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In the cases of Villabolos v. United States, and United States v. Curry, decided at the December Term, 1847, and especially in the latter case, it was held, on full consideration, that whether a case was attempted to be brought to this court by writ of error, or appeal, the record must be filed before the end of the term next succeeding the issue of the writ or the allowance of the appeal, or the court had no jurisdiction of the case. This was repeated in the Steamer Virginia v. West,4 Mesa v. United States,5 and United States v. Gomez.6 In Castro v. United States,7 the same question was raised. The importance of the case, together with other considerations, induced the court to consider the matter again at some length. Accordingly, the present Chief Justice delivered an opinion, in the course of which the former cases are considered and the ground of the rule distinctly stated. Other cases followed that, and in Mussina v. Cavazos, decided at the last term, the whole doctrine is again reviewed, and the rule placed distinctly on the ground that this court has no jurisdiction of the case unless the transcript be filed during the term next succeeding the allowance of the appeal. The intelligible ground of this decision is, that the writ of error and the appeal are the foundations of our jurisdiction, without which we have no right to revise the action of the inferior court; that the writ of error, like all other common law writs, becomes functus officio unless some return is made to it during the term of court to which it is return able; that the act of 1803, which first allowed appeals to this court, declared that they should be subject to the same rules, regulations, and restrictions, as are prescribed in law, in writs of error. These principles have received the unanimous approval of this court, and have been acted upon in a large number of cases not reported, besides several reported cases not here mentioned. And the court has never hesitated to act on this rule whenever it has appeared from the record that the case came within it, although no motion to dismiss was made by either party. In fact, treating it as a matter involving the jurisdiction of the court, we cannot do otherwise. In the case of United States v. Curry, Chief Justice Taney, answering the objection that the rule was extremely technical, replied, that nothing could be treated by this court as merely technical, and for that reason be disregarded, which was prescribed by Congress as the mode of exercising the court's appellate jurisdiction. We make the same observavation now, and add, that it is better, if the rule is deemed unwise or inconvenient, to resort to the legislature for its correction, than that the court should depart from its settled course of action for a quarter of a century. We are of opinion that the present case falls within the principle of these decisions. The only appeal that this record shows to have been either asked for or allowed, was that of May 26, 1860. The transcript was not filed during the term next succeeding the allowance of this appeal, nor until January, 1866. Two grounds are assigned as taking the case out of the rule we have stated. 1. It is said that the appeal of 1860 was not perfected until the bond was given under the order of November 14, 1865, and that until this was done there was in fact no appeal which required the transcript to be filed. The answer to this is, that the prayer for the appeal, and the order allowing it, constituted a valid appeal. The bond was not essential to it. It could have been given here, and cases have been brought here where no bond was approved by the court below, and the court has permitted the appellant to give bond in this court.8 In the case of Seymour v. Freer,9 the Chief Justice says, that if, through mistake or accident, no bond or a defective bond had been filed, this court would not dismiss the appeal, but would permit a bond to be given here. And in all cases where the government is appellant, no bond is required. It is not, therefore, an indispensable part of an appeal that a bond should be filed; and the appeal in this case must be held as taken on the 26th day of May, 1860. It is insisted that this view is in conflict with the case of The Dos Hermanos.10 We do not think so. While the argument of counsel on the merits in that case is fully reported, we have nothing from them on the motion to dismiss. The opinion of the court states that the question made was whether the appeal was in due time, and this is answered by saying, it was prayed and allowed within five years from the date of the decree. The appeal was, therefore, taken in due time. It is further said, that the fact that the bond was given after the expiration of the five years, did not vitiate the appeal. This is in full accord with what we have just stated. The bond may be given with effect at any time while the appeal is alive. There is no question made in the present case about the appeal being taken within time. It was taken in time. But the record was not filed in the court in time to save the appeal; and that question was not made or thought of in the Dos Hermanos case. It is perfectly consistent with all that we know of that case, and, indeed, probable, that, though the taking of the appeal was delayed until near the expiration of the five years, and filing the bond until after that period, the transcript was filed at the next term after the appeal was taken. 2. It is next insisted that a new appeal was taken by the proceedings of the 14th November, 1865. This, however, is in direct contradiction of the record. The petition of appellants, after reciting the former decree and the order allowing the appeal of May 26, 1860, and the death of some of the plaintiffs in the suit, and that no appeal-bond had been given, concludes as follows: 'Your petitioners now appear, and pray your honors to allow them to become parties to said appeal, and to perfect the same by now entering into a bond for the appeal.' And the order made is, 'that said petitioners have leave to perfect said appeal, so allowed at the June Term, 1859, of this court, by giving bond, &c.' The only appeal referred to in the petition, or the order of the court, is the appeal allowed May, 1860, and no language is used in either which refers to a new appeal, or which is consistent with such an idea. It is true that the citation speaks of the allowance of the appeal as obtained at the October Term, 1865, but this recital does not prove that an appeal was then allowed, when it stands unsupported by the record. Still less can it be permitted to contradict what the record states to have been done on that subject, at that time. In the case of United States v. Curry, the same facts almost precisely were relied on as constituting a second appeal, that exist in this case, including the misrecital in the citation. But the court says, 'that after very carefully considering the order, no just construction of its language will authorize us to regard it as a second appeal. The citation, which afterwards issued in August, 1847, calls this order an appeal, and speaks of it as an appeal granted on the day it bears date. But this description in the citation cannot change the meaning of the language used in the order.' That is precisely the case before us, and we think the ruling a sound one. The appeal must, for these reasons, be DISMISSED. But, we may add, that for anything we have been able to discover in this record, the appellants have the same right now, whatever that may be, to take a new appeal, that they had in November, 1865, when the unsuccessful effort was made to revive the first one.
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1. If if ii apparent from the record that this court has not acquired jurisdiction of a case for want of proper appeal or writ of error, it will be dismissed, although neither party ask it. 2. An appeal or writ of error which does not bring to this court a transcript of the record before the expiration of the term to which it is returnable, is no longer a valid appeal or writ. 3. Although a prayer for an appeal, and its allowance by the court below, constitute a valid appeal though no bond begiven (the bond being to bgiven with effect at any time while the appeal is in force), yet if ho transcript is filed in this court at the term next succeeding the allowance of the appeal, it has lost its vitality as an appeal. . Such vitality cannot be restored by an order of the Circuit Court made afterwards, accepting a bond made to perfect that appeal. Nor does a recital in the citation, issued after such order, that the appeal was taken as of that date, revive the defunct appeal or constitute a new one.
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The findings of fact made by the circuit court in its final decree are, in our opinion, amply sustained by the evidence. These findings, and other facts not disputed, establish prima facie the justice and equity of the decree. Upon the facts of the case, the decree of the court is simply to this effect, that where three persons form a partnership, and agree to bear the losses and share the profits of the partnership venture in proportion to their contributions to its capital, and two of the partners furnish all the money and do all the work, they are entitled to be repaid their advances out of its assets before payment of the individual creditors of the partner who paid nothing and did nothing to promote the partnership business. The decree may stand on even stronger grounds. There is no evidence in the record to show that there were any unpaid debts outstanding against the partnership of which Peck and the plaintiffs were the members. The decree of the court is based on the assumption that there were no such debts. The money, therefore, collected on the judgment recovered by Peck's administratrix was assets of the partnership, to which the partners were entitled in proportion to the amount paid in by them, and the record clearly shows that the money so collected was the only assets of the partnership. As McLean and Harmon had paid in all the money, they were entitled to all the money collected on the judgment, not by reason of any right to priority of payment, nor by reason of any lien, but because it was their property, and no other person had any claim to it. The plaintiffs' right to the fund was not at all impaired by the bankruptcy or death of Peck. Their claim was just as strong as if Peck were still living, and had received and collected the judgment in his own name, and the money had been taken from his hands and impounded in the registry of the court. The decree might, therefore, stand on the ground, which it in fact asserts, that the money in controversy was the absolute property of the plaintiffs. The defendant, however, assails the decree on several grounds, which we shall proceed to notice. It was shown by the evidence that on July 20, 1877, Peck executed and delivered to Harmon a paper, of which the following is a copy: 'FORT ABRAHAM LINCOLN, July 20, 1877. 'For value received, I promise to pay to William Harmon, or order, twenty-three thousand dollars, out of moneys I may hereafter receive on account of my claim against the United States government, for contract for wood, at Tongue River cantonment, on the Yellowstone river. 'C. K. PECK.' On the same day be executed and delivered to McLean a paper, similar in terms, for the payment to him of $17,000 out of the same fund. The appellant insists that the contract of partnership between Peck and the plaintiffs, and the promises of Peck above mentioned, were forbidden by the statutes of the United States, and were therefore illegal and void, and gave no rights to the plaintiffs to the fund in controversy. The statutes relied on are sections 3477 and 3737 of the Revised Statutes, which read as follows: 'Sec. 3477. All transfers and assignments made of any claim upon the United States, or of any part or share thereof, or interest therein, whether absolute or conditional, and whatever may be the consideration therefor, and all powers of attorney, orders, or other authorities for receiving payment of any such claim, or of any part or share thereof, shall be absolutely null and void, unless they are freely made and executed in the presence of at least two attesting witnesses, after the allowance of such a claim, the ascertainment of the amount due, and the issuing of a warrant for the payment thereof.' 'Sec. 3737. No contract or order, or any interest therein, shall be transferred by the party to whom such contract or order is given to any other party, and any such transfer shall cause the annulment of the contract or order transferred, so far as the United States are concerned. All rights of action, however, for any breach of such contract by the contracting parties, are reserved to the United States.' We shall first consider these two sections in their bearing upon the contract of partnership between Peck and the plaintiffs. It is obvious that section 3477, which forbids assignments of claims against the United States, or any interest therein, unless under the circumstances therein stated, can have no reference to such a contract as the partnership articles between Peck and the plaintiffs. When those articles were signed there was no claim against the United States to be transferred. Peck had at that time no contract even with the United States, and there was no certainty that he would have one. What is a claim against the United States is well understood. It is a right to demand money from the United States. Peck acquired no claim in any sense until after he had made and performed wholly or in part his contract with the United States. Section 3477, it is clear, only refers to claims against the United States which can be presented by the claimant to some department or officer of the United States for payment, or may be prosecuted in the court of claims. The section simply forbids the assignment of such claims before their allowance, the ascertainment of the amount due thereon, and the issue of a warrant for their payment. When the contract of partnership was made Peck had no claim which he could present for payment, or on which he could have brought suit. He therefore had no claim the assignment of which the statute forbids. It is so clear that the articles of partnership do not constitute such an assignment as is forbidden by the section under consideration that it would be a waste of words further to discuss the point. Nor are the articles of partnership forbidden by section 3737. They do not transfer the contract, or any interest therein, to the plaintiffs, and cannot fairly be construed to do so. But if the articles of partnership were fairly open to two constructions, the presumption is that they were made in subordination to and not in violation of section 3737, and if they can be construed consistently with the prohibitions of the section they should be so construed; for it is a rule of interpretation that, where a contract is fairly open to two constructions, by one of which it would be lawful and the other unlawful, the former must be adopted. Whart. Ev. § 654; Best, Ev. §§ 346, 347; Shore v. Wilson, 9 Clark & F. 397; Moss v. Bainbrigge, 18 Beav. 478; Lorillard v. Clyde, 86 N. Y. 384; Mandal v. Mandal, 28 La. Ann. 556. Interpreting the articles in the light of the statute, as it is the duty of the court to do, they were not intended to transfer, and do not transfer, to the plaintiffs any claim or demand, legal or equitable, against the United States, or any right to exact payment from the government by suit or otherwise. They may be fairly construed to be the personal contract of Peck, by which, in consideration of money to be advanced and services to be performed by the plaintiffs, he agreed to divide with them a fund which he expected to receive from the United States, on a contract which he had not yet entered into. This is the plainly-expressed meaning of the partnership contract, and it is only by a strained and forced construction that it can be held to effect a transfer of Peck's contract with the United States, and to be a violation of the statute. We are of opinion that the partnership contract was not opposed to the policy of the statute. The sections under consideration were passed for the protection of the government. Goodman v. Niblack, 102 U. S. 556. They were passed in order that the government might not be harassed by multiplying the number of persons with whom it had to deal, and might always know with whom it was dealing until the contract was completed and a settlement made. Their purpose was not to dictate to the contractor what he should do with the money received on his contract after the contract had been performed. One or both of the sections of the statute which we are now considering have been under the review of this court in the following cases: U. S. v. Gillis, 95 U. S. 407; Erwin v. U. S., 97 U. S. 392; Spofford v. Kirk, Id. 484; Goodman v. Niblack, 102 U. S. 556; Bailey v. U. S., 109 U. S. 432; S. C. 3 Sup. Ct. Rep. 272; St. Paul R. Co. v. U. S., 112 U. S. 733; S. C. 5 Sup. Ct. Rep. 366. In none of them is any opinion expressed in conflict with the views we have announced in this case. Our conclusion, therefore, is that the articles of partnership were not forbidden by the letter or policy of this statute. In respect to the papers executed by Peck on July 20, 1877, by which he agreed to pay $23,000 to Harmon and $17,000 to McLean, respectively, 'out of moneys' he might 'thereafter receive on account of' his 'claim against the United States government for contract for wood,' etc., it is plain they confer no new rights on the plaintiffs, and taken away no old ones. The evidence shows that Harmon and McLean were entitled, under the partnership articles, to the money specified in these memoranda. Peck was therefore only promising to do what, on a good consideration, he had already by the articles of partnership promised to do. There was no new consideration for these new promises. The only office, therefore, which the memoranda performed was to show the amount then due the plaintiffs, respectively, under the articles of partnership. It would be a strange conclusion to hold that, by accepting these papers, the plaintiffs lost their right, which they had already acquired under the articles of partnership, to have the money therein mentioned paid over to them when it should be collected by Peck, their copartner. If the obligation assumed by Peck in his articles of partnership was valid and binding, it was not impaired or annulled by the giving and the acceptance of these memoranda. From what we have already said in discussing the articles of partnership, it is clear that they were not forbidden by the language or policy of the sections prohibiting the transfer of claims and contracts. It is next assigned for error that the circuit court did not give effect to the defense of the statute of limitation of two years, prescribed by section 5057 of the Revised Statutes, which was set up in the answer of the defendant. The section mentioned forms a part of section 2 of the bankrupt act of March 2, 1867, c. 176, (14 St. 517,) and provides that no suit at law or in equity shall be maintained in any court between an assignee in bankruptcy and a person claiming an adverse interest, touching any property, or rights of property, transferable to or vested in such assignee, unless brought within two years from the time when the cause of action accrued for or against such assignee. It is plain that the facts shown by the record do not sustain this defense. This suit is for the recovery, as assets of a partnership, of the money collected on the contract between Peck and the United States, and its distribution among the partners on a settlement of the partnership affairs. If Peck had lived, and had not been adjudicated bankrupt, the plaintiffs could not have maintained this suit against him until the money which is the subject of this controversy had been collected from the United States. They had no right under this contract with Peck to demand their share of the money until the money had come to his hands. The bankruptcy and death of Peck did not change the terms of the contract. They could not sue his assignee for a distribution of the fund until the fund had been received. The judgment against the United States in favor of Peck's administratrix was not affirmed by this court until February 10, 1880, and the money was not received by the defendant until after he had been substituted as claimant in the case in place of Helen A. Peck, administratrix, by order of the court of claims, on May 10, 1880. This suit was begun September 22, 1880. A bill like the present, for the settlement of the affairs of the partnership and the distribution of its assets among the partners, would have been premature until the final determination of the suit of Peck against the United States, for that suit involved all the assets of the partnership, and until it was decided there could be no adjustment of the partnership concerns and no distribution of its assets; in fact, it was uncertain whether there would be any assets to distribute. As, therefore, the plaintiffs were not entitled to the relief prayed in the bill until final judgment in the suit of Peck against the United States, and especially had no demand against the defendant until the fund, which they assert was assets of the partnership, came to his hands, it is plain that the statute of limitation was not well pleaded. It is next assigned for error that the circuit court admitted the testimony of McLean and Harmon, the plaintiffs, offered in their own behalf, in regard to transactions with and statements by Peck, he being dead, and the suit being against his assignee in bankruptcy. It is insisted that the testimony of these witnesses was incompetent under section 858 of the Revised Statutes, which provides as follows: 'In the courts of the United States no witness shall be excluded * * * in any action because he is a party to or interested in the issue tried: provided, that in actions by or against executors, administrators, or guardians, in which judgment may be rendered for or against them, neither party shall be allowed to testify against the other as to any transaction with, or statement by, testator, intestate, or ward, unless called to testify thereto by the opposite party, or required to testify thereto by the court. In all other respects the laws of the state in which the court is held shall be the rules of decision as to the competency of the witnesses in the courts of the United States, in trials at common law and in equity and admiralty.' The witnesses admitted by the circuit court were not excluded by the terms of this statute. The suit in which they testified was not an action by or against an executor, administrator, or guardian. But the counsel for the plaintiffs insists that the policy of the act applies to suits by or against assignees as well as to suits by or against executors, administrators, or guardians, and that we ought to construe the act so as to include such suits. We cannot concur in this view. The purpose of the act was to remove generally the old incapacity to testify imposed on parties or persons interested in the suit. This was done by a sweeping provision, subject to certain well-defined exceptions, but the exceptions did not include suits by or against assignees in bankruptcy. We cannot insert the exception. When a provision is left out of a statute, either by design or mistake of the legislature, the courts have no power to supply it. To do so would be to legislate and not to construe. 'We are bound,' says Mr. Justice BULLER, in Jones v. Smart, 1 Term R. 44, 'to take the act of parliament as they have made it;' and Mr. Justice STORY, in Smith v. Rines, 2 Sum. 354, 355, observes: 'It is not for courts of justice proprio marte to provide for all the defects or mischiefs of imperfect legislation.' See, also, King v. Burrell, 12 Adol. & E. 460; Lamond v. Eiffe, 3 Q. B. 910; Bloxam v. Elsee, 6 Barn. & C. 169; Bartlett v. Morris, 9 Port. (Ala.) 266. The objection made to the admission of the testimony of the plaintiffs was properly overruled. The next ground of complaint against the decree of the circuit court is that the court did not hold the plaintiffs estopped from asserting title to the fund in controversy by the fact that they each testified in the suit of Peck against the United States, in which the fund was recovered, that he had no interest, direct or indirect, in the claim of Peck, except that he held one of the notes or memoranda made by Peck, a copy of one of which has already been given. It must be conceded that this testimony was evasive and disingenous, but it was not false. But admitting that the testimony was untrue, it is difficult to see how any estoppel is raised which the defendant can set up against a recovery in this case by the plaintiffs. An equitable estoppel is raised when there is some intended deception in the conduct or declarations of the party to be estopped, or such gross negligence on his part as to amount to a constructive fraud, by which another has been misled to his injury. Brant v. Virginia Coal & Iron Co., 93 U. S. 326. If any estoppel could be set up in this case by reason of the testimony of the plaintiffs, it would be one in favor of the United States, who alone could have been injured by that testimony. It is clear that the estoppel could not be set up by the defendant, for the evidence was given on his side of the controversy, and he is now in possession of and claims the fund which that testimony aided Peck, whose assignee he is, to recover. There was therefore no injury to the defendant, and no estoppel which he could set up against these plaintiffs. See Cushing v. Laird, 107 U. S. 69; S. C. 2 Sup. Ct. Rep. 196. It is true, his counsel say that, by reason of the denial by the plaintiffs that they had any interest in Peck's claim, the defendant was induced to employ counsel, and move both this court and the court of claims that he be made, as assignee of Peck, the party plaintiff in the suit against the United States, and to expend a large sum of money in prosecuting his motions. As we have already found that the plaintiffs were entitled to the fund in controversy, and the defendant was not, this contention amounts to this, that the plaintiffs should be precluded from a recovery of their own property, and it ought to be turned over to the defendant, because the defendant, misled by the testimony of the plaintiffs given in a case to which he was not at the time either a party or privy, was induced to expend money in a proceeding to get possession of the subject-matter of the controversy, to which, as it turned out, he had no title whatever. Upon such a state of facts no estoppel is raised. But there is no proof in the record that the defendant was misled by the testimony of the plaintiffs, or that he did not know the exact truth when he took the proceedings referred to. In no point of view, therefore, can the defendant assert that the plaintiffs are estopped to claim the fund in controversy. Lastly, the defendant insists that the circuit court erred in not allowing him compensation for his services, expenses, and attorneys' fees in recovering the fund in the court of claims from the United States. In reply to this contention, it is sufficient to say that the defendant rendered no services whatever in the recovery of the fund. Judgment had been rendered in the court of claims in favor of the administratrix of Peck, and had been affirmed by this court, and the mandate of this court had been sent to the court of claims before the defendant was admitted as plaintiff in the suit for the recovery of the fund. All he did was to get the fund into his possession. As in our view the fund belongs to the plaintiffs in this suit, all that comes out of it for the compensation of the defendant comes out of their pockets. We see no reason why they should pay the defendant, who, instead of aiding them in securing their rights, has been an obstacle and obstruction to their enforcement. The services for which the defendant seeks pay from the plaintiffs were not rendered in their behalf, but in hostility to their interest. When many persons have a common interest in a trust property or fund, and one of them, for the benefit of all and at his own cost and expense, brings a suit for its preservation or administration, the court of equity in which the suit is brought will order that the plaintiff be reimbursed his outlay from the property of the trust, or by proportional contribution from those who accept the benefits of his efforts. See Trustees v. Greenough, 105 U. S. 527, where the subject is discussed by Mr. Justice BRADLEY, and the cases cited; and Central R. R. v. Pettus, 113 U. S. 116; S. C. 5 Sup. Ct. Rep. 387. But where one brings adversary proceedings to take the possession of trust property from those entitled to it, in order that he may distribute it to those who claim adversely, and fails in his purpose, it has never been held, in any case brought to our notice, that such person had any right to demand reimbursement of his expenses out of the trust fund, or contribution from those whose property he sought to misappropriate. The circuit court was right in not compelling the plaintiffs to pay for services rendered and expenses incurred in a proceeding adversary to their interest, and carried on for the benefit of others. There is no error in the record. Decree affirmed.
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Where three persons form a partnership, and agree to bear the losses and share the profits of the partnership venture in proportion to their contribution to its capital, and two of the partners furnish all the money and do all the work, they are entitled to be repaid their advances out of its assets, before payment of the individual creditors of the partner who paid nothing and did nothing to promote the partnership business. When a contract is open to two constructions, the one lawful and the other unlawful, the former must be adopted. When many persons have a common interest in a trust fund, and one, for the benefit of all, at his own cost and expense, brings suit for its preservation or administration, a court of equity will order that the plamtiff be reimbursed his outlay from the property of the trust, or by proportional contribution from those who accept the benefit of his efforts. 'When one brings adversary proceedings to take trust property from the possession of those entitled to it, in order that he may distribute it to those entitled adversely, and fails in his purpose, he cannot demand reimbursement of his expenses from the trust fund, or contribution from those whose property he has sought to misappropriate. A, having contracted with the United States to furnish supplies of wood and hay to troops in Montana, entered into partnership with B and C for the purpose of executing the contract. A was to furnish half the capital, B and C one-fourth each, and profits and losses were to be divided on that basis but in fact the capital was furnished by B and C. A delivered the wood according to the contract, but failed to deliver the hay, and, payment being refused, he brought suit in his own name in the Court of Claims against the United States to recover the contract price of the wood. In this suit B and 0, each was a witness on behalf of A, and each testified that he had " no interest direct or indirect in the claim," except as a creditor of A. holding his note. Pending the suit A became bankrupt, and then died. His administratrix was admitted to prosecute the suit, but before entry of final judgment his assignee in bankruptcy was substituted in her place. Minal judgment was then rendered in favor of the assignee, and the amount of the judgment was paid to hn. B and C as surviving partners then filed a bill in equity against the asskMee and the attorneys and counsel, to rpcover their shares in the partnership property. Hrezd (I) That the interests of B and C in the partnership property were not affected by the fact that the contract under which they claimed was not made and attested by witnesses after the issue of a warrant for payment, as required by Rev. Stat. § 3477. (2) That they were not affected by the provisions of Rev. Stat. § 3737 that a transfer of a contract with the United States shall cause an annulment of the contract so far as the United States are concerned. (3) That the cause of action to recover of the assignee their proportionate shares of the partnership fund in his hands accrued to B and C on the receipt of the money by the assignee. (4) That B and C were not subject in this suit to the disabilities as witnesses imposed by Rev. Stat. § 858 upon parties to suits by or against executors, administrators or guardians. (5) That B and C were not estopped by their declarations in the Court of Claims as to their interest in the claim there in controversy, from setting up the interest in it which they seek to enforce in this suit. (6) That the assignee was entitled to no allowance for compensation for services, expenses and attorney's fees, in recovering the fund in the Court of Claims from the United States.
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These two cases are appeals from the Circuit Court of Appeals for the First Circuit, which were heard and will be decided together. The Pynchon National Bank of Springfield, Mass., with a capital stock of $200,000, divided into 2,000 shares of $100 each, became insolvent and in June, 1901, the Comptroller of the Currency appointed a receiver to liquidate its affairs. Upon examination there were found among its assets bonds of the American Writing Paper Company, of the par value of $577,000, which the bank had purchased at a discount, but which, at the time of the transaction we are about to consider, had so depreciated that they were worth on the market only 65 cents on the dollar. A consideration of the condition of the bank resulted on March 18, 1902, in an assessment by the Comptroller on the shareholders of their full statutory liability of 100 per cent., payable on the 15th day of the following May. Thereupon a plan was devised under which it was proposed that all of the shareholders, except the three defendant savings banks, should purchase from the receiver the paper company bonds at 95 cents on the dollar, each shareholder to purchase one bond of $1,000 for every three shares of stock owned by him. This purchase price was an advance over the market price of 30 cents on the dollar and the excess payment by each shareholder would equal 82 per cent. of the assessment which had been made by the Comptroller. Because they lacked corporate power to invest in such bonds the savings banks with the approval of the Comptroller and shareholders were to pay to the receiver the required advance over the market price without purchasing their quota of the bonds. The Comptroller cordially approved of this proposed purchase, and in a letter to the board of directors of the insolvent bank, the contents of which were intended to be and were communicated to its shareholders while the plan was under consideration, he stated that it would result in a settlement of the affairs of the bank highly satisfactory for all interests concerned, and that he was satisfied that if such sale of the bonds were made the receiver would be able to promptly pay all of the creditors in full, but that if the plan failed and it became necessary to sell the bonds on the market there would be no escape from an assessment of 100 per cent. against the shareholders. This proposed settlement was approved by all of the shareholders, and the defendant banks made payment to the receiver as follows: The Springfield Institution for Savings, $30,360.17; the Springfield Five Cents Savings Bank, $9,820; and the Hampden Savings Bank, $5,319.16. For these payments the banks did not receive any consideration other than the joining of the other shareholders in the plan, together with the anticipated saving of 18 per cent. of the assessment which the Comptroller had made against them. The bonds allotted the banks were sold at the market price. After the completion of this bond transaction, the receiver, under instructions from the Comptroller, on July 22, 1902, wrote to the shareholders as follows: 'Large amounts of securities sold make it probable that the payment of the assessment will not be required. The Comptroller has accordingly decided to withdraw this assessment and I have been instructed to suspend any action to enforce its payment. This withdrawal is made, however, without prejudice to the right of the Comptroller to levy and collect any assessment or assessments that may hereafter be necessary.' The results anticipated from this action on the part of the shareholders were not realized, and in order to satisfy the still unpaid debts of the bank and interest and costs of administration, the Comptroller on December 28, 1906, made a second assessment of $49 on each share of stock. The banks refusing to pay this second assessment, this suit was instituted against them in the District Court, and resulted in a holding in favor of the defendants, which was affirmed by the Circuit Court of Appeals in the decision which is now under review. It will be necessary to consider but two questions, viz.: (1) Was the second assessment invalid because the Comptroller did not withdraw and had no legal authority to withdraw the first assessment? and (2) was it the understanding that the payments made by the savings banks should be applied on the assessment for their statutory liability, so that they remained liable for only 18 per cent. additional? From the earliest days of the administration of the National Banking Act to this case attempts have been made in many forms to give to it a technical construction which would so restrict the powers of the Comptroller as to greatly delay and impede the settlement of the affairs of insolvent banks. But this court has uniformly declined to narrow the act by construction and has placed a liberal interpretation upon its provisions to promote its plain purpose of expeditiously and justly winding up the affairs and paying the debts of such unfortunate institutions. Studebaker v. Perry, 184 U. S. 258, 22 Sup. Ct. 463, 46 L. Ed. 528; Kennedy v. Gibson, 8 Wall. 498, 19 L. Ed. 476; United States v. Knox, 102 U. S. 422, 26 L. Ed. 216; Bushnell v. Leland, 164 U. S. 684, 17 Sup. Ct. 209, 41 L. Ed. 598; and Bowden v. Johnson, 107 U. S. 251, 2 Sup. Ct. 246, 27 L. Ed. 386. There is nothing in the act to prevent the Comptroller from withdrawing an assessment before it is paid, or when it is partly paid, if it should be concluded that further payment is not necessary, and no form is prescribed in which such action shall be taken by him. A large executive discretion is given to the Comptroller in this respect to adjust the assessments made to the exigencies of each case, so that the shareholders may not be burdened by paying more than is necessary or at a time when the money for any reason cannot be advantageously used. The wisdom of giving such large discretion to the Comptroller finds excellent illustration in the case before us. All persons interested in this bond transaction were convinced in July, 1902, that further payment than that which had been made would not be needed, and a construction should not be given to the act, its specific terms not requiring it, which would prevent such action as was taken by the Comptroller in withdrawing for the time being the unpaid portion of the first assessment. We conclude that the claim that the Comptroller did not have power to recall the first assessment in whole or in part is unsound in principle and wholly unsupported by the terms of the act or by court decisions. The remaining question is: Was it the understanding that the payments to the receiver should be applied upon the statutory liability of the savings banks for which assessment, then in full force, had been made-by the Comptroller? The case was tried in large part upon a stipulation as to the facts, which contains the following: 'Inasmuch as it was ultra vires of savings banks under the statutes of the commonwealth, as the receiver and comptroller at the time well knew, to purchase such bonds as an investment, it was arranged with the knowledge and approval of the comptroller and the receiver that the savings banks in question, instead of purchasing their proportion of the bonds, should pay the difference between their market value and what the national bank paid for them.' The checks of the banks were received 'without any agreement on the part of the Comptroller or receiver that the payments thereby made should in whole or in part discharge the liability of the savings banks for or on account of the indebtedness of the national bank and any stock assessments, excepting so far if at all, as such agreement or obligation may be lawfully implied from the facts stated in this stipulation and such evidence as may be introduced.' It is argued for the receiver that if it had been understood or intended that the payments by the banks should be credited on the outstanding assessment this would very certainly have found written expression, if not elsewhere, in the receipts given and received for the payments. It is notable that, although this bond purchase involved more than half a million dollars, the terms and purposes of it were not expressed in any writing, either between the shareholders themselves or between the receiver and the shareholders, which indicates that the transaction, while large, seemed simple to the men of affairs engaged in it, and that to their minds, at least, the implication from the payments to be made could not be doubtful. The shareholders who purchased the bonds had the prospect—how valuable it was the record does not indicate, but still a prospect—of recouping their losses through a later increase in the market value of the bonds, but the savings banks had no such prospect, because, not having legal authority to make such purchase, their payment of what equaled 82 per cent. of the assessment against them was a naked payment, without chance of reimbursement, in whole or in part, from any source. The evidence introduced in addition to the stipulation of facts is slight, consisting of contemporaneous entries in the corporation record and account books of the banks, and the indorsement on the checks by which payment was made. This evidence is not conclusive, but the implications from it, such as they are, are favorable to the contention of the banks. Since no clearly definite expression is found in the record either that these payments were or were not to be applied on the shareholding liability of the savings banks, we are required to decide which contention of the parties is the more reasonable and probable, having regard to all the facts and circumstances, stipulated and proved in the case. There being no evidence to the contrary, we must adopt the assumption of ordinary life and of law that the trustees for the savings banks acted lawfully, within the limits of their powers, and we must also have regard to the long-settled rule of law that where neither the debtor nor the creditor has applied payments before controversy has arisen, the courts will make application of them in a manner to accomplish the ends of justice. United States v. Kirkpatrick, 9 Wheat. 720, 6 L. Ed. 199; National Bank v. Mechanics' Bank, 94 U. S. 437, 439, 24 L. Ed. 176. When to this we add that natural justice, as distinguished from a technical conclusion, requires that the savings banks be allowed credit for the payments that they have made, since thereby the creditors of the insolvent bank may get the benefit of the full statutory liability of the shareholders without a new and unanticipated obligation being imposed on the stockholding banks, we are compelled to resolve any doubt in which the record might otherwise leave us in favor of the defendants. It is impossible for us to conclude that the officials of these savings banks, trustees as they were for their depositors and stockholders, and having in mind the limitations on their powers, as the stipulation declares that they and the receiver did have, should have made these considerable payments in such a manner as not to at all diminish the statutory liability of their banks, especially since payments not made to be applied on the assessment would be substantially unauthorized gifts, for, as we have said, the banks had no prospect, as the other stockholders had, of being reimbursed for such payments by the possible rise in the market value of the bonds. It results that the decree of the Circuit Court of Appeals must be affirmed, but not on the ground stated in the opinion of that court, and that the second assessment must be held void because excessive. This, however, without prejudice to the making of another assessment by the Comptroller upon the shareholding banks for the difference, if needed, between the amount paid and the amount of an assessment for the full statutory liability. Affirmed. Mr. Justice VAN DEVANTER and Mr. Justice PITNEY dissent.
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Under the National Banking Act the Comptroller has discretionary power to withdraw an assessment on shareholders before it is paid, or when partly paid. Upon the evidence, held, that certain sums paid by savings banks to the receiver of a national bank in which they held shares were intended to be applied against their liabilities under the National Banking Act, to enforce which an assessment, made by the Comptroller, was then outstanding. A second assessment, exceeding the differences between their statutory liabilities and the amounts so paid, was void. In determining the effect of certain payments made by the trustees of savings banks, the court here assumes, in the absence of contrary evidence, that it was the purpose of the trustees to act within their powers, and heeds the settled rule that when neither debtor nor creditor has applied payments before the controversy has arisen the courts will apply them in a manner to accomplish the ends of justice. 218 Fed. Rep. 814, affirmed.
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In this case, the Supreme Court of Pennsylvania vacated the decision of a postconviction court, which had granted relief to a prisoner convicted of first-degree murder and sentenced to death. One of the justices on the State Supreme Court had been the district attorney who gave his official approval to seek the death penalty in the prisoner’s case. The justice in question denied the prisoner’s motion for recusal and participated in the decision to deny relief. The question presented is whether the justice’s denial of the recusal motion and his subsequent judicial participation violated the Due Process Clause of the Fourteenth Amendment. This Court’s precedents set forth an objective standard that requires recusal when the likelihood of bias on the part of the judge “ ‘is too high to be constitutionally tolerable.’ ” Caperton v. A. T. Massey Coal Co., 556 U. S. 868, 872 (2009) (quoting Withrow v. Larkin, 421 U. S. 35, 47 (1975) ). Applying this standard, the Court concludes that due process compelled the justice’s recusal. I Petitioner is Terrance Williams. In 1984, soon after Williams turned 18, he murdered 56-year-old Amos Norwood in Philadelphia. At trial, the Commonwealth presented evidence that Williams and a friend, Marc Draper, had been standing on a street corner when Norwood drove by. Williams and Draper requested a ride home from Norwood, who agreed. Draper then gave Norwood false directions that led him to drive toward a cemetery. Williams and Draper ordered Norwood out of the car and into the cemetery. There, the two men tied Norwood in his own clothes and beat him to death. Testifying for the Commonwealth, Draper suggested that robbery was the motive for the crime. Williams took the stand in his own defense, stating that he was not involved in the crime and did not know the victim. During the trial, the prosecutor requested permission from her supervisors in the district attorney’s office to seek the death penalty against Williams. To support the request, she prepared a memorandum setting forth the details of the crime, information supporting two statutory aggravating factors, and facts in mitigation. After reviewing the memorandum, the then-district attorney of Philadelphia, Ronald Castille, wrote this note at the bottom of the document: “Approved to proceed on the death penalty.” App. 426a. During the penalty phase of the trial, the prosecutor argued that Williams deserved a death sentence because he killed Norwood “ ‘for no other reason but that a kind man offered him a ride home.’ ” Brief for Petitioner 7. The jurors found two aggravating circumstances: that the murder was committed during the course of a robbery and that Williams had a significant history of violent felony convictions. That criminal history included a previous conviction for a murder he had committed at age 17. The jury found no mitigating circumstances and sentenced Williams to death. Over a period of 26 years, Williams’s conviction and sentence were upheld on direct appeal, state postconviction review, and federal habeas review. In 2012, Williams filed a successive petition pursuant to Pennsylvania’s Post Conviction Relief Act (PCRA), 42 Pa. Cons. Stat. §9541 et seq. (2007). The petition was based on new information from Draper, who until then had refused to speak with Williams’s attorneys. Draper told Williams’s counsel that he had informed the Commonwealth before trial that Williams had been in a sexual relationship with Norwood and that the relationship was the real motive for Norwood’s murder. According to Draper, the Commonwealth had instructed him to give false testimony that Williams killed Norwood to rob him. Draper also admitted he had received an undisclosed benefit in exchange for his testimony: the trial prosecutor had promised to write a letter to the state parole board on his behalf. At trial, the prosecutor had elicited testimony from Draper indicating that his only agreement with the prosecution was to plead guilty in exchange for truthful testimony. No mention was made of the additional promise to write the parole board. The Philadelphia Court of Common Pleas, identified in the proceedings below as the PCRA court, held an evidentiary hearing on Williams’s claims. Williams alleged in his petition that the prosecutor had procured false testimony from Draper and suppressed evidence regarding Norwood’s sexual relationship with Williams. At the hearing, both Draper and the trial prosecutor testified regarding these allegations. The PCRA court ordered the district attorney’s office to produce the previously undisclosed files of the prosecutor and police. These documents included the trial prosecutor’s sentencing memorandum, bearing then-District Attorney Castille’s authorization to pursue the death penalty. Based on the Commonwealth’s files and the evidentiary hearing, the PCRA court found that the trial prosecutor had suppressed material, exculpatory evidence in violation of Brady v. Maryland, 373 U. S. 83 (1963) , and engaged in “prosecutorial gamesmanship.” App. 168a. The court stayed Williams’s execution and ordered a new sentencing hearing. Seeking to vacate the stay of execution, the Commonwealth submitted an emergency application to the Pennsylvania Supreme Court. By this time, almost three decades had passed since Williams’s prosecution. Castille had been elected to a seat on the State Supreme Court and was serving as its chief justice. Williams filed a response to the Commonwealth’s application. The disclosure of the trial prosecutor’s sentencing memorandum in the PCRA proceedings had alerted Williams to Chief Justice Castille’s involvement in the decision to seek a death sentence in his case. For this reason, Williams also filed a motion asking Chief Justice Castille to recuse himself or, if he declined to do so, to refer the recusal motion to the full court for decision. The Commonwealth opposed Williams’s recusal motion. Without explanation, Chief Justice Castille denied the motion for recusal and the request for its referral. Two days later, the Pennsylvania Supreme Court denied the application to vacate the stay and ordered full briefing on the issues raised in the appeal. The State Supreme Court then vacated the PCRA court’s order granting penalty-phase relief and reinstated Williams’s death sentence. Chief Justice Castille and Justices Baer and Stevens joined the majority opinion written by Justice Eakin. Justices Saylor and Todd concurred in the result without issuing a separate opinion. See ___ Pa. ___, ___, 105 A. 3d 1234, 1245 (2014). Chief Justice Castille authored a concurrence. He lamented that the PCRA court had “lost sight of its role as a neutral judicial officer” and had stayed Williams’s execution “for no valid reason.” Id., at ___, 105 A. 3d, at 1245. “[B]efore condemning officers of the court,” the chief justice stated, “the tribunal should be aware of the substantive status of Brady law,” which he believed the PCRA court had misapplied. Id., at ___, 105 A. 3d, at 1246. In addition, Chief Justice Castille denounced what he perceived as the “obstructionist anti-death penalty agenda” of Williams’s attorneys from the Federal Community Defender Office. Ibid. PCRA courts “throughout Pennsylvania need to be vigilant and circumspect when it comes to the activities of this particular advocacy group,” he wrote, lest Defender Office lawyers turn postconviction proceedings “into a circus where [they] are the ringmasters, with their parrots and puppets as a sideshow.” Id., at ___, 105 A. 3d, at 1247. Two weeks after the Pennsylvania Supreme Court decided Williams’s case, Chief Justice Castille retired from the bench. This Court granted Williams’s petition for certiorari. 576 U. S. ___ (2015). II A Williams contends that Chief Justice Castille’s decision as district attorney to seek a death sentence against him barred the chief justice from later adjudicating Williams’s petition to overturn that sentence. Chief Justice Castille, Williams argues, violated the Due Process Clause of the Fourteenth Amendment by acting as both accuser and judge in his case. The Court’s due process precedents do not set forth a specific test governing recusal when, as here, a judge had prior involvement in a case as a prosecutor. For the reasons explained below, however, the principles on which these precedents rest dictate the rule that must control in the circumstances here. The Court now holds that under the Due Process Clause there is an impermissible risk of actual bias when a judge earlier had significant, personal involvement as a prosecutor in a critical decision regarding the defendant’s case. Due process guarantees “an absence of actual bias” on the part of a judge. In re Murchison, 349 U. S. 133, 136 (1955) . Bias is easy to attribute to others and difficult to discern in oneself. To establish an enforceable and work-able framework, the Court’s precedents apply an objective standard that, in the usual case, avoids having to determine whether actual bias is present. The Court asks not whether a judge harbors an actual, subjective bias, but instead whether, as an objective matter, “the average judge in his position is ‘likely’ to be neutral, or whether there is an unconstitutional ‘potential for bias.’ ” Caperton, 556 U. S., at 881. Of particular relevance to the instant case, the Court has determined that an unconstitutional potential for bias exists when the same person serves as both accuser and adjudicator in a case. See Murchison, 349 U. S., at 136–137. This objective risk of bias is reflected in the due process maxim that “no man can be a judge in his own case and no man is permitted to try cases where he has an interest in the outcome.” Id., at 136. The due process guarantee that “no man can be a judge in his own case” would have little substance if it did not disqualify a former prosecutor from sitting in judgment of a prosecution in which he or she had made a critical decision. This conclusion follows from the Court’s analysis in In re Murchison. That case involved a “one-man judge-grand jury” proceeding, conducted pursuant to state law, in which the judge called witnesses to testify about suspected crimes. Id., at 134. During the course of the examinations, the judge became convinced that two witnesses were obstructing the proceeding. He charged one witness with perjury and then, a few weeks later, tried and convicted him in open court. The judge charged the other witness with contempt and, a few days later, tried and convicted him as well. This Court overturned the convictions on the ground that the judge’s dual position as accuser and decisionmaker in the contempt trials violated due process: “Having been a part of [the accusatory] process a judge cannot be, in the very nature of things, wholly disinterested in the conviction or acquittal of those accused.” Id., at 137. No attorney is more integral to the accusatory process than a prosecutor who participates in a major adversary decision. When a judge has served as an advocate for the State in the very case the court is now asked to adjudicate, a serious question arises as to whether the judge, even with the most diligent effort, could set aside any personal interest in the outcome. There is, furthermore, a risk that the judge “would be so psychologically wedded” to his or her previous position as a prosecutor that the judge “would consciously or unconsciously avoid the appearance of having erred or changed position.” Withrow, 421 U. S., at 57. In addition, the judge’s “own personal knowledge and impression” of the case, acquired through his or her role in the prosecution, may carry far more weight with the judge than the parties’ arguments to the court. Murchison, supra, at 138; see also Caperton, supra, at 881. Pennsylvania argues that Murchison does not lead to the rule that due process requires disqualification of a judge who, in an earlier role as a prosecutor, had significant involvement in making a critical decision in the case. The facts of Murchison, it should be acknowledged, differ in many respects from a case like this one. In Murchison, over the course of several weeks, a single official (the so-called judge-grand jury) conducted an investigation into suspected crimes; made the decision to charge witnesses for obstruction of that investigation; heard evidence on the charges he had lodged; issued judgments of conviction; and imposed sentence. See 349 U. S., at 135 (petitioners objected to “trial before the judge who was at the same time the complainant, indicter and prosecutor”). By contrast, a judge who had an earlier involvement in a prosecution might have been just one of several prosecutors working on the case at each stage of the proceedings; the prosecutor’s immediate role might have been limited to a particular aspect of the prosecution; and decades might have passed before the former prosecutor, now a judge, is called upon to adjudicate a claim in the case. These factual differences notwithstanding, the constitutional principles explained in Murchison are fully applicable where a judge had a direct, personal role in the defendant’s prosecution. The involvement of other actors and the passage of time are consequences of a complex criminal justice system, in which a single case may be litigated through multiple proceedings taking place over a period of years. This context only heightens the need for objective rules preventing the operation of bias that otherwise might be obscured. Within a large, impersonal system, an individual prosecutor might still have an influence that, while not so visible as the one-man grand jury in Murchison, is nevertheless significant. A prosecutor may bear responsibility for any number of critical decisions, including what charges to bring, whether to extend a plea bargain, and which witnesses to call. Even if decades intervene before the former prosecutor revisits the matter as a jurist, the case may implicate the effects and continuing force of his or her original decision. In these circumstances, there remains a serious risk that a judge would be influenced by an improper, if inadvertent, motive to validate and preserve the result obtained through the adversary process. The involvement of multiple actors and the passage of time do not relieve the former prosecutor of the duty to withdraw in order to ensure the neutral-ity of the judicial process in determining the consequences that his or her own earlier, critical decision may have set in motion. B This leads to the question whether Chief Justice Castille’s authorization to seek the death penalty against Williams amounts to significant, personal involvement in a critical trial decision. The Court now concludes that it was a significant, personal involvement; and, as a result, Chief Justice Castille’s failure to recuse from Williams’s case presented an unconstitutional risk of bias. As an initial matter, there can be no doubt that the decision to pursue the death penalty is a critical choice in the adversary process. Indeed, after a defendant is charged with a death-eligible crime, whether to ask a jury to end the defendant’s life is one of the most serious discretionary decisions a prosecutor can be called upon to make. Nor is there any doubt that Chief Justice Castille had a significant role in this decision. Without his express authorization, the Commonwealth would not have been able to pursue a death sentence against Williams. The importance of this decision and the profound consequences it carries make it evident that a responsible prosecutor would deem it to be a most significant exercise of his or her official discretion and professional judgment. Pennsylvania nonetheless contends that Chief Justice Castille in fact did not have significant involvement in the decision to seek a death sentence against Williams. The chief justice, the Commonwealth points out, was the head of a large district attorney’s office in a city that saw many capital murder trials. Tr. of Oral Arg. 36. According to Pennsylvania, his approval of the trial prosecutor’s request to pursue capital punishment in Williams’s case amounted to a brief administrative act limited to “the time it takes to read a one-and-a-half-page memo.” Ibid. In this Court’s view, that characterization cannot be credited. The Court will not assume that then-District Attorney Castille treated so major a decision as a perfunctory task requiring little time, judgment, or reflection on his part. Chief Justice Castille’s own comments while running for judicial office refute the Commonwealth’s claim that he played a mere ministerial role in capital sentencing decisions. During the chief justice’s election campaign, multiple news outlets reported his statement that he “sent 45 people to death rows” as district attorney. Seelye, Castille Keeps His Cool in Court Run, Philadelphia Inquirer, Apr. 30, 1993, p. B1; see also, e.g., Brennan, State Voters Must Choose Next Supreme Court Member, Legal Intelligencer, Oct. 28, 1993, pp. 1, 12. Chief Justice Castille’s willingness to take personal responsibility for the death sentences obtained during his tenure as district attorney indicate that, in his own view, he played a meaningful role in those sentencing decisions and considered his involvement to be an important duty of his office. Although not necessary to the disposition of this case, the PCRA court’s ruling underscores the risk of permitting a former prosecutor to be a judge in what had been his or her own case. The PCRA court determined that the trial prosecutor—Chief Justice Castille’s former subordinate in the district attorney’s office—had engaged in multiple, intentional Brady violations during Williams’s prosecution. App. 131–145, 150–154. While there is no indication that Chief Justice Castille was aware of the alleged prosecutorial misconduct, it would be difficult for a judge in his position not to view the PCRA court’s findings as a criticism of his former office and, to some extent, of his own leadership and supervision as district attorney. The potential conflict of interest posed by the PCRA court’s findings illustrates the utility of statutes and professional codes of conduct that “provide more protection than due process requires.” Caperton, 556 U. S., at 890. It is important to note that due process “demarks only the outer boundaries of judicial disqualifications.” Aetna Life Ins. Co. v. Lavoie, 475 U. S. 813 , 828 (1986). Most questions of recusal are addressed by more stringent and detailed ethical rules, which in many jurisdictions already require disqualification under the circumstances of this case. See Brief for American Bar Association as Amicus Curiae 5, 11–14; see also ABA Model Code of Judicial Conduct Rules 2.11(A)(1), (A)(6)(b) (2011) (no judge may participate “in any proceeding in which the judge’s impartiality might reasonably be questioned,” including where the judge “served in governmental employment, and in such capacity participated personally and substantially as a lawyer or public official concerning the proceeding”); ABA Center for Professional Responsibility Policy Implementation Comm., Comparison of ABA Model Judicial Code and State Variations (Dec. 14, 2015), available at http://www.americanbar.org/content/dam/aba/administrative/professional_responsibility/2_11.authcheckdam.pdf (as last visited June 7, 2016) (28 States have adopted language similar to ABA Model Judicial Code Rule 2.11); 28 U. S. C. §455(b)(3) (recusal required where judge “has served in governmental employment and in such capacity participated as counsel, adviser or material witness concerning the proceeding”). At the time Williams filed his recusal motion with the Pennsylvania Supreme Court, for example, Pennsylvania’s Code of Judicial Conduct disqualified judges from any proceeding in which “they served as a lawyer in the matter in controversy, or a lawyer with whom they previously practiced law served during such association as a lawyer concerning the matter. . . .” Pa. Code of Judicial Conduct, Canon 3C (1974, as amended). The fact that most jurisdictions have these rules in place suggests that today’s decision will not occasion a significant change in recusal practice. Chief Justice Castille’s significant, personal involvement in a critical decision in Williams’s case gave rise to an unacceptable risk of actual bias. This risk so endangered the appearance of neutrality that his participation in the case “must be forbidden if the guarantee of due process is to be adequately implemented.” Withrow, 421 U. S., at 47. III Having determined that Chief Justice Castille’s participation violated due process, the Court must resolve whether Williams is entitled to relief. In past cases, the Court has not had to decide the question whether a due process violation arising from a jurist’s failure to recuse amounts to harmless error if the jurist is on a multimember court and the jurist’s vote was not decisive. See Lavoie, supra, at 827–828 (addressing “the question whether a decision of a multimember tribunal must be vacated because of the participation of one member who had an interest in the outcome of the case,” where that member’s vote was outcome determinative). For the reasons discussed below, the Court holds that an unconstitutional failure to recuse constitutes structural error even if the judge in question did not cast a deciding vote. The Court has little trouble concluding that a due process violation arising from the participation of an inter-ested judge is a defect “not amenable” to harmless-error review, regardless of whether the judge’s vote was dispositive. Puckett v. United States, 556 U. S. 129, 141 (2009) (emphasis deleted). The deliberations of an appellate panel, as a general rule, are confidential. As a result, it is neither possible nor productive to inquire whether the jurist in question might have influenced the views of his or her colleagues during the decisionmaking process. Indeed, one purpose of judicial confidentiality is to assure jurists that they can reexamine old ideas and suggest new ones, while both seeking to persuade and being open to persuasion by their colleagues. As Justice Brennan wrote in his Lavoie concurrence, “The description of an opinion as being ‘for the court’ connotes more than merely that the opinion has been joined by a majority of the participating judges. It reflects the fact that these judges have exchanged ideas and arguments in deciding the case. It reflects the collective process of deliberation which shapes the court’s perceptions of which issues must be addressed and, more importantly, how they must be addressed. And, while the influence of any single participant in this process can never be measured with precision, experience teaches us that each member’s involvement plays a part in shaping the court’s ultimate disposition.” 475 U. S., at 831. These considerations illustrate, moreover, that it does not matter whether the disqualified judge’s vote was necessary to the disposition of the case. The fact that the interested judge’s vote was not dispositive may mean only that the judge was successful in persuading most members of the court to accept his or her position. That outcome does not lessen the unfairness to the affected party. See id., at 831–832 (Blackmun, J., concurring in judgment). A multimember court must not have its guarantee of neutrality undermined, for the appearance of bias demeans the reputation and integrity not just of one jurist, but of the larger institution of which he or she is a part. An insistence on the appearance of neutrality is not some artificial attempt to mask imperfection in the judicial process, but rather an essential means of ensuring the reality of a fair adjudication. Both the appearance and reality of impartial justice are necessary to the public legitimacy of judicial pronouncements and thus to the rule of law itself. When the objective risk of actual bias on the part of a judge rises to an unconstitutional level, the failure to recuse cannot be deemed harmless. The Commonwealth points out that ordering a rehearing before the Pennsylvania Supreme Court may not provide complete relief to Williams because judges who were exposed to a disqualified judge may still be influenced by their colleague’s views when they rehear the case. Brief for Respondent 51, 62. An inability to guarantee complete relief for a constitutional violation, however, does not justify withholding a remedy altogether. Allowing an appellate panel to reconsider a case without the participation of the interested member will permit judges to probe lines of analysis or engage in discussions they may have felt constrained to avoid in their first deliberations. Chief Justice Castille’s participation in Williams’s case was an error that affected the State Supreme Court’s whole adjudicatory framework below. Williams must be granted an opportunity to present his claims to a court unburdened by any “possible temptation . . . not to hold the balance nice, clear and true between the State and the accused.” Tumey v. Ohio, 273 U. S. 510, 532 (1927) . * * * Where a judge has had an earlier significant, personal involvement as a prosecutor in a critical decision in the defendant’s case, the risk of actual bias in the judicial proceeding rises to an unconstitutional level. Due process entitles Terrance Williams to “a proceeding in which he may present his case with assurance” that no member of the court is “predisposed to find against him.” Marshall v. Jerrico, Inc., 446 U. S. 238, 242 (1980) . The judgment of the Supreme Court of Pennsylvania is vacated, and the case is remanded for further proceedings not inconsistent with this opinion. It is so ordered.
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Petitioner Williams was convicted of the 1984 murder of Amos Norwood and sentenced to death. During the trial, the then-district attorney of Philadelphia, Ronald Castille, approved the trial prosecutor’s request to seek the death penalty against Williams. Over the next 26 years, Williams’s conviction and sentence were upheld on direct appeal, state postconviction review, and federal habeas review. In 2012, Williams filed a successive petition pursuant to Pennsylvania’s Post Conviction Relief Act (PCRA), arguing that the prosecutor had obtained false testimony from his codefendant and suppressed material, exculpatory evidence in violation of Brady v. Maryland, 373 U. S. 83 . Finding that the trial prosecutor had committed Brady violations, the PCRA court stayed Williams’s execution and ordered a new sentencing hearing. The Commonwealth asked the Pennsylvania Supreme Court, whose chief justice was former District Attorney Castille, to vacate the stay. Williams filed a response, along with a motion asking Chief Justice Castille to recuse himself or, if he declined to do so, to refer the motion to the full court for decision. Without explanation, the chief justice denied Williams’s motion for recusal and the request for its referral. He then joined the State Supreme Court opinion vacating the PCRA court’s grant of penalty-phase relief and reinstating Williams’s death sentence. Two weeks later, Chief Justice Castille retired from the bench. Held: 1. Chief Justice Castille’s denial of the recusal motion and his subsequent judicial participation violated the Due Process Clause of the Fourteenth Amendment. Pp. 5–12. (a) The Court’s due process precedents do not set forth a specific test governing recusal when a judge had prior involvement in a case as a prosecutor; but the principles on which these precedents rest dictate the rule that must control in the circumstances here: Under the Due Process Clause there is an impermissible risk of actual bias when a judge earlier had significant, personal involvement as a prosecutor in a critical decision regarding the defendant’s case. The Court applies an objective standard that requires recusal when the likelihood of bias on the part of the judge “is too high to be constitutionally tolerable.” Caperton v. A. T. Massey Coal Co., 556 U. S. 868 . A constitutionally intolerable probability of bias exists when the same person serves as both accuser and adjudicator in a case. See In re Murchison, 349 U. S. 133 –137. No attorney is more integral to the accusatory process than a prosecutor who participates in a major adversary decision. As a result, a serious question arises as to whether a judge who has served as an advocate for the State in the very case the court is now asked to adjudicate would be influenced by an improper, if inadvertent, motive to validate and preserve the result obtained through the adversary process. In these circumstances, neither the involvement of multiple actors in the case nor the passage of time relieves the former prosecutor of the duty to withdraw in order to ensure the neutrality of the judicial process in determining the consequences his or her own earlier, critical decision may have set in motion. Pp. 5–8. (b) Because Chief Justice Castille’s authorization to seek the death penalty against Williams amounts to significant, personal involvement in a critical trial decision, his failure to recuse from Williams’s case presented an unconstitutional risk of bias. The decision to pursue the death penalty is a critical choice in the adversary process, and Chief Justice Castille had a significant role in this decision. Without his express authorization, the Commonwealth would not have been able to pursue a death sentence against Williams. Given the importance of this decision and the profound consequences it carries, a responsible prosecutor would deem it to be a most significant exercise of his or her official discretion. The fact that many jurisdictions, including Pennsylvania, have statutes and professional codes of conduct that already require recusal under the circumstances of this case suggests that today’s decision will not occasion a significant change in recusal practice. Pp. 9–12. 2. An unconstitutional failure to recuse constitutes structural error that is “not amenable” to harmless-error review, regardless of whether the judge’s vote was dispositive, Puckett v. United States, 556 U. S. 129 . Because an appellate panel’s deliberations are generally confidential, it is neither possible nor productive to inquire whether the jurist in question might have influenced the views of his or her colleagues during the decisionmaking process. Indeed, one purpose of judicial confidentiality is to ensure that jurists can reexamine old ideas and suggest new ones, while both seeking to persuade and being open to persuasion by their colleagues. It does not matter whether the disqualified judge’s vote was necessary to the disposition of the case. The fact that the interested judge’s vote was not dispositive may mean only that the judge was successful in persuading most members of the court to accept his or her position—an outcome that does not lessen the unfairness to the affected party. A multimember court must not have its guarantee of neutrality undermined, for the appearance of bias demeans the reputation and integrity not just of one jurist, but of the larger institution of which he or she is a part. Because Chief Justice Castille’s participation in Williams’s case was an error that affected the State Supreme Court’s whole adjudicatory framework below, Williams must be granted an opportunity to present his claims to a court unburdened by any “possible temptation . . . not to hold the balance nice, clear and true between the State and the accused,” Tumey v. Ohio, 273 U. S. 510 . Pp. 12–14. __ Pa. __, 105 A. 3d 1234, vacated and remanded. Kennedy, J., delivered the opinion of the Court, in which Ginsburg, Breyer, Sotomayor, and Kagan, JJ., joined. Roberts, C. J., filed a dissenting opinion, in which Alito, J., joined. Thomas, J., filed a dissenting opinion.
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'The plaintiff in error insists that the map of its line of road was filed in 1859. The court of original jurisdiction finds that, up to the time of the trial in October, 1878, a period of nearly twenty years, no selection of these lands had ever been made by that company, or anyone for it. Was there a vested right in this company, during all this time, to have, not only these lands, but all the other odd sections within the 20-mile limits on each side of the line of the road, await its pleasure? Had the settlers in that populous region no right to buy of the government because the company might choose to take them, or might, after all this delay, find out that they were necessary to make up deficiencies in other quarters? How long were such lands to be withheld from market and withdrawn from taxation, and forbidden to cultivation? 'It is true that in some cases the statute requires the Land Department to withdraw the lands within these secondary limits from market, and in others, the officers do so voluntarily. This, however, is to give the company a reasonable time to ascertain their deficiencies and make their selections. 'It by no means implies a vested right in said company, inconsistent with the right of the government to sell, or of any other company to select, which has the same right of selection within those limits. Each company having this right of selection in such case, and having no other right, is bound to exercise that right with reasonable diligence; and when it is exercised in accordance with the statute, it becomes entitled to the lands as selected.' If the command of the statute were to withdraw from the market, instead of survey, all odd-numbered sections within the 40-mile strip, the position of the railroad company in this case would be impregnable; but as the withdrawal only extends to the lands 'hereby granted,' we must look elsewhere to ascertain the meaning of those precise words. There is good reason for withdrawing lands within the place limits, since these lands already belong to the railroad company, as soon as they are identified by the location of the line, while lands within the indemnity limits may never be required at all, and in most cases are required only to a limited extent. Undoubtedly the company acquires title to both classes of lands by the 3d section of the granting act; but it acquires a title to lands within the place limits by a present grant; but to land within the indemnity limits, only by a future power of selection. In both cases the statute is the origin of the title; but in the one case it gives instantaneously; in the other it is a mere promise to give in the future, and requires the action of the railroad to perfect it. The words 'hereby granted' evidently refer to the former. Treating this case as a reargument of the question involved in Hewitt v. Schultz, and it practically comes to that, we still adhere to the principle there announced. It seems to us the more reasonable, if not the necessary, inference to be deduced from the language of §§ 3 and 6. By the former there is 'hereby granted . . . every alternate section of public land, not mineral, designated by odd numbers, to the amount of twenty alternate sections per mile on each side of said railroad line, as said company may adopt, through the territories of the United States, and ten alternate sections of land per mile on each side of said railroad whenever it passes through any state.' These words terminate the grant, the remainder of the clause being immaterial in this connection, and if the whole clause had been followed by a period, instead of a semicolon, the meaning, perhaps, would have been clearer. But there follows another clause, that 'whenever, prior to said time, any of said section, or parts of sections, shall have been granted, sold, reserved, occupied by homestead settlers, or pre-empted, or otherwise disposed of, other lands shall be selected by said company in lieu thereof, under the direction of the Secretary of the Interior, in alternate sections, and designated by odd numbers, not more than 10 miles beyond the limits of said alternate sections,' etc. There is here a clear distinction between the lands granted in procsenti in the first clause, and lands to be thereafter selected by the company, whenever the deficiency in the granted lands shall be ascertained. The 6th section carries out the same idea. It requires a survey of 40 miles in width on both sides of the entire line, whether passing through states or territories. This would include only the granted or place limits within a territory, but within a state would cover the indemnity limits as well. There was no order in the act to withdraw any lands from settlement or sale, but such withdrawal seems to have been made in pursuance of the practice of the Interior Department, and for the purpose of preventing lands granted to the railroad company from being taken up by settlers, before the completion of the line and the final issue of patents. As was said by Mr. Secretary Lamar in the Atlantic & P. R. Co. 6 Land Dec. 84: 'Waiving all questions as to whether or not said granting act took from the Secretary all authority to withdraw said indemnity limits from settlement, it is manifest that the said act gave no special authority or direction to the executive to withdraw said lands; and when such withdrawal was made it was done by virtue of the general authority over such matters possessed by the Secretary of the Interior, and in the exercise of his discretion; so that, were the withdrawal to be revoked, no law would be violated, no contract broken.' But as the power to withdraw extends only to the 'lands hereby granted' and all other lands, except those hereby granted, remain open to settlement, we are thrown back upon § 3 to determine what are the lands 'hereby granted.' Now, as already observed, there is a clear distinction in § 3 between granted lands and lands to be selected after the deficiency in the granted lands has been ascertained. It is true that, prior to this selection being made, many of these indemnity lands may be taken up, and an insufficient amount left for the railroad (and we do not deny the force of the dissenting opinion in Hewitt v. Schultz in that connection), but we think this possibility serves rather as a basis for a further action by Congress, such as was made in the Northern Pacific case by the joint resolution of May 31, 1870 (16 Stat. at L. 378), than as a reason for withdrawing from settlement a vast amount of land which the railroad may never have occasion to require. It was said by Secretary Lamar in the case of the Atlantic & P. R. Co. 6 Land Dec. 84, 87: 'As to the lands within the indemnity limits, the contract was based upon two contingencies; that of losing lands within the granted limits, and being able to find sufficient to indemnify the company among the odd-numbered sections within a further limit of 10 miles. Here the interest of the company was so remote and contingent, being a mere potentiality, and not a grant, that Congress declined to order a withdrawal for the benefit of the same, or even a survey within the territories.' In view of the constant trend of population toward the western territories, it is a serious matter to withdraw these enormous tracts from settlement and hold them, as it were, in mortmain against the protest of those who stand ready to enter upon and possess them. It becomes still more serious when, as in this case, there was a delay of twenty-seven years between the granting act and the act of selection. It seems intolerable that a settler, who had entered and paid for lands in good faith, should be liable to an ouster after a possible lapse of twenty-seven years, when the very improvements he may have put upon the lands might be the reason for their selection by the company. We are therefore of opinion that the act of July 27, 1866, did not authorize the withdrawal by the Secretary of the Interior of the indemnity lands, that such lands remained open to homestead and pre-emption entry, and that patents issued to settlers within such indemnity limits, based upon the entries made prior to the selection by the railroad company, approved by the Interior Department, were valid as conveyances of the land as against the selection by the railroad company. The judgment of the Supreme Court of California is therefore affirmed.
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The Atlantic and Pacific Railroad Company took no title to lands within the indemnity limits of its grant until the deficiency in the place limits had been ascertained, and the company had exercised its right of selection. The Secretary of the Interior had no authority, upon the filing of a plat in the office of the Commissioner of the General Land Office, to withdraw lands lying within the indemnity limits of the grant from sale or preemption; and a patent issued to a settler under the land laws, prior to the selection made by the railroad company, of the land in dispute as lieu lands, was held to be valid, notwithstanding the lands lay within the forty-mile strip ordered by the act to be surveyed, after the general route of the road had been fixed. The case of Hewitt v. Schultz, 180 U. S. 139, followed and applied to the facts of this case.
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Appellant challenges the validity of the Act of the Alaska Legislature approved May 1, 1919 (Session Laws 1919, c. 29), which imposes upon each male person, with certain exceptions, within the territory or the waters thereof an annual poll tax of $5 to be used for school purposes; and also that portion of the Act of the same Legislature approved May 5, 1921 (Session Laws 1921, c. 31), which imposes an annual license tax of $5 upon every nonresident fisherman—the term 'to include all persons employed on a boat engaged in fishing.' Congress established an organized government for Alaska by the Act of August 24, 1912, c. 387, 37 Stats. 512 (Comp. St. § 3530). It declares that: 'The Constitution of the United States, and all the laws thereof which are not locally inapplicable, shall have the same force and effect within the said territory as elsewhere in the United States.' It also created a legislature, with power and authority which 'shall extend to all rightful subjects of legislation not inconsistent with the Constitution and laws of the United States,' subject to specified restrictions. One of them is this: 'Nor shall the lands or other property of nonresidents be taxed higher than the lands or other property of residents.' While residing in California, appellant was employed by appellee corporation, owner and operator, to serve as seaman and fisherman upon the sailing vessel Star of Finland. He sailed upon her to Alaska, and served with her there while she engaged in fishing, from the middle of May, 1921, until the middle of September. In compliance with the abovementioned statutes, appellee paid the taxes which they imposed upon him, and on final settlement charged the same against his wages. By this proceeding he seeks to recover the amount so deducted. Without opinion the court below sustained the validity of the taxes. Both statutes have been considered and upheld by the Circuit Court of Appeals for the Ninth Circuit. Alaska Packers' Association v. Hedenskoy, 267 Fed. 154; Northern Commercial Co. v. Territory of Alaska, 289 Fed. 786. Plainly, we think, the territorial Legislature had authority under the terms of the Organic Act to impose both the head and the license tax, unless, for want of power, Congress itself could not have laid them by direct action. Talbott v. Silver Bow County, 139 U. S. 438, 448, 11 Sup. Ct. 594, 35 L. Ed. 210; Binns v. United States, 194 U. S. 486, 491, 24 Sup. Ct. 816, 48 L. Ed. 1087; Alaska Pacific Fisheries v. United States, 248 U. S. 78, 87, 39 Sup. Ct. 40, 63 L. Ed. 138; Territory of Alaska v. Troy, 258 U. S. 101, 42 Sup. Ct. 241, 66 L. Ed. 487. Appellant went to the territory for the purpose of engaging in the business of fishing, and remained there for at least four months. He was not merely passing through—not a mere sightseer or tourist—but for a considerable period while so employed enjoyed the protection and was within the jurisdiction of the local government. To require him to contribute something toward its support did not deprive him of property without due process of law, within the Fifth Amendment. Such cases as Dewey v. Des Moines, 173 U. S. 193, 19 Sup. Ct. 379, 43 L. Ed. 665, and Union Refrigerator Transit Co. v. Kentucky, 199 U. S. 194, 202, 26 Sup. Ct. 36, 50 L. Ed. 150, 4 Ann. Cas. 493, relied upon to support the contrary view, are not controlling. The tax was upon an individual actually within the territory; there was no attempt to reach something in a mere state of transit or beyond the borders. Some general rules touching the taxation of property were pointed out in Brown v. Houston, 114 U. S. 622, 632, 633, 5 Sup. Ct. 1091, 29 L. Ed. 257, and Pullman's Palace Car Company v. Pennsylvania, 141 U. S. 18, 11 Sup. Ct. 876, 35 L. Ed. 613. No more stringent ones should be applied when poll taxes are questioned. Unless restrained by constitutional provision, the sovereign has power to tax all persons and property actually within its jurisdiction and enjoying the benefit and protection of its laws. Cooley on Taxation (3d Ed.) p. 22. We are not here concerned with taxation by a state. The license tax cannot be said to conflict with section 2, art. 4, of the Constitution: 'The citizens of each state shall be entitled to all privileges and immunities of citizens in the several states.' It applies only to nonresident fishermen; citizens of every state are treated alike. Only residents of the territory are preferred. This is not wholly arbitrary or unreasonable, and we find nothing in the Constitution which prohibits Congress from favoring those who have acquired a local residence and upon whose efforts the future development of the territory must largely depend. See Alaska Pacific Fisheries v. United States, supra, and Alaska Fish Co. v. Smith, 255 U. S. 44, 47, 48, 41 Sup. Ct. 219, 65 L. Ed. 489. None of the points relied upon by appellant is well taken, and the decree below must be affirmed.
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1. An annual poll tax, and an annual license imposed only on nonresident fishermen within Alaska, are within the power delegated to the Alaska legislature by the Organic Act. P. 514. 2. These taxes, as applied to a citizen of California who went to Alaska to engage in the business of fishing and remained there, so engaged, for four months, are not in conflict with the due process clause of the Fifth Amendment. Id. 3. Nor does the license tax, confined to non-residents, violate the "privileges and immunities" provision (Const., Art. IV, § 2,) ; nor was it arbitrary or unreasonable to favor local residents by exempting them from it. P. 515. Affirmed.
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Introduction Congress facilitated the development of railroads, especially railroads in the West, throughvarious forms of federal assistance. Primary among this assistance was the granting of rights of wayacross the public lands. Not all of these grants were the same, but some arguably contemplated aretained interest in the United States. As the continued operation of certain railways became lesspracticable and portions of rail lines were sold or closed, attention increasingly turned to title issuesand the nature and scope of the authority of Congress to dispose of rail corridors. This reportdiscusses the history of the federal railroad rights of way grants, the various forms such grants havetaken, and the provisions Congress has enacted to govern disposition of railroad rights of way. Thisreport will be updated as circumstances warrant. Background The middle of the nineteenth century witnessed a burst of federal legislation fostering theconstruction of railroads in America. (1) Many factors contributed to this legislative initiative, among themthe discovery of gold in California, the American civil war, the absence after secession of opposingvotes by southern states, and a desire to encourage the settlement and development of the vast newwestern territories, thereby increasing tax revenues, opening markets, and providing more adequatelyfor the defense of the West. It was also felt that transcontinental rail lines could not be built withoutsubstantial Federal assistance. The grants sometimes consisted only of a right of way across publiclands, but sometimes also included a greater subsidy in the form of additional grants of land,financial support, or both. Some land grants were made to states to be conveyed by them to arailroad company upon completion of specified segments of line. Other grants were made to railroadcorporations directly. Usually this latter course was followed if the route was to cross territoriesrather than states. Typically, in this latter instance, a federally chartered corporation was created bythe same legislation that established the land grants. Several transcontinental railroads were authorized in a ten-year period, including the UnionPacific/Central Pacific in 1862 and 1864, (2) the Northern Pacific in 1864, (3) the Atlantic and Pacific in1866, (4) and the TexasPacific in 1871. (5) Theterms of grants varied, but all of these railroads received a right of way and additional land grants. These lands were typically granted in a "checkerboard" layout -- blocks of railroad lands alternatedwith government-retained lands -- with the intent that the railroads would sell their lands to settlersto finance the railroad, and the presence of the railroad would make the retained government landsmore valuable. Other, non-transcontinental railroads also received federal grants to begin operation. By the time the fourth transcontinental line was authorized in 1871, vehement opposition wasdeveloping to the railroads that only a few short years before had received enthusiastic support. Asone historian put it, when the West "saw evidence that railroads were not prompt in bringing theirlands on the market and putting them into the hands of farm makers, the West turned from warmfriendship to outright hostility to railroads." (6) This hostility was reflected in a cessation of congressional land grants to railroads. (7) Congress did, however, wishto continue to encourage the expansion of railroads across the western lands. Special acts continuedto be passed that granted a right of way through the public lands of the United States to designatedrailroads, but this piecemeal approach was burdensome. In 1875, Congress enacted a statute knownas the "General Railway Right of Way Act (GRRWA)," (8) that granted a right of way two hundred feet wide across publiclands and, as codified at 43 U.S.C. § 934, states in pertinent part: The right of way through the public lands of the UnitedStates is granted to any railroad company duly organized under the laws of any State or Territory,except the District of Columbia, or by the Congress of the United States, which shall have filed withthe Secretary of the Interior a copy of its articles of incorporation, and due proofs of its organizationunder the same, to the extent of one hundred feet on each side of the central line of said road; alsothe right to take, from the public lands adjacent to the line of said road, material, earth, stone, andtimber necessary for the construction of said railroad; also ground adjacent to such right of way forstation buildings, depots, machine stops, side tracks, turnouts, and water stations, not to exceed inamount twenty acres for each station, to the extent of one station for each ten miles of itsroad. At times, railroads also acquired some rights through the exercise of state power of eminentdomain and through the exercise of federal power of eminent domain. In addition, some rights ofway were simply purchased by the railroads from non-federal owners. In the latter instance, therailroad obviously could hold full title to the right of way lands and the federal government none. By contrast, in those instances in which the right of way was obtained by an exercise of the federalpower of eminent domain, one would have to examine the particular authority for that exercise andalso the particular condemnation proceedings to determine the scope and conditions of the title therailroad obtained. This report does not address privately-owned railroad rights of way but discusses railroadrights of way granted by the federal government, either as part of a land grant or under the 1875 rightof way statute. Legal Nature of "Rights of Way" The courts have interpreted the right of way interests conveyed to railroads in various ways,and it has become increasingly difficult to reconcile the sequence of congressional enactments andjudicial holdings into a coherent body of law. A complete review of the extensive enactments,litigation, and interpretations is beyond the scope of this report, but some of the principal cases andissues are set out. The Supreme Court has said that a pre-1871 right of way granted to a land grant railroad wasa "limited fee," (9) while theright of way granted under the 1875 statute was an easement. (10) More recent cases seemto indicate that the terminology may not be of vital importance; the significance of the terms useddepends on the context in which an inquiry arises. (11) However, the "rail banking" provisions of the Rails to Trails Act(discussed below) have again resulted in a focus on the exact nature of the right of way interest andthe authority of Congress over rail corridors. To encourage settlement of the West, Congress notonly enacted railroad rights of way grants but also statutes that authorized the conveyance of landsto private citizens. The railroads crossed these lands and whether the "banking" of the rail corridorsonce trains no longer operate results in a taking of private property for which compensation is owedunder the 5th Amendment to the Constitution has been addressed in several recent cases discussedlater in this report. A review of property law terms may be helpful. Usually when land is granted to anotherowner, the conveyance is complete and final. If the interest conveyed is complete and includes allrights associated with the property, it is a "fee simple." It is possible, however, to convey less thanall property rights, or to convey title to a grantee so that title may revert to the grantor in somecircumstances. If the interest conveyed is only the right to use the land of another for a particularpurpose (such as the right to cross the land of another), the interest is an easement. There can be agradation of interests between fee title and an easement depending on the exclusivity of possessiongranted, the duration of the interest granted, and the completeness of the rights granted. A right ofway interest may be structured and conveyed in such a manner that the grantor retains a"reversionary" interest in the property, which means that the property may in some circumstancesrevert to the grantor. A fee grant may be made so that it continues only so long as some use or circumstancecontinues, and if that use or circumstance ceases, then title reverts automatically to the grantor. Thisis called a determinable grant. Or a fee grant may be interpreted as being made on the condition thatif "x" occurs, then the grantor may reenter the property, and title may revert to the grantor. This iscalled a grant on a condition subsequent. Both of these could be characterized as "limited fees,"since they are less than full fee title. The principal difference between these two types of grants is that in the former instance, noaction on the part of the grantor is necessary to reassert title; title reverts by action of law as soon asthe envisioned use or circumstance ceases. In contrast, if the grant is deemed to be a grant on acondition subsequent, the grantor must take some action to reassert title upon the breach (orfulfillment) of the condition (depending on whether the grant and condition were worded positivelyor negatively). This action usually takes the form of a judicial proceeding to determine that the termsof the condition have in fact been met or breached. If the right of way is a mere easement, at common law when the easement use ceases, theeasement simply disappears and the "servient" estate -- the land burdened by the easement -- nolonger is so burdened. (Therefore, it usually is not technically correct to speak of a "reversionaryinterest" in connection with a common law easement.) However, Art. IV, § 3, cl. 2 of the Constitution gives Congress the "Power to dispose of andmake all needful Rules and Regulations respecting the Territory or other Property belonging to theUnited States." When Congress grants a property interest, the grant is both a grant of property anda law and Congress is free to specify terms or elements different from those that otherwise wouldapply either by virtue of the common law or in other statutes. This fact seems to have been lost insome of the discussions of congressional railroad grants. A railroad grant may also be both a grantof a property interest and a contractual agreement between the federal government and therailroad. (12) One of the earlier cases in which the Supreme Court considered the title taken by a land-grantrailroad was Schulenberg v. Harriman in 1874, in which the Court said: "A legislative grant operatesas a law as well as a transfer of the property, and has such force as the intent of the legislaturerequires." (13) Considering all the conditions and provisos that in the legislation granted lands to the railroad inquestion, the court found the interests granted to the railroad to be a fee on condition, and that breachcould only be asserted by the government as grantor. In this respect, the Court clearly distinguishedbetween what could happen at common law where the two private parties were involved from thesecongressionally created property interests where one party was the sovereign government and mustenforce the terms of the property grant either by judicial proceedings or by legislative assertion thatwas the equivalent -- "the mode of asserting or of resuming the forfeited grant is subject to thelegislative authority of the government." (14) Another early case interpreted a land grant railroad right of way as a limited fee, made on animplied condition of reverter in the event that the company ceased to use the land for railroadpurposes. (15) In thiscase, the Court also said: "No express provision for a forfeiture was required to fix the rights of theGovernment. If an estate be granted upon a condition subsequent, no express words of forfeiture orreinvestiture of title are necessary to authorize the grantor to reenter in case of a breach of suchconditions." (16) It isimportant to note that this case involved private persons who had been patented lands over whichthe train tracks ran, and the Court voided those patents on the ground that they could not convey theblock of lands they purported to convey due to the fact that the railroad held limited fee title to theright of way strip of land. In 1875, Congress approved the general railroad right of way grant (GRRWA) using the samelanguage as in some of the land-grant rights of way grants: "The right of way through the publiclands of the United States is hereby granted to any railroad company ...." (17) The Supreme Court heldin Great Northern Railway Co. v. United States that this language clearly granted only a surfaceeasement rather than the strip of land right of way. (18) In reaching this conclusion, the Court looked to other languageof GRRWA, to administrative interpretations, and to subsequent enactments by Congress thatreferred to the "easements" given by the 1875 Act. The Court pointed to § 4 of the Act as especiallypersuasive in that it states that once each right of way is noted on plats in the local land office,"thereafter all such lands over which such right of way shall pass shall be disposed of subject to theright of way. " (Emphasis added.) "Apter words to indicate the intent to convey an easement wouldbe difficult to find." (19) As will be discussed, however, it is possible that Congress did not intend by this language torelinquish its authority over the ultimate disposition of the rail corridor. The Great Northern case illustrates the mixture of facts and terminology that rendersharmonizing the various judicial holdings difficult. In Great Northern , the United States sued toenjoin the plaintiff Railway Company from drilling for oil and gas beneath an 1875 right of way. The railroad owned the adjacent lands and hence at common law could have been the owner ofunderlying estate. No evidence of title in the United States was introduced; but the court allowedthe parties to stipulate that "the United States has retained title to certain tracts of land over whichpetitioner's right of way passes ...." (20) This stipulation avoided a resolution of issues involving thepossible rights of adjacent landowners or the nature of possible retained authority of Congress. In another case in which the government sued to enjoin a railroad company from drilling foroil and gas on the land-grant right of way granted it by the government, the Supreme Court ruled thatthe right of way grant did not include mineral rights because of other language in the Act thatexcepted out mineral lands -- language the Court held applied to the entire statute and not just togrants of lands. (21) Inreviewing the "limited fee" cases, the Court said that the most such cases decided was that "therailroads received all surface rights to the right of way and all rights incident to a use for railroadpurposes." This case has sometimes been regarded as holding that even land-grant rights of waywere merely easements, but in fact the Court held only that the grant did not give the mineral rightsto the owner of the right of way because nothing passed except what was conveyed in clear language;the grants were construed favorably to the government with doubts resolved in favor of thegovernment; and oil and gas development was not within the railroad purposes of the right of way. Nevertheless, the Supreme Court did strongly suggest that all railroad rights of way were easements. Although the courts have struggled at times to articulate the nature and scope of the interestheld by a railroad, the cases are clear that the right of way interest, whether limited fee or easement,is conditioned on the continued use of the right of way for railroad purposes, although that phrasemay be broadly construed. (22) Conveyances by the Railroads Congress has authorized the railroads to convey part of their rights of way for highwaypurposes. In 1920, Congress authorized railroads to convey to state, counties, or municipalities,portions of rights of way to be used as public highways or streets provided the conveyance wouldnot diminish the railroad right of way to less than 100 feet. As codified at 43 U.S.C. 913, thisprovision reads: § 913 Conveyance by land-grant railroads ofportions of rights-of-way to State, county, or municipality All railroad companies to which grants for rights of waythrough the public lands have been made by Congress, or their successors in interest or assigns, areauthorized to convey to any State, county, or municipality any portion of such right of way to be usedas a public highway or street: Provided , That no such conveyance shall have the effect to diminishthe right of way of such railroad company to a less width than 50 feet on each side of the center ofthe main track of the railroad as now established and maintained. (23) Section 16 of the Federal Highway Act of 1921 (24) gave the consent of the United States to any railroad or canalcompany conveyance to the highway department of any state "any part of its right of way or otherproperty in that State acquired by grant from the United States." Note that this provision did notmention the necessity for retaining the central right of way, and the legislative history offers noclarification on the point. The Federal Highway Act included language stating "all acts or parts ofacts in any way inconsistent with the provisions of this act are hereby repealed ...," and courts thathave addressed the issue have found that the 1921 enactment amended § 913, eliminating therequirement that the retained central core be 100 feet in width. (25) It is arguable, however,that because the railroad is only authorized to convey "property acquired" from the United States,neither a full fee title nor any retained interest of the United States could be conveyed. Under suchreasoning, the railroad must continue to use the right of way for railroad purposes or, if that useceased, the railroad could not convey the central core. In addition, if the railroad were legallyabandoned, the public highway exception in section 912 would still allow one year for anyabandoned portion of a right of way to be "embraced in a public highway." (26) Controversies have arisen as to the authority of the railroads to convey all or part of theirinterest in the rights of way aside from the highway context, and as to the authority of private citizensto obtain rights to property within the rights of way through adverse possession -- what might becharacterized as "squatter's rights." The Supreme Court interpreted the grant of a federal right of way as a unit, no portion ofwhich could be obtained for private purposes by adverse possession. By granting a right of way four hundred feet in width,Congress must be understood to have conclusively determined that a strip of that width wasnecessary for a public work of such importance, and it was not competent for a court, in the suit ofa private party, to adjudge that only twenty-five feet thereof were occupied for railroad purposes inthe face of the grant .... (27) Similarly, the court has held that the right of way purposes would be negated by the existenceof the power of the railroad to alienate the right of way or any portion of it. (28) Despite the limitations on the alienability of federal rights of way, the railroads still purportedto convey, and adjacent landowners continued to encroach upon, rights of way and claim rightsthereto. Over the years, Congress has repeatedly legislated to legitimize particular conveyances andactivities to alleviate the hardships to innocent purchasers. (29) In doing so, Congress hasconsistently asserted that Congress, not the railroads, had the authority to dispose of rail corridors. Many of the validation statutes involved land-grant railroad rights of way, which Congressrepeatedly characterized as limited fee grants with a reversionary interest in the federalgovernment. (30) Subsequent statutes interpreting and declaring the intent of earlier statutes are entitled to be givengreat weight in statutory construction. (31) In this context, Congress has enacted statutes for more than acentury that in text or committee reports refer to the reversionary interest of the United States, a pointthat will be discussed further below. A review of these enactments may shed light on the issues,although this consistent view of Congress that a residual interest remains in the United States hasnot figured prominently in judicial decisions thus far. Congressional Disposition of Underlying Federal Interests Congress legislated specially to provide for the final disposition of particular rights of wayno longer being used for railroad purposes, and in 1922 also enacted a general statute. (32) As codified at 43 U.S.C.§ 912, the 1922 statute provides that upon forfeiture or abandonment, the lands granted to anyrailroad company for use as a right of way for its railroad etc. would pass to a municipality if theright of way passed through one, or to adjacent landowners, except that a highway could beestablished within the right of way within one year after the date of a forfeiture or abandonment. Theprovisions state: Whenever public lands of the United States have beenor may be granted to any railroad company for use as a right of way for its railroad or as sites forrailroad structures of any kind, and use and occupancy of said lands for such purposes has ceasedor shall hereafter cease, whether by forfeiture or by abandonment by said railroad company declaredor decreed by a court of competent jurisdiction or by Act of Congress, then and thereupon all right,title, interest, and estate of the United States in said lands shall, except such part thereof as may beembraced in a public highway legally established within one year after the date of said decree orforfeiture or abandonment[,] be transferred to and vested in any person, firm, or corporation, assigns,or successors in title and interest to whom or to which title of the United States may have been ormay be granted, conveying or purporting to convey the whole of the legal subdivision or subdivisionstraversed or occupied by such railroad or railroad structures of any kind as aforesaid, except landswithin a municipality the title to which, upon forfeiture or abandonment, as herein provided, shallvest in such municipality, and this by virtue of the patent thereto and without the necessity of anyother or further conveyance or assurance of any kind or nature whatsoever: Provided , That thissection shall not affect conveyances made by any railroad company of portions of its right of wayif such conveyance be among those which have been or may after March 8, 1922, and before suchforfeiture or abandonment be validated and confirmed by any Act of Congress; nor shall this sectionaffect any public highway on said right of way on March 8, 1922: Provided further , That the transferof such lands shall be subject to and contain reservations in favor of the United States of all oil, gas,and other minerals in the land so transferred and conveyed, with the right to prospect for, mine andremove same. Note that this statute begins by referring to grants of lands for railroad rights of way, and atleast two fundamental elements of section 912 remain integral to disposition of railroad rights of way-- the concept of abandonment and the public highway exception. Under section 912, as amended, certain rights vest upon abandonment. (33) A finding of abandonmentmust also be declared by a court of competent jurisdiction or by an act of Congress. (34) What constitutesabandonment remains, however, somewhat uncertain. The relevant statutes do not defineabandonment, and no single court decision has definitively resolved the question. Likewise, thecongressional debate on the statute was limited and does not provide clarification of the intendedmeaning. (35) The courtsthat have addressed the abandonment requirement have often looked to common law principles ininterpreting the term. A particularly influential case has read § 912 to require a present intent toabandon as well as physical abandonment, evidenced by the cessation of tax payments related to theproperty, discontinuation of service and other railroad-related use, and removal of tracks. (36) Additional requirements,however, vary from circuit to circuit. The major point of dissension appears to be the status ofabandonment determinations by the Interstate Commerce Commission ("ICC") or, for cases arisingafter the termination of the ICC, by the Surface Transportation Board ("STB"). (37) The Tenth Circuit hasconsistently found such a determination a prerequisite to abandonment. (38) However, in the NinthCircuit, an ICC or STB determination of abandonment may not always be necessary. As stated in Vieux v. East Bay Regional Park District , "a railroad could abandon without any involvement fromthe I.C.C., if there is no injunctive action brought [by the I.C.C., the U.S. or state government] andif a court decrees that the railroad has abandoned the line. The I.C.C. regulation and processdetermine what effects an abandonment will have and what the railroad must do to counteract thoseeffects before it abandons, but they do not determine that an abandonment has actuallyoccurred." (39) Section 912 also established a public highway exception. A state or local agency has theright to include portions of any railroad right of way in a public highway within one year of its legalabandonment, thus eliminating other title claims. (40) The relevant committee report indicates: It seemed to the committee that such abandoned orforfeited strips are of little or no value to the Government and that in case of lands in ruralcommunities they ought in justice to become the property of the person to whom the whole of thelegal subdivision had been granted or his successor in interest. Granting such relief in reality giveshim only the land covered by the original patent. The attention of the committee was called,however, to the fact that in some cases highways have been established on abandoned rights of waysor that it might be desirable to establish highways on such as may be abandoned in the future. Recognizing the public interest in the establishment of roads, your committee safeguarded suchrights by suggesting the amendments above referred to protecting not only roads now established butgiving the public authorities one year's time after a decree of forfeiture or abandonment to establisha public highway upon any part of such right of way. (41) Two cases have held that the United States retained a reversionary interest in railroad rightsof way, including those established after 1871 (i.e. non-land grant railroad rights of way), and thatthe adjacent landowners had non-vested reversionary rights that were cut off when recreational trailuses were properly established as public highways under state law within the one-year publichighway exception set out in §§ 912 and 913. (42) The 1922 Act and the report language explaining it reveal an important point that arguablyhas not received adequate attention. Clearly, Congress believed that it had retained the authority toprovide for the disposition of railroad rights of way, whether because Congress continued to holdsome traditional property interest, such as a reversionary interest (note the reference to Congress'understanding that the rights of way were "strips" of land), or because its retained authority over thetermination of the rights granted was an element of the property interests granted . If the railroadrights of way exactly paralleled some common law property interest such as an easement, how canCongress make an alternative disposition of the underlying lands other than that which wouldotherwise apply at common law? The one-year window within which highways could be establishedin an abandoned rail corridor only makes sense if Congress retained the authority to deviate fromcommon law property rights with respect to termination of the grants. Recalling that the railroadgrants were both grants of a property interest and a law, the argument could be made that Congressintended as a matter of law to retain authority over the termination of the property rights granted. Arguably, this principle has been embodied in the enactments of Congress for more than a centurythat provided for the disposition of the rights of way. The importance of this question has beenhighlighted by recent cases involving the Rails to Trails litigation. "Rails to Trails" Congress has established a National Trails System to designate and manage a system ofnational trails. Amendments in 1983 (43) and 1988 (44) authorized the banking of railroad rights of wayto preserve themfor possible future railroad use and to allow interim use of the rights of way corridors for recreation. As indicated in the legislative history, Congress intended the trails system to increase recreationalopportunities, conserve natural resources, and, through the "Rails to Trails" provisions, preserverapidly diminishing rail corridors for possible future railroad use. (45) Specifically, the Rails toTrails provisions were enacted to deal with the problem of state property laws providing for theexpiration of easements upon abandonment. (46) As codified at 16 U.S.C. § 1247(d), Congress provided railroadswishing to discontinue service on a particular route an opportunity to negotiate with state, municipal,or private entities who were prepared to assume responsibility for conversion and management ofthe rail corridor as a trail. (47) If the negotiations were successful, the right of way would notbe deemed abandoned; rather it was considered to be under an "interim use," with the possibility thatrail service could be reinitiated in the future. (48) By avoiding final abandonment status, the railroad right of waydid not pass under applicable state law or 43 U.S.C. § 912. The 1988 amendment (16 U.S.C. § 1248(c)) provides for the retention by the federalgovernment of any and all federal interests in railroad rights of way. (49) The statute provides Commencing on October 4, 1988, any and all right, title,interest, and estate of the United States in all rights-of way of the type described in the Act of March8, 1922 (43 U.S.C. 912), shall remain in the United States upon the abandonment or forfeiture ofsuch rights-of way, or portions thereof, except to the extent that any such right-of way, or portionthereof, is embraced within a public highway no later than one year after a determination ofabandonment or forfeiture, as provided under such Act. (50) Section 1248(c) thus significantly changes the disposition of federal interests involved infederally-granted rail corridors over which trains no longer run, causing all interests to be retainedby the United States rather than passing to adjacent landowners or municipalities. By its ownlanguage, section 1248(c) confirms the continuing force of the 1922 Act, specifically reinforcing thecontinued vitality of §912 public highway exception. Accordingly, courts have continued torecognize §912 in so far as it does not conflict with section 1248(c). (51) 5th Amendment Takings Cases After the enactment of Rails to Trails, cases examined whether the retention of non-operatingrailroad rights of way for use as recreational trails constitutes a taking entitling the landowners to justcompensation under the 5th Amendment to the Constitution. With respect to some privately grantedrights of way, the Supreme Court in Preseault held that the law was constitutional because the"Tucker Act" (52) provided an avenue to obtain compensation if any were owed. (53) A subsequent caseinvolving the same plaintiffs held that a compensable taking had occurred, but that not every exerciseof authority by the United States under the Rails to Trails Act would necessarily result incompensable takings. The Preseault cases involved private fee-title landowners whose predecessorshad sold an easement for railroad purposes to a railroad. Ultimately, the Court of Appeals for theFederal Circuit decided that use of the right of way for recreational purposes was beyond the scopeof the easement granted and agreed to by the private parties, and hence the use of the corridor forthose purposes constituted a taking. (54) With respect to federal rights of way, early decisions after the 1988 statutory changeconcluded that, despite the absence of an explicit reservation of interest, the federal government didretain an implied interest when it patented (conveyed title to) lands crossed by federal railroadeasements into private ownership, such that the retention of the rights of way for interim use as trailswas not a taking, when a public highway was established under state law. (55) More recent cases haveheld the opposite. (56) There has not yet been a Supreme Court ruling in the federal right of way context. In the Hash case, (57) landowners brought a class action challenging a conversion ofa railroad right of way across their lands to a recreational trail. The federal district court for Idahofound no taking and plaintiffs appealed. The lower-court decision was vacated and remanded in lightof an Idaho Supreme Court decision. The right of way in question was granted under the 1875GRRWA, and the landowners argued that under the reasoning of Preseault , the application of theTrails Act after abandonment of railway use prevented the railroad easement from reverting to theowners of the servient estate and entitled them to compensation. This claim required the court toascertain whether the federal right of way was an easement and the claimant landowners owned theunderlying estate, or whether the underlying estate never left ownership by the United States, orwhether the estate was deeded in fee to the railroad. There were various categories of landowners,but for purposes of this report, we shall address only those who obtained title to their lands from thefederal government after the establishment of the railroad right of way, thereby raising the questionof what § 4 of the GRRWA means when it states that subsequent land owners take "subject to" theright of way. The court in Hash noted the previous cases that had held that the 1875 statute granted onlyeasements, and further noted that the United States had failed to expressly reserve any interest toitself when conveying lands to homesteaders, except that settlers took lands "subject to" the railroadright of way. "We have been directed to no suggestion, in any land patent, deed, statute, regulation,or legislative history, that can reasonably be construed to mean that the United States silentlyretained the fee to the land traversed by the right-of-way, when the United States granted that landto homesteaders." (58) Similarly, the court did not find that language directing the railroads to share their rights of way withhighways under either 43 U.S.C. § 912 or § 913 mandated the conclusion that the United States hadretained the fee to the land underlying the right of way after land patents including that land weregranted to private persons. Similarly, the court found that § 913 (that authorizes highways withinthe right of way for up to a year after abandonment) does not weaken the position of the landownersbecause it required that the rights of the United States be conveyed to the private owner. However,this reasoning arguably does not adequately take into account the fact that if the United States couldvalidly legislate regarding the one-year window for the establishment of the highways, Congressmust have had some interest in the right of way. As discussed above with respect to the statutesvalidating railroad right of way conveyances, Congress has repeatedly enacted statutes premised onsome legislative or proprietary interest over termination of the rights of way. Similarly, the court stated that the statute requires the United States to convey any rights ithas in the right of way, and that the statute does not indicate what rights the United States had. However, the statute actually directs that all right, title, and interest of the United States beconveyed, except for highways within the year after abandonment. "All" is not an equivocal wordas "any" is, and arguably may indicate that Congress believed there was such right or interest heldby the United States. The Beres case also involved an 1875 right of way, and the Court of Federal Claims held thatthe right of way granted only an easement, so that when the right of way was no longer used forrailroad purposes, the easement was lifted and no property interest reverted to the United States. When the underlying lands were patented, the court held, the government gave up all its interest inthe land, including any reversionary interest. This case again did not take into account the years ofenactments by Congress premised upon some retained interest or authority over the rights of way,nor the language of § 913 that on its face makes a disposition different from that which wouldpertain if the right of way were an easement at common law. The government in Beres again argued that the United States had retained some interest inthe railroad rights of way, quoting from Whipps Land & Cattle Co. v. Level 3 Communications, LLC in which the Nebraska Supreme Court stated that, "while the vocabulary of the common law of realproperty is often imported into the discussion of railroad rights-of-way, where those rights-of-wayhave been created by federal law, they are entirely creatures of federal statute, and their scope andduration are determined, not by common law principles, but by the relevant statutoryprovisions." (59) Thegovernment argued that even if the 1875 Act were an easement, Congress in the 1922 Act hadaffirmed its understanding that the United States had a reversionary interest in the rights of way evenwhere the whole of the land traversed had subsequently been patented. However, the discussion by both the government attorneys and the court devolved into anattempt to fit the various congressional actions into some traditional property interest. The courtstated the issue as being "whether the 1988 legislation can have retroactive effect on the transfer ofland rights which occurred years earlier...." The 1875 Act appeared to the court to have"intentionally omitted any words to create a reversionary right in the United States in grants ofrailroad rights of way, especially in light of the clarifying legislation in the 1922 Act, whichspecifically addressed the issue." An argument can be made that all elements of the court's reasoning miss the mark in that what land rights might have been transferred years earlier is part of the question; it is possible thatthe 1875 Act did not need to expressly create a reversionary right in the United States; and the 1922Act itself arguably reflects Congress' continuing belief that it had the power to dispose of part of theright of way in a manner different from what would pertain at common law. (60) Under Art. IV, § 3 of the Constitution, Congress has the authority to dispose of and make all needful Rules and Regulationsrespecting the Territory or other Property belonging to the United States.... Perhaps an avenue by which the enactments to date can be reconciled is the possibility thatCongress' actions were premised on its authority to legislate regarding the ultimate disposal of therights of way, and that this continuing authority over termination and disposition was an intrinsic partof both the railroad rights of way and the land titles homesteaders and others received when title waspatented "subject to the right of way." This retention of disposal authority makes sense of Congress'repeated and consistent enactments and accompanying committee reports regarding its "reversionaryinterest" in the rights of way. Perhaps Congress was using that term to indicate its reserved authorityto articulate the disposition of the rights of way upon termination of rail service. As one court saidwhen commenting on Congress' imprecise choice of words regarding another aspect of railroad landgrants: "[y]et it will not do for us to tell the Congress 'We see what you were driving at but you didnot use choice words to describe your purpose.'" (61) Perhaps many of the recurring difficulties could be resolved ifthe courts focused less on contradictory property/title words and more on the intent of Congressevident from decades of congressional enactments, including the 1922 Act, premised on Congress'continuing authority to specify disposition of terminating federal rights of way. There is analogous precedent for this approach in the "navigational servitude" context inwhich the government may sometimes take private property without compensation being owed underthe 5th Amendment. Over the years, the rationale for this result has been articulated either as annavigational easement of some sort implicitly reserved to the government -- i.e. a property interest-- or as a constitutional authority of the government that is always a part of all property conveyances,and hence no compensation is owed when it is exercised within the constitutional parameters. Therule of no compensation derives from the fact that the property damage "results from the lawfulexercise of a power to which the property has always been subject." (62) Most recently, this conceptmight be worded that the power of the government to take property for navigation purposes is abackground principle applicable to all title, and hence no compensation is owed because the ownernever had a property interest not subject to that limiting background principle of property law. (63) Similarly, the argument can be made that because Congress has the plenary power under Art.IV of the Constitution to provide for the regulation and disposal of the property of the United States,the power to control the ultimate disposal of federal rights of way was a part of the right of way titlethe railroads took and of the title homesteaders received to lands "subject to" the railroad right ofway. Arguably, if Congress made an alternative disposition of the lands before the conditions weremet that would have fully vested private title under the 1922 Act, no compensation would be owed. Congress could of course give up this authority, but arguably it must be clear that it has doneso. Again, in the context of the navigational servitude such a waiver "will not be implied, but insteadmust be surrendered in unmistakable terms, (64) and conferral by Congress of title to a streambed does not,without more, waive applicability of the navigational servitude. (65) Whether the courts will consider such an argument, of course, is not yet clear. However, thecases to date do not seem to have adequately taken into account the numerous enactments byCongress over the last 100 years, in which Congress has legislated regarding disposition of federalrailroad rights of way. Conclusion The legal status of land within any particular right of way depends on the interest held by arailroad or landowner, the general and particular applicable statutes, and the facts of a particularsequence of conveyances. Although Congress has on many occasions addressed the disposition ofrailroad rights of way, controversies may be expected to continue to arise because of issues as to thenature and scope of Congress' authority over the rights of way; the nature and scope of the interestof the railroad, the validity of attempts by the railroad to convey all or part of that interest,ambiguities associated with dating abandonment, disputes between adjacent landowners overperceived entitlements to lands within a right of way, and assertions that compensation is owed. Congress has from time to time legitimized conveyances that otherwise would be invalid, and inother legislation has permitted certain general types of conveyances. In particular, the conversionof federal rail corridors to recreational use under the Rails to Trails legislation may occasion furtherlitigation as to the interests held by the United States and those of adjacent landowners.
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During the drive to settle the western portion of the United States, Congress sought toencourage the expansion of railroads, at first through generous grants of rights of way and lands tothe great transcontinental railroads between 1862 and 1871, and later through the enactment of ageneral right of way statute. The 1875 General Railroad Right of Way Act permitted railroads toobtain a 200-foot federal right of way by running tracks across public lands. Some railroads alsoobtained rights of way by private purchase or through the exercise of state or federal powers ofeminent domain. Therefore, not all railroad rights of way are on federal lands, and the propertyinterest of a railroad in a right of way may vary. The courts have characterized the interest held bya railroad pursuant to a federally granted right of way variously: as a "limited fee" in the case of aland grant right of way, or as an easement in the case of a right of way under the 1875 Act. As railroads closed rail lines, questions arose as to the disposition of the lands within theformer rights of way. Many individual instances were resolved in separate legislation. In 1922,Congress enacted a general law to provide that federal railroad rights of way on federal lands becomethe property of the adjacent landowner or municipality through which the right of way passed. Thislaw is unclear in several respects -- for example, as to what procedures are sufficient to constitutean abandonment of a right of way, and on what authority Congress could provide for theestablishment of highways within the right of way after abandonment of the rail line. In 1988, inwhat is popularly known as the Rails to Trails Act, Congress opted to bank rail corridors, keepingthem available for possible future use as railroads and making them available for interim use asrecreational trails. Some cases have held that Rails to Trails results in takings of private property whennon-federal easements were involved. In the context of federal rights of way, recent cases have heldthat the federal government did not retain any interest in federal railroad rights of way when theunderlying lands were conveyed into private ownership, and therefore if an abandoned rail corridoris held for interim trail use, compensation is owed the adjacent landowners. However, Congress haslegislated numerous times over the years regarding federal railroad rights of way, as though Congressbelieved it had continuing authority over their ultimate disposition. Issues may continue to arisesurrounding the disposition of federal railroad rights of way, possibly involving, for example, theauthority of Congress over the rights of way, the nature of the interest held by the railroad, thevalidity of attempts by the railroad to convey all or part of that interest, and disputes betweenadjacent landowners over perceived entitlements to lands within a particular right of way. This report discusses the history of federal railroad rights of way and some of the casesaddressing them. It will be updated from time to time as circumstances warrant.
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G eorge Washington, Bob Hope, Joe Louis, the Wright Brothers, Robert Frost, Francis Albert "Frank" Sinatra, and Mother Teresa of Calcutta share a common bond in American history. These notable personages, together with approximately 300 other individuals and the American Red Cross, have been accorded the unique distinction of being awarded a Congressional Gold Medal. Through these awards, Congress has expressed public gratitude for distinguished contributions, dramatized the virtues of patriotism, and perpetuated the remembrance of great events. This tradition, of authorizing individually struck gold medals bearing the portraits of those so honored or images of events in which they participated, is rich with history. Although Congress has approved legislation stipulating specific requirements for numerous other awards and decorations, there are no permanent statutory provisions specifically relating to the creation of Congressional Gold Medals. When such an award has been deemed appropriate, Congress has, by special action, provided for the creation of a personalized medal to be given in its name, which would in each instance truly record the approbation of a grateful country. Practices Adopted During the American Revolution Congress from the outset was "imbued with the conviction that only the very highest achievements [were] entitled to such a distinction, and that the value of a reward is enhanced by its rarity!" Instituting such a tradition was considered "both a legitimate function and powerful instrument of nationality." "Few inventions," Colonel David Humphrey wrote in 1787, "could be more happily calculated to diffuse the knowledge and preserve the memory of illustrious characters and splendid events than medals—whether we take into consideration the imperishable nature of the substance whence they are formed, the facility of multiplying copies, or the practice of depositing them in the cabinets of the curious." With these words, Humphrey, who had the responsibility for having the first gold medals struck in Paris, captured the essence of the feelings which inspired the Continental Congress to choose medals as its highest distinction and expression of national appreciation. Following a long-standing historical practice, Congress commissioned gold medals as tributes for what were considered to be the most distinguished achievements. Silver and bronze medals, and ceremonial swords, were awarded for less eminent, but still notable, accomplishments. Of these, only the gold medal has been continuously awarded to the present day. The Continental Congress had not yet proclaimed its independence from Great Britain when, on March 25, 1776, George Washington, commander of the Continental Army, was tendered the first Congressional Gold Medal for his "wise and spirited conduct" in bringing about British evacuation of Boston. During the next 12 years, the Continental Congress authorized an additional six gold medals for Revolutionary military and naval leaders. In 1777, Major General Horatio Gates was recognized for his "brave and successful efforts" in bringing about the surrender of the British Army at Saratoga. Two years later, a similar honor was bestowed upon Major General Anthony Wayne in 1779 for his courageous assault on the British at Stony Point, NY. A gold medal was also given to Major Henry Lee in commemoration of the skill and bravery he exhibited against the British at Paulus Hook, NJ. Brigadier General [author name scrubbed] and Major General Nathaniel Greene were praised for their gallant efforts in South Carolina during 1781. Six years later, John Paul Jones was similarly honored for his "valor and brilliant services" in capturing the Serapis. First Medals Were Struck in Paris While the Continental Congress was prompt in approving each of these medals, those responsible for carrying out the wishes of Congress were far less expeditious. Because of its close ties with France, Congress turned to Paris for advice and assistance in having the medals struck. Unfortunately, Congress's preoccupation with the American Revolution, together with the lengthy and complicated procedures which had to be followed in Paris, produced long delays. Thomas Jefferson was not able to present Washington his gold medal until March 21, 1790, some 14 years after it had been approved. At the same time, Washington received a mahogany box containing a number of other gold medals ordered by Congress. Soon thereafter, these medals were transmitted by the former President to the various recipients. The gold medal conferred upon Major Henry "Light Horse Harry" Lee for his "remarkable prudence" and "bravery" during the surprise raid of Paulus Hook, NJ, was the first to be struck in this country. Recipients in the Nineteenth Century Following the ratification of the Constitution, the first gold medal authorized by the Congress of the United States was given to Captain Thomas Truxtun in 1800 for his gallant effort during the action between the United States frigate Constellation and the French ship La Vengeance . In 1805, Commodore Edward Preble received a gold medal for gallantry and good conduct during the War with Tripoli. War of 1812 Subsequently, Congress commissioned 27 gold medals for notable victories and achievements in the War of 1812. This was more than four times as many as it had given during the American Revolution. "Scarcely a victory of any consequence was overlooked." The gold medal Congress approved on February 22, 1816, honoring Captain James Biddle's "gallantry" in capturing the British sloop-of-war Penguin , was the final naval award of this character awarded by Congress until World War II. Mexican War Gold medals would continue to be awarded for military achievements until the Civil War, but with far less frequency. In part this is explained by the fact that in the War with Mexico naval operations were negligible and military operations were principally confined to two expeditions led, respectively, by Major General Zachary Taylor and Major General Winfield Scott. Taylor's heroics against the Mexicans earned him gold medals on three different occasions. Scott, for his efforts, was accorded a gold medal in 1848. Gold medals were also given to 10 officers and seamen belonging or attached to the French, British, and Spanish ships-of-war, who on December 10, 1846, gallantly rescued 37 of the officers and crew from the wreck of the United States brig Somers in Vera Cruz harbor. Heroic action of a very different type in 1854 prompted Congress to praise Commander Duncan N. Ingraham of the USS St. Louis for his efforts in rescuing Martin Koszta from illegal seizure and imprisonment aboard the Austrian war-brig Hussar . Congress Broadens the Scope of Its Gold Medal Soon after the Hussar episode, Congress broke with its tradition of only honoring heroism associated with the actions of American military or naval personnel. In 1858, Dr. Frederick A. Rose, an assistant-surgeon in the British Navy, was recognized for his kindness and humanity to sick American seamen aboard the U.S. steamer Susquehannah whose crew had been stricken with yellow fever. At the behest of President Abraham Lincoln, Congress applauded Cornelius Vanderbilt in 1864 for his patriotic gift to the imperiled nation of a steamship which bore the donor's name. Three years later, Cyrus W. Field was praised for his work in the laying of the transatlantic cable. Tribute was similarly paid to Private George F. Robinson for his "heroic conduct" in saving Secretary of State William H. Seward from an assassin's knife on April 14, 1865. At the same time, Congress established the first permanent American military decoration with creation of the Medal of Honor. This award, which was conceived in the early 1860s, marked the beginning of a formalized policy by the United States of awarding military decorations. Although this medal was also to be presented in the name of the Congress of the United States and today is often referred to as the Congressional Medal of Honor, the regulations for awarding the Medal of Honor have from the beginning been the responsibility of the armed services. There is a clear distinction between the Medal of Honor, which is a military award, and Congressional Gold Medals, which are authorized by Congress to honor particular individuals and events. During the Civil War, more than 1,500 Americans were awarded the Medal of Honor, but only one individual—Ulysses S. Grant—received a Congressional Gold Medal. Thirty-five years were to pass before Congress would bestow the award on another American military leader. On five occasions, in the interim, Congress expressed its gratitude for lifesaving contributions. In 1866 three merchant sea captains were recognized with gold medals for rescuing some 500 men from the wreck of the steamship San Francisco more than a decade earlier. In 1873, Congress expressed its admiration for the 10 men from Westerly, RI, who saved the lives of 32 persons from the wrecked steamer Metis , in the waters of Long Island Sound. The following year, the heroics of John Horn, Jr., who during an 11-year period had rescued 110 men, women, and children from drowning in the Detroit River, captured the attention of Congress. Joseph Francis was thanked in 1888 for his "life-long service to humanity" in the construction and perfection of lifesaving appliances, which had been instrumental in saving several hundreds of lives. In 1890, George Wallace Melville, chief engineer aboard the Arctic exploring steamer Jeannette , and seven of his shipmates were praised for their persistent efforts to find and assist their commanding officer after they became shipwrecked. Nineteenth-century contributions of a far different nature prompted expressions of gratitude to philanthropists George Peabody of Massachusetts and John F. Slater of Connecticut for their substantial financial support for education of the underprivileged in the South and Southwest. Recipients in the 20th and 21st Centuries In the 20 th and 21 st centuries, Congress continued to broaden the scope of such honors to include recognition of excellence in such varied fields as the arts, athletics, aviation, diplomacy, entertainment, exploration, medicine, politics, religion, and science. Actors, Artists, Authors, Entertainers, and Musicians Nineteen Americans from the arts and the world of entertainment have received Congressional Gold Medals to date. Composer George M. Cohan was the first to be so acclaimed, in 1936, for his patriotic songs "Over There" and "A Grand Old Flag." Some 18 years later, in recognition of Irving Berlin's brilliance in composing "God Bless America" and other patriotic songs, Congress bestowed its second gold medal on an American song writer. During the 1960s, poet Robert Frost was praised for enriching the culture of the world, comedian Bob Hope was honored for outstanding "service to his country and the cause of peace," and filmmaker Walt Disney was singled out for his "outstanding contributions to the United States and the world." Opera singer and humanitarian Marian Anderson and actor John Wayne were similarly decorated for their distinguished careers and contributions to the nation and world in the late 1970s. Since 1980, author Louis L'Amour, choral music conductor Fred Waring; entertainer and humanitarian Danny Thomas; and author Elie Wiesel, one of the foremost spokesmen of the victims of the Holocaust, were so honored. Singer Harry Chapin was recognized for his efforts to address issues of hunger around the world. In addition, Congress has memorialized the contributions of George and Ira Gershwin to American music, theater, and culture; Aaron Copland to American music composition; Andrew Wyeth to American art; Frank Sinatra to the entertainment industry through his endeavors as a producer, director, actor, and vocalist; and Charles M. Schulz to comic illustration. In 2008, Constantino Brumidi was recognized for his contributions to the nation as a designer and decorator of the U.S. Capitol. Aeronautical and Space Pioneers Gold medals for outstanding contributions in air and space exploration have covered a broad spectrum of accomplishments. In a public ceremony at Dayton, Ohio, on June 18, 1909, Wilbur and Orville Wright were presented Congressional Gold Medals for their achievements in demonstrating to the world the potential of aerial navigation. Congress recognized Charles A. Lindbergh for his aeronautical achievements in 1928. A year later, the seven officers and men who conceived, organized, and commanded the first trans-Atlantic flight in the United States naval flying boat NC-4 were honored. Howard Hughes was praised in 1939 for "advancing the science of aviation." At the close of World War II, Congress authorized a gold medal for American military aviation pioneer Brigadier General William (Billy) Mitchell. In September 1959, Dr. Robert H. Goddard's "historic pioneering research on space rockets, missiles, and jet propulsion" was acclaimed by Congress. Since that time, gold medals have been given to Lieutenant General Ira C. Eaker for his "distinguished career as an aviation pioneer and Air Force leader"; and to the first transatlantic balloonists: Ben Abruzzo, Maxie Anderson, and Larry Newman. Four decades later, in conjunction with the 40 th anniversary of mankind's historic and first lunar landing in 1969, Congress honored Neil A. Armstrong, the first human to walk on the Moon; Edwin E. "Buzz" Aldrin, Jr., the pilot of the lunar module and second person to walk on the Moon; Michael Collins, the pilot of their Apollo 11 mission's command module; and John Herschel Glenn, Jr., who, in 1962, became the first American to orbit the Earth. Antarctic Explorers Congressional tributes have also been extended to several explorers of Antarctica. American explorer Lincoln Ellsworth received a gold medal for his polar flight of 1925 and transpolar flight of 1926. Also participating in the latter flight, and similarly honored, were Norwegian explorer Roald Amundsen and Italian explorer Umberto Nobile. The undaunted services rendered by Rear Admiral Richard E. Byrd and the other members of the Byrd Expedition were praised with equal exuberance in 1930. Six years later, Lincoln Ellsworth received a second gold medal for his claims on behalf of the United States of approximately 350,000 square miles in Antarctica and for his 2,500-mile aerial survey of the heart of Antarctica. Acclaimed Lifesavers Despite the fact that several different lifesaving medals have been provided for over the years by law, Congress has still periodically expressed its own admiration for acts of heroism. In 1865, Congress praised George F. Robinson for his heroic conduct in fighting off an assassin attempting to kill Secretary of State William H. Seward. Two American sea captains, Captain Edwin J. Low, of the bark Kilby of Boston, and Captain George C. Stouffer, of the ship Antarctic of New York, were recognized in 1866 for aiding in the rescue of some 500 men from the wreck of the steamship San Francisco . Six years later, Congress lauded Captain Jared S. Crandall and nine other men of Westerly, RI, for manning a life-boat and a fishing boat to save the lives of 32 persons from the wreck of the steamer Metis on the waters of Long Island Sound. A Gold Medal was awarded to John Horn, Jr., in 1874 for his heroic exploits in rescuing 110 men, women, and children from drowning in Detroit River. Congress in 1888 acknowledged the work of Joseph Francis in the construction and perfection of life-saving appliances by which many thousands of lives have been saved. In 1902, three members of the Revenue Cutter Service were praised for a nearly 2,000-mile overland relief expedition to the American whaling fleet in the arctic region. At a March 1, 1913, White House ceremony, Captain Arthur Henry Rostron, commander of the steamship Carpathia , received a gold medal from President William Howard Taft for his prompt and heroic response in rescuing 704 survivors from the wreck of the Titanic . The following March, Captain Paul H. Kreibohm of the American steamer Kroonland , and four members of his crew, were awarded gold medals for rescuing 89 people from the burning steamer Volturno in the North Atlantic. Rev. Francis X. Quinn, pastor of the Church of the Guardian Angel in New York City, was honored in 1939 for risking his life in persuading an armed gunman holding an elderly couple hostage to surrender to police. The following January, a medal was authorized for William Sinnott, who had been wounded while guarding Franklin D. Roosevelt in Miami just prior to his first inauguration. A year later, 11-year-old Roland Boucher of Burlington, VT, saved the lives of four children who had broken through the ice on Lake Champlain near Juniper Island. Congress saluted Boucher's bravery and heroism in 1943. Distinguished Military Personnel In 1900, Congress once again returned to the practice of recognizing distinguished military service when it praised First Lieutenant Frank H. Newcomb, commander of the revenue cutter Hudson for rescuing the United States naval torpedo boat Winslow under a "most galling fire from the enemy's guns." At the conclusion of World War II, the valor, bravery, and heroism of Fleet Admiral Ernest J. King and General of the Army George C. Marshall, two of America's most able military leaders during the war, were recognized. Also in 1946, General John J. Pershing was honored for his "heroic achievements" as Commander in Chief of the American Expeditionary Forces in Europe in World War I and for his "unselfish devotion to the service of his country" during World War II. The four known surviving veterans of the Civil War received Congressional Gold Medals a decade later. Rear Admiral Hyman George Rickover was applauded in 1958 for his achievements in "directing the development and construction of the world's first nuclear-powered ships and the first large-scale nuclear power reactor devoted exclusively to the production of electricity." A quarter of a century later, Rickover was accorded a second gold medal for his contributions to the "development of safe nuclear energy and the defense of the United States." Meanwhile, in 1962, Congress authorized a Congressional Gold Medal for General Douglas MacArthur in recognition of his "gallant service" to the United States. Three other military leaders were so acclaimed in the 1990s. General Matthew B. Ridgeway's more than 40 years of distinguished service as a military commander earned recognition at the beginning of the decade. Following Operation Desert Storm, which culminated with the successful liberation of the nation of Kuwait, General H. Norman Schwarzkopf and General Colin L. Powell were honored. Schwarzkopf was cited for his "exemplary performance as a military leader in coordinating the planning, strategy, and execution of the United States" and coalition forces in liberating Kuwait. Powell was recognized for his "exemplary performance as a military leader and advisor to the President in planning and coordinating the military response to the Iraqi invasion of Kuwait." In 2000, Congress recognized the contribution of the original 29 Navajo Marine Corps Radio Operators, known as the "Navajo Code Talkers," who developed a code using their native language to communicate military messages during World War II. The code developed by these Native Americans proved to be unbreakable and was used extensively throughout the Pacific theater. Military commanders credited use of the Navajo Code with "saving lives of countless American soldiers and the success of the engagements of Guadalcanal, Tarawa, Saipan, Iwo Jima, and Okinawa." With the Code Talkers Recognition Act of 2008, Congress recognized the dedication and valor of Native American code talkers from other tribes for their contributions to United States victories in World War I and World War II. General Henry H. Shelton, Chairman of the Joint Chiefs of Staff (October 1997-September 2001), was honored in 2001 for his leadership in coordinating the United States and NATO successful combat action throughout Operation Allied Force in the Balkans. In a unique action early in 2006, Congress honored the Tuskegee Airmen collectively with a single Congressional Gold Medal in recognition of their unique military record, which inspired revolutionary reform in the Armed Forces. The presentation ceremony was held in the Capitol Rotunda on Thursday, March 29, 2007. Following presentation by the President, the medal was given to the Smithsonian Institution, where it was to be displayed. Congress used a similar approach in 2009, awarding the Women Airforce Service Pilots of World War II collectively for their "pioneering military service and exemplary record." The "WASP," as they were known, were the first women in history to fly American military aircraft. This medal, like the Tuskegee Gold Medal, is to be given to the Smithsonian Institution for display as appropriate. In 2010, another collective medal was awarded, to the 100 th Infantry Battalion, the 442 nd Regimental Combat Team, and the Military Intelligence Service United States Army, in recognition of their "bravery, valor, and dedication to country … while fighting a 2-fronted battle of discrimination at home and fascism abroad." Two other collective medals were awarded in 2011. The first was awarded to the Montford Point Marines, in recognition of "their personal sacrifice and service to their country" as the first African-American Marines. The second was awarded to all fallen heroes of 9/11, in "honor of the men and women who perished as a result of the terrorist attacks on the United States on September 11, 2001." In 2013, Congress awarded a collective medal to the First Special Service Force, in recognition of "its superior service during World War II." In 2014, Congress awarded collective medals to five groups associated with World War II: the American Fighter Aces, the Doolittle Raiders, The World War II Civil Air Patrol, the Monuments Men, and the 65 th Infantry Regiment, known as the Borinqueneers. In 2016 Congress awarded collective medals to two groups: the Filipino Veterans of World War II, and the Office of Strategic Services. Notables in Agriculture, Science, and Medicine Historic achievements in agriculture, science, and medicine also have been watched closely by Congress. For discovering the cause and means of transmission of yellow fever, Major Walter Reed and his 21 associates were recognized in 1928. Gold medals were subsequently authorized for Mrs. Richard Aldrich and Anna Bouligny some four decades after their outstanding, unselfish, and wholly voluntary service in establishing and operating "hospitals for the care and treatment of military patients in Puerto Rico" during the War with Spain. Thomas A. Edison was honored for the development and application of "inventions that have revolutionized civilization." Similar congressional tributes were subsequently extended to Dr. Jonas E. Salk, for discovering a serum for the prevention of polio, to Dr. Thomas Anthony Dooley III for his unselfish medical care among the underprivileged peoples of the world, particularly in southeast Asia, and to Mary Lasker, whom some considered the first lady of medicine and science in this country, for her "humanitarian contributions in the area of medical research and education, urban beautification and the fine arts." Congress recognized Nobel Laureate Dr. Norman E. Borlaug, "whose accomplishments in terms of bringing radical change to world agriculture and uplifting humanity are without parallel." Internationally recognized physician and surgeon Dr. Michael Ellis DeBakey was lauded for his pioneering work in the field of cardiovascular surgery, as well as for his innovative research into this and other fields of medicine. Awards for Public Service, Athletic Prowess, Civil Rights Activism, and Humanitarian Contributions The first politician to be honored with a gold medal was Vice President Alben W. Barkley in 1949. Since that time, Congress has saluted the distinguished and dedicated public service of Sam Rayburn, Robert F. Kennedy, Hubert Humphrey, Harry S. Truman, former President Gerald R. Ford and his wife Betty, and former President Ronald Reagan and his wife Nancy. Tribute was also paid to Representative Leo J. Ryan, following his "untimely" assassination while performing his responsibilities as a Member of the House of Representatives in Guyana. Most recently, former Senator Edward William Brooke III, of Massachusetts, the first African American elected by popular vote to the U.S. Senate, was recognized for his unprecedented and enduring service to our nation. Athletes so recognized have been baseball hall of famers Roberto Clemente and Jackie Robinson, heavyweight boxing champion Joe Louis, track and field star Jesse Owens, and golfers Byron Nelson and Arnold Palmer. Clemente was also praised for his "civil, charitable, and humanitarian contributions," Robinson for "many contributions to the nation," Louis for bolstering the "spirit of American people during one of the most critical times in American history," Owens for his "humanitarian contributions to public service, civil rights, and international goodwill," Nelson "for his significant contributions ... as a teacher and a commentator," and Palmer for "his service to the Nation in promoting excellence and good sportsmanship in golf." A lifelong commitment to the principles of freedom, equality, justice, and peace earned civil rights worker Roy Wilkins acclaim on Capitol Hill. The Little Rock Nine—Jean Brown Trickey, Carlotta Walls LaNier, Melba Patillo Beals, Terrence Roberts, Gloria Ray Karlmark, Thelma Mothershed Wair, Ernest Green, Elizabeth Eckford, and Jefferson Thomas—were recognized for the selfless heroism they exhibited "in the cause of civil rights by integrating Central High School in Little Rock Arkansas." Rosa Parks, the "First Lady of Civil Rights," was honored for her "quiet dignity," which "ignited the most significant social movement in the history of the United States." Praise was bestowed on Dr. Dorothy Height for her contribution "as one of the preeminent social and civil rights activists of her time, particularly in the struggle for equality, social justice, and human rights for all people." Reverend Joseph A. DeLaine, Harry and Eliza Briggs, and Levi Pearson were saluted "for their contributions to the Nation as pioneers in the effort to desegregate public schools that led directly to the landmark desegregation case of Brown et al. v. the Board of Education of Topeka et al." Reverend Doctor Martin Luther King, Jr., and his wife Coretta Scott King, were lauded for their contribution "to the Nation on behalf of the civil rights movement." Sustained efforts to preserve the beauty of our nation prompted praise for Lady Bird Johnson and Laurence Spelman Rockefeller. Lady Bird was applauded for her "outstanding contributions to the improvement and beautification of America," and Rockefeller for his "leadership on behalf of natural resource conservation and historic preservation. Marking humanitarian efforts, 12 of the 53 gold medals awarded by the 103 rd -106 th Congresses were given to individuals who have dedicated their lives to the service of others. Rabbi Menachem Mendel Schneerson, the leader of the Lubavitch movement for more than four decades, was recognized for his "outstanding and enduring contributions toward world education, morality, and acts of charity." Billy Graham, "America's most respected and admired evangelical leader for the past half century," and his wife Ruth, were honored for "their outstanding and enduring contributions toward faith, morality, and charity." Former President Gerald Ford and his wife Betty were honored "their dedicated public service and outstanding humanitarian contributions to the people of the United States." Mother Teresa of Calcutta was acclaimed for her nearly 70 years of "selfless dedication to humanity and charitable works." Ecumenical Patrick Bartholomew, the spiritual leader of 300 million Orthodox Christians around the world, was lauded for "outstanding and enduring contributions to religious understanding and peace." Nelson Rolihlahla Mandela was cited for his "lifelong dedication to the abolition of apartheid and promotion of reconciliation among the people of the Republic of South Africa." Congress honored Father Theodore M. Hesburgh, President of the University of Notre Dame from 1952 until 1987, for his "outstanding and enduring contributions to civil rights, higher education, the Catholic Church, the Nation, and the global community." John Cardinal O'Connor, Archbishop of New York, was recognized for "his accomplishments as a priest, a Navy chaplain, and a humanitarian." Tribute was paid to Pope Paul II for "his many and enduring contributions to peace and religious understanding." Enduring and outstanding contributions to peace, non-violence, human rights, and religion won acclaim for Tenzin Gyatso, the Fourteenth Dalai Lama. Recognition was bestowed on Daw Aung San Suu Kyi for "her courageous and unwavering commitment to peace, nonviolence, human rights, and democracy in Burma." Dr. Muhammad Yunus was recognized for his "contributions to the fight against global poverty." These recent awards are not without precedent, since the first and only Gold Medal given to an organization honored the American Red Cross in 1979 for "unselfish and humanitarian service to the people of the United States." In 2013, Congress awarded a gold medal to Addie Mae Collins, Denise McNair, Carole Robertson, and Cynthia Wesley, to "commemorate the lives they lost … in the bombing of the Sixteenth Street Baptist Church." In 2014, Jack Nicklaus was a awarded a gold medal in "recognition of his service to the Nation in promoting excellence, good sportsmanship, and philanthropy." In 2015, the Foot Soldiers of the Voting Rights Movement were awarded a gold medal in recognition of their "extraordinary bravery and sacrifice [that] brought national attention to the struggle for equal voting rights, and served as the catalyst for Congress to pass the Voting Rights Act of 1965." Foreign Recipients Thirty-one of the Congressional Gold Medals authorized to date have gone to non-Americans. In 1847, 10 officers and men belonging to or attached to French, British, and Spanish ships-of-war in the harbor of Vera Cruz captured congressional attention for aiding in the rescue of officers and crew of the United States brig Somers . Eight years after Congress paid tribute to Dr. Frederick A. Rose of the British Navy in 1858, Captain Robert Creighton, of the British ship Three Bells, won acclaim for aiding in the rescue of survivors from the steamship San Francisco . Gold medals were also given to Señor Domicio da Gama, Señor Rómulo S. Naón, and Señor Eduardo Suárez, the diplomatic representatives of Argentina, Brazil, and Chile who acted as mediators between the United States and Mexico in 1914; and to Norwegian explorer Roald Amundsen and Italian explorer Umberto Nobile for their participation in American explorer Lincoln Ellsworth's polar flight of 1925 and his 1926 transpolar flight. In 1969, President Nixon was authorized to present a gold medal in the name of the United States and in the name of Congress to the widow of the late British Prime Minister Winston Churchill. Canadian Ambassador to Iran Kenneth Taylor was honored in March 1980 for his efforts in securing the safe return of six American Embassy officials in their escape from Tehran. Congress recognized Simon Wiesenthal of Austria in 1980 for his dedicated action in bringing to justice Nazi war criminals who had gone into hiding at the end of World War II. Early in 1982, Her Majesty Queen Beatrix of the Netherlands was awarded a gold medal in recognition of the bicentennial anniversary of diplomatic and commercial relations between her country and the United States. Natan (Anatoly) and Avital Shcharansky of the former Soviet Union were applauded in 1986 for their "supreme dedication and total commitment to the cause of individual human rights and freedoms." During the 105 th Congress, the President was authorized to award gold medals to three additional foreign recipients—Mother Teresa of Calcutta, Ecumenical Patriarch Bartholomew, a Turkish citizen, and Nelson Rolihlahla Mandela of the Republic of South Africa. In the 106 th Congress, Pope John Paul II was cited. British Prime Minister Tony Blair in 2003 became the first Briton since Winston Churchill to be awarded the Congressional Gold Medal. Three years later, Tenzin Gyatso, Tenzin, the Fourteenth Dalai Lama, earned recognition. Daw Aung San Suu Kyi of Burma won acclaim in 2008, as did Dr. Muhammad Yunus in 2010. In 2012, a Congressional Gold Medal was awarded to Raoul Wallenberg in recognition of his achievements and heroic actions during the Holocaust. In 2014, a gold medal was awarded to Shimon Peres. Design and Casting of Gold Medals After a Congressional Gold Medal bill has been approved by both houses of Congress and signed into law by the President, officials of the United States Mint meet with the sponsors of the legislation and members of the honoree's family to discuss possible designs for the medal. Photographs of the honoree are also examined during this meeting. Mint engravers then prepare a series of sketches of possible designs for consideration and comment by the Commission of Fine Arts and subsequently the Secretary of the Treasury, who makes the final decision on the medal's design. Once the Secretary of the Treasury, in consultation with the honoree's family, has made a selection, the design is sculptured, a die is made, and the medal is struck at the Philadelphia Mint. The Mint then notifies the White House and arrangements are made for a formal presentation by the President. The cost of issuing a Congressional Gold Medal, generally about $30,000, is charged against the United States Mint Public Enterprise Fund. Congress established this revolving fund "in the Treasury of the United States ... to be available to the Secretary for numismatic operations and programs of the United States Mint without fiscal year limitations." The authorizing legislation in each case typically includes a provision stating that the "Secretary may strike and sell duplicates in bronze of the gold medal struck ... at a price sufficient to cover the costs of the medals (including labor, materials, dies, use of machinery, and overhead expenses) and the cost of the gold medal." Monies received from the sales of the bronze duplicates are deposited in the United States Mint Public Enterprise Fund. Legislative Procedures Procedures in the 115th Congress In the House, there are no chamber or committee rules regarding the procedures for gold medal bills. Rule 28(a)(7) of the House Republican Conference, however, prohibits the Republican leader from scheduling any bill or resolution for consideration under suspension of the Rules which directs the Secretary of the Treasury to strike a Congressional Gold Medal unless the recipient is a natural person; the recipient has performed an achievement that has an impact on American history and culture that is likely to be recognized as a major achievement in the recipient's field long after the achievement; the recipient has not received a medal previously for the same or substantially the same achievement; the recipient is living or, if deceased, has not been deceased for less than 5 years or more than 25 years; and the achievements were performed in the recipient's field of endeavor, and represent either a lifetime of continuous superior achievements or a single achievement so significant that the recipient is recognized and acclaimed by others in the same field, as evidenced by the recipient having received the highest honors in the field. The rules of the House Republican Conference also place an indirect restriction on the number of gold medals that may be awarded annually. Rule 28(a)(7)(F) prohibits the Republican leader from scheduling, or requesting to have scheduled, any bill for consideration under suspension of the rules which "directs the Secretary of the Treasury to strike a Congressional Gold Medal ...[that causes] the total number of measures authorizing the striking of such medals in that Congress to substantially exceed the average number of such measures enacted in prior Congresses." A waiver on the restriction can be granted by the majority of the elected leadership of the conference. In addition, because the restriction only applies to bills considered under suspension of the rules, it appears that an otherwise-prohibited bill could be brought to the floor under an alternative procedure, such as a special rule. In the Senate, the Banking, Housing, and Urban Affairs Committee in the 115 th Congress requires that at least 67 Senators must cosponsor any Congressional Gold Medal bill before being considered by the committee. Statutory Limitations on Eligibility Although Congress has approved legislation stipulating requirements for numerous other awards and decorations, there are no permanent statutory provisions specifically relating to the creation of Congressional Gold Medals. When a Congressional Gold Medal has been deemed appropriate, Congress has, by legislative action, provided for the creation of a medal on an ad hoc basis. Statutory Limitations on Awarding or Striking Gold Medals CRS research did not identify any statutory restrictions on the number of gold medals that may be awarded by Congress or struck by the U.S. Mint. Furthermore, since each award made by Congress is itself statutory law, it is unlikely that any statutory limitation on the annual number of Congressional Gold Medals that could be struck would prevent the enactment of legislation authorizing additional medals. Bills to Change Procedures or Criteria As of this writing, there have been no proposals in the 115 th Congress to change the procedures or criteria for awarding congressional gold medals. During the 109 th Congress, however, on January 26, 2005, the House, by a vote of 231 to 173, approved H.R. 54 , the Congressional Gold Medal Enhancement Act of 2005, sponsored by Representative Michael N. Castle. The bill would have amended Section 5111 of Title 31 of the United States Code by adding the following new subsection: (e) Congressional Gold Medal Standards— (1) MAXIMUM NUMBER—Beginning on the date of the enactment of the Congressional Gold Medal Enhancement Act of 2005, the Secretary of the Treasury may strike not more than 2 congressional gold medals for presentation pursuant to an Act of the Congress in any calendar year. (2) PROGRAM REQUIREMENTS—The Secretary may strike congressional gold medals only in accordance with the following requirements: (A) RECIPIENTS—Only an individual may be a recipient of a congressional gold medal. (B) TIMING—No gold medal may be presented posthumously on behalf of any individual except during the 20-year period beginning 5 years after the death of the individual (unless the Act of Congress authorizing the striking of such medal was enacted before the death of such individual). During House debate on H.R. 54 , Representative Castle emphasized that his measure sought "to maintain the prestige of the medal by limiting the number that may be awarded each year," and to "clarify that recipients are individuals and not groups." Passage of the measure, he argued, "will ensure the future integrity and true honor of the award. It is my goal that every recipient, [P]resident, civil rights leader, military hero, inventor, or noted healer, who receives the Congressional Gold Medal will remain part of a unique honor bestowed by the United States Congress." House Financial Services Committee Chairman Michael G. Oxley characterized the proposed legislation as a "commonsense effort to maintain the prestige of this award." By limiting the number of medals that can be struck each year, and by "limiting the recipients to individuals rather than groups, maintains the prestige and honor of receiving a Congressional Gold Medal. Combined with the requirement of a minimum co-sponsorship level of two-thirds of the House is the best way to preserve the integrity of the gold medal." Representative Joseph Crowley in opposing the legislation told his House colleagues, "We are rushing to act on an issue that does not represent a problem." "Who that received this medal in the past," he asked, "was not worthy of it?" He also expressed dismay "that the Committee on Rules refused to allow consideration of a key amendment that would strike a section of bill that only permits the granting of Congressional Gold Medals to individuals." Although Crowley tended "to agree with the notion that distributing what is an exceptional honor to too many individuals could devalue the symbolic worth of a gold medal, there are occasions when more than one person is justified to receive the medal for their honorable actions in tandem with others." He continued by emphasizing that had this bill already been law, "Congress would not have been able to issue" a Congressional Gold Medal "to the Little Rock Nine," to "President and Mrs. Reagan," or to "Martin Luther King and Coretta Scott King." The House adopted by voice vote an amendment to H.R. 54 offered by Representative Oxley that would make the legislation effective immediately upon passage, instead of the original effective date of January 1, 2006. Two amendments offered by Representative Crowley, both of which were defeated, would have (1) raised the number of Gold Medals that could be approved from two per calendar year to six per Congress, or an overall increase of two medals per Congress; and (2) required that there be an equitable distribution of Gold Medals approved between those sponsored by the majority and minority parties. Later the same day, H.R. 54 was received in the Senate, read twice, and referred to the Senate Committee on Banking, Housing, and Urban Affairs. There was no further action on the bill. Appendix. Recipients of Congressional Gold Medals, 1776-2016: A Chronological List George Washington . In recognition of the "wise and spirited conduct" of George Washington, and the officers and soldiers under his command, in the siege and acquisition of Boston. Approved March 25, 1776 (U.S. Continental Congress, Journal of the Continental Congress 1774-1789, 34 vols. (Washington: GPO, 1906, vol. 4, p. 234). Major General Horatio Gates . In recognition of the "brave and successful efforts" of Major General Horatio Gates, commander in chief in the northern department, and Major General Benjamin Lincoln and Major General Benedict Arnold, and the other officers and troops under his command, "in support of the independence of their country at Saratoga." Approved November 4, 1777 ( Journal of the Continental Congress 1774-1789 , vol. 9, pp. 861-862). Major General Anthony Wayne . In recognition of the "good conduct, coolness, discipline, and firm intrepidity" of Major General Anthony Wayne, and the officers and soldiers under his command, in the assault of the enemy's works at Stony Point. Approved July 26, 1779 ( Journal of the Continental Congress 1774-1789 , vol. 14, p. 890). Major Henry Lee . In recognition of the "remarkable prudence, address and bravery" exhibited by Major Henry Lee, and the non-commissioned officers and soldiers under his command, for their surprise raid of Pawles (Paulus) Hook, NJ, in August 1779. Approved September 24, 1779 ( Journal of the Continental Congress 1774-1789 , vol. 15, pp. 1099-1102). Brigadier General [author name scrubbed] . In recognition of the "fortitude and good conduct" displayed by Brigadier General [author name scrubbed], and the officers and men under his command, in the action at Cowpens, in the state of South Carolina on January 17, 1781. Approved March 9, 1781 ( Journal of the Continental Congress 1774-1789 , vol. 19, pp. 246-247). Major General Nathaniel Greene . In recognition of Major General Nathaniel Greene's "wise, decisive and magnanimous conduct in the action" of September 8, 1781, "near Eutaw Springs, in South Carolina; in which, with a force inferior in number to that of the enemy, he obtained a most signal victory." Approved October 29, 1781 ( Journal of the Continental Congress , 1774-1789, vol. 21, pp. 1083-1084). John Paul Jones . In recognition of the "valor and brilliant services" of John Paul Jones in commanding a "squadron of French and American ships under the flag and commission of the United States off the coast of Great Britain." Approved October 16, 1787 ( Journal of the Continental Congress 1774-1789 , vol. 33, p. 687). Captain Thomas Truxtun . In recognition of the "gallantry and good conduct" of Captain Thomas Truxtun in the action between the United States frigate Constellation and the French ship of war La Vengeance . Approved March 29, 1800 (2 Stat. 87). Commodore Edward Preble . In recognition of the "gallantry and good conduct" displayed by Captain Edward Preble, and the officers, petty officers, seamen and marines attached to the squadron under his command, in the several attacks on the town, batteries, and naval force of Tripoli in 1804. Approved March 3, 1805 (2 Stat. 346-347). Captain Isaac Hull, Captain Stephen Decatur, and Captain Jacob Jones . In recognition of the "gallantry, good conduct, and services" of Captain Isaac Hull of the frigate Constitution , Captain Stephen Decatur of the frigate United States , and Captain Jacob Jones of the sloop-of-war Wasp , in their respective conflicts with the British frigates the Guerriere and the Macedonian , and sloop-of-war Frolic . Approved January 29, 1813 (2 Stat. 830). Captain William Bainbridge . In recognition of the "gallantry, good conduct and services of Captain William Bainbridge," and the officers and crew of the frigate Constitution , in the capture of the British frigate Java , after a "brave and skillful combat." Approved March 3, 1813 (2 Stat. 831). Captain Oliver Hazard Perry and Captain Jesse D. Elliott . In recognition of the "decisive and glorious victory gained on Lake Erie" by Captain Oliver Hazard Perry and Captain Jesse D. Elliott, on September 10, 1813. Approved January 6, 1814 (3 Stat. 141). Lieutenant William Burrows and Lieutenant Edward R. M'Call . In recognition of the "gallantry and good conduct" of Lieutenant William Burrows and Lieutenant Edward R. M'Call of the brig Enterprise , in the conflict with the British sloop Boxer on September 4, 1813. Approved January 6, 1814 (3 Stat. 141-142). Captain James Lawrence . In recognition of the "gallantry and good conduct" of Captain James Lawrence, and the officers and crew of the sloop-of-war Hornet , in the capture of the British vessel of war, the Peacock . Approved January 11, 1814 (3 Stat. 142). Captain Thomas MacDonough, Captain Robert Henly, and Lieutenant Stephen Cassin . In recognition of the "decisive and splendid victory" of Captain Thomas MacDonough and Lieutenant Stephen Cassin, gained on Lake Champlain on September 11, 1814. Approved October 20, 1814 (3 Stat. 245-246). Captain Lewis Warrington . In recognition of the "gallantry and good conduct" of Captain Lewis Warrington, and the officers and crew of the sloop-of-war Peacock in the action with the British brig Epervier on April 29, 1814. Approved October 21, 1814 (3 Stat. 246). Captain Johnston Blakely . In recognition of the "gallantry and good conduct" of Captain Johnston Blakely, and the officers and crew of the sloop Wasp in the action with the British sloop-of-war Reindeer on June 28, 1814. Approved November 3, 1814 (3 Stat. 246-247). Major General Jacob Brown . In recognition of the "gallantry and good conduct" of Major General Jacob Brown, and the "officers and men, of the regular army, and of the militia under his command ... in the successive battles of Chippewa, Niagara, and Erie, in Upper Canada, in which British veteran soldiers were beaten and repulsed by equal and inferior numbers." Approved November 3, 1814 (3 Stat. 247). Major General Winfield Scott . In recognition of the "uniform gallantry and good conduct" of Major General Winfield Scott "in the successive conflicts of Chippewa and Niagara." Approved November 3, 1814 (3 Stat. 247). Brigadier General Eleazar W. Ripley, Brigadier General James Miller, and Major General Peter B. Porter . In recognition of the "gallantry and good conduct" of Brigadier General Eleazar W. Ripley, Brigadier General James Miller, and Major General Peter B. Porter "in the several conflicts of Chippewa, Niagara, and Erie." Approved November 3, 1814 (3 Stat. 247). Major General Edmund P. Gaines . In recognition of the "gallantry and good conduct" of General Edmund P. Gaines, and the officers and men under his command, in defeating the British Army at Erie on August 15, 1814. Approved November 3, 1814 (3 Stat. 247). Major General Alexander Macomb . In recognition of the "gallantry and good conduct" of Major General Alexander Macomb, and the officers and men under his command, in defeating a veteran British Army at Plattsburg on September 11, 1814. Approved November 3, 1814 (3 Stat. 247). Major General Andrew Jackson . In recognition of the "valor, skill and good conduct" of Major General Andrew Jackson, and the officers and soldiers of the regular army, of the militia, and of the volunteers under his command, which was conspicuously displayed against the British Army at New Orleans on January 8, 1815. Approved February 27, 1815 (3 Stat. 249). Captain Charles Stewart . In recognition of the "gallantry, good conduct and services" of Captain Charles Stewart, and the officers and crew, of the frigate Constitution , in capturing the British vessels of war, the Cyane and the Levant, after a brave and skillful combat. Approved February 22, 1816 (3 Stat. 341). Captain James Biddle . In recognition of the "gallantry, good conduct and services" of Captain James Biddle, and the officers and crew, of the sloop-of-war Hornet , in capturing the British sloop-of-war Penguin , after a brave and skillful combat. Approved February 22, 1816 (3 Stat. 341). Major General William Henry Harrison and Governor Isaac Shelby . In recognition of the "gallantry and good behavior" of Major General William Henry Harrison and Governor Isaac Shelby, and the officers and men under their command, "in defeating the combined British and Indian forces under Major General Proctor, on the Thames, in Upper Canada, on October 5, 1813, and in capturing the British Army with their baggage, camp equipage and artillery." Approved April 4, 1818 (3 Stat. 476). Colonel George Croghan . In recognition of the "gallantry and good conduct" of Colonel George Croghan in the defense of Fort Stephenson in 1813. Approved February 13, 1835 (4 Stat. 792). Major General Zachary Taylor . In recognition of the "fortitude, skill, enterprise, and courage" of Major General Zachary Taylor, and his officers and men, which distinguished the brilliant operations on the Rio Grande. Approved July 16, 1846 (9 Stat. 111). Major General Zachary Taylor . In recognition of the "fortitude, skill, enterprise, and courage" of Major General Zachary Taylor, and his officers and men, which distinguished the brilliant military operations at Monterey. Approved March 2, 1847 (9 Stat. 206). Rescuers of the Officers and Crew of the U. S. Brig Somers . In recognition of the "officers and men belonging or attached to the French, British, and Spanish ships-of-war in the harbor of Vera Cruz, who so gallantly, and at the imminent peril of their lives, aided rescuing from a watery grave many of the officers and crew of the United States brig Somers ." The records of the United States Mint indicate that 10 gold medals were struck in commemoration of the gallant effort of the Somers . Approved March 3, 1847 (9 Stat. 208). Major General Winfield Scott . In recognition of the "uniform gallantry and good conduct" of Major General Winfield Scott, and the officers and men of the regular and volunteer corps under him, "conspicuously displayed at the siege and capture of the city of Vera Cruz and castle of San Juan de Ulloa," on March 29, 1847; in the successive battles of Cerro Gordo on April 18, San Antonio and Churubusco on August 19 and 20; in the "victories achieved in front of the city of Mexico" on September 8 and 11-13; and for the capture of the metropolis on September 14, "in which the Mexican troops, greatly superior in numbers, and with every advantage of position, were in every conflict signally defeated by the American arms." Approved March 9, 1848 (9 Stat. 333). Major General Zachary Taylor . In recognition of the "valor, skill, and good conduct" of Major General Zachary Taylor, and the officers and soldiers of the regular army and of the volunteers under his command, "conspicuously displayed" on February 22 and 23, 1848, in the battle of Buena Vista, in "defeating a Mexican army under the command of General Santa Anna of more than four times their number." Approved May 9, 1848 (9 Stat. 334-335). Commander Duncan N. Ingraham . In recognition of the "gallant and judicious conduct" of Commander Duncan N. Ingraham "in extending protection to Martin Koszta, by rescuing him from illegal seizure and imprisonment on board the Austrian war-brig Hussar ." Approved August 4, 1854 (10 Stat. 594-595). Frederick A. Rose . In recognition of "Assistant-Surgeon Frederick A. Rose, of the British navy, who volunteered, with the permission of his commanding officer, to join the Susquehannah ," at a time when many of its crew had yellow fever, "at imminent personal risk, devoted himself, on the voyage from Jamaica to New York, to care for the sick remaining on board." Approved May 11, 1858 (11 Stat. 369). Major General Ulysses S. Grant . In recognition of "gallantry and good conduct" of Ulysses S. Grant, and the officers and men who fought under his command during the Civil War, in the battles in which they engaged. Approved December 17, 1863 (13 Stat. 399). Cornelius Vanderbilt . In recognition of Cornelius Vanderbilt's "gift to his imperiled country" of the steamship Vanderbilt , which was "actively employed in the service of the Republic against the rebel devastations of her commerce." Approved January 28, 1864 (13 Stat. 401). Captains Robert Creighton, Edwin J. Low, and George C. Stouffer . In recognition of the "gallant conduct" of Captain Robert Creighton, of the ship Three Bells , of Glasgow; Captain Edwin J. Low, of the bark Kilby , of Boston; and Captain George C. Stouffer, of the ship Antarctic, in rescuing about 500 men from the wreck of the steamer San Francisco . Approved July 26, 1866 (14 Stat. 365-366). Cyrus W. Field . In recognition of the "foresight, courage, and determination" of Cyrus W. Field "in establishing telegraphic communications by means of the Atlantic cable traversing mid-ocean and connecting the Old World with the New." Approved March 2, 1867 (14 Stat. 574). George Peabody . In recognition of George Peabody's "great and peculiar beneficence" in giving $2 million "for the promotion of education in the most destitute portions of the southern and southwestern States." Approved March 16, 1867 (15 Stat. 20). George F. Robinson . In recognition of the "heroic conduct" of George F. Robinson in saving the life of Secretary of State William H. Seward on April 14, 1865. Approved March 1, 1871 (16 Stat. 704). Captain Jared S. Crandall, and Others . In recognition of the services of Captain Jared S. Crandall, Albert Crandall, Daniel F. Larkin, Frank Larkin, Bryon Green, John D. Harvey, Courtland Gavitt, Eugene Nash, Edwin Nash, and William Nash of Westerly, RI, who "so gallantly volunteered to man a life-boat and a fishing-boat, and saved the lives of thirty-two persons from the wreck of the steamer Metis on the waters of the Long Island sound," on August 31, 1872. Approved February 24, 1873 (17 Stat. 638). John Horn, Jr . In recognition and commemoration of the "heroic and humane exploits" of John Horn, Jr., in rescuing 110 men, women, and children from drowning in the Detroit River. Approved June 20, 1874 (18 Stat. 573). On April 28, 1904, Congress authorized and directed the Secretary of the Treasury to strike off and present to John Horn, Jr., a duplicate of the medal voted by Congress to him in 1874, which was stolen from him in October 1901. Approved April 28, 1904 (33 Stat. 1684-1685). John F. Slater . In recognition of John F. Slater's contribution of $1 million for the purpose of "uplifting the lately emancipated population of the Southern States and their prosperity, by conferring on them the blessings of Christian education." Approved February 5, 1883 (22 Stat. 636). Joseph Francis . In recognition of Joseph Francis' "life-long services to humanity and to his country ... in the construction and perfection of life-saving appliances by which thousands of lives have been saved." Approved August 27, 1888 (25 Stat. 1249). Chief Engineer George Wallace Melville and Others . In recognition of the "meritorious service" of Chief Engineer George Wallace Melville, United States Navy, "in successfully directing the party under his command after the wreck of the Arctic exploring steamer Jeannette , and of his persistent efforts through dangers and hardships to find and assist his commanding officer and other members of the expedition before he himself was out of peril." This act does not specifically indicate what type of medal was to be presented to Chief Engineer Melville and the officers and men of the Jeannette "as an expression of the high esteem Congress [held] their services." The records of the United States Mint, however, indicate that eight gold medals were struck in commemoration of the perils encountered by the Jeannette expedition. Approved September 30, 1890 (26 Stat. 552-553). First Lieutenant Frank H. Newcomb . In recognition of the "intrepid and heroic gallantry" of First Lieutenant Frank H. Newcomb, commander of the revenue cutter Hudson , and the officers and men under his command, "in action at Cardenas, Cuba," on May 18, 1898, "when the Hudson rescued the United States naval torpedo boat Winslow in the face of a most galling fire from the enemy's guns, the Winslow being disabled, her captain wounded, her only other officer and half her crew killed." Approved May 3, 1900 (31 Stat. 717). First Lieutenant David H. Jarvis, Second Lieutenant Ellsworth P. Bertholf, and Dr. Samuel J. Call . In recognition of the "heroic service" rendered by First Lieutenant David H. Jarvis, Second Lieutenant Ellsworth P. Bertholf, and Dr. Samuel J. Call, all of the Revenue-Cutter Service and members of the overland expedition of 1897-1898, in providing relief to the whaling fleet in arctic regions. Approved June 28, 1902 (32 Stat. 492). Wright Brothers . In recognition and appreciation of the "great service" Orville and Wilbur Wright of Ohio, "rendered the science of aerial navigation in the invention of the Wright aeroplane, and for their ability, courage, and success in navigating the air." Approved March 4, 1909 (35 Stat. 1627). Captain Arthur Henry Rostron . In recognition of Captain Henry Rostron, and the officers and crew of the steamship Carpathia , "for promptly going to the relief of the steamship Titanic and heroically saving the lives of seven hundred and four people who had been shipwrecked in the North Atlantic Ocean." Approved July 6, 1912 (37 Stat. 639). Captain Paul H. Kreibohm and Others . In recognition of the heroic rescue of 89 people by Captain Paul H. Kreibohm and the officers and crew of the American steamer Kroonland from the burning steamer Volturno in the North Atlantic. The records of the United States Mint indicate that four gold medals were struck in commemoration of the actions of the Kroonland . Approved March 19, 1914 (38 Stat. 769). Señor Domicio da Gama, Señor Rómulo S. Naón, and Señor Eduardo Suárez . In recognition of the "generous services" of Señor Domicio da Gama, Señor Rómulo S. Naón, and Señor Eduardo Suárez, "as mediators in the controversy between the Government of the United States and the leaders of the warring parties in the Republic of Mexico." Approved March 4, 1915 (38 Stat. 1228). Charles A. Lindbergh . In recognition of the "achievements" of Charles A. Lindbergh. Approved May 4, 1928 (45 Stat. 490). Lincoln Ellsworth, Roald Amundsen, and Umberto Nobile . In recognition of the "conspicuous courage, sagacity, and perseverance" Lincoln Ellsworth exhibited during his famous polar flight of 1925 and his transpolar flight of 1926; and the contributions of Roald Amundsen, the distinguished Norwegian explorer, and Umberto Nobile, the distinguished Italian explorer, who participated with Ellsworth in the transpolar flight of 1926. Approved May 29, 1928 (45 Stat. 2026-2027). Thomas A. Edison . In recognition of the "achievements" of Thomas A. Edison. Approved May 29, 1928 (45 Stat. 1012). First Successful Trans-Atlantic Flight . In recognition of Commander John H. Tower's "extraordinary achievement" in conceiving, organizing, and commanding the first trans-Atlantic flight; and Lieutenant Commander Albert C. Read, United States Navy, commanding officer; Lieutenant Elmer F. Stone, United States Coast Guard, pilot; Lieutenant Walter Hinton, United States Navy, pilot; Lieutenant H. C. Rodd, United States Navy, radio operator; Lieutenant J. L. Breese, United States Naval Reserve Force, engineer; and Machinist's Mate Eugene Rhodes, United States Navy, engineer, "in making the first successful trans-Atlantic flight, in the United States naval flying boat NC-4, in May 1919." Approved February 9, 1929 (45 Stat. 1158). Major Walter Reed and Associates for Yellow Fever Experimentations in Cuba . In recognition of the "high public service rendered and disabilities contracted" by Major Walter Reed, James Carroll, Jesse W. Lazear, Aristides Agramonte, James A. Andrus, John R. Bullard, A. W. Covington, William H. Dean, Wallace W. Forbes, Levi E. Folk, Paul Hamann, James F. Hanberry, Warren G. Jernegan, John R. Kissinger, John J. Moran, William Olsen, Charles G. Sonntag, Clyde L. West, Dr. R. P. Cooke, Thomas M. England, James Hildebrand, and Edward Weatherwalks "in the interest of humanity and science as voluntary subjects for the experimentation during the yellow-fever investigations in Cuba." Approved February 28, 1929 (45 Stat. 1409-1410). This act was subsequently amended on July 2, 1956, and September 2, 1958, to include the names of Gustaf E. Lambert and Roger P. Ames (70 Stat. 484; and 72 Stat. 1702). Officers and Men of the Byrd Antarctic Expedition . In recognition of the "high admiration in which Congress and the American people hold [the] heroic and undaunted services [connected] with the scientific investigations and extraordinary aerial expeditions of the Antarctic Continent, under the personal direction of Rear Admiral Richard E. Byrd." The records of the United States Mint indicate that 67 gold medals were struck in commemoration of the Byrd Antarctic Expedition. Approved May 23, 1930 (46 Stat. 379). Lincoln Ellsworth . In recognition of Lincoln Ellsworth "claiming on behalf of the United States approximately three-hundred-fifty-thousand square miles of land in the Antarctic between the eightieth and one hundred and twentieth meridians west of Greenwich, representing the last unclaimed territory in the world, and for his exceptionally meritorious services to science and aeronautics in making a two-thousand-five-hundred mile aerial survey of the heart of Antarctica, thus paving the way for more detailed studies of geological, meteorological, and geographical questions of world-wide importance and benefit." Approved June 16, 1936 (49 Stat. 2324). George M. Cohan . In recognition of the public service of George M. Cohan during the World War in composing the patriotic songs "Over There" and "A Grand Old Flag." Approved June 29, 1936 (49 Stat. 2371). Mrs. Richard Aldrich and Anna Bouligny . In recognition of Mrs. Richard Aldrich and Anna Bouligny "who, during the War with Spain, voluntarily went to Puerto Rico and there rendered service of inestimable value to the Army of the United States in the establishment and operation of hospitals for the care and treatment of military patients in Puerto Rico." Approved June 20, 1938 (52 Stat. 1365). Howard Hughes . In recognition of the "achievements" of Howard Hughes in "advancing the science of aviation and thus bringing great credit to his country throughout the world." Approved August 7, 1939 (53 Stat. 1525). Reverend Francis X. Quinn . In recognition of the "valor of Reverend Francis X. Quinn, pastor of the Church of the Guardian Angel, New York City, who risked his life by entering the room when an armed desperado held two elderly persons as hostages, and who by successfully disarming this criminal and saving the lives of two innocent persons distinguished himself conspicuously by gallantry and intrepidity at the risk of his life above and beyond the call of his duty." Approved August 10, 1939 (53 Stat. 1533). William Sinnott . In recognition of action of "William Sinnott, a detective, who in guarding Franklin D. Roosevelt, then President-elect of the United States, at Miami, Florida, on February 15, 1933, was shot and wounded by Giuseppe Zangara, who attempted to assassinate" Mr. Roosevelt. Approved June 15, 1940 (54 Stat. 1283). Roland Boucher . In recognition of the "valor, bravery, and heroism of Roland Boucher, of Burlington, Vermont, age 11, who on February 12, 1941, risked his life in rescuing five children who had broken through the ice on Lake Champlain near Juniper Island, saving the lives of four, and who in so doing displayed unusual bravery and the presence of mind extraordinary in one of his age." Approved January 20, 1942 (56 Stat. 1099-1100). General of the Army George Catlett Marshall and Fleet Admiral Ernest Joseph King . In recognition of General of the Army George C. Marshall's "distinguished leadership, as Chief of Staff of the Army and as a member of the Combined Chiefs of Staff of the United Nations, in planning the expansion, equipment, training and deployment of the great Army of the United States and in formulating and executing the global strategy that led to victory in World War II," and the "members of the Army of the United States who served under his direction with such heroic devotion, and personal sacrifice." In recognition also of Admiral Ernest J. King's "distinguished leadership as Commander in Chief of the United States Fleet and Chief of Naval Operations and as a member of the Combined Chiefs of Staff of the United Nations, in planning the expansion, equipment, training, and operation of the United States Navy and in formulating and executing the global strategy that led to victory in World War II," and the "members of the United States Navy, the United States Marine Corps and the United States Coast Guard," and the "members of the Reserve Forces who served under his direction with such heroic devotion and personal sacrifice." Approved March 22, 1946 (60 Stat. 1134-1135). General of the Armies of the United States John J. Pershing . In recognition of General John J. Pershing's "peerless leadership, heroic achievements, and great military victories, as Commander in Chief of the American Expeditionary Forces in Europe in World War I, and for his gallant and unselfish devotion to the service of his country in preparation for, and the prosecution of World War II." Approved August 7, 1946 (60 Stat. 1297-1298). Brigadier General William Mitchell . In recognition of the "outstanding pioneer service and foresight of General William Mitchell in the field of American military aviation." Approved August 8, 1946 (60 Stat. 1319). Vice President Alben W. Barkley . In recognition of Vice President Alben W. Barkley's "distinguished public service and outstanding contribution to the general welfare." Approved August 12, 1949 (P.L. 81-221, 63 Stat. 599). Irving Berlin . In recognition of Irvin Berlin's "services in composing many patriotic songs, including God Bless America, which became popular during World War II." Approved July 16, 1954 (P.L. 83-536, 68 Stat. A120). Doctor Jonas E. Salk . "In recognition of the great achievement of Doctor Jonas E. Salk in the field of medicine by his discovery of a serum for the prevention of poliomyelitis." Approved August 9, 1955 (P.L. 84-297, 69 Stat. 589). Surviving Veterans of the War Between the States . "In honor of the last [four] surviving veterans of the War Between the States who served in the Union or the Confederate forces." Approved July 18, 1956 (P.L. 84-730, 70 Stat. 577). Rear Admiral Hyman George Rickover . "In recognition of the achievements of Rear Admiral Hyman George Rickover, United States Navy, in successfully directing the development and construction of the world's first nuclear-powered ships and the first large-scale nuclear power reactor devoted exclusively to the production of electricity." Approved August 28, 1958 (P.L. 85-826, 72 Stat. 985). Doctor Robert H. Goddard . In recognition of the "great, creative achievements of Doctor Robert H. Goddard, and his historic pioneering research on space rockets, missiles, and jet propulsion." Approved September 16, 1959 (P.L. 86-277, 73 Stat. 562-563). Robert Frost . In recognition of Robert Frost's "poetry, which has enriched the culture of the United States and the philosophy of the world." Approved September 13, 1960 (P.L. 86-747, 74 Stat. 883). Doctor Thomas Anthony Dooley III . "In recognition of the gallant and unselfish public service rendered by Doctor Thomas Anthony Dooley III in serving the medical needs of the people of Laos living in the remote areas of the Laotian jungles, and the peoples in other newly developing countries." Approved May 27, 1961 (P.L. 87-42, 75 Stat. 87). Bob Hope . In recognition of Bob Hope's outstanding "service to his country and the cause of peace." Approved June 8, 1962 (P.L. 87-478, 76 Stat. 93). Sam Rayburn, Speaker of the House of Representatives . In recognition of Sam Rayburn's "distinguished public service and outstanding contribution to the general welfare." Approved September 26, 1962 (P.L. 87-702, 76 Stat. 605). General of the Army Douglas MacArthur . "In recognition of the gallant service rendered by General of the Army Douglas MacArthur to his country." Approved October 9, 1962 (P.L. 87-760, 76 Stat. 760). Walt Disney . In recognition of Walt Disney's "distinguished public service and outstanding contributions to the United States and the world." Approved May 24, 1968 (P.L. 90-316, 82 Stat. 130-131). Winston Churchill . In recognition of Winston Churchill, on the occasion of the dedication of the Winston Churchill Memorial and Library at Westminster College in Fulton, MO, in May 1969. Approved May 7, 1969 (P.L. 91-12, 83 Stat. 8-9). Roberto Walker Clemente . In recognition of Roberto Clemente's "outstanding athletic, civil, charitable, and humanitarian contributions." Approved May 14, 1973 ( P.L. 93-33 , 87 Stat. 71). Marian Anderson . "In recognition of the highly distinguished and impressive career of Miss Marian Anderson for a period of more than a half a century during which she has been the recipient of the highest awards from a score of foreign countries, for her untiring and unselfish devotion to the promotion of the arts in this country and throughout the world including the establishment of scholarships for young people, for her strong and imaginative support to humanitarian causes at home, for her contributions to the cause of world peace through her work as United States delegate to the United Nations and her performances and recordings which have reached an estimated seven million people throughout the world, and her unstinting efforts on behalf of the brotherhood of man, and the many treasured moments she has brought to us with enormous demand on her time, talent, and energy." Approved March 8, 1977 ( P.L. 95-9 , 91 Stat. 19). Lieutenant General Ira C. Eaker . In recognition of Lieutenant General Ira C. Eaker's "distinguished career as an aviation pioneer and Air Force leader." Approved October 10, 1978 ( P.L. 95-438 , 92 Stat. 1060). Robert F. Kennedy . In recognition of the "distinguished and dedicated service" Robert Kennedy "gave to the Government and to the people of the United States." Approved November 1, 1978 ( P.L. 95-560 , 92 Stat. 2142). John Wayne . In recognition of John Wayne's "distinguished career as an actor and his service to the Nation." Approved May 26, 1979 ( P.L. 96-15 , 93 Stat. 32). Ben Abruzzo, Maxie Anderson, and Larry Newman . In recognition of the "distinguished feat" of transatlantic balloonists Ben Abruzzo, Maxie Anderson, and Larry Newman "as aviation pioneers." Approved June 13, 1979 ( P.L. 96-20 , 93 Stat. 45). Hubert H. Humphrey . In recognition of Hubert H. Humphrey's "distinguished and dedicated service" to the Government and to the people of the United States. Approved June 13, 1979 ( P.L. 96-21 , 93 Stat. 46). American Red Cross . In recognition of the "unselfish and humanitarian service" of the American Red Cross to the people of the United States. Approved December 12, 1979 ( P.L. 96-138 , 93 Stat. 1063). Ambassador Kenneth Taylor . In recognition of Canadian Ambassador to Iran Kenneth Taylor's "valiant efforts to secure the safe return of six American Embassy officials in Tehran." Approved March 6, 1980 ( P.L. 96-201 , 94 Stat. 79). Simon Wiesenthal . In recognition of Simon Wiesenthal's "contribution to international justice through the documentation and location of war criminals from World War II." Approved March 17, 1980 ( P.L. 96-211 , 94 Stat. 101). Queen Beatrix of the Netherlands . In recognition of the "two hundredth anniversary, in 1982, of the establishment of diplomatic and commercial relations between the Governments of the United States and the Netherlands." Approved March 22, 1982 ( P.L. 97-158 , 96 Stat. 18-19). Admiral Hyman George Rickover . In recognition of Admiral Hyman George Rickover's "distinguished service and for his unique world-renowned contributions to the development of safe nuclear energy and to the defense of the United States." Approved June 23, 1982 ( P.L. 97-201 , 96 Stat. 126-127). Fred Waring . In recognition of Fred Waring's "contribution to enriching American life." Approved August 26, 1982 ( P.L. 97-246 , 96 Stat. 315-316). Joe Louis . In recognition of Joe Louis's "accomplishments which did so much to bolster the spirit of the American people during one of the most crucial times in American history and which have endured throughout the years as a symbol of strength for the Nation." Approved August 26, 1982 ( P.L. 97-246 , 96 Stat. 315-316). Louis L'Amour . In recognition of Louis L'Amour's "distinguished career as an author and his contributions to the Nation through his historically based works." Approved August 26, 1982 ( P.L. 97-246 , 96 Stat. 315-316). Leo J. Ryan . In recognition of Leo J. Ryan's "distinguished service as a Member of Congress and the fact of his untimely death by assassination while performing his responsibilities as a Member of the United States House of Representatives." Approved November 18, 1983 ( P.L. 98-159 , 97 Stat. 992). Danny Thomas . In recognition of Danny Thomas' "humanitarian efforts and his outstanding work as an American." Approved November 29, 1983 ( P.L. 98-172 , 97 Stat. 1119-1120). Harry S. Truman. In recognition of the "life-time of outstanding public service which ... Harry S. Truman, gave to the United States, and in commemoration of his one hundredth birthday which was celebrated on May 8, 1984." Approved May 8, 1984 ( P.L. 98-278 , 98 Stat. 173-175). Lady Bird Johnson . In recognition of Lady Bird Johnson's "humanitarian efforts and outstanding contributions to the improvement and beautification of America." Approved May 8, 1984 ( P.L. 98-278 , 98 Stat. 173-175). Elie Wiesel . In recognition of Elie Wiesel's "humanitarian efforts and outstanding contributions to world literature and human rights." Approved May 8, 1984 ( P.L. 98-278 , 98 Stat. 173-175). Roy Wilkins . In recognition of the "incomparable contribution of Roy Wilkins to the struggle for civil rights and equality for all Americans." Approved May 17, 1984 ( P.L. 98-285 , 98 Stat. 186). George and Ira Gershwin . In recognition of "George and Ira Gershwin's outstanding and invaluable contributions to American music, theatre and culture." Approved August 9, 1985 ( P.L. 99-86 , 99 Stat. 288-289). Natan (Anatoly) and Avital Shcharansky . In recognition of the "supreme dedication and total commitment" of Natan (Anatoly) and Avital Shcharansky "to the cause of individual human rights and freedoms." Approved May 13, 1986 ( P.L. 99-298 , 100 Stat. 432-433). Harry Chapin . In recognition of "Harry Chapin's efforts to address issues of hunger around the world." Approved May 20, 1986 ( P.L. 99-311 , 100 Stat. 464). Aaron Copland . In recognition of Aaron Copland's "contribution to American musical composition." Approved September 23, 1986 ( P.L. 99-418 , 100 Stat. 952-953). Mary Lasker . In recognition of Mary Lasker's "humanitarian contributions in the areas of medical research and education, urban beautification and the fine arts." Approved December 24, 1987 ( P.L. 100-210 , 101 Stat. 1441). Jesse Owens . In recognition of "Jesse Owens' athletic achievements and humanitarian contributions to public service, civil rights and international goodwill." Approved September 20, 1988 ( P.L. 100-437 , 102 Stat. 1717). Andrew Wyeth . In recognition of Andrew Wyeth's "outstanding and invaluable contributions to American art and culture." Approved November 9, 1988 ( P.L. 100-639 , 102 Stat. 3331-3332). Laurence Spelman Rockefeller . In recognition of Laurence Spelman Rockefeller's "leadership on behalf of natural resource conservation and historic preservation." Approved May 17, 1990 ( P.L. 101-296 , 104 Stat. 197-199). General Matthew B. Ridgeway. In recognition of General Matthew B. Ridgeway's "distinguished service to the Nation" during World War II and the Korean War. Approved November 5, 1990 ( P.L. 101-510 ; 104 Stat. 1720-1721). General H. Norman Schwarzkopf. In recognition of General H. Norman Schwarzkopf's "exemplary performance as a military leader in coordinating the planning, strategy, and execution of the U.S. combat action and his invaluable contributions to the United States and to the liberation of Kuwait as Commander-in-Chief, United States Central Command." Approved April 23, 1991 ( P.L. 102-32 ; 105 Stat. 175-176). General Colin Powell. In recognition of General Colin Powell's "exemplary performance as a military leader and advisor to the President in planning and coordinating the military response of the United States to the Iraqi invasion of Kuwait and the ultimate retreat of Iraqi forces and Iraqi acceptance of all United Nations Resolutions relating to Kuwait." Approved April 23, 1991 ( P.L. 102-33 ; 105 Stat. 177-178). Rabbi Menachem Mendel Schneerson. In recognition of Rabbi Menachem Mendel Schneerson's "outstanding and enduring contributions toward world education, morality, and acts of charity." Approved November 2, 1994 ( P.L. 103-457 ; 108 Stat. 4799-4800). Ruth and Billy Graham. In recognition of Ruth and Billy Graham's "outstanding and lasting contributions to morality, racial equality, family, philanthropy, and religion." Approved February 13, 1996 ( P.L. 104-111 ; 110 Stat. 772-773). Francis Albert "Frank" Sinatra. In recognition of Frank Sinatra's "outstanding and enduring contributions through his entertainment career and humanitarian activities." Approved May 14, 1997 ( P.L. 105-14 , 111 Stat. 32-33). Mother Teresa of Calcutta. In recognition of Mother Teresa of Calcutta's "outstanding and enduring contributions through humanitarian and charitable activities." Approved June 2, 1997 ( P.L. 105-16 , 111 Stat. 35-36). Ecumenical Patriarch Bartholomew. In recognition of Ecumenical Patriarch Bartholomew's "outstanding and enduring contributions toward religious understanding and peace." Approved October 6, 1997 ( P.L. 105-51 , 111 Stat. 1170-1171). Nelson Rolihlahla Mandela. In recognition of Nelson Rolihlahla's "life-long dedication to the abolition of apartheid and the promotion of reconciliation among the people of the Republic of South Africa." Approved July 29, 1998 ( P.L. 105-215 , 112 Stat. 895-896). Little Rock Nine. In recognition of the "selfless heroism" Jean Brown Trickey, Carlotta Walls LaNier, Melba Patillo Beals, Terrence Roberts, Gloria Ray Karlmark, Thelma Mothershed Wair, Ernest Green, Elizabeth Eckford, and Jefferson Thomas "exhibited and the pain they suffered in the cause of civil rights by integrating Central High School in Little Rock, Arkansas." Approved October 21, 1998 ( P.L. 105-277 , 112 Stat. 2681-597). Gerald R. and Betty Ford. In recognition of Gerald R. and Betty Ford's "dedicated public service and outstanding humanitarian contributions to the people of the United States." Approved October 21, 1998 ( P.L. 105-277 , 112 Stat. 2681-598). Rosa Parks. In recognition of Rosa Parks' "contributions to the Nation" as the "first lady of civil rights" and "mother of the freedom movement," and whose "quiet dignity ignited the most significant social movement in the history of the United States." Approved May 4, 1999 ( P.L. 106-26 ; 113 Stat. 50-51). Theodore M. Hesburgh. In recognition of Theodore M. Hesburgh's "outstanding and enduring contributions to civil rights, higher education, the Catholic Church, the Nation, and the global community." Approved December 9, 1999 ( P.L. 106-153 ; 113 Stat. 1733-1734). John Cardinal O'Connor, Archbishop of New York. In recognition of John Cardinal O'Connor's "accomplishments as a priest, a chaplain, and a humanitarian." Approved March 3, 2000 ( P.L. 106-175 ; 114 Stat. 20-21). Charles M. Schulz. In recognition of Charles M. Schulz's "lasting artistic contributions to the Nation and the world." Approved June 20, 2000 ( P.L. 106-225 ; 114 Stat. 457-458). Pope John Paul II. In recognition of Pope John Paul II's "many and enduring contributions to peace and religious understanding." Approved July 27, 2000 ( P.L. 106-250 ; 114 Stat. 622-623). Ronald and Nancy Reagan. In recognition of Ronald and Nancy Reagan's "service to the Nation." Approved July 27, 2000 ( P.L. 106-251 ; 114 Stat. 624-625). Navajo Code Talkers. In recognition of the contribution of the original 29 Navajo Marine Corps Radio Operators, known as the Navajo Code Talkers, "who distinguished themselves in performing a unique, highly successful communications operation that greatly assisted in saving countless lives and hastening the end of World War II in the Pacific." (Silver medals were awarded to each person who qualified as a Navajo Code Talker (MOS 642).) Approved December 21, 2000 ( P.L. 106-554 ; 114 Stat. 2763A-311—2763A-312). General Henry H. Shelton. In recognition of the performance of General Henry H. Shelton "as a military leader in coordinating the planning, strategy, and execution of the United States and NATO combat action and his invaluable contributions to the United States and to the successful return to peace in the Balkans as Chairman of the Joint Chiefs of Staff." Approved January 16, 2002 ( P.L. 107-127 ; 115 Stat. 2405-2406). Prime Minister Tony Blair. In recognition of the "outstanding and enduring contributions" of Prime Minister Tony Blair of the United Kingdom "to maintaining the security of all freedom-loving nations." Approved July 17, 2003 ( P.L. 108-60 ; 117 Stat. 862). Jackie Robinson. In recognition of Jackie Robinson's "legacy and personal achievements," and "many contributions to the nation." Approved October 29, 2003 ( P.L. 108-101 ; 117 Stat. 1195-1197). Dr. Dorothy Height. In recognition of Dr. Dorothy Height's contribution "as one of the preeminent social and civil rights activists of her time, particularly in the struggle for equality, social justice, and human rights for all people." Approved December 6, 2003 ( P.L. 108-162 ; 117 Stat. 2017-2019). Reverend Joseph DeLaine, Harry and Eliza Briggs, and Levi Pearson . In recognition of the contributions of Reverend Joseph A. DeLaine, Harry and Eliza Briggs, and Levi Pearson "to the Nation as pioneers in the effort to desegregate public schools that led directly to the landmark desegregation case of Brown et al. v. the Board of Education of Topeka et al." Approved December 15, 2003 ( P.L. 108-180 ; 117 Stat. 2645-2647). Reverend Doctor Martin Luther King, Jr. and Coretta Scott King. In recognition of the contributions of Reverend Doctor Martin Luther King, Jr. and Coretta Scott King "to the Nation on behalf of the civil rights movement." Approved October 25, 2004 ( P.L. 108-368 ; 118 Stat. 1746-1748). Tuskegee Airmen. In recognition of the "unique military record" of the Tuskegee Airman, "which inspired revolutionary reform in the Armed Forces." Approved April 11, 2006 ( P.L. 109-213 ; 120 Stat. 322-325). Gyatso, Tenzin, the Fourteenth Dalai Lama. In recognition of the "many enduring and outstanding contributions of Tenzin Gyatso, the Fourteenth Dalai Lama, "to peace, non-violence, human rights, and religious understanding." Approved September 27, 2006 ( P.L. 109-287 ; 120 Stat. 1231-1232). Byron Nelson. In recognition of Byron Nelson's "significant contributions to the game of golf as a player, a teacher, and a commentator." Approved October 16, 2006 ( P.L. 109-357 ; 120 Stat. 2044-2046). Dr. Norman E. Borlaug. In recognition of Dr. Norman E. Borlaug's "enduring contribution to the United States and the World." Approved December 14, 2006 ( P.L. 109-395 ; 120 Stat. 2708-2710). Dr. Michael Ellis DeBakey. In recognition of Dr. Michael Ellis DeBakey's "many outstanding contributions to the Nation." Approved October 16, 2007 ( P.L. 110-95 ; 121 Stat. 1008-1010). Daw Aung San Suu Kyi. In recognition of Daw Aung San Suu Kyi's "courageous and unwavering commitment to peace, nonviolence, human rights and democracy in Burma." Approved May 6, 2008 ( P.L. 110-209 ; 122 Stat. 721-722). Constantino Brumidi. In recognition of his contributions to the nation as a designer and decorator of the U.S. Capitol. Approved July 1, 2008 ( P.L. 110-259 ; 122 Stat. 2430-2432). Edward William Brooke, III. In "recognition of his unprecedented and enduring service to our Nation." Approved July 1, 2008 ( P.L. 110-260 ; 122 Stat. 2433-2435). Code Talkers Recognition Act of 2008. In recognition of the service of all Native American code talkers during World War I and World War II. Approved October 15, 2008 ( P.L. 110-420 ; 122 Stat. 4774-4777). Women Airforce Service Pilots ("WASP") . In recognition of the "pioneering military service and exemplary record" of the Women Airforce Service Pilots ("WASP"), "which forged revolutionary reform in the Armed Forces of the United States of America." Approved July 2, 2009 ( P.L. 111-40 ; 123 Stat. 1958-1961). Neil A. Armstrong, Edwin E. "Buzz" Aldrin, Jr., Michael Collins, and John Herschel Glenn, Jr. In recognition of the "significant contributions to society" of Neil A. Armstrong, the first human to walk on the Moon; Edwin E. "Buzz" Aldrin, Jr., the pilot of the lunar module and second person to walk on the Moon; Michael Collins, the pilot of their Apollo 11 mission's command module; and John Herschel Glenn, Jr., the first American to orbit the Earth. Approved August 7, 2009 ( P.L. 111-44 ; 123 Stat. 1966-1967). Arnold Palmer. In recognition of Arnold Palmer's "service to the Nation in promoting excellence and good sportsmanship in golf." Approved September 30, 2009 ( P.L. 111-65 ; 123 Stat. 2003-2005). Dr. Muhammad Yunus . In recognition of Dr. Yunus's "contributions to the fight against global poverty." Approved October 5, 2010 ( P.L. 111-253 ; 124 Stat. 2635). 10 0 th Infantry Battalion and the 442 nd Regimental Combat Team, and the Military Intelligence Service, United States Army . In recognition of their "bravery, valor, and dedication to country … while fighting a 2-fronted battle of discrimination at home and fascism abroad." Approved October 5, 2010 ( P.L. 111-254 ; 124 Stat. 2637). The Montford Point Marines . In recognition of "their personal sacrifice and service to their country" as the first African-American Marines. Approved November 23, 2011 ( P.L. 112-59 ; 125 Stat. 749). Fallen Heroes of 9/11 . In "honor of the men and women who perished as a result of the terrorist attacks on the United States on September 11, 2001. Approved December 23, 2011 ( P.L. 112-76 ; 125 Stat. 1275). Raoul Wallenberg . In "recognition of his achievements and heroic actions during the Holocaust." Approved July 26, 2012 ( P.L. 112-148 ; 126 Stat. 1140). Addie Mae Collins, Denise McNair, Carole Robertson, and Cynthia Wesley . To "commemorate the lives they lost … in the bombing of the Sixteenth Street Baptist Church." Approved May 24, 2013 ( P.L. 113-11 ; 127 Stat. 446). First Special Service Force . In "recognition of its superior service during World War II." Approved July 12, 2013 ( P.L. 113-16 ; 127 Stat. 477). American Fighter Aces . In "recognition of their heroic military service and defense of the nation's freedom." Approved May 19,2014 ( P.L. 113-105 ; 128 Stat. 1157). Doolittle Tokyo Raiders . In "recognition of their military service during World War II." Approved May 23, 2014 ( P.L. 113-106 ; 128 Stat. 1160). World War II Civil Air Patrol . In "recognition of their military service and exemplary record during World War II." Approved May 30, 2014 ( P.L. 113-108 ; 128 Stat. 1164). Shimon Peres . In recognition of his lifetime achievements. Approved June 9, 2014 ( P.L. 113-114 ; 128 Stat. 1175). Monuments Men . In "recognition of their heroic role in the preservation, protection, and restitution of monuments, works of art, and artifacts of cultural importance during and following" World War II. Approved July 12, 20013 ( P.L. 113-116 ; 128 Stat. 1179). 65 th Infantry Regiment, the Borinqueneers . In "recognition of its pioneering military service, devotion to duty, and may acts of valor in the face of adversity." Approved June 10, 2014 ( P.L. 113-120 ; 128 Stat. 1187). Jack Nicklaus . In "recognition of his service to the Nation in promoting excellence, good sportsmanship, and philanthropy." Approved December 16, 2014 ( P.L. 113-210 ). Foot Soldiers of the Voting Rights Movement . In recognition of their "extraordinary bravery and sacrifice [that] brought national attention to the struggle for equal voting rights, and served as the catalyst for Congress to pass the Voting Rights Act of 1965." Approved March 7, 2015. ( P.L. 114-5 ). Filipino Veterans of World War II . In "recognition of the dedicated service of the veterans during World War II." Approved December 12, 2016 ( P.L. 114-265 ). Office of Strategic Services . In recognition of their "superior service and major contributions during World War II." Approved December 14, 2016. ( P.L. 114-269 ).
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Senators and Representatives are frequently asked to support or sponsor proposals recognizing historic events and outstanding achievements by individuals or institutions. Among the various forms of recognition that Congress bestows, the Congressional Gold Medal is often considered the most distinguished. Through this venerable tradition, the occasional commissioning of individually struck gold medals in its name, Congress has expressed public gratitude on behalf of the nation for distinguished contributions for more than two centuries. Since 1776, this award, which initially was bestowed on military leaders, has also been given to such diverse individuals as Sir Winston Churchill and Bob Hope, George Washington and Robert Frost, Joe Louis and Mother Teresa of Calcutta. Members of Congress and their staff frequently ask questions concerning the nature, history, and contemporary application of the process for awarding Gold Medals. This report responds to congressional inquiries concerning this process, and includes a historical examination and chronological list of these awards. It is intended to assist Members of Congress and staff in their consideration of future Gold Medal proposals, and will be updated as Gold Medals are approved.
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Motion is made to dismiss this case upon the ground that no Federal question is involved; or if there be such question, that there was another nonfederal question, the decision of which was sufficient to sustain the judgment, irrespective of what the decision of the supreme court may have been upon such Federal question. 1. From the foregoing abstract of the pleadings it will be seen that the title set up by the state rests solely upon the proposition that it became vested, upon its admission into the Union under the act of Congress of December 28, 1846 (9 Stat. at L. 117, chap. 1), with sovereignty over the beds of all lakes within its borders, by the act of the general government in meandering such lakes, and excluding from its survey of public lands all such as lay beneath their waters. This clearly does not involve the validity of any treaty or statute of the United States, or the constitutionality of any state statute or authority, so that, if jurisdiction exists in this court, it must be by reason of the claim of a title, right, privilege, or immunity under the Constitution, or an authority exercised under the United States, the decision of which was against such title, right, privilege, or authority. The real question, then, is whether the sovereignty of the state over the beds of its inland lakes rests upon some statute or provision of the Constitution, or upon general principles of the common law which long antedated the Constitution, and had their origin in rights conceded to the Crown centuries before the severance of our relations with the mother country. If the latter, then the state must look to the decisions of this court, recognizing and defining such rights and determining how far they are inherited, first, by the United States as the successor of the Crown, and, second, by the several states upon their admission into the Union. This would not involve a construction of the Constitution, nor of any title derived thereunder, but a determination of the title of the Crown to lands beneath the beds of inland lakes, and of the respective rights of the states and the general government as successors thereto. In support of our jurisdiction the state relies (1) upon article 3 of the treaty with France for the cession of Louisiana (8 Stat. at L. 200), which merely provides that 'the inhabitants of the ceded territory shall be incorporated in the Union of the United States and admitted as soon as possible, according to the principles of the Federal Constitution, to the enjoyment of all the rights, advantages, and immunities of citizens of the United States;' (2) the provision of the Constitution, art. 4, § 3, which merely declares, with certain immaterial qualification, that 'new states may be admitted by the Congress into this Union;' and (3) upon the act of Congress of 1846, admitting the state of Iowa into the Union, with the provision that it should be admitted on an equal footing with the original states in all respects whatsoever. None of these provisions was questioned by the supreme court of Iowa in its opinion, but neither of them has even a remote bearing upon the question of the title of the state to the land beneath its lakes. Indeed, the argument now made by the attorney general, that the title of the state depends upon the construction given to this act of Congress, is quite inconsistent with his first assignment of error upon the merits, which charges the court with error 'in not holding that the beds of all the meandered lakes and streams in the state of Iowa beling to said state in trust for the public by virtue of its sovereignty, and that this right does not depend upon any act of Congress or any grant from the United States.' In other words, the state is put in the dilemma of insisting, for the purpose of sustaining the jurisdiction of this court, that the title of the state is dependent upon the proper consruction of these three instruments, and, for the purpose of sustaining its case upon the merits, denying that the title depends upon either of them. This is an attempt to blow hot and cold upon the same question. The mere fact that the plaintiff in error asserts title under a clause of the Constitution or an act of Congress is not in itself sufficient, unless there be at least a plausible foundation for such claim. A party may assert a right, title, privilege, or immunity without even color for such assertion, and if that were alone sufficient to give this court jurisdiction, a vast number of cases might be brought here simply for delay or speculative advantage. New Orleans Waterworks Co. v. Louisiana, 185 U. S. 336, 46 L. ed. 936, 22 Sup. Ct. Rep. 691. It is equally clear that the mere fact that an act of Congress or a patent of the United States appears in a chain of title does not constitute such a right, title, or immunity as gives the Federal court jurisdiction, unless such title involves the construction of the act, or the determination of the rights of the party under it. De Lamar's Nevada Gold Min. Co. v. Nesbitt, 177 U. S. 523, 44 L. ed. 872, 20 Sup. Ct. Rep. 715. The case of New Orleans v. De Armas, 9 Pet. 224, 9 L. ed. 109, is directly in point. Plaintiffs claimed a parcel of land in the city of New Orleans by incomplete title from the Spanish government, which was, however, confirmed under the laws of the United States, and a patent issued therefor. The city claimed the land as a part of a quay dedicated to the city in the original plan of the town, and therefore not grantable by the King. The state court gave judgment for the plaintiffs, which was affirmed by the supreme court, and the city sued out a writ of error. The court held, through Chief Justice Marshall, that to sustain its jurisdiction it must be shown that the title set up by the city was protected by the treaty ceding Louisiana to the United States (the treaty involved in this case), or by some act of Congress applicable to that title. It was held that the 3d article of the treaty, above quoted, did not embrace the case, and that the act of Congress admitting Louisiana into the Union, which is identical in language with the act admitting Iowa, court not be construed to give appellate jurisdiction to this court over all questions of title between citizens of Louisiana; that the case involved no principle upon which this court could take jurisdiction, which would not apply to all the controversies respecting titles originating before the cession of Louisiana to the United States, and that 'it would also comprehend all controversies concernign titles in any of all controversies concerning titles in any of the Union by laws expressed in similar language.' The writ of error was dismissed. This case is conclusive against the existence of a Federal question in the case under consideration. 2. We are also asked to sustain the jurisdiction of this court upon the ground that the action of the government surveyors in segregating and setting apart the lake in question by meander lines from the public land, and the approval of such survey by the Commissioner of the General Land Office, was an adjudication by the government of the United States, by its duly authorized officers and agents, that the lake so segregated and set apart was the property of the state of Iowa, and not a part of the public domain. We do not so interpret the action of these officers. They undoubtedly did survey the lands adjoining this lake and meander the lake itself, but they determined nothing as to the title of the land beneath its waters,—a determination which would have been wholly beyond their powers; but simply omitted those lands from the survey, and left their title to be subsequently determined either by state or congressional action. It was obviously beyond the powers of a government surveyor, or of the Land Office, to determine the title to these lands, or to adjudicate anything whatever upon the subject. Had the decision of the supreme court been adverse to the plaintiffs, who claimed title under the swamp land act, it is possible that a writ of error might have lain from this court, but we have frequently held that to sustain such writ, the decision must be adverse to a right claimed under an act of Congress, or to the exercise of an authority granted by the United States. Baker v. Baldwin, 187 U. S. 61, ante, p. 19, 23 Sup. Ct. Rep. p. 19. The writ of error must be dismissed.
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Where the title claimed by the State of Iowa to land formerly the bed of a lake rested solely upon the proposition that the State became vested, upon its admission into the Union, with sovereignty over the beds of all lakes within its borders, and upon the act of the General Government in meandering such lakes and excluding from its survey of public lands all such as lay beneath their waters, and the Supreme Court of the State has decided adversely to the State and in favor of one who claimed under the act of Congress of September 28, 1850, known as the swamp land act, there is no question involving the validity of any treaty or statute of the United States or the constitutionality of any state statute or authority which gives this court jurisdiction. Neither article III of the treaty with France ceding Louisiana, article IV, section 3, of the Constitution of the United States, nor the act of Congress of 1846, admitting the State of Iowa into the Union on an equality with the original States, has even a remote bearing upon the question of title of the State of Iowa to the land beneath its lakes. The mere fact that the plaintiff in error asserts title under a clause of the Constitution or an act of Congress, or that such act or a patent of the United States appears in the chain of title, does not constitute such a right, title or immunity as to give the Federal courts jurisdiction, unless there is either a plausible foundation for such claim, or the title involves the construction of the act,or the determination of the rights of the party under it. The action of the government surveyors in segregating and setting apart the lakes in question by meander lines from the public lands and the approval of such survey by the Commissioner of the General Land Office was not an adjudication by the Government of the United States by its duly authorized officers and agents, that the lake so segregated and set apart was the property, of the State of Iowa and not a part of the public domain. It -was beyond the powers of a government surveyor to deter.mine~the title to such lands, or to adjudicate anything whatever upon the subject.
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The offense denounced by section 5209 of the Revised Statutes is punishable by imprisonment not less than 5 nor more than 10 years, and is therefore an infamous crime. In re Claasen, 140 U. S. 200, 11 Sup. Ct. 735, and cases cited. The question, then, is whether the circuit court of appeals for the Eighth circuit has jurisdiction of a writ of error to review the judgment and proceedings of the supreme court of the territory of New Mexico in the instance of a conviction of an infamous crime. By section 5 of the judiciary act of March 3, 1891 (26 Stat. 827, c. 517), it was provided that appeals or writs of error might be taken from the district courts or from the circuit courts direct to the supreme court in six classes of cases, one of which classes was 'cases of conviction of a capital or otherwise infamous crime'; and by section 6, that the circuit courts of appeals should exercise appellate jurisdiction to review, by appeal or writ of error, final judgments of the district courts and the circuit courts 'in all cases other than those provided for in the preceding section of this act, unless otherwise provided by law. And the judgments or decrees of the circuit courts of appeals shall be final in all cases in which the jurisdiction is dependent entirely upon the opposite parties to the suit or controversy being aliens and citizens of the United States or citizens of different states; also in all cases arising under the patent laws, the revenue laws or under the criminal laws, and in admiralty cases.' In harmony with previous legislation (25 Stat. 784, c. 333; 26 Stat. 99, c. 182 § 42), section 13 of the act of March 3, 1891 (26 Stat. 829, c. 517), provides: 'Appeals and writs of error may be taken and prosecuted from the decisions of the United States court in the Indian Territory to the supreme court of the United States, or to the circuit court of appeals in the Eighth circuit, in the same manner and under the same regulations as from the circuit or district courts of the United States under this act.' Obviously, this section was designed to give a review of the decisions of the court of original jurisdiction by an appellate tribunal, and the same reason would not obtain in respect of cases where such review could already be had. Nevertheless, section 15 was added, although congress did not see fit, in relation to appeals or writs of error from and to the supreme courts of the several territories, to make the same provision thereby as that in section 13, except so far as the circuit courts of appeals were concerned, and as to them only in cases in which their judgments were made final by the act. Section 15 is as follows: 'That the circuit court of appeals in cases in which the judgments of the circuit courts of appeals are made final by this act shall have the same appellate jurisdiction, by writ of error or appeal, to review the judgments, orders, and decrees of the supreme courts of the several territories as by this act they may have to review the judgments, orders, and decrees of the district courts and circuit courts; and for that purpose the several territories shall, by orders of the supreme court, to be made from time to time, be assigned to particular circuits.' 26 Stat. 830, c. 517. By section 702 of the Revised Statutes and the act of March 3, 1885 (23 Stat. 443, c. 355), the final judgments and decrees of the supreme courts of the territories, where the matter in dispute, exclusive of costs, exceeded the sum of $5,000, might be reviewed, reversed, or affirmed in this court upon a writ of error or appeal in the same manner and under the same regulations as the final judgments or decrees of a circuit court. In Shute v. Keyser, 149 U. S. 649, 13 Sup. Ct. 960, which was a case not falling within either of the classes in which the judgments of the circuit courts of appeals were made final by the act of March 3, 1891, we held that, as there was no provision by the fifteenth section of that act for appeals or writs of error, except to the circuit courts of appeals, in cases in which their judgments were made final, and no express repeal of the provisions of the prior acts regulating appeals or writs of error from the supreme courts of the territories in other cases, an appeal or writ of error lay to this court from the judgments or decrees of those courts in such other cases. In Mining Co. v. Ripley, 10 U. S. App. 383, 3 C. C. A. 388, and 53 Fed. 7, the circuit court of appeals for the Eighth circuit held that it had no jurisdiction under the fifteenth section, because the case at bar did not come within any one of the classes of cases wherein the judgments of that court were declared to be final, and its judgment dismissing the writ of error on that ground was affirmed by this court, while it was at the same time pointed out that, as the value of the matter in dispute did not reach $5,000, we could not take jurisdiction of the particular case. Mining Co. v. Ripley, 151 U. S. 79, 14 Sup. Ct. 236. It was urged that congress could not have intended that such cases should be brought to this court by reason of the discrimination in the fifteenth section, but we were constrained to the conclusion reached in view of all the legislation on the subject, and the specific language of the section which we were not at liberty to disregard. The result was rendered inevitable, in our opinion, by the restriction of the jurisdiction of the circuit courts of appeals to cases in which their judgments were made final by the act, and the same rule seems applicable in the disposal of the question under consideration. By the sixth section the circuit courts of appeals are vested with appellate jurisdiction 'to review by appeal or by writ of error final decisions in the district courts, and the existing circuit courts in all cases other than those provided for in the preceding section of this act, unless otherwise provided by law,' and their judgments are made final in, among others, cases arising under the criminal laws. By the preceding section, appeals or writs of error may be taken from the district courts or the existing circuit courts directly to this court 'in cases of conviction of a capital or otherwise infamous crime.' The criminal cases in which the judgments of the circuit courts of appeals are made final by section 6 do not embrace, therefore, capital cases or cases of infamous crimes. The fifteenth section confers appellate jurisdiction on the circuit courts of appeals to review the judgments of the supreme courts of the territories, but it is, in terms, the same appellate jurisdiction as conferred by the sixth section in respect of the judgments of district and circuit courts, and, this being so, is limited to those cases in which, if decided by the district and circuit courts, the judgments of the circuit courts of appeals would be final. Sections 5 and 6 relate to appellate jurisdiction over the judgments and decrees of district and circuit courts. Section 13 gives the same appellate jurisdiction over the decisions of the United States court in the Indian Territory, distributed in accordance with sections 5 and 6. Section 15 gives the same appellate jurisdiction over the territorial courts, but confines it to the courts of appeals and to particular cases as specified in section 6. The grant of jurisdiction is not general, but specific and limited; and we see no escape from the conclusion that it is not conferred on the circuit courts of appeals over territorial judgments in capital cases and cases of infamous crimes. It is said that this involves the absurdity that convictions for minor offenses are reviewable on a second appeal, while convictions for capital and infamous crimes are not. Doubtless, in some cases, where the language of a statute leads to an absurdity, hardship, or injustice, presumably not intended, a construction may be put upon it modifying the meaning of the words, so as to carry out the real intention; but, where the intention is plain, it is the duty of the court to expound the statute as it stands. As far as congress went in conferring this right to a second appeal, the intention is clear, and the language used unambiguous. The objection really is that congress should have gone further, and given by this act a second review in this court in cases of convictions of capital and infamous crimes in the territories. It may be that there was an oversight in that particular; but, if there were, we certainly cannot supply it by construing the fifteenth section as carrying appellate jurisdiction over such cases to the circuit courts of appeals, and so enlarging that jurisdiction into something other and different from 'the same appellate jurisdiction' as is exercised in reviewing the judgments of district and circuit courts under section 6 of the act. We answer the question in the negative, and it will be so certified.
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Circuit Courts of Appeals have no jurisdiction over the judgments of territorial courts in capital cases, and in cases of infamous crimet. This construction of the statute is imperative from its language, and Is not affected by the fact that convictions for minor offences are reviewable on a second appeal, while convictions for capital and infamous crimes are. not so reviewable.
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Article of War 92, 10 U.S.C. (1946 ed., Supp. IV) § 1564, which, prior to the adoption of the Uniform Code of Military Justice,1 governed trials for murder or rape before courts-martial,2 contained a proviso 'That no person shall be tried by court-martial for murder or rape committed within the geographical limits of the States of the Union and the District of Columbia in time of peace.' The question for decision concerns the meaning of the words 'in time of peace' in the context of Article 92. Petitioner, while serving with the United States Army in France, was convicted by a court-martial, dishonorably discharged, and sentenced to prison for 20 years. He was serving that sentence in the custody of the Army at Camp Cooke, California, when he was convicted by a court-martial of the crime of conspiracy to commit murder. This offense occurred on June 10, 1949, at Camp Cooke. The question is whether June 10, 1949, was 'in time of peace' as the term was used in the 92d Article. The question was raised by a petition for a writ of habeas corpus challenging the jurisdiction of the court-martial. Both the District Court (148 F.Supp. 23) and the Court of Appeals (248 F.2d 783) ruled against petitioner. We granted certiorari, 356 U.S. 911, 78 S.Ct. 672, 2 L.Ed.2d 585. The Germans surrendered on May 8, 1945 (59 Stat. 1857), the Japanese on September 2, 1945 (59 Stat. 1733). The President on December 31, 1946, proclaimed the cessation of hostilities, adding that 'a state of war still exists.' 61 Stat. 1048, 50 U.S.C.A.Appendix, § 601 note. In 1947, Senate Joint Resolution 123 was passed (61 Stat. 449) which terminated, inter alia, several provisions of the Articles of War3 but did not mention Article 92. The war with Germany terminated October 19, 1951, by a Joint Resolution of Congress (65 Stat. 451, 50 U.S.C.A.Appendix, note preceding section 1) and a Presidential Proclamation (66 Stat. c3, 50 U.S.C.A.Appendix, note preceding section 1). And on April 28, 1952, the formal declaration of peace and termination of war with Japan was proclaimed by the President (66 Stat. c31, 50 U.S.C.A.Appendix, note preceding section 1), that being the effective date of the Japanese Peace Treaty. Since June 10, 1949 the critical date involved here—preceded these latter dates, and since no previous action by the political branches of our Government had specifically lifted Article 92 from the 'state of war' category, it is argued that we were not then 'in time of peace' for the purposes of Article 92. That argument gains support from a dictum in Kahn v. Anderson, 255 U.S. 1, 9—10, 41 S.Ct. 224, 226, 65 L.Ed. 469, that the term 'in time of peace' as used in Article 92 'signifies peace in the complete sense, officially declared.' Of like tenor are generalized statements that the termination of a 'state of war' is 'a political act' of the other branches of Government, not the Judiciary. See Ludecke v. Watkins, 335 U.S. 160, 169, 68 S.Ct. 1429, 1433, 92 L.Ed. 1881. We do not think that either of those authorities is dispositive of the present controversy. A more particularized and discriminating analysis must be made. We deal with a term that must be construed in light of the precise facts of each case and the impact of the particular statute involved. Congress in drafting laws may decide that the Nation may be 'at war' for one purpose, and 'at peace' for another. It may use the same words broadly in one context, narrowly in another. The problem of judicial interpretation is to determine whether 'in the sense of this law' peace had arrived. United States v. Anderson, 9 Wall. 56, 69, 19 L.Ed. 615. Only mischief can result if those terms are given one meaning regardless of the statutory context. In the Kahn case, the offense was committed on July 29, 1918, and the trial started November 4, 1918—both dates being before the Armistice.4 It is, therefore, clear that the offense was not committed 'in time of peace.' Moreover, a military tribunal whose jurisdiction over a case attaches in a time of actual was does not lose jurisdiction because hostilities cease. Once a military court acquires jurisdiction that jurisdiction continues until the end of the trial and the imposition of the sentence. See Carter v. McClaughry, 183 U.S. 365, 383, 22 S.Ct. 181, 188, 46 L.Ed. 236. The broad comments of the Court in the Kahn case on the meaning of the term 'in time of peace' as used in Article 92 were therefore, quite unnecessary for the decision. Ludecke v. Watkins, 335 U.S. 160, 68 S.Ct. 1429, 92 L.Ed. 1881, belongs in a special category of cases dealing with the power of the Executive or the Congress to deal with the aftermath of problems which a state of war brings and which a cessation of hostilities does not necessarily dispel. That case concerns the power of the President to remove an alien enemy after hostilities have ended but before the political branches have declared the state of war ended. Hamilton v. Kentucky Distilleries & Warehouse Co., 251 U.S. 146, 40 S.Ct. 106, 107, 64 L.Ed. 194, involves the constitutionality under the war power of a prohibition law passed in 1918, 40 Stat. 1045, after the armistice with Germany was signed and to be operative 'until the conclusion of the present war and thereafter until the termination of demobilization, the date of which shall be determined and proclaimed by the President of the United States.' Woods v. Cloyd W. Miller Co., 333 U.S. 138, 68 S.Ct. 421, 92 L.Ed. 596, concerns the constitutionality of control of housing rentals promulgated after hostilities were ended and before peace was formally declared. These cases deal with the reach of the war power, as a source of regulatory authority over national affairs, in the aftermath of hostilities. The earlier case of McElrath v. United States, 102 U.S. 426, 26 L.Ed. 189, is likewise irrelevant to our problem. It was a suit for back pay by an officer, the outcome of which turned on a statute which allowed dismissal of an officer from the service 'in time of peace' only by court-martial. The President had made the dismissal; and the Court held that such action, being before August 20, 1866, when the Presidential Proclamation announced the end of the rebellion and the existence of peace, was lawful, since there was extrinsic evidence that Congress did not intend the statute to be effective until the date of the Proclamation. Our problem is not controlled by those cases. We deal with the term 'in time of peace' in the setting of a grant of power to military tribunals to try people for capital offenses. Did Congress design a broad or a narrow grant of authority? Is the authority of a court-martial to try a soldier for a civil crime, such as murder or rape, to be generously or strictly construed? Cf. Duncan v. Kahanamoku, 327 U.S. 304, 66 S.Ct. 606, 90 L.Ed. 688. We do not write on a clean slate. The attitude of a free society toward the jurisdiction of military tribunals—our reluctance to give them authority to try people for nonmilitary offenses—has a long history. We reviewed both British and American history, touching on this point, in Reid v. Covert, 354 U.S. 1, 23—30, 77 S.Ct. 1222, 1233—1237, 1 L.Ed.2d 1148. We pointed out the great alarms sounded when James II authorized the trial of soldiers for nonmilitary crimes and the American protests that mounted when British courts-martial impinged on the domain of civil courts in this country. The views of Blackstone on military jurisdiction became deeply imbedded in our thinking: 'The necessity of order and discipline in an army is the only thing which can give it countenance; and therefore it ought not to be permitted in time of peace, when the king's courts are open for all persons to receive justice according to the laws of the land.' 1 Blackstone's Commentaries 413. And see Hale, History and Analysis of the Common Law of England (1st ed. 1713), 40—41. We spoke in that tradition in United States ex rel. Toth v. Quarles, 350 U.S. 11, 22, 76 S.Ct. 1, 8, 100 L.Ed. 8, 'Free countries of the world have tried to restrict military tribunals to the narrowest jurisdiction deemed absolutely essential to maintaining discipline among troops in active service.' The power to try soldiers for the capital crimes of murder and rape was long withheld. Not until 1863 was authority granted. 12 Stat. 736. And then it was restricted to times of 'war, insurrection, or rebellion.'5 The theory was that the civil courts, being open, were wholly qualified to handle these cases. As Col. William Winthrop wrote in Military Law and Precedents (2d ed. 1920) 667, about this 1863 law: 'Its main object evidently was to provide for the punishment of these crimes in localities where, in consequence of military occupation, or the prevalence of martial law, the action of the civil courts is suspended, or their authority can not be exercised with the promptitude and efficiency required by the exigencies of the period and the necessities of military government.' Civil courts were, indeed, thought to be better qualified than military tribunals to try nonmilitary offenses. They have a more deeply engrained judicial attitude, a more thorough indoctrination in the procedural safeguards necessary for a fair trial. Moreover, important constitutional guarantees come into play once the citizen—whether soldier or civilian—is charged with a capital crime such as murder or rape. The most significant of these is the right to trial by jury, one of the most important safeguards against tyranny which our law has designed.6 We must assume that the Congress, as well as the courts, was alive to the importance of those constitutional guarantees when it gave Article 92 its particular phrasing. Statutory language is construed to conform as near as may be to traditional guarantees that protect the rights of the citizen. See Ex parte Endo, 323 U.S. 283, 301—304, 65 S.Ct. 208, 218, 219, 89 L.Ed. 243; Rowoldt v. Perfetto, 355 U.S. 115, 78 S.Ct. 180, 2 L.Ed.2d 140; Kent v. Dulles, 357 U.S. 116, 129, 78 S.Ct. 1113, 1119, 2 L.Ed.2d 1204. We will attribute to Congress a purpose to guard jealously against the dilution of the liberties of the citizen that would result if the jurisdiction of military tribunals were enlarged at the expense of civil courts. General Enoch H. Crowder, Judge Advocate General, in testifying in favor of the forerunner of the present proviso of Article 92, spoke of the protection it extended the officer and soldier by securing them 'a trial by their peers.'7 We think the proviso should be read generously to achieve that end. We refused in Duncan v. Kahanamoku, 327 U.S. 304, 66 S.Ct. 606, 90 L.Ed. 688, to construe 'martial law,' as used in an Act of Congress, broadly so as to supplant all civilian laws and to substitute military for judicial trials of civilians not charged with violations of the law of war. We imputed to Congress an attitude that was more consonant with our traditions of civil liberties. We approach the analysis of the term 'in time of peace' as used in Article 92 in the same manner. Whatever may have been the plan of a later Congress in continuing some controls long after hostilities ceased,8 we cannot readily assume that the earlier Congress used 'in time of peace' in Article 92 to deny soldiers or civilians the benefit of jury trials for capital offenses four years after all hostilities had ceased. To hold otherwise would be to make substantial rights turn on a fiction. We will not presume that Congress used the words 'in time of peace' in that sense. The meaning attributed to them is at war with common sense, destructive of civil rights, and unnecessary for realization of the balanced scheme promulgated by the Articles of War. We hold that June 10, 1949, was 'in time of peace' as those words were used in Article 92. This conclusion makes it unnecessary for us to consider the other questions presented, including the constitutional issues which have been much mooted. Reversed. Mr. Justice FRANKFURTER took no part in the consideration or decision of this case.
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Article 92 of the Articles of War provided that "no person shall be tried by court-martial for murder or, rape committed within the geographical limits of the States of the Union and the District of Columbia in time of peace." Petitioner was convicted by a court-martial of ,the crime of conspiracy to commit murder, the .offense having occurred in California on June 10, 1949-after actual termination of hostilities in 1945, but before termination of the wars with Germany and Japan had been proclaimed by the President or the Congress. Held: The offense was committed "in time of peace" within the meaning of-Article 92, and the court-martial had no jurisdiction. Pp. 229-236. (a) The term "in time of peace" must be construed in the light of the precise facts of each case and the impact of the particular statute involved, and it may have different meanings in different contexts. Kahn v. Anderson, 255 U. S. 1, and other cases, distinguished. Pp. 230-232. (b) In view of the attitude of a'free society toward the jurisdiction of military tribunals andour reluctance to give them authority to try people for non-military offenses, any grant to them of power to try people fbr capital offenses should be construed strictly. Pp. 232-236. (c) It cannot be readily assumed that Congress used the term "in time of peace" in Article 92 to deprive soldiers or civilians of the safeguards guaranteed in civil courts in capital cases, including the benefit of jury trials, four years after all hostilities had ceased. P. 236. 248 F. 2d 783, reversed.
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THIS was a writ of error to the Circuit Court of the United States for the District of New Jersey. Robert Morris Croxall, the plaintiff in error, in September, 1863,—the year is important,—brought ejectment in that court to recover certain premises in New Jersey. The jury found a special verdict, in substance thus: On the 15th of November, 1793, Robert Morris, being seized in fee simple of certain lands in the State just named, an indenture tripartite was made between him, of the first part, Charles Croxall and Mary, his wife, of the second, and Robert Morris, Jr., Adam Hoops, and Aaron Dickinson Woodruff, of the third. The deed set forth that for the better settling and assuring of the lands therein described, and intended to be conveyed and settled upon the uses and subject to the trusts, and for the purposes thereinafter limited, and in consideration of ten shillings paid to the said Robert Morris by the said Robert, Jr., Adam, and Aaron, the said Robert Morris thereby conveyed to the parties of the third part, and to their heirs, the land situated, &c. The habendum was thus: 'To have and to hold the said messuage, lands, &c., to the said Robert, Jr., Adam, and Aaron, their heris and assigns, to the uses, trusts, intents, and purposes hereinafter mentioned, limited, expressed, and declared of and concerning the same; that is to say, to the use and behoof of the said Charles Croxall and his assigns, for and during the term of his natural life; and from and immediately after the decease of the said Charles to the use and behoof of the said Mary, his wife, and her assigns, for and during the term of her natural life, in case she shall happen to survive the said Charles; and from and after the determination of the said estates so limited to them, the said Charles and Mary, his wife, for their several and respective lives, to the use and behoof of the said Robert, Jr., Adam, and Aaron, and their heirs, for and during the lives of them, the said Charles and Mary, his wife, and the life of the longer liver of them, upon trust to preserve the contingent uses and remainders thereof, hereinafter limited, from being destroyed, and to and for that purpose to make entries as occasion shall require, but not to convert any of the profits of said premises to their own uses, but nevertheless in trust to permit and suffer the said Charles, and his assigns, during his natural life, and after his death, the said Mary, his wife, and her assigns, during her natural life, to receive and take the rents, issues, and profits of all and singular the said premises, with the appurtenances, to and for their respective uses and benefits; and from and immediately after the death of the survivor of them, the said Charles and Mary, his wife, then to the use and behoof of the heirs of the body of the said Mary, by her present husband lawfully begotten, or to be begotten, and to the heirs of his, her, and their bodies lawfully to be begotten; and in default of such issue, then to the use and behoof of the said Robert Morris, party of the first part to these presents, and of his heirs and assigns forever, and to or for or upon no other use, trust, intent, or purpose whatsoever.' The grantees thereupon became seized of the premises, and Charles Croxall and his wife, and their assigns, occupied and possessed them, and received and enjoyed the profits until the premises were divided as hereinafter stated among the children of the said Charles and Mary; Charles Croxall, prior to 1817, having erected a mansion-house upon that part of the premises now in dispute. Mary, the wife of Charles Croxall, was the daughter of the grantor, Robert Morris, and was married to the said Charles long prior to the making the indenture, and had by him before, as well as after it was executed, several children, all of whom died unmarried and without issue in the lifetime of their parents, except four, namely: Thomas, Daniel, Ann Maria (who intermarried with Claudius Legrand), and Morris Croxall, who severally survived their parents, the said Charles and Mary,—the said Thomas being the eldest, and having been born prior to the execution of the said deed. Mary Croxall died in July, 1824, and Charles Croxall in November, 1831. Thomas Croxall was married in the year 1813, and had nine children,—three of whom died without issue in the lifetime of their father. The remaining six, of whom one was Robert Morris Croxall, the plaintiff, survived the said Thomas, and were still living. This Robert Morris Croxall, the only surviving son, was born on the 19th of March, 1821. Thomas Croxall died in October, 1861. On the 26th June, 1798, Charles Croxall and Mary, his wife, for the consideration of five shillings, conveyed the land by deed of bargain and sale to J. and W. Gallagher, their heirs and assigns, for and during the life of the said Charles, and after his death during the life of the said Mary, if she should survive him, in trust out of the rents and profits to pay certain debts of the said Charles, and to enable the said Mary to receive any sum, not exceeding four hundred dollars per annum, and after the debts were satisfied and the trustees reasonably compensated, to convey back the premises to the said Mary, her heirs and assigns. On the 11th July, 1804, the Gallaghers conveyed the lands to Mary Croxall, to hold the same during life. In December, 1807, the Court of Errors and Appeals of New Jersey, in a suit in chancery, wherein the Gallaghers were complainants, and Charles and Mary Croxall were respondents, decreed that the appellants, upon certain terms and conditions set forth, should deliver possession of the entire estate to Charles and Mary Croxall, and that they should convey the same to the said Mary, her heirs and assigns, pursuant to their agreement of June 26th, 1798. The conditions of the decree were complied with, and the Gallaghers conveyed to Mary Croxall accordingly. On the 1st of July, 1814, Charles and Mary Croxall executed to their two sons, Thomas and Daniel, a deed of bargain and sale for one undivided half of the property, with a covenant that they had done nothing to encumber the estate, and that they would warrant and defend against all persons claiming under them, or either of them. There was also a covenant for further assurances. On the 9th of May, 1808, all the interest of Charles Croxall in the premises was sold under execution to William McCullogh, and a sheriff's deed executed. On the 17th of May, 1808, McCullogh sold and conveyed to one Milner, who on the next day, conveyed the premises to A. D. Woodruff, Peter Gordon, and Jonathan Rhea, their heirs and assigns, to hold them during the natural lives of Charles and Mary Croxall, in trust, for the sole and separate use of Mary during life, and also to preserve the same from waste, so that after her death the same might enure to the heirs of her body by the said Charles Croxall, to the uses declared by the deed tripartite of 15th November, 1793, for the same premises. Shortly after the execution of the deed last mentioned, and before the application to the legislature of New Jersey, by Thomas Croxall, hereafter mentioned, Woodruff and Rhea died, leaving Gordon the sole surviving trustee, under the deed executed by Milner. Before that application also, Thomas, Daniel, and Anna Maria Croxall had arrived at majority, and Anna Maria had married, as before stated. Morris Croxall arrived at majority in 1820. Prior to that time and to the application to the legislature, Gordon was his guardian. In November, 1817, Thomas Croxall presented a petition to the legislature, asking for the partition of the premises. The petition stated that the title and right of possession for life had become vested in Mary Croxall; and that in the year 1814, she had, under the advice of counsel, conveyed to the memorialist all her right and title to the undivided part of the estate to which he, as an heir, laid claim. The aid of the legislature was invoked for the reason, as stated, that difficulties had arisen among the different branches of the family in relation to the property, that the estate was so situated as not to produce to its respective owners the income which it ought to yield, and that causes of litigation frequently occurred. Charles and Mary Croxall, Daniel Croxall, Legrand and wife, and Morris Croxall, by Peter Gordon, his guardian, submitted a remonstrance. The remonstrance was afterward withdrawn, and with the consent of all the parties, an act of the legislature was passed February 14, 1818, which appointed three commissioners, with power to divide the estate into four equal parts, and to set off and apart to each of the children of Charles and Mary Croxall, one equal fourth part by metes and bounds and in severalty. The was accordingly done. The premises in dispute in this case are a part of the share set off to Morris Croxall. The heirs afterwards mutually released and quit-claimed to each other according to the partition so made. Charles and Mary Croxall joined in the deeds. The deeds from Morris Croxall, and the deed to him, were executed after he arrived at the age of twenty-one years. Charles and Mary Croxall reserved for their use, during their lives, a part of his share. This was not embraced in their deed to him. The premises in dispute are a part of what was reserved. Thomas and Daniel Croxall, with Legrand and wife, in 1819, upon the execution of the deeds to them respectively, took possession in severalty of their respective shares, and held and enjoyed the same until they severally sold and conveyed to Garrett D. Wall, as hereafter stated. Morris Croxall did the same with respect to his share, except as to the part reserved for the use of his father and mother, which they occupied—he living with them. Their occupancy continued until the death of Mary, in 1824. Charles continued his occupancy after her death, until he also sold and conveyed to Wall. The deeds of the several parties to Wall were all executed in the year 1825. The deed of Morris includes the land in dispute in this case. At the time of the conveyance by Thomas Croxall, Wall held three mortgages upon the premises constituting his share, and had also bought the same, at a sale upon execution, and received a deed from the sheriff. When Daniel conveyed, Wall held a mortgage upon his share, and had also bought in the property at a sale under execution, and received the sheriff's deed accordingly. Wall had also taken up a mortgage executed by Morris Croxall before Morris conveyed to him. Wall is dead. The mortgages are held by his family as muniments of title. On the 13th of September, 1825, Charles Croxall, his wife being then dead, released and quitclaimed to Wall, all his interest in the entire premises so conveyed to Wall, whether that interest was in his own right or in right of his deceased wife. Wall paid the full value of the several parcels of the property at the times when the same were respectively conveyed. The lands have since been greatly increased in value, by improvements put upon them by Wall, and those who purchased from him. A large portion of the town of Belvidere now stood upon them. On the 25th January, 1827, Wall conveyed to Shererd, the defendant in the case, by deed of bargain and sale, for the consideration of $2200, the full value of the property at the time, a portion of the premises. They now made part of the town of Belvidere. Upon the making of the several deeds to Wall he immediately entered into possession under the conveyances; and Shererd, upon the making of the deed of conveyance to him by Wall, immediately entered into possession as the owner, and has ever since been in possession, and for one year prior to the making of the deed he had been in possession as the tenant of Wall. Possession was obtained by the defendant by a fair bon a fide purchase of the property in question, of a party in possession, and supposed to have a legal right and title thereto. Upon this special verdict, the court below gave judgment for the defendant. The case was now on error in this court. To understand the case fully, it is necessary to state that in New Jersey the legislature, by a statute of August 25th, 17841 (explained by one of March 3d, 1786, and repealed apparently by one in 1820), had enacted that—— 'All devises heretofore made in tail as aforesaid, which have not already passed through one descent since the death of the testator, and also all such devises which shall hereafter be made in tail of any kind, shall be deemed, taken, and adjudged to vest in and entitle the person to whom the same may descend, agreeably to the devise or entailment, after the decease of the first devisee, to all the estate in the devised premises which the testator was entitled to and might or could have devised; and that no entailment of any lands, or other real estate, shall continue to entail the same, in any case whatever, longer than the life of the person to whom the same hath been or shall be first given or devised by such entailment.' Also, that an act to abolish fines and recoveries was passed June 12th, 1799,2 as on the following day an act3 declaring that from that day 'no statute of the Parliament of England or Great Britain should have force within the State of New Jersey.' Also, that (by act of June 5th, 1787, section 2d),4 'Thirty years' actual possession of any lands, tenements, or other real estate, uninterruptedly continued as aforesaid, . . . wherever such possession was obtained by a fair bon a fide purchase of such lands, tenements, or other real estate, of any person or persons whatever in possession, and supposed to have a legal right and title thereto, or of the agent or agents of such person or persons, shall be a good and sufficient bar to all prior locations, rights, titles, conveyances, or claims whatever, not followed by actual possession as aforesaid, and shall vest an absolute right and title in the actual possessor and occupier of all such lands, tenements, or other real estate.' The act had the usual exceptions in favor of infants, feme coverts, &c., but not others. The case was argued at much length, and most interestingly, on the whole learning of estates tail, contingent remainders, the rule in Shelley's case, and how far affected by the statutes of New Jersey of 1786, 1799, and 1820, the different qualities of legal and equitable estates in connection with the particular subject, the effects of the different sorts of assurances at common law and under the statute of uses, as also on the more usual learning of the private statute of 1818 and the statute of limitations of 1787. The fact that the court apparently deemed it proper to rest its judgment on these last grounds chiefly, and 'not to go beyond them,' will be a sufficient excuse for a very slight or no report of so able and learned a discussion at the bar. Messrs. Reverdy Johnson, Brent, and Merrick, for the plaintiff in error: The plaintiff, Robert Morris Croxall, is the great-grandson of Robert Morris, and claims the benefit of the tripartite deed of settlement, made in 1793. Mr. Morris, known as the financier of our Revolution, settled the property in question by this trust upon his son-in-law, Croxall, for life, and after his death, if his wife survived, then upon his said wife, who was Mary Croxall, the daughter of Mr. Morris, for life, and in case of the determination of said life estates, to trustees to preserve contingent remainders, and after the death of the survivor of Charles and Mary Croxall, for the use of the heirs of the body of said Mary by Charles, and the heirs of his, her, or their bodies forever, and upon the failure of such issue, to the heirs of said Robert Morris. Mary Croxall did not survive her husband, but died in July, 1824, leaving her son Thomas, the heir of her body begotten by Charles, and in whom, as we maintain, the contingent remainder vested at her death subject to the outstanding life estate in Charles Croxall, who did not die until 1831. The New Jersey statute of 26th August, 1784, does not abolish entails or enable the tenant to do so. It only provides that estates tail shall only continue during life of the first taker who dies seized of the entail as held by the courts of New Jersey, and the next heir takes per formam doni, but takes in fee. The questions arising on this record will be—— 1. Whether, by the deed of settlement, Thomas was not the first tenant in tail? If so, as he survived until 1861, his son, the plaintiff in error, would inherit the property by primogeniture, taking, however, a fee, under the statutes of New Jersey. 2. If Mary Croxall, and not her son Thomas, became the first tenant in tail under the rule in Shelley's case, whether, as she survived until 1824, and the act of 26th August, 1784, restricting the entail, was itself repealed in her life by the act of 1820, the entail of which she was seized under the deed of 1793, did not continue and pass at her death in 1824 to her son Thomas, as second heir in tail, and at his death in 1861 to his son, the plaintiff in error, no act of the previous tenants in tail having destroyed the entail? 3. Whether, in the absence of a good paper title in the defendant in error, his possession, taken and held under the deeds of the tenants of the precedent estates, can operate to bar the plaintiff, whose title per formam doni accrued only in 1861, after the death of Thomas Croxall, the first or second tenant in tail, as he may be held to be? The deed of settlement is in form a bargain and sale for a nominal consideration, and therefore it raises the first use impliedly in the trustees, and they took the legal title. [The counsel then went into a learned argument to show that Thomas Croxall was the donee or first tenant in tail, and that he took a legal estate.] Assuming our positions here to have been made out, conceding that Thomas would have been the first heir in tail, it will probably be said that the private act of February 14th, 1818, authorizing a partition, virtually annulled the entail and invested the heirs apparent with a title where none existed before. We deny the legality of that act. If the act be a legal one, then the legislature not only destroyed the entail created by the grantor, but confiscated the reversion in his heirs at law, and all this on the petition of private parties, some of whom only represented life estates, and others represented not even a 'scintilla juris.' The legislature, we must think, were imposed on by ex parte allegations made in the proceedings which led to the enactment of this private act. The parties protesting withdraw their opposition, and the act passed for a division of Belvidere, as if all parties in interest had assented. This act assumes, incorrectly, a clear estate tail in Charles and Mary Croxall, if the rule in Shelley's case applies, and is obviously based on their assent, they being, according to the assumption in the act, the tenants of the inheritance, and willing that it should go at once to their children by an act of partition in consideration of the annuity mentioned. The legislature, it is to be observed, use no language to prejudice the rights of third parties, but merely authorize a partition among the parties before them, assuming that they represented a vested inheritance. There are certain rules about this class of acts—a dangerous class, perhaps, in this country—well settled, and necessary to be remembered. The presumption of law is, that in private acts the legislature only bind the parties before them, and not strangers or third parties. The presumption must be made certainly in regard to this act, which on its face breathes no aggressive spirit towards other parties. No greater title can be conferred on the parties by a private act than they possessed before.5 Private acts passed on petition of parties are to be construed merely as private agreements.6 Blackstone shows that consent of all parties having remote interest should be obtained.7 Private statutes do not bind strangers, unless they have a clause to that effect.8 In this case no party representing the inheritance was privy to the private act; nor were the trustees, or their representatives, under the deed of 1793, consulted. Gordon was not a substituted trustee. It was decided, indeed, in Westby v. Kiernan, reported by Ambler,9 that a private act passed to enable a tenant in tail to raise money out of the entailed estate, bound the issue in tail and the remainder, because tenant in tail could have effected the same object by a common recovery. But, in New Jersey, the tenant tail cannot bar his issue, and he has no power to alienate but during his life; nor was there, according to our construction, any person before the legislature, representing any estate or interest, greater than a life interest.10 In New Jersey, especially, the courts have gone far to restrain legislative control over private property, and in no form can it take A.'s property and give it to B. The case of Scudder v. Trenton Delaware Falls Company11 announces most conservative views on this topic. Nor could this private act change the estates as held under the old deed of 1793. Thistle v. The Frostburg Company12 seems to be much in point. We do not deny the power of the legislature to abolish the entail, but we deny that they have so intended or expressed that intention by this act of legislation. And certainly courts will not strain a private act to make it divest the right of parties not uniting in obtaining the act. But we must recover even if Mary Croxall was first tenant in tail. [The learned counsel then argued at length in support of this position, not necessary, in view of the concessions made by the court in its opinion, to be more than presented.] Then, too, it will be said that the defendant in error is protected by the New Jersey statute of limitations. But the statute does not bar our right under the thirty years' limitation, because our title did not accrue until 1861, when Thomas, the first tenant in tail, died. The English case of Tolson v. Kay13 establishes, indeed, that an adverse possession of twenty years against the first tenant in tail will bar the next heir, but that does not reach our case, inasmuch as the defendant holds merely as assignee of Wall, who was assignee by deeds of quit-claim (or bargain and sale, if you choose), of the tenants for life, and the first tenant in tail, under our title paper. Undoubtedly such an assignee cannot set up his possession as adverse, when his grantor held in conformity with and under our title, being in fact only the occupier of a precedent estate. Messrs. J. P. Bradley and F. T. Frelinghuysen, contra, for the purchasers. Mr. Justice SWAYNE delivered the opinion of the court. Whether under the deed of Robert Morris of the 15th November 1793, Charles Croxall was tenant for life, remainder to Mary Croxall his wife, for life, remainder to their son Thomas Croxall in tail—whether Mary Croxall was not the donee in tail under the rule in Shelley's case, and if so, whether her estate was a legal or equiptable one—and whether Thomas Croxall was not the donee or first tenant in tail, and if he were the first or the second tenant in tail, whether he took a legal estate by the operation of the statute of uses, then in force in New Jersey, or whether he took an equitable estate, the statute not executing the use created by the deed for his benefit, are questions not without difficulty, and upon which the views of some members of the court are not in harmony with those of others. As there are grounds of decision, not involving these inquiries, upon which we are all united in opinion, except one member of the court, as to one of the propositions, it is deemed proper to place our judgment upon those grounds and not to go beyond them. If Thomas Croxall, and not his mother, was the first tenant in tail, taking under the deed by purchase, and not by limitation, it is immaterial whether his estate was legal or equitable. In the law, if real property, the principles which apply to estates of both kinds, with a few limited exceptions not affecting this case, are the same. In the consideration of a court of equity, the cestui que trust is actually seized of the freehold. He may alien it, and any legal conveyance by him will have the same operation in equity upon the trust, as it would have had at law upon the legal estate.14 The trust like the legal estate is descendible, devisable, alienable, and barrable by the act of the parties, and by matter of record. Generally, whatever is true at law of the legal estate, is true in equity of the trust estate.15 The rule in Shelley's case applies alike to equitable and to legal estates;16 and an equitable estate tail may be barred in the same manner as an estate tail at law, and this end cannot be accomplished in any other way.17 In Doe v. Oliver18 the testator had devised lands to his wife for life; remainder to the children of his brother who should be living at the death of his wife. But one child, a daughter, was living at that time. She with her husband, in the lifetime of the devisee of the life estate, levied a fine, and declared the use to A. B. after the death of the first devisee, and the termination of her life estate. A. B. brought an action of ejectment for the lands, and recovered. It was held that the fine had a double operation, that it bound the husband and wife by estoppel or conclusion, so long as the contingencies continued, and that when the contingency happened, the estate which devolved upon the wife fed the estoppel, that the estate by estoppel created by the fine, ceased to be an estate by estoppel only, and became an interest, and gave to A. B. exactly what he would have had if the contingency had happened before the fine was levied. If Mary Croxall took under the deed an equitable contingent remainder for life, and Thomas at her death would have taken a legal estate tail, if the estate still subsisted, the statute in his case, executing the use, then the estates could not coalesce, one being legal and the other equitable, and the rule in Shelley's case would not apply. In that view of the subject Thomas and not his mother was the donee in tail. A use limited upon a use, is not executed or affected by the statute of uses. The statute executes only the first use. In the case of a deed of bargain and sale, the whole force of the statute is exhausted in transferring the legal title in fee simple to the bargainee. But the second use may be valid as a trust, and enforced in equity according to the rights of the parties.19 But without pursuing the subject, let it be conceded, for the purposes of this case, that Thomas Croxall was the donee or first tenant in tail, and that he took a legal estate, as contended by the counsel for the plaintiff in error. Taking this view of the subject, the first inquiry to which we shall direct our attention is as to the effect of the act of the legislature of the 14th of February, 1818 and of the proceedings which were had under it. All the parties in interest then in esse, were before the legislature, and asked for the act, or consented that it should be passed. There is no ground for the imputation upon either of them of any fraud, indirection, or concealment. It is not denied that the act was deliberately passed, nor that the partition made under it by the commissioners was fair and equal; all the parties testified their approbation, and confirmed it by their subsequent conveyances. The legal doubts and difficulties which hung over the deed, the uncertainty of the rights of the several parties; the learned and elaborate arguments, and conflicting views of the counsel, and our differences of opinion in this litigation, evince the wisdom and the equity of the act. It is as clear by implication as it could be made by expression, that the object of the legislature was to dock the entail, and unfetter the estate. What is implied is as effectual, as what is expressed.20 If it were possible for the parties and the legislature to accomplish this object, it was thus done. Had they the power? When the deed was executed, the statute de donis was in force in New Jersey, but modified by the acts of her legislature of the 25th of August, 1784, and of the 3d of March, 1786. Fines and recoveries, as known in the English law, were then a part of her judicial system. They were abolished by the act of June 12th, 1799. By the act of 13th of June, 1799, it was declared that no British statutes should thereafter have any force within the State. The plaintiff's lessor was the son of Thomas Croxall, and was born on the 29th of March, 1821. Estates tail, under the statute de donis, were, before the passage of the statute, known in the common law as conditional fees. Like estates tail, they were limited to particular heirs to the exclusion of others. The condition was, that if the donee died, without leaving such heirs as were specified, the estate should revert to the grantor. According to the common law, upon the birth of such issue, the estate became absolute for three purposes: 1. The donee could alien, and thus bar his own issue and the reversioner. 2. He could forfeit the estate in fee simple for treason. Before he could only forfeit his life estate. 3. He could charge it with incumbrances. He might also alien before issue born, but in that case, the effect of the alienation was only to exclude the lord, during the life of the tenant, and that of his issue, if such issue were subsequently born, while if the alienation were after the birth, its effect was complete, and vested in the grantee a fee simple estate.21 In this state of the law it became usual for the donee, as soon as the condition was fulfilled by the birth of issue, to alien, and afterwards to repurchase the land. This gave him a fee simple, absolute, for all purposes. The heir was thus completely in the power of the ancestor, and the bounty of the donor was liable to be defeated by the birth of the issue, for whom it was his object to provide. To prevent such results, and to enable the great families to transmit in a perpetuity the possession of their estates to their posterity, the statute de donis of the 13 Edward I, known as the Statute of Westminster the 2d, was passed. It provided, 'that the will of the donor, according to the form in his deed of gift manifestly expressed, should be observed, so that they to whom a tenement was so given upon condition, should not have the power of alienating the tenement so given, whereby it might not remain after their death to their issue, or to the heir of the donor, if the issue should fail.' Under this statute it was held that the donee had no longer a conditional fee governed by the rules of the common law, but that the estate was inalienable, and must descend 'per formam doni,' or pass in reversion. The evils arising from the statute were found to be very great. Repeated efforts were made by the Commons to effect its repeal. They were uniformly defeated by the nobility, in whose interest the statute was passed. It remained in force and was administered without evasion for about two centuries. In the reign of Edward IV it was held in Taltarem's case,22 that the entail might be destroyed by a common recovery. The effect of this process was to bar alike the issue, the reversioner, and all those to whom the donor had given other estates expectant on the death of the tenant in tail without issue. The demandant took an absolute estate in fee simple.23 Fines were subsequently resorted to for the same purpose. A statute of 32 Henry VIII, declared a fine, duly levied by the tenant in tail, to be a complete bar to him and his heirs, and all others claiming under the entail. Other incidents were subsequently, from time to time, annexed to such estates. By a statute of Henry VII, they were made liable to forfeiture for treason. At a later period they were made liable for the debts of the tenant to the crown, due by record or special contract; and still later they were made liable for all his debts in case of bankruptcy. The power to suffer a common recovery has been invariably held to be a privilege inseparably incident to an estate tail, and one which cannot be restrained by condition, limitation, custom, recognizance, or covenant.24 Private acts of Parliament are one of the modes of acquiring title enumerated by Blackstone. They are resorted to when the power of the courts of justice is inadequate to give the proper relief and the exigencies of the case require the interposition of the broader power of the legislature. They were very numerous immediately after the restoration of Charles II. The validity of statutes affecting private interests in specific real property has been repeatedly recognized by this court.25 Blackstone says: 'Nothing also is done without the consent expressly given of all parties in being, and capable of consent, that have the remotest interest in the matter, unless such consent shall be perversely and without any reason withheld.'26 Here all who were interested consented. No interest vested or contingent of the lessor of the plaintiff in error was involved; and no consent was asked of him, for the reason that he was then unborn. In Westby v. Kiernan,27 it was held that a private act passed to enable the tenant in tail to raise money bound the remainder. This involved the power to destroy the estate by incumbering the property to the full amount of its value. We entertain no doubt that the act in question was valid, and that the partition made under it, and the deeds subsequently executed, vested in each grantee a fee simple estate. This was the necessary result, whatever the quantity and character of the estate of Mary and Thomas Croxall at that time. It remains to consider the effect of the statute of limitation relied upon by the defendant in error. The second section of the act of the 5th of June, 1787, declares that thirty years' actual possession, where such possession was obtained by a fair and bon a fide purchase of any person in possession and supposed to have a legal right and title, shall vest an absolute right and title in the possessor and occupier. The deed of Morris Croxall to Garrett D. Wall bears date on the 30th of September, 1825. Wall conveyed to Shererd, the defendant, on the 5th of January, 1827. The special verdict finds that Wall took possession at the date of the deed to him from Morris Croxall, and held it until he conveyed to Shererd on the 5th of January, 1827, and that Shererd was continuously in possession from that time down to the commencement of the suit, 'and that possession was obtained by the defendant by a fair and bon a fide purchase of the lands in question of a party in possession and supposed to have a legal title thereto.' The finding of the jury brings the case exactly within the terms of the statute. And there had been uninterrupted possession for more than the statutory period of thirty years when the action was commenced. It is said that the possession of the defendant was subordinate to the ultimate right and title of the plaintiff's lessor, and was in effect his possession. This is not so. The defendant was a bon a fide purchaser. Such a party holds adversely to all the world. He may disclaim the title under which he entered, and set up any other title and any other defence alike against his vendor and against others.28 It is said also that the remainder to Thomas Croxall was contingent and expectant until the death of his father and mother; that nothing passed by his deed to Wall, and that the statute could not, under these circumstances, affect the rights of his heir in tail. Laying out of view the act of the legislature of 1818, and what was done under it, this is still an erroneous view of the subject. Thomas was living at the time of the execution of the deed of 1793, and took at once an estate vested in right, and deferred only as to the time of possession and enjoyment. It was in the latter respect only contingent and expectant. If this were not so, upon the death of the remainderman before the vesting of the possession his children could not inherit.29 The struggle with the courts had always been for that construction which gives to the remainder a vested rather than a contingent character. A remainder is never held to be contingent when, consistently with the intention, it can be held to be vested. If an estate be granted for life to one person, and any number of remainders for life to others in succession, and finally a remainder in fee simple or fee tail, each of the grantees of a remainder for life takes at once a vested estate, although there be no probability, and scarcely a possibility, that it will ever, as to most of them, vest in possession.30 Chancellor Kent says the definition of a vested remainder is thus fully and accurately expressed in the Revised Statutes of New York. It is, 'when there is a person in being who would have an immediate right to the possession of the lands, upon the ceasing of the intermediate precedent estate.' It is the present capacity to take effect in possession, if the precedent estate should determine, which distinguishes a vested from a contingent remainder. Where an estate is granted to one for life, and to such of his children as should be living after his death, a present right to the future possession vests at once in such as are living, subject to open and let in after-born children, and to be divested as to those who shall die without issue. A remainder, limited upon an estate tail, is held to be vested, though it be uncertain whether it will ever take effect in possession.31 A vested remainder is an estate recognized in law, and it is grantable by any of the conveyances operating by force of the statute of uses.32 Such an estate, if the entail had not been destroyed, passed by the deed of Thomas Croxall to Morris Croxall, by the deed of Morris Croxall to Garrett D. Wall, and by the deed of Wall to the defendant, Shererd. Whatever interest Charles Croxall had in the property after the death of his wife, passed by his deed of the 20th of September, 1825, to Wall, and from Wall, under the covenant of warranty in his deed, to Shererd. The special verdict having found that the defendant obtained possession by a bon a fide purchase from a party in possession, and supposed to have a valid title, the case is thus, in this view of the state of the title, brought again within the letter, and, as we think, within the meaning of the statute. The statute provides expressly that possession for the period of limitation shall vest in the occupant 'an absolute right and title to the land.' Such a title thus became vested in the defendant, Shererd. This would have been the effect of the bar without such a provision in the statute.33 The statute contains no qualification or exception as to issue in tail, and we can interpolate none; nor can we review or reverse the finding of the jury. In Inman v. Barnes,34 Mr. Justice Story said: 'I take it to be well settled that if the time limited has once run against any tenant in tail, it is a good bar, not only against him, but also against all persons claiming in descent per formam doni through him.' In Wright v. Scott,35 this same statute came under the consideration of the court. The case involved entailed property. The court gave the same construction to the statute which we have given. Mr. Justice Washington remarked that if such were not the proper construction the issue in tail could never be barred. In cases of this class, as in all others, when the statute has begun, it continues to run until its effect is complete. It proceeds to throw its protection over the property, and does not stop by the way for any intermediate right which may have arisen during the period of its progress. It allows no immunity beyond the savings which it contains. Such statutes are now favorably regarded in all courts. They are 'statutes of repose,' and are to be construed and applied in a liberal spirit. Our construction of this statute is sustained by the analogies of the English and Massachusetts decisions respecting writs of formidon in descender under the statute of the 21 James I, and other statutes containing similar provisions.36 The law presents other analogies which tend strongly in the same direction. As between trustee and cestui que trust—a joint tenant and a tenant in common, and their co-tenants, the bar becomes complete when the period has elapsed, which the statute prescribes, after the commencement of open and notorious adverse possession.37 We think the special verdict sustains conclusively this defence. The judgment below was properly given for the defendant in error, and it is affirmed. Mr. Justice MILLER. I concur in the judgment of the court, and in its opinion as to the first ground on which the judgment is based. In that part of the opinion which declares the statute of limitation to be a good defence, I cannot concur. The facts conceded by both parties show, that until the death of Thomas Croxall, in 1861, the defendants and those under whom they claimed, had a lawful possession; and were at no time liable to an action to disturb that possession until that event; and I do not believe that the statute of limitations of New Jersey, or of any other country, or any rule of prescription, was ever intended to create a bar in favor of parties in possession, who were not liable to be sued in regard to that possession. It was unnecessary to decide this proposition, as the court were unanimous in the opinion that defendants had a good title, in fee simple, which needed no statute of limitation to protect it. JUDGMENT AFFIRMED.
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1. As a general thing, any legal conveyance will have the same effect upon an equitable estate that it would have upon the like estate at law; and whatever is true at law of the latter is true in equity of the former. The rule, in Shelley's case, applies alike to equitable and to legal estates; and an equitable estate tail may be barred in the same manner as an estate tail at law. 2. A use limited upon a use is not affected by the statute of uses. The stat-, ute executes but the first use. In the conveyance by deed of bargain and sale the whole force of the statute is exhausted in transferring the legal title in fee simple to the bargainee, and the second use remains as a trust. 3. A private act of the legislature of New Jersey (passed in 1818), by which an estate meant to be settled in apparently some sort of tail, but over the deed settling which (executed in 1793) doubtsund difficulties of law hung, making the rights of the several parties uncertain,--the object of which private act was to dock the entail, unfetter the estate, and divide it equally between children in fe,-was held to be a proper exercise of the legislative power to effect an assurance of title through a private statute, and valid; all parties in interest in esse at the time having been before the legislature, and having either asked for the act or consented that it should pass, and there being no ground for imputation on amy of them of fraud, indirection, or concealment ; the partition, moreover, laving been made by disinterested commissioners, having been equal and fair, and all parties in esse in interest having confirmed it by conveyances and releases mutually made. 4. A purchaser boa fide holds adversely to all the world, and may disclaim the title under which he entered, and set up, even as against his vendor, any title whatever. 5. A remainder is to be considered as vested when there is a person in being who would have an immediate right to the possession upon the ceasing of the intermediate particular estate. And it is never to be held contingent when, coniistently with intention, it can be held vested. 6. Under the act of the New Jersey legislature, of June 5, 1787 (Q 2), declaring that thirty years' actual possession, where such possession was obtained by a fair and bone2fide purchase of any person supposed to have a legal right and title, shall vest an absolute right and title in the possessor and occupier, no qualification is made as to issue in tail ; and where a special verdict found that the defendant obtained possession by a bond fide purchase fron a party in possession, and supposed to have a valid title, and the court held that the estate in remainder of the party in possession, and supposed to have the valid title, was a vested remainder,-not a contingent one,-the case was considered to be brought within the meaning of the statute as within its letter.
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This is an appeal from the District Court under section 238 of the Judicial Code (Comp. St. § 1215) in a case in which the law of a state is claimed to be in contravention of the Constitution of the United States. The Burke Construction Company, a corporation organized under the laws of the state of Missouri, filed its bill against Terral, Secretary of State of Arkansas, averring that it has been licensed to do business in the state of Arkansas under an act of the Arkansas Legislature approved May 13, 1907 (Laws 1907, p. 744); that it was organized for the purpose of doing construction work, and carrying on interstate commerce, and was actually so engaged in Arkansas; that the right to do business in the state was a valuable privilege, and the revocation of the license would greatly injure it; that it had brought an original suit in the federal court of Arkansas and had removed a suit brought against it to the same federal court; that the Secretary of State was about to revoke the license because of such suit and such removal, acting under the requirement of section 1 of the act of the Legislature of Arkansas of May 13, 1907, reading as follows: 'If any company shall, without the consent of the other party to any suit or proceeding brought by or against it in any court of this state, remove said suit or proceeding to any federal court, or shall institute any suit or proceeding against any citizen of this state in any federal court, it shall be the duty of the Secretary of State to forthwith revoke all authority to such company and its agents to do business in this state, and to publish such revocation in some newspaper of general circulation published in this state; and if such corporation shall thereafter continue to do business in this state, it shall be subject to the penalty of this act for each day it shall continue to do business in this state after such revocation.' The penalty fixed is not less than $1,000 a The Construction Company avers that this act is in contravention of section 2, article 3, i. e., the judiciary article of the federal Constitution, and of section 1 of the Fourteenth Amendment. The defendant filed an answer in which there were many denials. One was that the complainant was engaged in interstate commerce. The answer did not deny, however, that the complainant was a foreign corporation, that it had been duly granted a license to do business in the state of Arkansas, that its right to do business in the state thus licensed was a valuable right, that the complainant had brought suit in the federal District Court and removed another case to that court, that such suit and removal were violations of the license granted by the state of Arkansas, or that the defendant intended to cancel the plaintiff's license. The case was heard on bill and answer, and is to be considered on the averments of the bill which are not denied by the answer. Iowa v. Illinois, 147 U. S. 1, 7, 13 Sup. Ct. 239, 37 L. Ed. 55. The sole question presented on the record is whether a state law is unconstitutional which revokes a license to a foreign corporation to do business within the state because, while doing only a domestic business in the state, it resorts to the federal court sitting in the state. The cases in this court in which the conflict between the power of a state to exclude a foreign corporation from doing business within its borders, and the federal constitutional right of such foreign corporation to resort to the federal courts has been considered, cannot be reconciled. They began with Home Insurance Co. v. Morse, 20 Wall. 445, 22 L. Ed. 365, which was followed by Doyle v. Continental Ins. Co., 94 U. S. 535, 24 L. Ed. 148; Barron v. Burnside, 121 U. S. 186, 7 Sup. Ct. 931, 30 L. Ed. 915; Southern Pacific Co. v. Denton, 146 U. S. 202, 13 Sup. Ct. 44, 36 L. Ed. 942; Martin v. Baltimore, 151 U. S. 673, 684, 14 Sup. Ct. 533, 38 L. Ed. 311; Barrow Steamship Co. v. Kane, 170 U. S. 100, 111, 18 Sup. Ct. 526, 42 L. Ed. 964; Security Mutual Life Ins. Co. v. Prewitt, 202 U. S. 246, 26 Sup. Ct. 619, 50 L. Ed. 1013, 6 Ann. Cas. 317; Herndon v. Chicago, Rock Island & Pac. Ry. Co., 218 U. S. 135, 30 Sup. Ct. 633, 54 L. Ed. 970; Harrison v. St. Louis & San Francisco R. R. Co., 232 U. S. 318, 34 Sup. Ct. 333, 58 L. Ed. 621, L. R. A. 1915F, 1187; and Wisconsin v. Philadelphia & Reading Coal Co., 241 U. S. 329, 36 Sup. Ct. 563, 60 L. Ed. 1027. The principle established by the more recent decisions of this court is that a state may not, in imposing conditions upon the privilege of a foreign corporation's doing business in the state, exact from it a waiver of the exercise of its constitutional right to resort to the federal courts, or thereafter withdraw the privilege of doing business because of its exercise of such right, whether waived in advance or not. The principle does not depend for its application on the character of the business the corporation does, whether state or interstate, although that has been suggested as a distinction in some cases. It rests on the ground that the federal Constitution confers upon citizens of one state the right to resort to federal courts in another, that state action, whether legislative or executive, necessarily calculated to curtail the free exercise of the right thus secured is void because the soverign power of a state in excluding foreign corporations, as in the exercise of all others of its sovereign powers, is subject to the limitations of the supreme fundamental law. It follows that the cases of Doyle v. Continental Insurance Co., 94 U. S. 535, 24 L. Ed. 148, and Security Mutual Life Ins. Co. v. Prewitt, 202 U. S. 246, 26 Sup. Ct. 619, 50 L. Ed. 1013, must be considered as overruled and that the views of the minority judges in those cases have become the law of this court. The appellant in proposing to comply with the statute in question and revoke the license was about to violate the constitutional right of the appellee. In enjoining him the District Court was right, and its decree is Affirmed.
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A state law which revokes the license of a foreign corporation to do business within the State because, while doing only a domestic business within the State, it resorts to the federal court sitting in the State, is unconstitutional. P. 532. Doyle v. Continental Insurance Co., 94 U. S. 535, and Security Mutual Life Insurance Co. v. Prewitt, 202 U. S. 246, held to have been overruled. Affirmed.
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Background CPSA created CPSC to regulate consumer products and address those that pose an unreasonable risk of injury; assist consumers in evaluating the comparative safety of consumer products; and promote research and investigation into the causes and prevention of product-related deaths, injuries, and illnesses. CPSC’s jurisdiction is broad, covering thousands of types of consumer products used in and around the home and in sports, recreation, and schools.regulated—that is, subject to mandatory standards governing performance or labeling requirements established by CPSC through regulations. In contrast, many consumer products that are under CPSC’s Some consumer products are jurisdiction are subject to voluntary standards, which are generally determined by standard-setting organizations, with input from government representatives and industry groups. Unregulated products are those products not subject to mandatory standards and may include those covered by voluntary standards. The 1981 amendments to CPSA required CPSC to defer to a voluntary standard rather than promulgating a mandatory standard through rulemaking if CPSC determines that (1) the voluntary standard adequately addresses the hazard and (2) there is likely to be substantial compliance with the voluntary standard. To address product hazards, CPSC may attend the meetings of standard- setting organizations and contribute relevant hazard data to assist in the development of voluntary standards, but staff are not permitted to vote on the standards or hold leadership positions. CPSC has broad authority to identify, assess, and address hazards associated with consumer products under the following laws: Consumer Product Safety Act (CPSA), which consolidated federal safety regulatory activity relating to consumer products within CPSC; Consumer Product Safety Improvement Act (CPSIA) of 2008, which amended CPSA to, among other things, expand CPSC’s authorities to address consumer product safety risks and direct the agency to develop a risk assessment methodology to identify hazardous imports; Flammable Fabrics Act, which, among other things, authorizes CPSC to prescribe flammability standards for clothing, upholstery, and other fabrics; and Federal Hazardous Substances Act, which establishes the framework for the regulation of substances that are toxic, corrosive, combustible, or otherwise hazardous. Other laws provide CPSC with authorities to prescribe performance standards for specific consumer products. In addition, CPSIA required CPSC to promulgate mandatory standards for durable infant and toddler products—such as cribs and strollers—through rulemaking in accordance with section 553 of the Administrative Procedure Act (APA), rather than the rulemaking procedures required by CPSA.governs “informal” or “notice and comment” rulemaking procedures for federal agencies and, according to CPSC officials, does not impose the Section 553 of the APA cost-benefit requirements specified in the rulemaking procedures in CPSA. When addressing a consumer product hazard, CPSC generally assesses whether it is known, new, or emerging. New or emerging hazards may be associated with either a new or existing product. For example, a new hazard could present itself in the form of new materials used to manufacture an existing product. CPSC’s Emerging Hazards Team— composed of statisticians—is responsible for reviewing incident reports to identify new and emerging product-associated hazards, performing product safety assessments, and directing new reports to appropriate Integrated Product Teams. The Emerging Hazards Team’s review is one of CPSC’s first steps in identifying the nature of a hazard. According to CPSC staff, the Emerging Hazards Team reviews all reports of incidents stemming from consumer products on a daily basis, including those stored in CPSC’s data management system, to identify trends and patterns. Integrated Product Teams are composed of subject-matter experts from a number of offices within CPSC and are organized by type of hazard. The teams are responsible for a variety of risk-related activities, including reviewing incident reports, requesting investigations, recommending new activities to management as needed, and monitoring follow-up status on corrective actions and the status of projects for standard development. standards, CPSC compliance staff conduct searches of the Internet and monitor online retailers. CPSC also monitors risks through agreements with other federal and state agencies to conduct research. For example, CPSC has a joint agreement with the Environmental Protection Agency (EPA) to research the health effects of nanotechnology in consumer products. In addition, CPSC staff attend trade shows to identify possible products of interest and exchange information about consumer products with a number of other federal agencies, including the National Institutes of Health and the Centers for Disease Control and Prevention. CPSIA mandated that CPSC, in tandem with Customs and Border Protection (CBP), develop a risk assessment methodology to identify products intended for import into the United States that are likely to violate consumer product safety laws enforced by CPSC.the agencies developed an import surveillance data system, known as Risk Assessment Methodology (RAM), and began to pilot it in 2011. The purpose of RAM is to evaluate products entering the United States based on criteria designed to identify imports with the highest risk to consumers. The criteria are determined through CPSC’s analysis of its historical data on consumer product risks and CBP’s advance shipment data. Currently, CPSC staff have access to CBP data systems and request data extracts, as necessary. CPSC generally evaluates consumer products to determine whether products present risks to consumers and how they should be addressed, such as through a voluntary standard, a consumer product safety standard, or ban by regulation to prevent or reduce an unreasonable risk. According to CPSC, it uses a multifaceted approach to reduce the risk of injury to consumers that is intended to address both immediate and future problems stemming from the risk. CPSC’s actions to address and reduce the risk of injury to consumers include the following: Compliance—CPSC conducts voluntary and mandatory recalls, enforcement of existing regulations by seeking civil and criminal penalties, and injunctive relief against prohibited acts. Standards and Rulemaking—As previously discussed, CPSC participates in the voluntary standards process, and develops mandatory safety standards, and product bans through rulemaking. Public education—CPSC notifies the public of safety hazards and educates them about safe practices. CPSC’s Authorities and Other Factors Affect How Quickly It Responds to New and Emerging Hazards Certain aspects of CPSC’s authorities, as well as other factors, impact how quickly CPSC responds to new and emerging hazards, including (1) compliance actions involving litigation, (2) reliance on voluntary standards, (3) rulemaking procedures, and (4) information-sharing restrictions. In addition, CPSC commissioners (former and current), consumer groups, and industry representatives have stated that limited resources can prolong the time it takes CPSC to respond to new and emerging hazards. Compliance Actions May Involve Litigation and Prolong Response to Hazardous Products CPSC can take a number of compliance actions to address unsafe products, including conducting voluntary recalls, mandatory recalls, and mandatory bans. Generally, CPSC negotiates the terms of voluntary recalls with manufacturers of products that have been identified to be hazardous or in violation of voluntary or mandatory standards. The company submits its corrective action plan to CPSC indicating how it plans to repair, refund, or replace the product. CPSC then reviews and, if necessary, negotiates the terms of the manufacturer’s proposed corrective action plan before approving it. According to CPSC staff and one commissioner we interviewed, because both CPSC and the manufacturer are seeking acceptable terms, the negotiations involved in the voluntary recall process could add time to CPSC’s response to a new or emerging product hazard. If CPSC and a manufacturer are unable to reach agreement on how to address a consumer product safety hazard through the voluntary recall process, the agency may pursue compliance actions through administrative hearings or in district court that could result in a number of remedies, including mandatory recalls and bans, and further increase the agency’s response time. While mandatory recalls, once imposed, may be used to remove hazardous products from the marketplace, according to CPSC officials, litigating such an action may lead to lengthy delays. For this reason, CPSC officials said that the agency typically pursues compliance actions that involve litigation as a last resort because such actions generally require additional time and resources. For example, in 2009, CPSC staff began learning about incidents of toddlers and young children ingesting small, loose, high-powered, rare earth magnets that were marketed to consumers aged 13 and older. In 2010, CPSC worked to obtain agreements with a number of retailers to voluntarily stop selling the product. After the agency continued to receive reports about ingestions and injuries, it issued a public safety alert in 2011. However, in July 2012, CPSC announced that attempts to negotiate a voluntary recall with one of the manufacturers of the high-powered magnets had failed. CPSC concluded that product warning labels and public education efforts were ineffective and could not prevent further injuries and incidents. As a result, CPSC staff filed an administrative complaint—the second in 11 years for any product, according to CPSC officials—which the commissioners approved, seeking a determination that the product constituted a substantial product hazard and that the firm stop selling the The manufacturer refused to product and offer consumers a full refund.submit to the conditions, and litigation continued for almost 2 years before CPSC reached a settlement in May 2014, ordering the former owner of the company to fund a trust to refund consumers. Officials with whom we spoke stated that CPSC may also address new and emerging risks through its imminent hazard authority. Specifically, if a consumer product is “imminently hazardous”—defined as a consumer product that presents an imminent and unreasonable risk of death, serious illness, or severe personal injury—CPSC may file an action in U.S. district court. If the court declares the product to be imminently hazardous, it may grant temporary or permanent relief—such as seizure of the product, recall, or public notice of the risk—to protect the public from the hazard. According to CPSC officials, the time needed to file the required legal actions and work through the courts using the imminent hazard authority prolongs the time CPSC takes to respond to new and emerging risks. Further, they noted that the legal standard required to prove that a product is an imminent hazard requires extensive data analysis and is difficult to prove in court. CPSC officials said that the agency attempted to use its imminent hazard authority one time, in 1986, to address hazards related to lawn darts, but was unsuccessful. In 1970, prior to the creation of CPSC, FDA, under its authority to administer the FHSA, issued a regulation banning lawn darts other than those that were not intended for use as a toy and were marketed solely for adults. CPSC later assumed responsibility for administering the FHSA and continued to enforce FDA’s regulations regarding the ban on lawn darts as well as the exemption from that ban. After receiving several reports that lawn darts were being sold in toy stores, between 1984 and 1987, CPSC inspected nearly 200 retailers throughout the U.S. and found numerous violations of both the labeling and marketing requirements for lawn darts. In 1987, CPSC staff met with manufacturers of lawn darts and discussed several voluntary actions that could be taken to assure firms’ compliance with the exemption from the ban, including making the warning label more conspicuous. Despite these efforts, continued reports of fatalities due to injuries involving lawn darts, according to CPSC, led Congress to question the adequacy of the ban. In an effort to prevent further injuries and fatalities, in 1988 CPSC issued a ban, through its rulemaking authority, on the sale of all lawn darts.Subsequently, CPSC received new reports of injury, and in March 2012 the agency issued a safety alert to reiterate the ban. Reliance on Voluntary Standards Can Prolong Response to Product Safety Hazards As previously discussed, consumer product safety laws require CPSC to rely on voluntary standards if it determines that (1) compliance with a voluntary standard would eliminate or adequately reduce the risk of injury identified and (2) there is likely to be substantial compliance with the voluntary standard. In addition, the agency may address the risk presented by unregulated products—that is, products not subject to mandatory standards—by recommending revisions to voluntary standards. However, if a voluntary standard does not address the particular defect or hazard that is being examined, the process of taking a corrective action to address the hazard is prolonged. In some instances, CPSC may find that a product meets a voluntary standard but still has a defect that creates a serious risk of injury or death, but the manufacturer may disagree. Because standards are voluntary, CPSC cannot legally compel a manufacturer to comply with a voluntary standard or take action against it for noncompliance. According to CPSC officials and staff, the nature of voluntary standards may extend the amount of time the agency takes to properly address new and emerging risks in consumer products. CPSC does not control the voluntary standards development process, and the laws do not establish a time frame within which standard- development organizations must finalize a voluntary standard. As a result, the voluntary standards development process can, in some instances, last for prolonged periods of time. For example, CPSC has worked with the window-covering industry since 1994 to develop voluntary standards to address strangulation hazards stemming from window blind cords, but conflicting consumer and industry goals have prolonged the process. The first voluntary standard to address this hazard was developed in 1996 and has been revised at least six times. However, some consumer groups argue that none of the revisions include designs aimed at eliminating the strangulation risk. Between 2007 and 2011, CPSC negotiated with 38 individual companies to voluntarily recall hazardous window blinds and issued multiple consumer safety alerts about hazards related to window blind cords. Consumer groups have asked standard-setting organizations to consider technologies, such as cordless window coverings, that would eliminate window cord-related hazards. Some manufacturers have said that while cordless window blinds would eliminate the hazard, a voluntary standard asking manufacturers to produce such window coverings would be too costly for some firms and could create a product that would be unaffordable for some consumers. In 2011, a coalition of consumer groups announced that they had withdrawn from the voluntary standard development process because it lacked transparency, and because resulting revisions to the standard still did not consider existing technologies that could eliminate strangulation hazards from accessible cords. In May 2013, the coalition of consumer groups petitioned CPSC to promulgate a mandatory standard because, according to the petition, the voluntary standards process had failed to develop a standard that eliminated or significantly reduced the strangulation risk. As of September 2014, CPSC continued its efforts to work with standard-setting organizations to develop a new voluntary standard. CPSC indicated in its proposed budget request for fiscal year 2015 that staff planned to include a response to the consumer groups’ petition for a mandatory standard for window-coverings in a briefing package to be considered by the commission. Some CPSC Rulemaking Procedures Result in Lengthy Time Frames CPSC’s rulemaking procedures, as outlined in CPSA, often lengthen the time the agency takes to respond to new and emerging risks. According to CPSC officials, the time required for mandatory standard rulemaking varies depending on multiple factors, including the complexity of the problem to be addressed; the volume of public comments responding to a proposed rule; time constraints imposed by other federal statutes, executive orders, or other administrative obligations; agency resources; and competing agency priorities. Under CPSA, CPSC shall not promulgate a rule, including a mandatory consumer product safety standard, unless it finds that all of the following conditions exist: The rule is in the public interest. The rule is reasonably necessary to eliminate or reduce an unreasonable risk of injury associated with the product. If a voluntary standard exists, compliance with such voluntary standard is not likely to eliminate or adequately reduce the risk of injury, or it is unlikely that there will be substantial compliance with such voluntary standard. The rule’s expected benefits bear a reasonable relationship to its costs. The rule imposes the least burdensome requirement that prevents or adequately reduces the risk of injury at issue. Additionally, any final rule must include a regulatory analysis describing (1) the potential benefits and costs of the rule; (2) any alternatives to the rule that CPSC considered, as well as the costs and benefits of the alternatives to the rule and why they were not chosen; and (3) significant issues raised by public comments submitted in response to the preliminary regulatory analysis and CPSC’s assessment of the issues. Some CPSC officials said that the required cost-benefit analysis is lengthy and resource intensive. These officials stated that requirements to explore possible alternatives to a new consumer product standard and completing the corresponding cost-benefit analysis proved to be time- consuming elements. For example, CPSC has been considering a mandatory rule to address the risk of fire associated with ignitions of upholstered furniture since 1994. However, action has yet to be taken because, according to one commissioner, demonstrating the efficacy of the risk-reduction alternatives is difficult. The commissioner cited CPSC’s efforts to address risks associated with flammable upholstered furniture, in particular, because options to address the hazard include manufacturers’ use of flame retardant chemicals, which some scientific studies have indicated could cause cancer in humans. Information-Sharing Restrictions May Prolong Response to New and Emerging Product Risks Specific sections of CPSA restrict CPSC’s ability to disclose certain information about potential product hazards, which in turn may impact CPSC’s ability to notify the public about new and emerging risks and prolong the time it takes for CPSC to respond to new and emerging risks. Section 6(b) of CPSA generally prohibits CPSC from publicly disclosing information that would readily identify a product manufacturer unless CPSC first takes reasonable steps to ensure that the information is accurate, and that the disclosure is fair in the circumstances, and reasonably related to carrying out CPSC’s purposes under its jurisdiction. Before publicly disclosing information, CPSC is required to provide the manufacturer advance notice and opportunity to comment on the accuracy of the information. If CPSC decides to disclose information that the manufacturer claims to be inaccurate, it generally must provide 5 days advance notice of the disclosure, and the manufacturer may bring suit to prevent the disclosure. Some consumer representatives and CPSC officials we interviewed said that these confidentiality requirements in CPSA may prolong the time it takes to get hazardous products out of consumers’ homes because CPSC is prohibited from releasing the name of the product or manufacturer until it has followed the 6(b) procedures or until the manufacturer has waived any objections to the information’s release. 15 U.S.C. § 2078(e). concluded that CPSC has been unable to complete certain information- sharing agreements with foreign counterparts because it cannot offer them reciprocal terms on disclosure of nonpublic information.reported that CPSC’s inability to establish information-sharing agreements with its foreign counterparts may hinder the agency’s ability to respond to a potential hazard in a timely manner because of the delay that might occur between when a foreign counterpart decides to take action in response to a product hazard and when that action becomes public. In that report, we also concluded that to better enable CPSC to target unsafe consumer products, Congress may wish to amend section 29(f) of CPSA to allow CPSC greater ability to enter into information- sharing agreements with its foreign counterparts that permit reciprocal terms on disclosure of nonpublic information. Our report concluded that this restriction on sharing information may hinder CPSC’s ability to identify risks from new products in a timely manner, possibly leading to injury and death if unsafe products enter the U.S. market. As of September 2014, there have been no changes to section 29(f) of CPSA. Limited Resources Could Hinder the Timeliness of CPSC’s Response In addition to factors previously discussed, CPSC’s ability to respond to new and emerging risks in a timely manner depends on the resources required to understand the nature of and address the specific product hazard. For example, the simplest risk assessments, such as lead testing, may require few resources to complete. However, assessing complex products, such as those involving phthalates, may require additional time, staff, and laboratory resources because the agency may need to develop new standards or consult outside scientific expertise in areas such as toxicology and epidemiology.U.S. imports under the agency’s jurisdiction increased by ten percent in two years—from about $637 billion in calendar year 2010 to $706.6 billion in calendar year 2012. In addition, CPSC’s full-time-equivalent staff generally decreased between fiscal years 2000 and 2008—from 492 to 396—until fiscal year 2009, when CPSC saw an increase in staff, to 435. As of September 2014, CPSC has 528 full-time equivalent staff, which is 41 percent less than the 890 full-time equivalent staff the agency had in CPSC data indicate that the dollar value of 1975. Further, many of the CPSC commissioners, consumer groups, and industry representatives we spoke with stated that CPSC currently lacks the staff, laboratory resources, and related funding to conduct risk assessments more efficiently than it currently does. According to these sources, CPSC’s lack of sufficient staff with scientific expertise could also prolong the time the agency takes to assess product hazards and ultimately address new and emerging risks. We reported in 2012 that CPSC has taken steps to improve its responsiveness through better technologies for identifying risks, more targeted surveillance of imported products, and a program for manufacturers to streamline the process for conducting recalls. According to CPSC, in fiscal year 2013, the pilot RAM helped port investigators to identify and prevent more than 12.5 million units of violative imports from entering the U.S. stream of commerce. In addition, since our December 2012 report on CPSC’s risk assessment activities, CPSC has stationed an additional full-time investigator at another port, for a total of 21 investigators at 16 of the 327 ports of entry. However, CPSC has reported that increased resources would help to expand these efforts. For example, according to CPSC, the pilot RAM import surveillance program is focused on import surveillance and compliance, but the fully developed program would emphasize prevention and programs that provide incentives for importers to implement preventive actions to improve product safety and better ensure legal and regulatory compliance. CPSC requested additional funding in its 2015 congressional budget request to expand the RAM and reports that additional funding would increase its capacity for laboratory sample testing and software acquisition for the RAM. Proposed Options for Improving CPSC’s Timeliness in Responding to New and Emerging Hazards Involve Trade-offs Over the years, stakeholders and observers have proposed various options to shorten the time CPSC takes to respond to new and emerging hazards. Some options, such as expanding CPSC’s use of regulatory approaches to prevent product safety hazards, may pose more challenges to implementation than others, such as enhancing CPSC’s resources to address product hazards, which could be achieved within the existing regulatory framework. We asked a range of consumer and industry representatives about the viability of these regulatory options as well as others that could be used to improve CPSC’s timeliness. Some options have the potential to prevent hazardous products from entering the market; and some could reduce the number of deaths and injuries from these products. But each also involves trade-offs that should be considered. These options and their trade-offs are summarized in figure 1. Expanding Preventive Approaches to Regulating Consumer Products According to CPSC, preventing hazards from entering the marketplace is one of the most effective ways the agency can protect consumers. CPSC reports that many consumer product hazards and safety defects arise in the very early stages of the supply chain, including product design and the selection and use of raw materials. As discussed earlier, CPSC addresses product hazards after the product has entered the market and after a specific product hazard has been identified. According to CPSC, given the large volume and diversity of products under CPSC’s jurisdiction, recalls and bans alone may not prevent product hazards from occurring. CPSIA mandated a preventive approach to the development and marketing of certain juvenile products by requiring that manufacturers of such products, prior to importing or distributing them for sale, submit samples of their product for third-party testing and certify that, based on such testing, their product complies with applicable safety standards. The precautionary principle approach is a preventive framework for guiding decision making that is used in some policy areas in the United States, such as the regulation of environmental policy and drugs, and more broadly in other countries, such as the European Union. The precautionary principle approach to regulation generally specifies that when a product, technology, or activity presents the possibility of severe or irreversible risk to human health or the environment, precautionary measures should be taken to reduce or eliminate the risk, even if the cause and effect are not fully understood. For example, Sweden has taken an approach to reducing the occurrence of pharmaceuticals in drinking water that is based on the precautionary principle. Sweden has taken steps, such as encouraging that prescriptions be written in smaller amounts to limit the amount of unused pharmaceuticals patients dispose of, even though there is no scientific evidence that the occurrence of pharmaceuticals in the environment is affecting human health. According to the precautionary principle, action should be taken preventively because definitive knowledge about causation might take decades of further research. In the United States, a consumer product is generally allowed on the market unless sufficient evidence can be presented to demonstrate that that product is unsafe. Under a precautionary principle approach, a product would generally not be allowed on the market unless sufficient evidence could be presented to demonstrate that it is safe. Further, the precautionary principle approach generally places the burden of proving the safety of a new product, technology, or activity on its proponents—such as manufacturers and distributors—rather than on the regulator. Premarket approval is an application of the precautionary principle in which certain products must be tested and approved before they can be marketed to consumers. In the United States, regulatory agencies such as FDA and EPA require that some products undergo an approval process. As part of the premarket approval process, regulators establish specific safety standards that products must meet before being approved for marketing to consumers. As in the precautionary principle approach, manufacturers generally bear the burden of demonstrating—with reasonable certainty and through sufficient scientific data and other requirements—that the product will not harm consumers. Regulators, then, must evaluate the data as part of the product approval process. A few consumer representatives we interviewed said a broad application of the precautionary principle approach to regulating consumer goods could decrease the number of products that come to market with unknown safety hazards and that as a result, injuries and deaths from hazardous products could decrease. However, the majority of the industry and consumer representatives we spoke with did not believe it was wise for CPSC to fully implement a precautionary principle approach. Representatives discussed various challenges the approach could present. For example, one representative said the approach would require manufacturers to incorporate into a product’s design a means of addressing all of the ways that consumers could potentially be harmed by using the product; in practice, the representative noted, manufacturers improve upon a product’s safety by learning how consumers actually use it. In addition, an industry representative noted that manufacturers could face significant additional costs from requirements to design and conduct an unknown number of new safety tests applicable to each new product. Several representatives said that, given the vast number of products under CPSC’s jurisdiction, the agency would need a significant increase in staff and budget to facilitate the ability to evaluate risk assessment data for all new consumer products. A commissioner and an industry representative also expressed concern about underlying assumptions that the approach would result in improvements over the current regulatory scheme. For example, both noted that because CPSC’s actions are already driven by data, a precautionary principle approach may not necessarily result in better outcomes. In addition, CPSC officials said that it would be unrealistic for the agency to implement a premarket approval process for all consumer goods given the vast number of products under CPSC’s jurisdiction. However, officials noted that a focused application of premarket approval on a specific product line, such as for cribs, could be an acceptable approach. An industry representative, a consumer representative, and a commissioner commented that certain children’s products regulated by CPSC are already subject to a process similar to premarket approval because of CPSIA’s requirement that such products meet third-party testing for compliance with applicable safety standards before they can be marketed to consumers. Two consumer representatives and a consumer safety expert we interviewed said that implementing a premarket approval process for all consumer products could, in theory, prevent hazardous products from entering the market and potentially reduce related injuries and deaths. However, most representatives we interviewed agreed that implementing premarket approval for all consumer products would not enable CPSC to respond to new and emerging hazards faster than it currently does. Some representatives said that such an approach could, among other things, increase (1) the time CPSC takes to respond to product risks, (2) the agency’s costs, and (3) the time for new products to come to market. In addition, one commissioner said that CPSC lacks the laboratory testing capacity to effectively implement a full premarket approval process. An industry representative also noted that a full premarket approval process would require CPSC to develop standards for testing all products, which would not be consistent with the current regulatory framework requiring CPSC to rely upon voluntary standards. CPSC officials said that the nature of CPSC’s work already incorporates some preventive measures because the agency relies upon an array of data and scientific analyses to determine the best way to reduce or prevent consumer safety risks. One industry representative noted that CPSC used a preventative approach to address risks stemming from the use of phthalates, as required by statute, much like the precautionary principle prescribes. Specifically, in 1998, CPSC asked manufacturers to remove specific types of phthalates from certain juvenile products, such as soft rattles and teething rings, after its study identified areas of scientific uncertainty about negative effects of the chemical on human health. In 2008, Congress passed a ban on certain phthalates in children’s toys until CPSC could convene an independent advisory panel to study the chemicals’ effects. The study, published in July 2014, concluded that additional phthalates should also be permanently banned and others should be subject to further risk assessment. Expedited Mandatory Standard Rulemaking Authority As previously discussed, CPSIA mandated that CPSC promulgate mandatory standards for durable infant and toddler products using rulemaking procedures in the Administrative Procedure Act (APA) which, according to CPSC staff, lack the cost-benefit analysis requirements specified in the rulemaking procedures in CPSA. CPSC staff said that APA rulemaking procedures enabled them to promulgate the mandated standards more easily and quickly than if they had been required to use CPSA’s procedures. Officials expressed interest in expanding CPSC’s authority to promulgate rules for other types of products with existing voluntary standards using APA rulemaking procedures. Several consumer representatives and a commissioner supported this idea and said if CPSC had such authority, its response to new and emerging hazards could be timelier. However, CPSC officials noted that expanding its use of this authority could inhibit the industry’s access to CPSC and due process as provided by section 9 of CPSA. Opinions vary among current and former commissioners about the extent to which expedited rulemaking authority should be used. At least two commissioners have said that the APA procedures provided CPSC with more flexibility to quickly issue the mandatory standards as required by CPSIA and one said that they could expedite its consideration of others, such as a standard to address the flammability of upholstered fabric. Conversely, one commissioner has said that CPSA’s cost-benefit analysis requirements make agencies, like CPSC, take the costs and benefits of their regulations more seriously before finalizing them; and another commissioner commented that CPSA’s cost benefit analysis is an important part of rulemaking because it requires agencies to identify a rational justification for proposing a rule. Enhancing CPSC’s Authorities to Address Unsafe Imports In September 2011, CPSC staff submitted a report to Congress that recommended several statutory changes designed to improve CPSC’s ability to identify hazardous products at the ports of entry and prevent them from entering the marketplace. For example, CPSC staff proposed that CPSC be granted authority to detain products at the ports like other federal agencies, such as Customs and Border Protection. Given the agency’s relatively small staff size, another proposal suggested giving CPSC authority to commission employees of other federal agencies to assist in the agency’s investigations and inspections to allow for greater enforcement efficiency. In August 2014, CPSC officials confirmed that they continue to support all of the statutory changes recommended in the 2011 report. Almost half of the 23 consumer and industry representatives and commissioners we interviewed expressed an opinion about whether the proposed statutory changes would enable CPSC to respond more quickly to new and emerging risks. Of these, about half generally supported efforts to improve CPSC’s import surveillance authorities. For example, a consumer safety expert said that improvements to CPSC’s import surveillance authorities could improve opportunities to stop hazardous products from entering the markets. However, a commissioner and a consumer safety expert we interviewed did not support the proposed statutory changes and said that they would not help CPSC address new and emerging risks. The commissioner said that new and emerging product risks are rarely identified at the ports. The consumer safety expert expressed concern that some of the statutory changes would add an undue cost burden particularly to the juvenile products industry. According to this representative, one of the statutory changes could result in manufacturers of certain children’s products incurring costs to have containers marked “refused for entry” in addition to the costs of compliance with CPSIA’s requirement that juvenile products be tested by third-party facilities to ensure compliance with applicable safety standards. Specifically, CPSC’s September 2011 report included a proposal to add a new statutory provision to both CPSA and the Federal Hazardous Substances Act designed to prevent the re-entry of all products that have been refused entry into U.S. ports by authorizing CPSC to require visible markings on all containers transporting refused consumer products. Refused products are currently prohibited from being sold or re-exported to other ports unless revised to address the safety violations. In some cases, manufacturers must destroy products that are refused for entry. Some importers attempt to circumvent the requirements by presenting the same violative product at a different port. According to CPSC, the “refused for entry” marking would enhance CPSC’s ability to identify such products. Improving CPSC’s Capabilities to Analyze Data In 2012, we reported that CPSC faced challenges in collecting and analyzing large quantities of data to identify potential product risks. Some sources it uses to identify injuries or death are dated—for instance, death certificates can be 2 or more years old—or contain limited information about the product involved in the incident. According to one CPSC official, additional resources could enable CPSC to purchase death certificates from a more direct source than it currently does, shortening the time it takes to analyze incidents and identify trends. According to CPSC, the agency has upgraded its data management system to enhance CPSC’s efficiency and effectiveness, enable a more rapid dissemination of information, and allow public access to its searchable database on consumer product safety information. As previously discussed, CPSC also recently requested additional funding in its fiscal year 2015 congressional budget request to expand the RAM. The majority of consumer and industry representatives and commissioners we interviewed agreed that additional funding and staff would better enable CPSC to identify and address consumer safety hazards, and more than half had suggestions to improve CPSC’s efforts. Specifically, because the agency relies heavily upon analyses of scientific and technical data to assess potential hazards from a growing number of consumer products, these representatives said that additional resources to hire staff with expertise in technical areas, such as toxicology, public health, epidemiology, and engineering, could improve the timeliness of CPSC’s response to new or emerging product risks. Other Options Several consumer groups and a commissioner we interviewed discussed two other options to improve CPSC’s ability to respond more quickly to new and emerging risks than it currently does, both of which would involve changes to CPSA. Amend Section 6(b) of CPSA. As previously discussed, the confidentiality requirements in section 6(b) of CPSA may prolong the time it takes to notify the public about potentially hazardous products, which could increase the time that hazardous products remain in consumers’ homes. Specifically, two consumer groups, a consumer safety expert, and two commissioners we interviewed commented that changes to section 6(b) of CPSA could improve CPSC’s ability to notify consumers about new and emerging safety hazards. A consumer safety expert we interviewed said that both consumers and manufacturers would benefit from knowing about potential product safety hazards as soon as they are identified. According to a consumer representative, consumers would be able to make informed purchases and manufacturers would learn about potential design defects that may be applicable to their own products. CPSC officials, however, said that releasing information to consumers before manufacturers have had an opportunity to review the details for accuracy could potentially unfairly harm manufacturers and inhibit their right to due process. Establish Timeframes for CPSC Rulemaking Activities. As noted earlier, existing laws do not provide a time frame for standard-setting organizations to complete the development of voluntary standards, which often prolongs the time CPSC takes to promulgate a rule to address a product safety hazard. One commissioner we spoke with suggested giving CPSC authority to set a time limit after which it would promulgate a final rule if industry has not developed a voluntary rule. When asked about the viability of this option, CPSC officials said that it takes time to sort through the complex issues associated with some safety hazards, and that it would be difficult to establish a meaningful time frame for the process. Concluding Observations Expansion of international trade, increasingly global supply chains, and technological advances have increased the spectrum of consumer products available to U.S. consumers. These changes have increased the challenges of overseeing and regulating thousands of product types and the potential for new and emerging hazards in the marketplace. Certain aspects of CPSC’s authorities, and other factors such as litigation and limited resources, prolong the time it takes CPSC to respond, potentially increasing the risk that consumers will be harmed by hazardous products. A number of options have been proposed that, individually or in combination, could improve CPSC’s ability to respond to new and emerging risks in a more timely manner. However, these options require making trade-offs, such as balancing sometimes competing consumer and industry interests. For example, changes to expand CPSC’s use of preventive approaches to consumer product safety could give the agency greater ability to respond to risks by preventing hazardous products from entering the market, but also could inhibit market innovation and impose costs on manufacturers. Statutory changes, such as enhanced authority to address unsafe imports, could allow CPSC to address existing hazards in a more timely manner and prevent hazardous products from entering the market, but also could create disadvantages for manufacturers by imposing costs and prolonging the time for some products to come to market. In addition, improving CPSC’s ability to analyze scientific and other data could also help the agency to respond to risks more quickly but may require enhanced resources in a constrained fiscal environment. Agency Comments We provided a draft of this report to CPSC for review and comment. In written comments, CPSC expressed appreciation for the report, but took no position since we made no new recommendations. These comments are reprinted in appendix II. In addition, CPSC provided technical comments, which we incorporated as appropriate. We are sending copies of this report to appropriate congressional committees and the Chairman and Commissioners of CPSC. The report also will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202)512-8678 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix II. Appendix I: Objectives, Scope, and Methodology In accordance with section 4 of the Consolidated Appropriations Act of 2014, GAO conducted a study of the ability of the Consumer Product Safety Commission (CPSC) to respond quickly to emerging consumer product safety hazards using authorities under the Consumer Product Safety Act (15 U.S.C. §§ 2056-2058), the Federal Hazardous Substances Act (15 U.S.C. § 1262), and the Flammable Fabrics Act (15 U.S.C. § 1193); and report to congressional appropriations committees on an assessment of CPSC’s ability to respond quickly to new and emerging risks. This report discusses (1) how CPSC’s authorities and other factors may affect the time it takes CPSC to respond to new and emerging risks and (2) proposed options that may be available to improve CPSC’s ability to respond to new and emerging risks in a timely manner and trade-offs associated with those options. To address both objectives, we reviewed our prior work on CPSC’s authorities, CPSC standard operating procedures, performance and accountability reports, and agency budget documentation in order to obtain information on the resources currently available to CPSC and how those resources may impact the agency’s ability to respond to new and emerging consumer product safety hazards. In addition to our document review, we interviewed cognizant CPSC officials, knowledgeable staff, and three current and three former CPSC commissioners, including CPSC’s acting Chairman, regarding CPSC’s ability and authority to identify, assess, and address new and emerging risks in a timely To gather perspectives on the sufficiency of CPSC’s current manner. statutory authority and specific factors affecting its ability to respond to emerging risks and to seek opinions on potential options that may be available to CPSC to address these risks in a more timely manner, we interviewed representatives from four consumer advocate groups and representatives from seven industry organizations that represented manufacturers for various consumer products, including juvenile products, clothing and home goods, chemical production, and general consumer goods. We also interviewed six consumer safety experts, three of which were legal experts in the consumer product safety field regarding CPSC’s existing statutory and regulatory authorities for addressing new and emerging risks and other potential options available to CPSC. A new Chairman and commissioner were appointed after we conducted our interviews. To address objective one, we reviewed and analyzed relevant federal laws that authorize CPSC to both promulgate and enforce consumer product safety standards, as well as those that authorize the agency to take corrective action necessary to remove a potentially hazardous product from the consumer market. We then examined CPSC rulemaking procedures as stipulated in relevant sections of the Consumer Product Safety Act, the Federal Hazardous Substances Act, and the Flammable Fabrics Act. We identified additional administrative and statutory requirements that may impede CPSC’s implementation of corrective action, and we reviewed CPSC’s ability to issue mandatory standards and enforce voluntary standards designed to address new and emerging consumer product safety hazards. To address objective two, we conducted a literature review of scholarly articles using Proquest, Nexis.com, and law review databases. Some of the search terms we used to identify articles on options available to respond to new and emerging risks were “consumer safety,” “new and emerging risks,” “precautionary principle,” “premarket model,” and the “Consumer Product Safety Commission” either in combination or alone with geographic delimiters such as “European Union,” or “United States,” and a date boundary of “after 2007”. After removing duplicate articles, we selected 96 scholarly articles and legal reviews from the thousands that were identified based on the extent to which they discussed (1) advantages and disadvantages of the precautionary principle approach or premarket approval or (2) the regulation of relevant policy areas such as consumer product safety, public health, or the environment. Two team members independently reviewed these articles for relevance and found that 18 were relevant for our study. We reviewed these articles more closely for background information on CPSC’s authorities and factors that affect timeliness of responding to new and emerging risks and also to identify trade-offs for any options the article discussed. Similarly, we also searched for additional material on the Internet using search terms such as “United States,” “precautionary principle,” and “premarket approval” and identified an additional 4 articles that we used for contextual purposes. We conducted this performance audit from March 2014 to October 2014 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: Comments from Consumer Product Safety Commission Appendix III: GAO Staff Contact and Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Debra Johnson (Assistant Director), Tiffani Humble (Analyst in Charge), Thomas Beall, Tarik Carter, Marc Molino, Patricia Moye, Rhonda Rose, Jennifer Schwartz, and Carrie Watkins made key contributions to this report. In addition, JoAnna Paige Berry, Timothy Bober, Christine Broderick, Philip Curtin, Kimberly Gianopoulos, Richard Hung, DuEwa Kamara, Steve Morris, and Michelle Sager also made contributions to the report.
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CPSC is responsible for ensuring the safety of thousands of consumer products, including imports, after they enter the U.S. market. Its jurisdiction covers a range of products–from children's toys to off-road recreational vehicles. Identifying and assessing new and emerging consumer product risks can present challenges. Questions have been raised in recent congressional hearings about the length of time CPSC takes to address a safety hazard, during which injuries and fatalities can continue to occur. Section 4 of the Consolidated Appropriations Act of 2014 mandated that GAO review CPSC's ability to respond quickly to new and emerging risks. This report discusses (1) how CPSC's authorities and other factors may affect its response time to new and emerging hazards and (2) options and their trade-offs that may be available to address CPSC's ability to respond to these hazards. GAO reviewed CPSC's laws and regulations, prior GAO reports, and other published studies. Additionally, GAO interviewed CPSC commissioners and staff, consumer safety experts, legal experts, and representatives from consumer and industry organizations. According to Consumer Product Safety Commission (CPSC) officials, industry representatives, consumer groups, and subject-matter experts GAO interviewed, the timeliness of CPSC's responses may be affected by several factors, including (1) compliance actions that can involve litigation, (2) reliance on voluntary standards, (3) rulemaking procedures, (4) restrictions on sharing information with the public and international agencies, and (5) limited agency resources. For example, CPSC must defer to a voluntary standard if it determines that compliance with a voluntary standard would eliminate or adequately reduce the risk of injury and there is likely to be substantial compliance with the voluntary standard. However, because the laws do not establish a time frame for finalizing a voluntary standard, conflicting industry and consumer interests can delay its development, sometimes for years. CPSC has worked with the window covering industry since 1994 to develop a voluntary standard to address strangulation hazards stemming from window blind cords, but as of September 2014, no voluntary standard that addresses the ongoing safety concerns had been finalized. Further, new and emerging product safety risks present challenges because, statutorily, CPSC was established to respond to risks after products have been introduced into market. Various options have been suggested for improving CPSC's ability to respond to new and emerging product safety risks, including the following examples: Preventative regulatory approaches . Many representatives said that regulatory approaches designed to prevent hazardous products from entering the market—such as premarket approval—could reduce consumer injuries, but could also inhibit market innovation and impose burdensome costs on manufacturers and CPSC. Expedited rulemaking authority . Some stakeholders proposed expanding CPSC's authority to use expedited rulemaking procedures similar to those authorized in 2008 in the Consumer Product Safety Improvement Act, which streamlined the rulemaking process for durable infant products. Most believed streamlined procedures would enable CPSC to promulgate rules in a more timely manner to address risks, but opinions differed on the extent to which the authority should be expanded. Enhancing CPSC's authorities to address unsafe imports . CPSC has proposed several statutory changes to improve its ability to identify hazardous products at the ports of entry and prevent them from entering the marketplace. About half the representatives GAO talked to supported the proposed changes, with some exceptions where the changes would impose additional burdens on industry. Enhanced data analysis capabilities . Most representatives agreed that CPSC could respond to new and emerging hazards more quickly if it had additional funding for technology and staff with technical expertise in the areas of engineering, toxicology, and public health to analyze product hazard data and conduct risk assessments.
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An employee seeking a remedy for an alleged breach of the collective-bargaining agreement between his union and employer must attempt to exhaust any exclusive grievance and arbitration procedures established by that agreement before he may maintain a suit against his union or employer under § 301(a) of the Labor Management Relations Act, 1947, 61 Stat. 156, 29 U.S.C. § 185(a). Republic Steel Corp. v. Maddox, 379 U.S. 650, 652-653, 85 S.Ct. 614, 616, 13 L.Ed.2d 580 (1965); see Hines v. Anchor Motor Freight, Inc., 424 U.S. 554, 563, 96 S.Ct. 1048, 1055, 47 L.Ed.2d 231 (1976); Vaca v. Sipes, 386 U.S. 171, 184, 87 S.Ct. 903, 913, 17 L.Ed.2d 842 (1967). The question presented by these cases is whether, and in what circumstances, an employee alleging that his union breached its duty of fair representation in processing his grievance, and that his employer breached the collective-bargaining agreement, must also attempt to exhaust the internal union appeals procedures established by his union's constitution before he may maintain his suit under § 301. * After eight years in the employ of ITT Gilfillan, Clifford E. Clayton, a member of the United Automobile, Aerospace, and Agricultural Implement Workers of America (UAW) and a shop steward of its Local 509, was dismissed for violating a plant rule prohibiting defined misbehavior. Pursuant to the mandatory grievance and arbitration procedure established by the collective-bargaining agreement between ITT and Local 509, Clayton asked his union representative to file a grievance on his behalf on the ground that his dismissal was not for just cause. The union investigated Clayton's charges, pursued his grievance through the third step of the grievance procedure, and made a timely request for arbitration.1 It then withdrew the request, choosing not to proceed to arbitration. Clayton was notified of the union's decision after the time for requesting arbitration had expired.2 The UAW requires every union member "who feels aggrieved by any action, decision, or penalty imposed upon him" by the union to exhaust internal union appeals procedures before seeking redress from a "civil court or governmental agency." UAW Constitution, Art. 33, § 12. These procedures, established by Arts. 32 and 33 of the UAW Constitution and incorporated into Art. IV of Local 509's bylaws, direct the employee first to seek relief from the membership of his local. Art. 33, § 3. If not satisfied with the result obtained there, the employee may further appeal to the International Executive Board of the UAW, and eventually to either the Constitutional Convention Appeals Committee or to a Public Review Board composed of "impartial persons of good public repute" who are not members or employees of the union. Arts. 32, 33, §§ 3-11. Clayton did not file a timely internal appeal from his local's decision not to seek arbitration of his grievance.3 Instead, six months after the union's withdrawal of its request for arbitration, Clayton filed this action under § 301(a) of the Labor Management Relations Act, 1947, 29 U.S.C. § 185(a), in the District Court for the Central District of California. He alleged that the union had breached its duty of fair representation by arbitrarily refusing to pursue his grievance past the third step of the grievance procedure, and that the employer had breached the collective-bargaining agreement by discharging him without just cause.4 Both the union and the employer pleaded as an affirmative defense Clayton's failure to exhaust the internal union appeals procedures. App. 12, 18. The District Court sustained this defense, finding that Clayton had failed to exhaust the internal appeals procedures; that those procedures were adequate as a matter of law; that Clayton had been advised of their existence; and that his failure to exhaust could not be excused as futile. Record 397-404. Accordingly, the court dismissed Clayton's suit against both the union and the employer. The United States Court of Appeals for the Ninth Circuit affirmed the dismissal of Clayton's suit against the union and reversed the dismissal of his suit against the employer. 623 F.2d 563 (1980). Focusing on the adequacy of the relief available under the internal union appeals procedures, the Court of Appeals held that Clayton's failure to exhaust was fatal to his claim against the union, because by filing an internal appeal Clayton might have received money damages, the relief he sought in his § 301 suit against the union. Id., at 566. However, the Court held that Clayton's failure to exhaust did not bar his suit against the employer, because the internal appeals procedures could not result in either reinstatement of his job, which was the relief Clayton sought from the employer under § 301, or in reactivation of his grievance. Id., at 569-570. In No. 80-5049, Clayton argues that his § 301 claim against the UAW and Local 509 should be allowed to proceed despite his failure to exhaust internal union procedures. In No. 80-54, ITT Gilfillan argues that if Clayton's failure to exhaust bars his suit against the union, it must also bar his suit against the employer. The Courts of Appeals are divided over whether an employee should be required to exhaust internal union appeals procedures before bringing suit against a union or employer under § 301. Some hold that the employee's failure to exhaust internal union procedures may not be asserted as a defense by an employer.5 Others permit the defense to be asserted by an employer if the internal appeals procedures could result in reactivation of the grievance.6 With respect to a union, some courts hold that the employee's failure to exhaust is excused if union officials would be so hostile to an employee that he could not hope to obtain a fair hearing.7 Others would also excuse the employee's failure to exhaust if the substantive relief available through the internal procedures would be less than that available in his § 301 action.8 We granted certiorari to resolve the conflict. 449 U.S. 950, 101 S.Ct. 352, 66 L.Ed.2d 213 (1980). We reverse the dismissal of Clayton's suit against the union and affirm the reversal of the dismissal of his suit against the employer. We hold that where an internal union appeals procedure cannot result in reactivation of the employee's grievance or an award of the complete relief sought in his § 301 suit, exhaustion will not be required with respect to either the suit against the employer or the suit against the union. In Republic Steel Corp. v. Maddox, 379 U.S. 650, 85 S.Ct. 614, 13 L.Ed.2d 580 (1965), we were asked to decide whether an employee alleging a violation of the collective-bargaining agreement between his union and employer must attempt to exhaust exclusive contractual grievance and arbitration procedures before bringing suit under § 301(a).9 In deciding that issue we looked to principles of federal common law. See Textile Workers v. Lincoln Mills, 353 U.S. 448, 457, 77 S.Ct. 912, 918, 1 L.Ed.2d 912 (1957). Two considerations influenced our decision to require exhaustion. First, Congress had "expressly approved contract grievance procedures as a preferred method for settling disputes and stabilizing the 'common law' of the plant." 379 U.S., at 653, 85 S.Ct., at 616.10 Second, a contrary rule, allowing an employee to bring suit under § 301 without attempting to exhaust the contractual grievance procedures, would "deprive employer and union of the ability to establish a uniform and exclusive method for orderly settlement of employee grievances." Ibid.11 The rule established by Republic Steel was thus intended to protect the integrity of the collective-bargaining process and to further that aspect of national labor policy that encourages private rather than judicial resolution of disputes arising over the interpretation and application of collective-bargaining agreements. See Hines v. Anchor Motor Freight, Inc., 424 U.S., at 567, 570-571, 96 S.Ct., at 1057, 1059. The contractual procedures we required the employee to exhaust in Republic Steel are significantly different from the procedures at issue here. In these cases, the Court is asked to require exhaustion of internal union procedures. These procedures are wholly a creation of the UAW Constitution. They were not bargained for by the employer and union and are nowhere mentioned in the collective-bargaining agreement that Clayton seeks to have judicially enforced.12 Nonetheless, Clayton's employer and union contend that exhaustion of the UAW procedures, like exhaustion of contractual grievance and arbitration procedures, will further national labor policy and should be required as a matter of federal common law. Their argument, in brief, is that an exhaustion requirement will enable unions to regulate their internal affairs without undue judicial interference and that it will also promote the broader goal of encouraging private resolution of disputes arising out of a collective-bargaining agreement. We do not agree that the policy of forestalling judicial interference with internal union affairs is applicable to these cases.13 This policy has been strictly limited to disputes arising over internal union matters such as those involving the interpretation and application of a union constitution. As we stated in NLRB v. Marine Workers, 391 U.S. 418, 88 S.Ct. 1717, 20 L.Ed.2d 706 (1968), the policy of deferring judicial consideration of internal union matters does not extend to issues "in the public domain and beyond the internal affairs of the union." Id., at 426, n. 8.14 Here, Clayton's dispute against his union is based upon an alleged breach of the union's duty of fair representation. This allegation raises issues rooted in statutory policies extending far beyond internal union interests. See United Parcel Service, Inc. v. Mitchell, 451 U.S. 56, 66, and n. 2, 101 S.Ct. 1559, 1562, and n. 2, 67 L.Ed.2d 732 (STEWART, J., concurring); Hines v. Anchor Motor Freight, Inc., supra, at 562, 96 S.Ct., at 1055; Vaca v. Sipes, 386 U.S., at 182, 87 S.Ct., at 912; Humphrey v. Moore, 375 U.S. 335, 84 S.Ct. 363, 11 L.Ed.2d 370 (1964). Our analysis, then, focuses on that aspect of national labor policy that encourages private rather than judicial resolution of disputes arising over collective-bargaining agreements. Concededly, a requirement that aggrieved employees exhaust internal remedies might lead to nonjudicial resolution of some contractual grievances. For example, an employee who exhausts internal union procedures might decide not to pursue his § 301 action in court, either because the union offered him a favorable settlement, or because it demonstrated that his underlying contractual claim was without merit. However, we decline to impose a universal exhaustion requirement lest employees with meritorious § 301 claims be forced to exhaust themselves and their resources by submitting their claims to potentially lengthy internal union procedures that may not be adequate to redress their underlying grievances. As we stated in NLRB v. Marine Workers, supra, at 426, and n. 8, 88 S.Ct., at 1722, and n. 8, courts have discretion to decide whether to require exhaustion of internal union procedures. In exercising this discretion, at least three factors should be relevant: first, whether union officials are so hostile to the employee that he could not hope to obtain a fair hearing on his claim; second, whether the internal union appeals procedures would be inadequate either to reactivate the employee's grievance or to award him the full relief he seeks under § 301; and third, whether exhaustion of internal procedures would unreasonably delay the employee's opportunity to obtain a judicial hearing on the merits of his claim. If any of these factors are found to exist, the court may properly excuse the employee's failure to exhaust. Clayton has not challenged the finding of the lower courts that the UAW internal appeals procedures are fair and reasonable. He concedes that he could have received an impartial hearing on his claim had he exhausted the internal union procedures. See Glover v. St. Louis-San Francisco R. Co., 393 U.S. 324, 330-331, 89 S.Ct. 548, 551-552, 21 L.Ed.2d 519 (1969). Accordingly, our inquiry turns to the second factor, whether the relief available through the union's internal appeals procedures is adequate. In his suit under § 301, Clayton seeks reinstatement from his employer and monetary relief from both his employer and his union.15 Although, the UAW Constitution does not indicate on its face what relief is available through the internal union appeals procedures,16 the parties have stipulated that the Public Review Board can award backpay in an appropriate case, Tr. 35-36, and the two decisions of the Public Review Board reprinted in the joint appendix both resulted in awards of backpay. App. 89-109. It is clear, then, that at least some monetary relief may be obtained through the internal appeals procedures.17 It is equally clear that the union can neither reinstate Clayton in his job, see n. 15, supra, nor reactivate his grievance. Article IX of the collective-bargaining agreement between Local 509 and ITT Gilfillan provides that the union may obtain arbitration of a grievance only if it gives "notice . . . to the Company in writing within fifteen (15) working days after the date of the Company's decision at Step 3 of the Grievance Procedure." By the time Clayton learned of his union's decision not to pursue the grievance to arbitration, this 15-day time limit had expired. See n. 2, supra. Accordingly, the union could not have demanded arbitration even if the internal appeal had shown Clayton's claim to be meritorious. The union was bound by its earlier decision not to pursue Clayton's grievance past the third stage of the grievance and arbitration procedure.18 For the reasons that follow, we conclude that these restrictions on the relief available through the internal UAW procedures render those procedures inadequate.19 Where internal union appeals procedures can result in either complete relief to an aggrieved employee or reactivation of his grievance, exhaustion would advance the national labor policy of encouraging private resolution of contractual labor disputes. In such cases, the internal union procedures are capable of fully resolving meritorious claims short of the judicial forum. Thus, if the employee received the full relief he requested through internal procedures, his § 301 action would become moot, and he would not be entitled to a judicial hearing. Similarly, if the employee obtained reactivation of his grievance through internal union procedures, the policies underlying Republic Steel would come into play,20 and the employee would be required to submit his claim to the collectively bargained dispute-resolution procedures.21 In either case, exhaustion of internal remedies could result in final resolution of the employee's contractual grievance through private rather than judicial avenues. By contrast, where an aggrieved employee cannot obtain either the substantive relief he seeks or reactivation of his grievance, national labor policy would not be served by requiring exhaustion of internal remedies. In such cases, exhaustion would be a useless gesture: it would delay judicial consideration of the employee's § 301 action, but would not eliminate it.22 The employee would still be required to pursue judicial means to obtain the relief he seeks under § 301. Moreover, exhaustion would not lead to significant savings in judicial resources, because regardless of the outcome of the internal appeal, the employee would be required to prove de novo in his § 301 suit that the union breached its duty of fair representation and that the employer breached the collective-bargaining agreement.23 As we recently stated, one of the important federal policies underlying § 301, is the " 'relatively rapid disposition of labor disputes.' " United Parcel Service, Inc. v. Mitchell, 451 U.S., at 63, 101 S.Ct., at 1564, quoting Auto Workers v. Hoosier Cardinal Corp., 383 U.S. 696, 707, 86 S.Ct. 1107, 1114, 16 L.Ed.2d 192 (1966). This policy is undermined by an exhaustion requirement unless the internal procedures are capable of either reactivating the employee's grievance or of redressing it.24 In reliance upon the Court of Appeals' opinion in these cases, the UAW contends that even if exhaustion is not required with respect to the employer, it should be required with respect to the union, because the relief Clayton seeks against the union in his § 301 suit is available through internal union procedures. But cf. n. 17, supra. We disagree. While this argument might have force where the employee has chosen to bring his § 301 suit only against the union, the defense should not be available where, as here, the employee has filed suit against both the union and the employer. A trial court requiring exhaustion with respect to the suit against the union, but not with respect to the suit against the employer, would be faced with two undesirable alternatives. If it stayed the action against the employer pending resolution of the internal appeals procedures, it would effectively be requiring exhaustion with respect to the suit against the employer, a result we have held would violate national labor policy. Yet if it permitted the action against the employer to proceed, and tolled the running of the statute of limitation in the suit against the union until the internal procedures had been exhausted, it could very well find itself with two separate § 301 suits, based on the same facts, proceeding at different paces in its courtroom. As we suggested in Vaca v. Sipes, 386 U.S., at 197, 87 S.Ct., at 920, this is a result that should be avoided if possible. The preferable approach is for the court to permit the employee's § 301 action to proceed against both defendants, despite the employee's failure to exhaust, unless the internal union procedures can reactivate the grievance or grant the relief that would be available in the employee's § 301 suit against both defendants. In contrast to contractual grievance and arbitration procedures, which are negotiated by the parties to a collective-bargaining agreement and are generally designed to provide an exclusive method for resolving disputes arising under that agreement, internal union appeals procedures are created by the union constitution and are designed to settle disputes between an employee and his union that arise under that constitution. Because of this distinction, the policies underlying Republic Steel, encouraging private resolution of grievances arising out of the collective-bargaining process, are not directly applicable to the issue whether to require exhaustion of internal union procedures. We conclude that the policies underlying Republic Steel are furthered by an exhaustion requirement only where the internal union appeals procedures can either grant the aggrieved employee full relief or reactivate his grievance. For only in those circumstances is there a reasonable possibility that the employee's claim will be privately resolved. If the internal procedures are not adequate to effect that relief, the employee should not be required to expend time and resources seeking a necessarily incomplete resolution of his claim prior to pursuing judicial relief. If the internal procedures are inadequate, the employee's failure to exhaust should be excused, and he should be permitted to pursue his claim for breach of the duty of fair representation and breach of the collective-bargaining agreement in court under § 301. In this case, the internal union appeals panels cannot reactivate Clayton's grievance and cannot grant Clayton the reinstatement relief he seeks under § 301. We therefore hold that Clayton should not have been required to exhaust internal union appeals procedures prior to bringing suit against his union and employer under § 301. Affirmed in part, reversed in part, and remanded.
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After being discharged for violation of his employer's plant rule prohibiting defined misbehavior, an employee, pursuant to the grievance and arbitration procedure mandated by the collective-bargaining agreement between the employer and respondent union, asked his union representative to file a grievance on his behalf on the ground that his dismissal was not for just cause. The union pursued the grievance through the third step of the grievance procedure and requested arbitration, but it then withdrew the request. The union constitution required union members aggrieved by any action of the union to exhaust the internal union appeals procedures before seeking redress from a court. The employee, however, instead of filing an appeal from the union's decision not to seek arbitration of his grievance, filed an action in Federal District Court under § 301 (a) of the Labor Management Relations Act, alleging that the union had breached its duty of fair representation and that the employer had breached the collective-bargaining agreement by discharging him without just cause. He sought reinstatement from the employer and monetary relief from both the employer and the union. The District Court sustained the union and the employer's affirmative defense that the employee had failed to exhaust the internal union appeals procedures, and accordingly dismissed the suit against both the union and the employer. The Court of Appeals affirmed the dismissal of the suit against the union but reversed the dismissal against the employer. The court held that the employee's failure to exhaust was fatal to his claim against the union because by filing an internal appeal he might have received money damages, the relief he sought in his § 301 suit against the union. But the court held that the employee's failure to exhaust did not bar his suit against the employer because the internal appeals procedures could not result in either reinstatement of his job, the relief sought from the employer under § 301 (a), or reactivation of his grievance. Held: Where the internal union appeals procedures could not reactivate the employee's grievance or grant him the complete relief he sought under § 301 (a), he should not have been required to exhaust such procedures prior to bringing suit against the union and the employer under § 301 (a). Pp. 685-696. (a) Because internal union appeals procedures, in contrast to contractual grievance and arbitration procedures negotiated by the parties to a collective-bargaining agreement, are created by the union constitution and are designed to settle disputes between an employee and his union arising under the constitution, the policies encouraging private resolution of grievances arising out of the collective-bargaining process are not directly applicable to the issue whether to require exhaustion of internal union procedures. Republic Steel Corp. v. Maddox, 379 U. S. 650, distinguished. Such policies are furthered by an exhaustion requirement only where the internal procedures can either grant the aggrieved employee full relief or reactivate his grievance. Pp. 685-689. (b). If the internal procedures are inadequate to effect the relief sought by the employee, his failure to exhaust should be excused and he should be permitted to pursue his claim for breach of the duty of fair representation and breach of the collective-bargaining agreement in court under § 301. Here, although it appears that some monetary relief could be obtained through the internal procedures, it also appears that the union could neither reinstate the employee in his job nor reactivate his grievance because of certain time restrictions in the collective-bargaining agreement for obtaining arbitration of a grievance. These restrictions on the relief available through the internal procedures rendered such procedures inadequate. The policy underlying § 301 to effect a relatively rapid disposition of labor disputes would be undermined by an exhaustion requirement unless the internal procedures are capable of either reactivating the employee's grievance or of redressing it. Pp. 689-693. (c) Although the argument that exhaustion of internal procedures should be required might have force if the employee's § 301 suit is only against the union and the internal procedures are adequate to grant the relief sought against the union, the defense should not be available where, as here, the employee sued both the union and the employer. If a trial court required exhaustion of the internal procedures with respect to the suit against the union but not against the employer, it would be faced with the undesirable alternatives of either staying the suit against the employer pending such exhaustion, thus violating national labor policy, or of permitting the suit against the employer to proceed and tolling the statute of limitations against the union pending exhaustion, with the possible result that the court would find itself with two separate § 301 suits based on the same facts proceeding at different paces in its court-room. Pp. 694-695. 623 F. 2d 563, affirmed in part, reversed in part, and remanded.
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SECTION 1. IMPROVEMENT AND ENHANCEMENT OF AUTHORITIES RELATING TO THE
EMPLOYMENT, USE, AND STATUS OF MILITARY TECHNICIANS (DUAL
STATUS).
(a) In General.--The text of section 709 of title 32, United States
Code, as amended by sections 512 and 513 of the National Defense
Authorization Act for Fiscal Year 2017 (Public Law 114-328), is further
amended to read as follows:
``(a) Under regulations prescribed by the Secretary of Defense,
persons may be employed as technicians for the purposes of--
``(1) the support of the readiness, organization,
administration, instruction, or training of the National Guard;
``(2) the maintenance and repair of supplies and equipment
or facilities issued to the National Guard or the armed forces;
and
``(3) the performance of the following additional duties to
the extent that the performance of such duties does not
interfere with the performance of the duties described by
paragraphs (1) and (2):
``(A) Support of operations or missions undertaken
by the technician's unit at the request of the
President or the Secretary of Defense.
``(B) Support of Federal training operations or
Federal training missions assigned in whole or in part
to the technician's unit.
``(C) Instructing or training in the United States
or the Commonwealth of Puerto Rico or possessions of
the United States of--
``(i) active-duty members of the armed
forces;
``(ii) members of foreign military forces
(under the same authorities and restrictions
applicable to active-duty members providing
such instruction or training);
``(iii) Department of Defense contractor
personnel; or
``(iv) Department of Defense civilian
employees.
``(b) In this section, a technician is a person employed under
subsection (a) who is an employee of the Department of the Army or the
Department of the Air Force, as the case may be, and an employee of the
United States, and who is either of the following:
``(1) A military technician (dual status) as defined in
section 10216(a) of title 10 who--
``(A) is a member of the National Guard of the
jurisdiction in which the person is employed;
``(B) is outside the competitive service;
``(C) holds the military grade specified pursuant
to regulations prescribed by the Secretary of Defense
for that position; and
``(D) while performing duties as a military
technician (dual status)--
``(i) wears the uniform appropriate for the
member's grade and component of the armed
forces; and
``(ii) adheres to all military regulations
of the component concerned.
``(2) A non-dual status technician as defined in section
10217 of title 10, in a technician position designated in
accordance with regulations prescribed by the Secretary of
Defense.
``(c) The adjutants general referred to in section 314 of this
title shall appoint, employ, administer, detail, and assign the
technicians authorized by this section.
``(d) Notwithstanding any other provision of law and under
regulations prescribed by the Secretary of Defense--
``(1) a person employed under subsection (a) who is a
military technician (dual status) and otherwise subject to the
requirements of subsection (b)(1) who--
``(A) is separated from the National Guard shall be
promptly separated from military technician (dual
status) employment by the adjutant general of the
jurisdiction concerned; or
``(B) ceases to hold the military grade specified
by the Secretary concerned for that position or fails
to maintain the security or other military standards
established for a member of a reserve component
pursuant to regulations prescribed by the Secretary of
Defense that are required for that position shall be
separated from employment as a military technician
(dual status) and concurrently discharged from the
National Guard by the adjutant general of the
jurisdiction concerned;
``(2) a technician may, at any time, be separated from
technician employment for cause by the adjutant general of the
jurisdiction concerned;
``(3)(A) a reduction in force, furlough, removal, or other
adverse action involving military technician (dual status)
employment shall be accomplished by the adjutant general of the
jurisdiction concerned, and neither the Secretary of Defense
nor the Chief of the National Guard Bureau may order persons
employed as military technicians (dual status) under subsection
(a) to be furloughed; or
``(B) a reduction in force, removal, or adverse action
involving discharge from non-dual status technician employment,
suspension, furlough without pay, or reduction in rank or
compensation shall be accomplished by the adjutant general of
the jurisdiction concerned;
``(4)(A) in the case of a military technician (dual status)
a right of appeal which may exist under paragraph (1), (2), or
(3) shall be through military proceedings, and shall not extend
beyond the adjutant general of the jurisdiction concerned when
the appeal concerns activity occurring while the member is in a
military pay status or military duty standards; or
``(B) in the case of a non-dual status technician, a right
of appeal which may exist with respect to paragraph (1), (2),
or (3) shall not extend beyond the adjutant general of the
jurisdiction concerned when the appeal concerns activity
occurring while the member is in a military pay status or
concerns military duty standards;
``(5)(A) in the case of a military technician (dual
status), under regulations prescribed by the Secretary of
Defense, a right of appeal of the final decision of the
adjutant general of the jurisdiction concerned which may exist
under paragraph (1), (2), or (3) shall be to an administrative
panel when the appeal concerns activities that occur while the
technician is performing technician duties or that relate to
aspects of technician employment not covered by paragraph (4),
and the decision of the administrative panel shall be binding
upon the adjutant general of the jurisdiction concerned and may
not be further appealed; or
``(B) in the case of a non-dual status technician, with
respect to an appeal concerning any activity not covered by
paragraph (4), the provisions of sections 7511, 7512, and 7513
of title 5 and section 717 of the Civil Rights Act of 1991 (42
U.S.C. 2000e-16) shall apply;
``(6) in the case of a military technician (dual status),
with respect to an appeal of any final decision by the adjutant
general of the jurisdiction concerned alleging discrimination
based upon race, color, religion, sex, or national origin
(including an appeal of an action under paragraph (1), (2), or
(3) that alleges such discrimination) in the non-military
aspects of technician employment (but not in activities that
occur while the military technician is in a military pay or
duty status or that concern military duty standards), the
provisions of section 717 of the Civil Rights Act of 1991 shall
apply;
``(7) a technician shall be notified in writing of the
termination of employment as a technician and, unless the
technician is serving under a temporary appointment, is serving
in a trial or probationary period, or has voluntarily ceased to
be a member of the National Guard when such membership is a
condition of employment, such notification shall be given at
least 30 days before the termination date of such employment;
and
``(8) a military technician (dual status) who is
involuntarily separated from military technician (dual status)
employment under paragraph (1) or (3), other than for
misconduct, shall--
``(A) be granted priority 1 consideration under the
Department of Defense priority placement program; and
``(B) be granted full eligibility under the
Interagency Career Transition Assistance Plan (ICTAP)
under subpart G of part 330 of title 5, Code of Federal
Regulations (5 C.F.R. 330.701 et seq.).
``(e)(1) Except as provided in subsection (d), sections 2108, 3502,
7511, and 7512 of title 5 do not apply to a person employed under this
section.
``(2) In addition to the sections referred to in paragraph (1),
section 6323(a)(1) of title 5 also does not apply to a person employed
under this section who is performing active Guard and Reserve duty (as
that term is defined in section 101(d)(6) of title 10).
``(f)(1) Notwithstanding sections 5544(a) and 6101(a) of title 5 or
any other provision of law, the Secretary concerned may prescribe the
hours of duty for technicians.
``(2) Notwithstanding sections 5542 and 5543 of title 5 or any
other provision of law, non-dual status technicians shall be granted an
amount of compensatory time off from their scheduled tour of duty equal
to the amount of any time spent by them in irregular or overtime work,
and shall not be entitled to compensation for such work.
``(3) Notwithstanding sections 5542 and 5543 of title 5 or any
other provision of law and subject to the availability of funds,
military technicians (dual status) shall be paid at a rate of one and
one-half times their basic pay rate for irregular or overtime work,
except that, upon request or when funds are unavailable, such
technicians may be granted an amount of compensatory time off from
their scheduled tour of duty equal to the amount of any time spent by
them in irregular or overtime work.
``(g) The Secretary concerned may not prescribe for purposes of
eligibility for Federal recognition under section 301 of this title a
qualification applicable to non-dual status technicians employed under
subsection (a) that is not applicable pursuant to that section to the
other members of the National Guard in the same grade, branch,
position, and type of unit or organization involved. However, the
adjutant general of the jurisdiction concerned may prescribe such
qualifications for military technicians (dual status).
``(h) In this section:
``(1) The term `military duty standards' means requirements
in law, regulation, or policy that are applicable to military
service, including service in the National Guard or other
reserve components of the armed forces or service on active
duty in the armed forces.
``(2) The term `military pay status' means a period of
service where the amount of pay payable to a technician for
that service is based on rates of military pay provided by
title 37.''.
(b) Accrual of Pay for Overtime Work Contingent Upon Regulations.--
No entitlement to payment for overtime work shall accrue under
paragraph (3) of subsection (f) of section 709 of title 32, United
States Code, as amended by subsection (a), until the Secretary of
Defense prescribes regulations relating to budgeted for and paying for
overtime work of military technicians under that section.
SEC. 2. ENHANCEMENT OF BENEFITS FOR MILITARY TECHNICIANS (DUAL STATUS).
(a) Bonuses and Related Benefits.--Section 10216 of title 10,
United States Code, is amended by adding at the end the following new
subsection:
``(h) Bonuses and Related Benefits.--(1) If an individual becomes
employed as a military technician (dual status) while the individual is
already a member of a reserve component of the armed forces, the
Secretary concerned may not require the individual to repay any
enlistment, reenlistment, or affiliation bonus provided to the
individual in connection with the individual's enlistment or
reenlistment before such employment.
``(2) Even though an individual employed as a military technician
(dual status) is required as a condition of that employment to maintain
membership in the Selected Reserve, the individual shall not be
precluded from receiving an enlistment, reenlistment, or affiliation
bonus nor be denied the opportunity to participate in an educational
loan repayment program under chapter 1609 of this title as an
additional incentive for the individual to accept and maintain such
membership.''.
(b) Eligibility for TRICARE Standard as Members of the Selected
Reserve.--Section 1076d(a)(2) of title 10, United States Code, is
amended--
(1) by striking ``Paragraph (1) does not'' and inserting
``(A) Except as provided in subparagraph (B), paragraph (1)
does not''; and
(2) by adding at the end the following new subparagraph:
``(B) Notwithstanding subparagraph (A), paragraph (1) applies to a
member who is enrolled, or eligible to enroll, in a health benefits
plan under chapter 89 of title 5 if the member is a military technician
(dual status) as described in section 10216(a) of this title.''.
SEC. 3. FISCAL YEAR 2018 END STRENGTHS FOR NATIONAL GUARD MILITARY
TECHNICIANS (DUAL STATUS).
Notwithstanding any other provision of law, the minimum number of
military technicians (dual status) as of the last day of fiscal year
2018 for the specified reserve components of the Army and the Air Force
(notwithstanding section 129 of title 10, United States Code) shall be
the following:
(1) For the Army National Guard of the United States,
25,507.
(2) For the Air National Guard of the United States,
22,103.
SEC. 4. MODIFICATION OF REQUIREMENTS RELATING TO CONVERSION OF MILITARY
TECHNICIAN (DUAL STATUS) POSITIONS.
Section 1053(a) of the National Defense Authorization Act for
Fiscal Year 2016 (Public Law 114-92; 129 Stat. 10 U.S.C. 10216 note),
as amended by section 1084(a) of the National Defense Authorization Act
for Fiscal Year 2017 (Public Law 114-328), is further amended by
striking paragraphs (1) and (2) and inserting the following new
paragraphs:
``(1) In general.--Commencing not earlier than October 1,
2017, the Secretary of Defense shall convert the military
technician positions described in paragraph (2) to positions
filled by individuals who are employed under section 3101 of
title 5, United States Code, or section 1601 of title 10,
United States Code, and are not military technicians.
``(2) Covered positions.--The positions described in this
paragraph are military technician (dual status) positions in
general administration, clerical, finance, and office service
occupations that are identified by the Secretary of Defense as
convertible without affecting military readiness.
``(3) Limitation on number converted.--The total number of
positions converted pursuant to this subsection may not exceed
the number equal to 4.8 percent of military technician (dual
status) positions of the National Guard and the Reserves that
are filled as of October 1, 2017.''.
SEC. 5. SCOPE OF AUTHORIZED DUTIES FOR MEMBERS OF THE NATIONAL GUARD
CALLED TO ACTIVE GUARD AND RESERVE DUTY BY THE GOVERNORS
OF THE STATES.
Section 328(b) of title 32, United States Code, is amended by
inserting ``, or additional duties in support of State missions,''
after ``additional duties specified in section 502(f) of this title''.
SEC. 6. MODIFICATION OF PERSONNEL MANAGEMENT AUTHORITIES FOR THE CHIEF
OF THE NATIONAL GUARD BUREAU.
Section 10508(b) of title 10, United States Code, as added by
section 932(2) of the National Defense Authorization Act for Fiscal
Year 2017 (Public Law 114-328), is amended--
(1) in paragraph (1), by striking ``may'' and all that
follows and inserting ``may--
``(A) program for persons under sections 2103,
2105, and 3101 of title 5, and section 328 of title 32;
and
``(B) appoint, employ, administer, detail, and
assign persons under sections 2103, 2105, and 3101 of
title 5 within the National Guard Bureau and, with the
consent and advice of the adjutant general of the
jurisdiction concerned, the National Guard of each
State, the Commonwealth of Puerto Rico, the District of
Columbia, Guam, and the Virgin Islands to execute the
functions of the National Guard Bureau, the missions of
the National Guard, and missions assigned by the Chief
of the National Guard Bureau.''; and
(2) by striking paragraph (2) and inserting the following
new paragraph (2):
``(2) Administration through adjutants general.--The
adjutants general referred to in section 314 of title 32 shall
exercise the authority of the Chief of the National Guard
Bureau under paragraph (1)(B) to appoint, employ, administer,
detail, and assign persons under sections 2103, 2105, and 3101
of title 5 within their jurisdictions. The adjutants general
may delegate such authority to persons under sections 328 and
709 of title 32.''.
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This bill revises provisions concerning military technicians (dual status), including by: (1) transferring authority to issue regulations regarding the employment, use, and status of such technicians from the Departments of the Army and the Air Force to the Department of Defense (DOD); and (2) requiring that such individuals be outside the competitive service and be appointed and administered by an adjutant general. An individual who becomes employed as such a technician while already a member of a reserve component of the armed forces shall not have to repay any enlistment, reenlistment, or affiliation bonus provided before such employment. The bill: (1) makes such technicians eligible for TRICARE, and (2) sets forth FY2018 end strengths for the Army National Guard and the Air National Guard. The National Defense Authorization Act for Fiscal Year 2016 is amended to reduce from 20% to 4.8% the percentage of technician positions filled in administration, clerical, finance, and office service occupations as of October 1, 2017, that DOD must convert to civilian positions. A governor or the commanding general of the District of Columbia National Guard may order a member of the National Guard to perform active Guard and Reserve duty in support of state missions. The bill modifies personnel management authorities of the Chief of the National Guard Bureau, including by requiring adjutants general to exercise the Chief's authority to employ, administer, and assign certain persons within their jurisdictions.
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Background Disability Determination and Administrative Appeals In fiscal year 2005, the Social Security Administration (SSA) paid approximately $128 billion in cash benefits to about 12.8 million beneficiaries through the two largest federal programs available to persons with disabilities and their families: the Disability Insurance (DI) program and the Supplemental Security Income (SSI) program. Both programs serve those who are medically determined to be unable to engage in any substantial gainful activity due to a severe physical or mental impairment that is expected to last at least 12 months or result in death. Claimants must apply to SSA to receive disability benefits from these programs and if awarded benefits, claimants may also have to requalify for support through what are known as continuing disability reviews. In most of the country currently, claimants who are denied initial or continuing benefits by SSA may appeal their denials administratively up to three times, each time for review by a different adjudicatory entity. These entities are 1) the state disability determination service that performs the initial review of disability claims and, in most states, a reconsideration determination, 2) an administrative law judge (ALJ) in SSA’s Office of Disability Adjudication and Review, and 3) a group of appellate reviewing officials within SSA known as the Appeals Council. The number of claims or appeals reviewed at each level in 2005 were: over 2.6 million by state agencies, almost 520,000 by ALJs, and over 94,000 by the Appeals Council. Disability determinations at all of these levels are often complex and necessarily involve some degree of subjectivity by adjudicators, and the nature of these decisions have contributed to long-standing concerns about the extent to which adjudicators across the agency consistently interpret and implement SSA’s national disability policy. To help achieve more consistent application of policy between the state disability determination service level and the ALJ level, in 1996, SSA established the process unification rulings, a set of nine Social Security rulings for all SSA disability adjudicators to follow in matters involving difficult judgments, such as the weight to be given to opinions of claimants’ treating physicians versus medical opinions from other sources, and the evaluation of pain and other subjective symptoms. See appendix II for more details on process unification rulings. Cases in Federal Court After claimants exhaust all administrative review options within SSA, they may then appeal their claims outside the agency to federal court. A claimant must first file an appeal with a federal district court within one of 12 federal judicial regions, known as judicial circuits. Figure 1 provides information on which states and territories are included in these circuits. In deciding the case, a district court judge or magistrate usually either affirms an agency decision, reverses the decision (essentially affirming the claimant’s case), or remands it back to SSA for further review. According to SSA officials, remanded cases are generally reviewed by the ALJ who made the original decision. Judges can also dismiss a case if its scope is outside the court’s legal jurisdiction. Furthermore, if SSA prefers not to defend a case that has been filed, usually because of an error it has identified, the agency may request that the judge remand the case back for the agency’s review. Court remands have implications for SSA’s workload, the types of decisions SSA adjudicators make on remanded cases, and the time claimants must wait for decisions on their cases. Generally, when cases are remanded, ALJs must perform new hearings, which could involve new evidence presented at the time of court reviews. These remanded cases add to the already high workloads that ALJs have in reviewing denials by the agency’s disability determination service offices. The load may also affect ALJ decisions: In its September 2006 report, the Social Security Advisory Board found a small correlation between increased ALJ workload and increased allowances. Furthermore, although remanded cases are given priority in the line of cases that must be reviewed by ALJs, a substantial amount of time may pass before new decisions can be made at this administrative level, and the ALJ’s decision may undergo another review by the Appeals Council. In fiscal year 2006, it took SSA nearly a year on average to process court remanded cases from the district courts. After a district court decision, both the claimant and SSA may appeal the case to a circuit court of appeals (also called an appellate court) and, beyond this, to the Supreme Court. However, few cases reach these appellate court levels and most disability cases are resolved in the district courts. According to SSA, no more than 20 district court cases have been appealed by the agency to the appellate courts each year since 2000. The Supreme Court has only reviewed four cases involving disability claims since 1991. See figure 2 for an overview of the disability appeals process. How Federal Court Decisions May Affect SSA Policy SSA is not obligated to follow a district court decision that conflicts with agency policies beyond that specific case. However, the agency is required to follow appellate court decisions for cases within that circuit, unless the agency seeks further judicial review. If the Supreme Court issues a decision, SSA is bound to follow the decision nationally. Several district, appellate, and Supreme Court decisions have affected disability policy in the past two decades. Appendix III outlines some cases that have resulted in such changes. SSA implemented its current policy of acquiescence in 1990 in response to the concerns of external stakeholders, including claimant representatives, that SSA had failed in the 1980s to offer timely and appropriate responses to appellate court decisions. With the acquiescence ruling, SSA agrees to follow the appellate court’s holding on new cases only when they fall within the jurisdiction of that appellate court. SSA rescinds an acquiescence ruling if one of the following occurs: 1) the Supreme Court overrules or limits the relevant appellate court decision; (2) an appellate court overrules or limits itself on the relevant issue; (3) Congress enacts a law that obviates the acquiescence ruling; or (4) SSA clarifies, modifies, or revokes the regulation or ruling that was the subject of the pertinent appellate court decision. Disability Service Improvement Process With new regulations issued in March 2006, SSA began implementing the Disability Service Improvement (DSI) process in August 2006 on a limited basis—i.e., in states in the Boston Region—and plans to gradually roll out the initiative to other regions. The regulations include changes to the appeals process within the agency that could potentially affect the number and types of cases that will go to federal courts in the future. Among these changes is the gradual replacement of the Appeals Council with a Decision Review Board, designed to ensure the accuracy of SSA decisions and reduce remands from federal courts. The Board would only review select cases based on whether they are considered likely to have contained errors or involved new policies, rules, and procedures. Under the DSI process, claimants who are unhappy with ALJ decisions, therefore, could no longer turn to the Appeals Council, but rather must appeal directly to the federal courts. In our June 2006 testimony, we reported that the public and stakeholders were concerned that replacing the Appeals Council with a Decision Review Board may increase the number of cases appealed to, and thus the workloads of, the federal courts. In its response to these concerns, SSA officials maintained that DSI improvements will ultimately reduce the need for court appeals and also reduce remands. As part of its DSI initiative, the agency is making a systematic effort to collect and analyze data on court decisions in the course of training staff and keeping ALJs current. Such monitoring and data collection are consistent with the Office of Management and Budget’s and GAO’s internal control standards for all federal agencies. Court Reviews and Remands Have Increased in Recent Years with Remands Often Resulting in SSA’s Subsequently Awarding Benefits Between fiscal years 1995 and 2005, the number of disability appeals reviewed by the courts and decisions to remand these cases increased, and in the majority of remanded cases, claimants were subsequently granted benefits by SSA. In 2005, the year for which disaggregated data were available, GAO found the proportion of remands by district courts varied significantly by circuit. However, GAO did not find substantial variation by judicial circuit in SSA decisions on court remanded cases. Cases Reviewed by District Courts Increased over the Past Decade, as Did the Proportion Remanded Back to the Agency We found that federal district courts reviewed an increasing number of disability cases over the past decade, which corresponded with the increasing number of cases processed by SSA. Although the number of cases reviewed by federal district courts fluctuated over time, they generally increased by 20 percent from about 10,300 in fiscal year 1995 to about 12,400 by fiscal year 2005. (See fig. 3.) According to SSA officials, the increase in the number of claims reviewed by the courts may be a result of the increase in the number of claims that passed through the Appeals Council, SSA’s final decision-making body, over the same time period. Over the same period, remands were generally the most common district court decision, and their proportion increased by 36 percent from 1995 to 2005. Of those SSA cases decided by the district courts on the merits and not dismissed, 50 percent were remanded, 44 percent were affirmed, and 6 percent were reversed on average. (See fig. 4.) Notably, the proportion of remands reached its peak in 2001. Although a range of factors may affect the extent of court remands, some SSA officials suggested that the Appeals Council, having reviewed a record number of ALJ decisions in 2000, may have made mistakes in a greater share of cases that were subsequently appealed to, then remanded by, the district courts. The proportion of remands exceeded the proportion of affirmances in 1997 and continued to increase until 2001. Specifically, in 1995 only 36 percent of SSA decisions were remanded by the courts while 57 percent were upheld or affirmed. However, by 1998, the proportion of remands increased to 49 percent, while the proportion of affirmances declined to 46 percent. When we showed SSA officials these trends, they generally attributed the shift to the process unification rulings, which the agency had established in 1996. According to SSA officials, the increased remands reflected district court efforts to assure that SSA adjudicators were following the agency’s new procedures. The Proportion of Remanded Cases Varied by Circuit GAO found substantial variation in the proportion of cases remanded by judicial circuit in fiscal 2005, the only year for which data by circuit were available. (See fig. 5.) Although remands and affirmances were the most frequently occurring types of decision in each circuit, the proportion of each varied considerably among the circuits. Specifically, the percent of remands ranged from a low of 35 percent to high of 78 percent, while affirmances ranged from 22 percent to 61 percent. SSA officials were not in agreement about why there might be differences in the types of decisions across judicial circuits. According to some, differences might be due to judges in different circuits interpreting disability laws differently. Others told us that disparities in the number of claims appealed to district courts across circuits may contribute to these differences. (See app. IV, fig. 14 for more information on the number of cases reviewed by circuit for fiscal year 2005.) Currently, SSA does not have sufficient data that would allow them to determine why these decisions vary by circuit but plans to obtain this information as part of the DSI process implementation. In the Majority of Remanded Cases, Claimants Were Awarded Benefits Of the 57,000 cases remanded by the district courts between 1995 and 2005, SSA awarded benefits to the majority of claimants—about 66 percent—upon re-adjudication, with the remainder being denied (about 30 percent) or dismissed (5 percent). (See fig. 6.) Agency officials said the large percentage of awards in remanded cases were due, in part, to the fact that the lengthy period of the appeals process increased the likelihood that the nature or severity of claimants’ disabilities would change. The officials also attributed the awards to information in the court’s written judgments that made it possible for ALJs, in reviewing cases anew, to make more accurate decisions. The proportion of allowances in court- remanded cases after re-adjudication is just below the average allowance rate of 70 percent for all ALJ decisions. We did not find substantial variation in SSA decisions on court-remanded claims across judicial circuits. As shown in figure 7, the proportion of allowances for remanded cases ranged from 62 percent to 72 percent by circuit—relative to a national average of 66 percent. Remands Have Been Attributed to a Range of Errors Caused by Heavy Workloads, but SSA Data That Could Shed More Light on the Problem Are Inadequate According to agency officials and stakeholders, a range of errors precipitated by heavy workloads is responsible for court remands of SSA’s disability determinations, but SSA data that would confirm or clarify reasons for remands are incomplete and not well managed. SSA has acknowledged the need to reduce remands and in 2006, along with other initiatives, introduced a new writing tool for ALJs in order to improve efficiency and better document decisions. However, agency data that would inform the problem and help address remands are incomplete and not well managed. Stakeholders Attribute Various Reasons for Remands to High SSA Workloads Stakeholders commonly cited two reasons for remands: written explanations that did not support the decisions and inadequate documentation of consideration given to medical evidence. They expressed the view, however, that errors made with respect to documenting decisions were due, in large part, to heavy SSA adjudicator workloads. Poor decision writing by ALJs and their staff was cited by all groups of stakeholders we interviewed, including SSA officials, district court judges, claimant representatives, and other stakeholders. Specifically, district court judges said they did not always believe that SSA’s decisions were wrong, but that the written explanations did not always support those decisions. Some claimant representatives said that poorly written decisions may be symptomatic of improper consideration of evidence and procedures by ALJs. With regard to the inadequate documentation of consideration given to medical evidence as a reason for remands, district court judges and claimant representatives we interviewed said ALJs either do not document how they weighed treating physicians’ opinions and assessed claimant statements about pain and other symptoms, or they do not consider them as required by the process unification rulings. ALJs we interviewed responded that addressing such evidence is sometimes very difficult and cited cases in which the treating physician appeared to be simply repeating claimants’ opinions about their inability to work, rather than offering substantive information about the conditions that would prevent work. Some district judges agreed that considering and incorporating medical evidence into a decision can be difficult, but stressed the importance of articulated and well-documented opinions in order for district court judges to make a decision other than to remand. Stakeholders we interviewed varied in their opinions regarding whether requirements of the process unification rulings were overly cumbersome and, therefore, resulted in remands. Members of the Appeals Council and the Social Security Advisory Board staff we spoke with believe that the process unification rulings provide important guidance, but have also made procedures for making decisions and decision-writing more cumbersome. On the other hand, representatives of the Association of Administrative Law Judges told us that they have not heard such complaints and, while acknowledging that decision-making involved more work, believe the rules did not make decision-writing overly cumbersome. At the same time, many of those we interviewed, including ALJs and district court judges, said the heavy ALJ workload was behind the apparent errors in documenting agency determinations that lead to remands. Some ALJs asserted that the frequency of court remands has not been unreasonable considering the number of cases that they must review. These ALJs also said their workload expectations of 50 to 60 hearings a month affected the time and attention they could give to each case. They asserted that they would need to write significantly fewer decisions in a month in order to assure that the work would withstand scrutiny by the federal courts. They noted that other ALJs who are able to write decisions that the courts uphold produce as few as five a month. Because the time needed to review cases and write decisions varied, however, representatives of the Association of Administrative Law Judges were unable to suggest an ideal number of cases that would be reasonable for ALJs to process. Specifically, these representatives said that decisions to deny benefits take substantially longer to document than those involving allowances. These representatives also stated that the number and quality of staff that ALJs have available to help process and write decisions vary. Finally, stakeholders also suggested that a variety of other factors contribute to remands, such as: ALJs’ providing poor instructions to decision writers, SSA’s not providing adequate feedback to ALJs on reasons for remands, and federal courts’ having bias against ALJs’ decisions. Some stakeholders further stated that federal court bias may be rooted in concerns over how well decisions are generally written, expectations about how determinations should be made, and concerns with the amount of time and attention given to cases under the current workload. Acknowledging the need to address remands from the federal court, SSA is taking steps to mitigate common documentation errors. One step has been to promote the use of a decision-writing tool known as the Findings Integrated Templates (FIT). This tool contains more than 1,600 templates for presenting analysis of evidence and ensuring that required statutes and regulations are followed. These templates are also designed to prevent common mistakes, such as failure to establish an appropriate date for the onset of disability benefits. SSA officials also said this tool is intended to help manage workloads by reducing the potential for miscommunication between ALJs and their staff and the time spent writing decisions. According to SSA officials, SSA plans to monitor the extent to which decisions written with this tool are remanded from the federal courts. Appeals Council judges we interviewed have reviewed some decisions written with FIT and have found them to be better articulated than decisions that did not rely on this tool. However, both Appeals Council judges and ALJ association representatives mentioned that the tool will not replace the need for additional, competent decision-writing staff. Additionally, SSA is pursuing a broader set of initiatives under its Disability Services Improvement (DSI) initiative that it hopes will result in more accurate decisions earlier in the process and, thereby, ultimately reduce workloads at the ALJ level. For example, as a part of DSI, SSA is implementing an expedited determination process for clear-cut cases, which it calls its Quick Disability Determinations. The agency also plans to add a level of reviewing attorneys, known as federal reviewing officials, who can affirm, reverse, or modify appealed agency decisions prior to their reaching ALJs. However, DSI is currently underway only in the Boston Region, and SSA has yet to evaluate the effectiveness of this initiative. Agency Remand Data Are Incomplete and Not Well Managed While SSA collects data on reasons for remands, we found that the data are not well managed, incomplete, and therefore not reliable. Two separate SSA offices recently began collecting data on remanded cases to identify and track the reasons for remands in order to help train ALJs and their staff on how to reduce the number of remands. Nevertheless, while the two offices were collecting and using the data for the same purpose— training—they told us that they were not collaborating. When the two offices—the Office of Disability Adjudication and Review (ODAR) and the OGC—developed lists of categories to group reasons for remands, the offices did not consult with each other. As a result, the lists of categories used by these offices are not the same, and SSA officials told us that the offices may well classify similar remands differently. Moreover, some remand categories in the two data systems may be duplicative, resulting in an inefficient use of agency resources. SSA officials acknowledged that better data reliability and collaboration between the two offices are needed and that, while the agency plans to develop a common vocabulary for remand reasons, it has yet to develop specific plans and timetables for addressing these issues. Through our conversations with SSA officials and reviews of reports, we also found that these data were not consistently entered into the agency’s databases. Within both systems, at least one reason should be entered per remanded case, but this did not always occur; instead, we found the extent to which this information was entered varied by database and SSA regional office. For the OGC reports, we found that the number of reasons recorded exceeded the number of cases, as would be expected; however officials were not confident that the data on remands reasons were accurate or complete because the officials have not been able to assess the quality of the data. Within the ODAR reports for fiscal years 2005 and 2006, on the other hand, there were substantially fewer reasons reported than cases. Regional reports showed that SSA’s Seattle and New York offices have been collecting the most information on remands. Notably, the agency’s Boston office––which is the first to implement the structural changes of DSI––and the Philadelphia office have collected the least amount of information. SSA officials told us that they were aware that remand data were not entered into ODAR’s system consistently in early fiscal year 2005, and said they subsequently reiterated the importance of collecting this information to staff. SSA officials also mentioned that they are considering making remand reasons a mandatory field in the ODAR database to improve collection. SSA Has Taken Several Steps Since 1990 to Align Its Policies Nationally with Court Decisions SSA officials have a process in place for determining whether appellate court decisions conflict with the agency’s interpretation of disability statutes or regulations, and the agency has taken steps in recent years to align its policies nationally with appellate court decisions. In those cases where the agency acceded to certain appellate court rulings by issuing acquiescence rulings, we found that about half of the rulings were eventually replaced with national policy. Also, we found that the number of acquiescence rulings has declined in more recent years, a decline that SSA officials mainly attributed to the agency’s implementation of its process unification rulings of 1996, which officials believe created less room for differences of opinion between the courts and the agency regarding broader policies. Moreover, we found that the timeliness of acquiescence rulings had improved since 1998, when SSA established a timeliness goal of 120 days. SSA Has a Process in Place for Reviewing and Addressing Appellate Court Decisions that Conflict with the Agency’s Interpretation of Law or Regulations When an appellate court decision is rendered, SSA officials review the decision to determine whether it conflicts with agency interpretation of law or regulations. The primary office responsible for this evaluation is the OGC, SSA’s office responsible for legal matters. For disability issues, OGC works in conjunction with the Office of Disability Programs, SSA’s office responsible for policy matters. These offices may consult with the Office of Disability Adjudication and Review, which rendered the agency’s final decision prior to its being appealed to federal court, as well as the Department of Justice (DOJ), the entity generally responsible for representing SSA in federal court. If SSA determines that the appellate court decision conflicts with its policy, then it decides whether to appeal the case to the Supreme Court or to modify its policy to conform with that decision. According to officials, SSA rarely challenges appellate court decisions, and decisions to appeal are ultimately the prerogative of DOJ, because DOJ represents SSA in court. Some of the situations in which SSA would consider appealing to the Supreme Court are: a conflict between circuits; an issue of exceptional importance involving high visibility or significant funds; a statute or regulation held by the courts to be unconstitutional; or an important regulation held to be invalid. If SSA decides to follow the appellate court decision, it issues an acquiescence ruling that applies only within that circuit. However, because these rulings result in inconsistent policies throughout the country, the agency has added a clarification in the preamble to its 1998 regulations that acquiescence rulings are generally temporary policies that are not intended to remain in effect permanently. Therefore, after issuing an acquiescence ruling, SSA attempts to pursue a uniform national policy through various means, such as modifying regulations or rules, issuing new regulations or policy interpretations, seeking legislative changes, or re-litigating the issue within the same circuit. When SSA successfully incorporates the acquiescence ruling into national policy, it rescinds the acquiescence ruling. When SSA finds it necessary to issue an acquiescence ruling, it has procedures in place for informing adjudicators of these departures from national policy. According to officials, SSA communicates these and other rulings to SSA officials who make claims determinations, such as ALJs, through a variety of sources including: the Federal Register, SSA’s internal operations manual, the agency’s Web site, and e-mails. In some instances, officials learn about these rulings through training sessions. However, because most acquiescence rulings since the 1990s concerned narrow issues, SSA officials said the rulings have not warranted special training for adjudicators. SSA Has Taken Steps to Align Its Policies with Court Decisions by Issuing Acquiescence Rulings More Quickly and Following with Changes in National Policy SSA has taken steps to align its policies with the court decisions by issuing acquiescence rulings in a timely manner and following up with changes to its national policies. Since the implementation of its current acquiescence policy, SSA has issued 45 acquiescence rulings, the majority of which relate to determining whether a claimant is eligible for disability benefits. (Fig. 8 shows the number of rulings issued each year from 1990 to 2006, and app. V provides synopses of court holdings concerning disability determinations that led to acquiescence rulings.) Most of these rulings were issued between 1990 and 2000, when SSA published an average of four acquiescence rulings per year. In contrast, during the 6-year period from 2001 to 2006, the agency issued only five such rulings. SSA officials attributed the decline in acquiescence rulings to implementation of its process unification rulings, which they believe created less room for differences of opinion between the courts and the agency regarding broader policies. Specifically, officials commented that the process unification rulings clarified SSA policy as well as filled gaps in policy that were previously open for the courts to fill, and noted that, while the courts are not bound by these and other Social Security Rulings, the courts have frequently deferred to SSA’s rulings. As a result, SSA has seen a decline in the number of significant court cases involving disability law over time. (See app. III for a listing of key court cases.) We found that the number of acquiescence rulings issued by SSA varied by circuit during our study period (1990 to 2006), ranging from one in the First Circuit to eight in the Ninth Circuit. (See fig. 9.) SSA officials pointed out that the number of acquiescence rulings the agency issues in a given circuit is a function of the number and types of decisions issued by the appellate court within that circuit. For example, officials said that the Ninth Circuit has the largest disability caseload, and therefore, one would expect it to have the highest number of acquiescence rulings. Also, because the Ninth Circuit’s decisions largely concerned technical issues, SSA officials said they were less amenable to Supreme Court Review. This official added that the Ninth as well as Eighth Circuits have had precedent- setting decisions. Since SSA established a regulation in 1998 that included a timeliness goal for issuing acquiescence rulings, the promptness of issuances has improved. (Fig. 10 depicts the timeliness of acquiescence rulings issued from 1990 to 2006.) Prior to establishing the regulation, SSA took more than a year to issue over 80 percent of the rulings. Since then, 54 percent of acquiescence rulings were issued within the guideline of 120 days (or 4 months). For those rulings that were not issued within 120 days, in most instances the timeliness goal did not apply because SSA either sought further judicial review or needed to coordinate with DOJ or other federal agencies. Once SSA has issued acquiescence rulings, the agency has frequently succeeded in replacing them with uniform national policies. We found that since 1990, nearly half of all acquiescence rulings (21 of 45) were rescinded and replaced by more permanent guidance. Further, most of these rescissions resulted from the agency’s issuing or modifying rulings or regulations. (Fig. 11 shows how acquiescence rulings were rescinded.) According to officials, acquiescence rulings are most commonly rescinded when the agency revises, publishes, or revokes rules and regulations— actions that are fully within the agency’s control. Six other rescissions occurred through other means: three from Supreme Court rulings upholding SSA’s policies and three from changes in law made by Congress. However, according to SSA, some issues brought about by federal court decisions, such as those involving the Constitution or federal law, have led to acquiescence rulings that have not been rescinded by the agency. For example, acquiescence ruling 91-1(5), which involves a claimant’s right to cross-examine an examining physician, remains in effect because SSA officials believe the only option for rescinding the ruling would require re- litigating the case. However, according to SSA officials, the relevant circuit appellate court and the Supreme Court have declined to review this ruling. Other reasons that acquiescence rulings may remain in effect include a lack of practical implications of the acquiescence ruling for other circuits or the fact that an acquiescence ruling was only recently issued. Replacing the acquiescence ruling with nationwide policy typically takes a significant period of time—in one case, 16 years. Conclusions On the whole, SSA has taken many steps to align its policies with court decisions and establish uniform national standards. The fact that the agency made some substantial changes to its policies in the mid-1990’s may account for the reduced incidence of acquiescence rulings in the past 5 years. On the other hand, the high proportion of remanded and awarded claims for the past decade has likely cost SSA additional time and resources to process, and may have impeded the timely award of benefits to eligible individuals. While the DSI improvement initiative is designed to ameliorate this problem, the lack of reliably collected and well-managed data on court remands is likely to inhibit that effort. Although SSA plans, through the implementation of DSI, to gradually address the heavy workload that has been cited by many for contributing to errors that lead to remands, the agency cannot pinpoint specific reasons for remands and take corrective action without more reliable data. To the degree that the agency does collect some data, the fact that collection is carried out by two different offices risks inconsistency and divergent interpretations. This lack of complete and consistent information ultimately undermines the agency’s ability to serve people with disabilities and their families. Recommendations To ensure the agency has accurate and well-managed information to use in identifying corrective actions for reducing remands, we recommended that the Commissioner of SSA implement the following two measures: take steps to ensure the reliability of data on reasons for remands, and coordinate agency data collection on remands and ascertain how best to use this information to reduce the proportion of cases remanded by federal courts. Agency Comments SSA provided us with comments on a draft of this report, which we have reprinted in appendix VI. In its comments, SSA agreed with both of our recommendations for improving data on remands and outlined actions it plans to take to enhance data reliability and collection. Specifically, in an upcoming update to the Case Processing Management System, SSA plans to make the reasons for remands a mandatory data input field. In addition, SSA plans to establish an intercomponent work group to address issues related to remand data, and analyze data on the use of the Findings Integrated Templates and court decisions. SSA also provided technical comments which generally improved the accuracy of the report, and we have incorporated them as appropriate. Copies of this report are being sent to the Commissioner of SSA, appropriate congressional committees, and other interested parties. The report is also available at no charge on GAO’s Web site at http://www.gao.gov. Please contact me on (202) 512-7215 if you or your staff has any questions concerning this report. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Other major contributors to this report are listed in appendix VII. Appendix I: Objective, Scope, and Methodology We designed our study to obtain information on (1) the trends of the past decade in the number of appeals reviewed by the district courts and their decisions; (2) the reasons for court remands and factors that may contribute to the incidence of those remands; and (3) SSA’s process for responding to appellate court decisions that conflict with agency policy and the agency’s response in recent years. To obtain information on these issues, we collected relevant quantitative and qualitative data from SSA; interviewed SSA officials and stakeholders within and outside the agency, such as district court judges, claimant representatives and experts; and reviewed agency policies and regulations that address appellate court rulings that conflict with SSA disability program policies. To determine the completeness and accuracy of data we obtained, we took steps, described below, and determined that these data, with the exception of reasons for remand, were sufficiently reliable for use in this report. We conducted this work between February 2006 and January 2007 according to generally accepted government auditing standards. To address the first research objective, we obtained national data from SSA on the number and decisions of cases reviewed by federal district courts—the first level of federal court review—for fiscal years 1995 to 2005 and analyzed these data for trends over time. Our analysis excluded cases that were dismissed because dismissals are generally decided on technical and procedural grounds rather than on the merits of the claim. For fiscal year 2005, the only year for which complete data were available, we obtained information from SSA on court decisions by state. We then categorized and analyzed these data by circuit. Furthermore, we obtained and analyzed agency data on the decisions SSA made on disability cases after they were remanded (i.e., allowances or denials of claims) for fiscal years 1995 to 2005. We also categorized and analyzed these data by circuit using information on the claimant’s state of residence. SSA officials were interviewed to gather information on potential reasons for any trends. In addition, we interviewed SSA officials and reviewed previously issued agency reports and data manuals to assess the reliability of these data. To address the second objective, we also obtained data on cited reasons for remands from two SSA databases, the Case Processing and Management System (CPMS), and the National Docketing/Management Information System (NDMIS), which are maintained by two separate offices in SSA responsible for re-adjudicating remanded cases and litigating claims in court. We compared the data to determine how and what SSA is reporting on reasons for remands within the agency. After interviewing agency officials and reviewing reports, we determined that these data were not sufficiently reliable for providing detailed information on reasons for remands, although some information was used to illustrate what SSA currently collects. In addition, we interviewed SSA officials and other stakeholder groups, including federal court judges and claimant representatives from the Seventh and Ninth circuits and experts, on reason for remands and factors that influenced them. Stakeholders from these two circuits were selected because these jurisdictions represent those with the lowest and highest numbers of SSA policy changes resulting from acquiescence rulings. Information from these interviews is not generalizable to all circuits or stakeholders. For the third objective, we interviewed SSA officials and obtained available documents on how SSA determines whether a court of appeals decision conflicts with its policies and what option to pursue to address conflicting decisions, e.g., appeal or issue an acquiescence ruling whereby the agency agrees to abide by the court judgment in future cases, albeit only in that jurisdiction. We also obtained data on the number of acquiescence and other rulings that SSA issued since establishing its policy of acquiescence in 1990. For acquiescence rulings, we further reviewed SSA’s timeliness in issuing acquiescence rulings as well as the number issued by circuit and how SSA replaced acquiescence rulings with nationwide policies. We were unable to independently determine the extent to which court decisions conflicted with SSA policy or whether SSA should have pursued one option over another. We also interviewed SSA officials and relevant stakeholders, including selected federal court judges and claimant representatives, to obtain information on how court decisions and their related agency rulings have affected SSA disability adjudication policy in recent years. Appendix II: Summary of Process Unification Rulings SSR 96-1p: “Application by the Social Security Administration of Federal Circuit Court and District Court Decisions.” Policy interpretation stating that SSA decision-makers will be bound by SSA’s nationwide policy until an acquiescence ruling is issued and that SSA does not acquiesce to federal district courts within a circuit. SSR 96-2p: “Giving Controlling Weight to Treating Source Medical Opinions.” Policy guidance for applying the regulatory provision that requires the adoption of a treating source’s medical opinion on the nature and severity of an impairment when the opinion is not inconsistent with other substantial evidence in the claimant’s file and the opinion is supported by medically acceptable diagnostic techniques. SSR 96-3p: “Considering Allegations of Pain and Other Symptoms in Determining Whether a Medically Determinable Impairment is Severe.” Policy interpretation on the consideration of symptoms in determining whether an impairment is “severe” at step 2 of the sequential evaluation process. SSR 96-4p: “Symptoms, Medically Determinable Physical and Mental Impairments, and Exertional and Nonexertional Limitations.” Policy interpretation explaining, among other things, that symptoms are not medically determinable impairments; that limitations, not impairments, are categorized as “exertional” or “nonexertional”; and that symptoms may result in nonexertional or exertional limitations. SSR 96-5p: “Medical Source Opinions on Issues Reserved to the Commissioner.” Policy interpretation on evaluating medical source opinions on issues such as whether an individual’s impairment(s) meets or is equivalent in severity to the requirements of a listing in SSA’s Listing of Impairments; what an individual’s residual functional capacity is; whether an individual’s residual functional capacity prevents him from doing past relevant work; and how the vocational factors of age, education, and work experience apply. SSR 96-6p: “Consideration of Administrative Findings of Fact by State Agency Medical and Psychological Consultants and Other Program Physicians and Psychologists at the ALJ and Appeals Council Levels of Administrative Review; Medical Equivalence.” Policy interpretation regarding weight given to Disability Determination Services level medical and psychological consultant findings at the ALJ and Appeals Council levels. Explanation of requirements for ALJs and the Appeals Council to obtain the opinion of a physician or psychologist designated by the Commissioner in making a determination about equivalence to the listings. SSR 96-7p: “Evaluation of Symptoms in Disability Claims: Assessing the Credibility of an Individual’s Statements.” Policy interpretation on when the evaluation of symptoms, including pain, requires a finding about the credibility of an individual’s statements about pain and symptoms, and the factors to be considered in assessing the credibility of such statements. SSR 96-8p: “Assessing Residual Functional Capacity in Initial Claims.” Policy clarification of the term residual functional capacity and discussion of the elements considered in assessing residual functional capacity. SSR 96-9p: “Determining Capability to Do Other Work—Implications of a Residual Functional Capacity for Less Than a Full Range of Sedentary Work.” Policy interpretation on the impact of a residual functional capacity assessment for less than a full range of sedentary work on an individual’s ability to do other work. Appendix III: Key Federal Court Rulings on Social Security Administration Disability Adjudication Heckler v. Campbell, 461 U.S. 458 (1983) The U.S. Supreme Court upheld SSA’s use of its vocational grid regulations. Hyatt v. Heckler, 579 F.Supp. 985 (W.D.N.C. 1984) In a class action, the U.S. District Court for the Western District of North Carolina found SSA’s policy on pain contrary to Fourth Circuit law. This ruling enjoined SSA from refusing to follow the law of the circuit. Lopez v. Heckler, 725 F.2d 1489 (9th Cir. 1984) The Ninth Circuit Court of Appeals enjoined SSA to uphold prior decisions requiring SSA to apply a medical improvement standard before terminating benefits. Stieberger v. Heckler, 615 F.Supp. 315 (S.D.N.Y. 1985) In a class action, the U.S. District Court for the Southern District of New York ruled that SSA had violated the rights of claimants by not following circuit court law on the weight to give treating physician evidence. After this decision SSA introduced its policy of Acquiescence Rulings when the agency is not willing to implement an appellate decision nationwide. Acquiescence rulings explain how SSA applies decisions of Courts of Appeals in the circuit in which the decision was rendered. Schisler v. Heckler, 787 F.2d 76 (2nd Cir. 1986) The Second Circuit Court of Appeals found that a treating physician’s opinion on the subject of medical disability is binding unless contradicted by substantial evidence. Hyatt v. Heckler, 711 F.Supp. 837 (W.D.N.C. 1989) On remand, the U.S. District Court for the Western District of North Carolina found SSA’s policies on pain did not conform to circuit law. The court ordered these policies to be cancelled and drafted a new ruling on pain for North Carolina adjudicators. Sullivan v. Zebley, 493 U.S. 521 (1990) The U.S. Supreme Court struck down SSA’s regulations for determining whether a child is disabled because the regulations denied benefits to children whose impairments did not meet or equal the listing of impairments and did not allow the child to qualify for benefits based on an individualized functional assessment. Schisler v. Sullivan, 3 F.3d. 563 (2nd Cir. 1993) The Second Circuit Court of Appeals upheld SSA’s 1991 regulations on the opinions of treating physicians as a valid use of SSA’s regulatory power. Hyatt class action settlement SSA agreed to re-adjudicate 77,000 cases under the 1991 regulations on the evaluation of pain and other symptoms. Barnhart v. Walton, 535 U.S. 212 (2002) The U.S. Supreme Court upheld SSA’s interpretation that the claimant’s inability to work last, or be expected to last, 12 months. The court also upheld SSA’s regulation precluding a finding of disability when the claimant returns to work within a 12-month period. Barnhart v. Thomas, 540 U.S. 20 (2003) The U.S. Supreme Court upheld denial of benefits to a claimant who was still able to do her previous work without determining whether that type of work continued to be available in the national economy. Appendix IV: Additional Information on Disability Appeals Appeals Council denials of Social Security disability claims increased by about 36 percent from about 48,300 in Fiscal Year 1994 to about 65,800 in Fiscal Year 2004. SSA decisions on disability claims following remands from federal district courts increased from about 3,000 in Fiscal Year 1995 to almost 7,500 in Fiscal Year 2005. The twelve judicial circuits with district courts that review Social Security disability claims varied in the number of claims they reviewed in Fiscal Year 2005. For example, the District of Columbia District Court reviewed less than 100 claims, while the district courts in the Ninth Circuit reviewed almost 3,000. Appendix V: Summary of Court Holdings for Acquiescence Rulings Related to Disability Determinations Rescinded? Court holding The court held that social security regulations allow the use of a vocational expert only at step five of the sequential evaluation process; and therefore, reliance on a vocational expert is improper in making the step four determination as to whether a claimant can return to past relevant work. The court held that SSA can re-open an otherwise final administrative determination at any time when a claimant, who had no individual legally responsible for prosecuting the claim at the time of the prior determination, established a prima facie case that mental incompetence prevented him from understanding the procedure to request administrative review, unless SSA holds a hearing and determines that mental incompetence did not prevent the claimant from filing a timely appeal. The court held that entitlement to a subpoena for cross-examination purposes of an examining physician is automatic and must be granted. The court held that in deciding the appeal of a determination that an individual’s disability has medically ceased, the adjudicator must consider the issue of the individual’s disability through the date of the Secretary of Health and Human Services’ final decision, rather than only through the date of the initial cessation determination. The court held that an Appeals Council dismissal of a request for review of an ALJ decision for reasons of untimeliness is a “final decision” and subject to judicial review. The court held that a person’s return to substantial gainful activity within 12 months of the onset date of his or her disability, and prior to an award of benefits, does not preclude an award of benefits and entitlement to a trial work period. The court held that an initial determination in the Social Security or SSI programs must be reopened when the notice of the initial determination did not explicitly state that the failure to seek reconsideration results in a final determination, and the claimant did not pursue a timely appeal. The court held that a claimant for disability or SSI benefits who has an IQ score in the range covered by listing 12.05C and who cannot perform his or her past relevant work because of a physical or other mental impairment has per se established the additional and significant work-related limitation of function requirement. The court held that, in making a determination following an individual’s re-entitlement period that an individual with a disabling impairment has engaged in substantial gainful activity, the Secretary of Health and Human Services may not consider work and earnings by the individual in a single month rather than an average of work and earnings over a period of months. The court held that, in making a disability determination on a subsequent disability claim with respect to an un-adjudicated period, an adjudicator must adopt a finding regarding a claimant’s residual functional capacity, made in a final decision on a prior disability claim arising under the same title of the Social Security Act unless there is new and material evidence. The court held that, in order to find that the skills of a claimant who is close to retirement age are “highly marketable” within the meaning of the Secretary of Health and Human Services’ regulations, SSA must first establish that the claimant’s skills are sufficiently specialized and coveted by employers as to make the claimant’s age irrelevant in the hiring process and enable the claimant to obtain employment with little difficulty. The court held that a claimant for Disability Insurance or SSI benefits based on disability who has an amputation of a lower extremity and cannot afford the cost of a prosthesis has an impairment that meets the listings. The court held that, in making a disability determination on a subsequent disability claim with respect to an un-adjudicated period, where the claim arises under the same title of the Social Security Act as a prior claim on which there has been a final decision by an ALJ or the Appeals Council that the claimant is not disabled, SSA must: (1) apply a presumption of continuing nondisability and, if the presumption is not rebutted by the claimant, determine that the claimant is not disabled; and (2) if the presumption is rebutted, adopt certain findings required under the applicable sequential evaluation process for determining disability, made in the final decision by the ALJ or the Appeals Council on the prior disability claim. The court held that a person’s return to substantial gainful activity within 12 months of the onset date of his or her disability, and prior to an award of benefits, does not preclude an award of benefits and entitlement to a trial work period. The court held that a claimant for Disability Insurance benefits or SSI benefits based on disability who has mental retardation or autism with a valid IQ score in the range covered by Listing 12.05C and who cannot perform his or her past relevant work because of a physical or other mental impairment has per se established the additional and significant work-related limitation of function requirement of the regulations. The court held that, in making a disability determination or decision on a subsequent disability claim with respect to an un-adjudicated period, where the claim arises under the same title of the Social Security Act as a prior claim on which there has been a final decision by an ALJ or the Appeals Council, SSA must adopt the finding of the demands of a claimant’s past relevant work made in the prior decision unless new and material evidence or changed circumstances provide a basis for a different finding. The court held that in making a disability determination or decision on a subsequent disability claim with respect to an un-adjudicated period, where the claim arises under the same title of the Social Security Act as a prior claim on which there has been a final decision by an ALJ or the Appeals Council, SSA must adopt the finding of a claimant’s residual functional capacity made in the final decision by the ALJ or the Appeals Council on the prior disability claim unless new or additional evidence or changed circumstances provide a basis for a different finding. The court held that SSA is required to find that a claimant close to retirement age and limited to sedentary or light work has “highly marketable” skills before determining that the claimant has transferable skills and, therefore, is not disabled. The court held that SSA is required to find that a claimant close to retirement age and limited to sedentary or light work has “highly marketable” skills before determining that the claimant has transferable skills and, therefore, is not disabled. The court held that an Appeals Council dismissal of a request for review of an ALJ decision for reasons of untimeliness is a “final decision” and subject to judicial review. The court held that, in making a disability determination on a subsequent disability claim with respect to an un-adjudicated period, SSA must consider a finding of a claimant’s residual functional capacity made in a final decision by an ALJ or the Appeals Council on the prior disability claim as evidence and give it appropriate weight in light of all relevant facts and circumstances but that SSA does not have to adopt the finding. The court held that a determination of medical equivalence under the regulations must be based solely on evidence from medical sources. The court held that an ALJ, when receiving evidence from a vocational expert must ask the expert how the testimony or information corresponds to information provided in the Dictionary of Occupational Titles and must ask the expert to explain the difference if the testimony or evidence differs from the Dictionary. The court held that SSA has the burden of proving at step five of the sequential evaluation process that the claimant has the residual functional capacity to perform other work which exists in the national economy. The court held that a claimant’s return to substantial gainful activity within 12 months of the alleged onset date of his or her disability, and prior to an award of benefits, does not preclude an award of benefits and entitlement to a trial work period. The court held that SSA may not apply the Medical-Vocational Guidelines (grid rules) as a frame work to deny disability benefits at step 5 of the sequential evaluation process when a claimant has a nonexertional limitation without either: (1) taking or producing vocational evidence; or (2) providing notice of the agency’s intention to take official notice of the fact that the particular nonexertional limitation does not significantly erode the occupational job base. The court held that for cases concerning Listings 12.05 or 112.05 decided by ALJs or the Appeals Council before September 20, 2000, which have been remanded by the courts to SSA, the ALJ should apply the pre-September 20, 2000 version of the Listing as interpreted by the Seventh Circuit. The court held that for certain applicants under age 18, ALJs and Administrative Appeals Judges must make reasonable efforts to ensure that a qualified pediatrician or other specialist evaluates the case. Appendix VI: Comments from the Agency Appendix VII: GAO Contact and Staff Acknowledgments Staff Acknowledgments Robert E. Robertson (Director), Michele Grgich (Assistant Director), Danielle Giese (Analyst-in-Charge), Susan Bernstein, Candace Carpenter, Joy Gambino, Suneeti Shah, Albert Sim, Ellen Soltow and Rick Wilson made significant contributions to this report. Luann Moy, Vanessa Taylor, and Walter Vance provided assistance with research methodology and data analysis. Daniel Schwimer provided legal counsel. Related GAO Reports Social Security Administration: Agency Is Positioning Itself to Implement Its New Disability Determination Process, but Key Facets Are Still in Development. GAO-06-779T. Washington, D.C.: June 15, 2006. Social Security Administration: Administrative Review Process for Adjudicating Initial Disability Claims. GAO-06-640R. Washington, D.C.: May 16, 2006. High-Risk Series: An Update. GAO-05-207. Washington, D.C.: January 2005. SSA’s Disability Programs: Improvements Could Increase the Usefulness of Electronic Data for Program Oversight. GAO-05-100R. Washington, D.C.: December 10, 2004. Social Security Administration: More Effort Needed to Assess Consistency of Disability Decisions. GAO-04-656. Washington, D.C.: July 2, 2004. Social Security Administration: Strategic Workforce Planning Needed to Address Human Capital Challenges Facing the Disability Determination Services. GAO-04-121. Washington, D.C.: January 27, 2004. Social Security Disability: Disappointing Results from SSA’s Efforts to Improve the Disability Claims Process Warrant Immediate Attention. GAO-02-322. Washington, D.C.: February 27, 2002. Standards for Internal Control in the Federal Government. GAO/AIMD-00-21.3.1 Washington, D.C.: November 1999.
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The Social Security Administration's (SSA) Disability Insurance and Supplemental Security Income programs provided around $128 billion to about 12.8 million persons with disabilities and their families in fiscal year 2005. Claimants who are denied benefits by SSA may appeal to federal courts. Through current initiatives, SSA is attempting to reduce the number of cases appealed to courts and remanded back to SSA for further review. In addition, there have been long-standing concerns about how SSA responds to court decisions that conflict with its policies. GAO was asked to examine: (1) trends over the past decade in the number of appeals reviewed by the courts and their decisions, (2) reasons for court remands and factors contributing to them, and (3) SSA's process for responding to court decisions that conflict with agency policy. GAO reviewed SSA data and documents on court decisions, remands and SSA's processes and interviewed agency officials and stakeholders on data trends, reasons for remands, and SSA processes. Between fiscal years 1995 and 2005, the number of disability appeals reviewed by the federal district courts increased, along with the proportion of decisions that were remanded. More disability claims were remanded than affirmed, reversed, or dismissed over the period, and the proportion of total decisions that were remands ranged from 36 percent to 62 percent, with an average of 50 percent. Remanded cases often require SSA to re-adjudicate the claim, with the result that--along with the passage of time and new medical evidence--the majority of remanded cases result in allowances. According to SSA officials and outside observers, a range of errors prompted by heavy workloads is responsible for court remands of SSA's disability determinations, but data that would confirm or clarify the issue are incomplete and not well-managed. SSA has only recently begun collecting data on remands, and we found these data to be incomplete. Additionally, this information is collected by two different offices that have created somewhat different categories for the data, making some of the information inconsistent and possibly redundant. Meanwhile, SSA has acknowledged the need to reduce remands and, in 2006 along with other initiatives, introduced new decision-writing templates to improve efficiency and reduce errors. SSA has a process in place for determining whether appellate court decisions conflict with the agency's interpretation of disability statutes or regulations and has taken steps in recent years to align its national policies with appellate court decisions. For example, officials and stakeholders attributed a downward trend in appellate court decisions that conflict with agency policy to significant policy changes instituted by SSA in the mid-1990s. In addition, for those cases where the agency acceded to conflicting appellate court decisions by issuing acquiescence rulings within the related circuits, we found that about half of the rulings issued were eventually replaced with national policy. Moreover, GAO found that the timeliness of acquiescence rulings had improved since 1998, when SSA established a timeliness goal of 120 days.
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The motion for leave to proceed in forma pauperis and the petition for a writ of certiorari are granted. The judgment is reversed. Miranda v. State of Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694; Darwin v. State of Connecticut, 391 U.S. 346, at 350, 88 S.Ct. 1488, at 1490, 20 L.Ed.2d 630 (concurring opinion of Mr. Justice Harlan). Mr. Justice BLACK and Mr. Justice WHITE are of the opinion that certiorari should be denied.
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Jack Greenberg, Michael Meltsner, and Anthony G. Amsterdam for petitioner. George F. McCanless, Attorney General of Tennessee, and Thomas E. Fox, Deputy Attorney General, for respondent.
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The facts of this case are identical with those of Anderson v. Santa Anna, 116 U. S. 356, ante, 413, except that here the bonds were issued by one township on the line of the Danville, Urbana, Bloomington & Pekin Railroad, and there, by another. The bonds in the two cases are the same in form, and the statutory authority for their issue the same. All questions actually decided in the other case are concluded in this; but one point is made now that was not presented then, and it arises on these facts: Artice 3, § 23, of the Illinois constitution of 1848, which was in force when the statutes on which the case depends were passed, contained this provision: 'And no private or local law which may be passed by the general assembly shall embrace more than one subject, and that shall be expressed in the title.' The act of 1867, under which the bonds were issued, was a private or local law, with the following title: 'An act to amend the articles of association of the Danville, Urbana, Bloomington & Pekin Railroad Company, and to extend the powers of, and confer a charter upon, the same.' The parts of the act pertinent to the present inquiry are sections 1, 12, and 13. These are as follows: 'Section 1. Be it enacted by the people of the state of Illinois, represented in the general assembly, that the said corporation is hereby created a body politic and corporate under the name and style of the 'Danville, Urbana, Bloomington & Pekin Railroad Company,' etc.; and the said company is authorized and empowered to locate, construct, and complete a railroad, extending from the city of Pekin, in Tazewell county, Illinois, through, or as near as practicable, to the towns of Tremont, Mackinawtown, Concord, Bloomington, Leroy, Mount Pleasant, Mahomet, Champaign City, Urbana, and St. Joseph, to the east boundary of the state of Illinois,' etc. 'Sec. 12. To further aid in the construction of said road by said company, any incorporated town or township in counties acting under the township organization law, along the route of said road, may subscribe to the capital stock of said company in any sum not exceeding two hundred and fifty thousand dollars. 'Sec. 13. No such subscription shall be made until the question has been submitted to the legal voters of such incorporation, town, or township in which the subscription is proposed to be made; and the clerk of each of said towns or townships is hereby required, upon the presentation of a petition signed by at least ten citizens, who are legal voters and tax-payers of such town or township for which he is clerk, and in which petition the amount proposed to be subscribed shall be stated, to post up notices in at least three public places in each town or township; which notice shall be posted not less than thirty days before the day of holding of such election, notifying the legal voters of such town or township to meet at the usual place of holding elections in such town or township, or some other convenient place named in such notice, for the purpose of voting for or against such subscription: provided, that where elections may have already been held, and a majority of the legal voters of any township or incorporated town were in favor of a subscription to said railroad, then, and in that case, no other election need be had, and the amount so voted for shall be subscribed as in this act provided. And such elections are hereby declared to be legal and valid, as though this act had been in force at the time thereof, and all the provisions hereof had been complied with.' The point now made is that the statute, so far as it undertakes to authorize municipalities to subscribe to the capital stock of the corporation, is unconstitutional, because it embraces two distinct subjects,—one the incorporation of the railroad company, and the other an enlargement of the corporate powers of municipal corporations,—the first of which alone is expressed in the title. This objection, it seems to us, is fully disposed of by the case of Supervisors of Schuyler Co. v. Rock Island & Alton R. Co., 25 Ill. 182, decided by the supreme court of Illinois in 1860. There the title was 'An act to incorporate the Rock Island & Alton Railroad Company,' and the act, besides incorporating the company, authorized counties to subscribe to the stock. As to this the court said, speaking through Chief Justice CATON: 'We think the title of this act sufficient to embrace the whole of the law, and that it is a compliance with the constitutional requirement. All the provisions of the act are appropriately designed to carry out the object of the corporation. If it was proper to authorize subscriptions to the stock, it was certainly proper to enable individuals or counties to subscribe and specify the terms and conditions on which they might subscribe, and the mode of making the subscription.' In states where constitutional provisions like that now under consideration have been decided to be mandatory, and not directory only, it has generally been held that the requirement is satisfied if the law has but one general object, and that is clearly expressed in the title. It is enough if the body of the act is germane to the title. This is certainly the well-establed rule in Illinois, where, as was said by Mr. Justice BREESE, dissenting in O'Leary v. County of Cook, 28 Ill. 543, decided in 1862, the 'court has leaned rather in favor of the validity of private acts, when the subjects of the acts are multifarious.' In that case a provision in a law entitled 'An act to amend an act entitled 'An act to incorporate the Northwestern University," which prohibited 'the sale of spirituous liquors within four miles of the university, under a special penalty to be recovered by the county of Cook,' was held by a majority of the court not to be repugnant to this provision of the constitution; and it was said, (page 538:) 'The object of the charter was to create an institution for the education of young men, and it was competent for the legislature to embrace within it every thing which was designed to facilitate that object. Every provision which was intended to promote the well being of the institution, or its students, was within the proper subject-matter of the law.' As early as 1853 it was decided in Belleville, etc., R. Co. v. Gregory, 15 Ill. 29, that in 'An act to incorporate the Belleville & Illinoistown Railroad Company' authority could be given the company 'to extend and unite with any other railroad in this state.' So, too, in Firemen's Benev. Ass'n v. Lounsbury, 21 Ill. 511, it was held, in 1859, that, in a law entitled 'An act to incorporate the Firemen's Benevolent Association, and for other purposes,' it was competent to provide that the agents of all foreign insurance companies doing business in Chicago should pay the association two dollars on every one hundred dollars of premiums received by them during a year, the court simply remarking on this branch of the case, (page 575:) 'We think the sixth section germane to the objects of the bill, and embraced properly in the same subject, the whole of which is sufficiently expressed in the title.' The same general principle has been fully recognized and enforced in Neifing v. Town of Pontiac, 56 Ill. 172; People v. Wright, 70 Ill. 396; People v. Brislin, 80 Ill. 423, where it was said, (page 433:) 'This court has gone very far to uphold statutes supposed to be within this objection;' 'the body of the act in question is germane to the title of the bill.' Guild v. City of Chicago, 82 Ill. 475; Fuller v. People, 92 Ill. 185. This court also decided to the same effect in Jonesboro City v. Cairo & St. L. R. Co., 110 U. S. 199, S. C. 4. Sup. Ct. Rep. 67, as to a similar provision in the Illinois constitution of 1870. It is further insisted, however, that if this law is good, so far as the general authority to subscribe is concerned, it is bad to the extent that it seeks to give effect to elections which were unauthorized at the time they were held; and we are referred to the cases of Village of Lockport v. Gaylord, 61 Ill. 276, and Middleport v. AEtna Life Ins. Co., 82 Ill. 562, in support of this position. In Lockport v. Gaylord it was decided that a provision legalizing certain appropriations theretofore made by the president and trustees of the village, and certain orders drawn by the clerk, was not germane to the title of 'An act to amend the charter of the village of Lockport,' passed February 12, 1853; and in Middleport v. Insurance Co. that authority to issue bonds in liquidation of appropriations voted under a prior act was not germane to the title of 'An act to legalize certain aids heretofore voted and granted to aid in the construction' of a proposed railroad. The first of these cases was decided in 1871 and the last in 1876. In the present case, however, the provision relates only to the terms and conditions on which subscription to the stock of the railroad company might be made, which it was said, in Supervisors of Schuyler Co. v. Rock Island & A. R. Co., was germane to the general subject of a bill to incorporate a railroad company. It is nothing more nor less than a requirement of a vote of the people as authority for the subscription, with a proviso that if the vote had already been taken it need not be taken over again. This, as it seems to us, comes within both the letter and spirit of the earlier adjudications, and that these have not been overthrown by the later cases. We are aware that in Welch v. Post, 99 Ill. 474, decided in 1881, the court said that, 'on the authority of Middleport v. AEtna Ins. Co.,' it was 'inclined to hold' that power could not be given to municipal corporations to subscribe to the stock of a railroad company in an act entitled substantially like that now under consideration; but as neither in this case, nor in that of Middleport v. Ins. Co., nor in that of Lockport v. Gaylord, was any reference whatever made to the earlier decisions, which seem to be so decidedly the other way, we do not feel ourselves called upon to depart from the long-settled practice in the state by what has yet been done towards making a change. In fact, in Fuller v. People, before cited, which was decided eight years after the Lickport case, and three years after that of Middleport, the following quotation is made with approval from Cooley, Const. Lim. (1st Ed.) 144, § 2: 'The general purpose of these provisions is accomplished when a law has but one general object, which is fairly indicated by its title. To require every end and means necessary or convenient for the accomplishment of this general object to be provided for by a separate act relating to that alone would not only be unreasonable, but would actually render legislation impossible.' And again, from Sun M. Ins. Co. v. Mayor, etc., 8 N. Y. 253: 'There must be but one subject, but the mode in which the subject is treated, or the reasons which influenced the legislation, could not and need not be stated in the title, according to the letter and spirit of the constitution.' In Montclair v. Ramsdell, 107 U. S. 147; S. C. 2 Sup. Ct. Rep. 391; Otoe Co. v. Baldwin, 111 U. S. 16; S. C. 4 Sup. Ct. Rep. 265; and Ackley School-dist. v. Hall, 113 U. S. 135; S. C. 5 Sup. Ct. Rep. 371,—we had occasion to consider the same general question, with the same result, in connection with similar provisions in the constitutions of New Jersey, Nebraska, and Iowa, respectively. Finding nothing in this case to distinguish it from Anderson v. Santa Anna, the judgment is affirmed on that authority.
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The requirement of the Constitution of Illinois that "no private or local law which may be passed by the geueral assembly shall embrace more than one subject, and that shall be expressed in the title," is satisfied if the law has but one general object, and that object is expressed m the title and the body of the act isg ermane to the title. A statute of Illinois which was entitled "An Act to amend the articles of association of the Danville et cet. Railroad Company, and to extend the powers of and confer a charter upon the same," and which, in the body of the act, authorized incorporated townships along the route to subscribe to its capital stock on an assenting vote of a majority of the legal voters, and further legalized assents of voters of certain townships given at meetings held previous to the passage of the act, complied with the reqnirement of the Constitution of that State that "no private or local law which may be passed by the general assembly shall embrace more than one subject, and that shall be expressed in the title." AnddrsoM v. Santa Anna, 116 U. S. 856, affirmed. Schuyler County v. Rock Island & Alton .RaiTroad Co., 25 Ill.1 82, and O'Leary v. Cook County, 28 Ill. 543, approved and applied. Welch v. Post, 99 111. 474, questioned.
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This controversy thus arose: In December, 1910, Reid, the petitioner, delivered in London to the American Express Company an automobile, to be carried to New York. The Express Company, in a communication concerning the shipment, was informed that the car was worth about $3,900. The car was boxed by the Express Company and by it delivered to the Minnewaska, a steamship belonging to the International Mercantile Marine Company, bound for New York. The Express Company shipped the car in its own name as consignor, to itself in New York as consignee, and no express notice was given to the ship of the real value of the package and its contents. The bill of lading issued by the steamship company expressly limited the liability to $100, and contained the following clause: 'It is also mutually agreed that the value of each package shipped hereunder does not exceed $100, or its equivalent in English currency on which basis the freight is adjusted, and the carrier's liability shall in no case exceed that sum, unless a value in excess thereof be specially declared, and stated herein, and extra freight as may be agreed on paid.' On the arrival of the ship at New York, T. Hogan & Sons, Incorporated, stevedores, were employed to discharge the cargo. A sling was placed around the box containing the car, and a fall, with a hook attached to it, was affixed to the sling, and by a winch the car was lifted up from the hold, through the hatchway. When it had passed above the hatchway, a hook attached to another tackle was fastened to the sling, this second tackle being used to swing the package toward and over the side of the ship, to land it on the pier. This was not accomplished, however, because, as the package swung over the side of the ship, toward the pier, the sling broke, and the car fell into the water, and was seriously damaged. In November, 1911, Reid filed his libel in the district court of the United States for the southern district of New York, against the Express Company, to recover from it the amount of damage caused to the automobile. Before answering, the Express Company, in conformity to admiralty rule 59, of this court, and with rule 15 in admiralty for the southern district of New York, filed two petitions, one against the steamship company, and the other against Hogan & Sons, to make them parties defendant on the ground that, if there was any liability on the part of the Express Company on the libel of Reid, both the steamship company and Hogan & Sons were responsible therefor, and asking a decree over against each of them separately in case there was any decree against the Express Company. Thereupon the Express Company answered the original libel, denying responsibility on the ground, among others, that it was a mere forwarder. Subsequently both Hogan & Sons and the steamship company answered not only the petitions of the Express Company, making them parties defendant, but also the original libel, traversing the alleged liability on various grounds. The latter company, however, referring to the limitation of liability to $100 in the bill of lading which it had issued, admitted its responsibility to that extent, and alleged that the sum thereof had been offered and declined. In March, 1913, an interlocutory decree was entered, holding that Hogan & Sons were primarily responsible, and that the Express Company was secondarily so, and that when the amount of the loss was ascertained, Reid would therefore have the right to recover the amount from Hogan & Sons, and in addition to recover from the Express Company any part of the sum which he was unable to collect under execution from Hogan & Sons. The final decree, which thereafter fixed the amount at $2,724.40, carried out the interlocutory decree. Nobody appealed from the interlocutory decree, and the Express Company did not appeal from the final decree, fixing its secondary liability. Hogan & Sons, however, did appeal. The court below, considering that, on the appeal, the case was before it for a trial de novo, and therefore that the rigths and liabilities of all the parties must be considered from that point of view, reversed the decree below, and held that error had been committed in the decree rendered against Hogan & Sons, because the proof did not establish that they had been negligent. As to the Express Company, it was also held that error had been committed in decreeing it to be liable secondarily, because, in receiving the automobile, it had acted in the capacity of a mere forwarder, and had discharged its obligations in that respect. As to the decree which dismissed the steamship company, it was held that error had been committed, because that company, as an insurer, was liable, not, however, exceeding the amount of $100, the limitation stated in the bill of lading. As the result of the allowance of a petition for certiorari, the correctness of these conclusions is now before us for decision. At the threshold it is insisted that the court below had no authority to consider the case as before it for a new trial, that is, de novo, and to award relief upon that theory, and that consequently it erred in reviewing the interlocutory decree, which was not appealed from, by which the steamship company was dismissed, and allowing a recovery against that company, and also in reviewing both the interlocutory and final decrees so far as it was essential to grant relief to the Express Company, because that company had not appealed. It is not denied that in the second circuit the right to a de novo trial was considered as settled by Munson S. S. Line v. Miramar S. S. Co. 93 C. C. A. 360, 167 Fed. 960, and that a well-established practice to that effect obtained, but it is insisted that a general review of the adjudged cases on the subject will show the want of foundation for the rule and practice. But we think this contention is plainly without merit, and that the right to a de novo trial in the court below authoritatively resulted from the ruling in Irvine v. The Hesper, 122 U. S. 256, 30 L. ed. 1175, 7 Sup. Ct. Rep. 1177,—a conclusion which is plainly demonstrated by the opinion in that case and the authorities there cited, and the long-continued practice which has obtained since that case was decided, and the full and convincing review of the authorities on the subject, contained in the opinion in the Miramar Case. Entertaining this view, we do not stop to consider the various arguments which are here pressed upon our attention, tending at least indirectly to establish the nonexistence of the right to the trial de novo in the court below, or that this case, for reasons which are wholly unsubstantial, may be distinguished and made an exception to the general rule, because to do so would serve no useful purpose, and would be at least impliedly to admit that there was room to discuss a question concerning which there was no room for discussion whatever. It is conceded that if the grounds relied upon to fix liability as against the Express Company, the steamship company, and Hogan & Sons are established, there is a right to an independent recovery as to each, whatever may be the recourse of these parties to recover over as against each other. Which of the defendants, if any, was liable primarily for the loss, is, then, to be considered. We first approach this question from the point of view of Hogan & Sons, because undoubtedly that company was in possession and control of the car at the time it dropped into the river and was damaged. While there is some confusion and various slight contradictions in the testimony, we are of the opinion that the trail court was right in holding that the loss occurred through the fault of Hogan & Sons, and therefore that the court below erred in reversing the decree against that company. And without undertaking to review the testimony, to all of which we have given a careful consideration, we content ourselves with briefly pointing out the general points of view which have led us to the conclusion stated. Without saying that the mere fact of the dropping of the automobile into the water in the course of delivery from the ship's hold to the pier serves to speak for itself on the issue of responsibility, that is, to bring the case within the principle of res ipsa loquitur, we are of the opinion that, by analogy, the case well illustrates that rule for this reason: Some cause must be found for the dropping of the car into the river, and only two theories on this subject may be deduced from the proof: either that the accident to the car occurred without fault, as the result of the breaking of the rope composing the sling because of some unseen and hidden defect in such rope, or that it was occasioned by some act of negligence or want of care in handling the car. The first, we are of opinion, is without any substantial support in the proof; in fact, to accept it would conflict with direct and positive proof to the contray. That view, therefore, could only be sustained by substituting imagination for proof. The second, on the contrary, we are of opinion, finds cogent support from the proof which could only be escaped by overthrowing it by the process of imagination to which we have just referred. It is unquestioned that when the sling was put around the box containing the car, preparatory to attaching the hook in order to hoist it, no blocks or other means were used to prevent the rope from being worn or cut by the edges of the box. The presumption that the rope was strong and efficient, arising from the fact that it held the weight of the box until it was lifted above the hatch, and until, by the swinging motion, the danger of straining or cutting of the ropes upon the edges was more likely to result, gives adequate ground for the inference that such cutting and straining occurred and led to the severance of the rope, and the precipitation of the car into the water. And this inference is supported by various other circumstances which we do not stop to recapitulate. Were the steamship company and the Express Company, in the order stated, liable to Reid, the libellant, dependent upon his inability to make under execution the amount of the decree from Hogan & Sons, is, then, the only remaining question. In substance this question, however, is negligible since, in the argument at bar, it was conceded that T. Hogan & Sons, Incorporated, were amply solvent, and that there was no question of their ability to respond to any decree which might be rendered against them. To avoid, however, all miscarriage of right from any possible, though improbable, change of conditions, without going into detail or stating the considerations which control our conclusion on the subject, we content ourselves with saying, first, that as to the steamship company we are of the opinion that, on the failure to make the amount of the decree against Hogan & Sons, the libellant will be entitled to recover over against that company to the amount of $100, to which its liability was limited, as stated in the bill of lading under which the shipment was made; second, that even looking upon the Express Company as a forwarder, under the circumstances of the case and the terms of the bill of lading under which the car was shipped by that company, the trial court rightly held it liable, and that recovery against it on failure to enforce the decree against Hogan & Sons will also obtain. It follows that the decree below must be reversed and the cause remanded to the trial court, with directions to set aside its decree in so far as it dismissed the steamship company from the case, and to enter a decree in conformity with this opinion. Reversed and remanded.
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In the Second Circuit, the practice is well established that an appeal from the decree of the District Court to the Circuit Court of Appeals in an admiralty case by one of the parties opens the case for a trial de novo. Irvine v. The Hesper, 122 U. S. 256. The owner of an automobile delivered it to an express company in London to forward to New York, declaring its value to be far in excess of $100; the express company boxed it and delivered it to a carrier and accepted a bill of lading with a limitation of $100 liability; on arrival at destination a stevedore discharged the cargo and the rope by which the automobile was being hoisted broke and the automobile was seriously damaged: in a suit in personam in admiralty against the express company and to which the carrier and the stevedore had been made parties held that: The breaking of the rope in this case illustrates, as by analogy, the rule of res ipsa loquitur and throws the responsibility on the stevedore furnishing the rope and handling the article, unless such breaking can be explained as resulting from a hidden defect, which in this case is without support in the evidence. The breaking of the rope appearing from the evidence to have probably resulted from straining and cutting, the stevedore was responsible for the damage and the decree should be against him primarily. In case of failure to collect from the stevedore the carrier is responsible to the extent of the limited amount stated in the bill of lading, and in case there is still a deficiency, the express company, even though only a forwarder, is liable by reason of having, without the authority of the shipper and with knowledge of the value of the article entrusted to it, accepted from the carrier a bill of lading limiting its liability.
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This case concerns the powers of a bankruptcy court when a claim adverse to the bankrupt estate is asserted. An involuntary petition for adjudication in bankruptcy was filed against Gold Medal Laundries on September 22, 1941. A month later the adjudication was made. On December 22, petitioner, the trustee in bankruptcy, filed with the referee a petition for an order directing the respondents to turn over certain assets, allegedly belonging to the bankrupt, which had come into possession of the respondents some fifteen months prior to the institution of the bankruptcy proceedings. Respondents' answer claimed ownership in themselves and prayed dismissal of the petition. Extensive hearings were held to determine whether the property was in the constructive possession of the bankrupt. Prior to the close of the hearings respondents orally moved that the petition be dismissed for want of summary jurisdiction and a formal motion to this effect was filed on May 19, 1942. On June 24, 1942, the referee granted this motion. The District Court reversed, whereupon the referee denied a turnover order on the merits and the District Court again reversed. Appeals from both decisions of the District Court were taken to the Circuit Court of Appeals for the Seventh Circuit. Having found that the objection to the summary jurisdiction had been timely and had not been waived, that court sustained the referee's dismissal for lack of jurisdiction. 142 F.2d 301. Conflicting views having been expressed in different circuits on matters affecting bankruptcy administration which ought not to be left in doubt, we granted certiorari. 323 U.S. 691, 65 S.Ct. 67. A bankruptcy court has the power to adjudicate summarily rights and claims to property which is in the actual or constructive possession of the court. Thompson v. Magnolia Petroleum Co., 309 U.S. 478, 481, 60 S.Ct. 628, 629, 84 L.Ed. 876. If the property is not in the court's possession and a third person asserts a bona fide claim adverse to the receiver or trustee in bankruptcy, he has the right to have the merits of his claim adjudicated 'in suits of the ordinary character, with the rights and remedies incident thereto.' Galbraith v. Vallely, 256 U.S. 46, 50, 41 S.Ct. 415, 416, 65 L.Ed. 823; Taubel-Scott-Kitzmiller Co. v. Fox, 264 U.S. 426, 44 S.Ct. 396, 68 L.Ed. 770. But the mere assertion of an adverse claim does not oust a court of bankruptcy of its jurisdiction. Harrison v. Chamberlin, 271 U.S. 191, 194, 46 S.Ct. 467, 468, 70 L.Ed. 897. It has both the power and the duty to examine a claim adverse to the bankrupt estate to the extent of ascertaining whether the claim is ingenuous and substantial. Louisville Trust Co. v. Comingor, 184 U.S. 18, 25, 26, 22 S.Ct. 293, 296, 46 L.Ed. 413. Once it is established that the claim is not colorable nor frivolous, the claimant has the right to have the merits of his claim passed on in a plenary suit and not summarily. Of such a claim the bankruptcy court cannot retain further jurisdiction unless the claimant consents to its adjudication in the bankruptcy court. MacDonald v. Plymouth County Trust Co., 286 U.S. 263, 52 S.Ct. 505, 76 L.Ed. 1093. Consent to proceed summarily may be formally expressed, or the right to litigate the disputed claim by the ordinary procedure in a plenary suit, like the right to a jury trial, may be waived by failure to make timely objection. MacDonald v. Plymouth County Trust Co., supra, 286 U.S. at pages 266, 267, 52 S.Ct. at page 506, 76 L.Ed. 1093. Consent is wanting where the claimant has throughout resisted the petition for a turnover order and where he has made formal protest against the exercise of summary jurisdiction by the bankruptcy court before that court has made a final order. Louisville Trust Co. v. Comingor, supra. In the Comingor case although the claimant 'participated in the proceedings before the referee, he had pleaded his claims in the outset, and he made his formal protest to the exercise of jurisdiction before the final order was entered.' Id., 184 U.S. at page 26, 22 S.Ct. at page 296, 46 L.Ed. 413. This it was held negatived consent and thereby the right to proceed summarily. Thus, what a bankruptcy court may do and what it may not do when a petition for a turnover order is resisted by an adverse claimant is clear enough. But whether or not there was the necessary consent upon which its power to proceed may depend is, as is so often true in determining consent, a question depending on the facts of the particular case. And so we turn to the facts of this case. When the trustee filed his petition for a turnover order, respondents denied any basis for such an order and asserted their adverse claim. There is no dispute about that. Before the matter went to the referee for determination, respondents explicitly raised objection to the disposition of their claim by summary procedure. They later amplified that objection by a written motion and supported it by extended argument. The established practice based on the criteria of the Comingor case was thus entirely satisfied. We reject the suggestion that respondents conferred consent by participating in the hearing on the merits. See In re West Produce Corp., 2 Cir., 118 F.2d 274, 277. In view of the referee's opinion that the hearings were held to determine whether the bankrupt had constructive possession of the property, the petitioner can hardly claim the benefit of the restricted rule which he invokes. In any event, such a view is contrary to that which was decided in Louisville Trust Co. v. Comingor, supra, which held, as we have noted, that consent is not given even though claimant 'participated in the proceedings' provided formal objection to summary jurisdiction is made before entry of the final order. And the Comingor case 'has been repeatedly cited as determinative of the law and practice in similar cases.' Galbraith v. Vallely, 256 U.S. 46, 49, 41 S.Ct. 415, 416, 65 L.Ed. 823. We find no merit in other questions raised by the petitioner. But they do not call for elaboration. Affirmed.
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1. Where a bona fide claim adverse to that of the bankrupt estate is asserted as to property which is not in the actual or constructive possession of the bankruptcy court, the claimant has the right to have the merits of his claim adjudicated in a plenary suit. P. 98. 2. The bankruptcy court has the power and the duty to examine the adverse claim to ascertain whether it is ingenuous and substantial. P. 99. 3. When it is established that the adverse claim is substantial, the bankruptcy court can not retain jurisdiction unless the claimant consents to its adjudication by that court. P. 99. 4. Consent to adjudication by the bankruptcy court of an adverse claim is lacking where the claimant has throughout resisted a petition for a turnover order and has made formal objection to the exercise of summary jurisdiction before the entry of a final order. Louisville Trust Co. v. Comingor, 184 U. S. 18. P. 99. 5. Upon the facts of this case, held that a claimant adverse to the bankrupt estate, as to property which was not in the actual or constructive possession of the bankruptcy court, did not consent to adjudication of the claim by the bankruptcy court. P. 100. 142 F. 2d 301, affirmed.
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SECTION 1. ALTERNATIVE PENALTY PROCEDURE FOR CHILD SUPPORT DATA
PROCESSING REQUIREMENTS.
(a) In General.--Section 455(a) of the Social Security Act (42
U.S.C. 655(a)) is amended by adding at the end the following:
``(4)(A) If--
``(i) the Secretary determines that a State plan under
section 454 would (in the absence of this paragraph) be
disapproved for the failure of the State to comply with section
454(24)(A), and that the State has made and is continuing to
make a good faith effort to so comply; and
``(ii) the State has submitted to the Secretary a
corrective compliance plan that describes how, by when, and at
what cost the State will achieve such compliance, which has
been approved by the Secretary,
then the Secretary shall not disapprove the State plan under section
454, and the Secretary shall reduce the amount otherwise payable to the
State under paragraph (1)(A) of this subsection for the fiscal year by
the penalty amount.
``(B) In this paragraph:
``(i) The term `penalty amount' means, with respect to a
failure of a State to comply with section 454(24)--
``(I) 4 percent of the penalty base, in the case of
the 1st fiscal year in which such a failure by the
State occurs;
``(II) 8 percent of the penalty base, in the case
of the 2nd such fiscal year;
``(III) 16 percent of the penalty base, in the case
of the 3rd such fiscal year; or
``(IV) 20 percent of the penalty base, in the case
of the 4th or any subsequent such fiscal year.
``(ii) The term `penalty base' means, with respect to a
failure of a State to comply with section 454(24) during a
fiscal year, the amount otherwise payable to the State under
paragraph (1)(A) of this subsection for the preceding fiscal
year, minus the applicable share of such amount which would
otherwise be payable to any county to which the Secretary
granted a waiver under the Family Support Act of 1988 (Public
Law 100-485; 102 Stat. 2343) for 90 percent enhanced Federal
funding to develop an automated data processing and information
retrieval system provided that such system was implemented
prior to October 1, 1997.
``(C)(i) The Secretary shall waive a penalty under this paragraph
for any failure of a State to comply with section 454(24)(A) during
fiscal year 1998 if--
``(I) by December 31, 1997, the State has submitted to the
Secretary a request that the Secretary certify the State as
having met the requirements of such section;
``(II) the Secretary has provided the certification as a
result of a review conducted pursuant to the request; and
``(III) the State has not failed such a review.
``(ii) If a State with respect to which a reduction is made under
this paragraph for a fiscal year achieves compliance with section
454(24)(A) by the beginning of the succeeding fiscal year, the
Secretary shall increase the amount otherwise payable to the State
under paragraph (1)(A) of this subsection for the succeeding fiscal
year by an amount equal to 75 percent of the reduction for the fiscal
year.
``(D) The preceding provisions of this paragraph (except for
subparagraph (C)(i)) shall apply, separately and independently, to a
failure to comply with section 454(24)(B) in the same manner in which
the preceding provisions apply to a failure to comply with section
454(24)(A).''.
(b) Inapplicability of Penalty Under TANF Program.--Section
409(a)(8)(A)(i)(III) of such Act (42 U.S.C. 609(a)(8)(A)(i)(III)) is
amended by inserting ``(other than section 454(24))'' before the
semicolon.
SEC. 2. AUTHORITY TO WAIVE SINGLE STATEWIDE AUTOMATED DATA PROCESSING
AND INFORMATION RETRIEVAL SYSTEM REQUIREMENT.
(a) In General.--Section 452(d)(3) of the Social Security Act (42
U.S.C. 652(d)(3)) is amended to read as follows:
``(3) The Secretary may waive any requirement of paragraph (1) or
any condition specified under section 454(16), and shall waive the
single statewide system requirement under sections 454(16) and 454A,
with respect to a State if--
``(A) the State demonstrates to the satisfaction of the
Secretary that the State has or can develop an alternative
system or systems that enable the State--
``(i) for purposes of section 409(a)(8), to achieve
the paternity establishment percentages (as defined in
section 452(g)(2)) and other performance measures that
may be established by the Secretary;
``(ii) to submit data under section 454(15)(B) that
is complete and reliable;
``(iii) to substantially comply with the
requirements of this part; and
``(iv) in the case of a request to waive the single
statewide system requirement, to--
``(I) meet all functional requirements of
sections 454(16) and 454A;
``(II) ensure that the calculation of
distribution of collected support is according
to the requirements of section 457;
``(III) ensure that there is only 1 point
of contact in the State for all interstate case
processing and coordinated intrastate case
management;
``(IV) ensure that standardized data
elements, forms, and definitions are used
throughout the State; and
``(V) complete the alternative system in no
more time than it would take to complete a
single statewide system that meets such
requirement;
``(B)(i) the waiver meets the criteria of paragraphs (1),
(2), and (3) of section 1115(c); or
``(ii) the State provides assurances to the Secretary that
steps will be taken to otherwise improve the State's child
support enforcement program; and
``(C) in the case of a request to waive the single
statewide system requirement, the State has submitted to the
Secretary separate estimates of the total cost of a single
statewide system that meets such requirement, and of any such
alternative system or systems, which shall include estimates of
the cost of developing and completing the system and of
operating the system for 5 years, and the Secretary has agreed
with the estimates.''.
(b) Payments to States.--Section 455(a)(1) of such Act (42 U.S.C.
655(a)(1)) is amended--
(1) by striking ``and'' at the end of subparagraph (B);
(2) by striking the semicolon at the end of subparagraph
(C) and inserting ``, and''; and
(3) by inserting after subparagraph (C) the following:
``(D) equal to 66 percent of the sums expended by the State
during the quarter for an alternative statewide system for
which a waiver has been granted under section 452(d)(3), but
only to the extent that the total of the sums so expended by
the State on or after the date of the enactment of this
subparagraph does not exceed the least total cost estimate
submitted by the State pursuant to section 452(d)(3)(C) in the
request for the waiver.''.
|
Amends part D (Child Support and Establishment of Paternity) of title IV of the Social Security Act to prescribe alternative penalty reductions in its Federal payments for a State that would otherwise have its child support data processing system plan disapproved for noncompliance, if it has an approved corrective compliance plan and makes a good faith effort to comply with the requirements for such a system. Instructs the Secretary of Health and Human Services to waive the noncompliance penalty during FY 1998 for any State which meets certain criteria.
Authorizes the Secretary to waive the single statewide automated data processing and information retrieval system requirement if a State demonstrates that it has or can develop an alternative system or systems that meet specified requirements.
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Petitioners were convicted of armed robbery in the Circuit Court of Kankakee County, Ill., and their convictions were affirmed on appeal. At their trial, the prosecution offered into evidence a sawed-off rifle and rifle shells that had been seized by police during a search of an automobile in which petitioners had been passengers. Neither petitioner is the owner of the automobile and neither has ever asserted that he owned the rifle or shells seized. The Illinois Appellate Court held that petitioners lacked standing to object to the allegedly unlawful search and seizure and denied their motion to suppress the evidence. We granted certiorari in light of the obvious importance of the issues raised to the administration of criminal justice, 435 U.S. 922, 98 S.Ct. 1483, 55 L.Ed.2d 515 (1978), and now affirm. * Because we are not here concerned with the issue of probable cause, a brief description of the events leading to the search of the automobile will suffice. A police officer on a routine patrol received a radio call notifying him of a robbery of a clothing store in Bourbonnais, Ill., and describing the getaway car. Shortly thereafter, the officer spotted an automobile which he thought might be the getaway car. After following the car for some time and after the arrival of assistance, he and several other officers stopped the vehicle. The occupants of the automobile, petitioners and two female companions, were ordered out of the car and, after the occupants had left the car, two officers searched the interior of the vehicle. They discovered a box of rifle shells in the glove compartment, which had been locked, and a sawed-off rifle under the front passenger seat. App. 10-11. After discovering the rifle and the shells, the officers took petitioners to the station and placed them under arrest. Before trial petitioners moved to suppress the rifle and shells seized from the car on the ground that the search violated the Fourth and Fourteenth Amendments. They conceded that they did not own the automobile and were simply passengers; the owner of the car had been the driver of the vehicle at the time of the search. Nor did they assert that they owned the rifle or the shells seized.1 The prosecutor challenged petitioners' standing to object to the lawfulness of the search of the car because neither the car, the shells nor the rifle belonged to them. The trial court agreed that petitioners lacked standing and denied the motion to suppress the evidence. App. 23-24. In view of this holding, the court did not determine whether there was probable cause for the search and seizure. On appeal after petitioners' conviction, the Appellate Court of Illinois, Third Judicial District, affirmed the trial court's denial of petitioners' motion to suppress because it held that "without a proprietary or other similar interest in an automobile, a mere passenger therein lacks standing to challenge the legality of the search of the vehicle." 46 Ill.App.3d 569, 571, 4 Ill.Dec. 877, 878, 360 N.E.2d 1252, 1253 (1977). The court stated: "We believe that defendants failed to establish any prejudice to their own constitutional rights because they were not persons aggrieved by the unlawful search and seizure. . . . They wrongly seek to establish prejudice only through the use of evidence gathered as a consequence of a search and seizure directed at someone else and fail to prove an invasion of their own privacy. (Alderman v. United States (1969), 394 U.S. 165, 89 S.Ct. 961, 22 L.Ed.2d 176)." Id., at 571-572, 4 Ill.Dec., at 879, 360 N.E.2d, at 1254. The Illinois Supreme Court denied petitioners leave to appeal. Petitioners first urge us to relax or broaden the rule of standing enunciated in Jones v. United States, 362 U.S. 257, 80 S.Ct. 725, 4 L.Ed.2d 697 (1960), so that any criminal defendant at whom a search was "directed" would have standing to contest the legality of that search and object to the admission at trial of evidence obtained as a result of the search. Alternatively, petitioners argue that they have standing to object to the search under Jones because they were "legitimately on [the] premises" at the time of the search. The concept of standing discussed in Jones focuses on whether the person seeking to challenge the legality of a search as a basis for suppressing evidence was himself the "victim" of the search or seizure. Id., at 261, 80 S.Ct., at 731.2 Adoption of the so-called "target" theory advanced by petitioners would in effect permit a defendant to assert that a violation of the Fourth Amendment rights of a third party entitled him to have evidence suppressed at his trial. If we reject petitioners' request for a broadened rule of standing such as this, and reaffirm the holding of Jones and other cases that Fourth Amendment rights are personal rights that may not be asserted vicariously, we will have occasion to re-examine the "standing" terminology emphasized in Jones. For we are not at all sure that the determination of a motion to suppress is materially aided by labeling the inquiry identified inJones as one of standing, rather than simply recognizing it as one involving the substantive question of whether or not the proponent of the motion to suppress has had his own Fourth Amendment rights infringed by the search and seizure which he seeks to challenge. We shall therefore consider in turn petitioners' target theory, the necessity for continued adherence to the notion of standing discussed in Jones as a concept that is theoretically distinct from the merits of a defendant's Fourth Amendment claim, and, finally, the proper disposition of petitioners' ultimate claim in this case. We decline to extend the rule of standing in Fourth Amendment cases in the manner suggested by petitioners. As we stated in Alderman v. United States, 394 U.S. 165, 174, 89 S.Ct. 961, 966, 22 L.Ed.2d 176 (1969), "Fourth Amendment rights are personal rights which, like some other constitutional rights, may not be vicariously asserted." See Brown v. United States, 411 U.S. 223, 230, 93 S.Ct. 1565, 1569, 36 L.Ed.2d 208 (1973); Simmons v. United States, 390 U.S. 377, 389, 88 S.Ct. 967, 973, 19 L.Ed.2d 1247 (1968); Wong Sun v. United States, 371 U.S. 471, 492, 83 S.Ct. 407, 419, 9 L.Ed.2d 441 (1963); cf. Silverman v. United States, 365 U.S. 505, 511, 81 S.Ct. 679, 682, 5 L.Ed.2d 734 (1961); Gouled v. United States, 255 U.S. 298, 304, 41 S.Ct. 261, 263, 65 L.Ed. 647 (1921). A person who is aggrieved by an illegal search and seizure only through the introduction of damaging evidence secured by a search of a third person's premises or property has not had any of his Fourth Amendment rights infringed. Alderman, supra, 394 U.S., at 174, 89 S.Ct., at 966. And since the exclusionary rule is an attempt to effectuate the guarantees of the Fourth Amendment, United States v. Calandra, 414 U.S. 338, 347, 94 S.Ct. 613, 619, 38 L.Ed.2d 561 (1974), it is proper to permit only defendants whose Fourth Amendment rights have been violated to benefit from the rule's protections.3 See Simmons v. United States, supra, 390 U.S., at 389, 88 S.Ct., at 973. There is no reason to think that a party whose rights have been infringed will not, if evidence is used against him, have ample motivation to move to suppress it. Alderman, supra, 394 U.S., at 174, 89 S.Ct., at 966. Even if such a person is not a defendant in the action, he may be able to recover damages for the violation of his Fourth Amendment rights, see Monroe v. Pape, 365 U.S. 167, 81 S.Ct. 473, 5 L.Ed.2d 492 (1961), or seek redress under state law for invasion of privacy or trespass. In support of their target theory, petitioners rely on the following quotation from Jones : "In order to qualify as a 'person aggrieved by an unlawful search and seizure' one must have been a victim of a search or seizure, one against whom the search was directed, as distinguished from one who claims prejudice only through the use of evidence gathered as a consequence of a search or seizure directed at someone else." 362 U.S., at 261, 80 S.Ct., at 731 (emphasis added). They also rely on Bumper v. North Carolina, 391 U.S. 543, 548, n. 11, 88 S.Ct. 1788, 1791, 20 L.Ed.2d 797 (1968), and United States v. Jeffers, 342 U.S. 48, 72 S.Ct. 93, 96 L.Ed. 59 (1951). The above-quoted statement from Jones suggests that the italicized language was meant merely as a parenthetical equivalent of the previous phrase "a victim of a search or seizure." To the extent that the language might be read more broadly, it is dictum which was impliedly repudiated in Alderman v. United States, supra, and which we now expressly reject. In Jones, the Court set forth two alternative holdings: It established a rule of "automatic" standing to contest an allegedly illegal search where the same possession needed to establish standing is an essential element of the offense charged;4 and second, it stated that "anyone legitimately on premises where a search occurs may challenge its legality by way of a motion to suppress." 362 U.S., at 264, 267, 80 S.Ct., at 732, 734. See Combs v. United States, 408 U.S. 224, 227 n. 4, 92 S.Ct. 2284, 2286, 33 L.Ed.2d 308 (1972); Mancusi v. DeForte, 392 U.S. 364, 368 n. 5, 88 S.Ct. 2120, 2123, 20 L.Ed.2d 1154 (1968); Simmons v. United States, supra, 390 U.S., at 390, 88 S.Ct., at 974. Had the Court intended to adopt the target theory now put forth by petitioners, neither of the above two holdings would have been necessary since Jones was the "target" of the police search in that case.5 Nor does United States v. Jeffers, supra, or Bumper v. North Carolina, supra, support the target theory. Standing in Jeffers was based on Jeffers' possessory interest in both the premises searched and the property seized. 342 U.S., at 49-50, 54, 72 S.Ct., at 94-95, 96; see Mancusi v. DeForte, supra, 392 U.S., at 367-368, 88 S.Ct., at 2123-2124; Hoffa v. United States, 385 U.S. 293, 301, 87 S.Ct. 408, 413, 17 L.Ed.2d 374 (1966); Lanza v. New York, 370 U.S. 139, 143, and n. 10, 82 S.Ct. 1218, 1221, 8 L.Ed.2d 384 (1962). Similarly, in Bumper, the defendant had a substantial possessory interest in both the house searched and the rifle seized. 391 U.S., at 548 n. 11, 88 S.Ct., at 1791. In Alderman v. United States, Mr. Justice Fortas, in a concurring and dissenting opinion, argued that the Court should "include within the category of those who may object to the introduction of illegal evidence 'one against whom the search was directed.' " 394 U.S., at 206-209, 89 S.Ct., at 985. The Court did not directly comment on Mr. Justice Fortas' suggestion, but it left no doubt that it rejected this theory by holding that persons who were not parties to unlawfully overheard conversations or who did not own the premises on which such conversations took place did not have standing to contest the legality of the surveillance, regardless of whether or not they were the "targets" of the surveillance. Id., at 176, 89 S.Ct., at 968. Mr. Justice Harlan, concurring and dissenting, did squarely address Mr. Justice Fortas' arguments and declined to accept them. Id., at 188-189, n. 1, 89 S.Ct., at 974. He identified administrative problems posed by the target theory: "[T]he [target] rule would entail very substantial administrative difficulties. In the majority of cases, I would imagine that the police plant a bug with the expectation that it may well produce leads to a large number of crimes. A lengthy hearing would, then, appear to be necessary in order to determine whether the police knew of an accused's criminal activity at the time the bug was planted and whether the police decision to plant a bug was motivated by an effort to obtain information against the accused or some other individual. I do not believe that this administrative burden is justified in any substantial degree by the hypothesized marginal increase in Fourth Amendment protection." Ibid. When we are urged to grant standing to a criminal defendant to assert a violation, not of his own constitutional rights but of someone else's, we cannot but give weight to practical difficulties such as those foreseen by Mr. Justice Harlan in the quoted language. Conferring standing to raise vicarious Fourth Amendment claims would necessarily mean a more widespread invocation of the exclusionary rule during criminal trials. The Court's opinion in Alderman counseled against such an extension of the exclusionary rule: "The deterrent values of preventing the incrimination of those whose rights the police have violated have been considered sufficient to justify the suppression of probative evidence even though the case against the defendant is weakened or destroyed. We adhere to that judgment. But we are not convinced that the additional benefits of extending the exclusionary rule to other defendants would justify further encroachment upon the public interest in prosecuting those accused of crime and having them acquitted or convicted on the basis of all the evidence which exposes the truth." Id., at 174-175, 89 S.Ct., at 967. Each time the exclusionary rule is applied it exacts a substantial social cost for the vindication of Fourth Amendment rights. Relevant and reliable evidence is kept from the trier of fact and the search for truth at trial is deflected. See United States v. Ceccolini, 435 U.S. 268, 275, 98 S.Ct. 1054, 1059, 55 L.Ed.2d 268 (1978); Stone v. Powell, 428 U.S. 465, 489-490, 96 S.Ct. 3037, 3050, 49 L.Ed.2d 1067 (1976); United States v. Calandra, 414 U.S., at 348-352, 94 S.Ct., at 620-622. Since our cases generally have held that one whose Fourth Amendment rights are violated may successfully suppress evidence obtained in the course of an illegal search and seizure, misgivings as to the benefit of enlarging the class of persons who may invoke that rule are properly considered when deciding whether to expand standing to assert Fourth Amendment violations.6 Had we accepted petitioners' request to allow persons other than those whose own Fourth Amendment rights were violated by a challenged search and seizure to suppress evidence obtained in the course of such police activity, it would be appropriate to retain Jones' use of standing in Fourth Amendment analysis. Under petitioners' target theory, a court could determine that a defendant had standing to invoke the exclusionary rule without having to inquire into the substantive question of whether the challenged search or seizure violated the Fourth Amendment rights of that particular defendant. However, having rejected petitioners' target theory and reaffirmed the principle that the "rights assured by the Fourth Amendment are personal rights, [which] . . . may be enforced by exclusion of evidence only at the instance of one whose own protection was infringed by the search and seizure," Simmons v. United States, 390 U.S., at 389, 88 S.Ct., at 974, the question necessarily arises whether it serves any useful analytical purpose to consider this principle a matter of standing, distinct from the merits of a defendant's Fourth Amendment claim. We can think of no decided cases of this Court that would have come out differently had we concluded, as we do now, that the type of standing requirement discussed in Jones and reaffirmed today is more properly subsumed under substantive Fourth Amendment doctrine. Rigorous application of the principle that the rights secured by this Amendment are personal, in place of a notion of "standing," will produce no additional situations in which evidence must be excluded. The inquiry under either approach is the same.7 But we think the better analysis forthrightly focuses on the extent of a particular defendant's rights under the Fourth Amendment, rather than on any theoretically separate, but invariably intertwined concept of standing. The Court in Jones also may have been aware that there was a certain artificiality in analyzing this question in terms of standing because in at least three separate places in its opinion the Court placed that term within quotation marks. 362 U.S., at 261, 263, 265, 80 S.Ct., at 731, 732, 733. It should be emphasized that nothing we say here casts the least doubt on cases which recognize that, as a general proposition, the issue of standing involves two inquiries: first, whether the proponent of a particular legal right has alleged "injury in fact," and, second, whether the proponent is asserting his own legal rights and interests rather than basing his claim for relief upon the rights of third parties. See, e. g., Singleton v. Wulff, 428 U.S. 106, 112, 96 S.Ct. 2868, 2873, 49 L.Ed.2d 826 (1976); Warth v. Seldin, 422 U.S. 490, 499, 95 S.Ct. 2197, 2205, 45 L.Ed.2d 343 (1975); Data Processing Service v. Camp, 397 U.S. 150, 152-153, 90 S.Ct. 827, 829-830, 25 L.Ed.2d 184 (1970). But this Court's long history of insistence that Fourth Amendment rights are personal in nature has already answered many of these traditional standing inquiries, and we think that definition of those rights is more properly placed within the purview of substantive Fourth Amendment law than within that of standing. Cf. id., at 153, and n. 1, 90 S.Ct., at 829; Barrows v. Jackson, 346 U.S. 249, 256 n. 4, 73 S.Ct. 1031, 1035, 97 L.Ed. 1586 (1953); Hale v. Henkel, 201 U.S. 43, 69-70, 26 S.Ct. 370, 376-377, 50 L.Ed. 652 (1906).8 Analyzed in these terms, the question is whether the challenged search or seizure violated the Fourth Amendment rights of a criminal defendant who seeks to exclude the evidence obtained during it. That inquiry in turn requires a determination of whether the disputed search and seizure has infringed an interest of the defendant which the Fourth Amendment was designed to protect. We are under no illusion that by dispensing with the rubric of standing used inJones we have rendered any simpler the determination of whether the proponent of a motion to suppress is entitled to contest the legality of a search and seizure. But by frankly recognizing that this aspect of the analysis belongs more properly under the heading of substantive Fourth Amendment doctrine than under the heading of standing, we think the decision of this issue will rest on sounder logical footing. Here petitioners, who were passengers occupying a car which they neither owned nor leased, seek to analogize their position to that of the defendant in Jones v. United States. In Jones, petitioner was present at the time of the search of an apartment which was owned by a friend. The friend had given Jones permission to use the apartment and a key to it, with which Jones had admitted himself on the day of the search. He had a suit and shirt at the apartment and had slept there "maybe a night," but his home was elsewhere. At the time of the search, Jones was the only occupant of the apartment because the lessee was away for a period of several days. 362 U.S., at 259, 80 S.Ct., at 730. Under these circumstances, this Court stated that while one wrongfully on the premises could not move to suppress evidence obtained as a result of searching them,9 "anyone legitimately on premises where a search occurs may challenge its legality." Id., at 267, 80 S.Ct., at 734. Petitioners argue that their occupancy of the automobile in question was comparable to that of Jones in the apartment and that they therefore have standing to contest the legality of the search—or as we have rephrased the inquiry, that they, like Jones, had their Fourth Amendment rights violated by the search. We do not question the conclusion in Jones that the defendant in that case suffered a violation of his personal Fourth Amendment rights if the search in question was unlawful. Nonetheless, we believe that the phrase "legitimately on premises" coined in Jones creates too broad a gauge for measurement of Fourth Amendment rights.10 For example, applied literally, this statement would permit a casual visitor who has never seen, or been permitted to visit, the basement of another's house to object to a search of the basement if the visitor happened to be in the kitchen of the house at the time of the search. Likewise, a casual visitor who walks into a house one minute before a search of the house commences and leaves one minute after the search ends would be able to contest the legality of the search. The first visitor would have absolutely no interest or legitimate expectation of privacy in the basement, the second would have none in the house, and it advances no purpose served by the Fourth Amendment to permit either of them to object to the lawfulness of the search.11 We think that Jones on its facts merely stands for the unremarkable proposition that a person can have a legally sufficient interest in a place other than his own home so that the Fourth Amendment protects him from unreasonable governmental intrusion into that place. See 362 U.S., at 263, 265, 80 S.Ct., at 732, 733. In defining the scope of that interest, we adhere to the view expressed in Jones and echoed in later cases that arcane distinctions developed in property and tort law between guests, licensees, invitees, and the like, ought not to control. Id., at 266, 80 S.Ct., at 733; see Mancusi v. DeForte, 392 U.S. 364, 88 S.Ct. 2120, 20 L.Ed.2d 1154 (1968); Warden v. Hayden, 387 U.S. 294, 87 S.Ct. 1642, 18 L.Ed.2d 782 (1967); Silverman v. United States, 365 U.S. 505, 81 S.Ct. 679, 5 L.Ed.2d 734 (1961). But the Jones statement that a person need only be "legitimately on premises" in order to challenge the validity of the search of a dwelling place cannot be taken in its full sweep beyond the facts of that case. Katz v. United States, 389 U.S. 347, 88 S.Ct. 507, 19 L.Ed.2d 576 (1967), provides guidance in defining the scope of the interest protected by the Fourth Amendment. In the course of repudiating the doctrine derived from Olmstead v. United States, 277 U.S. 438, 48 S.Ct. 564, 72 L.Ed. 944 (1928), and Goldman v. United States, 316 U.S. 129, 62 S.Ct. 993, 86 L.Ed. 1322 (1942), that if police officers had not been guilty of a common-law trespass they were not prohibited by the Fourth Amendment from eavesdropping, the Court in Katz held that capacity to claim the protection of the Fourth Amendment depends not upon a property right in the invaded place but upon whether the person who claims the protection of the Amendment has a legitimate expectation of privacy in the invaded place. 389 U.S., at 353, 88 S.Ct., at 512; see United States v. Chadwick, 433 U.S. 1, 7, 97 S.Ct. 2476, 2481, 53 L.Ed.2d 538 (1977); United States v. White, 401 U.S. 745, 752, 91 S.Ct. 1122, 1126, 28 L.Ed.2d 453 (1971). Viewed in this manner, the holding in Jones can best be explained by the fact that Jones had a legitimate expectation of privacy in the premises he was using and therefore could claim the protection of the Fourth Amendment with respect to a governmental invasion of those premises, even though his "interest" in those premises might not have been a recognized property interest at common law.12 See Jones v. United States, 362 U.S., at 261, 80 S.Ct., at 731. Our Brother WHITE in dissent expresses the view that by rejecting the phrase "legitimately on [the] premises" as the appropriate measure of Fourth Amendment rights, we are abandoning a thoroughly workable, "bright line" test in favor of a less certain analysis of whether the facts of a particular case give rise to a legitimate expectation of privacy. Post, at 168. If "legitimately on premises" were the successful litmus test of Fourth Amendment rights that he assumes it is, his approach would have at least the merit of easy application, whatever it lacked in fidelity to the history and purposes of the Fourth Amendment. But a reading of lower court cases that have applied the phrase "legitimately on premises," and of the dissent itself, reveals that this expression is not a shorthand summary for a bright-line rule which somehow encapsulates the "core" of the Fourth Amendment's protections.13 The dissent itself shows that the facile consistency it is striving for is illusory. The dissenters concede that "there comes a point when use of an area is shared with so many that one simply cannot reasonably expect seclusion." Post, at 164. But surely the "point" referred to is not one demarcating a line which is black on one side and white on another; it is inevitably a point which separates one shade of gray from another. We are likewise told by the dissent that a person "legitimately on private premises . . . , though his privacy is not absolute, is entitled to expect that he is sharing it only with those persons [allowed there] and that governmental officials will intrude only with consent or by complying with the Fourth Amendment." Ibid. (emphasis added). This single sentence describing the contours of the supposedly easily applied rule virtually abounds with unanswered questions: What are "private" premises? Indeed, what are the "premises?" It may be easy to describe the "premises" when one is confronted with a 1-room apartment, but what of the case of a 10-room house, or of a house with an attached garage that is searched? Also, if one's privacy is not absolute, how is it bounded? If he risks governmental intrusion "with consent," who may give that consent? Again, we are told by the dissent that the Fourth Amendment assures that "some expectations of privacy are justified and will be protected from official intrusion." Post, at 166 (emphasis added). But we are not told which of many possible expectations of privacy are embraced within this sentence. And our dissenting Brethren concede that "perhaps the Constitution provides some degree less protection for the personal freedom from unreasonable governmental intrusion when one does not have a possessory interest in the invaded private place." But how much "less" protection is available when one does not have such a possessory interest? Our disagreement with the dissent is not that it leaves these questions unanswered, or that the questions are necessarily irrelevant in the context of the analysis contained in this opinion. Our disagreement is rather with the dissent's bland and self-refuting assumption that there will not be fine lines to be drawn in Fourth Amendment cases as in other areas of the law, and that its rubric, rather than a meaningful exegesis of Fourth Amendment doctrine, is more desirable or more easily resolves Fourth Amendment cases.14 In abandoning "legitimately on premises" for the doctrine that we announce today, we are not forsaking a time-tested and workable rule, which has produced consistent results when applied, solely for the sake of fidelity to the values underlying the Fourth Amendment. Rather, we are rejecting blind adherence to a phrase which at most has superficial clarity and which conceals underneath that thin veneer all of the problems of line drawing which must be faced in any conscientious effort to apply the Fourth Amendment. Where the factual premises for a rule are so generally prevalent that little would be lost and much would be gained by abandoning case-by-case analysis, we have not hesitated to do so. See United States v. Robinson, 414 U.S. 218, 235, 94 S.Ct. 467, 476, 38 L.Ed.2d 427 (1973). But the phrase "legitimately on premises" has not been shown to be an easily applicable measure of Fourth Amendment rights so much as it has proved to be simply a label placed by the courts on results which have not been subjected to careful analysis. We would not wish to be understood as saying that legitimate presence on the premises is irrelevant to one's expectation of privacy, but it cannot be deemed controlling. Judged by the foregoing analysis, petitioners' claims must fail. They asserted neither a property nor a possessory interest in the automobile, nor an interest in the property seized. And as we have previously indicated, the fact that they were "legitimately on [the] premises" in the sense that they were in the car with the permission of its owner is not determinative of whether they had a legitimate expectation of privacy in the particular areas of the automobile searched. It is unnecessary for us to decide here whether the same expectations of privacy are warranted in a car as would be justified in a dwelling place in analogous circumstances. We have on numerous occasions pointed out that cars are not to be treated identically with houses or Apartments for Fourth Amendment purposes. See United States v. Chadwick, 433 U.S., at 12, 97 S.Ct., at 2484; United States v. Martinez-Fuerte, 428 U.S. 543, 561, 96 S.Ct. 3074, 3084, 49 L.Ed.2d 1116 (1976); Cardwell v. Lewis, 417 U.S. 583, 590, 94 S.Ct. 2464, 2469, 41 L.Ed.2d 325 (1974) (plurality opinion).15 But here petitioners' claim is one which would fail even in an analogous situation in a dwelling place, since they made no showing that they had any legitimate expectation of privacy in the glove compartment or area under the seat of the car in which they were merely passengers. Like the trunk of an automobile, these are areas in which a passenger qua passenger simply would not normally have a legitimate expectation of privacy. Supra, at 142. Jones v. United States, 362 U.S. 257, 80 S.Ct. 725, 4 L.Ed.2d 697 (1960) and Katz v. United States, 389 U.S. 347, 88 S.Ct. 507, 19 L.Ed.2d 576 (1967), involved significantly different factual circumstances. Jones not only had permission to use the apartment of his friend, but also had a key to the apartment with which he admitted himself on the day of the search and kept possessions in the apartment. Except with respect to his friend, Jones had complete dominion and control over the apartment and could exclude others from it. Likewise in Katz, the defendant occupied the telephone booth, shut the door behind him to exclude all others and paid the toll, which "entitled [him] to assume that the words he utter[ed] into the mouthpiece [would] not be broadcast to the world." Id., at 352, 88 S.Ct., at 512.16 Katz and Jones could legitimately expect privacy in the areas which were the subject of the search and seizure each sought to contest. No such showing was made by these petitioners with respect to those portions of the automobile which were searched and from which incriminating evidence was seized.17 The Illinois courts were therefore correct in concluding that it was unnecessary to decide whether the search of the car might have violated the rights secured to someone else by the Fourth and Fourteenth Amendments to the United States Constitution. Since it did not violate any rights of these petitioners, their judgment of conviction is Affirmed.
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After receiving a robbery report, police stopped the suspected getaway car, which the owner was driving and in which petitioners were passengers. Upon searching the car, the police found a box of rifle shells in the glove compartment and a sawed-off rifle under the front passenger seat and arrested petitioners. Subsequently, petitioners were convicted in an Illinois court of armed robbery at a trial in which the rifle and shells were admitted as evidence. Before trial petitioners had moved to suppress the rifle and shells on Fourth Amendment grounds, but the trial court denied the motion on the ground that petitioners lacked standing to object to the lawfulness of the search of the car because they concededly did not own either the car or the rifle and shells. The Illinois Appellate Court affirmed. Held: 1. "Fourth Amendment rights are personal rights which ... may not be vicariously asserted," Alderman v. United States, 394 U. S. 165, 174, and a person aggrieved by an illegal search and seizure only through the introduction of damaging evidence secured by a search of a third person's premises or property has not had any of his Fourth Amendment rights infringed. The rule of standing to raise vicarious Fourth Amendment claims should not be extended by a so-called "target" theory whereby any criminal defendant at whom a search was "directed" would have standing to contest the legality of that search and object to the admission at trial of evidence obtained as a result of the search. Pp. 133-138. 2. In any event, the better analysis of the principle that Fourth Amendment rights are personal rights that may not be asserted vicariously should focus on the extent'of a particular defendant's rights under that Amendment, rather than on any theoretically separate but invariably intertwined concept of standing. Pp. 138-140. 3. The phrase "legitimately on premises" coined in Jones v. United States, 362 U. S. 257, creates "too broad a gauge" for measurement of Fourth Amendment rights. The holding in Jones can best be explained by the fact that Jones had a legitimate expectation of privacy in the premises he was using and therefore could claim the protection of the Fourth Amendment. Pp. 140-148. 4. Petitioners, who asserted neither a property nor a possessory interest in the automobile searched nor an interest in the property seized and who failed to show that they had any legitimate expectation of privacy in the glove compartment or area under the seat of the car in which they were merely passengers, were not entitled to challenge a search of those areas. Jones v. United States, supra; Katz v. United States, 389 U. S. 347, distinguished. Pp. 148-149. 46 Ill. App. 3d 569, 360 N. E. 2d 1252, affirmed.
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These cases present the questions whether the Control Share Acquisitions Chapter of the Indiana Business Corporation Law, Ind. Code § 23-1-42-1 et seq. (Supp.1986), is pre-empted by the Williams Act, 82 Stat. 454, as amended, 15 U.S.C. §§ 78m(d)-(e) and 78n(d)-(f) (1982 ed. and Supp. III), or violates the Commerce Clause of the Federal Constitution, Art. I, § 8, cl. 3. * A. On March 4, 1986, the Governor of Indiana signed a revised Indiana Business Corporation Law, Ind. Code § 23-1-17-1 et seq. (Supp.1986). That law included the Control Share Acquisitions Chapter (Indiana Act or Act). Beginning on August 1, 1987, the Act will apply to any corporation incorporated in Indiana, § 23-1-17-3(a), unless the corporation amends its articles of incorporation or bylaws to opt out of the Act, § 23-1-42-5. Before that date, any Indiana corporation can opt into the Act by resolution of its board of directors. § 23-1-17-3(b). The Act applies only to "issuing public corporations." The term "corporation" includes only businesses incorporated in Indiana. See § 23-1-20-5. An "issuing public corporation" is defined as: "a corporation that has: "(1) one hundred (100) or more shareholders; "(2) its principal place of business, its principal office, or substantial assets within Indiana; and "(3) either: "(A) more than ten percent (10%) of its shareholders resident in Indiana; "(B) more than ten percent (10%) of its shares owned by Indiana residents; or "(C) ten thousand (10,000) shareholders resident in The Act focuses on the acquisition of "control shares" in an issuing public corporation. Under the Act, an entity acquires "control shares" whenever it acquires shares that, but for the operation of the Act, would bring its voting power in the corporation to or above any of three thresholds: 20%, 331/3%, or 50%. § 23-1-42-1. An entity that acquires control shares does not necessarily acquire voting rights. Rather, it gains those rights only "to the extent granted by resolution approved by the shareholders of the issuing public corporation." § 23-1-42-9(a). Section 23-1-42-9(b) requires a majority vote of all disinterested2 shareholders holding each class of stock for passage of such a resolution. The practical effect of this requirement is to condition acquisition of control of a corporation on approval of a majority of the pre-existing disinterested shareholders.3 The shareholders decide whether to confer rights on the control shares at the next regularly scheduled meeting of the shareholders, or at a specially scheduled meeting. The acquiror can require management of the corporation to hold such a special meeting within 50 days if it files an "acquiring person statement,"4 requests the meeting, and agrees to pay the expenses of the meeting. See § 23-1-42-7. If the shareholders do not vote to restore voting rights to the shares, the corporation may redeem the control shares from the acquiror at fair market value, but it is not required to do so. § 23-1-42-10(b). Similarly, if the acquiror does not file an acquiring person statement with the corporation, the corporation may, if its bylaws or articles of incorporation so provide, redeem the shares at any time after 60 days after the acquiror's last acquisition. § 23-1-42-10(a). On March 10, 1986, appellee Dynamics Corporation of America (Dynamics) owned 9.6% of the common stock of appellant CTS Corporation, an Indiana corporation. On that day, six days after the Act went into effect, Dynamics announced a tender offer for another million shares in CTS; purchase of those shares would have brought Dynamics' ownership interest in CTS to 27.5%. Also on March 10, Dynamics filed suit in the United States District Court for the Northern District of Illinois, alleging that CTS had violated the federal securities laws in a number of respects no longer relevant to these proceedings. On March 27, the board of directors of CTS, an Indiana corporation, elected to be governed by the provisions of the Act, see § 23-1-17-3. Four days later, on March 31, Dynamics moved for leave to amend its complaint to allege that the Act is pre-empted by the Williams Act, 15 U.S.C. §§ 78m(d)-(e) and 78n(d)-(f) (1982 ed. and Supp. III), and violates the Commerce Clause, Art. I, § 8, cl. 3. Dynamics sought a temporary restraining order, a preliminary injunction, and declaratory relief against CTS' use of the Act. On April 9, the District Court ruled that the Williams Act pre-empts the Indiana Act and granted Dynamics' motion for declaratory relief. 637 F.Supp. 389 (N.D.Ill.1986). Relying on Justice WHITE's plurality opinion in Edgar v. MITE Corp., 457 U.S. 624, 102 S.Ct. 2629, 73 L.Ed.2d 269 (1982), the court concluded that the Act "wholly frustrates the purpose and objective of Congress in striking a balance between the investor, management, and the takeover bidder in takeover contests." 637 F.Supp., at 399. A week later, on April 17, the District Court issued an opinion accepting Dynamics' claim that the Act violates the Commerce Clause. This holding rested on the court's conclusion that "the substantial interference with interstate commerce created by the [Act] outweighs the articulated local benefits so as to create an impermissible indirect burden on interstate commerce." Id., at 406. The District Court certified its decisions on the Williams Act and Commerce Clause claims as final under Federal Rule of Civil Procedure 54(b). Ibid. CTS appealed the District Court's holdings on these claims to the Court of Appeals for the Seventh Circuit. Because of the imminence of CTS' annual meeting, the Court of Appeals consolidated and expedited the two appeals. On April 23—23 days after Dynamics first contested application of the Act in the District Court—the Court of Appeals issued an order affirming the judgment of the District Court. The opinion followed on May 28. 794 F.2d 250 (CA7 1986). After disposing of a variety of questions not relevant to this appeal, the Court of Appeals examined Dynamics' claim that the Williams Act pre-empts the Indiana Act. The court looked first to the plurality opinion in Edgar v. MITE Corp., supra, in which three Justices found that the Williams Act pre-empts state statutes that upset the balance between target management and a tender offeror. The court noted that some commentators had disputed this view of the Williams Act, concluding instead that the Williams Act was "an anti-takeover statute, expressing a view, however benighted, that hostile takeovers are bad." 794 F.2d, at 262. It also noted: "[I]t is a big leap from saying that the Williams Act does not itself exhibit much hostility to tender offers to saying that it implicitly forbids states to adopt more hostile regulations. . . . But whatever doubts of the Williams' Act preemptive intent we might entertain as an original matter are stilled by the weight of precedent." Ibid. Once the court had decided to apply the analysis of the MITE plurality, it found the case straightforward: "Very few tender offers could run the gauntlet that Indiana has set up. In any event, if the Williams Act is to be taken as a congressional determination that a month (roughly) is enough time to force a tender offer to be kept open, 50 days is too much; and 50 days is the minimum under the Indiana act if the target corporation so chooses." Id., at 263. The court next addressed Dynamic's Commerce Clause challenge to the Act. Applying the balancing test articulated in Pike v. Bruce Church, Inc., 397 U.S. 137, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970), the court found the Act unconstitutional: "Unlike a state's blue sky law the Indiana statute is calculated to impede transactions between residents of other states. For the sake of trivial or even negative benefits to its residents Indiana is depriving nonresidents of the valued opportunity to accept tender offers from other nonresidents. ". . . Even if a corporation's tangible assets are immovable, the efficiency with which they are employed and the proportions in which the earnings they generate are divided between management and shareholders depends on the market for corporate control—an interstate, indeed international, market that the State of Indiana is not authorized to opt out of, as in effect it has done in this statute." 794 F.2d, at 264. Finally, the court addressed the "internal affairs" doctrine, a "principle of conflict of laws . . . designed to make sure that the law of only one state shall govern the internal affairs of a corporation or other association." Ibid. It stated: "We may assume without having to decide that Indiana has a broad latitude in regulating those affairs, even when the consequence may be to make it harder to take over an Indiana corporation. . . . But in this case the effect on the interstate market in securities and corporate control is direct, intended, and substantial. . . . [T]hat the mode of regulation involves jiggering with voting rights cannot take it outside the scope of judicial review under the commerce clause." Ibid. Accordingly, the court affirmed the judgment of the District Court. Both Indiana and CTS filed jurisdictional statements. We noted probable jurisdiction under 28 U.S.C. § 1254(2), 479 U.S. 810, 107 S.Ct. 258, 93 L.Ed.2d 17 (1986), and now reverse.5 The first question in these cases is whether the Williams Act pre-empts the Indiana Act. As we have stated frequently, absent an explicit indication by Congress of an intent to pre-empt state law, a state statute is pre-empted only " 'where compliance with both federal and state regulations is a physical impossibility . . .,' Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142-143 [83 S.Ct. 1210, 1217, 10 L.Ed.2d 248] (1963), or where the state 'law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.' Hines v. Davidowitz, 312 U.S. 52, 67 [61 S.Ct. 399, 404, 85 L.Ed. 581] (1941). . . ." Ray v. Atlantic Richfield Co., 435 U.S. 151, 158, 98 S.Ct. 988, 994, 55 L.Ed.2d 179 (1978). Because it is entirely possible for entities to comply with both the Williams Act and the Indiana Act, the state statute can be pre-empted only if it frustrates the purposes of the federal law. Our discussion begins with a brief summary of the structure and purposes of the Williams Act. Congress passed the Williams Act in 1968 in response to the increasing number of hostile tender offers. Before its passage, these transactions were not covered by the disclosure requirements of the federal securities laws. See Piper v. Chris-Craft Industries, Inc., 430 U.S. 1, 22, 97 S.Ct. 926, 939-940, 51 L.Ed.2d 124 (1977). The Williams Act, backed by regulations of the SEC, imposes requirements in two basic areas. First, it requires the offeror to file a statement disclosing information about the offer, including: the offeror's background and identity; the source and amount of the funds to be used in making the purchase; the purpose of the purchase, including any plans to liquidate the company or make major changes in its corporate structure; and the extent of the offeror's holdings in the target company. See 15 U.S.C. § 78n(d)(1) (incorporating § 78m(d)(1) by reference); 17 CFR §§ 240.13d-1, 240.14d-3 (1986). Second, the Williams Act, and the regulations that accompany it, establish procedural rules to govern tender offers. For example, stockholders who tender their shares may withdraw them while the offer remains open, and, if the offeror has not purchased their shares, any time after 60 days from commencement of the offer. 15 U.S.C. § 78n(d)(5); 17 CFR § 240.14d-7(a)(1) (1986) as amended, 51 Fed.Reg. 25873 (1986). The offer must remain open for at least 20 business days. 17 CFR § 240.14e-1(a) (1986). If more shares are tendered than the offeror sought to purchase, purchases must be made on a pro rata basis from each tendering shareholder. 15 U.S.C. § 78n(d)(6); 17 CFR § 240.14(8) (1986). Finally, the offeror must pay the same price for all purchases; if the offering price is increased before the end of the offer, those who already have tendered must receive the benefit of the increased price. § 78n(d)(7). The Indiana Act differs in major respects from the Illinois statute that the Court considered in Edgar v. MITE Corp., 457 U.S. 624, 102 S.Ct. 2629, 73 L.Ed.2d 269 (1982). After reviewing the legislative history of the Williams Act, Justice WHITE, joined by Chief Justice Burger and Justice BLACKMUN (the plurality), concluded that the Williams Act struck a careful balance between the interests of offerors and target companies, and that any state statute that "upset" this balance was pre-empted. Id., at 632-634, 102 S.Ct., at 2635-2636. The plurality then identified three offending features of the Illinois statute. Justice WHITE's opinion first noted that the Illinois statute provided for a 20-day precommencement period. During this time, management could disseminate its views on the upcoming offer to shareholders, but offerors could not publish their offers. The plurality found that this provision gave management "a powerful tool to combat tender offers." Id., at 635, 102 S.Ct., at 2637. This contrasted dramatically with the Williams Act; Congress had deleted express precommencement notice provisions from the Williams Act. According to the plurality, Congress had determined that the potentially adverse consequences of such a provision on shareholders should be avoided. Thus, the plurality concluded that the Illinois provision "frustrate[d] the objectives of the Williams Act." Ibid. The second criticized feature of the Illinois statute was a provision for a hearing on a tender offer that, because it set no deadline, allowed management " 'to stymie indefinitely a takeover,' " id., at 637, 102 S.Ct., at 2638 (quoting MITE Corp. v. Dixon, 633 F.2d 486, 494 (CA7 1980)). The plurality noted that " 'delay can seriously impede a tender offer,' " 457 U.S., at 637, 102 S.Ct., at 2638 (quoting Great Western United Corp. v. Kidwell, 577 F.2d 1256, 1277 (CA5 1978) (Wisdom, J.)), and that "Congress anticipated that investors and the takeover offeror would be free to go forward without unreasonable delay," 457 U.S., at 639, 102 S.Ct., at 2639. Accordingly, the plurality concluded that this provision conflicted with the Williams Act. The third troublesome feature of the Illinois statute was its requirement that the fairness of tender offers would be reviewed by the Illinois Secretary of State. Noting that "Congress intended for investors to be free to make their own decisions," the plurality concluded that " '[t]he state thus offers investor protection at the expense of investor autonomy—an approach quite in conflict with that adopted by Congress.' " Id., at 639-640, 102 S.Ct., at 2639 (quoting MITE Corp. v. Dixon, supra, at 494). As the plurality opinion in MITE did not represent the views of a majority of the Court,6 we are not bound by its reasoning. We need not question that reasoning, however, because we believe the Indiana Act passes muster even under the broad interpretation of the Williams Act articulated by Justice WHITE in MITE. As is apparent from our summary of its reasoning, the overriding concern of the MITE plurality was that the Illinois statute considered in that case operated to favor management against offerors, to the detriment of shareholders. By contrast, the statute now before the Court protects the independent shareholder against the contending parties. Thus, the Act furthers a basic purpose of the Williams Act, " 'plac[ing] investors on an equal footing with the takeover bidder,' " Piper v. Chris-Craft Industries, Inc., 430 U.S., at 30, 97 S.Ct., at 943 (quoting the Senate Report accompanying the Williams Act, S.Rep. No. 550, 90th Cong., 1st Sess., 4 (1967)).7 The Indiana Act operates on the assumption, implicit in the Williams Act, that independent shareholders faced with tender offers often are at a disadvantage. By allowing such shareholders to vote as a group, the Act protects them from the coercive aspects of some tender offers. If, for example, shareholders believe that a successful tender offer will be followed by a purchase of nontendering shares at a depressed price, individual shareholders may tender their shares—even if they doubt the tender offer is in the corporation's best interest to protect themselves from being forced to sell their shares at a depressed price. As the SEC explains: "The alternative of not accepting the tender offer is virtual assurance that, if the offer is successful, the shares will have to be sold in the lower priced, second step." Two-Tier Tender Offer Pricing and Non-Tender Offer Purchase Programs, SEC Exchange Act Rel. No. 21079 (June 21, 1984), [1984 Transfer Binder] CCH Fed.Sec.L.Rep. ¶ 83,637, p. 86,916 (footnote omitted) (hereinafter SEC Release No. 21079). See Lowenstein, Pruning Deadwood in Hostile Takeovers: A Proposal for Legislation, 83 Colum.L.Rev. 249, 307-309 (1983). In such a situation under the Indiana Act, the shareholders as a group, acting in the corporation's best interest, could reject the offer, although individual shareholders might be inclined to accept it. The desire of the Indiana Legislature to protect shareholders of Indiana corporations from this type of coercive offer does not conflict with the Williams Act. Rather, it furthers the federal policy of investor protection. In implementing its goal, the Indiana Act avoids the problems the plurality discussed in MITE. Unlike the MITE statute, the Indiana Act does not give either management or the offeror an advantage in communicating with the shareholders about the impending offer. The Act also does not impose an indefinite delay on tender offers. Nothing in the Act prohibits an offeror from consummating an offer on the 20th business day, the earliest day permitted under applicable federal regulations, see 17 CFR § 240.14e-1(a) (1986). Nor does the Act allow the state government to interpose its views of fairness between willing buyers and sellers of shares of the target company. Rather, the Act allows shareholders to evaluate the fairness of the offer collectively. The Court of Appeals based its finding of pre-emption on its view that the practical effect of the Indiana Act is to delay consummation of tender offers until 50 days after the commencement of the offer. 794 F.2d, at 263. As did the Court of Appeals, Dynamics reasons that no rational offeror will purchase shares until it gains assurance that those shares will carry voting rights. Because it is possible that voting rights will not be conferred until a shareholder meeting 50 days after commencement of the offer, Dynamics concludes that the Act imposes a 50-day delay. This, it argues, conflicts with the shorter 20-business-day period established by the SEC as the minimum period for which a tender offer may be held open. 17 CFR § 240.14e-1 (1986). We find the alleged conflict illusory. The Act does not impose an absolute 50-day delay on tender offers, nor does it preclude an offeror from purchasing shares as soon as federal law permits. If the offeror fears an adverse shareholder vote under the Act, it can make a conditional tender offer, offering to accept shares on the condition that the shares receive voting rights within a certain period of time. The Williams Act permits tender offers to be conditioned on the offeror's subsequently obtaining regulatory approval. E.g., Interpretive Release Relating to Tender Offer Rules, SEC Exchange Act Rel. No. 34-16623 (Mar. 5, 1980), 3 CCH Fed.Sec.L.Rep. ¶ 24,284I, p. 17,758, quoted in MacFadden Holdings, Inc. v. JB Acquisition Corp., 802 F.2d 62, 70 (CA2 1986).8 There is no reason to doubt that this type of conditional tender offer would be legitimate as well.9 Even assuming that the Indiana Act imposes some additional delay, nothing in MITE suggested that any delay imposed by state regulation, however short, would create a conflict with the Williams Act. The plurality argued only that the offeror should "be free to go forward without unreasonable delay." 457 U.S., at 639, 102 S.Ct., at 2639 (emphasis added). In that case, the Court was confronted with the potential for indefinite delay and presented with no persuasive reason why some deadline could not be established. By contrast, the Indiana Act provides that full voting rights will be vested—if this eventually is to occur—within 50 days after commencement of the offer. This period is within the 60-day period Congress established for restitution of withdrawal rights in 15 U.S.C. § 78n(d)(5). We cannot say that a delay within that congressionally determined period is unreasonable. Finally, we note that the Williams Act would pre-empt a variety of state corporate laws of hitherto unquestioned validity if it were construed to pre-empt any state statute that may limit or delay the free exercise of power after a successful tender offer. State corporate laws commonly permit corporations to stagger the terms of their directors. See Model Business Corp. Act § 37 (1969 draft) in 3 Model Business Corp. Act Ann. (2d ed. 1971) (hereinafter MBCA); American Bar Foundation, Revised Model Business Corp. Act § 8.06 (1984 draft) (1985) (hereinafter RMBCA).10 By staggering the terms of directors, and thus having annual elections for only one class of directors each year, corporations may delay the time when a successful offeror gains control of the board of directors. Similarly, state corporation laws commonly provide for cumulative voting. See 1 MBCA § 33, ¶ 4; RMBCA § 7.28.11 By enabling minority shareholders to assure themselves of representation in each class of directors, cumulative voting provisions can delay further the ability of offerors to gain untrammeled authority over the affairs of the target corporation. See Hochman & Folger, Deflecting Takeovers: Charter and By-Law Techniques, 34 Bus.Law. 537, 538-539 (1979). In our view, the possibility that the Indiana Act will delay some tender offers is insufficient to require a conclusion that the Williams Act pre-empts the Act. The longstanding prevalence of state regulation in this area suggests that, if Congress had intended to pre-empt all state laws that delay the acquisition of voting control following a tender offer, it would have said so explicitly. The regulatory conditions that the Act places on tender offers are consistent with the text and the purposes of the Williams Act. Accordingly, we hold that the Williams Act does not pre-empt the Indiana Act. As an alternative basis for its decision, the Court of Appeals held that the Act violates the Commerce Clause of the Federal Constitution. We now address this holding. On its face, the Commerce Clause is nothing more than a grant to Congress of the power "[t]o regulate Commerce . . . among the several States . . .," Art. I, § 8, cl. 3. But it has been settled for more than a century that the Clause prohibits States from taking certain actions respecting interstate commerce even absent congressional action. See, e.g., Cooley v. Board of Wardens, 12 How. 299, 13 L.Ed. 996 (1852). The Court's interpretation of "these great silences of the Constitution," H.P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 525, 535, 69 S.Ct. 657, 663, 93 L.Ed. 865 (1949), has not always been easy to follow. Rather, as the volume and complexity of commerce and regulation have grown in this country, the Court has articulated a variety of tests in an attempt to describe the difference between those regulations that the Commerce Clause permits and those regulations that it prohibits. See, e.g., Raymond Motor Transportation, Inc. v. Rice, 434 U.S. 429, 441, n. 15, 98 S.Ct. 787, 794, n. 15, 54 L.Ed.2d 664 (1978). The principal objects of dormant Commerce Clause scrutiny are statutes that discriminate against interstate commerce. See, e.g., Lewis v. BT Investment Managers, Inc., 447 U.S. 27, 36-37, 100 S.Ct. 2009, 2015-2016, 64 L.Ed.2d 702 (1980); Philadelphia v. New Jersey, 437 U.S. 617, 624, 98 S.Ct. 2531, 2535-2536, 57 L.Ed.2d 475 (1978). See generally Regan, The Supreme Court and State Protectionism: Making Sense of the Dormant Commerce Clause, 84 Mich.L.Rev. 1091 (1986). The Indiana Act is not such a statute. It has the same effects on tender offers whether or not the offeror is a domiciliary or resident of Indiana. Thus, it "visits its effects equally upon both interstate and local business," Lewis v. BT Investment Managers, Inc., supra, 447 U.S., at 36, 100 S.Ct., at 2015. Dynamics nevertheless contends that the statute is discriminatory because it will apply most often to out-of-state entities. This argument rests on the contention that, as a practical matter, most hostile tender offers are launched by offerors outside Indiana. But this argument avails Dynamics little. "The fact that the burden of a state regulation falls on some interstate companies does not, by itself, establish a claim of discrimination against interstate commerce." Exxon Corp. v. Governor of Maryland, 437 U.S. 117, 126, 98 S.Ct. 2207, 2214, 57 L.Ed.2d 91 (1978). See Minnesota v. Clover Leaf Creamery Co., 449 U.S. 456, 471-472, 101 S.Ct. 715, 727-728, 66 L.Ed.2d 659 (1981) (rejecting a claim of discrimination because the challenged statute "regulate[d] evenhandedly . . . without regard to whether the [commerce came] from outside the State"); Commonwealth Edison Co. v. Montana, 453 U.S. 609, 619, 101 S.Ct. 2946, 2954, 69 L.Ed.2d 884 (1981) (rejecting a claim of discrimination because the "tax burden [was] borne according to the amount . . . consumed and not according to any distinction between in-state and out-of-state consumers"). Because nothing in the Indiana Act imposes a greater burden on out-of-state offerors than it does on similarly situated Indiana offerors, we reject the contention that the Act discriminates against interstate commerce. This Court's recent Commerce Clause cases also have invalidated statutes that may adversely affect interstate commerce by subjecting activities to inconsistent regulations. E.g., Brown-Forman Distillers Corp. v. New York State Liquor Authority, 476 U.S. 573, 583-584, 106 S.Ct. 2080, 2086-2087, 90 L.Ed.2d 552 (1986); Edgar v. MITE Corp., 457 U.S., at 642, 102 S.Ct., at 2640-2641 (plurality opinion of WHITE, J.); Kassel v. Consolidated Freightways Corp., 450 U.S. 662, 671, 101 S.Ct. 1309, 1316-1317, 67 L.Ed.2d 580 (1981) (plurality opinion of POWELL, J.). See Southern Pacific Co. v. Arizona, 325 U.S. 761, 774, 65 S.Ct. 1515, 1522-1523, 89 L.Ed. 1915 (1945) (noting the "confusion and difficulty" that would attend the "unsatisfied need for uniformity" in setting maximum limits on train lengths); Cooley v. Board of Wardens, supra, 12 How., at 319 (stating that the Commerce Clause prohibits States from regulating subjects that "are in their nature national, or admit only of one uniform system, or plan of regulation"). The Indiana Act poses no such problem. So long as each State regulates voting rights only in the corporations it has created, each corporation will be subject to the law of only one State. No principle of corporation law and practice is more firmly established than a State's authority to regulate domestic corporations, including the authority to define the voting rights of shareholders. See Restatement (Second) of Conflict of Laws § 304 (1971) (concluding that the law of the incorporating State generally should "determine the right of a shareholder to participate in the administration of the affairs of the corporation"). Accordingly, we conclude that the Indiana Act does not create an impermissible risk of inconsistent regulation by different States. The Court of Appeals did not find the Act unconstitutional for either of these threshold reasons. Rather, its decision rested on its view of the Act's potential to hinder tender offers. We think the Court of Appeals failed to appreciate the significance for Commerce Clause analysis of the fact that state regulation of corporate governance is regulation of entities whose very existence and attributes are a product of state law. As Chief Justice Marshall explained: "A corporation is an artificial being, invisible, intangible, and existing only in contemplation of law. Being the mere creature of law, it possesses only those properties which the charter of its creation confers upon it, either expressly, or as incidental to its very existence. These are such as are supposed best calculated to effect the object for which it was created." Trustees of Dartmouth College v. Woodward, 4 Wheat. 518, 636, 4 L.Ed. 518 (1819). See First National Bank of Boston v. Bellotti, 435 U.S. 765, 822-824, 98 S.Ct. 1407, 1439-1441, 55 L.Ed.2d 707 (1978) (REHNQUIST, J., dissenting). Every State in this country has enacted laws regulating corporate governance. By prohibiting certain transactions, and regulating others, such laws necessarily affect certain aspects of interstate commerce. This necessarily is true with respect to corporations with shareholders in States other than the State of incorporation. Large corporations that are listed on national exchanges, or even regional exchanges, will have shareholders in many States and shares that are traded frequently. The markets that facilitate this national and international participation in ownership of corporations are essential for providing capital not only for new enterprises but also for established companies that need to expand their businesses. This beneficial free market system depends at its core upon the fact that a corporation—except in the rarest situations—is organized under, and governed by, the law of a single jurisdiction, traditionally the corporate law of the State of its incorporation. These regulatory laws may affect directly a variety of corporate transactions. Mergers are a typical example. In view of the substantial effect that a merger may have on the shareholders' interests in a corporation, many States require supermajority votes to approve mergers. See, e.g., 2 MBCA § 73 (requiring approval of a merger by a majority of all shares, rather than simply a majority of votes cast); RMBCA § 11.03 (same). By requiring a greater vote for mergers than is required for other transactions, these laws make it more difficult for corporations to merge. State laws also may provide for "dissenters' rights" under which minority shareholders who disagree with corporate decisions to take particular actions are entitled to sell their shares to the corporation at fair market value. See, e.g., 2 MBCA §§ 80, 81; RMBCA § 13.02. By requiring the corporation to purchase the shares of dissenting shareholders, these laws may inhibit a corporation from engaging in the specified transactions.12 It thus is an accepted part of the business landscape in this country for States to create corporations, to prescribe their powers, and to define the rights that are acquired by purchasing their shares. A State has an interest in promoting stable relationships among parties involved in the corporations it charters, as well as in ensuring that investors in such corporations have an effective voice in corporate affairs. There can be no doubt that the Act reflects these concerns. The primary purpose of the Act is to protect the shareholders of Indiana corporations. It does this by affording shareholders, when a takeover offer is made, an opportunity to decide collectively whether the resulting change in voting control of the corporation, as they perceive it, would be desirable. A change of management may have important effects on the shareholders' interests; it is well within the State's role as overseer of corporate governance to offer this opportunity. The autonomy provided by allowing shareholders collectively to determine whether the takeover is advantageous to their interests may be especially beneficial where a hostile tender offer may coerce shareholders into tendering their shares. Appellee Dynamics responds to this concern by arguing that the prospect of coercive tender offers is illusory, and that tender offers generally should be favored because they reallocate corporate assets into the hands of management who can use them most effectively.13 See generally Easterbrook & Fischel, The Proper Role of a Target's Management in Responding to a Tender Offer, 94 Harv.L.Rev. 1161 (1981). As indicated supra, at 82—83, Indiana's concern with tender offers is not groundless. Indeed, the potentially coercive aspects of tender offers have been recognized by the SEC, see SEC Release No. 21079, p. 86,916, and by a number of scholarly commentators, see, e.g., Bradley & Rosenzweig, Defensive Stock Repurchases, 99 Harv.L.Rev. 1377, 1412-1413 (1986); Macey & McChesney, A Theoretical Analysis of Corporate Greenmail, 95 Yale L.J. 13, 20-22 (1985); Lowenstein, 83 Colum.L.Rev., at 307-309. The Constitution does not require the States to subscribe to any particular economic theory. We are not inclined "to second-guess the empirical judgments of lawmakers concerning the utility of legislation," Kassel v. Consolidated Freightways Corp., 450 U.S., at 679, 101 S.Ct., at 1321 (BRENNAN, J., concurring in judgment). In our view, the possibility of coercion in some takeover bids offers additional justification for Indiana's decision to promote the autonomy of independent shareholders. Dynamics argues in any event that the State has " 'no legitimate interest in protecting the nonresident shareholders.' " Brief for Appellee 21 (quoting Edgar v. MITE Corp., 457 U.S., at 644, 102 S.Ct., at 2641-2642). Dynamics relies heavily on the statement by the MITE Court that "[i]nsofar as the . . . law burdens out-of-state transactions, there is nothing to be weighed in the balance to sustain the law." 457 U.S., at 644, 102 S.Ct., at 2641. But that comment was made in reference to an Illinois law that applied as well to out-of-state corporations as to in-state corporations. We agree that Indiana has no interest in protecting nonresident shareholders of nonresident corporations. But this Act applies only to corporations incorporated in Indiana. We reject the contention that Indiana has no interest in providing for the shareholders of its corporations the voting autonomy granted by the Act. Indiana has a substantial interest in preventing the corporate form from becoming a shield for unfair business dealing. Moreover, unlike the Illinois statute invalidated in MITE, the Indiana Act applies only to corporations that have a substantial number of shareholders in Indiana. See Ind. Code § 23-1-42-4(a)(3) (Supp.1986). Thus, every application of the Indiana Act will affect a substantial number of Indiana residents, whom Indiana indisputably has an interest in protecting. Dynamics' argument that the Act is unconstitutional ultimately rests on its contention that the Act will limit the number of successful tender offers. There is little evidence that this will occur. But even if true, this result would not substantially affect our Commerce Clause analysis. We reiterate that this Act does not prohibit any entity—resident or nonresident from offering to purchase, or from purchasing, shares in Indiana corporations, or from attempting thereby to gain control. It only provides regulatory procedures designed for the better protection of the corporations' shareholders. We have rejected the "notion that the Commerce Clause protects the particular structure or methods of operation in a . . . market." Exxon Corp. v. Governor of Maryland, 437 U.S., at 127, 98 S.Ct., at 2215. The very commodity that is traded in the securities market is one whose characteristics are defined by state law. Similarly, the very commodity that is traded in the "market for corporate control"—the corporation—is one that owes its existence and attributes to state law. Indiana need not define these commodities as other States do; it need only provide that residents and nonresidents have equal access to them. This Indiana has done. Accordingly, even if the Act should decrease the number of successful tender offers for Indiana corporations, this would not offend the Commerce Clause.14 On its face, the Indiana Control Share Acquisitions Chapter evenhandedly determines the voting rights of shares of Indiana corporations. The Act does not conflict with the provisions or purposes of the Williams Act. To the limited extent that the Act affects interstate commerce, this is justified by the State's interests in defining the attributes of shares in its corporations and in protecting shareholders. Congress has never questioned the need for state regulation of these matters. Nor do we think such regulation offends the Constitution. Accordingly, we reverse the judgment of the Court of Appeals. It is so ordered.
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The federal Williams Act and implementing regulations govern hostile corporate stock tender offers by requiring, inter alia, that offers remain open for at least 20 business days. An Indiana Act applies to certain business corporations chartered in Indiana that have specified levels of shares or shareholders within the State and that opt into the Act's protection. The Indiana Act provides that the acquisition of "control shares" in such a corporation-shares that, but for the Act, would bring the acquiring entity's voting power to or above certain threshold levels does not include voting rights unless a majority of all pre-existing disinterested shareholders so agree at their next regularly scheduled meeting. However, the stock acquiror can require a special meeting within 50 days by following specified procedures. Appellee Dynamics Corporation announced a tender offer that would have raised its ownership interest in CTS Corporation above the Indiana Act's threshold. Dynamics also filed suit in Federal District Court alleging federal securities violations by CTS. After CTS opted into the Indiana Act, Dynamics amended its complaint to challenge the Act's validity. The District Court granted Dynamics' motion for declaratory relief, ruling that the Act is pre-empted by the Williams Act and violates the Commerce Clause. The Court of Appeals affirmed, adopting the holding of the plurality opinion in Edgar v. MITE Corp., 457 U. S. 624, that the Williams Act pre-empts state statutes that upset the balance between target company management and a tender offeror. The court based its preemption finding on the view that the Indiana Act, in effect, imposes at least a 50-day delay on the consummation of tender offers and that this conflicts with the minimum 20-day, hold-open period under the Williams Act. The court also held that the state Act violates the Commerce Clause since it deprives nonresidents of the valued opportunity to accept tender offers from other nonresidents, and that it violates the conflict-oflaws "internal affairs" doctrine in that it has a direct, intended, and substantial effect on the interstate market in securities and corporate control. Held: 1. The Indiana Act is consistent with the provisions and purposes of the Williams Act and is not pre-empted thereby. Pp. 78-87. (a) The Indiana Act protects independent shareholders from the coercive aspects of tender offers by allowing them to vote as a group, and thereby furthers the Williams Act's basic purpose of placing investors on an equal footing with takeover bidders. Moreover, the Indiana Act avoids the problems the plurality discussed in MITE, since it does not give either management or the offeror an advantage in communicating with shareholders, nor impose an indefinite delay on offers, nor allow the state government to interpose its views of fairness between willing buyers and sellers. Thus, the Act satisfies even the MITE plurality's broad interpretation of the Williams Act. Pp. 81-84. (b) The possibility that the Indiana Act will delay some tender offers does not mandate pre-emption. The state Act neither imposes an absolute 50-day delay on the consummation of tender offers nor precludes offerors from purchasing shares as soon as federal law permits. If an adverse shareholder vote is feared, the tender offer can be conditioned on the shares' receiving voting rights within a specified period. Furthermore, even assuming that the Indiana Act does impose some additional delay, the MITE plurality found only that "unreasonable" delays conflict with the Williams Act. Here, it cannot be said that a 50-day delay is unreasonable since that period falls within a 60-day period Congress established for tendering shareholders to withdraw their unpurchased shares. If the Williams Act were construed to pre-empt any state statute that caused delays, it would pre-empt a variety of state corporate laws of hitherto unquestioned validity. The longstanding prevalence of state regulation in this area suggests that, if Congress had intended to pre-empt all such state laws, it would have said so. Pp. 84-87. 2. The Indiana Act does not violate the Commerce Clause. The Act's limited effect on interstate commerce is justified by the State's interests in defining attributes of its corporations' shares and in protecting shareholders. Pp. 87-94. (a) The Act does not discriminate against interstate commerce since it has the same effect on tender offers whether or not the offeror is an Indiana domiciliary or resident. That the Act might apply most often to out-of-state entities who launch most hostile tender offers is irrelevant, since a claim of discrimination is not established by the mere fact that the burden of a state regulation falls on some interstate companies. Pp. 87-88. (b) The Act does not create an impermissible risk of inconsistent regulation of tender offers by different States. It simply and evenhandedly exercises the State's firmly established authority to define the voting rights of shareholders in Indiana corporations, and thus subjects such corporations to the law of only one State. Pp. 88-89. (c) The Court of Appeals' holding that the Act unconstitutionally hinders tender offers ignores the fact that a State, in its role as overseer of corporate governance, enacts laws that necessarily affect certain aspects of interstate commerce, particularly with respect to corporations with shareholders in other States. A State has interests in promoting stable relationships among parties involved in its corporations and in ensuring that investors have an effective voice in corporate affairs. The Indiana Act validly furthers these interests by allowing shareholders collectively to determine whether the takeover is advantageous to them. The argument that Indiana has no legitimate interest in protecting nonresident shareholders is unavailing, since the Act applies only to corporations incorporated in Indiana that have a substantial number of shareholders in the State. Pp. 89-93. (d) Even if the Act should decrease the number of successful tender offers for Indiana corporations, this would not offend the Commerce Clause. The Act does not prohibit any resident or nonresident from offering to purchase, or from purchasing, shares in Indiana corporations, or from attempting thereby to gain control. It only provides regulatory procedures designed for the better protection of the corporations' shareholders. The Commerce Clause does not protect the particular structure or methods of operation in a market. Pp. 93-94. 794 F. 2d 250, reversed.
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This case involves the right of a mortgagee to relief against one who secretly purchased the premises just prior to a bill being filed for the foreclosure of the mortgage, and who withheld his deed from record until after the summons in the foreclosure suit had been served and a lis pendens had been filed. At the time the original foreclosure suit was begun, the defendant William A. Daggs was in possession of the premises, and the title, so far as disclosed by the record, then appeared to be in Robert E. Daggs. But after it had culminated in a sale of the premises, June 6, 1894, and the sheriff had executed his deed, December 12, 1894, William A. refused to surrender possession, and claimed to hold as the tenant of Johns, and from that time continued to hold as such tenant, to the exclusion of plaintiff. The supreme court found as a fact that the defendants Robert E. and A. Jackson Daggs had conspired together to hinder and obstruct Wilson in the collection of his mortgage debt, and to that end procured the deed from Robert E. Daggs to Johns, and withheld it from record until after the foreclosure suit had been begun; that such deed was fraudulent and void as against Wilson, and was executed and recorded by Robert E. Daggs for the purpose of hindering and delaying the plaintiff in securing possession of the mortgaged premises, and in obtaining satisfaction of his judgment by process of law. A large number of errors are separately assigned by the different defendants, but we shall notice only such as were passed upon by the supreme court, or pressed upon our attention in the briefs. 1. The most important is that Robert E. Daggs, the grantee of the original mortgagor, was not liable in a direct action by the mortgagee, because no privity of contract was shown between such grantee and the plaintiff mortgagee; and the action was not brought in the name of, or for the benefit of, the mortgagor Armstrong. This assignment should be read in connection with the second finding, which is in substance that, in December, 1893, Armstrong sold to the defendant Robert E. Daggs the premises previously mortgaged to Wilson, the appellee, and conveyed the same to him by deed, in which Daggs agreed and bound himself to pay the two notes executed by Armstrong and secured by the mortgage. Under this sale and transfer Daggs entered into possession of the premises by William A. Daggs, his tenant. There was also in the deed of March 17, 1894, from Robert E. Daggs to Alvin L. Johns, as appears from a copy of the deed sent up with the record, a similar agreement by Johns to assume and pay the Wilson mortgage; but as the supreme court held this deed to be fraudulent and void, and that there could be no recovery upon the agreement against Johns, this deed becomes immaterial. The question is whether there can be a personal judgment against Daggs upon the agreement in his deed from Armstrong to pay this mortgage. In the first decree rendered in the suit of Wilson v. Armstrong and Robert E. Daggs there was a personal judgment against Armstrong upon the notes which the mortgage was given to secure, and an order for a foreclosure and sale of the premises; and in case the proceeds of the sale were insufficient to satisfy the judgment, the sheriff should make the balance out of any other property of the defendant Armstrong; but there was no personal judgment against Robert E. Daggs. Such judgment was prayed for and granted in this case. The question whether a mortgagee can recover against the grantee of the mortgagor upon a stipulation in his deed from the mortgagor to assume and pay off the mortgage, as well as the more general question how far a third party may avail himself of a promise made by the defendant to another party, has been the subject of much discussion and difference of opinion in the courts of the several states; but we think the decisions of this court have practically removed it from the domain of controversy. In Second Nat. Bank v. Grand Lodge of F. & A. M. 98 U. S. 123, 25 L. ed. 75, the Masonic Hall Association, a Missouri corporation, had issued a large number of bonds which the grand lodge had assumed by resolution to pay. The bank brought an action at law against the grand lodge to compel the payment of certain coupons attached to these bonds, of which it was the holder; and this court held that it was not entitled to recover, upon the ground that the holders of the bonds were not parties to the resolution, and there was no privity of contract between them and the lodge. In delivering the opinion of the court, Mr. Justice Strong observed: 'We do not propose to enter at large upon a consideration of the inquiry how far privity of contract between a plaintiff and defendant is necessary to the maintenance of an action ofassumpsit. The subject has been much debated, and the decisions are not all reconcilable. No doubt the general rule is that such a privity must exist. But there are confessedly many exceptions to it. One of them, and by far the most frequent one, is the case where, under a contract between two persons, assets have come to the promisor's hands or under his control, which in equity belong to a third person. In such a case it is held that the third person may sue in his own name. But then the suit is founded rather on the implied undertaking the law raises from the possession of the assets, than on the express promise.' Keller v. Ashford, 133 U. S. 610, 33 L. ed. 667, 10 Sup. Ct. Rep. 494, was a bill in equity by Keller, the mortgagee, against Ashford, the grantee of the land subject to this mortgage, which he had agreed to pay. It was held after full examination of the authorities, first, that the mortgagee could not sue at law, citing Second Nat. Bank v. Grand Lodge of F. & A. M. 98 U. S. 123, 25 L. ed. 75, and Cragin v. Lovell, 109 U. S. 194, 27 L. ed. 903, 3 Sup. Ct. Rep. 132; second, that in equity, as at law, the contract of the purchaser to pay the mortgage, being made with the mortgagor and for his benefit only, creates no direct obligation of the purchaser to the mortgagee; but, third, that, under the equitable doctrine that a creditor shall have the benefit of any obligation or security given by the principal to the surety for the payment of the debt, the mortgagee was entitled to avail himself of an agreement in a deed of conveyance from the mortgagor, by which the grantee promised to pay the mortgage. This is upon the theory that the purchaser of land subject to the mortgage becomes the principal debtor, and the liability of the vendor, as between the parties, is that of surety. In Willard v. Wood. 135 U. S. 309, 34 L. ed. 210, 10 Sup. Ct. Rep. 831, in error to the supreme court of the District of Columbia, it was held that the question whether the remedy of the mortgagee against the grantee of the mortgagor, to enforce an agreement contained in the deed to him to pay the mortgage debt, be at law or in equity, was governed by the lex fori, and that in the District of Columbia such remedy was by bill in equity only. In Union Mut. L. Ins. Co. v. Hanford, 143 U. S. 187, 36 L. ed. 118, 12 Sup. Ct. Rep. 437, it was said to be 'the settled law of this court [that] the grantee is not directly liable to the mortgagee, at law or in equity; and the only remedy of the mortgagee against the grantee is by bill in equity in the right of the mortgagor and grantor, by virtue of the right in equity of a creditor to avail himself of any security which his debtor holds from a third person for the payment of the debt.' The court restated the rule laid down in Willard v. Wood, 135 U. S. 309, 34 L. ed. 210, 10 Sup. Ct. Rep. 831, that the question of the remedy of the mortgagee, whether at law or in equity, was to be decided by the law of the place where the suit was brought. The material question in that case was whether the giving of time to the grantee, without the assent of the grantor, discharged the latter from personal liability. It was held that it did, citing Shepherd v. May, 115 U. S. 505, 29 L. ed. 456, 6 Sup. Ct. Rep. 119. As, however, under the Arizona Code, there is no distinction between suits at law and in equity, we see no reason to doubt that this action will lie. Indeed, in Williams v. Naftzger, 103 Cal. 438, 37 Pac. 411, the supreme court of California, whose Code was practically adopted by the legislature of Arizona, thought an agreement on the part of the grantee to pay and discharge a mortgage debt upon the granted premises, for which his grantor was liable, renders the grantee liable therefor to the mortgagee; and in an action for a foreclosure of the mortgage, if the mortgaged premises are insufficient to satisfy the mortgage debt, judgment may be rendered against him as well as against the mortgagor, for the amount of such deficiency,—citing Keller v. Ashford, 133 U. S. 622, 33 L. ed. 673, 10 Sup. Ct. Rep. 494. 2. Further objection is made to this proceeding upon the ground that it is not shown that the mortgagor 'had been exhausted,' or that he is insolvent. If by this is meant that, after the sale of the property, the mortgagee is bound primarily to proceed against the mortgagor personally for any deficiency, the position is inconsistent with the doctrine of the cases above cited, in which it is assumed that the purchaser, who has agreed to pay the mortgage, is the principal debtor, and the mortgagor is surety. This view is thus concisely stated by Mr. Justice Gray in Union Mut. L. Ins. Co. v. Hanford, 143 U. S. 187, 190, 36 L. ed. 118, 120, 12 Sup. Ct. Rep. 437, 438: 'The grantee, as soon as the mortgagee knows of the arrangement, becomes directly and primarily liable to the mortgagee for the debt for which the mortgagor was already liable to the latter, and the relation of the grantee and grantor toward the mortgagee, as well as between themselves, is thenceforth that of principal and surety for the payment of the mortgage debt.' Undoubtedly the mortgaged property must first be applied to the payment of the debt. This was done. The judgment, though nominally against Daggs for the amount of the mortgage debt, contemplated in subsequent paragraphs that the sheriff should only make the balance out of the property of the defendant Daggs, in case the proceeds of the sale were insufficient to pay the judgment. This, too, was the language of the order of sale. In the case of Biddel v. Brizzolara, 64 Cal. 354, 30 Pac. 609, relied upon by the appellants, the general principle was recognized that, where a purchaser of real estate from the mortgagor assumes payment of the mortgage debt, a cause of action arises, upon the principle of subrogation, in favor of the mortgagee, which he may enforce at any time within the life of his mortgage by a suit against the purchaser. In that case, however, it was held there could be no recovery, because the statute of limitations had run against the mortgage debt, and because the purchaser had reconveyed the mortgaged property to the mortgagor prior to the commencement of the action. As Armstrong could have recovered against Robert E. Daggs, any deficiency he had been obliged to pay, the plaintiff could proceed against Daggs directly for such deficiency. It is true that William A. Daggs was not made a party to the prior foreclosure bill, but his only claim to the property was that of tenant, either of Robert E. Daggs or of Johns. Robert E. Daggs was made a party to that bill, and Johns is made a party to this. We fail to see how either of them is prejudiced by William A. Daggs not being made a party to the former bill. 3. The seventh assignment, that no reason is shown for not applying for relief in the former foreclosure suit, appears to be based upon the theory that the former judgment is conclusive against the parties to the action, and that the plaintiff has no legal right to a second foreclosure. While it is true that, if the plaintiff had sought to foreclose the right of William A. Daggs to this property, he should have been made a party to the former foreclosure, it is difficult to see how Johns would have been affected by a decree against Daggs, unless he also had been made a party. That he was not made such party is explained by the fact that his deed had not been put upon record, and that it was impossible for the plaintiff to have known, from aught that appeared to him, that Johns was the owner of the property. Where the mortgagee has no knowledge, and no means of knowing, that the mortgaged property has been sold by the person in whose name it stands of record,—especially where such sale is brought about by a fraudulent conspiracy between the vendor and vendee, and the conveyance is withheld from record for the purpose of misleading the mortgagee,—we know of no objection to a second foreclosure for the purpose of terminating the rights of the vendee. As stated in Jones on Mortgages, § 1679: 'If the owner of the equity has, through mistake, not been made a party, the mortgagee, who has purchased at the sale, may maintain a second action to foreclose the equity of such owner, and for a new sale, but he cannot recover the costs of the previous sale.' State Bank v. Abbott, 20 Wis. 570; Stackpole v. Robbins, 47 Barb. 212; Shirk v. Andrews, 92 Ind. 509; Brackett v. Banegas, 116 Cal. 278, 48 Pac. 90; Morey v. Duluth, 69 Minn. 5, 71 N. W. 694; Benedict v. Gilman, 4 Paige, 58; Georgia P. R. Co. v. Walker, 61 Miss. 481. While it is possible that the mortgagee might have been able to obtain relief by an amended bill in the original suit, a new action is a proper remedy where he has been mistaken in his facts, especially if such mistake has been brought about by the contrivance of the legal owners. Appellants apparently proceed upon the assumption that the possession of William A. Daggs was not only notice of his own rights to the property, and of his tenancy under Robert E. Daggs, the record owner, but also of the ownership of Johns, whose title did not appear of record, and of which the mortgagee had no actual notice. We cannot acquiesce in this assumption. It is true that plaintiff asserts in his complaint that, two days after his original bill of foreclosure was filed, William A. Daggs 'claimed and asserted' (to whom is not stated) that he had abandoned the premises as tenant of Robert E. Daggs to become the tenant of Johns. Under such circumstances, the plaintiff, if he knew of it, should have at once filed an amended bill; but his failure to do so does not seem to have resulted to the prejudice of any of the defendants; nor can it be said that plaintiff has lost his rights, except to the costs of the first suit, by failing to do so. An amended or supplemental bill is rather an alternative than an only remedy, and a failure to pursue this course ought not to debar him from resorting to another bill. White v. Secor, 58 Iowa, 533, 12 N. W. 586; Bottineau v. AEtna L. Ins. Co. 31 Minn. 125, 16 N. W. 849; Rogers v. Benton, 39 Minn. 39, 38 N. W. 765; Foster v. Johnson, 44 Minn. 290, 46 N. W. 350; Stackpole v. Robbins, 48 N. Y. 665; Moulton v. Cornish, 138 N. Y. 133, 20 L. R. A. 370, 33 N. E. 842; Dodge v. Omaha & S. W. R. Co. 20 Neb. 276, 29 N. W. 936. Defendants also claim a misjoinder of causes of action, in that the plaintiff sues Daggs, not only for a breach of his contract of assumption of the notes set out in the complaint, and to foreclose the mortgage lien, but upon an alleged conspiracy, wherein he charges him with colluding with A. Jackson Daggs to withhold the deed to Johns from record, and prays damages in the sum of $1,000 for a refusal to surrender possession. As there was no recovery, however, upon this claim, we think it has become immaterial to consider whether there was a misjoinder. The same comment may be made upon the alleged misjoinder of parties. We have examined the remaining assignments of error, of which there are a large number, contained in appellant's brief, and find them to turn upon questions of facts or as to the admission or rejection of testimony, which are foreclosed by the findings of the supreme court, or upon the alleged defects in procedure, which were not deemed to be of sufficient importance to be noticed in the opinion of that court. We find in none of them any sound reason for disturbing this judgment, and it is therefore affirmed.
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Under the practice in Arizona the grantee of a mortgagor, who has agreed to pay the notes secured by the mortgage, may be held liable for a deficiency upon the sale of the mortgaged premises, in a direct action by the mortgagee. In such action the grantee of the original mortgagor is the party primarily liable to the mortgagee for the debt, the relation of the grantee and mortgagor toward the mortgagee, as well as between themselves, being that of principal and surety. Where a decree of foreclosure and sale against the original mortgagor and his immediate grantee is ineffectual, by reason of the fact that, a few days before the filing of the bill, the grantee conveyed the premises to a second grantee by a deed which was withheld from the record until after the foreclosure proceedings had been begun, a bill will lie to set aside the sale, to annul the deed upon the ground of fraud, and to decree a new foreclosure and sale of the same premises. While it is possible that the mortgagee might have been able to obtain relief by an amended bill in the original suit, a new action is the proper remedy, where he has been mistaken in his facts, especially if such mistake has been brought about by the contrivance of the legal owners.
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Messrs. William A. Day and John G. Carlisle for appellant. [Argument of Counsel from pages 29-31 intentionally omitted] Messrs. John G. Johnson, Walter W. Ross, Adelbert Moot, George F. Brownell, Francis I. Gowen, F. H. Janvier, J. D. Campbell, Robert Thorne, and Robert W. Deforest for appellees. [Argument of Counsel from Pages 31-35 intentionally omitted] A motion is made to dismiss the appeal upon the ground that no direct appeal lies to this court from the order of the circuit court. The act of February 19, 1903 [32 Stat. at L. 849, chap. 708; U. S. Comp. Stat. 1901, Sup. of 1903, p. 365], to further regulate commerce with foreign nations and among the states, § 3, closing paragraph, enacts, 'Provided. That the provisions of an act entitled [32 Stat. at L. 823, chap. 544]1 'An Act to Expedite the Hearing and Determination of Suits in Equity Pending or Hereafter Brought Under the Act of July Second, Eighteen Hundred and Ninety, Entitled 'An Act to Protect Trade and Commerce Against Unlawful Restraints and Monopolies,' [26 Stat. at L. 209, chap. 647, U. S. Comp. Stat. 1901, p. 3200] 'An Act to Regulate Commerce,' Approved February Fourth, Eighteen Hundred and Eighty-seven, [24 Stat. at L. 379, chap. 104, U. S. Comp. Stat. 1901, p. 3154] or Any Other Acts having a Like Purpose That May Be Hereafter Enacted, Approved February Eleventh, Nineteen Hundred and Three, shall apply to any case prosecuted under the direction of the Attorney General in the name of the Interstate Commerce Commission.' The 2d section of the act of February 11, 1903 (U. S. Comp. Stat. 1901, Sup. for 1903, p. 376), provides, 'That in every suit in equity pending or hereafter brought in any circuit court of the United States under any of said acts [having reference to the anti-trust act of 1890 and the Act to Regulate Commerce mentioned in the preceding section] wherein the United States is complainant, including cases submitted but not yet decided, an appeal from the final decree of the circuit court will lie only to the Supreme Court, and must be taken within sixty days from the entry thereof.' In support of the motion to dismiss it is argued that the language of the proviso of § 3, above quoted, 'shall apply to any case prosecuted under the direction of the Attorney General in the name of the Interstate Commerce Commission,' must be read in connection with preceding paragraphs of the section, which provide for bringing actions by direction of the Attorney General in the circuit courts of the United States, and do not include proceedings of the character of the present action to compel the production of books and papers and the giving of testimony by witnesses called before the Commission. It is true that the office of a proviso, strictly considered, is to make exception from the enacting clause, to restrain generality and to prevent misinterpretation. Minis v. United States, 15 Pet. 423; 10 L. ed. 791; Austin v. United States, 155 U. S. 417-431; 39 L. ed. 206-211, 15 Sup. Ct. Rep. 167; White v. United States, 191 U. S. 545, 551, ante, p. 171, 24 Sup. Ct. Rep. 171. It is apparent that this proviso was not inserted in any restrictive sense or to make clear that which might be doubtful from the general language used. It was inserted for the purpose of enlarging the operation of the statute so as to include a class of cases not otherwise within the operation of the section. It may be admitted that this use of a proviso is not in accord with the technical meaning of the term or the office of such part of a statute when properly used. But it is, nevertheless, a frequent use of the proviso in Federal legislation to introduce, as in the present case, new matter extending rather than limiting or explaining that which has gone before. In Chesapeake & P. Teleph. Co. v. Manning, 186 U. S. 238, 242, 46 L. ed. 1144, 1146, 22 Sup. Ct. Rep. 881, 883, the subject was under consideration, and Mr. Justice Brewer, delivering the opinion, while recognizing the restrictive office of a proviso as stated by Mr. Justice Story in Minis v. United States, 15 Pet. 423, 445, 10 L. ed. 791, 799, added: 'While this is the general effect of a proviso, yet in practice it is not always so limited. As said in Georgia R. & Bkg. Co. v. Smith, 128 U. S. 174, 181, 32 L. ed. 377, 380, 9 Sup. Ct. Rep. 47. The general purpose of a proviso, as is well known, is to except the clause covered by it from the general provisions of a statute, or from some provisions of it, or to qualify the operation of the statute in some particular. But it is often used in other senses. It is a common practice in legislative proceedings, on the consideration of bills, for parties desirous of securing amendments to them to precede their proposed amendments with the term 'provided,' so as to declare that, nothwithstanding existing provisions, the one thus expressed is to prevail, thus having no greater signification than would be attached to the conjunction 'but' or 'and' in the same place, and simply serving to separate or distinguish the different paragraphs or sentences.' The provision in the statute under consideration being intended to enlarge rather than limit the application of previous terms should not receive so narrow a construction as to defeat its purpose. It extends the terms of the act of February 11, 1903, to 'any case' brought under the direction of the Attorney General in the name of the Interstate Commerce Commission. The 2d section of the act of February 11 has reference, it is true, to a suit in equity under certain acts wherein the United States is complainant, and the argument is that the extension of the terms of this act in the act of February 19 is only to suits in equity. But for some reason Congress, in the act under consideration, saw fit not to limit the terms of the extension to suits or proceedings provided for in § 3 of the act of February 19, or to suits in equity, but broadly extended the rights and privileges of the act of February 11 to 'cases' of the character designated. We cannot assume that this use of the broader term was without purpose. Before the passage of this act this court had held that a petition filed under § 12 of the Interstate Commerce Act2 against a witness duly summoned to testify before the Commission, to compel him to testify or to produce books, documents, and papers relating to the matter in controversy, makes a case or controversy to which the judicial power of the United States extends. Interstate Commerce Commission v. Brimson, 154 U. S. 447, 38 L. ed. 1047, 4 Inters. Com. Rep. 545, 14 Sup. Ct. Rep. 1125. The object of construction, as has been often said by the courts and writers of authority, is to ascertain the legislative intent, and, if possible, to effectuate the purposes of the lawmakers. We cannot read these statutes without perceiving the manifest purpose of Congress to facilitate the disposition of cases brought under the direction of the Attorney General to enforce the provision of the anti-trust and interstate commerce statutes. The present proceeding is not merely advisory to the Commission, but, as was said in Interstate Commerce Commission v. Brimson, 154 U. S. 447, 38 L. ed. 1047, 4 Inters. Com. Rep. 545, 14 Sup. Ct. Rep. 1125, a judgment rendered will be a final and indisputable basis of action as between the Commission and the defendant, and furnish a precedent for similar cases. While it has for its object the obtaining of testimony in aid of proceedings before the Commission, it is evident that important questions may be involved touching the power of the Commission and the constitutional rights and privileges of citizens. Congress deemed it imperative that such cases, affecting the commerce of the country as well as personal rights, should be promptly determined in a court of last resort. If the appeal in the first instance was to the court of appeals the judgment of that court would not be final under the act of March 3, 1891 [26 Stat. at L. 826, chap. 517, U. S. Comp. Stat. 1901, p. 547], and in such case this court would still be required to consider the cases on final appeal. We think it was the purpose of the act to eliminate an appeal to the circuit court of appeals, and to permit the litigation to be shortened by a direct appeal to this court. We pass, now, to the merits of the controversy. The record in this case is voluminous, and much of the discussion before the Commission is printed. We shall endeavor to classify and consider the questions made so as to indicate our holdings with a view to a proper judgment in the ease. It is urged that the complainant before the Commission did not show any real interest in the case brought and that the proceeding should, for that reason, have been dismissed. It is provided in the Act to Regulate Commerce, § 13, that 'any person, firm, corporation,' etc., complaining of anything done or omitted to be done by any common carrier subject to the provisions of this act, in contravention of the provisions thereof, may apply to said Commission by petition, etc. And certain procedure is provided for and (said Commission) 'may institute any inquiry on its own motion in the same manner and to the same effect as though complaint had been made,' and the section concludes: 'No complaint shall at any time be dismissed because of the absence of direct damage to the complainant.' In face of this mandatory requirement that the complaint shall not be dismissed because of the want of direct damage to the complainant, no alternative is left the Commission but to investigate the complaint, if it presents matter within the purview of the act and the powers granted to the Commission. Power is conferred upon the Commission, under § 12 of the act as amended March 2, 1889 (25 Stat. at L. 858, chap. 382, U. S. Comp. Stat. 1901, p. 3162), and February 10, 1891 (26 Stat. at L. 743, chap. 128, U. S. Comp. Stat. 1901, p. 3162), to inquire into the management of the business of all common carriers subject to the provisions of the act, and to keep itself informed as to the manner and method in which the same is conducted, with the right to obtain from such common carriers full and complete information necessary to enable the Commission to perform the duties and carry out the objects for which it was created. In making the orders which were the basis of the application to the circuit court, and in the petition filed therein, it is set forth that the Commission, at the time when the witnesses refused to produce the contracts required was engaged 'in the discharge of its duty to execute and enforce the provisions of the Act to Regulate Commerce, and in the exercise of its authority to inquire into the business of common carriers subject to the provisions of the act, and to keep itself informed as to the manner and method in which said business is conducted, and to obtain from said common carriers full and complete information necessary to enable it to perform the duties and carry out the objects for which it was created; and your petitioner is of the opinion that said contracts are not only material and relevant to the issues on trial in said proceeding, but that the production thereof as required by it, as aforesaid, is necessary to enable your petitioner to discharge its duty and execute and enforce said provisions of said Act to Regulate Commerce and to inform your petitioner as to the manner and method in which the business of said common carriers is conducted, and to enable your petitioner to obtain the full and complete information necessary to enable your petitioner to perform the duties and carry out the objects for which it was created.' But in the present case, whatever may be the right of the Commission to carry on an investigation under the general powers conferred in § 12, this proceeding was under the complaint filed, and we will examine the testimony offered with a view to its competency under the allegations made by the complainant. Coming now to the specific items of testimony which the circuit court, in dismissing the petition, considered irrelevant to the controversy, we will first consider the socalled coal purchase contracts. It is unnecessary for the present purpose to go into detail as to the provisions of these contracts. In the main they were made with coal companies owned principally by the railroad companies and contain the same general provisions. Among others, the purchase price of anthracite coal above a certain size is to be 65 per cent of the average price, computed monthly, at certain tide points, of coal of the same quality and size. All the coal mined by the contracting operators is sold, shipments to be made as called for by the purchasers. While the contracts were produced for inspection, the witnesses refused to permit them to be given in evidence. The circuit court held them to be irrelevant upon the ground that they related solely to an intrastate transaction,—the sale of the coal in Pennsylvania,—and had nothing to do with interstate commerce. It appears that the railroad companies proceeded against in the complaint are engaged in carrying coal from the anthracite coal regions to tidewater. The contracts are between certain coal companies and independent operators engaged in mining coal in that region. The testimony shows that the coal companies making the contracts are principally owned by the railroad companies. For what purpose this separate ownership is maintained it is not necessary now to inquire. The fact of such ownership is undisputed, and for the present purpose it may be conceded that the ownership is lawful under the laws of the state of Pennsylvania. The railroads are all engaged in interstate commerce, and into their affairs and methods of doing business the Commission might be, and is, lawfully authorized by the commerce act to make investigation. In speaking of this power as undertaken to be vested in the Commission, this court said in the Brimson Case, 154 U. S. 472, 38 L. ed. 1055, 4 Inters. Com. Rep. 554, 14 Sup. Ct. Rep. 1131: 'It was not disputed at the bar, nor indeed can it be successfully denied, that the prohibition of unjust charges, discriminations, or preferences by carriers engaged in interstate commerce, in respect to property or persons transported from one state to another, is a proper regulation of interstate commerce, or that the object that Congress has in view by the act in question may be legitimately accomplished by it under the power to regulate commerce among the several states. In every substantial sense such prohibition is a rule by which interstate commerce must be governed, and is plainly adapted to the object to be accomplished. The same observation may be made in respect to those provisions empowering the Commission to inquire into the management of the business of carriers subject to the provisions of the act, and to investigate the whole subject of interstate commerce as conducted by such carriers, and in that way to obtain full and accurate information of all matters involved in the enforcement of the act of Congress. It was clearly competent for Congress, to that end, to invest the Commission with authority to require the attendance and testimony of witnesses, and the production of books, papers, tariffs, contracts, agreements, and documents relating to any matter legally committed to that body for investigation.' In Interstate Commerce Commission v. Cincinnati, N. O. & T. P. R. Co. 167 U. S. 479, 506, 42 L. ed. 243, 255, 17 Sup. Ct. Rep. 896, 903, this court held that the Commission had no power to fix rates. In the course of the opinion it was said: 'It [the Commission] is charged with the general duty of inquiring as to the management of the business of railroad companies, and to keep itself informed as to the manner in which the same is conducted, and has the right to compel complete and full information as to the manner in which such carriers are transacting their business.' The testimony shows that much of the coal purchased under these contracts is sold in Pennsylvania, but a considerable portion is carried to tide water. The coal is purchased by companies owned by the railroads, for which payment is made on the basis of 65 per cent of the general average price received at tidewater by the sale of sizes above pea coal, leaving 35 per cent for the purchaser, from which he must pay transportation charges and cost of sale. Here is a railroad company engaged at once in the purchase of coal through a company which it practically owns and the transportation of the same coal through different states to the seaboard. Why may not the Interstate Commerce Commission, under the powers conferred, and under this complaint, inquire into the manner in which this business is done? It has the right to know how interstate traffic is conducted, the relations between the carrier and its shippers, and the rates charged and collected. We see no reason why contracts of this character, which have direct relation to a large amount of its carrying trade, can be withheld from examination as evidence by the Commission. These contracts were made by the officials of the railroad companies, who were also officials of the coal companies, after protracted conferences. Upon the ground that they pertained to the manner of conducting a material part of the business of these interstate carriers, which was under investigation, we think the Commission had a right to demand their production. And, further, it was claimed that, while these contracts were in form purchases of coal, their real purpose was to fix a rate for transportation to the carriers, who were in fact paid for the only interest they had in the coal,—the right to receive pay for its transportation,—by the percentage retained from the selling price after deducting charges and expenses in marketing the coal. It is to be remembered in this connection that we are not dealing with the ultimate fact of controversy, or deciding which of the contending claims will be finally established. This is a question of relevancy of proof before a body not authorized to make a final judgment, but to investigate and make orders which may or may not be finally embodied in judgments or decrees of the court. If the railroad companies in fact received their compensation for carriage from the sum retained by the coal companies as was claimed, then, whether they realized more or less than their published rates depended upon the price of coal. Taking the prices at times as shown in the statements filed with the Commission, it is apparent that the 35 per cent was less than published rates, and if that was the sum received for transportation, would work a discrimination against coal companies not having such contracts, and paying the full rate. On the other hand, if the coal companies paid the full rate, and failed to realize as much from the percentage of the selling price retained, they would be losing money, and as they were owned by the railroad companies the loss would be ultimately theirs, and not the coal companies. It may be that the Commission or the courts will ultimately find that these contracts do not fix the compensation received by the carriers, and that, as claimed, the full rate is paid by these purchasing companies, and if there is a loss on these contracts it is made up in other business; but, as we have said, the question concerns the relevancy of proof, and not whether it finally establishes the issue made, one way or the other. Relevancy does not depend upon the conclusiveness of the testimony offered, but upon its legitimate tendency to establish a controverted fact. Relevancy is that 'quality of evidence which renders it properly applicable in determining the truth or falsity of the matter in issue between the parties to a suit.' 1 Bouvier Law Dict. Rawle's Revision, 866. The inquiry of a board of the character of the Interstate Commerce Commission should not be too narrowly constrained by technical rules as to the admissibility of proof. Its function is largely one of investigation, and it should not be hampered in making inquiry pertaining to interstate commerce by those narrow rules which prevail in trials at common law, where a strict correspondence is required between allegation and proof. It is contended in the answers filed in the circuit court that to require the production of these contracts would be to compel the witnesses to furnish evidence against themselves which might result in forfeiture of estate, in violation of the 5th Amendment to the Constitution; would subject the parties to unreasonable searches and seizure of their papers, contrary to the 4th Amendment, and would require them to produce papers pertaining wholly to intrastate affairs, in violation of the reserved rights of the people of the states, and beyond the power of the Commission, whose duties are limited to investigations pertaining to interstate commerce. At the hearing the constitutional objections do not seem to have been relied upon; those argued pertained to the relevancy of the proof and the rights of persons not before the court to be protected from the publication of their private contracts. As to the constitutional objection based upon the 5th Amendment, the act as amended February 11, 1893 [27 Stat. at L. 443, chap. 83, U. S. Comp. Stat. 1901, p. 3173], expressly extends immunity from prosecution or forfeiture of estate because of testimony given in pursuance of the requirements of the law. The full consideration of the subject and the decision of this court in Brown v. Walker, 161 U. S. 591, 40 L. ed. 819, 5 Inters. Com. Rep. 369, 16 Sup. Ct. Rep. 644, renders further consideration of this objection unnecessary. The origin and interpretation of the 4th Amendment to the Constitution, securing immunity from unreasonable searches and seizures, was fully discussed by Mr. Justice Bradley in the leading case of Boyd v. United States, 116 U. S. 616, 26 L. ed. 746, 6 Sup. Ct. Rep. 524. In that opinion the learned Justice points out the analogy between the 4th and 5th Amendments, and the object of both to protect a citizen from compulsory testimony against himself which may result in his punishment or the forfeiture of his estate, or the seizure of his papers by force, or their compulsory production by process for the like purpose. In the course of the opinion it is said: 'Breaking into a house and opening boxes and drawers are circumstances of aggravation; but any forcible and compulsory extortion of a man's own testimony or of his private papers to be used as evidence to convict him of crime or to forfeit his goods is within the condemnation of that judgment. In this regard the 4th and 5th Amendments run almost into each other.' And see Adams v. New York (decided at this term), 193 U. S. ante, p. 372, 24 Sup. Ct. Rep. 372. As we have seen, the statute protects the witness from such use of the testimony given as will result in his punishment for crime or the forfeiture of his estate. Testimony given under such circumstances presents scarcely a suggestion of an unreasonable search or seizure. Indeed, the parties seem to have made little objection to the inspection of the papers, the contest was over their relevancy as testimony. Nor can we see force in the suggestion that these contracts were made with persons not parties to the proceeding. Undoubtedly the courts should protect nonlitigants from unnecessary exposure of their business affairs and papers. But it certainly can be no valid objection to the admission of testimony, otherwise relevant and competent, that a third person is interested in it. As to the so-called Temple Iron Company contracts: It appears that in 1889 certain operators in the anthracite coal region organized a competing railroad, with a view to carrying their product from the coal regions to market at tidewater. It became evident that this company was likely to succeed, and to construct a competing railroad from the coal fields to the sea. With a view to acquiring its property, five of the leading railroad carriers purchased the collieries whose proprietors were developing the new scheme. To pay for these the charter of the Temple Iron Company was purchased and its capital stock increased. The company issued a large amount of stock and bonds, and the contracting railroad companies agreed among themselves and with the Guaranty Trustee Company of New York, as trustee, to guarantee a 6 per cent dividend upon the Temple Iron Company stock and the payment of principal and interest of the bonds. This ended the building of an independent line, and the transportation of coal from the collieries is distributed among the carriers interested. It is argued that these contracts, if given in evidence, will tend to show a pooling of freights, in violation of the 5th section of the commerce act. While this testimony may not establish such an arrangement as is suggested, it has, in our opinion, a legitimate bearing upon the question. There is a division of freight among several railroads, where, by agreement or otherwise, the companies have a common interest in the source from which it is obtained. Furthermore, we think the testimony competent as bearing upon the manner in which transportation rates are fixed, in view of determining the question of reasonableness of rates, into which the Commission has a right to inquire. To unreasonably hamper the Commission by narrowing its field of inquiry beyond the requirements of the due protection of rights of citizens will be to seriously impair its usefulness and prevent a realization of the salutary purposes for which it was established by Congress. An appeal is also prosecuted from the refusal of the circuit court to order the witnesses Eben B. Thomas and William H. Truesdale to answer certain questions respecting the prices and sale of coal. Upon the principles already discussed we think these questions had legitimate bearing upon the matters into which the Commission was making inquiry. We are of the opinion that the circuit court erred in holding the contracts for the purchase of coal by the companies or directly by the railroad, where a percentage of the price was agreed to be paid for the coal, to be irrelevant, and in refusing to order their production as evidence by the witnesses who are parties to the appeal, and likewise erred as to the Temple Iron Company contracts, and in refusing to require the witnesses aforesaid to answer the questions stated in the petition, and the order appealed from is reversed, and the cause is remanded to the Circuit Court for further proceedings in accordance with this opinion. Mr. Justice Brewer dissents.
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The object of construction is to ascertain the legislative intent, and, if possible, to effectuate the purposes of the lawmakers. Although not in accord with its technical meaning, or its office when properly used, a frequent u~e of the proviso in Federal legislation is to introduce new matter'extending, rather than limiting or explaining, that which has gone before. Under the proviso in § 3 of the act of February 19, 1903, a direct appeal may be taken to this court from a judgment of the Circuit Court in a proceeding brought by the Interstate Commerce Commission, under the direction of the Attorney General, to obtain orders requiring the testimony of witnesses and the production of books and documents. Relevancy of evidence does not depend upon the conclusiveness of the testimony offered, but upon its legitimate tendency to establish a contioverted fact. Where a company owned by a railroad purchases coal at the mines or breakers under a contract fixing the price to the vendor on the basis of a percentage of the average price received at.tidewater in another State, it being claimed that this transaction was the means whereby the railroad gave preferential rates to the companies selling the coal, the Interstate Commerce Commission may, in a proceeding properly instituted, inquire into the manner in which the business is done, and compel, through the Circuit Court, the testimony of witnesses and the production of the contracts relating thereto. Where coal companies who had organized a competing line to tidewater made contracts with 'railroad companies for the purchase of the collieries by the railroad companies, which resulted in the abandonment of the proposed competing line, the contracts are relevant evidence bearing upon the manner in which rates'were fixed, and their production before the Commission in an investigation, properly commenced, as to the reasonableness of coal rates, should be ordered by the Circuit Court. Compelling the giving of such testimony and the production of such contracts does not deprive the witnesses of any rights under the Fourth and 'Fifth Amendments to the Constitution of the United States.
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SECTION 1. INDIAN EDUCATION ASSISTANCE TRUST FUNDS.
(a) Establishment.--
(1) Arizona fund.--
(A) In general.--There is established in the
Treasury of the United States a fund to be known as the
Interim Arizona InterTribal Education Assistance Trust
Fund subject to the same conditions as described for
the Arizona InterTribal Trust Fund in subsections (c)
and (d) of section 405 of the Arizona-Idaho
Conservation Act of 1988, Public Law 100-696
(hereinafter ``the Act'').
(B) Amounts in fund.--The fund established in
subparagraph (A) shall consist of such amounts as are
appropriated and allocated to the fund pursuant to
subsection (b).
(2) Navajo fund.--
(A) In general.--There is established in the
Treasury of the United States a fund to be known as the
Interim Navajo Education Assistance Trust Fund subject
to the same conditions as described for the Navajo
Trust Fund in subsections (c) and (d) of section 405 of
the Act.
(B) Amounts in fund.--The fund established in
subparagraph (A) shall consist of such amounts as are
appropriated and allocated to the fund pursuant to
subsection (b).
(b) Authorization of Appropriations.--
(1) In general.--There are authorized to be appropriated an
aggregate of $34,900,000 to the funds established in subsection
(a) to be allocated in accordance with paragraph (2). In no
case shall moneys appropriated pursuant to this authorization
diminish or otherwise reduce any Indian account.
(2) Allocation.--
(A) Arizona fund.--Sums appropriated pursuant to
paragraph (1) shall be allocated to the fund
established in subsection (a)(1) in the same manner as
sums are allocated to the Arizona InterTribal Trust
Fund pursuant to section 405 of the Act.
(B) Navajo fund.--Sums appropriated pursuant to
paragraph (1) shall be allocated to the fund
established in subsection (a)(2) in the same manner as
sums are allocated to the Navajo Trust Fund pursuant to
section 405 of such Act.
(c) Reimbursement.--
(1) In general.--
(A) Full appropriation.--Notwithstanding title IV
of such Act, if the full amount specified in subsection
(b)(1) is appropriated and allocated in accordance with
subsection (b) prior to the date on which the first
annual payment is required to be made by Collier to the
Arizona InterTribal Trust Fund and the Navajo Trust
Fund under title IV of such Act, and the Trust Fund
Payment Agreement required under section 403 of such
Act, the Secretary of the Interior shall direct Collier
to pay to the Secretary of the Treasury for deposit
into the general fund of the Treasury any amounts
otherwise due and payable to the United States under
the Trust Fund Payment Agreement, in lieu of and in
full satisfaction of payment to the United States by
Collier for deposit into the Arizona InterTribal Trust
Fund and the Navajo Trust Fund pursuant to title IV of
such Act and such Trust Fund Payment Agreement.
(B) Partial appropriation.--Notwithstanding title
IV of such Act, if less than the amount specified in
subsection (b)(1) is appropriated and allocated in
accordance with subsection (b) prior to the date
described in subparagraph (A), at such time as Collier
is required to make any payment under the Trust Fund
Payment Agreement described under subparagraph (A), the
Secretary of the Interior shall direct Collier to pay,
in full satisfaction and in lieu of such payment--
(i) to the Secretary of the Treasury for
deposit into the general fund of the Treasury,
an amount which bears the same proportion to
the total amount of such payment as the total
of the sums appropriated pursuant to subsection
(b) bears to $34,900,000, and
(ii) to the Secretary of the Interior for
deposit into the Arizona InterTribal Trust Fund
and Navajo Trust Fund, in accordance with
section 405 of the Act, the remainder of each
such payment.
(2) Definition.--As used in this subsection, the term
``Collier'' has the meaning provided under section 401(5) of
such Act.
(d) Termination.--
(1) In general.--The funds established in subsection (a)
shall terminate on the date of the first Collier payment
described in subsection (c)(1)(A).
(2) Transfer of remaining sums.--Upon termination under
paragraph (1)--
(A) The Secretary of the Treasury shall transfer
any sums remaining in the fund established in
subsection (a)(1) to the Arizona InterTribal Trust Fund
established under section 405(a) of such Act; and
(B) The Secretary of the Treasury shall transfer
any sums remaining in the fund established in
subsection (a)(2) to the Navajo Trust Fund established
under section 405(a) of such Act.
(e) No funds appropriated under this Act shall be available to the
InterTribal Council in Arizona (ITCA) and Navajo Tribe (as defined in
section 401 of the Act) or be deposited into the Interim Trust Funds
established by section 1 of this Act unless the ITCA and Navajo Tribe
provide written consent to the method of payment established in this
Act in lieu of the method of payment provided in the Act and the Trust
Fund Payment Agreement authorized by the Act.
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Establishes in the Treasury the Interim Arizona InterTribal Education Assistance Trust Fund and the Interim Navajo Education Assistance Trust Fund (interim education funds). Subjects such funds to the same conditions as those for the Arizona InterTribal Trust Fund and the Navajo Trust Fund (permanent funds) under the Arizona-Idaho Conservation Act of 1988.
Authorizes appropriations. Requires reimbursement of such sums to the Treasury by the Barron Collier Co. in fulfillment of its obligations under such Act.
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SECTION 1. SHORT TITLE.
This Act may be cited as the ``Open Skies Treaty Compliance
Assurance Act''.
SEC. 2. DEFINITIONS.
In this Act:
(1) Appropriate congressional committees.--The term
``appropriate congressional committees'' means--
(A) the Committee on Armed Services, the Committee
on Foreign Relations, and the Select Committee on
Intelligence of the Senate; and
(B) the Committee on Armed Services, the Committee
on Foreign Affairs, and the Permanent Select Committee
on Intelligence of the House of Representatives.
(2) Covered state party.--The term ``covered state party''
means a foreign country that--
(A) is a state party to the Open Skies Treaty; and
(B) is a United States ally.
(3) Intelligence community.--The term ``intelligence
community'' has the meaning given that term in section 3 of the
National Security Act of 1947 (50 U.S.C. 3003).
(4) Observation aircraft, observation flight, and sensor.--
The terms ``observation aircraft'', ``observation flight'', and
``sensor'' have the meanings given such terms in Article II of
the Open Skies Treaty.
(5) Open skies treaty.--The term ``Open Skies Treaty''
means the Treaty on Open Skies, done at Helsinki March 24,
1992, and entered into force January 1, 2002.
SEC. 3. CERTIFICATION OF NEW SENSORS.
(a) Limitation.--Notwithstanding any other provision of law, no
funds may be obligated or expended to aid, support, permit, or
facilitate the certification or approval of any new sensor, including
to carry out an initial or exhibition observation flight of an
observation aircraft, for use by the Russian Federation on observation
flights under the Open Skies Treaty unless the President, in
consultation with the Secretary of State, the Secretary of Defense, the
Secretary of Homeland Security, and the Director of National
Intelligence, submits to the appropriate committees of Congress the
certification described in subsection (b)(1).
(b) Certification.--
(1) In general.--The certification described in this
subsection is a certification for a new sensor referred to in
subsection (a) that--
(A) the capabilities of the new sensor do not
exceed the capabilities imposed by the Open Skies
Treaty, and safeguards are in place to prevent the new
sensor, or any information obtained therefrom, from
being used in any way not permitted by the Open Skies
Treaty;
(B) the Secretary of Defense, the commanders of
relevant combatant commands, the directors of relevant
elements of the intelligence community, and the Federal
Bureau of Investigation have in place mitigation
measures with respect to collection against high-value
United States assets and critical infrastructure by the
new sensor;
(C) each covered state party has been notified and
briefed on concerns of the intelligence community
regarding upgraded sensors used under the Open Skies
Treaty, Russian Federation warfighting doctrine, and
intelligence collection in support thereof; and
(D) the Russian Federation is in compliance with
all of its obligations under the Open Skies treaty,
including the obligation to permit properly notified
covered state party observation flights over all of
Moscow, Chechnya, Abkhazia, South Ossetia, and
Kaliningrad.
(2) Specific sensor approval.--The certification described
in paragraph (1) shall be required for each sensor and platform
for which the Russian Federation has requested approval under
to the Open Skies Treaty.
(c) Waiver Authority.--
(1) In general.--The President may waive the requirements
of subparagraph (D) of subsection (b)(1) if, not later than 30
days prior to certifying or approving a new sensor for use by
the Russian Federation on observation flights under the Open
Skies Treaty, the President submits a certification to the
appropriate committees of Congress that the certification or
approval of the new sensor is in the national security interest
of the United States that includes the following:
(A) A written explanation of the reasons it is in
the national security interest of the United States to
certify or approve the sensor.
(B) The date that the President expects the Russian
Federation to come into full compliance with all of its
Open Skies Treaty obligations, including the overflight
obligations described in subparagraph (D) of subsection
(b)(1).
(C) A detailed description of efforts made by the
United States Government to bring the Russian
Federation into full compliance with the Open Skies
Treaty.
(2) Form.--Each certification submitted under paragraph (1)
shall be submitted in unclassified form, but may include a
classified annex.
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Open Skies Treaty Compliance Assurance Act This bill prohibits funds from being obligated or expended to aid the certification or approval of any new sensor, including to carry out an initial or exhibition observation flight of an observation aircraft, for use by the Russian Federation on observation flights under the Treaty on Open Skies unless the President certifies to Congress that: the new sensor's capabilities do not exceed capabilities imposed by the treaty and safeguards are in place to prevent the sensor or any information obtained from being used in any way not permitted by the treaty; mitigation measures are in place regarding collection by such sensor of high-value U.S. assets and critical infrastructure; each covered state party has been briefed on intelligence concerns regarding upgraded sensors used under the treaty, Russian Federation war fighting doctrine, and related intelligence collection; and the Russian Federation is in compliance with all of its treaty obligations, including the obligation to permit properly notified covered state party observation flights over all of Moscow, Chechnya, Abkhazia, South Ossetia, and Kaliningrad. Certification is required for each sensor and platform for which the Russian Federation has requested approval under the treaty. The President may waive the requirement of Russian compliance with treaty obligations by certifying that sensor certification or approval is in U.S. national security interests. Such certification must include the date such compliance is expected and a description of U.S. efforts to achieve it. "Covered state party" means a foreign country that is a state party to the treaty and a U.S. ally.
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The bill was brought by Sarah S. Sutton, the appellee, against Erastus F. Brown and Francis A. Kenyon, executors of the last will of John S. Kenyon, and was in the nature of a suit for specific performance of a contract, and for the conveyance of the title to a certain house and grounds in the city of Oconomowoc, in Wisconsin. There was no written agreement on the subject, but the suit is based upon the idea of a verbal promise or agreement upon the part of John S. Kenyon, in his life-time, that he would convey the property to Mrs. Sutton, the appellee, and that such part performance had been had in its execution as to bring the case within the exception made by that doctrine in the requirement of the statute of frauds that the sale of lands must be in writing. The executors and trustees under the will filed their answer, denying the existence of any verbal promise at all, and also denying that it was so far performed as to justify a decree. The court, however, rendered a decree in favor of Mrs. Sutton, that she was entitled to the property, and that the defendants in the action should convey to her. It is from this decree that the present appeal is taken. A history of the relations of the testator, John S. Kenyon, to Mrs. Sutton and her husband, is essential to a correct decision of the case. The following facts regarding them are in the main undisputed by either party: In 1868, Mr. Kenyon lived with his wife in Harlem, in the city of New York; was a man of some wealth, an officer of a bank in Harlem, and at his death left an estate of nearly $200,000. He was without children or close kin in whom he was much interested, as was shown by his will, in which, after having made some slight provisions for some of his sisters, he devised the great bulk of his fortune to 15 charitable and religious societies or associations. The father of Mrs. Sutton lived in New York and Brooklyn, and she had been intimate with Mr. Kenyon since her birth, being at the time of the trial about 44 years old. Prior to 1868 she married Charles T. Sutton, and ever since lived with him as his wife, but had no children. The wife of Mr. Kenyon was for a very considerable period, certainly from 1868 to 1872, when she died, an invalid, requiring much care and attention. Mrs. Sutton spent a large part of her time, both before and after the date first mentioned, with her, assisting in the care of her during sickness. In 1868, Mr. Kenyon and his wife visited Oconomowoc, at the house of George F. Westover, whose wife was a sister of Mrs. Sutton. Thereafter the Kenyons removed to Tremont, near New York city, where Mrs. Kenyon died in February, 1872. During a large part of this time, and at her death, Mrs. Sutton was with her. Shortly after her decease, Mr. Kenyon and Mr. and Mrs. Sutton went to Oconomowoc together, lived in the family of Westover, paying therefor a consideration, and so continued until April, 1874, except a few weeks, when Mr. Kenyon was absent. Westover then removed to Chicago, and on the 28th of that month Kenyon bought a cottage in the village of Oconomowoc, and lived in it with the Suttons, who kept the house. On July 1, 1874, Kenyon made a deed of this cottage to Mrs. Sutton, declaring it to be in accordance with the request of his wife during her life-time, as a tribute from her to Mrs. Sutton. For seven years these three continued living together in that cottage, Kenyon making certain contributions for board, or as his quota towards the expenses of housekeeping. During these years he made frequent trips to New York on business connected with the bank of which he was a shareholder, and probably a director, being absent from several weeks to three months at a time. While in New York in 1879, upon one of these visits, he made a will, in which, after disposing of several small items of personal property, giving to Mrs. Sutton all the personal property in her house at Oconomowoc, except his jewels, and the interest during her life on one-third of $10,000, and to his sisters some slight bequests of jewelry and furniture, the body of his estate was bequeathed to his executors, as trustees for the associations referred to. In November, 1879, the Suttons closed the cottage, and spent the winter in New York, in a house belonging to Mr. Kenyon, and furnished by him; the family consisting of the same three persons and one servant. Thereafter they seem to have vibrated for a year or two between the house in New York and the cottage in Oconomowoc, always living together as one family. In September, 1880, Mr. Kenyon bought, for the consideration of $2,300, the premises in dispute in this action, known as the 'Oaks,' situated in Oconomowoc, and in 1881 began the erection thereon of a large dwelling-house. Late in the fall of 1881 he went with the Suttons again to New York, and they all resided together as usual in his house, until he was stricken with apoplexy, and died in January following. The bill alleges that the property called the 'Oaks,' was bought by Mr. Kenyon for Mrs. Sutton; that he had promised to buy it for her as a consideration for the services rendered to him, and to be thereafter performed, in keeping house for him, and giving him her care and society; and that he also agreed to build thereon a new house, of sufficient dimensions to accommodate others besides these three who lived together as a family, so that, if the necessity should arise, in the event of Mr. Kenyon's death, she might be enabled to make a living by keeping boarders. It is claimed that the land was bought and the house built in accordance with this promise, or at least that it was in progress of erection at the time of his death. A definite promise on his part to do this is asserted, the consideration for which was sufficient in what she had already done and had agreed thereafter to do for him. Mr. and Mrs. Sutton were placed in possession of the premises as soon as the purchase was made, and they were living there at the time the present suit was brought. The controversy in the present case is really whether any such promise or agreement was made, because, if it was, there can be little doubt that the delivery of possession to the Suttons, and the construction of this house under their direction and control, is a sufficient part performance to take the case out of the statute of frauds. As Mrs. Sutton was not competent as a witness to establish a promise on the part of Mr. Kenyon to convey the property to her, under section 858 of the Revised Statutes, and as Mr. Sutton, being her husband, was also incompetent, it can be readily seen, in the absence of any written agreement upon the subject, or any correspondence between the parties, which could not reasonably be expected to exist, as they were nearly always living together, that it is almost impossible to prove a direct verbal promise from Mr. Kenyon to her in regard to that matter. Any such promise must be largely inferred from the situation and circumstances of the parties, and must depend almost wholly on verbal statements made by Mr. Kenyon to others. The depositions in the case contain full and ample evidence of the declarations of Mr. Kenyon on this subject. They are, in substance, that he had bought the property for Mrs. Sutton; that he had given it to her, had placed her in possession of the ground, and was building a house upon it for her at the time of his death; and that he treated her and her husband as, and frequently called them, his 'children,' or 'the children.' There can be no question that Mr. Kenyon bought the property in dispute with the intention, clear and well defined in his own mind, that he was buying it for Mrs. Sutton; and when he came to build the house upon it, there can be as little doubt that he erected it for her, with the intention that it should be her house, expecting to live with the Suttons as long as he lived, and that it would go to her in the event of his dying before she did. It may be said, and it is true, that this unexecuted purpose of his is not of itself sufficient to constitute a contract to convey to her the house; nor would it alone be a sufficient foundation for a decree; but it leaves the case in such a position that no very strong evidence is required that such a contract did exist, as it would be entirely consistent with all the other uncontradicted testimony in regard to what he had said and done, and with the possession of the property by her. There is also quite a sufficient consideration for such a promise in the services, care, and attention rendered by her to an old man in his declining years, in connection with the fact that at the time he bought this property he was very sure of receiving these attentions as long as he lived. The evidence shows that this expectation on his part was fully realized. Let us examine briefly the positive evidence of a promise on this subject. We have the testimony of Mr. Westover, whose relation to Mr. Kenyon and the family has already been noted, in whose house they lived for two summers prior to his removal to Chicago, and who seems to have been on intimate terms with Mr. Kenyon, that he had many conversations with him about his private matters, although he was not a man who talked generally about his affairs. He states that Mr. Kenyon was not well, and never was well, since he first went to Oconomowoc; that he was a pretty old man, at least old enough to be Mrs. Sutton's father, and probably older than her own father was; that he needed a great deal of nursing, and wanted more care and attention, when near her, in the little details of life, than any man he ever saw; that he seemed to dread to be alone, and in fact she went everywhere with him, and devoted the most of her life during those years to him, as a daughter to a father. He says: 'She filled the place that an exceedingly attentive daughter would to a weak, sickly, old father. I never saw a case in a family of more marked service in that line than was that case. No person but Mrs. Sutton was relied upon to look after his personal wants at all.' The witness then went on to state a conversation that he had with Mr. Kenyon about his affairs, in which he said of his relatives: 'All they want of me is my money. Some day they will be terribly disappointed;' and proceeded to say that no one had filled the place of a relative to him as had Mrs. Sutton; that he was under great obligations to her, and how to discharge it,—to repay her, or attempt to repay her,—was something that he was considering; and that he was going to recompense her for her services to him in some way. After the purchase of the property in dispute here, Westover asked Mr. Kenyon about it, and gives his language as follows: 'He told me then that that was the final result of his determination as to Mrs. Sutton; that he had bought the place for her; that she wanted it, and he had made up his mind that it was the very best that could be done, and he had promised her that he would put a house on the place, such as she wanted, and the place should be hers. He said that it was not perhaps as much as Mrs. Sutton was really entitled to, but he thought that after all it would be better for her than if she should be provided for in some other way that would be even larger. He said that he had made her home his home, as I knew, and it was understood that he was to continue thereafter making his home with Sortie,—that is, Mrs. Sutton.' Mr. Kenyon then went on to say, as the witness states, that by having a fine building on the place she would be able, if anything should happen to him, to take care of herself by keeping boarders; and continued: 'The house will be such as Mrs. Sutton wants. I have agreed that Sortie shall have the house just exactly as she wants it,—just to suit her. He said he was to continue to make his home with Mr. and Mrs. Sutton, and that in view of the past, and her services to him, and what had been done, and in view of the position which she was occupying as to him, and the services she had performed and was still to perform, he had promised her that place; and he had bought it for her because it pleased her; and he had promised to build such a house thereon as she should want.' If this statement be true, here is at once the promise and the consideration for it, amounting to an agreement, stated in Mr. Kenyon's own language, with all the clearness of detail necessary to a contract. There was no question about the property to be conveyed, the promise to build the house, the parties to the agreement, or the consideration for the promise. The witness then details a conversation which he had in 1881, in which Mr. Kenyon reminded him of what he had said to him before on the same subject, and said that after much thought he had concluded that was the best arrangement, and she had agreed to it; that it was arranged between them that he should continue to live with her in the future; that he was under obligations to her for what she had done for him individually, and that he had made arrangements with her, and she would continue to do for him as she had done, and he had promised to buy that place for her, and fix it up, and deed it to her. The witness then testified as to the board paid by Mr. Kenyon, and said: 'I understood from him, as he said, that the services of Mrs. Sutton which she had rendered him, and which he was under obligations to requite, together with those of the same kind which she had agreed to perform in the future, were the basis of his promise to convey her the premises in dispute, and were outside of anything which he had furnished in cash expense of living.' Julia L. White, who was well acquainted with Mr. Keynon, details various conversations with him, in one of which he said that he wanted to give the property which is now in controversy to Mrs. Sutton, for she had taken care of him, and had promised and was to continue to take care of him as long as he lived, and that he then said he had promised to give it to her. She testifies that Mr. Kenyon stated to her that he desired to purchase this property for Mrs. Sutton on account of the services and care she had already given to him, and had promised to give him; and that he said, on Wednesday before his death, that he had bought the place; that it was for Mrs. Sutton, to make her home there, for the care she had given him, and for the care she promised to take of him until his death. Mr. Small, who lives adjoining the property in dispute, details a long conversation he had with Mr. Kenyon in regard to the building of the house, and states that he said: 'I am not building it for myself; I am building it for Mrs. Sutton.' Mr. Kenyon then went on to say that he did not want to be bothered with the building of it; he had left it all to Mr. and Mrs. Sutton; he had nothing to do with the building except to furnish the money; that the rooms had all been arranged by her; and that he intended she should have it as she wanted it. He states that he asked Mr. Kenyon in whom the title was,—whether it was in Mrs. Sutton at that time,—and he replied: 'No, when the property was bought I took the deed, but I intend to have the property all fixed in Mrs. Sutton.' 'I said, 'Haven't you done anything about it yet?' He said, 'No.' Said I. 'You may have it in your mind to do something you want to do, but if you do not do it, if you should be taken away, it won't be done. Under our law, unless there is a writing made, or the parties put in possession under the agreement, it won't amount to anything.' He said: 'I can't make out anything here for the reason my papers are in New York. I desire to make some alterations in my affairs. Then I shall fix it up; but I shall put them in possession. I have put them in possession. Mrs. Sutton has had possession ever since I went to New York in the summer. I turned it over to them then, and they are now in possession. Mr. Sutton has the keys to the little house, and all the property, and I intend they shall be in possession, and are in possession just as perfect as I can make it. If I had my papers here I should have them altered now. I have my attorney down there. I don't want to do anything until I get down there.' He said: 'I propose to give it to them. Mrs. Sutton has been very kind to me in sickness and disease in my family; took care of my wife until she died. I have a good home myself with them. I propose now to repay them in this way." The witness also testifies as to other conversations, in which Mr. Kenyon declared that the keys and the possession were in the Suttons; that the property was theirs to all intents and purposes; that the title was taken in his name when he bought the property, but that he intended Mrs. Sutton should have it, and that he frequently spoke of them as 'the children.' Mrs. Williams, an insurance agent, while examining the house at the request of Mrs. Sutton, with reference to a policy, met Mr. Kenyon on the premises. He showed her over the house, and directed her attention to certain alterations that the Suttons had made in the plan, and said: 'It is as they want it; it is the children's; it don't make any difference to me how they fix it.' And, again, she states that he said in regard to the gables that he would have made every one different, but the children (a phrase which he often used with reference to Mr. and Mrs. Sutton) wanted it so, and it did not make any difference to him; 'it was theirs.' To William K. Washburn, who was working about the grounds, Mr. Kenyon said that he was fixing it up for Mr. and Mrs. Sutton; that it was their place, and they were in possession. In regard to some of the details, Mr. Eastman, another witness, testified that Mr. Kenyon said he had nothing to do with the building of it; that Mr. Sutton was building it for himself. Mr. Anderson, a resident of Oconomowoc, testifies that he asked Mr. Kenyon, in a conversation that they had about the place now in dispute, if he felt anything like a granger; and that his reply was that he could not say he did, as he did not buy the place for himself, but had bought it for Mrs. Sutton, who undoubtedly would be a permanent resident, althought he should make it his home with them while there, as he had for several years made their place his home. In another conversation, Mr. Kenyon said to him that the building was much larger than they intended in the start, but he was building it entirely for Mrs. Sutton, and it had been enlarged at her suggestion; that Mr. Sutton had the entire control, and he had authorized him to build and finish it, and make the improvements, exactly as Mrs. Sutton wished. On his cross-examination he testified that Mr. Kenyon said he had bought it, but not for himself; that he had bought it for Mrs. Sutton, and they would make it a permanent residence, and he should make it his home with them whenever he was there. Celestia Edwards testifies to a conversation with Mr. Kenyon about the property, in which she remarked that they would have a very beautiful place and home there, to which he replied that he liked it very well, but it did not make any difference to him; 'it was all theirs; it was the children's; they were fixing it up just to suit themselves.' Clarence I. Peck also testifies to a conversation about this place, in which Mr. Kenyon said that he intended to finish it up in good style for 'the children,' as he called them; meaning Mr. and Mrs. Sutton; and also that he said on another occasion: 'The place belongs to Charlie and Sortie, anyhow, and I thought I would give the job of superintending it to Charlie.' Some comment is made that the most direct testimony on the subject of a promise comes from the sister and brother-in-law of the plaintiff, but there is nothing to discredit their evidence, no impeachment of their character is attempted, nor is it shown that they are in any way dependent upon her. No reason is given why they should state anything false, and their testimony is wholly uncontradicted. It is also consistent with all the circumstances of the case. It is further made a subject of comment that Mrs. Sutton did not make claim to the title to this property, nor bring this suit, for two or three years after the death of Mr. Kenyon; but it is easy to suppose that she really believed that for want of a written promise or agreement she could not enforce her right to the property. While this principle of the necessity for a written agreement in regard to the title to real property is almost universally understood among all classes of people, however unlearned in the law, it is not very well known that there is an exception to it in the case of a promise, not in writing, but so far performed as to take it out of the statute of frauds. On the whole, we think that the evidence justifies the inference that Mr. Kenyon, having a clear intention that this property should belong to Mrs. Sutton, bought it for her, and also promised her that he would make over the title to her upon consideration that she should take care of him during the remainder of his life as she had done in the past. The decree of the circuit court is therefore affirmed.
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On the whole proof in this case, some of which is referred to m the opinion of the court. Held, (1) That the appellant's intestate intended that the property in dispute should belong to the appellee, that he bought it for her, and that he promised her orally that he would make over the title to her upon the consideration that she should take care of him during the remainder of his life, as she had done in the past; (2) That there had been sufficient part performance of this parol contract to take it out of the operation of the Statute of Frauds, in a court of equity, and to render it capable of being enforced by a decree for specific performaice. (3) That the appellee had been guilty of no laches by her delay in commencing this suit.
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JOHN GIBSON } v. } FREDERICK J. BARNARD and others. } I. W. W. Woodworth conveyed to John Gibson the exclusive right to the Woodworth planing-machine in and for the city and county of Albany, with the single exception of two rights in the town of Watervliet, in said county. With this exception, the whole right of the county was in Gibson. II. The two machines, the right to use which was thus excepted, consisted, first, of a machine in use at the time in said town by Rousseau and Easton, which had been erected under the first term of the patent, and the right to continue which they claimed during any extension of the grant; and, second, of a machine which Gibson had conveyed to Woodworth, and by him to Rousseau and Easton. III. Woodworth, on the 19th of May, 1842, agreed with Rousseau and Easton to make an assignment to them by which they would become vested more fully with the right of running the machine in the town of Watervliet, which they claimed under the first term of the patent; and also to assign to them the right to use the other machine which had been conveyed to him by Gibson, of even date with this agreement. In consideration of which, Rousseau and Easton paid at the time $200; and, in case the extension should be obtained, and assignment of the two machines, as above stipulated for, made, they would pay, in addition, $2,000, in four equal annual instalments. IV. This agreement of the 19th of May, 1842, was modified by an indorsement on the same, signed by all parties, 26th April, 1843, in which it was recited that Rousseau and Easton had, on that day, executed and delivered to Woodworth eight promissory notes, of $250 each, payable at different periods, the last one 1st July, 1846; in consideration thereof, the said Woodworth agreed that, upon payment of said notes as they became due, he would make the assignments stipulated for in the said agreement referred to. V. On the 12th of August, 1844, Woodworth assigned all his interest in this contract with Rousseau and Easton in respect to the two machines, and all right and title to the use of the same, to J. G. Wilson, by which he took the place of Woodworth. VI. On the 13th of November, 1844, Gibson renounced and released all right or claim, if any, to these two machines, to J. G. Wilson, this having been supposed necessary to enable Wilson to sue Rousseau and Easton for breach of their contract, or for an infringement of the Woodworth patent and extension by the use of the machines in the town of Watervliet, after refusing to fulfil their contract; Gibson claimed no right to the use of the two machines in said town, as he had already passed to Woodworth all the right which he ever had in the same. The release was given for abundant caution, the better to secure to Wilson the right which he had acquired by the assignment from Woodworth. VII. On the 5th of December, 1845, J. G. Wilson granted to F. J. Barnard & Son a license to construct and use two machines in the town of Watervliet, for which he was to receive $4,000; but it was then and there agreed, that, if the decision of the Supreme Court of the United States, in a case then pending between Wilson and Rousseau and Easton, should be against Wilson, so as to exclude him from the use of the said two machines in the said town, then he was to repay to Barnard & Son $2,000, paid to him on that day in part satisfaction of the purchase-money; but if the decision should be in favor of Wilson, and Barnard & Son should be put in possession of the right to erect and use the two machines in said town, then they were to pay to Wilson a further sum of $2,000. VIII. Upon the foregoing state of facts, and upon the pleadings and proofs in the case, it is quite clear, that, down to the time of the grant of Wilson to Barnard & Son, the 5th of December, 1845, Gibson, the complainant, possessed the exclusive right and title to the planing-machine in and for the county of Albany, with the exception of the two rights in the town of Watervliet, namely, the right to use one claimed by Rousseau and Easton, under the first grant, and more effectually secured to them by Woodworth, and the one sold and assigned by Gibson to Woodworth, and by him to Rousseau and Easton. And, further, that Wilson possessed no interest in any right to the use of the planing-machine in the town of Watervliet, except in the two so derived from Woodworth by assignment of the 12th of August, 1844, and which had before been sold to Rousseau and Easton, and of which they were in the actual use and enjoyment. Wilson therefore could grant his interest, whatever it might be, in these two rights, and nothing more; and this was all that could pass to Barnard & Son under the grant of the 5th of December, 1845. The terms of that agreement also establish, that it was the interest of Wilson in these two rights which he intended to sell, and Barnard & Son to purchase. IX. The failure of Rousseau and Easton to fulfil their agreement of purchase with Woodworth, the interest in which belonged to Wilson, did not, of itself, operate to annul and cancel the contract. It was a contract partly executed; $200 of the purchase-money had been paid, and promissory notes given for the residue. The machines had been erected, and were in operation; and although a court of equity might have decreed the contract to be delivered up and cancelled upon terms, until then Rousseau and Easton must be deemed in the lawful use and enjoyment of the two rights under the patent. And even assuming the contract to be annulled, and the parties remitted to their original rights, it is clear that Wilson had power to grant but one of the rights in said town of Watervliet, as the other was secured to Rousseau and Easton, under the decision of the court in Wilson v. them. An injunction was accordingly issued. On the 11th of April, 1848, the Circuit Court of the United States for the Northern District of New York was in session at Utica, when the following decree was passed:——'This cause having been brought on to be heard upon pleadings and proofs, and Mr. Wm. H. Seward having been heard on the part of the plaintiff, and Mr. Marcus T. Reynolds on the part of the defendants, and due deliberation having been had, it is ordered, adjudged, and decreed, that the defendants in this cause be, and they are hereby, perpetually enjoined from any further constructing or using in any manner, and from selling or disposing in any manner, of the two planing-machines mentioned in said bill as erected by them in the town of Watervliet, in the county of Albany, or either of said machines, which machines are machines for dressing boards and plank, by planing, tonguing, or grooving, or either, or in some separate combination, constructed upon the principle and plan specified and described in the schedule annexed to letters patent issued to Wm. W. Woodworth, administrator of William Woodworth, on the 8th day of July, 1845; which letters were a renewal upon a formal surrender for an imperfect specification of letters patent issued to Wm. Woodworth on the 27th day of December, 1828, and extended on the 16th day of November, 1842, to take effect on the 27th day of December, 1842, and again extended by act of Congress on the 26th day of February, 1845, and from infringing upon or violating the said patent in any way whatsoever. 'And it is further ordered, adjudged, and decreed, that it be referred to Julius Rhodes, Esq., of Albany, counsellor at law, as a master pro hac vice in this cause, with the usual powers of a master of this court, to ascertain and report the damages which the plaintiff has sustained, arising from the infringement of his rights by the defendants, by the use of the said two machines by them. 'And it is further ordered, that the report of the said master herein may be made, either to this court in term time, or to one of the judges thereof at chambers in vacation; and that either party may, on ten days' notice to the other of time and place, apply, either to this court in term time, or to one of the judges thereof at chambers in vacation, for confirmation of such report. 'And it is further ordered, that either party may at any time, on ten days' notice of time and place to the other, apply to this court in term time, or to one of the judges thereof in vacation, for further directions in the premises. 'And the question of costs, and all other questions in this cause, are hereby reserved until the coming in of the said report. 'And the complainant shall either pay to the defendants, or set off against the damages to be awarded, the sum of two thousand dollars, which he offered in his bill to pay them, with interest from the 5th of December, 1845.' An appeal from this decree brought the case up to this court. Mr. Seward moved to dismiss the appeal, upon the ground that the decree was not a final one, which motion was opposed by Mr. Taber. Mr. Seward stated the case, and then said that it was admitted that an appeal would not lie except from a final decree. The only question is, what is the distinction between final and interlocutory decrees. The same principle may be applied which governs the construction of judgments at law; those are final which grant a remedy upon the whole matter, and dismiss a party from the court. But in equity there is some difficulty, owing to the different nature of the relief which is granted. A final decree in equity may be defined to be one which definitively adjudges the whole subject-matter; an interlocutory decree, one which disposes of some parts and reserves others for future decision. (2 Daniel, Ch. Pr., Part 2, pp. 631, 632, 635, 638, 641, London ed. of 1840.) The present decree is not final, when tested by the principles laid down by Daniel. 1. It expressly reserves the question of costs. They do not depend upon any statute, but upon judicial discretion. 2. It does not determine the amount of damages, but refers the subject to a master to ascertain and report. 3. Even if the master decides, still the decree does not adjudge them to be according to the report. 4. It does not settle any principles upon which damages can be computed; whether they are for one machine or two, &c. 5. It reserves a decision upon the rights of the respective parties. The complainant offered, in his bill, to pay $2,000; the decree says he shall do so, but does not say whether it is an extinguishment of the claim, or only a set-off. 6. The bill prays that the machines and their produce may be delivered to the plaintiff; but the decree is silent upon this point. The question is reserved. It may be said that a perpetual injunction is decision of the rights of the parties. But it is only an order, which the court may revoke at any time. It cannot be pleaded in bar. We think the parties are still in court. 7. The decree does not give all the relief which is prayed for in the bill. Whatever is asked and not granted is left undecided, because the bill is not dismissed as to that. (Mr. Seward then commented on 10 Wheat. 502; 11 Wheat. 429; 8 Peters, 318; 9 Peters, 1; 6 Cranch, 51; 15 Peters, 287; 2 How. 62; 5 How. 51; 6 How. 203; Ib. 208, 209.) Mr. A. Taber, against the motion. 1. The decree in question is a 'final decree,' upon a sound construction of the Judiciary Act of 1803, chap. 93, § 2. The fundamental purpose of this act was to give an appeal, if required, where the amount in controversy was sufficient, to the end that the substantial rights of parties should not be finally disposed of by Circuit Courts. Not so of the English statutes of limitations, authorities construing which have been cited on the other side. Their leading object was, not to give or take away an appeal, but to restrict by a short limitation appeals taken pendente lite, allowing a longer one to those taken after the cause was ended. Wherefore, the words 'final decree,' in these English acts, are justly interpreted to mean one which is a finis of the cause, and in our act, one which is a finis of substantial rights of the parties, which, unless immediately appealed from, would take away property from one and give it to another, or work irreparable mischief. (6 How. 202, 203, 206; 13 Peters, 15; 3 Cranch, 179; 2 Smith's Chan. Prac. 187, 188.) The decree in question would do both. It was intended by the Circuit Court finally to adjudge and determine the patent rights in controversy. It takes them away from the defendants, and vests them in the complainant; and, by the perpetual injunction it directs, immediately renders worse than valueless,—an encumbrance upon the ground,—the expensive erections of the defendants for their enjoyment. For the costs of the cause, no appeal would hereafter lie. (4 Russell, Ch. 180; 3 Peters, 307, 319; 2 How. 210, 237.) The other matters reserved are merely in execution of the decree already passed. Before these matters could have been adjusted, and an appeal prosecuted to effect, our patent rights would have expired by their own limitation, and nothing remain for the appellate offices of this court but a post mortem examination of our rights for the vindication of abstract law. The perpetual injunction, the main relief prayed, is a final execution; not the mere extension of a preliminary injunction, which latter has been repeatedly denied in this cause, and is wholly inapplicable to a contest between assignees under the same patent, which is, therefore, no more prim a facie evidence for one party than the other. (4 Burr. 2303, 2400; 1 Vernon, 120; Ib. 275; 7 Ves. 1; 3 Meriv. 622; 14 Ves. 130-132; Drewry on Injunctions, 223, § 5, 221, § 3, 223, § 4; Eden on Injunctions, 207.)2. But if this is not a case for an appeal under the act above cited, it assuredly must be one of 'all other cases,' provided for by the seventeenth section of the patent act of 1836, chap. 747. In patent causes, evidently for the reasons above alluded to, there is no limitation of an appeal except the safe one, that 'the court shall deem it reasonable to allow the same.' If the act means this honorable court, this appeal has been allowed by it, by one of its justices at chambers. If, as is more probable, the Circuit Court was intended (6 How. 458, and note, and 477), then Justice Nelson, being a quorum of that court (Laws of 1837, chap. 801, sect. 3), acted as such, judicially, in allowing it at chambers. (1 Brock. 380.) Or if error has occurred in the manner of taking this appeal, no statute restriction being in the way, it should be allowed, in furtherance of justice, to be amended now. (Laws of 1789, chap. 20, sect. 32; 16 Peters, 319; 7 Wend. 508.) And this, according to the last-cited case, would be properly done by simply denying this motion. 3. If it be replied to the last point, that this is not a case arising under the patent law, but under the common law of contracts and assignments, then the Circuit Court never had jurisdiction, the cause being between residents of the same State, and an appeal lies at any time, to reverse its decision already made, and dismiss the cause. (2 How. 244; 3 ib. 693; 8 Peters, 148; 16 ib. 97; 3 Dallas, 19.) Mr. Justice M'LEAN delivered the opinion of the court. This is an appeal from the decree of the Circuit Court for the Northern District of New York. The parties claim conflicting interests as assignees of Woodworth's patented planing-machine. The cause was submitted to the circuit judge, who decreed, that the defendants below be perpetually enjoined from any further constructing or using in any manner the two planing-machines, &c., and the case was referred to a master to ascertain and report the damages which the plaintiff has sustained, arising from the infringement of his rights by the defendants by the use of the said two machines. The report of the master to be made in term time, or to one of the judges at chambers in vacation, and on ten days' notice either party to move for confirmation of the report, &c. The question of costs was reserved until the coming in of the report, &c. A motion is made to dismiss this appeal, on the ground that the decree is not final. No point is better settled in this court, than that an appeal may be prosecuted only from a final decree. The cases are numerous where appeals have been dismissed, because the decree of the Circuit Court was not final. It is supposed there was a departure from this uniform course of decision, at the last term, in the case of Forgay et al. v. Conrad, 6 How. 201. In that case the court says,—'The decree not only decides the title to the property in dispute, and annuls the deeds under which the defendants claim, but also directs the property in dispute to be delivered to the complainant, and awards execution. And according to the last paragraph in the decree, the bill is retained merely for the purpose of adjusting the accounts referred to the master. In all other respects, the whole of the matters brought into controversy by the bill are finally disposed of as to all of the defendants, and the bill as to them is no longer pending before the court.' 'If these appellants, therefore, must wait until the accounts are reported by the master and confirmed by the court, they will be subjected to irreparable injury.' The decree in that case would have been executed by a sale of the property, and the proceeds distributed among the creditors of the bankrupt, and lost to the appellants, before the minor matters of account referred to the master could be adjusted and acted on by the court. The course of procedure in the Circuit Court was irregular, and the consequent injury to the defendants would have been irreparable. Effect should not be given to its final orders by the Circuit Court, until the matters in controversy shall be so adjusted as to make the decree final. Any other course of proceeding will, in many cases, make the remedy by an appeal of no value. The decree in the case under consideration is not final, within the decisions of this court. The injunction prayed for was made perpetual, but there was a reference to a master to ascertain the damages by reason of the infringement; the bill was not dismissed, nor was there a decree for costs. In several important particulars, this decree falls below the rule of decision in Forgay v. Conrad. The execution of the decree in that case would have inflicted on the defendant below an irreparable injury. The bill was dismissed as to the principal matters in controversy, and there was a decree for costs. It is said that the decree in this case, by enjoining the defendants below from the use of their machines, destroys their value and places the defendants in a remediless condition. That in the course of a few months their right to run the machines will expire, and that no reparation can be obtained for the suspension of a right by the act of the court. It is alleged, too, that many thousands of dollars have been invested in the machinery, which by such a procedure becomes useless. The hardship stated is an unanswerable objection to the operation of the injunction, until all the matters shall be finally adjusted. If the injunction has been inadvertently granted, the Circuit Court has power to suspend it or set it aside, until the report of the master shall be sanctioned. And unless the defendants below are in doubtful circumstances, and cannot give bond to respond in damages for the use of the machines, should the right of the plaintiff be finally established, we suppose that the injunction will be suspended. Such is a correct course of practice, as indicated by the decisions of this court, and that is a rule of decision for the Circuit Court. The appeal is dismissed. This cause came on to be heard on the transcript of the record from the Circuit Court of the United States for the Northern District of New York, and was argued by counsel. On consideration whereof, and it appearing to the court here that the decree of the court below complained of is not a final decree within the meaning of the act of Congress, it is thereupon now here ordered and decreed by this court, that this cause be and the same is hereby dismissed for the want of jurisdiction.
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Where a decre in chhneery refers thq matters to a.master to ascertain the -amount of damiges, and in the mean time the bill is not dismissed, nor is there a decree for costs, the decree is not a final one, from which an appeal will lie to this court, although there is a perpetual injunction granted, The amount of damage which will follow from restraining a party from using a machine held under a patent right is a proper considerationto be addressil to the' Circuit Court but does not cdstitute a ground of appeal.
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THIS was an appeal from the Circuit Court of the United States for the District of Maine, sitting as a court of equity. The complainant, Veszie, resided at Bangor, in the state of Maine, and the defendants in Massachusetts, viz., Nathaniel L. Williams at Boston, and Stephen Williams at Roxbury. On the 1st of January, 1836, Nathaniel L. Williams and Stephen Williams were the owners of two mill privileges, situated on Old Town Falls, in the town of Orono and state of Maine. On that day, they offered the property for sale, at public auction, in the town of Bangor. The whole controversy in the case having arisen respecting the manner in which the sale was effected, it is necessary to state the circumstances as they were disclosed by some of the witnesses. The owners employed Mr. Stephen H. Williams to proceed to Bangor and attend to the sale, who hired an auctioneer by the name of Head to effect it. The most material parts of the transaction are thus stated by Head, who was examined as a witness on the part of the complainant. 'I was employed, in the winter of 1836, by a son of one of the Messrs. Williams, to sell certain real estate in Orono, as an auctioneer. The estate sold was mill privileges, situated in Old Town, near Old Town Falls. It was put up at a minimum price of $14,500, but it is my impression that the minimum price was not fixed or named at the sale; but it commenced at a much lower sum, which I have now forgotten, and run on up to about eighteen thousand dollars; it might have been more or less. I then received from Samuel J. Foster bids, who was the only person that bid, to my recollection, after the sum last named. Foster bid a hundred dollars, and I then advanced upon him; he then bid again, another hundred dollars, or some other sum; I again advanced upon him, and so on, till the bid got up to forty thousand dollars, when it was struck off to Samuel J. Foster. I don't recollect the terms of sale. A certain per cent. was to be paid down, but what it was I don't recollect.' To the third interrogatory. 'I don't recollect that said sale was conditional, except as I have stated. I don't recollect the sum first offered, but it is my impression that it was something like five thousand dollars. I don't recollect what the bids were from that sum. My impressions are, that Samuel J. Foster, Ira Wadleigh, John B. Morgan, and, I think, James Purrington, were the bidders. There might have been others. The highest sum bid by any person other than the purchaser was somewhere in the vicinity of eighteen thousand dollars, to the best of my recollection.' To the fourth interrogatory. 'I have already answered, as near as I can recollect, as to the highest sum offered as a bid, except that at which it was struck off. After other bidders stopped, he, Foster, bid a hundred dollars, or so. I then advanced upon him, and he then again bid, and so on up to forty thousand dollars.' To the fifth and a half interrogatory, viz., 'What was the highest sum offered as a bid at said sale, which you received as a bid, except the bids offered by said Foster?'—'It was somewhere about eighteen thousand dollars, as I have already answered. The actual bidders were about to that sum, as near as I can recollect. It is my impression that I advanced from that sum, or thereabouts. I cannot say for a certainty from what sum I so advanced. But I think it could not have exceeded twenty thousand dollars at which the actual bidders stopped, and my impression is, that they ceased to bid beyond eighteen thousand dollars.' To the sixth interrogatory. 'I never communicated said facts to said Veazie, to my knowledge. I cannot recollect when I first communicated them to any one who would have been likely to have communicated them to Veazie. About six months ago, J. P. Rogers, Esq., came to me, and said that he had knowledge of certain facts that I knew. I did not know what he meant. He then referred to the sale of this property. I did not tell him anything about it at that time. He called on me again; I refused, as I did not know but I might implicate myself. Afterwards, he called again, and I then told him, if Veazie would give me a writing holding me harmless, I would state the facts. He said he would give me such a writing, as attorney for Veazie, which would be good. He did so, and I then went forward and gave my deposition in a case between the parties, as to the facts of the case.' To the ninth cross-interrogatory. 'Said defendants, nor any agent of theirs, did not request me to employ any by-bidder at the sale, nor to use any other than fair and lawful means to enhance the price of the said property.' Samuel J. Foster, who was the person employed by Veazie, the complainant, to bid for him thus testified:—— To the second interrogatory. 'I did attend said auction sale in the winter of 1836. It was held on the 1st day of January, 1836, at the Penobscot Exchange, in Bangor. Certain mill privileges and appurtenances, situate near or on the Old Town Falls, was the property sold.' To the third interrogatory. 'The highest sum bid for said property was forty thousand dollars. I bid it, and was acting and bidding for Samuel Veazie.' To the fourth interrogatory. 'Previous to the sale, I was instructed by General Veazie to bid to the amount of twenty thousand dollars. At the time of the sale, after the bidding had gone up to twenty thousand dollars, Mr. Veazie came to me, under considerable excitement, and told me to advance and bid it off. I have no distinct recollection what my first bid was, but my impression is, that I commenced with about five thousand dollars. It advanced pretty rapidly, till it amounted to fifteen or sixteen thousand dollars. I think, between that point and twenty thousand, the bidding was not very prompt, but it went on finally from twenty thousand, till it was struck off to me at forty thousand dollars. I think I did not communicate my relation to General Veazie to any one, until the property was knocked off. I then notified Mr. Bright, the agent of the defendants, a Mr. Williams, the son of one of the defendants, and Mr. Head, the auctioneer, that I bid for General Veazie, and the parties made arrangements to meet, the afternoon of the same day, at the office of William Abbott, Esq., in Bangor, to settle and close the business.' To the fifth interrogatory. 'John Bright, who acted as agent, and a Mr. Williams, son of one of the defendants, were present, apparently acting for them. I have no recollection of their making any remark at the time of sale, nor that they did anything, at that time, about the sale.' To the fifth and one half interogatory. 'My impression is, that I saw or heard no bidding after it got up to sixteen or eighteen thousand dollars. The biddings, audibly, or by signs, then ceased to be known to me. I observed Mr. Wadleigh, and believe he was present from the beginning to the close of sale sale. My impressions are very strong that I noticed Mr. Wadleigh's biddings till it reached to sixteen or eighteen thousand dollars. After that, I am positive that there were no signs, or open bids, that would enable me to discover who, or that any one, was bidding against me. I endeavored to discover if Wadleigh was doing so, and could find no sign or nodding from him, or from any one else.' Ira Wadleigh, also a witness on the part of the complainant, thus testified:—— To the second interrogatory. 'I know the property, and that it was sold to Samuel J. Foster at forty thousand dollars. About a month before the sale I was in Boston, and called on Nathaniel L. Williams to see if he would sell me the property. He said they thought of putting it up at auction, and would let me know in a few days, as soon as he could see his brother Stephen. I advised him to sell, so that mills could be built that winter. On coming out of Boston, I met Stephen Williams's son, Stephen H. Williams, who was coming down to see to selling the property; and after he reached Bangor, I saw him here, and talked with him about the property, and asked him if he would sell it at private sale. He told me he would sell it for fifteen thousand dollars or thereabouts;—I think he told me so. Afterwards it was advertised to be sold at the Exchange in Bangor. Stephen H. Williams appeared to be acting for the defendants.' To the third interrogatory. 'The property was sold at auction; I was present at the sale, and bid I cannot say how many times, nor what sums I bid; but somewhere from fifteen to twenty thousand dollars. I don't remember bidding over twenty thousand dollars, although I might have done so. Nicholas G. Norcross bid; I think Myrick Emerson bid, and Samuel J. Foster, and some others; but I do not recollect who. I cannot tell how much they bid, but from where it started up along, but how far I cannot say.' To the fourth interrogatory. 'When they first commenced, the bids were audible, and properly made; but after they got up to twenty thousand dollars and over, it was by signs.' To the fifth interrogatory. 'I saw General Veazie at the auction; he was about the room there; and was walking back and forth in the long entry part of the time. I did not see anything very particular in his manner. I did not mind much about it.' To the sixth interrogatory. 'I talked with Head before the sale, and told him I wanted to buy it. He asked me how high I would go. I told him to seventeen thousand dollars, if I could not get it for less. I agreed with Norcross to take it at that sum; and told Head that I would hold my pencil between my thumb and forefinger, and turn it for a bid. I soon went up to twenty thousand and upwards, and stopped. I found the bidding was going on without my nodding, turning my pencil, or making any sign, and stepped up to Head, and asked him if he was bidding for me. He made no answer; and I said, 'For God's sake, don't bid any more for me,' and went and sat down and bid no more. After the sale I had a conversation with young Williams, and, I think, told him how the bidding went on; but he must have seen it, as he was siiting behind, and close to Mr. Head. He said he was surprised at the sale; that the property sold for much more than they expected.' To the seventh interrogatory. 'There were four privileges; and they were not then actually worth more than two thousand dollars a privilege. I don't believe it would sell to-day for four thousand dollars at auction,—the whole property, that is, the four privileges.' Four other witnesses, viz., Myrick Emerson, Levi Young, Richard Moore, and Isaac Smith, who were present at the sale, were examined on behalf of the complainants, whose evidence corroborated that of the preceding witnesses, as far as mere spectators could have any knowledge of the transaction. Ten witnesses were examined on the part of the defendants. Stephen H. Williams, the authorized agent of the owners of the property, thus testified:—— 'My name is Stephen H. Williams. I am thirty-four years old. I am a merchant, and reside in Roxbury; I know the said parties. Mr. Veazie resides in Bangor, and is the president of a bank; I don't know his occupation. Mr. Williams resides in Boston, and is retired from business; he is my uncle. 'To the second interrogatory he says:—In the winter of 1835-36, I was employed by the defendants to go to Bangor, and act as their agent in selling at auction certain mill privileges, at Orono or Old Town; I went to Bangor; the sale took place, January 1, 1836; the property was sold by Henry A. Head, as auctioneer, and was knocked off to a man named Foster, but Mr. Veazie was the purchaser. The price was forty thousand dollars. 'To the third interrogatory he says:—On arriving at Bangor, being a stranger, I made inquiries of Mr. John Bright as to who was the most respectable auctioneer in the place, and he referred me to Mr. Henry A. Head, as the person employed in disposing of the government lands, and in his opinion the most desirable auctioneer. I accordingly applied to him to dispose of the property, and he consented to do so. On the day of the auction, previous to commencing the sale, he asked me what amount was to be paid to him for his services; being unacquainted with the amount of commissions usually paid to an auctioneer, I told him that he should be paid what was customary. Nothing further was said respecting his fees previous to the sale. 'To the fourth interrogatory he says:—I have already answered this interrogatory in my reply to the third interrogatory. 'To the fifth interrogatory he says:—I did not authorize, or request, or in any way suggest to the said auctioneer, to bid himself on the said property, or employ any other person to do so, or to do or permit any thing unfair, unusual, or in any way improper, to be done at the said sale to enhance the price of the said property; and I did not know, nor had I any reason to believe, that he intended to do so. 'To the sixth interrogatory he says:—I did not, nor did any one authorized by me, make any bid on the said property at the said sale. 'To the seventh interrogatory he says:—I knew the said Wadleigh, at the time of the sale, so as to speak to him; he was present at the sale. 'To the eighth interrogatory he says:—I did see the said Wadleigh, while the sale was going on, go up to the auctioneer and speak to him; the bid had then gone to thirty-nine thousand dollars. He did not go up and speak to him more than once; I am distinct in my recollection on this point. 'To the ninth interrogatory he says:—I did ask the auctioneer immediately after the sale what Mr. Wadleigh had said to him, when he came up to him during the sale, and he replied to me, that, on going into the room immediately previous to the sale, Mr. Wadleigh gave him unqualified authority to purchase the property for him, or, in other words, had told him that, when the property was knocked off, it was to be his (Wadleigh's). He (the auctioneer) also told me that, when Wadleigh came up to him on that occasion, he said to him, 'For God's sake stop, and bid no more for me.' 'To the tenth interrogatory he says:—The property was knocked off to a Mr. Foster, but after the sale, much to my surprise, I found that Mr. Veazie was the purchaser. He had told me previous to the sale, that he would not give more than twelve thousand dollars for it. He immediately desired a bond for the delivery of the deed. The bond was accordingly drawn, with a penalty of fifty thousand dollars, for the delivery of the deed, at Bangor, within ten days or a fortnight. After receiving the bond, and while he was folding it up, he said to me that he thought it proper to state, now that he was secure himself, that an express had been fitted out for the purpose of purchasing this property before the news of the sale, by auction, could reach the owner; and it is my impression that he said that Mr. Wadleigh was engaged in it, but of this I am not positive. I left to go to Boston and obtain a deed and return to Bangor. I remained in Boston a day or two to complete the deed, which having been done, I set out to return to Bangor. Between Boston and Portsmouth I found, by some conversation with the passengers, that Mr. Veazie had passed us on the road going to Boston. I accordingly made arrangements to return to Boston and meet him, and thus save my journey to Bangor. On returning to Boston I found he had left there an hour or two previous to my arrival. A day or two after, I started for Bangor again, and overtook Mr. Veazie at Portland. We then travelled together to Bangor. During the journey, he told me that he had made up his mind to give forty thousand dollars for the property; that it had been canvassed in his family, and arrangements been made to that effect, and that he had secured this Mr. Foster to hold him harmless to that amount, and that the journey he had made to Boston was to obtain knowledge that I had a deed for him, as he was suspicious, on the return of those who went on the express, that they had succeeded in their design. And, by way of showing his anxiety, he told me that he had left Bangor for Boston on the evening of a large party given by his wife. He said that the value of this property to him was caused by a quarrel and lawsuit between him and Wadleigh, which rendered it of vast importance to either of them to obtain the property. He also said, that he had traced the person who conducted the express as far as the Tremont House, and there all trace of him was lost. 'To the eleventh interrogatory he says:—Previous to and on the morning of the sale, Mr. Veazie manifested much indifference as to the purchase of the property, observing that he would give twelve thousand dollars for it, and no more. Of course I was surprised when I found he had given forty thousand dollars for it. 'To the fourth cross-interrogatory he says:—Immediately after the sale, I was informed by the auctioneer, that, when Wadleigh stopped him at thirty-nine thousand dollars, he (the auctioneer) then bid the remaining one thousand dollars on his own responsibility, alternately with Foster. On my return to Boston, I related this (with every thing else that had transpired) to the defendants, my employers.' John Bright, who was the agent for the owners of the property prior to the arrival of Stephen H. Williams, thus testified to the fourth interrogatory:—— 'I did not, nor did any one to my knowledge or belief, request or authorize, or in any way suggest to the auctioneer, or any other person, to bid at said sale, in behalf of the defendants, or to make any fictitious or pretended bid at the said sale, or to do anything, or permit anything to be done, unfairly, to enhance the price of the said property.' To the fifth interrogatory:—— 'I did attend the sale. I did not bid on the property, nor did I then know, nor had I cause to believe, that said auctioneer was himself bidding on the said property, nor that any one was bidding on said property for the defendants, or was using any unfair means to run up said property, or to enhance the price thereof.' The witnesses all concurred, that there had been a great depreciation in the market value of mills and mill privileges since January 1, 1836. The terms of sale were ten per cent. of the purchase-money payable immediately, and twenty per cent. more upon the delivery of the deed. These two sums together made $12,000, all of which was paid by Veazie. The balance, being $28,000, was divided into two notes of $14,000 each, payable in one and two years. The first was also paid, and the interest upon the second up to the 1st of January, 1840. The amount still due was, therefore, one note of $14,000, with interest from the 1st of January, 1840. Upon this note suit was brought against Veazie, prior to the filing of the bill in this case. These were the circumstances attending the sale, as stated by the principal witnesses. On the 21st of July, 1841, the following release was executed by Veazie to Head, viz.:—— 'Know all men by these presents, that I, Samuel Veazie, of Bangor, in the county of Penobscot, and state of Maine, Esquire, in consideration of one dollar to me paid by Henry H. Head and Nehemiah O. Pillsbury, both of said Bangor, auctioneers, and late copartners in the auction business, under the firm and style of Head and Pillsbury, the receipt whereof I do hereby acknowledge, do hereby release and discharge said Head and Pillsbury, jointly and severally, from all damages by me sustained, or supposed to be sustained, and from all action, or causes of action, to me accrued, or accruing in consequence of any misfeasance, nonfeasance, or malfeasance, or any illegal management by them done, performed or suffered, at the sale at auction of Nathaniel L. Williams and Stephen Williams's real estate, situated in Old Town, in said county of Penobscot, on or near Old Town Falls, so called, which was sold at auction on or near January 1st, 1836, by the said Head and Pillsbury, as auctioneers; hereby, also, releasing the said Head and Pillsbury from any claim for damage, by or in consequence of any of their proceedings relating to said sale of said property. 'In witness whereof, I have hereto set my hand and seal, this 21st day of July, A. D. 1841. 'SAMUEL VEAZIE. [L. S.]' This release was introduced into the cause by agreement of counsel, filed at a subsequent stage of the proceedings; by which agreement it was admitted that neither the respondents nor their counsel had any knowledge of the existence of the release until after the publication of the evidence in the suit, and also further admitted, that the release and circumstances under which it was given might be referred to and made use of in the cause with the same effect as if the same had been put in issue by a cross-bill and admitted by the answer. It will be seen by referring to the third volume of Story's Reports, page 66, that Mr. Justice Story did not consider this agreement as a proper mode of introducing the release into the cause, when it came up before him for argument. According to his suggestion, the proper steps to do so were immediately taken by filing a supplemental bill. These remarks are here made for the purpose of connecting the report of the case in 3 Story, 54, with this statement. On the 23d of July, 1841, Veazie filed his bill of complaint on the equity side of the Circuit Court of the United States for the District of Maine. The bill stated, that, on January 1, 1836, defendants owned two mill privileges in Maine, and on that day offered them for sale, at auction, at Bangor, in Maine, employing one Head as auctioneer, and, by themselves or agent, instructed Head to put them up, beginning with $14,500, minimum, and prescribed certain conditions of sale as to payment; that the complainant, relying on the good faith of defendants and of Head, attended the sale, and bid, by one Foster as agent, and, the minimum having been offered, Head continued to announce a still higher sum, and Foster, supposing it fair and honest, made a still higher bid, and so on, until said property was struck off to Foster, for the plaintiff, at $40,000. And thereupon the complainant, supposing the sale had been conducted and the bidding made in good faith, complied with the conditions of sale, paid $4,000 in cash, $8,000 more on delivery of the deed, gave his note for $14,000 in one year, with interest, which he has since paid, and his other note for $14,000 in two years, with interest, on which he has paid the interest annually to January 1, 1840. And defendants executed a deed to complainant, and complainant a mortgage of same to defendants to secure said notes, and another of $1,900, received as part of the $8,000 aforesaid. The bill further alleges, that there was no real bid at said auction for more than $16,000 or $18,000; but that the auctioneer, by sham bids, run up said Foster from about $16,000 to $40,000, Foster's being the only real bon a fide bids over about $16,000; by means of which pretended bidding and management of the auctioneer, defendants have received from the complainant a large sum of money which they ought not to have received; and so the complainant has been deceived and defrauded. The bill further alleges, that complainant discovered the fraud since January 1, 1840, and notified defendants of it, and hoped they would have refunded the money; but they not only refused to rescind, but have commenced a suit on the unpaid note, which is now pending in this court, and attached complainant's property. The defendants are requested to answer specifically,—1. Whether they authorized the sale, and employed Head as auctioneer. 2. Whether the land was put up at the minimum stated, and if Head was directed not to sell for less, and authorized to bid for defendants to that extent. 3. What sum they agreed to pay Head, prior to the sale; what they did pay; was he to be paid any sum if there was no sale; how he was to be paid. 4. What amount, principal and interest, complainant has paid defendants. 5. Whether the note on which defendants have brought a suit is one of those given for said purchase. 6. Whether the whole purchase-money was not paid and secured by complainant, and the deed given directly to him; and whether it was not stated and understood, at that time, that Foster acted simply as complainant's agent at said sale. The prayer of said bill is, that said suit may be enjoined, the note delivered up, the sale rescinded, and the money paid back with interest. The answer admitted the ownership, and that defendants employed one Bright to advertise the property for sale at auction on January 1, 1836. That a few days before the sale they sent Stephen H. Williams, a son of one of the defendants, to Bangor, to employ an auctioneer and make all necessary arrangements. The defendants denied having instructed, intimated, or suggested to Williams, Bright, or any other person, that there should be any by-bidding or other unfairness; or that, before said sale, said Williams, Bright, the auctioneer, or any other person, received from defendants any instruction or suggestion that said property should be run up by fictitious bids, or that any thing unfair should be done. They admit that they did fix $14,500 as a minimum, but aver that they gave no instructions to keep the same secret; that they believe the fact was well known at the sale; that they have been informed, and believe, that no bid was made by any agent of theirs in consequence of the fixing of the said minimum price, bids far exceeding that amount being immediately made by those desiring and intending to purchase. The conditions of sale, as to payment, are admitted to have been as stated in the bill. The answer admitted that Stephen H. Williams employed Head as auctioneer, who was said to be duly licensed, skilful, experienced, and believed to be honest. The defendants aver their belief that said Williams did not authorize or suggest any by-bidding or other unfairness by Head, but employed him as a public officer, duly empowered by the laws of Maine. They further aver, that they have been informed, and believe, that said Williams did not authorize Head to bid up to the minimum, or to make any bid on their account. The defendants aver that they were not present at the sale; but deny that there was no real bid above $16,000 or $18,000, or any such sum; or that the auctioneer run up Foster, by sham bids, from $16,000, or any such sum, to $40,000; or that there was no real bid above $16,000, or any such sum. Defendants admit that complainant informed them, after the sale, that Foster was his agent, and allege that complainant exhibited great anxiety to have the conveyance made; and they have been informed, and believe, that there was great competition at the sale, both on account of the intrinsic value and the local position of the property, and that complainant authorized Foster to bid as high as $40,000. Defendants completed the sale, gave a deed, received payment of all but the last note, and interest on that to January 1, 1840; but complainant did not notify defendants that he considered the sale invalid until January 14, 1841, and they then brought a suit, as alleged. That more than five years and six months have elapsed since said sale, and defendants have lost the benefit of evidence as to occurrences at said sale, and there has been a great depreciation in such property, owing to an increase in the number of mills, the scarcity of timber, and financial difficulties in that region, by which mill-sites have much depreciated in value; and defendants believe that changes have been made in the property by building or altering. The defendants do not know when, in particular, the complainant pretends to have discovered the alleged fraud; but whatever was done at the sale might have been known, on inquiry, at any time; and they pray for proof of diligence. They believe that complainant, since the changes in value, would gladly annul the bargain, and compel defendants to repay the price, and pay for his expenditures; but they submit that this ought not to be, after such a lapse of time and the changes in condition and value, especially as they deny the fraud alleged, and any concealment, on their part, of any thing done at the sale. That S. H. Williams agreed to pay Head for his services what was customary, and did pay him $200, after the sale, which defendants think was reasonable; and there was no agreement that Head was to receive nothing if no sale was effected. It has been before mentioned, that when this cause came up for argument before Mr. Justice Story, as reported in 3 Story, 54, he suggested that a supplemental bill should be filed, for the purpose of properly introducing the release to Head into the cause. The supplemental bill alleged that Head paid no consideration for the release, and made no satisfaction; that it was not intended as a discharge of any claim against the defendants; and if such was its effect, it was a fraud and a mistake; that it was given because Head refused to disclose the facts, on the ground that complainant might sue him, and complainant wished to obtain proof with a view to institute proceedings in equity against defendants; that the whole agreement with regard to it was between Head and complainant's counsel, and it was signed by complainant without inquiry, and without any negotiation between Head and complainant, and no indemnity against Head's liability to defendants was asked or intended. The supplemental bill then prayed that said release may be reformed and restrained to the true intention of the parties. The answer to this supplemental bill stated that the existence of the release was not discovered by defendants until after the testimony had been taken in the original case; that defendants now insist on it as a bar; do not know whether any consideration was paid for it; and as to the intentions of the parties, or any understanding as to its legal effect, no fraud was practised to procure it to their knowledge, or any language used that was not intended by complainant, by whom it was signed by the advice of counsel and under no mistake of fact; and it is not competent for him to control or alter it by extrinsic evidence. They have no knowledge of the intentions of the parties to it, or what inducements or agreements led to it. They have been informed by Head, that Veazie's counsel promised him an indemnity, and this was accordingly given. They deny that Head expected that, after said release, he would be liable to any action by defendants, or any construction given to the release which would prevent his being held harmless against them. To this answer there was a general replication. On the 3d of August, 1844, a bill of revivor was filed against Louisa Williams, the widow and executrix of Stephen Williams, deceased, and at May term, 1845, the bill was revived by consent of counsel, and the cause set down for hearing. At the same term it came on to be heard upon the bill, answer, pleadings, and evidence, when the judges of the court, being divided in opinion on the merits of the cause, ordered and decreed that the bill be dismissed, without costs to either party. This decision is reported in 3 Story, 612. An appeal from it by the complainant below brought the case up to this court. It was very elaborately argued by Mr. Fessenden and Mr. Webster, for the complainant and appellant, Veazie, and by Mr. Davies and Mr. Gilpin, for the defendants. The points on the part of the appellant were thus stated by Mr. Fessenden. They were stated somewhat differently by Mr. Webster, as will be mentioned afterwards. As stated by Mr. Fessenden they were,—— I. That the defendants were owners and sellers of the property described, at said auction sale, by and through Head, as auctioneer; and that the complainant was purchaser of the same through the agency of Foster. II. That Head, the auctioneer, did, by pretended and illegal bidding at the sale, greatly enhance the price to the complainant; that he actually received no bid from any bon a fide bidder, or person proposing to purchase, other than the complainant's agent, above the sum of twenty thousand dollars, or thereabouts; but, by illegal and fraudulent practices, induced the complainant's agent to bid, and the complainant to pay, a much larger sum than they would have done had said sale been fairly conducted. III. That Head, the auctioneer, was the general agent of defendants for all the purposes of the sale, and in all the transactions connected therewith; and they are responsible for all his acts, and his knowledge, connected with the sale, and cannot avoid that responsibility on the ground that he was a public officer. IV. That an auctioneer cannot legally be a bidder on his own account; and therefore, whether the bidding by Head was really for himself, as intending to purchase, or merely pretended, for the purpose of enhancing the price, it was equally a fraud upon the complainant, and vitiated the sale. V. That defendants became actual parties to the fraud by having received information of one illegal act of the auctioneer at the sale, before the contract was closed, which they did not communicate to the complainant, but concealed, and by which they were put upon inquiry. VI. That equity will not allow the defendants to retain the proceeds of a fraud committed by their agent, whether they had knowledge of it or not. VII. That Head was not a necessary party to the bill. VIII. That the release to Head and Pilsbury is no bar,—— 1. Because equity will not extend its operation beyond its legal effect and the intention of the parties, which were a release of damages. 2. Because it was a release to the agent, and not to the principal. 3. Because the defendants would have no right of action against Head and Pilsbury, should the sale be rescinded. 4. The extent and design of a release, like a receipt, are explainable by extrinsic evidence. IX. That the claim of the complainant to rescind the contract is not barred by lapse of time. Because six years had not elapsed between the sale and the filing of the bill, or between the discovery of the fraud and the filing of the bill, and there had been no loss of evidence or change in the actual condition of the property, such as would justify the court in refusing relief; and because the circumstances attending the sale were not such as to excite the complainant's suspicions, or put him upon inquiry. X. Even if there was no fraud, the sale should be rescinded for mutual mistake of a material fact. As stated by Mr. Webster, they were,—— 1. That an auctioneer is the agent of the owner until the sale is made, and also afterwards, until he gives a memorandum in writing. This writing is given in order to avoid the statute of frauds, and in making it, the auctioneer becomes the agent of both parties. 2. That fraud by an auctioneer, committed whilst he is the agent of the vendor, vitiates a sale as thoroughly as if it had been committed by the vendor himself. 3. That it is not necessary to show that the principal was cognizant of the fraud. 4. That the auctioneer is the alter ego of the party who employs him. What he knows, he principal knows; or, as the rule is substantially stated in 6 Cl. & F., 448, 449, if an agent made wilfully false representations, and then made a contract, equity will relieve just as much as if the scienter were traced to the principal. 5. An agent to sell cannot buy. Therefore an auctioneer cannot bid for himself. This rule may not be very applicable in this case, because the auctioneer does not say that he intended to purchase the property for himself. 6. The owner of real estate, put up at auction, may protect himself in one of two ways. 1st. He may fix a minimum or starting point. If no bid is made for this amount, then it is no sale. This mode appears to have been pursued here. The minimum was fixed at $14,500, and this fact was made known to the purchasers at the sale. This fact is highly important. 2d. The owner may employ one person to bid up to the minimum, or he may bid himself. But in this mode, as in the preceding, where the bidding has reached the minimum, then all by-bidding or puffing is fraudulent, and vitiates the sale. The highest real bidder, after reaching that point, is entitled to the property. The points stated and argued by the counsel for the defendants were the following:—— 1. That neither on the allegations or form of the complainant's bill, nor on the evidence, is he entitled in the Circuit Court of the United States, sitting in equity, to the relief he prays for. 2. That neither on the allegations of the bill, nor on the evidence, is there ground to charge the defendants with fraud. 3. That the evidence does not establish any fraud on the part of Head, the auctioneer, but if it does, it will not entitle the complainant to the relief prayed for in this suit. 4. That the release of Head is a conclusive bar to the complainant's prayer for relief. 5. That, both on the facts of the case and the well settled principles of equity jurisprudence, the decree of the Circuit Court, dismissing the bill, was correct, and ought to be affirmed. Mr. Justice WOODBURY delivered the opinion of the court. This was an appeal from a decree of the Circuit Court in the Maine district, dismissing a bill which was brought originally by Veazie, the appellant. As to the contents of the bill and the evidence in its support, it may suffice to say here, that the bill asked the rescission of a sale at auction, made about the 1st of January, 1836, of certain mills, owned by the respondents, and a return of the money paid, and the notes still held by them for a part of the purchase money. It asked this, on the alleged ground of imposition in the sale by means of puffing or by-bidding, so as to advance the price about $20,000 above what it otherwise would have been. In their answer, the respondents denied any such bidding by their procurement, or that it avoided the sale if happening; and further contended, that they had been discharged from any liability which might have existed by a release to the auctioneer, one of the persons implicated in the by-bidding. The answer insisted, also, that the auctioneer should have been made a party to the bill, and that any claim to relief by the plaintiff is barred by the lapse of time since the sale. The leading point arising in this case involves so difficult questions both of fact and law, that they have, in some degree, divided this court, as well as the court below, and great care and discrimination will be necessary in order to reach conclusions that can be satisfactory. The relief here is not sought, as has been objected, on account of inadequacy of price,—though that may at times be so gross as to show fraud, and might here very well raise some presumption of it. Warner v. Daniels, 1 Woodb. & M., 111; Coles v. Trecothick, 9 Ves., 234; 2 Ves. Sr., 155. But it is sought for a fraud practised in augmenting the price; or, in other words, for taking false steps to enhance it; and it is the consequence and injury caused by these unfair means that the plaintiff would avoid. How far, then, in point of fact, was the price increased above the real bids? and by what means? A minimum price of $14,500 is clearly proved to have been fixed by the owners. The weight of the testimony is, that the real bids went only $3,500 to $5,500 higher. There is no pretence that Wadleigh—the rival or competitor of the plaintiff—bid or authorized others to bid for him above eighteen or nineteen thousand dollars, though a statement of the auctioneer to one person has been relied on to the contrary. Wadleigh denies it,—nobody testifies to it,—and nobody is produced who bid or employed others to bid higher, unless the auctioneer himself did it. The true value, also, as fixed by the owners at $14,500, tends to confirm the idea that no real, fair bid would be likely to go above $20,000,—or over $5,000 or $6,000 beyond the owner's own estimate. It is, then, a leading feature in this case, that should not be overlooked, as it gives a stamp and character to the whole equity as between these parties in favor of the plaintiff, that the respondents fixed the minimum bid for the sale of their property at $14,500, and authorized the auctioneer to dispose of it for that amount, when in truth, by some means or other, and without any real rival bids above $20,000, they obtained for it $40,000. Whether this extraordinary result was effected by any improper conduct on their part, or that of any agent for whom they may in law be responsible, is the next prominent inquiry. In the outset, the probability certainly is, that property like this could not be sold at auction for from $25,000 to $26,000 more than the owner asked for it, unless under some imposition or great mistake. And the further presumption seems at first to be reasonable, that the respondents, whose property was thus sold, and by an auctioneer employed by themselves, and who have benefited by the large excess in the price given, by taking the money and securities, were either instrumental in causing the excess, or, having availed themselves of it and all its advantages, should be answerable civiliter for any wrong and error connected with it. It is conceded, in point of fact, that some other bids than Veazie's went nearly to $40,000, and as no person is shown to have made them but the auctioneer, it follows that they must have been real bids by him for himself, or fictitious ones by him, with a view to increase the price to be obtained by the respondents, and to increase his own commissions on a sum so much larger than had been anticipated when the sale began. Looking to the supposition that the bids were real and for himself, that idea is not supported, but rather disproved, by the testimony. The auctioneer does not appear to be a man of wealth, able to buy so valuable property for investment, nor was such a purchase in the line of his business or profession, nor does he seem to have had the means or disposition for speculation, and especially on so large a scale; and he must have well known that the true value of this property was not considered by the owners above $14,500, nor its value to Wadleigh as enhanced by its locality in his dispute with Veazie, as above $18,000. The weight of the testimony, then, is decidedly against the correctness of the supposition, that the bids above $20,000, except the plaintiff's, were by the auctioneer for himself and on his own account. Had it been otherwise, it would be very questionable whether, in point of law or equity, an auctioneer can be allowed to bid off for himself the very property he is selling. It has been laid down that he cannot. Hughes's case, 6 Ves., 617; Oliver et al. v. Court et al., 8 Price, 126; 9 Ves., 234; 8 Id., 337; Long on Sales, 228; Babington on Auctions, 164. The principles against it are stronger, if possible, and certainly were enforced earlier in courts of equity than of law. An opposite course would give to an auctioneer many undue advantages. It would tend, also, to weaken his fidelity in the execution of his duties for the owner. He would be allowed to act in double and inconsistent capacities, as agent for the seller and as buyer also; and the precedents are numerous holding such sales voidable, if not void, and at all events unlawful, as opposed to the soundest public policy. See Michoud v. Girod, 4 How., 554; 15 Pick. (Mass.), 30; 1 Mason, 344; 2 Johns. (N. Y.) Ch., 51; Tufts v. Tufts, Mass. Dist., 1848, and cases there cited; Long on Sales, 228; 9 Paige (N. Y.), 663; 1 Stor. Eq. Jur., § 315; 3 Story, 625. That an auctioneer is a general agent for the owner usually, though questioned in the argument, cannot be doubtful. See Howard v. Braithwaite, 1 Ves. & B., 209; Stor. on Agency, §§ 27, 28; 4 Burr., 1921; 1 H. Bl., 85. He is so till the sale is completed. Long on Sales, 231; Seton v. Slade, 7 Ves., 276; Babington on Auctions, 90; 20 Wend. (N. Y.), 43. And though he may be agent of the buyer after the sale for some purposes, such as to take the case out of the statute of frauds (Williams v. Millington, 1 H. Bl., 84; 3 T. R., 148; Cowp., 395; Long on Sales, 228, 60, 63; Emerson v. Heelis, 2 Taunt., 38; 1 Esp., 101), yet this does not affect the other principle, that till the sale, and before it, he acts for the vendor alone. Nor is an auctioneer a public officer in Maine, and a license required to him. 2 Laws of Maine, p. 390, ch. 134. But whether a public officer or not is a circumstance that does not generally appear to have changed the liability of the principal for his acts, if taking the benefit of them. Treating his bids, then, as made by the auctioneer, not for himself, and the proof having failed to show that they were for a stranger, the only remaining hypothesis is, that they were made by him while agent of the owners, with a view to their benefit particularly, though with hopes of some incidental gain to himself in increased commissions. How does this view accord with the evidence of the transaction, taken as a whole? It is the only plausible aspect of it existing. The auctioneer found Wadleigh willing, on account of his quarrel with Veazie and his interests near the property, to go about $5,000 higher than the owners' estimate, and then found Veazie, for like reasons, willing to go still higher rather than let Wadleigh purchase the premises, for whom he supposed the auctioneer was bidding. In the eagerness of competition and with ample capital, Veazie seems in this way to have been induced to go even as high as $40,000, under the exciting but delusive and false impression, that he thus was obtaining the property against the efforts of Wadleigh or others, real bidders and real competitors. That impression the auctioneer sought to create, and did create, by deceptive means. Residing on the spot and acquainted with the character of the parties, he doubtless suspected that Veazie, rather than let the property go to Wadleigh, might bid very high,—and perhaps, by rumor, even to $40,000,—and proceeded, after the real bids were over at about $20,000, to make by-bids, either on his own judgment, to benefit his employers and increase his own commissions, or on the suggestions or signs of Stephen H. Williams, who was present as agent of the respondents, and is proved to have sat behind and near the auctioneer at the sale. Veazie being thus situated so as to be more easily duped by either of them, and his condition and fears and anxieties being probably known to Head, if not to Stephen H. Williams, the auctioneer, by the means before described, procured for his employers nearly treble what they expected or what had been agreed on as the minimum price. The next inquiry is, if such a transaction renders the sale in point of law void, either for fraud or mistake. In some countries, under the civil law, a buyer of immovables is of right entitled to a rescission of the sale if it turn out, though without fraud, that the price was more than fifty per cent. above the true value. Pothier on Contracts of Sale, part 5, ch. 2, § 2; and see Domat, tit. 6, § 3. Here the price was at least a hundred per cent. above,—yet there must in this country be fraud also, or a mistake. Though no evidence is seen of fraud practised by the respondents in person, nor by their express directions, yet a fraud was evidently perpetrated by the auctioneer, as agent for the respondents, or by him in connection with Stephen H. Williams, and the respondents have taken and still retain the benefit of it. This conclusion is indisputable, whatever obscurity or concealment may have been flung over the case by the auctioneer. Does this state of things, then, in point of law, require the sale to be relieved against, on sound principles of equity and public morals? By-bidding or puffing by the owner, or caused by the owner, or ratified by him, has often been held to be a fraud, and avoids the sale. Cowp., 395; 6 B. Mon. (Ky.), 630; 11 Serg. & R. (Pa.), 86; 4 Har. & M. (Md.), 282; Babington on Auctions, 45; 3 Bing., 368; 2 Carr. & P., 208; 6 T. R., 624; Rex v. Marsh, 3 Younge & J., 331; 11 Moor, 283. He may fix a minimum price, or give notice of by-bids, and thus escape censure. Ross on Sales, 311; Howard v. Castle, 6 T. R., 642. But this shows that, without such notice, it is bad to resort to them. Crowder v. Austin, 3 Bing., 368; 3 Younge & J., 331. 'The act itself is fraudulent,' says Lord Tenterden. Wheeler v. Collier, 1 Moo. & M., 126. The by-bidding deceives, and involves a falsehood, and is, therefore, bad. It violates, too, a leading condition of the contract of sales at auction, which is that the article shall be knocked off to the highest real bidder, without puffing. 2 Kent Com., 538, 539. It does not answer to apologize and say that by-bidding is common. For, observed Lord Mansfield, 'Gaming, stockjobbing, and swindling are frequent. But the law forbids them all.' Cowp., 397. In Bexwell v. Christie, Cowp., 396, the pole-star on this whole subject, it is said,—'The basis of all dealings ought to be good faith. So more especially in these transactions, where the public are brought together in a confidence that the articles set up for sale will be disposed of to the highest real bidder.' Even in a court of law, Lord Kenyon has, with true regard to what is honorable and just, said,—'All laws stand on the best and broadest basis, which go to enforce moral and social duties.' Pasly v. Freeman, 3 T. R., 64. See also Bruce v. Ruler, 2 Man. & Ry., 3. And in Howard v. Castle, 6 T. R., 642, he held that Lord Mansfield's doctrine, that all sham bidding at auctions is a fraud, was a doctrine founded 'on the noblest principles of morality and justice.' Nor does it lessen the injury or the fraud if the by-bidding be by the auctioneer himself. He, being agent of the owner, is equally with him forbidden by sound principle to conduct clandestinely and falsely on this subject. Cowp., 397. All should be fair,—above-board. Indeed, in point of principle, any fraud by auctioneers is more dangerous than by owners themselves. The sales through the former extend to many millions annually, and are distributed over the whole country, and the acts accompanying them are more confided in as honest and true than acts or statements made by owners themselves in their own behalf, and to advance their own interests. Great care is therefore proper to preserve them unsullied, and to discourage and repress the smallest deviations in them from rectitude. Here the auctioneer virtually said to his hearers, when he made a fictitious bid,—'I have been offered so much more for this property.' But he said it falsely, and said it with a view to induce the hearers to offer still more. He averred it as a fact, and not an opinion; and as a fact peculiarly within his knowledge. Now if, under such an untrue and fraudulent assertion, persons were persuaded to give more,—relying, as they had a right to, on the truth of what was thus more within the personal knowledge of the auctioneer, and was publicly and expressly alleged by him, and being of course more willing to give higher for what others had offered more, who probably were acquainted with such property and had means to pay for it,—they were imposed on and injured by the falsehood. It is said—'A naked, wilful lie, or the assertion of a falsehood knowingly, is certainly evidence of fraud.' 1 Const. (S. C.), 8. The following authorities support the views here laid down. 3 Younge & J., 331; Moo. & M., 123; 2 Carr. & P., 208; Bexwell v. Christie, Cowp., 395; Howard v. Castle, 6 T. R., 642; 1 Hall (N. Y.), 146; 1 Dev. (N. C.), 35; 6 Cl. & F., 444, 329. Some cases, and some reasoning found in them, attempt to sanction a contrary doctrine, if the by-bids were made merely to prevent a sacrifice of the property,—a 'defensive precaution,'—but not otherwise. Connolly v. Parsons, 3 Ves., 625, note; Smith v. Clarke, 12 Id., 477; Steele v. Ellmaker, 11 Serg. & R. (Pa.), 86; Woodward v. Miller, 1 Collier, 279; 5 Madd., 34. These exceptions still concede that the by-bidding, when an artifice to mislead the judgment and inflame the zeal of others, 'to screw up and enhance the price,' in the language of Sir William Grant,—is fraudulent and makes the sale void. 12 Ves., 483; 2 Kent Com., 537. Some cases hold, too, that the by-bidding will not vitiate, if real bids besides those of the vendee occurred after. 3 Ves., 620. But neither of these excuses or apologies existed here. These by-bids were made after some thousands of dollars had been offered over the value of the mills, as estimated by the owners themselves, and were palpably made 'to screw up,' or enhance the price. Any other excuses, which have ever availed, either are anomalies, or rest on a false analogy. Thus, at one time in England duties on auctions were remitted, if the property was bought in by the owner. 3 Ves., 17, 621; 1 Fonbl. Eq., 226. This, however, was founded on the theory that no sale had taken place, and hence no duty should be paid, rather than that a sale under such circumstances was valid. It, therefore, strengthens rather than impairs the view taken of the present case. It is no answer to this reasoning to say, as has been done, that Veazie bid voluntarily, or expressed satisfaction with his purchase, and was in haste to close it up. Because, in all this, he was laboring under a misapprehension that others had honestly valued the property near the same price, and been in truth as anxious as himself to bid it off,—and because he believed that he had thus succeeded against a real rival in securing the mills and some incidental advantages,—when in reality there had been no such honest bids over $20,000, and he had been contending against a man of straw falsely set up by the auctioneer. In short, he had been imposed on by the agent of the respondents; and that by virtual falsehood, and in a point material, and in a manner likely to mislead. He was not allowed to exercise his judgment, and bid higher or not on the truth,—on facts,—but on falsehoods. 6 T. R., 644. He was not the highest bidder at $40,000, except through deception wrought on him fraudulently. Id. Secrecy was practised,—privacy as to the real offers,—stratagem,—which, as already seen, is in the teeth of the great principles of a valid public sale. Bexwell v. Christie, Cowp., 396; 2 Kent Com., 539. A technical objection to the quantity rather than weight of the evidence has been urged, which it may be well to dispose of here. It is said that fraud is denied as to the defendants, and is not proved against them by two witnesses. It is conceded that the denials that the respondents were personally guilty of fraud, or expressly directed falsehood and fraud, are not overcome, nor are they in controversy. But it is the puffing or by-bidding of the auctioneer, their agent, which is in controversy as a fact. As to that they can make no denial from any personal knowledge pro or con,—not having been present; and hence their answer furnishes no evidence in respect to it, as an independent fact. But this fact being substantiated by the agent, and the matter proved by others, as to no real bids being made over $20,000, and by various other circumstances in the case, the amount of evidence for it is ample. It is true, they deny that they ordered it. It is to be remembered, however, that they are not held liable here merely by declarations of their agent, when not ordered by them or perhaps known to them at the time,—though it is a sound doctrine that the verbal declarations of an agent at a sale often bind the principal. 1 Ves. & B., 209; 6 Cl. & F., 448, 449; Story on Agency, § 107. And that the agent is bound to disclose all and to act as the principal is when present, and selling. 1 Metc. (Mass), 560; Hough v. Richardson, 3 Story, 698; 3 Hill (N. Y.), 260; 1 Woodb. & M., 353. And that a principal so acting in person cannot be justified in asserting what is false, and by which another is injured. Pasly v. Freeman, 3 T. R., 51; Vernon v. Keys, 12 East, 632; 2 Id., 92. And that what the vendor may not do in person, or may not employ others to do in his absence,—that is, make by-bids to enhance the price,—his agent, the auctioneer, cannot rightfully do. But they are held liable on ground beyond and apart from all this, and as well settled in England as here, that if a principal ratify a sale by his agent, and take the benefit of it, and it afterwards turn out that fraud or mistake existed in the sale, the latter may be annulled, and the parties placed in statu quo; or they may, where the case and the wrong are divisible, be at times relieved to the extent of the injury. The principal in such case is profiting by the acts of the agent, and is hence answerable civiliter for the acts of the agent, however innocent himself of any intent to defraud. 13 Wend. (N. Y.), 513; 1 Vt., 239; 1 Salk., 289; 7 Bing., 543; Mason et al. v. Crosby et al., 1 Woodb. & M., 342, and cases there cited; Doggett v. Emerson, 1 Id., 1; Story on Agency, § 451; Doggett v. Emerson, 3 Story, 700; Olmsted et al. v. Hotaling, 1 Hill (N. Y.), 317; Taylor v. Green, 8 Carr. & P., 316. Whether the principal knew all those acts or not, is not the test in this case, as in 2 East, 92 notes, and 13 East, 634, note, though it may be in some others, as in 5 Bing., 97; 6 Cl. & F., 444. But the test here is, Was the purchaser deceived, and has the vendor adopted the sale, made by deception, and received the benefits of it? For, if so, he takes the sale with all its burdens. Wilson v. Fuller, 3 Ad. & Ell. (N. S.), 68. The sale thus made here, was adopted and carried into effect by the respondents; and hence, on account of the fraud involved in it, they should either restore the consideration, and take back the mills, or indemnify the purchaser to the extent of his suffering. Some miscellaneous objections to these results are yet to be considered. It is said to be justly deemed an extraordinary power in a court of chancery to rescind contracts at all, instead of leaving parties to a suit at law for their damages. Sugden on Vendors, 392; 11 Pet., 248. And that a fraud or mistake must be very manifest to justify it. 10 Price, 117; 13 Id., 349; 7 Cranch, 368; 2 Johns. (N. Y.) Ch., 603; 12 Ves., 477. And that the burden of proof to show these grounds for a rescission rests on the plaintiff, and not on the defendant. Grant this. Yet all requirements appear fulfilled here. On satisfactory proof, also, executed, as well as executory, contracts may in such cases be set aside. One case is reported of its being done after twenty years. 8 Price, 125. And a defendant is likely, in most cases, to suffer no more by a rescission in chancery, than by damages adequate to the loss or injury. There is next the objection, that too long a time had elapsed here before seeking redress. More force would attach to this if Veazie had discovered the imposition sooner. The sale happened January 1st, 1836; the discovery of the fraud was after January 1st, 1840, and this bill was filed July 23d, 1841, after demanding redress of the respondents in January, 1841. Having effected his object in the purchase,—to obtain the property rather than let his rival get it, who, he doubtless supposed, was bidding against him,—and being a man of ample means, Veazie submitted, as feeling bound, to the excess of price. Nor did he suspect any imposition till informed of it within a few years; and then he seasonably applied for relief, and should not be barred from obtaining it by any lapse of time while the fraud or mistake as to the bids not being real remained undiscovered. Doggett v. Emerson, 3 Story, 740; Daniels v. Warner, 1 Woodb. & M., 90; Doggett v. Emerson, Id., 1; 8 Cl. & F., 651; 1 Russ. & M., 236. It is said that, after this lapse of time, the plaintiff is not in a proper condition to restore the mills. 16 Me., 42. He is less likely to be, if they are ordered to be restored; but that is the fault of the fraud, and the concealment of it, rather than his fault. The defendant, too, if the property has deteriorated in value, is in no worse a condition than he would be where an avoidance of the sale takes place at law for fraud.4 If the plaintiff has sold the property, or disabled himself from restoring it, when ordered by a decree, then the evil consequences will light on himself, and not the defendants. That is what is meant by inability to restore the property, in 8 Cranch, 476. Nor is there any need he should aver substantively in his bill that he can restore it, this being presumed as a usual if not necessary, consequence, when he applies to have the contract rescinded, and every thing placed in statu quo. The last exception to a recovery here by the plaintiff is, that the release to Head, the auctioneer, should be considered as discharging the respondents also. Neither the design of the parties to the release, nor the agreement or consideration to make it, extended beyond the auctioneer. It was suicidal for the plaintiff to pay for a release to get a witness in a case, which release would destroy the case itself. (2 Ired. (N. C.), 219.) Sitting as we do in a court of equity, we cannot, without an open and gross departure from equity, give to the release any effect beyond the design in making it, and the literal words of it, reaching only to the discharge of the release. It is a strict rule at law, and not of equity, which goes further in any case. 7 Johns. (N. Y.) Ch., 207; 18 Wend. (N. Y.), 399; 22 Pick. (Mass.), 308. The operation was meant to be like a covenant not to sue him; and such a covenant is no bar to suing others when jointly liable. Ferson v. Sanger, 1 Woodb. & M., 138. Again, in the present instance, there was no joint liability at law by the respondents and the auctioneer. Their accountability was separate, and resting on different grounds; his on actual falsehood,—theirs on the adoption of the benefits of it, and the accountability thus arising for it. The release of one, therefore, is not like the release of a joint contractor or joint trespasser. 1 Anstr., 38. And in equity it may well be limited to the person released, and the person paying the consideration for it. Hopk. (N. Y.), 251, 334. Beside this, Head was in law a competent witness for Veazie, without any release, his interest being against Veazie. This conclusion as to the release is an answer, likewise, to the objection, that Head ought to have been made a party to this bill. His liability resting on a separate ground, and not joint, he could not be united at law, nor is it always done in equity under like circumstances. See Mason et al. v. Crosby, 1 Woodb. & M., 342; Ferson v. Sanger, Id., 138; Jewett v. Conrad, 3 Id., ——; Small v. Atwood, 6 Cl. & F., 352, 466. All that remains is to decide upon the most equitable course to carry these views into effect, consistent with sound principles. One mode is to set aside unconditionally the whole sale, for the fraud practised in it, and have the mills reconveyed by Veazie, and the money, notes, and mortgage returned by the respondents. Another mode is to treat as unjust only so much of the proceedings as was fraudulent; that is, the excess of price over $20,000 obtained by by-bidding, and to cause that excess only to be refunded. To attain this last result in some way is preferable, considering the length of time which has elapsed here, and the probable deterioration in value of the mills by use and the fall of prices in the market since the inflation of 1836, and, though objected to by the respondents, is likely more than the other to secure them against loss. To restore the excess of consideration, or to restore all and have back the mills, has in other respects much the same effect. The plaintiff in either way will obtain nothing which did not belong to him, nor the respondents lose anything which was theirs before the falsehood or mistake. It is, at the same time, gratifying to find, that, by either of these courses, on incidental loss or inconvenience will fall on the respondents, except what has been occasioned by the misbehavior of their own agent, and the fruits of which they accepted, and which they cannot in foro conscientiae retain against those injured by that misbehavior. But there is one equitable operation before named, in relieving only as to what is fraudulent, which makes it most desirable, if legal. It is objected, first, that it will be giving damages, like a court of law, to the extent of the wrong, rather than rescinding the whole contract on account of fraud or an evident mistake. We are inclined to think, unless under peculiar circumstances, that damages cannot be given in a court of equity, but the parties must be left to a court of law to recover them. 17 Ves., 203; 1 Russ. & M., 88; 2 Keen, 12; 1 Cow. (N. Y.), 711; 5 Johns. (N. Y.), 193. The exceptions of damages in part, under certain circumstances may be seen in the following cases, and the authorities there quoted. 2 Story Eq. Jur., §§ 711, 779, 788, 794; 4 Johns. (N. Y.) Ch., 460; 14 Ves., 96; 9 Cranch, 456. But the course we propose, to have the sale stand so far as not fraudulent, and to make the defendants restore only what was obtained by the puffing and fraud, is not giving damages either eo nomine or in substance. It requires to be surrendered merely the money and interest on it, and the notes and mortgage unpaid, which were obtained by the deception of by-bidding. This, among other things, is prayed for in the bill. This course will only carry out the established rule on this subject, laid down in elementary treatises,—that 'the injured party is placed in the same situation, and the other party is compelled to do the same acts, as if all had been transacted with the utmost good faith.' 1 Story Eq. Jur., § 420; 1 Madd. Ch. Pr., 209, 210; Fonbl. Eq., book 1, ch. 3 and 4, notes. Everything is thus relieved against, to the extent to which it is wrong or fraudulent, but nothing beyond it. Jopling v. Dooly, 1 Yerg. (Tenn.), 289. It is suggested, however, secondly, that this course does not set aside the whole sale, or whole contract, which ought to be done, if intermeddled with at all. It is true that, generally, a part of a deed, or contract, or sale, cannot be avoided without avoiding the whole. 2 Ves., 408; 1 Madd. Ch., 262. Though at times there may be a division or break in them where fraud begins and good faith ends, and where beyond that line only it would seem just to annul them. (1 Yerg. (Tenn.), 289.) But if the whole must be annulled or none, it can be here, and yet equitable terms imposed on the plaintiff to let such part of the transaction remain undisturbed as is consistent with equity and good faith. This is justified, not only by the general principle that he must do equity who asks it, (4 Pet., 328,) but that it is one of the leading principles on this particular subject in a court of chancery, 'if it should rescind the contract, to allow it only upon terms of due compensation, and the allowance of countervailing equities.' 2 Story Eq. Jur., § 694; Harding v. Handy, 11 Wheat., 126; Bromly v. Holland, 5 Ves., 618. So it is said, that, 'when the judgment debtor comes into court, asking protection, on the ground that he has satisfied the judgment, the door is fully open for the court to modify or grant his prayer upon such condition as justice demands.' The Mechanics' Bank of Alexandria v. Lynn, 1 Pet., 384. This court on its equity side, says Chief Justice Marshall, is 'capable of imposing its own terms on the party to whom it grants relief.' Mar. Ins. Co. v. Hodgson, 7 Chanch, 336, 337. And it will not grant relief even in fraud, unless the party 'wishing it will do complete justice.' Payne v. Dudly, 1 Wash. (Va.), 196; Semb., 1 Johns. (N. Y.) Ch., 478; Scott v. Nesbit, 2 Cox, 183. Here, then, in the decree, we can set aside the whole sale and contract; but, instead of doing it unconditionally, the plaintiff should be required first to do equity, and to allow any countervailing equities on the part of the respondents,—which are, to let the sale itself stand at what was fairly bid for the property, and require only the residue of the consideration, being entirely fraudulent, to be restored. 1 Story Eq. Jur., §§ 344, 599, and cases there cited; McDonald v. Neilson, 2 Cow. (N. Y.), 139, 192. Thus, a borrower of money on usury will not be allowed relief in chancery, except on the payment of principal and legal interest. Scott v. Nesbit, 2 Cox, 183; 2 Bro. Ch. Cas., 649; 2 Story Eq. Jur., § 696; Stanly v. Gadsby, 10 Pet., 521; Jordan v. Trumbo, 6 Gill. & J. (Md.), 106; 3 Ves. & B., 14; Fanning v. Dunham, 5 Johns. (N. Y.) Ch., 143. Like terms are imposed on borrowers under void annuity bonds. (See same cases.) So, by analogy, the cases of specific performance frequently exhibit the enforcement of a part only, when just. Pratt et al. v. Law et al., 9 Cranch, 456; Hargrave v. Dyer, 10 Ves., 506; Harnett v. Yielding, 2 Sch. & L., 553; 1 Madd. Ch., 431. So, in respect to injunctions, one may issue against a judgment for land, and stay execution for a part, and allow it to stand for the residue. Dunlap et al. v. Stetson, 4 Mason, 364. See other illustrations and cases, Com. Dig., Chancery Appendix, 6 and 18; Fildes v. Hooker, 2 Meriv., 427; 14 Ves., 91; Wharton v. May, 5 Ves., 27. The form of a decree nearly adapted to this case may be seen in Fanning v. Dunham, 5 Johns. (N. Y.) Ch., 146. The last real bid here being in some doubt as to its amount, whether eighteen or twenty thousand dollars, we think the weight of evidence is in favor of the last sum, and the computations are therefore to be made on that basis. The judgment below must therefore be reversed, and a mandate sent down directing the proper decree, in conformity to these views, to be entered for the plaintiff. Mr. Chief Justice TANEY, Mr. Justice McLEAN, and Mr. Justice GRIER dissented from this opinion. This cause came on to be heard on the transcript of the record from the Circuit Court of the United States for the District of Maine, and was argued by counsel. On consideration whereof, it is the opinion of this court, that the pretended sale of the two mill privileges, at and for the sum of $40,000, as set forth and described in the pleadings and proofs in this cause, was fraudulent, and should be set aside; but as equitable terms imposed on the complainant, he is to let the sale stand for the sum of $20,000, fairly bid by him; and that the balance of the moneys paid by the complainant over and above the said $20,000 should be refunded to him by the defendants, with legal interest thereon, and that the notes and securities given for the payment of any part of such excess should be cancelled and given up by the defendants to the complainant; that the defendants should pay the costs in this court, upon this appeal, and all the costs which have accrued in this cause in the said Circuit Court, or which may accrue therein, in carrying out the decree of this court. Whereupon, it is now here ordered, adjudged, and decreed by this court, that the decree of the said Circuit Court dismissing the complainant's bill be, and the same is hereby, reversed and annulled. And this court, proceeding to render such decree as the said Circuit Court ought to have rendered herein, doth now here order, adjudge, and decree, that the aforesaid sale, as above set forth, be, and the same is hereby, rescinded and set aside; that the said complainant shall, as equitable terms, retain the said property at and for the said sum of $20,000, part of the moneys paid by him to the said defendants, and that the said defendants shall, on or before the third day of that term of the said Circuit Court next ensuing the filing the mandate of this court in said Circuit Court, refund and pay to the complainant all such sums of money over and above the said last-mentioned sum of $20,000, as they or either of them shall have received from the said complainant on account of the purchase of said property, together with legal interest thereon from the time or times at which they were so received by the said defendants, and that the said defendants shall, on or before the same day of the same term of the said Circuit Court, cancel and deliver up the notes and securities given for the payment of any and every portion of the excess over and above the said $20,000. And this court doth further order, adjudge, and decree, that the said defendants do pay the costs in this court upon this appeal, and all the costs which have accrued in this cause in the said Circuit Court, or which may accrue therein, in carrying out the decree of this court. And this court doth further order, adjudge, and decree, that this cause be, and the same is hereby, remanded to the said Circuit Court, with instructions to carry this decree into effect, and with power to make all such orders and decrees as may be necessary for that purpose.
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Where false steps are taken to enhance the price of property sold at auction, a court of equity will relieve the purchaser from the consequences and injury caused by these unfair means. Therefore, where the owners had instructed the auctioneer to take $14,500 for the property, and the real bids stopped at $20,000, and the auctioneer, even without the consent or knowledge of the owner, continued to make fictitious bids until he ran it'up to $40,000, this was a fraud upon the purchaser, These sham bids could not have been made by the auctioneer upon his own account. Even if they bad been so, it is very questionable whether they would have been valid. Being'the gbneral agent of the owners, the latter are responsible for his acts if they receive the benefit of them. By-bidding or puffing by the owners, or caused by or ratified by them, is a fraud, and avoids the sale. The sale being made on the 1st of January, 1836, but the fraud not discovered until 1840, and the bill being filed in 1841, there is no sufficient objection to relief owing to lapse of time. A release given by the purchaser to the auctioneer, for the purpose of making him a competent witness, did not operate as a bar to a recovery against the vendors. le would have been a competent witness without it. There was no necessity for making the auctioneer a defendant in the suit. The various modes of relief examined.
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SECTION 1. SHORT TITLE.
This Act may be cited as the ``Fisheries Restoration and Irrigation
Mitigation Act of 2007''.
SEC. 2. PRIORITY PROJECTS.
Section 3(c)(3) of the Fisheries Restoration and Irrigation
Mitigation Act of 2000 (16 U.S.C. 777 note; Public Law 106-502) is
amended by striking ``$5,000,000'' and inserting ``$2,500,000''.
SEC. 3. COST SHARING.
Section 7(c) of Fisheries Restoration and Irrigation Mitigation Act
of 2000 (16 U.S.C. 777 note; Public Law 106-502) is amended--
(1) by striking ``The value'' and inserting the following:
``(1) In general.--The value''; and
(2) by adding at the end the following:
``(2) Bonneville power administration.--
``(A) In general.--The Secretary may, without
further appropriation and without fiscal year
limitation, accept any amounts provided to the
Secretary by the Administrator of the Bonneville Power
Administration.
``(B) Non-federal share.--Any amounts provided by
the Bonneville Power Administration directly or through
a grant to another entity for a project carried under
the Program shall be credited toward the non-Federal
share of the costs of the project.''.
SEC. 4. REPORT.
Section 9 of the Fisheries Restoration and Irrigation Mitigation
Act of 2000 (16 U.S.C. 777 note; Public Law 106-502) is amended--
(1) by inserting ``any'' before ``amounts are made''; and
(2) by inserting after ``Secretary shall'' the following:
``, after partnering with local governmental entities and the
States in the Pacific Ocean drainage area,''.
SEC. 5. AUTHORIZATION OF APPROPRIATIONS.
Section 10 of the Fisheries Restoration and Irrigation Mitigation
Act of 2000 (16 U.S.C. 777 note; Public Law 106-502) is amended--
(1) in subsection (a), by striking ``2001 through 2005''
and inserting ``2008 through 2014''; and
(2) in subsection (b), by striking paragraph (2) and
inserting the following:
``(2) Administrative expenses.--
``(A) Definition of administrative expense.--In
this paragraph, the term `administrative expense'
means, except as provided in subparagraph (B)(iii)(II),
any expenditure relating to--
``(i) staffing and overhead, such as the
rental of office space and the acquisition of
office equipment; and
``(ii) the review, processing, and
provision of applications for funding under the
Program.
``(B) Limitation.--
``(i) In general.--Not more than 6 percent
of amounts made available to carry out this Act
for each fiscal year may be used for Federal
and State administrative expenses of carrying
out this Act.
``(ii) Federal and state shares.--To the
maximum extent practicable, of the amounts made
available for administrative expenses under
clause (i)--
``(I) 50 percent shall be provided
to the State agencies provided
assistance under the Program; and
``(II) an amount equal to the cost
of 1 full-time equivalent Federal
employee, as determined by the
Secretary, shall be provided to the
Federal agency carrying out the
Program.
``(iii) State expenses.--Amounts made
available to States for administrative expenses
under clause (i)--
``(I) shall be divided evenly among
all States provided assistance under
the Program; and
``(II) may be used by a State to
provide technical assistance relating
to the program, including any staffing
expenditures (including staff travel
expenses) associated with--
``(aa) arranging meetings
to promote the Program to
potential applicants;
``(bb) assisting applicants
with the preparation of
applications for funding under
the Program; and
``(cc) visiting
construction sites to provide
technical assistance, if
requested by the applicant.''.
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Fisheries Restoration and Irrigation Mitigation Act of 2007 - Amends the Fisheries Restoration and Irrigation Mitigation Act of 2000 to direct the Secretary of the Interior, acting through the Director of the U.S. Fish and Wildlife Service, to give priority to any project that has a total cost of less than $2.5 million (currently, $5 million).
Authorizes the Secretary, without further appropriation and without fiscal year limitation, to accept any amounts provided to the Secretary by the Administrator of the Bonneville Power Administration.
Requires: (1) any amounts provided by the Bonneville Power Administration directly or through a grant to another entity for a project carried out under the Program to be credited toward the non-federal share of project costs; and (2) the Secretary's report on projects under such Act to be made after partnering with local governmental entities and the states in the Pacific Ocean drainage area (Oregon, Washington, Montana, and Idaho).
Authorizes appropriations for the Act through FY2014. Sets forth limits and requirements on the amount that may be used each fiscal year for federal and state administrative expenses of carrying out this Act.
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SECTION 1. SHORT TITLE.
This Act may be cited as the ``Department of Defense Privatization
and Outsourcing Moratorium Act''.
SEC. 2. MORATORIUM ON PRIVATIZATION AND OUTSOURCING OF DEPARTMENT OF
DEFENSE FUNCTIONS.
(a) Findings.--Congress finds the following:
(1) There is conflicting evidence that the current
privatization and outsourcing efforts of the Department of
Defense, including the Departments of the Army, Navy, and Air
Force, are reducing the cost of support functions within the
Department.
(2) Typically, these privatization and outsourcing efforts
result in contractors simply replacing civilian employees of
the Department at lower initial costs, but higher longer-term
costs, while stagnating organizational improvements that would
otherwise result in greater efficiencies and effectiveness.
(3) Recent and current privatization and outsourcing
efforts in some cases appear to have created serious oversight
and accountability problems for the Department.
(4) The Department, as a general practice, has adjusted the
operating budgets of the Armed Forces and specific military
installations to reflect savings anticipated as a result of
Office of Management and Budget Circular A-76 studies and
subsequent privatization and outsourcing activities.
(5) The massive drawdowns in the size of the Armed Forces
during the 1990's and the restructuring of military
installations through the base closure process have created a
climate in which making accurate decisions concerning
privatization and outsourcing are further complicated due to
the dynamic nature of the civilian workforce of the Department.
(6) The Department should pursue alternatives to the
privatization and outsourcing approach conducted under the A-76
process, such as ``Strategic Sourcing'', to find its most
efficient organization to perform commercial or industrial type
functions.
(b) Moratorium.--(1) Chapter 146 of title 10, United States Code,
is amended by adding at the end the following new section:
``Sec. 2475. Moratorium on privatization and outsourcing
``(a) Moratorium.--(1) During the period specified in subsection
(b), any commercial or industrial type function of the Department of
Defense that, as of the date of the enactment of this section, is being
performed by Department of Defense civilian employees may not be
changed to performance by the private sector.
``(2) The moratorium applies to a function even though, as of the
date of the enactment of this section, the function--
``(A) is the subject of a study or report under section
2461 of this title for conversion to contractor performance; or
``(B) is being considered for such conversion under the
procedures and requirements of Office of Management and Budget
Circular A-76.
``(3) As part of the moratorium, the Secretary of Defense shall
order the suspension of any study being conducted under section 2461 of
this title or Office of Management and Budget Circular A-76 regarding a
commercial or industrial type function of the Department. New studies
regarding such a function at a military installation may not be
commenced under such section or circular during the period of the
moratorium.
``(b) Duration of Moratorium.--The moratorium imposed under
subsection (a) begins on the date of the enactment of this section and
shall continue until the end of the five-year period beginning on the
date the Secretary of Defense certifies to Congress that all actions
necessary to carry out the 1995 round of base closures and realignments
have been completed under the Defense Base Closure and Realignment Act
of 1990 (part A of title XXIX of Public Law 101-510; 10 U.S.C. 2687
note).
``(c) Exception.--The moratorium imposed under subsection (a) does
not apply to a commercial or industrial type function of the Department
of Defense that is being converted, or is being considered for
conversion, to performance by the private sector under a Strategic
Sourcing or Business Process and Re-engineering plan of the Department.
``(d) Report Evaluating Conversion to Contractor Performance.--(1)
Not later than 18 months after the date of the enactment of this
section, the Secretary of Defense shall submit to Congress a report
evaluating--
``(A) each conversion of a commercial or industrial type
function of the Department of Defense to contractor performance
that was carried out, in whole or in part, since October 1,
1996; and
``(B) each commercial or industrial type function of the
Department that was considered, since that date, for conversion
to contractor performance under section 2461 of this title or
Office of Management and Budget Circular A-76, but that was not
converted.
``(2) At a minimum, the report shall contain the following
information for each function covered by the report:
``(A) The code, title, and actual functions performed by
civilian employees of the Department.
``(B) The cost to study the function for possible
conversion.
``(C) The number of civilian employees affected.
``(D) The personnel cost of the conversion, including costs
resulting from reduction in force, retirement, retraining and
other movement and separation costs.
``(E) The cost and identity of materials, equipment and
facilities provided contractors in conversion to contractor
performance.
``(F) The cost of the initial contract, the number of
employees expected to perform the function, and variants in
each thereafter.
``(3) The report shall also contain the following aggregate
information for the functions covered by the report:
``(A) The average annual costs or savings associated with
all Department conversions to contractor performance.
``(B) The overall average annual costs or savings resulting
from efficiencies achieved in Department functions described in
paragraph (1)(B).
``(e) Effect of Moratorium on Operating Budgets.--On account of the
moratorium imposed under subsection (a), the Secretary of Defense shall
provide for an adjustment in the operating budgets of the armed forces
and military installations to compensate for the fact that the
operating budgets of the armed forces and many military installations
were reduced, before the start of the moratorium, to reflect future
savings anticipated as a result of completing the A-76 competitive
study process and converting to contractor performance those commercial
and industrial type functions of the Department of Defense that are now
subject to the moratorium.''.
(2) The table of sections at the beginning of such chapter is
amended by adding at the end the following new item:
``2475. Moratorium on privatization and outsourcing.''.
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Requires the Secretary to report to Congress evaluating: (1) each conversion that was carried out since October 1, 1996; and (2) each function that was considered for conversion since such date, but not converted.
Directs the Secretary, on account of such moratorium, to provide for an adjustment in the operating budgets of the armed forces and military installations to compensate for the fact that such budgets were previously reduced to reflect savings anticipated from the conversion of such functions to private sector performance.
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The plaintiff formerly owned the land in question, and still owns it, unless he has been deprived of it by a sale and conveyance, under order of the probate court of the county of Thurston and territory of Washington, by an administrator of his estate, appointed by that court on April 20, upon a petition filed April 2, 1888. The form of the order appointing the administrator is peculiar. By that order, after reciting that the plaintiff disappeared more than seven years before, and had not since been seen or heard of by his relatives and acquaintances, and that the circumstances at and immediately after the time when he was last seen, about eight years ago, were such as to give them the belief that he was murdered about that time, the probate court finds that he 'is dead to all legal intents and purposes, having died on or about March 25, 1888;' that is to say, not at the time of his supposed murder, seven or eight years before, but within a month before the filing of the petition for administration. The order also, after directing that Milroy be appointed administrator, purports to direct that 'letters of guardianship' issue to him upon his giving bond; but this was evidently a clerical error in the order or in the record, for it appears that he received letters of administration and qualified under them. The fundamental question in the case is whether letters of administration upon the estate of a person who is in fact alive have any validity or effect as against him. By the law of England and America, before the Declaration of Independence, and for almost a century afterwards, the absolute nullity of such letters was treated as beyond dispute. In Allen v. Dundas, 3 Term R. 125, in 1789, in which the court of king's bench held that payment of a debt due to a deceased person to an executor who had obtained probate of a forged will discharged the debtor, notwithstanding the probate was afterwards declared null and void, and administration granted to the next of kin, the decision went upon the ground that the probate, being a judicial act of the ecclesiastical court within its jurisdiction, could not, so long as it remained unrepealed, be impeached in the temporal courts. It was argued for the plaintiff that the case stood as if the creditor had not been dead, and had himself brought the action, in which case it was assumed, on all hands, that payment to an executor would be no defense. But the court clearly stated the essential distinction between the two cases. Mr. Justice Ashurst said: 'The case of a probate of a supposed will during the life of the party may be distinguished from the present, because during his life the ecclesiastical court has no jurisdiction, nor can they inquire who is his representative; but, when the party is dead, it is within their jurisdiction.' And Mr. Justice Buller said: 'Then this case was compared to a probate of a supposed will of a living person; but in such a case the ecclesiastical court have no jurisdiction, and the probate can have no effect: their jurisdiction is only to grant probates of the wills of dead persons. The distinction in this respect is this: if they have jurisdiction, their sentence, as long as it stands unrepealed, shall avail in all other places; but where they have no jurisdiction, their whole proceedings are a nullity.' Id. 130. And such is the law of England to this day. Williams, Ex'rs (9th Ed.), 478, 1795; Taylor, Ev. (8th Ed.) §§ 1677, 1714. In Griffith v. Frazier, 8 Cranch, 9, 23, in 1814, this court, speaking by Chief Justice Marshall, said: 'To give the ordinary jurisdiction, a case in which, by law, letters of administration may issue, must be brought before him. In the common case of intestacy, it is clear that letters of administration must be granted to some person by the ordinary; and though they should be granted to one not entitled by law, still the act is binding until annulled by the competent authority, because he had power to grant letters of administration in the case. But suppose administration to be granted on the estate of a person not really dead. The act, all will admit, is totally void. Yet the ordinary must always inquire and decide whether the person, whose estate is to be committed to the care of others, be dead or in life. It is a branch of every cause in which letters of administration issue. Yet the decision of the ordinary that the person on whose estate he acts is dead, if the fact be otherwise, does not invest the person he may appoint with the character or powers of an administrator. The case, in truth, was not one within his jurisdiction. It was not one in which he had a right to deliberate. It was not committed to him by the law. And although one of the points occurs in all cases proper for his tribunal, yet that point cannot bring the subject within his jurisdiction.' See also Jnsurance Co. v. Tisdale, 91 U. S. 238, 243; Hegler v. Faulkner, 153 U. S. 109, 118, 14 Sup. Ct. 779. The same doctrine has been affirmed by the supreme court of Pennsylvania in a series of cases beginning 70 years ago. McPherson v. Cunliff (1824) 11 Serg. & R. 422, 430; Peebles' Appeal (1826) 15 Serg. & R. 39, 42; Devlin v. Com. (1882) 101 Pa. St. 273. In the last of those cases, it was held that a grant of letters of administration upon the estate of a person who, having been absent and unheard from for 15 years, was presumed to be dead, but who, as it afterwards appeared, was in fact alive, was absolutely void, and might be impeached collaterally. The supreme judicial court of Massachusetts, in 1861, upon full consideration, held that an appointment of an administrator of a man who was in fact alive, but had been absent and not heard from for more than seven years, was void, and that payment to such an administrator was no bar to an action brought by the man on his return; and, in answer to the suggestion of counsel, that 'seven years' absence, upon leaving one's usual home or place of business, without being heard of, authorizes the judge of probate to treat the case as though the party were dead,' the court said: 'The error consists in this, that those facts are only presumptive evidence of death, and may always be controlled by other evidence showing that the fact was otherwise. The only jurisdiction is over the estate of the dead man. When the presumption arising from the absence of seven years is overthrown by the actual personal presence of the supposed dead man, it leaves no ground for sustaining the jurisdiction.' Jochumsen v. Bank, 3 Allen. 87, 96. See, also, Waters v. Stickney, 12 Allen, 1, 13; Day v. Floyd, 130 Mass. 488, 489. The Civil Code of Louisiana, in title 3, 'Of Absentees,' contains provisions for the appointment of a curator to take care of the property of any person who is absent from or resides out of the state, without having left an attorney therein; and for the putting of his presumptive heirs into provisional possession after he has been absent and not heard from for five, or, if he has left an attorney, seven, years, or sooner if there be strong presumption of his death; and for judicial sale, if necessary, of his movable or personal property, and safe investment of the proceeds; and, upon proof that he has not been heard from for 10 years, and has left no known heirs, for sale of his whole property, and payment of the proceeds into the treasury of the state, as in the case of vacant successions; but neither the curator nor those in provisional possession can alienate or mortgage his immovables or real estate; and, if he returns at any time, he recovers his whole property, or the proceeds thereof, and a certain proportion of the annual revenues, depending upon the length of his absence. The main object of those provisions, as their careful regulations show, is to take possession of and preserve the property for the absent owner, not to deprive him of it upon an assumption that he is dead. Accordingly, the supreme court of Louisiana held that the appointment, by a court having jurisdiction of successions, of an administrator of the estate of a man represented to be dead, but who was in fact alive at the time of the appointment, was void; and that persons claiming land of his, under a sale by such administrator under order of the court, followed by long possession, could not hold the land against his heirs; and, speaking by Chief Justice Manning, said: 'The title of Hotchkiss as administrator is null, because he had no authority to make it, and the prescription pleaded does not validate it. It was not a sale, the informalities of which are cured by a certain lapse to time, and which becomes perfect through prescription; but it was void, because the court was without authority to order it. * * * It is urged, on the part of the defendants, that the decree of the court ordering the sale of the succession property should protect them, and as the court which thus ordered the sale had jurisdiction of successions, it was not for them to look beyond it. But that is assuming as true that which we know was not true. The owner was not dead. There was no succession.' And the court added that Chief Justice Marshall, in Griffith v. Frazier, above cited, disposed of that position. Burns v. Van Loan (1877) 29 La. Ann. 560, 563. The absolute nullity of administration granted upon the estate of a living person has been directly adjudged or distinctly recognized in the courts of many other states. French v. Frazier's Adm'r (1932) 7 J. J. Marsn. 425, 427; State v. White (1846) 7 Ired. 116; Duncan can v. Stewart (1854) 25 Ala. 408; Andrews v. Avory (1858) 14 Grat. 229, 236; Moore v. Smith (1858) 11 Rich. Law 569; Morgan v. Dodge (1862) 44 N. H. 255, 259; Withers v. Patterson (1864) 27 Tex. 491, 497; Johnson v. Beazley (1877) 65 Mo. 250, 264; Melia v. Simmons (1878) 45 Wis. 334; D'Arusment v. Jones (1880) 4 Lea, 251; Stevenson v. Superior Court (1882) 62 Cal. 60; Perry v. Railroad (1882) 29 Kan. 420, 423; Thomas v. People (1883) 107 Ill. 517, in which the subject is fully and ably treated. The only judicial opinions cited at the bar (except the judgment below in the present case) which tend to support the validity of letters of administration upon the estate of a living person were delivered in the courts of New York and New Jersey within the last 20 years. In Roderigas v. Institution, 63 N. Y. 460, in 1875, a bare majority of the court of appeals of New York decided that payment of a deposit in a savings institution to an administrator under letters of administration issued in the lifetime of the depositor was a good defense to an action by an administrator appointed after his death, upon the ground that the statutes of the state of New York made it the duty of the surrogate, when applied to for administration on the estate of any person, to try and determine the question whether he was alive or dead, and therefore his determination of that question was conclusive. That decision was much criticised as soon as it appeared, notably by Chief Justice Redfield in 15 Am. Law Reg. (N. S.) 212. And in a subsequent case between the same parties in 1879 the same court unanimously reached a different conclusion, because evidence was produced that the surrogate never in fact considered the question of death, or had any evidence thereof,—thus making the validity of the letters of administration to depend, not upon the question whether the man was dead, but upon the question whether the surrogate thought so. Roderigas v. Institution, 76 N. Y. 316. In Plume v. Institution, 46 N. J. Law, 211, 230, in 1884, which was likewise an action to recover the amount of a deposit in a savings institution, the plaintiff had been appointed by the surrogate administrator of a man who, as the evidence tended to show, had neither drawn out any part of the deposit, nor been heard from, for more than 20 years; an inferior court certified to the supreme court of New Jersey the questions whether payment of the amount to the plaintiff would bar a recovery thereof by the depositor, and whether the plaintiff was entitled to recover; and that court, in giving judgment for the plaintiff, observed, by way of distinguishing the case from the authorities cited for the defendant, that 'in most, if not all, of such cases, it was affirmatively shown that the alleged decedent was actually alive at the time of the issuance of letters of administration, while in the present case there is no reason for even surmising such to have been the fact.' The grounds of the judgment of the supreme court of the state of Washington in the case at bar, as stated in its opinion, were that the equities of the case appeared to be with the defendants; that the court was inclined to follow the case of Roderigas v. Institution, 63 N. Y. 460; and that, under the laws of the territory, the probate court, on an application for letters of administration, had authority to find the fact as to the death of the intestate, the court saying: 'Our statutes only authorize administration of the estates of deceased persons, and before granting letters of administration the court must be satisfied by proof of the death of the intestate. The proceeding is substantially in rem, and all parties must be held to have received notice of the institution and pendency of such proceedings, where notice is given as required by law. Section 1299 of the 1881 Code gave the probate court exclusive original jurisdiction in such matters, and authorized such court to summon parties and witnesses, and examine them touching any matter in controversy before said court or in the exercise of its jurisdiction.' Such were the grounds upon which it was held that the plaintiff had not been deprived of his property without due process of law. 5 Wash. 309, 317, 318, 31 Pac. 873. After giving to the opinion of the supreme court of the state the respectful consideration to which it is entitled, we are unable to concur in its conclusion or in the reasons on which it is founded. The fourteenth article of amendment of the constitution of the United States, after other provisions which do not touch this case, ordains: 'Nor shall any state deprive any person of life, liberty or property without due process of law, nor deny to any person within its jurisdiction the equal protection of the laws.' These prohibitions extend to all acts of the state, whether through its legislative, its executive, or its judicial authorities. Virginia v. Rives, 100 U. S. 313, 318, 319; Ex parte Virginia, Id. 339, 346; Neal v. Delaware, 103 U. S. 370, 397. And the first one, as said by Chief Justice Waite in U. S. v. Cruikshank, 92 U. S. 542, 554, repeating the words of Mr. Justice Johnson in Bank v. Okely, 4 Wheat. 235, 244, was intended 'to secure the individual from the arbitrary exercise of the powers of government, unrestrained by the established principles of private rights and distributive justice.' Upon a writ of error to review the judgment of the highest court of a state upon the ground that the judgment was against a right claimed under the constitution of the United States, this court is no more bound by that court's construction of a statute of the territory or of the state, when the question is whether the statute provided for the notice required to constitute due process of law, than when the question is whether the statute created a contract which has been impaired by a subsequent law of the state, or whether the original liability created by the statute was such that a judgment upon it has not been given due faith and credit in the courts of another state. In every such case, this court must decide for itself the true construction of the statute. Huntington v. Attrill, 146 U. S. 657, 683, 684, 13 Sup. Ct. 224; Mobile & O. R. Co. v. Tennessee, 153 U. S. 486, 492-495, 14 Sup. Ct. 968. No judgment of a court is due process of law, if rendered without jurisdiction in the court, or without notice to the party. The words 'due process of law,' when applied to judicial proceedings, as was said by Mr. Justice Field, speaking for this court, 'mean a course of legal proceedings according to those rules and principles which have been established in our systems of jurisprudence for the protection and enforcement of private rights. To give such proceedings any validity, there must be a tribunal competent by its constitution—that is, by the law of its creation—to pass upon the subject-matter of the suit; and, if that involves merely a determination of the personal liability of the defendant, he must be brought within its jurisdiction by service of process within the state, or his voluntary appearance.' Pennoyer v. Neff, 95 U. S. 714, 733. Even a judgment in proceedings strictly in rem binds only those who could have made themselves parties to the proceedings, and who had notice, either actually or by the thing condemned being first seized into the custody of the court. The Mary, 9 Cranch, 126, 144; Hollingsworth v. Barbour, 4 Pet. 466, 475; Pennoyer v. Neff, 95 U. S. 714, 727. And such a judgment is wholly void if a fact essential to the jurisdiction of the court did not exist. The jurisdiction of a foreign court of admiralty, for instance, in some cases, as observed by Chief Justice Marshall, 'unquestionably depends as well on the state of the thing as on the constituion of the court. If by any means whatever a prize court should be induced to condemn, as prize of war, a vessel which was never captured, it could not be contended that this condemnation operated a change of property.' Rose v. Himely, 4 Cranch, 241, 269. Upon the same principle, a decree condemning a vessel for unlawfully taking clams, in violation of a statute which authorized proceedings for her forfeiture in the county in which the seizure was made, was held by this court to be void, and not to protect the officer making the seizure from a suit by the owner of the vessel, in which it was proved that the seizure was not made in the same county, although the decree of condemnation recited that it was. Thompson v. Whitman, 18 Wall. 457. The estate of a person supposed to be dead is not seized or taken into the custody of the court of probate upon the filing of a petition for administration, but only after and under the order granting that petition; and the adjudication of that court is not upon the question whether he is living or dead, but only upon the question whether and to whom letters of administration shall issue. Insurance Co. v. Tisdale, 91 U. S. 238, 243. The local law on the subject, contained in the Code of 1881 of the territory of Washington, in force at the time of the proceedings now in question, and since continued in force by article 27, § 2, of the constitution of the state, does not appear to us to warrant the conclusion that the probate court is authorized to conclusively decide, as against a living person, that he is dead, and his estate therefore subject to be administered and disposed of by the probate court. On the contrary, that law, in its very terms, appears to us to recognize and assume the death of the owner to be a fundamental condition and prerequisite to the exercise by the probate court of jurisdiction to grant letters testamentary or of administration upon his estate, or to license any one to sell his lands for the payment of his debts. By section 1, the common law of England, so far as not inconsistent with the constitution and laws of the United States, or with the local law, is made the rule of decision. In the light of the common law, the exclusive original jurisdiction conferred by section 1299 upon the probate court in the probate of wills and the granting of letters testamentary or of administration is limited to the estates of persons deceased; and the power conferred by that section to summon and examine on oath, as parties or witnesses, executors and administrators or other persons intrusted with or accountable for the 'estate of any deceased person,' and 'any person touching any matter of controversy before said court or in the exercise of its jurisdiction,' is equally limited. By section 1340, wills are to be proved and letters testamentary or of administration are to be granted in the county of 'which deceased was a resident,' or in which 'he may have died,' or in which any part of his estate may be, 'he having died out of the territory.' By section 1388, administration of the estate of 'a person dying intestate' is to be granted to relatives, next of kin, or creditors, in a certain order, with a proviso in case the person so entitled or interested neglect 'for more than forty days after the death of the intestate' to apply for administration. By section 1389, an application for administration must 'set forth the facts essential to giving the court jurisdiction of the case,' and state 'the names and places of residence of the heirs of the deceased, and that the deceased died without a will;' and, by section 1391, notice of such application is to be given by posting in three public places in the county where the court is held a notice 'containing the name of the decedent,' the name of the applicant, and the time of hearing. And, by sections 1493 and 1494, a petition by an executor or administrator for the sale of real estate for the payment of debts must set forth 'the amount of the personal estate that has come to his hands, and how much, if any, remains undisposed of, a list and the amounts of the debts outstanding against the deceased, as far as the same can be ascertained, a description of all the real estate of which the testator or intestate died seized, the condition and value of the respective lots and portions, the names and ages of the devisees, if any, and of the heirs of the deceased;' and must show that it is necessary to sell real estate 'to pay the allowance to the family, the debts outstanding against the deceased, and the expenses of administration.' Under such a statute, according to the overwhelming weight of authority, as shown by the cases cited in the earlier part of this opinion, the jurisdiction of the court to which is committed the control and management of the estates of deceased persons, by whatever name it is called,—ecclesiastical court, probate court, orphans' court, or court of the ordinary or the surrogate,—does not exist or take effect before death. All proceedings of such courts in the probate of wills and the granting of administrations depend upon the fact that a person is dead, and are null and void if he is alive. Their jurisdiction in this respect being limited to the estates of deceased persons, they have no jurisdiction whatever to administer and dispose of the estates of living persons of full age and sound mind, or to determine that a living man is dead, and thereupon undertake to dispose of his estate. A court of probate must, indeed, inquire into and be satisfied of the fact of the death of the person whose will is sought to be proved or whose estate is sought to be administered, because, without that fact, the court has no jurisdiction over his estate; and not because its decision upon the question, whether he is living or dead, can in any wise bind or estop him, or deprive him, while alive, of the title or control of his property. As the jurisdiction to issue letters of administration upon his estate rests upon the fact of his death, so the notice given before issuing such letters assumes that fact, and is addressed, not to him, but to those who after his death may be interested in his estate, as next of kin, legatees, creditors, or otherwise. Notice to them cannot be notice to him, because all their interests are adverse to his. The whole thing, so far as he is concerned, is res inter alios acta. Next of kin or legatees have no rights in the estate of a living person. His creditors indeed, may, upon proper proceedings, and due notice to him, in a court of law or of equity, have specific portions of his property applied in satisfaction of their debts. But neither creditors nor purchasers can acquire any rights in his property through the action of a court of probate, or of an administrator appointed by that court, dealing, without any notice to him, with his whole estate as if he were dead. The appointment by the probate court of an administrator of the estate of a living person, without notice to him, being without jurisdiction, and wholly void as against him, all acts of the administrator, whether approved by that court or not, are equally void. The receipt of money by the administrator is no discharge of a debt, and a conveyance of property by the administrator passes no title. The fact that a person has been absent and not heard from for seven years may created such a presumption of his death as, if not overcome by other proof, is such prima facie evidence of his death that the probate court may assume him to be dead, and appoint an administrator of his estate, and that such administrator may sue upon a debt due to him. But proof, under proper pleadings, even in a collateral suit, that he was alive at the time of the appointment of the administrator, controls and overthrows the prima facie evidence of his death, and establishes that the court had no jurisdiction and the administrator no authority; and he is not bound, either by the order appointing the administrator or by a judgment in any suit brought by the administrator against a third person, because he was not a party to and had no notice of either. In a case decided in the circuit court of the United States for the southern district of New York in 1880, substantially like Roderigas v. Institution, as reported in 63 N. Y. 460, above cited, Judge Choate, in a learned and able opinion, held that letters of administration upon the estate of a living man, issued by the surrogate after judicially determining that he was dead, were null and void as against him; that payment of a debt to an administrator so appointed was no defense to an action by him against the debtor; and that to hold such administration to be valid against him would deprive him of his property without due process of law, within the meaning of the fourteenth amendment of the constitution of the United States. This court concurs in the proposition there announced 'that it is not competent for a state, by a law declaring a judicial determination that a man is dead, made in his absence, and without any notice to or process issued against him, conclusive for the purpose of divesting him of his property and of vesting it in an administrator, for the benefit of his creditors and next of kin, either absolutely or in favor of those only who innocently deal with such administrator. The immediate and necessary effect of such a law is to deprive him of his property without any process of law whatever, as against him, although it is done by process of law against other people, his next of kin, to whom notice is given. Such a statutory declaration of estoppel by a judgment to which he is neither party nor privy, which has the immediate effect of divesting him of his property, is a direct violation of this constitutional guaranty.' Lavin v. Bank, 18 Blatchf. 1, 24, 1 Fed. 641. The defendants did not rely upon any statute of limitations, nor upon any statute allowing them for improvements made in good faith; but their sole reliance was upon a deed from an administrator, acting under the orders of a court which had no jurisdiction to appoint him or to confer any authority upon him, as against the plaintiff. Judgment reversed, and case remanded to the supreme court of the state of Washington for further proceedings not inconsistent with this opinion.
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A court of probate, in the exercise of its jurisdiction over the probate of wills and the administration of estates of deceased persons, has no jurisdiction to appoint an administrator of the estate of a living person; and its orders, made after public notice, appointing an administrator of the estate of a person who is in fact alive, although he has been absent and not heard from for seven years, and licensing the administrator to sell his land for payment of his debts, are void, and the purchaser at the sale takes no title, as against him. A: judgment of the highest court of a State, by which the purchaser, at an administrator's sale under order of a probate court, of land of V living person, who had no notice of its proceedings, is held to be entitled to the land as against him, deprives him of his property without due process of law, contrary to the Fourteenth Amendment of the Constitution of the United States, and is reviewable by this court on writ of error.
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Introduction This report summarizes and compares provisions for carbon capture and sequestration (CCS) contained in H.R. 2454 and S. 1733 , the two leading cap-and-trade bills aimed at reducing U.S. emissions of greenhouse gases. CCS receives considerable attention in both bills because of its potential for substantially reducing carbon dioxide (CO 2 ) emissions from stationary sources, such as coal-fired power plants, cement plants, and oil refineries, while allowing those industrial sources to continue to operate even in a carbon-constrained environment. The goal of reduced emissions and continued operations is particularly important for the coal industry: coal-fired power plants generate approximately half of all the electricity in the United States, and are responsible for over 40% of U.S. CO 2 emissions from fossil fuels. Many observers consider CCS to be an integral component of a comprehensive strategy to reduce greenhouse gas emissions without creating a near-term disruption of the U.S. energy sector. Currently, no coal-fired power plants, cement plants, oil refineries, or other large industrial sources of CO 2 in the United States are capturing and sequestering large quantities of CO 2 solely for the purpose of greenhouse gas mitigation. The CCS provisions in H.R. 2454 and S. 1733 are likely intended to spur commercial deployment of CCS at a scale that would greatly surpass the degree of deployment in the absence of additional federal incentives and requirements. Without these incentives, some analyses have projected that low emission allowance prices combined with high costs for installing CCS systems would preclude most additional CCS deployment. Many questions remain, however, about the possible consequences of accelerated CCS development: financial, legal, regulatory, infrastructure, environmental, and public acceptance. Both bills attempt to some degree to address these questions, largely in parallel and similar fashion, albeit with some important differences. Table 1 provides a snapshot comparison of the parallel sections in H.R. 2454 and S. 1733 , and the body of the report summarizes and discusses each section in sequence. Overview of Key Similarities and Differences The CCS provisions in H.R. 2454 and S. 1733 are very similar (some sections are identical), and both bills appear to share the goal of fostering the commercial development and deployment of CCS projects as an important component of mitigating greenhouse gas emissions. S. 1733 even specifies—which H.R. 2454 does not—that Congress finds it is in the public interest to achieve widespread commercial deployment of CCS in the United States and throughout Asia before January 1, 2030. Both bills would require the Environmental Protection Agency (EPA) to regulate geologic sequestration of CO 2 under both the Safe Drinking Water Act and the Clean Air Act, and would also require that the EPA Administrator establish a coordinated certification and permitting process for geological sequestration sites. Recognizing that these statutes do not provide for comprehensive management of geologic sequestration issues (such as long-term liability and pore space ownership), the House and Senate bills would direct the EPA Administrator to establish a task force to examine broadly the federal and state legal framework for geologic sequestration sites and activities, and to report to Congress within 18 months. Both bills would create two separate programs that would provide financial incentives to develop and deploy commercial-scale CCS. The "wires charge" program, which is nearly identical in both bills and very similar to H.R. 1689 , the Carbon Capture and Storage Early Deployment Act introduced by Representative Boucher, would create an annual funding stream of approximately $1 billion to be awarded by a private corporation to eligible projects. The allocation of development and deployment grants and contracts would be largely independent of federal control, once the corporation is established, leaving the program to the discretion of the electricity generating industry for the most part. The second program would distribute emission allowances from the cap-and-trade portions of both bills to qualifying electric generating plants and industrial facilities. Although the programs in the two bills are similar in construct and scale, S. 1733 would award allowances to the first 20 gigawatts (Gw) of electricity generation that employs CCS technology via a formula that provides a significant financial incentive, as much as $106 per ton of CO 2 captured for 90% capture efficiency. In contrast, H.R. 2454 would award only the first 6 Gw via the same formula, and then employ a reverse auction scheme to allocate the rest, up to a total of 72 Gw. Arguably the reverse auction process would provide an allowance price closer to its true market value, and thus reflect how the market values CCS versus other emissions reduction options, such as fuel-switching, offsets, and others. If so, then S. 1733 hedges in favor of CCS as a preferred technology by allocating allowances to a substantially larger proportion of electricity generating capacity in the first phase of the program, at bonus allowance values that could be significantly higher than their average market value. Both the "wires charge" program and the emission allowance scheme focus on the CO 2 capture stage of CCS and generally presume that the technical and regulatory requirements for the transportation and sequestration stages would be in place by the time capture technology is installed and operational. Three nearly identical sections in H.R. 2454 and S. 1733 attempt to address those requirements, through amendments to the Clean Air Act and Safe Drinking Water Act, as well as through studies and reports to construct a national strategy for CCS and identify gaps and barriers that could require additional legislation. Despite these provisions, it is not yet clear whether all of the challenges to transportation and sequestration aspects of CCS can or will be met in concert with the technological and financial challenges of building capture technology that works at large power plants and other industrial sources of CO 2 . The promise of CCS in some part depends on the promulgation of a CCS regulatory structure, a sufficient transportation capacity, resolution of liability concerns about long-term CO 2 storage, and public acceptance of CCS, as well as other requirements prior to or in conjunction with the deployment of capture technology at large commercial facilities. Given these present uncertainties, how well the provisions in H.R. 2454 and S. 1733 would advance widespread deployment of CCS still remains an open question. Summary Comparison of CCS Provisions National Strategy H.R. 2454 Title I, § 111, of H.R. 2454 would require the Administrator of the Environmental Protection Agency (EPA) to submit to Congress, within one year of enactment, a report detailing a unified national strategy for addressing the key legal and regulatory barriers to deployment of commercial-scale carbon capture and sequestration. The report is to identify barriers and gaps that could be addressed using existing federal authority and those that would require new federal legislation, as well as barriers and gaps that would be best addressed at the state, tribal, or regional level. Additionally, the report is to include regulatory, legislative, or other recommendations to address the gaps and barriers. S. 1733 Division A, subsections 121(a) and (b) contain the same provisions as § 111 of H.R. 2454 , calling for development of a national strategy and related report to Congress. The Senate bill includes an additional provision, subsection 121(c), which states that Congress finds that it is in the public interest that commercial-scale CCS achieve wide deployment in the United States and throughout Asia before 2030. Regulations for Geologic Sequestration Sites H.R. 2454 Section 112 of the House bill would require the EPA Administrator to promulgate regulations to manage the geologic sequestration of CO 2 under both the Clean Air Act (CAA) and the Safe Drinking Water Act (SDWA). Section 112(a) would amend Title VIII of CAA, adding a new § 813 to require the EPA Administrator to establish a coordinated certification and permitting process for geologic sequestration sites, taking into account all relevant statutory authorities. This provision would direct the Administrator to reduce redundancy with SDWA requirements (including the current rulemaking for geologic sequestration wells) and, to the extent practical, reduce the regulatory burden imposed on certified sequestration entities and implementing authorities. Within two years of enactment, the Administrator would be required to promulgate CAA regulations to protect human health and the environment by minimizing the risk of atmospheric release of carbon dioxide injected for geologic sequestration. The scope of the regulations would include enhanced oil and gas recovery combined with geologic sequestration. The regulations would have to include a process to obtain certification for geologic sequestration; requirements for monitoring, record keeping, and reporting for injected and escaped emissions (taking into account any requirements under § 713 regarding a greenhouse gas registry); and requirements for public participation. Section 112(a) further would require that, within two years of promulgation of the regulations and every three years thereafter, the EPA Administrator report to the House Committee on Energy and Commerce and the Senate Committee on Environment and Public Works on geologic sequestration in the United States and elsewhere in North America. The report would include data on injection and any emissions to the atmosphere, an evaluation of active and closed sequestration sites, and an evaluation of the performance of federal environmental regulations and programs for sequestration as well as recommendations for their improvement. This provision broadens the scope of geologic sequestration regulatory authority beyond protecting ground water under SDWA, to protecting against atmospheric releases of CO 2 under the CAA. Currently, EPA's proposed geologic sequestration rulemaking is limited to establishing requirements related to the protection of underground sources of drinking water under SDWA's underground injection control provisions (42 U.S.C. 300h et seq. ). H.R. 2454 , § 112(b), would amend SDWA by adding a new § 1421(e) to require regulation of geologic sequestration wells. This subsection would direct the EPA Administrator to promulgate, within one year of enactment, regulations for the development, operation, and closure of CO 2 sequestration wells. The regulations would include financial responsibility requirements for emergency and remedial response, well plugging, site closure, and post-injection care. The Safe Drinking Water Act currently does not include explicit financial responsibility provisions, thus limiting EPA's ability to address this issue in its proposed rule. The section of SDWA that the bill would amend, § 1421, directs the EPA Administrator to promulgate regulations for state underground injection control programs. Thus, H.R. 2454 envisions that EPA would delegate primary oversight and enforcement authority for geologic sequestration wells to interested and qualified states. S. 1733 Division A, §122, contains the same provisions. Studies and Reports H.R. 2454 Section 113(a) would direct the EPA Administrator to establish, within six months, a task force to conduct a study examining the legal framework for geologic sequestration sites. The bill specifies a range of experts, public and private sector representatives, and other participants to be included on the task force. The study would evaluate (1) existing federal environmental statutes, state environmental statutes, and state common law that would apply to CO 2 storage sites; (2) existing state and federal laws that apply to harm and damage to public health or the environment at closed sites where CO 2 injection has been used for enhanced oil and gas recovery; (3) the statutory framework, implementation issues, and financial implications for various liability models regarding closed sequestration sites; (4) private sector mechanisms that may be available to manage risks from closed sites; and (5) subsurface mineral rights, water rights, and property rights issues associated with geologic sequestration. EPA would be required to report to Congress within 18 months of enactment. Section 113(b) would direct the EPA Administrator to establish a task force to conduct a study examining how, and under what circumstances, the environmental statutes for which EPA has responsibility would apply to CO 2 injection and geologic sequestration activities. EPA would be required to report to Congress within 12 months of enactment. S. 1733 Division A, § 123, contains the same provisions for studies and reports. Summary of Regulatory and Reporting Requirements Table 2 identifies the schedules for completing reports and regulations required in the above provisions. Carbon Capture and Sequestration Demonstration and Early Deployment Program H.R. 2454 Section 114 of H.R. 2454 allows for the creation of a Carbon Storage Research Corporation that would establish and administer a program to accelerate the commercial availability of CO 2 capture and storage technologies and methods by awarding grants, contracts, and financial assistance to electric utilities, academic institutions, and other eligible entities. The section would establish the corporation by a referendum among "qualified industry organizations," which would include the Edison Electric Institute, the American Public Power Association, the National Rural Electric Cooperative Association, their successors, or a group of owners or operators of distribution utilities delivering fossil fuel-based electricity who collectively represent at least 20% of the volume of all fossil fuel-based electricity delivered by distribution utilities to U.S. consumers. Voting rights would be based on the quantity of fossil fuel-based electricity delivered to the consumer in the previous year or other representative period. The corporation would be established if persons representing two-thirds of the total quantity of fuel-based electricity delivered to retail consumers vote for approval. However, if 40% or more of state regulatory authorities submit written notices of opposition to the creation of the corporation, it would not be established. If established, the corporation would award grants, contracts, and assistance to support commercial-scale demonstration of carbon capture or storage technology projects that encompass coal and other fossil fuels, and are suitable for either new or retrofitted plants. The corporation would seek to support at least five commercial-scale demonstration projects over the lifetime of the corporation. Pilot-scale and other small-scale projects would not be eligible under the program. Under § 114, several entities would be eligible to receive grants, contracts, or assistance from the corporation: distribution utilities, electric utilities and other private entities, academic institutions, national laboratories, federal research agencies, state and tribal research agencies, nonprofit organizations, or a consortium of two or more eligible entities. In addition, § 114 would favor "early movers" by providing, in the form of grants, 50% of the funds raised to electric utilities that had already committed resources to deploy large-scale electricity generation units integrated with CCS. The section would provide grant funds to defray costs already incurred for at least five "early movers." The corporation would raise funding for its program by collecting an assessment on distribution utilities for all fossil fuel-based electricity delivered to retail customers. The assessments would reflect the relative CO 2 emission rates of different fossil fuels used to generate electricity, as shown in Table 3 . The corporation would be authorized to adjust the assessments so that they generate not less than $1.0 billion and not more than $1.1 billion per year. The authority to collect assessments would be authorized for a 10-year period, beginning six months after enactment. The corporation would dissolve 15 years after enactment unless extended by Congress. If assessments are collected as specified in the legislation, the corporation would accumulate approximately $10 billion to be awarded over 15 years. Section 114 allows for cost recovery. The legislation would allow a distribution utility whose transmission, delivery, or sale of electric energy are subject to any form of rate regulation the opportunity to recover the full amount of "the prudently incurred costs" associated with complying with § 114, consistent with state or federal laws. Section 114 also allows for ratepayer rebates. If the corporation does not disburse or dedicate at least 75% of the funds in a calendar year due to absence of qualified projects or similar circumstances, then the corporation must reimburse the balance to the distribution utilities. In this case, the regulatory authority that gave its approval for cost recovery could also order rebates to ratepayers from the reimbursed pool of funds. Section 114 also provides specific provisions for the Electric Reliability Council of Texas (ERCOT), so that the program can work for ERCOT as well as for other regions of the country. Within five years, the Comptroller General of the United States must prepare an analysis and report to Congress assessing the corporation's activities, including project selection and methods of disbursement of assessed fees, impacts on the prospects for commercialization of carbon capture and storage technologies, and adequacy of funding. S. 1733 Division A, § 125, of S. 1733 is very similar to § 114 of H.R. 2454 with a few exceptions. Under both bills, the corporation to be established would operate as a division or affiliate of the Electric Power Research Institute (EPRI), and be managed by a board consisting of no more than 15 members drawn from the following groups: investor-owned utilities; utilities owned by a state agency, municipality, or Indian tribe; rural electric cooperatives; fossil fuel producers; nonprofit environmental organizations; independent generators or wholesale power providers; and consumer groups. S. 1733 adds two additional groups to the board that were not included in H.R. 2454 : (1) the National Energy Technology Laboratory of the Department of Energy, and (2) the Environmental Protection Agency. The entities eligible to receive grants, contracts, or assistance under the program are identical for both bills; however, S. 1733 also requires that projects shall meet the eligibility requirements of § 780(b) of the Clean Air Act. Section 780 would be an amendment to Title VII of the Clean Air Act, added under S. 1733 , and would provide for the commercial deployment of carbon capture and sequestration technologies. Apart from these relatively minor differences, this "wires charge" program created under S. 1733 and H.R. 2454 would be nearly identical. One possible advantage of the program, if enacted, would be the creation of a consistent funding stream—exempt from the annual appropriations process—for development of CCS technology over 10 years. In contrast, funding for CCS technology from DOE, which is subject to appropriations, has changed significantly over the past decade or more. It has increased from approximately $1 million in FY1997 to $581 million in FY2009. Further, the American Recovery and Reinvestment Act (ARRA, P.L. 111-5 ) allocated $3.4 billion to CCS to be committed by the end of FY2010, a dramatic increase over current funding levels. Concerns could be raised over the relative effectiveness of a sharp but short-lived increase in funding—provided by ARRA, for example—versus a consistent stream of funding over a longer time period, for the purposes of technology development. Performance Standards for Coal-Fueled Power Plants H.R. 2454 Title I, §116, of H.R. 2454 would amend Title VIII of the Clean Air Act by adding performance standards for CO 2 removal for new coal-fired power plants. Plants covered by this section include those that have a permit issued under CAA Title V to derive at least 30% of their annual heat input from coal, petroleum coke, or any combination of these fuels. The performance standards are as follows: A covered unit that is "initially permitted" on or after January 1, 2020, shall reduce carbon dioxide emissions by 65%. The 65% reduction would result in a level of emissions roughly equivalent to the CO 2 released by a natural gas-fired plant of modern design (a "combined cycle" plant) using no carbon controls. However, to achieve a 65% reduction (or the 50% reduction for older plants; see immediately below) a coal plant would have to install carbon removal technology. A covered unit that is initially permitted after January 1, 2009, and before January 1, 2020, must achieve a 50% reduction in CO 2 emissions by a compliance date that will be determined by future developments. Specifically, the compliance date will be the earliest of (1) four years after the date in which the equivalent of 4 gigawatts (Gw) of generating capacity with commercial CCS technology are operating in the United States and sequestering at least 12 million tons of CO 2 annually (equivalent to roughly eight medium-sized coal plants); or (2) January 1, 2025 (which can be extended by the EPA Administrator by up to 18 months on a case-by-case basis). Not later than 2025 and at five-year intervals thereafter, the Administrator is to review the standards for new covered units under this section and shall reduce the maximum CO 2 emission rate for new covered units to a rate that reflects the degree of emission limitation achievable through the application of the best system of emission reduction that the Administrator determines has been adequately demonstrated. The Administrator is also to publish biennial reports on the amount of capacity with commercial CCS technology in the United States. The use of the term "initially permitted" is important in the implementation of this section. A new power plant that has received a permit that is still subject to administrative or legal review is considered to be "initially permitted." If a proposed new coal plant has been "initially permitted" prior to January 1, 2009, it will not fall under the requirements of this section to eventually install carbon controls. S. 1733 Division A, Section 124, of S. 1733 contains a nearly identical provision. Probably the most important change relates to units that are initially permitted after January 1, 2009, and before January 1, 2020. In H.R. 2454 , this class of plants must achieve a 50% reduction in carbon dioxide emissions by a compliance date that can be triggered by market developments, but normally is no later than January 1, 2025. In S. 1733 this date is January 1, 2020. As noted above, the compliance deadline date can be earlier than 2020 if certain market developments occur. In H.R. 2454 these criteria include installation of the equivalent of at least 4 Gw of generating capacity with carbon capture and sequestration equipment. In the chairman's mark of S. 1733 this is put at 10 Gw, but the breakdown of the target between power plants and industrial plants still adds to 4 Gw. The chairman's mark also clarifies that in determining whether the target has been met, only the treated capacity of retrofitted power plants should be counted toward the target. Commercial Deployment of Carbon Capture and Sequestration Technologies H.R. 2454 Section 115 of H.R. 2454 would amend Title VII of the Clean Air Act (and create § 786) to require that not later than two years after the date of enactment, the EPA Administrator is to promulgate regulations providing for the distribution of emission allowances to support the commercial deployment of carbon capture and sequestration technologies in both electric power generation and industrial operations. Eligibility for emission allowances requires an owner or operator to implement carbon capture and sequestration technology at: an electric generating unit that has a nameplate capacity of 200 megawatts or more, and derives at least 50% of its annual fuel input from coal, petroleum coke, or any combination of these two fuels, and which will achieve at least a 50% reduction in carbon dioxide emissions annually produced by the unit; and an industrial source that, absent carbon capture and sequestration, would emit more than 50,000 tons per year of CO 2 , and upon implementation will achieve at least a 50% reduction in annual CO 2 emissions from an emission point. Eligibility for emission allowances requires that the owner or operator geologically sequester captured CO 2 or convert it to a stable form that can be safely and permanently sequestered. Section 115 would distribute emission allowances to electric generating units in two phases. Phase I applies to the first 6 Gw of electric generating units, measured in cumulative generating capacity of such units. Under Phase I, eligible projects would receive allowances equal to the number of tons of carbon dioxide captured and sequestered, multiplied by a bonus allowance value, divided by the average fair market value of an emission allowance in the prior year. The Administrator would establish a bonus allowance value for each rate of carbon capture and sequestration—compared to how much would otherwise be emitted—from a minimum of $50 per ton for a 50% rate to a maximum of $90 per ton for an 85% rate. This section provides an incentive for "early movers." Under Phase I distribution to electric generating units, the bonus allowance value is increased by $10—of the otherwise applicable bonus value—if the generating unit achieves a 50% capture rate before January 1, 2017. Allowances would be distributed under Phase II after the 6 Gw threshold is achieved. Phase II would distribute emission allowances by reverse auction. At each reverse auction, the EPA Administrator would select bids from eligible projects—each bid submitted would include the total quantity of CO 2 to be sequestered over 10 years and the desired CO 2 sequestration incentive per ton—and begin with the project proposing the lowest level of CO 2 incentive per ton. If the Administrator determines that reverse auctions are not efficient or cost-effective for deploying commercial-scale capture and sequestration technologies, the Administrator may prescribe an alternative distribution method. In an alternative distribution method, the Administrator would divide emission allowances into multiple "tranches," each supporting the deployment of a specified quantity of cumulative electric generating capacity utilizing CCS technology. Each tranche would support no more than 6 Gw of electric generating capacity, and would be distributed on a first-come, first-serve basis. For each tranche, the Administrator would establish a sliding scale that would provide higher bonus allowance values for projects achieving higher rates of capture and sequestration. For each successive tranche, the Administrator would establish a bonus allowance value that is lower than the rate established for the previous tranche. Limitations Under both Phase I and Phase II, the EPA Administrator would reduce or adjust the bonus allowance values for projects that sequester CO 2 in geological formations for the purposes of enhanced hydrocarbon recovery. By reducing the bonus allowance value for these projects, the Administrator would take into account the lower net costs for an enhanced hydrocarbon recovery project. The lower net costs would presumably result from income to the project provided via sale of the recovered hydrocarbons. Section 115 of H.R. 2454 also contains several provisions that limit the number of allowances and the total cumulative electric generating capacity eligible for allowances. Under § 115, no more than 72 Gw of total cumulative generating capacity may receive allowances, including industrial applications measured under an equivalent metric determined by the EPA Administrator. In addition, a qualifying project, either an electricity generating plant or industrial facility, would be eligible to receive allowances only for the first 10 years of operation. H.R. 2454 also limits the total percentage of emission allowances made available under the bill for CCS to 1.75% for years 2014 through 2017, 4.75% for years 2018 through 2019, and 5% for years 2020 through 2050. These annual allocation percentages are established in § 782(f) of the Clean Air Act, as amended by H.R. 2454 . Section 115 would allocate the bulk of emission allowances to electricity generating units and limit the amount of emission allowances available to industrial sources. The Administrator would not distribute more than 15% of the allocated allowances under § 782(f) to eligible industrial sources. The allowances may be distributed to eligible industrial sources using a reverse auction method or an incentive schedule, similar to the Phase II methods described for electric generating units. Industrial facilities are specifically excluded if they produce a liquid transportation fuel from a solid fossil-based feedstock, such as coal. S. 1733 Under Subtitle B of Division B of S. 1733 , § 111 allows for the disposition of emission allowances for the global warming pollution reduction program. Similar to § 115 of H.R. 2454 , this section of S. 1733 would amend Title VII of the Clean Air Act and add § 780 (equivalent to § 786 created in H.R. 2454 ), which would distribute emission allowances to electricity generating plants and industrial facilities to foster the deployment of CCS technologies. The goal, scope, and structure of the program in Division B, § 111, of S. 1733 are very similar to those of the program created under § 115 of H.R. 2454 , with several important distinctions. As with H.R. 2454 , S. 1733 would distribute allowances for the first 72 Gw of total cumulative generating capacity to employ CCS, including industrial applications, and would distribute them as a similar percentage of the total pool of available allowances: 1.75% for years 2014 through 2017, 4.75% for years 2018 through 2019, and 5% for years 2020 through 2050. S. 1733 would also distribute allowances in two phases; however, it would distribute allowances to the first 20 Gw of generating capacity in Phase I, instead of 6 Gw as proposed in Phase I of H.R. 2454 . Phase I of S. 1733 would distribute allowances in two 10-Gw tranches according to the same formula described in H.R. 2454 : First tranche—10 Gw for eligible projects achieving 50% or more reduction in CO 2 emissions through the use of CCS technology, with bonus allowance values ranging from $50 per ton for 50% capture to $96 per ton for 90% capture (versus $90 per ton for 85% capture in H.R. 2454 ). Second tranche—10 Gw for eligible projects achieving 50% or more reduction in CO 2 emissions with a maximum bonus allowance value of $85 per ton for 90% capture. Similar to H.R. 2454 , "early mover" projects would receive an additional $10 per ton if they commenced operations by January 1, 2017, which would apply to all 20 Gw of Phase I in S. 1733 . In contrast, the "early mover" bonus would apply to only 6 Gw in H.R. 2454 . As in H.R. 2454 , allowances would be distributed under Phase II by reverse auction. In S. 1733 , similar to H.R. 2454 , the EPA Administrator may establish reverse auctions for no more than five different project categories, defined based on (1) coal type, (2) capture technology, (3) geological formation type, (4) new versus retrofit, and (5) other factors or any combination of categories 1-4. In S. 1733 , the Administrator would establish a separate reverse auction, to be held annually, for projects at industrial sources. Industrial sources would not be allowed to participate in other auctions. A requirement to segregate industrial sources from electricity generating sources is not specified in H.R. 2454 . In parallel to H.R. 2454 , the Administrator may prescribe an alternative distribution method under S. 1733 if it is determined that reverse auctions are not efficient or cost-effective. Under both H.R. 2454 and S. 1733 , the Administrator would divide the emission allowances into a series of multiple tranches, each supporting the deployment of a specific quantity of cumulative electricity generating capacity. Under S. 1733 , each tranche would support 10 Gw of generation capacity. In contrast, under H.R. 2454 each tranche would support 6 Gw. Limitations As with H.R. 2454 , no more than 15% of the total emission allowances allocated for CCS in S. 1733 would be distributed to eligible industrial sources in any vintage year. In addition, S. 1733 prohibits the distribution of allowances to industrial sources under the first tranche of Phase 1 (i.e., the first 10 gigawatts of generating capacity), but does allow industrial projects to receive allowances under the second tranche of Phase I and thereafter. Under H.R. 2454 , projects at industrial sources would be eligible to receive allowances in Phase II, after the allowances for the first 6 gigawatts of generating capacity have been distributed. S. 1733 also contains a provision for certification of qualifying projects that is not included in H.R. 2454 . Under S. 1733 , qualifying projects that are eligible to receive allowances under either Phase I (the first 20 Gw) or the alternative distribution method of Phase II may request a certification from the EPA Administrator that the project is eligible to receive emission allowances. A project that successfully bids under the reverse auction method of Phase II does not have an option; it would be required to request a certification from the Administrator. The process of obtaining a certification is apparently a more formal requirement for eligibility that leads to a reservation of a portion of emission allowances allocated for the deployment of CCS technology. In addition to applying for a certification, a qualifying project would need to document several items in order for the Administrator to make a determination of eligibility: technical information regarding CCS technology to be used, coal type, geological formation type, and other relevant design criteria; the annual CO 2 reductions projected for the first 10 years of commercial operation; and a demonstration by the owner and operator that they are committed to constructing and operating the project along a timeline of reasonable capture and sequestration milestones. In addition to documenting this information, the qualifying project must demonstrate its commitment to the project by taking at least one of three qualifying actions : execution of a commitment by lenders or other appropriate entities to finance the project; commitment of the owner or operator to execute a surety bond; or an authorization by a state regulatory authority to allow cost recovery from the retail customers for the costs of the project. For projects that elect not to request certification (Phase I or alternative distribution projects under Phase II are not required to, although they may), the Administrator would make a separate determination of whether the project satisfies eligibility requirements. That determination would occur at a time when the emission allowances are actually distributed. As with H.R. 2454 , emission allowances under S. 1733 would be distributed on an annual basis, based on the total tons of CO 2 the project actually captures and sequesters in each of the first 10 years of operation. Although emission allowances may be reserved in advance, based on the issuance of a certification or other determination of eligibility, they would not be actually distributed until after the CO 2 has been already captured and sequestered. Chairman's Mark On October 23, 2009, Senator Boxer released the chairman's mark to S. 1733 , which contained a new provision to the emission allowance distribution program for CCS. The new provision would allow for advanced distribution of allowances under Phase I of the program, thus providing an opportunity for fossil fuel fired electricity plants and industrial facilities to receive allowances before the plants have actually captured and sequestered any CO 2 . This approach differs from the allowance distribution scheme in H.R. 2454 and S. 1733 (as introduced), which would distribute emission allowances based on the total tons of CO 2 actually captured and sequestered. Similar to H.R. 2454 and S. 1733 (as introduced), the chairman's mark would require that plants have at least a 50% capture rate before they would qualify for allowances. Under the new provision, 70% of the number of emission allowances reserved under the first tranche of Phase I would be eligible for advanced distribution, and 50% of the second tranche would also be eligible. The amount of allowances eligible for advanced distribution would total 12 Gw of the 20 Gw of generating capacity, or 60% of the total, available under Phase I of S. 1733 . By comparison, H.R. 2454 would provide only half that amount (6 Gw) in total for Phase I, and would require that the plants have commenced operations and actually be capturing CO 2 before receiving any allowances. The provision in the chairman's mark of S. 1733 could be seen as an additional incentive to "early movers" to build CCS-ready facilities or retrofit existing plants. The requirements for when to provide the advanced distribution are somewhat vague, however, allowing the EPA Administrator discretion to pick a time prior to the plant's operational phase that would "ensure expeditious deployment" of CCS technology. Some may view the new provision as providing access to emission allowances before the plant owner or operator has made an iron-clad commitment to building and operating a CCS unit. In part, the chairman's mark addresses that concern by specifying that advanced allowances would be limited to only cover costs for retrofitting an existing plant for CCS and to cover the difference in costs between building a new electric generating unit with CCS versus a new plant without CCS. The bill assigns responsibility for the necessary cost estimates—for both the retrofit and the new plant costs—to the organization requesting the advanced appropriations. The advanced allowances would be distributed using the cost estimates provided by the requesting organization. In addition, certification would be required for a plant to receive advanced allowances. As one of the criteria for obtaining certification, the chairman's mark adds an additional qualifying action to the list of qualifying actions in S. 1733 that would demonstrate a commitment to construct and operate a CCS project: an authorization from a state legislature to allow cost recovery for the CCS project. Thus, a project could receive authorization either from a state regulatory authority for cost recovery, or from a state legislature, as one necessary step to obtaining certification. The advanced allowance scheme provides a new incentive for power plants and industrial facilities to make a commitment to building CCS that is not present in H.R. 2454 or in S. 1733 (as introduced). It is likely to accelerate early deployment of CCS by making up to 12 Gw eligible for advanced allowances, compared to H.R. 2454 , which provides for only 6 Gw in Phase I. How much more electricity generating capacity will employ CCS as a result of the advanced allowance provision is difficult to predict, and would depend, in part, on other factors such as the ratio of the value of bonus allowances established in legislation versus the market price of allowances. The long-term deployment of CCS would also depend on how well the hoped-for "learning-by-doing" gains in efficiency and knowledge accrue from demonstration projects and the experience gained through early deployment at a commercial scale.
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The carbon capture and sequestration (CCS) provisions in H.R. 2454 and S. 1733 are similar (some sections are identical), and both bills appear to share the goal of fostering the commercial development and deployment of CCS projects as an important component of mitigating greenhouse gas emissions. The bills call for a unified national strategy for addressing the key legal and regulatory barriers to deployment of commercial-scale CCS. A required report detailing a national strategy would identify barriers and gaps that could be addressed using existing federal authority and those that would require legislation, as well as those that would be best addressed at the state, tribal, or regional level. Both bills would also amend the Clean Air Act (CAA) and Safe Drinking Water Act (SDWA) to require that the EPA Administrator establish a coordinated certification and permitting process for geologic sequestration sites, taking into account all relevant statutory authorities. The amended law would require regulation of geologic sequestration wells, and promulgation of regulations to protect human health and the environment by minimizing the risk of atmospheric release of carbon dioxide injected for geologic sequestration. Both bills contain identical provisions establishing performance standards for CO2 removal for new coal-fired power plants. Plants covered by this section include those that have a permit issued under the CAA, Title V, to derive at least 30% of their annual heat input from coal, petroleum coke, or any combination of these fuels. Both bills contain similar provisions that would create a program to accelerate the commercial availability of CO2 capture and storage technologies and methods by awarding grants, contracts, and financial assistance to electric utilities, academic institutions, and other eligible entities. The bills would allow the establishment of a corporation, by referendum among power industry organizations, that would derive revenue of approximately $1 billion per year via a "wires charge" on electricity delivered from the combustion of fossil fuels. One possible advantage of the program, if enacted, would be the creation of a consistent funding stream—exempt from the annual appropriations process—for development of CCS technology over 10 years. Both bills would also create a second program that would distribute emission allowances from the cap-and-trade provisions to qualifying electric generating plants and industrial facilities. Although the programs in the two bills are similar in construct and scale, S. 1733 would award allowances to the first 20 gigawatts (Gw) of electricity generation that employs CCS technology via a formula that provides a significant financial incentive, as much as $106 per ton of CO2 captured for 90% capture efficiency. In contrast, H.R. 2454 would award only the first 6 Gw via the same formula, and then employ a reverse auction scheme to allocate the rest, up to a total of 72 Gw. Thus, S. 1733 allocates allowances to a substantially larger proportion of electricity generating capacity in the first phase of the program, compared to H.R. 2454, at bonus allowance values that could be significantly higher than their average market value. A chairman's mark to S. 1733, introduced on October 23, 2009, would add an additional incentive for early deployment of CCS by allowing advanced distribution of emission allowances for CCS. In contrast to H.R. 2454 and S. 1733 (as introduced), the chairman's mark would award allowances before the plant has actually captured any CO2. In contrast, H.R. 2454 and S. 1733 (as introduced) would only distribute emission allowances based on the total tons of CO2 already captured and sequestered.
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Background Today, federal employees are issued a wide variety of ID cards that are used to access federal buildings and facilities, sometimes solely on the basis of visual inspection by security personnel. These cards generally cannot be used to control access to an agency’s computer systems. Furthermore, many can be easily forged or stolen and altered to permit access by unauthorized individuals. The ease with which traditional ID cards can be forged has contributed to increases in identity theft and related security and financial problems for both individuals and organizations. One means to address such problems is offered by the use of smart cards. What Are Smart Cards? Smart cards are plastic devices about the size of a credit card that contain an embedded integrated circuit chip capable of storing and processing data. The unique advantage that smart cards have over traditional cards with simpler technologies like magnetic stripes or bar codes is that they can exchange data with other systems and process information, rather than simply serving as static data repositories. By securely exchanging information, a smart card can help authenticate the identity of the individual possessing the card in a far more rigorous way than is possible with traditional ID cards. A smart card’s processing power also allows it to exchange and update many other kinds of information with a variety of external systems, which can facilitate applications such as financial transactions or other services that involve electronic record-keeping. Figure 1 shows a typical example of a smart card. Smart cards can also be used to significantly enhance the security of an organization’s computer systems by tightening controls over user access. A user wishing to log on to a computer system or network with controlled access must “prove” his or her identity to the system—a process called authentication. Many systems authenticate users merely by requiring them to enter secret passwords. This provides only modest security because passwords can be easily compromised. Substantially better user authentication can be achieved by supplementing passwords with smart cards. To gain access under this scenario, a user is prompted to insert a smart card into a reader attached to the computer as well as type in a password. This authentication process is significantly harder to circumvent because an intruder would not only need to guess a user’s password but also possess that same user’s smart card. Even stronger authentication can be achieved by using smart cards in conjunction with biometrics. Smart cards can be configured to store biometric information (such as fingerprints or iris scans) in an electronic record that can be retrieved and compared with an individual’s live biometric scan as a means of verifying that person’s identity in a way that is difficult to circumvent. An information system requiring users to present a smart card, enter a password, and verify a biometric scan provides what security experts call “three-factor” authentication, the three factors being “something you possess” (the smart card), “something you know” (the password), and “something you are” (the biometric). Systems employing three-factor authentication are considered to provide a relatively high level of security. The combination of smart cards and biometrics can provide equally strong authentication for controlling access to physical facilities. Smart cards can also be used in conjunction with public key infrastructure (PKI) technology to better secure electronic messages and transactions. A properly implemented and maintained PKI can offer several important security services, including assurance that (1) the parties to an electronic transaction are really who they claim to be, (2) the information has not been altered or shared with any unauthorized entity, and (3) neither party will be able to wrongfully deny taking part in the transaction. PKI systems are based on cryptography and require each user to have two different digital “keys”: a public and a private key. Both public and private keys may be generated on a smart card or on a user’s computer. Security experts generally agree that PKI technology is most effective when used in tandem with hardware tokens, such as smart cards. PKI systems use cryptographic techniques to generate and manage electronic “certificates” that link an individual or entity to a given public key. These digital certificates are then used to verify digital signatures and facilitate data encryption. The digital certificates are created by a trusted third party called a certification authority, which is also responsible for providing status information on whether the certificate is still valid or has been revoked or suspended. The PKI software in the user’s computer can verify that a certificate is valid by first verifying that the certificate has not expired and then by checking the online status information to ensure that it has not been revoked or suspended. In addition to enhancing security, smart cards have the flexibility to support a wide variety of uses not related to security, such as tracking itineraries for travelers, linking to immunization or other medical records, or storing cash value for electronic purchases. Currently, a typical smart card can store and process up to 32 kilobytes of data, however newer cards have been introduced that can accommodate 64 kilobytes. The larger a card’s electronic memory, the more functions it can support. Smart cards are grouped into two major classes: “contact” cards and “contactless” cards. Contact cards have gold-plated contacts that connect directly with the read/write heads of a smart card reader when the card is inserted into the device. Contactless cards contain an embedded antenna and work when the card is waved within the magnetic field of a card reader or terminal. Contactless cards are better suited to environments that require quick interaction between the card and the reader, such as places with a high volume of people seeking physical access. For example, the Washington Metropolitan Area Transit Authority has deployed an automated fare collection system using contactless smart cards as a way of speeding patrons’ access to the Washington, D.C., subway system. Smart cards can be configured to include both contact and contactless capabilities, but two separate interfaces are needed because standards for the technologies are very different. Governmentwide Smart Card Efforts Were Under Way Prior to HSPD-12 Since the 1990s, the federal government has promoted the use of smart card technology as one option for improving security over buildings and computer systems. In 1996, OMB, which has statutory responsibility to develop and oversee policies, principles, standards, and guidelines—used by agencies for ensuring the security of federal information and systems— tasked GSA with taking the lead in facilitating a coordinated interagency management approach for the adoption of smart cards across government. Because the value of a smart card is greatly enhanced if it can be used with multiple systems at different agencies, GSA worked with NIST and smart card vendors to develop the Government Smart Card Interoperability Specification, which defined a uniform set of commands and responses for smart cards to use in communicating with card readers. This specification defined a software interface for smart card systems that served to bridge the significant incompatibilities among vendors’ proprietary systems. Vendors could meet the specification by writing software for their cards that translated their unique command and response formats to the government standard. NIST completed the first version of the interoperability specification in August 2000. However, this and subsequent versions did not fully define all implementation details, and therefore the extent to which systems using the specification could interoperate was limited. In 2003, OMB created the Federal Identity Credentialing Committee to make policy recommendations and develop the Federal Identity Credentialing component of the Federal Enterprise Architecture to include processes such as identity proofing and credential management. In February 2004, the Federal Identity Credentialing Committee issued the Government Smart Card Handbook on the use of smart card–based systems in badge, identification, and credentialing systems with the objective of helping agencies plan, budget, establish, and implement identification and credentialing systems for government employees and their agents. In September 2004, we reported that nine agencies were planning or implementing agencywide smart card initiatives. Some of these initiatives included the Defense’s Common Access Card (CAC), which had 3.2 million cards in use at the time of our review, and the Department of State’s Domestic Smart Card Access Control project, which had issued 25,000 cards as of September 2004. HSPD-12 Requires Standardized Agency ID and Credentialing Systems In August 2004, the President issued HSPD-12, which required the Department of Commerce to develop a new standard for secure and reliable forms of ID for federal employees and contractors by February 27, 2005. The directive defined secure and reliable ID as meeting four control objectives. Specifically, credentials must be: based on sound criteria for verifying an individual employee’s identity; strongly resistant to identity fraud, tampering, counterfeiting, and terrorist exploitation; rapidly authenticated electronically; and issued only by providers whose reliability has been established by an official accreditation process. The directive stipulated that the standard include graduated criteria, from least secure to most secure, to ensure flexibility in selecting the appropriate level of security for each application. In addition, the directive required agencies to implement the standard for IDs issued to federal employees and contractors in order to gain physical access to controlled facilities and logical access to controlled information systems, to the maximum extent practicable, by October 27, 2005. NIST, OMB, and GSA Have Issued Guidance for Implementing HSPD-12 In response to HSPD-12, NIST published FIPS 201, titled “Personal Identity Verification of Federal Employees and Contractors” on February 25, 2005. The standard specifies the technical requirements for personal identity verification (PIV) systems to issue secure and reliable identification credentials to federal employees and contractors for gaining physical access to federal facilities and logical access to information systems and software applications. Smart cards are the primary component of the envisioned PIV system. The FIPS 201 standard is composed of two parts. The first part, PIV-I, sets standards for PIV systems in three areas: (1) identity proofing and registration, (2) card issuance and maintenance, and (3) protection of card applicants’ privacy. OMB directed agencies to implement the first two requirements by October 27, 2005, but did not require agencies to implement the privacy provisions until they start issuing FIPS 201 compliant identity cards, which is not expected until October 2006. To verify individuals’ identities, agencies are required to adopt an accredited identity proofing and registration process that is approved by the head of the agency and includes initiating or completing a background investigation, such as a National Agency Check with Written Inquiries (NACI), or ensuring that one is on record for all employees and contractors; conducting and adjudicating a Federal Bureau of Investigation (FBI) National Criminal History Fingerprint Check (fingerprint check) for all employees and contractors prior to credential issuance; requiring applicants to appear in person at least once before the issuance of a PIV card; requiring applicants to provide two original forms of identity source documents from an OMB-approved list of documents; and ensuring that no single individual has the capability to issue a PIV card without the cooperation of another authorized person (separation of duties principle). Agencies are further required to adopt an accredited card issuance and maintenance process that is approved by the head of the agency and includes standardized specifications for printing photographs, names, and other information on PIV cards; loading relevant electronic applications into a card’s memory; capturing and storing biometric and other data; issuing and distributing digital certificates; and managing and disseminating certificate status information. The process must satisfy the following requirements: ensure complete and successful adjudication of background investigations required for federal employment and revoke PIV cards if the results of investigations so justify; when issuing a PIV card to an employee or contractor, verify that the individual is the same as the applicant approved by the appropriate authority; and issue PIV cards only through accredited systems and providers. Finally, agencies are required to perform the following activities to protect the privacy of the applicants, including assigning an individual to the role of senior agency official for privacy to oversee privacy-related matters in the PIV system, conducting a comprehensive privacy impact assessment on systems containing personal information for the purpose of implementing a PIV system, providing full disclosure of the intended uses of the PIV card and related privacy implications to the applicants, utilizing security controls described in NIST guidance to accomplish privacy goals where applicable, and ensuring that implemented technologies in PIV systems do not erode privacy protections. Figure 2 illustrates PIV-I provisions for identity proofing and registration, card issuance and maintenance, and protection of applicants’ privacy. The second part of the FIPS 201 standard, PIV-II, provides technical specifications for interoperable smart card-based PIV systems. Agencies are required to begin issuing credentials that meet these provisions by October 27, 2006. The requirements include the following: specifications for the components of the PIV system that employees and contractors will interact with, such as PIV cards, card and biometric readers, and personal identification number (PIN) input devices; security specifications for the card issuance and management a suite of authentication mechanisms supported by the PIV card and requirements for a set of graduated levels of identity assurances; physical characteristics of PIV cards, including requirements for both contact and contactless interfaces and the ability to pass certain durability tests; mandatory information that is to appear on the front and back of the cards, such as a photograph, the full name, card serial number and issuer identification; and technical specifications for electronic identity credentials (i.e., smart cards) to support a variety of authentication mechanisms, including PINs, PKI encryption keys and corresponding digital certificates, biometrics (specifically, representations of two fingerprints), and unique cardholder identifier numbers. As outlined in a NIST special publication, agencies can choose between two alternate approaches to become FIPS 201 compliant, depending on their previous experience with smart cards. The guidance sets different specifications for each approach. One approach is to adopt “transitional” card interfaces, based on the Government Smart Card Interoperability Specification (GSC-IS). Federal agencies that have already implemented smart card systems based on the GSC-IS can elect to adopt the transitional card interface specification to meet their responsibilities for compliance with part II of the standard. The other approach is to immediately adopt the “end-point” card interfaces, which are fully compliant with the FIPS 201 PIV-II card standard. All agencies without previous large scale smart card implementations are expected to proceed with implementing PIV systems that meet the end-point interface specification. Figure 3 shows an example of a FIPS 201 card. NIST has issued several other special publications providing supplemental guidance on various aspects of the FIPS 201 standard, including guidance on verifying that agencies or other organizations have the proper systems and administrative controls in place to issue PIV cards, and technical specifications for implementing the required encryption technology. Additional information on NIST’s special publications is provided in appendix II. In addition, NIST was responsible for developing a suite of tests to be used by approved commercial laboratories in validating whether commercial products for the smart card and the card interface are in conformance with FIPS 201. NIST developed the test suite and designated several laboratories as interim NIST PIV Program testing facilities in August 2005. The designated facilities were to use the NIST test suite to validate commercial products required by FIPS 201 so that they could be made available for agencies to acquire as part of their PIV-II implementation efforts. According to NIST, during the next year, these laboratories will be assessed for accreditation for PIV testing. Once accreditation is achieved, the “interim” designation will be dropped. OMB is responsible for ensuring that agencies comply with the standard, and in August 2005, it issued a memorandum to executive branch agencies with instructions for implementing HSPD-12 and the new standard. The memorandum specifies to whom the directive applies; to what facilities and information systems FIPS 201 applies; and, as outlined below, the schedule that agencies must adhere to when implementing the standard: October 27, 2005— for all new employees and contractors, adhere to the identity proofing, registration, card issuance, and maintenance requirements of the first part (PIV-I) of the standard. Implementation of the privacy requirements of PIV-I was deferred until agencies are ready to start issuing FIPS 201 credentials. October 27, 2006—start issuing cards that comply with the second part (PIV-II) of the standard. Agencies may defer implementing the biometric requirement until the NIST guidance is final. October 27, 2007—verify and/or complete background investigations for all current employees and contractors (Investigations of individuals who have been employees for more than 15 years may be delayed past this date.) October 27, 2008—complete background investigations for all individuals who have been federal agency employees for over 15 years. OMB guidance also includes specific time frames in which NIST and GSA must provide additional guidance, such as technical references and Federal Acquisition Regulations. GSA, in collaboration with the Federal Identity Credentialing Committee, the Federal Public Key Infrastructure Policy Authority, OMB, and the Smart Card Interagency Advisory Board—which GSA established to address government smart card issues and standards—developed the Federal Identity Management Handbook. This handbook was intended to be a guide for agencies implementing HSPD-12 and FIPS 201 and includes guidance on specific courses of action, schedule requirements, acquisition planning, migration planning, lessons learned, and case studies. It is to be periodically updated; the most current draft version of the handbook was released in September 2005. In addition, on August 10, 2005, GSA issued a memorandum to agency officials that specified standardized procedures for acquiring FIPS 201- compliant commercial products that have passed NIST’s conformance tests. According to the GSA guidance, agencies are required to use these standardized acquisition procedures when implementing their FIPS 201 compliant systems. Figure 4 is a time line that illustrates when FIPS 201 and additional guidance were issued as well as the major deadlines for implementing the standard. Agencies Have Taken Actions to Begin Implementing FIPS 201 The six agencies that we reviewed—Defense, Interior, DHS, HUD, Labor, and NASA—have each taken actions to begin implementing the FIPS 201 standard. Their primary focus has been on actions to address the first part of the standard, including establishing appropriate identity proofing and card issuance policies and procedures. For example, five of the six agencies had instituted policies to require that at least a successful fingerprint check be completed prior to issuing a credential; and the sixth agency, Defense, was in the process of having such a policy instituted. Regarding other requirements, efforts were still under way. For example, Defense and NASA reported that they were still making modifications to their background check policies. Four of the six agencies were still updating their policies and procedures or gaining formal agency approval for them. Labor and HUD officials had completed modifications of their policies and gained approval for their PIV-I processes. Agencies have begun to take actions to address the second part of the standard, which focuses on interoperable smart card systems. Defense and Interior, for example, have conducted assessments of technological gaps between their existing systems and the infrastructure required by FIPS 201, but they have not yet developed specific designs for card systems that meet FIPS 201 interoperability requirements. Department of Defense Defense has been working on implementing smart card technology since 1993, when the Deputy Secretary of Defense issued a policy directive that called for the implementation of the CAC program, a standard smart card- based identification system for all active duty military personnel, civilian employees, and eligible contractor personnel. Defense began testing the CAC in October 2000 and started to implement it departmentwide in November 2001. Currently, the CAC program is the largest smart card deployment within the federal government, with approximately 3.8 million cards considered active or in use as of May 2005. The CAC addresses both physical and logical access capabilities and incorporates PKI credentials. Defense officials have taken steps to implement PIV-I requirements but have not yet completed all planned actions. For example, according to agency officials, Defense implemented its first PIV-I compliant credential issuance station, accredited and trained designated individuals to issue credentials, and took steps to better secure access to Defense personnel data. However, at the time of our review, Defense was still drafting modifications to the department’s background check policy to meet PIV-I requirements, and agency officials expected to issue a revised policy by the end of December 2005. Work was also under way to modify an automated system used by contractors to apply for the CAC to comply with the PIV-I background check requirements for contractors. To address PIV-II, Defense program officials conducted an assessment to identify the technological gaps between their existing CAC infrastructure and the infrastructure required to meet PIV-II interoperability requirements. This assessment identified that of the 245 requirements specified by FIPS 201, the CAC did not support 98 of those requirements, which led to a strategy to implement each of the needed changes. Some of the changes include deploying cards that contain both contact and contactless capabilities; ensuring that information on the cards is in both visual and electronic form; and ensuring that the electronic credentials stored on PIV cards to verify a cardholder’s identity contain all required data elements, including the cardholder’s PIN, PIV authentication data (PKI encryption keys and corresponding digital certificates), and two fingerprints. Additionally, program officials prepared rough cost estimates for specific elements of their planned implementation, such as cards and card readers. Program officials have also begun developing agency-specific PIV applications to be stored on the cards. However, Defense has not yet developed a specific design for a card system that meets FIPS 201 interoperability requirements. Department of the Interior In January 2002, Interior’s Bureau of Land Management (BLM) launched a smart card pilot project to help improve security over its sites and employees. About 2,100 employees were given smart cards for personal ID and for access to sites in the pilot program. Having successfully implemented the smart card pilot at BLM, Interior began a program to implement smart cards agencywide. According to program officials, the agencywide smart card system is in compliance with the GSC-IS specification. As of October 19, 2005, the department had deployed approximately 20,000 smart cards, providing access control for approximately 25 buildings. Interior officials have taken steps to implement PIV-I requirements but have not yet had their system accredited or approved, as required by the standard. For example, Interior revised its policy on identity proofing and registration to require at least a fingerprint check be completed before issuing a credential. Regarding card issuance and maintenance processes, Interior revised its policies to include steps to ensure the completion and successful adjudication of a NACI or equivalent background investigation for all employees and contractor personnel. Additionally, Interior officials reported they had completed more than 90 percent of all required background checks for existing employees, and had signed a contract to develop a Web-enabled PIV-I identity proofing and registration process, which may eventually replace the current manual process. However, as of November 2005, Interior’s identity proofing, registration, issuing, and maintenance processes had not been accredited or approved by the head of the agency. Regarding privacy protection, according to the officials, they had completed two privacy impact assessments on systems containing personal information for the purposes of implementing PIV-I. To meet PIV-II requirements, Interior officials reported that they had established a pilot PKI and had also conducted a gap analysis to identify specific areas in which their existing smart card system does not meet the FIPS 201 standard. In the absence of approved FIPS 201 compliant products, they had not developed a specific design for a card system that meets FIPS 201 interoperability requirements. Department of Homeland Security Prior to the issuance of FIPS 201, DHS developed a smart card-based identification and credentialing pilot project that was intended to serve as a comprehensive identification and credentialing program for the entire department when fully deployed. This effort was based on the GSC-IS specification and was intended to use PKI technology for logical access and proximity cards that are read by electronic readers to gain building access. As of November 2005, program officials indicated that they had deployed approximately 150 cards as part of this effort. However, OMB directed DHS to not issue smart cards until it had developed and implemented a system based on cards that are fully compliant with the PIV-II section of FIPS 201. DHS officials have taken steps to implement PIV-I requirements but, as of November 2005, were still making necessary modifications to their policies and procedures. For example, DHS revised its policy on identity proofing and registration to require at least a fingerprint check be completed before issuing a credential. However, other DHS actions to implement PIV-I were still under way. For example, according to DHS officials, they had not yet fully implemented the requirements to ensure that background checks are successfully adjudicated or to establish a credential revocation process. DHS officials further stated that they were finalizing a security announcement that would outline the PIV-I process. DHS officials had begun to take actions to meet PIV-II requirements. According to program officials, to help plan and prepare the agency for deployment, they conducted a survey of all DHS components to determine the types of information systems their various components had deployed. However, officials have planned to wait until approved FIPS 201 products and services are available before purchasing any equipment or undergoing any major deployment of a PIV-II compliant system. National Aeronautics and Space Administration NASA officials indicated that they had been working to improve their identity and credentialing process since 2000. Prior to the issuance of FIPS 201, NASA officials were planning for the implementation of the One NASA Smart Card Badge project. This project was intended to be deployed agencywide and was being designed to provide GSC-IS compliant smart cards for identity, physical access, and logical access to computer systems. However, NASA officials were directed by OMB to not implement this system because it had not initiated large-scale deployment of its smart cards prior to July 2005. In the meantime, NASA has been utilizing proximity cards, which are read by electronic readers, to gain building access. NASA officials have taken steps to implement PIV-I requirements; but, as of November 2005, they were still making necessary modifications to their policies and procedures. For example, regarding identity proofing and registration, NASA officials stated that they had modified their policy to address the fingerprint check requirement. According to NASA officials, they have also implemented a process for gathering all required data elements from individuals, with the exception of the biometric data. In addition, NASA officials conducted an analysis of how FIPS 201 requirements impact security within NASA. Other NASA actions to implement PIV-I were still under way. For example, NASA was getting its revised policy approved which specifies the completion and successful adjudication of the NACI. Regarding privacy protection, NASA was updating its privacy impact assessments for relevant systems containing personal information for the purpose of implementing PIV-I. NASA has begun to take actions to implement PIV-II requirements. NASA officials said they were planning to modify their existing PKI to issue digital certificates that can be used with the PIV cards that will be issued under FIPS 201. In the absence of approved FIPS 201 compliant products, NASA has not developed specific designs for a card system that meets FIPS 201 interoperability requirements. Department of Housing and Urban Development HUD did not have an existing smart card program in place prior to HSPD- 12. Like NASA, HUD controls physical access to its buildings by using proximity cards that are read by electronic readers. HUD officials reported that they have taken steps to implement PIV-I requirements. To meet identity proofing and registration practices, for example, officials modified their policies to require that at least a fingerprint check be completed before issuing a credential. Policies regarding card issuance and maintenance processes were also modified to ensure that all necessary steps were in place regarding the completion and successful adjudication of a NACI or another equivalent background investigation. Additionally, HUD issued guidelines explaining policies and procedures to ensure that the issuance of credentials complies with PIV-I. Program officials have also been analyzing the differences between their existing processes and those required by FIPS 201. As of January 2006, HUD’s identity proofing, registration, issuing, and maintenance processes were approved by HUD’s Assistant Secretary for Administration, as required by PIV-I. Finally, regarding privacy protections, officials have drafted a document describing how personal information will be collected, used, and protected throughout the lifetime of the FIPS 201 cards. Thus far, HUD’s actions related to PIV-II have been limited to analyzing their needs and planning for physical security and information technology infrastructure requirements. HUD officials said they had developed rough estimates to determine how much implementing FIPS 201 would cost. In the absence of approved FIPS 201 compliant products, HUD officials have not developed a specific design for a card system that meets FIPS 201 interoperability requirements. Department of Labor Like HUD, Labor did not have an existing smart card program in place prior to HSPD-12. Labor currently utilizes a nonelectronic identity card that contains an employee’s photograph and identifying information. The identity cards can only be used for physical access, which is granted by security personnel once they have observed the individual’s identity card. As of November 2005, Labor officials reported that they had implemented the major requirements of PIV-I. As an example of Labor’s efforts to implement identity proofing and registration requirements, the officials modified their policies to require that, at minimum, a fingerprint check is conducted and successfully adjudicated prior to issuing the credential. Regarding issuance and maintenance processes, Labor officials modified their policies to ensure all necessary steps were in place regarding the completion and successful adjudication of the NACI or another equivalent background investigation. In addition, the officials reported that they had implemented a system of tracking metrics for background investigations to ensure that they are completed and successfully adjudicated. Labor officials stated that they had not made substantial progress toward implementing PIV-II because they were waiting for compliant FIPS 201 products to become available before making implementation decisions. The Federal Government Faces Challenges in Implementing FIPS 201 The federal government faces a number of significant challenges to implementing FIPS 201, including testing and acquiring compliant products within OMB’s mandated time frames; reconciling divergent implementation specifications; assessing risks associated with implementing the recently- chosen biometric standard; incomplete guidance regarding the applicability of FIPS 201 to facilities, people, and information systems; and planning and budgeting with uncertain knowledge and the potential for substantial cost increases. Addressing these challenges will be critical in determining whether agencies will be able to meet fast-approaching implementation deadlines and in ensuring that agencies’ FIPS 201 systems are interoperable with one another. Testing and Acquiring Compliant Products within OMB-Mandated Time Frames Based on OMB and GSA guidance, all commercial products, such as smart cards, card readers, and related software, are required to successfully complete interdependent tests before agencies can purchase them for use in their FIPS 201 compliant systems. These tests include (1) conformance testing developed by NIST to determine whether individual commercial products conform to FIPS 201 specifications, (2) performance and interoperability testing to be developed by GSA to ensure that compliant products can work together to meet all the performance and interoperability requirements specified by FIPS 201, and (3) agencies’ testing to determine whether the products will work satisfactorily within the specific system environments at each of the agencies. Because it is difficult to predict how long each of these tests will take, and because they must be done in sequence, fully tested FIPS 201 compliant products may not become available for agencies to acquire in time for them to begin issuing FIPS 201 compliant ID cards by OMB’s deadline of October 27, 2006. According to NIST officials, conformance testing of individual commercial products, based on the test suite developed by NIST, was authorized to begin on November 1, 2005. The officials indicated that it would take a minimum of several weeks to test and approve a product— assuming the product turned out to be fully FIPS 201 compliant—and would more likely take significantly longer. Experience with similar NIST conformance testing regimes, such as FIPS 140-2 cryptography testing, has shown that this process can actually take several months. According to a FIPS 140-2 consulting organization, the variability in the time it takes to test products depends on (1) the complexity of the product, (2) the completeness and clarity of the vendor’s documentation, (3) how fast the vendor is able to answer questions and resolve issues raised during testing, and (4) the current backlog of work encountered in the lab. According to officials from NIST and the Smart Card Alliance, these factors are likely to keep FIPS 201 compliant products from completing conformance testing and becoming available for further testing until at least the early part of 2006. Furthermore, once commercial products pass conformance testing, they must then go through performance and interoperability testing. These tests are intended to ensure that the products meet all the performance and interoperability requirements specified by FIPS 201. According to GSA, which was developing the tests, they can only be conducted on products that have passed NIST conformance testing. GSA will also conduct performance and interoperability tests on other products that are required by FIPS 201, but not within the scope of NIST’s conformance tests, such as smart card readers, fingerprint capturing devices, and software required to program the cards with employees’ data. At the time of our review, GSA officials stated that they were developing initial plans for these tests and had planned to have the tests ready in March 2006. GSA officials indicated that once they finalized the tests, they estimated that it would take approximately 2 to 3 months to test each product. Officials stated that they do not expect to have multiple products approved until May 2006, at the earliest. Vendors with approved products and services will be awarded a blanket-purchase agreement, making them available for agencies to acquire. According to GSA officials, there will be a modification to the Federal Acquisition Regulation to require that agencies purchase PIV products through this blanket-purchase agreement. Prior to purchasing commercial products, each agency will also need to conduct its own testing to determine how well the products will work in conjunction with the rest of the agency’s systems. According to agency officials, this process could take from 1 to 8 months, depending on the size of the agency. For example, GSA officials estimated that a small agency could complete this testing in about 1 month. Defense officials, in contrast, estimated it would take them about 4 months to conduct testing, and Interior officials have stated that, based on their prior experience, it would take 6 months to conduct the testing. When Defense initially implemented their CAC system, it took 8 months to conduct testing. Following this series of tests, agencies must also acquire products—which could add at least an additional month to the process—and install them at agency facilities. OMB, which is tasked with ensuring compliance with the standard, has not indicated how it plans to monitor agency progress in developing systems based on FIPS 201 compliant products. For example, OMB has not stated whether it will require agencies to report on the status of their FIPS 201 implementations in advance of the October 2006 deadline. While in the best case scenario it may be possible for some agencies to purchase compliant products and begin issuing FIPS 201 compliant cards to employees by OMB’s deadline of October 27, 2006, it will likely take significantly longer for many other agencies. With compliance testing scheduled to be complete in early 2006 and at least two sets of additional testing required, each of which could potentially take many months, many agencies are likely to be at risk of not meeting the deadline to begin issuing FIPS 201 compliant credentials. Given these uncertainties, it will be important to monitor agency progress and completion of key activities to ensure that the goals of HSPD-12 are being met. Reconciling Divergent Implementation Specifications Recognizing that some agencies, such as Defense, have significant investments in prior smart card technology that does not comply with the new standard, NIST, in supplemental guidance on FIPS 201, allowed such agencies to address the requirements of FIPS 201 by adopting a “transitional” smart card approach. According to the guidance, the transitional approach should be based on the existing GSC-IS specification and should be a temporary measure prior to implementing the full FIPS 201 specification, known as the “end point” specification. Agencies without existing large-scale smart card systems were to implement only systems that fully conform to the end-point specification. NIST deferred to OMB to set time frames for when agencies adopting the transitional approach would be required to reach full compliance with the end-point specification. However, OMB has not yet set these time frames and has given no indication of how or when it plans to address this issue. The provision for transitional FIPS 201 implementations in NIST’s guidance acknowledges that agencies with fully implemented GSC-IS smart card systems may already be meeting many of the security objectives of FIPS 201 and that it may be unreasonable to require them to replace all of their cards and equipment within the short time frames established by HSPD-12. However, according to NIST officials, the transitional specification is not technically interoperable with the end-point specification. Thus, cards issued by an agency implementing a transitional system will not be able to interoperate with systems at agencies that have implemented the end-point specification until those agencies implement the end-state specification, too. Although allowing for the transitional approach to FIPS 201 compliance in their guidance, NIST stated that agencies should implement the end-point specification directly, wherever possible. According to NIST, agencies that adopt the transitional specification will have to do more work than if they immediately adopt the end-point specification. Specifically, major technological differences between the two interfaces will require agencies to conduct two development efforts—one to adopt the transitional specification and then another at a later date to adopt the end-point specification. Agencies with substantial smart card systems already deployed—such as Defense and Interior—have chosen the transitional option because they believe it poses fewer technical risks than the end-point specification, which is a new standard. These agencies do not plan to implement end- point systems by the October 2006 deadline for PIV-II compliance, nor have they determined when they will have end-point systems in place. According to OMB, these agencies will be allowed to meet OMB’s October 2006 deadline by implementing the transitional specification. Defense officials stated that, based on their past experience in implementing the CAC system, they believe the transitional approach will entail fewer development problems because it involves implementing hardware and software that is similar to their current system. Further, Defense officials indicated that implementing the end-point specification would be risky. For example, Defense officials conducted a technical evaluation, which determined that the specification was incomplete. The officials stated that they would not plan to adopt the end-point specification until at least one other agency has demonstrated a successful implementation. Similarly, Interior officials said they also plan to use products based on the transitional specification until approved end-point products are readily available. While NIST and OMB guidance on FIPS 201 compliance allows agencies to meet the requirements of HSPD-12 using two divergent specifications that lead to incompatible systems, it does not specify when agencies choosing the transitional approach need to move from that approach to the end-point specification. Until OMB provides specific deadlines for when agencies must fully implement the end-point specification, achieving governmentwide interoperability—one of the goals of FIPS 201—may not be achieved. Assessing Risks Associated with Implementing the Recently-Chosen Biometric Standard One of the major requirements of FIPS 201 is that electronic representations of two fingerprints be stored on each PIV card. In January 2005, NIST issued initial draft guidance for storing electronic images of fingerprints on PIV cards in accordance with a preexisting standard. NIST based its draft guidance on the fact that the existing fingerprint image standard is internationally recognized and thus can facilitate interoperability among multiple vendors’ products. When agency officials and industry experts reviewed and commented on the initial draft guidance, they were strongly opposed to the use of fingerprint images, arguing instead for a more streamlined approach that would take less electronic storage space on the cards and could be accessed more quickly. According to industry experts, because the large amount of memory required for images can only be accessed very slowly, it could take approximately 30 seconds for card readers to read fingerprint information from an electronic image stored on a card—a length of time that would likely cause unacceptable delays in admitting individuals to federal buildings and other facilities. Instead of relying on electronic images, agency officials and industry experts advocated that the biometric guidance instead be changed to require the use of “templates” extracted from fingerprint “minutiae.” A minutiae template is created by mathematically extracting the key data points related to breaks in the ridges of an individual’s fingertip. As shown in figure 6, the most basic minutiae are ridge endings (where a ridge ends) and bifurcations (where a single ridge divides into two). Using minutiae templates allows for capturing only the critical data needed to confirm a fingerprint match, and storing just those key data points rather than a full representation of an individual’s fingerprint. Thus, this technique requires much less storage space than a full electronic image of a fingerprint. An additional benefit of using minutiae templates is rapid processing capability. Because minutiae data require a much smaller amount of storage space than fingerprints in image format, the smaller data size allows for decreased transmission time of fingerprint data between the cards and the card readers—approximately 7 to 10 seconds, according to industry experts at Smart Card Alliance. Short transmission times are especially important for high traffic areas such as entrances to federal buildings. Despite these advantages, existing minutiae template technology suffers from two significant drawbacks. One disadvantage is that vendors’ techniques for converting fingerprint images to minutiae are generally proprietary and incompatible; a minutiae template that one vendor uses cannot be used by another. Another disadvantage of template technology is its questionable reliability. Different algorithms for extracting minutiae produce templates with varying reliability in producing accurate matches with the original fingerprints. To resolve these issues, NIST began systematically testing minutiae template algorithms submitted by 14 vendors to determine if it is possible to adopt a standard minutiae template that can accurately match templates to individuals. NIST officials anticipate that testing will be completed by February 2006, when they expect to be able to determine the accuracy and level of interoperability that can be achieved for the 14 vendors being tested, using standard minutiae templates. In December 2005, NIST officials stated that they had conducted enough tests to determine that the reliability, accuracy, and interoperability of minutiae data among these 14 vendors were generally within the bounds of what was likely to be required for many applications of the technology. However they noted that the tests showed that the products of the 14 vendors varied significantly in their reliability and accuracy—by as much as a factor of 10. NIST officials expect that once they complete testing in February 2006, they will have sufficient data to establish the reliability and accuracy of each of the 14 vendors. Despite the fact that the testing of minutiae template technology was still under way, NIST was requested by the Executive Office of the President to issue revised draft guidance that replaced the previously proposed image standard with a minutiae standard. While the minutiae standard resolves the problems of storage and access speed associated with the image standard, it opens new questions about how agencies should choose vendor implementations of the minutiae standard, due to their varying reliability and accuracy. Agencies will need to ensure that the vendors they select to provide minutiae template matching will provide systems that provide the level of reliability and accuracy needed for their applications. Agencies will also have to determine the level of risk they are willing to accept that fingerprints may be incorrectly matched or incorrectly fail to match. According to NIST officials, agencies may find that in order to preserve interoperability across agencies’ systems, they may need to allow for less reliability and accuracy in determining whether fingerprints match. This reduction in reliability and accuracy—and the associated higher security risk—could pose problems for secure facilities that require very high levels of assurance. Further, according to NIST officials, any vendors beyond the 14 currently being tested would need to undergo similar testing in order to determine their levels of reliability and accuracy. If agencies do not fully understand the implications of the variation in accuracy among the biometric vendors, the security of government facilities could be compromised and interoperability between agencies could be hindered. Incomplete Guidance Regarding the Applicability of FIPS 201 to Facilities, People, and Information Systems FIPS 201 and OMB’s related guidance provide broad and general criteria regarding the facilities, people, and information systems that are subject to the provisions of FIPS 201. For instance, according to FIPS 201, compliant identification credentials must be issued to all federal employees and contractors who require physical access to federally controlled facilities— including both federally owned buildings and leased space—and logical access to federally controlled information systems. OMB guidance adds that agencies should make risk-based decisions on how to apply FIPS 201 requirements to individuals and information systems that do not fit clearly into the specified categories. For example, OMB guidance states that applicability of FIPS 201 for access to federal systems from a nonfederally controlled facility (such as a researcher uploading data through a secure Web site or a contractor accessing a government system from its own facility) should be based on a risk determination made by following NIST guidance on security categorizations for federal information and information systems (FIPS 199). Although this guidance provides general direction, it does not provide sufficient specificity regarding when and how to apply the standard. For example, OMB’s guidance does not explain how NIST’s security categories can be used to assess types of individuals accessing government systems. FIPS 199 provides guidance only on how to determine the security risk category of government information and information systems, not how such a category relates to providing access from nonfederally controlled facilities. As a result, agencies are unlikely to make consistent determinations about when and how to apply the standard. HUD is one example of an agency that has not been able to finalize how it would implement FIPS 201, with regard to allowing access to federal information systems from remote locations; and according to a HUD official, they are considering multiple options. Further, the guidance does not address all categories of people who may need physical and logical access to federal facilities and information systems. Specifically, for individuals such as foreign nationals, volunteers, and unpaid researchers, meeting some of the FIPS 201 requirements—such as conducting a standard background investigation—may be difficult. For example, Defense and NASA employ a significant number of foreign nationals—individuals who are not U.S. citizens and work outside the U.S. foreign nationals generally cannot have their identity verified through the standard NACI process. In order to conduct a NACI, an individual must have lived in the United States long enough to have a traceable history, which may not be the case for foreign nationals. According to NASA officials, approximately 85 percent of NASA’s staff at its Jet Propulsion Laboratory are foreign nationals. However, OMB’s guidance for such individuals states only that agencies should conduct an “equivalent investigation,” without providing any specifics that would ensure the consistent treatment of such individuals. Specifically regarding foreign nationals, the Smart Card Interagency Advisory Board (IAB) and OMB have recognized that FIPS 201 may not adequately address this issue. The IAB obtained data from agencies who hire foreign nationals to more specifically identify the issues with identity proofing of foreign nationals. According to IAB representatives, these data were provided to OMB. In addition, OMB indicated that they planned to establish an interagency working group to assess whether additional guidance is necessary concerning background investigations for foreign nationals. However, no time frames have been set for issuing revised or supplemental guidance regarding foreign nationals. In addition to foreign nationals, other types of workers also have not been addressed. For example, Interior has approximately 200,000 individuals that serve as volunteers, some of whom require access to facilities and information systems. OMB’s guidance provides no specifics on what criteria to use to make a risk-based decision pertaining to access to facilities and systems by volunteers. Moreover, the guidance is not clear on the extent to which FIPS 201 should be implemented at all federal facilities. While the standard provides for a range of identity authentication assurance levels based on the degree of confidence in the identity of cardholders, it does not provide guidance on establishing risk levels for specific facilities or how to implement FIPS 201 based on an assessment of the risks associated with facilities. Therefore, agencies such as HUD, which has 21 field offices with five or fewer employees, and Interior, which has 2,400 field offices, many of which are also quite small, do not have the guidance necessary to make decisions consistently about how to implement FIPS 201 at each of their facilities. Depending on how risks are assessed, to implement a FIPS 201 compliant access control system at each facility could represent a significant expense, including possibly acquiring and installing card readers, network infrastructure, biometric hardware and software. As of November 2005, OMB officials reported no specific plans to supplement or revise its FIPS 201 implementation guidance to address these issues. Without more specific and complete guidance on the scope of implementing FIPS 201 regarding individuals, facilities, and information systems, the objectives of HSPD-12 could be compromised. For instance, agencies could adopt varying and inconsistent approaches for identity proofing and issuing PIV cards to foreign nationals and volunteers needing physical and logical access to their facilities and information systems, thus undermining the objective of FIPS 201 to establish consistent processes across the government. Variations from the standard could also pose problems within each agency. Specifically, if agencies choose to make exceptions to implementing FIPS 201 requirements for specific categories of individuals, information systems, or facilities, such exceptions could undermine the security objectives of the agency’s overall FIPS 201 implementation. Conversely, some agencies could expend resources implementing FIPS 201 infrastructure at locations where it is not really needed or may impose unnecessary constraints on access, due to the lack of clarity of FIPS 201 guidance. Planning and Budgeting with Uncertain Knowledge Agencies have been faced with having to potentially make substantial new investments in smart card technology systems with little time to adequately plan and budget for such investments and little cost information about products they will need to acquire. To comply with budget submission deadlines, agencies would have had to submit budget requests for new systems to meet the October 2006 PIV-II deadline in the fall of 2004, several months prior to the issuance of FIPS 201. If a major information technology (IT) investment were expected, agencies also would have had to submit business cases at the same time. Agencies were not in a position to prepare such documentation in the fall of 2004, nor were they able to determine whether a major new investment would be required. As part of the annual federal budget formulation process, agencies are required to submit their budget requests 1 year in advance of the time they expect to spend the funds. In addition, in the case of major IT investments, which could include new smart-card based credentialing systems, OMB requires agencies to prepare and submit formal businesses cases, which are used to demonstrate that agencies have adequately defined the proposed cost, schedule, and performance goals for the proposed investments. In order for agencies to prepare business cases for future funding requests, they need to conduct detailed analyses such as a cost- benefit analysis, a risk analysis, and an assessment of the security and privacy implications of the investment. However, agencies have lacked the information necessary to conduct such reviews. For example, agencies have not had reliable information about product costs and cost elements, which are necessary for cost-benefit analyses. In addition, without FIPS 201 compliant products available for review, agencies have been unable to adequately conduct risk analyses of the technology. Most importantly, the lack of FIPS 201 compliant products has inhibited planning for addressing the investment’s security and privacy issues. Several officials from the agencies we reviewed reported that they based their cost estimates on experience with existing smart card systems because they could not predict the costs of FIPS 201 compliant products. For example, HUD officials reported that in order to formulate their preliminary budget, they developed implementation estimates based on discussions with various vendors about similar technology as well as discussions with other agencies regarding their past experiences with smart card implementation. Furthermore, Defense and Labor officials reported that the only information they had on which to base costs was Defense’s CAC—a smart card system that has significant differences from FIPS 201. While it is not known how much FIPS 201 compliant systems will cost, OMB maintains that agencies should be able to fund their new FIPS 201 compliant systems with funds they are spending on their existing ID and credentialing systems. However, officials from agencies such as HUD— who stated that they estimate that implementing a FIPS 201 system will cost approximately 400 percent more than their existing identification system—have indicated that existing funds will be insufficient to finance implementation of the FIPS 201 system. As of November 2005, OMB officials did not report any specific plans to monitor agencies’ funding of FIPS 201 compliant card systems to ensure that the systems can be implemented in a timely fashion. As a result of the lack of cost and product information necessary for the development of accurate budget estimates, agency officials believe they may not have sufficient funds to implement FIPS 201 within the time frames specified by OMB. Further, the overall implementation schedules and planned performance of FIPS 201 investments across the government could be affected. Conclusions Agencies have been focusing their efforts on a range of actions to establish appropriate identity proofing and card issuance policies and procedures to meet the first part of the FIPS 201 standard. They have also begun to take actions to implement new smart card-based ID systems that will be compliant with the second part of the standard. With the deadline for implementing the second part of the standard approaching in October 2006, the government faces significant challenges in implementing the requirements of the standard. Several of these challenges do not have easy solutions— testing and acquiring compliant smart cards, card readers, and other related commercial products within OMB-mandated deadlines; implementing fully functional systems; and planning and budgeting for FIPS 201 compliance with uncertain knowledge. OMB officials have not indicated any plans to monitor the impact on agencies of the constrained testing time frames and funding uncertainties, which could put agencies at risk of not meeting the compliance goals of HSPD-12 and FIPS 201. Without close monitoring of agency implementation progress through, for example, establishing an agency reporting process, it could be difficult for OMB to fulfill its role of ensuring that agencies are in compliance with the goals of HSPD-12. Other challenges have arisen because guidance to agencies has been incomplete. For example, time frames have not been set for agencies implementing transitional smart card systems to migrate to the fully compliant end-point specification. Additionally, existing guidance related to the draft biometric standard does not offer the necessary information to help agencies understand the implications of variation in the reliability and accuracy of fingerprint matching among the biometric systems being offered by vendors. Further, complete guidance for implementing FIPS 201 with regard to specific types of individuals, facilities, and information systems has not been established. Without more complete time frames and guidance, agencies may not be able to meet implementation deadlines; and more importantly, true interoperability among federal government agencies’ smart card programs—one of the major goals of FIPS 201—could be jeopardized. Recommendations We recommend that the Director, OMB, take steps to closely monitor agency implementation progress and completion of key activities by, for example, establishing an agency reporting process, to fulfill its role of ensuring that agencies are in compliance with the goals of HSPD-12. Further, we also recommend that the Director, OMB, amend or supplement governmentwide policy guidance regarding compliance with the FIPS 201 standard to take the following three actions: provide specific deadlines by which agencies implementing transitional smart card systems are to meet the “end-point” specification, thus allowing for interoperability of smart card systems across the federal government; provide guidance to agencies on assessing risks associated with the variation in the reliability and accuracy among biometric products, so that they can select vendors that best meet the needs of their agencies while maintaining interoperability with other agencies, and clarify the extent to which agencies should make risk-based assessments regarding the applicability of FIPS 201 to specific types of facilities, individuals, and information systems, such as small offices, foreign nationals, and volunteers. The updated guidance should (1) include criteria that agencies can use to determine precisely what circumstances call for risk-based assessments and (2) specify how agencies are to carry out such risk assessments. Agency Comments and Our Evaluation We received written comments on a draft of this report from the Administrator of E-Government and Information Technology of OMB, the Acting Associate Administrator of GSA, and the Deputy Secretary of Commerce. Letters from these agencies are reprinted in appendixes III through V. We received technical comments from the Director of the Card Access Office for Defense and, a Special Agent at OPM, via e-mail, which we incorporated as appropriate. We also received written technical comments from the Assistant Secretary for Administration for HUD and the Assistant Secretary of Policy, Management, and Budget for Interior. Additionally, representatives from NASA and Labor indicated via e-mail that they reviewed the draft report and did not have any comments. Officials from DHS did not respond to our request for comments. Officials from GSA, Commerce, HUD, Defense, Interior, and OPM generally agreed with the content of our draft report and our recommendations and provided updated information and technical comments, which have been incorporated where appropriate. In response to our recommendation that OMB monitor agency implementation progress and completion of key activities, OMB stated that it would continue to oversee agency implementation using their existing management and budget tools to ensure compliance. However, as agencies continue to move forward with implementing FIPS 201, we believe that in order for OMB to successfully monitor agencies’ progress, it will be essential for OMB to develop a process specifically for agencies to report on their progress toward implementing the standard. Regarding our recommendation to OMB to amend or supplement government wide policy guidance regarding compliance with the HSPD-12 standard, OMB stated that it did not think that its guidance was incomplete. Officials stated that their guidance provides the appropriate balance between the need to aggressively implement the President’s deadlines, while ensuring agencies have the flexibility to implement HSPD-12, based on the level of risk their facilities and information systems present. While we agree that it is important for agencies to have flexibility in implementing the standard based on their specific circumstances, we believe that OMB has not provided agencies with adequate guidance in order for them to make well-informed, risk-based decisions about when and how to apply the standard for important categories of individuals and facilities that affect multiple agencies. For example, while multiple agencies employ foreign nationals to work at their facilities, OMB does not provide guidance on how agencies should investigate these foreign nationals prior to allowing them to access U.S. government facilities and information systems. Similarly, several agencies maintain very small facilities, yet OMB does not provide guidance on the extent to which FIPS 201 should be applied at these facilities. In addition, guidance has not been provided on assessing risks associated with the variation in the reliability and accuracy among biometric products, so that agencies can select vendors that best meet their needs while maintaining interoperability across the government. Additionally, OMB indicated that at this time, they do not have a full understanding of whether interoperability among the transitional and end- point specifications is a concern and stated that it can not comment on our recommendation to specify the time frame for when agencies implementing transitional smart card systems are to implement the end- point specification. However, our review showed that these two specifications are not interoperable and, until all agencies implement the end-state specification the interoperability objective of HSPD-12 may not be achieved. In commenting on our report, GSA stated that they agreed with our findings, conclusions, and recommendations. In addition, it provided us with technical comments that we incorporated as appropriate. It also suggested that in order to fully demonstrate the scope and scale of implementing HSPD-12 and FIPS 201 that we provide, as background, the current state of identity management systems across the government and industry and the impact of compliance with HSPD-12. We believe that we have adequately explained the benefits of using smart card-based ID systems and have outlined several of the significant requirements that agencies must implement as part of their new PIV systems. In Commerce’s written comments, it stated that our report was fair and balanced. It also provided technical comments that we incorporated, where appropriate. Additionally, OMB and Commerce noted that NIST’s biometric specification had recently been revised. We have made changes to our report to reflect the revised specification. Unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretaries of Homeland Security, Labor, Interior, Defense, and HUD; the Directors of OMB, OPM and NIST; the Administrators of NASA and GSA; and interested congressional committees. In addition, the report will be available at no charge on the GAO Web site at http://www.gao.gov. Should you or your staff have any questions on matters discussed in this report, please contact me at (202) 512-6240 or by e-mail at [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Other contacts and key contributors to this report are listed in appendix VI. Objectives, Scope, and Methodology Our objectives were to determine (1) actions that selected federal agencies have taken to implement the new standard and (2) challenges that federal agencies are facing in implementing the standard. We reviewed Homeland Security Presidential Directive 12 (HSPD-12), Federal Information Processing Standards 201 (FIPS 201), related National Institute of Standards and Technology (NIST) special publications, Office of Management and Budget (OMB) guidance, and General Services Administration (GSA) guidance. On a nonprobability basis and using the results of the 2005 Federal Computer Security Report Card—which includes an assessment of agencies’ physical security—and the results of our previous reports on federal agencies’ progress in adopting smart card technology, we selected six agencies that represented a range of experience in implementing smart card-based identification systems. For example, we included agencies with no prior experience implementing smart card systems as well as agencies with years of experience in implementing smart card systems. The agencies we selected were the Departments of Defense, Interior, Homeland Security (DHS), Housing and Urban Development (HUD), Labor, and the National Aeronautics and Space Administration (NASA). To obtain information on the actions these agencies have taken and plan to take to implement the standard, we analyzed documentation such as agencies’ implementation plans. We also interviewed officials from selected agencies to obtain additional information on the actions their agencies took. We reviewed the completeness and appropriateness of actions reported to us. However, we did not determine whether agencies were fully compliant with HSPD-12 and FIPS 201. To identify challenges and barriers associated with implementing the new federal identification (ID) standard, we analyzed documentation and interviewed program officials as well as officials from GSA, NIST, the Office of Personnel Management (OPM), and OMB. In addition, we presented the preliminary challenges that we identified to agency officials to obtain their feedback and concurrence on the challenges. We performed our work at the offices of Defense, Interior, DHS, HUD, Labor, NASA, NIST, OMB, OPM, and GSA in the Washington, D.C., metropolitan area from April 2005 to December 2005, in accordance with generally accepted government auditing standards. NIST Guidelines on Implementing FIPS 201 NIST has issued several special publications providing supplemental guidance on various aspects of the FIPS 201 standard. These special publications are summarized below. NIST Special Publication 800-73, Interfaces for Personal Identity Verification, April 2005 SP 800-73 is a companion document to FIPS 201 that specifies the technical aspects of retrieving and using the identity credentials stored in a personal identity verification (PIV) card’s memory. This special publication aims to promote interoperability among PIV systems across the federal government by specifying detailed requirements intended to constrain vendors’ interpretation of FIPS 201. SP 800-73 also outlines two distinct approaches that agencies might take to become FIPS 201 compliant and specifies a set of requirements for each: one set for “transitional” card interfaces that are based on the Government Smart Card Interoperability Specification (GSC-IS), Version 2.1 and another set for “end-point” card interfaces that are more fully compliant with the FIPS 201 PIV-II card specification. Federal agencies that have implemented smart card systems based on the GSC-IS can elect to adopt the transitional specification as an intermediate step before moving to the end-point specification. However, agencies with no existing implementation are required to implement PIV systems that meet the end-point specification. SP 800-73 includes requirements for both the transitional and end-point specifications and is divided into the following three parts: Part 1 specifies the requirements for a PIV data model that is designed to support dual interface (contact and contactless) cards. The mandatory data elements outlined in the data model are common to both the transitional and end-point interfaces and include strategic guidance for agencies that are planning to take the path of moving from the transitional interfaces to the end-point interfaces. Part 2 describes the transitional interface specifications and is for use by agencies with existing GSC-IS based smart card systems. Part 3 specifies the requirements for the end-point PIV card and associated software applications. NIST SP 800-79, Guidelines for the Certification and Accreditation of PIV Card Issuing Organizations, July 2005 SP 800-79 is a companion document to FIPS 201 that describes the attributes that a PIV card issuer—an organization that issues PIV cards that comply with FIPS 201—should exhibit in order to be accredited. Agency officials need complete, accurate, and trustworthy information about their PIV credential issuers to make decisions about whether to authorize their operation. Agencies can use the guidelines in this document to certify and accredit the reliability of such organizations. There are four phases (initiation, certification, accreditation, and monitoring) in the certification and accreditation processes that cover a PIV credential issuer’s ability to carry out its primary responsibilities in identity proofing and registration, PIV card creation and issuance, and PIV card life-cycle management. By following the guidelines, federal agencies should be able to accomplish the following: Satisfy the HSPD-12 requirement that all identity cards be issued by PIV credential issuers whose reliability have been established by an official accreditation process; Ensure that a PIV credential provider (1) understands the requirements in FIPS 201; (2) is reliable in providing the required services; and (3) provides credible evidence that its processes were implemented as designed and adequately documented the processes in its operations plan; Ensure more consistent, comparable, and repeatable assessments of the required attributes of PIV credential issuers; Ensure more complete, reliable, and trusted identification of federal employees and contractors in controlling access to federal facilities and information systems; and Make informed decisions in the accreditation process in a timely manner and by using available resources in an efficient manner. NIST SP 800-78, Cryptographic Algorithms and Key Sizes for PIV, April 2005 FIPS 201 specifies mechanisms for implementing cryptographic techniques to authenticate cardholders, secure the information stored on a PIV card, and secure the supporting infrastructure. SP 800-78 contains the technical specifications needed to implement the encryption technology specified in the standard, including cryptographic requirements for PIV keys (e.g., algorithm and key size) and information stored on the PIV card (i.e., requiring the use of digital signatures to protect the integrity and authenticity of information stored on the card). In addition, this document specifies acceptable algorithms and key sizes for digital signatures on PIV status information (i.e., digital signatures on the certificate revocation lists or online certificate status protocol status response messages) and card management keys, which are used to secure information stored in the PIV card. For additional information on public key infrastructure technology, see our 2001 report. NIST SP 800-85, PIV Middleware and PIV Card Application Conformance Test Guidelines (SP 800-73 Compliance), October 2005 SP 800-85 outlines a suite of tests to validate a software developer’s PIV middleware and card applications to determine whether they conform to the requirements specified in SP 800-73. This special publication also includes detailed test assertions that provide the procedures to guide the tester in executing and managing the tests. This document is intended to allow (1) software developers to develop PIV middleware and card applications that can be tested against the interface requirements specified in SP 800-73; (2) software developers to develop tests that they can perform internally for their PIV middleware and card applications during the development phase; and (3) certified and accredited test laboratories to develop tests that include the test suites specified in this document and that can be used to test the PIV middleware and card applications for conformance to SP 800-73. NIST SP 800-87, Codes for the Identification of Federal and Federally Assisted Organizations, October 2005 SP 800-87 outlines the organizational codes necessary to establish the unique cardholder identifier numbers. Comments from the Office of Management and Budget Comments from the General Services Administration Comments from the Department of Commerce Contacts and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the person named above, Devin Cassidy, Derrick Dicoi, Neil Doherty, Sandra Kerr, Steven Law, Shannin O’Neill, and Amos Tevelow. Glossary Application programming interface The interface between the application software and the application platform (i.e., operating system), across which all services are provided. Authentication The process of confirming an asserted identity with a specified or understood level of confidence. Authorization The granting of appropriate access privileges to authenticated users. Biometrics Measures of an individual’s unique physical characteristics or the unique ways that an individual performs an activity. Physical biometrics include fingerprints, hand geometry, facial patterns, and iris and retinal scans. Behavioral biometrics include voice patterns, written signatures, and keyboard typing techniques. Biometric template A digital record of an individual’s biometric features. Typically, a “livescan” of an individual’s biometric attributes is translated through a specific algorithm into a digital record that can be stored in a database or on an integrated circuit chip. Card edge The set of command and response messages that allow card readers to communicate effectively with the chips embedded on smart cards. Certificate A digital representation of information that (1) identifies the authority issuing the certificate; (2) names or identifies the person, process, or equipment using the certificate; (3) contains the user’s public key; (4) identifies the certificate’s operational period; and (5) is digitally signed by the certificate authority issuing it. A certificate is the means by which a user is linked—”bound”—to a public key. Confidentiality The assurance that information is not disclosed to unauthorized entities or computer processes. Contactless smart card A smart card that can exchange information with a card reader without coming in physical contact with the reader. Contactless smart cards use 13.56 megahertz radio frequency transmissions to exchange information with card readers. Credential An object such as a smart card that identifies an individual as an official representative of a government agency. Digital signature The result of a transformation of a message by means of a cryptographic system using digital keys such that a relying party can determine (1) whether the transformation was created using the private key that corresponds to the public key in the signer's digital certificate and (2) whether the message has been altered since the transformation was made. Digital signatures may also be attached to other electronic information and programs so that the integrity of the information and programs may be verified at a later time. Electronic credentials The electronic equivalent of a traditional paper-based credential—a document that vouches for an individual’s identity. Identification The process of determining to what identity a particular individual corresponds. Identity The set of physical and behavioral characteristics by which an individual is uniquely recognizable. Identity proofing The process of providing sufficient information, such as identity history, credentials, and documents, to facilitate the establishment of an identity. Interoperability The ability of two or more systems or components to exchange information and to use the information that has been exchanged. Middleware Software that allows applications running on separate computer systems to communicate and exchange data. Minutiae Key data points—especially ridge bifurcations and end lines—within an individual’s fingerprint that can be extracted and used to match against the same individual’s live fingerprint. Online certificate status protocol A communications protocol that is used to determine whether a public key certificate is still valid or has been revoked or suspended. Personal Identity Verification (PIV) card A smart card that contains stored identity credentials—such as a photograph, digital certificate and cryptographic keys, or digitized fingerprint representations—that is issued to an individual so that the claimed identity of the cardholder can be verified against the stored credentials by another person or through an automated process. An accredited and certified organization that procures FIPS 201 compliant blank smart cards, initializes them with appropriate software and data elements for the requested identity verification and access control application, personalizes the cards with the identity credentials of the authorized cardholders, and delivers the personalized cards to the authorized cardholders along with appropriate instructions for protection and use. An entity that authenticates an individual’s identity applying for a PIV card by checking the applicant’s identity source documents through an identity proofing process, and to ensures that a proper background check was completed before the credential and the PIV card is issued to the individual. Privacy The ability of an individual to control when and on what terms his or her personal information is collected, used, or disclosed. Public key infrastructure (PKI) A system of hardware, software, policies, and people that, when fully and properly implemented, can provide a suite of information security assurances—including confidentiality, data integrity, authentication, and nonrepudiation—that are important in protecting sensitive communications and transactions. Risk The expectation of loss expressed as the probability that a particular threat will exploit a particular vulnerability with a particular harmful result. Smart card A tamper-resistant security device—about the size of a credit card—that relies on an integrated circuit chip for information storage and processing. Standard A statement published by organizations such as NIST, Institute of Electrical and Electronics Engineers, International Organization for Standardization, and others on a given topic—specifying the characteristics that are usually measurable, and must be satisfied in order to comply with the standard.
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Many forms of identification (ID) that federal employees and contractors use to access government-controlled buildings and information systems can be easily forged, stolen, or altered to allow unauthorized access. In an effort to increase the quality and security of federal ID and credentialing practices, the President directed the establishment of a governmentwide standard--Federal Information Processing Standard (FIPS) 201--for secure and reliable forms of ID based on "smart cards" that use integrated circuit chips to store and process data with a variety of external systems across government. GAO was asked to determine (1) actions that selected federal agencies have taken to implement the new standard and (2) challenges that federal agencies are facing in implementing the standard. The six agencies we reviewed--Defense, Interior, Homeland Security, Housing and Urban Development (HUD), Labor, and the National Aeronautics and Space Administration (NASA)--had each taken actions to begin implementing the FIPS 201 standard. Their primary focus has been on actions to address the first part of the standard, which calls for establishing appropriate identity proofing and card issuance policies and procedures and which the Office of Management and Budget (OMB) required agencies to implement by October 27, 2005. Agencies had completed a variety of actions, such as instituting policies to require that at least a successful fingerprint check be completed prior to issuing a credential. Regarding other requirements, however, efforts were still under way. For example, Defense and NASA reported that they were still modifying their background check policies. Based on OMB guidance, agencies have until October 27, 2006, to implement the second part of the standard, which requires them to implement interoperable smart-card based ID systems. Agencies have begun to take actions to address this part of the standard. For example, Defense and Interior conducted assessments of technological gaps between their existing systems and the infrastructure required by FIPS 201 but had not yet developed specific designs for card systems that meet FIPS 201 interoperability requirements. The federal government faces significant challenges in implementing FIPS 201, including (1) testing and acquiring compliant commercial products--such as smart cards and card readers--within required time frames; (2) reconciling divergent implementation specifications; (3) assessing the risks associated with specific vendor implementations of the recently chosen biometric standard; (4) incomplete guidance regarding the applicability of FIPS 201 to facilities, people, and information systems; and (5) planning and budgeting with uncertain knowledge and the potential for substantial cost increases. Until these implementation challenges are addressed, the benefits of FIPS 201 may not be fully realized. Specifically, agencies may not be able to meet implementation deadlines established by OMB, and more importantly, true interoperability among federal government agencies' smart card programs--one of the major goals of FIPS 201--may not be achieved.
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The Baltimore bank was a national bank, and was not authorized to permanently invest any portion of its capital in the stock of other corporations, nor did it attempt to do so in this instance. The shares of stock of the Brunswick bank were merely accepted as collateral to a note discounted by the Baltimore bank. They stood, it is true, for a few weeks in the name of the Baltimore bank on the registry of the Brunswick bank, but they were then retransferred to the pledgeor as appeared on the registry, the note having been paid. Complainants became creditors long after the transaction, and were chargeable with notice so far as the Baltimore bank was concerned. But notwithstanding the latter bank only held the shares as collateral, and had returned the pledge in due course on the payment of the loan, the contention is that the bank is under a statutory liability to these subsequent creditors, to the full amount of the shares it had temporarily held as security. This additional liability of a stockholder depends on the terms of the statute creating it, and as it is in derogation of the common law, the statute cannot be extended beyond the words used. As to stockholders of the Brunswick bank, such a liability was imposed by the 9th section of the charter, granted in 1889, which provided 'that said corporation shall be responsible to its creditors to the extent of its property and assets, and the stockholders, in addition thereto, shall be individually liable equally and ratably, and not one for another, as sureties to the creditors of such corporation for all contracts and debts of said corporation, to the extent of the amount of their stock therein, at the par value thereof, respectively, at the time the debt was created, in addition to the amount invested in such shares.' Tested by the language of this section, the Baltimore bank was never under liability to these creditors. For if this national bank could have been regarded as the owner of these shares from August 25 to October 20, 1890, notwithstanding the actual facts and the limitations on its powers, it was not such stockholder, in fact or in appearance, at the time complainants' debts were created. It acquired the stock as pledgee, August 25, 1890, and the note to which it was collateral, having been paid, retransferred it October 20, 1890, the retransfer being regularly entered on the books of the bank. It was after this that the transactions commenced from which the indebtedness to complainants arose, and no element of estoppel was involved. Nevertheless complainants contend that the Baltimore bank remained liable as a stockholder because it did not give notice of the retransfer under § 1496 of the Georgia Code of 1882, reading as follows: 'When a stockholder in any bank or other corporation is individually liable under the charter, and shall transfer his stock, he shall be exempt from such liability unless he receives a written notice from a creditor within six months after such transfer, of his intention to hold him liable; provided, he shall give notice once a month, for six months, of such transfer, immediately thereafter, in two newspapers in or nearest the place where such institution shall keep its principal office.' This section was obviously not intended to impose a liability, but to exempt from an existing liability. If any debt had been created from August 25 to October 20, and perhaps as to any debt outstanding on August 25, the Baltimore bank, treating it as a stockholder from August 25 to October 20, might have been held liable because it did not give the statutory notice, but no such case is presented. On the face of this record it is immaterial whether there were any creditors during the six months after the retransfer to give or to receive notice or whether there was any indebtedness incurred prior to August 25, or during the period from August 25 to October 20, 1890. We concur in the views of the circuit court, as thus expressed by Morris, J.: 'As by the charter of the Brunswick State Bank a stockholder was only liable as surety to creditors to the extent of his stock in the bank at the time the debt was created, and as the defendant, at the time the debts of the plaintiffs were created, had no stock in the bank and was therefore under no liability, it does not appear that § 1496 of the Georgia Code could have any application to this defendant. This section is applicable to a stockholder who, being individually liable to a creditor or creditors, shall then transfer his stock. The stockholders in the Brunswick State Bank were only liable for debts created while they held their stock, and, as applied to them, this section means that a stockholder who has become individually liable to a creditor by holding stock at the time the creditor's debts were created shall be exempt from such liability, provided he publishes a notice that he has transferred his stock, unless, within six months after the transfer, the creditor gives him notice that he intends to hold him liable. This would seem to be the plain meaning and intention of the statute. 'As § 1496 enables a stockholder who, by the charter, is already under liability to a creditor, to escape that liability by transferring his stock, unless the creditor gives him notice within six months after the transfer, it is sensible and understandable why notice of the transfer should be given; but, as to persons who as yet had no dealing with the bank out of which debts could be created, to require notice to them would not be sensible, and would be a mere arbitrary penalty, without reason,—a thing which is not to be imputed to the legislature if the section is capable of a more reasonable interpretation. If no notice of transfer by advertisement is given by the stockholder, then no notice within six months need be given by the creditor, and both stand upon the rights given by the charter, unaffected by § 1496 of the Code.' But it is said that the highest judicial tribunal of Georgia has decided otherwise, and that the circuit court and this court are bound to accept its interpretation of these statutory provisions. Without discussing the exceptions to that rule the inquiry in the first instance is as to what has been actually decided by the supreme court of Georgia in respect of the construction and application of those provisions in circumstances such as exist in this case. We are referred to the cases of Brobston v. Downing, 95 Ga. 505, 22 S. E. 277, decided May Term, 1894; and Chatham Bank v. Brobston, 99 Ga. 801, 27 S. E. 790, decided December Term, 1895, which involved the charter of the Brunswick State Bank. The court delivered no opinion in Brobston v. Downing, but the first headnote by Bleckley, Ch. J., was in these words: 'With or without a clause in the charter restricting the personal statutory liability of stockholders to the amount of stock at its par value at the time the debt in question was created, the liability exists and continues for any debt incurred by the corporation at any time until the stockholder who claims to be exempt by reason of having sold and transferred his stock before the debt was created has given notice of such sale, conformably to § 1496 of the Code. Lumpkin, J., concurring dubitante.' This does not in terms refer to stock which has been held as collateral, and retransferred on payment of the loan. In the second case there was no opinion of the court, but the following headnotes appear: '1. The decisions of this court in the cases of Brobston v. Downing, and vice versa, and Brobston v. Chatham Bank, 95 Ga. 505, 22 S. E. 277, upon a review thereof, are affirmed. '2. Where the charter of a bank imposes on all of its stockholders personal liability to its creditors, such liability attaches as well to those who acquire a complete legal title to stock of the bank by having the same transferred to them as collateral security for debts due by the transferrers, as to those who purchase such stock outright. '3. Under the charter of the Brunswick State Bank, and the general rules of law applicable thereto, a stockholder is individually liable for his pro rata part of the corporation debts created before he acquired his shares of stock by transfer, as well as for a like part of those created during his ownership of the shares. '4. A stockholder in that bank is also liable to the same extent upon debts of the corporation created after he transferred his shares, unless he gave notice of the transfer, as prescribed in § 1496 of the Code.' These were followed by four other head-notes, which need not be set forth. Of the three members of the court, Mr. Justice Lumpkin and Gober, J., filed an explanatory opinion, in which, after giving the 9th section of the Brunswick bank charter, and § 1496 of the Code of 1882, they stated: 'In the case of Brobston v. Downing, 95 Ga. 505, 22 S. E. 277, this court in effect decided that a stockholder in this bank was individually liable for his pro rata part of the debts of the corporation created before he became a stockholder, as well as for a like proportion of the indebtedness incurred by it while he held his stock. This decision controls the present cases. Upon a review of it, duly allowed, Chief Justice Simmons and Justice Lumpkin are of the opinion that it should be affirmed; and Judge Gober, being thus bound by it, of necessity concurs in the judgments now rendered. He is nevertheless of the opinion that in dealing with the cases reported in 95 Ga. Supra, the court, in so far as it held that a stockholder of this bank could be made liable for any debt created by it before he actually became a stockholder, misconstrued that portion of the bank's charter which is quoted above. If free to do so, he would hold that, under the language just referred to, the individual liability of a stockholder of this corporation is limited to such debts only as were contracted during the time be was an owner of stock and up to the date when, relatively to such liability, he legally severed his connection with the corporation. We all agree that any such owner, although he may have transferred his stock, would still be bound, under the above-cited section of the Code, for whatever liability the charter fixed upon him, unless he gave the notice provided for by that section. 'In 1894 an act was passed by the general assembly which materially modifies the law bearing upon this subject, in that it dispenses with any necessity for a stockholder, upon transferring his stock, to publish notice of the fact in order to be discharged from liability. That act declares that 'whenever a stockholder in any bank or other corporation is individually liable under the charter, and shall transfer his stock, he shall be exempt from such liability by such transfer, unless such bank or other corporation shall fail within six months from the date of such transfer.' Acts of 1894, p. 76; Civil Code, § 1888. In view of the radical change thus made in the law, the difference of opinion which exists between the majority and the minority of the court as constituted for the hearing of the cases now in hand is, apparently, of but little practical importance, save as affecting the result of the present litigation. If another case should arise the decision of which would depend upon the question as to which we disagree, the whole matter would still be open to review by a bench of six justices. Accordingly, we have agreed among ourselves to let the present decision stand upon the headnotes as announced, with the foregoing explanation of our reasons for not entering upon a discussion as to what should be the proper construction of the bank charter now under consideration.' As the reference was to the increase of the number of justices from three to six, which followed soon after, we think this explanation indicated that it was contemplated that 'the whole matter would be open for review,' before the new bench, if another case arose. The power to re-examine would exist, and these remarks were evidently intended to suggest that in the circumstances it might be properly exercised. And this, although the point of disagreement was confined to the question whether liability attached in respect of indebtedness created Sections 1, 2, and 6 of the act of 1894 are as follows: Sec. I. Be it enacted by the general assembly of the state of Georgia, etc., That from and after the passage of this act, whenever a stockholder in any bank or other corporation is individually liable under the charter, and shall transfer his stock, he shall be exempt from such liability by such transfer, unless such bank or other corporation shall fail within six months from the date of such transfer. Sec. II. Be it further enacted, That the stockholders in whose name the capital stock stands upon the books of such bank or other corporation at the date of its failure shall be primarily liable to respond upon such individual liability; but upon proof made that any of said shareholders at the date of the failure are insolvent, recourse may be had against the person or persons from whom such insolvent shareholder received his stock, if within a period of six months prior to the date of the failure of such bank or other corporation. Sec. VI. Be it further enacted, That all laws and parts of laws in conflict with this law be, and the same are, hereby repealed. before the particular stockholders sought to be charged became such. We conclude, therefore, that the questions before us have not been so definitively determined by the state court as to entitle such determination to be adopted and applied in this case. And this conclusion is confirmed by other considerations. The foregoing decisions were rendered in 1894 and 1895, and the Baltimore bank was not a party to the litigation and was never within the jurisdiction of the Georgia courts. The transaction with this bank occurred in 1890, and fully terminated October 20 of that year. When it took the collateral shares in its own name, it seems to us that it had the right to assume that it ran no risk of incurring liability by virtue of the terms of the charter of the Brunswick bank for indebtedness created after, in the ordinary course of business, it ceased to hold the stock, and that it could not reasonably have supposed that § 1496 of the Code of Georgia was intended arbitrarily to make all who might have held the stock of the Brunswick bank from time to time liable for every transaction during twenty years (the period of limitations), after they had ceased to be stockholders. There had been no such ruling in respect of the statutory liability imposed by the charter of the Brunswick bank on its stockholders when the loan was made and paid, and the cases cited from Georgia reports prior to 1894, all of which we have carefully examined, dealt with different provisions, and involved different considerations. The charter of the Brunswick bank was granted in 1889, at which time § 1496 had been in force for many years, and its application could only extend to the liability imposed by the charter,—namely, liability for indebtedness created while the relation of stockholder existed. The words 'at the time the debt was created,' must be held to have been providently inserted as words of limitation, and cannot be rejected nor rendered inefficacious by the prior law, which only applied to the actual situation, and did not control it nor purport to do so. The question is not whether all stockholders remained such if notice were not published, but whether the liability as stockholders, as to subsequent transactions, continued in spite of the termination of that relation, and that question is answered by the explicit terms of the 9th section of the charter. Decree affirmed.
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The additional liability of the shareholders of corporations depends on the terms of the statute creating it, and as such a statute is in derogation of the common law it cannot be extended beyond the words used. Where the charter of a state bank provides for additional liability of the shareholders as sureties to the creditors of the bank for all contracts and debts to the extent of their stock therein, at the par value thereof, at the time the debt was created, a shareholder is not liable for a debt created after he has actually parted with his stock and the transfer has been regularly entered on the books of the bank. Where the decisions of the highest court of a State show that it regarded the construction and application of a statute as open for review if another case arose, its prior determinations of the questions do not necessarily have to be adopted and applied by the Federal courts in cases where the cause of action arose prior to any of the adjudications by the state court. Section 1496 of the Georgia Code of 1882, requiring shareholders of banks to publish notice of transfer in order to exempt themselves from liability, does'not apply to shareholders who have transferred their stock prior to the inception of the debts at the time of the failure of the institution.
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Plaintiff in error was plaintiff below, and brought this action to recover a sum levied as a legacy tax under §§ 29 and 30 of the war revenue act of June 13, 1898, chap. 448, 30 Stat. at L. 464, 465, as amended by the act of March 2, 1901, chap. 806, §§ 10, 11, 31 Stat. at L. 946-948, U. S. Comp. Stat. 1901, pp. 2308, 2310. The grounds for recovery stated in the petition in effect presented only questions of statutory construction. The trial court, being of opinion that a recovery was justified upon one of the stated grounds, sustained a demurrer to the answer, and the defendants not desiring to plead further, judgment was entered for the plaintiff. The case was then taken to the circuit court of appeals. That court, in a full and careful opinion, reviewed the grounds for recovery relied upon in the petition, decided that all the grounds of the claim were without merit, and held there was no right to the relief prayed. In consequence the judgment of the court below was reversed and the case was remanded with directions to overrule the demurrer, and for further proceedings consistent with the views expressed in the opinion of the court. 90 C. C. A. 441, 164 Fed. 795. A petition for rehearing was overruled. 94 C. C. A. 95, 168 Fed. 617. On the receipt of the mandate the trial court allowed the plaintiff to file an amended petition, wherein, in addition to repeating the contentions urged in the original petition, it was alleged that the 'clear value' of the life estate in question had been fixed and determined by a method so arbitrary as to amount to a deprivation of property without due process of law. A demurrer to this amended petition was sustained, and, the plaintiff electing not to plead further, judgment was entered in favor of the defendants. The case was then brought directly to this court upon the theory that a constitutional question was involved. The assignments of error invoked a re-examination of all the issues, including those which had been adversely passed on by the circuit court of appeals. On these assignments the case was argued at bar and taken under advisement on a record which contained only the proceedings had in the trial court subsequent to the filing of the mandate of the circuit court of appeals. While in that situation the published report of the opinion of the circuit court of appeals came under our observation. Mindful of the proper consideration due to the circuit court of appeals, and of our duty at all times to be scrupulous to keep within our jurisdiction, for the purpose of enabling us to apply the doctrine announced in the case of Aspen Min. & Smelting Co. v. Billings, 150 U. S. 31, 37 L. ed. 986, 14 Sup. Ct. Rep. 4, in which case, as in this, the record did not disclose that the cause had been passed upon by the circuit court of appeals, although there were on the files of this court certiorari proceedings so showing, to which resort was had, we directed that the court below supply the deficiency, if any there was, in the record, by certifying all the proceedings had in the case. At once, by stipulation of counsel, an additional transcript was filed, stating the proceedings on the first trial, the taking of the appeal to the circuit court of appeals, and the action of that court, and in the light thus afforded we come first to consider our jurisdiction over the controversy. There can be no doubt that on the record upon which the circuit court of appeals acted, the judgment of that court, if it had been final in form, would have been beyond our competency to review. Spreckels Sugar Ref. Co. v. McClain, 192 U. S. 397, 48 L. ed. 496, 24 Sup. Ct. Rep. 376. There can equally be no doubt that if we have power to pass upon the case on this record, our jurisdiction embraces not only the right to decide the alleged constitutional question raised after the mandate of the circuit court of appeals had been filed in the trial court, but also all other questions arising on the record, including those passed upon by the circuit court of appeals. Indeed, it is unnecessary to cite the many authorities sustaining this view, since the insistence of the plaintiff in error is that every question is open, and in effect the argument seeks a review and reversal of the rulings previously made by the circuit court of appeals. But by the distribution of power made by the act of 1891 [26 Stat. at L. 826, chap. 517, U. S. Comp. Stat. 1901, p. 488] and embodied in the Judicial Code [36 Stat. at L. 1087, chap. 231, U. S. Comp. Stat. Supp. 1911, p. 128], no jurisdiction is conferred upon this court to review a judgment or decree of the circuit court of appeals otherwise than by proceedings addressed directly to that court in a cause which is susceptible of being reviewed. Under these conditions the absence of jurisdiction to exercise the authority which we are now asked to exert would seem to be clear unless the principle be recognized that we have a right to do by indirection that which the statute gives us power only to do by direct action. It is, however, said the statute gives the right to come directly to this court where a constitutional question is involved, and as such question was raised below, albeit after the cause was pending in the trial court for the purpose of giving effect to the mandate of the circuit court of appeals, the right to direct review exists and cannot be denied without refusing to accord the relief plainly afforded by the statute. At best this proposition but involves the assertion that by virtue of the power conferred to take a direct appeal from one court, authority is given to indirectly review the decision of another and higher court, although the statute restricts the right to review such decision to a direct proceeding. But resort to original reasoning to establish the unsoundness of the proposition relied on is scarcely necessary, as that result will be made plainly manifest by applying principles established in the following cases: Aspen Min. & Smelting Co. v. Billings, 150 U. S. 31, 37, 37 L. ed. 986, 988, 14 Sup. Ct. Rep. 4; Brown v. Alton Water Co. 222 U. S. 325, 56 L. ed. 221, 32 Sup. Ct. Rep. 156, and Metropolitan Water Co. v. Kaw Valley Drainage Dist. 223 U. S. 519, 56 L. ed. 533, 32 Sup. Ct. Rep. 246. Nor, as in effect held in the Metropolitan Case, can the case of Globe Newspaper Co. v. Walker, 210 U. S. 356, 52 L. ed. 1096, 28 Sup. Ct. Rep. 726, be considered as announcing a doctrine in conflict with the rulings in the Aspen and Alton Cases. And aside from a distinction suggested in the Metropolitan Case between the Aspen and Alton Cases and the Globe Case, it must follow that if the ruling in the Globe case was in anywise in conflict with the doctrine announced and approved in the Metropolitan Case, to the extent of such conflict it was necessarily qualified by that decision. It is insisted, however, that in both the Aspen and the Alton Cases, the questions which it was sought to review by direct appeal after the decision of the circuit court of appeals had been, either expressly or by necessary implication, passed upon by that court and therefore were expressly foreclosed, while here such is not the case, since the constitutional question was not in the case when it went to the circuit court of appeals, but only made its appearance by an amendment to the pleadings after the decision of that court. Granting the premise upon which the argument rests, the deduction is unfounded. The ruling in both the Aspen and Alton Cases rested upon plain ground of the duty of this court not to exert a power not conferred, of the impossibility of proceeding upon the theory that error could be said to have been committed by the trial court because it had applied the decision of the circuit court of appeals, or of maintaining the right to the direct appeal which was relied upon in those cases consistently with the power of the circuit court of appeals not only to decide questions within its jurisdiction, but, moreover, to determine whether, when in a particular case it had decided such questions and remanded the case in which they had been decided to a trial court for further proceedings, that court had in such further proceedings given due effect to its decision. Indeed, these considerations were expounded in the Metropolitan Case, and it was there pointed out that the attempt to make a distinction upon the mere form of the mandate was without merit (p. 523). Looked at arguendo, however, as a matter of first impression, the source of the error which the proposition here relied upon involves is not difficult to perceive. It consists in pursuing a mistaken avenue of approach to this court; that is, of coming directly from a trial court in a case where, by reason of the cause having been previously decided by the circuit court of appeals, the way to that court should have been pursued even if it was proposed to ultimately bring the case here. The error comes from attempting, after the case has been taken to the circuit court of appeals and been there decided, to resort to proceedings for review which, under the statute, are applicable only in case no such action by the circuit court of appeals had been taken. A consideration of the confusion which inevitably would result if the doctrine of the Metropolitan, Alton and Aspen Cases were not applied, of the necessity which would arise for denying powers conferred upon the circuit court of appeals by the statute, and of calling into play a power of review by this court not given, clearly demonstrates the error of the right to direct appeal here insisted upon. And the correctness of the rule announced in the Aspen Case, and which was reiterated in the Alton and Metropolitan Cases, which we again now apply, is shown by the complete accordance between all of the provisions of the statute which will be brought about by its application. Dismissed for want of jurisdiction. Mr. Justice Pitney took no part in the decision of this case.
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By the distribution of power made by the Circuit Court of Appeals Act of 1891, and now embodied in the Judicial Code of 1911, this court has no jurisdiction to review a judgment. or decree of the Circuit Court of Appeals otherwise than by proceedings addressed directly to that court in a cause which is susceptible of being reviewed. That which can only be done by direct action cannot be done by indirection. In a case in which on the original pleadings the judgment of the Circuit Court of Appeals would not have been reviewable by this court, plaintiff recovered in the Circuit Court and on appeal the Circuit Court of Appeals reversed and remanded for new trial, with an opinion adverse to all of plaintiff's contentions: plaintiff in the Circuit Court amended by adding an allegation denying due process of law, and elected not to plead further after demurrer sustained and' took a direct writ of error to this court basing it on the constitutional question, and claiming that in this court all other questions could also be passed on: Held that this court will not in this indirect manner attempt to review a judgment of the Circuit Court of Appeals which it otherwise has not jurisdiction to review. This court is scrupulous to keep within its jurisdiction, and if the record does not show that the Circuit Court of Appeals has already passed on questions in the case it will order the deficiency supplied by directing the court below to certify all the papers in the case.
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SECTION 1. SHORT TITLE.
This Act may be cited as the ``Noncommercial Broadcasting Freedom
of Expression Act of 2000''.
SEC. 2. FINDINGS.
The Congress finds the following:
(1) In the additional guidance contained in the Federal
Communication Commission's memorandum opinion and order in WQED
Pittsburgh (FCC 99-393), adopted December 15, 1999, and
released December 29, 1999, the Commission attempted to impose
content-based programming requirements on noncommercial
educational television broadcasters without the benefit of
notice and comment in a rulemaking proceeding.
(2) In doing so, the Commission did not adequately consider
the implications of its proposed guidelines on the rights of
such broadcasters under First Amendment and the Religious
Freedom Restoration Act.
(3) Noncommercial educational broadcasters should be
responsible for using the station to primarily serve an
educational, instructional, cultural, or religious purpose in
its community of license, and for making judgments about the
types of programming that serve those purposes.
(4) Religious programming contributes to serving the
educational and cultural needs of the public, and should be
treated by the Commission on a par with other educational and
cultural programming.
(5) Because noncommercial broadcasters are not permitted to
sell air time, they should not be required to provide free air
time to commercial entities or political candidates.
(6) The Commission should not engage in regulating the
content of speech broadcast by noncommercial educational
stations.
SEC. 3. CLARIFICATION OF SERVICE OBLIGATIONS OF NONCOMMERCIAL
EDUCATIONAL OR PUBLIC BROADCAST STATIONS.
(a) Service Conditions.--Section 309 of the Communications Act of
1934 (47 U.S.C. 309) is amended by adding at the end the following new
subsection:
``(m) Service Conditions on Noncommercial Educational and Public
Broadcast Stations.--
``(1) In general.--A nonprofit organization shall be
eligible to hold a noncommercial educational radio or
television license if the station is used primarily to
broadcast material that the organization determines serves an
educational, instructional, cultural, or religious purpose (or
any combination of such purposes) in the station's community of
license, unless that determination is arbitrary or
unreasonable.
``(2) Additional content-based requirements prohibited.--
The Commission shall not--
``(A) impose or enforce any quantitative
requirement on noncommercial educational radio or
television licenses based on the number of hours of
programming that serve educational, instructional,
cultural, or religious purposes; or
``(B) impose or enforce any other requirement on
the content of the programming broadcast by a licensee,
permittee, or applicant for a noncommercial educational
radio or television license that is not imposed and
enforced on a licensee, permittee, or applicant for a
commercial radio or television license, respectively.
``(3) Rules of construction.--Nothing in this subsection
shall be construed as affecting--
``(A) any obligation of noncommercial educational
television broadcast stations under the Children's
Television Act of 1990 (47 U.S.C. 303a, 303b); or
``(B) the requirements of section 396, 399, 399A,
and 399B of this Act.''.
(b) Political Broadcasting Exemption.--Section 312(a)(7) of the
Communications Act of 1934 (47 U.S.C. 312(a)(7)) is amended by
inserting ``, other than a noncommercial educational broadcast
station,'' after ``use of a broadcasting station''.
(c) Audit of Compliance With Donor Privacy Protection
Requirements.--Section 396(l)(3)(B)(ii) of the Communications Act of
1934 (47 U.S.C. 396(l)(3)(B)(ii)) is amended--
(1) in subclause (I), by inserting before the semicolon the
following: ``, and shall include a determination of the
compliance of the entity with the requirements of subsection
(k)(12)''; and
(2) in subclause (II), by inserting before the semicolon
the following: ``, except that such statement shall include a
statement regarding the extent of the compliance of the entity
with the requirements of subsection (k)(12)''.
(d) Implementation.--Consistent with the requirements of section 4
of this Act, the Federal Communications Commission shall amend sections
73.1930 through 73.1944 of its rules (47 CFR 73.1930-73.1944) to
provide that those sections do not apply to noncommercial educational
broadcast stations.
SEC. 4. RULEMAKING.
(a) Limitation.--After the date of the enactment of this Act, the
Federal Communications Commission shall not establish, expand, or
otherwise modify requirements relating to the service obligations of
noncommercial educational radio or television stations except by means
of agency rulemaking conducted in accordance with chapter 5 of title 5,
United States Code, and other applicable law (including the amendments
made by section 3).
(b) Rulemaking Deadline.--The Federal Communications Commission
shall prescribe such revisions to its regulations as may be necessary
to comply with the amendment made by section 3 within 270 days after
the date of the enactment of this Act.
Passed the House of Representatives June 20, 2000.
Attest:
JEFF TRANDAHL,
Clerk.
By Martha C. Morrison,
Deputy Clerk.
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Prohibits the Federal Communications Commission (FCC) from: (1) imposing or enforcing any quantitative requirement on NCE licenses based on the number of hours of programming that serve such purposes; or (2) imposing or enforcing any other programming content requirement on an NCE license that is not imposed on a licensee, permittee, or applicant for a commercial radio or television license. Specifies that NCE licensees remain subject to applicable provisions of the Children's Television Act and the requirements of the Public Broadcasting Act.Exempts NCE stations from requirements to make broadcast stations accessible to political candidates and directs the FCC to amend its rules governing political broadcasting to provide that such rules do not apply to NCE stations.Requires each public telecommunications entity that receives funds from donors to undergo an annual audit (current law) which shall include a determination of such entity's compliance with donor privacy protection requirements.Prohibits the FCC from establishing, expanding, or otherwise modifying requirements relating to the service obligations of noncommercial educational radio or television stations except by means of agency rulemaking.
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Background Historically, IPP projects were placed in one of three categories—Thrust 1, Thrust 2, and Thrust 3. DOE now only supports Thrust 2 projects. Specifically: Thrust 1 projects were geared toward technology identification and verification and focused on “laboratory-to-laboratory” collaboration, or direct contact between DOE’s national laboratories and weapons institutes and scientists in the former Soviet Union. These projects had no industry partner and, according to DOE, were entered into to quickly engage former Soviet weapons scientists and their institutes. DOE funded 447 Thrust 1 projects, 378 of which were completed. DOE no longer supports Thrust 1 projects. Thrust 2 projects involve a U.S. industry partner that agrees to share in the costs of the project with DOE to further develop potential technologies. The U.S. industry partner is expected to match the funds DOE provides, either by providing in-kind support, such as employee time and equipment, or by providing cash. Through October 2007, there were 479 IPP projects in the Thrust 2 category. Thrust 3 projects, with the exception of 1 project, did not receive any financial support from DOE and were intended to be self-sustaining business ventures. DOE no longer supports Thrust 3 projects. There were only three Thrust 3 projects and the last project was completed in 2001. All proposed IPP projects are reviewed by DOE’s national laboratories; the IPP program office; and other agencies, including Defense and State, before they are approved for funding. Initially, a national laboratory proposes a project for consideration. As the national laboratory prepares the proposal, the laboratory project manager, generally referred to as the “principal investigator,” is responsible for including, among other things, a list of intended participants and for designating the WMD experience for each participant. The proposed participants are assigned to one of the following three categories: Category I—direct experience in WMD research, development, design, production, or testing; Category II—indirect WMD experience in the underlying technologies of potential use in WMD; or Category III—no WMD-relevant experience. If the IPP project is approved, DOE transfers funding to the project participants using payment mechanisms at CRDF, ISTC, or STCU. To be paid by any of these entities, the project participants must self-declare whether they possess weapons experience and indicate a more specific category of WMD expertise, such as basic knowledge of nuclear weapons design, construction, and characteristics. The weapons category classifications these scientists declare are certified first by the foreign institute’s director and then by the foreign government ministry overseeing the institute. See appendix III for a more detailed list of the WMD categories used by DOE, CRDF, ISTC, and STCU. After the project passes an initial review within the proposing national laboratory, it is further analyzed by the ILAB and its technical committees, which then forward the project proposal to DOE headquarters for review. DOE, in turn, consults with State and other U.S. government agencies on policy, nonproliferation, and coordination considerations. The IPP program office at DOE headquarters is ultimately responsible for making final decisions, including funding, on all projects. DOE Has Overstated the Progress Made on Key Performance Measures, Raising Doubts about the IPP Program’s Nonproliferation Benefits DOE has not accurately portrayed the IPP program’s progress, according to our analysis of two key measures used to assess the program’s performance—the number of WMD scientists receiving DOE support and the number of long-term, private sector jobs created. Many of the scientists in Russia and other countries that DOE has paid through its IPP program did not claim to have WMD experience. Furthermore, DOE’s process for substantiating the weapons backgrounds of IPP project participants has several weaknesses, including limited information about the backgrounds of scientists proposed for an IPP project. In addition, DOE has overstated the rate at which weapons scientists have been employed in long-term, private sector jobs because it does not independently verify the data it receives on the number of jobs created, relies on estimates of job creation, and includes in its count a large number of part-time jobs that were created. Finally, DOE has not revised the IPP program’s performance metrics, which are currently based on a 1991 assessment of the threat posed by former Soviet weapons scientists. DOE Has Supplemented the Salaries of Many Scientists in Russia and Other Countries Who Did Not Claim Direct Experience with WMD A major goal of the IPP program is to engage former Soviet weapons scientists, engineers, and technicians, and DOE claims to have supplemented the incomes of over 16,770 of these individuals since the program’s inception. However, this number is misleading because DOE officials told us that this figure includes both personnel with WMD experience and those without any WMD experience. We reviewed the payment records of 97 IPP projects, for which information was available and complete, and found that 54 percent, or 3,472, of the 6,453 participants in these projects did not claim to possess any WMD experience in the declarations they made concerning their backgrounds. Moreover, project participants who did not claim any WMD experience received 40 percent, or approximately $10.1 million, of the $25.1 million paid to personnel on these projects. For example, in 1 project to develop a high-power accelerator that was funded for $1 million, 88 percent, or 66, of the 75 participants who have received payments did not claim any previous weapons-related experience. On a project-by-project basis, we also found that DOE is not complying with a requirement of its own guidance for the IPP program—that is, each IPP project must have a minimum of 60 percent of the project’s participants possessing WMD-relevant experience prior to 1991 (i.e., Soviet-era WMD experience). According to our analysis of the payment records of 97 projects for which information was available and complete, we found that 60 percent, or 58, of the 97 projects did not meet this requirement. A factor contributing to this outcome may be a poor understanding of the IPP program guidance among the ILAB representatives of the 12 national laboratories participating in the program. During our interviews with national laboratory officials, we heard a range of opinions on the appropriate minimum percentage of WMD scientists on individual IPP projects. For example, ILAB representatives from 5 national laboratories indicated that they strive for a minimum of 50 percent of WMD scientists on each IPP project; the ILAB representative from the Pacific Northwest National Laboratory indicated a goal of 55 percent. The ILAB representative from the National Renewable Energy Laboratory indicated that he was not aware of any DOE policy establishing a minimum percentage of participants with WMD backgrounds on an IPP project. Finally, many IPP project participants that DOE supports are too young to have supported the Soviet Union’s WMD programs. Officials at 10 of the 22 Russian and Ukrainian institutes we interviewed said that IPP program funds have allowed their institutes to recruit, hire, and retain younger scientists. We found that 15 percent, or 972, of the 6,453 participants in the payment records of the 97 projects we reviewed were born in 1970 or later and, therefore, were unlikely to have contributed to Soviet-era WMD efforts. This group of younger participants received approximately 14 percent, or about $3.6 million, of $25.1 million paid to project participants in the 97 projects we reviewed. While DOE guidance for the IPP program does not specifically prohibit participation of younger scientists in IPP projects, DOE has not clearly stated the proliferation risk posed by younger scientists and the extent to which they should be a focus of the IPP program. The absence of a clear policy on this matter has contributed to confusion and lack of consensus among national laboratory officials involved in the program about the extent to which younger scientists, rather than older, more experienced WMD experts, should be involved in IPP projects. For example, the ILAB representative at the Argonne National Laboratory told us that it would be appropriate to question the participation of personnel born in the mid-1960s or later since they most likely lacked weapons-related experience. A representative at the Los Alamos National Laboratory who has been involved with the IPP program for over a decade said that the program should engage “second-generation” scientists born in 1980 or later because doing so can help create opportunities for “third- and fourth- generation” scientists at facilities in Russia and other countries in the future. Senior officials at the Lawrence Livermore National Laboratory told us that scientists in Russia and other countries, regardless of their age or actual experience in weapons-related programs, should be included in IPP projects because weapons expertise can be passed from one generation to the next. DOE Lacks Necessary Information and a Rigorous, Formalized Review Process to Assess the WMD Credentials of IPP Project Participants In 1999, we recommended that, to the extent possible, DOE should obtain more accurate data on the number and background of scientists participating in IPP program projects. DOE told us that it has made improvements in this area, including development of a classification system for WMD experts, hiring a full-time employee responsible for reviewing the WMD experience and backgrounds of IPP project participants, and conducting annual project reviews. DOE relies heavily on the statements of WMD experience that IPP project participants declare when they submit paperwork to receive payment for work on IPP projects. However, we found that DOE lacks an adequate and well-documented process for evaluating, verifying, and monitoring the number and WMD experience level of individuals participating in IPP projects. According to DOE officials, all IPP projects are scrutinized carefully and subjected to at least 8, and in some cases 10, stages of review to assess and validate the WMD experience of the project participants. Responsibility for verifying the WMD experience and backgrounds of IPP project participants rests not only with DOE, but with the national laboratories, other federal agencies, and the entities responsible for transmitting funding to the scientists in Russia and other countries (CRDF, ISTC, or STCU). However, the ultimate responsibility for this assessment rests with DOE’s IPP program office. Table 1 provides an overview of the different stages involved in DOE’s assessment of IPP project participants’ WMD backgrounds. In reviewing project documentation and in our discussions with officials responsible for conducting these reviews, we found limitations throughout this multistage assessment process. Specifically: DOE has limited information to verify the WMD experience of personnel proposed for IPP projects because government officials in Russia and other countries are reluctant to provide information about their countries’ scientists. For example, ISTC officials told us that the Russian government refuses to provide résumés for scientists involved in projects funded by the Science Centers program, including IPP projects that use the ISTC payment process; while CRDF officials indicated that both the Russian and Ukrainian governments have shown increasing resistance to the policy requiring the scientists to declare their WMD-related experience. Three national laboratory officials stated that it is illegal under Russian law to ask project participants about their backgrounds, and that instead they make judgments regarding the WMD experience of the project participants on the basis of their personal knowledge and anecdotal information. Some IPP project proposals may advance from the national laboratories for consideration by DOE with insufficient vetting or understanding of all personnel who are to be engaged on the project. Contrary to the process DOE laid out for the review of the WMD scientists’ backgrounds, senior representatives at five national laboratories told us that they and their project managers do not have sufficient time or the means to verify the credentials of the proposed project participants. Furthermore, they believe that DOE is primarily responsible for substantiating the weapons experience of the individuals who are to be engaged in the projects. DOE does not have a well-documented process for verifying the WMD experience of IPP project participants, and, as a result, it is unclear whether DOE has a reliable sense of the proliferation risk these individuals pose. DOE’s review of the WMD credentials of proposed project participants relies heavily on the determinations of the IPP program office. We examined the proposal review files that the program maintains, and we were unable to find adequate documentation to substantiate the depth or effectiveness of the program office’s review of the WMD experience of proposed IPP project participants. DOE officials noted that they do not usually check the weapons backgrounds of every individual listed in an IPP project proposal, but only the key project scientists and a few of the personnel working with them. Specifically, in none of the IPP project files that we reviewed did we find formal, written documentation analyzing and substantiating the WMD backgrounds and proliferation risks of the personnel to be engaged in those IPP projects. Each of these files did, however, contain a comprehensive formal assessment by DOE’s Office of International Regimes and Agreements analyzing export control issues and compliance with U.S. nonproliferation laws. Officials at the three organizations DOE uses to make tax-free payments for IPP projects—CRDF, ISTC, and STCU—also downplayed their organizations’ ability to validate the backgrounds of the scientists participating in IPP projects. CRDF officials stated that their organization has not independently validated any of the weapons backgrounds of the participating scientists, and they do not consider that a responsibility under CRDF’s contract with DOE. Similarly, ISTC officials told us that their organization cannot verify the backgrounds of scientists in projects funded by the Science Centers program, including IPP projects that use the ISTC payment process, and instead relies on the foreign institute’s certification of the project participants. Finally, STCU relies on the validation provided by the foreign institute’s director, and verifies this information in annual project reviews during which a sample of project participants are interviewed to confirm their WMD experience. Because it can be a matter of months or longer between development of an IPP project proposal and project implementation, the list of personnel who are actually paid on a project can differ substantially from the proposed list of scientists. For several IPP projects we reviewed, we did not find documentation in DOE’s project files indicating that the department was notified of the change of staff or had assessed the WMD backgrounds of the new project participants. For example, 1 IPP project— to discover new bioactive compounds in Russia and explore their commercial application—originally proposed 27 personnel and was funded at $1 million. However, 152 personnel were eventually paid under this project, and we did not find an updated list of the project personnel or any indication of a subsequent review of the additional personnel by DOE in the IPP project files. In another project to develop straw-fired boilers in Ukraine funded at $936,100, DOE reviewed the backgrounds of 18 personnel who were part of the project proposal. However, CRDF payment records indicated that 24 personnel were subsequently paid on the project, only 5 of whom were listed in the original proposal DOE had reviewed and approved. As a result, it is unclear whether DOE conducts sufficient oversight on changes in the number or composition of the workforce involved in IPP projects. For its part, CRDF informed us that when an institute requests a change in project staff and that change is approved by the participating national laboratory, CRDF does not report these changes to DOE, but relies on the national laboratory to notify relevant DOE officials. The limited information DOE obtains about IPP project participants and the weaknesses in DOE’s review of the backgrounds of these individuals leave the IPP program vulnerable to potential misallocation of funds. In our review, we found several examples that call into question DOE’s ability to adequately evaluate IPP project participants’ backgrounds before the projects are approved and funded. For example: A National Renewable Energy Laboratory official told us he was confident that a Russian institute involved in a $250,000 IPP project he oversaw to monitor microorganisms under environmental stress was supporting Soviet-era biological weapons scientists. However, during our visit to the institute in July 2007, the Russian project leader told us that neither he nor his institute was ever involved in biological weapons research. As a result of this meeting, DOE canceled this project on July 31, 2007. DOE’s cancellation letter stated that the information provided during our visit led to this action. It further stated, “it is well documented in statute and in the General Program Guidance that our projects must engage Russians, and others, with relevant weapons of mass destruction or strategic delivery means backgrounds. Violation of this requirement is an extremely serious matter.” In November 2006, DOE canceled a project in Ukraine intended to develop a new type of fuel combustion system, 18 months after approving the project and after spending about $76,000. DOE canceled this project when it discovered an inadequate number of personnel with WMD backgrounds involved in the project and after a Defense Contract Audit Agency (DCAA) audit revealed other irregularities, including a conflict of interest between the primary Ukrainian institute and the U.S. partner company. During the interagency review of the project proposal, State officials questioned the primary Ukrainian institute’s involvement in WMD. However, in our review of DOE’s project files, we did not find evidence that these concerns triggered a more-intensive evaluation of this institute by DOE prior to the project’s approval. A 2005 DCAA audit found that 90 percent of the participants on an IPP project administered by the Pacific Northwest National Laboratory lacked WMD experience. This project, which was designed to develop improved biological contamination detectors, was funded at $492,739. Officials at the national laboratory insisted that DCAA “was just plain wrong.” DOE and national laboratory officials asserted that the project participants were under instruction not to discuss their weapons involvement and, on the basis of their personal knowledge of the Russian project leader and the institute, they believed the project participants constituted a proliferation risk. However, according to the payment records we reviewed, the Russian project leader and other scientists involved in the project were not prevented from declaring their WMD backgrounds to CRDF. Such conflicting accounts, the absence of clear information, and the judgments made by IPP program officials in assessing the proliferation risks posed by IPP project participants underscore the difficulties the program faces and the possibility that the program is funding personnel who do not constitute a proliferation risk. DOE Has Overstated the Number of Former Weapons Scientists Reemployed in Long-term, Private Sector Jobs Although a senior DOE official described commercialization as the “flagship” of the IPP program, we found that the program’s commercialization achievements have been overstated and are misleading, further eroding the perceived nonproliferation benefits of the program. In the most recent annual report for the IPP program available at the time of our review, DOE indicated that 50 projects had evolved to support 32 commercially successful activities. DOE reported that these 32 commercial successes had helped create or support 2,790 new private sector jobs for former weapon scientists in Russia and other countries. In reviewing these projects, we identified several factors that raise concerns over the validity of the IPP program’s reported commercial success and the numbers of scientists employed in private sector jobs. For example: The annual survey instrument that USIC distributes to collect information on job creation and other commercial successes of IPP projects relies on “good-faith” responses from U.S. industry partners and foreign institutes, which are not audited by DOE or USIC. In 9 of the 32 cases, we found that DOE based its job creation claims on estimates or other assumptions. For example, an official from a large U.S. company told us that the number of jobs it reported to have helped create was his own rough estimate. He told us he derived the job total by estimating the amount of money that the company was spending at Russian and Ukrainian institutes and dividing that total by the average salary for Russian engineers in the company’s Moscow office. We could not substantiate many of the jobs reported to have been created in our interviews with the U.S. companies and officials at the Russian and Ukrainian institutes where these commercial activities were reportedly developed, due to conflicting information and accounts. For example, officials from 1 U.S. company we interviewed claimed that 250 jobs at 2 institutes in Russia had been created, on the basis of 2 separate IPP projects. However, during our visit to the Scientific Research Institute of Measuring Systems to discuss one of these projects, we were told that the project is still under way, manufacturing of the product has not started, and none of the scientists have been reemployed in commercial production of the technology. Similarly, during our site visit, officials at the Institute of Nuclear Research of the Russian Academy of Sciences could not confirm the creation of 350 jobs they had reported as a result of several IPP projects relating to the production of radioisotopes. They indicated that no more than 160 personnel were employed at their institute in commercial activities stemming from those IPP projects, that most of these jobs were only part time, and that they could not account for jobs that may have been created at other institutes previously involved in the projects. “A product, process, or service is generating revenue from sales or other economic value added in the or the U.S., based on an IPP project (either completed or ongoing); and/or there is a private contractual relationship between the U.S. industry partner and the institute covering research and development work to be done by the institute for the U.S. industry partner growing out of an IPP project.” The lack of consensus among DOE and national laboratory officials involved in the IPP program on a common commercialization definition has created confusion and disagreement on which IPP projects should be considered commercially successful. For example, DOE counted as a commercial success one IPP project administered by the Pacific Northwest National Laboratory to facilitate biodegradation of oil spills. However, the national laboratory officials responsible for this project disagreed with DOE’s characterization, in part because the project has not generated any commercial revenues. Furthermore, DOE’s broad-based definition of commercialization has allowed it to overstate its commercialization accomplishments to include part-time jobs created from and revenues derived from grants or contract research. Specifically: DOE counts part-time private sector jobs created, even if the scientists employed in these part-time jobs also continue to work at the former Soviet weapons institute. DOE policy does not require scientists employed in a private sector activity resulting from an IPP project to sever their relationship with their institute. In fact, in our review of the 2,790 jobs created, we found that 898, or nearly one third, of these jobs were part-time jobs, meaning that the scientists in some cases may still be affiliated with the institutes and involved in weapons-applicable research. The sources of revenue for some commercially successful IPP projects also call into question the long-term sustainability of some of the jobs created. DOE reported that $22.1 million in total revenue was generated by the foreign institutes or their spin-off companies as a result of commercial activities stemming from IPP projects. Of this total, approximately $4.5 million, or 20 percent, consisted of grants (including grants from the Russian government); contract research; and other sources of income that appear to be of limited duration, that are not based on commercial sales, and that may not offer a sustainable long-term source of revenue. For example, DOE reported that 510 jobs were created at the Kurchatov Institute and other Russian institutes as the result of an IPP project to develop thorium-based fuels for use in nuclear reactors. However, we found that over 400 of those jobs were supported by a separate DOE contract to evaluate the use of thorium fuels for plutonium disposition. The Russian project participants told us that over 500 workers were supported while receiving funding from the 2 DOE sources, but the project is now completed, it has not been commercialized, and there are no more than 12 personnel currently involved in efforts related to the project. DOE Has Not Revised the IPP Program’s Performance Metrics to Reflect Updated Threat Information The IPP program’s long-term performance targets do not accurately reflect the size and nature of the threat the program is intended to address because DOE is basing the program’s performance measures on outdated information. DOE has established 2 long-term performance targets for the IPP program—to engage 17,000 weapons scientists annually by 2015 in either IPP grants or in private sector jobs resulting from IPP projects, and to create private sector jobs for 11,000 weapons scientists by 2019. However, DOE bases these targets on a 16-year-old, 1991 National Academy of Sciences (NAS) assessment that had estimated approximately 60,000 at-risk WMD experts in Russia and other countries in the former Soviet Union. DOE derived 17,000 scientists as its share of the total target population by subtracting from the NAS estimate the number of WMD scientists engaged by other U.S. government and international WMD scientist assistance programs (such as State’s Science Centers program) and making assumptions about attrition rates in the former Soviet WMD workforce. DOE officials acknowledged that the 1991 NAS study does not provide an accurate assessment of the current threat posed by WMD scientists in Russia and other countries. A 2005 DOE-commissioned study by the RAND Corporation estimated that the population of unemployed or underemployed weapons scientists in Russia and other former Soviet states had decreased significantly. The RAND study provided rough revised estimates of the number of WMD scientists in the former Soviet Union, and DOE acknowledged in 2006 that the target population of WMD experts in the former Soviet Union had dropped from the 1991 NAS estimate of 60,000 to approximately 35,000 individuals. However, DOE has not formally updated its performance metrics for the IPP program and, in its fiscal year 2008 budget justification, continued to base its long-term program targets on the 1991 NAS estimate. Moreover, DOE’s current metrics for the IPP program are not complete or meaningful indicators of the proliferation risk posed by weapons scientists in Russia and other countries and, therefore, do not provide sufficient information to the Congress on the program’s progress in reducing the threat posed by former Soviet WMD scientists. The total number of scientists supported by IPP grants or employed in private sector jobs conveys a level of program accomplishment, but these figures are broad measures that do not describe progress in redirecting WMD expertise within specific countries or at institutes of highest proliferation concern. DOE has recognized this weakness in the IPP program metrics and recently initiated the program’s first systematic analysis to understand the scope of the proliferation risk at individual institutes in the former Soviet Union. DOE believes that setting priorities for providing support to foreign institutes is necessary because (1) the economies in Russia and the other countries of the former Soviet Union have improved since the program’s inception, (2) former “at-risk” institutes are now solvent, and (3) the threat of mass migration of former Soviet weapons scientists has subsided. However, DOE believes that a concern remains over the “targeted recruitment” of scientists and former WMD personnel. DOE officials briefed us on their efforts in September 2007, but told us that the analysis is still under way, and that it would not be completed until 2008. As a result, we were unable to evaluate the results of DOE’s assessment. DOE Has Not Developed an Exit Strategy for the IPP Program, but Instead Has Expanded Efforts to Iraq and Libya and Is Using the Program to Support the Department’s Global Nuclear Energy Partnership Russian government officials, representatives of Russian and Ukrainian institutes, and individuals at U.S. companies raised questions about the continuing need for the IPP program, particularly in Russia, whose economy has improved in recent years. However, DOE has yet to develop criteria for phasing-out the IPP program in Russia and other countries of the former Soviet Union. Meanwhile, DOE is departing from the program’s traditional focus on Russia and other former Soviet states to engage scientists in new countries, such as Iraq and Libya, and to fund projects that support a DOE-led initiative on nuclear energy, called the Global Nuclear Energy Partnership (GNEP). Russian Government Officials, Russian and Ukrainian Scientists, and U.S. Industry Representatives Questioned the Continuing Need for the IPP Program Officials from the Russian government, representatives of Russian and Ukrainian institutes, and individuals at U.S. companies who have been long-time program participants raised questions about the continuing need for the IPP program, given economic improvements in Russia and other countries of the former Soviet Union. Specifically: A senior Russian Atomic Energy Agency official told us in July 2007 that the IPP program is no longer relevant because Russia’s economy is strong and its scientists no longer pose a proliferation risk. Additionally, in September 2006, the Deputy Head of the Russian Atomic Energy Agency stated that Russia is no longer in need of U.S. assistance, and that it is easier and more convenient for Russia to pay for its own domestic nuclear security projects. Officials from 10 of the 22 Russian and Ukrainian institutes we interviewed told us that they do not see themselves or scientists at their institutes as a proliferation risk. Russian and Ukrainian officials at 14 of the 22 institutes we visited told us that salaries are regularly being paid, funding from the government and other sources has increased, and there is little danger of scientists migrating to countries of concern. However, many of these officials said that they are concerned about scientists emigrating to the United States and Western Europe, and that IPP program funds help them to retain key personnel. Furthermore, many of these officials noted that the program was particularly helpful during the difficult financial period in the late 1990s. Representatives of 5 of the 14 U.S. companies we interviewed told us that, due to Russia’s increased economic prosperity, the IPP program is no longer relevant as a nonproliferation program in that country. Some of these company officials believe that the program should be reassessed to determine if it is still needed. In economic terms, Russia has advanced significantly since the IPP program was created in 1994. Some of the measures of Russia’s economic strength include the following: massive gold and currency reserves, including more than $113 billion in a a dramatic decrease in the amount of foreign debt—from about 96 percent of Russia’s gross domestic product in 1999 to about 5 percent in April 2007; and rapid growth in gross domestic product—averaging about 6 percent per year from 1998 to 2006. In addition, the president of Russia recently pledged to invest substantial government resources in key industry sectors, including nuclear energy, nanotechnology, and aerospace technologies and aircraft production. Many of the Russian institutes involved in the IPP program could benefit substantially under these planned economic development initiatives, undercutting the need for future IPP program support. In fact, officials at many of the Russian institutes with whom we spoke told us that they hope to receive increased government funding from these new presidential initiatives. In another sign of economic improvement, many of the institutes we visited in Russia and Ukraine appeared to be in better physical condition and more financially stable, especially when compared with their condition during our previous review of the IPP program. In particular, at one institute in Russia—where during our 1998 visit we observed a deteriorated infrastructure and facilities—we toured a newly refurbished building that featured state-of-the-art equipment. Russian officials told us that the overall financial condition of the institute has improved markedly because of increased funding from the government as well as funds from DOE. In addition, one institute we visited in Ukraine had recently undergone a $500,000 renovation, complete with a marble foyer and a collection of fine art. Furthermore, we found that many institutes we visited have been able to develop commercial relationships with Russian, U.S., and other international companies on their own—outside of the IPP framework—leading to increased revenues and commercial opportunities. For example, officials at one Russian institute met with us immediately following their successful negotiation of a new contract for research and development activities with a large international energy company. However, DOE officials noted that the economic recovery throughout Russia has been uneven, and that DOE believes there are many facilities that remain vulnerable. Even so, DOE officials told us that their intent is to reorient the IPP program from assistance to cooperation, especially in Russia, given the recent improvements in that country’s economy. DOE Has Not Developed Criteria to Determine When Individuals or Institutes Should No Longer Receive IPP Funding DOE has not developed an exit strategy for the IPP program, and it is unclear when the department expects that the program will have completed its mission. DOE officials told us in September 2007 that they do not believe that the program needs to develop an exit strategy at this time. However, DOE officials acknowledged that the IPP program’s long- term goal of finding employment for 17,000 WMD scientists in Russia and other countries does not represent an exit strategy. DOE has not developed criteria to determine when scientists, institutes, or countries should be “graduated” from the IPP program, and DOE officials believe that there is a continued need to engage Russian scientists. In contrast, State has already assessed participating institutes and developed a strategy—using a range of factors, such as the institute’s ability to pay salaries regularly and to attract funding from other sources—to graduate certain institutes from its Science Centers program. State and DOE officials told us that the Science Centers and IPP programs are complementary and well-coordinated. However, we found that the programs appear to have different approaches regarding continued U.S. government support at certain institutes. Specifically, DOE is currently supporting 35 IPP projects at 17 Russian and Ukrainian institutes that State considers to already be graduated from its Science Centers program and, therefore, no longer in need of U.S. assistance. For example, according to State documents, beginning in fiscal year 2003, State considered the Kurchatov Institute to be graduated from its Science Centers program and, according to the Deputy Executive Director of ISTC, the institute is financially well-off and no longer needs U.S. assistance. However, we found that since fiscal year 2003, DOE has funded 6 new IPP projects at the Kurchatov Institute and a related spin-off company. DOE officials acknowledged that coordination between State and DOE’s scientist assistance programs could be improved. Part of State’s exit strategy involves enhancing commercial opportunities at some institutes through the Commercialization Support Program. This program, which began in October 2005, is administered by ISTC with funding from the United States, through State’s Science Centers program. State aims to facilitate and strengthen long-term commercial self- sustainability efforts at institutes in Russia and other countries by providing training and equipment to help them bring commercially viable technologies to market through the Commercialization Support Program. According to ISTC officials, 17 commercialization initiatives at institutes in Russia have been supported through the program, 2 of which were completed as of July 2007. DOE, State, and ISTC officials told us the IPP program and the Commercialization Support Program have a similar goal of finding commercial opportunities for weapons scientists in Russia and other countries of the former Soviet Union. According to ISTC officials, a key difference in the programs is that the Commercialization Support Program can support infrastructure upgrades at foreign institutes, but, unlike the IPP program, it is not used to support research and development activities. DOE and State officials insisted that the programs are complementary, but acknowledged that they need to be better coordinated. DOE Expanded IPP Efforts to Iraq and Libya and Is Working with Its Global Nuclear Energy Partnership to Maintain the IPP Program’s Relevance DOE recently expanded its scientist assistance efforts on two fronts: DOE began providing assistance to scientists in Iraq and Libya, and the IPP program is working with DOE’s Office of Nuclear Energy to develop IPP projects that support GNEP—a DOE-led international effort to expand the use of civilian nuclear power. These new directions represent a significant departure from the IPP program’s traditional focus on the former Soviet Union. According to a senior DOE official, the expansion of the program’s scope was undertaken as a way to maintain its relevance as a nonproliferation program. DOE has expanded the IPP program’s efforts into these new areas without a clear mandate from the Congress and has suspended parts of its IPP program guidance for implementing projects in these new areas. Specifically: Although DOE briefed the Congress on its plans, DOE officials told us that they began efforts in Iraq and Libya without explicit congressional authorization to expand the program outside of the former Soviet Union. In contrast, other U.S. nonproliferation programs, such as Defense’s Cooperative Threat Reduction program, sought and received explicit congressional authorization before expanding their activities to countries outside of the former Soviet Union. DOE officials told us they plan to ask the Congress to include such language in future legislation. In Libya, DOE is deviating from IPP program guidance and its standard practice of limiting the amount of IPP program funds spent at DOE’s national laboratories for project oversight to not more than 35 percent of total expenditures. Regarding efforts to support GNEP, DOE has suspended part of the IPP program’s guidance that requires a U.S. industry partner’s participation, which is intended to ensure IPP projects’ commercial potential. Iraq Since 2004, DOE has been working to identify, contact, and find employment for Iraqi scientists in peaceful joint research and development projects. DOE’s efforts were undertaken at the request of State, which has overall responsibility for coordinating nonproliferation activities and scientist assistance efforts in Iraq. DOE and State coordinate their activities through regular meetings and correspondence, participation in weekly teleconferences, interagency proposal review meetings, and coordination on strategic planning and upcoming events. Through May 2007, DOE had spent about $2.7 million to support its activities in Iraq. DOE has approved 29 projects, the majority of which are administered by Sandia National Laboratories. These include projects on radon exposure, radionuclides in the Baghdad watershed, and the development of salt tolerant wheat strains. However, owing to the uncertain security situation in Iraq, DOE and national laboratory officials told us that these are short- term projects. Sandia National Laboratory officials acknowledged that most of the projects DOE is funding in Iraq have no commercialization potential. Libya Similarly, DOE expanded its efforts to Libya at the request of State. DOE spent about $934,000 through May 2007 to support 5 projects in Libya, including projects involving water purification and desalination. However, DOE is deviating from its IPP program guidance and standard practices by placing no restrictions on the amount of IPP program funds that can be spent at DOE national laboratories for oversight of these projects. DOE limits spending at the national laboratories for IPP projects in all other countries to comply with section 3136(a)(1) of the National Defense Authorization Act for Fiscal Year 2000, which states the following: “Not more than 35 percent of funds available in any fiscal year after fiscal year 1999 for the IPP program may be obligated or expended by the DOE national laboratories to carry out or provide oversight of any activities under that program.” DOE officials acknowledged that more than 35 percent of IPP program funds for projects in Libya have been and will continue to be spent at the national laboratories. We found that through May 2007, DOE spent about $910,000 (97 percent) at the national laboratories, while spending about $24,000 (3 percent) in Libya. In a written response to us on September 7, 2007, DOE noted that the IPP program “will continue to operate in Libya on this basis [i.e., spending more than 35 percent of funds at the DOE national laboratories], while working with our legislative office to eliminate any perceived ambiguities .” DOE informed us on October 24, 2007, that these efforts are currently under way. DOE officials estimate that about 200 scientists in Libya have WMD knowledge and pose a proliferation risk. However, in contrast with its activities in Russia and other countries, DOE’s focus in Libya is not on engaging individual weapons scientists, but rather on converting former WMD manufacturing facilities, because, according to DOE, the Libyan government has made clear that it will continue to pay the salaries of its former WMD scientists and engineers. In collaboration with State, DOE is working to help scientists at Tajura, formerly the home of Libya’s nuclear research center, set up and transition to research in seawater desalination and analytical water chemistry. DOE and State coordinate on strategic planning for and implementation of scientist engagement efforts in Libya. According to State, coordination mechanisms include regular e-mail correspondences, weekly interagency and laboratory teleconferences, and quarterly meetings. DOE officials told us they plan to complete their efforts in Libya by 2009. Global Nuclear Energy Partnership In fiscal year 2007, DOE also expanded the efforts of the IPP program to provide support for GNEP—a DOE-led international effort to expand the use of civilian nuclear power. In October 2006, a senior DOE official told us that the department planned to use IPP projects to support GNEP as a way to maintain the program’s relevance as a nonproliferation program. On December 13, 2006, the IPP program office brought together national laboratory experts to propose new IPP projects that could support GNEP. Currently, six active or approved IPP projects are intended to support GNEP. According to IPP program officials, DOE’s Office of Nuclear Energy and Office of Science will be providing some funding to three of these projects. According to DOE officials, because these funds will come from other DOE offices and programs, they would not be subject to congressionally mandated limitations on the percentage of IPP program funds that can be spent at DOE national laboratories. As a result, DOE officials told us they plan to use funding provided by the Office of Nuclear Energy and the Office of Science to increase the amount spent at DOE national laboratories for technical review and oversight of GNEP-related IPP projects. DOE has suspended some key IPP program guidelines, such as the requirement for a U.S. industry partner, for IPP projects intended to support GNEP. DOE officials told us that most GNEP-related IPP projects do not have immediate commercial potential, but could attract industry in the future. Furthermore, they said that GNEP-related IPP projects are essentially collaborative research and development efforts between Russian institutes and DOE national laboratories. DOE has yet to develop separate written guidance for GNEP-related IPP projects, but told us it is planning to do so. As a result, national laboratory officials we interviewed told us that implementing procedures for GNEP-related IPP projects has been piecemeal and informal, which has created some confusion about how these projects will be managed and funded. Multiple DOE and Contractor Reviews and Delays in Project Implementation Contribute to the IPP Program’s Large Balances of Unspent Program Funds In every fiscal year since 1998, DOE has carried over unspent funds in excess of the amount that the Congress provided for the IPP program, primarily because of DOE and its contractors’ lengthy and multilayered review and approval processes for paying former Soviet weapons scientists for IPP-related work and long delays in implementing some IPP projects. DOE and national laboratory officials told us they are attempting to improve financial oversight over the IPP program, in part, to address concerns about unspent program funds. To that end, DOE is developing a new program management system, which it expects to fully implement in 2008—14 years after the start of the program. DOE Has Carried Over Unspent Funds Greater Than the Amount the Congress Has Allocated to the IPP Program Each Fiscal Year since 1998 Since fiscal year 1994, DOE has spent about $309 million to implement the IPP program, but has annually carried over large balances of unspent program funds. DOE officials have recognized that unspent funds are a persistent and continuing problem with the IPP program. Specifically, in every fiscal year after 1998, DOE has carried over unspent funds in excess of the amount that the Congress provided for the program the following year. For example, as of September 2007, DOE had carried over about $30 million in unspent funds—$2 million more than the $28 million that the Congress had appropriated for the IPP program in fiscal year 2007. In fact, as figure 1 shows, for 3 fiscal years—2003 through 2005—the amount of unspent funds was more than double the amount that the Congress appropriated for the program in those fiscal years, although the total amount of unspent funds has been declining since its peak in 2003. The IPP Program’s Persistent Annual Unspent Balances Have Resulted Primarily from Multiple Layers of Review and Delays in Project Implementation Two main factors have contributed to DOE’s large and persistent carryover of unspent funds: the lengthy and multilayered review and approval processes DOE uses to pay IPP project participants for their work, and long delays in implementing some IPP projects. DOE identified three distinct payment processes that it uses to transfer funds to individual scientists’ bank accounts in Russia and other countries—ISTC/STCU, CRDF subcontract, and CRDF master contract. These three processes involve up to seven internal DOE offices and external organizations that play a variety of roles, including reviewing project deliverables, approving funds, and processing invoices. DOE officials told us that these processes were originally introduced to ensure the program’s fiscal integrity, but they agreed that it was time to streamline these procedures. Regarding the first payment process, as figure 2 illustrates, before payment reaches project participants’ bank accounts, it passes from DOE headquarters (which includes the IPP program office and NNSA’s Budget Office), through DOE’s Energy Finance and Accounting Service Center, which records the obligation of funds. DOE then transfers funding to the Oak Ridge Financial Service Center, which pays the invoice by transferring funds to ISTC or STCU. The funds arrive at ISTC or STCU, which disburses them in quarterly payments to IPP project participants, upon receipt of project invoices, quarterly technical reports, and documentation from the participating former Soviet Union institutes that deliverables were sent to the national laboratories. However, DOE and national laboratory officials told us that this payment process has limitations. Specifically, these officials told us that if there is a problem with a deliverable, it is usually too late for DOE or the participating national laboratory to request that ISTC or STCU stop the payment to the project participants for the current quarter. The other two processes that DOE uses to make payments to IPP project participants involve CRDF. In most cases, DOE administers the CRDF payment process through a subcontract with the participating national laboratory. In some rare cases, DOE contracts directly with foreign institutes through a CRDF “master contract.” For projects that use CRDF to process payments, the entire amount of project funding is first transferred to the participating national laboratory, where it is placed in two separate accounts. The first account consists of no more than 30 percent of project funding for oversight costs incurred by the national laboratory. The second account has all funding for the foreign project participants, which is at least 70 percent of project funding. As figure 3 illustrates, before IPP project participants receive payment from CRDF, invoices and approvals of deliverables from the national laboratories, as well as CRDF forms, are sent to DOE headquarters for approval. DOE headquarters reviews the invoices against the contract and, if the amounts match, approves them and sends documentation to the DOE Procurement Office. DOE headquarters also notifies the participating national laboratory of its approval, and the laboratory sends the funds listed on the invoices to DOE’s Energy Finance and Accounting Service Center. The DOE Procurement Office approves payment on project invoices and notifies CRDF and DOE’s Energy Finance and Accounting Service Center that payments should be made. Funds are then transferred from the Energy Finance and Accounting Service Center to the Oak Ridge Financial Service Center and then to CRDF. Once CRDF has received the funds and the necessary approvals from DOE, it makes payments to the project participants’ bank accounts. DOE officials acknowledged the enormity of the problem that the lag time between the allocation of funds, placement of contracts, and payment for deliverables creates for the IPP program and told us they are taking steps to streamline their payment processes. In addition, Russian and Ukrainian scientists at 9 of the 22 institutes we interviewed told us that they experienced delays in payments ranging from 3 months to 1 year. Among the 207 projects we reviewed, we found several examples of payment delays. For example: In one project on the development and testing of a device to detect hidden explosives, the Lawrence Livermore National Laboratory official who heads the project told us that the U.S. industry partner had to pay Russian scientists’ salaries until IPP funding could be released. Lawrence Livermore officials involved in this project noted that delays in payments to project participants slowed the project’s completion. Officials at another Russian institute told us about two projects that experienced payment delays. On the project to develop nuclear material container security devices, they had shipped a deliverable to Sandia National Laboratories in October 2006, but it took more than 4 months for them to receive payment. On the project to produce a new computer modeling code for use in Russian nuclear reactor simulators, Russian institute officials told us payments were delayed 3 to 4 months. Officials said that when they asked Brookhaven National Laboratory officials about the delay, they were told it was due to DOE’s complex payment processing systems. Delays in implementing some IPP projects also contribute to DOE’s large and persistent carryover of unspent funds. According to officials from U.S. industry partners, national laboratories, and Russian and Ukrainian institutes, some IPP projects experience long implementation delays. As a result, project funds often remain as unspent balances until problems can be resolved. For example, the ILAB representative from the Argonne National Laboratory told us that, in his experience, IPP projects do not finish on schedule about 60 percent of the time owing to a variety of problems. These problems include implementation issues due to administrative problems, the withdrawal or bankruptcy of the U.S. industry partner, and turnover in key project participants. In our review of 207 IPP projects, we found several examples of projects that had experienced implementation delays. For example: One project to produce a low-cost artificial leg for use in developing countries had $245,000 in unspent funds as of April 2007—19 percent of the $1.3 million DOE allocated for the project. Because a testing device needed for the project was not properly labeled when it was sent from the United States, the Russian Customs Service rejected the device. Sandia National Laboratory officials told us that this rejection had delayed project implementation for nearly 1 year. About 3 years into a project to create banks of chemical compounds linked with computer databases for industrial use, the project’s U.S. industry partner was bought out by a larger company. The amount allocated for the project was nearly $1.4 million. The larger company lost interest in the project, and, according to the DOE project manager, the project sat idle for 3 or 4 years while DOE tried to get the company to take action. Ultimately, the project was finished 8 years after it began. Officials at one Russian institute we visited told us another IPP project to improve a material to help neutralize radioactive waste had experienced delays when the original U.S. industry partner went bankrupt, causing the project to be temporarily suspended. According to these officials, it took 2 years to find a new U.S. industry partner. Brookhaven National Laboratory officials described a delay of more than 6 months on a $740,000 project intended to develop new pattern recognition software. According to Brookhaven officials, these delays were caused by significant personnel turnover at the participating Russian institute, mostly through the loss of key personnel who found better, higher paying jobs outside of the institute. DOE Is Implementing a New IPP Program Management System, in Part, to Address Problems with Large Balances of Unspent Funds DOE is implementing a new system designed to better manage IPP projects’ contracts and finances. DOE officials told us that this action was undertaken in response to a recommendation we made in 2005 to improve the management and internal controls at NNSA. Specifically, we recommended in our August 2005 report, among other things, that NNSA’s program managers maintain quick access to key contract records, such as deliverables and invoices that relate to management controls, regardless of whether the records are located at a national laboratory or headquarters. Following our 2005 report, in 2006, DOE initiated an extensive review of IPP financial and procurement procedures at participating national laboratories. DOE and national laboratory officials told us that representatives from the IPP program office visited all of the participating national laboratories, except for the Kansas City Plant, and worked with each laboratory’s financial department to find ways to reduce unspent funds. DOE officials told us that, as a result, they were able to redirect about $15 million in unspent program funds for immediate use on existing IPP projects. In addition, DOE officials said that they have imposed new management controls to address project delays and reduce balances of unspent funds. These controls include implementing a management reengineering plan and enforcing control mechanisms, called “sunset” provisions, which require national laboratory officials to justify continuing any IPP project that experiences an implementation delay of 6 to 8 months. DOE has also begun to implement its new Expertise Accountability Tool (EXACT), a project and information management system that it launched in October 2006. DOE expects to fully implement the EXACT system in 2008— 14 years after the start of the IPP program. According to DOE officials, EXACT will allow instant sharing of IPP project data between DOE and the participating national laboratories. DOE officials believe that the EXACT system will allow the IPP program office to better monitor and oversee the progress of IPP projects at the national laboratories, including reviews of IPP project participants’ WMD backgrounds and tracking unspent funds at the national laboratories. Conclusions In our view, the purpose and need for the IPP program must be reassessed. We believe that DOE has failed to clearly articulate the current threat posed by WMD scientists in Russia and other countries and has not adjusted the IPP program to account for the changed economic landscape in the region and improved conditions at many of the institutes involved in the program. Instead, DOE has continued to emphasize a broad strategy of engagement with foreign scientists and institutes, much as it did more than a decade ago, and it has not developed comprehensive plans for focusing on the most at-risk individuals and institutes or for developing an end- game for the program. We believe that DOE’s inability to establish a clear exit strategy for the IPP program has contributed to a perception among foreign recipients that the program is essentially open-ended, represents an indefinite commitment of U.S. support, and serves as a useful marketing tool to attract and retain young scientists who might otherwise emigrate to the United States or other western countries. We believe that it is time for DOE to reassess the program to explain to the Congress how the program should continue to operate in the future or to discuss whether the program should continue to operate at all. Without a reassessment of the program’s objectives, metrics, priorities, and exit strategy, the Congress cannot adequately determine at what level and for how long the program should continue to be supported. We believe that such a reassessment presents DOE with an opportunity to refocus the program on the most critical remaining tasks, with an eye toward reducing the program’s scope, budget, and number of participating organizations. Beyond reassessing the continuing need for the IPP program, a number of management problems are negatively affecting the program. Specifically: The fact that DOE has paid many scientists who claimed no WMD expertise is particularly troubling and, in our view, undermines the IPP program’s credibility as a nonproliferation program. The lack of documentation of DOE’s review of IPP project participants also raises concerns. DOE does not have reliable data on the commercialization results of IPP projects or a clear definition of what constitutes a commercially successful IPP project, preventing it from providing the Congress with a more accurate assessment of the program’s results and purported benefits. Regarding its efforts to expand the IPP program, DOE’s projects in Iraq and Libya represent a significant departure from the program’s original focus on the countries of the former Soviet Union. While there may be sound national security reasons for expanding efforts to these countries, we are concerned that, unlike other federal agencies, DOE did not receive explicit authorization from the Congress before expanding its program outside of the former Soviet Union. Furthermore, in its efforts in Libya, DOE is not adhering to its own guidance restricting the percentage of IPP program funds that can be spent at DOE’s national laboratories on oversight activities. The lack of clear, written guidance for IPP projects intended to support GNEP has led to confusion among national laboratory officials who implement the IPP program. Regarding the financial state of the IPP program, DOE’s long-standing problem with large balances of unspent program funds raises serious concerns about DOE’s ability to spend program resources in a timely manner and about the method DOE uses to develop requests for future budgets. Reform of the complex payment system used by the IPP program to pay foreign scientists could help address some of these concerns. Because Russian scientists and institutes benefit from the IPP program, it seems appropriate that DOE should seek to take advantage of Russia’s improved economic condition to ensure a greater commitment to jointly held nonproliferation objectives. The absence of a joint plan between DOE’s IPP program and ISTC’s Commercialization Support Program, which is funded by State, raises questions about the lack of coordination between these two U.S. government programs that share similar goals of finding peaceful commercial opportunities for foreign WMD scientists. Recommendations for Executive Action We recommend that the Secretary of Energy, working with the Administrator of the National Nuclear Security Administration, reassess the IPP program to justify to the Congress the continued need for the program. Such a reassessment should, at a minimum, include a thorough analysis of the proliferation risk posed by weapons scientists in Russia and other countries; a well-defined strategy to more effectively target the scientists and institutes of highest proliferation concern; more accurate reporting of program accomplishments; and a clear exit strategy for the IPP program, including specific criteria to determine when specific countries, institutes, and individuals are ready to graduate from participation in the IPP program. This reassessment should be done in concert with, and include input from, other federal agencies, such as State; the U.S. intelligence community; officials in host governments where IPP projects are being implemented; the U.S. business community; and independent U.S. nongovernmental organizations. If DOE determines that the program is still needed, despite the increased economic prosperity in Russia and in light of the general trend toward cost-sharing in U.S. nonproliferation programs in that country, we recommend that the Secretary of Energy, working with the Administrator of the National Nuclear Security Administration, seek a commitment for cost-sharing from the Russian government for future IPP projects at Russian institutes. To address a number of management issues that need to be resolved so that the IPP program operates more effectively, we recommend that the Secretary of Energy, working with the Administrator of the National Nuclear Security Administration, immediately take the following eight actions: establish a more rigorous, objective, and well-documented process for verifying the WMD backgrounds and experiences of participating foreign scientists; develop more reliable data on the commercialization results of IPP projects, such as the number of jobs created; amend IPP program guidance to include a clear definition of what constitutes a commercially successful IPP project; seek explicit congressional authorization to expand IPP efforts outside of the former Soviet Union; for IPP efforts in Libya, ensure compliance with the statutory restriction on the percentage of IPP program funds spent on oversight activities at the DOE national laboratories to no more than 35 percent; develop clear and specific guidance for IPP projects that are intended to streamline the process through which foreign scientists receive IPP funds by eliminating unnecessary layers of review; and seek to reduce the large balances of unspent funds associated with the IPP program and adjust future budget requests accordingly. Finally, we recommend that the Secretaries of Energy and State, working with the Administrator of the National Nuclear Security Administration, develop a joint plan to better coordinate the efforts of DOE’s IPP program and ISTC’s Commercialization Support Program, which is funded by State. Agency Comments and Our Evaluation DOE and State provided written comments on a draft of this report, which are presented in appendixes V and VI, respectively. DOE agreed with 8 of our 11 recommendations to improve the overall management and oversight of the IPP program, including augmenting the department’s process for reviewing the WMD backgrounds of IPP project participants and developing more reliable data on the commercialization results of IPP projects. DOE disagreed with 2 of our recommendations and neither agreed nor disagreed with 1 recommendation. In addition, State concurred with our recommendation to improve coordination between DOE’s IPP program and ISTC’s Commercialization Support Program, which is funded by State. DOE and State also provided technical comments, which we incorporated in this report as appropriate. In its comments on our draft report, DOE raised concerns about our characterization of the IPP program’s accomplishments, requirements, and goals. DOE stated that we did not acknowledge actions the department was undertaking during the course of our review and asserted that our report does not provide a balanced critique of the IPP program because we relied on an analysis of a judgmental sample of IPP projects to support our findings. DOE also disagreed with our general conclusion and recommendation that the IPP program needs to be reassessed. In addition, DOE did not concur with our recommendation that the department ensure compliance with the statutory restriction on the percentage of IPP program funds spent on oversight activities at the DOE national laboratories to no more than 35 percent. DOE neither agreed nor disagreed with our recommendation that the department seek a commitment for cost-sharing from the Russian government for future IPP projects at Russian institutes. DOE is incorrect in its assertions that we failed to acknowledge actions it was undertaking during the course of our review, and that our report does not provide a balanced critique of the IPP program. Our report acknowledges actions DOE is taking to improve program management, such as the development of a new program and financial management system. Our review identified numerous problems and raised concerns about the IPP program’s scope, implementation, and performance that we believe should be addressed by DOE as part of a reassessment of the IPP program. However, DOE disagreed with our recommendation that the IPP program needs to undergo such a reassessment and noted in its comments that the department believes it has already conducted such an assessment of the program. We were aware that such broad internal reviews took place in 2004 and 2006, but these assessments were conducted not of the IPP program exclusively, but rather of all DOE efforts to assist weapons scientists, including a complementary DOE program to assist workers in Russia’s nuclear cities that has since been canceled. As a result, we believe these assessments are outdated because the IPP program operates under a significantly different set of circumstances today than when DOE conducted its previous internal assessments. Finally, DOE disagreed with our recommendation that the department ensure compliance with the statutory restriction on the percentage of IPP program funds spent on oversight activities at the DOE national laboratories to no more than 35 percent. We believe DOE has misconstrued our recommendation concerning its funding of projects in Libya. We did not recommend, nor did we mean to imply, that DOE should allocate 65 percent of total project funds to Libya for projects in that country. Instead, our recommendation urges the department to ensure that it complies with existing statutory restrictions on the percentage of IPP funds that can be spent on oversight activities by DOE national laboratories. Specifically, as DOE notes, section 3136 of the National Defense Authorization Act for Fiscal Year 2000 provides that not more than 35 percent of funds available in any fiscal year for the IPP program may be spent by DOE national laboratories to provide oversight of program activities. DOE’s IPP guidance and its standard practice have been to implement this provision of law on a project-by-project basis, so that no more than 35 percent of the funds for each project are spent by national laboratories. However, with respect to projects in Libya, DOE is deviating from its IPP guidance by placing no restrictions on the amount of IPP program funds that can be spent at DOE national laboratories for oversight of projects in Libya. We found that 97 percent of funds DOE spent on projects in Libya through May 2007 were spent at DOE’s national laboratories for project management and oversight. (See app. V for DOE’s comments and our responses.) As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to interested congressional committees; the Secretaries of Energy and State; the Administrator, National Nuclear Security Administration; and the Director, Office of Management and Budget. We will also make copies available to others upon request. In addition, this report will be made available at no charge on the GAO Web site at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Major contributors to this report are included in appendix VII. Appendix I: Scope and Methodology To review the Initiatives for Proliferation Prevention (IPP) program, we interviewed key officials and analyzed documentation, such as program guidance, project proposals, and financial information from the Departments of Energy (DOE), Defense, and State (State). We also interviewed representatives from each of the 12 national laboratories—the Argonne, Brookhaven, Idaho, Lawrence Berkeley, Lawrence Livermore, Los Alamos, National Renewable Energy, Oak Ridge, Pacific Northwest, Sandia, and Savannah River National Laboratories and the Kansas City Plant—that participate in the IPP program. Our interviews focused on general program plans, strategies, and policies as well as issues associated with specific IPP projects. We also interviewed and reviewed documentation provided by the U.S. Civilian Research and Development Foundation (CRDF) in Arlington, Virginia; the International Science and Technology Center (ISTC) in Moscow, Russia; and the Science and Technology Center in Ukraine (STCU) in Kyiv, Ukraine. We analyzed cost and budgetary information from DOE, DOE’s national laboratories, CRDF, ISTC, and STCU. Furthermore, we interviewed knowledgeable officials on the reliability of these data, including issues such as data entry, access, quality control procedures, and the accuracy and completeness of the data. We determined that these data were sufficiently reliable for the purposes of this review. We visited Russia and Ukraine to discuss the implementation of the IPP program with officials and personnel involved in IPP projects. While in Russia and Ukraine, we interviewed officials from 15 Russian and 7 Ukrainian institutes that participate in the IPP program. We met with officials from the Federal Agency for Atomic Energy of the Russian Federation, which oversees institutes involved in Russia’s nuclear weapons program. We also spoke with officials from the U.S. embassies in Moscow and Kyiv. Furthermore, we interviewed officials from 14 U.S. companies that participate in the IPP program to better understand their perspectives on the program’s goals, benefits, and challenges, and the results of specific projects for which they have served as industry partners. We interviewed the principal staff of the U.S. Industry Coalition, which represents companies that participate in the IPP program. We also met with 5 nongovernmental experts who have followed developments in the IPP and related nonproliferation programs to get their views on the program. To assess the reported accomplishments of the IPP program, we judgmentally selected for in-depth review 207 IPP projects, including draft, active, inactive, and completed projects, in the Thrust 1, Thrust 2, and Thrust 3 categories. These 207 projects represented over 22 percent of the 929 total IPP projects through September 2007. Of the projects that we reviewed, 180 were with Russia, 21 were with Ukraine, 3 were with Kazakhstan, and 3 were with Armenia. Because these projects were a judgmental sample, the findings associated with them cannot be applied generally to the IPP program as a whole. We used the IPP information system to identify and select IPP projects. This database, also referred to by DOE as the “Lotus Notes” system, was developed and maintained by the Los Alamos National Laboratory and is considered the program’s project proposal management system. The system contains data on all IPP projects, from draft proposals to completed projects, and includes such information as the project description, statement of work, information on participating scientists in the former Soviet Union and the U.S. industry partner, and financial expenditures. DOE notified us that it was developing a new IPP project management database, known as the Expertise Accountability Tool (EXACT), and that some IPP project information contained in Lotus Notes—especially pertaining to project expenditures and the number of scientists supported—might not be current, accurate, or complete. However, DOE officials told us that the EXACT system was not available during our project selection phase, and that it would not contain information on completed IPP projects. As a result, we used the Lotus Notes database to make our project selection. We selected projects on the basis of a number of criteria, such as project status, project funding, the type of institute involved in the project, geographic distribution, national laboratory representation, and the claimed commercial success of the project. We also received and used recommendations from DOE on criteria to consider in selecting projects for review. The status and dollar size of IPP projects were significant considerations in our project selection. For example, we focused primarily on active projects—that is, Thrust 2 projects that were approved, funded, or under way—regardless of their dollar value. We also considered draft and inactive Thrust 2 projects where proposed funding was over $800,000, as well as completed Thrust 1 and Thrust 2 projects that spent over $250,000. We also selected projects for review across a variety of institutes in the former Soviet Union, including facilities with backgrounds in nuclear, chemical, biological, and missile research and development. The foreign countries and institutes where we planned to conduct fieldwork also played a significant role in our project selection. Time and cost constraints, as well as Russian government restrictions on access to some facilities, limited the number and types of sites we were able to visit. We concentrated on projects at institutes in Russia and Ukraine because over 90 percent of all IPP projects are in these two countries. We focused on IPP projects at institutes in the Russian cities of Moscow, Nizhny Novgorod, and Sarov because these cities ranked high in our analysis of several variables, including the total number of IPP projects, the number of projects supporting commercial activities, and the total amount of funding proposed in IPP projects in those locations. We also focused on projects in the Ukrainian cities of Kyiv, because over 54 percent of IPP projects in Ukraine are there, and Kharkiv, because of its relative proximity to Kyiv and the number of projects there. We selected institutes in the Russian and Ukrainian cities for site visits on the basis of several criteria, including the total number of projects, the number of active projects, the type of institute, and the number of projects commercialized at each location. We also selected projects administered by each of the national laboratories and the Kansas City Plant that participate in the program as well as projects managed by DOE headquarters. The selected projects included 18 projects at Argonne, 22 at Brookhaven, 8 at Idaho, 18 at Lawrence Berkeley, 33 at Lawrence Livermore, 14 at Los Alamos, 11 at National Renewable Energy, 12 at Oak Ridge, 41 at Pacific Northwest, 15 at Sandia, and 2 at Savannah River; 9 projects at the Kansas City Plant; as well as 4 projects managed by DOE headquarters. The commercial success of an IPP project also played an important role in its selection. For example, we selected for review all 50 projects that DOE indicated as having led to commercially successful ventures identified in its Fiscal Year 2005 IPP Program Annual Report. We were able to review 48 of the 50 commercially successful projects with the sponsoring national laboratory, Russian or Ukrainian institute, or industry partner or some combination of these three entities. We also reviewed 11 IPP projects that had been identified as commercially successful in prior year annual reports, but that were not addressed in the fiscal year 2005 report. To assess the nonproliferation impact of the IPP program, we requested and evaluated available information on the personnel at institutes in the countries of the former Soviet Union participating in the projects we selected for review. To determine the percentage of personnel without weapons of mass destruction (WMD) experience, we added the total number of project personnel who did not claim prior WMD experience— based on the WMD experience codes the project personnel self-declared to one of the three IPP payment systems—and divided this figure against the total number of project participants. We followed a similar process to calculate the percentage of older personnel versus younger personnel. We classified workers born in 1970 or later as younger workers because they were unlikely to have contributed to Soviet-era WMD programs. We also calculated the total amount of funds paid to these four different categories of participants—those claiming WMD experience, those who did not, older workers, and younger participants. In some cases, birth dates were not available for some participants in the documentation we received; in those instances, those individuals and the payments made to them were tracked in separate categories. We collected this information by providing officials at each of the 12 participating national laboratories with a template, requesting that the laboratory project leader provide information on the personnel involved in each project in our sample, including each participant’s full name, institute affiliation, date of birth, WMD experience, and amount paid under the project. In instances where we did not receive complete information from the laboratories, we used payment records and other information on IPP project participants maintained by the three payment mechanisms— CRDF, ISTC, and STCU—to complete data missing from the templates, or to reconstruct payment records for the project participants in cases where the national laboratory did not provide any information on the project participants. Because of potential data reliability concerns raised by CRDF on older IPP projects for which it processed payments, we consulted with CRDF representatives and received recommendations on specific projects that we should exclude from our analysis. Among the 207 IPP projects we reviewed, no payments had yet been made on 42 projects and 14 projects were inactive. Of the remaining 151 IPP projects in our sample, we determined that 54 projects were too old for evaluation, because DOE did not collect rosters of individual project participants before 2000, or that sufficient and reliable information on the project participants was not readily available. Thus, our review of the backgrounds of the participants was conducted on 97 of the 207 projects in our sample. To assess the commercial results of IPP projects, we reviewed 48 of the 50 projects that contributed to the commercial successes presented in DOE’s fiscal year 2005 annual report for the IPP program, which was the most recent report available at the time of our review. DOE provided us with the list of IPP projects associated with those commercial successes, and we reviewed and evaluated the raw data collected by the U.S. Industry Coalition for each of those projects in its 2005 commercial success survey, which DOE used as the basis for the commercial successes cited in its fiscal year 2005 IPP annual report. In addition, for the 48 commercially successful projects we reviewed, we interviewed representatives from the sponsoring national laboratory, Russian or Ukrainian institute, or industry partner or some combination of these three entities to understand the commercial activities and other details associated with these projects. Specifically, we (1) met or conducted telephone interviews with 12 companies involved in the commercially successful projects, (2) interviewed representatives at the national laboratories for 46 of the 50 projects reported to be commercially successful, and (3) visited 6 of the institutes in Russia and Ukraine where IPP projects were reported to have been commercialized. To assess the IPP program’s future, we interviewed DOE and national laboratory officials. We also assessed State’s planned exit strategy for its Science Centers program. We discussed State’s strategy with DOE, State, and ISTC officials. Regarding the IPP program’s expansion, we met with officials and reviewed documentation from DOE, State, and the Lawrence Livermore, National Renewable Energy, and Sandia National Laboratories concerning the engagement of former weapons scientists in Iraq and Libya. Regarding the program’s support to the Global Nuclear Energy Partnership, we reviewed documents and interviewed officials from the IPP program office, DOE national laboratories, and DOE’s Office of Nuclear Energy. To assess the extent to which the IPP program has had annual carryover balances of unspent funds and the reasons for such carryover, we obtained financial data from DOE’s IPP program office, DOE’s National Nuclear Security Administration’s (NNSA) budget and finance office, and the national laboratories participating in the program. We discussed and reviewed these data with budget and program analysts at the IPP program office and NNSA’s budget and finance office. In addition, we interviewed knowledgeable officials on the reliability of these data, including issues such as data entry, access, quality control procedures, and the accuracy and completeness of the data. We determined that these data were sufficiently reliable for the purposes of this review. We conducted our review from October 2006 through December 2007 in accordance with generally accepted government auditing standards. Appendix II: Additional Information on the Russian and Ukrainian Institutes That We Included in Our Fieldwork During our review of the DOE’s IPP program, we interviewed officials from 15 institutes in Russia and 7 in Ukraine in July 2007. Russian Institutes In July 2007, we met with Russian scientists and officials from institutes in Moscow, Nizhny Novgorod, Pushchino, and Troitsk, Russia, to discuss draft, active, inactive, and completed IPP projects. Center for Ecological Research and BioResources Development The Center for Ecological Research and BioResources Development was established in 2000 through a $1.5 million grant from the IPP program. It focuses on the discovery of novel bioactive compounds, biodiversity collection and identification, and environmental bioremediation. The center comprises 9 research institutes and is connected with 30 laboratories, with about 300 scientists. The center’s role is to coordinate the activities of the member institutes, organize workshops and visits, consult on the administration of IPP projects, provide report editing and translation, perform financial reporting and examinations, and export biomaterials to the United States and elsewhere. The center has shipped over 50,000 biological samples. We discussed 5 IPP projects, including 2 completed, 2 active, and 1 draft project. When we discussed IPP projects with the center, representatives from 2 partner institutes—the Institute of Biochemistry and Physiology of Microorganisms and the Scientific Center for Applied Microbiology and Biotechnology—were also present. Gamaleya Scientific Research Institute of Epidemiology and Microbiology The Gamaleya Scientific Research Institute of Epidemiology and Microbiology was founded in 1891 for research into infectious diseases in humans and manufactures more than 40 different pharmaceutical products, including a tuberculosis vaccine. Gamaleya officials told us that the institute employs 800 staff, including 120 scientists and 680 technicians and administrative personnel. We visited the institute during our first audit of the IPP program in 1999. We spoke with Gamaleya officials about 3 completed IPP projects. The institute is involved in marketing a veterinary drug and is just starting to market an antiparasite drug for honeybees. The third project is expected to produce a marketable product in 2 to 3 years. Institute for Nuclear Research of the Russian Academy of Sciences The Institute for Nuclear Research of the Russian Academy of Sciences, with branches in Moscow and Troitsk, was founded in 1970 to further development of fundamental research activities in the field of atomic, elementary particle, and cosmic ray physics and neutrino astrophysics. The institute, with a staff of about 1,300 specialists, was formed from 3 nuclear laboratories of the P.N. Lebedev Institute of Physics of the former Soviet Union’s National Academy of Sciences. About 600 people work in the Troitsk branch of the institute. We spoke with institute officials at this branch about 5 IPP projects—4 completed and 1 active. During the first audit of DOE IPP programs, in 1999, we visited the Moscow branch of this institute. Institute of Applied Physics of the Russian Academy of Sciences The Institute of Applied Physics of the Russian Academy of Sciences in Nizhny Novgorod became an independent research facility in 1977. During this time, its primary focus was working with transmitting and detecting waves through different matters; in practical terms, this included work for the Soviet military on radar tracking of missiles and supporting Russian missile defense, materials science applications in radioelectronic equipment, and submarine detection using radar. Institute officials told us that since the beginning of the 1990s, the institute has reduced its staff from about 2,000 employees, to roughly 1,100. However, it has retained a large number of top-level researchers despite the fact that defense orders plummeted to zero. Officials told us that the institute was in good shape today, has adapted to the changing environment, and has created several successful spin-off companies. We discussed 4 IPP projects with institute officials—1 completed, 1 active, and 2 draft. Institute of Biochemistry and Physiology of Microorganisms The Institute of Biochemistry and Physiology of Microorganisms is 1 of 4 research institutes that make up the Center for Ecological Research and BioResources Development. This institute is not a weapons institute and never had a role in the Soviet biological weapons program. However, institute officials noted that some scientists at the institute had come from other institutes that were involved in biological warfare research. The institute is home to the “All Russia Biological Culture Collection.” We discussed 3 IPP projects—1 completed, 1 active, and 1 draft—with officials from the institute. These were 3 of the 4 IPP projects we discussed at the Center for Ecological Research and BioResources Development. Institute of General Physics of the Russian Academy of Sciences The Institute of General Physics of the Russian Academy of Sciences was founded in 1983 by Nobel Prize winner Academician A.M. Prokhorov, who headed it until 1998 and now serves as the institute’s honorary director. The institute began as Division “A” of the Lebedev Physical Institute. It currently consists of 13 research departments and 5 research centers: (1) natural sciences, (2) laser materials and technologies, (3) wave research, (4) fiber optics, and (5) physical instrumentation. The institute has a staff of 1,264, including 600 researchers. Its principal research areas encompass quantum electronics and optics, solid state physics, micro- and nanoelectronics, integral and fiber optics, plasma physics and photoelectronics, radio physics and acoustics, laser medicine, and ecology. We discussed 6 IPP projects with institute officials—4 completed and 2 active. Krasnaya Zvezda (Red Star) Krasnaya Zvezda was established in 1972 to combine other organizations that employed designers, developers, and manufacturers of space-based nuclear power systems. Krasnaya Zvezda officials told us that they continue to do some defense-related work. However, the institute now mostly focuses on the civilian sector and work on civilian nuclear energy projects, including radioactive waste management at civilian nuclear power plants. The financial situation has been relatively steady over the past years and officials anticipate that with the reorganization of the Federal Agency for Atomic Energy of the Russian Federation, Krasnaya Zvezda will be involved in many future civilian nuclear energy contracts. Krasnaya Zvezda maintains a close relationship with the Kurchatov Institute. We discussed 5 IPP projects— 3 completed and 2 draft—with Krasnaya Zvezda officials. Kurchatov Institute The Kurchatov Institute is one of Russia’s leading nuclear research institutes. Through the mid-1950s, defense activities represented more than 80 percent of the institute’s budget. By 1965, the defense portion had been reduced to about 50 percent, and, although Kurchatov has scientists who were involved with nuclear weapons programs in the past, today there are virtually no defense-related contracts. The institute conducts research on controlled thermonuclear fusion, plasma physics, solid state physics, and superconductivity. It designs nuclear reactors for the Russian Navy, the Russian icebreaker fleet, and space applications. Nuclear experts from the Kurchatov Institute have helped set up and operate Soviet-exported research reactors, including one at Libya’s Tajura nuclear research center. In addition, the Kurchatov Institute is the subcontractor for DOE’s Material Protection, Control, and Accounting program with the Russian Navy and icebreaker fleet. We discussed 10 IPP projects with Kurchatov officials—7 completed and 3 active. In 1999, we visited the Kurchatov Institute during our first audit of DOE’s IPP program. Moscow State University One of the oldest Russian institutions of higher education, Moscow State University was established in 1755. According to DOE and national laboratory officials, Moscow State University departments of physics, chemistry, and biology were involved in research related to WMD. Specifically, according to DOE, when the Soviet Ministry of Defense needed certain expertise or research done, it called upon individuals at academic institutions, such as Moscow State University. We discussed 1 project DOE subsequently canceled and 1 draft IPP project with Moscow State University officials. Radiophysical Research Institute The Radiophysical Research Institute of the Ministry of Education and Science was founded in 1956 in Nizhny Novgorod. Since then outreach efforts have been directed toward (1) supporting research in the fields of natural sciences and astronomy and (2) expanding interest in research work in such areas as astronomy, solar physics, the relationship between the Sun and the Earth, and the associated geophysics. We spoke with an official from the Radiophysical Research Institute, who was present during our interview with officials from the Scientific Research Institute of Measuring Systems. We discussed 1 project that ended in 2002 with this official. Scientific Research Institute of Measuring Systems The Scientific Research Institute of Measuring Systems in Nizhny Novgorod, Russia, was established in 1966 to develop and produce electronics to support industry enterprises, including nuclear power plants as well as nuclear research and developments. Today, the institute researches, designs, and manufactures computer and semiconductor equipment, mostly for use in the Russian energy industry. The institute also develops and manufactures software and control systems for gas lines, and thermal and nuclear power stations. We discussed 3 IPP projects with officials—1 active and 2 completed projects. Afrikantov Experimental Machine Building Design Bureau The State Unitary Enterprise I.I. Afrikantov Experimental Machine Building Design Bureau was founded in 1947 as a component of the Gorky Machine Building Plant Design Bureau to create equipment for nuclear industry. Later, as the mission expanded to the creation of various nuclear reactors, the design bureau was separated from the Gorky Machine Building Plant. Currently, the Afrikantov Experimental Machine Building Design Bureau employs about 3,400 staff and is one of the lead design organizations in the industry, supporting a large scientific and production center for nuclear power engineering. Since the 1960s, the institute has been the chief designer of ship-based reactor plants and fast neutron reactors. One of the institute’s significant achievements is the creation of innovative integral reactors with natural and forced coolant circulation. The institute actively participates in the creation of nuclear power installations abroad and has scientific and technical cooperative arrangements with the International Atomic Energy Agency, and national laboratories and companies in China, France, India, Japan, South Korea, and the United States. We discussed 2 draft IPP projects with officials from the institute. Soliton-NTT Research Center Soliton is a private company that was spun off from the Kurchatov Institute in the early 1990s. Soliton was formed by scientists from the Kurchatov Institute to convert defense technologies to civil purposes and to commercialize these technologies. Before working for Soliton, many Soliton employees were involved in weapons-related activities at the Kurchatov Institute, and most still retain some ties to Kurchatov. Soliton has official permission to use scientists from other institutes as part of the effort to commercialize former weapons laboratories. Soliton was organized so that small-scale nonweapons projects could be undertaken using the talents of several weapons scientists from a variety of institutes. We discussed 6 IPP projects with Soliton officials—5 completed and 1 active. Russian Federal Nuclear Center—All-Russian Scientific Research Institute of Experimental Physics In 1946, the Soviet government established the All-Russian Scientific Research Institute of Experimental Physics in Sarov, where the first Soviet nuclear bomb was designed and assembled. In Soviet times, the institute’s mission included the design of nuclear warheads and the development of experimental and prototype warheads. Today, the safety and reliability of the Russian nuclear stockpile are the institute’s primary missions. According to information provided by the institute, since 1990, it has increasingly developed international collaboration in unclassified science and technology areas. The institute employs about 24,000 people, approximately half of whom are scientists or engineers, and is the largest research institution in Russia that successfully handles defense, science, and national economic problems. Under the current nuclear testing moratorium, nuclear weapons research and development activities are concentrated at computational and theoretical, design, and test divisions of the institute. During our earlier audit of DOE’s IPP program, we interviewed officials from this institute in 1998. We discussed 10 IPP projects—5 active and 5 completed—with institute officials. Zelinsky Institute of Organic Chemistry The Zelinsky Institute of Organic Chemistry of the Russian Academy of Sciences, founded in 1934, is one of the world’s largest scientific centers in the fields of organic chemistry, organic catalysis, and chemistry of biologically active compounds. It employs about 600 people, although it had over 1,300 at its peak in the 1980s. In addition, about 150 students are engaged in graduate studies at the institute. Officials told us that until the early 1990s, the institute was involved in some defense-related activities, but it has not been involved in any WMD-related work since the early 1990s. The institute mostly worked on research related to high explosives and solid rocket fuel (not chemical weapons). We discussed 3 IPP projects—2 completed and 1 canceled—with institute officials. Ukrainian Institutes While in Ukraine, we met with representatives from 7 institutes based in Dnipropetrovsk, Kharkiv, and Kyiv and discussed 18 IPP projects with scientists and institute officials. E.O. Paton Electric Welding Institute The E.O. Paton Electric Welding Institute was founded in 1934, and has become one of the largest research institutes in the world, with about 8,000 employees (3,000 at the headquarters in Kyiv). The institute is a multidisciplinary scientific and technical complex involved in fundamental and applied research in the field of welding and related technologies; development of technologies, materials, equipment, and control systems; rational welded structures and parts; and methods and means for diagnostics and nondestructive testing. The institute undertakes research in all phases of electric welding and certain specialized related processes, such as brazing, explosive forming, electrometallurgy, and friction welding. The institute’s work covers welding of virtually all metals and alloys as well as ceramics in thicknesses varying from submicron to tens of centimeters. The institute also develops welding equipment, manufactures pilot plants, and develops welding consumables. We discussed 7 IPP projects—4 completed and 3 active—with E.O. Paton officials and Pratt and Whitney Kyiv employees at 3 Paton facilities in Kyiv. International Center for Electron Beam Technology The International Center for Electron Beam Technology is a spin-off institute from the E.O. Paton Welding Institute and is located nearby in Kyiv. The center derives more than half of its funding from IPP funds and was created in the early 1990s by Paton employees specifically to take on projects with international organizations. According to institute officials, they do not receive any funding for their activities from the Ukrainian government. However, they also told us that financially, their situation is much better than 14 years ago, but that all of their research equipment is out of date. All of the IPP funds are used to pay scientists’ salaries, and they do not have other funds for new equipment. We discussed 2 IPP projects—1 completed and 1 active—during the interview. Institute for Metal Physics The Institute for Metal Physics is part of the Ukrainian Academy of Sciences and employs about 600 staff—about half researchers and half support staff. The number of staff is down from a peak of 1,600 in Soviet times but has been stable for the past 5 to 6 years, according to institute officials. These officials told us that during the Soviet era, about 80 percent of the institute’s work was related to missile delivery systems. The institute became completely divorced from weapons work in the mid 1980s. Today, virtually all work is commercial. During our visit, we discussed 1 active IPP project. International Institute of Cell Biology The International Institute of Cell Biology is a nonprofit entity founded in 1992 by the Ukrainian Academy of Sciences. The International Institute of Cell Biology employs about 150 people, about one third of whom have doctorates. It is closely affiliated with the Institute of Cell Biology and Genetic Engineering, founded in 1988, and the Institute of Microbiology and Virology founded in 1928. The Institute of Cell Biology and Genetic Engineering is one of the key laboratories involved with plant genetic engineering in the former Soviet Union and offers substantial expertise in tissue culture initiation, preservation and maintenance, and gene transfer and expression. The Institute of Microbiology and Virology, with about 300 scientists, hosts the second largest collection of microorganisms in the countries of the former Soviet Union. The official we interviewed told us that the Institute of Microbiology and Virology was involved in defense efforts involving biological agents during Soviet times. Researchers from both of these institutes were involved in the International Institute of Cell Biology’s work with the IPP program. The deputy director told us that there has been a significant brain drain over the years. Over the last 15 years, 50 scientists left the institute and went to western-oriented countries, such as Germany and Australia. We discussed 1 completed IPP project. However, the deputy director told us that he is planning to apply for 2 more projects in the future. Intertek, Ltd. Registered as a private company in 2000, Intertek, Ltd., was founded by a man who was a professor of Aircraft Engines and Technology at the National Aerospace University in Kharkiv until 2004. We discussed an IPP project, at the draft stage, with Intertek’s director and a representative from a partner institute, the State Design Office Yuzhnoye. The director told us that Intertek currently employs about 15 people and would expand to 40 if the IPP project starts up. Most of the staff would be drawn from the National Aerospace University in Kharkiv. Kharkov Institute of Physics and Technology Kharkov Institute of Physics and Technology, one of the oldest and largest centers for physical science in Ukraine, was created in 1928 to research nuclear and solid-state physics. The institute, located in Kharkiv, Ukraine, currently has 2,500 employees, down from about 6,500 employees before 1991. Many young specialists left during the difficult financial period of the late 1990s for Brazil, Canada, France, Germany, Israel, the Netherlands, Sweden, the United Kingdom, and the United States. Institute officials are not aware of any specialists who have either left Ukraine for a country of concern or provided any information to such a country. Since 2004, the institute has been under the Ukrainian Academy of Sciences and is Ukraine’s lead organization on scientific programs for nuclear and radiation technologies. The institute’s economic condition has significantly improved over the past 10 years. It is receiving more direct funding from the Ukrainian federal budget and also receives grants from U.S. and European programs. Assistance partners include STCU and IPP. IPP funding makes up no more than 2 percent of the total budget. We discussed 6 IPP projects—1 draft, 2 active, and 3 completed—with institute officials. State Design Office Yuzhnoye The State Design Office Yuzhnoye in Dnipropetrovsk was founded in 1954 for researching and engineering space and rocket technology. The institute has designed and manufactured many varieties of ballistic missile complexes, and designed and launched 70 types of spacecraft. Once Ukraine gained its independence in 1991, Yuzhnoye, the sole Soviet missile design facility located outside of the Russian Federation, discontinued its work on ballistic missiles. However, since 1994, Yuzhnoye personnel, under a contract with the Russian Strategic Rocket Forces, have continued to provide a wide range of services aimed at extending the service life of those missile complexes still in use. In addition, the institute has diversified its production to include agricultural machinery, such as combines; a line of food processing accessories; and trolleys. We met with an official from Yuzhnoye during our interview with Intertek, Ltd., and discussed 1 draft IPP project on which the 2 institutes are collaborating. Appendix III: Classification Systems Used to Assess IPP Project Participants’ Knowledge of Weapons of Mass Destruction This appendix provides information on the classification systems DOE and the three entities that make IPP project payments to recipients in Russia and other countries use to classify the WMD expertise of the personnel participating in an IPP project. DOE, for example, classifies personnel into one of three categories: 1. Direct experience in WMD design, production, or testing. 2. Experience in research and development of WMD underlying technology. 3. No WMD-relevant experience. DOE also requires that a preponderance of staff working on its projects have had WMD-relevant experience before 1991 (i.e., fall in categories 1 or 2 above). According to DOE, “the meaning of ‘preponderance’ is taken to be 60 percent, as a bare minimum. Two thirds would be better, and anything above that better still.” There is no consistent approach to categorizing the proposed project personnel by the national laboratories in the lists they submit in the proposal to DOE for review. In some cases, the proposed personnel are categorized using the DOE classifications. But in other cases, the individuals in the project proposal are classified using weapons experience codes of the intended payment mechanism. Some IPP project proposals classify personnel using both the DOE categories and the payment system codes. Each of the three payment entities have similar but slightly different lists of weapons experience codes that personnel on an IPP project use to designate their relevant WMD background. See table 2 for the weapons codes used by CRDF, ISTC, and STCU, by general type of weapons expertise. Appendix IV: IPP Projects DOE Reported to Be Commercially Successful Table 3 provides information on the 50 IPP projects DOE indicated as contributing to commercial successes in its Fiscal Year 2005 IPP Program Annual Report. Appendix V: Comments from the Department of Energy The following are GAO’s comments on the Department of Energy’s letter dated November 21, 2007. GAO Comments 1. We are aware that DOE conducted internal assessments in 2004 and 2006 of its overall efforts to engage WMD scientists in the former Soviet Union and other countries. However, these assessments did not evaluate the IPP program exclusively and were conducted at a time when the IPP program was complemented by and coordinated with a similar DOE program focused on downsizing facilities and creating new jobs for personnel in Russia’s nuclear cities. This complementary program—the Nuclear Cities Initiative—has since been canceled. As a result, the IPP program operates under a significantly different set of circumstances today than when DOE conducted its previous internal assessments. Moreover, we note that some recommendations and action items from DOE’s previous internal assessments, such as the development of an exit strategy, have not been implemented. Finally, during our review and as discussed in this report, we found numerous shortcomings and problems with the IPP program. We made a number of recommendations for improving the program, many of which DOE agreed with, including issues that should be addressed in the context of a program reassessment, such as the need to develop a program exit strategy. For these reasons, we are recommending that DOE undertake a fundamental reassessment of the IPP program, in concert with other agencies, to determine the continuing value of and need for the program. 2. DOE has incorrectly characterized how we collected information and conducted our analysis of the participants on IPP projects. Contrary to DOE’s assertion, we did not base our analysis of this issue on responses to questions we posed directly to officials at Russian and Ukrainian institutes. We used data and statements provided directly by DOE program officials to determine the total number of former Soviet weapons scientists, engineers, and technicians the program has engaged since its inception. Regarding the level and number of WMD experts involved in individual IPP projects, as explained in the scope and methodology section of our draft report, we used a number of methods for assessing these totals, including analyzing data provided by project managers at the national laboratories; reviewing payment records provided by CRDF, ISTC, and STCU; and assessing the reliability of data we received. 3. DOE has incorrectly asserted that we implied that DOE and State did not concur on the project in question, and that DOE ignored State’s concerns regarding the primary Ukrainian institute’s involvement in WMD. We used this case as an example of how DOE’s limited ability to assess the proposed participants on an IPP project can lead to misallocation of funding. In our view, a more thorough evaluation of the entities involved in the project by DOE during its proposal review might have uncovered the conflict-of-interest issues between the primary Ukrainian institute and the industry partner discovered by the Defense Contract Audit Agency after the project was under way and funds had been spent. 4. Our finding was based on an in-depth review of the personnel involved in 97 IPP projects, representing over 6,450 individuals, or over 38 percent of the total personnel DOE has reported to have engaged through the IPP program. We have no way of assessing the accuracy, reliability, or validity of DOE’s assertion that a majority of IPP project participants have WMD experience. However, we are skeptical that the department was able to conduct a thorough analysis of all IPP project payment records during the time it took to review and comment on our draft report. 5. During our visit to the Russian institute in question, institute officials told us that they were not the source for the reported job creation figure and could not substantiate the total number of jobs created as a result of the IPP projects we asked about. For this reason, we declined the institute official’s offer to obtain further documentation regarding the number of jobs created at other institutes involved in these projects. Although DOE claims to have received additional information from this institute to corroborate the number of jobs reported to have been created, DOE did not provide this information to us. As a result, we cannot determine the reliability or accuracy of DOE’s claim that the number of jobs it had reported as created is correct. 6. We have accurately described what we observed during our visit to the Ukrainian institute in question. Based on our observations, this institute clearly was not in dire financial straits or in poor physical condition like some of the institutes in the former Soviet Union we have visited in the past. The donation of funding to improve the physical condition of the institute has no material bearing on the facts that we presented in our draft report. 7. DOE has mischaracterized our findings and our process for evaluating the continued need for the program. As we pointed out in our draft report, officials at 10 of the 22 Russian and Ukrainian institutes we visited stated that they did not believe they or the other scientists at their institutes posed a proliferation risk, while officials at 14 of the 22 institutes also attested to the financial stability of their facilities. Moreover, a senior Russian Atomic Energy Agency official told us, in the presence of IPP program officials, in July 2007 that the program is no longer relevant. DOE asserted that we did not include endorsements of the program in our draft report. However, we do state that many officials at the Russian and Ukrainian institutes we visited noted that the program was especially helpful during the period of financial distress in the late 1990s. 8. DOE misstates the number of institutes that we included in our fieldwork in Russia and Ukraine. The correct number is 22. Regarding DOE’s comment, our draft report clearly stated that DOE policy does not require IPP project participants reemployed in peaceful activities to cut ties to their home institute. However, more than one institute we visited stated that they are still involved in some weapons-related work, and many institutes remain involved in research and technology development that could be applied to WMD or delivery systems for WMD. We do not believe it is possible for DOE to verify the full extent and intended purpose of all activities at the institutes where the IPP program is engaged. Moreover, we believe that DOE misrepresents the IPP program’s accomplishments by counting individuals who have been reemployed in private sector jobs but also are employed by their institutes and, therefore, may still be involved in weapons-related activities. In our view, the reemployment of former weapons scientists into new long-term, private sector jobs—one of the primary metrics DOE uses to measure progress of the IPP program—implies that these individuals have terminated their previous employment at the institutes and are dedicated solely to peaceful commercial activities outside of their institutes. 9. While there is no IPP program requirement to exclude former weapons scientists employed on a part-time basis from the total number of jobs created as a result of IPP projects, DOE’s reported job creation total fails to delineate between part-time and full-time jobs. By not more clearly distinguishing the number of jobs created in each category, this metric is misleading and also misrepresents the program’s accomplishments regarding the employment of weapons scientists in commercial activities. However, we have added information to our report that states that there is no IPP program requirement to exclude former weapons scientists employed on a part-time basis from the total number of jobs created as a result of IPP projects. 10. Our draft report stated that the IPP program does not prohibit participation of younger scientists in IPP projects. In our view, however, DOE has a mistaken and naïve impression of how institutes in the former Soviet Union view the benefits of allowing younger scientists to participate in the IPP program. DOE believes that participation of some younger generation scientists on IPP projects must be permitted to successfully implement projects. This practice has the unintended consequence of allowing former Soviet Union institutes to use the IPP program as a long-term recruitment tool for younger scientists and, thereby, may perpetuate the proliferation risk posed by scientists at these institutes. As we stated in our draft report, officials at 10 of the 22 institutes we visited in Russia and Ukraine said that the IPP program has allowed their institutes to recruit, hire, and retain younger scientists. In our view, this is contrary to the original intent of the program, which was to reduce the proliferation risk posed by Soviet-era weapons scientists. That is why, among other reasons, we are recommending that DOE conduct a reassessment of the IPP program that includes a thorough analysis of the proliferation risk posed by weapons scientists in Russia and other countries, a well- defined strategy to more effectively target the scientists and institutes of highest proliferation concern, more accurate reporting of program accomplishments, and a clear exit strategy for the program. 11. DOE incorrectly characterized our description of its program management system. Specifically, we stated in the draft report “DOE and national laboratory officials told us they are attempting to improve financial oversight over the IPP program, in part, to address concerns about unspent program funds. To that end, DOE is developing a new program management system, which it expects to fully implement in 2008—14 years after the start of the program.” Throughout our review, numerous DOE and national laboratory officials expressed concern about the existing systems that DOE used to manage IPP projects. Our description of DOE’s planned implementation of its new program management system is accurate. 12. DOE officials concurred with our recommendation of reducing large balances of unspent funds and adjusting future budget requests accordingly. The data we present are based on DOE’s own financial reporting and accurately reflect the state of the program’s uncosted balances (unspent funds) over the last 10 years. We noted in our draft report that the program’s uncosted balances are declining, but, as DOE officials acknowledge, uncosted balances remain a serious problem for the IPP program. 13. We are pleased that DOE concurs with our recommendation to improve coordination between the department’s IPP program and ISTC’s Commercialization Support Program, which is funded by State. In its comments, State also concurred with this recommendation. 14. We believe DOE has misconstrued our recommendation concerning its funding of projects in Libya. We did not recommend, nor did we mean to imply, that DOE should allocate 65 percent of project funds to Libya for projects in that country. Instead, our recommendation urges the department to ensure that it complies with existing statutory restrictions on the percentage of IPP funds that can be spent on oversight activities by DOE national laboratories. Specifically, as DOE notes, section 3136 of the National Defense Authorization Act for Fiscal Year 2000 provides that not more than 35 percent of funds available in any fiscal year for the IPP program may be spent by DOE national laboratories to provide oversight of program activities. As our report indicates, DOE’s IPP guidance and its standard practice have been to implement this provision of law on a project-by-project basis, so that no more than 35 percent of the funds for each project are spent by national laboratories. Our point in our report and in our recommendation is that, with respect to projects in Libya, DOE has not followed its IPP guidance restricting national laboratory expenditures. Instead, we found that 97 percent of funds DOE spent on projects in Libya through May 2007 were spent at DOE’s national laboratories for project management and oversight. In this regard, we note that DOE concurred with our recommendation that the department seek explicit congressional authorization to expand IPP efforts outside of the former Soviet Union. In seeking such authorization, DOE may wish to clarify the nature of other restrictions on the program, such as those set forth in section 3136 of the National Defense Authorization Act for Fiscal Year 2000. 15. DOE has mistakenly asserted that our selection of projects for review served as the sole basis for our conclusions and recommendations. As we explained in the draft report’s scope and methodology section, the selection and evaluation of a sample of IPP projects was one of several analytical tools we employed during our review. We not only conducted an in-depth assessment of over 200 IPP projects, but also met multiple times with DOE officials; analyzed program plans, policies, and procedures; interviewed representatives at each of the 12 national laboratories involved in the program; interviewed staff of the U.S. Industry Coalition and 14 U.S. industry partner companies with long-standing participation in the program; and had discussions with numerous recipients of IPP program assistance at 22 institutes in Russia and Ukraine. We also met several times with State officials who are responsible for funding a similar program; interviewed and assessed information provided by officials at CRDF, ISTC, and STCU; and met with nongovernmental experts familiar with the program. As further noted in our draft report, to develop our judgmental sample of 207 projects we used project selection criteria supplied by DOE and considered a variety of factors—such as project status, project funding, type and location of institutes where projects have been implemented, and a project’s commercial success—to ensure we addressed a broad cross-section of IPP projects. This comprehensive approach, consistent with generally accepted government auditing standards, served as the foundation for our assessment which was fair, balanced, and objective. Our extensive review identified legitimate questions concerning the IPP program’s scope, implementation, and performance that we believe should be addressed during the course of the fundamental reassessment of the program recommended in our draft report. Appendix VI: Comments from the Department of State Appendix VII: GAO Contact and Staff Acknowledgments Staff Acknowledgments In addition to the contact named above, Glen Levis (Assistant Director), R. Stockton Butler, David Fox, Preston Heard, and William Hoehn made key contributions to this report. Other technical assistance was provided by David Maurer; Carol Herrnstadt Shulman; Jay Smale, Jr.; and Paul Thompson. Related GAO Products Nuclear Nonproliferation: Better Management Controls Needed for Some DOE Projects in Russia and Other Countries. GAO-05-828. Washington, D.C.: August 29, 2005. Weapons of Mass Destruction: Nonproliferation Programs Need Better Integration. GAO-05-157. Washington, D.C.: January 28, 2005. Nuclear Nonproliferation: DOE’s Effort to Close Russia’s Plutonium Production Reactors Faces Challenges, and Final Shutdown Is Uncertain. GAO-04-662. Washington, D.C.: June 4, 2004. Nuclear Nonproliferation: DOE’s Efforts to Secure Nuclear Material and Employ Weapons Scientists in Russia. GAO-01-726T. Washington, D.C.: May 15, 2001. Weapons of Mass Destruction: State Department Oversight of Science Centers Program. GAO-01-582. Washington, D.C.: May 10, 2001. Nuclear Nonproliferation: DOE’s Efforts to Assist Weapons Scientists in Russia’s Nuclear Cities Face Challenges. GAO-01-429. Washington, D.C.: May 3, 2001. Biological Weapons: Effort to Reduce Former Soviet Threat Offers Benefits, Poses New Risks. GAO/NSIAD-00-138. Washington, D.C.: April 28, 2000. Nuclear Nonproliferation: Concerns with DOE’s Efforts to Reduce the Risks Posed by Russia’s Unemployed Weapons Scientists. GAO/RCED-99-54. Washington, D.C.: February 19, 1999.
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To address concerns about unemployed or underemployed Soviet-era weapons scientists in Russia and other countries, the Department of Energy (DOE) established the Initiatives for Proliferation Prevention (IPP) program in 1994 to engage former Soviet weapons scientists in nonmilitary work in the short term and create private sector jobs for these scientists in the long term. GAO assessed (1) DOE's reported accomplishments for the IPP program, (2) DOE's exit strategy for the program, and (3) the extent to which the program has experienced annual carryovers of unspent funds and the reasons for any such carryovers. To address these issues, GAO analyzed DOE policies, plans, and budgets and interviewed key program officials and representatives from 22 Russian and Ukrainian institutes. DOE has overstated accomplishments for the 2 critical measures it uses to assess the IPP program's progress and performance--the number of scientists receiving DOE support and the number of long-term, private sector jobs created. First, although DOE claims to have engaged over 16,770 scientists in Russia and other countries, this total includes both scientists with and without weapons-related experience. GAO's analysis of 97 IPP projects involving about 6,450 scientists showed that more than half did not claim to possess any weapons-related experience. Furthermore, officials from 10 Russian and Ukrainian institutes told GAO that the IPP program helps them attract, recruit, and retain younger scientists who might otherwise emigrate to the United States or other western countries and contributes to the continued operation of their facilities. This is contrary to the original intent of the program, which was to reduce the proliferation risk posed by Soviet-era weapons scientists. Second, although DOE asserts that the IPP program helped create 2,790 long-term, private sector jobs for former weapons scientists, the credibility of this number is uncertain because DOE relies on "good-faith" reporting from U.S. industry partners and foreign institutes on the number of jobs created and does not independently verify the number of jobs reported to have been created. DOE has not developed an exit strategy for the IPP program, even though officials from the Russian government, Russian and Ukrainian institutes, and U.S. companies raised questions about the continuing need for the program. Importantly, a senior Russian Atomic Energy Agency official told GAO that the IPP program is no longer relevant because Russia's economy is strong and its scientists no longer pose a proliferation risk. DOE has not developed criteria to determine when scientists, institutes, or countries should "graduate" from the program. In contrast, the Department of State (State), which supports a similar program to assist Soviet-era weapons scientists, has assessed participating institutes and developed a strategy to graduate certain institutes from its program. Instead of finding ways to phase out the IPP program, DOE has recently expanded the program to include new countries and areas. Specifically, in 2004, DOE began providing assistance to scientists in Iraq and Libya. In addition, the IPP program is working with DOE's Office of Nuclear Energy to develop projects that support the Global Nuclear Energy Partnership--a DOE-led international effort to expand the use of civilian nuclear power. In every fiscal year since 1998, DOE carried over unspent funds in excess of the amount that the Congress provided for the program. For example, as of September 2007, DOE carried over about $30 million in unspent funds--$2 million more than the $28 million that the Congress had appropriated for the IPP program in fiscal year 2007. Two main factors have contributed to this recurring problem--lengthy review and approval processes for paying former Soviet weapons scientists and delays in implementing some IPP projects.
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Two questions are presented for determination in this case: first, whether the lien of the owner of the ship upon the cargo for the freight was waived or displaced by the stipulations of the charter-party; and, second, whether the notes given for a portion of the charter-money constituted payment of the same. It is admitted that the lien of the owner of a ship upon its cargo for freight is favored by the courts; and will not be displaced, so long as the ship-owner retains possession of the cargo, except by express contract, or by stipulations in the charter-party inconsistent with its exercise. The position of the appellants is, that there are such inconsistent stipulations in the charter-party in this case; and two clauses are mentioned in support of this position,—the clause requiring the delivery of the cargo within reach of the ship's tackle, and the clause providing that the balance of the charter-money remaining unpaid on the termination of the homeward voyage shall be 'payable one-half in five and one-half in ten days after discharge' of the cargo. There is nothing in these provisions inconsistent with the right of the owner to retain the cargo for the preservation of his lien. The first clause only designates the place where the delivery must be had, which, in this case, is the wharf at which the ship may be lying. The second clause only prescribes the period in which payment must be made after the discharge of the cargo. The discharge mentioned does not import a delivery of the cargo; it only imports its unlading from the ship. Such is the obvious meaning of the term, and so it had been judicially held.9 The clause was intended for the benefit of the charterers. It gives them ample time to examine the goods, and ascertain their condition, and decide whether they will take them and pay the freight, or decline to receive them. They can waive it and take the cargo short of the period designated, if it be ready for delivery. The cases cited by the appellants do not support their position. In Foster v. Colby,10 the charter-party provided that the remainder due for freight should be paid 'in cash two months from the vessel's report inwards at London or Liverpool, and after right delivery of the cargo.' The stipulation for the payment after the delivery of the cargo was inconsistent with the existence of a lien. In Alsager v. St. Katherine Dock Co.,11 the charter-party contained two clauses, one providing for the delivery of the cargo on payment of the freight at a stipulated price, and the other providing for the payment of the freight 'two months after the vessel's inward report at the custom-house.' The court reconciled these clauses by annexing to the first the qualification as to the time of payment contained in the second, and read them together as requiring payment two months after delivery. The payment being thus considered to be irrespective of the delivery, it followed that no lien existed. There is no doubt that a credit for the freight may be given for so great a period as to justify, in the absence of any provision for the delivery of the cargo, the inference that the ship-owner intended to waive his right to a lien, and to look solely to the personal responsibility of the charterers. It is sufficient, however, that there is no such credit given in the present case. Here the period allowed is only a reasonable one for examining the condition of the cargo. But if there were any doubt as to the construction of the provision for the credit, it is dispelled by the concluding clause of the charter-party. By that clause the owner binds the vessel, and the charterers bind the cargo for the performance of all their respective covenants, of which the payment of the charter-money is one. Though the law, in the absence of any stipulations on the subject, ordinarily implies this mutual security in every contract of affreightment, yet its distinct statement in the charter-party shows that the attention of the parties was called to it, and is an important circumstance to be considered in the construction of other stipulations of the instrument respecting the payment of the freight. In the case of the Schooner Volunteer,12 Mr. Justice Story had occasion to consider the effect of a similar clause in a charter-party. In that case the charterers had agreed to pay for the freight 'within ten days after the return of the vessel to Boston,' or in case of loss after she was last heard from; and the question was, whether the allowance of the ten days for the payment of the fright amounted to a waiver of the lien? The learned judge held that it did not, and in this connection considered the effect of the clause named. After an extended examination of the authorities, he came to the conclusion that it contained an express contract for a lien; and if it did not, still that it contained enough to repel any notion that the delivery of the goods should precede the payment of the freight, or that the lien of the maritime law for freight was intended to be waived by the parties. The second question for determination is, whether the notes given for a portion of the charter-money constituted payment of the same? The notes were given before the termination of the voyage, and, consequently, before the balance of the charter-money became due. Treating them as an advance of a portion of the freight, they could be recovered back, or their amount, if paid, if the vessel did not arrive. Freight being the compensation for the carriage of goods, if paid in advance, is in all cases, unless there is a special agreement to the contrary, to be refunded, if from any cause not attributable to the shipper the goods be not carried.13 And there was no such special agreement in this case. The notes were drawn so as to mature near the time of the anticipated arrival of the ship, and according to the statement of the broker who made the arrangement, they were given for the accommodation of the ship-owner, and were to be held over or renewed in case they fell due before the arrival. This statement is consistent with the nature of the transaction, and is sufficient to repel any presumption, under the law of Massachusetts, that the notes were taken in discharge or payment of the claim for the charter-money. The presumption which prevails in that State, that a promissory note extinguishes the debt or claim for which it is given, may be repelled by any circumstances showing that such was not the intention of the parties. By the general commercial law, as well of England as of the United States, a promissory note does not discharge the debt for which it is given unless such be the express agreement of the parties; it only operates to extend until its maturity the period for the payment of the debt. The creditor may return the note when dishonored, and proceed upon the original debt. The acceptance of the note is considered as accompanied with the condition of its payment. Thus it was said, as long ago as the time of Lord Holt, that 'a bill shall never go in discharge of a precedent debt, except it be part of the contract that it should be so.'14 Such has been the rule in England ever since; and the same rule prevails, with few exceptions, in the United States. The doctrine proceeds upon the obvious ground, that nothing can be justly considered as payment in fact, but that which is in truth such, unless something else is expressly agreed to be received in its place. That a mere promise to pay cannot of itself be regarded as an effective payment is manifest. The rule in Massachusetts is an exception to the general law; but even there, as we have said, the presumption that the note was given in satisfaction of the debt may be repelled and controlled by evidence that such was not the intention of the parties, and this evidence may arise from the general nature of the transaction, as well as from direct testimony to the fact. Thus, in Butts v. Dean,15 where a note was given for a debt secured by the bond of a third person, it was held that it was not to be presumed that the creditor intended to relinquish his security, and, therefore, the note was not to be deemed payment for the original debt. And following this and other like authorities of that State, Mr. Justice Sprague, of the United States District Court, held that a lien for materials furnished a vessel built in Massachusetts, a lien given in such a case, by a law of that State, was not displaced or impaired by the creditors taking the notes of the debtor.16 And on like grounds, we think that any presumption of a discharge of the claim of a ship-owner, and of his lien upon the cargo in this case, by his taking the notes of the charterers, is repelled and overthrown. DECREE AFFIRMED.
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like it. The reason is apparent, for it is outside the acknow ledged limit of admiralty cognizance over marine torts, among which it has been sought to be classed. The remedy for the injury belongs to the courts of common law. DECREE AFFIRMED. Statement of the case.
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Background While no commonly accepted definition of a community bank exists, they are generally smaller banks that provide banking services to the local community and have management and board members who reside in the local community. In some of our past reports, we often defined community banks as those with under $10 billion in total assets. However, many banks have assets well below $10 billion as data from the financial condition reports that institutions submit to regulators (Call Reports) indicated that of the more than 6,100 banks in the United States, about 90 percent had assets below about $1.2 billion as of March 2016. Based on our prior interviews and reviews of documents, regulators and others have observed that small banks tend to differ from larger banks in their relationships with customers. Large banks are more likely to engage in transactional banking, which focuses on the provision of highly standardized products that require little human input to manage and are underwritten using statistical information. Small banks are more likely to engage in what is known as relationship banking in which banks consider not only data models but also information acquired by working with the banking customer over time. Using this banking model, small banks may be able to extend credit to customers such as small business owners who might not receive a loan from a larger bank. Small business lending appears to be an important activity for community banks. As of June 2017, community banks had almost $300 billion outstanding in loans with an original principal balance of under $1 million (which banking regulators define as small business lending), or about 20 percent of these institutions’ total lending. In that same month, non- community banks had about $390 billion outstanding in business loans under $1 million representing 5 percent of their total lending. Credit unions are nonprofit member-owned institutions that take deposits and make loans. Unlike banks, credit unions are subject to limits on their membership because members must have a “common bond”—for example, working for the same employer or living in the same community. Financial reports submitted to NCUA (the regulator that oversees federally-insured credit unions) indicated that of the more than 6,000 credit unions in the United States, 90 percent had assets below about $393 million as of March 2016. In addition to providing consumer products to their members, credit unions are also allowed to make loans for business activities subject to certain restrictions. These member business loans are defined as a loan, line of credit, or letter of credit that a credit union extends to a borrower for a commercial, industrial, agricultural, or professional purpose, subject to certain exclusions. In accordance with rules effective January 2017, the total amount of business lending credit unions can do is not to generally exceed 1.75 times the actual net worth of the credit union. Overview of Federal Financial Regulators for Community Banks and Credit Unions Federal banking and credit union regulators have responsibility for ensuring the safety and soundness of the institutions they oversee, protecting federal deposit insurance funds, promoting stability in financial markets, and enforcing compliance with applicable consumer protection laws. All depository institutions that have federal deposit insurance have a federal prudential regulator. The regulator responsible for overseeing a community bank or credit union varies depending on how the institution is chartered, whether it is federally insured, and whether it is a Federal Reserve member (see table 1). Other federal agencies also impose regulatory requirements on banks and credit unions. These include rules issued by CFPB, which has supervision and enforcement authority for various federal consumer protection laws for depository institutions with more than $10 billion in assets and their affiliates. The Federal Reserve, OCC, FDIC, and NCUA continue to supervise for consumer protection compliance at institutions that have $10 billion or less in assets. Although community banks and credit unions with less than $10 billion in assets typically would not be subject to CFPB examinations, they generally are required to comply with CFPB rules related to consumer protection. In addition, FinCEN also issues requirements that financial institutions, including banks and credit unions, must follow. FinCEN is a component of Treasury’s Office of Terrorism and Financial Intelligence that supports government agencies by collecting, analyzing, and disseminating financial intelligence information to combat money laundering. It is responsible for administering the Bank Secrecy Act, which, with its implementing regulations, generally requires banks, credit unions, and other financial institutions, to collect and retain various records of customer transactions, verify customers’ identities in certain situations, maintain AML programs, and report suspicious and large cash transactions. FinCEN relies on financial regulators and others to examine U.S. financial institutions to determine compliance with these requirements. In addition, financial institutions also have to comply with requirements by Treasury’s Office of Foreign Asset Control to review transactions to ensure that business is not being done with sanctioned countries or individuals. Recent Regulatory Changes In response to the 2007-2009 financial crisis, Congress passed the Dodd- Frank Act, which became law on July 21, 2010. The act includes numerous reforms to strengthen oversight of financial services firms, including consolidating consumer protection responsibilities within CFPB. Under the Dodd-Frank Act, federal financial regulatory agencies were directed to or granted authority to issue hundreds of regulations to implement the act’s reforms. Many of the provisions in the Dodd-Frank Act target the largest and most complex financial institutions, and regulators have noted that much of the act is not meant to apply to community banks. Although the Dodd-Frank Act exempts small institutions, such as community banks and credit unions, from several of its provisions, and authorizes federal regulators to provide small institutions with relief from certain regulations, it also contains provisions that impose additional restrictions and compliance costs on these institutions. As we reported in 2012, federal regulators, state regulatory associations, and industry associations collectively identified provisions within 7 of the act’s 16 titles that they expected to affect community banks and credit unions. The provisions they identified as likely to affect these institutions included some of the act’s mortgage reforms, such as those requiring institutions to ensure that a consumer obtaining a residential mortgage loan has the reasonable ability to repay the loan at the time the loan is consummated; comply with a new CFPB rule that combines two different mortgage loan disclosures that had been required by the Truth-in-Lending Act and the Real Estate Settlement Procedures Act of 1974; and ensure that property appraisers are sufficiently independent. In addition to the regulations that have arisen from provisions in the Dodd-Frank Act, we reported that other regulations have created potential burdens for community banks. For example, the depository institution regulators also issued changes to the capital requirements applicable to these institutions. Many of these changes were consistent with the Basel III framework, which is a comprehensive set of reforms to strengthen global capital and liquidity standards issued by an international body consisting of representatives of many nations’ central banks and regulators. These new requirements significantly changed the risk-based capital standards for banks and bank holding companies. As we reported in November 2014, officials interviewed from community banks did not anticipate any difficulties in meeting the U.S. Basel III capital requirements but expected to incur additional compliance costs. In addition to regulatory changes that could increase burden or costs on community banks, some of the Dodd-Frank Act provisions have likely resulted in reduced costs for these institutions. For example, revisions to the way that deposit insurance premiums are calculated reduced the amount paid by banks with less than $10 billion in assets by $342 million or 33 percent from the first to second quarter of 2011 after the change became effective. Another change reduced the audit-related costs that some banks were incurring in complying with provisions of the Sarbanes- Oxley Act. Prior Studies on Regulatory Burden Generally Focused on Costs A literature search indicated that prior studies by other entities, including regulators, trade associations or others, which examined how to measure regulatory burden generally focused on direct costs resulting from compliance with regulations, and our analysis of them identified various limitations that restrict their usefulness in assessing regulatory burden. For example, researchers commissioned by the Credit Union National Association, which advocates for credit unions, found costs attributable to regulations totaled a median of 0.54 percent of assets in 2014 for a non- random sample of the 53 small, medium, and large credit unions responding to a nationwide survey. However, one of the study’s limitations was its use of a small, non-random sample of credit unions. In addition, the research was not designed to conclusively link changes in regulatory costs for the sampled credit unions to any one regulation or set of regulations. CFPB also conducted a study of regulatory costs associated with specific regulations applicable to checking accounts, traditional savings accounts, debit cards, and overdraft programs. Through case studies involving 200 interviews with staff at seven commercial banks with assets over $1 billion, the agency’s staff determined that the banks’ costs related to ongoing regulatory compliance were concentrated in operations, information technology, human resources, and compliance and retail functions, with operations and information technology contributing the highest costs. While providing detailed information about the case study institutions, reliance on a small sample of mostly large commercial banks limits the conclusions that can be drawn about banks’ regulatory costs generally. In addition, the study notes several challenges to quantifying compliance costs that made their cost estimates subject to some measurement error, and the study’s design limits the extent to which a causal relationship between financial regulations and costs could be fully established. Researchers from the Mercatus Center at George Mason University used a nongeneralizable survey of banks to find that respondents believed they were spending more money and staff time on compliance than before due to Dodd-Frank regulations. From a universe of banks with less than $10 billion of assets, the center’s researchers used a non-random sample to collect 200 responses to a survey sent to 500 banks with assets less than $10 billion about the burden of complying with regulations arising from the Dodd-Frank Act. The survey sought information on the respondents’ characteristics, products, and services and the effects various regulatory and compliance activities had on operations and decisions, including those related to bank profitability, staffing, and products. About 83 percent of the respondents reported increased compliance costs of greater than or equal to 5 percent due to regulatory requirements stemming from the Dodd-Frank Act. The study’s limitations include use of a non-random sample selection, small response rate, and use of questions that asked about the Dodd-Frank Act in general. In addition, the self-reported survey items used to capture regulatory burden—compliance costs and profitability—have an increased risk of measurement error and the causal relationship between Dodd- Frank Act requirements and changes in these indicators is not well- established. Institutions Cited Mortgage and Anti- Money Laundering Regulations as Most Burdensome, although Others Noted Their Significant Public Benefits Community bank and credit union representatives that we interviewed identified three sets of regulations as most burdensome to their institutions: (1) data reporting requirements related to loan applicants and loan terms under the Home Mortgage Disclosure Act of 1975 (HMDA); (2) transaction reporting and customer due diligence requirements as part of the Bank Secrecy Act and related anti-money laundering laws and regulations (collectively, BSA/AML); and (3) disclosures of mortgage loan fees and terms to consumers under the TILA-RESPA Integrated Disclosure (TRID) regulations. In focus groups and interviews, many of the institution representatives said these regulations were time- consuming and costly to comply with, in part because the requirements were complex, required preparation of individual reports that had to be reviewed for accuracy, or mandated actions within specific timeframes. However, federal regulators and consumer advocacy groups said that benefits from these regulations were significant. HMDA Requirements Deemed Time Consuming by Institutions but Critical to Others Representatives of community banks and credit unions in all our focus groups and in most of our interviews told us that HMDA’s data collection and reporting requirements were burdensome. Under HMDA and its implementing Regulation C, banks and credit unions with more than $45 million in assets that do not meet regulatory exemptions must collect, record, and report to the appropriate federal regulator, data about applicable mortgage lending activity. For every covered mortgage application, origination, or purchase of a covered loan, lenders must collect information such as the loan’s principal amount, the property location, the income relied on in making the credit decision, and the applicants’ race, ethnicity, and sex. Institutions record this on a form called the loan/application register, compile these data each calendar year, and submit them to CFPB. Institutions have also been required to make these data available to the public upon request, after modifying them to protect the privacy of applicants and borrowers. Representatives of many community banks and credit unions with whom we spoke said that complying with HMDA regulations was time consuming. For example, representatives from one community bank we interviewed said it completed about 1,100 transactions that required HMDA reporting in 2016, and that its staff spent about 16 hours per week complying with Regulation C. In one focus group, participants discussed how HMDA compliance was time consuming because the regulations were complex, which made determining whether a loan was covered and should be reported difficult. As a part of that discussion, one bank representative told us that it was not always clear whether a residence that was used as collateral for a commercial loan was a reportable mortgage under HMDA. In addition, representatives in all of our focus groups in which HMDA was discussed and in some interviews said that they had to provide additional staff training for HMDA compliance. Among the 28 community banks and credit unions whose representatives commented on HMDA in our focus groups, 61 percent noted having to conduct additional HMDA-related training. In most of our focus groups and three of our interviews, representatives of community banks and credit unions also expressed concerns about how federal bank examiners review HMDA data for errors. When regulatory examiners conducting compliance examinations determine that an institution’s HMDA data has errors above prescribed thresholds, the institution has to correct and resubmit its data, further adding to the time required for compliance. While regulators have revised their procedures for assessing errors as discussed later, prior to 2018, if 10 percent or more of the loan/application registers that examiners reviewed had errors, an institution was required to review all of their data, correct any errors, and resubmit them. If 5 percent or more of the reviewed loan/application registers had errors in a single data field, an institution had to review all other registers and correct the data in that field. Participants in one focus group discussed how HMDA’s requirements left them little room for error and that they were concerned that examiners weigh all HMDA fields equally when assessing errors. For example, representatives of one institution noted that for purposes of fair lending enforcement, errors in fields such as race and ethnicity can be more important than errors in the action taken date (the field for the date when a loan was originated or when an application not resulting in an origination was received). Representatives of one institution also noted that they no longer have access to data submission software that allowed them to verify the accuracy of some HMDA data, and this has led to more errors in their submissions. Representatives of another institution told us that they had to have staff conduct multiple checks of HMDA data to ensure the data met accuracy standards, which added to the time needed for compliance. Representatives of many community banks and credit unions with whom we spoke also expressed concerns that compliance requirements for HMDA were increasing. The Dodd-Frank Act included provisions to expand the information institutions must collect and submit under HMDA, and CFPB issued rules implementing these new requirements that mostly became effective January 2018. In addition to certain new data requirements specified in the act, such as age and the total points and fees payable at origination, CFPB’s amendments to the HMDA reporting requirements also added additional data points, including some intended to collect more information about borrowers such as credit scores, as well as more information about the features of loans, such as fees and terms. In the final rule implementing the new requirements, CFPB also expanded the types of loans on which some institutions must report HMDA data to include open-ended lines of credit and reverse mortgages. Participants in two of our focus groups with credit unions said reporting this expanded information will require more staff time and training and cause them to purchase new or upgraded computer software. In most of our focus groups, participants said that changes should be made to reduce the burdens associated with reporting HMDA data. For example, in some focus groups, participants suggested raising the threshold for institutions that have to file HMDA reports above the then current $44 million in assets, which would reduce the number of small banks and credit unions that are required to comply. Representatives of two institutions noted that because small institutions make very few loans compared to large ones, their contribution to the overall HMDA data was of limited value in contrast to the significant costs to the institutions to collect and report the data. Another participant said their institution sometimes make as few as three loans per month. In most of our focus groups, participants also suggested that regulators could collect mortgage data in other ways. For example, one participant discussed how it would be less burdensome for lenders if federal examiners collected data on loan characteristics during compliance examinations. However, staff of federal regulators and consumer groups said that HMDA data are essential for enforcement of fair lending laws and regulations. Representatives of CFPB, FDIC, NCUA, and OCC and groups that advocate for consumer protection issues said that HMDA data has helped address discriminatory practices. For example, some representatives noted a decrease in “redlining” (refusing to make loans to certain neighborhoods or communities). CFPB staff noted that HMDA data provides transparency about lending markets, and that HMDA data from community banks and credit unions is critical for this purpose, especially in some rural parts of the country where they make the majority of mortgage loans. While any individual institution’s HMDA reporting might not make up a large portion of HMDA data for an area, CFPB staff told us that if all smaller institutions were exempted from HMDA requirements, regulators would have little or no data on the types of mortgages or on lending patterns in some areas. Agency officials also told us that few good alternatives to HMDA data exist and that the current collection regime is the most effective available option for collecting the data. NCUA officials noted that collecting mortgage data directly from credit unions during examinations to enforce fair lending rules likely would be more burdensome for the institutions. CFPB staff and consumer advocates we spoke with also said that HMDA provides a low-cost data source for researchers and local policy makers, which leads to other benefits that cannot be directly measured but are included in HMDA’s statutory goals—such as allowing local policymakers to target community investments to areas with housing needs. While representatives of some community banks and credit unions argued that HMDA data were no longer necessary because practices such as redlining have been reduced and they receive few requests for HMDA data from the public, representatives of some consumer advocate groups responded that eliminating the transparency that HMDA data creates could allow discriminatory practices to become more common. CFPB staff and representatives of one of these consumer groups also said that before the financial crisis of 2007–2009, some groups were not being denied credit outright but instead were given mortgages with terms, such as high interest rates, which made them more likely to default. The expanded HMDA data will allow regulators to detect such problematic lending practices for mortgage terms. CFPB and FDIC staff also told us that while lenders will have to collect and report more information, the new fields will add context to lending practices and should reduce the likelihood of incorrectly flagging institutions for potential discrimination. For example, with current data, a lender may appear to be denying mortgage applications to a particular racial or ethnic group, but with expanded data that includes applicant credit scores, regulators may determine that the denials were appropriate based on credit score underwriting. CFPB staff acknowledged that HMDA data collection and reporting may be time consuming, and said they have taken steps to reduce the associated burdens for community banks and credit unions. First, in its final rule implementing the Dodd-Frank Act’s expanded HMDA data requirements, CFPB added exclusions for banks and credit unions that make very few mortgage loans. Effective January 2018, an institution will be subject to HMDA requirements only if it has originated at least 25 closed-end mortgage loans or at least 100 covered open-end lines of credit in each of the 2 preceding calendar years and also has met other applicable requirements. In response to concerns about the burden associated with the new requirement for reporting open-end lines of credit, in 2017. CFPB temporarily increased the threshold for collecting and reporting data for open-end lines of credit from 100 to 500 for the 2018 and 2019 calendar years. CFPB estimated that roughly 25 percent of covered depository institutions will no longer be subject to HMDA as a result of these exclusions. Second, the Federal Financial Institutions Examination Council (FFIEC), which includes CFPB, announced the new FFIEC HMDA Examiner Transaction Testing Guidelines that specify when agency examiners should direct an institution to correct and resubmit its HMDA data due to errors found during supervisory examinations. CFPB said these revisions should greatly reduce the burden associated with resubmissions. Under the revised standards, institutions will no longer be directed to resubmit all their HMDA data if they exceeded the threshold for HMDA files with errors, but will still be directed to correct specific data fields that have errors exceeding the specified threshold. The revised guidelines also include new tolerances for some data fields, such as application date and loan amount. Third, CFPB also introduced a new online system for submitting HMDA data in November 2017. CFPB staff said that the new system, the HMDA Platform, will reduce errors by including features to allow institutions to validate the accuracy and correct the formatting of their data before submitting. They also noted that this platform will reduce burdens associated with the previous system for submitting HMDA data. For example, institutions no longer will have to regularly download software, and multiple users within an institution will be able to access the platform. NCUA officials added that some credit unions had tested the system and reported that it reduced their reporting burden. Finally, on December 21, 2017, CFPB issued a public statement announcing that, for HMDA data collected in 2018, CFPB does not intend to require resubmission of HMDA data unless errors are material, and does not intend to assess penalties for errors in submitted data. CFPB also announced that it intends to open a rule making to reconsider various aspects of the 2015 HMDA rule, such as the thresholds for compliance and data points that are not required by statute. Institutions Found BSA/AML Regulations Burdensome and Regulators Have Been Considering Steps to Reduce Burden In all our focus groups and many of our interviews, participants said they found BSA/AML requirements to be burdensome due to the staff time and other costs associated with their compliance efforts. To provide regulators and law enforcement with information that can aid in pursuing criminal, tax, and regulatory investigations, BSA/AML statutes and regulations require covered financial institutions to file Currency Transaction Reports (CTR) for cash transactions conducted by a customer for aggregate amounts of more than $10,000 per day and Suspicious Activity Reports (SAR) for activity that might signal criminal activity (such as money laundering or tax evasion); and establish BSA/AML compliance programs that include efforts to identify and verify customers’ identities and monitor transactions to report, for example, transactions that appear to violate federal law. Participants in all of our focus groups discussed how BSA/AML compliance was time-consuming, and in most focus groups participants said this took time away from serving customers. For example, representatives of one institution we interviewed told us that completing a single SAR could take 4 hours, and that they might complete 2 to 5 SARs per month. However, representatives of another institution said that at some times of the year it has filed more than 300 SARs per month. In a few cases, representatives of institutions saw BSA/AML compliance as burdensome because they had to take actions that seemed unnecessary based on the nature of the transactions. For example, one institution’s representatives said that filing a CTR because a high school band deposited more than $10,000 after a fundraising activity seemed unnecessary, while another’s said that it did not see the need to file SARs for charitable organizations that are well known in their community. Representatives of institutions in most of our focus groups also noted that BSA/AML regulations required additional staff training. Some of these representatives noted that the requirements are complex and the activities, such as identifying transactions potentially associated with terrorism, are outside of their frontline staff’s core competencies. Representatives in all focus groups and a majority of interviews said BSA imposes financial costs on community banks and credit unions that must be absorbed by those institutions or passed along to customers. In most of our focus groups, representatives said that they had to purchase or upgrade software systems to comply with BSA/AML requirements, which can be expensive. Some representatives also said they had to hire third parties to comply with BSA/AML regulations. Representatives of some institutions also noted that the compliance requirements do not produce any material benefits for their institutions. In most of our focus groups, participants were particularly concerned that the compliance burden associated with BSA/AML regulations was increasing. In 2016, FinCEN—the bureau in the Department of the Treasury that administers BSA/AML rules—issued a final rule that expanded due-diligence requirements for customer identification. The final rule was intended to strengthen customer identification programs by requiring institutions to obtain information about the identities of the beneficial owners of businesses opening accounts at their institutions. The institutions covered by the rule are expected to be in compliance by May 11, 2018. Some representatives of community banks and credit unions that we spoke with said that this new requirement will be burdensome. For example, one community bank’s representatives said the new due-diligence requirements will require more staff time and training and cause them to purchase new or upgraded computer systems. Representatives of some institutions also noted that accessing beneficial ownership information about companies can be difficult, and that entities that issue business licenses or tax identification numbers could perform this task more easily than financial institutions. In some of our focus groups, and in some comment letters that we reviewed that community banks and credit unions submitted to bank regulators and NCUA as part of the EGRPRA process, representatives of community banks and credit unions said regulators should take steps to reduce the burdens associated with BSA/AML. Participants in two of our focus groups and representatives of two institutions we interviewed said that the $10,000 CTR threshold, which was established in 1972, should be increased, noting it had not been adjusted for inflation. One participant told us that if this threshold had been adjusted for inflation over time, it likely would be filing about half of the number of CTRs that it currently files. In several focus groups, participants also indicated that transactions that must be checked against the Office of Foreign Assets Control list also should be subject to a threshold amount. Representatives of one institution noted that they have to complete time-consuming compliance work for even very small transactions (such as less than $1). Representatives of some institutions suggested that the BSA/AML requirements be streamlined to make it easier for community banks and credit unions to comply. For example, representatives of one institution that participated in the EGRPRA review suggested that institutions could provide regulators with data on all cash transactions in the format in which they keep these records rather than filing CTRs. Finally, participants in one focus group said that regulators should better communicate how the information that institutions submit contributes to law enforcement successes in preventing or prosecuting crimes. Staff from FinCEN told us that the reports and due-diligence programs required in BSA/AML rules are critical to safeguarding the U.S. financial sector from illicit activity, including illegal narcotics and terrorist financing activities. They said they rely on CTRs and SARs that financial institutions file for the financial intelligence they disseminate to law enforcement agencies, and noted that they saw all BSA/AML requirements as essential because activities are designed to complement each other. Officials also pointed out that entities conducting terrorism, human trafficking, or fraud all rely heavily on cash, and reporting frequently made deposits makes tracking criminals easier. They said that significant reductions in BSA/AML reporting requirements would hinder law enforcement, especially because depositing cash through ATMs has become very easy. FinCEN staff said they utilize a continuous evaluation process to look for ways to reduce burden associated with BSA/AML requirements, and noted actions taken as a result. They said that FinCEN has several means of soliciting feedback about potential burdens, including through its Bank Secrecy Act Advisory Group that consists of industry, regulatory, and law enforcement representatives who meet twice a year, and also through public reporting and comments received through FinCEN’s regulatory process. FinCEN officials said that based on this advisory group’s recommendations, the agency provided SAR filing relief by reducing the frequency of submission for written SAR summaries on ongoing activity from 90 days to 120 days. FinCEN also has recognized that financial institutions do not generally see the beneficial impacts of their BSA/AML efforts, and officials said they have begun several different feedback programs to address this issue. FinCEN staff said they have been discussing ways to improve the CTR filing process, but in response to comments obtained as part of a recent review of regulatory burden they noted that the staff of law enforcement agencies do not support changing the $10,000 threshold for CTR reporting. FinCEN officials said that they have taken some steps to reduce the burden related to CTR reporting, such as by expanding the ability of institutions to seek CTR filing exemptions, especially for low-risk customers. FinCEN is also utilizing its advisory group to examine aspects of the CTR reporting obligations to assess ways to reduce reporting burden, but officials said it is too early to know the outcomes of the effort. However, FinCEN officials said that while evaluation of certain reporting thresholds may be appropriate, any changes to them or other CTR requirements to reduce burden on financial institutions, must still meet the needs of regulators and law enforcement, and prevent misuse of the financial system. FinCEN staff also said that some of the concerns raised about the upcoming requirements on beneficial ownership may be based on misunderstandings of the rule. FinCEN officials told us that under the final rule, financial institutions can rely on the beneficial ownership information provided to them by the entity seeking to open the account. Under the final rule, the party opening an account on behalf of the legal entity customer is responsible for providing beneficial ownership information, and the financial institution may rely on the representations of the customer unless it has information that calls into question the accuracy of those representations. The financial institution does not have to confirm ownership; rather, it has to verify the identity of the beneficial owners as reported by the individual seeking to open the account, which can be done with photocopies of identifying documents such as a driver’s license. FinCEN issued guidance explaining this aspect of the final rule in 2016. Institutions Found New Mortgage Term Disclosure Rules Burdensome, but Some May Be Misinterpreting Requirements In all of our focus groups and many of our interviews, representatives of community banks and credit unions said that new requirements mandating consolidated disclosures to consumers for mortgage terms and fees have increased the time their staff spend on compliance, increased the cost of providing mortgage lending services, and delayed the completion of mortgages for customers. The Dodd Frank Act directed CFPB to issue new requirements to integrate mortgage loan disclosures that previously had been separately required by the Truth-in-Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA), and their implementing regulations, Regulation Z and X, respectively. Effective in October 2015, the combined TILA-RESPA Integrated Disclosure (known as TRID) requires mortgage lenders to disclose certain mortgage terms, conditions, and fees to loan applicants during the origination process for certain mortgage loans and prescribe how the disclosures should be made. The disclosure provisions also require lenders, in the absence of specified exceptions, to reimburse or refund to borrowers portions of certain fees that exceed the estimates previously provided in order to comply with the revised regulations. Under TRID, lenders generally must provide residential mortgage loan applicants with two forms, and deliver these documents within specified time frames (as shown in fig. 1). Within 3 business days of an application and at least 7 business days before a loan is consummated, lenders must provide the applicant with the loan estimate, which includes estimates for all financing costs and fees and other terms and conditions associated with the potential loan. If circumstances change after the loan estimate has been provided (for example, if a borrower needs to change the loan amount), a new loan estimate may be required. At least 3 days before a loan is consummated, lenders must provide the applicant with the closing disclosure, which has the loan’s actual terms, conditions, and associated fees. If the closing disclosure is mailed to an applicant, lenders must wait an additional 3 days for the applicant to receive it before they can execute the loan, unless they can demonstrate that the applicant has received the closing disclosure. If the annual percentage rate or the type of loan change after the closing disclosure is provided, or if a prepayment penalty is added, a new closing disclosure must be provided and a new 3-day waiting period is required. Other changes made to the closing disclosure require the provision of a revised closing disclosure, but a new 3-day waiting period is not required. If the fees in the closing disclosure are more than the fees in the loan estimate (subject to some exceptions and tolerances discussed later in this section), the lender must reimburse the applicant for the amount of the increase in order to comply with the applicable regulations. In all of our focus groups and most of our interviews, representatives of community banks and credit unions said that TRID has increased the time required to comply with mortgage disclosure requirements and increased the cost of mortgage lending. In half of our focus groups, participants discussed how they have had to spend additional time ensuring the accuracy of their initial estimates of mortgage costs, including fees charged by third parties, in part because they are now financially responsible for changes in fees during the closing process. Some participants also discussed how they have had to hire additional staff to meet TRID’s requirements. In one focus group of community banks, participants described how mortgage loans frequently involve the use of multiple third parties, such as appraisers and inspectors, and obtaining accurate estimates of the amounts these parties will charge for their services within the 3-day period prescribed by TRID can be difficult. The community banks we spoke with also discussed how fees from these parties often change at closing, and ensuring an accurate estimate at the beginning of the process was not always possible. As a result, some representatives said that community banks and credit unions have had to pay to cure or correct the difference in changed third-party fees that are outside their control. In most of our focus groups and some of our interviews, representatives told us that this TRID requirement has made originating a mortgage more costly for community banks and credit unions. Community banks and credit unions in half of our focus groups and some of our interviews also told us that TRID’s requirements are complex and difficult to understand, which adds to their compliance burden. Participants in one focus group noted that CFPB’s final rule implementing TRID was very long—the rule available on CFPB’s website is more than 1,800 pages including the rule’s preamble—and has many scenarios that require different actions by mortgage lenders or trigger different responsibilities as the following examples illustrate. Some fees in the loan estimate, such as prepaid interest, may be subsequently changed provided that the estimates were in good faith. Other fees, such as for third-party services where the charge is not paid to the lender or the lender’s affiliate, may be changed by as much as 10 percent in aggregate before the lender becomes liable for the difference. However, for some charges the lender must reimburse or refund to the borrower portions of subsequent increases, such as fees paid to the creditor, mortgage broker, or a lender affiliate, without any percentage tolerance. Based on a poll we conducted in all six focus groups, 40 of 43 participants said that they had to provide additional training to staff to ensure that TRID’s requirements were understood, which takes additional time from serving customers. In all of our focus groups and most of our interviews, community banks and credit unions also said that TRID’s mandatory waiting periods and disclosure schedules increased the time required to close mortgage loans, which created burdens for the institutions and their customers. Several representatives we interviewed told us that TRID’s waiting periods led to delays in closings of about 15 days. The regulation mandates that mortgage loans generally cannot be consummated sooner than 7 business days after the loan estimate is provided to an applicant, and no sooner than 3 business days after the closing disclosure is received by the applicant. If the closing disclosure is mailed, the lender must add another 3 business days to the closing period to allow for delivery. Representatives in some of our focus groups said that when changes needed to be made to a loan during the closing period, TRID requires them to restart the waiting periods, which can increase delays. For example, if the closing disclosure had been provided, and the loan product needed to be changed, a new closing disclosure would have to be provided and the applicant given at least 3 days to review it. Some representatives we interviewed said that their customers are frustrated by these delays and would like to close their mortgages sooner than TRID allows. Others said that TRID’s waiting periods decreased flexibility in scheduling the closing date, which caused problems for homebuyers and sellers (for instance, because transactions frequently have to occur on the same day). However, CFPB officials and staff of a consumer group said that TRID has streamlined previous disclosure requirements and is important for ensuring that consumers obtaining mortgages are protected. CFPB reported that for more than 30 years lenders have been required by law to provide mortgage disclosures to borrowers, and CFPB staff noted that prior time frames were similar to those required by TRID and Regulation Z. CFPB also noted that information on the disclosure forms that TRID replaced was sometimes overlapping, used inconsistent terminology, and could confuse consumers. In addition, CFPB staff and staff of a consumer group said that the previous disclosures allowed some mortgage-related fees to be combined, which prevented borrowers from knowing what charges for specific services were. They said that TRID disclosures better highlight important items for home buyers, allowing them to more readily compare loan options. Furthermore, CFPB staff told us that before TRID, lenders and other parties commonly increased a mortgage loan’s fees during the closing process, and then gave borrowers a “take it or leave it” choice just before closing. As a result, borrowers often just accepted the increased costs. CFPB representatives said that TRID protects consumers from this practice by shifting the responsibility for most fee increases to lenders, and increases transparency in the lending process. CFPB staff told us that it is too early to definitively identify what impact TRID has had on borrowers’ understanding of mortgage terms, but told us that some information they have seen indicated that it has been helpful. For example, CFPB staff said that preliminary results from the National Survey of Mortgage Originations conducted in 2017 found that consumer confidence in mortgage lending increased. While CFPB staff said that this may indicate that TRID, which became effective in October 2015, has helped consumers better understand mortgage terms, they noted that the complete survey results are not expected to be released until 2018. CFPB staff said that these results should provide valuable information on how well consumers generally understood mortgage terms and whether borrowers were comparison shopping for loans that could be used to analyze TRID’s effects on consumer understanding of mortgage products. CFPB staff also told us that complying with TRID should not result in significant time being added to the mortgage closing process. Based on the final rule, they noted that TRID’s waiting periods should not lead to delays of more than 3 days. CFPB staff also pointed out that the overall 7-day waiting period and the 3-day waiting period can be modified or waived if the consumer has a bona fide personal financial emergency, and thus should not be creating delays for those consumers. To waive the waiting period, consumers have to provide the lender with a written statement that describes the emergency. CFPB staff also said that closing times are affected by a variety of factors and can vary substantially, and that the delays that community banks and credit unions we spoke with reported may not be representative of the experiences of other lenders. A preliminary CFPB analysis of industry-published mortgage closing data found that closing times increased after it first implemented TRID, but that the delays subsequently declined. CFPB staff also said that they plan to analyze closing times using HMDA data now that they are collecting these data, and that they expect that delays that community banks and credit unions may have experienced so far would decrease as institutions adjusted to the new requirements. Based on our review of TRID’s requirements and discussions with community banks and credit unions, some of the burden related to TRID that community banks and credit unions described appeared to result from institutions taking actions not required by regulations, and community banks and credit unions told us they still were confused about TRID requirements. For example, representatives of some institutions we interviewed said that they believed TRID requires the entire closing disclosure process to be restarted any time any changes were made to a loan’s amount. CFPB staff told us that this is not the case, and that revised loan estimates can be made in such cases without additional waiting periods. Representatives of several other community banks and credit unions cited 5- and 10-day waiting periods not in TRID requirements, or believed that the 7-day waiting period begins after the closing disclosure is received by the applicant, rather than when the loan estimate is provided. Participants in one focus group discussed that they were confused about when to provide disclosures and what needs to be provided. Representatives of one credit union said that if they did not understand a requirement, it was in their best interest to delay closing to ensure they were in compliance. CFPB staff said that they have taken several steps to help lenders understand TRID requirements. CFPB has published a Small Entity Compliance Guide and a Guide to the Loan Estimate and Closing Disclosure Forms. As of December 2017, these guides were accessible on a TRID implementation website that has links to other information about the rule, as well as blank forms and completed samples. CFPB staff told us that the bureau conducted several well-attended, in-depth webinars to explain different aspects of TRID, including one with more than 20,000 participants, and that recordings of the presentations remained available on the bureau’s TRID website. CFPB also encourages institutions to submit questions about TRID through the website, and the staff said that they review submitted questions for any patterns that may indicate that an aspect of the regulation is overly burdensome. However, the Mortgage Bankers Association reported that CFPB’s guidance for TRID had not met the needs of mortgage lenders. In a 2017 report on reforming CFPB, this association stated that timely and accessible answers to frequently asked questions about TRID were still needed, noting that while CFPB had assigned staff to answer questions, these answers were not widely circulated. The association also reported that it had made repeated requests for additional guidance related to TRID, but the agency largely did not respond with additional materials in response to these requests. Although we found that misunderstandings of TRID requirements could be creating unnecessary compliance burdens for some small institutions, CFPB had not assessed the effectiveness of the guidance it provided to community banks and credit unions. Under the Dodd-Frank Act, CFPB has a general responsibility to ensure its regulations are not unduly burdensome, and internal control standards direct federal agencies to analyze and respond to risks related to achieving their defined objectives. However, CFPB staff said that they have not directly assessed how well community banks and credit unions have understood TRID requirements and acknowledged that some of these institutions may be applying the regulations improperly. They said that CFPB intends to review the effectiveness of its guidance, but did not indicate when this review would be completed. Until the agency assesses how well community banks and credit unions understand TRID requirements, CFPB may not be able to effectively respond to the risk that some smaller institutions have implemented TRID incorrectly, unnecessarily burdening their staff and delaying consumers’ home purchases. Community Banks and Credit Unions Appeared to Be Receiving Applicable Regulatory Exemptions, but Expressed Concerns about Examiner Expectations We did not find that regulators directed institutions to comply with regulations from which they were exempt, although institutions were concerned about the appropriateness of examiner expectations. To provide regulatory relief to community banks and credit unions, Congress and regulators have sometimes exempted smaller institutions from the need to comply with all or part of some regulations. Such exemptions are often based on the size of the financial institution or the level of particular activities. For example, CFPB exempted institutions with less than $45 million in assets and fewer than 25 closed-end mortgage loans or 500 open-end lines of credit from the expanded HMDA reporting requirements. In January 2013, CFPB also included exemptions for some institutions in a rule related to originating loans that meet certain characteristics—known as qualified mortgages—in order for the institutions to receive certain liability protections if the loans later go into default. To qualify for this treatment, the lenders must make a good faith effort to determine a borrower’s ability to repay a loan and the loan must not include certain risky features (such as interest-only or balloon payments). In its final rule, CFPB included exemptions that allow small creditors to originate loans with certain otherwise restricted features (such as balloon payments) and still be considered qualified mortgage loans. Concerns expressed to legislators about exemptions not being applied appeared to be based on misunderstandings of certain regulations. For example, in June 2016, a bank official testified that he thought his bank would be exempt from all of CFPB’s requirements. However, CFPB’s rules applicable to banks apply generally to all depository institutions, although CFPB only conducts compliance examinations for institutions with assets exceeding $10 billion. The depository institution regulators continue to examine institutions with assets below this amount (the overwhelming majority of banks and credit unions) for compliance with regulations enacted by CFPB. Although not generalizable, our analysis of select examinations did not find that regulators directed institutions to comply with requirements from which they were exempt. In our interviews with representatives from 17 community banks and credit unions, none of the institutions’ representatives identified any cases in which regulators required their institution to comply with a regulatory requirement from which they should have been exempt. We also randomly selected and reviewed examination reports and supporting material for 28 examinations conducted by the regulators to identify any instances in which the regulators had not applied exemptions. From our review of the 28 examinations, we found no instances in the examination reports or the scoping memorandums indicating that examiners had required these institutions to comply with the regulations covered by the eight selected exemptions. Because of the limited number of the examinations we reviewed, we cannot generalize our findings to the regulatory treatment of all institutions qualifying for exemptions. Although not identifying issues relating to exemptions, representatives of community banks and credit unions in about half of our interviews and focus groups expressed concerns that their regulators expected them to follow practices they did not feel corresponded to the size or risks posed by their institutions. For example, representatives from one institution we interviewed said that examiners directed them to increase BSA/AML activities or staff, whereas they did not see such expectations as appropriate for institutions of their size. Similarly, in public forums held by regulators as part of their EGRPRA reviews (discussed in the next section) a few bank representatives stated that regulators sometimes considered compliance activities by large banks to be best practices, and then expected smaller banks to follow such practices. However, institution representatives in the public forums and in our interviews and focus groups that said sometimes regulators’ expectations for their institutions were not appropriate, but did not identify specific regulations or practices they had been asked to consider following when citing these concerns. To help ensure that applicable exemptions and regulatory expectations are appropriately applied, federal depository institution regulators told us they train their staff in applicable requirements and conduct senior-level reviews of examinations to help ensure that examiners only apply appropriate requirements and expectations on banks and credit unions. Regulators said that they do not conduct examinations in a one-size-fits- all manner, and aim to ensure that community banks and credit unions are held to standards appropriate to their size and business model. To achieve this, they said that examiners undergo rigorous training. For example, FDIC staff said that its examiners have to complete four core trainings and then receive ongoing on-the-job instruction. Each of the four regulators also said they have established quality assurance programs to review and assess their examination programs periodically. For example, each Federal Reserve Bank reviews its programs for examination inconsistency and the Federal Reserve Board staff conducts continuous and point-in-time oversight reviews of Reserve Banks’ examination programs to identify issues or problems, such as examination inconsistency. The depository institution regulators also said that they have processes for depository institutions to appeal examination findings if they feel they were held to inappropriate standards. In addition to less formal steps, such as contacting a regional office, each of the four regulators have an ombudsman office to which institutions can submit complaints or concerns about examination findings. Staffs of the various offices are independent from the regulators’ management and work with the depository institutions to resolve examination issues and concerns. If the ombudsman is unable to resolve the complaints, then the institutions can further appeal their complaints through established processes. Reviews of Regulations Resulted in Some Reduction in Burden, but the Reviews Have Limitations Federal depository institution regulators address regulatory burden of their regulated institutions through the rulemaking process and also through retrospective reviews that may provide some regulatory relief to community banks. However, the retrospective review process has some limitations that limit its effectiveness in assessing and addressing regulatory burden on community banks and credit unions. Mechanisms for Regulators to Address Regulatory Burden Include Mandated Decennial Reviews Federal depository institution regulators can address the regulatory burden of their regulated institutions throughout the rulemaking process and through mandated, retrospective or “look back” reviews. According to the regulators, attempts to reduce regulatory burden start during the initial rulemaking process. Staff from FDIC, Federal Reserve, NCUA, and OCC all noted that when promulgating rules, their staff seek input from institutions and others throughout the process to design requirements that achieve the goals of the regulation at the most reasonable cost and effort for regulated entities. Once a rule has been drafted, the regulators publish it in the Federal Register for public comment. The staff noted that regulators often make revisions in response to the comments received to try to reduce compliance burdens in the final regulation. After regulations are implemented, banking regulators also address regulatory burdens by periodically conducting mandated reviews of their regulations. The Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA) directs three regulators (Federal Reserve, FDIC, and OCC, as agencies represented on the Federal Financial Institutions Examination Council) to review at least every 10 years all of their regulations and through public comment identify areas of the regulations that are outdated, unnecessary or unduly burdensome on insured depository institutions. Under the act, the regulators are to categorize their regulations and provide notice and solicit public comment on all the regulations for which they have regulatory authority. The act also includes a number of requirements on how the regulators should conduct the review, including reporting results to Congress. The first EGRPRA review was completed in 2007. The second EGRPRA review began in 2014 and the report summarizing its results was submitted to Congress in March 2017. While NCUA is not required to participate in the EGRPRA review (because EGRPRA did not include the agency in the list of agencies that must conduct the reviews), NCUA has been participating voluntarily. NCUA’s assessment of its regulations appears in separate sections of the reports provided to Congress for each of the 2007 and 2017 reviews. Bank Regulators’ 2017 EGRPRA Review Process and Results Regulators began the most recent EGRPRA review by providing notice and soliciting comments in 2014–2016. The Federal Reserve, FDIC, and OCC issued four public notices in the Federal Register seeking comments from regulated institutions and interested parties on 12 categories of regulations they promulgated. The regulators published a list of all the regulations they administer in the notices and asked for comments, including comments on the extent to which regulations were burdensome. Although not specifically required under EGRPRA, the regulators also held six public meetings across the country with several panels of banks and community groups. At each public meeting, at least three panels of bank officials represented banks with assets of generally less than $5 billion and a large number of the panels included banks with less than $2 billion in assets. Panels were dedicated to specific regulations or sets of regulations. For example, one panel covered capital-related rules, consumer protection, and director-related rules, and another addressed BSA/AML requirements. Although panels were dedicated to specific regulations or sets of regulations, the regulators invited comment on all of their regulations at all public meetings. The regulators then assessed the public comments they received and described actions they intended to take in response. EGRPRA requires that the regulators identify the significant issues raised by the comments. The regulators generally deemed the issues that received the most public comments as significant. For the 2017 report, representatives at the Federal Reserve, FDIC, and OCC reviewed, evaluated, and summarized more than 200 comment letters and numerous oral comments they received. For interagency regulations that received numerous comments, such as those relating to capital and BSA/AML requirements, the comment letters for each were provided to staff of one of the three regulators or to previously established interagency working groups to conduct the initial assessments. The regulators’ comment assessments also included reviews by each agency’s subject-matter experts, who prepared draft summaries of the concerns and proposed agency responses for each of the rules that received comments. According to one bank regulator, the subject-matter experts assessed the comments across three aspects: (1) whether a suggested change to the regulation would reduce bank burdens; (2) how the change to the regulation would affect the safety and soundness of the banking system; and (3) whether a statutory change would be required to address the comment. The summaries drafted by the subject-matter experts then were shared with staff representing all three regulators and further revised. The staff of the three regulators said they then met jointly to analyze the merits of the comments and finalize the comment responses and the proposed actions for approval by senior management at all three regulators. In the 2017 report summarizing their assessment of the comments received, the regulators identified six significant areas in which commenters raised concerns: (1) capital rules, (2) financial condition reporting (Call Reports), (3) appraisal requirements, (4) examination frequency, (5) Community Reinvestment Act, and (6) BSA/AML. Based on our analysis of the 2017 report, the Federal Reserve, FDIC, and OCC had taken or pledged to take actions to address 11 of the 28 specific concerns commenters had raised across these six areas. We focused our analysis on issues within the six significant issues that affected the smaller institution and defined an action taken by the regulators as a change or revision to a regulation or the issuance of guidance. Capital rules. The regulators noted in the 2017 EGRPRA report that they received comment letters from more than 30 commenters on the recently revised capital requirements. Although some of the concerns commenters expressed related to issues affecting large institutions, some commenters sought to have regulators completely exempt smaller institutions from the requirements. Others objected to the amounts of capital that had to be held for loans made involving more volatile commercial real estate. In response, the regulators stated that the more than 500 failures of banks in the recent crisis, most of which were community banks, justified requiring all banks to meet the new capital requirements. However, they pledged in the report to make some changes, and have recently proposed rules that would alter some of the requirements. For example, on September 27, 2017, the regulators proposed several revisions to the capital requirements that would apply to banks not subject to the advanced approach requirements under the capital rules (generally, banks with less than $250 billion in assets and less than $10 billion in total foreign exposure). For example, the proposed rule simplifies the capital treatment for certain commercial acquisition, development, and construction loans, and would change the treatment of mortgage servicing assets. Call Reports. The regulators also received more than 30 comments relating to the reports—known as Call Reports—that banks file with the regulators outlining their financial condition and performance. Generally, the commenters requested relief (reducing the number of items required to be reported) for smaller banks and also asked that the frequency of reporting for some items be reduced. In response to these concerns, the regulators described a review of the Call Report requirements intended to reduce the number of items to be reported to the regulators. The regulators had started this effort to address Call Report issues soon after the most recent EGRPRA process had begun in June 2014. In the 2017 EGRPRA report, the regulators noted that they developed a new Call Report form for banks with assets of less than $1 billion and domestic offices only. For instance, according to the regulators, the new form reduced the number of items such banks had to report by 40 percent. Staff from the regulators told us that about 3,500 banks used the new small-bank reporting form in March 2017, which represented about 68 percent of the banks eligible to use the new form. OCC officials told us that an additional 100 federally chartered banks submitted the form for the 2017 second quarter reporting period. After the issuance of the 2017 EGRPRA report, in June 2017 the regulators issued additional proposed revisions to the three Call Report forms that banks are required to complete. These proposed changes are to become effective in June 2018. For example, one of the proposed changes to the new community bank Call Report form would change the frequency of reporting certain data on non-accrual assets— nonperforming loans that are not generating their stated interest rate— from quarterly to semi-annually. In November 2017, the agencies issued further proposed revision to the community bank Call Report that would delete or consolidate a number of items and add a new, or raise certain existing, reporting thresholds. The proposed revision would take effect as of June 2018. Appraisals. The three bank regulators and NCUA received more than 160 comments during the 2017 EGRPRA process related to appraisal requirements. The commenters included banks and others that sought to raise the size of the loans that require appraisals, and a large number of appraisers that objected to any changes in the requirements According to the EGRPRA report, several professional appraiser associations argued that raising the threshold could undermine the safety and soundness of lenders and diminish consumer protection for mortgage financing. These commenters argued that increasing the thresholds could encourage banks to neglect collateral risk-management responsibilities. In response, in July 2017, the regulators proposed raising the threshold for when an appraisal is required from $250,000 to $400,000 for commercial real estate loans. The regulators indicated that the appraisal requirements for 1-4 family residential mortgage loans above the current $250,000 would not be appropriate at the this time because they believed having such appraisals for loans above that level increased the safety of those loans and better protected consumers and because other participants in the housing market, such as the Department of Housing and Urban Development and the government-sponsored enterprises, also required appraisals for loans above that amount. However, the depository institution regulators included in the proposal a request for comment about the appraisal requirements for residential real estate and what banks think are other factors that should be included when considering the threshold for these loans. As part of the 2017 EGRPRA process, the regulators also received comments indicating that banks in rural areas were having difficulty securing appraisers. In the EGRPRA report, the regulators acknowledged this difficulty and in May 2017, the bank regulators and NCUA issued agency guidance on how institutions could obtain temporary waivers and use other means to expand the pool of persons eligible to prepare appraisals in cases in which suitable appraiser staff were unavailable. The agencies also responded to commenters who found the evaluation process confusing by issuing an interagency advisory on the process in March 2016. Evaluations may be used instead of an appraisal for certain transactions including those under the threshold. Frequency of safety and soundness examinations. As part of the 2017 EGRPRA process, the agencies also received comments requesting that they raise the total asset threshold for an insured depository institution to qualify for the extended 18-month examination cycle from $1 billion to $2 billion and to further extend the examinations cycle from 18 months to 36 months. During the EGRPRA process, Congress took legislative action to reduce examination frequency for smaller, well-capitalized banks. In 2015, the FAST Act raised the threshold for the 18-month examination cycle from less than $500 million to less than $1 billion for certain well-capitalized and well-managed depository institutions with an “outstanding” composite rating and gave the agencies discretion to similarly raise this threshold for certain depository institutions with an “outstanding” or “good” composite rating. The agencies exercised this discretion and issued a final rule in 2016 making qualifying depository institutions with less than $1 billion in total assets eligible for an 18-month (rather than a 12-month) examination cycle. According to the EGRPRA report, agency staff estimated that the final rules allowed approximately 600 more institutions to qualify for an extended 18-month examination cycle, bringing the total number of qualifying institutions to 4,793. Community Reinvestment Act. The commenters in the 2017 EGRPRA process also raised various issues relating to the Community Reinvestment Act, including the geographic areas in which institutions were expected to provide loans to low- and moderate-income borrowers and whether credit unions should be required to comply with the act’s requirements. The regulators noted that they were not intending to take any actions to revise regulations relating to this act because many of the revisions the commenters suggested would require changes to the statute (that is, legislative action). The regulators also noted that they had addressed some of the concerns by revising the Interagency Questions and Answers relating to this act in 2016. Furthermore, the agencies noted that they have been reviewing their existing examination procedures and practices to identify policy and process improvements. BSA/AML. The regulators also received a number of comments as part of the 2017 EGRPRA process on the burden institutions encounter in complying with BSA/AML requirements. These included the threshold for reporting currency transactions and suspicious activities. The regulators also received comments on both BSA/AML examination frequency and the frequency of safety and soundness examinations generally. Agencies typically review BSA/AML compliance programs during safety and soundness examinations. As discussed previously, regulators allowed more institutions of outstanding or good composite condition to be examined every 18 months instead of every 12 months. Institutions that qualify for less frequent safety-and-soundness examinations also will be eligible for less frequent BSA/AML examinations. For the remainder of the issues raised by commenters, the regulators noted they do not have the regulatory authority to revise the requirements but provided the comments to FinCEN, which has authority for these regulations. A letter with FinCEN’s response to the comments was included as an appendix of the EGRPRA report. In the letter, the FinCEN Acting Director stated that FinCEN would work through the issues raised by the comments with its advisory group consisting of regulators, law enforcement staff, and representatives of financial institutions. Additional Burden Reduction Actions. In addition to describing some changes in response to the comments deemed significant, the regulators’ 2017 report also includes descriptions of additional actions the individual agencies have taken or planned to take to reduce the regulatory burden for banks, including community banks. The Federal Reserve Board noted that it changed its Small Bank Holding Company Policy Statement that allows small bank holding companies to hold more debt than permitted for larger bank holding companies. In addition, the Federal Reserve noted that it had made changes to certain supervisory policies, such as issuing guidance on assessing risk management for banks with less than $50 billion in assets and launching an electronic application filing system for banks and bank holding companies. OCC noted that it had issued two final rules amending its regulations for licensing/chartering and securities-related filings, among other things. According to OCC staff, the agency conducted an internal review of its agency-specific regulations and many of the changes to these regulations came from the internal review. The agency also noted that it integrated its rules for national banks and federal savings associations where possible. In addition, OCC noted that it removed redundant and unnecessary information requests from those made to banks before examinations. FDIC noted that it had rescinded enhanced supervisory procedures for newly insured banks and reduced the consumer examination frequency for small and newly insured banks. Similarly to OCC, FDIC is integrating its rules for both non-state member banks and state- chartered savings and loans associations. In addition, FDIC noted it had issued new guidance on banks’ deposit insurance filings and reduced paperwork for new bank applications. NCUA 2017 EGRPRA Process and Results The 2017 report also presents the results of NCUA’s concurrent efforts to obtain and respond to comments as part of the EGRPRA process. NCUA conducts its review separately from the bank regulators’ review. In four Federal Register notices in 2015, NCUA sought comments on 76 regulations that it administers. NCUA received about 25 comments raising concerns about 29 of its regulations, most of which were submitted by credit union associations. NCUA received no comments on 47 regulations. NCUA’s methodology for its regulatory review was similar to the bank regulators’ methodology. According to NCUA, all comment letters responding to a particular notice were collected and reviewed by NCUA’s Special Counsel to the General Counsel, an experienced, senior-level attorney with overall responsibility for EGRPRA compliance. NCUA staff told us that criteria applied by the Special Counsel in his review included relevance, depth of understanding and analysis exhibited by the comment, and degree to which multiple commenters expressed the same or similar views on an issue. The Special Counsel prepared a report summarizing the substance of each comment. The comment summary was reviewed by the General Counsel and circulated to the NCUA Board and reviewed by the Board members and staff. NCUA identified in its report the following as significant issues relating to credit union regulation: (1) field of membership and chartering; (2) member business lending; (3) federal credit union ownership of fixed assets; (4) expansion of national credit union share insurance coverage; and (5) expanded powers for credit unions. For these, NCUA took various actions to address the issues raised in the comments. For example, NCUA modified and updated its field of credit union membership by revising the definition of a local community, rural district and underserved area, which provided greater flexibility to federal credit unions seeking to add a rural district to their field of membership. NCUA also lessened some of the restrictions on member lending to small business; and raised some of the asset thresholds for what would be defined as a small credit union so that fewer requirements would apply to these credit unions. Also, in April 2016, the NCUA Board issued a proposed rule that would eliminate the requirement that federal credit unions must have a plan by which they will achieve full occupancy of premises within an explicit time frame. The proposal would allow for federal credit unions to plan for and manage their use of office space and related premises in accordance with their own strategic plans and risk-management policies. Bank Regulators and NCUA 2007 EGRPRA Review Process and Results The bank and credit union regulators’ process for the 2007 EGRPRA review also began with Federal Register notices that requested comments on regulations. The regulators then reviewed and assessed the comments and issued a report in 2007 to Congress in which they noted actions they took in some of the areas raised by commenters. Our analysis of the regulators’ responses indicated that the regulators took responsive actions in a few areas. The regulators noted they already had taken action in some cases (including after completion of a pending study and as a result of efforts to work with Congress to obtain statutory changes). However, for the remaining specific concerns, the four regulators indicated that they would not be taking actions. Similar to its response in 2017, NCUA discussed its responses to the significant issues raised about regulations in a separate section of the 2007 report. Our analysis indicated that NCUA took responsive actions in about half of the areas. For example, NCUA adjusted regulations in one case and in another case noted previously taken actions. For comments related to three other areas, NCUA took actions not reflected in the 2007 report because the actions were taken over a longer time frame (in some cases, after 8 years). In the remaining areas, NCUA deemed actions as not being desirable in four cases and outside of its authority in two other cases. Other Retrospective Reviews The bank regulators do not conduct other retrospective reviews of regulations outside of the EGRPRA process. We requested information from the Federal Reserve, FDIC, and OCC about any discretionary regulatory retrospective reviews that they performed in addition to the EGRPRA review during 2012–2016. All three regulators reported to us they have not conducted any retrospective regulatory reviews outside of EGRPRA since 2012. However, under the Regulatory Flexibility Act (RFA), federal agencies are required to conduct what are referred to as section 610 reviews. The purpose of these reviews is to determine whether certain rules should be continued without change, amended, or rescinded consistent with the objectives of applicable statutes, to minimize any significant economic impact of the rules upon a substantial number of small entities. Section 610 reviews are to be conducted within 10 years of an applicable rule’s publication. As part of other work, we assessed the bank regulators’ section 610 reviews and found that the Federal Reserve, FDIC, and OCC conducted retrospective reviews that did not fully align with the Regulatory Flexibility Act’s requirements. Officials at each of the agencies stated that they satisfy the requirements to perform section 610 reviews through the EGRPRA review process. However, we found that the requirements of the EGRPRA reviews differ from those of the RFA-required section 610 reviews, and we made recommendations to these regulators to help ensure their compliance with this act in a separate report issued in January 2018. In addition to participating in the EGRPRA review, NCUA also reviews one-third of its regulations every year (each regulation is reviewed every 3 years). NCUA’s “one-third” review employs a public notice and comment process similar to the EGRPRA review. If a specific regulation does not receive any comments, NCUA does not review the regulation. For the 2016 one-third review, NCUA did not receive comments on 5 of 16 regulations and thus these regulations were not reviewed. NCUA made technical changes to 4 of the 11 regulations that received comments. In August 2017, NCUA staff announced they developed a task force for conducting additional regulatory reviews, including developing a 4-year agenda for reviewing and revising NCUA’s regulations. The primary factors they said they intend to use to evaluate their regulations will be the magnitude of the benefit and the degree of effort that credit unions must expend to comply with the regulations. Because the 4-year reviews will be conducted on all of NCUA’s regulations, staff noted that the annual one-third regulatory review process will not be conducted again until 2020. Limitations of Reviews of Burden Include CFPB Exclusion and Lack of Quantitative Analysis Our analysis of the EGRPRA review found three limitations to the current process. CFPB Not Included and Significant Mortgage Regulations Not Assessed First, the EGRPRA statute does not include CFPB and thus the significant mortgage-related regulations and other regulations that it administers— regulations that banks and credit unions must follow—were not included in the EGRPRA review. Under the Dodd-Frank Act, CFPB was given financial regulatory authority, including for regulations implementing the Home Mortgage Disclosure Act (Regulation C); the Truth-in-Lending Act (Regulation Z); and the Truth-in-Savings Act (Regulation DD). These regulations apply to many of the activities that banks and credit unions conduct; the four depository institution regulators conduct the large majority of examinations of these institutions’ compliance with these CFPB-administered regulations. However, EGRPRA was not amended after the Dodd-Frank Act to include CFPB as one of the agencies that must conduct the EGRPRA review. During the 2017 EGRPRA review, the bank regulators only requested public comments on consumer protection regulations for which they have regulatory authority. But the banking regulators still received some comments on the key mortgage regulations and the other regulations that CFPB now administers. Our review of 2017 forum transcripts identified almost 60 comments on mortgage regulations, such as HMDA and TRID. The bank regulators could not address these mortgage regulation-related comments because they no longer had regulatory authority over these regulations; instead, they forwarded these comment letters to CFPB staff. According to CFPB staff, their role in the most recent EGRPRA process was very limited. CFPB staff told us they had no role in assessing the public comments received for purposes of the final 2017 EGRPRA report. According to one bank regulator, the bank regulators did not share non- mortgage regulation-related letters with CFPB staff because those comment letters did not involve CFPB regulations. Another bank regulator told us that CFPB was offered the opportunity to participate in the outreach meetings and were kept informed of the EGRPRA review during the quarterly FFIEC meetings that occurred during the review. Before the report was sent to Congress, CFPB staff said that they reviewed several late-stage drafts, but generally limited their review to ensuring that references to CFPB’s authority and regulations and its role in the EGRPRA process were properly characterized and explained. As a member of FFIEC, which issued the final report, CFPB’s Director was given an opportunity to review the report again just prior to its approval by FFIEC. CFPB must conduct its own reviews of regulations after they are implemented. Section 1022(d) of the Dodd-Frank Act requires CFPB to conduct an assessment of each significant rule or order adopted by the bureau under federal consumer financial law. CFPB must publish a report of the assessment not later than 5 years after the effective date of such rule or order. The assessment must address, among other relevant factors, the rule’s effectiveness in meeting the purposes and objectives of title X of the Dodd-Frank Act and specific goals stated by CFPB. The assessment also must reflect available evidence and any data that CFPB reasonably may collect. Before publishing a report of its assessment, CFPB must invite public comment on recommendations for modifying, expanding, or eliminating the significant rule or order. CFPB announced in Federal Register notices in spring 2017 that it was commencing assessments of rules related to Qualified Mortgage/Ability- to-Repay requirements, remittances, and mortgage servicing regulations. The notices described how CFPB planned to assess the regulations. In each notice, CFPB requested comment from the public on the feasibility and effectiveness of the assessment plan, data, and other factual information that may be useful for executing the plan; recommendations to improve the plan and relevant data; and data and other factual information about the benefits, costs, impacts, and effectiveness of the significant rule. Reports of these assessments are due in late 2018 and early 2019. According to CFPB staff, the requests for data and other factual information are consistent with the statutory requirement that the assessment must reflect available evidence and any data that CFPB reasonably may collect. The Federal Register notices also describe other data sources that CFPB has in-house or has been collecting pursuant to this requirement. CFPB staff told us that they have not yet determined whether certain other regulations that apply to banks and credit unions, such as the revisions to TRID and HMDA requirements, will be designated as significant and thus subjected to the one-time assessments. CFPB staff also told us they anticipate that within approximately 3 years after the effective date of a rule, it generally will have determined whether the rule is a significant rule for section 1022(d) assessment purposes. In tasking the bank regulators with conducting the EGRPRA reviews, Congress indicated its intent was to require these regulators to review all regulations that could be creating undue burden on regulated institutions. According to a Senate committee report relating to EGRPRA, the purpose of the legislation was to minimize unnecessary regulatory impediments for lenders, in a manner consistent with safety and soundness, consumer protection, and other public policy goals, so as to produce greater operational efficiency. Some in Congress have recognized that the omission of CFPB in the EGRPRA process is problematic, and in 2015 legislation was introduced to require that CFPB—and NCUA—formally participate in the EGRPRA review. Currently, without CFPB’s participation, key regulations that affect banks and credit unions may not be subject to the review process. In addition, these regulations may not be reviewed if CFPB does not deem them significant. Further, if reviewed, CFPB’s mandate is for a one-time, not recurring, review. CFPB staff told us that they have two additional initiatives designed to review its regulations, both of which have been announced in CFPB’s spring and fall 2017 Semiannual Regulatory Agendas. First, CFPB launched a program to periodically review individual existing regulations—or portions of large regulations—to identify opportunities to clarify ambiguities, address developments in the marketplace, or modernize or streamline provisions. Second, CFPB launched an internal task force to coordinate and bolster their continuing efforts to identify and relieve regulatory burdens, including with regard to small businesses such as community banks that potentially will address any regulation the agency has under its jurisdiction. Staff told us the agency has been considering suggestions it received from community banks and others on ways to reduce regulatory burden. However, CFPB has not provided public information specifically on the extent to which it intends to review regulations applicable to community banks and credit unions and other institutions or provided information on the timing and frequency of the reviews. In addition, it has not indicated the extent to which it will coordinate the reviews with the federal depository institution regulators as part of the EGRPRA reviews. Until CFPB publicly provides additional information indicating its commitment to periodically review the burden of all its regulations, community banks, credit unions, and other depository institutions may face diminished opportunities for relief from regulatory burden. Regulators Have Not Conducted or Reported Quantitative Analyses Second, the federal depository institution regulators have not conducted or reported on quantitative analyses during the EGRPRA process to help them determine if changes to regulations would be warranted. Our analysis of the 2017 report indicated that in responses to comments in which the regulators did not take any actions, the regulators generally only provided their arguments against taking actions and did not cite analysis or data to support their narrative. In contrast, other federal agencies that are similarly tasked with conducting retrospective regulatory reviews are required to follow certain practices for such reviews that could serve as best practices for the depository institution regulators. For example, the Office of Management and Budget’s Circular A-4 guidance on regulatory analysis notes that a good analysis is transparent and should allow qualified third parties reviewing such analyses to clearly see how estimates and conclusions were determined. In addition, executive branch agencies that are tasked under executive orders to conduct retrospective reviews of regulations they issue generally are required under these orders to collect and analyze quantitative data as part of assessing the costs and benefits of changing existing regulations. However, EGRPRA does not require the regulators to collect and report on any quantitative data they collected or analyzed as part of assessing the potential burden of regulations. Conducting and reporting on how they analyzed the impact of potential regulatory changes to address burden could assist the depository institution regulators in conducting their EGRPRA reviews. For example, as discussed previously, Community Reinvestment Act regulations were deemed a significant issue, with commenters questioning the relevance of requiring small banks to make community development loans and suggesting that the asset threshold for this requirement be raised from $1 billion to $5 billion. The regulators told us that if the thresholds were raised, then community development loans would decline, particularly in underserved communities. However, regulators did not collect and analyze data for the EGRPRA review to determine the amount of community development loans provided by banks with assets of less than $1 billion; including a discussion of quantitative analysis might have helped show that community development loans from smaller community banks provided additional credit in communities—and thus helped to demonstrate the benefits of not changing the requirement as commenters requested. By not performing and reporting quantitative analyses where appropriate in the EGRPRA review, the regulators may be missing opportunities to better assess regulatory impacts after a regulation has been implemented, including identifying the need for any changes or benefits from the regulations and making their analyses more transparent to stakeholders. As the Office of Management and Budget’s Circular A-4 guidance on the development of regulatory analysis noted, sound quantitative estimates of costs and benefits, where feasible, are preferable to qualitative descriptions of benefits and costs because they help decision makers understand the magnitudes of the effects of alternative actions. By not fully describing their rationale for the analyses that supported their decisions, regulators may be missing opportunities to better communicate their decisions to stakeholders and the public. Reviews Have Not Considered Cumulative Effects of Regulations Lastly, in the EGRPRA process, the federal depository institution regulators have not assessed the ways that the cumulative burden of the regulations they administer may have created overlapping or duplicative requirements. Under the current process, the regulators have responded to issues raised about individual regulations based on comments they have received, not on bodies of regulations. However, congressional intent in tasking the depository institution regulators with the EGRPRA reviews was to ensure that they considered the cumulative effect of financial regulations. A 1995 Senate Committee on Banking, Housing, and Urban Affairs report stated while no one regulation can be singled out as being the most burdensome, and most have meritorious goals, the aggregate burden of banking regulations ultimately affects a bank’s operations, its profitability, and the cost of credit to customers. For example, financial regulations may have created overlapping or duplicative regulations in the areas of safety and soundness. One primary concern noted in the EGRPRA 2017 report was the amount of information or data banks are required to provide to regulators. For example, the cumulative burden of information collection was raised by commenters in relation to Call Reports, Community Reinvestment Act, and BSA/AML requirements. But in the EGRPRA report, the regulators did not examine how the various reporting requirements might relate to each other or how they might collectively affect institutions. In contrast, the executive branch agencies that conduct retrospective regulatory reviews must consider the cumulative effects of their own regulations, including cumulative burdens. For example, Executive Order 13563 directs agencies, to the extent practicable, to consider the costs of cumulative regulations. Executive Order 13563 does not apply to independent regulatory agencies such as the Federal Reserve, FDIC, OCC, NCUA, or CFPB. A memorandum from the Office of Management and Budget provided guidance to the agencies required to follow this order for assessing the cumulative burden and costs of regulations. The actions suggested for careful consideration include conducting early consultations with affected stakeholders to discuss potential interactions between rulemaking under consideration and existing regulations as well as other anticipated regulatory requirements. The executive order also directs agencies to consider regulations that appear to be attempting to achieve the same goal. However, other researchers often acknowledge that cumulative assessments of burden are difficult. Nevertheless, until the Federal Reserve, FDIC, OCC, and NCUA identify ways to consider the cumulative burden of regulations, they may miss opportunities to streamline bodies of regulations to reduce the overall compliance burden among financial institutions, including community banks and credit unions. For example, regulations applicable to specific activities of banks, such as lending or capital, could be assessed to determine if they have overlapping or duplicative requirements that could be revised without materially reducing the benefits sought by the regulations. Conclusions New regulations for financial institutions enacted in recent years have helped protect mortgage borrowers, increase the safety and soundness of the financial system, and facilitate anti-terrorism and anti-money laundering efforts. But the regulations also entail compliance burdens, particularly for smaller institutions such as community banks and credit unions, and the cumulative burden on these institutions can be significant. Representatives from the institutions with which we spoke cited three sets of regulations—HMDA, BSA/AML, and TRID—as most burdensome for reasons that included their complexity. In particular, the complexity of TRID regulations appears to have contributed to misunderstandings that in turn caused institutions to take unnecessary actions. While regulators have acted to reduce burdens associated with the regulations, CFPB has not assessed the effectiveness of its TRID guidance. Federal internal control standards require agencies to analyze and respond to risks to achieving their objectives, and CFPB’s objectives include addressing regulations that are unduly burdensome. Assessing the effectiveness of TRID guidance represents an opportunity to reduce misunderstandings that create additional burden for institutions and also affect individual consumers (for instance, by delaying mortgage closings). The federal depository institution regulators (FDIC, Federal Reserve, OCC, as well as NCUA) also have opportunities to enhance the activities they undertake during EGRPRA reviews. Congress intended that the burden of all regulations applicable to depository institutions would be periodically assessed and reduced through the EGRPRA process. But because CFPB has not been included in this process, the regulations for which it is responsible were not assessed, and CFPB has not yet provided public information about what regulations it will review, and when, and whether it will coordinate with other regulators during EGPRA reviews. Until such information is publicly available, the extent to which the regulatory burden of CFPB regulation will be periodically addressed remains unclear. The effectiveness of the EGRPRA process also has been hampered by other limitations, including not conducting and reporting on depository institution regulators’ analysis of quantitative data and assessing the cumulative effect of regulations on institutions. Addressing these limitations in their EGRPRA processes likely would make the analyses the regulators perform more transparent, and potentially result in additional burden reduction. Recommendations for Executive Action We make a total of 10 recommendations, which consist of 2 recommendations to CFPB, 2 to FDIC, 2 to the Federal Reserve, 2 to OCC, and 2 to NCUA. The Director of CFPB should assess the effectiveness of TRID guidance to determine the extent to which TRID’s requirements are accurately understood and take steps to address any issues as necessary. (Recommendation 1) The Director of CFPB should issue public information on its plans for reviewing regulations applicable to banks and credit unions, including information describing the scope of regulations the timing and frequency of the reviews, and the extent to which the reviews will be coordinated with the federal depository institution regulators as part of their periodic EGRPRA reviews. (Recommendation 2) The Chairman, FDIC, should, as part of the EGRPRA process, develop plans for their regulatory analyses describing how they will conduct and report on quantitative analysis whenever feasible to strengthen the rigor and transparency of the EGRPRA process. (Recommendation 3) The Chairman, FDIC, should, as part of the EGRPRA process, develop plans for conducting evaluations that would identify opportunities for streamlining bodies of regulation. (Recommendation 4) The Chair, Board of Governors of the Federal Reserve System, should, as part of the EGRPRA process develop plans for their regulatory analyses describing how they will conduct and report on quantitative analysis whenever feasible to strengthen the rigor and transparency of the EGRPRA process. (Recommendation 5) The Chair, Board of Governors of the Federal Reserve System, should, as part of the EGRPRA process, develop plans for conducting evaluations that would identify opportunities to streamline bodies of regulation. (Recommendation 6) The Comptroller of the Currency should, as part of the EGRPRA process, develop plans for their regulatory analyses describing how they will conduct and report on quantitative analysis whenever feasible to strengthen the rigor and transparency of the EGRPRA process. (Recommendation 7) The Comptroller of the Currency should, as part of the EGRPRA process, develop plans for conducting evaluations that would identify opportunities to streamline bodies of regulation. (Recommendation 8) The Chair of NCUA should, as part of the EGRPRA process, develop plans for their regulatory analyses describing how they will conduct and report on quantitative analysis whenever feasible to strengthen the rigor and transparency of the EGRPRA process. (Recommendation 9) The Chair of NCUA should, as part of the EGRPRA process, develop plans for conducting evaluations that would identify opportunities to streamline bodies of regulation. (Recommendation 10) Agency Comments and Our Evaluation We provided a draft of this report to CFPB, FDIC, FinCEN, the Federal Reserve, NCUA, and OCC. We received written comments from CFPB, FDIC, the Federal Reserve, NCUA, and OCC that we have reprinted in appendixes II through VI, respectively. CFPB, FDIC, FinCEN, the Federal Reserve, NCUA, and OCC also provided technical comments, which we incorporated as appropriate. In its written comments, CFPB agreed with the recommendation to assess its TRID guidance to determine the extent to which it is understood. CFPB stated it intends to solicit public input on how it can improve its regulatory guidance and implementation support. In addition, CFPB agreed with the recommendation on issuing public information on its plan for reviewing regulations. CFPB committed to developing additional plans with respect to their reviews of key regulations and to publicly releasing such information and in the interim, CFPB stated it intends to solicit public input on how it should approach reviewing regulations. FDIC stated that it appreciated the two recommendations and stated that it would work with the Federal Reserve and OCC to find the most appropriate ways to ensure that the three regulators continue to enhance their rulemaking analyses as part of the EGRPRA process. In addition, FDIC stated that as part of the EGRPRA review process, it would continue to monitor the cumulative effects of regulation through for example, a review of the community and quarterly banking studies and community bank Call Report data. The Federal Reserve agreed with the two recommendations pertaining to the EGRPRA process. Regarding the need conduct and report on quantitative analysis whenever feasible to strengthen and to increase the transparency of the EGRPRA process, the Federal Reserve plans to coordinate with FDIC and OCC to identify opportunities to conduct quantitative analyses where feasible during future EGRPRA reviews. With respect to the second recommendation, the Federal Reserve agreed that the cumulative impact of regulations on depository institutions is important and plans to coordinate with FDIC and OCC to identify further opportunities to seek comment on bodies of regulations and how they could be streamlined. NCUA acknowledged the report’s conclusions as part of their voluntary compliance with the EGRPRA process; NCUA should improve its qualitative analysis and develop plans for continued reductions to regulatory burden within the credit union industry. In its letter, NCUA noted it has appointed a regulatory review task force charged with reviewing and developing a four-year plan for revising their regulations and the review will consider the benefits of NCUA’s regulations as well as the burden they have on credit unions. In its written comments, OCC stated that it understood the importance of GAO’s recommendations. They stated they OCC will consult and coordinate with the Federal Reserve and FDIC to develop plans for regulatory analysis, including how the regulators should conduct and report on quantitative analysis and also, will work with these regulators to increase the transparency of the EGRPRA process. OCC also stated it will consult with these regulators to develop plans, as part of the EGRPRA process, to conduct evaluations that identify ways to decrease the regulatory burden created by bodies of regulations. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to CFPB, FDIC, FinCEN, the Federal Reserve, NCUA, and OCC. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions concerning this report, please contact me at (202) 512-8678 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix VII. Appendix I: Objectives, Scope, and Methodology This report examines the burdens that regulatory compliance places on community banks and credit unions and actions that federal regulators have taken to reduce these burdens; specifically: (1) the financial regulations that community banks and credit unions reported viewing as the most burdensome, the characteristics of those regulations that make them burdensome, and the benefits are associated with those regulations and (2) federal financial regulators’ efforts to reduce any existing regulatory burden on community banks and credit unions. To identify the regulations that community banks and credit unions viewed as the most burdensome, we first constructed a sample frame of financial institutions that met certain criteria for being classified as community banks or community-focused credit unions for the purposes of this review. These sample frames were then used as the basis for drawing our non-probability samples of institutions for purposes of interviews, focus group participation, and document review. Defining a community bank is important because, as we have reported, regulatory compliance may be more burdensome for community banks and credit unions than for larger banks because they are not as able to benefit from economies of scale in compliance resources. While there is no single consensus definition for what constitutes a community bank, we reviewed criteria for defining community banks developed by the Federal Deposit Insurance Corporation (FDIC), officials from the Independent Community Bankers Association, the Office of the Comptroller of the Currency (OCC). Based on this review, we determined that institutions that had the following characteristics would be the most appropriate to include in our universe of institutions, (1) fewer total assets, (2) engage in traditional lending and deposit taking activities, have limited geographic scope, and (3) did not have complex operating structures. To identify banks that met these characteristics, we began with all banks that filed a Consolidated Reports of Condition and Income (Call Report) for the first quarter of 2016 (March 31, 2016) and are not themselves subsidiaries of another bank that filed a Call Report. We then excluded banks using an asset-size threshold, to ensure we are including only small institutions. Based on interviews with regulators and our review of the FDIC’s community bank study, we targeted institutions around the $1 billion in assets as the group that could be relatively representative of the experiences of many community banks in complying with regulations. Upon review of the Call Reports data, we found that the banks in the 90th percentile by asset size were had about $1.2 billion, and we selected this to be an appropriate cutoff for our sample frame. In addition we excluded institutions with characteristics suggesting they do not engage in typical community banking activities like such as deposit-taking and lending; and those with characteristics suggesting they conduct more specialized operations not typical of community banking, such as credit card banks. In addition to ensure that we excluded banks whose views of regulatory compliance might be influenced by being part of a large and/or complex organization, we also excluded banks with foreign offices and banks that are subsidiaries of either foreign banks or of holding companies with $50 billion or more in consolidated assets. Finally, as a practical matter, we excluded banks for which we could not obtain data on one or more of the characteristics listed below. We also relied on a similar framework to construct a sample frame for credit unions. We sought to identify credit unions that were relatively small, engaged in traditional lending and deposit taking activities, and had limited geographic scope. To do this, we began with all insured credit unions that filed a Call Report for the first quarter of 2016 (March 31, 2016). We then excluded credit unions using an asset-size threshold of $860 million, which is the 95th percentile of credit unions, to ensure we are including only smaller institutions. The percentile of credit unions was higher than the percentile of banks because there are more large banks than there are credit unions. We then excluded credit unions that did not engage in activities that are typical of community lending, such as taking deposits, making loans and leases, and providing consumer checking accounts, as well as those credit unions with headquarters outside of the United States. We assessed the reliability of data from FFIEC, FDIC, the Federal Reserve Bank of Chicago, and NCUA by reviewing relevant documentation and electronically testing the data for missing values or obvious errors, and we found the data from these sources to be sufficiently reliable for the purpose of creating sample frames of community banks and credit unions. The sample frames were then used as the basis for drawing our nonprobability samples of institutions for purposes of interviews and focus groups. To identify regulations that community banks and credit unions viewed as among the most burdensome, we conducted structured interviews and focus groups with a sample of a total of 64 community banks and credit unions. To reduce the possibility of bias, we selected the institutions to ensure that banks and credit unions with different asset sizes and from different regions of the country were included. We also included at least one bank overseen by each of the three primary federal depository institution regulators, Federal Reserve, FDIC, NCUA, and OCC in the sample. We interviewed 17 institutions (10 banks and 7 credit unions) about which regulations their institutions experienced the most compliance burden. On the basis of the results of these interviews, we determined that considerable consensus existed among these institutions as to which regulations were seen as most burdensome, including those relating to mortgage fees and terms disclosures to consumers, mortgage borrower and loan characteristics reporting, and anti-money laundering activities. As a result, we determined to conduct focus groups with institutions to identify the characteristics of the regulations identified in our interviews that made these regulations burdensome. To identify the burdensome characteristics of the regulations identified in our preliminary interviews, we selected institutions to participate in three focus groups of community banks and three focus groups of credit unions. For the first focus group of community banks, we randomly selected 20 banks among 647 banks between $500 million and $1 billion located in nine U.S. census geographical areas using the sample frame of community banks we developed, and contacted them asking for their participation. Seven of the 20 banks agreed to participate in the first focus group. However, mortgages represented a low percentage of the assets of two participants in the first focus group, so we revised our selection criteria because two of the regulations identified as burdensome were related to mortgages. For the remaining two focus groups with community banks, we randomly selected institutions with more than $45 million and no more than $1.2 billion in assets to ensure that they would be required to comply with the mortgage characteristics reporting and with at least a 10 percent mortgage to asset ratio to better ensure that they would be sufficiently experienced with mortgage regulations. After identifying the large percentage of FDIC regulated banks in the first 20 banks we contacted, we decided to prioritize contact with banks regulated by OCC and the Federal Reserve for the institutions on our list. When banks declined or when we determined an institution merged or was acquired, we selected a new institution from that state and preferenced institutions regulated by OCC and the Federal Reserve. The three focus groups totaled 23 community banks with a range of assets. We used a similar selection process for three focus groups of credit unions consisting of 23 credit unions. We selected credit unions with at least $45 million in assets so that they would be required to comply with the mortgage regulations and with at least a 10 percent mortgage-to-asset ratio. During each of the focus groups, we asked the representatives from participating institutions what characteristics of the relevant regulations made them burdensome with which to comply. We also polled them about the extent to which they had to take various actions to comply with regulations, including hiring or expanding staff resources, investing in additional information technology resources, or conducting staff training. During the focus groups, we also confirmed with the participants that the three sets of regulations (on mortgage fee and other disclosures to consumers, reporting of mortgage borrower and loan characteristics, and anti-money laundering activities) were generally the ones they found most burdensome. To identify in more detail the steps a community bank or credit union may take to comply with the regulations identified as among the most burdensome, we also conducted an in-depth on-site interview with one community bank. We selected this institution by limiting the community bank sample to only those banks in the middle 80 percent of the distribution in terms of assets, mortgage lending, small business lending, and lending in general that were no more than 70 miles from Washington, D.C. We limited the sample in this way to ensure that the institution was not an outlier in terms of activities or size, and to limit the travel resources needed to conduct the site visit. We also interviewed associations representing consumers to understand the benefits of these regulations. These groups were selected using professional judgement of their knowledge of relevant banking regulations. We interviewed associations representing banks and credit unions. To identify the requirements of the regulations identified as among the most burdensome, we reviewed the Home Mortgage Disclosure Act (HMDA) and its implementing regulation, Regulation C; Bank Secrecy Act and anti-money laundering (BSA/AML) regulations, including those deriving from the Currency and Foreign Transactions Reporting Act, commonly known as the Bank Secrecy Act (BSA), and the 2001 USA PATRIOT Act; and the Integrated Mortgage Disclosure Rule Under the Real Estate Settlement Procedures Act (RESPA) with the implementing Regulation X; and the Truth-in-Lending Act (TILA) with implementing Regulation Z. We reviewed the Consumer Financial Protection Bureau’s (CFPB) small entity guidance and supporting materials on the TILA- RESPA Integrated Disclosure (TRID) regulation and HMDA to clarify the specific requirements of each rule and to analyze the information included in the CFPB guidance. We interviewed staff from each of the federal regulators responsible for implementing the regulations, as well as from the federal regulators responsible for examining community banks and credit unions. To identify the potential benefits of the regulations that were considered burdensome by community banks and credit unions, we interviewed representatives from four community groups to document their perspectives on the benefits provided by the identified regulations. To determine whether the bank regulators had required banks to comply with certain provisions from which the institutions might be exempt, we identified eight exemptions from the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 from which community banks and credit unions should be exempt and reviewed a small group of the most recent examinations to identify instances in which a regulator may not have applied an exemption for which a bank was eligible. We reviewed 20 safety and soundness and consumer compliance examination reports of community banks and eight safety and soundness examination reports of credit unions. The bank examination reports we reviewed were for the first 20 community banks we contacted requesting participation in the first focus group. The bank examination reports included examinations from all three bank regulators (FDIC, Federal Reserve, and OCC). The NCUA examination reports we reviewed were for the eight credit unions that participated in the second focus group of credit unions. Because of the limited number of the examinations we reviewed, we cannot generalize whether regulators extended the exemptions to all qualifying institutions. To assess the federal financial regulators’ efforts to reduce the existing regulatory burden on community banks and credit unions, we identified the mechanisms the regulators used to identify burdensome regulations and actions to reduce potential burden. We reviewed laws and congressional and agency documentation. More specifically, we reviewed the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA) that requires the Federal Reserve, FDIC, and OCC to review all their regulations every 10 years and identify areas of the regulations that are outdated, unnecessary, or unduly burdensome and reviewed the 1995 Senate Banking Committee report, which described the intent of the legislation. We reviewed the Federal Register notices that bank regulators and NCUA published requesting comments on their regulations. We also reviewed over 200 comment letters that the regulators had received through the EGRPRA process from community banks, credit unions, their trade associations, and others, as well as the transcripts of all six public forums regulators held as part the 2017 EGRPRA regulatory review efforts they conducted. We analyzed the extent to which the depository institutions regulators addressed the issues raised in comments received for the review. In assessing the 2017 and 2007 EGRPRA reports sent to Congress, we reviewed the significant issues identified by the regulators and determined the extent to which the regulators proposed or took actions in response to the comments relating to burden on small entities. We compared the requirements of Executive Orders 12866, 13563, and 13610 issued by Office of Management and Budget with the actions taken by the regulators in implementing their 10-year regulatory retrospective review. The executive orders included requirements on how executive branch agencies should conduct retrospective reviews of their regulations. For both objectives, we interviewed representatives from CFPB, FDIC, Federal Reserve, Financial Crimes Enforcement Network, NCUA, and OCC to identify any steps that regulators took to reduce the compliance burden associated with each of the identified regulations and to understand how they conduct retrospective reviews. We also interviewed representatives of the Small Business Administration’s Office of Advocacy, which reviews and comments on the burdens of regulations affecting small businesses, including community banks. We conducted this performance audit from March 2016 to February 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: Comments from the Consumer Financial Protection Bureau Appendix III: Comments from the Board of Governors of the Federal Reserve System Appendix IV: Comments from the Federal Deposit Insurance Corporation Appendix V: Comments from the National Credit Union Administration Appendix VI: Comments from the Office of the Comptroller of the Currency Appendix VII: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact name above, Cody J. Goebel (Assistant Director); Nancy Eibeck (Analyst in Charge); Bethany Benitez; Kathleen Boggs; Jeremy A. Conley; Pamela R. Davidson; Courtney L. LaFountain; William V. Lamping; Barbara M. Roesmann; and Jena Y. Sinkfield made key contributions to this report.
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In recent decades, many new regulations intended to strengthen financial soundness, improve consumer protections, and aid anti-money laundering efforts were implemented for financial institutions. Smaller community banks and credit unions must comply with some of the regulations, but compliance can be more challenging and costly for these institutions. GAO examined (1) the regulations community banks and credit unions viewed as most burdensome and why, and (2) efforts by depository institution regulators to reduce any regulatory burden. GAO analyzed regulations and interviewed more than 60 community banks and credit unions (selected based on asset size and financial activities), regulators, and industry associations and consumer groups. GAO also analyzed letters and transcripts commenting on regulatory burden that regulators prepared responding to the comments. Interviews and focus groups GAO conducted with representatives of over 60 community banks and credit unions indicated regulations for reporting mortgage characteristics, reviewing transactions for potentially illicit activity, and disclosing mortgage terms and costs to consumers were the most burdensome. Institution representatives said these regulations were time-consuming and costly to comply with, in part because the requirements were complex, required individual reports that had to be reviewed for accuracy, or mandated actions within specific timeframes. However, regulators and others noted that the regulations were essential to preventing lending discrimination and use of the banking system for illicit activity, and they were acting to reduce compliance burdens. Institution representatives also said that the new mortgage disclosure regulations increased compliance costs, added significant time to loan closings, and resulted in institutions absorbing costs when others, such as appraisers and inspectors, changed disclosed fees. The Consumer Financial Protection Bureau (CFPB) issued guidance and conducted other outreach to educate institutions after issuing these regulations in 2013. But GAO found that some compliance burdens arose from misunderstanding the disclosure regulations—which in turn may have led institutions to take actions not actually required. Assessing the effectiveness of the guidance for the disclosure regulations could help mitigate the misunderstandings and thus also reduce compliance burdens. Regulators of community banks and credit unions—the Board of Governors of the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the National Credit Union Administration—conduct decennial reviews to obtain industry comments on regulatory burden. But the reviews, conducted under the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA), had the following limitations: CFPB and the consumer financial regulations for which it is responsible were not included. Unlike executive branch agencies, the depository institution regulators are not required to analyze and report quantitative-based rationales for their responses to comments. Regulators do not assess the cumulative burden of the regulations they administer. CFPB has formed an internal group that will be tasked with reviewing regulations it administers, but the agency has not publicly announced the scope of regulations included, the timing and frequency of the reviews, and the extent to which they will be coordinated with the other federal banking and credit union regulators as part of their periodic EGRPRA reviews. Congressional intent in mandating that these regulators review their regulations was that the cumulative effect of all federal financial regulations be considered. In addition, sound practices required of other federal agencies require them to analyze and report their assessments when reviewing regulations. Documenting in plans how the depository institution regulators would address these EGRPRA limitations would better ensure that all regulations relevant to community banks and credit unions were reviewed, likely improve the analyses the regulators perform, and potentially result in additional burden reduction.
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SECTION 1. SHORT TITLE.
This Act may be cited as the ``Voluntary Certification Program Act
of 2014''.
SEC. 2. VOLUNTARY CERTIFICATION PROGRAMS FOR AIR CONDITIONING, FURNACE,
BOILER, HEAT PUMP, AND WATER HEATER PRODUCTS.
Section 326(b) of the Energy Policy and Conservation Act (42 U.S.C.
6296(b)) is amended by adding at the end the following:
``(6) Voluntary certification programs for air
conditioning, furnace, boiler, heat pump, and water heater
products.--
``(A) Definition of basic model group.--In this
paragraph, the term `basic model group' means a set of
models--
``(i) that share characteristics that allow
the performance of 1 model to be generally
representative of the performance of other
models within the group; and
``(ii) in which the group of products does
not necessarily have to share discrete
performance.
``(B) Reliance on voluntary certification
programs.--For the purpose of testing to verify the
performance rating of, or receiving test reports from
manufacturers certifying compliance with energy
conservation standards and Energy Star specifications
established under sections 324A, 325, and 342, the
covered products described in paragraphs (3), (4), (5),
(9), and (11) of section 322(a) and covered equipment
described in subparagraphs (B), (C), (D), (F), (I),
(J), and (K) of section 340(1), the Secretary and
Administrator shall rely on voluntary certification
programs that--
``(i) are nationally recognized;
``(ii) maintain a publicly available list
of all certified products and equipment;
``(iii) as determined by the Secretary,
annually test not less than 10 percent and not
more than 30 percent of the basic model group
of a program participant;
``(iv) require the changing of the
performance rating or removal of the product or
equipment from the program, if verification
testing determines that the performance rating
does not meet the levels the manufacturer has
certified to the Secretary;
``(v) require the qualification of new
participants in the program through testing and
production of test reports;
``(vi) allow for challenge testing of
products and equipment within the scope of the
program;
``(vii) require program participants to
certify the performance rating of all covered
products and equipment within the scope of the
program;
``(viii) are conducted by a certification
body that is accredited under International
Organization for Standardization/International
Electrotechnical Commission (ISO/IEC) Standard
17065;
``(ix) provide to the Secretary--
``(I) an annual report of all test
results;
``(II) prompt notification when
program testing results in--
``(aa) the rerating of the
performance rating of a product
or equipment; or
``(bb) the delisting of a
product or equipment; and
``(III) test reports, on the
request of the Secretary or the
Administrator, for Energy Star
compliant products, which shall be
treated as confidential business
information as provided for under
section 552(b)(4) of title 5, United
States Code (commonly known as the
`Freedom of Information Act');
``(x) use verification testing that--
``(I) is conducted by an
independent test laboratory that is
accredited under International
Organization for Standardization/
International Electrotechnical
Commission (ISO/IEC) Standard 17025
with a scope covering the tested
products or equipment;
``(II) follows the test procedures
established under this title; and
``(III) notes in each test report
any instructions specified by the
manufacturer or the representative of
the manufacturer for the purpose of
conducting the verification testing;
and
``(xi) satisfy such other requirements as
the Secretary has determined--
``(I) are essential to ensure
standards compliance; or
``(II) have consensus support
achieved through a negotiated
rulemaking process.
``(C) Administration.--
``(i) In general.--The Secretary shall not
require--
``(I) manufacturers to participate
in a voluntary certification program
described in subparagraph (B); or
``(II) participating manufacturers
to provide information that can be
obtained through a voluntary
certification program described in
subparagraph (B).
``(ii) List of covered products.--The
Secretary or the Administrator may maintain a
publicly available list of covered products and
equipment certified under a program described
in subparagraph (B) that distinguishes
between--
``(I) covered products and
equipment verified by the program; and
``(II) products not verified by the
program.
``(iii) Reduction of requirements.--Any
rules promulgated by the Secretary that require
testing of products or equipment for
certification of performance ratings shall on
average reduce requirements and burdens for
manufacturers participating in a voluntary
certification program described in subparagraph
(B) for the products or equipment relative to
other manufacturers.
``(iv) Periodic testing by program
nonparticipants.--In addition to certification
requirements, the Secretary shall require a
manufacturer that does not participate in a
voluntary certification program described in
subparagraph (B)--
``(I) to verify the accuracy of the
performance rating of the product or
equipment through periodic testing
using the testing methods described in
clause (iii) or (x) of subparagraph
(B); and
``(II) to provide to the Secretary
test results and, on request, test
reports verifying the certified
performance for each basic model group
of the manufacturer.
``(v) Restrictions on test laboratories.--
``(I) In general.--Subject to
subclause (II), with respect to covered
products and equipment, a voluntary
certification program described in
subparagraph (B) shall not be a test
laboratory that conducts the testing on
products or equipment within the scope
of the program.
``(II) Limitation.--Subclause (I)
shall not apply to Energy Star
specifications established under
section 324A.
``(vi) Effect on other authority.--Nothing
in this paragraph limits the authority of the
Secretary or the Administrator to test products
or equipment or to enforce compliance with any
law (including regulations).''.
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Voluntary Certification Program Act of 2014 - Amends the Energy Policy and Conservation Act to require the Secretary of Energy and the Administrator of the Environmental Protection Agency (EPA) to rely on voluntary programs for certifying manufacturer compliance with energy conservation performance standards for air conditioning, furnace, boiler, heat pump, and water heater products. Sets forth required characteristics of such certification programs.
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SECTION 1. SHORT TITLE.
This Act may be cited as the ``Surface Transportation Safety Act of
2008''.
SEC. 2. WORKER INJURY PREVENTION AND FREE FLOW OF VEHICULAR TRAFFIC.
The Secretary of Transportation shall modify regulations issued
pursuant to section 1402 of the Safe, Accountable, Flexible, Efficient
Transportation Equity Act: A Legacy for Users (23 U.S.C. 401 note; 119
Stat. 1227) to allow fire services personnel that are subject to the
regulations to wear apparel meeting the high visibility requirements
set forth in NFPA 1971-2007 (Standard on Protective Ensembles for
Structural Fire Fighting and Proximity Fire Fighting) in lieu of
apparel meeting the requirements set forth in ANSI/ISEA 107-2004.
SEC. 3. POSITIVE PROTECTIVE DEVICES.
Not later than 60 days after the date of enactment of this Act, the
Secretary of Transportation shall modify section 630.1108(a) of title
23, Code of Federal Regulations, to ensure that--
(1) at a minimum, positive protective measures are used to
separate workers on highway construction projects from
motorized traffic in all work zones conducted under traffic in
areas that offer workers no means of escape (e.g., tunnels,
bridges, etc.), unless an engineering analysis determines
otherwise;
(2) temporary longitudinal traffic barriers are used to
protect workers on highway construction projects in stationary
work zones lasting 2 weeks or more when the project design
speed is 45 miles per hour or greater and the nature of the
work requires workers to be within one lane-width from the edge
of a live travel lane, unless an engineering analysis
determines otherwise; and
(3) when positive protective devices are necessary for
highway construction projects, these devices are paid for on a
unit pay basis, unless doing so would create a conflict with
innovative contracting approaches, such as design-build or some
performance-based contracts where the contractor is paid to
assume a certain risk allocation and payment is generally made
on a lump sum basis.
SEC. 4. USE OF PATENTED OR PROPRIETARY ITEMS TO FURTHER STATE STRATEGIC
HIGHWAY SAFETY PLANS.
Section 112 of title 23, United States Code, is amended by adding
at the end the following:
``(h) Use of Patented or Proprietary Items To Further State
Strategic Highway Safety Plans.--The Secretary shall approve the use of
Federal funds made available to carry out this chapter in the payment
of patented or proprietary items if the State transportation department
certifies, based on the documented analysis and professional judgment
of qualified State transportation officials, that--
``(1) the patented or proprietary item will contribute to
the accomplishment of one or more goals set forth in the
State's strategic highway safety plan;
``(2) no equally suitable alternative item exists;
``(3) any specified patented or proprietary item will be
clearly identified as a patented or proprietary item in bid
documents; and
``(4) any patented or proprietary item specified pursuant
to this certification will be available in sufficient quantity
to complete any project identified in bid documents.''.
SEC. 5. MINIMUM LEVEL OF RETROREFLECTIVITY FOR PAVEMENT MARKINGS.
Not later than October 1, 2010, the Secretary of Transportation
shall revise the Manual on Uniform Traffic Control Devices to include a
standard for a minimum level of retroreflectivity that must be
maintained for pavement markings, which shall apply to all roads open
to public travel.
SEC. 6. HIGHWAY SAFETY IMPROVEMENT PROGRAM.
(a) Highway Signs and Pavement Markings.--Section 148(a)(3)(A)(xi)
of title 23, United States Code, is amended to read as follows:
``(xi) Installation, replacement, and
upgrade of highway signs and pavement markings,
including any upgrade of materials and the
implementation of any assessment or management
method designed to meet a State-established
performance standard, Federal regulation, or
requirement contained in the Manual on Uniform
Traffic Control Devices relating to minimum
levels of retroreflectivity.''.
(b) Minimum Levels of Retroreflectivity.--Section 148 of such title
is amended by adding at the end the following:
``(i) Minimum Levels of Retroreflectivity.--Not later than
September 30, 2010, the Secretary shall establish a program to require
each State--
``(1) to conduct an assessment for each fiscal year of the
financial obligations, if any, of each unit of local government
in the State attributable to a national standard for
maintaining minimum levels of retroreflectivity in traffic
signs and pavement markings; and
``(2) to provide to each unit of local government in the
State, out of amounts made available to carry out this chapter,
funds in an amount not less than 90 percent of the financial
obligations, if any, of the unit of local government identified
under paragraph (1).''.
SEC. 7. ROADWAY SAFETY IMPROVEMENT PROGRAM FOR OLDER DRIVERS AND
PEDESTRIANS.
(a) In General.--The Secretary of Transportation shall carry out a
program to improve traffic signs and pavement markings in all States
(as such term is defined in section 101 of title 23, United States
Code) in a manner consistent with the recommendations included in the
publication of the Federal Highway Administration entitled ``Guidelines
and Recommendations to Accommodate Older Drivers and Pedestrians 9FHWA-
RD-01-103)'' and dated October 2001.
(b) Apportionment of Funds.--On October 1 of each fiscal year, the
Secretary shall apportion sums authorized to be appropriated to carry
out this section for such fiscal year among the several States using
the formula set forth in section 104(b)(5) of title 23, United States
Code.
(c) Federal Share.--The Federal share of the cost of a project
carried out under this section shall be determined in accordance with
section 120 of title 23, United States Code.
(d) Authorization of Appropriations.--There is authorized to be
appropriated out of the Highway Trust Fund (other than the Mass Transit
Account) $90,000,000 to carry out this section for each of fiscal years
2010 through 2014.
(e) Applicability of Title 23.--Funds made available to carry out
this section shall be available for obligation in the same manner as if
such funds were apportioned under chapter 1 of title 23, United States
Code.
SEC. 8. RAILWAY-HIGHWAY GRADE CROSSINGS.
(a) Transparency of State Survey and Schedule of Railway-Highway
Grade Crossings.--Section 130(d) of title 23, United States Code, is
amended by adding at the end the following: ``Each State shall make
surveys and schedules compiled under this subsection available to the
public through the Internet Web site of the State.''.
(b) Authorization of Appropriations.--There is authorized to be
appropriated out of the Highway Trust Fund (other than the Mass Transit
Account) to carry out section 130 of title 23, United States Code,
$220,000,000 for each of fiscal years 2010 through 2014.
(c) Conforming Amendments.--Section 130 of title 23, United States
Code, is amended--
(1) in subsection (e)(1) by striking the first sentence;
and
(2) in subsections (f)(1) and (f)(3) by striking ``set
aside'' and inserting ``made available''.
SEC. 9. REVIEW OF SAFETY OF HIGHWAY-RAIL GRADE CROSSINGS.
(a) In General.--The Secretary of Transportation shall conduct a
comprehensive review of the safety of all highway-rail grade crossings
in the United States.
(b) Method.--In reviewing the safety of a highway-rail grade
crossing under subsection (a), the Secretary shall--
(1) assess, at a minimum, safety conditions, average daily
traffic, proximity to schools, past accidents, fatalities, and
possible safety improvements; and
(2) determine the best method for making the crossing
safer, including closings, grade separations, installation of
protective devices, or other methods.
(c) Priority List.--Based on the information collected in
conducting the comprehensive review under subsection (a), the Secretary
shall compile, maintain, and submit to Congress a list of the 10
highway-rail grade crossings in each State that have the greatest need
for safety improvements.
(d) Inclusion in Highway-Rail Grade Crossing Database.--The
Secretary shall include the information collected in conducting the
comprehensive review under subsection (a), and the priority list
submitted under subsection (c), in the national database on the safety
of highway-rail grade crossings required under section 20156(a) of
title 49, United States Code, as added by section 10 of this Act.
(e) Update.--The Secretary shall update the comprehensive review
under subsection (a) at least once every 4 years.
(f) Availability of Information.--The Secretary shall make priority
lists and databases compiled under this section available to the public
through the Internet Web site of the Department of Transportation.
(g) Limitation on Use of Data in Judicial Proceedings.--
Notwithstanding any other provision of law, any report, review, survey,
schedule, list, or data compiled or collected for the purpose of
identifying, evaluating, or planning the safety enhancement of a
potential accident site or railway-highway crossing pursuant to this
section shall not be subject to discovery or admitted into evidence in
a Federal or State court proceeding or considered for other purposes in
any action for damages arising from any occurrence at a location
mentioned or addressed in such report, review, survey, schedule, list,
or data.
SEC. 10. HIGHWAY-RAIL GRADE CROSSING SAFETY.
(a) Highway-Rail Grade Crossing Safety.--Subchapter II of chapter
201 of title 49, United States Code, is amended by adding at the end
the following:
``Sec. 20156. Highway-rail grade crossing safety information
``(a) Establishment of Database.--The Secretary of Transportation
shall establish and maintain a national database of information on the
safety of highway-rail grade crossings in the United States.
``(b) Accident and Incident Reports To Be Included in Database.--
The Secretary shall include in the database under subsection (a)
information from incident reports filed with the Federal Railroad
Administration regarding accidents and other safety-related incidents
that have occurred at highway-rail grade crossings.''.
(b) Clerical Amendment.--The analysis for subchapter II of such
chapter is amended by adding at the end the following:
``20156. Highway-rail grade crossing safety information.''.
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Surface Transportation Safety Act of 2008 - Directs the Secretary of Transportation to modify certain federal regulations to: (1) allow fire services personnel to wear high visibility apparel meeting certain requirements; and (2) ensure that positive protective measures (including temporary longitudinal traffic barriers) are used to separate workers on highway construction projects from motorized traffic.
Directs the Secretary to approve the use of federal-aid highway funds for patented or proprietary items that further the goals of state strategic highway safety plans.
Directs the Secretary of Transportation to revise the Manual on Uniform Traffic Control Devices to include a standard for a minimum level of retroreflectivity that must be maintained for pavement markings, which shall apply to all roads open to public travel.
Revises requirements for the highway safety improvement program to count installation, replacement, and upgrade of highway signs and pavement markings as a highway safety improvement project. Directs the Secretary to: (1) require each state to assess local government financial obligations to maintain minimum levels of retroreflectivity in traffic signs and pavement markings; and (2) provide local governments funding for at least 90% of such obligations.
Directs the Secretary to: (1) carry out a program to improve traffic signs and pavement markings for older drivers and pedestrians in all states; (2) review the safety of all highway-rail grade crossings in the United States and, based on such review, compile a list of the ten highway-rail grade crossings having the greatest need for safety improvements; and (3) establish a national database of information on the safety of highway-rail grade crossings in the United States.
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Introduction Second chance homes (SCHs, also referred to as maternity group homes) for unwed teenage mothers are not a new concept in the nation. They are a revival of an old institution, called the "maternity home," in a new form to provide a safe, stable environment for teen mothers and their children who cannot live at home. Such teens are assisted in becoming self-sufficient, developing job skills, learning how to become good mothers, obtaining help in gaining access to child care, and in planning for the future. Renewed interest in such homes occurred in 1995 during the welfare reform debate. With the passage of the welfare reform bill in 1996, the state block grant for Temporary Assistance for Needy Families (TANF) was created. TANF allowed the use of SCHs as a form of adult-supervised setting for unwed teenage mothers in which they could live apart from their parents and still be eligible for cash assistance. In the 109 th Congress, legislation has been introduced that would amend the Runaway and Homeless Youth Act (RHYA) to explicitly authorize funding for maternity group homes through its Transitional Living Program, and to evaluate such homes. When the 108 th Congress reauthorized the RHYA, maternity group homes were added as an allowable use of funds under TLP. This report describes second chance homes, discusses legislation that was introduced in the 109 th Congress related to such homes, and describes federal funding provided through TANF and other programs to assist needy teen mothers who live in second chance homes. Evaluations of the effectiveness of a SCH also are discussed. What Are Second Chance Homes? There is no one definition for second chance homes because, according to the Department of Health and Human Services (HHS), second chance homes "can refer to a group home, a cluster of apartments, or a network of homes that integrate housing and services for teen mothers and their children who cannot live at home because of abuse, neglect or other extenuating circumstances." TANF law defines a second chance home as "an entity that provides individuals ... with a supportive and supervised living arrangement in which such individuals are required to learn parenting skills, including child development, family budgeting, health and nutrition, and other skills to promote their long-term economic independence and the well-being of their children." The law lists a "maternity home" as a distinct entity from a second chance home and requires state welfare agencies to assist unwed teen mothers in locating such a home. It does not, however, define a maternity home or indicate how one differs from a second chance home. The Social Policy Action Network (SPAN), which was a private nonprofit national resource center for these homes, defined second chance homes as "places of refuge for the most vulnerable teen mothers and their children. They are community-based institutions that build social capital." Depending on a community's need, such homes can be located in both urban and rural areas of a state. The purpose of a second chance home is to assist and support young teen mothers in becoming self-sufficient by completing high school and developing job skills, to learn how to become good mothers by properly caring for their child, to help them gain access to child care, and to provide advice in planning for the future. According to SPAN, the main criteria for second chance homes is that they serve parenting teens (some will accept pregnant teens and allow them to remain in the residence with their infants for at least six months or longer after birth), and that they are residential. SPAN indicated that second chance homes not only provided a stable, nurturing atmosphere for teen mothers, but safe, nurturing environments for their offspring. Second chance homes were said to be unique because most offered access on site "to child care, education, job training, counseling, and advice on parenting and life skills." Staff also assist the residents in obtaining outside social services, child care and in making future plans. Second chance homes can be individually operated or can be operated and funded by agencies with broader missions and services. Churches and nonprofit organizations across the nation have operated group homes for teen mothers for a number of years. After the passage of the 1996 welfare reform law, several states joined the effort to create and operate second chance homes by supporting programs that were community-based or conducted by faith-based groups using TANF or state funds. History of Maternity and Second Chance Homes Second chance homes provide a substitute living arrangement for unwed teenage mothers and their children who cannot live at home due to extenuating circumstances, such as violence, physical abuse, or unsafe living conditions. Earlier versions of this concept can be traced back to the mid-1880s. Before that time, support for unwed teen mothers was primarily provided by family, friends, and churches. In 1883, however, Charles Crittenton, a wealthy businessman and philanthropist, founded the first "rescue home" (named for his daughter Florence) that eventually became a chain of what later were called private maternity homes, to better support such mothers. Through moral and religious instruction, directors of these establishments tried to ensure that the mother did not bear more out-of-wedlock children. Subsequently, an extensive network of private maternity homes for "women in crisis" was established across the nation. The Florence Crittenton homes, described as one of the best known networks of maternity homes in 19 th century America, "shielded mothers from psychological or material worries during and after their confinement; ... provided nutritional and medical services that encouraged healthy deliveries; ... helped stressed individuals become better prepared to mother; and ... helped arrange adoptions" for mothers who lacked the means to raise their offspring. The average length of stay in the homes was about 20 months, and 60% of the mothers put their children up for adoption. In 1935, when the Aid to Families with Dependent Children (AFDC) program was enacted, primarily to help widows care for their children, federal funding to assist unwed mothers was established for the first time. George Liebmann, an attorney and former counsel to the Maryland Department of Social Services, reports that as a result of the AFDC program, the framework of the local maternity homes began to disintegrate. Through the AFDC program, cash aid was extended to unwed mothers to support and care for children in their own homes. Eventually, and also as a result of changing social attitudes toward non-marital births, maternity homes were widely viewed as obsolete. Around 1980, Liebmann indicates in a 1995 article, the number of maternity homes "bottomed out," and since that time the number of homes has been struggling upward. A survey of maternity homes conducted in the mid-1990s revealed that 215 such residences were located across the nation. In September 1995, during the Senate's welfare reform debate, there was support for the SCH concept, with passage of an amendment to provide $150 million (over six years) as seed money for states to support community-based homes for teen mothers under the age of 18. The SCH concept differed from the maternity home by requiring young mothers from unstable families to live with their children under adult supervision in the SCH as a condition for receiving welfare. Although included in two versions of the welfare reform bills that subsequently were vetoed by President Clinton, the SCH concept and principles attracted support in states and communities and revived interest in the concept. On August 22,1996, the welfare reform bill (the Personal Responsibility and Work Opportunity Reconciliation Act) was enacted into law ( P.L. 104-193 ). The law established block grants to states for Temporary Assistance for Needy Families and replaced the AFDC program. Funds may be used through TANF for second chance homes at state discretion. In addition, TANF (1) prohibits cash assistance to unmarried teen parents (under 18) unless they live with their own parents, guardians, or another adult relative, or other appropriate adult supervised living arrangement; (2) requires states to provide or assist unwed teen parents, who are on welfare and because of extenuating circumstances cannot live at home, in locating a second chance home, maternity home, or other appropriate supervised living arrangement; and (3) defines second chance homes. SPAN reported that a renewal of interest in second chance homes could be attributed to three factors—(1) a decrease in state welfare caseloads directed more attention to the needs of young teen mothers and their need for secure, stable housing; (2) state welfare surpluses brought attention to options, such as second chance homes, which initially appeared to be too expensive at the beginning of welfare reform; and (3) President George W. Bush made second chance homes one of the mainstays of his philosophy of compassionate conservatism. Goals of Second Chance Homes Second chance home providers may set various kinds of goals for their residents and the program in general to attain. SPAN suggested that a primary goal should be understood and supported by the entities funding the program, state and local social service agencies, community groups, and the teen mothers. For example, Massachusetts administrators chose safety as the state's primary goal for SCH providers. Consequently, state officials made contracts with private agencies to establish 27 second chance homes to provide safe and stable housing for unwed teen mothers and their children. New Mexico chose education as its primary goal and focuses on providing secure housing for teen mothers and assistance in preventing additional pregnancies, so that they can complete high school and strive to go to college. Proponents maintain that short- and long-term goals that might be established for second chance homes include stressing the importance of protecting and nurturing the children of the mothers, reuniting teens with and stabilizing their families, building the self-esteem of the mothers, suggesting alternatives to abortion, and keeping foster care mothers united with their children, among others. What Teen Families Are Served? Most teen mothers who live in and are assisted by second chance homes have experienced troubled lives. Many such mothers have undergone difficulties, which might include living in poverty stricken and oftentimes abusive families, suffering persistent neglect, and possibly using drugs. A new challenge they must confront is parenthood. Living in a structured second chance home might not be easy for some teen mothers because in a large number of cases, such a setting might be the first time they are required to follow strict rules and meet certain expectations. Because of such backgrounds of potential residents, not all second chance homes are qualified to serve all teen mothers. SPAN noted that generally, teen mothers under age 14 might be better suited for foster care because of their inability to assume primary responsibility for the care of their offspring. Consequently, second chance home providers have to determine whether there are teen mothers that they will not serve. SPAN gave several tips that second chance home providers could consider when deciding which teen mothers can or cannot be assisted. These tips included—determining the age range of teens to admit; deciding what time limits, if any, will be set for periods spent at the home; deciding whether teen fathers will be provided residential services; and determining how to handle custody issues (that is, whether minor teen mothers living in such residences will remain in the custody of their parents, or be in the custody of the state). Because of the criteria that most second chance homes apply, some teen mothers will not be accepted. In such instances, SPAN advised, program providers should be aware of alternatives that are available to such teens. Information in SPAN's Second Chance Homes National Directory indicated that of the 95 second chance home providers who responded to their survey, all (except two, which specifically indicated that they also assist pregnant teens) served teen families (which consist of a mother and child ), and assisted such mothers of ages that ranged from as young as 12 to as old as 29. The time limit of stay ranged from no limit, to one or no more than two years. Some of the providers precisely indicated certain limits, such as, when the mother completed high school and found permanent housing, or when the child turned three years of age. Others indicated the time limit as it related to the type of housing or the specific program in which the mother was involved, such as two years for those living in group homes, and two years for those involved in a foster care Independent Living program. HHS reports that in some cases, second chance home providers involve the fathers of the offspring and assist them in obtaining access to services that they might need in becoming good parents, and in acquiring skills that will lead to employment. The SPAN Second Chance Homes National Directory lists 54 second chance homes that provide services to teen fathers. Growth of Second Chance Homes SPAN reported in its Second Chance Homes National Directory that "a growing number of states and communities have found a way to break the cycle of poverty and abuse for ... teen mothers" through creating second chance homes. Although funds for second chance homes were not specifically provided in the 1996 welfare reform law, several states decided to provide their own funding or use TANF funds to establish second chance homes. No state or community, however, directly operates a SCH, but instead contracts with nonprofit organizations to operate the homes. Among the first states to allow funding for a network of such homes were Massachusetts, Maryland, Michigan, and New Mexico. In 1999, statewide networks for such homes began in Texas, Rhode Island, and Nevada. In 2001, Georgia began a statewide program to operate second chance homes. Several communities in Missouri, Connecticut, Oregon, Texas, Washington, and Vermont have used Department of Housing and Urban Development (HUD) funding to open second chance homes. On the other hand, SPAN stated that because of a lack of funding, some second chance homes have been closed in various states. SPAN listed information about 95 second chance homes that were operating throughout the nation in its November 2001 National Directory (the latest data available). Such information includes what was described as "vital statistics" for the homes (that is, whether families and/or pregnant teens are helped, time limit of residency, if any, age of persons helped, etc.), services that residents receive, budget information, and contact information. Also listed were 37 additional second chance homes that currently were operating but where similar information about the homes could not be obtained. Information was gathered from the homes through a written survey distributed in summer and fall 2001 and provided through telephone interviews. The directory listed a total of 132 second chance homes that were operating in 30 states in the nation. SPAN did not claim that the list was exhaustive, but planned to produce annual updated editions to include information about additional second chance home providers as it became available. As far as it is known, annual updates to the directory were not produced. Reauthorization Legislation Legislation was enacted to reauthorize the Runaway and Homeless Youth Act for FY2004 through FY2008, and to authorize funding for maternity group homes through TLP, as previously mentioned. On May 1, 2003, H.R. 1925 , the Runaway, Homeless, and Missing Children Protection Act, was introduced by Representative Phil Gingrey to reauthorize programs under the Runaway and Homeless Youth Act and the Missing Children's Assistance Act. On October 10, 2003, the measure was signed into law ( P.L. 108-96 ). Title I of the law amends the Runaway and Homeless Youth Act's section regarding eligibility for assistance to establish a Transitional Living Program (TLP), by specifying that plans to establish group homes include maternity group homes, and that services provided include, as appropriate, parenting skills. A definition for maternity group homes was included as a new subsection. For FY2004, $105 million was authorized for RHYA, and such sums as necessary for FY2005 through FY2008. No specific funding, however, was recommended for maternity group homes. RHYA is up for reauthorization in the 110 th Congress. Appropriations Funding Affecting Second Chance Homes Between FY2002 and FY2006, congressional funding for the Runaway and Homeless Youth Program has fluctuated between $88 million to a high of nearly $90 million in FY2003. For an appropriations history of the Runaway and Homeless Youth Program, see CRS Report RL31933, The Runaway and Homeless: Administration, Funding, and Legislative Action , by [author name scrubbed]. For FY2007, the President requested the same amount enacted for the program in FY2006, that is, $87,837,000. The President, however, did not request separate funding for maternity group homes. The Administration proposes awarding 193 TLP grants for FY2007 that would include maternity group homes to provide transitional living opportunities for pregnant and parenting homeless teens. Furthermore, the Administration for Children and Families (ACF) announced that it will begin using vouchers to provide maternity group home services in order to reach more vulnerable youth. ACF estimates that $4 million will be used to support about 100 vouchers to pregnant and parenting homeless teens. It states further that a competitive grant would be awarded to a national organization for issuing the vouchers. Also, that national group would be responsible for recruiting and accrediting various maternity group home programs throughout the nation and for working with existing grantees to identify youths seeking those types of specialized services. The Runaway and Homeless Youth Program is currently funded at FY2006 levels under a continuing resolution, (CR, P.L. 109-383 ) through February 15, 2007. Legislation in the 109th Congress On January 24, 2005, S. 6 , the Marriage, Opportunity, Relief, and Empowerment Act of 2005 (MORE Act), was introduced by Senator Rick Santorum and referred to the Senate Finance Committee. Title III, Subtitle H of the bill would have amended RHYA to require an evaluation of maternity group homes and require the evaluator to submit a report to Congress regarding the status, activities, and accomplishments of such homes (supported by grant funds) no later than two years after the date in which the Secretary of HHS entered into a contract for the evaluation, and biennially thereafter. The bill would have authorized $33 million for FY2006 for maternity group homes eligible under RHYA, and such sums as necessary for FY2007. Identical provisions were included in S. 1780 , introduced by Senator Santorum on September 28, 2005, and referred to the Senate Finance Committee. No further action occurred. On September 27, 2005, Representative Roy Blunt introduced H.R. 3908 , the Charitable Giving Act of 2005, which not only would have amended the Internal Revenue Code to provide incentives for individuals and businesses to increase contributions to charities, but also would have amend RHYA to include maternity group homes for homeless youth within TLP. Referred to the House committees on Ways and Means and Education and the Workforce, no further action occurred. This provision, however, was similar to language already enacted in P.L. 108-96 . Selected Federal Programs and Services There is no single primary federal funding source for second chance homes. There are a variety of federal, state, and local programs, however, through which funding can be obtained for second chance homes. SPAN indicated that second chance homes were expensive to operate. It reported that such costs ranged from $8,000 to $65,000 per year per teen family, depending on the location of the home, the ability of the providers to coordinate services in a community, and the level of care needed by teen families. Not all SCH providers receive federal funding to operate second chance homes. For example, in Massachusetts, funding for some SCHs is received only from the state Department of Social Services, the United Way and/or state grants and contracts, while other homes receive funding from various sources, including individual donors, non-profits and foundations, faith-based groups, county or city governments, as well as federal grants. Major federal sources for second chance homes are available via programs administered by HHS and the Department of Housing and Urban Development (HUD). How much funding is being used for second chance homes through these avenues, however, cannot be determined. Such decisions are made according to the discretion of the agency administering the program. As mentioned above, some second chance homes have been closed in various states because of a lack of funding. Selected HHS and HUD programs that can be used as funding sources for second chance homes are discussed below. For FY2007, all federal programs are operating under a CR until February 15, 2007. U.S. Department of Health and Human Services Programs administered by HHS that may provide assistance to unwed teen mothers through second chance homes include the Runaway and Homeless Youth Transitional Living Program, TANF, Social Services Block Grants, Child Welfare Services Program (Title IV-B of the Social Security Act), and the Foster Care Program (Title IV-E, of the SSA). According to HHS, the two largest federal funding sources for second chance homes within the department are TANF and the Social Services Block Grant. These two programs, HHS states, "provide funds to states that may be important sources of support for young parents and can be used to fund second chance homes." Each program is discussed below. Runaway and Homeless Youth Program—Transitional Living Program The Runaway and Homeless Youth Program (RHYP) is authorized under Title III of the Juvenile Justice and Delinquency Prevention Act of 1974. Amended by the Runaway, Homeless, and Missing Children Protection Act ( P.L. 108-96 ) in the 108 th Congress, the program authorizes the HHS Secretary to make grants to states that would assist public and private entities in creating and operating a community-based care system for runaway and homeless youth and their families. As previously stated, the Runaway and Homeless Youth Act is up for reauthorization in the 110 th Congress. For FY2002, the Administration proposed a new Maternity Group Homes (or SCH) initiative as a program component of TLP to allow young single mothers to participate in transitional living opportunities. Concern that such mothers are vulnerable to abuse and neglect, often end up on welfare, in foster care, in homeless shelters or on the streets, and that their children are at risk of becoming teen parents themselves, prompted this proposal. Competitive grants would have been offered to faith-based and community-based groups to provide a safe and nurturing adult-supervised living environment for unwed teen mothers (aged 16 to 21) and their children who cannot live safely with their own families. For FY2002, the Administration requested $33 million specifically for maternity group homes as a component of TLP. Congress appropriated, however, a total of $39.7 million for TLP, without specifying funds for maternity group homes but including an additional $19 million over the FY2001 TLP appropriation to ensure that pregnant and parenting homeless teens would be able to access transitional living opportunities and support through their communities. Since FY2002, funding for the needs of pregnant and parenting teens has been given to various organizations that already were receiving TLP funds and were directly serving that teen population. When the 108 th Congress reauthorized the Runaway and Homeless Youth Act, maternity group homes were explicitly added as an allowable use of funds under TLP. For FY2003 through FY2006, the President requested annual funding of $10 million for maternity group homes, separate from TLP funding. Congress, however, never appropriated specific funding for such homes. Both pregnant and parenting teens would have been assisted through community- or faith-based maternity group homes. Congress was aware of the need for funding residential services for young mothers and their children, and that pregnant and parenting teens were eligible for and served by TLP. Congress expected that the Family and Youth Services Bureau would continue providing technical assistance to enable TLP grantees and their community partners to address the unique needs of young mothers and their children, as well as to assist interested entities in identifying funding sources currently available to provide residential services to this population. For FY2007, the President did not request separate funding for Maternity Group Homes. Temporary Assistance for Needy Families Block Grant As mentioned above, there are certain restrictions on the use of federal TANF funds for unwed teen parents. TANF funds cannot assist unwed teen mothers under 18 unless they live with their own parents, adult relatives, or live under adult supervision. Also, teen parents who have not completed high school must go to school, or enter a GED program, or participate in a state-approved alternative education or training program. Furthermore, states may use TANF funds for operating a SCH and maternity group home (TANF makes a distinction between the two homes), but not for constructing the living quarters. Other restrictions on the use of TANF funds include prohibiting their use for remodeling such buildings, or paying for medical services. Teen mothers living in such homes may be given cash assistance or vouchers through TANF funds. Also, funds may be used for financing any service that states want to provide in second chance homes. Such services might include pre-pregnancy family planning services, including abstinence education and birth control. There is no limit on the amount of TANF funding a state may use for a SCH. There is a federal five-year time limit for receiving TANF assistance for teen parents who are heads of households or who are married to a head of household. Some states as well have their own shorter time limits on recipients receiving TANF funds; however, states also have discretion in implementing time limit policies. According to Kathy Reich who worked for SPAN, States could exempt teens from time limits while they are living in Second Chance Homes by declaring that the home provider acts as head of household. Even if states decide against this, they will have discretion under TANF to exempt up to 20 percent of their welfare caseloads from the lifetime limit for reasons related to family hardship or domestic violence. The definition of "hardship" is left to the states to determine and could encompass teens living in Second Chance Homes. Social Services Block Grant The Social Service Block Grant (SSBG), Title XX of SSA, is "designed to reduce or eliminate dependency; achieve or maintain self-sufficiency for families; help prevent neglect, abuse or exploitation of children and adults; prevent or reduce inappropriate institutional care; and secure admission or referral for institutional care when other forms of care are not appropriate." States are free to designate eligible populations, which typically include low-income children and families, the disabled, and the elderly. SSBG funds can be used for any services related to second chance homes at the discretion of the state. Funds are provided to states by formula based on total population. There are no limitations on how much states can earmark for SCH or any other use, and no time limit on assistance. States must report to HHS, however, about how SSBG funds are spent and who is served. There are several federal restraints on how SSBG funds can be used. Similar to TANF restrictions, these include no use for construction, purchasing facilities, or major capital improvements. Neither can SSBG funds be used for medical care, other than for family planning; cash assistance; unlicenced child care; education services that are generally available in the public schools; or social services provided by hospitals, nursing homes, or prisons, except services to help drug or alcohol dependent persons and individuals in rehabilitation for those problems. In addition, funds cannot be used to purchase food or pay for housing, except in short-term emergencies. Child Welfare Services Program (Title IV-B, Subpart 1 of SSA) The goal of the Child Welfare Services program is to assist state public welfare agencies in protecting children from abuse or neglect. These state services include—interventions that will allow children to remain in their homes, if possible; services that provide alternative placements, such as foster care or adoption, if children cannot remain at home; and services to reunite children with their families, if appropriate. All such services are available to children and their families regardless of income. States have wide discretion over Title IV-B funds and can use them to provide services for teen mothers in a SCH, if the state considers it appropriate (that is, in the best interest of the teen mother). Foster Care Program (Title IV-E of SSA) The purpose of the Foster Care Program is to assist states to provide proper care for children who are removed from their families because of abuse, neglect, or abandonment. Through the Title IV-E program, funds are provided to states for foster care maintenance payments; administrative costs to manage the program, including costs for statewide automated information systems; and training of staff and foster and adopting parents. If a teen mother meets federal eligibility criteria (that is, she has been removed from a welfare eligible family) and the state and the court decide that a licensed second chance home is the appropriate placement, the state may be reimbursed for part of the costs for maintaining a teen mother and her child in a SCH. This program operates as an open-ended entitlement to states. John H. Chafee Foster Care Independence Program In 1999, the Independent Living program, which was originally authorized in 1986 under Section 477 of Title IV-E of SSA, was replaced with the John H. Chafee Foster Care Independence Program (CFCIP, P.L. 106-169 ). Under CFCIP, states have more flexibility and extra resources for child welfare services that are designed to assist teens in foster care with making a transition to an independent productive adulthood. Services are provided to foster children under 18 and to former foster care youth who are 18 to 21. Various services are provided such individuals to assist them in making the transition to independent living, including, but not limited to, "educational assistance, career exploration, vocational training, job placement, life skills training, home management, health services, substance abuse prevention, preventive health activities, and room and board." Mandatory funding for CFCIP is $140 million. States can use CFCIP funds, which are disbursed through formula grants, to provide second chance homes for 18- to 21-year-old unwed mothers who have been in foster care. Also, funds can be used to support foster care teens who live in a SCH. States are restricted from using more than 30% of the program's funds for room and board. U.S. Department of Housing and Urban Development Second chance homes provide housing as well as programs and services. There are several funding sources through HUD programs that can be used for second chance homes—the Community Development Block Grants (CDBG) program, the Supportive Housing Program, and the Emergency Shelter Grants (ESG) program. They are discussed below. Community Development Block Grants The CDBG program, authorized as Title I of the Housing and Community Development Act of 1974, as amended ( P.L. 93-383 ), provides assistance to state and local governments by awarding formula grants to cities, urban counties, and states for community and economic development that will assist low- and moderate-income individuals. Such development might be broadly used by states and communities for acquiring, constructing, or revitalizing permanent housing for low-income families, temporary and transitional housing, developing community and economic activities, creating and retaining jobs, reviving neighborhoods, and public services, among other activities. CDBG funds may be used for second chance homes. SPAN reported that many such homes nationwide received CDBG funds. Furthermore, it stated that there were no limits on how much funding states and eligible communities could allocate for a SCH, but there were some federal restrictions related to the program. States and grantees were required to prepare an action plan that determined how funds are to be spent and that allowed communities to participate in the program. The annual action plan had to include the local community's objectives and indicate how the funds would be used. Also, grantees were required to certify that at least 70% of the funds received during either a one, two, or three-year period that it indicated, would primarily benefit low- and moderate-income families. Supportive Housing Program The Supportive Housing Program (SHP), authorized as Title IV, Subtitle C of the McKinney-Vento Homeless Assistance Act of 1987, as amended ( P.L. 100-628 ), is administered by HUD's Community Planning and Development office, which generates supportive housing and services for the homeless, through the Homeless Assistance Grant. Stable housing is provided for the homeless while they increase their job skills and income to enable them to live as independently as possible. SHP funds may be used for (1) transitional housing within a 24-month period, and up to six months of follow-up assistance for former residents to help them adjust to living independently; (2) permanent housing for homeless persons with disabilities to maximize their ability to live independently; (3) supportive services to help meet the immediate or long-term needs of homeless persons and families; (4) supportive services that are not provided in conjunction with supportive housing for homeless persons; and (5) "safe havens" for homeless mentally ill persons who live on the streets and are not yet ready for supportive services. Funding for SHP, which is awarded as competitive grants, is provided through the Homeless Assistance Grants account. Consequently, SHP funding assistance is restricted only to homeless persons and to homeless families with children. SPAN indicated that SHP funding could be used to acquire, rehabilitate, or lease housing (that is, second chance homes), for homeless unmarried teenage mothers. Also, SHP funding could be used to provide supportive services for such mothers including "child care, employment assistance, outpatient health services, food, and case management." Furthermore, agencies could use the funds to assist these homeless teen mothers with permanent housing, counseling concerning employment and nutrition, security services, and ways to find additional help at the federal, state, and local levels. Grants can be awarded to state and local governmental organizations and other governmental entities, to private nonprofit groups, and to community mental health organizations that are public nonprofit groups. The following limitations are placed on financial assistance received through SHP grants: (1) SHP grant awards for acquiring or rehabilitating buildings cannot exceed $200,000 (but can be increased up to $400,000 for high-cost areas and for new construction); (2) SHP grant awards for operating costs cannot exceed 75% of the funds awarded; (3) SHP grant awards for supportive services costs cannot exceed 80% of the funds awarded; (4) SHP grant awards for administrative costs cannot exceed 5% of the funds awarded; and (5) SHP grant awards for leasing costs cannot exceed three years. Grants may be made available for operating and supportive services costs for up to three years. Grant recipients must match an equal amount of funds from other sources for acquiring, rehabilitating, and building new structures. If persons live in substandard housing, live with friends or relatives, or are wards of the state, HUD does not consider them to be homeless. In order to continue to receive SHP assistance, individuals must remain homeless. Emergency Shelter Grants Program The purpose of the Emergency Shelter Grants Program (ESG), authorized as Title IV, Subtitle B of the McKinney-Vento Homeless Assistance Act of 1987, as amended ( P.L. 100-628 ), is fivefold—(1) to assist in improving the quality of emergency shelters and transitional housing for the homeless; (2) to make more shelters available to such persons; (3) to cover the costs of operating shelters; (4) to provide fundamental social services to homeless persons; and (5) to help prevent homelessness. Funding for ESG is provided through the Homeless Assistance Grant (see the " Supportive Housing Program " above). Formula grant allocations are distributed to states, cities, urban counties, and territories, which receive funds based upon population. States must distribute ESG funds to local governments, or to nonprofit groups with local government approval, including second chance home providers. ESG funds for second chance homes can be used to convert and rehabilitate structures, cover operating expenses for the homes, encourage homelessness prevention, and provide necessary services, such as employment, health care, drug abuse, and education to homeless unwed teen mothers. No more than 30% of such funds can be used by state and community grantees for prevention and essential services, unless waived by HUD, and no more than 5% of funds can be used for administering the grant. Evaluations of Second Chance Homes To date there have been very few rigorous evaluations on the effectiveness of second chance homes. HHS reports, however, that there have been several analyses regarding service delivery approaches of different programs that documented how the programs worked and provided descriptions of the teen mothers and their children. As a result, insights have been gained regarding the needs of the mothers and their children, as well as in some cases, program outcomes, such as subsequent employment, education or subsequent pregnancies. Successful outcomes have been reported, according to HHS, by several states or programs related to reductions in repeat pregnancies, compared with the state average, higher rates of mothers completing school, lower rates of child abuse and neglect, improvements in the health of mothers and children, higher rates of mothers becoming employed, and a reduction in their dependency upon welfare. New Mexico, which began its state-sponsored second chance homes project in 1990 and has the oldest operation of such homes in the nation, operates 10 second chance homes with the capacity to serve 80 teen families. All needy teen mothers and their children are served (as long as the mothers stay in school). New Mexico has had less than 1% of its residents experience repeat pregnancies while living in the homes. The mothers are allowed to stay until they are 22 years of age. Services provided include supervision, case management, family planning, educational assistance, job training, health care, counseling, life skills training, and child care. Massachusetts, which was one of the first states to create a network of second chance homes (beginning in December 1995), operates 15 such homes statewide through state centralized services and assists pregnant and parenting teens ages 13 to 19. Data collected through its Department of Transitional Living Programs indicate that there were fewer repeat pregnancies (about 2% ) among teen mothers living in second chance homes than the statewide average. Furthermore, SPAN reported that over half of the teen mothers in Massachusetts who left second chance homes in 1998 made notable progress in school, in learning to manage their personal budgets, maintaining the health requirements of their children, such as immunizations, and in mastering good parenting methods. The homes provide services such as counseling, case management, and some on-site GED training, and child care. Massachusetts once had 21 second chance homes across the state and had the capacity to help 120 teen families on TANF and 16 teen families in the child welfare system. SPAN reported, however, that because of a lack of funding, Massachusetts closed some of its second chance homes. Consequently, the housing capacity to assist such teens might have diminished. It remained, however, the state with the largest network of such homes and, according to SPAN, was a good model of how state-run homes should work. Texas, which began operating second chance homes in 1999 and has four sites, serves teen mothers on TANF under age 18 and their children as well as pregnant teens eligible for Medicaid. Services provided include case management, counseling, mentoring, parenting classes, child care, school-to-work services, and transportation. Its home located in San Antonio reports that 90% of babies born to residents weigh more than the average birth weight for teen births, which are expected to be high risk for low birth-weight. HHS cautions that there are limitations in using these results to make informed policy decisions about designing programs to assist such mothers because: (1) results were based upon the participants' self-reports that were not independently validated for accuracy, (2) information was based on the reports of a very small number of mothers; and (3) results reflected the outcomes of mothers who remained with the programs or were tracked after leaving the programs. HHS found that in nearly all cases, there was no other group used to compare outcomes in order to determine whether participating in second chance homes specifically made a difference compared with what could have otherwise occurred. The need for evaluation, HHS concluded, is being recognized as a fundamental part of a new program's design. Such information, HHS believed, not only could inform program operators and sponsors about the general success of a second chance home in accomplishing intended outcomes, but could be useful in informing others interested in starting or redesigning a second chance home. HHS suggests four key issues and challenges that might be considered as more program administrators try to conduct accurate program evaluations. They are: "Program size and capacity"—Most second chance homes accommodate a very small number of teen mothers and their children at one time, usually six or eight. Because of the small numbers, rigorous impact evaluations are more difficult. "Measurements"—Determining certain outcomes for mother and child, such as acquiring a high school diploma or GED, might be easily quantified. Other outcomes, such as good parenting skills or increased self-esteem, might not be easily or quickly determined and might not surface for extended periods of time. "Comparison"—For rigorous impact evaluation, there is a need to use two comparable groups. Second chance homes participants, however, would be difficult to separate into two distinct groups. "Neither program operators nor researchers," HHS states, "would support the denial of services to teens and their children for purely research purposes." Often, however, there are places where there is more demand for service than the ability to serve. In such instances, applicants who are not selected, HHS suggests, could be included in a study to compare outcomes. "Follow-up and tracking"—Certain key outcomes needed to determine the effectiveness of second chance homes can be measured only after an extended period of time. These outcomes include long-term employment, subsequent higher earning and self-sufficiency, and child development outcomes. Many of the evaluations of second chance homes have data collected about participants while in the program. Tracking such teens after they have left a program, however, has proven to be very difficult.
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Second chance homes for unwed teenage mothers are not a new concept in the nation. Before the mid-1880s, support for unwed teen mothers was primarily provided by family, friends, and churches. In 1883, Charles Crittenton founded the first "rescue home" (named for his daughter Florence) that eventually became a chain of what later were called private maternity homes, to better support such mothers and ensure that no repeat out-of-wedlock pregnancies occurred. Subsequently, an extensive network of private maternity homes was established across the nation. In 1935, with the passage of the Aid to Families with Dependent Children (AFDC) program, financial support and other services through federal funding were established primarily to help widows care for their children, and for the first time to assist unwed mothers. After the framework of the private maternity home began to disintegrate, a renewed interest in such homes occurred during the 1995 Senate welfare reform debate when agreement was made to support the "second chance home" concept. With the passage of the welfare reform bill in August 1996, a block grant program to states for Temporary Assistance for Needy Families (TANF) was created to replace AFDC. States were given the flexibility to use their TANF funds to assist unwed teen mothers under 18 and their children who lived in a second chance home. Although TANF is a significant source of funds for second chance homes, there is no single primary federal funding source for such homes. On October 10, 2003, the Runaway, Homeless, and Missing Children Protection Act, in which maternity group homes (that is, second chance homes) were added as an allowable activity under the act's Transitional Living Program projects, was signed into law (P.L. 108-96). This act reauthorized programs under the Runaway and Homeless Youth Act (RHYA) and Missing Children's Assistance Act. RHYA is up for reauthorization in the 110th Congress. In the 109th Congress, three bills were introduced that would have amended RHYA to include provisions related to maternity group homes—S. 6 (the Marriage, Opportunity, Relief, and Empowerment Act of 2005), H.R. 3908 (the Charitable Giving Act), and S. 1780 (the CARE Act of 2005). Each was referred to the appropriate committee. No further action occurred. To date there have been very few rigorous evaluations of the effectiveness of second chance homes. HHS reports, however, that there have been several analyses regarding service delivery approaches of different programs that documented how the programs worked and provided descriptions of the teen mothers and their children. As a result, insights have been gained regarding the needs of the mothers and their children, as well as in some cases, program outcomes, such as subsequent employment, education, or subsequent pregnancies.
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Background Kyrgyzstan is a small and poor country that gained independence in 1991 with the breakupof the Soviet Union. (1) Itwas long led by Askar Akayev, who initially was widely regarded as a reformer but in recent yearsappeared increasingly autocratic. Despite this, the country was still considered "the most open,progressive and cooperative in Central Asia," according to the U.S. Agency for InternationalDevelopment. (2) TheUnited States has been interested in helping Kyrgyzstan to enhance its sovereignty and territorialintegrity, increase democratic participation and civil society, bolster economic reform anddevelopment, strengthen human rights, prevent weapons proliferation, and more effectively combattransnational terrorism and trafficking in persons and narcotics. The United States has pursued theseinterests throughout Central Asia, with special strategic attention to oil-rich Kazakhstan andregional-power Uzbekistan, and somewhat less to Kyrgyzstan. The significance of Kyrgyzstan tothe United States increased after the September 11, 2001, terrorist attacks on the United States. TheU.S. military repaired and upgraded the air field at the Manas international airport for trans-shippingpersonnel, equipment, and supplies to support coalition operations in Afghanistan and the region. In early 2005, the base hosted about 800 U.S. and 100 Spanish troops. (3) The Coup and Its Aftermath Many people both inside and outside Kyrgyzstan were hopeful that the national legislativeelection on February 27, 2005 would strengthen political pluralism, easing the way for a peacefulhandover of executive power in late 2005 when President Akayev was expected to step down. Nearly 400 prominent politicians and businessmen and 40 parties (many united in blocs) ran for 75seats in the highly contentious race. Many in Kyrgyzstan thought it unseemly that the president'sand prime minister's children were running for seats, along with many other family members andfriends of high officials. Balloting resulted in the filling of less than half the seats, with run-offs heldon March 13 in districts where no one candidate received over 50% of the votes cast. On March 22,the Central Electoral Commission (CEC) announced that results for 71 districts were valid. Lessthan 10% of seats were won by opposition candidates, although there reportedly were many closeraces where they "lost" only by a few votes. These results incensed many in the opposition camp,who alleged massive vote fraud. An initial report by election observers from the Organization forSecurity and Cooperation in Europe (OSCE) and the European Parliament fueled this discontent bystating that serious irregularities had taken place, including the questionable exclusion of severalopposition candidates from running, biased state-controlled media and other heavy government useof administrative resources, and problematic voter lists. (4) After opposition candidates won only two seats in the first round, opposition party-leddemonstrators called for a new election and for Akayev to resign. In southern Kyrgyzstan, protestorsstormed and occupied government facilities, including in the regional centers of Osh and Jalalabad. Many of these southerners (including a majority ethnic Uzbek community) viewed themselves asdiscriminated against both economically and politically by a central government dominated bynortherners. (5) Somecounter-demonstrations in support of the government also were reported. Protests widenedthroughout both the north and south in the wake of the March 13 run-off. Akayev hastily convenedthe new legislature immediately after the CEC announced voting results on March 22, and urged thepublic to focus on the upcoming planting season rather than a past election. He blamed foreignNGOs and religious extremists for the protests, and his spokesman warned that the unrest markedefforts by drug lords and terrorists to take power. Akayev's Ouster Kyrgyzstan's capital Bishkek remained relatively calm until an opposition rally on March 23was successfully dispersed by police and armed Akayev supporters. The next day, thousands ofangry demonstrators converged on government offices. According to one account, a violent attackon the protesters by some of Akayev's supporters enraged the demonstrators and they stormed andoccupied the presidential and other offices. Akayev fled the melee and he and his family soon flewto Moscow. Akayev's prime minister resigned. The protesters released opposition party leaderFeliks Kulov from prison, where he had been held on embezzlement charges that many observershad deemed politically motivated. Going to the occupied compound, he hailed the "revolution madeby the people." (6) Indicative of the chaotic legal situation, the Kyrgyz Supreme Court on March 24 recognizedthe former legislature as still duly empowered. Deputies from the former legislature met that night. They were shocked by rampant looting in Bishkek, and appointed Kulov to oversee the Security,Interior (police), and Defense ministries. They also appointed opposition figure Kurmanbek Bakiyevacting prime minister, and the next morning named him acting president as well. Bakiyev quicklyproposed a provisional government composed of opposition politicians, most prominently RozaOtunbaeva as acting minister of foreign affairs; Adakhan Madumarov, acting deputy prime minister;and Azimbek Beknazarov, acting prosecutor-general (for further information on selected politicians,see the Appendix ). The old legislature wrangled with Bakiyev over the appointments, perhapsspurring him to decide to dispense with it and endorse the powers of the new legislature. Over the weekend, the Constitutional Court, Bakiyev, Kulov, and a newly appointed headof the CEC proclaimed that the new legislature was constitutionally legitimate and should beempowered, although granting that twenty or more district races might need to be held again. Thenew legislature met on March 28 and elected Omurbek Tekebayev as speaker and reaffirmedBakiyev as prime minister and acting president. The interim government has announced that apresidential election will take place on July 10, 2005. Akayev's formal resignation as president on April 4, 2005, was a major boost to thelegitimacy of the interim government. The resignation agreement called for Akayev to foreswearrunning for president again and for the new Kyrgyz authorities to respect existing law that grantsretired presidents immunity from prosecution. Russia pledged to assist the parties in honoring theircommitments. The Kyrgyz legislature accepted Akayev's resignation on April 11. Among early policy decisions, Bakiyev on March 29 stated that he would combat corruptionthat siphons away investment capital and compromises the educational and legal systems. He alsoannounced that personnel in the former government responsible for electoral fraud and attacks ondemonstrators would be prosecuted, and that some property belonging to the Akayev family mightbe confiscated. Both Bakiyev and Otunbayeva stressed that Kyrgyzstan's foreign policy would notchange, including its close relations with Russia and the United States and the presence of theirmilitary bases in the country. Implications for Kyrgyzstan and the Region Observers remain divided on prospects for Kyrgyzstan, with some suggesting that it willcontinue to democratize because it has a relatively vibrant civil society, compared to the rest ofCentral Asia. Others are less optimistic, pointing to the economic development challenges facingKyrgyzstan and the high level of disaffection among its population. They also point to the socialfragility of a country where the north and south have differing interests and where even groundtransport back and forth is difficult during the winter because of mountainous terrain. The main division among the groups vying for power and influence during the late Marchevents appeared to be between pro-Akayev regional, clan, and family groups -- which togetherconstituted the political and economic elite -- and other regional, clan, and family groups that feltdeprived of their share of political and economic power. Ethnic issues appeared at least initially lesssignificant, since many ethnic Uzbeks in southern Kyrgyzstan joined other southerners in topplingthe regime. However, ethnic tensions remain of concern. Beyond their anti-Akayev stance anddemands for redistributing political and economic power, the opposition parties mostly lackwell-developed policies and strategic plans for the future of Kyrgyzstan. Some observers have raisedconcerns that interim government leaders are engaging in nepotism and other corrupt practicesrather than combating them. Several commentators view the coup as involving two anti-regime groups, the dispossessedand the political opposition. To some degree, the former are younger and the latter are older. Theformer were the active agents in taking over government offices, and reportedly were motivatedmore by poverty and unemployment than by opposition politics. Otunbayeva stressed that "mainlypoor people" rather than party stalwarts stormed the government complex on March 24. Thesecommentators warn that if a new government fails to remedy economic distress, more violence couldoccur. (7) Other analystshave placed less credence on the "poor people" theory, suggesting that at least some of the politicalopposition may have planned to forcibly oust Akayev on March 24. (8) No one opposition leader appears to enjoy overwhelming public and elite support, althoughBakiyev's influence appears to have grown in recent months. (9) As was the case in Georgia,some of the most influential opposition leaders appear at least initially to be cooperating in runningthe government. However, the planned July presidential election appears to be accentuating tensionswithin the opposition camp, in particular between Bakiyev and Kulov. (10) Bakiyev, representingsouthern interests, seeks to enlarge his power base by wooing northern politicians (such asOtunbayeva and many of those elected to the new legislature). Such actions could reduce Kulov'sstrong appeal in the north. On the other hand, many of the oppositionists remain outside the Bakiyevgovernment, and at least some may unify to support Kulov in a prospective presidential race. Kulovalso is trying to woo former Akayev supporters by endorsing Akayev's immunity from prosecution. However, some pro-Akayev and northern interests have created the Akyykat (Justice) politicalmovement to challenge opposition candidates in the election. Some observers raise the specter of a highly contentious and problematic presidential electionthat may deepen civil disorder. Another source of likely disorder may then come to the fore later inthe year if the 15-20 or more disputed legislative seats are re-contested, or if a new election of thewhole legislature is carried out. Unless these elections take place, however, the legislature willremain illegitimate in the eyes of many Kyrgyzstanis. Calls by some in Kyrgyzstan for rewriting theconstitution to remove what are viewed as illegitimate changes made during Akayev-orchestratedreferenda create still more uncertainties about Kyrgyzstan's stability during the next few months. Some optimistic observers suggest that the relatively bloodless March coup (3 deaths were reported)and reduced public passions after Akayev's ouster may bode well for the avoidance of violence orpolitical instability in the near term. (11) Other observers who caution that political disorder may deepen suggest that Islamicextremists could bid to take power. They maintain that Hizb ut-Tahrir and other Islamic extremistgroups have gained members in Kyrgyzstan in recent years, and warn that such groups areanti-American and anti-Russian. (12) Before the coup, there appeared to be some cooperation among ethnic Kyrgyz and Uzbeksin protests in Kyrgyzstan's south, in contrast to inter-communal violence there in the early 1990s. Many ethnic Uzbeks and Kyrgyz joined in supporting ethnic Uzbek opposition leader Anvar Artykovin Osh. The emergence of such cooperation appeared buttressed by region-wide parades and othercelebrations to mark Akayev's overthrow. However, while some ethnic Uzbeks have supportedBakiyev, others have criticized him for appointing people to leading government posts whom theyregard as Kyrgyz nationalists and for not appointing enough ethnic Uzbeks. (13) Regional Implications The coup in Kyrgyzstan appears to have belied the views of some who asserted that therelatively authoritarian regimes in Central Asia would endure for the foreseeable future. The couphas galvanized opposition throughout the region and caused palpable unease among regional elites,who unanimously condemned it as a bloody putsch. Kazakh President Nursultan Nazarbayev, forexample, told his citizenry that the coup was the work of 5,000 convicts who had escaped from jailand were looting Kyrgyzstan. Some observers suggest that Kazakhstan might be the most likely candidate among theremaining Central Asian states where the opposition could influence political change, becauseNazarbayev has not completely crushed civil society. However, he appears to be taking measuresto head off a Kyrgyz-type coup. He has, for example, raised salaries and pensions. Among securitymeasures perhaps inspired by the Kyrgyz coup, the legislature quickly approved electoral lawchanges banning political rallies immediately after an election. Zamanbek Nurkadilov, a leader ofa newly formed opposition bloc, called in late March for Nazarbayev to step down when his termexpires in 2006, so that a democratic and non-violent leadership transition may occur. (14) In late 2005, Tajikistan faces a planned presidential election which the incumbentauthoritarian leader Emomali Rakhmanov is expected to win. Although some political oppositionparties were legalized as part of the 1997 settlement of Tajikistan's civil war, they have facedincreasing harassment. The OSCE and the Tajik opposition have criticized the Rakhmanovgovernment for gross interference in past elections, including the February 2005 legislative race, butthe opposition has not reopened the civil war. Following the events in Kyrgyzstan, however, theTajik opposition may consider the conduct of the 2005 presidential race as a decision point for itsfuture cooperation with the government. (15) In Uzbekistan, the government strictly censored news about the Kyrgyz coup, restrictedpublic gatherings in regions near Kyrgyzstan, and closed the border. President Islam Karimovharshly condemned the coup as an illegal act. Some Uzbek opposition leaders hailed events inKyrgyzstan as a call to arms in Uzbekistan, but most of the major opposition leaders are in exile andlittle political expression is allowed within the country. The coup in Kyrgyzstan at least temporarily set back the already limited cooperation amongthe Central Asian states, with Kazakhstan and Uzbekistan putting restrictions on cross-border tradeand travel, some of which remain in place. The regional presidents have contacted the interimleaders of Kyrgyzstan to establish working relations to replace initial strains. These strains at timesappeared to be exacerbated by statements made by the interim Kyrgyz leadership. While Otunbayevaat the end of March assured the regional leaders that "the guidelines of our diplomacy will notchange," it appeared that she may have been advocating the export of revolution when she added that"I hope that our neighbors will experience the same thing ... that the other countries in central Asiawill follow our path." (16) While opposition forces in the region include those espousing democratic principles, theyalso include Islamic extremists and ultra-nationalists. It appears unlikely that Islamic extremistssoon could come to power, many observers argue. More likely, Islamic extremists could use aweakened Kyrgyzstan as a base to support affiliated groups throughout the Fergana Valley (whichis shared by Kyrgyzstan, Uzbekistan, and Tajikistan), thereby enhancing threats to the regimes ofthese countries. (17) Another possibility could be the rise to power of an ultra-nationalist regime. It such a regime cameto power, many observers suggest, there might well be increased discrimination against ethnicUzbeks, Russians, and other minorities that could lead to violence. Kyrgyzstan's foreign relationswith neighboring countries could also suffer if it pressed sensitive border claims or stoppedcooperating as a critical source of water supply for the downstream countries of Kazakhstan,Uzbekistan, and Turkmenistan. Implications for Afghanistan The coup does not appear to have affected the operations of the U.S. base in Kyrgyzstan insupport of coalition actions in Afghanistan. A more democratic and stable Kyrgyzstan might beconsidered for longer term pre-positioning of military supplies or other enhanced use. The changeof government in Kyrgyzstan could result in greater efforts to combat cross-border criminal, terrorist,and drug smuggling activities that conceivably could have a positive effect on Afghanistan. Drugtraffickers, however, could switch to other routes out of Afghanistan. Kyrgyzstan and Afghanistanmight also cooperate in bolstering democracy in each other's countries and throughout the region. Implications for Russia and Other Eurasian States Some analysts view the coup in Kyrgyzstan as a harbinger of political transformations inother Soviet successor (Eurasian) states. Others view it as prompting tougher repression byauthoritarian leaders intent on retaining power. Russia quickly shifted in late March from harshcriticism of the Kyrgyz opposition to offers of aid to the interim government. This volte face wasmade easier after Bakiyev and others pledged that Kyrgyzstan would remain Russia's "strategicpartner." Some observers suggested that Russia had realized that its heavy-handed approach topolitical liberalization in Ukraine and Georgia was only making these countries more determined togravitate toward the West. Putin reflected this stance when he allowed that while "it is regretful thatonce more in a country in the post-Soviet area, political issues are decided by unlawful means," hehoped that he could work with the new leaders, many of whom he had amicably worked with in thepast. (18) Although Putin appeared to be putting the best face on the impact of the coup on Russia'sregional influence, others in Russia raised concerns that the coup marked a further decline in Russianinfluence in other former Soviet successor states. Nikolai Bordyuzha, General Secretary of theCollective Security Treaty Organization of the Commonwealth of Independent States, (19) raised concerns that theCSTO had proved impotent, since Akayev had refused an offer of help from the CSTO in the daysbefore the coup, and the interim leaders of Kyrgyzstan also were ignoring it. Perhaps portendinggreater tension in U.S.-Russia relations, some state-owned television commentators in Russia allegedthat the coup was simply another example, after similar coups in Georgia and Ukraine, of U.S.meddling in Eurasia. Reflecting an ultranationalist perspective, one private Russian newspaper evendarkly warned that the U.S. goal was "direct control over Eurasia," including Russia, and that Russiaappeared to lack the political will to resist. (20) Other authoritarian states in Eurasia have followed Uzbekistan's example and cracked downon civil society rather than liberalizing. In Belarus, President Aleksandr Lukashenka orderedmilitary exercises on March 28 that he stated would "make sure [that people] are afraid of replacingthe authorities" by attempted force. (21) In Azerbaijan, the government moved even before the Kyrgyzcoup (perhaps in response to democratization events in Ukraine) to restrict youth participation infuture electoral campaigns. Azerbaijan's opposition Musavat Party head Isa Gambar hailed theKyrgyz coup as proving that Muslim countries could roll back dictatorship, and called on oppositionparties to unite in bringing a "democratic revolution" to Azerbaijan by winning legislative electionsscheduled for November 2005. (22) Leaders of Moldova's Transnistria and Georgia's Abkhazia andSouth Ossetia regions in April appeared concerned about Russia's seeming impotence in influencingevents in Kyrgyzstan. Perhaps uncertain about Russia's continued de facto support for theirseparatism, they pledged to help one another militarily if they were attacked. (23) In contrast to these leaders, Ukrainian President Viktor Yushchenko and Georgian PresidentMikheil Saakashvili hailed the Kyrgyz coup and dispatched their foreign ministers to Bishkek at theend of March to offer advice and support to the interim leadership. The ministers proposed thatKyrgyzstan join a "Democratic Choice Coalition" just formed by the two presidents to cooperate ondemocratic reforms. Reportedly, democratic activists from both countries had traveled to Kyrgyzstanbefore the coup to give advice to activists there. (24) Implications for China China is concerned that the coup could lead to a more democratic Kyrgyzstan that wouldinspire Chinese democrats and embolden some ethnic Uighurs (a Turkic people) who advocateseparatism in China's Xinjiang region bordering Kyrgyzstan. Groups such as the East TurkestanIndependence Movement (ETIM; designated by the United States as a terrorist group) have basesin Central Asia. Akayev had reached agreement with China in 2003 to step up cooperation incombating these groups, and China is anxious that such cooperation continue. China may also beconcerned that peaceful Uighurs within a democratic Kyrgyzstan might become more politicallyactive in advocating for their kin in Xinjiang. (25) Apparently, there were some attacks on Chinese businessmenin Kyrgyzstan during the coup that might be classified as hate crimes. China is also concerned thatinstability in Kyrgyzstan could result in increased cross-border smuggling and other crime. China's Foreign Ministry spokeman on March 29 stressed China's paramount concern thatlaw and order be re-established with Kyrgyzstan and that "good neighborly relations" continue,including cooperation in combating terrorists. (26) The latter includes work within the Shanghai CooperationOrganization (SCO; formed in by China, Russia, and most of the Central Asian states),headquartered in Bishkek. Matching in some respects Russian concerns about the CSTO, the coupreportedly raised questions in China about the effectiveness of the SCO's emergency consultationprovisions. Implications for U.S. Interests The U.S. Administration has considered Akayev's government as less objectionable thanothers in Central Asian, and hoped that a planned late 2005 presidential race would become "a modelfor peaceful, democratic transfer of executive power in the region." (27) In line with these hopes,the Administration and others were focusing on civil society aid to facilitate a free and fairpresidential election late in the year, so Akayev's ouster caught the United States and virtually allobservers by surprise. Cumulative U.S. budgeted assistance to Kyrgyzstan for FY1992-FY2004 was $749.0 million(FREEDOM Support Act and other agency funds). Kyrgyzstan ranks third in such aid per capitaamong the Eurasian states, indicative of U.S. government and Congressional support in the early1990s for its apparent progress in making reforms and more recently for anti-terrorism and borderprotection. Of this cumulative aid, 14.6% supported democratization programs, including legal andjudicial training, legal support for NGOs, advice on party and electoral legislation, training forpolitical parties, support for independent media, and the dissemination of civics textbooks. (28) Estimated aid for FY2005(FREEDOM Support Act and other foreign aid, excluding Defense and Energy Department aid) was$36.4 million. The Administration requested $35.7 million for FY2006, and on March 24 stated thatit would "continue to support economic and democratic reform in Kyrgyzstan, including elections,humanitarian assistance, law enforcement, and security, and will carefully watch for emerging needs"as political developments there unfold. (29) Reportedly, opposition leaders Tekebayev and Otunbayeva have stated that U.S. democracyassistance was helpful to their endeavors. For example, both were participants in the InternationalVisitors Program to observe the 2004 U.S. presidential election. Other aid included a printing pressoperating since November 2003 that prints all opposition newspapers, which earlier had facedobstacles in obtaining services at state-controlled facilities. In the run-up to the legislative race, oneopposition newspaper did an expose on the alleged wealth of the Akayev family. Akayev denouncedthe article as libelous. A few days later, electricity mysteriously was shut off to the press. The U.S.Embassy strongly protested and lent generators to continue operations until power returned a weeklater. (30) Although accepting some credit for the role U.S. democratization aid has played infacilitating the development of civil society in Kyrgyzstan, the Administration has been careful tostress that it did not "mastermind" the coup. Secretary Rice also has tried to reassure Russia that theUnited States and the West are not attempting to "encircle" Russia by instigating democratic"revolutions" throughout Eurasia, but that these are indigenous developments that will benefit Russiaas these countries become more stable and prosperous. (31) The Administration at least initially appeared to follow the European Union and otherinternational institutions and governments in cautiously assessing developments in Kyrgyzstanduring the chaotic period leading up to the coup. Concerns that disorder and violence might increasewere foremost and the Administration urged peaceful negotiations between the Akayev governmentand opposition forces. Reportedly, U.S. Ambassador to Kyrgyzstan Stephen Young soon after thecoup told Bakiyev that the United States would provide added aid to bolster a democratic transition. Deputy Secretary of State Robert Zoellick on March 29 endorsed a significant role for the OSCE infacilitating talks among pro-Akayev and opposition leaders to ease the transition of power and infacilitating support for the transition among regional OSCE members, including Russia. (32) Some in the Administration have suggested that the Kyrgyz coup is part of a worldwide trendof democratization, following in the footsteps of those in Georgia, Ukraine, and elsewhere. Secretary of State Rice stated on March 24 that "the Kyrgyz people have a desire and an aspirationfor freedom and democracy, as do people around the world. The responsibility of the internationalsystem ⦠is to help people when they express this to channel this into a set of processes that thenlead to stable institutions." Deputy Secretary Zoellick similarly asserted that the Kyrgyz, like"people in very diverse parts of the world, whether it is Ukraine, Georgia, Iraq, Afghanistan or thePalestinian elections ... desire to be free...." (33) Indicating support for democratization and continued security ties, Defense Secretary DonaldRumsfeld briefly visited Kyrgyzstan on April 14. He thanked the interim leadership for Kyrgyzstan'ssupport for the Global War on Terror and stated that he told them that "the United States is wishingthem well in the important work that they're engaged in building a stable and modern and prosperousdemocracy." Bakiyev assured Rumsfeld that U.S. basing rights would be upheld. (34) While the Kyrgyz interim government has pledged to continue Akayev's foreign policy ofgood relations with both the United States and Russia, it is uncertain whether this might change inthe future. The interim leadership appears to support important U.S. interests in the region. Kulovseems to be strongly pro-U.S., but he also has argued that up to one million Kyrgyz (20% of thepopulation) may be working in Russia, that their repatriated earnings constitute a major portion ofthe Kyrgyz budget, and that Russia provides oil, so "we cannot quarrel with Moscow." (35) Some observers suggestthat even if Kyrgyzstan endeavors to maintain close relations with China, Russia, and the UnitedStates, a strong Kyrgyz state would serve U.S. interests in the region by more effectively combatingterrorism and drug and human trafficking emanating from Afghanistan. The United States has been building twenty troop barracks at the U.S. airbase at Manas toreplace tents, anticipating that the base will continue to be a major transhipment point for personneland equipment for operations in Afghanistan. According to a March 2005 report by Kyrgyzstan'sForeign Ministry (later denied by both U.S. and Kyrgyz authorities), the government had receivedrequests from the United States and NATO regarding the possibility of deploying airborne warningand control systems planes (AWACS) at Ganci. The government denied the requests, however,ostensibly because of its commitments to the CSTO and the SCO. Although the interim governmenthas stated that it will uphold the existing balance of security ties with Russia, China, and the UnitedStates, a more Western-oriented government might eventually reassess such ties. As Congress and the Administration consider how to assist democratic and economictransformation in Kyrgyzstan, several possible programs have been suggested by observers inKyrgyzstan, the United States, and elsewhere. At the same time, these observers have cautioned thatdevelopments in Kyrgyzstan remain fluid and that a democratic transformation is not assured. Theseobservers suggest that one sign that the new leaders are committed to democratization would be afree and fair presidential election. Among possible programs, former Kyrgyz foreign ministerMuratbek Imanaliyev has called for the creation of an advisory group of international experts toexamine how Kyrgyz politics might become more inclusive of both northern and southern interestsand how Kyrgyzstan might step up its pace of private sector economic transformation. In Congress,the newly established House Democracy Assistance Committee is examining possibleinter-parliamentary technical assistance to Kyrgyzstan. Other observers have called for Kyrgyzstanto soon be designated a country eligible for aid from the U.S. Millennium Challenge Corporation. The International Monetary Fund views Kyrgyzstan as making important recent progress in fiscalreforms, GDP growth, and poverty reduction, and calls for international financial institutions tocontinue to support the country in coming years. (36) Appendix Opposition Leaders in the New Government Kurmanbek Bakiyev , prime minister 2000-2002. Then-President Askar Akayev blamed him for agovernment crackdown on a protest in the south that led to several deaths, and he was forced toresign. He became head of the opposition People's Movement of Kyrgyzstan (PMK) bloc in late2004. He lost his bid for a legislative seat in the March 2005 run-off. Azimbek Beknazarov , head of the nationalist Asaba Party. In 2001 he harshly criticized PresidentAkayev for agreeing to border adjustments deemed favorable to China and Kazakhstan, allegedlycontributing to his arrest in 2002. In late 2004, he became deputy head of PMK. He won alegislative seat in the March 2005 run-off. Murtabek Imanaliyev , foreign minister 1997-2002. He heads the Jany Bagyt (New Direction) Socialand Political Movement. Feliks Kulov , head of the Ar-Namys (Dignity) Party. He was imprisoned in 2001 on corruptioncharges that some observers viewed as politically motivated. His party is prominent in the north buthas members all over the country. He was released from prison during the demonstrations on March24, 2005, and the Supreme Court threw out all charges against him on April 11. Adakhan Madumarov , co-head of the Ata Jurt party bloc and For Fair Elections Movement. Hecontested his "loss" in the March 2005 run-off and was declared the winner by the CEC. Roza Otunbayeva , former deputy prime minister, foreign minister, ambassador to the UnitedKingdom and the United States, and U.N. emissary. In late 2004, she became co-chair of theAta-Jurt party bloc. The CEC refused to register her as a candidate in the recent legislative election. Omurbek Tekebayev , heads the Ata Meken Party. He won a legislative seat in the March 2005run-off. Figure 1. Map of Kyrgyzstan
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Kyrgyzstan is a small and poor country that gained independence in 1991 with the breakupof the Soviet Union. It was long led by Askar Akayev -- who many observers warned was becomingincreasingly autocratic -- but the country was still considered "the most open, progressive andcooperative in Central Asia," according to the U.S. Agency for International Development. TheUnited States has been interested in helping Kyrgyzstan to enhance its sovereignty and territorialintegrity, increase democratic participation and civil society, bolster economic reform anddevelopment, strengthen human rights, prevent weapons proliferation, and more effectively combattransnational terrorism and trafficking in persons and narcotics. The significance of Kyrgyzstan tothe United States increased after the September 11, 2001, terrorist attacks on the United States. TheKyrgyz government permitted the United States to establish a military base that trans-shipspersonnel, equipment, and supplies to support coalition operations in Afghanistan. Many people both inside and outside Kyrgyzstan were hopeful that the national legislativeelection on February 27, 2005 would strengthen political pluralism, easing the way for a peacefulhandover of executive power in late 2005 when President Akayev was expected to step down. Thelegislative race proved highly contentious, however, and necessitated a second round of voting onMarch 13. The Organization for Security and Cooperation in Europe tentatively concluded thatserious irregularities took place in the first round. After the February 27 vote, protestors occupiedgovernment offices in the southern part of the country, and protests spread throughout the rest of thecountry after the second round of voting. On March 24, thousands of protesters stormed thepresidential and other offices in the capital of Bishkek and Akayev and his family fled. He resignedas president on April 4. Acting president Kurmanbek Bakiyev has pledged to focus on combatingcorruption that siphons away investment capital, and stressed that foreign policy would not change,including Kyrgyzstan's close relations with Russia and the United States. Looming challenges toKyrgyzstan's stability include a planned presidential election, possible legislative by-elections to fillseats under dispute, and a possible referendum to adopt democratic changes to the constitution. Indicating early support for democratization and continued security ties, Defense SecretaryDonald Rumsfeld briefly visited Kyrgyzstan on April 14. Cumulative U.S. budgeted assistance toKyrgyzstan for FY1992-FY2004 was $749.0 million (FREEDOM Support Act and agency funds). Kyrgyzstan ranks third in such aid per capita among the Soviet successor states, indicative of U.S.government and Congressional support in the early 1990s for its apparent progress in makingreforms and more recently for anti-terrorism and border protection. Of this aid, 14.6% supporteddemocratization programs. While this aid has bolstered the growth of civil society in Kyrgyzstan,the Administration also has stressed that the United States did not orchestrate the coup. As Congressand the Administration consider how to assist democratic and economic transformation inKyrgyzstan, several possible programs have been suggested, including those to buttress civil rights,construct a federal government, and bolster private sector economic growth. (See also CRS Issue Brief IB93108, Central Asia , updated regularly.)
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Background Current Law Prior to the enactment of the FY2008 defense authorization act ( H.R. 4986 / P.L. 110-181 of January 28, 2008), 10 U.S.C. §2401 stated DOD may not lease a vessel or aircraft for a period of more than five years unless it is specifically authorized by law to make such a lease. Section 1011 of the FY2008 defense authorization act amended 10 U.S.C. §2401 to permit the Secretary of a military department to lease a vessel for a period of greater than two years, but less than five years, only if the Secretary provides a notification of the lease to the House and Senate Armed Services and Appropriations committees (including a detailed description of its terms, a justification for entering it rather than purchasing the vessel, a determination that entering into it is the most cost-effective option; and a plan for meeting the requirement upon the lease's completion), and a period of 30 days of continuous session of Congress has expired. (See " Prior-Year Legislative Activity .") Other laws and regulations relating to DOD leases of equipment include 41 U.S.C. §11, Appendix B of Office of Management and Budget (OMB) Circular A-11, OMB Circular A-94, and the Budget Enforcement Act of 1990, which is Title XIII of Omnibus Budget Reconciliation Act of 1990 ( H.R. 5835 / P.L. 101-508 of November 5, 1990). Another legal provision—10 U.S.C. §7309—states that no vessel to be constructed for any of the armed forces may be constructed in a foreign shipyard. DOD Leases of Foreign-Built Ships in Recent Years DOD's Military Sealift Command (MSC), which operates sealift (i.e., cargo transport and prepositioning) ships, in recent years has leased some foreign-built sealift ships for periods of up to 4 years and 11 months. According to the American Shipbuilding Association (ASA), a trade association representing certain shipyards and shipbuilding-related firms, MSC as of June 2006 had renewed the leases of four of these ships for additional periods of up to 4 years and 11 months, providing potential total lease periods of up to almost 10 years. American Shipbuilding Association (ASA) Position Supporters of U.S. shipyards, particularly the ASA, have been concerned that, in addition to the four ships cited above, MSC in the future might renew or extend the leases of other foreign-built ships beyond 4 years and 11 months, and that the Defense Logistics Agency (DLA)—another part of DOD—might also begin leasing foreign-built ships. ASA has argued that leasing a ship for a period of almost 10 years indicates that DOD has a long-term need for such a ship, and that in such cases, DOD should purchase a ship and have it built in a U.S. yard. ASA has argued that leasing a foreign-built ship for almost 10 years effectively circumvents the requirement in 10 U.S.C. §7309 that U.S. military ships be built in U.S. yards. The ASA has supported changing 10 U.S.C. §2401 to limit leases of foreign-built ships to no more than two years, including all options to renew or extend the contract. ASA has said the proposal is intended to encourage DOD, in cases where DOD has a long-term need for a ship, to purchase the ship and have it built in a U.S. yard, rather than lease a foreign-built ship. In a statement issued prior to the enactment of the FY2008 defense authorization act, the ASA stated that The Department of Defense (DOD) is purchasing, via long-term leases, foreign-built ships to meet long-term military requirements. The leases in question are 5 years in duration and can be, and have been, renewed for another 5-year period. The length of these leases indicate a long-term military requirement, and results in de facto purchases of the ships in contravention of U.S. acquisition law (Section 7309 of Title 10 USC), which states that ships for the U.S. military shall be built in the United States, and the intent of the Budget Enforcement Act of 1990, limiting leases of capital assets.... The Budget Enforcement Act of 1990 placed a limit on the duration of leasing contracts for capital equipment by the Executive Branch in an effort to impose budget discipline on future year contract obligations by the Government, and to encourage the purchase rather than leasing of capital assets to meet long-term requirements because of the higher cost associated with leasing. To enforce this budget discipline, the Office of Management and Budget (OMB) issued scoring guidelines stating that vessels and other capital assets leased for a period of five years or longer would have to be scored in the budget year in which the contract was entered into, and the budget request in that year would have to include authorization for the total multi-year lease contract. This scoring rule eliminated the budget benefits of leasing versus buying American-built ships. Additionally, in the 1980's, Congress passed restrictions in Defense Appropriations Bills limiting ship and other capital leases to not more than 18-months in duration in an effort to deter leasing and discipline out-year funding obligations. DOD has been circumventing these leasing restrictions by entering lease contracts of 59-months (one month shy of five years), thereby avoiding triggering the requirement of scoring the entire cost of the lease in the first year as required by the Budget Enforcement Act of 1990. Many of these 59-month leases are being renewed for an additional 59-month period resulting in foreign-built ships operating for DOD for a period of nearly 10 consecutive years. While the Budget Enforcement Act met its intended objective of ending long-term leases of U.S.-built ships, it has opened the door to leasing foreign-built assets. Most of the ships under lease are used commercial ships of South Korean manufacture that have been modified to meet U.S. military specifications. DOD states that it needs to have the ability to lease these ships for 59 months to provide the foreign owner of the ship access to private financing to convert a commercial ship to meet a specialized military requirement. U.S. shipbuilders cannot obtain bank financing to build new ships to meet the requirement unless they recover the entire construction cost in the five years of the lease, making the lease payments for newly built ships non-competitive with foreign ships of ten or more years old for which the capital cost has been significantly amortized. While DOD needs to have the flexibility to lease foreign-built ships to meet shorter-term or emergency requirements, the growing reliance by DOD on this practice is resulting in the de-facto purchase of foreign-built ships to meet special, dedicated, long-term military requirements.... [The ASA recommends] Support [for] an amendment to the DOD FY07 Authorization and Appropriations Bills that will limit the duration of DOD lease contracts of foreign-built ships to two years, including contract options. DOD Position DOD has argued that its leases of foreign-built ships are the most cost-effective way to meet its needs for the ships in question, and that limiting such leases to no more than two years would make them much more expensive and difficult to implement, and therefore less cost effective. DOD has opposed changing 10 U.S.C. §2401 to limit leases of foreign-built ships to no more than two years. In a statement issued prior to the enactment of the FY2008 defense authorization act, DOD stated that [MSC] charters ships (from the commercial market) to meet the requirements of DoD components and respond to changes in the operational environment. Unfortunately, very few commercial ships with high military utility have been constructed in U.S. shipyards in the past 20 years. Consequently, when MSC has a requirement to charter a vessel, nearly all of the offers are for foreign-built ships. In cases where the need is immediate or subject to change, due to the operational environment or other factors, a commercial charter is the only practical way to obtain the capability. When a requirement for a particular type of vessel is known to be long-term , as was the case with the Large Medium Speed Roll-on/Roll-off [sealift] ships (LMSRs) [that were procured for DOD in the 1990s], the Navy seeks authorization from Congress for a new construction program which can take up to five years for delivery of the first vessel.... In cases where there are long term, consistent requirements that are best satisfied by the construction of new purpose-built vessels, the Navy, upon authorization by Congress, establishes and funds programs such as the LMSRs and the [Lewis and Clark (TAKE-1 class) dry cargo ships], to meet these requirements. We are also moving ahead with the acquisition of the Joint High Speed Vessel [JHSV] as a replacement for the capability currently fulfilled by the WESTPAC EXPRESS Charter.... [DOD] opposes [a provision to limit leases to no more than 2 years], as it would have a severe negative impact on the ability of [MSC] to carry out its mission of providing sealift support for a wide variety of [DOD] activities. To support rapid deployment of military forces, the military services maintain equipment on MSC chartered vessels (some foreign built, converted in U.S. shipyards, all U.S.-flagged and U.S.-crewed) for periods up to five years and budgeted for operational requirements accordingly. MSC also operates vessels chartered for periods up to five years for other unique military requirements. Having to conduct new charter solicitations biennially would greatly reduce the Services' ability to effectively plan and budget resources and would severely limit [regional] Combatant Commanders' ability to maintain mission readiness, especially for our nation's prepositioning force and in support of the Global War on Terror. Additionally, the potential necessity to return the ships to the United States for the purposes of transferring the equipment to a newly chartered ship, as ship charters changed, would severely impact DOD readiness. This constant disruption and transition on a biennial basis would defeat the central purpose of the prepositioning program: forward deployment of fully-loaded ships in strategic locations worldwide that are ready to meet warfighting needs at a moment's notice. Additionally, such a restriction would adversely impact the U.S. merchant marine industry upon which [DOD] relies to crew surge sealift ships, since any foreign built vessel chartered by MSC must have all reflagging work performed in a US shipyard and, during operation, must be crewed with US merchant mariners. Thus, the charter of foreign-built vessels by MSC has the added benefit of increasing the number of privately owned cargo vessels flying the US flag. Further, any such restriction would be contrary to [DOD's] objectives of supporting a vigorous and competitive domestic ship repair industry. Restricting the maximum lease/charter period for foreign built vessels to 24 months would not increase the number of U.S.-built militarily useful ships. It would increase the cost for MSC to charter vessels. Responses to informal queries to the owners/operators of MSC chartered ships indicate that the Government would likely have to pay twice as much [per day] for charters if forced from 59-month to 24-month charter periods. This price differential results from the ship owner's ability to amortize capital investment costs over longer periods of time for longer leases. This restriction would do nothing to encourage U.S. ship construction because building new vessels for DOD use would involve unacceptable lead times for current requirements and require substantial additional funding that is not available. DoD is pursuing a [JHSV] capability based on lessons learned from leased vessels. Potential Questions for Congress DOD's leases of foreign-built ships raise several potential questions for Congress, including the following: How many additional foreign-built ships might DOD in the future decide to lease, with renewals, for total periods of more than five years? If DOD leases of foreign-built ships were limited to no more than two years, including all options to renew or extend the contract, in how many cases would DOD purchase a ship and have it built in a U.S. yard rather than lease a foreign-built ship? What would be the resulting impact on workloads, revenues, and employment levels at various U.S. shipyards, and on U.S. merchant marine employment? Would this impact be in the national security interest? What is the comparative cost effectiveness of meeting DOD sealift requirements under current ship leasing authorities, under a two-year limit for leases of foreign-built ships, and through purchase of U.S.-built ships? How much risk would there be of a mismatch between DOD's sealift requirements and DOD sealift capacity if a two-year limit on DOD leases of foreign-built ships resulted in a decision by DOD to purchase U.S.-built ships rather than lease foreign-built ships? What are the potential implications, if any, of DOD's leases of foreign-built ships for acquisition of other DOD capabilities, such as capabilities provided by aircraft? Legislative Activity for FY2011 FY2011 Defense Authorization Act (H.R. 6523/P.L. 111-383) The reports of the House and Senate Armed Services Committees ( H.Rept. 111-491 of May 21, 2010, and S.Rept. 111-201 of June 4, 2010, respectively) on the FY2011 defense authorization bill ( H.R. 5136 and S. 3454 , respectively), and the joint explanatory statement for the final version of the bill ( H.R. 6523 / P.L. 111-383 of January 7, 2011), did not comment on the issue of DOD leases of foreign-built ships. FY2011 DOD Appropriations Bill (S. 3800) The Senate Appropriations Committee, in its report ( S.Rept. 111-295 of September 16, 2010) on S. 3800 , did not comment on the issue of DOD leases of foreign-built ships. Prior-Year Legislative Activity FY2010 DOD Appropriations Act (H.R. 3326/P.L. 111-118) The House Appropriations Committee, in its report ( H.Rept. 111-230 of July 24, 2009) on H.R. 3326 , states: LEASING OF FOREIGN BUILT SHIPS The Committee remains very concerned with the Navy's practice of entering into extended leases for foreign built ships. Historically, these leases have met the intent of long term capital lease restrictions on an individual basis, but the recurring nature of several of the leases violates the spirit and intent of the 1990 Budget Enforcement Act. The Committee recognizes that the ships leased by the Navy fill an important role that must be continued through the near term and well into the future, but believes that ships that fill these roles can provide an economic opportunity for the domestic shipbuilding industry. Two years ago, the Committee received a report from the Navy on their practice of leasing foreign built ships and a plan for ending the practice of leasing foreign built ships by 2012. The basic conclusion of the report was that the dependence on foreign built ships would be significantly reduced by the year 2012, principally as a result of shifting requirements and modifications to existing Department of Defense assets. Since the administration is currently undertaking a review of future requirements, the Committee is extremely interested in how that review will affect the Navy's practice of leasing foreign built ships. Therefore, the Committee directs the Secretary of the Navy to update the report submitted in March 2008 regarding the practice of leasing foreign built ships. The report should include the Navy's updated plan for terminating the practice of leasing foreign built ships to supplement the fleet and using only domestic built ships by 2012. Additionally, the report should include the necessary budget and funding plans that may be required to accomplish this. This report should be submitted no later than March 31, 2010. (Page 166) In lieu of a conference report, the House Appropriations Committee on December 15, 2009, released an explanatory statement on a final version of H.R. 3326 . This version was passed by the House on December 16, 2009, and by the Senate on December 19, 2009, and signed into law on December 19, 2009, as P.L. 111-118 . The explanatory statement states on page one that it "is an explanation of the effects of Division A [of H.R. 3326 ], which makes appropriations for the Department of Defense for fiscal year 2010. As provided in Section 8124 of the consolidated bill, this explanatory statement shall have the same effect with respect to the allocation of funds and the implementation of this as if it were a joint explanatory statement of a committee of the conference." The explanatory statement states: LEASING OF FOREIGN BUILT SHIPS There exists strong interest in the impact that the review of future requirements in the Quadrennial Defense Review will have on the Navy's practice of leasing foreign built ships. Therefore, the Secretary of the Navy is directed to update its March 2008 report on the use of such leases and address impacts on American seafarers, sealift capabilities, and naval shipbuilding. (Page 169) FY2010 Defense Authorization Act (H.R. 2647/P.L. 111-84) The conference report ( H.Rept. 111-288 of October 7, 2009) on H.R. 2647 / P.L. 111-84 of October 28, 2009, does not contain any provisions relating directly to DOD leases of foreign-built ships. The conference report states: Conversion of certain vessels; leasing rates The House bill contained a provision (sec. 126) that would permit the Secretary of the Navy to use up to $35.0 million from the Weapons Procurement, Navy, account to lease and convert vessels that have defaulted on construction loan guarantees: (1) that have become the property of the United States; and (2) for which, the Maritime Administrator has a right of disposal. The Senate amendment contained no similar provision. The House recedes. The conferees agree that the Navy should, in trying to make near-term additions to the high speed vessel fleet, consider fully the possibility of using vessels within the control of the Maritime Administration. (Page 687) FY2008 DOD Appropriations Act (H.R. 3222/P.L. 110-116) The House Appropriations Committee, in its report ( H.Rept. 110-279 of July 30, 2007) on H.R. 3222 / P.L. 110-116 of November 13, 2007, stated that it was concerned with the Navy practice of bypassing the intent of the long term capital lease restrictions in the way several foreign built military sealift mission ships are leased.... The Committee believes this leasing practice is harming the Nation's shipyards and major ship component industrial base by indirectly denying our shipbuilders the opportunity for additional ship construction. The Committee recognizes that the ships leased by the Navy fill an important role that must be continued through the near term and into the future.... However, the Committee strongly believes that the American shipbuilders must take advantage of this opportunity. Therefore, the Committee directs the Navy to submit a report that outlines a plan to wean itself off the practice of leasing foreign built ships to supplement the fleet and institute the practice of utilizing only American built ships within four years.... (Pages 230-231) FY2008 Defense Authorization Act (H.R. 4986/P.L. 110-181) The text of Section 1011 of the FY2008 defense authorization act ( H.R. 4986 / P.L. 110-181 of January 28, 2008) is as follows: SEC. 1011. LIMITATION ON LEASING OF VESSELS. Section 2401 of title 10, United States Code, is amended by adding at the end the following new subsection: `(h) The Secretary of a military department may make a contract for the lease of a vessel or for the provision of a service through use by a contractor of a vessel, the term of which is for a period of greater than two years, but less than five years, only if— `(1) the Secretary has notified the Committee on Armed Services and the Committee on Appropriations of the Senate and the Committee on Armed Services and the Committee on Appropriations of the House of Representatives of the proposed contract and included in such notification— `(A) a detailed description of the terms of the proposed contract and a justification for entering into the proposed contract rather than obtaining the capability provided for by the lease, charter, or services involved through purchase of the vessel; `(B) a determination that entering into the proposed contract as a means of obtaining the vessel is the most cost-effective means of obtaining such vessel; and `(C) a plan for meeting the requirement provided by the proposed contract upon completion of the term of the lease contract; and `(2) a period of 30 days of continuous session of Congress has expired following the date on which notice was received by such committees.'
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Prior to the enactment of the FY2008 defense authorization act (H.R. 4986/P.L. 110-181 of January 28, 2008), 10 U.S.C. §2401 stated DOD may not lease a vessel or aircraft for a period of more than five years unless it is specifically authorized by law to make such a lease. Operating under this provision, the Department of Defense (DOD) in recent years used lease options and renewals to lease some foreign-built cargo ships for total periods of almost 10 years—a length of time that some observers argue effectively circumvented a legal requirement that U.S. military ships be built in U.S. shipyards. These observers, particularly the American Shipbuilding Association (ASA), proposed reducing the current five-year legal limit on ship leases to two years for foreign-built ships. DOD opposed the idea, arguing that its ship leases are the most cost-effective way to meet its needs for the ships in question. Section 1011 of the FY2008 defense authorization act amended 10 U.S.C. §2401 to permit the Secretary of a military department to lease a vessel for a period of greater than two years, but less than five years, only if the Secretary provides a notification of the lease to the House and Senate Armed Services and Appropriations committees (including a detailed description of its terms, a justification for entering it rather than purchasing the vessel, a determination that entering into it is the most cost-effective option, and a plan for meeting the requirement upon the lease's completion), and a period of 30 days of continuous session of Congress has expired. The explanatory statement on the final version of the FY2010 DOD appropriations act (H.R. 3326/P.L. 111-118 of December 19, 2009) directed the Navy to update its March 2008 report on the leasing of foreign-built ships and address impacts on American seafarers, sealift capabilities, and naval shipbuilding.
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El Paso Natural Gas Co. is an interstate natural gas pipeline company that delivers gas at the Arizona-California border to three California distribution companies. The present controversy concerns gas to be purchased by it in Texas from Lo-Baca Gathering Co. and Houston Pipe Line Co. Under Lo-Vaca's contract gas produced in Texas is to be delivered to a subsidiary of El Paso's at a Texas point for delivery into its pipeline. The contract contains the following two clauses: 'All of the gas to be purchased by El Paso from Gatherer (Lo-Vaca) under this agreement shall be used by El Paso solely as fuel in El Paso's compressors, treating plants, boilers, camps and other facilities located outside of the State of Texas. It is understood, however, that said gas will be commingled with other gas being transported in El Paso's pipe line system.' 'It is the intent and understanding of the parties hereto that the sale of natural gas hereof is not subject to the jurisdiction of the Federal Power Commission because this sale is not for resale.' This 'restricted use' agreement provides for a separate metering of the contract volumes prior to their delivery into El Paso's system. El Paso will meter the gas used for fuel purposes in its New Mexico and Arizona facilities to make certain this amount invariably exceeds the volumes of gas taken from Lo-Vaca under this agreement. El Paso and Houston made a similar contract containing a similar 'restricted use' provision by which El Paso covenants that this Houston gas will be consumed by El Paso solely as fuel in its Texas operations or in another Texas plant. This contract, like the other one, also provides for metering the volume of gas delivered in Texas; and it includes a covenant by El Paso that the Texas uses will at all times exceed the amounts supplied by Houston. In spite of these 'restricted use' covenants it is conceded that the gas sold by Lo-Vaca and Houston to El Paso will flow in a commingled stream with gas from other sources and that at least a portion of the gas will in fact be resold out of Texas. The Federal Power Commission asserted jurisdiction over these sales as sales in interstate commerce 'for resale,' as that term is used is § 1(b) of the Natural Gas Act, 52 Stat. 821, 15 U.S.C. § 717 (1958 ed.).1 26 F.P.C. 606, rehearing denied, id., at 840. The Court of Appeals reversed, one judge dissenting. 323 F.2d 190. The case is here on a writ of certiorari. 377 U.S. 951, 84 S.Ct. 1627, 12 L.Ed.2d 496. We said in Connecticut Light & Power Co. v. Federal Power Comm., 324 U.S. 515, 529, 65 S.Ct. 749, 755, 89 L.Ed. 1150, 'Federal jurisdiction was to follow the flow of electric energy, an engineering and scientific, rather than a legalistic or governmental, test.' And that is the test we have followed under both the Federal Power Act and the Natural Gas Act, except as Congress itself has substituted a so-called legal standard for the technological one. Id., at 530—531, 65 S.Ct., at 756. In Interstate Natural Gas Co. v. Federal Power Comm., 331 U.S. 682, 687, 67 S.Ct. 1482, 1485, 91 L.Ed. 1742, we considered the anatomy of the pipeline system to discover the channel of the constant flow; again in Federal Power Comm. v. East Ohio Gas Co., 338 U.S. 464, 467, 70 S.Ct. 266, 268, 94 L.Ed. 268; and most recently in Federal Power Comm. v. Southern Cal. Edison Co., 376 U.S. 205, 209, n. 5, 84 S.Ct. 644, 647, 11 L.Ed.2d 638. The result of our decisions is to make the sale of gas which crosses a state line at any stage of its movement from wellhead to ultimate consumption 'in interstate commerce' within the meaning of the Act. Attempts have been made by one convention or another to convert a local transaction into one of interstate commerce (Sprout v. City of South Bend, 277 U.S. 163, 48 S.Ct. 502, 72 L.Ed. 833; Superior Oil Co. v. Mississippi ex rel. Knox, 280 U.S. 390, 50 S.Ct. 169, 74 L.Ed. 504) or to make a segment of interstate commerce appear to be only intrastate (Baltimore & Ohio S.W.R.R. Co. v. Settle, 260 U.S. 166, 43 S.Ct. 28, 67 L.Ed. 189). But those attempts have failed. Similarly, we conclude that when it comes to the question what gas is for 'resale' the present contracts should not be able to change the jurisdictional result. The fact that a substantial part of the gas will be resold, in our view, invokes federal jurisdiction at the outset over the entire transaction. Were suppliers of gas and pipeline companies free to allocate by contract gas from a particular source to a particular use, havoc would be raised with the federal regulatory scheme, as it was construed and applied in Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672, 74 S.Ct. 794, 98 L.Ed. 1035. A pipeline would then be able to discriminate in favor of its 'nonjurisdictional' customers. Moreover, a pipeline company by a contract clause could immunize a particular supplier from the reach of federal regulation2 as defined by Phillips Petroleum Co. v. Wisconsin, supra. There would be created in those and in other ways an 'attractive gap' in the federal regulatory scheme (Federal Power Comm. v. Transcontinental Gas Pipe Line Corp., 365 U.S. 1, 28, 81 S.Ct. 435, 449, 5 L.Ed.2d 377) which the producing States might have little incentive to close, since the gap would often involve either lower costs to intrastate customers or else merely higher pipeline costs which ultimately would be reflected in rates paid by consumers in other States. Whether cases could be conjured up where in spite of original commingling there might be a separate so-called nonjurisdictional transaction3 of a precise amount of gas not-for-resale4 within the meaning of the Act is a question we need not reach. Finally it is said that the Commission should draw the appropriate lines between 'jurisdiction' and 'nonjurisdictional' sales through the use of its rule-making power. But we cannot say that the adjudicatory process is not an appropriate method for drawing the line case-by-case (United States v. Public Utilities Comm., 345 U.S. 295, 73 S.Ct. 706, 97 L.Ed. 1020) as in a host of other administrative determinations. The Commission has acted responsibly in this situation and its decision must be upheld. Reversed. Mr. Justice WHITE took no part in the consideration or decision of these cases.
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An interstate pipeline company which supplies natural gas at the California border entered into contracts to buy gas in Texas for delivery to its pipeline system. Although the gas was to be commingled with other purchases the contracts provided for "restricted use" of the gas for internal company use, either intrastate or, if interstate, not for resale. It was conceded that some of the gas input would be resold outside of Texas. The Federal Power Commission asserted jurisdiction over these sales as sales in interstate commerce for resale under § 1 (b) of the Natural Gas Act. The Court of Appeals reversed. Held: 1. The actuality of the interstate transportation and resale of a substantial portion of the gas invokes federal jurisdiction over the transactions, the form of the contracts notwithstanding. Pp. 369-370. 2. The jurisdictional boundaries of the Federal Power Commission may be established by adjudication rather than by rule-making. P. 371. 323 F. 2d 190, reversed.
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Appellant was indicted in the Superior Court of Wilkinson County, Georgia, for violation of §§ 7408 and 7409, of Title 26 of the Georgia Code. Section 7408 provides: 'Any person who shall contract with another to perform for him services of any kind with intent to procure money, or other thing of value thereby, and not to perform the service contracted for, to the loss and damage of the hirer; or after having so contracted, shall procure from the hirer money, or other thing of value, with intent not to perform such service, to the loss and damage of the hirer, he shall be deemed a common cheat and swindler, and upon conviction shall be punished as for a misdemeanor.'1 And Section 7409 declares: 'Satisfactory proof of the contract, the procuring thereon of money or other thing of value, the failure to perform the services so contracted for, or failure to return the money so advanced with interest thereon at the time said labor was to be performed, without good and sufficient cause and loss or damage to the hirer, shall be deemed presumptive evidence of the intent referred to in the preceding section.'2 The indictment alleged that appellant had entered into a contract with R. L. Hardie to perform manual labor for $1.25 a day until he had earned $19.50 at that rate, that he had done so with the intent not to perform the services, that he had thus obtained the $19.50 as an advance, that he had failed without good and sufficient cause to do the work, that he had failed and refused to repay the $19.50, and that loss and damage to Hardie had resulted. Appellant demurred to the indictment, asserting that §§ 7408 and 7409, upon which it was based, were repugnant both to the Thirteenth Amendment and the Act of Congress passed pursuant to it,3 and to the due process clause of the Fourteenth Amendment. The demurrer was overruled, exception was taken, and the case went to trial. Hardie was the only witness for the State. He testified that the agreement had been made, that he had advanced the $19.50, that appellant had neither done the work nor returned the money, and that although appellant had said something about being sick, he had given no visible sign of it and had not been confined to bed. Under the statutes of Georgia4 appellant could not testify under oath, but he was permitted to make an unsworn statement in which he generally denied that he and Hardie had made the agreement or that Hardie had paid him the $19.50. The trial judge charged the jury in the language of §§ 7408 and 7409. He refused to instruct the jury that these sections are repugnant to the Thirteenth and Fourteenth Amendments of the Constitution of the United States. The jury returned a verdict of guilty and judgment of conviction was entered. Appellant moved for a new trial on the ground that §§ 7408 and 7409 violated provisions of both the federal and state Constitutions, and the motion was denied. On appeal, the conviction was affirmed by the Supreme Court of Georgia. 191 Ga. 682, 13 S.E.2d 647. We think the conviction must be reversed. There is no material distinction between the Georgia statutes challenged here and the Alabama statute which was held to violate the Thirteenth Amendment in Bailey v. Alabama, 219 U.S. 219, 31 S.Ct. 145, 55 L.Ed. 191.5 It is argued here, just as it was in the Bailey case, that the purpose of § 7408 is nothing more than the punishment of a species of fraud, namely, the obtaining of money by a promise to perform services with intent never to perform them. And the presumption created by § 7409 is said to be merely a rule of evidence for the trial of cases arising under § 7408. Actually, however, § 7409 embodies a substantive prohibition which squarely contravenes the Thirteenth Amendment and the Act of Congress of March 2, 1867.6 Its effect is to authorize the jury to convict upon proof that an agreement has been reached, that money has been advanced on the strength of it, that the money has not been returned, that the appellant has failed or refused to perform the services 'without good and sufficient cause,' and nothing more. The necessary consequence is that one who has received an advance on a contract for services which he is unable to repay is bound by the threat of penal sanction to remain at his employment until the debt has been discharged. Such coerced labor is peonage. And it is no less so because a presumed initial fraud rather than a subsequent breach of the employment contract is the asserted target of the statute. It is of course clear that peonage is a form of involuntary servitude within the meaning of the Thirteenth Amendment and that the Act of 1867 is an 'appropriate' implementation of that Amendment. Clyatt v. United States, 197 U.S. 207, 25 L.Ed. 429, 49 L.Ed. 726. We are told that the manner in which these sections have been interpreted by the courts of Georgia rescues them from invalidity. It is urged that the phrase 'without good and sufficient cause', which appears in § 7409, in effect requires proof of fraudulent intent at the time of making the contract and obtaining the money. But this argument is wide of the mark. The words 'without good and sufficient cause' plainly refer to the failure to perform the services or to return the money advanced. Since the subsequent breach of the contract by the defendant, however capricious or reprehensible, does not establish a fraudulent intent at the initial stage of the transaction, the content which has been assigned to the phrase 'without good and sufficient cause' by the Georgia courts is immaterial. See Bailey v. Alabama, 219 U.S. at pages 233, 234, 31 S.Ct. at page 148, 55 L.Ed. 191. Moreover, as the Court observed in the Bailey case, 'the controlling construction of the statute is the affirmance of this judgment of conviction.' 219 U.S. at page 235, 31 S.Ct. at page 149, 55 L.Ed. 191. The most that the jury could have found in the evidence here was proof that the contract had been made, that $19.50 had been advanced, that the appellant had failed to do the work or to return the money, and perhaps that this failure had been 'without good and sufficient cause'. The presumption created by § 7409 was thus essential to the conviction. It is true that it appears from the record that the Supreme Court of Georgia regarded it as unnecessary to determine the sufficiency of the evidence to support the verdict because 'the defendant relies solely on constitutional grounds' (191 Ga. 682, 13 S.E.2d 647, 650). And it is also true that it appears from the record that in his brief in that court the appellant stated: 'Inasmuch as the defendant in seeking to set aside his conviction relies solely on constitutional grounds, the evidence set out in the record is material only in so far as it relates to these grounds.' However, the only possible construction of this statement, in the light of appellant's consistent attack upon the presumption created by § 7409, is that appellant agreed to waive any contention that the evidence was insufficient to establish the factors declared by that section to warrant the presumption of an initial intent to defraud. He cannot fairly be said to have conceded more. Consequently, the Georgia Supreme Court could not escape the necessity of passing upon the validity of the presumption raised by § 7409 in order to sustain the conviction. We are aware that in Wilson v. State, 138 Ga. 489, 75 S.E. 619, the Supreme Court of Georgia held that Bailey v. Alabama does not require the invalidation of these sections. Its error in so doing arose from a misconception of the scope of the Bailey decision. To be sure, a judicially created rule in Alabama denied to a defendant the opportunity to make any kind of statement as to his uncommunicated motives, and this circumstance drew the notice of the Court, 219 U.S. at pages 228, 236, 31 S.Ct. at pages 146, 149, 55 L.Ed. 191. In Georgia, on the other hand, a defendant is permitted to make an unsworn statement if he chooses. But the opinion in the Bailey case leaves no doubt that this factor was far from controlling and that its effect was simply to accentuate the harshness of an otherwise invalid statute. We think that the sections of the Georgia Code upon which this conviction rests are repugnant to the Thirteenth Amendment and to the Act of 1867, and that the conviction must therefore be reversed. Reversed. Mr. Justice ROBERTS took no part in the decision of this case.
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1. Peonage is a form of involuntary servitude, within the meaning of the Thirteenth Amendment; and the Act of Congress of March 2, 1867 is an appropriate implementation of that Amendment. P. 29. 2. A state statute making it a crime for any person to contract with another to perform services of any kind, and thereupon obtain in advance money or other thing of value, with intent not to perform such service; and providing further that failure to perform the service or to return the money, without good and sufficient cause, shall be deemed presumptive evidence of intent, at the time of making the contract, not to perform such service, held violative of the Thirteenth Amendment and the Act of 1867. P. 29. The necessary consequence of such statute is that one who has received an advance on a contract for services which he is unable to repay is bound by the threat of penal sanction to remain at his employment until the debt has been discharged. Such coerced labor is peonage. 191 Ga. 682, 13 S. E. 2d 647, reversed.
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W. G. Henry, who had leased to Cornelius B. Parker, a married man, two farms, one Rio Hondo, containing 440 acres, and the other El Quinto, embracing 278 acres, gave him in writing an option to buy both for the sum of $37,000 in gold, payable on or before May 1, 1911. Shortly before that period Parker and the Successors of A. Monroig, a sugar manufacturing corporation, agreed the one to sell and the other to buy a piece of land 'composed of about 200 acres, a part of the farm known as El Quinto,' for $125 per acre, and on the same day an agreement in writing was executed between the parties by which Parker created in favor of the corporation an easement of way across the farms El Quinto and Rio Hondo for the operation of a private railway, conditioned on the carrying out by the corporation of the purchase of the portion of El Quinto as stated in the option contract. The option and the agreement to buy were both consummated. Parker acquired the two farms and the corporation bought from Parker 207 acres out of the farm El Quinto, about 70 acres, therefore, remaining in Parker. The formal deeds accomplishing this result are not in the record, but as found by the court below, and not disputed, the matter was so arranged that the $25,875 due for the part of El Quinto bought by the corporation was made available for Parker, so that he was enabled to use it as part of the $37,000 which, under the option, he was to pay for the purchase of the whole of El Quinto and Rio Hondo. It further appears from the opinion below that nothing was said in the deed to the corporation as to the right of way over the strip remaining of El Quinto, but at or about the time of the sale a deed was drawn by Parker and his wife, giving to the corporation the right of way over Rio Hondo as provided in the option contract. A controversy grew up between Parker and the corporation as to whether the corporation had not lost the right to the easement of way over the portion of El Quinto retained by Parker, and an attempt of the corporation to exercise the right of servitude was interfered with. This suit was then brought by the corporation and this appeal is prosecuted to obtain the reversal of a decree rendered in favor of the corporation, directing the performance of the contract concerning the easement, and preventing the interference with the enjoyment of such right. It is apparent that the substantial controversy is a very narrow one, concerning only the easement of way over the small strip of the farm El Quinto remaining after carving out the portion of that farm bought by the corporation. And the contention as to the nonexistence of the right of way rests exclusively upon a challenge of the validity of the contract as to the right between Parker and the corporation. The contention is that by virtue of the purchase made from Henry of the two farms, they became acquets of the community existing between Parker and his wife, and as, under the Porto Rican law, the assent of the wife to the disposal of real property of the community was essential, and such assent was not given by the wife, Parker alone having been a party to the contract giving the corporation the right of way, that contract was absolutely void and not susceptible of being enforced. But the error lies in assuming that the property was community property when the option contract was made in order to measure its legality by such erroneous assumption. On the contrary, when the contract made by Parker, giving the right of way, was entered into, the property belonged to Henry, and the only right possessed by the community was that which might arise from the exercise by Parker, the head and master of the community, of the option to buy from Henry which he, Parker, had procured. When, therefore, before the exercise of the option, Parker agreed to the establishment of the right of way to attach to the property when bought under his option, such contract modified to that extent the right to buy conferred by the option; or, in other words, submitted the exercise of the option to a limitation which followed the property into the hands of the community and diminished the estate which it would otherwise have been entitled to under the option. Obviously from this it results that there was a legal obligation on the part of the community to respect and give effect to the right of way, and that its refusal to do so gave rise to the duty of exerting judicial power to compel performance. And the cogency of these conclusions becomes additionally convincing when it is considered that there is no contention as to wrong against the community resulting from the contract which gave to the corporation a right to buy a part of the property covered by the option held by Parker, especially when, from the surrounding circumstances, it is clearly to be deduced that the agreement to give to the corporation the right of way was one of the considerations by which it was led to consent to become a purchaser of part of the property which the option embraced, thereby in part, at least, affording the means by which Parker was enabled to acquire under the option the property which remained. The claim now made thus reduces itself to the contention that the right of the community to purchase under the option must be by it enjoyed free from the obligations inseparably resulting from its exertion; or, in another aspect, that the community, having secured through its contract with the corporation the means to enable it to pay for the property which it acquired, can retain the property free from the obligation incurred in favor of the corporation. There is a contention that the right to enforce the agreement to grant the servitude of way is barred by the limitation provided in § 4481 of the Porto Rican Code of 1913 (§ 1375 of the previous Code). But, on the face of the provision relied upon, it is plainly applicable only to actions for lesion in cases of sale embraced by § 4480 of the same Code, and has therefore no possible relation to the subject before us. So, also, there is a contention that the decree below was too broad since it enforced a perpetual easement instead of one depending upon the continued use of the property for the purposes for which the easement was created. But we think this contention is also wholly without merit, because the decree, when rightly interpreted, is not susceptible of the extreme construction placed upon it. Affirmed.
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A community cannot enjoy an acquet free of the obligations inseparably connected with it; and if it takes real-estate, as in this case, subject to a servitude imposed by the master of the community before acquisition, it cannot enjoy the property afterwards free from such servitude because of the failure of the wife thereafter to unite therein. Porto Rico Code, § 4481, is only applicable to cases of lesion in cases of sale embraced in § 4480 of that code, (Q1 375 of the previous code).
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These were bills filed in the circuit court of the United States for the middle district of Tennessee against the comptroller of that state for an injunction restraining him from the collection from complainant of certain privilege taxes or license fees for the years 1887, 1888, and 1889, under laws of the state of Tennessee in that behalf, which complainant averred to be in conflict with the federal and state constitutions, and the taxes accordingly illegal and void. In No. 1,381, the bill alleged that the comptroller was threatening to issue his warrant for the collection of the taxes, and to levy it upon complainant's sleeping-cars, 'and your orator believes and fears that said defendant, unless restrained by this honorable court, will proceed to force the collection of said tax so illegally assessed and claimed, by distraining and seizing upon your orator's cars from your orator, and that the proceedings threatened for the collection of said taxes will lead to a multiplicity of suits, and will greatly harass your orator. Your orator further shows that all the sleeping and drawingroom cars aforesaid running in the state of Tennessee are attached to through express trains on the roads of said railroad companies; that prior to their arrival in Tennessee seats and sleeping berths therein have always been sold by your orator to persons traveling from other states into Tennessee; that your orator has at all times contracts with passengers to give them the accommodations furnished by said cars while traveling upon such railroads; that, unless your orator pays the taxes so illegally imposed upon it, your orator believes and fears that said defendant will, unless restrained therefrom by this court, levy upon and seize, in order to force from your orator said illegal taxes, said sleeping and drawing-room cars while the same are in actual use and running attached to said express trains; that thereby the traveling public will be discommoded, the carriage of passengers interstate willbe prevented, your orator and said railroad companies may become harassed by many suits for damages by passengers for not furnishing them the accommodations they contracted for, the credit and reputation of your orator for furnishing comfortable accommodations, which credit and reputation are of great value to it and have been established by strict attention to business and at great expense and trouble for many years, will be broken up, and the good will of said business greatly impaired, and thereby your orator will suffer great and irreparable injury.' In No. 1,382 complainant averred that the comptroller had issued his warrant to the sheriff of the county of Davidson, Tenn., and the sheriff, by his deputy, one Hobson, 'has, by force, and pretending to act under said warrant, seized upon the sleeping car 'Wetumpka,' belonging to your orator, and now holds the same in their possession; that said car is reasonably worth $8,000; that said Hobson has advertised and threatens to sell said car to satisfy said illegal and pretended tax; that said sleeping-car of your orator when seized was being used by your orator in the carrying on of interstate commerce as aforesaid, and was in use as an instrument of interstate commerce, and was in Tennessee only by virtue of such use, and was therefore not liable to be taken in satisfaction of said tax, even if it had been a valid tax; that the railroad companies over whose lines of road your orator operates cars are common carriers, and are obliged by law to take upon their trains and carry all who properly present themselves for carriage, whether they are traveling between points wholly within Tennessee or not; that such passengers, traveling locally in Tennessee, sometimes apply for sleeping car accommodations in your orator's cars attached to such train, and, if your orator is obliged to receive them on its cars, then the state of Tennessee by such tax act forces your orator to pay such privilege tax, and take out such license, or to cease carrying on the interstate commerce in which it is now engaged; that said defendants have demanded said three thousand dollars from your orator, and have declared that they will force your orator to pay the same; that they now threaten to sell said car so seized by them, and your orator believes will do so unless restrained by this honorable court; that said car is very valuable, but will not bring its full value at a forced sale, and your orator fears that it will be sold for a small amount not sufficient to pay said tax, and your orator believes and fears that said defendants, unless restrained by this honorable court, will thereupon proceed to enforce the collection of said tax so illegally claimed, by distraining and seizing upon your orator's other cars, and that the proceedings threatened by defendants for the collection of said taxes will greatly harass your orator. Your orator further shows that all its sleeping-cars aforesaid running through the state of Tennessee are attached to through express trains on the roads of the said railroad companies; that prior to their arrival in Tennessee seats and berths have always been sold by your orator to persons traveling from other states into Tennessee; that your orator has at all times contracts with passengers to give them the accommodations furnished by said cars while traveling upon said roads; that, unless your orator pays the taxes so illegally imposed upon it, your orator believes and fears that the said defendant will, unless restrained therefrom by this court, sell said car so already levied on, and, if it does not bring enough to satisfy said tax, will levy upon and seize, in order to force from your orator said illegal tax, its sleeping-cars while they are in actual use and running attached to said express trains; that thereby the traveling public will be discommoded, the carriage of passengers interstate will be prevented, your orator and said railroad companies may become harassed by many suits by passengers for damaes for not furnishing them the accommodations they contracted for, the credit and reputation of your orator for furnishing comfortable accommodations, which credit and reputation are of great value to it, and have been established by strict attention to business and at great expense and trouble for many years, will be broken up, and the good will of said business greatly impaired, and thereby your orator will suffer great and irreparable injury.' The bills prayed for injunction and general relief. Answers and replications were filed, and some evidence taken, but nothing appears in the pleadings or proofs bearing upon the question of the standing of complainant in a court of equity, except as indicated by the averments of the bills above quoted. Upon hearing, the relief sought was decreed, and the taxes in question perpetually enjoined. We have already decided in Shelton v. Platt, ante, 646, that purely injunction bills cannot be sustained to restrain the collection of taxes upon the sole ground of their unconstitutionality. The jursidictional averments are more comprehensive in these causes than in that, but we are of opinion that they did not make out a case for equity interposition, for the reasons there given, and in view, of the act of Tennessee of 1873, entitled 'An act to facilitate the collection of revenues,' approved March 21, 1873. Laws Tenn. 1873, c. 44, p. 71. So far as appeared, complainant could avert all the consequences which it deprecated as likely to ensue if the state officials were not restrained, by complying with the terms of that statute and availing itself of the remedy thereby afforded. Pickard v. Car Co., 117 U. S. 34, 6 Sup. Ct. Rep. 635. There is, however, this marked distinction between Shelton v. Platt and these cases. In Shelton v. Platt the objection to the jurisdiction was asserted by motion, by plea, and by the answer. Here that objection is urged apparently for the first time in this court, but, inasmuch as the entire record fails to show complainant entitled to an injunction within the rule announced, the decrees must nevertheless be reversed. It is true that there was a prayer for general relief, but relief given under the general prayer must be agreeable to the case made by the bill, and in this instance the complainant sought a preventive remedy only. Ordinarily, where it is competent for the court to grant the relief sought, and it has jurisdiction of the subject-matter, the objection of the adequacy of the remedy at law should be taken at the earliest opportunity and before the defendant enters upon a full defense. Reynes v. Dumont, 130 U. S. 354, 9 Sup. Ct. Rep. 486; Kilbourn v. Sunderland, 130 U. S. 505, 9 Sup. Ct. Rep. 594; Brown v. Iron Co., 134 U. S. 530, 10 Sup. Ct. Rep. 604. But in Lewis v. Cocks, 23 Wall. 466, it was held that if the court, in looking at the proofs, found none of the matters which would make a proper case for equity, it would be the duty of the court to recognize the fact and give it effect, though not raised by the pleadings nor suggested by counsel. Parker v. Woolen Co., 2 Black, 545; Oelricks v. Spain, 15 Wall. 211; New York Guaranty, etc., Co. v. Memphis Water Co., 107 U. S. 205, 2 Sup. Ct. Rep. 279. The decrees are reversed, and the causes remanded for further proceedings in conformity with this opinion. HARLAN and BROWN, JJ., dissented.
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Purely injunction bills cannot be maintained to restrain the collection of taxes upon the sole ground of their unconstitutionality. Shelton v. Platt, 139 U. S. 591, affirmed and applied. When in a suit in equity this court finds, on examining the proofs, nothing which makes a proper case for equity, it is its duty to recognize the fact, and give it effect though not raised by the pleadings, nor suggested by counsel.
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SECTION 1. SHORT TITLE.
This Act may be cited as the ``Bankruptcy Judgeship Act of 2003''.
SEC. 2. AUTHORIZATION FOR ADDITIONAL BANKRUPTCY JUDGESHIPS.
The following judgeship positions shall be filled in the manner
prescribed in section 152(a)(1) of title 28, United States Code, for
the appointment of bankruptcy judges provided for in section 152(a)(2)
of such title:
(1) Two additional bankruptcy judgeships for the southern
district of New York.
(2) Four additional bankruptcy judgeships for the district
of Delaware.
(3) One additional bankruptcy judgeship for the district of
New Jersey.
(4) One additional bankruptcy judgeship for the eastern
district of Pennsylvania.
(5) Three additional bankruptcy judgeships for the district
of Maryland.
(6) One additional bankruptcy judgeship for the eastern
district of North Carolina.
(7) One additional bankruptcy judgeship for the district of
South Carolina.
(8) One additional bankruptcy judgeship for the eastern
district of Virginia.
(9) Two additional bankruptcy judgeships for the eastern
district of Michigan.
(10) Two additional bankruptcy judgeships for the western
district of Tennessee.
(11) One additional bankruptcy judgeship for the eastern
and western districts of Arkansas.
(12) Two additional bankruptcy judgeships for the district
of Nevada.
(13) One additional bankruptcy judgeship for the district
of Utah.
(14) Two additional bankruptcy judgeships for the middle
district of Florida.
(15) Two additional bankruptcy judgeships for the southern
district of Florida.
(16) Two additional bankruptcy judgeships for the northern
district of Georgia.
(17) One additional bankruptcy judgeship for the southern
district of Georgia.
SEC. 3. TEMPORARY BANKRUPTCY JUDGESHIPS.
(a) Authorization for Additional Temporary Bankruptcy Judgeships.--
The following judgeship positions shall be filled in the manner
prescribed in section 152(a)(1) of title 28, United States Code, for
the appointment of bankruptcy judges provided for in section 152(a)(2)
of such title:
(1) One additional bankruptcy judgeship for the district of
Puerto Rico.
(2) One additional bankruptcy judgeship for the northern
district of New York.
(3) One additional bankruptcy judgeship for the middle
district of Pennsylvania.
(4) One additional bankruptcy judgeship for the district of
Maryland.
(5) One additional bankruptcy judgeship for the northern
district of Mississippi.
(6) One additional bankruptcy judgeship for the southern
district of Mississippi.
(7) One additional bankruptcy judgeship for the southern
district of Georgia.
(b) Vacancies.--
(1) In general.--The first vacancy occurring in the office
of bankruptcy judge in each of the judicial districts set forth
in subsection (a)--
(A) occurring 5 years or more after the appointment
date of the bankruptcy judge appointed under subsection
(a) to such office; and
(B) resulting from the death, retirement,
resignation, or removal of a bankruptcy judge;
shall not be filled.
(2) Term expiration.--In the case of a vacancy resulting
from the expiration of the term of a bankruptcy judge not
described in paragraph (1), that judge shall be eligible for
reappointment as a bankruptcy judge in that district.
(c) Extension of Existing Temporary Bankruptcy Judgeships.--
(1) In general.--The temporary bankruptcy judgeships
authorized for the northern district of Alabama and the eastern
district of Tennessee under paragraphs (1) and (9) of section
3(a) of the Bankruptcy Judgeship Act of 1992 (28 U.S.C. 152
note) are extended until the first vacancy occurring in the
office of a bankruptcy judge in the applicable district
resulting from the death, retirement, resignation, or removal
of a bankruptcy judge and occurring 5 years or more after the
date of enactment of this Act.
(2) Applicability of other provisions.--All other
provisions of section 3 of the Bankruptcy Judgeship Act of 1992
(28 U.S.C. 152 note) remain applicable to the temporary
bankruptcy judgeships referred to in this subsection.
SEC. 4. TRANSFER OF BANKRUPTCY JUDGESHIP SHARED BY THE MIDDLE DISTRICT
OF GEORGIA AND THE SOUTHERN DISTRICT OF GEORGIA.
The bankruptcy judgeship presently shared by the southern district
of Georgia and the middle district of Georgia shall be converted to a
bankruptcy judgeship for the middle district of Georgia.
SEC. 5. CONVERSION OF EXISTING TEMPORARY BANKRUPTCY JUDGESHIPS.
(a) District of Delaware.--The temporary bankruptcy judgeship
authorized for the district of Delaware pursuant to section 3 of the
Bankruptcy Judgeship Act of 1992 (28 U.S.C. 152 note), shall be
converted to a permanent bankruptcy judgeship.
(b) District of Puerto Rico.--The temporary bankruptcy judgeship
authorized for the district of Puerto Rico pursuant to section 3 of the
Bankruptcy Judgeship Act of 1992 (28 U.S.C. 152 note), shall be
converted to a permanent bankruptcy judgeship.
SEC. 6. TECHNICAL AMENDMENTS.
Section 152(a)(2) of title 28, United States Code, is amended--
(1) in the item relating to the eastern and western
districts of Arkansas, by striking ``3'' and inserting ``4'';
(2) in the item relating to the district of Delaware, by
striking ``1'' and inserting ``6'';
(3) in the item relating to the middle district of Florida,
by striking ``8'' and inserting ``10'';
(4) in the item relating to the southern district of
Florida, by striking ``5'' and inserting ``7'';
(5) in the item relating to the northern district of
Georgia, by striking ``8'' and inserting ``10'';
(6) in the item relating to the middle district of Georgia,
by striking ``2'' and inserting ``3'';
(7) in the item relating to the southern district of
Georgia, by striking ``2'' and inserting ``3'';
(8) in the collective item relating to the middle and
southern districts of Georgia, by striking ``Middle and
Southern . . . . . . 1'';
(9) in the item relating to the district of Maryland, by
striking ``4'' and inserting ``7'';
(10) in the item relating to the eastern district of
Michigan, by striking ``4'' and inserting ``6'';
(11) in the item relating to the district of Nevada, by
striking ``3'' and inserting 5'';
(12) in the item relating to the district of New Jersey, by
striking ``8'' and inserting ``9'';
(13) in the item relating to the southern district of New
York, by striking ``9'' and inserting ``11'';
(14) in the item relating to the eastern district of North
Carolina, by striking ``2'' and inserting ``3'';
(15) in the item relating to the eastern district of
Pennsylvania, by striking ``5'' and inserting ``6'';
(16) in the item relating to the district of Puerto Rico,
by striking ``2 and inserting ``3'';
(17) in the item relating to the district of South
Carolina, by striking ``2'' and inserting ``3'';
(18) in the item relating to the western district of
Tennessee, by striking ``4'' and inserting ``6'';
(19) in the item relating to the district of Utah, by
striking ``3'' and inserting ``4''; and
(20) in the item relating to the eastern district of
Virginia, by striking ``5'' and inserting ``6''.
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Bankruptcy Judgeship Act of 2003 - Authorizes appointment of additional bankruptcy judgeships for specified States, including additional temporary bankruptcy judgeships for Puerto Rico, New York, Pennsylvania, Maryland, Mississippi, and Georgia.
Extends certain existing temporary bankruptcy judgeships in Alabama and. Tennessee.
Converts the bankruptcy judgeship presently shared by the southern district and the middle district of Georgia to a bankruptcy judgeship for the middle district of Georgia.
Converts to a permanent bankruptcy judgeship existing temporary bankruptcy judgeships for the districts of Delaware and Puerto Rico.
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These cases require us to decide whether the First Amendment permits courts to intervene in employment disputes involving teachers at religious schools who are entrusted with the responsibility of instructing their students in the faith. The First Amendment protects the right of religious institutions “to decide for themselves, free from state interference, matters of church government as well as those of faith and doctrine.” Kedroff v. Saint Nicholas Cathedral of Russian Orthodox Church in North America, 344 U.S. 94, 116 (1952). Applying this principle, we held in Hosanna-Tabor Evangelical Lutheran Church and School v. EEOC, 565 U.S. 171 (2012), that the First Amendment barred a court from entertaining an employment discrimination claim brought by an elementary school teacher, Cheryl Perich, against the religious school where she taught. Our decision built on a line of lower court cases adopting what was dubbed the “ministerial exception” to laws governing the employment relationship between a religious institution and certain key employees. We did not announce “a rigid formula” for determining whether an employee falls within this exception, but we identified circumstances that we found relevant in that case, including Perich’s title as a “Minister of Religion, Commissioned,” her educational training, and her responsibility to teach religion and participate with students in religious activities. Id., at 190–191. In the cases now before us, we consider employment discrimination claims brought by two elementary school teachers at Catholic schools whose teaching responsibilities are similar to Perich’s. Although these teachers were not given the title of “minister” and have less religious training than Perich, we hold that their cases fall within the same rule that dictated our decision in Hosanna-Tabor. The religious education and formation of students is the very reason for the existence of most private religious schools, and therefore the selection and supervision of the teachers upon whom the schools rely to do this work lie at the core of their mission. Judicial review of the way in which religious schools discharge those responsibilities would undermine the independence of religious institutions in a way that the First Amendment does not tolerate. I A 1 The first of the two cases we now decide involves Agnes Morrissey-Berru, who was employed at Our Lady of Guadalupe School (OLG), a Roman Catholic primary school in the Archdiocese of Los Angeles. Excerpts of Record (ER) 58 in No. 17–56624 (CA9) (OLG).[1] For many years, Morrissey-Berru was employed at OLG as a lay fifth or sixth grade teacher. Like most elementary school teachers, she taught all subjects, and since OLG is a Catholic school, the curriculum included religion. App. 23, 75. As a result, she was her students’ religion teacher. Morrissey-Berru earned a B. A. in English Language Arts, with a minor in secondary education, and she holds a California teaching credential. Id., at 21–22. While on the faculty at OLG, she took religious education courses at the school’s request, ER 41–ER 42, ER 44–ER 45, ER 276, and was expected to attend faculty prayer services, App. to Pet. for Cert. in No. 19–267, p. 87a.[2] Each year, Morrissey-Berru and OLG entered into an employment agreement, App. 21,[3] that set out the school’s “mission” and Morrissey-Berru’s duties. See, e.g., id., at 154–164.[4] The agreement stated that the school’s mission was “to develop and promote a Catholic School Faith Community,” id., at 154, and it informed Morrissey-Berru that “[a]ll [her] duties and responsibilities as a Teache[r were to] be performed within this overriding commitment.” Ibid. The agreement explained that the school’s hiring and retention decisions would be guided by its Catholic mission, and the agreement made clear that teachers were expected to “model and promote” Catholic “faith and morals.” Id., at 155. Under the agreement, Morrissey-Berru was required to participate in “[s]chool liturgical activities, as requested,” ibid., and the agreement specified that she could be terminated “for ‘cause’ ” for failing to carry out these duties or for “conduct that brings discredit upon the School or the Roman Catholic Church.” Id., at 155–157. The agreement required compliance with the faculty handbook, which sets out similar expectations. Id., at 156; App. to Pet. for Cert. in No. 19–267, at 52a–55a. The pastor of the parish, a Catholic priest, had to approve Morrissey-Berru’s hiring each year. Id., at 14a; see also App. 164. Like all teachers in the Archdiocese of Los Angeles, Morrissey-Berru was “considered a catechist,” i.e., “a teacher of religio[n].” App. to Pet. for Cert. in No. 19–267, at 56a, 60a. Catechists are “responsible for the faith formation of the students in their charge each day.” Id., at 56a. Morrissey-Berru provided religious instruction every day using a textbook designed for use in teaching religion to young Catholic students. Id., at 45a–51a, 90a–92a; see App. 79–80. Under the prescribed curriculum, she was expected to teach students, among other things, “to learn and express belief that Jesus is the son of God and the Word made flesh”; to “identify the ways” the church “carries on the mission of Jesus”; to “locate, read and understand stories from the Bible”; to “know the names, meanings, signs and symbols of each of the seven sacraments”; and to be able to “explain the communion of saints.” App. to Pet. for Cert. in No. 19–267, at 91a–92a. She tested her students on that curriculum in a yearly exam. Id., at 87a. She also directed and produced an annual passion play. Id., at 26a. Morrissey-Berru prepared her students for participation in the Mass and for communion and confession. Id., at 68a, 81a, 88a–89a. She also occasionally selected and prepared students to read at Mass. Id., at 83a, 89a. And she was expected to take her students to Mass once a week and on certain feast days (such as the Feast Day of St. Juan Diego, All Saints Day, and the Feast of Our Lady), and to take them to confession and to pray the Stations of the Cross. Id., at 68a–69a, 83a, 88a. Each year, she brought them to the Catholic Cathedral in Los Angeles, where they participated as altar servers. Id., at 95a–96a. This visit, she explained, was “an important experience” because “[i]t is a big honor” for children to “serve the altar” at the cathedral. Id., at 96a. Morrissey-Berru also prayed with her students. Her class began or ended every day with a Hail Mary. Id., at 87a. She led the students in prayer at other times, such as when a family member was ill. Id., at 21a, 81a, 86a–87a. And she taught them to recite the Apostle’s Creed and the Nicene Creed, as well as prayers for specific purposes, such as in connection with the sacrament of confession. Id., at 20a–21a, 92a. The school reviewed Morrissey-Berru’s performance under religious standards. The “ ‘Classroom Observation Report’ ” evaluated whether Catholic values were “infused through all subject areas” and whether there were religious signs and displays in the classroom. Id., at 94a, 95a; App. 59. Morrissey-Berru testified that she tried to instruct her students “in a manner consistent with the teachings of the Church,” App. to Pet. for Cert. in No. 19–267, at 96a, and she said that she was “committed to teaching children Catholic values” and providing a “faith-based education.” Id., at 82a. And the school principal confirmed that Morrissey-Berru was expected to do these things.[5] 2 In 2014, OLG asked Morrissey-Berru to move from a full-time to a part-time position, and the next year, the school declined to renew her contract. She filed a claim with the Equal Employment Opportunity Commission (EEOC), received a right-to-sue letter, App. 169, and then filed suit under the Age Discrimination in Employment Act of 1967, 81Stat. 602, as amended, 29 U. S. C. §621 et seq., claiming that the school had demoted her and had failed to renew her contract so that it could replace her with a younger teacher. App. 168–169. The school maintains that it based its decisions on classroom performance—specifically, Morrissey-Berru’s difficulty in administering a new reading and writing program, which had been introduced by the school’s new principal as part of an effort to maintain accreditation and improve the school’s academic program. App. to Pet. for Cert. in No. 19–267, at 66a–67a, 70a, 73a. Invoking the “ministerial exception” that we recognized in Hosanna-Tabor, OLG successfully moved for summary judgment, but the Ninth Circuit reversed in a brief opinion. 769 Fed. Appx. 460, 461 (2019). The court acknowledged that Morrissey-Berru had “significant religious responsibilities” but reasoned that “an employee’s duties alone are not dispositive under Hosanna-Tabor’s framework.” Ibid. Unlike Perich, the court noted, Morrissey-Berru did not have the formal title of “minister,” had limited formal religious training, and “did not hold herself out to the public as a religious leader or minister.” Ibid. In the court’s view, these “factors” outweighed the fact that she was invested with significant religious responsibilities. Ibid. The court therefore held that Morrissey-Berru did not fall within the “ministerial exception.” OLG filed a petition for certiorari, and we granted review. B 1 The second case concerns the late Kristen Biel, who worked for about a year and a half as a lay teacher at St. James School, another Catholic primary school in Los Angeles. For part of one academic year, Biel served as a long-term substitute teacher for a first grade class, and for one full year she was a full-time fifth grade teacher. App. 336–337. Like Morrissey-Berru, she taught all subjects, including religion. Id., at 288; ER 588 in No. 17–55180 (CA9) (St. James).[6] Biel had a B. A. in liberal studies and a teaching credential. App. 244. During her time at St. James, she attended a religious conference that imparted “[d]ifferent techniques on teaching and incorporating God” into the classroom. Id., at 260–262. Biel was Catholic.[7] Biel’s employment agreement was in pertinent part nearly identical to Morrissey-Berru’s. Compare id., at 154–164, with id., at 320–329. The agreement set out the same religious mission; required teachers to serve that mission; imposed commitments regarding religious instruction, worship, and personal modeling of the faith; and explained that teachers’ performance would be reviewed on those bases. Biel’s agreement also required compliance with the St. James faculty handbook, which resembles the OLG handbook. Id., at 322. Compare ER 641–ER 651 (OLG) with ER 565–ER 597 (St. James). The St. James handbook defines “religious development” as the school’s first goal and provides that teachers must “mode[l] the faith life,” “exemplif[y] the teachings of Jesus Christ,” “integrat[e] Catholic thought and principles into secular subjects,” and “prepar[e] students to receive the sacraments.” Id., at ER 570–ER 572. The school principal confirmed these expectations.[8] Like Morrissey-Berru, Biel instructed her students in the tenets of Catholicism. She was required to teach religion for 200 minutes each week, App. 257–258, and administered a test on religion every week, id., at 256–257. She used a religion textbook selected by the school’s principal, a Catholic nun. Id., at 255; ER 37 (St. James). The religious curriculum covered “the norms and doctrines of the Catholic Faith, including . . . the sacraments of the Catholic Church, social teachings according to the Catholic Church, morality, the history of Catholic saints, [and] Catholic prayers.” App. to Pet. for Cert. in No. 19–348, p. 83a. Biel worshipped with her students. At St. James, teachers are responsible for “prepar[ing] their students to be active participants at Mass, with particular emphasis on Mass responses,” ER 587, and Biel taught her students about “Catholic practices like the Eucharist and confession,” id., at ER 226–ER 227. At monthly Masses, she prayed with her students. App. to Pet. for Cert. in No. 19–348, at 82a, 94a–96a. Her students participated in the liturgy on some occasions by presenting the gifts (bringing bread and wine to the priest). Ibid. Teachers at St. James were “required to pray with their students every day,” id., at 80a–81a, 110a, and Biel observed this requirement by opening and closing each school day with prayer, including the Lord’s Prayer or a Hail Mary, id., at 81a–82a, 93a, 110a. As at OLG, teachers at St. James are evaluated on their fulfillment of the school’s religious mission. Id., at 83a–84a. St. James used the same classroom observation standards as OLG and thus examined whether teachers “infus[ed]” Catholic values in all their teaching and included religious displays in their classrooms. Id., at 83a–84a, 92a. The school’s principal, a Catholic nun, evaluated Biel on these measures. Id., at 106a. 2 St. James declined to renew Biel’s contract after one full year at the school. She filed charges with the EEOC, and after receiving a right-to-sue letter, brought this suit, alleging that she was discharged because she had requested a leave of absence to obtain treatment for breast cancer. App. 337–338. The school maintains that the decision was based on poor performance—namely, a failure to observe the planned curriculum and keep an orderly classroom. See id., at 303; App. to Pet. for Cert. in No. 19–348, at 85a–89a, 114a–115a, 120a–121a. Like OLG, St. James obtained summary judgment under the ministerial exception, id., at 74a, but a divided panel of the Ninth Circuit reversed, reasoning that Biel lacked Perich’s “credentials, training, [and] ministerial background,” 911 F.3d 603, 608 (2018). Judge D. Michael Fisher, sitting by designation, dissented. Considering the totality of the circumstances, he would have held that the ministerial exception applied “because of the substance reflected in [Biel’s] title and the important religious functions she performed” as a “stewar[d] of the Catholic faith to the children in her class.” Id., at 621, 622. An unsuccessful petition for rehearing en banc ensued. Judge Ryan D. Nelson, joined by eight other judges, dissented. 926 F.3d 1238, 1239 (2019). Judge Nelson faulted the panel majority for “embrac[ing] the narrowest construction” of the ministerial exception, departing from “the consensus of our sister circuits that the employee’s ministerial function should be the key focus,” and demanding nothing less than a “carbon copy” of the specific facts in Hosanna-Tabor. Ibid. We granted review and consolidated the case with OLG’s. 589 U. S. ___ (2019). II A The First Amendment provides that “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof.” Among other things, the Religion Clauses protect the right of churches and other religious institutions to decide matters “ ‘of faith and doctrine’ ” without government intrusion. Hosanna-Tabor, 565 U. S., at 186 (quoting Kedroff, 344 U. S., at 116). State interference in that sphere would obviously violate the free exercise of religion, and any attempt by government to dictate or even to influence such matters would constitute one of the central attributes of an establishment of religion. The First Amendment outlaws such intrusion. The independence of religious institutions in matters of “faith and doctrine” is closely linked to independence in what we have termed “ ‘matters of church government.’ ” 565 U. S., at 186. This does not mean that religious institutions enjoy a general immunity from secular laws, but it does protect their autonomy with respect to internal management decisions that are essential to the institution’s central mission. And a component of this autonomy is the selection of the individuals who play certain key roles. The “ministerial exception” was based on this insight. Under this rule, courts are bound to stay out of employment disputes involving those holding certain important positions with churches and other religious institutions. The rule appears to have acquired the label “ministerial exception” because the individuals involved in pioneering cases were described as “ministers.” See McClure v. Salvation Army, 460 F.2d 553, 558–559 (CA5 1972); Rayburn v. General Conference of Seventh-day Adventists, 772 F.2d 1164, 1168 (CA4 1985). Not all pre-Hosanna-Tabor decisions applying the exception involved “ministers” or even members of the clergy. See, e.g., EEOC v. Southwestern Baptist Theological Seminary, 651 F.2d 277, 283–284 (CA5 1981); EEOC v. Roman Catholic Diocese of Raleigh, N. C., 213 F.3d 795, 800–801 (CA4 2000). But it is instructive to consider why a church’s independence on matters “of faith and doctrine” requires the authority to select, supervise, and if necessary, remove a minister without interference by secular authorities. Without that power, a wayward minister’s preaching, teaching, and counseling could contradict the church’s tenets and lead the congregation away from the faith.[9] The ministerial exception was recognized to preserve a church’s independent authority in such matters. B When the so-called ministerial exception finally reached this Court in Hosanna-Tabor, we unanimously recognized that the Religion Clauses foreclose certain employment discrimination claims brought against religious organizations. 565 U. S., at 188. The constitutional foundation for our holding was the general principle of church autonomy to which we have already referred: independence in matters of faith and doctrine and in closely linked matters of internal government. The three prior decisions on which we primarily relied drew on this broad principle, and none was exclusively concerned with the selection or supervision of clergy. Watson v. Jones, 13 Wall. 679 (1872), involved a dispute about the control of church property, and both Kedroff, 344 U.S. 94, and Serbian Eastern Orthodox Diocese for United States and Canada v. Milivojevich, 426 U.S. 696 (1976), also concerned the control of property, as well as the appointment and authority of bishops. In addition to these precedents, we looked to the “background” against which “the First Amendment was adopted.” Hosanna-Tabor, 565 U. S., at 183. We noted that 16th-century British statutes had given the Crown the power to fill high “religious offices” and to control the exercise of religion in other ways, and we explained that the founding generation sought to prevent a repetition of these practices in our country. Ibid. Because Cheryl Perich, the teacher in Hosanna-Tabor, had a title that included the word “minister,” we naturally concentrated on historical events involving clerical offices, but the abuses we identified were not limited to the control of appointments. We pointed to the various Acts of Uniformity, id., at 182, which dictated what ministers could preach and imposed penalties for non-compliance. Under the 1549 Act, a minister who “preach[ed,] declare[d,] or [spoke] any thing” in derogation of any part of the Book of Common Prayer could be sentenced to six months in jail for a first offense and life imprisonment for a third violation. Act of Uniformity, 2 & 3 Edw. 6, ch. 1. In addition, all other English subjects were forbidden to say anything against the Book of Common Prayer in “[i]nterludes[,] play[s,] song[s,] r[h]ymes, or by other open [w]ord[s].” Ibid. A 1559 law contained similar prohibitions. See Act of Uniformity, 1 Eliz., ch. 2. After the Restoration, Parliament enacted a new law with a similar aim. Ministers and “Lecturer[s]” were required to pledge “unfeigned assent and consent” to the Book of Common Prayer, and all schoolmasters, private tutors, and university professors were required to “conforme to the Liturgy of the Church of England” and not “to endeavour any change or alteration” of the church. Act of Uniformity, 1662, 14 Car. 2, ch. 4. British law continued to impose religious restrictions on education in the 18th century and past the time of the adoption of the First Amendment. The Schism or Established Church Act of 1714, 13 Ann., ch. 7, required that schoolmasters and tutors be licensed by a bishop. Non-conforming Protestants, as well as Catholics and Jews, could not teach at or attend the two universities, and as Blackstone wrote, “[p]ersons professing the popish religion [could] not keep or teach any school under pain of perpetual imprisonment.” 4 W. Blackstone, Commentaries on the Laws of England 55 (8th ed. 1778). The law also imposed penalties on “any person [who] sen[t] another abroad to be educated in the popish religion . . . or [who] contribute[d] to their maintenance when there.” Id., at 55–56. British colonies in North America similarly controlled both the appointment of clergy, see Hosanna-Tabor, 565 U. S., at 183, and the teaching of students. A Maryland law “prohibited any Catholic priest or lay person from keeping school, or taking upon himself the education of youth.” 2 T. Hughes, History of the Society of Jesus in North America: Colonial and Federal 443–444 (1917). In 1771, the Governor of New York was instructed to require that all schoolmasters arriving from England obtain a license from the Bishop of London. 3 C. Lincoln, The Constitutional History of New York 485, 745 (1906). New York law also required an oath and license for any “ ‘vagrant Preacher, Moravian, or disguised Papist’ ” to “ ‘Preach or Teach, Either in Public or Private.’ ” S. Cobb, The Rise of Religious Liberty in America 358 (1902). C In Hosanna-Tabor, Cheryl Perich, a kindergarten and fourth grade teacher at an Evangelical Lutheran school, filed suit in federal court, claiming that she had been discharged because of a disability, in violation of the Americans with Disabilities Act of 1990 (ADA), 42 U. S. C. §12112(a). The school responded that the real reason for her dismissal was her violation of the Lutheran doctrine that disputes should be resolved internally and not by going to outside authorities. We held that her suit was barred by the “ministerial exception” and noted that it “concern[ed] government interference with an internal church decision that affects the faith and mission of the church.” 565 U. S., at 190. We declined “to adopt a rigid formula for deciding when an employee qualifies as a minister,” and we added that it was “enough for us to conclude, in this our first case involving the ministerial exception, that the exception covers Perich, given all the circumstances of her employment.” Id., at 190–191. We identified four relevant circumstances but did not highlight any as essential. First, we noted that her church had given Perich the title of “minister, with a role distinct from that of most of its members.” Id., at 191. Although she was not a minister in the usual sense of the term—she was not a pastor or deacon, did not lead a congregation, and did not regularly conduct religious services—she was classified as a “called” teacher, as opposed to a lay teacher, and after completing certain academic requirements, was given the formal title “ ‘Minister of Religion, Commissioned.’ ” Id., at 177–178, 191. Second, Perich’s position “reflected a significant degree of religious training followed by a formal process of commissioning.” Id., at 191. Third, “Perich held herself out as a minister of the Church by accepting the formal call to religious service, according to its terms,” and by claiming certain tax benefits. Id., at 191–192. Fourth, “Perich’s job duties reflected a role in conveying the Church’s message and carrying out its mission.” Id., at 192. The church charged her with “ ‘lead[ing] others toward Christian maturity’ ” and “ ‘teach[ing] faithfully the Word of God, the Sacred Scriptures, in its truth and purity and as set forth in all the symbolical books of the Evangelical Lutheran Church.’ ” Ibid. Although Perich also provided instruction in secular subjects, she taught religion four days a week, led her students in prayer three times a day, took her students to a chapel service once a week, and participated in the liturgy twice a year. “As a source of religious instruction,” we explained, “Perich performed an important role in transmitting the Lutheran faith to the next generation.” Ibid. The case featured two concurrences. In the first, Justice Thomas stressed that courts should “defer to a religious organization’s good-faith understanding of who qualifies as its minister.” Id., at 196. That is so, Justice Thomas explained, because “[a] religious organization’s right to choose its ministers would be hollow . . . if secular courts could second-guess” the group’s sincere application of its religious tenets. Id., at 197. The second concurrence argued that application of the “ministerial exception” should “focus on the function performed by persons who work for religious bodies” rather than labels or designations that may vary across faiths. Id., at 198 (opinion of Alito, J., joined by Kagan, J.). This opinion viewed the title of “minister” as “relevant” but “neither necessary nor sufficient.” Id., at 202. It noted that “most faiths do not employ the term ‘minister’ ” and that some “consider the ministry to consist of all or a very large percentage of their members.” Ibid. The opinion concluded that the “ ‘ministerial’ exception” “should apply to any ‘employee’ who leads a religious organization, conducts worship services or important religious ceremonies or rituals, or serves as a messenger or teacher of its faith.” Id., at 199. D 1 In determining whether a particular position falls within the Hosanna-Tabor exception, a variety of factors may be important.[10] The circumstances that informed our decision in Hosanna-Tabor were relevant because of their relationship to Perich’s “role in conveying the Church’s message and carrying out its mission,” id., at 192, but the other noted circumstances also shed light on that connection. In a denomination that uses the term “minister,” conferring that title naturally suggests that the recipient has been given an important position of trust. In Perich’s case, the title that she was awarded and used demanded satisfaction of significant academic requirements and was conferred only after a formal approval process, id., at 191, and those circumstances also evidenced the importance attached to her role, ibid. But our recognition of the significance of those factors in Perich’s case did not mean that they must be met—or even that they are necessarily important—in all other cases. Take the question of the title “minister.” Simply giving an employee the title of “minister” is not enough to justify the exception. And by the same token, since many religious traditions do not use the title “minister,” it cannot be a necessary requirement. Requiring the use of the title would constitute impermissible discrimination, and this problem cannot be solved simply by including positions that are thought to be the counterparts of a “minister,” such as priests, nuns, rabbis, and imams. See Brief for Respondents 21. Nuns are not the same as Protestant ministers. A brief submitted by Jewish organizations makes the point that “Judaism has many ‘ministers,’ ” that is, “the term ‘minister’ encompasses an extensive breadth of religious functionaries in Judaism.”[11] For Muslims, “an inquiry into whether imams or other leaders bear a title equivalent to ‘minister’ can present a troubling choice between denying a central pillar of Islam—i.e., the equality of all believers—and risking loss of ministerial exception protections.”[12] If titles were all-important, courts would have to decide which titles count and which do not, and it is hard to see how that could be done without looking behind the titles to what the positions actually entail. Moreover, attaching too much significance to titles would risk privileging religious traditions with formal organizational structures over those that are less formal. For related reasons, the academic requirements of a position may show that the church in question regards the position as having an important responsibility in elucidating or teaching the tenets of the faith. Presumably the purpose of such requirements is to make sure that the person holding the position understands the faith and can explain it accurately and effectively. But insisting in every case on rigid academic requirements could have a distorting effect. This is certainly true with respect to teachers. Teaching children in an elementary school does not demand the same formal religious education as teaching theology to divinity students. Elementary school teachers often teach secular subjects in which they have little if any special training. In addition, religious traditions may differ in the degree of formal religious training thought to be needed in order to teach. See, e.g., Brief for Ethics and Religious Liberty Commission of the Southern Baptist Convention et al. as Amici Curiae 12 (“many Protestant groups have historically rejected any requirement of formal theological training”). In short, these circumstances, while instructive in Hosanna-Tabor, are not inflexible requirements and may have far less significance in some cases. What matters, at bottom, is what an employee does. And implicit in our decision in Hosanna-Tabor was a recognition that educating young people in their faith, inculcating its teachings, and training them to live their faith are responsibilities that lie at the very core of the mission of a private religious school. As we put it, Perich had been entrusted with the responsibility of “transmitting the Lutheran faith to the next generation.” 565 U. S., at 192. One of the concurrences made the same point, concluding that the exception should include “any ‘employee’ who leads a religious organization, conducts worship services or important religious ceremonies or rituals, or serves as a messenger or teacher of its faith.” Id., at 199 (opinion of Alito, J.) (emphasis added). Religious education is vital to many faiths practiced in the United States. This point is stressed by briefs filed in support of OLG and St. James by groups affiliated with a wide array of faith traditions. In the Catholic tradition, religious education is “ ‘intimately bound up with the whole of the Church’s life.’ ” Catechism of the Catholic Church 8 (2d ed. 2016). Under canon law, local bishops must satisfy themselves that “those who are designated teachers of religious instruction in schools . . . are outstanding in correct doctrine, the witness of a Christian life, and teaching skill.” Code of Canon Law, Canon 804, §2 (Eng. transl. 1998). Similarly, Protestant churches, from the earliest settlements in this country, viewed education as a religious obligation. A core belief of the Puritans was that education was essential to thwart the “chief project of that old deluder, Satan, to keep men from the knowledge of the Scriptures.”[13] Thus, in 1647, the Massachusetts General Court passed what has been called the Old Deluder Satan Act requiring every sizable town to establish a school.[14] Most of the oldest educational institutions in this country were originally established by or affiliated with churches, and in recent years, non-denominational Christian schools have proliferated with the aim of inculcating Biblical values in their students.[15] Many such schools expressly set themselves apart from public schools that they believe do not reflect their values.[16] Religious education is a matter of central importance in Judaism. As explained in briefs submitted by Jewish organizations, the Torah is understood to require Jewish parents to ensure that their children are instructed in the faith.[17] One brief quotes Maimonides’s statement that religious instruction “is an obligation of the highest order, entrusted only to a schoolteacher possessing ‘fear of Heaven.’ ”[18] “The contemporary American Jewish community continues to place the education of children in its faith and rites at the center of its communal efforts.”[19] Religious education is also important in Islam. “[T]he acquisition of at least rudimentary knowledge of religion and its duties [is] mandatory for the Muslim individual.”[20] This precept is traced to the Prophet Muhammad, who proclaimed that “ ‘[t]he pursuit of knowledge is incumbent on every Muslim.’ ”[21] “[T]he development of independent private Islamic schools ha[s] become an important part of the picture of Muslim education in America.”[22] The Church of Jesus Christ of Latter-day Saints has a long tradition of religious education, with roots in revelations given to Joseph Smith. See Doctrine and Covenants of the Church of Jesus Christ of Latter-day Saints §93:36 (2013). “The Church Board of Education has established elementary, middle, or secondary schools in which both secular and religious instruction is offered.”[23] Seventh-day Adventists “trace the importance of education back to the Garden of Eden.”[24] Seventh-day Adventist formation “restore[s] human beings into the image of God as revealed by the life of Jesus Christ” and focuses on the development of “knowledge, skills, and understandings to serve God and humanity.”[25] This brief survey does not do justice to the rich diversity of religious education in this country, but it shows the close connection that religious institutions draw between their central purpose and educating the young in the faith. 2 When we apply this understanding of the Religion Clauses to the cases now before us, it is apparent that Morrissey-Berru and Biel qualify for the exemption we recognized in Hosanna-Tabor. There is abundant record evidence that they both performed vital religious duties. Educating and forming students in the Catholic faith lay at the core of the mission of the schools where they taught, and their employment agreements and faculty handbooks specified in no uncertain terms that they were expected to help the schools carry out this mission and that their work would be evaluated to ensure that they were fulfilling that responsibility. As elementary school teachers responsible for providing instruction in all subjects, including religion, they were the members of the school staff who were entrusted most directly with the responsibility of educating their students in the faith. And not only were they obligated to provide instruction about the Catholic faith, but they were also expected to guide their students, by word and deed, toward the goal of living their lives in accordance with the faith. They prayed with their students, attended Mass with the students, and prepared the children for their participation in other religious activities. Their positions did not have all the attributes of Perich’s. Their titles did not include the term “minister,” and they had less formal religious training, but their core responsibilities as teachers of religion were essentially the same. And both their schools expressly saw them as playing a vital part in carrying out the mission of the church, and the schools’ definition and explanation of their roles is important. In a country with the religious diversity of the United States, judges cannot be expected to have a complete understanding and appreciation of the role played by every person who performs a particular role in every religious tradition. A religious institution’s explanation of the role of such employees in the life of the religion in question is important. III In holding that Morrissey-Berru and Biel did not fall within the Hosanna-Tabor exception, the Ninth Circuit misunderstood our decision. Both panels treated the circumstances that we found relevant in that case as checklist items to be assessed and weighed against each other in every case, and the dissent does much the same. That approach is contrary to our admonition that we were not imposing any “rigid formula.” 565 U. S., at 190. Instead, we called on courts to take all relevant circumstances into account and to determine whether each particular position implicated the fundamental purpose of the exception.[26] The Ninth Circuit’s rigid test produced a distorted analysis. First, it invested undue significance in the fact that Morrissey-Berru and Biel did not have clerical titles. 769 Fed. Appx., at 460; 911 F. 3d, at 608–609; Post, at 15–16. It is true that Perich’s title included the term “minister,” but we never said that her title (or her reference to herself as a “minister”) was necessary to trigger the Hosanna-Tabor exception. Instead, “those considerations . . . merely made Perich’s case an especially easy one.” Brief for United States as Amicus Curiae 19. Moreover, both Morrissey-Berru and Biel had titles. They were Catholic elementary school teachers, which meant that they were their students’ primary teachers of religion. The concept of a teacher of religion is loaded with religious significance. The term “rabbi” means teacher, and Jesus was frequently called rabbi.[27] And if a more esoteric title is needed, they were both regarded as “catechists.”[28] Second, the Ninth Circuit assigned too much weight to the fact that Morrissey-Berru and Biel had less formal religious schooling than Perich. 769 Fed. Appx., at 460–461; 911 F. 3d, at 608; post, at 16–17. The significance of formal training must be evaluated in light of the age of the students taught and the judgment of a religious institution regarding the need for formal training. The schools in question here thought that Morrissey-Berru and Biel had a sufficient understanding of Catholicism to teach their students,[29] and judges have no warrant to second-guess that judgment or to impose their own credentialing requirements. Third, the St. James panel inappropriately diminished the significance of Biel’s duties because they did not evince “close guidance and involvement” in “students’ spiritual lives.” 911 F. 3d, at 609; post, at 12, 17–18. Specifically, the panel majority suggested that Biel merely taught “religion from a book required by the school,” “joined” students in prayer, and accompanied students to Mass in order to keep them “ ‘quiet and in their seats.’ ” 911 F. 3d, at 609. This misrepresents the record and its significance. For better or worse, many primary school teachers tie their instruction closely to textbooks, and many faith traditions prioritize teaching from authoritative texts. See Brief for InterVarsity Christian Fellowship USA et al. as Amici Curiae 26; Brief for Senator Mike Lee et al. as Amici Curiae 24–27. As for prayer, Biel prayed with her students, taught them prayers, and supervised the prayers led by students. She prepared them for Mass, accompanied them to Mass, and prayed with them there. See supra, at 8–9. In Biel’s appeal, the Ninth Circuit suggested that the Hosanna-Tabor exception should be interpreted narrowly because the ADA, 42 U. S. C. §12101 et seq., and Title VII, §2000e–2, contain provisions allowing religious employers to give preference to members of a particular faith in employing individuals to do work connected with their activities. 911 F. 3d, at 611, n. 5; post, at 2–3. But the Hosanna-Tabor exception serves an entirely different purpose. Think of the quintessential case where a church wants to dismiss its minister for poor performance. The church’s objection in that situation is not that the minister has gone over to some other faith but simply that the minister is failing to perform essential functions in a satisfactory manner. While the Ninth Circuit treated the circumstances that we cited in Hosanna-Tabor as factors to be assessed and weighed in every case, respondents would make the governing test even more rigid. In their view, courts should begin by deciding whether the first three circumstances—a ministerial title, formal religious education, and the employee’s self-description as a minister—are met and then, in order to check the conclusion suggested by those factors, ask whether the employee performed a religious function. Brief for Respondents 20–24. For reasons already explained, there is no basis for treating the circumstances we found relevant in Hosanna-Tabor in such a rigid manner. Respondents go further astray in suggesting that an employee can never come within the Hosanna-Tabor exception unless the employee is a “practicing” member of the religion with which the employer is associated. Brief for Respondents 12–13, 21. In hiring a teacher to provide religious instruction, a religious school is very likely to try to select a person who meets this requirement, but insisting on this as a necessary condition would create a host of problems. As pointed out by petitioners, determining whether a person is a “co-religionist” will not always be easy. See Reply Brief 14 (“Are Orthodox Jews and non-Orthodox Jews co- religionists? . . . Would Presbyterians and Baptists be similar enough? Southern Baptists and Primitive Baptists?”). Deciding such questions would risk judicial entanglement in religious issues. Expanding the “co-religionist” requirement, Brief for Respondents 28–29, 44, to exclude those who no longer practice the faith would be even worse, post, at 13. Would the test depend on whether the person in question no longer considered himself or herself to be a member of a particular faith? Or would the test turn on whether the faith tradition in question still regarded the person as a member in some sense? Respondents argue that Morrissey-Berru cannot fall within the Hosanna-Tabor exception because she said in connection with her lawsuit that she was not “a practicing Catholic,” but acceptance of that argument would require courts to delve into the sensitive question of what it means to be a “practicing” member of a faith, and religious employers would be put in an impossible position. Morrissey-Berru’s employment agreements required her to attest to “good standing” with the church. See App. 91, 144, 154. Beyond insisting on such an attestation, it is not clear how religious groups could monitor whether an employee is abiding by all religious obligations when away from the job. Was OLG supposed to interrogate Morrissey-Berru to confirm that she attended Mass every Sunday? Respondents argue that the Hosanna-Tabor exception is not workable unless it is given a rigid structure, but we declined to adopt a “rigid formula” in Hosanna-Tabor, and the lower courts have been applying the exception for many years without such a formula. Here, as in Hosanna-Tabor, it is sufficient to decide the cases before us. When a school with a religious mission entrusts a teacher with the responsibility of educating and forming students in the faith, judicial intervention into disputes between the school and the teacher threatens the school’s independence in a way that the First Amendment does not allow. * * * For these reasons, the judgment of the Court of Appeals in each case is reversed, and the cases are remanded for proceedings consistent with this opinion. It is so ordered. Notes 1 A major theme of the dissent is that we do not heed the rule that, in deciding whether summary judgment is proper, a court must view the facts in the light most favorable to the party against whom summary judgment is sought. See post, at 1–2, 8, 10–11, 14 (opinion of Sotomayor, J.). But the dissent, which approves of the Ninth Circuit’s reasoning, seems to forget that the Ninth Circuit in effect granted summary judgment in favor of the teachers on the issue of the applicability of the so-called ministerial exception. It did not remand for a trial on that issue but instead held that the exception did not apply. 769 Fed. Appx. 460, 460–461 (2019); 911 F.3d 603, 605, 611, n. 6 (2018). Therefore, if any material facts were genuinely in dispute, the relevant parts of the record would have to be viewed in the light most favorable to the schools. The dissent, however, does exactly the opposite. In any event, the dissent’s comments about summary judgment are so much smoke. It does not identify any disputed fact that is essential to our holding, and, although there are differences of opinion on certain facts, neither party takes the position that any material fact is genuinely in dispute. 2 After bringing suit, Morrissey-Berru filed a declaration stating that she is “not currently a practicing Catholic.” ER 248. It is unclear what Morrissey-Berru means by “practicing.” There is, however, no hint in the record that Morrissey-Berru considered herself a non-practicing Catholic during her employment at OLG. See infra, at 5 (describing religious observation). 3 This appears to have been a standard contract used within the Archdiocese of Los Angeles. See App. 154; cf. id., at 230. 4 It is not entirely clear from the record whether teachers at OLG must be Catholic. Id., at 113 (“ [Q.] ‘Is it a requirement that a teacher be Catholic in order to teach at OLG School? Yes or no?’ [A.] Yes”); but see ibid. (“Exceptions can be made”); id., at 154 (“If you are Roman Catholic[,] you must be in good standing with the Church” (emphasis added)). But it is clearly preferred. Id., at 110. 5 Record in No. 2:16–CV–09353 (CD Cal.), Doc. 33, ¶9. 6 Biel died during the pendency of this suit, which has subsequently been litigated by her husband as representative of her estate. Record in No. 17–55180 (CA9), Docs. 112, 113. 7 The school principal stated that she prefers that teachers at the school be Catholic. ER 32 (St. James). 8 Record in No. 2:15–CV–04248 (CD Cal.), Doc. 67–1, ¶¶4–7. 9 Cf. McConnell, Establishment and Disestablishment at the Founding, Part I: Establishment of Religion, 44 Wm. & Mary L. Rev. 2105, 2141 (2003) (politically appointed ministers in colonial Virginia were, in the view of the faithful, often “less than zealous in their spiritual responsibilities and less than irreproachable in their personal morals”). 10 In considering the circumstances of any given case, courts must take care to avoid “resolving underlying controversies over religious doctrine.” Presbyterian Church in U. S. v. Mary Elizabeth Blue Hull Memorial Presbyterian Church, 393 U.S. 440, 449 (1969); ibid. (“ First Amendment values are plainly jeopardized when . . . litigation is made to turn on the resolution by civil courts of controversies over religious doctrine and practice”); see also Serbian Eastern Orthodox Diocese for United States and Canada v. Milivojevich, 426 U.S. 696, 715, n. 8 (1976) (“ ‘It is not to be supposed that the judges of the civil courts can be as competent in the ecclesiastical law and religious faith of all these bodies as the ablest men in each are in reference to their own’ ” (quoting Watson v. Jones, 13 Wall. 679, 729 (1872))); cf. Thomas v. Review Bd. of Ind. Employment Security Div., 450 U.S. 707, 714–716 (1981). 11 Brief for Colpa et al. as Amici Curiae i, 3 (quotation modified). 12 Brief for Asma T. Uddin as Amicus Curiae 2. 13 Old Deluder Satan Act of 1647, in The Laws and Liberties of Massachusetts 47 (M. Farrand ed. 1929). 14 Ibid. 15 See P. Parsons, Inside America’s Christian Schools (1987); see also Association of Christian Schools International, Why Christian Schooling?, https://www.acsi.org/membership/why-christian-schooling; Association of Classical Christian Schools, What is CCE?, https://classicalchristian.org/what-is-cce/?v=a44707111a05. 16 R. Dreher, The Benedict Option 146, 155, 160 (2017); see, e.g., J. Ekeland & B. Walton, Discover Christian Schools: Ten Differences, https : / / discoverchristianschools.com/wp-content/uploads/2019/02/DCS_TenDifferences.pdf. 17 See Deuteronomy 6:7, 11:19. 18 Brief for General Conference of Seventh-day Adventists et al. as Amici Curiae 7–8 (quoting Maimonides, Mishne Torah, Hilkhot Talmud Torah 1:2; 2:1, 3). 19 Brief for Church of God in Christ, Inc., et al. as Amici Curiae 15. 20 Afsaruddin, Muslim Views on Education: Parameters, Purview, and Possibilities, 44 J. Cath. Legal Studies 143, 143–144 (2005). 21 Id., at 143. 22 Haddad & Smith, Introduction: The Challenge of Islamic Education in North America, in Educating the Muslims of America 3, 6, 11 (Y. Haddad, F. Senzai, & J. Smith eds. 2009). 23 Berrett, Church Educational System (CES) in 1 Encyclopedia of Mormonism 274, 275 (D. Ludlow ed. 1992). 24 Brief for General Conference of Seventh-day Adventists et al. as Amici Curiae 9. 25 Seventh-day Adventist Church, About Us, https://adventisteducation.org/abt.html. 26 The dissent charges that we transform the holding in Hosanna-Tabor, but that is what the dissent does. Post, at 8. According to the dissent: “Hosanna-Tabor charted a way to separate leaders who ‘personify’ a church’s ‘beliefs’ [and] ‘minister to the faithful’ from individuals who may simply relay religious tenets.” Post, at 7 (quoting 565 U. S., at 188, 195). The dissent cobbles together this new test by taking phrases out of context from separate passages and inserting a proposition never suggested in Hosanna-Tabor, namely, that an individual cannot qualify for the exception if he or she “simply relay[s] religious tenets” without “ ‘minister[ing] to the faithful.’ ” Post, at 7. Hosanna-Tabor never adopted this unworkable test. It did not suggest that the exception it recognized applied only to “leaders.” Post, at 4–5, and n. 1. The term is never used in the opinion of the Court. Insisting on leadership as a qualification would shrink the exception even more than respondents advocate. For example, they agree that it should apply to nuns, see Brief for Respondents 21, but, under the dissent’s test, is every cloistered nun—or every cloistered monk—disqualified? And even if leadership were a requirement, why couldn’t a religious teacher be regarded as a leader of the students in the class? Nor did our opinion in Hosanna-Tabor draw a critical distinction between a person who “simply relay[s] religious tenets” and one who relays such tenets while also “ ‘minister[ing] to the faithful.’ ” Post, at 7. A teacher, such as an instructor in a class on world religions, who merely provides a description of the beliefs and practices of a religion without making any effort to inculcate those beliefs could not qualify for the exception, but otherwise the distinction makes no sense. If a member of the Christian clergy or a rabbi spends almost all of his or her time studying Scripture or theology and writing instead of ministering to a congregation, would that individual fall outside the exception as understood by the dissent? 27 See, e.g., Mark 9:5, 11:21; John 1:38, 3:26, 4:31, 6:25, 9:2. 28 See App. to Pet. for Cert. in No. 19–267, at 56a, 60a; ER 593 (St. James) (“teachers are expected to . . . engage in catechetical . . . development”); Record in No. 2:15–CV–04248 (CD Cal.), Doc. 67–1, ¶10 (“requir[ing]” attendance at “Catholic education conference” to “prepare teachers as religious educators”). 29 The record also makes clear (contrary to the Ninth Circuit’s and dissent’s conclusion, post, at 17) that Morrissey-Berru and Biel “held themselves out” as authorities on religion to their students, and, by extension, their families. See supra, at 2–9.
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The First Amendment protects the right of religious institutions “to decide for themselves, free from state interference, matters of church government as well as those of faith and doctrine.” Kedroff v. Saint Nicholas Cathedral of Russian Orthodox Church in North America, 344 U.S. 94, 116. Applying this principle, this Court held in Hosanna-Tabor Evangelical Lutheran Church and School v. EEOC, 565 U.S. 171, that the First Amendment barred a court from entertaining an employment discrimination claim brought by an elementary school teacher, Cheryl Perich, against the religious school where she taught. Adopting the so-called “ministerial exception” to laws governing the employment relationship between a religious institution and certain key employees, the Court found relevant Perich’s title as a “Minister of Religion, Commissioned,” her educational training, and her responsibility to teach religion and participate with students in religious activities. Id., at 190–191. In these cases, two elementary school teachers at Roman Catholic schools in the Archdiocese of Los Angeles had teaching responsibilities similar to Perich’s. Agnes Morrissey-Berru taught at Our Lady of Guadalupe School (OLG), and Kristen Biel taught at St. James School. Both were employed under nearly identical agreements that set out the schools’ mission to develop and promote a Catholic School faith community; imposed commitments regarding religious instruction, worship, and personal modeling of the faith; and explained that teachers’ performance would be reviewed on those bases. Each was also required to comply with her school’s faculty handbook, which set out similar expectations. Each taught religion in the classroom, worshipped with her students, prayed with her students, and had her performance measured on religious bases. Both teachers sued their schools after their employment was terminated. Morrissey-Berru claimed that OLG had demoted her and had failed to renew her contract in order to replace her with a younger teacher in violation of the Age Discrimination in Employment Act of 1967. OLG invoked Hosanna-Tabor’s “ministerial exception” and successfully moved for summary judgment, but the Ninth Circuit reversed, holding that Morrissey-Berru did not fall within the exception because she did not have the formal title of “minister,” had limited formal religious training, and did not hold herself out publicly as a religious leader. Biel alleged that St. James discharged her because she had requested a leave of absence to obtain breast cancer treatment. Like OLG, St. James obtained summary judgment under the “ministerial exception.” But the Ninth Circuit reversed, reasoning that Biel lacked Perich’s credentials, religious training, and ministerial background. Held: The First Amendment’s Religion Clauses foreclose the adjudication of Morrissey-Berru’s and Biel’s employment-discrimination claims. Pp. 10–27. (a) The independence of religious institutions in matters of “faith and doctrine” is closely linked to independence in what the Court has termed “ ‘matters of church government.’ ” Hosanna-Tabor, 565 U. S., at 186. For this reason, courts are bound to stay out of employment disputes involving those holding certain important positions with churches and other religious institutions. Pp. 10–11. (b) When the “ministerial exception” reached this Court in Hosanna-Tabor, the Court looked to precedent and the “background” against which “the First Amendment was adopted,” 565 U. S., at 183, and unanimously recognized that the Religion Clauses foreclose certain employment-discrimination claims brought against religious organizations, id., at 188. Pp. 11–14. (c) In Hosanna-Tabor, the Court applied the “ministerial exception” but declined “to adopt a rigid formula for deciding when an employee qualifies as a minister.” 565 U. S., at 190. Instead, the Court identified four relevant circumstances of Perich’s employment at an Evangelical Lutheran school. First, Perich’s church had given her the title of “minister, with a role distinct from that of most of its members.” Id., at 191. Second, her position “reflected a significant degree of religious training followed by a formal process of commissioning.” Ibid. Third, she “held herself out as a minister of the Church” and claimed certain tax benefits. Id., at 191–192. Fourth, her “job duties reflected a role in conveying the Church’s message and carrying out its mission.” Id., at 192. Pp. 14–16. (d) A variety of factors may be important in determining whether a particular position falls within the ministerial exception. The circumstances that informed the Court’s decision in Hosanna-Tabor were relevant because of their relationship to Perich’s “role in conveying the Church’s message and carrying out its mission.” 565 U. S., at 192. But the recognition of the significance of those factors in Perich’s case did not mean that they must be met in all other cases. What matters is what an employee does. Implicit in the Hosanna-Tabor decision was a recognition that educating young people in their faith, inculcating its teachings, and training them to live their faith are responsibilities that lie at the very core of a private religious school’s mission. Pp. 16–21. (e) Applying this understanding of the Religion Clauses here, it is apparent that Morrissey-Berru and Biel qualify for the exception recognized in Hosanna-Tabor. There is abundant record evidence that they both performed vital religious duties, such as educating their students in the Catholic faith and guiding their students to live their lives in accordance with that faith. Their titles did not include the term “minister” and they had less formal religious training than Perich, but their core responsibilities were essentially the same. And their schools expressly saw them as playing a vital role in carrying out the church’s mission. A religious institution’s explanation of the role of its employees in the life of the religion in question is important. Pp. 21–22. (f) The Ninth Circuit mistakenly treated the circumstances the Court found relevant in Hosanna-Tabor as a checklist of items to be assessed and weighed against each other. That rigid test produced a distorted analysis. First, it invested undue significance in the fact that Morrissey-Berru and Biel did not have clerical titles. Second, it assigned too much weight to the fact that Morrissey-Berru and Biel had less formal religious schooling that Perich. Third, the St. James panel inappropriately diminished the significance of Biel’s duties. Respondents would make Hosanna-Tabor’s governing test even more rigid. And they go further astray in suggesting that an employee can never come within the Hosanna-Tabor exception unless the employee is a “practicing” member of the religion with which the employer is associated. Deciding such questions risks judicial entanglement in religious issues. Pp. 22–27. No. 19–267, 769 Fed. Appx. 460; No. 19–348, 911 F.3d 603, reversed and remanded. Alito, J., delivered the opinion of the Court, in which Roberts, C. J., and Thomas, Breyer, Kagan, Gorsuch, and Kavanaugh, JJ., joined. Thomas, J., filed a concurring opinion, in which Gorsuch, J., joined. Sotomayor, J., filed a dissenting opinion, in which Ginsburg, J., joined. Notes 1 Together with No. 19–348, St. James School v. Biel, as Personal Representative of the Estate of Biel, on certiorari to the same Court.
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The people of the State of California do enact as follows:
SECTION 1.
Section 4119.8 is added to the Business and Professions Code, to read:
4119.8.
(a) Notwithstanding any other law, a pharmacy may furnish naloxone hydrochloride or another opioid antagonist to a school district, county office of education, or charter school pursuant to Section 49414.3 of the Education Code if all of the following are met:
(1) The naloxone hydrochloride or another opioid antagonist is furnished exclusively for use at a school district schoolsite, county office of education schoolsite, or charter school.
(2) A physician and surgeon provides a written order that specifies the quantity of naloxone hydrochloride or another opioid antagonist to be furnished.
(b) Records regarding the acquisition and disposition of naloxone hydrochloride or another opioid antagonist furnished pursuant to subdivision (a) shall be maintained by the school district, county office of education, or charter school for a period of three years from the date the records were created. The school district, county office of education, or charter school shall be responsible for monitoring the supply of naloxone hydrochloride or another opioid antagonist and ensuring the destruction of expired naloxone hydrochloride or another opioid antagonist.
SEC. 2.
Section 49414.3 is added to the Education Code, to read:
49414.3.
(a) School districts, county offices of education, and charter schools may provide emergency naloxone hydrochloride or another opioid antagonist to school nurses or trained personnel who have volunteered pursuant to subdivision (d), and school nurses or trained personnel may use naloxone hydrochloride or another opioid antagonist to provide emergency medical aid to persons suffering, or reasonably believed to be suffering, from an opioid overdose.
(b) For purposes of this section, the following terms have the following meanings:
(1) “Authorizing physician and surgeon” may include, but is not limited to, a physician and surgeon employed by, or contracting with, a local educational agency, a medical director of the local health department, or a local emergency medical services director.
(2) “Auto-injector” means a disposable delivery device designed for the automatic injection of a premeasured dose of an opioid antagonist into the human body and approved by the federal Food and Drug Administration for layperson use.
(3) “Opioid antagonist” means naloxone hydrochloride or another drug approved by the federal Food and Drug Administration that, when administered, negates or neutralizes in whole or in part the pharmacological effects of an opioid in the body, and has been approved for the treatment of an opioid overdose.
(4) “Qualified supervisor of health” may include, but is not limited to, a school nurse.
(5) “Volunteer” or “trained personnel” means an employee who has volunteered to administer naloxone hydrochloride or another opioid antagonist to a person if the person is suffering, or reasonably believed to be suffering, from an opioid overdose, has been designated by a school, and has received training pursuant to subdivision (d).
(c) Each public and private elementary and secondary school in the state may voluntarily determine whether or not to make emergency naloxone hydrochloride or another opioid antagonist and trained personnel available at its school. In making this determination, a school shall evaluate the emergency medical response time to the school and determine whether initiating emergency medical services is an acceptable alternative to naloxone hydrochloride or another opioid antagonist and trained personnel. A private elementary or secondary school choosing to exercise the authority provided under this subdivision shall not receive state funds specifically for purposes of this subdivision.
(d) (1) Each public and private elementary and secondary school in the state may designate one or more volunteers to receive initial and annual refresher training, based on the standards developed pursuant to subdivision (e), regarding the storage and emergency use of naloxone hydrochloride or another opioid antagonist from the school nurse or other qualified person designated by an authorizing physician and surgeon. A benefit shall not be granted to or withheld from any individual based on his or her offer to volunteer, and there shall be no retaliation against any individual for rescinding his or her offer to volunteer, including after receiving training. Any school district, county office of education, or charter school choosing to exercise the authority provided under this subdivision shall provide the training for the volunteers at no cost to the volunteer and during the volunteer’s regular working hours.
(2) An employee who volunteers pursuant to this section may rescind his or her offer to administer emergency naloxone hydrochloride or another opioid antagonist at any time, including after receipt of training.
(e) (1) The Superintendent shall establish minimum standards of training for the administration of naloxone hydrochloride or another opioid antagonist that satisfies the requirements of paragraph (2). Every five years, or sooner as deemed necessary by the Superintendent, the Superintendent shall review minimum standards of training for the administration of naloxone hydrochloride or other opioid antagonists that satisfy the requirements of paragraph (2). For purposes of this subdivision, the Superintendent shall consult with organizations and providers with expertise in administering naloxone hydrochloride or another opioid antagonist and administering medication in a school environment, including, but not limited to, the California Society of Addiction Medicine, the Emergency Medical Services Authority, the California School Nurses Organization, the California Medical Association, the American Academy of Pediatrics, and others.
(2) Training established pursuant to this subdivision shall include all of the following:
(A) Techniques for recognizing symptoms of an opioid overdose.
(B) Standards and procedures for the storage, restocking, and emergency use of naloxone hydrochloride or another opioid antagonist.
(C) Basic emergency followup procedures, including, but not limited to, a requirement for the school or charter school administrator or, if the administrator is not available, another school staff member to call the emergency 911 telephone number and to contact the pupil’s parent or guardian.
(D) Recommendations on the necessity of instruction and certification in cardiopulmonary resuscitation.
(E) Written materials covering the information required under this subdivision.
(3) Training established pursuant to this subdivision shall be consistent with the most recent guidelines for medication administration issued by the department.
(4) A school shall retain for reference the written materials prepared under subparagraph (E) of paragraph (2).
(5) The department shall include on its Internet Web site a clearinghouse for best practices in training nonmedical personnel to administer naloxone hydrochloride or another opioid antagonist to pupils.
(f) Any school district, county office of education, or charter school electing to utilize naloxone hydrochloride or another opioid antagonist for emergency aid shall distribute a notice at least once per school year to all staff that contains the following information:
(1) A description of the volunteer request stating that the request is for volunteers to be trained to administer naloxone hydrochloride or another opioid antagonist to a person if the person is suffering, or reasonably believed to be suffering, from an opioid overdose.
(2) A description of the training that the volunteer will receive pursuant to subdivision (d).
(3) The right of an employee to rescind his or her offer to volunteer pursuant to this section.
(4) A statement that no benefit will be granted to or withheld from any individual based on his or her offer to volunteer and that there will be no retaliation against any individual for rescinding his or her offer to volunteer, including after receiving training.
(g) (1) A qualified supervisor of health at a school district, county office of education, or charter school electing to utilize naloxone hydrochloride or another opioid antagonist for emergency aid shall obtain from an authorizing physician and surgeon a prescription for each school for naloxone hydrochloride or another opioid antagonist. A qualified supervisor of health at a school district, county office of education, or charter school shall be responsible for stocking the naloxone hydrochloride or another opioid antagonist and restocking it if it is used.
(2) If a school district, county office of education, or charter school does not have a qualified supervisor of health, an administrator at the school district, county office of education, or charter school shall carry out the duties specified in paragraph (1).
(3) A prescription pursuant to this subdivision may be filled by local or mail order pharmacies or naloxone hydrochloride or another opioid antagonist manufacturers.
(4) An authorizing physician and surgeon shall not be subject to professional review, be liable in a civil action, or be subject to criminal prosecution for the issuance of a prescription or order pursuant to this section, unless the physician and surgeon’s issuance of the prescription or order constitutes gross negligence or willful or malicious conduct.
(h) (1) A school nurse or, if the school does not have a school nurse or the school nurse is not onsite or available, a volunteer may administer naloxone hydrochloride or another opioid antagonist to a person exhibiting potentially life-threatening symptoms of an opioid overdose at school or a school activity when a physician is not immediately available. If the naloxone hydrochloride or another opioid antagonist is used it shall be restocked as soon as reasonably possible, but no later than two weeks after it is used. Naloxone hydrochloride or another opioid antagonist shall be restocked before its expiration date.
(2) Volunteers may administer naloxone hydrochloride or another opioid antagonist only by nasal spray or by auto-injector.
(3) A volunteer shall be allowed to administer naloxone hydrochloride or another opioid antagonist in a form listed in paragraph (2) that the volunteer is most comfortable with.
(i) A school district, county office of education, or charter school electing to utilize naloxone hydrochloride or another opioid antagonist for emergency aid shall ensure that each employee who volunteers under this section will be provided defense and indemnification by the school district, county office of education, or charter school for any and all civil liability, in accordance with, but not limited to, that provided in Division 3.6 (commencing with Section 810) of Title 1 of the Government Code. This information shall be reduced to writing, provided to the volunteer, and retained in the volunteer’s personnel file.
(j) (1) Notwithstanding any other law, a person trained as required under subdivision (d), who administers naloxone hydrochloride or another opioid antagonist, in good faith and not for compensation, to a person who appears to be experiencing an opioid overdose shall not be subject to professional review, be liable in a civil action, or be subject to criminal prosecution for his or her acts or omissions in administering the naloxone hydrochloride or another opioid antagonist.
(2) The protection specified in paragraph (1) shall not apply in a case of gross negligence or willful and wanton misconduct of the person who renders emergency care treatment by the use of naloxone hydrochloride or another opioid antagonist.
(3) Any public employee who volunteers to administer naloxone hydrochloride or another opioid antagonist pursuant to subdivision (d) is not providing emergency medical care “for compensation,” notwithstanding the fact that he or she is a paid public employee.
(k) A state agency, the department, or a public school may accept gifts, grants, and donations from any source for the support of the public school carrying out the provisions of this section, including, but not limited to, the acceptance of naloxone hydrochloride or another opioid antagonist from a manufacturer or wholesaler.
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(1) Existing law authorizes a pharmacy to furnish epinephrine auto-injectors to a school district, county office of education, or charter school if certain conditions are met. Existing law requires the school district, county office of education, or charter school to maintain records regarding the acquisition and disposition of epinephrine auto-injectors furnished by the pharmacy for a period of 3 years from the date the records were created.
This bill would authorize a pharmacy to furnish naloxone hydrochloride or another opioid antagonist to a school district, county office of education, or charter school if certain conditions are met. The bill would require the school district, county office of education, or charter school to maintain records regarding the acquisition and disposition of naloxone hydrochloride or another opioid antagonist furnished by the pharmacy for a period of 3 years from the date the records were created.
(2) Under existing law, the governing board of a school district is required to give diligent care to the health and physical development of pupils and may employ properly certified persons for that work. Existing law requires school districts, county offices of education, and charter schools to provide emergency epinephrine auto-injectors to school nurses or trained volunteer personnel and authorizes school nurses and trained personnel to use epinephrine auto-injectors to provide emergency medical aid to persons suffering, or reasonably believed to be suffering, from an anaphylactic reaction, as provided.
This bill would authorize a school district, county office of education, or charter school to provide emergency naloxone hydrochloride or another opioid antagonist to school nurses and trained personnel who have volunteered, as specified, and authorizes school nurses and trained personnel to use naloxone hydrochloride or another opioid antagonist to provide emergency medical aid to persons suffering, or reasonably believed to be suffering, from an opioid overdose. The bill would expressly authorize each public and private elementary and secondary school in the state to voluntarily determine whether or not to make emergency naloxone hydrochloride or another opioid antagonist and trained personnel available at its school and to designate one or more school personnel to receive prescribed training regarding naloxone hydrochloride or another opioid antagonist from individuals in specified positions.
The bill would require the Superintendent of Public Instruction to establish minimum standards of training for the administration of naloxone hydrochloride or another opioid antagonist, to review these standards every 5 years or sooner as specified, and to consult with organizations and providers with expertise in administering naloxone hydrochloride or another opioid antagonist and administering medication in a school environment in developing and reviewing those standards. The bill would require the State Department of Education to include on its Internet Web site a clearinghouse for best practices in training nonmedical personnel to administer naloxone hydrochloride or another opioid antagonist to pupils.
The bill would require a school district, county office of education, or charter school choosing to exercise the authority to provide emergency naloxone hydrochloride or another opioid antagonist to provide the training for the volunteers at no cost to the volunteers and during the volunteers’ regular working hours. The bill would require a qualified supervisor of health or administrator at a school district, county office of education, or charter school electing to utilize naloxone hydrochloride or another opioid antagonist for emergency medical aid to obtain the prescription for naloxone hydrochloride or another opioid antagonist from an authorizing physician and surgeon, as defined, and would authorize the prescription to be filled by local or mail order pharmacies or naloxone hydrochloride or another opioid antagonist manufacturers.
The bill would authorize school nurses or, if the school does not have a school nurse, a person who has received training regarding naloxone hydrochloride or another opioid antagonist to immediately administer naloxone hydrochloride or another opioid antagonist under certain circumstances. The bill would provide that volunteers may administer naloxone hydrochloride or another opioid antagonist only by nasal spray or by auto-injector, as specified.
The bill would prohibit an authorizing physician and surgeon from being subject to professional review, being liable in a civil action, or being subject to criminal prosecution for any act in the issuing of a prescription or order, pursuant to these provisions, unless the act constitutes gross negligence or willful or malicious conduct. The bill would prohibit a person trained under these provisions who administers naloxone hydrochloride or another opioid antagonist, in good faith and not for compensation, to a person who appears to be experiencing an opioid overdose from being subject to professional review, being liable in a civil action, or being subject to criminal prosecution for this administration.
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Background Sources of Retirement Income There are three main pillars of retirement income in the United States: Social Security benefits, employer-sponsored or other retirement savings plans, and individual savings and assets. Social Security Social Security is a cash benefit that partially replaces earnings when an individual retires or becomes disabled. The monthly benefit amount depends on a worker’s earnings history and the age at which he or she chooses to begin receiving benefits, as well as other factors. Social Security benefits are paid to workers who meet requirements for the time they have worked in covered employment, that is, jobs through which they have paid Social Security taxes. To qualify for retirement benefits, workers must typically have earned a minimum of 40 quarters of coverage (also referred to as credits) over their lifetime. Social Security benefits are calculated based on the highest 35 years of earnings on which workers paid Social Security taxes. Those who wait until the full retirement age, which has gradually increased from 65 to 67, to claim Social Security receive unreduced benefits. Social Security provides larger benefits, as a percentage of earnings, to lower earners than to higher earners. Social Security makes up a large portion of income for many older Americans, and older Americans face greater risk of poverty without Social Security benefits. We previously reported that data from the Federal Reserve Board’s most recent Survey of Consumer Finances showed that in 2016, among households age 65 and over, the bottom 20 percent, ranked by income, relied on Social Security retirement benefits for 81 percent of their income, on average. According to a 2014 Census report, about 43 percent of people age 65 or older would have incomes below the poverty line if they did not receive Social Security. Employer-Sponsored or Other Retirement Savings Plans The most common type of employer-sponsored retirement plan is a defined contribution plan, such as a 401(k) plan. Defined contribution plans generally allow individuals to accumulate tax-advantaged retirement savings in an individual account based on employee and employer contributions, and the investment returns (gains and losses) earned on the account. Individuals or employers may make contributions up to statutory limits. Individuals typically pay fees for account maintenance, such as investment management or record keeping fees. An employee may take funds out of the account prior to age 59 ½, but will owe taxes, possibly including an additional tax, for early withdrawal. Workers can also save for retirement through an individual retirement account (IRA). IRAs allow workers to receive favorable tax treatment for making contributions to an account up to certain statutory limits. Most IRAs are funded by assets rolled over from defined benefit and defined contribution plans when individuals change jobs or retire. Individuals must have taxable earnings to contribute to an IRA, and the amount of their contribution cannot exceed their earned income. IRAs also have account maintenance fees, which are generally higher than those charged to participants in employer-sponsored plans. IRAs are a major source of retirement assets. As we reported in 2017, IRAs held about $7.3 trillion in assets compared to $5.3 trillion held in defined contribution plans. Individual Savings and Assets Individuals may augment their retirement income from Social Security and employer-sponsored plans with their own savings, which includes any home equity and other non-retirement savings and investments. Non- retirement savings and investments might include income from interest, dividends, estates or trusts, or royalties. Selected Federal and State Efforts to Support Caregivers Through our review of literature and interviews with experts, we identified several federal and state efforts that may provide support to caregivers: Medicaid. This federal-state health financing program for low-income and medically needy individuals is the nation’s primary payer of long- term services and supports for disabled and aged individuals. Within broad federal requirements, states have significant flexibility to design and implement their programs based on their unique needs, resulting in 56 distinct state Medicaid programs. Under Medicaid requirements governing the provision of services, states generally must provide institutional care to Medicaid beneficiaries, while home and community based long-term services and supports is generally an optional service. All 50 states and the District of Columbia provide long-term care services to some Medicaid beneficiaries in home and community settings under a variety of programs authorized by statute. Some of these programs include self-directed services under which participants, or their representatives if applicable, have decision- making authority over certain services and take direct responsibility for managing their services with the assistance of a system of available supports. Under one such program, participants can hire certain relatives to provide personal care services. Tax-related provisions. Caregivers may be able to use dependent care accounts, tax credits, or tax deductions for financial assistance with caregiving costs. Dependent care accounts are set up through an employer and allow individuals to set aside pre-tax funds to care for a qualifying individual, such as a spouse who is unable to care for himself or herself. As an example of a tax credit, beginning in 2018, caregivers may be eligible to obtain a $500 non-refundable credit for qualifying dependents other than children, such as a parent or a spouse. As an example of a deduction, taxpayers may deduct the cost of qualifying medical expenses. The Family and Medical Leave Act of 1993 (FMLA). This act generally provides up to 12 weeks of unpaid leave per year for eligible employees to help care for a spouse, child, or parent with a serious health condition or for their own serious health condition, among other things. Employees are generally eligible for FMLA leave if they have worked for their employer at least 12 months, at least 1,250 hours over the past 12 months, and work at a worksite where the employer employs 50 or more employees or if the employer employs 50 or more employees within 75 miles of the worksite. The Older Americans Act of 1965. This act was passed to help older individuals remain in their homes and includes grant funding for services for older individuals. Since its reauthorization in 2000, the Older Americans Act of 1965 has provided supports for caregivers through programs such as the National Family Caregiver Support Program. This program provides grants to states to fund a range of supports to help caregivers. For example, the program provides access to respite care. According to the National Institute on Aging, respite care provides in-home or facility-based care by a trained care provider to give the primary caregiver short-term relief from caregiving. Paid sick leave. This form of leave provides pay protection to workers for short-term health needs, and paid family leave is used by employees for longer-term caregiving. No federal sick or paid family leave policy exists. However, as of March 2019, 10 states (AZ, CA, CT, MA, MD, NJ, OR, RI, VT, WA) and the District of Columbia (DC) have guaranteed paid sick days for specific workers, according to the National Partnership for Women and Families, with eligibility varying by state. As of February 2019, six states (CA, NJ, NY, RI, MA, and WA) and DC have paid family leave laws in effect or soon will be implementing them, according to the National Partnership for Women and Families. The covered family relationships, wage replacement rate, and funding mechanism of these programs vary by state. About One in 10 Americans Provided Parental or Spousal Care, with Women and Minority Caregivers Providing More Frequent Care Most Eldercare Providers Cared for a Parent or Spouse An estimated 45 million people per year provided unpaid eldercare from 2011 through 2017, according to American Time Use Survey (ATUS) data. About 26 million people—roughly one in 10 adults in the U.S. population—cared for their parent or spouse, and about 22 million people cared for other relatives, such as grandparents, aunts and uncles, or non- related adults (see fig. 1). Among parental and spousal caregivers, 88 percent (about 23.4 million people) provided care to a parent, and 12 percent (3.2 million people) provided care to a spouse. About 7.4 million parental or spousal caregivers (close to 30 percent) provided care for more than one person. Parental and Spousal Caregivers Had Similar Demographic Characteristics but Different Economic Circumstances We examined several demographic and economic characteristics of parental and spousal caregivers compared to the general population. Gender Women and men were almost evenly divided in the general population, but women were more likely than men to be parental or spousal caregivers, according to ATUS data from 2011 through 2017. Women made up 52 percent of the general population, but represented 56 percent of parental caregivers and 63 percent of spousal caregivers (see fig. 2). Parental caregivers were younger than spousal caregivers, but both groups were older, on average, than the general population. The average age of parental caregivers was 50, and the average age of spousal caregivers was 70, according to ATUS data. While about half of the general population was under 45, most parental caregivers were over 50, and most spousal caregivers were over 65 (see fig. 3). While far fewer in number, spousal caregivers were considerably older than parental caregivers. Almost three-quarters of spousal caregivers were over Social Security claiming age for full retirement benefits compared to less than 10 percent of parental caregivers. The racial/ethnic distribution of parental and spousal caregivers was consistent with the general population in that a significant majority of caregivers were white. When compared to the general population, caregivers were more likely to be white and less likely to be minorities. Marital Status The distribution in the marital status of parental caregivers was similar to the general population in that most people in the general population were married, followed by single, divorced, widowed, and separated. About two-thirds of parental caregivers were married, and not surprisingly, almost all spousal caregivers were married. Education Parental caregivers were more educated than spousal caregivers and the general population, according to ATUS data. For example, 38 percent of parental caregivers had completed college compared to 26 percent of spousal caregivers (see fig. 4). These differences may reflect that spousal caregivers are generally older and may come from a generation in which women were less likely to attend college. Parental caregivers were more likely to be employed and to have higher earnings than spousal caregivers and those in the general population. Over 70 percent of parental caregivers worked either full-time or part-time compared to 26 percent of spousal caregivers and 62 percent of the general population (see fig. 5). This may be related to the older age of many spousal caregivers, as the percentage of spousal caregivers out of the labor force was about equal to the percentage over age 65. Further, parental caregivers tended to earn higher wages than spousal caregivers. Among wage and salary workers with a single job, parental caregivers earned $931 per week while spousal caregivers earned $513 per week, and the general population earned $743 per week, according to ATUS data. Women Caregivers Were More Likely to Work Part- time and Have Lower Earnings than Men Caregivers We found that women who provided parental or spousal care were more likely to be employed part-time and to have lower earnings than men who were parental or spousal caregivers (see fig. 6). Women caregivers were less likely to work than men caregivers, but among those who worked, women caregivers were more likely to work part-time, according to ATUS data. For example, among parental caregivers, 66 percent of women were employed either full-time or part-time compared to 77 percent of men, but 17 percent of women worked part-time compared to 10 percent of men. Similarly, among spousal caregivers, women were less likely to be employed than men. In addition, differences in the employment status of women and men caregivers are similar to differences between women and men in the general population. When we examined the distribution of men and women caregivers in earnings quartiles, we found that men caregivers were more likely to be among the highest earners. For parental caregivers, 43 percent of men compared to 25 percent of women were among the highest earners. For spousal caregivers, 22 percent of men compared to 14 percent of women were among the highest earners. Regression results show that these differences between men and women caregivers were significant for parental and spousal caregivers, and remained significant after controlling for caregiver age and years of education. In terms of education, women parental caregivers were more likely to have completed some college or more (69 percent) while women spousal caregivers were less likely to have done so (50 percent) compared to men parental and spousal caregivers (63 and 56 percent, respectively). Similar to the education levels of the parental and spousal caregiving populations generally, these results may reflect generational differences. Women, Minorities, and Those with Lower Education and Earnings Levels Provided More Frequent Care Spousal caregivers were more likely to provide care daily compared to parental caregivers, and parental caregivers who lived in the same house as their parents were unsurprisingly more likely to provide care daily than those who did not, according to ATUS data. The vast majority of spousal caregivers (81 percent) provided care on a daily basis compared to 21 percent of parental caregivers. When we examined the frequency of caregiving among those who lived in the same house as their parents, we found that about 63 percent of these parental caregivers provided care daily, suggesting there is a positive relationship between frequency of care and cohabitation (see fig. 7). Experts we spoke with said the frequency of care may depend on whether the care recipient has a disability and the type of disability. For example, someone with a severe disability may be more likely to require care daily compared to someone with a less severe disability. Women and minorities tended to provide care more frequently. Among parental and spousal caregivers, 30 percent of women provided care daily compared to 25 percent of men. While the majority of caregivers were white, as discussed above, black and Hispanic caregivers were more likely to provide daily care than white caregivers—35 percent of black caregivers and 39 percent of Hispanic caregivers provided care daily compared to 26 percent of white caregivers (see fig. 8). While most parental caregivers were married, parental caregivers who were never married were more likely to provide daily care than divorced, widowed, separated, and married caregivers. Daily caregiving may be concentrated among those with the fewest financial resources. Parental or spousal caregivers with lower levels of education and earnings were more likely to provide care daily (see fig. 9). For example, 48 percent of caregivers without a high school degree provided care daily compared to 21 percent who had completed college. Those who worked part-time were also more likely to provide care daily compared to those who worked full-time (27 percent versus 18 percent, respectively). Those who provided care daily were also more likely to be among the lowest earners. In addition to examining frequency of care, we also found that most parental or spousal caregivers provided care that lasted several years. The majority of parental or spousal caregivers (54 percent) provided care for at least 3 years, and 16 percent provided care for 10 years or more. On average, parental or spousal caregivers provided care for about 5 years, regardless of gender. The number of years of care provided increased with the age of the parental or spousal caregivers (see fig. 10). Women caregivers, spousal caregivers, and Hispanic caregivers were more likely to provide long-term daily care. Among parental or spousal caregivers who said they provided care daily and provided care for at least 5 years, 61 percent were women. In comparison, among all parental and spousal caregivers, 56 percent were women. Twenty-nine percent of spousal caregivers provided long-term daily care compared to 8 percent of parental caregivers. In addition, 16 percent of Hispanic caregivers provided long-term daily care compared to 10 percent of whites and 12 percent of blacks. Some Caregivers Experienced Adverse Effects on Their Jobs and on Their Retirement Assets and Income Parental and Spousal Caregivers Said Caregiving Affected Their Work An estimated 68 percent of working parental and spousal caregivers said they experienced at least one of eight job impacts about which they were asked, according to our analysis of data used in the 2015 National Alliance for Caregiving and AARP sponsored study, Caregiving in the U.S. The highest percentage of parental and spousal caregivers—more than half—reported that they went in late, left early, or took time off during the day to provide care (see fig. 11). Spousal caregivers were more likely to experience adverse job impacts than parental caregivers. About 81 percent of spousal caregivers said they experienced at least one of the eight job impacts they were asked about compared to 65 percent of parental caregivers. Spousal caregivers were more likely to reduce their work hours, give up work entirely, or retire early, compared to working parental caregivers. For example, 29 percent of spousal caregivers said they went from working full-time to part-time or cut back their hours due to caregiving, compared to 15 percent of parental caregivers. Our prior work has reported that some older workers felt forced to retire for professional or personal reasons and that individuals approaching retirement often have to retire for reasons they did not anticipate, including caregiving responsibilities. In addition, our prior work has reported that job loss for older workers, in general, can lead to lower retirement income, claiming Social Security early, and exhaustion of retirement savings. We also found that older workers face many challenges in regaining employment. Consistent with these results, we also found that spousal caregiving was negatively associated with the number of hours caregivers worked. Specifically, spousal caregivers who were ages 59 to 66 worked approximately 20 percent fewer annual hours than married individuals of the same age who did not provide spousal care, according to HRS data from 2002 to 2014. Spousal Caregivers Nearing Retirement Had Less in Retirement Assets and Income While Parental Caregivers Did Not We found that spousal caregivers who were at or near the age of full retirement eligibility had lower levels of IRA assets, non-IRA assets, and Social Security income compared to those who did not provide care. We did not detect the same relationship between parental caregiving and retirement income, which may be due, in part, to the older age of the caregivers we examined. Retirement Assets and Income of Spousal Caregivers Spousal caregivers at or near retirement age had lower levels of retirement assets and income compared to married individuals who did not provide spousal care. Spousal caregivers tended to have lower levels of IRA assets, non-IRA assets—such as real estate or stocks—and Social Security income than non-caregivers (see table 1). After controlling for certain characteristics of caregivers, we found that spousal caregivers still had less retirement assets and income than non- caregivers. For example, spousal caregivers had an estimated 39 percent less in non-IRA assets than non-caregivers, after controlling for characteristics such as level of education and race/ethnicity. When we compared women and men spousal caregivers, we found both had less in IRA and non-IRA assets than non-caregivers, but only women had less in Social Security income. Specifically, we found that women and men caregivers had 37 to 54 percent less in IRA and non-IRA assets than non-caregivers, after controlling for demographic and other characteristics. However, the effect of spousal caregiving on Social Security income was only significant among women. Women caregivers had 15 percent less in Social Security income than married women who did not provide care. Many older Americans rely on Social Security for a significant portion of their retirement income. Therefore, a lower Social Security benefit could have serious consequences for these individuals’ retirement security. One possible explanation experts offered for why spousal caregivers may have less in retirement income and assets than non-caregivers is that the care recipient may be in poor health, resulting in reduced workforce participation of both members of the household, which could then have a large negative impact on household wealth. This scenario could leave spousal caregivers in a precarious financial situation heading into retirement. Retirement Assets and Income of Parental Caregivers We did not find that parental caregivers at or near retirement age had lower levels of retirement assets or income than non-caregivers. We compared the retirement assets and income of parental caregivers to the retirement assets and income of individuals who did not provide parental care and did not find a statistically significant effect of parental caregiving on IRA assets, non-IRA assets, defined contribution balances, or Social Security income. See appendix I for more information on this analysis. We may not have seen a significant effect of parental caregiving for a few reasons. First, because of the scope of the HRS data we used, we limited the analysis to individuals who provided care in the 6 years leading up to ages 65 or 66. Therefore, this analysis does not capture the possible effects of parental caregiving prior to age 59, which may be during the middle of a person’s career or during their peak earning years. Second, similar to spousal caregivers, experts said a caregiver may reduce their workforce participation to care for a parent; however, parental caregiving may not affect household income because married caregivers’ spouses may be able to continue working and offset any lost earnings. In addition, unlike spousal care, parental care may be provided by multiple individuals, so the effect on retirement security may be distributed across siblings. Challenges in Comparing Caregivers to Non-caregivers Our analysis could not definitively identify the causal effect or lack of effect of caregiving on retirement income due to three main limitations. First, because caregiving is not random but is a function of an individual’s circumstances, it is difficult to isolate its effect. For example, individuals who provide care may do so because they have jobs that are more flexible, or because they have better family support. Second, there may be other ways of providing care beyond an individual giving their time that were not captured in the HRS data and therefore could not be included in our analysis. For example, a child may provide financial assistance to a parent rather than providing time. However, the HRS does not capture whether financial help to parents was specifically used for caregiving expenses. Third, common to analyses of this type, alternate measures of certain variables may produce different estimates. For example, we controlled for a caregiver’s level of education based on data included in the HRS; however, a measure of education that included the type of education, such as whether the person was a trained caregiver, might have changed our estimates. As a result of these limitations, our estimates may not capture the effect of caregiving on retirement income for the broader population. Experts Said a Comprehensive Framework That Incorporates Actions across Policy Categories Could Improve Caregivers’ Retirement Security Caregivers Face Several Retirement Security Challenges Our analysis of literature and expert interviews found that parental or spousal caregivers could face several retirement security challenges: Caregivers may have high out–of-pocket expenses. Caregivers may face immediate out-of-pocket expenses that could make it difficult to set aside money for retirement or that could require them to prematurely withdraw funds from existing retirement accounts. These financial burdens can include, for example, travel and medical expenses for a care recipient. AARP’s study, Family Caregiving and Out-of-Pocket Costs, estimated that family caregivers spent an average of nearly $7,000 on caregiving costs in 2016. Caregiving costs amounted to about 14 percent of income for white family caregivers and 44 percent and 34 percent for Hispanic and black caregivers, respectively. Caregivers may reduce their workforce participation. In addition to foregone earnings, caregivers who reduce their workforce participation may also lose access to employer-provided retirement benefits, such as participating in an employer-sponsored 401(k) plan or receiving an employer’s matching contributions. About 68 percent of working parental and spousal caregivers reported job impacts due to caregiving responsibilities, which included reducing their workforce participation. For those who leave the workforce, re-entry can be challenging, and wages and retirement savings can be negatively affected long-term. Caregivers may not contribute to retirement accounts. Caregivers may face challenges contributing to retirement accounts due to caregiving, and some working caregivers may not be eligible for employer-sponsored retirement benefits. For example, some part-time employees may not be eligible to participate in employer-sponsored retirement plans, or some employees may lose access if they reduce their workforce participation. Individual and employer-sponsored retirement accounts serve as important supplements to Social Security as income replacements in retirement. Caregivers may have lower Social Security benefits. Caregivers may have less in Social Security benefits if they reduce their workforce participation. Social Security benefits are calculated using the highest 35 years of earnings. If a caregiver retires after working for 33 years, he or she would have 2 years of zero income in their benefit calculation, which would result in lower benefits throughout retirement compared to what their benefit would have been if they had a full 35- year earnings history. Social Security makes up a large portion of retirement income from many older Americans, so a lower Social Security benefit could have significant consequences for financial security. Four Policy Categories Encompass Actions That Could Improve Caregivers’ Retirement Security We identified four policy categories that could potentially address retirement security challenges faced by caregivers. To do so, we identified specific actions that could improve caregivers’ retirement security based on a review of literature and interviews with experts. We then grouped these actions into four categories: 1) decrease caregivers’ out–of-pocket expenses, 2) increase caregivers’ workforce attachment and wage preservation, 3) increase caregivers’ access or contributions to retirement accounts, and 4) increase caregivers’ Social Security benefits. See figure 12 for example actions in each category. Experts Said Some Policy Categories Could Better Help Women and Low- Income Caregivers and All Have Costs Experts we interviewed identified potential benefits of each of the four policy categories. They also identified specific groups of parental or spousal caregivers who could benefit, including women, lower-income caregivers, and working caregivers (see table 2). As discussed previously, women were more likely to provide parental and spousal care, to work part-time, and to have lower earnings than men caregivers. In addition, over one-third of parental caregivers and almost two-thirds of spousal caregivers were in the bottom two income quartiles, and caregivers in the bottom earnings quartile were more likely to provide care daily. Experts also said all four categories have potential costs and challenges (see table 3). Experts identified three implementation issues that would need to be addressed regardless of the policy category. Determining responsibility for implementation. It is unclear who would be responsible for implementing and funding certain actions under each approach, according to experts. Some may require legislative changes, steps by employers, or public-private partnerships that integrate both sectors. The RAISE Family Caregivers Act enacted in January 2018 requires the Department of Health and Human Services (HHS) to develop a strategy, including recommendations related to financial security and workforce issues, to support family caregivers and to convene an advisory council to help develop the strategy. The advisory council will include representatives from federal agencies, employers, state and local officials, and other groups. Between October 12, 2018 and December 3, 2018, HHS sought nominations for individuals to serve on the advisory council. Defining caregiving for benefit eligibility. Experts said some actions may require a definition of caregiving to use in determining eligibility for benefits. Current definitions related to federal caregiving policy vary. For example, FMLA defines a caregiver by specific familial relationships. In contrast, the RAISE Family Caregivers Act defines a family caregiver more broadly as an “adult family member or other individual who has a significant relationship with, and who provides a broad range of assistance to, an individual with a chronic or other health condition, disability, or functional limitation.” Identifying and verifying caregivers. Experts said some actions may require a mechanism for identifying and verifying a caregiver’s status. Experts noted that many caregivers do not identify themselves as such, particularly those caring for a spouse, and therefore do not claim existing benefits. In addition, certain actions may require a decision about whether benefits extend to the primary caregiver or to all caregivers, for example, siblings who may jointly provide care to a parent. Experts Said Implementing Actions across Policy Categories and Enhancing Public Awareness Would Help Address Caregivers’ Needs Several experts we interviewed said caregivers could benefit more from a retirement system that incorporates actions across the policy categories so that actions can work in tandem to address caregivers’ needs. For example, if caregivers have lower out-of-pocket caregiving costs, they might be able to contribute more to their retirement savings. If caregivers can contribute more to their retirement savings because they have better access to accounts, they might have to rely less on Social Security in retirement. Some experts pointed to Hawaii’s Kupuna Caregivers Program as an example of a program with complementary goals—to alleviate out-of-pocket expenses and reduce barriers to staying fully employed while providing care for a family member. Specifically, according to experts, the program provides a financial benefit of $70 per day for up to 365 days to caregivers who work at least 30 hours a week to spend on respite care, home health care workers, meal preparation, and transportation costs for a care recipient age 60 or older. Although the program is in the early stages of implementation, experts said several states already see it as a model for meeting these two goals. Experts also said it would be helpful to implement actions that address the needs of caregivers in the long- and short-term and across their lifespans. In general, experts said each of the policy categories could help longer-term caregivers more than short-term caregivers. However, they said certain actions to decrease caregivers’ out-of-pocket expenses or to increase workforce attachment could also help in addressing immediate needs. For example, experts said actions such as paid time off and flexible work schedules could help those caring for individuals with acute conditions to attend doctor’s appointments. Experts also said policies should address the needs of caregivers with different levels of workforce attachment. For example, one expert said there are disparate policy impacts to consider depending on whether someone is a salaried worker, an hourly worker, or a caregiver who does not work. Similarly, someone who depends on other types of government assistance, such as Social Security Disability Insurance, may also have different needs. Another expert said the age at which caregiving takes place may impact retirement security; people may be caring for older parents or a spouse at a point in their careers when they are supposed to be catching up on retirement contributions or have peak earnings, so they may not be able to make up for lost time in terms of retirement savings. Finally, several experts mentioned public awareness as critical to helping people understand the implications of caregiving on retirement security. They stressed the importance of financial literacy and making caregivers aware of existing and new benefits. Experts said people are not well informed about their Social Security benefits or their options for private retirement savings. In addition, it can be difficult to understand the long- term impacts of becoming a caregiver, and experts pointed to the need for education about how the decision, along with those to leave the workforce or reduce workforce participation, could affect caregivers’ long- term financial security. One expert noted that education and services that help families proactively think about their financial security and plan for caregiving needs could be useful. Educating the public about what supports exist, new supports as they become available, and eligibility and enrollment procedures, is critical to ensuring caregivers take advantage of available supports. Agency Comments We provided a draft of this report to the Department of Labor, the Department of Health and Human Services, the Department of the Treasury, and the Social Security Administration for review and comment. The Departments of Labor, Health and Human Services, and the Treasury provided technical comments, which we incorporated as appropriate. The Social Security Administration told us they had no comments on the draft report. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretaries of Labor, Health and Human Services, and Treasury, the Acting Commissioner of Social Security, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made contributions to this report are listed in appendix IV. Appendix I: Objectives, Scope, and Methodology The objectives of this review were to (1) examine what is known about the size and characteristics of the parental and spousal caregiving population, including differences among women and men; (2) examine the extent to which parental or spousal caregiving affects retirement security; and (3) identify and discuss policy options and initiatives that could improve caregivers’ retirement security. This appendix provides information about the methods we used to answer these questions. Section I describes key information sources we used, and section II describes the empirical methods we used to answer the first and second research questions and the results of supplementary analyses. Section I: Information Sources To answer our research questions, we analyzed data from three nationally representative surveys—the American Time Use Survey (ATUS), the Health and Retirement Study (HRS), and Caregiving in the U.S.—conducted an extensive literature search, and interviewed relevant experts or stakeholders. This section provides a description of our data sources and the steps we took to ensure their reliability for the purposes of our review. American Time Use Survey To answer the first objective, we analyzed data collected through ATUS’ eldercare module from 2011 through 2017, the most recent year of data available. The ATUS—which is sponsored by the Bureau of Labor Statistics and conducted by the U.S. Census Bureau—provides nationally representative estimates of how, where, and with whom Americans spend their time. Individuals interviewed for the ATUS are randomly selected from a subset of households that have completed their eighth and final month of interviews for the Current Population Survey (CPS). Starting in 2011, the ATUS began asking questions about eldercare. We weighted the data and calculated relative standard errors to reflect CPS guidance on the sample design. A relative standard error is equal to the standard error of a survey estimate divided by the survey estimate. Caregiving in the U.S. We analyzed data used in the 2015 Caregiving in the U.S. study sponsored by the National Alliance for Caregiving and the AARP Public Policy Institute to estimate job impacts of parental and spousal caregiving for working caregivers. The survey was conducted through online interviews. To identify caregivers, respondents were asked whether they provided unpaid care to a relative or friend 18 years or older to help them take care of themselves. Respondents were also asked to whom they provided care, which allowed us to identify parental and spousal caregivers. We considered someone to be a parental caregiver if they provided care to a parent or a parent-in-law. We considered someone to be a spousal caregiver if they provided care to a spouse or partner. To determine the job impacts of caregiving, respondents were asked whether they were currently employed while providing care or whether they were employed in the last year while providing care and whether they experienced any of the following job impacts as a result of caregiving: Went in late, left early, or took time off during the day to provide care Went from working full-time to part-time, or cut back hours Took a leave of absence Received a warning about performance or attendance at work Gave up working entirely Turned down a promotion Lost any job benefits All estimates derived from random samples are subject to sampling error. All percentage estimates from this survey have margins of error at the 95 percent confidence level of plus or minus 5 percentage points or less, unless otherwise noted. Health and Retirement Study To analyze the effects of caregiving on retirement security, we analyzed data collected through the HRS, a nationally representative survey sponsored by the National Institute on Aging and the Social Security Administration and conducted by the Survey Research Center at the University of Michigan’s Institute for Social Research. This biennial longitudinal survey collects data on individuals over age 50 and contains information on unpaid parental and spousal caregivers. Each biennial period is referred to as a “wave.” The HRS includes both members of a couple as respondents. There are currently 12 waves of core data available from 1992 to 2014 with about 18,000 to 23,000 participants in any given wave. The initial 1992 cohort consisted of respondents who were then ages 51 to 61, and these respondents have been interviewed every 2 years since 1992. New cohorts have been added over time to maintain the representation of the older population from pre-retirement through retirement and beyond. We used data from 2002 to 2014 for our analyses; we did not use data prior to 2002 because data on spousal caregivers were formatted differently. We adjusted asset and income values for inflation. We weighted the data and calculated standard errors to reflect HRS guidance on the sample design. Data Reliability For each of the datasets described above, we conducted a data reliability assessment of variables included in our analyses. We reviewed technical documentation, conducted electronic data tests for completeness and accuracy, and contacted knowledgeable officials with specific questions about the data. We determined that the variables we used from the data we reviewed were sufficiently reliable for the purposes of describing and comparing the caregiving populations to each other or to non-caregivers. We also cited studies conducted by other researchers to supplement our findings; each of these studies was reviewed by two social scientists with expertise in research methodology and was found to be sufficiently methodologically sound for the purposes of supplementing our descriptions or comparisons. Literature Review and Interviews To gain an understanding of policy options that could improve caregivers’ retirement security, we reviewed prior GAO work, conducted an extensive literature review of journal articles, working papers, and think-tank studies on caregiving and topics related to retirement security, and conducted preliminary interviews with experts in caregiving or retirement security. Based on this information, we identified specific actions that could affect caregivers’ retirement security, which we categorized into four different categories based on common themes. We then conducted semi- structured interviews with or received written responses from a range of experts and stakeholders—including some of the experts we met with to identify specific policy actions—to obtain their views on the benefits and costs of the specific policy options and approaches we identified, and we also asked them to identify any additional actions. We selected experts and stakeholders who are engaged in research or advocacy around caregiving or retirement issues, or those who might be affected by the actions identified. We also aimed to interview experts or stakeholders who might have different viewpoints regarding the identified actions. See table 4 for a list of the experts or stakeholders we interviewed or received written comments from over the course of our work. Section II: Methods for Analyzing Parental and Spousal Caregivers’ Characteristics and the Effect of Caregiving on Retirement Security This section discusses the quantitative analysis methods we used to describe the characteristics of parental and spousal caregivers and the regression analyses we conducted to estimate the impact of caregiving on retirement security. We used ATUS and HRS data for these analyses. Characteristics of Parental and Spousal Caregivers To describe the characteristics of parental and spousal caregivers, we conducted descriptive analyses to examine differences between parental and spousal caregivers and the general population. For all univariate and multivariate statistics calculated using the ATUS data, we constructed variance estimates using replicate weights. The ATUS eldercare module defines caregiving as “assisting or caring for an adult who needed help because of a condition related to aging.” The eldercare module contains one observation per eldercare recipient, and for each recipient, includes information about the duration of care provided to the recipient, the age of the recipient, the relationship of the recipient to the care provider, and whether the care recipient and the care provider share a household. To analyze data on eldercare providers rather than recipients, we restructured the data into a single observation per care provider. While any given care provider could provide care to multiple recipients, we defined care provider types as follows: Spousal caregivers were those who provided care to a spouse or cohabiting domestic partner, regardless of whether they also provided care to another person. Parental caregivers were those who provided care to a parent or parent-in-law, regardless of whether they also provided care to another person. Caregivers of another relative were those who provided care to someone related to them (such as a grandparent or aunt or uncle), regardless of whether they also provided care to another person. Caregivers of a non-relative were those who provided care to an unrelated person, such as a friend or neighbor, regardless of whether they also provided care to another person. Data on frequency of care—how often a respondent provided eldercare— is collected once for each care provider, rather than for each recipient, and therefore did not require restructuring. However, as noted above, data on the duration of care—how long a respondent provided care—is collected for each care recipient. Therefore, we analyzed the duration of care for the relevant care recipient (parent or spouse) using the same caregiver types as described above. For example, if someone provided both parental and spousal care, the duration of care for the relevant recipient would be used. We conducted descriptive analyses to examine parental and spousal caregivers’ characteristics including gender, age, race and ethnicity, marital status, level of education, employment status, and earnings. The following are important considerations of these analyses: Age. We examined caregivers who provided care to an adult recipient of any age, and, except where indicated in the text, we compared the characteristics of adult caregivers to the general adult population of all ages. We used four age categories (15 to 44, 45 to 50, 51 to 64, and 65 and older). We chose these age groups so that we could examine the characteristics of care providers with a similar age profile to those we examine in our analysis of household income and assets. Presence of a living parent. We did not have information in the ATUS to determine whether those who provided parental care had living parents; therefore, our analyses included all parental caregivers who said they provided care to a parent or parent-in-law within the past three to four months, even if the parent was deceased by the time of their interview. Certain analyses, where indicated in the text, control for the presence of a parent in the respondent’s household. Earnings. ATUS provides current information on respondent’s usual weekly earnings at their main job. Because we did not have current information on earnings from all jobs, for this analysis only, we restricted the sample to those respondents who have a single job. Because we did not have current information on self-employment income, we restricted our analysis of earnings to those respondents who are wage and salary workers. In our report, we present data on the unadjusted demographic and economic characteristics of caregivers and the general population. We present the unadjusted characteristics so that readers can view the actual demographic profile of caregivers. However, we also conducted logistic regression analyses that predict the likelihood of caregiving as a function of various demographic and economic characteristics and found that most characteristics are qualitatively similar in the multivariate and univariate context. Our independent variables for this multivariate analysis were age, education, gender, marital status, race, ethnicity, and labor force status—employed, unemployed, or not in the labor force. Where indicated, as mentioned above, we included a categorical variable for whether the respondent’s parent lives in the respondent’s household. Where indicated, we included quartiles of usual weekly earnings; in logistic regressions that included weekly earnings as an independent variable, the analyses were restricted to wage and salary workers with a single job. See appendix III for more detail about these logistic regression analyses. Effect of Parental and Spousal Caregiving on Retirement Security To analyze the impact of caregiving on retirement assets and income, we compared the assets and retirement income of caregivers and non- caregivers. We conducted separate analyses for each type of care, as described below. Spousal Care To determine the effect of spousal caregiving on retirement security, we took two approaches: 1. We conducted descriptive analyses to examine differences between spousal caregivers and non-caregivers in terms of assets at or near retirement and Social Security income during retirement. We also examined differences between spousal caregivers and non-caregivers in terms of work, education, and health status of both the person providing and the person receiving care. 2. We conducted regression analyses to examine whether observed differences in assets and Social Security income were still statistically significant when we controlled for these differences in the spousal caregiving and non-caregiving populations. In order to construct our analysis sample of spousal caregivers, we took the following steps. First, we identified married individuals at ages 65 or 66. We chose these ages because they are at or near the full retirement age at which individuals can receive unreduced Social Security benefits. We then identified the respondents that provided spousal care in the current wave or in the prior two waves of data, a 6-year period of time. To determine whether someone provided spousal care, the HRS asks the respondent whether they received help with activities of daily living (ADLs) or with instrumental activities of daily living (IADLs) and who helped with these activities. If the respondent indicated that their spouse or partner provided help, we then identified that person as a spousal caregiver. This resulted in a sample of about 5,000 observations. We found that about 10 percent of the sample provided spousal care in the 6 years we examined. We also obtained information on the asset levels, hours worked, and other descriptive attributes at ages 65 or 66. To determine the level of Social Security retirement income, we looked ahead to the household’s Social Security income at age 71 using data from future waves of the HRS because some individuals may receive benefits at a later age. We found differences between spousal caregivers and non-spousal caregivers, and differences were often statistically significant (see table 5). As the table shows, spousal caregivers tended to have lower asset levels—IRA assets, non-IRA assets, or defined contribution account balances—as well as lower levels of Social Security income. Although the asset levels of spousal caregivers did not increase as much as for non-caregivers, the differences were not statistically significant. Spousal caregivers also tended to work fewer hours, were less likely to have a college degree, and were more likely to be in self-reported poor or fair health. Spouses receiving care also had different characteristics than spouses not receiving care, indicating that the care recipient also could affect household assets. Spouses receiving care tended to work less and to be in poorer self-reported health. Spouses receiving care also worked fewer hours—1,100 compared to 2,700 for spouses who did not receive care (see table 5). About 66 percent of spouses that received care were in self-reported fair or poor health, as opposed to 15 percent of those who did not receive care. We also compared differences between spousal caregivers and non- caregivers by gender (see table 6). We found some of the same differences between men and women spousal caregivers and non- caregivers as we did among spousal caregivers and non-caregivers more generally. However, there were also additional differences. For example, among women, growth in assets was larger among caregivers, and was statistically significant. However, differences in the cumulative hours worked was not statistically significant. In order to investigate whether observed differences in retirement assets or income might be due to factors other than caregiving, we controlled for additional variables using a multiple regression. Specifically, we generated a binary variable which took the value of one if the respondent had provided spousal care and took the value of zero if not and examined the estimated coefficient on this variable. We ran six different regression models for each of the assets, with six different sets of controls, in addition to the spousal caregiving variable. The different models are as follows, with each building on the model prior. Unless otherwise noted, the findings presented in the report are from model 5. Model 1 estimated the differences, with only controls for the year of the wave. This helps control for the effects that would be experienced by all retirees in that year, like an economic recession. Model 2 included the controls from model 1 and also whether the person has a college degree. This helps control for the effects of education on assets and income. Model 3 included the controls from models 1 and 2 as well as earnings for the respondent in the period before we observed them caregiving. This helps control for caregivers having lower earnings before caregiving, which could affect assets and income. Model 4 included the controls from models 1, 2, and 3 and also demographic characteristics, such as race and ethnicity, which can be associated with assets or income. Model 5 included the controls from models 1, 2, 3, and 4 and also controlled for the self-reported health of the potential caregiver. Model 6 included the controls from models 1, 2, 3, 4, and 5 and also controlled for the self-reported health of the potential care recipient. Having a spouse in poor health might affect assets or income, even if no caregiving was provided. We estimated effects on four different types of assets and income at ages 65 and 66: IRA assets, non-IRA assets, defined contribution balances, and Social Security income (see table 7). We took the logarithm of the value before running the regression to normalize the distribution. We also considered the possibility that caregiving might not only affect the level of assets, but might affect the accumulation or growth of assets. We did that by including models that estimated the effect on the growth of IRA and non-IRA assets. The table below shows the parameter estimates of the effect of spousal caregiving with different levels of controls or dependent variables. In the table, the columns represent the different models (1 through 6). The rows represent different dependent variables—different types of assets or Social Security income for which we estimated the effect of spousal caregiving. In the table, the upper panel shows the effects on women’s assets and income based on caregiving. The middle panel shows the effects on men’s assets and income based on caregiving, and the final panel shows the effect when the men’s and women’s samples were pooled. As the table shows: For women, men, and when the sample was pooled, we found significant negative effects of spousal caregiving on both IRA and non-IRA assets. However, the coefficient decreased in magnitude when we added additional controls. For example, when we controlled for the health of the person receiving the help, the coefficient almost fell by half, from about .5 to about .25 in the case of non-IRA assets. This indicates that it is difficult to differentiate the effect of spousal caregiving from the effect of having a spouse in poor self-reported health. For women, men, and when the sample was pooled, we found significant negative effects of spousal caregiving on Social Security income. But for men, the effect was only significant at the 10 percent level for models with fewer controls. In addition, when we added controls for demographics and health, the effect for men no longer was significant. For the growth of assets, we found negative effects for non-IRA assets for women, but not for men and not for the pooled sample. However, the effects were only significant at the 10 percent level and not significant when we controlled for the health of the care recipient. In addition to the regression coefficients, we also calculated the differences in percent terms, which may be easier to interpret (see table 8). We found results that were strongest when comparing women spousal caregivers to women who did not provide spousal care. The effect for women was resilient to the inclusion of controls. In the model that included the health of the recipient (model 6), the effect ranged from a 40 percent reduction in IRA assets, to an 8 percent reduction in household Social Security income. For men, we found effects for IRA assets, but the effects for Social Security income were not resilient to the inclusion of controls besides the education of the recipient. To determine the effect of parental caregiving on retirement security, we conducted descriptive analyses to examine differences between parental caregivers and non-caregivers in terms of assets at or near retirement age and Social Security income during retirement. In order to construct our analysis sample of parental caregivers, we took the following steps. First, we identified individuals at age 65 or 66 who had living parents or parents-in law. We made this restriction because having living parents at ages 60 to 66 (and the opportunity to provide care) might be associated with higher socio-economic strata. Therefore, we did not want to compare caregivers to those who did not provide care because their parents were deceased. We then identified the respondents that provided parental care in the current wave or in the prior two waves of data. To determine who is a parental caregiver, the HRS asks respondents two separate questions. The first asks whether a respondent spent a total of 100 hours or more since their last interview or in the last 2 years helping a parent or parent-in-law with basic personal activities like dressing, eating, or bathing. The second question asks whether a respondent spent a total of 100 hours or more since their last interview or in the last 2 years helping a parent or parent-in-law with other things, such as household chores, errands, or transportation. We limited the analysis to those with living parents or in-laws. This resulted in a sample of about 2,499 observations. We found that about 57 percent of the sample provided parental care in the 6 years we examined. Unlike our analysis of spousal caregivers, we found that parental caregivers had higher levels of assets at or near retirement than non- caregivers, but differences between parental caregivers and non- caregivers were not statistically significant (see table 9). Appendix II: Characteristics of Different Types of Caregivers The following tables provide information about the characteristics of various types of eldercare providers. Appendix III: Multivariate Analysis of the Probability of Providing Care Table 13 shows the adjusted odds of providing care for people with different economic and demographic characteristics, from multivariate analyses. Models 1, 2, 3 and 4 show the adjusted odds of providing parental care, and models 5 and 6 show the adjusted odds of providing spousal care. Model 1 estimates the probability of providing parental care as a function of gender, age, marital status, race, education, and labor force status. Model 2 estimates the probability of providing parental care as a function of gender, age, marital status, race, education, and income quartiles. This model is restricted to employed workers, and therefore does not include labor force status as a regressor. Model 3 is identical to model 1, except that model 3 includes an indicator for whether the parental caregiver and the parental care recipient live in the same household. Model 4 is identical to model 2, except that model 4 includes an indicator for whether the parental caregiver and the parental care recipient live in the same household. Model 5 estimates the probability of providing spousal care as a function of gender, age, marital status, race, education, and labor force status. Model 6 estimates the probability of providing spousal care as a function of gender, age, marital status, race, education, and income quartiles. Like model 2, this model is restricted to employed workers, and therefore does not include labor force status as a regressor. Appendix IV: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Erin M. Godtland (Assistant Director), Nisha R. Hazra (Analyst-in-charge), Benjamin Bolitzer, Jessica Mausner, and Rhiannon C. Patterson made key contributions to this report. Also contributing to this report were Susan Aschoff, Deborah Bland, Justin Fisher, Avani Locke, Michael Naretta, Mimi Nguyen, Rachel Stoiko, Shana Wallace, and Adam Wendel.
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According to the U.S. Census Bureau, the number of people in the United States over age 65 is expected to almost double by 2050. As Americans age, family caregivers, such as adult children and spouses, play a critical role in supporting the needs of this population. However, those who provide eldercare may risk their own long-term financial security if they reduce their workforce participation or pay for caregiving expenses. GAO was asked to provide information about parental and spousal caregivers and how caregiving might affect their retirement security. This report (1) examines what is known about the size and characteristics of the parental and spousal caregiving population, including differences among women and men; (2) examines the extent to which parental or spousal caregiving affects retirement security; and (3) identifies and discusses policy options and initiatives that could improve caregivers' retirement security. GAO analyzed data from three nationally representative surveys; conducted an extensive literature review; and interviewed experts who are knowledgeable about caregiving or retirement security, engaged in research or advocacy around caregiving, or represent groups that might be affected by the identified policy approaches. An estimated one in 10 Americans per year cared for a parent or spouse for some period of time from 2011 through 2017, and women were more likely than men to provide care, according to Bureau of Labor Statistics survey data. Both parental and spousal caregivers were older than the general population, with spousal caregivers generally being the oldest. In addition, spousal caregivers were less likely to have completed college or to be employed, and they had lower earnings than parental caregivers and the general population. Most parental and spousal caregivers provided care for several years, and certain groups were more likely to provide daily care, including women and minorities. Some caregivers experienced adverse effects on their jobs and had less in retirement assets and income. According to data from a 2015 caregiving-specific study, an estimated 68 percent of working parental and spousal caregivers experienced job impacts, such as going to work late, leaving early, or taking time off during the day to provide care. Spousal caregivers were more likely to experience job impacts than parental caregivers (81 percent compared to 65 percent, respectively). According to 2002 to 2014 data from the Health and Retirement Study, spousal caregivers ages 59 to 66 had lower levels of retirement assets and less income than married non-caregivers of the same ages. Specifically, spousal caregivers had an estimated 50 percent less in individual retirement account (IRA) assets, 39 percent less in non-IRA assets, and 11 percent less in Social Security income. However, caregiving may not be the cause of these results as there are challenges to isolating the effect of caregiving from other factors that could affect retirement assets and income. Expert interviews and a review of relevant literature identified a number of actions that could improve caregivers' retirement security, which GAO grouped into four policy categories. Experts identified various benefits to caregivers and others from the policy categories—as well as pointing out possible significant costs, such as fiscal concerns and employer challenges—and in general said that taking actions across categories would help address caregivers' needs over both the short-term and long-term (see figure). Several experts also said public awareness initiatives are critical to helping people understand the implications of caregiving on their retirement security. For example, they pointed to the need for education about how decisions to provide care, leave the workforce, or reduce hours could affect long-term financial security.
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The issue presented in this case is whether a court asked to order arbitration of a grievance filed under a collective-bargaining agreement must first determine that the parties intended to arbitrate the dispute, or whether that determination is properly left to the arbitrator. * AT & T Technologies, Inc. (AT & T or the Company), and the Communications Workers of America (the Union) are parties to a collective-bargaining agreement which covers telephone equipment installation workers. Article 8 of this agreement establishes that "differences arising with respect to the interpretation of this contract or the performance of any obligation hereunder" must be referred to a mutually agreeable arbitrator upon the written demand of either party. This Article expressly does not cover disputes "excluded from arbitration by other provisions of this contract."1 Article 9 provides that, "subject to the limitations contained in the provisions of this contract, but otherwise not subject to the provisions of the arbitration clause," AT & T is free to exercise certain management functions, including the hiring and placement of employees and the termination of employment.2 "When lack of work necessitates Layoff," Article 20 prescribes the order in which employees are to be laid off.3 On September 17, 1981, the Union filed a grievance challenging AT & T's decision to lay off 79 installers from its Chicago base location. The Union claimed that, because there was no lack of work at the Chicago location, the planned layoffs would violate Article 20 of the agreement. Eight days later, however, AT & T laid off all 79 workers, and soon thereafter, the Company transferred approximately the same number of installers from base locations in Indiana and Wisconsin to the Chicago base. AT & T refused to submit the grievance to arbitration on the ground that under Article 9 the Company's decision to lay off workers when it determines that a lack of work exists in a facility is not arbitrable. The Union then sought to compel arbitration by filing suit in federal court pursuant to § 301(a) of the Labor Management Relations Act, 29 U.S.C. § 185(a).4 Communications Workers of America v. Western Electric Co., No. 82 C 772 (ND Ill., Nov. 18, 1983). Ruling on cross-motions for summary judgment, the District Court reviewed the provisions of Articles 8, 9, and 20, and set forth the parties' arguments as follows: "Plaintiffs interpret Article 20 to require that there be an actual lack of work prior to employee layoffs and argue that there was no such lack of work in this case. Under plaintiffs' interpretation, Article 20 would allow the union to take to arbitration the threshold issue of whether the layoffs were justified by a lack of work. Defendant interprets Article 20 as merely providing a sequence for any layoffs which management, in its exclusive judgment, determines are necessary. Under defendant's interpretation, Article 20 would not allow for an arbitrator to decide whether the layoffs were warranted by a lack of work but only whether the company followed the proper order in laying off the employees." App. to Pet. for Cert. 10A. Finding that "the union's interpretation of Article 20 was at least 'arguable,' " the court held that it was "for the arbitrator, not the court to decide whether the union's interpretation has merit," and accordingly, ordered the Company to arbitrate. Id., at 11A. The Court of Appeals for the Seventh Circuit affirmed. Communications Workers of America v. Western Electric Co., 751 F.2d 203 (1984). The Court of Appeals understood the District Court to have ordered arbitration of the threshold issue of arbitrability. Id., at 205, n. 4. The court acknowledged the "general rule" that the issue of arbitrability is for the courts to decide unless the parties stipulate otherwise, but noted that this Court's decisions in Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960), and Steelworkers v. American Mfg. Co., 363 U.S. 564, 80 S.Ct. 1343, 4 L.Ed.2d 1403 (1960), caution courts to avoid becoming entangled in the merits of a labor dispute under the guise of deciding arbitrability. From this observation, the court announced an "exception" to the general rule, under which "a court should compel arbitration of the arbitrability issue where the collective bargaining agreement contains a standard arbitration clause, the parties have not clearly excluded the arbitrability issue from arbitration, and deciding the issue would entangle the court in interpretation of substantive provisions of the collective bargaining agreement and thereby involve consideration of the merits of the dispute." 751 F.2d, at 206. All of these factors were present in this case. Article 8 was a "standard arbitration clause," and there was "no clear, unambiguous exclusion from arbitration of terminations predicated by a lack of work determination." Id., at 206-207. Moreover, although there were "colorable arguments" on both sides of the exclusion issue, if the court were to decide this question it would have to interpret not only Article 8, but Articles 9 and 20 as well, both of which are "substantive provisions of the Agreement." The court thus "decline[d] the invitation to decide arbitrability," and ordered AT & T "to arbitrate the arbitrability issue." Id., at 207. The court admitted that its exception was "difficult to reconcile with the Supreme Court's discussion of a court's duty to decide arbitrability in [John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964) ]." The court asserted, however, that the discussion was "dicta," and that this Court had reopened the issue in Nolde Brothers, Inc. v. Bakery Workers, 430 U.S. 243, 255, n. 8, 97 S.Ct. 1067, 1074, n. 8, 51 L.Ed.2d 300 (1977). 751 F.2d, at 206. We granted certiorari, 474 U.S. 814, 106 S.Ct. 56, 88 L.Ed.2d 46 (1985), and now vacate the Seventh Circuit's decision and remand for a determination of whether the Company is required to arbitrate the Union's grievance. The principles necessary to decide this case are not new. They were set out by this Court over 25 years ago in a series of cases known as the Steelworkers Trilogy: Steelworkers v. American Mfg. Co., supra; Steelworkers v. Warrior & Gulf Navigation Co., supra; and Steelworkers v. Enterprise Wheel & Car Corp., 363 U.S. 593, 80 S.Ct. 1358, 4 L.Ed.2d 1424 (1960). These precepts have served the industrial relations community well, and have led to continued reliance on arbitration, rather than strikes or lockouts, as the preferred method of resolving disputes arising during the term of a collective-bargaining agreement. We see no reason either to question their continuing validity, or to eviscerate their meaning by creating an exception to their general applicability. The first principle gleaned from the Trilogy is that "arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." Warrior & Gulf, supra, 363 U.S., at 582, 80 S.Ct., at 1353; American Mfg. Co., supra, 363 U.S., at 570-571, 80 S.Ct., at 1364-1365 (BRENNAN, J., concurring). This axiom recognizes the fact that arbitrators derive their authority to resolve disputes only because the parties have agreed in advance to submit such grievances to arbitration. Gateway Coal Co. v. Mine Workers, 414 U.S. 368, 374, 94 S.Ct. 629, 635, 38 L.Ed.2d 583 (1974). The second rule, which follows inexorably from the first, is that the question of arbitrability—whether a collective-bargaining agreement creates a duty for the parties to arbitrate the particular grievance—is undeniably an issue for judicial determination. Unless the parties clearly and unmistakably provide otherwise, the question of whether the parties agreed to arbitrate is to be decided by the court, not the arbitrator. Warrior & Gulf, supra, 363 U.S., at 582-583, 80 S.Ct., at 1352-1353. See Operating Engineers v. Flair Builders, Inc., 406 U.S. 487, 491, 92 S.Ct. 1710, 1712, 32 L.Ed.2d 248 (1972); Atkinson v. Sinclair Refining Co., 370 U.S. 238, 241, 82 S.Ct. 1318, 1320, 8 L.Ed.2d 462 (1962), overruled in part on other grounds, Boys Markets, Inc. v. Retail Clerks, 398 U.S. 235, 90 S.Ct. 1583, 26 L.Ed.2d 199 (1970). Accord, Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626, 105 S.Ct. 3346, 3353-3354, 87 L.Ed.2d 444 (1985). The Court expressly reaffirmed this principle in John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964). The "threshold question" there was whether the court or an arbitrator should decide if arbitration provisions in a collective-bargaining contract survived a corporate merger so as to bind the surviving corporation. Id., at 546, 84 S.Ct., at 912. The Court answered that there was "no doubt" that this question was for the courts. " 'Under our decisions, whether or not the company was bound to arbitrate, as well as what issues it must arbitrate, is a matter to be determined by the Court on the basis of the contract entered into by the parties.' . . . The duty to arbitrate being of contractual origin, a compulsory submission to arbitration cannot precede judicial determination that the collective bargaining agreement does in fact create such a duty." Id., at 546-547, 84 S.Ct., at 912-913 (citations omitted). The third principle derived from our prior cases is that, in deciding whether the parties have agreed to submit a particular grievance to arbitration, a court is not to rule on the potential merits of the underlying claims. Whether "arguable" or not, indeed even if it appears to the court to be frivolous, the union's claim that the employer has violated the collective-bargaining agreement is to be decided, not by the court asked to order arbitration, but as the parties have agreed, by the arbitrator. "The courts, therefore, have no business weighing the merits of the grievance, considering whether there is equity in a particular claim, or determining whether there is particular language in the written instrument which will support the claim. The agreement is to submit all grievances to arbitration, not merely those which the court will deem meritorious." American Mfg. Co., 363 U.S., at 568, 80 S.Ct., at 1346 (footnote omitted). Finally, it has been established that where the contract contains an arbitration clause, there is a presumption of arbitrability in the sense that "[a]n order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage." Warrior & Gulf, 363 U.S., at 582-583, 80 S.Ct., at 1352-1353. See also Gateway Coal Co. v. Mine Workers, supra, 414 U.S., at 377-378, 94 S.Ct., at 636-637. Such a presumption is particularly applicable where the clause is as broad as the one employed in this case, which provides for arbitration of "any differences arising with respect to the interpretation of this contract or the performance of any obligation hereunder. . . ." In such cases, "[i]n the absence of any express provision excluding a particular grievance from arbitration, we think only the most forceful evidence of a purpose to exclude the claim from arbitration can prevail." Warrior & Gulf, supra, 363 U.S., at 584-585, 80 S.Ct., at 1353-1354. This presumption of arbitrability for labor disputes recognizes the greater institutional competence of arbitrators in interpreting collective-bargaining agreements, "furthers the national labor policy of peaceful resolution of labor disputes and thus best accords with the parties' presumed objectives in pursuing collective bargaining." Schneider Moving & Storage Co. v. Robbins, 466 U.S. 364, 371-372, 104 S.Ct. 1844, 1849-1850, 80 L.Ed.2d 366 (1984) (citation omitted). See Gateway Coal Co., supra, 414 U.S., at 378-379, 94 S.Ct., at 637-638. The willingness of parties to enter into agreements that provide for arbitration of specified disputes would be "drastically reduced," however, if a labor arbitrator had the "power to determine his own jurisdiction . . . ." Cox, Reflections Upon Labor Arbitration, 72 Harv.L.Rev. 1482, 1509 (1959). Were this the applicable rule, an arbitrator would not be constrained to resolve only those disputes that the parties have agreed in advance to settle by arbitration, but, instead, would be empowered "to impose obligations outside the contract limited only by his understanding and conscience." Ibid. This result undercuts the longstanding federal policy of promoting industrial harmony through the use of collective-bargaining agreements, and is antithetical to the function of a collective-bargaining agreement as setting out the rights and duties of the parties. With these principles in mind, it is evident that the Seventh Circuit erred in ordering the parties to arbitrate the arbitrability question. It is the court's duty to interpret the agreement and to determine whether the parties intended to arbitrate grievances concerning layoffs predicated on a "lack of work" determination by the Company. If the court determines that the agreement so provides, then it is for the arbitrator to determine the relative merits of the parties' substantive interpretations of the agreement. It was for the court, not the arbitrator, to decide in the first instance whether the dispute was to be resolved through arbitration. The Union does not contest the application of these principles to the present case. Instead, it urges the Court to examine the specific provisions of the agreement for itself and to affirm the Court of Appeals on the ground that the parties had agreed to arbitrate the dispute over the layoffs at issue here. But it is usually not our function in the first instance to construe collective-bargaining contracts and arbitration clauses, or to consider any other evidence that might unmistakably demonstrate that a particular grievance was not to be subject to arbitration. The issue in the case is whether, because of express exclusion or other forceful evidence, the dispute over the interpretation of Article 20 of the contract, the layoff provision, is not subject to the arbitration clause. That issue should have been decided by the District Court and reviewed by the Court of Appeals; it should not have been referred to the arbitrator. The judgment of the Court of Appeals is vacated, and the case is remanded for proceedings in conformity with this opinion. It is so ordered.
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Petitioner employer and respondent Union are parties to a collectivebargaining agreement covering telephone equipment installation workers. Article 8 of the agreement provides for arbitration of differences arising over interpretation of the agreement. Article 9 provides that subject to certain limitations, but otherwise not subject to the arbitration clause, petitioner is free to exercise certain management functions, including the hiring, placement, and termination of employees. Article 20 prescribes the order in which employees will be laid off "[w]hen lack of work necessitates Layoff." The Union filed a grievance challenging petitioner's decision to lay off 79 installers from its Chicago location, claiming that there was no lack of work at that location and that therefore the layoffs would violate Article 20. But petitioner laid off the installers and refused to submit the grievance to arbitration on the ground that under Article 9 the layoffs were not arbitrable. The Union then sought to compel arbitration by filing suit in Federal District Court, which, after finding that the Union's interpretation of Article 20 was at least "arguable," held that it was for the arbitrator, not the court, to decide whether that interpretation had merit, and, accordingly, ordered petitioner to arbitrate. The Court of Appeals affirmed. Held: The issue whether, because of express exclusion or other evidence, the dispute over interpretation of Article 20 was subject to the arbitration clause, should have been decided by the District Court and reviewed by the Court of Appeals, and should not have been referred to the arbitrator. Pp. 648-657. (a) Under the principles set forth in the Steelworkers Trilogy (Steelworkers v. American Mfg. Co., 363 U. S. 564; Steelworkers v. Warrior & Gulf Navigation Co., 363 U. S. 574; and Steelworkers v. Enterprise Wheel & Car Corp., 363 U. S. 593), it was the District Court's duty to interpret the collective-bargaining agreement and to determine whether the parties intended to arbitrate grievances concerning layoffs predicated on a "lack of work" determination by petitioner. If the court should determine that the agreement so provides, then it would be for the arbitrator to determine the relative merits of the parties' substantive interpretations of the agreement. Pp. 648-651. (b) This Court will not examine the collective-bargaining agreement for itself and affirm the Court of Appeals on the ground that the parties had agreed to arbitrate the dispute over the layoffs. It is not this Court's function in the first instance to construe collective-bargaining agreements and arbitration clauses, or to consider any other evidence that might demonstrate that a particular grievance was not subject to arbitration. Pp. 651-652. 751 F. 2d 203, vacated and remanded.
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SECTION 1. SHORT TITLE.
This Act may be cited as the ``Bovine Growth Hormone Milk Labeling
Act''.
SEC. 2. DEFINITIONS.
Section 201 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C.
321) is amended by adding at the end the following:
``(gg) The term `bovine growth hormone' means--
``(A) a substance described as bovine somatotropin, bST,
BST, bGH, or BGH; and
``(B) a growth hormone, intended for use in bovine animals,
that has been produced through recombinant DNA techniques.
``(hh) The term `cow' means a bovine animal.''.
SEC. 3. LABELING.
Section 403 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C.
343) is amended by adding at the end the following:
``(s)(1) If it is milk that--
``(A) is intended for human consumption; and
``(B)(i) is produced by cows that have been injected with
bovine growth hormone; or
``(ii) has been commingled with milk produced by such cows,
unless the labeling of the milk bears the following statement: `This
milk was produced by cows injected with bovine growth hormone.'.
``(2) If it is milk that is intended for human consumption, other
than milk described in paragraph (1), unless the labeling of the milk
bears the following statement: `This milk was not produced by cows
injected with bovine growth hormone.'.
``(3) If it is a milk product that is intended for human
consumption and is derived from milk described in paragraph (1), unless
the labeling of the milk product bears the following statement: `This
milk product was derived from milk produced by cows injected with
bovine growth hormone.'.
``(4) If it is a milk product that is intended for human
consumption and is not derived from milk described in paragraph (1),
unless the labeling of the milk product bears the following statement:
`This milk product was not derived from milk produced by cows injected
with bovine growth hormone.'''.
SEC. 4. RECORDS.
(a) Prohibited Act.--Section 301 of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 331) is amended by adding at the end the
following:
``(u) The failure to prepare and maintain records required by
section 512A, or to comply with a requirement of regulations
promulgated under such section.''.
(b) Records.--Chapter V of the Federal Food, Drug, and Cosmetic Act
is amended by inserting after section 512 (21 U.S.C. 360b) the
following:
``SEC. 512A. BOVINE GROWTH HORMONE.
``(a) Records.--
``(1) In general.--A person who sells bovine growth
hormone, purchases the hormone, distributes the hormone, or
injects the hormone into a cow shall prepare and maintain
records that comply with the regulations issued by the
Secretary under paragraph (2).
``(2) Regulations regarding records.--
``(A) Persons covered.--Not later than 30 days
after the date of enactment of the Bovine Growth
Hormone Milk Labeling Act, the Secretary shall issue
regulations that require--
``(i) persons who sell bovine growth
hormone;
``(ii) persons who purchase bovine growth
hormone;
``(iii) persons who distribute bovine
growth hormone; and
``(iv) persons who inject bovine growth
hormone into cows,
to create and maintain records that contain the
applicable information specified in subparagraph (B).
``(B) Information.--Regulations issued under this
paragraph shall require records to contain a
description of--
``(i) the quantity and source of the bovine
growth hormone obtained (by manufacture,
purchase, or any other means);
``(ii) the date on which the hormone was
obtained; and
``(iii) the identity of each person to whom
the hormone was sold or otherwise distributed,
the cows into which any portion of the hormone
was injected, and each person who has an
operator or ownership interest in the cows.
``(b) Other Regulations.--Not later than 30 days after the date of
enactment of the Bovine Growth Hormone Milk Labeling Act, the Secretary
shall issue regulations that establish--
``(1) requirements with respect to the sale, distribution,
and administration of bovine growth hormone; and
``(2) such other requirements with respect to the use of
bovine growth hormone as the Secretary may determine to be
necessary to carry out the objectives of this Act.''.
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Bovine Growth Hormone Milk Labeling Act - Amends the Federal Food, Drug, and Cosmetic Act to require that all milk and milk products labels indicate whether or not the product is derived from cows injected with bovine growth hormone.
Sets forth related bovine growth hormone recordkeeping requirements.
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SECTION 1. SHORT TITLE.
This Act may be cited as the ``Guam War Restitution Act''.
SEC. 2. AMENDMENT TO THE ORGANIC ACT OF GUAM.
The Organic Act of Guam (48 U.S.C. 1421 et seq.) is amended by
adding at the end the following new section:
``SEC. 36. RECOGNITION OF DEMONSTRATED LOYALTY OF THE PEOPLE OF GUAM TO
THE UNITED STATES, AND THE SUFFERING AND DEPRIVATION
ARISING THEREFROM, DURING WORLD WAR II.
``(a) Application of Section.--This section shall apply to
Guamanians who did not meet the one-year time limitation for filing of
death or personal injury claims specified in the first section of the
Act of November 15, 1945 (Chapter 483; 59 Stat. 582), or who suffered
other compensable injuries if such Guamanians, their heirs or next of
kin, meet the eligibility, time limitation for filing, and other
criteria set forth in this section.
``(b) Definitions.--For the purposes of this section:
``(1) Award.--The term `award' means the amount of
compensation payable under subsection (c).
``(2) Benefit.--The term `benefit' means the amount of
compensation payable under subsection (d).
``(3) Board.--The term `Board' means the Guam Restitution
Trust Fund Board of Directors established by subsection (h).
``(4) Claims fund.--The term `Claims Fund' means the Guam
Restitution Claims Fund established by subsection (f)(1).
``(5) Compensable injury.--The term `compensable injury'
means one of the following three categories of injury incurred
during, or as a result of, World War II:
``(A) Death.
``(B) Personal injury.
``(C) Forced labor, forced march, or internment.
``(6) Guamanian.--The term `Guamanian' means any person who
resided in the territory of Guam during the period beginning
December 8, 1941, and ending September 2, 1945, and who was a
United States citizen or national during the period.
``(7) Secretary.--The term `Secretary' means the Secretary
of the Interior.
``(8) Trust fund.--The term `Trust Fund' means the Guam
Restitution Trust Fund established by subsection (g)(1).
``(c) General Authority of Secretary and Board; Requirements.--
``(1) In general.--The Secretary may receive, examine, and
render final decisions concerning claims for awards under
subsection (d) and benefits under subsection (e) filed in
accordance with this section. The Secretary may certify and
disburse payments from the Claims Fund, and the Board may
certify and disburse payments from the Trust Fund, in
accordance with this section.
``(2) Required information for inclusion in claims for
awards and benefits.--A claim for an award or benefit under
this section shall be made under oath and shall include--
``(A) the claimant's name and age;
``(B) the village in which the claimant resided at
the time the compensable injury occurred;
``(C) the approximate date or dates when the
compensable injury incurred;
``(D) a brief description of the compensable injury
being claimed;
``(E) the circumstances leading up to that
compensable injury; and
``(F) in the case of an award based on death as the
compensable injury and in the case of a claim for a
benefit, proof of the relationship of the claimant to
the deceased.
``(3) Time limitation applicable to secretary.--The
Secretary shall act expeditiously in the examination,
determination, and certification of submitted claims, but in no
event later than one year after the expiration of the time to
be issued by the Secretary.
``(d) Eligibility.--
``(1) Eligibility for awards.--To be eligible for an award
under this section, the following criteria must be met:
``(A) The claimant is a living Guamanian who
personally received the compensable injury, except that
in a claim for death, a claimant may be the heir or
next of kin of the decedent Guamanian.
``(B) The claimant files a claim with the Secretary
for a compensable injury containing all the information
required by subsection (c)(2).
``(C) The claimant is able to furnish either proof
of the compensable injury or is able to produce
affidavits by two witnesses to the compensable injury.
``(D) The claimant files a claim within one year
after the date of enactment of this section.
``(2) Eligibility for benefits.--To be eligible for
benefits under this section, the following criteria must be
met:
``(A) The claimant is a living Guamanian who is an
heir or next of kin of the decedent Guamanian who
personally received the compensable injury and who died
after September 2, 1945.
``(B) The claimant files a claim with the Secretary
or the Board for a compensable injury containing all
the information required by subsection (c)(2).
``(C) The claimant is able to furnish either proof
of the compensable injury or is able to produce
affidavits by two witnesses to the compensable injury.
``(D) The claimant files a claim within one year
after the date of enactment of this section; except
that persons who can prove consanguinity with claimants
who have met the criteria specified in subparagraphs
(A) through (C) may become eligible for pro rata share
of benefits accruing to such claim by filing a claim
with the Board at any time, by such procedures as the
Board may prescribe.
``(3) Limitation on eligibility for awards and benefits.--
(A) A claimant may only be eligible for an award arising out of
one category of compensable injury.
``(B) A claimant may only be eligible for benefits arising
out of one category of compensable injury.
``(e) Payments.--
``(1) Certification.--The Secretary shall certify all
awards for payment, and the Board shall certify all benefits
for payment, under this section.
``(2) Awards.--The Secretary shall pay the following
amounts as an award to each eligible claimant under subsection
(d)(1) from the Claims Fund:
``(A) $20,000 for the category of death.
``(B) $7,000 for the category of personal injury.
``(C) $5,000 for the category of forced labor,
forced march, or internment.
``(3) Benefits.--The Secretary shall pay the following
amounts as a benefit to each eligible claimant under subsection
(d)(2) from the Trust Fund:
``(A) $7,000 for the category of personal injury.
``(B) $5,000 for the category of forced labor,
forced march, or internment.
``(4) Refusal to accept payment.--If a claimant refuses to
accept a payment under paragraph (2) or (3), an amount equal to
such payment shall remain in the Claims Fund or Trust Fund, as
appropriate, and no payment may be made under this section to
such claimant at any future date.
``(5) Prorated payments related to claims for the same
death.--Payment of the award or benefit relating to death shall
be prorated among the heirs or next of kin claiming for the
same death, as provided in the Guam probate laws.
``(6) Order of payments.--The Secretary shall endeavor to
make payments under this section to eligible individuals in the
order of date of birth (with the oldest individual on the date
of the enactment of this Act or, if applicable, that
individual's survivors under paragraph (6), receiving full
payment first), until all eligible individuals have received
payment in full.
``(f) Guam Restitution Claims Fund.--
``(1) Establishment.--There is established in the Treasury
of the United States the Guam Restitution Claims Fund, to be
administered by the Secretary of the Treasury, as directed by
the Secretary of the Interior. Amounts in the Claims Fund shall
only be available for disbursement by the Secretary of the
Interior in the amounts specified in subsection (e). In the
event that all eligible claims have been paid and a balance
exists in the Claims Fund, any unobligated funds shall be
transferred to the Trust Fund 60 days after the final report
required in subsection (j)(3) is submitted to Congress.
``(2) Limitation on use of amounts from claims fund.--No
cost incurred by the Secretary in carrying out this section
shall be paid from the Claims Fund or set off against, or
otherwise deducted from, any payment under this section to any
eligible claimant.
``(g) Guam Restitution Trust Fund.--
``(1) Establishment.--There is established in the Treasury
of the United States the Guam Restitution Trust Fund, which
shall be administered by the Secretary of the Treasury.
``(2) Investments.--Amounts in the Trust Fund shall be
invested in accordance with section 9702 of title 31, United
States Code.
``(3) Uses.--Amounts in the Trust Fund shall be available
only for disbursement by the Board in accordance with
subsection (h).
``(h) Guam Restitution Trust Fund Board of Directors.--
``(1) Establishment.--There is established the Guam
Restitution Trust Fund Board of Directors, which shall be
responsible for making disbursements from the Trust Fund in the
manner provided in this subsection.
``(2) Uses.--The Board may make disbursements from the
Trust Fund only--
``(A) to sponsor research and public educational
activities so that the events surrounding the wartime
experiences and losses of the Guamanian people will be
remembered, and so that the causes and circumstances of
this and similar events may be illuminated and
understood;
``(B) to disburse available funds as benefits to
eligible claimants through a revolving fund for such
purposes as post-secondary scholarships, first-time
home ownership loans, and other suitable purposes as
may be determined by the Board; and
``(C) for reasonable administrative expenses of the
Board, including expenses incurred under paragraphs
(3)(C), (4), and (5).
``(3) Membership.--(A) The Board shall be composed of nine
members appointed by the Secretary from recommendations made by
the Governor of Guam, from individuals who are not officers or
employees of the United States Government.
``(B)(i) Except as provided in subparagraphs (B) and (C),
members shall be appointed for terms of three years.
``(ii) Of the members first appointed--
``(I) five shall be appointed for terms of three
years, and
``(II) four shall be appointed for terms of two
years,
as designed by the Secretary at the time of appointment.
``(iii) Any member appointed to fill a vacancy occurring
before the expiration of the term for which such member's
predecessor was appointed shall be appointed only for the
remainder of such term. A member may serve after the expiration
of such member's term until such member's successor has taken
office. No individual may be appointed as a member for more
than two consecutive terms.
``(C) Members of the Board shall serve without pay as such,
except that members of the Board shall be entitled to
reimbursement for travel, subsistence, and other necessary
expenses incurred by them in carrying out the functions of the
Board, in the same manner as persons employed intermittently in
the United States Government are allowed expenses under section
5703 of title 5, United States Code.
``(D) Five members of the Board shall constitute a quorum
but a lesser number may hold hearings.
``(E) The Chair of the Board shall be elected by the
members of the Board.
``(4)(A) The Board shall have a Director who shall be
appointed by the Board.
``(B) The Board may appoint and fix the pay of such
additional staff as it may require.
``(C) The Director and the additional staff of the Board
may be appointed without regard to section 5311(b) of title 5,
United States Code, and without regard to the provisions of
such title governing appointments in the competitive service,
and may be paid without regard to the provisions of chapter 51
and subchapter III of chapter 53 of such title relating to
classification and General Schedule pay rates, except that the
compensation of any employee of the Board may not exceed a rate
equivalent to the minimum rate of basic pay payable for GS-15
of the General Schedule under section 5332(a) of such title.
``(5) Administrative support services.--The Administrator
of General Services shall provide to the Board on a
reimbursable basis such administrative support services as the
Board may request.
``(6) Gifts and donations.--The Board may accept, use, and
dispose of gifts or donations of services or property for
purposes authorized under paragraph (2).
``(7) Annual report.--Not later than 12 months after the
first meeting of the Board and every 12 months thereafter, the
Board shall transmit to the President and to each House of the
Congress a report describing the activities of the Board.
``(i) Notice.--Not later than 90 days after the date of enactment
of this section, the Secretary shall give public notice in the
territory of Guam and such other places as the Secretary deems
appropriate of the time when, and the time limitation within which,
claims may be filed under this section. The Secretary shall assure that
the provisions of this section are widely published in the territory of
Guam and such other places as the Secretary deems appropriate, and the
Secretary shall make every effort to advise promptly all persons who
may be entitled to file claims under the provisions of this section and
to assist them in the preparation and filing of their claims.
``(j) Reports.--
``(1) Compensation needed.--No later than 18 months after
enactment of this section, the Secretary shall submit a report
to Congress and the Governor of Guam with a recommendation of a
specific amount of compensation necessary to fully carry out
this section. The report shall include--
``(A) a list of all claims, categorized by
compensable injury, which were approved under this
section; and
``(B) a list of all claims, categorized by
compensable injury, which were denied under this
section, and a brief explanation for the reason
therefore.
``(2) Annual.--Beginning with the first full fiscal year
ending after submittal of the report provided in paragraph (1),
and annually thereafter, the Secretary shall submit an annual
report to Congress concerning the operations under this
section, the status of the Claims Fund and Trust Fund, and any
request for an appropriation in order to make disbursement from
the Claims Fund and Trust Fund. Such report shall be submitted
no later than January 15th of each year.
``(3) Final award report.--Once all awards have been paid
to eligible claimants, the Secretary shall submit a report to
Congress and to the Governor of Guam certifying--
``(A) the total amount of compensation paid as
awards under this section, broken down by category of
compensable injury; and
``(B) the final status of the Claims Fund and the
amount of any existing balance thereof.
``(k) Limitation.--Any remuneration on account of services rendered
on behalf of any claimant, or any association of claimants, in
connection with any claim or claims under this section may not exceed 5
percent of the amount paid on such claim or claims under this section.
Any agreement to the contrary shall be unlawful and void. Whoever, in
the United States or elsewhere, demands or receives, on account of
services so rendered, any remuneration in excess of the maximum
permitted by this section, shall be guilty of a misdemeanor and upon
conviction thereof, shall be fined in accordance with title 18, United
States Code, imprisoned not more than 12 months, or both.
``(l) Disclaimer.--Nothing contained in this section shall
constitute a United States obligation to pay any claim arising out of
war. The compensation provided in this section is ex gratia in nature
intended solely as a means of recognizing the demonstrated loyalty of
the people of Guam to the United States, and the suffering and
deprivation arising therefrom, during World War II.
``(m) Authorization of Appropriations.--There is authorized to be
appropriated such sums as may be necessary to carry out this section.
Amounts appropriated pursuant to this section are authorized to remain
available until expended.''.
HR 4741 IH----2
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Guam War Restitution Act - Amends the Organic Act of Guam to apply this Act to Guamanians who did not meet the one-year time limitation for filing of death or personal injury claims specified in a certain Act or who suffered other compensable injuries if such Guamanians, their heirs, or next of kin meet the eligibility, time limitation for filing, and other criteria set forth in this Act.
Defines "compensable injury" as one of the three following categories of injury incurred during, or as a result of, World War II: (1) death; (2) personal injury; or (3) forced labor, forced march, or internment.
Authorizes the Secretary of the Interior to render final decisions concerning claims for awards and benefits under this Act. Sets forth eligibility requirements. Makes awards available to Guamanians who personally received the compensable injury or to their heirs or next of kin in claims for death. Makes benefits available to Guamanians who are heirs or next of kin of the decedent Guamanian who received the compensable injury and who died after September 2, 1945.
Requires payment of the award or benefit relating to death to be prorated among the heirs or next of kin claiming for the same death, as provided in the Guam probate laws.
Establishes the Guam Restitution Claims Fund, the Guam Restitution Trust Fund, and the Guam Restitution Trust Fund Board of Directors. Permits the Board to make disbursements from the Trust Fund only: (1) to sponsor research and public educational activities relating to Guamanian wartime experiences; (2) to disburse funds as benefits to eligible claimants through a revolving fund for purposes such as post-secondary scholarships and first-time home ownership loans; and (3) for administrative expenses.
Limits any remuneration on account of services rendered on behalf of any claimant in connection with any claim to five percent of the amount paid on such claim. Prescribes penalties for violations of such limit.
Authorizes appropriations.
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Background In a 5-to-4 ruling, the Supreme Court in Citizens United v. F ederal Election Commission (F EC ) lifted certain restrictions on corporate independent expenditures. The decision invalidated two provisions of the Federal Election Campaign Act (FECA), codified at 2 U.S.C. § 441b. It struck down the long-standing prohibition on corporations using their general treasury funds to make independent expenditures, and Section 203 of the Bipartisan Campaign Reform Act of 2002 (BCRA), which amended FECA, prohibiting corporations from using their general treasury funds for "electioneering communications." The Court determined that these prohibitions constitute a "ban on speech" in violation of the First Amendment. In so doing, the Court overruled its earlier holdings in Austin v. Michigan Chamber of Commerce, finding that the allegedly distorting effect of corporate expenditures provided no basis for allowing the government to limit corporate independent expenditures. It also overruled the portion of its decision in McConnell v. FEC, upholding the facial validity of Section 203 of BCRA, finding that the McConnell Court relied on Austin. The Court, however, upheld the disclaimer and disclosure requirements in Sections 201 and 311 of BCRA as applied to a movie regarding a presidential candidate that was produced by Citizens United, a tax-exempt corporation, and the broadcast advertisements it planned to run promoting the movie. According to the Court, while they may burden the ability to speak, disclaimer and disclosure requirements "impose no ceiling on campaign-related activities." It does not appear that the Court's ruling in Citizens United affects the validity of Title I of BCRA, which generally bans the raising of soft, unregulated money by national parties and federal candidates or officials, and restricts soft money spending by state parties for "federal election activities." For a legal analysis of the Supreme Court's ruling, see CRS Report R41045, The Constitutionality of Regulating Corporate Expenditures: A Brief Analysis of the Supreme Court Ruling in Citizens United v. FEC , by [author name scrubbed]. Impact of Citizens United on Current Federal Campaign Finance Law In brief, before the Court's ruling, corporations and labor unions were prohibited from using their general treasury funds to make expenditures for communications expressly advocating election or defeat of a clearly identified federal candidate. In addition, corporations and unions were prohibited from using general treasury funds to finance electioneering communications, which FECA defines as any broadcast, cable, or satellite communication that refers to a clearly identified federal candidate made within 60 days of a general election or 30 days of a primary. However, corporations and labor unions were permitted to use political action committees (PACs), financed with regulated contributions from certain employees, shareholders, or members, to make independent expenditures for express advocacy communications and to fund electioneering communications within the restricted time periods. As a result of the Court's ruling, it appears that federal campaign finance law does not restrict corporate or, most likely, labor union use of general treasury funds to make independent expenditures for any communication expressly advocating election or defeat of a candidate. In addition, the law now also permits corporate and union treasury funding of electioneering communications. However, the law prohibiting contributions to candidates, political parties, and political action committees (PACs) from corporate and labor union general treasuries still applies. Legislation and Proposals in Response to Citizens United In response to the Supreme Court's ruling in Citizens United v. FEC , various proposals have been discussed and legislation has been introduced. This report provides an analysis of the constitutional and legal issues raised by several proposals, organized by regulatory topic: increasing disclaimer requirements, increasing disclosure for tax-exempt organizations, requiring shareholder notification and approval, restricting U.S. subsidiaries of foreign corporations, restricting political expenditures by government contractors and grantees, taxing corporate independent expenditures, and providing public financing for congressional campaigns. The report also discusses amending the Constitution. This report does not describe specific legislation. For a comprehensive discussion of legislation that has been introduced and an analysis of policy options, see CRS Report R41054, Campaign Finance Policy After Citizens United v. Federal Election Commission: Issues and Options for Congress , by [author name scrubbed]. Increased Disclaimer Requirements19 Some legislation and proposals that have been discussed in response to the Supreme Court's ruling in Citizens United v. FEC would increase disclaimer requirements for political communications paid for by corporations. The term "disclaimer" typically refers to sponsor identification that is included in the content of the advertisement. For example, such proposals may require advertisements to include a statement by the president or chief executive officer of the corporation, identifying such individual by name and position, and indicating that the corporation that he or she heads paid for the ad and approved its contents. In addition, such proposals may require inclusion of an image of the individual making the statement. Currently, the Federal Election Campaign Act (FECA) requires that any public political advertising financed by a political committee include various disclaimers. Of particular relevance, it also requires that corporations and labor unions include disclaimers in any communication expressly advocating the election or defeat of a clearly identified candidate, any solicitation of contributions, or any other public political advertising, including electioneering communications, that are financed by corporations and labor unions. FECA defines "electioneering communication" as any broadcast, cable, or satellite communication that refers to a clearly identified federal candidate made within 60 days of a general election or 30 days of a primary. For communications financed by corporations and labor unions, FECA requires the disclaimer to clearly state the name and permanent street address, telephone number, or website address of the person who paid for the communication and state that the communication was not authorized by any candidate or candidate committee. In radio and television advertisements, corporations and labor unions are required to include in a clearly spoken manner, the following audio statement: "________ is responsible for the content of this advertising," with the blank to be filled in with the name of the entity paying for the ad. In addition, in television advertisements, the statement is required to be conveyed by an unobscured, full-screen view of a representative of the entity paying for the ad, in a voice-over, and shall also appear in a clearly readable manner with a reasonable degree of color contrast for a period of at least four seconds. This requirement is often referred to as "stand by your ad." FECA does not require disclosure for advertising that does not expressly advocate election or defeat of a clearly identified candidate, and that does not meet the criteria of an "electioneering communication." In McConnell v. FEC , by a vote of 8 to 1, the Supreme Court upheld the facial validity of the disclaimer requirement in Section 311 of BCRA. Specifically, the Court found that it "bears a sufficient relationship to the important governmental interest of 'shedding the light of publicity' on campaign financing." Similarly, in Citizen s United v. FEC , by a vote of 8 to 1, the Court upheld the disclaimer requirement in Section 311 as applied to a movie that Citizens United produced regarding a presidential candidate and the broadcast advertisements it planned to run promoting the movie. According to the Court, while they may burden the ability to speak, disclaimer and disclosure requirements "impose no ceiling on campaign-related activities," and "do not prevent anyone from speaking." According to the Court, the disclaimer requirements in Section 311 of BCRA "provid[e] the electorate with information," and "insure that the voters are fully informed" about who is speaking. Moreover, they facilitate the ability of a listener or viewer to "evaluate the arguments to which they are being subjected." At a minimum, the Court announced, disclaimers make clear that an advertisement is not financed by a candidate or a political party. As a result, it appears likely that enactment of increased disclaimer requirements for corporate-financed political advertisements would survive facial challenges to their constitutionality. However, if a disclaimer requirement was so burdensome that it impeded the ability of a corporation to speak—for example, a requirement that a disclaimer comprise an unreasonable amount of time—a court might conclude that it is a violation of a corporation's free speech rights under Citizens United . Disclosure of Donors to § 501(c) Organizations32 Some have proposed requiring the identities of certain donors to § 501(c) organizations be publicly disclosed, either through traditional disclosure mechanisms or the disclaimer provisions discussed above. The organizations described in IRC § 501(c) have federal tax-exempt status. They include § 501(c)(4) social welfare organizations, § 501(c)(5) labor unions, and § 501(c)(6) trade associations. Under current law, FECA requires the public disclosure of certain donors to entities, including § 501(c) organizations, that make independent expenditures and electioneering communications. In general, the identification of donors to such entities is subject to disclosure if their donations exceed a threshold amount and are made to further the entity's campaign activity. In certain situations, the identity of any donor whose contribution exceeds the threshold amount may be subject to disclosure, regardless of whether it was made to further the activity. The organization may avoid disclosing these donors by establishing a separate account to pay for the activities, which will result in only the donors to that account being publicly disclosed. Some might argue that compelled donor disclosure chills the organization's and donors' First Amendment rights. In Citizens United , the Court upheld disclosure requirements as applied to the movie that Citizens United produced and the broadcast advertisements it planned to run promoting the movie. The Court explained that while they may burden the ability to speak, the requirements "impose no ceiling on campaign-related activities," and "do not prevent anyone from speaking." At the same time, such requirements would be unconstitutional as applied to an organization if there is a reasonable probability that its donors would be subject to threats, harassment, or reprisals. As mentioned, some have suggested mandating the public disclosure of certain donors to § 501(c) organizations beyond that required by current law. Additionally, some have proposed expanding FECA's disclaimer requirements so that large donors to § 501(c) organizations would be named in the organization's political advertisements. Some of these proposals would differ from the existing provisions described above in that they would require public disclosure of certain donors regardless of the purpose for which the money was donated or used, without providing a mechanism by which the organization could limit such disclosure to only those donors whose contributions were intended to be used for political purposes. Some have raised the possibility that there might be constitutional limitations on the ability of Congress to require disclosure of donors who have not necessarily donated specifically for political activity, particularly if there is no mechanism by which such disclosure could be limited. In other words, some might argue that the differences between the proposals and existing law could be constitutionally significant. How a court would analyze such an argument might be uncertain. It seems any requirement would be subject to "exacting scrutiny, which requires a substantial relation between the disclosure requirement and a sufficiently important governmental interest." Here, some might argue, for example, that the relationship between (1) the compelled disclosure of donors who gave money for reasons not necessarily related to campaign activity and (2) the government's interest to provide information to the electorate or avoid corruption or the appearance of corruption is insufficient to withstand judicial scrutiny. Proponents of such an argument might point to the fact that § 501(c) organizations engage in a panoply of activities outside the election context and campaign activity cannot, by law, be their primary activity. Thus, donors who make non-earmarked contributions are supporting the entirety of the organization's activities, and some might question whether the government can require the public disclosure of their identities simply because the organization happens to engage in limited amounts of campaign activity. Such an argument might be extended to the disclaimer proposals as well. On the other hand, it is unclear whether this argument has constitutional merit. As discussed above, the Court has generally looked favorably on disclosure and disclaimer requirements, and there may be other factors that support the constitutionality of the proposals. For example, while the § 501(c) organizations we are concerned with here are limited in the amount of campaign activity they may participate in, they are permitted to engage in an unlimited amount of lobbying. Thus, a court might look at the full spectrum of the organization's activities when determining whether a donor disclosure requirement is sufficiently related to the government's informational interest. A court might also consider the extent to which the requirement furthers donor protection interests (i.e., whether donors' interests are presumably aligned with the organization's activities or donors are on notice that their donations might be disclosed). Additionally, particular proposals might contain limitations or protections that could be important to a court's analysis. Shareholder Notification and Approval45 There is congressional interest in amending federal securities laws to require a corporation to provide notice to shareholders of corporate political spending and/or to require that shareholders authorize corporate political spending. For example, a very general description of such a bill is a proposal requiring that no publicly traded company which must file annual and other reports with the Securities and Exchange Commission may make any political expenditure in excess of a certain amount in a fiscal year without first obtaining the authorization of a majority of the shareholders. Congress does not appear to have enacted legislation which provides shareholders with voting authority concerning specific corporate expenditures. These matters have traditionally been left for individual corporations to handle. Most decisions involving corporate expenditures are made by corporate executives and boards of directors. Under the business judgment rule, if there is a reasonable basis that a corporate transaction was made in good faith, management will typically be immunized from liability. Arguably, the business judgment rule applies to decisions of management concerning corporate political expenditures. However, this tradition of leaving corporate expenditure decisions to corporate executives does not mean that Congress is without constitutional authority to enact legislation requiring shareholder approval of corporate political expenditures. The Constitution's Commerce Clause may arguably provide Congress with authority to enact legislation of the type in question. No case specifically on point may be cited as precedent for upholding such legislation, but courts have cited the Commerce Clause as providing Congress with constitutional authority to enact various kinds of broad legislation concerning corporations. For example, several cases were brought challenging the constitutionality of the Securities Act of 1933 and the Securities Exchange Act of 1934. The cases upheld the constitutionality of these major federal securities laws on the basis of Congress's power under the Commerce Clause. Although these cases are approximately 70 years old, their holdings arguably remain within the philosophy of later interpretations by courts of the Commerce Clause. The Securities Act of 1933 ... does not attempt to regulate or prohibit the sale of securities in intrastate commerce. It merely provides as a condition precedent to the use of the mails and the facilities of interstate commerce that the issuer file a registration statement containing a true and complete statement of the information required by Section 7 of the Act, 15 U.S.C.A. § 77g, in order to protect the public against imposition and fraud in the sale of securities through the use of the mails or the facilities of interstate commerce.... It is well settled that Congress may enact reasonable regulations to prevent the mails and the facilities of interstate commerce from being used as instruments of fraud and imposition. The type of legislation described above would not prohibit corporate spending on political advertising; rather, it would require that shareholders give their approval of the spending. It may be argued that shareholders, as owners of a corporation, have virtually an inherent right, though perhaps not necessarily the expertise, to direct spending by executives and boards of directors and that legislation of the type in question would affirm this right. Legislation requiring voting by shareholders on proposed corporate political advertising could arguably be drafted in such a way as to act as a kind of impediment to the corporation's free speech as set out in Citizens United . For example, if a proposal required that a corporation submit to shareholder vote each specific expenditure for political advertising and that the vote must occur within an unreasonable period of time, a court might conclude that the legislation is a violation of the corporation's free speech rights as described by Citizens United . The practicalities of when to require these votes and the enforcement of this kind of legislation may need to be carefully considered in order not to run afoul of corporate freedom of speech rights defined by the Supreme Court in Citizens United . Restrictions on Foreign-Owned Corporations53 The Supreme Court in Citizens United struck down an attempt to limit First Amendment rights to political speech based on the speaker's "form" as a corporation. However, its doing so does not necessarily mean that the ability to make campaign expenditures, or otherwise engage in political speech, cannot be restricted based upon the speaker's foreign status. Certain federal laws already categorize some corporations incorporated within the United States as "foreign" because of circumstances related to their ownership and control and impose significant restrictions upon them. Congress could explore similar legislation in response to the Citizens United decision. Because of the lack of direct precedent, it is unclear how far Congress could go in this regard. Foreign Corporations vs. Foreign-Owned Corporations under Election Law The corporations that are the targets of proposed legislation are incorporated within the United States but are owned, to some degree, by foreign governments, corporations, or individuals, or can otherwise be characterized as under "substantial foreign influence." They are not foreign corporations in the sense that they are incorporated under the laws of another country. Such foreign corporations are among the "foreign nationals" currently prohibited from making campaign contributions or expenditures under 2 U.S.C. § 441e(a). The constitutionality of this prohibition was not at issue in Citizens United and has apparently never been challenged. In contrast, U.S. corporations with some degree of foreign ownership or control were prohibited from directly making campaign expenditures under 2 U.S.C. § 441b prior to Citizens United because of their status as corporations, not because of their foreign ties. They could, however, form political action committees (PACs) to make such expenditures. There were statutory and regulatory limitations upon the involvement of foreign nationals in these PACs, but these limitations were based on the alienage of the foreign nationals, not of the corporations. Redefining "Foreign Nationals" to Include Foreign-Owned Corporations Many proposed bills would amend the existing definition of "foreign national" to include corporations with some degree of foreign ownership or control. Such proposals could arguably be characterized as contrary to the prevailing legal theory of the corporation, the "natural person theory," which views corporations as separate persons possessed of personalities and interests distinct from those of their shareholders. However, there are instances where courts or statutes effectively rely on alternate theories of the corporation, or otherwise look beyond the corporate form to its shareholders. For example, federal statutes currently classify some U.S. corporations as "foreign" because they have a certain percentage of foreign ownership. There is no constitutional provision that expressly permits Congress to enact such statutes, which generally regulate foreign investment in the United States. However, these statutes are commonly justified by other federal powers mentioned in the Constitution, including federal powers over immigration and naturalization; federal power to regulate interstate and foreign commerce; and the power to provide for the national defense. These provisions, or similar ones limiting the involvement of foreigners in the federal government, could also be cited in support of legislation restricting the political speech of foreign-owned or -controlled corporations. In fact, there are already two instances within election law where parent corporations and their subsidiaries are treated as a single entity. There does not appear to be any bright-line rule as to what percentage of foreign ownership suffices for categorizing a corporation as "foreign" for statutory purposes. Rather, courts would consider any percentages along with the other provisions of the statute when examining the relationship between any challenged restrictions and the alleged government interests. Federal laws that distinguish on the basis of alienage and do not affect fundamental rights, discussed below, will generally be upheld so long as they are not "'wholly irrational' means of effectuating a legitimate government interest." In one of the few cases directly on point, Moving Phones Partnership, L.P. v. Federal Communications Commission , the U.S. Court of Appeals for the District of Columbia Circuit upheld Section 310(b) of the Communications Act and its implementing regulations against an equal protection challenge brought by several partnerships whose applications for authorization to construct and operate cellular systems were denied because they were more than 20% foreign-owned. The plaintiffs conceded that concerns about national security constituted a legitimate reason for discriminating against aliens in broadcasting, and the court found that limiting foreign ownership to no more than 20% was not a "wholly irrational" means of effectuating that interest. Preventing foreign influence on U.S. elections has apparently never been recognized as a legitimate state interest in the same way that national security was recognized in Moving Phones and other cases. However, it seems plausible that a court would treat it as such given that determining who can participate in the political process is arguably an inherent aspect of sovereignty; there are other restrictions on non-citizens' involvement in the political process (i.e., lobbying and contributions); and certain provisions of the Constitution have been read as indicating the Framers' concerns about foreign involvement in U.S. politics. First Amendment Rights Because foreigners located abroad generally lack First Amendment rights, it seems possible that some restrictions upon campaign expenditures or other political speech by foreign-owned corporations could be upheld. Also, the United States has a strong sovereign and constitutional interest in limiting political participation to members of its polity. The nature of these restrictions may, however, depend upon corporate structure and related considerations, as courts attempt to reconcile the corporation's "foreignness" with the general corporate rights to political speech recognized in Citizens United . Some commentators have suggested that the Court's intention, in finding that an outright ban on corporate expenditures could not be justified as a protection against foreign influence, "is clear: it does not want to license too broad a ban on all corporate independent expenditures when there is no reason to think that foreign nationals exercise control over the decision making." Such commentators are probably correct in suggesting that restrictions targeting small percentages of ownership, without the possibility of control, are more suspect than restrictions targeting wholly owned subsidiaries of foreign governments. Beyond the identity of the foreign owners and the degree of ownership, other considerations could include whether foreign ownership is unitary or dispersed (i.e., does a single foreign owner own the entire interest, or are there multiple owners?); whether ownership is direct or indirect; and what, beyond ownership, suffices for control. Certain restrictions upon the political speech of foreign-owned or -controlled corporations could also potentially be challenged on First Amendment grounds by U.S. citizens. Courts have recognized that some restrictions on the speech of foreigners can abridge First Amendment rights of U.S. citizens by, for example, denying them use of funds to finance this speech. In Mendelsohn v. Meese , a U.S. district court upheld a challenged statute that prevented two U.S. citizens from using funds from the Palestine Liberation Organization (PLO) to finance their speaking throughout the U.S. on behalf of the PLO after applying the more lenient standard of review applied to content-neutral speech. Similarly lenient review may be unlikely here, however, in part because the majority in Citizens United noted that "[s]peech restrictions based on the identity of the speaker are all too often simply a means to control content." This could potentially be a problem with restrictions on corporations with small percentages of foreign ownership because the speech of the U.S. majority owners would be affected by these restrictions. Vagueness Certain proposed restrictions could potentially be challenged on the grounds that they are vague. Due process under the Fifth Amendment requires that criminal statutes "give adequate guidance to those who would be law-abiding, to advise defendants of the nature of the offense with which they are charged, or to guide courts in trying those who are accused." Statutes that fail to do this will be held "void for vagueness." Vagueness is of particular concern with governmental restrictions on speech and has been used to void statutes involving loyalty oaths, obscenity and indecency, and restrictions on public demonstrations. Some commentators have expressed concerns that difficulties in determining corporate ownership, particularly in the case of corporations whose stock is publicly traded, could raise vagueness issues because corporations might not know whether they had the requisite percentage of foreign ownership. Similar concerns could also arise because corporate ownership can shift over time, or because of difficulties in determining what, beyond ownership, constitutes control or influence. Such concerns may be particularly apposite given that the majority in Citizens United suggested that complicated regulations of speech can serve to unconstitutionally chill speech. Conditioning Government Contracts or Grants on Forgoing Right to Political Speech95 Efforts by the federal government to restrict private, nongovernmental entities from using their own (non-federal) resources to engage in independent political advocacy or other political communications as a condition to receiving, or because the entity receives, some federal funding by way of grants or contracts would raise significant First Amendment concerns. Congress may certainly limit, regulate, or condition the use of the funds it appropriates, and there are now under federal law and regulation several prohibitions and multiple restrictions on the use by private recipients of federal funds or federal subsidies for political or advocacy purposes. When the government goes beyond restrictions and conditions on the use of the funds it appropriates, however, (or goes beyond attempts to control or "define" the content of a government program ), and seeks to institute a direct suppression of independent political advocacy by private entities as a condition to receive (or as a consequence of receiving) federal funds, then such legislation must be examined under the heightened scrutiny of First Amendment principles. The Supreme Court has noted that restrictions on otherwise constitutionally protected activities could not be "justified simply because" persons were receiving federal funds, nor was "a lesser degree of judicial scrutiny ... required simply because Government funds were involved." "Unconstitutional Conditions" on the Receipt of Federal Funds The Supreme Court has in the past ruled "that the government may not deny a benefit to a person because he exercises a constitutional right." The principle has thus developed in a line of cases that the government may not condition the receipt of a public benefit upon the requirement of relinquishing one's protected First Amendment rights. Although it is true that a private organization may simply choose to forgo participating in political or public policy advocacy to be eligible to receive a grant or a contract, and although no one has a "right" to participate in or receive funding, the Supreme Court under the so-called "unconstitutional conditions" cases has in the past established the principle that the receipt of a federal benefit may not be conditioned upon abdicating one's constitutional rights, particularly one's First Amendment freedom of speech: For at least a quarter-century, this Court has made clear that even though a person has no "right" to a valuable governmental benefit and even though the government may deny him the benefit for any number of reasons, there are some reasons upon which the government may not rely. It may not deny a benefit to a person on a basis that infringes his constitutionally protected interests—especially, his interest in freedom of speech. For if the Government could deny a benefit to a person because of his constitutionally protected speech or associations, his exercise of those freedoms would in effect be penalized and inhibited. This would allow the government to "produce a result which [it] could not command directly." Speiser v. Randall, 357 U.S. 513, 526. Such interference with constitutional rights is impermissible. In 1996 the Court recognized "the right of independent contractors not to be terminated for exercising their First Amendment rights." This principle, noted the Court, expressly applied to and derived from judicial decisions negating attempts to condition the receipt of government contract funds on the abdication of one's First Amendment rights of speech and advocacy. The Supreme Court under this line of cases invalidated a federal law which would have placed an advocacy restriction on any recipient of particular grants from a federally funded program (public broadcasting) in Federal Communications Commission v. League of Women Voters of California . Although broadcast stations might be required to follow certain fairness guidelines, the Court found that such broadcasters, merely because they receive some federal funding through the Corporation for Public Broadcasting, could not be prohibited from providing their own expression and opinions on matters of public interest, as the ban was not narrowly tailored to sufficiently address the government's asserted justifications for such restrictions on speech. In Citizens United , one of the arguments for maintaining the statutory restriction on independent corporate campaign expenditures was that the corporation had been granted by law certain benefits and privileges, and as a condition to receive such government-granted benefits, the corporations could be denied their First Amendment right to engage in political expression in making independent campaign expenditures. The Supreme Court, however, summarily dismissed such notion that government benefits could be given in this situation on the condition of forfeiting or forgoing First Amendment privileges: [T]he Austin majority undertook to distinguish wealthy individuals from corporations on the ground that "[s]tate law grants corporations special advantages—such as limited liability, perpetual life, and favorable treatment of the accumulation and distribution of assets." 494 U.S. at 658-659. This does not suffice, however, to allow laws prohibiting speech. "It is rudimentary that the State cannot exact as the price of those special advantages the forfeiture of First Amendment rights." It is therefore questionable under this line of cases whether general or broad-based restrictions on independent expenditures for political speech and advocacy of all private individuals, firms, associations, or corporations could be instituted as a "condition" to receiving a federal grant or a federal contract. It is noted that under current federal law, a government contractor is prohibited from making a campaign "contribution." Under the theory that campaign contributions to candidates have a significant potential for quid pro quo corruption, the Supreme Court, in overturning the corporate campaign independent "expenditure" prohibition, left intact the limitation on such corporate campaign "contributions." Campaign contributions to candidates or parties (and their potential for corrupting influences) have been clearly distinguished by the Supreme Court from independent campaign "expenditures." Such independent expenditures in campaigns are afforded greater First Amendment protection as speech, and are apparently not subject to the same considerations of potential corruption or corrupting influence because of the absence of pre-arrangement or coordination with the candidate or the candidate's campaign: The Buckley Court recognized a "sufficiently important" government interest in "the prevention of corruption and the appearance of corruption." Id. , at 25; see id ., at 26. This followed from the Court's concern that large contributions could be given "to secure a political quid pro quo ." Ibid . The Buckley Court explained that the potential for quid pro quo corruption distinguished direct contributions to candidates from independent expenditures. The Court emphasized that "the independent expenditure ceiling ... fails to serve any substantial governmental interest in stemming the reality or appearance of corruption in the electoral process," id ., at 47-48, because "[t]he absence of prearrangement and coordination ... alleviates the danger that expenditures will be given as a quid pro quo for improper commitments from the candidate," id ., at 47. The Court then concluded in Citizens United: Limits on independent expenditures ... have a chilling effect extending well beyond the Government's interest in preventing quid pro quo corruption. The anticorruption interest is not sufficient to displace the speech here in question. * * * For the reasons explained above, we now conclude that independent expenditures , including those made by corporations, do not give rise to corruption or the appearance of corruption. The same considerations in allowing an exception to First Amendment principles in prohibiting contractor "contributions" to candidates, therefore, may not necessarily be present to justify a similar government restriction on contractor "expenditures" for independent political speech. Government Program Restrictions and "Government Speech" It is obvious that Congress may and does institute various conditions and requirements on the receipt of federal funds. Although the cases discussed above were found to constitute an "unconstitutional condition" on the receipt of federal funds by private parties, the Supreme Court has permitted the government to require a restriction on the use of a recipient's own funds for certain speech within a particular program when that program is even partially funded with federal funds. In Rust v. Sullivan , the Court explained that in prohibiting abortion counseling by private entities within certain federally supported programs the government did not place a "condition on the recipient of the subsidy," but rather placed the restrictions on the "particular program or service" which "merely require that the grantee keep such activities separate and distinct from the" publicly funded activities. Chief Justice Rehnquist, writing for the Court, distinguished this situation from the "unconstitutional conditions" cases: In contrast, our "unconstitutional conditions" cases involve situations in which the Government has placed a condition on the recipient of the subsidy rather than on a particular program or service, thus effectively prohibiting the recipient from engaging in the protected conduct outside the scope of the federally funded program. More recently, the Supreme Court has noted that when the government funds activities it may limit, restrict, and fashion the speech of those speaking on its behalf either as "government speech," or when the government uses "private speakers to transmit specific information pertaining to its own programs." The Court explained that "[w]hen the government disburses public funds to private entities to convey a governmental message , it may take legitimate and appropriate steps to ensure that its message is neither garbled nor distorted by the grantee." This "exception" to the First Amendment for "government speech," or for certain private speech within the parameters of some government programs, would not, in any event, extend to all activities and programs of individuals or private entities which receive government funds. In Legal Services Corporation v. Velazquez , the Court overturned a restriction on the Legal Services Corporation's grantees "lobbying" for changes in welfare legislation as part of legal representation of indigent clients. The Court found that even though the legal services program was government funded, and thus the speech that the government wished to limit by statute was, in fact, within the confines of that program (as in Rust ), the activity and speech involved, that is, lobbying the legislature on behalf of a client, could not be considered "government speech," and thus was not subject to regulation under the "government speech" doctrine. Along a somewhat similar line as the "government speech" concept may be situations where private organizations serve as what might be described as surrogates or stand-ins for government agencies, to perform "governmental functions" of administering and disbursing public funds. In some of these instances federal law has treated these private organizations, for purposes of restrictions on the partisan political activities of their employees, as "state or local" governmental agencies under the provisions of the Hatch Act. If a contract or a grant were thus given to perform what might be considered "governmental functions," or to have private parties serve as surrogates for government officials in administering or managing certain public programs, then arguments could be made that the government could then limit political speech or activities of such private participants in the program under the "government speech" guidelines, or under a similar rationale as the Hatch Act, to protect the fair administration of government programs. The Supreme Court in Citizens United noted that there is "a narrow class of speech restrictions" which may be permissible, such as in the Hatch Act (citing the Letter Carriers case, 413 U.S. 548 (1973)), "based on an interest in allowing governmental entities to perform their functions." Such rationale, however, would not appear to be strong in the case of private contractors who are merely providing goods or selling products to the government. Governmental Interest Promoted by the Legislation; Least Restrictive Means of Accomplishing Objective When a provision of law limits or interferes with First Amendment rights, the Supreme Court will engage in what it terms "strict scrutiny" to examine the law and its purposes to determine, initially, if there are significant, "overriding," or "compelling" governmental interests in the restriction that outweigh the impositions on First Amendment rights. If there are such governmental interests in the suppression of speech, the Court will then examine whether the restriction is sufficiently tailored to promote those interests asserted as the law's justification. There are several governmental interests which might arguably be promoted by a prohibition on "independent expenditures" by government contractors or grantees, and such interests would need to be analyzed under the Supreme Court's standards. The interests of the prevention of corruption of the electoral process and undue influences on candidates and officeholders, for example, have been found to be important governmental interests which may justify, in some cases, certain limitations or burdens on First Amendment activities. Even while such interests have been found to be significant, however, the Court has struck down restrictions on advocacy and political activities which were not narrowly tailored to meet the objective of preventing such undue influence or the appearance of corruption. In relation to the interest of preventing "corruption," the Supreme Court has found that although such governmental interest is compelling, that interest is not necessarily advanced by restricting "independent expenditures" by private entities in political campaigns. In Buckley v. Valeo , the Supreme Court found "that the governmental interest in preventing corruption and the appearance of corruption [was] inadequate to justify [the ban] on independent expenditures." Similarly, the Court found in Citizens United that a prohibition on "independent expenditures" does not advance in a sufficient manner the interest of preventing corruption: "[W]e now conclude that independent expenditures, including those made by corporations, do not give rise to corruption or the appearance of corruption." For this reason, it would seem that legislation which would restrict all private parties (or merely all corporations) receiving federal contracts or grants from engaging in independent political expenditures with their own non-governmental resources, may not necessarily advance the interest in the prevention of "corruption" of candidates or officeholders. As noted by the Supreme Court in Citizens United , the absence of any pre-arrangement or coordination with the candidate in the making of an "independent expenditure" by a private entity mitigates against a corrupting influence or quid pro quo agreement, and thus does not necessarily reach the concerns in so-called "pay to play" corruption schemes. A governmental interest in attempting to "balance" competing voices in public policy or campaign debate, by limiting expression of one group over another, was found by the Supreme Court not to be a compelling interest to justify suppression of speech. The Supreme Court thus rejected the so-called "antidistortion" rationale that would attempt to limit the influence of monied interests over less well-funded persons or groups in a political campaign. If the governmental purpose is not to prevent corruption of candidates or governmental processes, then such interest may be to protect government funds and programs. In such case the interests may be two-fold: one would be to prevent the use and diversion of federal government funds for private political or public policy advocacy activities which are not authorized by Congress; and the second would be to prevent the federal government "subsidizing" political advocacy activities of private parties by providing such private parties with federal dollars for other purposes. Clearly the federal government need not "pay for," nor directly "subsidize," the political advocacy or lobbying of private entities. To that end, current federal provisions already expressly bar the use of contract or grant funds by private recipients for political or lobbying purposes, or the paying for or "charging off" of expenses for political advocacy or lobbying to any government contract or grant; and provide criminal penalties for the diversion of government funds to non-authorized purposes. Such limitations are less restrictive means of providing assurances concerning the proper use of government funds than a ban on all political speech by private recipients with their own resources. If the interest of the government is merely to avoid a direct subsidy for private political activities out of public monies, then a restriction in any proposed legislation which barred all privately funded advocacy by grant or contract recipients might arguably, in the first instance, be considered "over-inclusive" because it reaches activities, speech, and conduct paid for completely with private , non-federal monies, as well as privately funded activities wholly outside of the realm of the federal program. As such, the restriction may arguably be found, with respect to otherwise protected First Amendment speech and conduct, to be unnecessarily over-broad and burdensome on such First Amendment rights. A further interest of the government forwarded by legislation might also arguably be to prevent an "indirect" subsidy for groups which engage in political advocacy by providing such groups with federal funds for other non-advocacy activities, goods, or services which the government desires. The argument in such case would be that money is "fungible," and thus grants and contracts for proper public purposes to private groups "frees up" other non-federal money which the private contractor or grantee may then use for any purposes, including campaign or public policy advocacy activities. The Supreme Court, however, in another context, has found that a grant for one purpose is not a subsidy of the other, non-federally funded activities, and expressly rejected the "fungibility" of funds argument as a justification to prohibit federal funding of an organization engaging in First Amendment activities. Other Government Interests or Narrower Tailoring Sufficient to Justify Restrictions Involving Government Contractors131 While conditioning the political speech of all government contractors upon their forgoing their rights to political speech seems likely to raise significant First Amendment issues, as discussed in prior sections, it is possible that the government could assert hitherto unrecognized interests in such conditions, especially if any restrictions targeted specific categories of contractors. Alleged government interests in preventing contractors from using the "wealth" generated by their dealings with the government to influence the political process, or in avoiding the appearance of corruption created when "contractors endorse their friends in power," may be insufficient to support conditions affecting all government contractors in the aftermath of Citizens United . The majority in Citizens United found such interests were insufficient to justify a ban on campaign expenditures and electioneering by all corporations, a conclusion which it reached after considering the various "types" of corporations affected by such prohibitions. Commentators have alleged other interests that the government could potentially assert in targeting government contracts, such as safeguarding the integrity of the procurement process and protecting contractors from being required to "pay for play." However, no court appears to have recognized these interests as compelling governmental interests justifying restrictions on First Amendment rights, and courts may find that such interests are insufficient to justify across-the-board restrictions given the wide variety of "types" of government contractors and means by which they into enter contracts with the government. Such alleged interests might more plausibly be asserted with narrower restrictions targeting specific types of contractors. For example, the appearance of quid pro quo corruption of the sort that the majority in Citizens United recognized as sufficient to uphold limitations on campaign contributions is arguably stronger with contracts that are "earmarked" for certain entities as part of the congressional appropriations process than with other contracts. Contractors performing "functions approaching inherently governmental," "critical functions," or "mission essential functions," could perhaps be similarly targeted on an analogy to the Hatch Act, which bars federal employees from express endorsements , although any such legislation could raise constitutional concerns about vagueness given recent disputes over whether particular functions qualify as such . "Personal service contracts," or contracts that, by their express terms or as administered, make contractor personnel appear to be government employees, could perhaps also be targeted based on this analogy. Government contractors that are foreign governments, corporations, or individuals are prohibited from making campaign contributions or expenditures under a separate statute whose constitutionality has apparently never been challenged. Taxation of Corporate Campaign-Related Expenditures145 Some have proposed that Congress enact an excise tax on the corporate campaign-related expenditures permitted under Citizens United . As discussed below, there are several existing taxes that apply to tax-exempt organizations, including those that are incorporated. For purposes of this discussion, it is assumed that any proposed tax would apply to both for-profit and non-profit corporations, and, in the case of incorporated tax-exempt organizations, be in addition to the existing taxes. It is also assumed that the expenditures would be non-deductible under IRC § 162(e) as a trade or business expense. Congress has broad powers to tax under the Constitution. In general, tax distinctions and classifications are constitutionally permissible so long as "they bear a rational relation to a legitimate governmental purpose." The rational basis standard is a low level of review by a court. In the tax context in particular, courts typically show great deference in recognition of "the large area of discretion which is needed by a legislature in formulating sound tax policies." At the same time, not all exercises of Congress's taxing power receive such deference. Sometimes, tax provisions are subject to higher levels of scrutiny. For example, tax provisions based on the content of speech are, like non-tax provisions, subject to strict scrutiny. A provision subject to this highest level of scrutiny must be necessary to serve a compelling government interest and be narrowly drawn to achieve that end. This is a heavy burden for the government to meet. The decision by Congress to impose a tax on certain corporate expenditures would typically appear to be within its broad taxing powers and subject to minimal review by a court. It could, nonetheless, be argued that a more rigorous analysis should apply when, as here, the tax is related to the exercise of a constitutional right. Any analysis of whether Congress could enact an excise tax on corporate political expenditures is severely limited by the fact that it does not appear there is case law analyzing the constitutionality of a similar tax. Even so, it appears an excise tax could potentially raise significant constitutional concerns since, depending on the particulars of a specific proposal, it could be characterized as a penalty on protected speech. The Supreme Court has upheld provisions that provide disfavorable tax treatment to a taxpayer's campaign activities under the rationale that there is no requirement for the federal government to subsidize the constitutional rights of taxpayers. In Cammarano v. United States , the Court upheld the validity of a tax regulation that disallowed a business deduction for lobbying expenditures. The taxpayers had been denied a deduction for amounts paid to a professional organization to lobby against a state initiative that would have had dire consequences for their business. They argued the disallowance violated the First Amendment, relying on a previous case, Speiser v. Randall . In Speiser , the Court had struck down a state property tax exemption that required taxpayers take a loyalty oath on the grounds that the state's tax administration procedures did not afford adequate due process. In striking down the provision that was clearly "aimed at the suppression of dangerous ideas," the Court emphasized its chilling effect on the proscribed speech and equated it to a fine for engaging in that type of speech. In Cammarano , the Court rejected the claim that Speiser was controlling, reasoning that the nondiscriminatory disallowance of a deduction for lobbying expenditures was different because, unlike the provision in Speiser , it was not intended to suppress dangerous ideas. Instead, the Court explained, the taxpayers "are not being denied a tax deduction because they engage in constitutionally protected activities, but are simply being required to pay for those activities entirely out of their own pockets, as everyone else engaging in similar activities is required to do under" the tax laws. The Court further explained that the disallowance "express[ed] a determination by Congress that since purchased publicity can influence the fate of legislation which will affect, directly or indirectly, all in the community, everyone in the community should stand on the same footing as regards its purchase so far as the Treasury of the United States is concerned." In a subsequent case, Regan v. Taxation With Representation of Washington , the Court addressed a similar issue in upholding the federal law that limits the lobbying of § 501(c)(3) organizations to "no substantial part" of their activities. The Court rejected the argument that the limitation infringed on the organization's First Amendment rights. Rather, the Court, noting it had held in Cammarano that the First Amendment does not require the federal government to subsidize lobbying, explained that "Congress has merely refused to pay for the lobbying out of public moneys" and stated that it "again reject[s] the notion that First Amendment rights are somehow not fully realized unless they are subsidized by the State." An excise tax on corporate campaign expenditures would not, in general, appear to be supported by the non-subsidization rationale discussed in Cammarano . Instead, depending on the specifics of the proposal, a court might find the tax to be a restriction on speech, perhaps comparably onerous to the prohibition struck down in Citizens United , which would then place a heavy burden on the government to justify the provision. It is not possible to say how a court would analyze a proposal; however, characteristics that might affect the analysis could include the rate of tax (e.g., a high rate might look more like a restriction or de facto prohibition); the scope of taxpayers subject to the tax (e.g., a court might look less favorably at a tax limited to certain taxpayers); the scope of activities subject to tax (e.g., a generally applicable tax might be less scrutinized than one that applies only to campaign expenditures); and the purpose of the tax (e.g., a court might look differently at a tax enacted as part of a campaign finance regulatory regime than one with other regulatory or traditional revenue raising purposes). Proponents of an excise tax on corporate campaign expenditures might point to the existence of several taxes that apply to tax-exempt organizations making political expenditures for support of the idea that Congress could enact such a tax; for example: IRC § 527(f) imposes a tax on § 501(c) organizations that make expenditures for influencing elections or similar activities. The tax is imposed at the highest corporate rate on the lesser of the expenditures or the organization's net investment income. IRC § 4955 imposes a tax on § 501(c)(3) organizations making campaign expenditures. These organizations are prohibited under the tax laws from making these types of expenditures. The tax equals 10% of the expenditures, with an additional 100% tax imposed if the expenditures are not corrected in a timely manner. IRC § 4945 imposes a similar tax on the political expenditures of private foundations, although it covers a broader range of activities, some of which fall outside the § 501(c)(3) campaign intervention prohibition. Private foundations are § 501(c)(3) organizations that receive contributions from limited sources. Due to fear of abuse, they are subject to stricter regulation than other § 501(c)(3) organizations. IRC § 6033 imposes a proxy tax on tax-exempt organizations that fail or choose not to notify their members of the non-deductible portion of dues used for political purposes. IRC §§ 4911 and 4912 impose a tax on § 501(c)(3) organizations that have lobbying expenditures exceeding certain limits. It could be argued that the § 527(f) tax and § 6033 proxy tax are similar to a corporate campaign expenditure tax in that all three would tax the political expenditures of entities which are otherwise permitted to engage in the activities. The other taxes might be characterized as penalty taxes, and thus could support an argument that an excise tax would be permissible even if it had some penalizing features. However, as discussed below, there are characteristics of the existing taxes that might undermine an attempt to draw support from them for an excise tax on corporate campaign expenditures. It could be argued that the § 527(f) tax and § 6033 proxy tax could be upheld, in at least some contexts, under the non-subsidization rationale expressed in Cammarano . While they may look like taxes imposed on entities engaging in protected speech, it might be more appropriate in certain situations to characterize them as the mechanism to avoid federal subsidization of political activities. This is because the effect of both is that the organizations are not exempt from federal income tax on otherwise exempt income to the extent funds are used for certain political activities. Thus, the two taxes are arguably the functional equivalents of a disallowed deduction under § 162(e), although this comparison might not support the taxes in all circumstances. Such an argument would not appear to apply to the proposal to tax corporate campaign expenditures. The taxes imposed under §§ 4955, 4945, 4911, and 4912 could be characterized as penalty taxes on § 501(c)(3) organizations for engaging in campaign and lobbying speech, thus suggesting that the subsidization rationale cannot fully justify their imposition. The taxes imposed under §§ 4955, 4911, and 4912 are imposed on activities that § 501(c)(3) organizations are restricted under the tax laws from engaging in. Assuming these limitations are constitutional, the taxes may be an appropriate mechanism for enforcing them. If the limitations were found to be unconstitutional, then that might call into question the constitutionality of the taxes as well. The § 4945 tax is different in that it also applies to certain expenditures that are otherwise permitted under the tax laws. Thus, to the extent the § 4945 tax is imposed on such activities, it might be characterized as penalizing behavior that is otherwise lawful, and therefore might be compared to a proposal to tax corporate campaign expenditures. However, the two circumstances might be distinguished. Private foundations are heavily regulated due to fear of abuse, and thus the § 4945 tax could be seen as a part of an overall regulatory scheme, separate from campaign finance. Whether a comparable rationale would exist for a proposal to tax corporate campaign expenditures would appear to depend on the specific proposal and its context. Finally, one could point to the fact that the existing taxes apply to tax-exempt organizations, thus perhaps permitting the argument that any burden on their speech could be avoided by restructuring their activities. It seems difficult to fully extend a similar rationale to a tax on corporate campaign expenditures. Public Financing For Congressional Campaigns167 Proposals to enact public financing for congressional candidate campaigns have been introduced in the 111 th Congress. Public financing programs are generally voluntary and traditionally offer grants or matching funds in exchange for candidates agreeing to limit spending. It appears that legislation establishing such public financing programs, requiring compliance with spending limits, would pass constitutional muster on the condition that they are voluntary. In the 1976 landmark case of Buckley v. Valeo , the Supreme Court held that spending limitations violate the First Amendment because they impose direct, substantial restraints on the quantity of political speech. The Court found that expenditure limitations fail to serve any substantial government interest in stemming the reality of corruption or the appearance thereof, and that they heavily burden political expression. Reaffirming Buckley, in Citizens United v. FEC, the Court reiterated this determination finding that truly independent expenditures, with no prearrangement and coordination with a candidate, not only lessen the value of the expenditure to the candidate, but also mitigate any danger that expenditures will be made as a quid pro quo for improper commitments from the candidate. As a result, spending limits may only be imposed if they are voluntary. In Buckley, the Supreme Court upheld the constitutionality of the voluntary public financing program for presidential elections. The Court concluded that presidential public financing was within the constitutional powers of Congress to reform the electoral process, and that public financing provisions did not violate any First Amendment rights by abridging, restricting, or censoring speech, expression, and association, but rather encouraged public discussion and participation in the electoral process. According to the Court: Congress may engage in public financing of election campaigns and may condition acceptance of public funds on an agreement by the candidate to abide by specified expenditure limitations. Just as a candidate may voluntarily limit the size of the contributions he chooses to accept, he may decide to forgo private fundraising and accept public funding. Although public financing proposals contain an incentive for compliance with spending limits—the receipt of public monies or other benefits—it does not appear that such incentives jeopardize the voluntary nature of the spending limitation. That is, a candidate could legally choose not to comply with the spending limits by opting not to accept the public benefits. Therefore, it appears that a proposal establishing a voluntary public finance program for congressional candidates, requiring compliance with spending limits, would likely be upheld as constitutional. Constitutional Amendment174 In Citizens United v. FEC , the Supreme Court invalidated two provisions of the Federal Election Campaign Act (FECA), codified at 2 U.S.C. § 441b, finding that they were unconstitutional under the First Amendment. It struck down the long-standing prohibition on corporations using their general treasury funds to make independent expenditures, and Section 203 of the Bipartisan Campaign Reform Act of 2002 (BCRA), which amended FECA, prohibiting corporations from using their general treasury funds for "electioneering communications." BCRA defines "electioneering communication" as any broadcast, cable, or satellite communication that refers to a clearly identified federal candidate made within 60 days of a general election or 30 days of a primary. The Court determined that these prohibitions constitute a "ban on speech" in violation of the First Amendment. As a result of the Court's decision being one of constitutional interpretation—not statutory interpretation—amending the Constitution is an option for overturning the ruling directly . In order to restore FECA provisions that were in effect prior to the Court's ruling, it appears that a proposal to amend the Constitution would need to allow, at a minimum, enactment of legislation that prohibits corporations and labor unions from using their general treasury funds to make expenditures for communications that expressly advocate election or defeat of a clearly identified federal candidate and for electioneering communications. In the 111 th Congress, proposals have been introduced that would amend the Constitution. In accordance with Article V of the Constitution, such joint resolutions would require approval by two-thirds of each House, would become effective upon ratification by the legislatures of three-fourths of the states, and specify that approval is required within seven years from the date of submission. Proposals to amend the Constitution vary. Some would provide Congress with the expansive power to regulate the raising and spending of money in federal elections, including setting limits on expenditures made in support of or opposition to federal candidates. Such an amendment to the Constitution would not only appear to allow Congress to enact legislation restricting corporate and labor union expenditures, but also limiting independent expenditures by candidates, political parties, political action committees (PACs), and individuals. In contrast, other proposals take a more direct approach and would expressly prohibit corporations and labor unions from using general treasury funds for advertisements in connection with a federal office campaign, regardless of whether the advertisement expressly advocates the election or defeat of a clearly identified federal candidate. In addition, as Citizens United appears to invalidate state laws that restrict corporate expenditures—in addition to the federal statute—some proposals to amend the Constitution would also provide states with the power to enact laws regulating corporate expenditures in connection with state elections.
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In Citizens United v. FEC, the Supreme Court invalidated two provisions of the Federal Election Campaign Act (FECA), finding that they were unconstitutional under the First Amendment. The decision struck down the long-standing prohibition on corporations using their general treasury funds to make independent expenditures, and Section 203 of the Bipartisan Campaign Reform Act of 2002 (BCRA), prohibiting corporations from using their general treasury funds for "electioneering communications." BCRA defines "electioneering communication" as any broadcast, cable, or satellite communication that refers to a clearly identified federal candidate made within 60 days of a general election or 30 days of a primary. The Court determined that these prohibitions constitute a "ban on speech" in violation of the First Amendment. The Court, however, upheld the disclaimer and disclosure requirements in Sections 201 and 311 of BCRA as applied to a movie regarding a presidential candidate that was produced by Citizens United, a tax-exempt corporation, and the broadcast advertisements it planned to run promoting the movie. As a result of the Court's ruling, federal campaign finance law no longer restricts corporate or, most likely, labor union use of general treasury funds to make independent expenditures for any communication expressly advocating election or defeat of a candidate. In addition, the law now also permits corporate and union treasury funding of electioneering communications. However, the law prohibiting contributions to candidates, political parties, and political action committees (PACs) from corporate and labor union general treasuries still applies. In response to the Supreme Court's ruling, various proposals have been discussed and legislation has been introduced in the 111th Congress, including for example H.Con.Res. 13, H.J.Res. 13, H.J.Res. 68, H.J.Res. 74, H.R. 158, H.R. 1095, H.R. 1826, H.R. 2038, H.R. 2056, H.R. 3574, H.R. 3859, H.R. 4431, H.R. 4432, H.R. 4433, H.R. 4434, H.R. 4435, H.R. 4487, H.R. 4510, H.R. 4511, H.R. 4517, H.R. 4522, H.R. 4523, H.R. 4527, H.R. 4537, H.R. 4540, H.R. 4550, H.R. 4583, H.R. 4617, H.R. 4630, H.R. 4644, H.R. 5175, S.J.Res. 28, S. 133, S. 752, S. 2954, S. 2959, S. 3004, and S. 3628. This report provides an analysis of the constitutional and legal issues raised by several proposals, organized by regulatory topic: increasing disclaimer requirements, increasing disclosure for tax-exempt organizations, requiring shareholder notification and approval, restricting U.S. subsidiaries of foreign corporations, restricting political expenditures by government contractors and grantees, taxing corporate independent expenditures, and providing public financing for congressional campaigns. The report also addresses amending the Constitution. For a comprehensive discussion of legislation that has been introduced and an analysis of policy options, see CRS Report R41054, Campaign Finance Policy After Citizens United v. Federal Election Commission: Issues and Options for Congress, by [author name scrubbed]. For a legal analysis of the Supreme Court's ruling, see CRS Report R41045, The Constitutionality of Regulating Corporate Expenditures: A Brief Analysis of the Supreme Court Ruling in Citizens United v. FEC, by [author name scrubbed].
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The people of the State of California do enact as follows:
SECTION 1.
Section 15643 of the Government Code is amended to read:
15643.
(a) (1) The board shall proceed with the surveys of the assessment procedures and practices in the 10 largest counties and cities and counties as rapidly as feasible, and shall repeat or supplement each survey at least once in five years.
(2) The surveys of the 10 largest counties and cities and counties shall include a sampling of assessments on the local assessment rolls as described in Section 15640. The 10 largest counties and cities and counties shall be determined based upon the total value of locally assessed property located in the counties and cities and counties on the lien date that falls within the calendar year of 1995 and every fifth calendar year thereafter.
(b) The board shall, commencing January 1, 2016, and each of the next four calendar years, do all of the following:
(1) (A) Survey the assessment procedures of one qualified county or city and county and conduct a sample of assessments on the local assessment roll of another qualified county or city and county.
(B) For purposes of this paragraph, “qualified county or city and county” means the 11th to the 20th, inclusive, largest counties and cities and counties. The 11th to the 20th, inclusive, largest counties and cities and counties shall be determined based upon the total value of locally assessed property located in the counties and cities and counties on the lien date that falls within the calendar year of 2015 and every fifth calendar year thereafter.
(C) The qualified counties and cities and counties shall be stratified and selected at random by the board, in consultation with the California Assessors’ Association.
(2) (A) Survey the assessment procedures of three qualified counties or cities and counties and conduct a sample of assessments on the local assessment roll of two other qualified counties or cities and counties.
(B) For purposes of this paragraph, “qualified counties or cities and counties” means the 21st to the 58th, inclusive, largest counties and cities and counties. The 21st to the 58th, inclusive, largest counties and cities and counties shall be determined based upon the total value of locally assessed property located in the counties and cities and counties on the lien date that falls within the calendar year 2015 and every fifth calendar year thereafter.
(3) Conduct a sample of assessments on the local assessment roll in a county or city or county that the board determines has significant assessment problems pursuant to Section 75.60 of the Revenue and Taxation Code.
(C) The qualified counties and cities and counties shall be stratified and selected at random by the board, in consultation with the California Assessors’ Association.
(c) The statewide surveys which are limited in scope to specific topics, issues, or problems may be conducted whenever the board determines that a need exists to conduct a survey.
(d) When requested by the legislative body or the assessor of any county or city and county to perform a survey not otherwise scheduled, the board may enter into a contract with the requesting local agency to conduct that survey. The contract may provide for a board sampling of assessments on the local roll. The amount of the contracts shall not be less than the cost to the board, and shall be subject to regulations approved by the Director of General Services.
(e) This section shall remain in effect only until January 1, 2021, and as of that date is repealed.
SEC. 2.
Section 15643 is added to the Government Code, to read:
15643.
(a) The board shall proceed with the surveys of the assessment procedures and practices in the several counties and cities and counties as rapidly as feasible, and shall repeat or supplement each survey at least once in five years.
(b) The surveys of the 10 largest counties and cities and counties shall include a sampling of assessments on the local assessment rolls as described in Section 15640. In addition, the board shall each year, in accordance with procedures established by the board by regulation, select at random at least three of the remaining counties or cities and counties, and conduct a sample of assessments on the local assessment roll in those counties. If the board finds that a county or city and county has “significant assessment problems,” as provided in Section 75.60 of the Revenue and Taxation Code, a sample of assessments will be conducted in that county or city and county in lieu of a county or city and county selected at random. The 10 largest counties and cities and counties shall be determined based upon the total value of locally assessed property located in the counties and cities and counties on the lien date that falls within the calendar year of 2021 and every fifth calendar year thereafter.
(c) The statewide surveys which are limited in scope to specific topics, issues, or problems may be conducted whenever the board determines that a need exists to conduct a survey.
(d) When requested by the legislative body or the assessor of any county or city and county to perform a survey not otherwise scheduled, the board may enter into a contract with the requesting local agency to conduct that survey. The contract may provide for a board sampling of assessments on the local roll. The amount of the contracts shall not be less than the cost to the board, and shall be subject to regulations approved by the Director of General Services.
(e) This section shall become operative on January 1, 2021.
SEC. 3.
Section 15645 of the Government Code is amended to read:
15645.
(a) Upon completion of a survey of the procedures and practices of a county assessor, the board shall prepare a written survey report setting forth its findings and recommendations and transmit a copy to the assessor. In addition the board may file with the assessor a confidential report containing matters relating to personnel. Before preparing its written survey report, the board shall do both of the following:
(1) Meet with the assessor to discuss and confer on those matters which may be included in the written survey report.
(2) Notify the former assessor if the survey reviews the former assessor’s procedures and practices, and meet with the former assessor, upon his or her request, to discuss and confer on those matters that may be included in the survey report.
(b) Within 30 days after receiving a copy of the survey report, the assessor may file with the board a written response to the findings and recommendations in the survey report.
The board may, for good cause, extend the period for filing the response.
(c) (1) The survey report, together with the assessor’s response, if any, and the board’s comments, if any, shall constitute the final survey report. An addendum to the final survey report shall be published to include a former assessor’s written response to the findings and recommendations in the survey report that reviewed the former assessor’s procedures and practices, if any, and the board’s comments, if any. The final survey report shall be issued by the board as follows:
(A) For any survey commenced before July 1, 2016, within two years after the date the board began the survey.
(B) For any survey commenced on or after July 1, 2016, to June 30, 2017, within 15 months after the date the board began the survey.
(C) For any survey commenced on or after July 1, 2017, within 12 months after the date the board began the survey.
(2) Within a year after receiving a copy of the final survey report, and annually thereafter, no later than the date on which the initial report was issued by the board and until all issues are resolved, the assessor shall file with the board of supervisors a report, indicating the manner in which the assessor has implemented or intends to implement, or the reasons for not implementing, the recommendations of the survey report, with copies of that response being sent to the Governor, the Attorney General, the State Board of Equalization, the Senate and Assembly, and to the grand juries and assessment appeals boards of the counties to which they relate.
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Existing law requires the State Board of Equalization to make surveys in each county and city and county to determine the adequacy of the procedures and practices employed by the county assessor in the valuation of property. Existing law requires the board to proceed with the surveys of the assessment procedures and practices in the several counties and cities and counties as rapidly as feasible, and to repeat or supplement each survey at least once in 5 years. Existing law requires the surveys of the 10 largest counties and cities and counties to include a sampling of assessments of the local assessment rolls, and requires the board, each year, to select at random at least 3 of the remaining counties or cities and counties to conduct a sample of assessments on the local assessment roll in those counties.
This bill would eliminate the board’s requirement to select at random at least 3 remaining counties or cities and counties to conduct a sample of assessments on the local assessment roll, and would instead require the board, commencing January 1, 2016, and each of the next 4 calendar years, to survey the assessment procedures of qualified counties or cities and counties and to conduct sample assessments on the local roll of other qualified counties or cities and counties. This bill would define “qualified counties or cities and counties” for these purposes. This bill would additionally require the board to conduct a sample of assessments in a county or city and county that the board determines has significant assessment problems, as specified. This bill would require the qualified counties and cities and counties to be stratified and selected at random by the board, in consultation with the California Assessors’ Association.
Existing law requires the board, upon completion of the survey of the procedures and practices of a county assessor, to prepare a written survey report setting forth its findings and recommendations, and requires the board, before preparing its written survey report, to meet with the assessor to discuss and confer on those matters which may be included in the written survey report. Existing law requires the survey report, together with the assessor’s response and the board’s comments, to constitute the final survey report. Existing law requires the final survey report to be issued by the board within 2 years after the date the board began the survey.
This bill would require the board, before preparing its written survey report, to notify the former assessor if the survey reviews the former assessor’s procedures and practices, and to also meet with the former assessor, upon his or her request if the survey reviews, to discuss and confer on those matters that may be included in the survey report. This bill would require an addendum to the final survey report to be published to include the former assessor’s written response and the board’s comments, if any. This bill would shorten the period of time the board has to issue the final survey report from 2 years to 15 months for any survey commenced on or after July 1, 2016, to June 30, 2017, inclusive, and to 12 months for any survey commenced on or after July 1, 2017.
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SECTION 1. SHORT TITLE.
This Act may be cited as the ``Taxpayer Rebate and Responsibility
Act''.
SEC. 2. REFUND OF CERTAIN BUDGET SURPLUS AMOUNTS.
(a) In General.--Subchapter B of chapter 65 of the Internal Revenue
Code of 1986 (relating to abatements, credits, and refunds) is amended
by adding at the end the following new section:
``SEC. 6429. REFUND OF BUDGET SURPLUS AMOUNTS.
``(a) In General.--Each individual who was an eligible individual
for such individual's first taxable year beginning in the calendar year
in which a surplus year begins shall be treated as having made a
payment against the tax imposed by chapter 1 for such first taxable
year in an amount equal to the lesser of--
``(1) the taxpayer's allocable portion of the refund amount
for such taxable year, or
``(2) the taxpayer's limitation amount for such taxable
year.
``(b) Timing of Payments.--In the case of any overpayment
attributable to this section, the Secretary shall, subject to the
provisions of this title, refund or credit such overpayment as rapidly
as possible.
``(c) Definitions.--For purposes of this section--
``(1) Eligible individual.--The term `eligible individual'
means any individual other than--
``(A) any estate or trust,
``(B) any nonresident alien individual, and
``(C) any individual with respect to whom a
deduction under section 151 is allowable to another
taxpayer for a taxable year beginning in the calendar
year in which the individual's taxable year begins.
``(2) Surplus year.--The term `surplus year' means a fiscal
year for which the Director of the Office of Management and
Budget certifies to the President and the Congress after the
close of such year that there is a surplus in the budget of the
United States for such fiscal year and the amount of such
surplus, determined without regard to the income and
expenditures of the Federal Old-Age and Survivors Insurance
Trust Fund, the Federal Disability Insurance Trust Fund, and
the Federal Hospital Insurance Trust Fund. Such term shall not
include any year if the Secretary determines that the cost of
carrying out this section with respect to such year would
exceed the refund amount for such year.
``(3) Refund amount.--
``(A) In general.--The term `refund amount' means
with respect to a surplus year, the applicable
percentage of the amount of the surplus certified under
paragraph (2) for that year.
``(B) Applicable percentage.--The term `applicable
percentage' means such percentage as the Secretary may
determine with respect to any surplus year, except that
such percentage shall not be less than 50 percent nor
more than 100 percent.
``(4) Taxpayer's allocable portion of the refund amount.--A
taxpayer's allocable portion of the refund amount is the
portion of the refund amount determined by the Secretary to be
the amount which bears the same ratio to the tax paid by the
taxpayer under subtitle A for the taxpayer's first taxable year
beginning in the calendar year in which the surplus year begins
as the total amount of taxes imposed under subtitle A on all
eligible individuals for such taxable year bears to the total
amount of the refund amount for the surplus year.
``(5) Limitation amount.--The term `limitation amount'
means, with respect to any taxable year, the excess (if any)
of--
``(A) the sum of the regular tax liability (as
defined in section 26(b)) for such taxable year plus
the tax imposed by section 55 for such taxable year,
over
``(B) the sum of the credits allowable under part
IV of subchapter A of chapter 1 (other than the credits
allowable under subpart C thereof, relating to
refundable credits) for such taxable year.
``(d) Special Rules.--
``(1) No interest.--No interest shall be allowed on any
overpayment attributable to this section.
``(2) Joint returns.--In the case of a refund or credit
made or allowed under this section with respect to a joint
return, half of such refund or credit shall be treated as
having been made or allowed to each individual filing such
return.''.
(b) Clerical Amendment.--The table of sections for subchapter B of
chapter 65 is amended by adding at the end the following new item:
``6429. Refund of budget surplus amounts.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.
|
Taxpayer Rebate and Responsibility Act - Amends the Internal Revenue Code to provide for refunds or credits to individual taxpayers of a portion of their income tax for any year in which the Director of the Office of Management and Budget certifies that there is a surplus in the U.S. budget.
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This suit was brought by the State of New Mexico against the State of Texas in 1913 to settle a controversy concerning the location of the part of their common boundary extending southwardly in the valley of the Rio Grande River an air-line distance of about fifteen miles from the parallel of 32 degrees north latitude to the parallel of 31 degrees 47 minutes on the international boundary between the United States and Mexico. This is an off-set in the southern boundary of New Mexico extending nearly to El Paso. In its bill New Mexico alleged that under certain designated statutes and other public proceedings1 the channel of the Rio Grande as it existed in 1850 became and was the boundary of Texas and the Territory of New Mexico between these two parallels, that this boundary had 'remained unchanged' and 'now is' the boundary between the two States, and that a correct delineation of this line in the middle of the channel was shown on a map attached as an exhibit to the bill; and prayed specifically that 'the middle of the channel of the Rio Grande as it existed in the year 1850,' and as shown upon this map, be 'decreed to be the true boundary line.' In its answer and cross-bill Texas also alleged that the true boundary line is the channel of the Rio Grande as it existed in the year 1850, but denied the correctness of the location shown on the map exhibited with the bill, and alleged that the line was correctly delineated on a map attached as an exhibit to the answer, and prayed that the boundary line 'be declared to be the middle of the channel of the Rio Grande as it actually existed in the year 1850,' and as shown upon the map exhibited with the answer. And in its answer to the cross-bill New Mexico again stated that the true boundary line 'is the channel of the Rio Grande * * * as it existed in the year 1850,' but denied that this was correctly located on the map exhibited with the answer. Each State thus asserted that the true boundary line is the middle of the channel of the Rio Grande in 1850. Neither alleged that there had been any change in this line by accretions. And the only issue was as to the true location of the channel in that year. Upon this single issue a large mass of testimony was taken before examiners, during a period of several years. Some of this, as bearing evidentially upon the location of the river in 1850, related incidentally to subsequent changes by accretions and avulsions. In 1924 New Mexico, on its motion, was allowed by the Court2 to take, subject to rebuttal, the additional testimony of one witness on the question whether, assuming that in what is known as the Country Club area, the river had been located in 1850 on the western side of the valley as claimed by Texas, it had thereafter moved eastward by accretions. But-still claiming that in fact the river was located in 1850 on the eastern side of the valley, in a position that was inconsistent with such accretions-New Mexico neither averred in its motion that there had in fact been such accretions, nor sought to amend its pleadings so as to allege either that they had taken place, or that, if so, the boundary line had been changed by reason thereof. And the question as to the location of the middle of the channel in 1850, remained, as before, the sole issue under the pleadings. Thereafter the Court referred the cause to a special master, with directions to make special findings, based upon the entire record, on all material questions of fact, and report the same with his recommendations.3 The master, after a full hearing,4 made his report, to which both states filed exceptions. And the cause has been heard on the report and these exceptions. In the territory in dispute the Rio Grande flows southwardly through a plain of alluvial and sandy bottom land, composed largely of detritus, and bordered on the east and west by ranges of hills. The valley is about four miles wide at the northern end and narrows gradually to a canyon or gorge at the southern end. The river in normal times is very shallow; but at frequently recurring periods freshets caused by melting snow in the mountains and heavy rains or cloudbursts, flood and overflow the banks of the river and result in many changes in the channel both by erosions and accretions and by sudden and violent avulsions. At the time the bill was filed the river ran on the eastern side of the valley in the northern portion of the area in dispute, and, crossing the valley in the southern portion, ran on the western side until it reached the gorge. Neither State claims that this was the location in 1850. New Mexico, on the one hand, contends that the river then ran the entire distance from the 32d parallel to the gorge on the eastern side of the valley, near the eastern range of hills. Texas, on the other hand, contends that it crossed the parallel about three-fifths of a mile westwardly, ran farther to the west in the northern portion of the disputed area, and, crossing about midway to the western side of the valley, ran most of the way to the gorge near the western range of hills. That is, broadly speaking, New Mexico contends that the river then ran on the eastern side of the valley, and Texas, that it ran mainly on the western side. The distance between the two locations midway of the disputed area is about four miles. The master made an elaborate and thorough report in which he considered at length the contentions of the two states and the salient features of the testimony. He found, on all the evidence that the allegations of New Mexico as to the location of the Rio Grande 'as it existed in the year 1850' were not sustained, and that the river then followed in general the course claimed by Texas, and on the dates nearest to 1850 of which there was credible evidence, was located as particularly described in the report,5 and had an average width of 300 feet; but that thereafter, between 1852 and the filing of the bill, the channel in certain portions of the course, including the Country Club area, was moved eastward by reason of accretions.6 And he reported that the true boundary line when the oill was filed was the middle of the channel of the river in the location occupied after such accretions, as descrived in the report,7 and recommended that this be fixed 150 feet from the east and west banks, respectively, as found by him. The questions presented are whether the master's finding as to the location of the river in 1850 is correct; and, if so, whether the boundary line was subsequently changed by accretions, and to what extent. 1. New Mexico while not excepting specifically to the ultimate finding of the master as to the location of the river in 1850, has filed various exceptions to matters leading to this general finding, by which it challenges the correctness of certain incidental statements of the master; his conclusions as to certain portions of the evidence; and the fact that he refers to certain official reports and maps which he thought might be judicially noticed, several of which he filed as exhibits to his report. Some of these exceptions are plainly immaterial. And none of them need be dealt with separately, as they are merged in the ultimate question whether, upon the competent evidence, viewed in its entirety, the master's finding as to the location of the river in 1850 is correct. The evidence relating to this matter is so voluminous8 that it is entirely impracticable to refer to it in any detail. And while we have considered the various contentions relating to its many phases, we can here deal with the question of its weight only in the broadest outlines. To establish its contention as to the location of the river New Mexico relied mainly upon the testimony of a large number of Indians and Mexicans, most of whom-with others who did not testify-had been members of different parties that had accompanied its engineers on various trips down the river between 1912 and 1914, shortly before and after the filing of the bill, for the purpose of pointing out the location of the old river; the testimony of a former registrar of the Land Office, who had known the river in 1857 and 1858 when conductor on a state route and had been employed by New Mexico to find witnesses having knowledge of the old river; and a survey of the 32d parallel made in 1859 by John H. Clark, United States commissioner, with the testimony of its engineers, surveyors and others relating thereto. 2. While there were various discrepancies and contradictions in the testimony of the witnesses as to the location of the old river, their evidence was to the general effect that at different times between 1850 and 1860, it ran, as they recollected, on the eastern side of the valley, near the eastern range of hills, substantially as claimed by New Mexico. The master, in dealing with the evidence of the Indian and Mexican witnesses, said: 'Most of the witnesses were illiterate; they were unable to estimate distances with any degree of accuracy. * * * All * * * were old men, some very old, and some were only ten years of age or less at the date when they passed along the river between the years 1850 and 1860. There was much evidence that in those years the country was wild and infested with hostile Indians, * * * Many of the witnesses traveled part of the time at night. From White's Ranch to Alamitos, there was but one, if any, house prior to 1857. The names given by the witnesses, therefore, to points along the river with relation to which * * * they located the river, * * * referred to bends, hills, bosques, esteros, cottonwood trees, etc. There was no stage coach route prior to 1857. Many of the witnesses had not traveled along the river since the Civil War; and only a few claimed to have had any continuous knowledge of the river. * * * Moreover, most of the whole river plane or valley had been altered in condition since 1850-1860. In those years, it was uninhabited, uncultivated and covered in many parts near the river with thick bosques (groves or forests) of cottonwood and tornillo trees. The * * * land, in 1912-1914, was considerably settled and cultivated; the town of Anthony had come into existence; there were farms, cornfields, and alfalfa fields, paved roads and a railroad, in many places where they located the bed of the old 1850 river. * * * In many years, at the time of annual floods * * * the river covered the whole valley from its western to its eastern margin. When the floods subsided, the river at times resumed its former channel, and at times it did not. * * * (As) testified to by plaintiff's engineer witness, Post: 'There are old river beds or indications of old river beds in various parts of the valley. * * * If I had started out to survey old river beds * * * I would not be through surveying yet.' He further stated that, in surveying throughout the valley, he had seen old water courses and river beds as distinct and more distinct than that claimed by the witnesses to be the river of 1850. The river has always carried and deposited large quantities of silt, mud and other detritus. At times of flood, many old channels were filled with deposits and their presence effaced. The river valley, at places, * * * has been raised in level many feet. The Santa Fe Railroad has been obliged to raise its railroad bed several times, and in doing so has, at places, excavated from the sandhills at the east. In describing the manner in which they located the river in 1912-1914, the witnesses testified that they walked along depressions, low ground, old channels, etc., which they pointed to Post and the surveyors as the bed of the river of 1850, according to their recollection; that this bed, as a rule, showed banks not more than two or three feet high; * * * that for a considerable distance, at various points, the bed of the old river was then occupied by the railroad tracks, by the county road, and by the river as it flowed in 1912-1914. Many of the witnesses * * * testified that, before they made their trips, the channel of the old river had been outlined by the surveyor's stakes. Several witnesses said that they followed the stakes. * * * Under all the conditions outlined above, I consider it improbable that Indian and Mexican witnesses would be able to trace accurately, on the ground, the course of a river as it flowed over fifty to sixty years prior.' The master further found that the identification of the point from which these witnesses began their location of the old river, as the place called Alamitos where there had been prior to 1857 a camp or watering place for travelers on the east bank of the river, was 'particularly doubtful and difficult of belief,' and that the road leading up the river past Alamitos, to which they referred, did not run on the eastern side of the valley or along the eastern sand hills, as claimed, but up the valley bottom, west of the location of the river claimed by New Mexico and in a position incompatible therewith. And, after referring to the testimony of the former registrar of the Land Office, he concluded: 'In view of all the evidence in the case, I am unable to attach great weight or credit to the testimony of the plaintiff's witnesses as to the location either of the bed or of the course of the Rio Grande as it flowed in 1850. * * * I am of opinion that their memories were defective, and especially that they were mistaken as to dates, and that they confused the course of the river as they knew it in later years with their knowledge of it in earlier years. If not so mistaken * * * it is apparent that many of them were testifying as to * * * those periods of the year when the river was in flood and may well have been flowing along the eastern as well as the western banks. There is also evidence * * * as to the existence on the east side of the remains of an old river channel of 1826, which had left sloughs or esteros at various points; also as to the existence of old ditches. * * * It is probable that the river, subsiding from floods, at times ran in these sloughs, esteros, or ditches, as a minor channel or branch, and that it was thus mistaken by some witnesses for the main channel of the river.' 3. The survey of John H. Clark, United States commissioner, was made by him as a member of the United States and Texas Boundary Commission,9 in and after 1859, of a portion of the boundary line between Texas and the territories of the United States, including the lines of the 103d meridian and the 32d parallel between that meridian and the channel of the Rio Grande River, which then constituted part of the boundary between Texas and the Terriory of New Mexico,10 connecting on the west with the line running down the channel of the river here in dispute. In 1891 the lines of the meridian and parallel established by Clark were 'confirmed' by an Act of Congress and a Joint Resolution of the Texas Legislature as boundary lines between Texas and the Territory of New Mexico.11 The significance of Clark's survey lies in its bearing upon the location of the east bank of the Rio Grande in 1859. His report shows, admittedly, that he placed at the initial point of the survey on the 32d parallel a pyramid of stone, designated as Monument No. 1, standing 600 feet from the east bank of the river. This monument has long since disappeared. New Mexico contended that as shown by the field notes and as re-established by its engineers with reference to other objects called for in the field notes and shown on the maps, the location of this Monument coincided with that of Station 1 on the survey of the parallel from which Clark took the bearings of various objects, and that the river bank was thereby fixed at a point 600 feet west of this Station-whose location was agreed upon-substantially as shown by the witnesses who testified to the location of the old river. On the other hand, Texas contended that as shown by the field notes and as re-established by its engineers with reference to other objects, this Monument was located at a point about 2800 feet west of Station 1, and the river bank was thereby fixed at a like distance west of the location claimed by New Mexico; and further that in 1911-1913 this Monument had been re-established at a point about 200 feet west of the location shown by its witnesses, by joint commissioners of the United States and Texas, and this re-establishment was binding upon New Mexico, irrespective of its precise accuracy. The basis of the latter contention is this: Before the Territory of New Mexico had been admitted as a State under the Enabling Act of 1910,12 a Constitution was adopted for the proposed State,13 which, disregarding entirely the lines of Clark's survey, declared in general terms that its boundaries ran along the 103d meridian to the 32d parallel, along that parallel to the Rio Grande, as it existed on September 9, 1850, and with the main channel of the river, as it existed on that date, to the parallel of 31 degrees and 47 minutes. Thereupon, in February, 1911, Congress, by a Joint Resolution14 declared that any provision of this constitution that tended to annul or change the established boundary lines between the Territory and the State of Texas15 run by Clark in 1859 and 1860, 'shall be of no force or effect' and be construed so as not to affect or alter the Clark lines in any way, and that the ratification of these lines by the United States and the State of Texas in 1891 'shall be held and deemed a conclusive location and settlement of said boundary lines,' and the lines run and marked by monuments along the 103d meridian and the 32d parallel shall 'remain the true boundaries of Texas and New Mexico.' This Resolution further authorized the President, in conjunction with the State of Texas, to re-establish and remark the Clark boundary lines, and, for such purpose, to appoint a commissioner who, with a commissioner for the State of Texas, should re-mark the boundary between the Territory of New Mexico and Texas on the line run by Clark for the 103d meridian to the southeast corner of New Mexico, and thence west with the 32d parallel as determined by him to the Rio Grande; the position of the boundary lines as marked by him to be determined by his old monuments and lines where found on the ground, or otherwise by their original position as shown by parol evidence or his topographical maps and field notes. In August, 1911, Congress, in a Joint Resolution16 declaring that New Mexico should be admitted as a State upon compliance with certain specified conditions, specifically provided that such admission 'shall be subject to the terms and conditions of' the Joint Resolution of February, 1911. In January, 1912, New Mexico was admitted as a State.17 Thereafter, the joint commissioners appointed to re-mark the Clark boundary lines-commonly called the Scott-Cockrell Commission-submitted to the President reports of their proceedings. In one of these, relating to Clark's Monument No. 1 on the 32d parallel, they stated that, on completing their field work in September, 1911, being unable after a second effort to locate this Monument from any physical facts found upon the ground or oral testimony, they had determined the approximate scale of the topographical map accompanying Clark's report, and measuring westward on the ground from his Monument No. 4 the distance to his Monument No. 1 indicated on the map, had re-established his Monument No. 1 at the point thus ascertained, and erected there a concrete monument marked to show such re-establishment. In February, 1913, the President by an Executive Order18 approved the reports of the commissioners, and confirmed and established their findings, conclusions and acts for the establishment and demarcation of the boundary lines between New Mexico and Texas. The Clark Monument No. 1, as re-established by the Scott-Cockrell Commission, is almost exactly 3,000 feet west of Station 1, and, if this is conclusive as to its original location, places the river bank in 1859 substantially in the position claimed by Texas. As to this New Mexico contended that in re-establishing the Monument the Commission had mistaken Clark's Monument No. 3 for his Monument No. 4 and consequently started the measurement from a point 3,000 feet too far to the west, and, further that as the re-establishment was not made until after New Mexico had been admitted as a State, it was not bound thereby. The master, in dealing with Clark's survey-as to which there was much conflicting evidence-and the re-establishment of Monument No. 1, found, as a matter of law, that New Mexico was bound by the Clark lines as re-established by the Commission and could not challenge the correctness of its acts, and that hence in locating the boundary line extending southwardly from the 32d parallel through the valley the starting point on the parallel could not be fixed east of the re-established Monument. And he further found that it was shown by the evidence, as a matter of fact, that the location of Clark's Monument No. 1 did not coincide with that of Station 1, but was at a point 2,783 feet west of that Station, 216.5 feet east of the point where the Monument had been re-established by the Commission, thereby showing that the river bank was at least 2,783 feet west of the location claimed by the witnesses for New Mexico; that the theory that the Commission had measured from Monument No. 3 instead of Monument No. 4, was without basis; and that the location of Monument No. 1, either as found by him or as fixed by the Commission, was utterly inconsistent with the location of the river claimed by New Mexico. 4. In support of its contention as to the location of the river, Texas further relied upon various old surveys, patents and maps, and the testimony of its engineers in regard thereto, as showing the true course of the river southwardly through the valley from the point where it crossed the parallel. These documents consisted mainly of the socalled Salazar-Diaz Survey of the Rio Grande, made in 1852 by Diaz, a Mexican engineer, by order of Salazar, the Mexican member of the Joint Commission under the Treaty of Guadalupe-Hidalgo;19 a survey made in 1860 and a resurvey made in 1886, by Texas surveyors, of a Mexican grant on which Texas reissued a patent in 1886; surveys made by Texas surveyors between 1848 and 1873, several of which were bounded on the west by the river bank, on which Texas issued patents between 1860 and 1874; maps of surveys made in 1852-1853 and 1855 under the direction of the American surveyor for the Joint Boundary Commission under the Treaty of Guadalupe-Hidalgo and the American member of the Joint Boundary Commission under the Gadsden Treaty, and agreed to by the joint Commissions, which showed the course of the river; and War Department maps of surveys made in 1854-1856 in the course of explorations for a railroad route to the Pacific Ocean likewise showing the course of the river. And Texas also relied upon long acquiescence by the United States before the Territory of New Mexico had been admitted as a state. The Salazar-Diaz Survey covered the course of the Rio Grande through all the area in dispute except in the extreme northern portion. The evidence of this Survey consisted of two copies of a document containing Diaz's memoranda and field notes. One was a copy of the original document in the archives of the International Boundary Commission under the Convention of 1889,20 which was authenticated by a certificate of the Mexican Commissioner. This was introduced in evidence by Texas, over the objection of New Mexico that the Commissioner had no authority to make such a certificate.21 A few days later counsel for New Mexico stated that they would offer in evidence a copy of these memoranda and field notes properly certified by one of the departments of the Mexican Government. They later furnished counsel for Texas a copy certified by a government officer in the City of Mexico.22 The copy so furnished was thereafter introduced by Texas, without objection; and engineers of both States were examined and cross-examined as to their work and calculations based on this copy, concerning the reproduction of the survey on the ground. Two years later, in 1918, on the day that the taking of testimony was closed by agreement, New Mexico moved to strike out both copies from the record on the ground that they were not so authenticated as to be admissible in evidence; and introduced evidence in support of this motion for the purpose of showing that there was not in fact any original of the document in the department in the City of Mexico as they had believed when they furnished the copy to the counsel for Texas. We agree with the view of the master that the objections to the two copies were not well taken. The first was admissible upon authentication by the Mexican Boundary Commissioner having proper custody of the original. See United States v. Wiggins, 14 Pet. 334, 346, 10 L. Ed. 481, and United States v. Acosta, 1 How. 24, 26, 11 L. Ed. 33. And under all the circumstances the motion to exclude the second copy came too late, apart from any question as to its proper authentication. See Benson v. United States, 146 U. S. 325, 333, 13 S. Ct. 60, 36 L. Ed. 991. There was much conflict in the evidence of the engineers for New Mexico and Texas as to the location of the river as shown by the Salazar-Diaz Survey, which was described in the field notes by traverse from triangulation points; also as to the location of the Texas patent on the Mexican grant and other Texas surveys and patents. New Mexico also challenged the authenticity of the Salazar-Diaz Survey. That the Salazar-Diaz Survey was authentic; that the course of the river as surveyed in 1852 had been reproduced by the engineers for Texas, by traverse from the triangulation points, with substantial correctness, and that even if the engineers for New Mexico were correct in certain contentions, the resultant reproduction would not place the river anywhere near the location claimed by New Mexico; That the boundaries of the patent issued by Texas on the Mexican grant-which extended nearly across the entire valley-except possibly the river boundary, could be substantially identified on the ground, and by far the greater part of the land patented was west of the location of the river claimed by New Mexico; That, although according to New Mexico's contention as to the location of the river a large part of the Texas surveys for lands lying between the 32d parallel and the Mexican grant claiming a frontage on the river, would be located in the sand-hills east of the valley, they were in fact located in the valley; That, although some of the Texas surveys for lands lying south of the Mexican grant and extending to the end of the valley, might, if exactly surveyed now, extend across the river and on the western bank, they claimed land lying, at least in part, west of the location of the river for which New Mexico contended, and that the western line of the lands claimed in the surveys and patents fairly corresponded, with minor variations, to the line of the river shown by the Salazar-Diaz Survey; and That the Salazar-Diaz Survey was corroborated by certain of the maps of the surveys made for the Joint Boundary Commissions and the War Department, and by a map accompanying Clark's survey of the 32d parallel, and that all these maps-as well as certain other maps that had not been introduced in evidence, but of which he thought judicial notice might be taken-sustained the contention of Texas as to the course of the Rio Grande in 1850 and were inconsistent with the contention of New Mexico. He further found that for many years prior to the admission of New Mexico as a State in 1912, surveys were made by Texas surveyors and patents issued by Texas on substantially all the land in the area in dispute;23 that the occupancy and physical possession of this land by Texas patentees and persons claiming under them, had been admitted by counsel at the hearing before him; that there was no evidence that from 1850 to 1911 the United States had issued any patents specifically covering lands east of the river as located by the Salazar-Diaz Survey, or conflicting with any of the patents issued by Texas; and that, for at least thirty years prior to the admission of the Territory of New Mexico as a State, the United States made no challenge of the claims to lands asserted by Texas and its citizens and, impliedly at least, recognized the practical line that had been established as the boundary between the territory and Texas. The master concluded on all the evidence that the allegations in New Mexico's bill as to the location and course of the Rio Grande 'as it existed in the year 1850' were not sustained, and that the river did not then flow on the eastern side of the valley as claimed by New Mexico; that its location and course in 1850 was, in general, as alleged in the cross-bill of Texas, and, in particular, that on the dates nearest to 1850 of which there was credible evidence it followed the course set forth in his report and described by reference to Clark's Monument No. 1, two Texas surveys made in 1860, a Texas survey made in 1849, and the Salazar-Diaz Survey of 1852, substantially as reproduced by the engineers for Texas; and that under the testimony the average width of the river should be estimated as 300 feet, and the middle of the channel fixed at 150 feet from the line of its east bank as shown by the Texas surveys, and 150 feet from the line of its west bank as shown by the Salazar-Diaz Survey. 6. We need not determine whether any of the documents referred to by the master that had not been introduced in evidence were properly the subject of judicial notice. Be that as it may, since New Mexico had no opportunity to introduce evidence in explanation or rebuttal of them, we have not considered them in reaching our own conclusions. 7. Upon the whole case we are satisfied that the master's finding as to the location of the river in 1850 is substantially correct, and fixes its course as accurately as is possible after the lapse of more than three-quarters of a century. Whithout attempting to set out our reasons in detail, we conclude: That the testimony of the witnesses as to their recollection of the old river is far from satisfactory, and does not, in view of the other evidence in the case, sustain the burden of proof resting upon New Mexico; that the greater weight of the evidence shows that Clark's Monument No. 1 did not coincide with Station 1, but was located at least 2783 feet west thereof, substantially as re-established by the Scott-Cockrell Commission; that under the Joint Resolution of February and August, 1911, preceding and conditioning the admission of New Mexico as a State, it is bound by the re-establishment of the Monument by the Commission and cannot question its accuracy; that this necessarily extends the Clark boundary line along the 32d parallel to the east bank of the river, at a point 600 feet west of the re-established Monument; that, according to the greater weight of the evidence, the river, in 1850, or as near thereto as may now be determined, ran southwardly through the valley from the parallel, as shown by certain of the surveys, patents and maps relied on by Texas-especially the Salazar-Diaz Survey of 1852, the Texas surveys of 1849 and 1860, the maps of the surveys made in 1852-1855 for the Joint Boundary commissions, and the Clark map of 1859-on the course and in the location set forth and described in the master's report; and that this conclusion is reinforced by the tacit and long-continued acquiescence of the United States, while New Mexico was a Territory, in the claims of those holding the land in controversy under Texas surveys and patents, and the undisturbed possession of the Texas claimants. In short, we find that New Mexico has failed to sustain the burden of proof and that the master's report is in accord with the greater weight of the evidence. 8. New Mexico's exceptions to so much of the report as deals with the location of the river in 1850, are accordingly overruled. Accretions. Both states have filed exceptions to the master's report in reference to accretions. Texas, on the one hand, insists that he was in error in reporting as the boundary line the location occupied by the river after it had been moved eastward from its location in 1850 by accretions. New Mexico, on the other hand, insists conditionally-that is, only if its exceptions as to the location in 1850 are not sustained-that in determining the accretions in the Country Club area the master fixed the line of such accretions in an indefinite manner and not far enough to the east. We find that the contention of Texas is well taken and the conditional contention of New Mexico is therefore immaterial. This case is not one calling for the application of the general rule established in Nebraska v. Iowa, 143 U. S. 359, 12 S. Ct. 396, 36 L. Ed. 186; Missouri v. Nebraska, 196 U. S. 23, 25 S. Ct. 155, 49 L. Ed. 372; Arkansas v. Tennessee, 246 U. S. 158, 38 S. Ct. 301, 62 L. Ed. 638, L. R. A. 1918D, 258 and Oklahoma v. Texas, 260 U. S. 606, 43 S. Ct. 221, 67 L. Ed. 428, as to changes in State boundary lines caused by gradual accretions on a river boundary. We reach this conclusion without reference to the fact that there were no issues under the pleadings as to accretions or changes in the boundary line since 1850, and without considering the propriety of permitting amendments to the pleadings, since in any event the outcome must be the same. By the legislative compact created by an Act of Congress of September 9, 1850, and an Act of the Texas Legislature of November 25, 1850, the channel of the Rio Grande southwardly from its intersection with the 32d parallel was established as a boundary between Texas and the territory of the United States. By this same Act of Congress the territory of New Mexico was created, and by that Act, supplemented by an Act of 1854 following the Gadsden Treaty, the channel of the river between the 32d parallel and the parallel of 31 degrees 47 minutes became a boundary between the Territory of New Mexico and the State of Texas.24 New Mexico, when admitted as a State in 1912, explicitly declared in its Constitution that its boundary ran 'along said thirty-second parallel to the Rio Grande . . . as it existed on the ninth day of September, one thousand eight hundred and fifty; thence, following the main channel of said river, as it existed on the ninth day of September, one thousand eight hundred and fifty, to the parallel of thirty-one degrees, forth-seven minutes north latitude.' This was confirmed by the United States by admitting New Mexico as a State with the line thus described as its boundary; and Texas has also affirmed the same by its pleadings in this cause. Since the Constitution defined its boundary by the channel of the river as existing in 1850, and Congress admitted it as a State with that boundary, New Mexico, manifestly, cannot now question this limitation of its boundary or assert a claim to any land lying east of the line thus limited. And it was doubtless for this reason that New Mexico alleged in its pleadings and has consistently asserted throughout this litigation that the true boundary is the channel of the river as it existed in 1850. The exceptions of Texas to so much of the master's report as deals with the question of accretions and fixes the boundary with reference thereto, are accordingly sustained; and the conditional exceptions of New Mexico to so much of the report as relates to accretions in the Country Club area, are overruled. Conclusion. Our conclusion on the entire case is that the boundary line between New Mexico and Texas in the area in dispute is the middle of the channel of the Rio Grande as it was located in 1850, extending southwardly from the parallel of 32 degrees north latitude to the parallel of 31 degrees 47 minutes, as found and described by the master in Section V(1) of his report; the intersection of the east bank of the river with the line of the 32d parallel to be taken at a point 600 feet west from the Clark Monument No. 1 as reestablished by the Scott-Cockrell Commission, and the middle line of the channel to be taken 150 feet from the east and west banks of the river, respectively, as found by the master. It results that the bill of New Mexico must be dismissed; and that under the cross-bill of Texas, the line above described must be decreed to be the boundary between the two states. This boundary line should now be accurately surveyed and marked by a commissioner or commissioners to be appointed by the Court, whose report shall be subject to its approval. The parties may submit within forty days the form of a decree to carry these conclusions into effect. Bill dismissed and decree directed under cross-bill.
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1. A copy of memoranda and field notes of a survey of part of the boundary between Mexico and Texas, made in 1852 by a Mexican engineer by order of the Mexican Member of the Joint Boundary Commission, under the Treaty of Guadalupe-Hidalgo, was admissible in evidence upon authentication by the Mexican Boundary Commissioner having custody of the original. P. 296. 2. A motion, by the party who produced it, to strike out an authenticated copy, accompanied by evidence adduced to prove that the party had been mistaken in believing that there was any original in the place from which the authentication was made, comes too late, when deferred until the day when the taking of testimony is closed by mutual agreement, two years after the copy was introduced by the opposite party and treated by both sides as evidence in the case. P. 297. 3. The New Mexico-Texas boundary, in the area involved in this suit, is the middle of the main channel of th3 Rio Grande, as that river flowed in 1850, extending southwardly from the 32d parallel of North Latitude to the parallel of 31 degrees, 47 minutes in the course and location found and described in Section V (1) of the report of the Special Master in this case; the intersection of the east bank of the river with the 32d parallel is to be taken at a point 600 feet west from Monument No. 1 of Clark's Survey on that parallel made in and after 1859 in locating the Texas-United States boundary, as said monument No. 1 was reestablished by Joint Commissioners of the United States and Texas, appointed pursuant to a Joint Resolution of Congress passed in February, 1911; and the middle line of the channel is to be taken 150 feet from the east and west banks of the river respectively, as found by the Special Master. P. 303. In arriving at this conclusion, the Court finds and decides as follows: 4. That the testimony of ancient witnesses called by New Mexico as to their recollection of the old river, is far from satisfactory, and does not, in view of the other evidence, sustain the burden resting on New Mexico of proving her claim that the location was farther east than the one claimed by Texas and found in this case. P. 300. 5. That the greater weight of the evidence shows that Clark's Monument No. 1. did not coincide with his Station 1, but was located at least 2783 feet west thereof, substantially as reestablished by the Joint Commission of the United States and Texas above mentioned. P. 300. 6. That under the Joint Resolutions of February and August, 1911, preceding and conditioning the admission of New Mexico as a State, she is bound by the restablishment of the Monument by the Commission and cannot question its accuracy. Id. 7. That this necessarily extends the Clark boundary line along the 32d parallel to the east bank of the river, at a point 600 feet west of the reestablished Monument. Id. 8. That according to the. greater weight of the evidence, the river, in 1850, ran, as shown by certain surveys, patents and maps relied on by Texas, on the course and in the location set forth and described in the Special Master's report. Id. 9. That this conclusion is reinforced by the tacit and long-continued acquiescence of the United States, while New Mexico was a Territory, in the claims of those holding the land in controversy under Texas surveys and patents, and the undisturbed possession of the Texas claimants. Id. 10. New Mexico, having explicitly declared in her Constitution of 1912 that her boundary between parallels of 32° and 310 47' followed the main channel of the Rio Grande as it existed on the ninth day of September, 1850, and this having been confirmed by the United States by admitting her as a State with the line thus described as her boundary, and also approved by Texas in her pleadings, New Mexico cannot question this limitation of her boundary and lay claim to lands east of that line because of changes in the river course since,1850, due to the process of accretion. P. 302.
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Congress, by the act of June 6, 1900 (31 Stat. at L. 322, chap. 786), established a district court for Alaska, with general civil and criminal jurisdiction. There were three judges, who, though given jurisdiction over the entire district, were required to reside in that one of the three divisions to which they were respectively assigned by the President. On December 29, 1908, the grand jury of the third division indicted Matheson for murder. On the next day he was arraigned and entered a plea of not guilty. Before his case was called for trial, Congress passed the act of March 3, 1909 (35 Stat. at L. 839, chap. 269), providing for a fourth division, to be held at Fairbanks by the judge of the former third division. This act was not to become effective until July 1, 1909; but in preparation for the first term convened thereunder, the district judge, assigned to the fourth division passed an order, under which jurors were drawn and summoned in June to attend at the session of court to be held in July at Fairbanks. On July 13, during this term, the defendant applied for and obtained an order to have his witnesses subpoenaed at the expense of the government. His case was called for trial in September. He announced ready, and without making any question as to the qualification of the jurors or the method and regularity of their selection, objected to the entire panel on the ground that the judge of the third division was without jurisdiction to issue the call at a time when the fourth division had not come into existence. The objection was overruled. Several of those on the jury which tried his case were taken from this panel. After a verdict of guilty and sentence to imprisonment for life, the case was brought here by writ of error in which complaint is made of the action of the judge in allowing a jury to be selected from a panel drawn in June, before the act creating the fourth division became effective. The Alaskan Code (31 Stat. at L. 322, §§ 4 & 5, chap. 786) created one district court with three judges having general civil and criminal jurisdiction over the entire district, and authority to hold regular terms at Juneau, St. Michael's, and Eagle City, and special terms at such times and places in the district as they or any of them might deem expedient. The act of March 3, 1909 (35 Stat. at L. 839, chap. 269), in providing for a fourth division, did not contemplate an interruption of the functions of the judge throughout the entire district, nor did it destroy the unity of the district court. But while preserving unimpaired the power of the court and judges, it fixed a new place, at which the same district court must be held. It did not create a new tribunal, with new officers, to be organized in a new political division, but it continued the jurisdiction and power of the judge to be exercised anywhere in Alaska. It did not revoke his authority to summon jurors to attend at any session of the district court, whether permitted to be held at Fairbanks, under the act of 1900, or required there to be held after July 1st, under the act of 1909. The principle involved is, in some of its aspects, like that considered in Rosencrans v. United States, 165 U. S. 257, 41 L. ed. 708, 17 Sup. Ct. Rep. 302, where it was said that 'jurisdiction is coextensive with district, and no mere multiplication of places at which courts are to be held or mere creation of division nullifies it.' Barrett v. United States, 169 U. S. 219, 42 L. ed. 723, 18 Sup. Ct. Rep. 327; Bird v. United States, 187 U. S. 118, 47 L. ed. 100, 23 Sup. Ct. Rep. 42. There was no error in overruling the objection made by the defendant to the panel. There are 37 assignments of error, none of which presents a ground requiring a reversal. One relates to the giving of a charge requested by the defendant; others to rulings as to which no exception was taken at the time, or as to matters not set out in the assignments, and requiring a search through the record to determine the subject of the complaint; others, to the exclusion of testimony as to facts subsequently proved. Those which relate to the refusal of the court to permit nonexperts to express the opinion that the defendant was insane, until after they had given facts on which it was based, are without merit. It was the duty of the judge to determine whether such witnesses had qualified themselves to give opinion evidence, and there was no abuse of the court's discretion in passing on these matters (Turner v. American Security & T. Co. 213 U. S. 260, 53 L. ed. 789, 29 Sup. Ct. Rep. 420), but his rulings were favorable to the defendant. It would serve no useful purpose to discuss the ruling as to the burden of proof and the definitions of insanity, since they present no new propositions. In both these matters the court followed cases in which those subjects have been fully treated. He instructed the jury that while the burden of proof was upon the defendant to establish the fact that he was insane at the time of the killing, yet they could not convict if they had a reasonable doubt as to his sanity. Davis v. United States, 160 U. S. 469, 40 L. ed. 499, 16 Sup. Ct. Rep. 353. His definition of insanity and as to what would relieve the defendant of criminal responsibility was in accord with the principle declared in Davis v. United States, 165 U. S. 378, 41 L. ed. 754, 17 Sup. Ct. Rep. 360; in fact, the court gave the exact charge there held to be correct. The case was one peculiarly for the jury, and finding no error in matter of law, the judgment must be affirmed.
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Where the jurisdiction is coextensive with the district, multiplication of places at which courts may be held or mere creation of divisions does not nullify it. Barrett v. United States, 169 U. S. 231. Jurors summoned by the District Judge in Alaska before the act of March 3, 1909, creating a Fourth Division, became effective, to attend the first term of the court in that division when the act did become effective, held properly summoned, as the act did not create a new tribunal or revoke the power of the District Judges to summon jurors to attend at any session of the court. It is the duty of the judge to determine whether non-experts are qualified to express an opinion as to sanity of the accused, and in this case there does not appear to have been any abuse of discretion. An instruction that while the burden of proof is on defendant to establish the fact of insanity, the jury cannot convict if they had reasonable doubt as to his sanity, held proper and sufficient. Davis v. United States, 160 U. S. 469. The court properly instructed the jury as to the definition of insanity and as to what relieves defendant from criminal responsibility by giving the charge approved in Davis v. United States, 165 U. S. 373.
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The people of the State of California do enact as follows:
SECTION 1.
Section 25503.36 is added to the Business and Professions Code, to read:
25503.36.
(a) Notwithstanding any other provision of this division, an authorized licensee may sponsor events promoted by, and may purchase advertising space and time from, or on behalf of, a live entertainment marketing company in connection with events organized and conducted by the live entertainment marketing company on the premises of a permanent retail licensee located at the San Diego County Fairgrounds, located in the City of Del Mar in the County of San Diego, subject to all of the following conditions:
(1) The live entertainment marketing company operates and promotes live artistic, musical, sports, or cultural entertainment events only.
(2) The events will take place over a period of no more than four consecutive days during which approximately 100 acts will perform before approximately 20,000 or more patrons.
(3) The live entertainment marketing company is a Delaware limited liability company that is under common ownership, management, or control by a private equity firm that may also have common ownership, management, or control of a licensed California winery, provided the winery represents not more than 25 percent of the assets under common ownership, management, or control by the private equity firm or its subsidiaries, and the live entertainment marketing company exercises no control over the operations of the winery. Any authorized licensee sponsoring an event or purchasing advertising space or time, pursuant to this section, shall obtain written verification of compliance with this subdivision prior to such sponsorship or the purchase of advertising space or time.
(4) Any on-sale licensee operating at the San Diego County Fairgrounds shall serve other brands of beer, distilled spirits, and wine distributed by a competing wholesaler or manufacturer in addition to any brand manufactured, distributed, or owned by the authorized licensee sponsoring an event or purchasing advertising space or time pursuant to this section.
(5) An agreement pursuant to this section shall not be conditioned directly or indirectly on the purchase, sale, or distribution of any alcoholic beverage manufactured or distributed by any authorized licensee sponsoring or purchasing advertising space or time pursuant to this section.
(b) Any sponsorship of events or purchase of advertising space or time conducted pursuant to subdivision (a) shall be conducted pursuant to a written contract entered into by the authorized licensee and the live entertainment marketing company.
(c) Any authorized licensee who, through coercion or other illegal means, induces, directly or indirectly, a holder of a wholesaler’s license to fulfill those contractual obligations entered into pursuant to subdivision (a) shall be guilty of a misdemeanor and shall be punished by imprisonment in the county jail not exceeding six months, or by a fine in an amount equal to the entire value of the advertising space or time involved in the contract, whichever is greater, plus ten thousand dollars ($10,000), or by both imprisonment and fine. The person shall also be subject to license suspension or revocation pursuant to Section 24200.
(d) Any on-sale retail licensee who, directly or indirectly, solicits or coerces a holder of a wholesaler’s license to solicit an authorized licensee to purchase advertising time or space pursuant to subdivision (a) shall be guilty of a misdemeanor and shall be punished by imprisonment in the county jail not exceeding six months, or by a fine in an amount equal to the entire value of the advertising space or time involved in the contract, whichever is greater, plus ten thousand dollars ($10,000), or by both imprisonment and fine. The person shall also be subject to license suspension or revocation pursuant to Section 24200.
(e) Nothing in this section shall authorize the purchasing of advertising space or time directly from, or on behalf of, any on-sale licensee except as expressly authorized by this section or any other provision of this division.
(f) Nothing in this section shall authorize an authorized licensee to furnish, give, or lend anything of value to an on-sale retail licensee described in subdivision (a) except as expressly authorized by this section or any other provision of this division.
(g) For purposes of this section, the following definitions shall apply:
(1) “Authorized licensee” means the following licensees: beer manufacturer, out-of-state beer manufacturer’s certificate, winegrower, winegrower’s agent, importer, rectifier, distilled spirits manufacturer, distilled spirits rectifier general, distilled spirits manufacturer’s agent.
(2) Except for a licensee that holds only a beer and wine importer general license or a distilled spirits importer general license, “importer” does not include the holder of any importer license that does not also hold at least one other license specified as an authorized licensee.
(h) The Legislature finds that it is necessary and proper to require a separation between manufacturing interests, wholesale interests, and retail interests in the production and distribution of alcoholic beverages in order to prevent suppliers from dominating local markets through vertical integration and to prevent excessive sales of alcoholic beverages produced by overly aggressive marketing techniques. The Legislature further finds that the exception established by this section to the general prohibition against tied interests must be limited to its expressed terms so as not to undermine the general prohibition, and intends that this section be construed accordingly.
SEC. 2.
The Legislature finds and declares that a special law is necessary and that a general law cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because of the unique conditions located in the County of San Diego.
SEC. 3.
No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.
SEC. 4.
This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are:
In order to allow for the sponsoring of events within the County of San Diego as soon as possible, it is necessary that this act take effect immediately.
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Existing law generally restricts certain alcoholic beverage licensees, including manufacturers and winegrowers, from paying, crediting, or compensating a retailer for advertising in connection with the advertising and sale of alcoholic beverages. Existing law expressly authorizes a beer manufacturer, holder of a winegrower’s license, winegrower’s agent, holder of an importer’s general license, distilled spirits manufacturer, holder of a distilled spirits rectifier’s general license, or a distilled spirits manufacturer’s agent to sponsor events promoted by or purchase advertising space and time from, or on behalf of, a live entertainment marketing company that is a wholly owned subsidiary of a live entertainment company that has its principal place of business in the County of Los Angeles, as provided.
This bill would expressly authorize an authorized licensee, as defined, to sponsor events promoted by or purchase advertising space and time from, or on behalf of, a live entertainment marketing company in connection with events organized and conducted by the live entertainment marketing company at the San Diego County Fairgrounds, under specified conditions. The bill would also make an authorized licensee who, through coercion or other illegal means, induces the holder of a wholesaler’s license to fulfill those contractual obligations entered into pursuant to these provisions guilty of a misdemeanor. The bill would additionally make an on-sale retail licensee, as described, who solicits or coerces a holder of a wholesaler’s license to solicit an authorized licensee to purchase advertising time or space pursuant to these provisions guilty of a misdemeanor. The bill would make a related statement of findings.
By creating new crimes, this bill would impose a state-mandated local program.
This bill would make legislative findings and declarations as to the necessity of a special statute for the County of San Diego.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
This bill would declare that it is to take effect immediately as an urgency statute.
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In this case we are asked to reconsider prior decisions holding that the privilege against self-incrimination is not safeguarded against state action by the Fourteenth Amendment. Twining v. New Jersey, 211 U.S. 78, 29 S.Ct. 14, 53 L.Ed. 97; Adamson v. California, 332 U.S. 46, 67 S.Ct. 1672, 91 L.Ed. 1903.1 The petitioner was arrested during a gambling raid in 1959 by Hartford, Connecticut, police. He pleaded guilty to the crime of pool selling, a misdemeanor, and was sentenced to one year in jail and fined $500. The sentence was ordered to be suspended after 90 days, at which time he was to be placed on probation for two years. About 16 months after his guilty plea, petitioner was ordered to testify before a referee appointed by the Superior Court of Hartford County to conduct an inquiry into alleged gambling and other criminal activities in the county. The petitioner was asked a number of questions related to events surrounding his arrest and conviction. He refused to answer any question 'on the grounds it may tend to incriminate me.' The Superior Court adjudged him in contempt, and committed him to prison until he was willing to answer the questions. Petitioner's application for a writ of habeas corpus was denied by the Superior Court, and the Connecticut Supreme Court of Errors affirmed. 150 Conn. 220, 187 A.2d 744. The latter court held that the Fifth Amendment's privilege against self-incrimination was not available to a witness in a state proceeding, that the Fourteenth Amendment extended no privilege to him, and that the petitioner had not properly invoked the privilege available under the Connecticut Constitution. We granted certiorari. 373 U.S. 948, 83 S.Ct. 1680, 10 L.Ed.2d 704. We reverse. We hold that the Fourteenth Amendment guaranteed the petitioner the protection of the Fifth Amendment's privilege against self-incrimination, and that under the applicable federal standard, the Connecticut Supreme Court of Errors erred in holding that the privilege was not properly invoked. The extent to which the Fourteenth Amendment prevents state invasion of rights enumerated in the first eight Amendments has been considered in numerous cases in this Court since the Amendment's adoption in 1868. Although many Justices have deemed the Amendment to incorporate all eight of the Amendments,2 the view which has thus far prevailed dates from the decision in 1897 in Chicago, B. & Q.R. Co. v. Chicago, 166 U.S. 226, 17 S.Ct. 581, 41 L.Ed. 979, which held that the Due Process Clause requires the States to pay just compensation for private property taken for public use.3 It was on the authority of that decision that the Court said in 1908 in Twining v. New Jersey, supra, that 'it is possible that some of the personal rights safeguarded by the first eight Amendments against national action may also be safeguarded against state action, because a denial of them would be a denial of due process of law.' 211 U.S., at 99, 29 S.Ct., at 19. The Court has not hesitated to re-examine past decisions according the Fourteenth Amendment a less central role in the preservation of basic liberties than that which was contemplated by its Framers when they added the Amendment to our constitutional scheme. Thus, although the Court as late as 1922 said that 'neither the Fourteenth Amendment nor any other provision of the Constitution of the United States imposes upon the States any restrictions about 'freedom of speech' * * *,' Prudential Ins. Co. of America v. Cheek, 259 U.S. 530, 543, 42 S.Ct. 516, 522, 66 L.Ed. 1044, three years later Gitlow v. New York, 268 U.S. 652, 45 S.Ct. 625, 69 L.Ed. 1138, initiated a series of decisions which today hold immune from state invasion every First Amendment protection for the cherished rights of mind and spirit—the freedoms of speech, press, religion, assembly, association, and petition for redress of grievances.4 Similarly, Palko v. Connecticut, 302 U.S. 319, 58 S.Ct. 149, decided in 1937, suggested that the rights secured by the Fourth Amendment were not protected against state action, citing 302 U.S., at 324, 58 S.Ct., at 151, the statement of the Court in 1914 in Weeks v. United States, 232 U.S. 383, 398, 34 S.Ct. 341, 346, that 'the 4th Amendment is not directed to individual misconduct of (state) officials.' In 1961, however, the Court held that in the light of later decisions,5 it was taken as settled that '* * * the Fourth Amendment's right of privacy has been declared enforceable against the States through the Due Process Clause of the Fourteenth * * *.' Mapp v. Ohio, 367 U.S. 643, 655, 81 S.Ct. 1684, 1691, 6 L.Ed.2d 1081. Again, although the Court held in 1942 that in a state prosecution for a non-capital offense, 'appointment of counsel is not a fundamental right,' Betts v. Brady, 316 U.S. 455, 471, 62 S.Ct. 1252, 1261, 86 L.Ed. 1595; cf. Powell v. Alabama, 287 U.S. 45, 53 S.Ct. 55, 77 L.Ed. 158, only last Term this decision was re-examined and it was held that provision of counsel in all criminal cases was 'a fundamental right, essential to a fair trial,' and thus was made obligatory on the States by the Fourteenth Amendment. Gideon v. Wainwright, 372 U.S. 335, 343—344, 83 S.Ct. 792, 796.6 We hold today that the Fifth Amendment's exception from compulsory self-incrimination is also protected by the Fourteenth Amendment against abridgment by the States. Decisions of the Court since Twining and Adamson have departed from the contrary view expressed in those cases. We discuss first the decisions which forbid the use of coerced confessions in state criminal prosecutions. Brown v. Mississippi, 297 U.S. 278, 56 S.Ct. 461, 80 L.Ed. 682, was the first case in which the Court held that the Due Process Clause prohibited the States from using the accused's coerced confessions against him. The Court in Brown felt impelled, in light of Twining, to say that its conclusion did not involve the privilege against self-incrimination. 'Compulsion by torture to extort a confession is a different matter.' 297 U.S., at 285, 56 S.Ct., at 464. But this distinction was soon abandoned, and today the admissibility of a confession in a state criminal prosecution is tested by the same standard applied in federal prosecutions since 1897, when, in Bram v. United States, 168 U.S. 532, 18 S.Ct. 183, 42 L.Ed. 568, the Court held that '(i)n criminal trials, in the courts of the United States, wherever a question arises whether a confession is incompetent because not voluntary, the issue is controlled by that portion of the Fifth Amendment to the constitution of the United States commanding that no person 'shall be compelled in any criminal case to be a witness against himself." Id., 168 U.S. at 542, 18 S.Ct. at 187. Under this test, the constitutional inquiry is not whether the conduct of state officers in obtaining the confession was shocking, but whether the confession was 'free and voluntary; that is, (it) must not be extracted by any sort of threats or violence, nor obtained by any direct or implied promises, however slight, nor by the exertion of any improper influence. * * *' Id., 168 U.S. at 542—43, 18 S.Ct. at 186—187; see also Hardy v. United States, 186 U.S. 224, 229, 22 S.Ct. 889, 891, 46 L.Ed. 1137; Ziang Sun Wan v. United States, 266 U.S. 1, 14, 45 S.Ct. 1, 3, 69 L.Ed. 131; Smith v. United States, 348 U.S. 147, 150, 75 S.Ct. 194, 196, 99 L.Ed. 192. In other words the person must not have been compelled to incriminate himself. We have held inadmissible even a confession secured by so mild a whip as the refusal, under certain circumstances, to allow a suspect to call his wife until he confessed. Haynes v. Washington, 373 U.S. 503, 83 S.Ct. 1336, 10 L.Ed.2d 513. The marked shift to the federal standard in state cases began with Lisenba v. California, 314 U.S. 219, 62 S.Ct. 280, 86 L.Ed. 166, where the Court spoke of the accused's 'free choice to admit, to deny, or to refuse to answer.' Id., 314 U.S. at 241, 62 S.Ct. at 292. See Ashcraft v. Tennessee, 322 U.S. 143, 64 S.Ct. 921, 88 L.Ed. 1192; Malinski v. New York, 324 U.S. 401, 65 S.Ct. 781, 89 L.Ed. 1029; Spano v. New York, 360 U.S. 315, 79 S.Ct. 1202, 3 L.Ed.2d 1265; Lynumn v. Illinois, 372 U.S. 528, 83 S.Ct. 917, 9 L.Ed.2d 922; Haynes v. Washington, 373 U.S. 503. The shift reflects recognition that the American system of criminal prosecution is accusatorial, not inquisitorial, and that the Fifth Amendment privilege is its essential mainstay. Rogers v. Richmond, 365 U.S. 534, 541, 81 S.Ct. 735, 739, 5 L.Ed. 760. Governments, state and federal, are thus constitutionally compelled to establish guilt by evidence independently and freely secured, and may not be coercion prove a charge against an accused out of his own mouth. Since the Fourteenth Amendment prohibits the States from inducing a person to confess through 'sympathy falsely aroused,' Spano v. New York, supra, 360 U.S., at 323, 79 S.Ct., at 1207, or other like inducement far short of 'compulsion by torture,' Haynes v. Washington, supra, it follows a fortiori that it also forbids the States to resort to imprisonment, as here, to compel him to answer questions that might incriminate him. The Fourteenth Amendment secures against state invasion the same privilege that the Fifth Amendment guarantees against federal infringement—the right of a person to remain silent unless he chooses to speak in the unfettered exercise of his own will, and to suffer no penalty, as held in Twining, for such silence. This conclusion is fortified by our recent decision in Mapp v. Ohio, 367 U.S. 643, 81 S.Ct. 1684, overruling Wolf v. Colorado, 338 U.S. 25, 69 S.Ct. 1359, 93 L.Ed. 1782, which had held 'that in a prosecution in a State court for a State crime the Fourteenth Amendment does not forbid the admission of evidence obtained by an unreasonable search and seizure,' 338 U.S., at 33, 69 S.Ct., at 1364. Mapp held that the Fifth Amendment privilege against self-incrimination implemented the Fourth Amendment in such cases, and that the two guarantees of personal security conjoined in the Fourteenth Amendment to make the exclusionary rule obligatory upon the States. We relied upon the great case of Boyd v. United States, 116 U.S. 616, 6 S.Ct. 524, 29 L.Ed. 746, decided in 1886, which, considering the Fourth and Fifth Amendments as running 'almost into each other,' id., 116 U.S., at 630, 6 S.Ct., at 532, held that 'Breaking into a house and opening boxes and drawers are circumstances of aggravation; but any forcible and compulsory extortion of a man's own testimony, or of his private papers to be used as evidence to convict him of crime, or to forfeit his goods, is within the condemnation of (those Amendments) * * *.' 116 U.S., at 630, 6 S.Ct., at 532. We said in Mapp: 'We find that, as to the Federal Government the Fourth and Fifth Amendments and, as to the States, the freedom from unconscionable invasions of privacy and the freedom from convictions based upon coerced confessions do enjoy an 'intimate relation' in their perpetuation of 'principles of humanity and civil liberty (secured) * * * only after years of struggle.' Bram v. United States, 189 , 168 U.S. 532, 543 544, 18 S.Ct. 183 * * * . The philosophy of each Amendment and of each freedom is complementary to, although not dependent upon, that of the other in its sphere of influence the very least that together they assure in either sphere is that no man is to be convicted on unconstitutional evidence.' 367 U.S., at 656—657, 81 S.Ct., at 1692. In thus returning to the Boyd view that the privilege is one of the 'principles of a free government,' 116 U.S., at 632, 6 S.Ct., at 533,7 Mapp necessarily repudiated the Twining concept of the privilege as a mere rule of evidence 'best defended not as an unchangeable principle of universal justice, but as a law proved by experience to be expedient.' 211 U.S., at 113, 29 S.Ct., at 25. The respondent Sheriff concedes in its brief that under our decisions, particularly those involving coerced confessions, 'the accusatorial system has become a fundamental part of the fabric of our society and, hence, is enforceable against the States.'8 The State urges, however, that the availability of the federal privilege to a witness in a state inquiry is to be determined according to a less stringent standard than is applicable in a federal proceeding. We disagree. We have held that the guarantees of the First Amendment, Gitlow v. New York, supra; Cantwell v. Connecticut, 310 U.S. 296, 60 S.Ct. 900, 84 L.Ed. 1213; Louisiana ex rel. Gremillion v. N.A.A.C.P., 366 U.S. 293, 81 S.Ct. 1333, 6 L.Ed.2d 301, the prohibition of unreasonable searches and seizures of the Fourth Amendment, Ker v. California, 374 U.S. 23, 83 S.Ct. 1623, 10 L.Ed.2d 726, and the right to counsel guaranteed by the Sixth Amendment, Gideon v. Wainwright, supra, are all to be enforced against the States under the Fourteenth Amendment according to the same standards that protect those personal rights against federal encroachment. In the coerced confession cases, involving the policies of the privilege itself, there has been no suggestion that a confession might be considered coerced if used in a federal but not a state tribunal. The Court thus has rejected the notion that the Fourteenth Amendment applies to the States only a 'watered-down, subjective version of the individual guarantees of the Bill of Rights,' Ohio ex rel. Eaton v. Price, 364 U.S. 263, 275, 80 S.Ct. 1463, 1470, 4 L.Ed.2d 1708 (dissenting opinion). If Cohen v. Hurley, 366 U.S. 117, 81 S.Ct. 954, and Adamson v. California, supra, suggest such an application of the privilege against self-incrimination, that suggestion cannot survive recognition of the degree to which the Twining view of the privilege has been eroded. What is accorded is a privilege of refusing to incriminate one's self, and the feared prosecution may be by either federal or state authorities. Murphy v. Waterfront Comm'n, 378 U.S. 52, 84 S.Ct. 1594. It would be incongruous to have different standards determine the validity of a claim of privilege based on the same feared prosecution, depending on whether the claim was asserted in a state or federal court. Therefore, the same standards must determine whether an accused's silence in either a federal or state proceeding is justified. We turn to the petitioner's claim that the State of Connecticut denied him the protection of his federal privilege. It must be considered irrelevant that the petitioner was a witness in a statutory inquiry and not a defendant in a criminal prosecution, for it has long been settled that the privilege protects witnesses in similar federal inquiries. Counselman v. Hitchcock, 142 U.S. 547, 12 S.Ct. 195, 35 L.Ed. 1110; McCarthy v. Arndstein, 266 U.S. 34, 45 S.Ct. 16, 69 L.Ed. 158; Hoffman v. United States, 341 U.S. 479, 71 S.Ct. 814, 95 L.Ed. 1118. We recently elaborated the content of the federal standard in Hoffman: 'The privilege afforded not only extends to answers that would in themselves support a conviction * * * but likewise embraces those which would furnish a link in the chain of evidence needed to prosecute. * * * (I)f the witness, upon interposing his claim, were required to prove the hazard * * * he would be compelled to surrender the very protection which the privilege is designed to guarantee. To sustain the privilege, it need only be evident from the implications of the question, in the setting in which it is asked, that a responsive answer to the question or an explanation of why it cannot be answered might be dangerous because injurious disclosure could result.' 341 U.S., at 486 487, 71 S.Ct. at 818. We also said that, in applying that test, the judge must be "perfectly clear, from a careful consideration of all the circumstances in the case, that the witness is mistaken, and that the answer(s) cannot possibly have such tendency' to incriminate.' 341 U.S., at 488, 71 S.Ct., at 819. The State of Connecticut argues that the Connecticut courts properly applied the federal standards to the facts of this case. We disagree. The investigation in the course of which petitioner was questioned began when the Superior Court in Hartford County appointed the Honorable Ernest A. Inglis, formerly Chief Justice of Connecticut, to conduct an inquiry into whether there was reasonable cause to believe that crimes, including gambling, were being committed in Hartford County. Petitioner appeared on January 16 and 25, 1961, and in both instances he was asked substantially the same questions about the circumstances surrounding his arrest and conviction for pool selling in late 1959. The questions which petitioner refused to answer may be summarized as follows: (1) for whom did he work on September 11, 1959; (2) who selected and paid his counsel in connection with his arrest on that date and subsequent conviction; (3) who selected and paid his bondsman; (4) who paid his fine; (5) what was the name of the tenant of the apartment in which he was arrested; and (6) did he know John Bergoti. The Connecticut Supreme Court of Errors ruled that the answers to these questions could not tend to incriminate him because the defenses of double jeopardy and the running of the one-year statute of limitations on misdemeanors would defeat any prosecution growing out of his answers to the first five questions. As for the sixth question, the court held that petitioner's failure to explain how a revelation of his relationship with Bergoti would incriminate him vitiated his claim to the protection of the privilege afforded by state law. The conclusions of the Court of Errors, tested by the federal standard, fail to take sufficient account of the setting in which the questions were asked. The interrogation was part of a wide-ranging inquiry into crime, including gambling, in Hartford. It was admitted on behalf of the State at oral argument—and indeed it is obvious from the questions themselves—that the State desired to elicit from the petitioner the identity of the person who ran the pool-selling operation in connection with which he had been arrested in 1959. It was apparent that petitioner might apprehend that if this person were still engaged in unlawful activity, disclosure of his name might furnish a link in a chain of evidence sufficient to connect the petitioner with a more recent crime for which he might still be prosecuted.9 Analysis of the Sixth question, concerning whether petitioner knew John Bergoti, yields a similar conclusion. In the context of the inquiry, it should have been apparent to the referee that Bergoti was suspected by the State to be involved in some way in the subject matter of the investigation. An affirmative answer to the question might well have either connected petitioner with a more recent crime, or at least have operated as a waiver of his privilege with reference to his relationship with a possible criminal. See Rogers v. United States, 340 U.S. 367, 71 S.Ct. 438, 95 L.Ed. 344. We conclude, therefore, that as to each of the questions, it was 'evident from the implications of the question, in the setting in which it (was) asked, that a responsive answer to the question or an explanation of why it (could not) be answered might be dangerous because injurious disclosure could result,' Hoffman v. United States, 341 U.S., at 486—487, 71 S.Ct. 818; see Singleton v. United States, 343 U.S. 944, 72 S.Ct. 1041. Reversed. While Mr. Justice DOUGLAS joins the opinion of the Court, he also adheres to his concurrence in Gideon v. Wainwright, 372 U.S. 335, 345, 83 S.Ct. 792, 797.
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Petitioner, who was on probation after pleading guilty to a gambling misdemeanor, was ordered to testify before a referee appointed by a state court to investigate gambling and other criminal activities. He refused to answer questions about the circumstances of his arrest and conviction on the ground that the answers might incriminate him. Adjudged in contempt and committed to prison until he answered, he filed an application for writ of habeas corpus, which the highest state court denied. It ruled that petitioner was protected against prosecution growing out of his replies to all but one question, and that as to that question his failure to explain how his answer would incriminate him negated his claim to the protection of the privilege under state law. Held: 1. The Fourteenth Amendment prohibits state infringement of the privilege against self-incrimination just as the Fifth Amendment prevents the Federal Government from denying the privilege. P. 8. 2. In applying the privilege against self-incrimination, the same standards determine whether an accused's silence is justified regardless of whether it is a federal or state proceeding at which he is called to testify. P. 11. 3. The privilege is available to a witness in a statutory inquiry as well as to a defendant in a criminal prosecution. P. 11. 4. Petitioner's claim of privilege as to all the questions should have been upheld, since it was evident from the implication of each question in the setting in which it was asked, that a response or an explanation why it could not be answered might be dangerous because injurious disclosure would result. Hoffman v. United States, 341 U. S. 479, followed. Pp. 11-14. 150 Conn. 220, 187 A. 2d 744, reversed.
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We have once again a case that presents 'the perennial problem of the validity of a state tax for the privilege of carrying on, within a state, certain activities' related to a corporation's operation of an interstate business. Memphis Gas Co. v. Stone, 335 U.S. 80, 85, 68 S.Ct. 1475, 1477, 92 L.Ed. 1832 (1948).1 The issue is whether Louisiana, consistent with the Commerce Clause, Art. I, § 8, cl. 3, may impose a fairly apportioned and nondiscriminatory corporation franchise tax on appellant, Colonial Pipeline Co., a corporation engaged exclusively in interstate business, upon the 'incident' of its 'qualification to carry on or do business in this state or the actual doing of business within this state in a corporate form.' No question is raised as to the reasonableness of the apportionment of appellant's capital deemed to have been employed in Louisiana, and it is not claimed that the tax is discriminatory. The Supreme Court of Louisiana sustained the validity of the tax. 289 So.2d 93 (1974). We noted probable jurisdiction, 417 U.S. 966, 94 S.Ct. 3169, 41 L.Ed.2d 1137 (1974). We affirm. * Appellant is a Delaware corporation with its principal place of business in Atlanta, Ga. It is a common carrier of liquefied petroleum products and owns and operates a pipeline system extending from Houston, Tex., to the New York City area. This 3,400-mile pipeline links the oil refining complexes of Texas and Louisiana with the population centers of the Southeast and Northeast. Appellant daily delivers more than one million gallons of petroleum products to 14 States and the District of Columbia. Approximately 258 miles of the pipeline are located in Louisiana. Over this distance within Louisiana, appellant owns and operates several pumping stations which keep the petroleum products flowing at a sustained rate, and various tank storage facilities used to inject or withdraw petroleum products into or from the line. A work force of 25 to 30 employees—mechanics, electricians, and other workers—inspect and maintain the line within the State. During the tax years in question, 1970 and 1971, appellant maintained no administrative offices or personnel in Louisiana, although it had once maintained a division office in Baton Rouge. Appellant does no intrastate business in petroleum products in Louisiana. On May 9, 1962, appellant voluntarily qualified to do business in Louisiana, although it could have carried on its interstate business without doing so. La.Rev.Stat.Ann. § 12:302 H. (1969); see n. 8, infra. Thereupon, the Collector of Revenue imposed the Louisiana franchise tax on appellant's activities in the State during 1962. At that time La.Rev.Stat.Ann. § 47:601, the Louisiana Franchise Tax Act, expressly provided: 'The tax levied herein is due and payable for the privilege of carrying on or doing business, the exercising of its charter or the continuance of its charter within this state, or owning or using any part or all of its capital or plant in this state.'2 (Emphasis supplied.) Appellant paid the tax and sued for a refund. The Louisiana Court of Appeal, First Circuit, held that, in that form, § 601 was unconstitutional as applied to appellant because, being imposed directly upon 'the privilege of carrying on or doing (interstate) business,' it violated the Commerce Clause, Art. I, § 8, cl. 3. Colonial Pipeline Co. v. Mouton, La.App., 228 So.2d 718 (1969). The Supreme Court of Louisiana refused review. 255 La. 474, 231 So.2d 393 (1970).3 Following this decision, the Louisiana Legislature amended La.Rev.Stat.Ann. § 47:601 by Act 325 of 1970. The amendment excised from § 601 the words: 'The tax levied herein is due and payable for the privilege of carrying on or doing business,' and substituted: 'The qualification to carry on or do business in this state or the actual doing of business within this state in a corporate form,' as one of three 'alternative incidents' upon which the tax might be imposed. The other two 'incidents'—the exercise of the corporate charter in the State, and the employment there of its capital, plant, or other property— were carried forward from the earlier version of the statute.4 See n. 2, supra. The Collector of Revenue then renewed his efforts to impose a tax on appellant, this time for doing business 'in a corporate form' during 1970 and 1971. Again, appellant paid the tax and sued for a refund. The Louisiana District Court and the Court of Appeal, First Circuit, concluded that the 1970 amendment made no substantive change in § 601, which it construed as still imposing the tax directly upon the privilege of carrying on or doing an interstate business, and held that amended § 601 was therefore unconstitutional as applied to appellant. 275 So.2d 834 (1973). The Supreme Court of Louisiana reversed. The court recognized that '(t)he pertinent Constitutional question is whether, as applied to a corporation whose exclusive business carried on within the State is interstate, this statute violates the Commerce Clause of the United States Constitution.' 289 So.2d, at 97. But the court attached controlling significance to the omission from the amended statute of the 'primary operating incident (of the former version), i.e., 'the privilege of carrying on or doing business," id., at 96, and the substitution for that incident of doing business in the corporate form. The court held: 'The thrust of the (amended) statute is to tax not the interstate business done in Louisiana by a foreign corporation, but the doing of business in Louisiana in a corporate form, including 'each and every act, power, right, privilege or immunity exercised or enjoyed in this state, as an incident to or by virtue of the powers and privileges acquired by the nature of such organizations . . .." Id., at 97. Accordingly, the court concluded that amended § 601 applied the franchise tax to foreign corporations doing only an interstate business in Louisiana not as a tax upon 'the general privilege of doing interstate business but simply (as a tax upon) the corporation's privilege of enjoying in a corporate capacity the ownership or use of its capital, plant or other property in this state, the corporation's privilege of exercising and continuing its corporate character in the State of Louisiana, and the corporation's use of its corporate form to do business in the State.' Id., at 100. Upon that premise, the court validated the levy as a constitutional exaction for privileges enjoyed by corporations in Louisiana and for benefits furnished by the State to enterprises carrying on business, interstate or local, in the corporate form, whether as domestic or foreign corporations. The court reasoned: 'The corporation, including the foreign corporation doing only interstate business in Louisiana, enjoys under our laws many privileges separate and apart from simply doing business, such for instance as the legal status to sue and be sued in the Courts of our State, continuity of business without interruption by death or dissolution, transfer of property interests by the disposition of shares of stock, advantages of business controlled and managed by corporate directors, and the general absence of individual liability, among others. 'The fact that the corporate form of doing business is inextricably interwoven in a foreign corporation's doing interstate business in the State, does not in our view detract from the fact that the local incident taxed is the form of doing business rather than the business done by that corporation. And it is our view that the local incident is real and sufficiently distinguishable, so that taxation thereof does not, under the controlling decisions of the United States Supreme Court, violate the Commerce Clause. 'The statute does not discriminate between foreign and local corporations, being applicable, as it is, to both. Nor do we believe that the State's exercise of its power by this taxing statute is out of proportion to Colonial's activities within the state and their consequent enjoyment of the opportunities and protection which the state has afforded them. 'Furthermore we believe that the State has given something for which it can ask return. The return, tax levy in this case, is an exaction which the State of Louisiana requires as a recompense for its protection of lawful activities carried on in this state by Colonial, activities which are incidental to the powers and privileges possessed by it by the nature of its organization, here, . . . the local activities in maintaining, keeping in repair, and otherwise in manning the facilities of their pipeline system throughout the 258 miles of its pipeline in the State of Louisiana.' Id., at 100—101.5 This Court is, of course, not bound by the state court's determination that the challenged tax is not a tax on interstate commerce. 'The State may determine for itself the operating incidence of its tax. But it is for this Court to determine whether the tax, as construed by the highest court of the State, is or is not 'a tax on interstate commerce." Memphis Steam Laundry v. Stone, 342 U.S. 389, 392, 72 S.Ct. 424, 426, 96 L.Ed. 436 (1952). We therefore turn to the question whether the tax imposed upon appellant under amended § 601, as construed by the Louisiana Supreme Court, is or is not a tax on interstate commerce. It is a truism that the mere act of carrying on business in interstate commerce does not exempt a corporation from state taxation. 'It was not the purpose of the commerce clause to relieve those engaged in interstate commerce from their just share of state tax burden even though it increases the cost of doing the business.' Western Live Stock v. Bureau of Revenue, 303 U.S. 250, 254, 58 S.Ct. 546, 548, 82 L.Ed. 823 (1938). Accordingly, decisions of this Court, particularly during recent decades, have sustained nondiscriminatory, properly apportioned state corporate taxes upon foreign corporations doing an exclusively interstate business when the tax is related to a corporation's local activities and the State has provided benefits and protections for those activities for which it is justified in asking a fair and reasonable return.6 General Motors Corp. v. Washington, 377 U.S. 436, 84 S.Ct. 1564, 12 L.Ed.2d 430 (1964); Memphis Gas Co. v. Stone, 335 U.S. 80, 68 S.Ct. 1475, 92 L.Ed. 1832 (1948). Cf. Spector Motor Service v. O'Connor, 340 U.S. 602, 71 S.Ct. 508, 95 L.Ed. 573 (1951), General Motors Corp., supra, states the controlling test: '(T)he validity of the tax rests upon whether the State is exacting a constitutionally fair demand for that aspect of interstate commerce to which it bears a special relation. For our purposes the decisive issue turns on the operating incidence of the tax. In other words, the question is whether the State has exerted its power in proper proportion to appellant's activities within the State and to appellant's consequent enjoyment of the opportunities and protections which the State has afforded. . . . As was said in Wisconsin v. J. C. Penney Co., 311 U.S. 435, 444, 61 S.Ct. 246, 249, 85 L.Ed. 267 (1940), '(t)he simple but controlling question is whether the state has given anything for which it can ask return." 377 U.S., at 440—441, 84 S.Ct., at 1568. Amended § 601 as applied to appellant satisfies this test. First, the Supreme Court of Louisiana held that the operating incidences of the franchise tax are the three localized alternative incidences provided in § 601: (1) doing business in Louisiana in the corporate form; (2) the exercise of a corporation's charter or the continuance of its charter within the State; and (3) the owning or using any part of its capital, plant, or other property in Louisiana in a corporate capacity. We necessarily accept this construction of amended § 601 by Louisiana's highest court. 289 So.2d, at 97. Second, the court found that the powers, privileges, and benefits Louisiana bestows incident to these activities were sufficient to support a tax on doing business in the corporate form in that State. We perceive no basis upon which we can say that this is not in fact the case. Our pertinent precedents therefore require affirmance of the State Supreme Court's judgment. Memphis Gas Co. v. Stone, supra, sustained a similar franchise tax imposed by Mississippi on a foreign pipeline corporation engaged exclusively in an interstate business even though the company had not qualified in Mississippi. Memphis Natural Gas Co., a Delaware corporation, owned and operated a natural gas pipeline extending from Louisiana, through Arkansas and Mississippi, to Memphis and other parts of Tennessee. Approximately 135 miles of the pipeline were located in Mississippi, and two of the corporation's compressing stations were located in that State. The corporation engaged in no intrastate commerce in Mississippi, and had only one customer there. It had not qualified under the corporation laws of Mississippi. It had neither an agent for the service of process nor an office in that State, and its only employees there were those necessary for the maintenance of the pipeline. The corporation paid all ad valorem taxes assessed against its property in Mississippi. In addition to these taxes, however, Mississippi imposed a 'franchise or excise tax' upon all corporations 'doing business' within the State. The statute defined 'doing business' in terms that suggest it may have been the model for § 601, that is, '(to) mean and (to) include each and every act, power or privilege exercised or enjoyed in this State, as an incident to, or by virtue of the powers and privileges acquired by the nature of such organization.' 335 U.S., at 82, 68 S.Ct., at 1476.7 The Supreme Court of Mississippi held, as did the Supreme Court of Louisiana here, 289 So.2d, at 101, that the tax was "an exaction . . . as a recompense for . . . protection of . . . the local activities in maintaining, keeping in repair, and otherwise manning the facilities of the system throughout the 135 miles of its line in this State." 335 U.S. at 84, 68 S.Ct., at 1477. In affirming the judgment of that court, Mr. Justice Reed, in a plurality opinion, said: 'We think that the state is within its constitutional rights in exacting compensation under this statute for the protection it affords the activities within its borders. Of course, the interstate commerce could not be conducted without these local activities. But that fact is not conclusive. These are events apart from the flow of commerce. This is a tax on activities for which the state, not the United States, gives protection and the state is entitled to compensation when its tax cannot be said to be an unreasonable burden or a toll on the interstate business.' Id., at 96, 68 S.Ct., at 1483. This conclusion is even more compelled in the instant case since appellant voluntarily qualified under Louisiana law and therefore enjoys the same rights and privileges as a domestic corporation. La.Rev.Stat.Ann. § 12:306(2) (Supp.1975).8 The Louisiana Supreme Court defined appellant's powers and privileges as including 'the legal status to sue and be sued in the Courts of our State, continuity of business without interruption by death or dissolution, transfer of property interests by the disposition of shares of stock, advantages of business controlled and managed by corporate directors, and the general absence of individual liability . . ..' 289 So.2d, at 100. These privileges obviously enhance the value to appellant of its activities within Louisiana. See Southern Gas Corp. v. Alabama, 301 U.S. 148, 153, 57 S.Ct. 696, 698, 81 L.Ed. 970 (1937); Stone v. Interstate Natural Gas Co., 103 F.2d 544 (CA5), aff'd, 308 U.S. 522, 60 S.Ct. 292, 84 L.Ed. 442 (1939). Cf. Railway Express Agency v. Virginia (Railway Express II), 358 U.S. 434, 79 S.Ct. 411, 3 L.Ed.2d 450 (1959). Nevertheless, appellant contends that Spector Motor Service v. O'Connor, 340 U.S. 602, 71 S.Ct. 508, 95 L.Ed. 573 (1951), and Railway Express Agency v. Virginia (Railway Express I), 347 U.S. 359, 74 S.Ct. 558, 98 L.Ed. 337 (1954), require the conclusion that § 601 is unconstitutional as applied to appellant. The argument is without merit. Spector held invalid under the Commerce Clause a Connecticut tax based expressly 'upon (the corporation's) franchise for the privilege of carrying on or doing business within the state . . ..' Similarly, Railway Express I invalidated Virginia's 'annual license tax' imposed on express companies expressly 'for the privilege of doing business' in the State. Thus both taxes, as express imposts upon the privilege of carrying on an exclusively interstate business, contained the same fatal constitutional flaw that led the Louisiana Court of Appeal to strike down the levy against appellant under § 601 before its amendment in 1970. 'A tax is (an unconstitutional) direct burden, if laid upon the operation or act of interstate commerce.' Ozark Pipe Line v. Monier, 266 U.S. 555, 569, 45 S.Ct. 184, 187, 69 L.Ed. 439 (1925), (Brandeis, J., dissenting). The 1970 amendment however repealed that unconstitutional basis for the tax, and made § 601 constitutional by limiting its application to operating incidences of activities within Louisiana for which the State affords privileges and protections that constitutionally entitle Louisiana to exact a fairly apportioned and nondiscriminatory tax. Spector expressly recognized: 'The incidence of the tax provides the answer. . . . The State is not precluded from imposing taxes upon other activities or aspects of this business which, unlike the privilege of doing interstate business, are subject to the sovereign power of the State.' 340 U.S., at 608—609, 71 S.Ct., at 512.9 Of course, an otherwise unconstitutional tax is not made the less so by masking it in words cloaking its actual thrust. Railway Express II, supra, 358 U.S., at 441, 79 S.Ct., at 416; Railway Express I, supra, 347 U.S., at 363, 74 S.Ct., at 561; Galveston, H. & S.A.R. Co. v. Texas, 210 U.S. 217, 227, 28 S.Ct. 638, 640, 52 L.Ed. 1031 (1908). 'It is not a matter of labels.' Spector, supra, 340 U.S., at 608, 71 S.Ct., at 512. Here, however, the Louisiana Legislature amended § 601 purposefully to remove any basis of a levy upon the privilege of carrying on an interstate business and narrowly to confine the impost to one related to appellant's activities within the State in the corporate form. Since appellant, a foreign corporation qualified to carry on its business in corporate form, and doing business in Louisiana in the corporate form, thereby gained benefits and protections from Louisiana of value and importance to its business, the application of that State's fairly apportioned and nondiscriminatory levy to appellant does not offend the Commerce Clause. The tax cannot be said to be imposed upon appellant merely or solely for the privilege of doing interstate business in Louisiana. It is, rather, a fairly apportioned and nondiscriminatory means of requiring appellant to pay its just share of the cost of state government upon which appellant necessarily relies and by which it is furnished protection and benefits. Affirmed. Mr. Justice DOUGLAS took no part in the consideration or decision of this case.
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Louisiana's fairly apportioned and nondiscriminatory corporation franchise tax upon the "incident" of the "qualification to carry on or do business in this state or the actual doing of business within this state in a corporate form" does not violate the Commerce Clause as applied to appellant, an interstate carrier of liquefied petroleum products incorporated in Delaware with its principal place of business in Atlanta, Georgia, which does no intrastate business in petroleum products in Louisiana but has employees there to inspect and maintain its pipeline, pumping stations, and related facilities in that State. "[T]he decisive issue turns on the operating incidence of the tax," General Motors Corp. v. Washington, 377 U. S. 436, 441, and "[t]he simple but controlling question is whether the state has given anything for which it can ask return," Wisconsin v. J. C. Penney Co., 311 U. S. 435, 444. Because appellant, as a foreign corporation qualified to carry on, and carrying on, its business in Louisiana in corporate form, gained benefits and protections from that State of value and importance to its business, it can be required through the franchise tax to pay its just share. Memphis Gas Co. v. Stone, 335 U. S. 80. Pp. 108-114. 289 So. 2d 93, affirmed.
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This is an appeal from the Supreme Court of the Territory of Minnesota, in a suit in chancery to compel a specific performance of a written contract to convey a certain parcel of land described in the bill of complaint, and situated in the village of Stillwater, and county of Washington, in that Territory. The bill was presented to the district judge at chambers, in the first place, where an order was passed for an injunction, and it was then duly filed in the office of the clerk of the District Court, and on the same day the writ of injunction was issued, returnable to the District Court at the May term next ensuing, and was duly served on the respondent. On the 29th day of November, 1851, the respondent, by his solicitors, filed his answer to the bill of complaint, and on the 30th day of June, 1852, the complainant filed the general replication, and testimony was subsequently taken by both parties, under a regular commission issued in pursuance of the order of the court. After the testimony was taken, the temporary injunction was dissolved, and the cause was set down for hearing on the 6th day of October, 1853, upon bill, answer, replication, and proofs; and after the hearing, the District Court decided in favor of the complainant, and entered a final decree against the respondent for a specific performance of the agreement set forth in the bill of complaint. An appeal was taken by the respondent to the Supreme Court of the Territory, and the Supreme Court, at the January term, 1856, reversed the decree of the District Court, and entered a final decree against the complainant, dismissing the bill, with costs; whereupon, the complainant appealed to this court. A brief statement of the pleadings will be sufficient to give a clear view of the nature of the contraversy between the parties to the suit. On the part of the complainant, it is alleged that the respondent, being seized in fee simple of the parcel of land described in the bill of complaint, entered into a treaty with the complainant for the purchase of the same on the 15th day of June, 1850, for the price of one hundred and ninety dollars, with interest, to be paid on the 1st day of May, 1851, and that he agreed to accept that sum for the consideration; and that an agreement in writing was entered into between them to that effect, and the bill of complaint sets forth the agreement, which is of that date, and is signed and sealed by the parties. By that agreement, the respondent contracted to sell and convey the premises by deed of warranty, provided the complainant should pay him the sum of one hundred and sixty-five dollars on the 1st day of October then next, or the sum of one hundred and ninety dollars by the 1st day of May, 1851, and the complainant agreed to purchase and pay for the premises in the manner, and to the amount specified. They also thereby mutually agreed to build a wharf suitable for a steamboat landing—the complainant on the land contracted for, and the respondent on his lot adjoining—and it was stipulated between them that either party was to be at liberty to commence the building of the wharf on his own lot, but neither was to be obliged to continue or complete it, unless the other upon notice did the same in a reasonable time. And the complainant further alleges that the respondent delivered up the possession of the premises to him about the time of the execution of the agreement, and that he has ever since remained in the occupation of the same; that he paid the respondent sixty dollars on the 2d day of July, 1850, in part performance of the agreement; and the respondent, on the 7th day of September, 1850, endorsed on the agreement thirty dollars and thirty-three cents more, in part performance of the same, being the amount awarded to him as damages under a reference between the parties of a claim he presented against the respondent on account of a misrepresentation made by him, at the time of the execution of the agreement, in respect to the western boundary of the land; and that since he entered into the possession of the premises, under the agreement, he has laid out large sums of money upon the land, in erecting a valuable dwelling-house, and in making other improvements thereon; and that he has tendered to the respondent the whole sum of the balance of the purchase-money, with the interest, and has always been ready and willing to perform the agreement on his part, according to its terms, upon having a proper title made out, and a proper conveyance executed to him of the premises therein described; and that he has demanded the deed of the respondent, and he had hoped that he would specifically perform his part of the agreement, as in justice and equity he ought to do. And the bill of complaint charges that the respondent, combining and confederating with persons unknown, refuses to perform his part of the agreement, and at times falsely pretends that he is entitled to more than the sum stipulated between the parties; and at other times, that the complainant had not performed his part of the agreement, whereas it is alleged he has performed his part of the agreement, and that the respondent is entitled to no more than the balance due and unpaid of the sum stipulated, and the interest thereon, and that the whole of that sum, with interest, is now ready and unproductive in the hands of the complainant; and that he is seriously embarrassed and injured by reason of not having a good and sufficient title to the premises, which is contrary to equity; and the complainant prays for discovery and general relief, and that the respondent may be decreed specifically to perform the agreement upon being paid the balance so due, with interest, and for an injunction to restrain the respondent from conveying, transferring, or in any manner disposing of the title to the premises. The answer admits that the fee simple title was in the respondent at the time mentioned, and that there was a negotiation between the parties respecting the purchase and sale of the premises, and that the agreement was made and executed at the time it bears date, and that the complainant paid the sum of sixty dollars, as alleged in the bill of complaint, but expressly denies that the respondent delivered the possession of the same to the complainant, or that he ever consented to his taking the possession in any manner, as is stated, unless he should pay the purchase-money, with interest, except and save for the purpose of building the wharf; and the answer also denies that any misrepresentation was made respecting the western boundary of the lot, or that the respondent ever admitted that he made it, as is charged in the bill, or that the complainant was ever injured by any representation made by him in that behalf, though the answer admits that the complainant did express some dissatisfaction with that boundary, and that for the purpose of cultivating and sustaining friendly relations with him, as a citizen and neighbor, in the same community where they resided, he did agree to refer the matter, whether he ought to make any deduction from the price agreed, and that the referees did determine that he should deduct the sum of thirty dollars and thirty-three cents from the same; and he further admits, that the complainant has made improvements upon the premises by erecting a dwelling-house thereon, which has greatly enhanced the value of the same, but he denies that any improvements were ever made by his consent, or that the complainant had any right to make them, and also denies every allegation in the bill that the complainant was ever ready and willing to perform his part of the agreement, or that he has performed or ever offered to perform the same. On the contrary, the answer avers the fact to be, that at the time the purchase-money became due and payable, he called upon the complainant, and demanded of him the sum due, and told him he was ready and willing to execute and deliver to him the deed, upon being paid the balance of the money, which he refused to pay, alleging as an excuse that he had not the means. And it is further averred, that the respondent at different times, afterwards, called upon the complainant, and informed him of his ability and readiness to deliver the deed upon being so paid, and urged the payment, which was refused on every occasion when the demand was made; and the respondent says he has suffered great pecuniary embarrassment and injury in his business, from the refusal of the complainant to perform his part of the agreement. He admits, however, that the solicitor of the complainant, on or about the first day of November, 1851, did demand the deed of him, and offered to pay him a sum of money which the solicitor informed him was the balance of the sum of one hundred and ninety dollars and interest at seven per cent.; but what sum of money was so offered he does not know, nor whether that money is now ready in the hands of the complainant and unproductive, but he does not believe such to be the fact; and he denies all manner of fraud, combination, and confederacy. There is not much dispute about the facts of the case, whether we look to the testimony on the one side of the other. The agreement was admitted in the answer, and was made, as is alleged in the bill, on the fifteenth day of June, 1850, and it is fully proved that the complainant shortly after entered into the possession of the premises, and has continued in the possession of the same to the present time, and there is not an intimation in the proofs exhibited in the case that the respondent ever demanded the surrender of the premises, or that he ever manifested any intention to rescind the agreement, except so far as it arises from his refusal on the first day of November, 1851, to accept the balance remaining unpaid when it was tendered to him by the solicitor of the complainant. On the contrary, it appears from his own witness, William H. Morse, that in the fall of 1851 he requested payment of the balance then due and unpaid; and when the complainant replied to his request, that he had a good many debts out, and as soon as he could collect the money he would settle up with him, he told the complainant he was ready to make him a deed whenever he was paid the balance due on the lot. The precise time when this conversation took place does not appear; but the witness says he was in the employment of the respondent from the twentieth day of October to the eighteenth day of November, 1851, and that within that time he heard the respondent ask the complainant two or three times for the balance due on that lot, and it was in some one of those conversations that he told the complainant that he was ready to make the deed whenever the balance was paid; and we infer from the testimony of the witness, though it is not very clearly expressed in the deposition, that the last interview between the parties, when that remark was repeated, must have taken place only a few days before the tender was made by the solicitor of the complainant. Whether so or not, it is plain, as well from the language of the request as from that employed by the respondent in reply to the reasons assigned by the complainant, why he could not make the payment as requested; that the object of the respondent on the occasion was more to hasten the action of the complainant, and prompt him to an early compliance, than to make any formal demand of the money with the view to terminate the agreement, or to impair the right of the complainant to make the payment at a future time. Such, unquestionably, was the impression that the conversation at the interview was calculated to produce upon the mind of the complainant; and considering all the circumstances under which the interview took place, and the relation of the parties to each other in respect to the matter now in controversy, we think it was the only reasonable construction which could be put upon the language used by the respondent, consistent with fair dealing on his part, and rectitude of intention; and that view of the conversation derives strong confirmation in the fact that the deed subsequently tendered to the complainant had not then been prepared, and no allusion was made to a conveyance on the part of the respondent, except in connection with the promise of the complainant to settle and make the payment as soon as he could collect the means. Nothing further transpired between the parties, in respect to the subject-matter of the controversy, till after the tender was made by the solicitor of the complainant. There is not a word of proof, other than what has been mentioned, that has the least tendency to show that the respondent, prior to the tender made by the complainant, ever formally demanded the payment of the sum due as is alleged in the answer, or ever notified the complainant, or even intimated to him that he should insist upon a rescission of the agreement, unless the payment was made at the time, or in the manner specified, or that he ever expressed so much as a wish that the possession of the premises should be surrendered up because the payment had not been made, or in any manner signified to the complainant that he was unwilling that he should remain in possession, and continue his occupation and improvement of the same, as he had done, throughout nearly the whole period after the agreement was made. The proofs are clear and full that the complainant entered into the possession shortly after the agreement was made, and that he had built a valuable dwelling-house on the premises, and if the wharf was not completed, he had at least commenced the building, and made considerable progress in the work, and had otherwise made expenditures in levelling and grading the grounds, and in various ways had greatly improved the premises and enhanced their value, and that all these improvements had been carried forward at large expense, while the respondent resided in the same village, and under circumstances which show, beyond controversy, that he must have had full knowledge of their progress, and daily opportunities to have manifested his dissent if he had desired to do so, or if such had been his intention; and yet, he never expressed the slightest dissatisfaction while the works were progressing, or intimated to the complainant, so far as appears, that in case he failed to make the payment at the time specified in the agreement, he should claim that the improvements had been made of his own wrong, and at his own risk, and without any liability, on his part, to allow any compensation either for the labor, materials, or money expended, in making them. On the contrary, he suffered the improvements to go on Silently acquiescing in the right of the complainant to make them, until they were nearly completed; and when the tender was made by the solicitor of the complainant, and he found he could no longer conceal his real position with respect to the failure to make the payment at the time specified in the agreement, he then declined to accept the money, and refused to execute the deed. The tender on the part of the complainant was made by Frederick R. Bartlett, his solicitor, on the 1st day of November, 1851, at Stillwater, where the land is situated, and in the office of H. L. Morse, the solicitor of the respondent. A sum sufficient to pay the whole balance due, with interest, was formally tendered on the occasion, and the deed demanded, and the respondent notified that the sum so tendered would be always in readiness to be paid by the solicitor, at his dwelling-house in Stillwater, where both parties resided. According to the testimony of the solicitor, the respondent refused to accept the money, and got up and went out of the office, and did not take it, and did not offer to execute a deed; and it does not appear that he gave any explanation whatever, as to the grounds of his refusal. His omission to explain why he refused to accept the money, which, not many days before, he had requested the complainant to pay, indicates an inconsistency in his acts not altogether reconcilable with the idea that the previous request for payment had been made in good faith, or at a time and under circumstances when he either anticipated or desired that the complainant might be able to obtain the money to comply with the request; and it is calculated also to throw some light upon his subsequent conduct, in selecting a moment to demand the money and tender the deed to the complainant, when there is much reason to think that he must have known that a compliance could not be expected, on account of the absence of the solicitor, in whose hands the money was deposited. He was then reminded by the complainant that the money had been deposited with his solicitor, and informed that he was absent, and told that he must wait until the solicitor returned. These facts are established by the testimony of several witnesses introduced by the respondent, and it is worthy of remark, that this attempt to demand the money and tender the deed was not made till more than a year after the bill was filed, and nearly six months after the respondent had formally answered to the suit. It occurred at the dwelling-house of the complainant on the premises; and it appears, from the testimony of Elijah A. Bissell, that the respondent called upon the complainant at the time mentioned, and told him that he understood that he, the complainant, had a sum of money for him on the account of the lot, and that he was ready to give him a deed of the premises, upon the receipt of the money which he then demanded, and called the witness to notice the same, and the witness put a private mark on the deed, which is annexed to his deposition, and makes a part of the case. According to the testimony of that witness, the complainant said that the money which he was supposed to have, had been paid away, but the witness admits that he referred to the money deposited with his solicitor, as that which was designed to pay the respondent. Three days afterwards the same thing was repeated, when the complainant was called into the office of the solicitor of the respondent, unattended by any friend or legal adviser, and a second demand was made of him for the money, and the same deed was again tendered. His explanation on this last occasion, as given in the testimony produced by the respondent, is full and satisfactory, and we refer to it as affording a perfect solution of the whole transaction. After the demand was made, he replied that he could not pay the money, as he had not enough to pay his taxes; that he had left the money with his solicitor, who had once tendered it to the respondent, and that he ought then to have taken it; that his solicitor was now away from home, and the respondent must wait until he returned. Three depositions were taken by the respondent to establish this last demand, and each of the witnesses proves the substance of this explanation, and we think it is not of a character to require any extended comment, as the transaction speaks its own construction. More than a year before that demand was made, the complainant had tendered the money to the respondent, and deposited it in the hands of his solicitor, and notified the respondent that it would always be in readiness to be paid whenever he would accept it; and he well knew that he had never asked for it, or in any manner signified his willingness either to receive the money or to execute the deed. These considerations furnish a complete answer to any supposed defence upon that ground, wholly irrespective of any question which might otherwise arise, involving the rectitude of the transaction, or the motives of those who were concerned in making the demand, and consequently remove all necessity for any farther remarks upon this branch of the case. Looking to the whole evidence, we think it is satisfactorily proved that more than half of the consideration was paid in advance of the time when it fell due; that valuable improvements were made on the premises by the complainant, under the agreement; and that the possession of the premises was continued by him after the time elapsed for payment, with the knowledge and approbation of the respondent, which, in some cases, has been held sufficient of itself to entitle the party to relief, where, in all other respects, it appeared that he was without fault. (Waters v. Travis, 9 John., 466.) Suppose it were otherwise; it can make no difference in this case, as it also appears, and the proof on this point is equally satisfactory, that the tender of the balance of the purchasemoney was duly made while the complainant was in possession of the premises, under the agreement, and before any act had been done by the respondent disaffirming it, or any notice or intimation given by him that he did not intend to insist upon its performance. Readiness to perform is distinctly alleged in the bill of complaint, and is as distinctly denied in the answer, and therefore it becomes important to inquire how the fact was, according to the evidence in the case. What occurred between the parties, in respect to the delay which had ensued prior to the interview at the dwelling-house of the complainant, does not appear by the testimony on either side, and consequently it is reasonable to conclude that, so far as that period is concerned, it was not the subject of dispute; and it seems quite probable that it had been arranged by mutual consent. That such was the fact, though not directly proved, is clearly inferable, as well from the conduct as the conversation of the parties at the time the interview took place. They met at the time in a friendly way, and the respondent asked for the money, and in turn the complainant asked for some forbearance till he could collect the means; and apparently it was granted, without objection or any imputation of any prior remissness. No demand was made of the money, or any intimation given, that if it was not paid immediately, the delay would be regarded in any manner as impairing the right of the complainant to make it at any time. It was a mere ordinary request of a creditor to a debtor, and embraced not only what was due on the agreement, but also a balance due on account, and was not intended as anything more than an offer to settle and a request for payment, which applied quite as much to the account as to the agreement; and there is good reason to infer that the respondent himself had not been ready to execute the title prior to that time, as he took occasion to inform the complainant that he was ready to make the deed when he was paid; whereas, if the business had been delayed, contrary to his wishes, there would have been no necessity for that notification. However that may have been, the circumstances we think abundantly show that the delay, prior to that time, was not the subject of complaint; and therefore it is dismissed from any farther consideration. Time may be, and often is, of the essence of a contract for the purchase and sale of real property, so that courts of equity will not interfere in behalf of either party. It may be made so by express stipulations of the parties, or it may arise by implication from the nature of the property, or the avowed objects of the seller or purchaser; and even when it is not so, expressly or impliedly, if the party seeking redress has been guilty of gross laches, or has been inexcusably negligent in performing the contract on his part, or if there has, in the mean time, been a material change in the circumstances affecting the rights, interests, or obligations of the parties, in all such cases courts of equity will in general refuse to decree a specific performance, upon the plain ground that it would be inequitable and unjust. On the other hand, the general doctrine on this point is expressed in the maxim, 'that time is not of the essence of a contract in equity;' and except in cases like those already mentioned, or in those of a kindred character, courts of equity, as a general rule, have always claimed and exercised the right to decree specific performance of agreements, in respect to the purchase and sale of real property, in their discretion, and usually to a more liberal extent in favor of purchasers than those who contract to sell such properties. (Taylor v. Longwood, 14 Pet., 174; 2 Story's Eq. Jur., sec. 771 to 776; Adams Eq., ch. 2, p. 263.) The authorities cited will suffice for the present occasion, as the cause depends very much upon the facts exhibited by the parties, and upon certain obvious principles of justice and equity, universally admitted wherever courts of equity exist. There was no negligence or delay of performance on the part of the complainant prior to the tender of the money on the 1st day of November, 1851, except what is reasonably and satisfactorily accounted for on the ground of acquiescence or waiver on the part of the respondent; and after that time the fault was entirely his own, and neither the rules of common justice nor equity will allow him to take advantage of his own wrong. He can derive no benefit from his subsequent attempt to tender the deed, as it was then too late to impair the right of the complainant to insist upon performance; and we attach no importance whatever to his demand of the money, as he well know at the time that the amount was deposited in the hads of the solicitor of the complainant, and that he could have it the moment he returned. It is a case of clear equity on the part of the complainant. He has been guilty of no negligence or fraud, and he was admitted into possession of the premises under the agreement, and suffered to make valuable improvements, without any notice to desist; and now, when he cannot be made whole in any other way, it is his right to insist that the agreement should be performed, and a court of equity is the proper tribunal to enforce his right. On the whole case, we are of the opinion that the Supreme Court of the Territory of Minnesota erred in the order and decree made in this cause. The decree, therefore, of that court is reversed, and the cause remanded for further proceedings, with directions to enter a decree affirming the decree of the District Court, with costs.
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'Where there was a contract for the sale of a lot of ground, partly on time, and the vendee entered into possession; and the vendor fdid not formally'de .and the payment of the balance When due, but merely said he was ready to make a deed when the money was paid; and after the time of payment had elapsed, the vendee made a tender of the sum due, which the vendor refused to receive; these and other circumstances show that time was not of the essence of the contract, and the vendee was entitled to relief upon a bill for a specific performance of the contract.
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This is an appeal from and writ of error to the district court of the United States for the western district of Kentucky, refusing a writ of mandamus which the United States undertook to obtain under authority of § 20 of the act to regulate commerce [24 Stat. at L. 386, chap. 104], as amended, 34 Stat. at L. 584, 594, 595, chap. 3591, Comp. Stat. 1913, §§ 8563, 8592. In view of the character of an action in mandamus, we are of opinion that the review is by writ of error. Columbian Ins. Co. v. Wheelright, 7 Wheat. 534, 5 L. ed. 516; Kentucky v. Dennison, 24 How. 66, 97, 16 L. ed. 717, 725; High, Extr. Leg. Rem. §§ 6, 557. The appeal is therefore dismissed. The petition sets forth the authority conferred upon the Commission by § 20 of the act, and also § 12, and embodies a copy of a resolution passed by the Senate of the United States, which is given in the margin.1 It further states that for the purpose of enabling the Commission to perform its duties, it appointed two special agents and duly authorized them to inspect and examine the accounts, records, and memoranda of the defendant railway company; that on February 4, 1914, one of said agents demanded of the vice president of the defendant, the officer in charge and control of the accounts, records, and memoranda of the company, and to and of other officers, access to and opportunity to examine the accounts, records, and memoranda kept by the defendant prior to August 28, 1906 [the Hepburn act took effect August 29, 1906], and that the same was refused by the officers of the company; that on February 4, 1914, a demand was made for an opportunity to examine the accounts, records, and memoranda of the defendant on and subsequent to August 28th, 1906, which was refused; and a writ of mandamus was asked against the company, requiring it to give access to its accounts, records, and memoranda, and its correspondence and copies of correspondence, and indexes thereto, and to afford opportunity to examine the same to the commission and its agents and examiners, and to give such access to and opportunity to examine the said accounts, records, and memoranda made and kept by and for said defendant both before, on, and subsequent to August 28, 1906, including correspondence, copies of correspondence, and indexes thereto, and other indexes to said accounts, records, and memoranda. To this petition the defendant answered, setting out that it did, prior to the beginning of the suit, give the examiners access to the correspondence other than privileged communications, and that after this suit it did refuse and does now refuse to give to said commission or to said agent access to or opportunity to examine correspondence received by it before, on, or subsequent to August 28, 1906, or copies of correspondence sent out by defendant before, on, or subsequent to that date, or the indexes kept with respect to said outgoing and incoming correspondence by defendant (except correspondence as to passes issued since January 1, 1911), and the defendant set up that its correspondence contains private communications between its various officers and agents regarding various matters which did not in any way pertain to the provisions of the act to regulate commerce, nor to any act of Congress, the provisions of which it is made the duty of the Interstate Commerce Commission to enforce, and avers that said correspondence contains communications of a private and confidential nature between the president of the railway company and the heads of the various departments, relative to its internal affairs, to its proposed constructions and extensions in the future, to its policies with competing and rival roads, to its relations with labor organizations represented in its operating department, and to a variety of other subjects of a private and confidential nature, and that do not relate to the provisions of the act to regulate commerce and acts amendatory thereto, or to any other act of Congress as to the enforcement of which any duty has been imposed upon the Interstate Commerce Commission, and that said correspondence also contains confidential, private, and privileged communications between defendant and its attorneys. The answer further sets up that under the provisions of § 20 of the commerce act a uniform system of accounting has been prescribed by the Commission, and that defendant has fully complied with all such requirements, and that the Commission's examiners have full and complete access to the same; that if the act to regulate commerce can be construed as to give the said Commission or its examiners a right of access to, and the right to examine or inspect at will, any or all accounts, records, and memoranda, and all correspondence received, and all copies of correspondence sent out by the defendant or its officials in the manner and as set out and claimed in the petition, then the exercise of such alleged right in this respect will amount to and operate as an unreasonable search and seizure of the private papers of the defendant, in violation of the 4th Amendent to the Constitution of the United States. The answer further sets out a copy of the Senate resolution, and the order of the Interstate Commerce Commission ordering the investigation and inquiry concerning the matters and things set forth in the resolution, and providing that the proceeding be set for hearing at such times and places, and that such persons be required to appear and testify, or to produce books, documents, and papers, as the Commission may direct, and that a copy be served upon certain railways, including the defendant. The answer also sets up that the subject-matter of the first twelve paragraphs of the Senate resolution was not within the authority of the Interstate Commerce Commission, and avers that as to the subject-matter of the thirteenth paragraph, which relates to free passes, since January 1, 1911, defendant permitted the Commission and its examiners and agents, on their request, to have access to and to examine and inspect all accounts, records, and memoranda, relating to such passes, whether interstate or intrastate, and also all correspondence relating to such passes (although defendant claims that the Commission had no legal right to examine any of said correspondence, nor to examine any intrastate passes, or any accounts, records, and memoranda pertaining thereto). Motion was made for the writ of mandamus to issue as prayed for in the petition, certain testimony was taken, showing the demand of the agent and the refusal of the company. Upon hearing, the motion was denied. The testimony shows that the refusal withheld from the inspection of the agents making the demand all accounts, records, and memoranda kept prior to the 28th of August, 1906; all accounts, records, and memoranda subsequent to that date, except such as to which the form had been subsequently prescribed by the Commission; all correspondence and the indexes thereto upon any subject other than the issue of passes subsequent to January 1, 1911, and all certificates of destruction, if any, relating to papers antedating August 28, 1906. The discussion in this case has taken a wide range, and much has been said of the constitutional rights of the defendant and the authority of the Commission to carry out the purpose of the interstate commerce act, and to make investigations which shall be the basis of the discharge of duties imposed upon it by the law. But, as we view the case, the real questions may be determined by a consideration of certain provisions of the act to regulate commerce. We may at the beginning put aside any question of authority derivable from the resolution passed by the Senate. The resolution was passed by only one branch of the legislative body, and it is not contended by the government or the Commission that any authority is derivable from it. To authorize the government to demand the writ of mandamus in this case two sections of the interstate commerce act are invoked, 12 and 20. It is enough to say of § 12 that the record discloses that the proceedings and the demands for inspection in this case were not conducted under its authority. See Harriman Case, 211 U. S. 407, 53 L. ed. 253, 29 Sup. Ct. Rep. 115. Section 12 deals with the production of evidence in certain cases; it does not make provision for inspection by examiners duly authorized by the Commission. That feature of the law was added by the amendment to § 20, of June 29, 1906. The substantial question in the case is: Was the right of inspection of the accounts, records, and memoranda of the defendant in the manner attempted by the agents who represented the Commission in this respect, authorized by § 20 of the act, as the same is amended by the Hepburn act of June, 1906? 'The Commission may, in its discretion, prescribe the forms of any and all accounts, records, and memoranda to be kept by carriers subject to the provisions of this act, including the accounts, records, and memoranda of the movement of traffic as well as the receipts and expenditures of moneys. The Commission shall at all times have access to all accounts, records, and memoranda kept by carriers subject to this act, and it shall be unlawful for such carriers to keep any other accounts, records, or memoranda than those prescribed or approved by the Commission, and it may employ special agents or examiners, who shall have authority under the order of the Commission to inspect and examine any and all accounts, records, and memoranda kept by such carriers. This provision shall apply to receivers of carriers and operating trustees. 'In case of failure or refusal on the part of any such carrier, receiver, or trustee to keep such accounts, records, and memoranda on the books and in the manner prescribed by the Commission, or to submit such accounts, records, and memoranda as are kept to the inspection of the Commission or any of its authorized agents or examiners, such carrier, receiver, or trustee shall forfeit to the United States the sum of five hundred dollars for each such offense and for each and every day of the continuance of such offense, such forfeitures to be recoverable in the same manner as other forfeitures provided for in this act. 'Any person who shall wilfully make any false entry in the accounts of any book of accounts, or in any record or memoranda kept by a carrier, or who shall wilfully destroy, mutilate, alter, or by any other means or device falsify the record of any such account, record, or memoranda, or who shall wilfully neglect or fail to make full, true, and correct entries in such accounts, records, or memoranda of all facts and transactions appertaining to the carrier's business, or shall keep any other accounts, records, or memoranda than those prescribed or approved by the Commission, shall be deemed guilty of a misdemeanor and shall be subject, upon conviction in any court of the United States of competent jurisdiction, to a fine of not less than one thousand dollars nor more than five thousand dollars, or imprisonment for a term not less than one year nor more than three years, or both such fine and imprisonment. 'Any examiner who divulges any fact or information which may come to his knowledge during the course of such examination, except in so far as he may be directed by the Commission or by a court or judge thereof, shall be subject, upon conviction in any court of the Unitted States of competent jurisdiction, to a fine of not more than five thousand dollars or imprisonment for a term not exceeding two years, or both.' This section, it will be observed, gives authority to the Commission to employ special agents or examiners, who shall have authority under the order of the Commission to inspect and examine any and all accounts, records, and memoranda kept by such carriers. The copy of the authority issued by the Commission to the special agent or examiner who made the demand for inspection in this case shows that he was clothed with authority to examine any and all 'accounts, records, and memoranda' kept by carriers subject to the act to regulate commerce. The language here used, taken from § 20, shows that the Commission acted under authority of that section, and the examiner was thereby authorized to make the demand, the refusal to comply with which was the basis for the petition for the writ of mandamus in this case. This part of the amended section, as the report of the Interstate Commerce Commission, 1905, page 11, shows, was framed by the Commission and became a part of the law upon its recommendation. The appendix to the report (p. 182) shows the amendment in the form in which it became a law. In commending the passage of such an act, the Commission, in its report to Congress, said: 'Examination of Books of Account.' 'An efficient means of discovering illegal practices would be found, as we believe, in authority to prescribe a form in which books of account shall be kept by railways, with the right on the part of the Commission to examine such books at any and all times through expert accountants. This recommendation has been urged upon the attention of the Congress in previous reports, and we earnestly renew it at this time. Probably no one thing would go further than this toward the detection and punishment of rebates and kindred wrongdoing. 'We have also called attention to the fact that certain carriers now refuse to make the statistical returns required by the Commission. For example, railways are required, among other things, to indicate what permanent improvements have been charged to operating expenses. Without an answer to this question, it is impossible to determine to what extent gross earnings have been used in improving the property and the actual cost of operation proper. Admitting the right of a railroad company to use its money as it sees fit, it is certainly proper that the government should know what use is made of it, for the purpose of determining whether its rates and charges imposed are legitimate. Certain important railways decline to furnish this information at all, and others furnish it in a very imperfect and unsatisfactory manner. 'We have also recently required carriers to furnish statistics showing the rate per ton-mile actually received for the movement of certain kinds of carload traffic, but this requirement has not been generally complied with.' Responding to this recommendation, and acting upon the bill in the form proposed by the Commission, it was adopted as an amendment and became amended § 20 of the act to regulate commerce. Of course, this act, like other acts, may be read in the light of the purpose it was intended to subserve and the history of its origin. We find, then, that in this section Congress has authorized the Commission to prescribe the forms of accounts, records, and memoranda, which shall include accounts, records, and memoranda of the movements of traffic, as well as the receipts and expenditures of money, to which accounts, records, and memoranda the Commission is given access at all times. The railroads are not allowed to keep any other than those prescribed by the Commission. The Commission is empowered to appoint agents or examiners with authority to inspect and examine such accounts, records, and memoranda, and provision is made, penalizing the failure to comply with the orders of the Commission concerning such accounts, records, and memoranda, or the falsification thereof, or the wilful destruction or mutilation thereof, or the failure to make full, true, and correct entries in such accounts, records, and memoranda of all facts and transactions pertaining to the carrier's business, or keeping any other accounts, records, and memoranda. Reading these provisions of the act, there is nothing to suggest that they were intended to include correspondence relative to the railroad's business. In recommending the passage of the act, the Commission did not suggest that it was essential to its purpose to have an inspection of the correspondence of the railroad. And, with its expert consideration of the questions involved, and having clearly in mind the authority it was intended to secure, it can scarcely be supposed that the Commission would have confined its proposed amendment to the carefully chosen words 'accounts, records, or memoranda,' and would have omitted the word 'correspondence,' if it had intended to include the latter. If we apply the rule of construction,—noscitur a sociis,—we find that all the provisions of the act as to the inspection of accounts have relation to such as are kept in the system of bookkeeping to be prescribed by the Commission. It would be a great stretch of the meaning of the term as here used, to make 'memoranda' include correspondence. The 'records' of a corporation import the transcript of its charter and by-laws, the minutes of its meetings the books containing the accounts of its official doings and the written evidence of its contracts and business transactions. Certainly it was not intended that the Commission should prescribe the forms of correspondence, although it was given the power to prescribe the forms of all accounts, records, and memoranda subject to the provisions of the act. It is urged that the amendment to § 20 of February 25, 1909, adding a proviso to paragraph 7, shows the intention of Congress to provide for accounts, records, and memoranda, including more than those as to which the form may be prescribed by the Commission, and in the word 'document' making this section broad enough to include correspondence. The language of this proviso is as follows: 'Any person who shall wilfully make any false entry in the accounts of any book of accounts, or in any record or memoranda kept by a carrier, or who shall wilfully destroy, mutilate, alter, or by any other means or device falsify the record of any such account, record, or memoranda, or who shall wilfully neglect or fail to make full, true, and correct entries in such accounts, records, or memoranda of all facts and transactions appertaining to the carrier's business, or shall keep any other accounts, records, or memoranda than those prescribed or approved by the Commission, shall be deemed guilty of a misdemeanor, and shall be subject, upon conviction in any court of the United States of competent jurisdiction, to a fine of not less than one thousand dollars nor more than five thousand dollars, or imprisonment for a term not less than one year nor more than three years, or both such fine and imprisonment: Provided, that the Commission may, in its discretion, issue orders specifying such operating, accounting, or financial papers, records, books, blanks, tickets, stubs, or documents of carriers which may, after a reasonable time, be destroyed, and prescribing the length of time such books, papers, or documents shall be preserved.' [35 Stat. at L. 649, chap. 193, Comp. Stat. 1913, § 8592.] It may be that the section is broad enough, particularly when read in the light of this proviso, to authorize an inspection of accounts, records, and memoranda for which no form has been prescribed by the Commission, but we do not find in this proviso anything to indicate that Congress in the original act or the amendment intended to provide for the compulsory inspection spection of correspondence. There is nothing from the beginning to the end of the section to indicate that Congress had in mind that it was making any provisions concerning the correspondence received or sent by the railroad companies. The primary object to be accomplished was to establish a uniform system of accounting and bookeeping, and to have an inspection thereof. If it intended to permit the Commission to authorize examiners to seize and examine all correspondence of every nature, Congress would have used language adequate to that purpose. A sweeping provision of that nature, attended with such consequences, would not be likely to have been enacted without probable exceptions as to some lines of correspondence required to be kept open and subject to inspection upon demand of the agents of the government. In the brief filed on behalf of the United States, it is frankly admitted that there is much force in the objection that Congress did not intend in this grant of authority to include the confidential correspondence of the railroad companies between itself and its counsel, and it is admitted that in this respect the demand of the agent of the Commission may be too broad. The desirability of protecting confidential communications between attorney and client as a matter of public policy is too well known and has been too often recognized by textbooks and courts to need extended comment now. If such communications were required to be made the subject of examination and publication, such enactment would be a practical prohibition upon professional advice and assistance. Connecticut Mut. L. Ins. Co. v. Schaefer, 94 U. S. 457, 458, 24 L. ed. 251, 252. And see the comments of this court in Blackburn v. Crawford, 3 Wall. 175, 192, 18 L. ed. 186, 193. How far such a demand as embodied in this petition can be permitted within the constitutional rights set up by the defendant, we do not need to consider, as we do not think that the section of the act of Congress under which the demand was made authorizes the compulsory submission of the correspondence of the company to inspection. It is true that correspondence may contain a record, and it may be the only record of business transactions, but that fact does not authorize a judicial interpretation of this statute which shall include clude a right to inspection which Congress did not intend to authorize. The court below held that the right to demand inspection of documents before August 29, 1906, the date when the Hepburn act went into effect, was of such a doubtful character that the writ ought not to issue. We think the right of inspection and examination given by the interstate commerce act by the amendment to § 20 was not intended to be limited to such accounts, records, and memoranda only as were made after the passage of the act, but is intended to permit an examination of all such accounts, records, and memoranda, for the purpose of carrying out the provisions of the act. It is not contended that Congress might not do this within its constitutional authority, and the argument is that it had no such right in contemplation, and did not intend to authorize it; but we think it is clear from the terms of the act, read in the light of its purpose, that Congress did not intend to draw the line of inspection at pre-existing accounts, records, and memoranda. The government argues that if it be held that the prayer for the writ of mandamus and the accompanying motion were too broad in requiring the production of confidential communications between attorney and client which were contained in this correspondence, nevertheless the court should have issued its writ of mandamus in so far as the relator showed it was entitled thereto, and the case of West Virginia Northern R. Co. v. United States, 67 C. C. A. 220, 134 Fed. 198, 203, is cited to the effect such practice is permissible. The case shows, however, an amendment was permitted so as to make the writ conform to the rights which could be properly granted. And that course might have been pursued in this case. Whether the Commission would desire an inspection of the accounts, records, and memoranda as we have construed the terms of the act, without the right to examine the correspondence, we are not advised. As the petition in this case was dismissed by the court below without prejudice, and a new proceeding may be started, asking for such inspection as the law allows, we think the order of the court refusing to grant the writ of mandamus in the broad terms prayed for in the petition and the motion for the writ should not be reversed to permit a grant of relief within the limits which the law allows as we interpret it. It follows that the judgment of the District Court, refusing the writ and dismissing the petition, should be affirmed. Mr. Justice McReynolds took no part in the consideration and decision of this case.
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No authority beyond that already conferred on the Inter8tate Commerce Commission by the Act to Regulate Commerce can be derived by that Commission from a resolution passed by only Gne branch of Congress; and so held that the powers of the Commission in making the investigation required by Senate Resolution No. 153, in regard to inspection of accounts and other papers, are limited to those conferred by the Act to Regulate Commerce and the amendments thereto. Section 12 of the Act to Regulate Commerce does not make provision for inspection of accounts and correspondence of carriers authorized by the Commission; that feature was added by the Hepburn Act of June 29, 1906, amending § 20 of the Commerce Act. The H(ipburn Act, like other statutes, may be read in the light of the purpose it was intended to subserve, and the history of its origin and the report of the Interstate Commerce Commission submitted to Congress recommending the passage of the Act may be referred to. As construed in the light of such report, and applying the rule of noscitur a sociis, § 20 of the Act to Regulate Commerce does not provide for the compulsory inspection of the correspondence of carriers, but is limited to accounts, including records, documents and memoranda. Congress is not likely to enact a sweeping provision subjecting all correspondence of carriers to examination, attended with serious consequences in case of withholding it, without using language adequate to that purpose. The protection of confidential communications between attorney and client is well known and recognized as a matter of public policy. The right of inspection of whatever accounts, records, documents and memoranda are included within § 20 of the Act to Regulate Commerce, as amended by the Hepburn Act, is not limited to those kept and made after the passage of the latter Act, but includes those kept and made prior thereto. Quaere, whether compulsory inspection of correspondence and other matters referred to in Senate Resolution No. 153 of Nov. 6, 1913i can be permitted within the constitutional rights of the carrier. Where the Interstate Commerce Commission has applied for a writ of mandamus broader than the law permits, and no amendment was made narrowing the demand, but the petition was dismissed without prejudice, the proper practice is to affirm the order and not to reverse so as to grant the relief within the limits which the law allows; a new proceeding may be started for that purpose. 212 Fed. Rep. 486, affirmed.
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Background USPS’s current field-office structure includes 7 area offices and 67 district offices. USPS’s management structure is decentralized, with the area and district offices overseeing a vast network of facilities, which, as of December 19, 2011, included 31,060 post offices and 461 mail- processing facilities (see fig. 1). According to USPS data, the operating cost of its field offices in fiscal year 2011 totaled about $1.2 billion—the majority of which (about $1 billion) was spent operating district offices. The total operating costs of USPS’s field offices represented less than 2 percent of its approximately $71 billion fiscal year 2011 operating expenses. Significant policy and operational decisions are made at USPS headquarters and disseminated through the managerial hierarchy, including area and district offices. Each of the 67 district offices reports to a designated area office, which, in turn, reports to headquarters. Employees in the area offices are generally responsible for overseeing district offices and facilities that have an area-wide impact, such as mail- processing facilities, while employees in district offices are typically responsible for overseeing post offices and other facilities that serve a particular district. For example, as of December 19, 2011, the Southwest Area office was responsible for overseeing 90 mail-processing facilities, while the 12 district offices in the Southwest Area were responsible for overseeing operations at about 5,600 post offices—an average of about 470 post offices per district. Each area and district office is organized into departments, which include operations support, human resources, finance, and marketing. In 2011, USPS had 4,985 field office employees (806 area and 4,179 district employees), who comprised less than 1 percent of USPS’s workforce of about 557,000 career employees. About 85 percent of USPS’s career workforce, including most mail carriers and mail- processing staff, is covered by collective bargaining agreements with employment protections, such as no lay-off provisions. In contrast, most USPS field employees, which include area and district office managers, are not covered by collective bargaining agreements. From 2002 to 2011, USPS reduced the number of employees in area and district offices by almost 56 percent (see fig. 2) by, among other actions, closing 4 area offices and 18 district offices and centralizing some accounting, human resources, and other services. (App. I provides additional information on these office closures and selected centralizations of administrative services previously performed in field offices.) In September 2011, the Postmaster General testified before Congress that due to USPS’s urgent need to address its financial situation, USPS was undertaking or planning several efforts intended to improve the efficiency in its retail, mail-processing, and delivery networks.February 2012, USPS issued a 5-year business plan in which it estimated that these efforts and others, such as reducing Saturday deliveries, could restore USPS to profitability. USPS estimates that it could save $9.1 billion annually, the majority of which will be achieved by 2016, through changes in the following areas: In Retail network: USPS plans to downsize its retail network for potential savings of $2 billion annually beginning in 2016. As part of this effort, USPS plans to review about half of its post offices to identify opportunities to close facilities, reduce work hours, and expand the use of lower-cost alternatives, such as self-service kiosks, and partnerships with retailers. Mail-processing network: USPS plans to downsize its mail- processing network and reduce costs in its transportation network for potential savings of $4.1 billion annually beginning in 2016.this effort, USPS anticipates closing or consolidating about half of its mail-processing facilities and reducing the number of its employees. Delivery network: USPS is realigning its delivery routes for potential savings of $3 billion annually beginning in 2016. As part of this effort, USPS plans to eliminate and consolidate approximately 20,000 out of its 144,000 city routes. While reducing USPS’s network costs is essential, the Postmaster General testified that USPS also must generate additional revenue to deal with its financial crisis. To help accomplish this, he said he implemented a variety of “core business strategies” to, among other things, (1) strengthen the value of mail to businesses, (2) improve its customers’ experience using USPS’s services, and (3) compete with private sector firms for the package business. USPS’s fourth core business strategy—becoming a “leaner, faster, and smarter” organization—relates to reducing its network costs and includes the actions described above. To address USPS’s financial problems, several Members of the 112th Congress have introduced postal reform legislation which, if enacted, would likely impact USPS’s downsizing plans, including its ability to close retail and mail-processing facilities. Certain legislative proposals also include provisions requiring USPS to develop and submit to Congress plans for further consolidating its field offices. While USPS needs authority from Congress to make some of its planned network changes, it currently has the flexibility to continue consolidating area and district offices. In December 2011, USPS announced a moratorium on closing its post offices and mail-processing facilities until May 15, 2012. The moratorium was established in response to congressional requests for additional time to enact comprehensive postal reform legislation. In the interim, USPS is continuing to review the feasibility of closing retail facilities and recently completed studies of mail-processing facilities for consolidation and possible closure. Field Employees Have a Key Role in USPS’s Cost-Reduction and Revenue-Generation Efforts Cost-Reduction Efforts Field employees have key roles in USPS’s efforts to reduce costs in its retail, mail-processing, and delivery networks. The extent of area and district employees’ involvement in specific cost-reduction efforts varies, however. For example, area employees, who comprise 16 percent of the field employees, generally provide guidance and oversee the implementation of all cost-reduction efforts in their area to ensure consistency in how these efforts are implemented. In addition, area employees prepare proposals for headquarters on potential consolidations of mail-processing operations, based on information gathered and presented by district employees. On the other hand, district employees, who account for the remainder of field employees, are directly responsible for carrying out both the retail and mail-processing facility reviews and other cost-reduction efforts, such as consolidating delivery routes. Since 2006, USPS has reviewed over 3,000 retail facilities and closed 686—about 23 percent of those reviewed. In 2011, as part of USPS’s Retail Access Optimization Initiative, the agency announced plans to review another 3,650 retail facilities for possible closure. Reviewing retail facilities for possible closure generally involves one to three stages, depending on the outcome of each stage. Area officials oversee activities related to each stage to ensure compliance with USPS’s requirements. District employees are involved in completing work required for each of these stages. For example, in the first stage, district employees study and prepare a report on the feasibility of closing a particular facility and examine the potential effects on (1) services, (2) customers, and (3) USPS employees, as well as the potential economic savings associated with closing a particular retail facility. To identify these effects, district employees collect and analyze operational, financial, and delivery data related to the facility. District employees also distribute questionnaires to potentially affected customers about the customers’ service needs and access to postal services in their vicinity and hold community meetings to discuss, among other matters, the reason for the proposed change in service and to respond to customer inquiries and concerns. According to USPS officials, these questionnaires and community meetings provide USPS with local information that headquarters might not otherwise have available during its decision-making process. (Fig. 3 provides more information on USPS’s process for reviewing retail facilities for possible closure.) When headquarters officials decide to close a retail facility, district employees carry out a variety of activities related to the closure. For example, district employees must move equipment, realign any affected delivery routes, and transfer mail carriers and other employees into other locations. Related to this, district employees also are responsible for identifying potential positions for staff affected by the closure. None of the 3,650 facilities USPS identified for review in 2011 had been closed at the completion of our review. USPS is continuing to review these facilities and could decide to close some of them after the moratorium on facility closures expires on May 15, 2012. USPS officials acknowledge that closing retail postal facilities is highly contentious. As a result, according to USPS officials, USPS is exploring additional options to reduce its retail facility costs by, for example, reducing employee work hours and shortening operating hours at selected facilities. Since 2006, USPS has taken several actions to reduce its costs by improving the operational efficiency of its mail-processing network. As discussed in our April 2012 report, these actions included consolidating operations at various types of mail-processing facilities and closing unneeded facilities, which, according to USPS, resulted in about $2.4 billion in cost savings. completed Area Mail Processing reviews of 264 of its mail-processing facilities to examine the feasibility of consolidating mail-processing operations from one or more postal facilities to other facilities to improve USPS’s operational efficiency. Of the 264 facilities that were reviewed, 35 will remain open, 6 are on hold for further study, and 223 have been found feasible for consolidation, according to USPS. Area and district employees completed these reviews, which examined opportunities to consolidate mail origination and destination operations. As discussed in our April 2012 report, these savings derive from actions in three areas: Specifically, USPS (1) closed nearly all of its Remote Encoding Centers (10 of 12) and Airport Mail Centers (76 of 77) between 2006 and 2011, (2) moved all of the operations previously performed at 21 Bulk Mail Centers into its Network Distribution Centers, and (3) completed 100 mail-processing consolidations. GAO-12-470. According to USPS, it considered a variety of criteria in identifying the 264 facilities for possible consolidation, including, projected savings, service issues, and capacity within processing plants. processing facilities for review, district employees analyzed, among other things, the facility’s mail volumes, work hours, and services, as well as the estimated costs and savings of a potential consolidation and prepared a report on their findings that was reviewed by headquarters and area managers. After considering the results of the feasibility study headquarters made a final determination on whether to consolidate one or more aspects of the facility’s operations. Figure 4 provides more information on USPS’s process for reviewing mail-processing facilities for possible closure or consolidation. If headquarters approves the consolidation of operations at a facility, area and district employees perform those activities. For example, area employees must move mail-processing equipment and transfer the facility’s mail operations and transportation network to other USPS facilities. In addition, area and district employees must coordinate on repositioning employees into new positions as specified by their collective bargaining agreement. After the consolidation has been completed, area employees conduct—with input from district employees—post- implementation reviews to evaluate, among other matters, the impacts of the consolidation and actual cost savings. USPS uses a variety of routes to deliver its mail, but the two principle route types are “city” and “rural.” City and rural carriers have different collective bargaining agreements and compensation systems. Generally, city carriers are paid by the hour with overtime, as applicable, while rural carriers are salaried employees. in routes that city carriers can complete in less than 8 hours. Recognizing that these factors cause inefficiencies in USPS’s city delivery network, in 2008, USPS and the National Association of Letter Carriers—the union that represents city carriers—entered into an agreement that permits USPS to conduct city route inspections and to realign routes that no longer reflect 8 hours of work into more efficient routes. In fiscal year 2011, USPS eliminated 6,821 of its 224,485 city and rural delivery routes (about 3 percent). In addition, USPS recently announced plans to eliminate another 20,000 city routes (about 9 percent of current routes) for an estimated $2 billion in annual savings. According to USPS officials, realigning delivery routes likely will continue well into the future given expected mail volume declines and annual increases in addresses receiving mail which, until recently, have historically increased by about 1 million addresses per year. Area and district employees have key roles in realigning city delivery routes. Specifically, area employees oversee the city route realignment process to ensure consistency across districts in their area, while district employees directly carry out the realignments. To do so, district employees (1) gather and analyze information on the factors that affect delivery time; (2) observe the time a mail carrier spends servicing his or her route and, if the route is determined to represent less than a full 8- hour work day; (3) reconfigure the route so that it is more efficient. To evaluate the factors that affect delivery time, district managers consider a variety of factors, including the number of addresses and mail volume on a particular route, the distance between addresses, the geographic location of the route (e.g., the downtown of a major metropolitan area versus a small town), and the mode of delivery (e.g., mail delivered to a curbside mailbox, a mail slot in a door, or a cluster box). In addition, district employees physically observe a mail carrier’s daily activities, both in the office preparing mail for delivery and transporting and delivering the mail, to determine whether the route represents a full 8-hour day. If after conducting these activities, district employees determine that the workload does not fill an 8-hour day, specially trained district employees use a computerized management tool—called the Carrier Optimal Routing system—to redesign routes. This system uses digital mapping, algorithms, and route inspection data to create efficient city carrier routes that are more compact and contiguous. As a result, USPS could, for example, consolidate portions of other city routes, such as routes that necessitate carrier overtime, to complete or augment the prior reconfigured route, thereby eliminating the need for overtime. Because route realignments reorder mail deliveries along city routes, the realignments result in major changes to USPS’s database for managing addresses that, according to district managers, requires district Address Management Systems Specialists to update the database on an ongoing basis. According to USPS field officials, if updates to the database are not made in a timely manner, delivery efficiency and customer service would be degraded. Revenue-Generating Efforts As with USPS’s cost reduction efforts, area and district employees have a significant role in several aspects of USPS’s efforts to generate additional revenue through three of the Postmaster General’s four core business strategies: (1) strengthening the value of mail to businesses, (2) improving its retail customers’ experience, and (3) competing for the package business. Area and district employees promote and oversee a variety of efforts intended to strengthen the value of mail to businesses. Collectively, these efforts are intended to enhance how U.S. businesses contact their customers to deliver billing statements and notifications (using First-Class Mail) and advertisements and offers (using Standard Mail). For example, area and district Business Service Network employees (marketing employees) provide direct and ongoing customer service to business mailers to, among other things, help the mailers conveniently process their mail and to correct any mailing problems, such as shipment delays, that may arise. In 2011, USPS generated about $50 billion (76 percent of its total operating revenue) from business mailers. Of this amount, $40 billion (60 percent of its total operating revenue) came from business mailers that area and district Business Service Network employees directly serviced. Area and district employees also have a role in promoting the value of mail with new business mailers. According to the Postmaster General’s speech in May 2011, three quarters of U.S. businesses are not using the mail to market their businesses to potential customers. Thus, he said encouraging these businesses to do so represents an opportunity to increase USPS’s revenue. In January 2011, USPS introduced a new initiative called Every Door Direct Mail to (1) make it easier for small and medium-sized businesses to advertise through the mail, and (2) enable local businesses to target potential customers by street, as opposed to specific mailing addresses. Area employees oversee the implementation of this initiative in districts within their area, and monitor performance metrics and revenue earned. Similarly, district employees promote the initiative in their districts to attract new customers in their locations. According to USPS, this initiative generated over $92 million in revenue in the 9 months following its introduction in January 2011. Improving the retail customer experience means maintaining and growing the customer base through improved customer service. Area employees have a key role in monitoring the quality of customer interactions and resolving any performance problems identified. For example, area employees told us that they regularly monitor the results of, among other things, customer surveys in specific post offices as well as in districts as a whole. When these data identify specific performance problems, area employees share the results with district employees who are then expected to work with particular facilities and individuals to correct the identified service-related problems. District employees also track the performance and revenue generated by third parties who provide alternative access to postal products through contract postal units and work with local postmasters, who most directly oversee these facilities, to improve service and maximize revenue. USPS’s field employees also have key roles in helping the USPS successfully compete for and grow its package business. Overall, according to USPS, its package deliveries have increased from 12.7 percent of its revenue in fiscal year 2006 to 16.1 percent in fiscal year 2011. District employees work directly with employees at post offices and mail-processing facilities to train employees on how to properly scan packages for delivery—a key factor in growing USPS’s package business. Proper scanning helps ensure that packages travel through its delivery network efficiently and that customers and USPS can track the packages to determine their current location. USPS’s competitors offer this service, and USPS hopes to improve the reliability of its package- tracking services to capture portions of its competitors’ business. In addition, field employees we interviewed in one of the four areas we selected for our review developed a program to generate additional revenue by targeting small businesses that are not currently using USPS’s services. Specifically, in the Southwest Area, area employees worked with employees of their Dallas district office to collaborate on ways to identify and contact small businesses that generate less than $10,000 annually in postage sales and that currently use USPS competitors, such as the United Parcel Service, to persuade these companies to use USPS for their package mailing needs. According to USPS from August 1, 2011, through February 10, 2012, this initiative generated about $11.9 million in revenue from new small business customers. USPS headquarters officials stated that USPS is currently considering whether to implement similar revenue-generating efforts elsewhere. In 2011 USPS Closed Field Offices and Eliminated Field Positions, Resulting in $150 Million in Estimated Annual Savings In 2011 USPS consolidated its field offices by closing eight offices, centralizing support services, and eliminating field positions for an estimated $150 million in annual savings. However, USPS field employees we interviewed were concerned that the staffing reductions could negatively affect their ability to carry out additional cost-savings and revenue-generating efforts. USPS issued a plan in December 2011 to evaluate area and district offices for possible consolidation but, according to headquarters officials, USPS does not anticipate initiating these evaluations until after the completion of cost-reduction efforts in its retail, mail-processing, and delivery networks. USPS’s 2011 Field-Office Consolidation Prior to the consolidation, USPS estimated that the 2011 consolidation would result in an estimated annual cost savings of $150 million through December 2011. According to USPS, the goals of this consolidation were to, among other things, enhance and strengthen customer service and allow USPS to more quickly adapt to changing market forces, such as continuing mail volume declines. USPS closed its Southeast area office and seven district offices, and assigned functions previously performed at these locations to other area and district offices within close proximity. According to USPS headquarters officials, USPS considered a variety of factors in deciding which field offices to close and which positions to eliminate, including mail volume, number of customers served, population density, number of delivery routes, and revenue generated. Overall, USPS reduced its field offices positions by 1,946, or 26 percent. At the conclusion of the consolidation in September 2011, USPS had 817 area and 4,698 district office positions, totaling 5,515 field positions. Of the four departments that we selected for review, most of the field position reductions were in operations support (35 percent) and human resources (35 percent). The smallest reductions (14 percent) were in marketing (see table 1). As part of this consolidation, USPS also centralized several district support services positions, including the following, into other locations which resulted in a net reduction of 247 positions. USPS centralized Family and Medical Leave Act Coordinators from district offices to its Human Resources Shared Services Center in Greensboro, North Carolina. Overall, USPS eliminated 106 district positions and, according to officials at the center, created 45 positions to handle the work previously carried out by the districts’ coordinators—a net reduction of 61 positions. USPS centralized responsibilities for allocating budgets from district to area offices. As part of this change, it eliminated 154 of its 221 district budget positions and created 11 positions in its area offices—a net reduction of 143 positions. According to area officials, moving this responsibility to area offices will help ensure that all facilities within an area have standardized and comparable budgets. USPS also eliminated 43 of the 78 district Mailpiece Design Analyst positions and centralized the remaining 35 positions at area offices. The remaining coordinators now provide design services to USPS customers through a centralized hotline. Appendix I provides additional information on selected centralization actions between 2002 and 2005. Area and District Officials’ Concerns about the 2011 Consolidation Concerns about the Ability to Carry Out Key USPS Efforts Several area and district officials expressed concern about how staff reductions and the allocation of field resources could affect their ability to manage ongoing and planned cost-reduction and revenue-generation efforts. Such concerns include the following: Four of the six district operations support managers whom we interviewed raised concerns about the number of Address Management Systems Specialist positions that USPS eliminated in the 2011 consolidation. According to these officials, the loss of these positions could limit their ability to perform future route realignments. Overall, USPS reduced the number of these district positions from 624 positions to 427—a 32 percent reduction. As discussed, according to field officials, Address Management Systems Specialists are critical to USPS’s ongoing efforts to update its address management database following route realignments. Seven of the 10 area and district marketing managers we interviewed also raised concerns about the number of marketing positions eliminated in the 2011 consolidation. Of these reductions, 38 percent were area and district Business Service Network positions. These reductions may have been particularly difficult in the Capital Metro Area office because the area gained responsibility for managing 25 additional business mailer accounts previously handled by the Southeast Area office. Several field officials told us that given USPS’s increased focus on generating revenue, it is important that area and district offices be staffed appropriately to oversee the range of marketing activities and to maintain business mailer customers. A district marketing manager reiterated this point, indicating that most business mailers expect personal service to resolve any mailing issues and that consequently, USPS should ensure that these business mailers receive consistent and reliable service to reduce the possibility of losing their business to competitors. As we have reported, businesses that publish mail Periodicals, such as daily or weekly news magazines, have expressed concern about USPS’s ability to provide reliable service. According to these business mailers, they will likely (1) accelerate their efforts to shift subscribers from hard copy mail to electronic communication or (2) otherwise stop using USPS if it is unable to provide reliable service. In addition, 12 of the 30 district managers we interviewed expressed concern that when USPS allocated resources for the 2011 consolidation, it did not fully consider that some offices would be picking up additional work from the field office closures. For example, several district managers told us that during this consolidation, several field position reductions were made that, in their view, did not reflect office workload variations. The managers said that their departments are now understaffed. For example, the District Manager at the Connecticut Valley District told us that following the 2011 consolidation, her district is now one of the largest districts in the country, both with respect to the number of USPS employees and geographic size. Specifically, she said her district grew from 11,939 employees to 15,421—an increase of 29 percent and added over 100 facilities, while losing 20 district positions. She expressed concern that despite overseeing one of the largest districts, she experienced the same number of staffing reductions as other districts with smaller workloads. Eight field officials told us that long work hours resulting from the 2011 consolidation combined with other factors, such as employee uncertainty about their future employment, have made it difficult to recruit and retain area and district employees for management positions. For example, one district office manager told us that employees in her department have been seeking management opportunities outside USPS because of these concerns. Another district manager commented that he has seen a decrease in the number of employees willing to move into managerial positions because of uncertainty about future promotional opportunities and the stress associated with these positions. In addition, 17 field officials we talked to expressed concern that the loss of a significant number of senior, experienced area and district employees during the 2011 consolidation might negatively affect USPS’s ability to manage field operations. USPS headquarters officials stated that while they understand the concerns expressed by area and district employees, the changes undertaken as part of the 2011 consolidation were intended to align with other actions that USPS has taken to standardize and streamline support services. For example, according to these officials, USPS has developed several Web-based systems to automate and standardize administrative tasks that were previously conducted by district staff. As these tasks are streamlined, fewer district resources are needed. In addition, as discussed, USPS headquarters officials told us that USPS considered a variety of factors in deciding its 2011 consolidation, including mail volume, number of customers, population density, number of delivery routes, and revenue generated. In addition, according to USPS headquarters officials, USPS also intends to consider workload impacts in its future field-office consolidations. Issuance of Plan and Decision to Hold Off on Future Field-Office Consolidations In December 2011, USPS issued a plan for evaluating area and district offices for possible consolidation and for carrying out future consolidations. According to the OIG, this plan addresses its recommendations related to USPS’s 2009 consolidation. In particular, OIG officials told us that the document addresses recommendations to USPS to develop a plan which (1) periodically evaluates area and district offices for possible consolidation, (2) guides decisions on future field- office consolidations, and (3) considers factors such as an office’s mail volume, workload, and proximity to other offices. In addition, OIG officials told us that the plan addresses the agency’s recommendation that USPS develop procedures for maintaining adequate documentation of its field office evaluations and consolidation decisions. USPS’s December 2011 plan specifies that it will take numerous steps to evaluate field offices for possible consolidation, including: conducting periodic evaluations of area and district offices to assess the need for consolidations; developing a business case, which includes expected cost savings and benefits, for proposed field-office consolidations: using reliable data sources to evaluate area and district offices for adequately documenting all analyses and data used to make conducting post-consolidation reviews to identify key achievements and actual cost savings, and document lessons learned. USPS’s past area and district consolidations have lacked documentation and transparency. For example, despite numerous requests, USPS did not provide us with any documentation of the analyses it used or the approval process for its decision to consolidate field operations in 2011. Similarly, in 2010, the OIG reported that USPS could not always provide documentation supporting its 2009 and earlier field-office consolidations. In addition, USPS has not completed postconsolidation reviews to assess either its lessons learned or its actual cost savings. Headquarters officials told us that the plan it issued in December 2011 should address these past concerns. These officials also said that USPS intends to ensure that its future evaluations consider the operational impacts of potential field- office consolidations on ongoing and planned initiatives, such as those related to downsizing its retail, mail-processing, and delivery networks. While USPS’s recent plan indicates that it intends to periodically evaluate its field office structure for possible consolidation, it does not specify when it will initiate these evaluations. According to headquarters officials, USPS does not plan to initiate these evaluations until after the completion of cost-reduction efforts in its retail, mail-processing, and delivery networks, efforts that USPS intends to complete in 2016. These officials also told us that further consolidation of field offices would be counterproductive at this time because field employees are key to the successful accomplishment of these cost-reduction efforts. In addition, the headquarters officials noted that cost savings from future field consolidations would be minimal compared to the roughly $9 billion USPS estimates can be saved by streamlining its retail, mail-processing, and delivery networks. Thus, according to these officials, for the time being, USPS needs its current field-office structure to focus on other efforts that will result in the largest potential cost savings. Concluding Observations USPS’s dire financial outlook necessitates urgent action to align its total network and reduce its costs as mail volume continues to decline. To reduce costs, USPS reduced the number of employees in its area and district offices by almost 56 percent from 2002 to 2011. And, in 2011, it announced additional USPS-wide initiatives to save an estimated $9.1 billion annually by 2016. USPS also recently issued a plan for evaluating area and district offices for future consolidations; however, USPS has chosen to hold off on future field-office consolidations until after the USPS-wide initiatives are complete, which should allow USPS to make additional field- office changes, if needed, based on a network that is aligned with the reduced mail volume. This decision seems appropriate in view of the importance of area and district offices in implementing and managing these initiatives. If USPS decides to move forward with future field-office evaluations, its plan for doing so should address past concerns about inadequate documentation and transparency and lead to postconsolidation reviews to assess lessons learned and to measure actual savings. Agency Comments We provided a draft of this report to USPS for review and comment. USPS had no comments. We are sending copies of this report to the appropriate congressional committees, the Postmaster General, and other interested parties. In addition, the report will be available at no charge on GAO’s Web site at http://www.gao.gov. If you or your staffs have any questions on this report, please contact me at (202) 512-2834 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Contact information and key contributors to the report are listed in appendix III. Appendix I: Timeline of Recent Field Office Consolidations and Information on Selected Centralizations of Administrative Services Appendix I: Timeline of Recent Field Office Consolidations and Information on Selected Centralizations of Administrative Services Prior to 1992, USPS’s field-office structure consisted of 5 regions, 73 field divisions, and 144 management sectional centers. Centralization of Accounting Services USPS centralized some of its accounting services in 2002 and 2003. As part of this effort, USPS replaced its prior information technology systems with a new computer system—the Standard Accounting for Retail System. In addition, USPS reviewed the range of accounting services performed at its district offices to identify services that could be standardized and streamlined and, as a result of this effort, eliminated 1,063 district accounting positions. To handle work previously performed by district employees, USPS created 295 positions at three accounting shared service centers in Eagan, Minnesota; St. Louis, Missouri; and San Mateo, California—a net reduction of 768 USPS positions. In fiscal year 2005, USPS completed a postcentralization review and determined that its actions had resulted in cost savings of $56.8 million. Centralization of Equal Employment Opportunity Investigations In 2004, USPS centralized activities related to its investigations of equal employment opportunity complaints within a shared service center—the National Equal Opportunity Employment Service Office—located in Tampa, Florida. To accomplish this centralization, USPS eliminated 169 area and district human-resource positions and created 47 positions at the new center to handle the complaints—a net reduction of 122 employee positions. According to USPS officials at the center, the goals of this centralization were to (1) correct problems in USPS’s equal employment opportunity complaint process, (2) reduce a substantial backlog of cases, and (3) implement a consistent process for investigating future complaints. Among other responsibilities, employees at this center review complaints filed by USPS employees and applicants for employment, assign complaints to contracted investigative personnel, and review and make determinations about the investigators’ findings. According to USPS officials at the center, centralizing this work resulted in about $13 million in cost savings as of fiscal year 2011. In addition, beginning in 2005, USPS began soliciting federal agencies to carry out their agencies’ equal employment opportunity investigations through the center. According to officials at the center, 17 agencies have entered into interagency agreements with USPS for this purpose. From 2006 to 2011, USPS earned about $3 million in revenue from these agreements, according to officials at the center. Centralization of Human Resource Services In 2005, USPS established its Human Resource Shared Services Center in Greensboro, North Carolina, to centralize most of its services related to employee benefits; personnel actions; safety and injury compensation; and employee hiring, retirements, and reassignments. According to USPS officials at the center, the centralization was needed to streamline and standardize its human resources services. As part of this effort, USPS introduced a new information technology system—the Human Capital Enterprise System—which integrated information from a variety of prior human resource computer systems. According to USPS officials, the introduction of the improved computer system, along with the centralization, allowed USPS to reduce its district human resource staff by approximately 1,300-1,400 positions. While USPS eliminated well over a thousand district positions, it also created 457 positions at the shared services center to provide these services—a net staff reduction of roughly 900 employee positions. According to a Human Resources official, the centralization of human resource services resulted in cost savings of about $150 million annually from 2007 through 2011. Appendix II: Objectives, Scope, and Methodology This report describes: (1) the role of area and district office employees in implementing the U.S. Postal Service’s (USPS) cost-savings and revenue-generation efforts and (2) USPS’s actions to consolidate its field office structure in 2011 and the impact of these actions. This report also describes actions taken by USPS between 2002 and 2005 to centralize selected services previously conducted at field offices to other USPS locations. To address these objectives, we reviewed numerous documents, including prior GAO and USPS Office of Inspector General (OIG) reports, USPS documents, and the September 6, 2011, testimony of the Postmaster General. We also interviewed USPS officials, including headquarters officials and officials in area and district offices. We interviewed officials at four area offices—the Capital Metro Area, the Northeast Area, the Southwest Area, and the Pacific Area—that we selected based on several factors, including geographic dispersion throughout the U.S. and whether the office had recently absorbed the responsibilities of other offices following a USPS field-office consolidation. We selected a mixture of area offices that had been affected by recent consolidations and one office that had not been affected. We also interviewed officials from six district offices—Connecticut Valley; Dallas; Fort Worth; Los Angeles; Northern Virginia; and Santa Ana—which we selected based on their proximity (i.e., within about 100 miles) to the four area offices we selected. In total, we interviewed over 50 USPS officials, including USPS’s Chief Human Resources Officer; Area Vice Presidents; District Managers; area and district officials responsible for operations support, human resources, finance, and marketing in their locations; and managers representing USPS’s accounting, equal opportunity employment investigations, and human resources shared services centers. We also interviewed representatives from the National Association of Postal Supervisors, which represents among others, USPS area and district managers. To describe the role of field office employees in implementing USPS’s cost-savings and revenue-generation efforts, we reviewed USPS documents describing USPS’s strategic goals and the role of area and district employees in carrying out potential consolidations of retail, mail- processing, and delivery networks. To describe USPS’s actions to consolidate its area and district offices in 2011 and the impact of this consolidation we reviewed a 2010 OIG report on the 2009 consolidation, which included recommendations for USPS related to future field-office consolidation actions, and a variety of USPS documents, including USPS’s (1) statements on the expectations and goals for the 2011 consolidation, (2) 2011 Annual Report, (3) Form 10-K filing with the Securities and Exchange Commission on its 2011 Annual Report, (4) plan issued in December 2011 entitled Area and District Office Structure Evaluations Strategy, Policy and Process, and (5) 5-Year Business Plan issued in February 2012. We also interviewed USPS officials to learn about the financial and operational impacts of the 2011 consolidation. In addition, we analyzed USPS data on the number of employee positions at area and districts offices following the 2011 consolidation, and USPS’s cost-savings estimates for this consolidation and for its support service centralization efforts between 2002 to 2005. We assessed the reliability of these data sources by, among other things, interviewing USPS officials and reviewing USPS procedures for maintaining the data and verifying their accuracy. Based on this information, we determined that the data provided to us were sufficiently reliable for our reporting purposes. Finally, we interviewed USPS headquarters officials and OIG officials to obtain information on recommendations in the OIG’s 2010 report and USPS’s December 2011 plan for future evaluations of area and district offices for possible consolidations. We conducted this performance audit from April 2011 to April 2012 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient and appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix III: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Kathleen Turner, Assistant Director; Patrick Dudley; Delwen Jones; Elke Kolodinski; James Leonard; Maria Mercado; Sara Ann Moessbauer; Joshua Ormond; and Crystal Wesco made key contributions to this report.
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USPS has lost $25.3 billion over the last 5 years and expects to lose another $83.2 billion through fiscal year 2016 unless it takes action to reduce its costs and improve its operational efficiency. USPS has cut costs in its retail, mail processing, and delivery networks, as well as in its field office structure, which includes 7 area offices and 67 district offices, and plans other cost-cutting actions throughout the organization. As requested, this report discusses (1) the role of area and district employees in implementing USPSs cost-savings and revenue-generation efforts and (2) USPSs actions to consolidate its field office structure in 2011, and the impact of this consolidation. GAO analyzed USPS documents describing the role of field staff in carrying out USPSs cost-saving and revenue-generation efforts; information on the impact of the 2011 consolidation, including anticipated cost savings; and USPSs plan, issued in December 2011, for evaluating and implementing possible field office consolidations. GAO also interviewed USPS officials at headquarters and at four area and six district offices selected based on several factors, including geographic dispersion throughout the U.S. Field employees have key roles in the U.S. Postal Services (USPS) efforts to reduce costs and generate revenue. For example, these employees evaluate the feasibility of closing or consolidating facilities, such as post offices and mail- processing facilities; carry out the closures and consolidations of these facilities; and evaluate and consolidate delivery routes. These roles support USPSs plans to save, by 2016, about $9 billion annually by improving its operational efficiency and realigning its retail, mail processing, and delivery networks with declining mail use. These plans include evaluating about half of its approximately 31,000 post offices to identify cost-reduction opportunities, closing or reducing operations at about half of its 461 mail-processing facilities, and consolidating about 20,000 of its 144,000 city delivery routes. Area and district employees also have a significant role in USPSs efforts to generate additional revenue by (1) promoting the value of mail to businesses, (2) maintaining and increasing its customer base through customer service, and (3) growing the package business. In 2011, USPS consolidated its field office structure by, among other actions, closing one area office and seven district offices and eliminating 1,946 positionsactions that it estimated would save about $150 million annually. However, several area and district officials expressed concern that this consolidation could lessen their ability to carry out ongoing and future cost-savings and revenue-generation initiatives, and to recruit and retain future managers. In December 2011, USPS issued a plan on how it would evaluate additional field offices for possible consolidation and address concerns that the USPS Office of Inspector General identified in past field office consolidations. These concerns included the need to develop a plan to guide future field office consolidations and to consider factors such as workload and proximity to other offices. According to USPS officials, the plan also addressed past concerns about inadequate documentation and transparency and will lead to post-consolidation reviews to assess lessons learned and measure actual savings. Although USPS has a plan to guide future consolidations, according to USPS officials, it does not plan additional field office consolidations until it has completed ongoing cost-reduction efforts in its retail, mail processing, and delivery networks.
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SECTION 1. SHORT TITLE.
This Act may be cited as the ``Protecting Educational Loans for
Underserved Students Act''.
SEC. 2. ADVERSE CREDIT HISTORY DETERMINATIONS FOR FEDERAL DIRECT PLUS
LOAN ELIGIBILITY.
Section 455 of the Higher Education Act of 1965 (20 U.S.C. 1087e)
is amended by adding at the end the following:
``(r) Federal Direct PLUS Loans.--
``(1) In general.--Beginning July 1, 2014, in determining
the eligibility of a student to borrow Federal Direct PLUS
Loans, the Secretary shall determine whether the student has an
adverse credit history in accordance with paragraph (2).
``(2) Determination of adverse credit history.--In
determining whether a student has an adverse credit history for
purposes of paragraph (1), the Secretary--
``(A) shall obtain a credit report on the student
from at least one consumer reporting agency described
under section 603(p) of the Fair Credit Reporting Act
(15 U.S.C. 1681a(p)) and within a timeframe that would
ensure the most accurate, current representation of the
student's credit history before the first day of the
period of enrollment for which the loan is intended;
``(B) unless the Secretary determines that the
student has extenuating circumstances, shall consider
that a student has an adverse credit history based on
the student's credit report, if--
``(i) the student is considered 90 or more
days delinquent on the repayment of a debt
exceeding $2,000; or
``(ii) during the 3 years before the date
of the credit report, the student has been the
subject of a--
``(I) default determination;
``(II) bankruptcy discharge;
``(III) foreclosure;
``(IV) repossession;
``(V) tax lien;
``(VI) wage garnishment; or
``(VII) write-off of a debt under
this title;
``(C) shall not consider a student with debt that
is unrelated to loans made under this title and that,
as of the date of the student's credit report, are in
collections or have been charged off, to have an
adverse credit history and shall not deny a Federal
Direct PLUS Loan to the student for having such debt;
``(D) shall require that any student described in
subparagraph (C) or a student who has been the subject
of 1 or more of the actions described in subclauses (I)
through (VII) of subparagraph (B)(ii) during a period
ending more than 3 years before the date of the
student's credit report, to participate in loan
counseling provided by the applicable institution of
higher education as a condition of being eligible to
receive a Federal Direct PLUS Loan;
``(E) shall not consider a student with no credit
history as an individual with an adverse credit
history, and shall not use a student's absence of
credit history as a reason to deny a Federal Direct
PLUS Loan to such student;
``(F) shall retain a record of the Secretary's
basis for determining that the student has extenuating
circumstances under subparagraph (B), which may include
an updated credit report, debt related to a medical
condition, a statement from a creditor that the student
has made satisfactory arrangements to repay the debt
owed to the creditor, a satisfactory statement from the
student explaining any delinquencies with outstanding
balances of less than $2,000, or a reduction of the
credit requirements under this subsection in response
to a natural disaster or poor economic conditions that
are unforeseen or prolonged; and
``(G) in a case in which the Secretary determines
that a student does not to have an adverse credit
history in accordance with this subsection, shall
consider such determination to be in effect for a 2-
year period beginning on the date the Secretary makes
such determination.
``(3) Definition.--For purposes of this subsection, the
term `student' means a graduate or professional student or the
parents of a dependent student.''.
SEC. 3. INAPPLICABILITY OF TITLE IV NEGOTIATED RULEMAKING REQUIREMENT
AND MASTER CALENDAR EXCEPTION.
Sections 482(c) and 492 of the Higher Education Act of 1965 (20
U.S.C. 1089(c), 1098a) shall not apply to the amendment made by section
2, or to any regulations promulgated under such amendment.
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Protecting Educational Loans for Underserved Students Act - Amends title IV (Student Assistance) of the Higher Education Act of 1965 to establish criteria for the Secretary of Education to use in determining whether the credit history of applicants for William D. Ford Federal Direct PLUS loans renders them ineligible for such loans. (Federal Direct PLUS loans are provided to graduate or professional degree students and the parents of dependent undergraduate students.) Directs the Secretary to consider an applicant to have an adverse credit history on the basis of his or her credit report, absent a determination that the applicant has extenuating circumstances, if : (1) the applicant is 90 or more days delinquent on the repayment of a debt exceeding $2,000; or (2) during the three years before the credit report date, the applicant has been subject to a default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off of a title IV debt. Requires applicants that have been subject to such actions to participate in loan counseling provided by the applicable institution of higher education before becoming eligible for Federal Direct PLUS loans. Prohibits the Secretary from: (1) denying a Federal Direct PLUS loan to an applicant for having debt that is unrelated to title IV loans and is in collection or has been charged off, provided the applicant participates in such loan counseling; or (2) using the applicant's lack of a credit history as a reason to deny a Federal Direct PLUS loan to such applicant. Requires the Secretary to retain a record of the Secretary's basis for determining that an applicant has extenuating circumstances that make the applicant eligible for a Federal Direct PLUS loan despite having an adverse credit history. Makes the Secretary's determination that an applicant does not have an adverse credit history effective for the two years following such determination.
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The present being a suit upon a local statute, giving a particular remedy in the nature of a foreign attachment against garishees, who possess goods, effects or credits of the principal debtor, the decisions which have been made upon the construction of that statute by the state courts, are entitled to great respect; and ought in conformity to the uniform practice of this Court to govern our own decisions. This consideration saves us from the necessity of discussing many of the questions which have been so elaborately argued at the bar. If we were called upon to decide them upon general principles applicable to conveyances, which are assailed as being in fraud of creditors; we should have much difficulty in arriving at a conclusion upon some of the points, and should require further time for deliberation. But we are of opinion, that the case may be finally disposed of upon a single ground, which has received the sanction of the highest state court of Massachusetts. It is this. It appears from the facts, that the proceeds of all the property received by the assignees under this assignment, are insufficient to pay the amount of the just debts and demands due, bona fide, to the assignees. Under such circumstances, the established doctrine in Massachusetts is, that the assignees cannot be holden as trustees of the debtor under this process, so as to be chargeable to the creditor, who is plaintiff in the suit. Even if the assignment were held to be constructively fraudulent, in point of law, they would be entitled to retain for their own bona fide debts; for as to these, they stand upon equal grounds with any other creditors. This is understood to be the clear result of the cases decided in Massachusetts; and it therefore becomes unnecessary to go into the more extensive inquires presented by the arguments at the bar. Upon this ground we are all of opinion, that the judgment of the circuit court ought to be affirmed with costs. This cause came on to be heard on the transcript of the record from the circuit court of the United States for the district of Massachusetts, and was argued by counsel; on consideration whereof, it is considered, ordered and adjudged by this Court, that the judgment of the said circuit court in this cause be and the same is hereby affirmed with costs.
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This being a suit upon'a local statute, giving a particular remedy, in the nature of a foreign attachmeat,-gamst garnishees, who possess goods, effects, ot credits of the'principal debtoi; the decisions Whichuhave been made on the construction of that statute by the state edurt of Massaihusetts,, are entiiled'to great respect; *and ought, in conformity to the uniform practice of this Court, to govern its'decisions: [678] Where under a voiuntdry assign'naent of an insolventdebtor, the proceeds of al1lh e property-received by the assignees under the assignment are insufficient to pay theamountof thejust debts and dividends due to the assigneesj the established doctrine in Missachusetts is, that the assignees cannot be holden as trustees of the debtor, to the cre4itok who is the plaintiff in: an attachment, so as to be chargeable to him '.1 the suit. 'Even-if the assignment were held to be constructively fraudulent in point of law, thy would be entitled to retaixr their -own bona fide debts; for as to those, they stand upon equal grounds With any other creditors. This is understood to be the clear result of th cases decided in Massachusetts. [6783
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Introduction Social Security forms the foundation for our retirement income system. In 1998, it provided approximately $264 billion in annual benefits to 31 million workers and their dependents. However, the Social Security program is facing significant future financial challenges as a result of profound demographic changes, including the aging of the baby boom generation and increased life expectancy. In response, different groups and individuals have advanced numerous proposals that have called for the creation of some sort of mandatory or voluntary individual accounts. To better understand the potential implications of individual accounts, the Chairman of the House Committee on Ways and Means asked GAO to determine how individual accounts could affect private capital and annuities markets as well as national savings, the potential risks and returns to individuals, and the disclosure and educational information needed for public understanding and use of an individual account investment program. Social Security Has a Financing Problem The Social Security program is not in long-term actuarial balance. That is, Social Security revenues are not expected to be sufficient to pay all benefit obligations from 1999 to 2073. Without a change in the current program, excess cash revenues from payroll and income taxes are expected to begin to decline substantially around 2008. Based on the Social Security Trustees latest “best estimate” projections, in 2014 the combined OASDI program will experience a negative cash flow that will accelerate in subsequent years. In addition, the combined OASDI trust funds are expected to be exhausted in 2034, and the estimated annual tax income will be enough to pay approximately 70 percent of benefits. Every year, Social Security’s Board of Trustees estimates the financial status of the program for the next 75 years using three sets of economic and demographic assumptions about the future. According to the Trustees’ intermediate set of these assumptions (or best estimate), the nation’s Social Security program will face both solvency and sustainability problems in the years ahead unless corrective actions are taken. Over the next 75 years, Social Security’s total shortfall is projected to be about $3 trillion in 1998 dollars. Social Security’s long-term financing problem is primarily caused by the aging of the U.S. population. As the baby boom generation retires, labor force growth is expected to slow dramatically. Beyond 2030, the overall population is expected to continue aging due to relatively low birth rates and increasing longevity. These demographic trends will require substantial changes in the Social Security benefits structure and/or revenues (i.e., taxes and/or investment returns). Without such changes, current Social Security tax revenues are expected to be insufficient to cover benefit payments in about 2014, less than 15 years from now. These trends in Social Security’s finances will place a significant burden on future workers and the economy. Without major policy changes, the relatively smaller workforce of tomorrow will bear the brunt of financing Social Security’s cash deficit. In addition, the future workforce also would likely be affected by any reduction in Social Security benefits or increased payroll taxes needed to resolve the program’s long-term financing shortfall. As a result, without timely actions, certain generations could face the twin blows of higher burdens and reduced benefits. Individual Accounts Proposed to Help Solve Social Security’s Financing Problem Proposals have been advanced by different groups to reform Social Security through individual accounts. Such proposals basically also try to restore the Social Security program’s solvency and conserve its sustainability. In its report to the Social Security Commissioner, the 1994- 1996 Advisory Council on Social Security offered three alternative reform proposals, two of which would create individual accounts. The remaining proposal called for having the government invest the trust fund in financial assets, such as corporate equities. Numerous other proposals, also calling for individual accounts, have since been put forth by various organizations. Currently, therefore, there are a wide array of proposals that rely on some form of individual accounts. These proposals have in common the idea that to varying extents, individuals would manage their own individual accounts. The returns from these accounts would provide some or much of an individual’s future retirement income. Social Security is currently structured as a defined benefit program. The current Social Security program’s benefit structure is designed to address the twin goals of individual equity and income security—including retirement income adequacy. The basis of the benefit structure is that these twin goals, and the range of benefits Social Security provides, are currently combined within a single defined benefit formula. Under this defined benefit program, the worker’s retirement benefits are based on the lifetime record of earnings, not directly on the payroll tax he or she contributed. Alternatively, a number of individual account proposals introduce a defined contribution structure as an element of the Social Security program. A defined contribution approach to Social Security focuses on more directly linking a portion of the worker’s contributions to the retirement benefits that will be received. The worker’s contributions are invested in financial assets and earn market returns, and the accumulations in these accounts can then be used to provide income in retirement and an additional pre-retirement death benefit. One advantage of this approach is that the individual worker has more control over the account and more choice in how the account is invested. In essence, the defined contribution structure is similar to the current 401(k) or IRA systems. Some proposals combine defined contribution and defined benefit approaches into a two-tiered structure for Social Security. The aim is to maintain in some form the current existing system as a base tier and add an individual account component as a supplemental tier. Some proposals modify the existing benefit structure; and others propose features that provide guarantees of current law benefits or some other level, such as the poverty line. Other proposals have a more complicated formula including forms of matching. Thus, the relationship between contributions and benefits may be less direct. Under most of these proposals, individuals would receive part of their future benefits from a modified Social Security program and part from the accumulations from their individual account. Four Main Characteristics of Individual Account Proposals Most of the individual account proposals seek to create investment accounts that to varying extents are managed by the participants themselves. However, the actual details of how to structure individual accounts vary by each proposal. Individual account proposals are usually framed by four characteristics: (1) carve-out versus add-on; (2) mandatory versus voluntary participation; (3) range of investment options offered; and (4) distribution options (e.g., required annuitization or lump-sum pay- out). Carve-out Versus Add-on The first characteristic pertains to whether to carve-out a portion of Social Security’s tax that is to be invested in financial assets or to add-on a percentage to the current tax that is to be invested in financial assets. OASDI has a payroll tax of 12.4 percent. A carve-out involves creating and funding individual accounts with a portion of the existing payroll tax. Thus, some portion of the 12.4 percent payroll tax, such as 2 percent, would be carved out of the existing Social Security cash flow and allocated to individual account investments. The resulting impact would be that revenues are taken out of Social Security and less is left to finance current benefits. Other proposals take a different approach and add-on individual accounts as a type of supplementary defined contribution tier. For instance, 2 percent would be added on to the current tax of 12.4 percent. The resulting effect of an add-on leaves the entire 12.4 percent payroll tax contribution available to finance the program while dedicating additional revenues for program financing either from higher payroll taxes and/or from general revenue. Mandatory Versus Voluntary The second characteristic of individual account proposals concerns whether to make investments in individual accounts mandatory or voluntary. Mandatory participation in individual accounts would require that each individual invest some percentage of his or her payroll tax contribution in financial assets such as equities. Voluntary participation in individual accounts could allow individuals to opt in or opt out of investing any portion of their payroll tax contributions into financial assets. Individuals would rely on the existing Social Security if they chose to opt out of participating in individual accounts. Other voluntary approaches allow individuals to contribute with or without matching to a retirement account. Additionally, mandatory or voluntary can also refer to the pay- out an individual receives upon retirement, such as a pay-out in the form of a lump sum. Investment Choices The third characteristic has to do with the degree of choice and flexibility that individuals would have over investment options. Some proposals would allow unlimited investment choices, such as investments in corporate equities, bonds, or real estate. Other proposals would offer a more limited range of choices, such as equity or bond indexed funds. Thus, individual account investments offer individuals some range of choice over how to accumulate balances for their retirement. Annuitization Versus Lump-Sum The final characteristic centers around how the accumulated earnings in individual accounts will be paid out. Preserving individual’s retirement income prior to pay-out by prohibiting pre-retirement distributions or loans is also a requirement of most proposals. However, upon pay-out, some proposals would permit requiring annuities--contracts that convert savings into income and provide periodic pay-outs for an agreed-upon span of time in return for a premium. Other proposals suggest allowing the individual to withdraw the account balance in lumpsum or through gradual pay-outs. Individual Accounts are Different From the Current Social Security Program Among the changes implementing individual accounts would make to the current Social Security program is to move away from a pay-as-you-go system in the direction of an advanced funded system. Pay-As-You-Go Social Security is currently financed largely on a pay-as-you-go basis. Under this type of financing structure, the payroll tax revenues collected from today’s workers are used to pay the benefits of today’s beneficiaries. Under a strict pay-as-you-go financing system, any excess of revenues over expenditures is credited to the program’s trust funds, which function as a contingency reserve. Advanced Funding Through Individual Accounts Advanced funding refers to building and maintaining total balances for Social Security, whether that is done through individual accounts or some other mechanism. Thus, although individual accounts are a form of advanced funding, the two terms are distinct. For instance, building up the balance in the Trust Funds is a form of advanced funding. The creation of individual accounts refers to a defined contribution system of accounts connected to Social Security and held in individuals’ names. Essentially, individual accounts would be advanced funded income arrangements similar to defined contribution plans or 401 (k) plans. Although privately held individual accounts are a widely discussed means to achieve advanced funding, there are other ways to achieve advanced funding. Another approach to advanced funding using private markets would have the government invest directly in private capital markets. Building up the Trust Fund using Treasury securities (marketable or nonmarketable) is another form of advanced funding, although it does not involve diversification gains. Proponents of individual accounts often state that advanced funding and asset diversification are benefits of their proposals. Yet, although advanced funding, individual accounts, and asset diversification are often linked, they are conceptually different. Diversification refers to investing in more than one asset and can be performed by individuals investing in individual accounts or by the government investing the trust fund in corporate equities stocks as well as corporate bonds. Any one of the three categories could change without changing the other. For instance, Social Security’s Trust Funds are currently invested in nonmarketable Treasuries. Allowing the Trust Funds to invest in assets other than Treasuries would be diversifying without introducing individual accounts. Alternatively, individual accounts could be introduced whereby individuals are allowed to invest in only one asset--thereby introducing individual accounts without diversifying. Savings Implications of Advanced Funding Whether advanced funding through individual accounts increases national saving is uncertain. The nation’s saving are composed of the private saving of individuals and businesses and the saving or dissaving of all levels of government. Supporters of advanced funding point out that individual accounts offer a way to increase national savings as well as investment and economic growth. Others suggest that the national saving claims of those favoring advanced funding through individual accounts may not be realized. Whether advanced funding through individual accounts increases national saving depends on a number of factors, including how individual accounts are financed (existing payroll tax, general revenues); how private saving responds to an individual account system; the structure of the individual account system (mandatory or voluntary), and the limitation or prohibition of pre-retirement distributions and loans to make sure retirement income is preserved. Furthermore, even if national saving increases as a result of individual accounts, individuals may or may not be better off. Saving involves giving up consumption today in exchange for increased consumption in the future. Some economists have stated that it is not necessarily the case that all increases in saving are worth the cost of foregone consumption. Objectives, Scope, and Methodology The Chairman of the House Committee on Ways and Means asked us to determine how individual accounts could affect (1) private capital and annuities markets as well as national savings, (2) potential returns and risks to individuals, and (3) the disclosure and educational information needed for public understanding and use of an individual account investment program. To determine the effect of individual accounts on the private capital and annuities markets, as wells as risk and return issues, we interviewed economists and other officials who were both proponents and opponents of individual accounts. These officials included officials from think tanks as well as academicians who have studied Social Security reform. We also reviewed and analyzed several studies relating to the impact of individual accounts on the market as well as studies that had tried to assess the risks and return issues that would arise because of individual accounts. We also analyzed data from the Federal Reserve Flow of Funds as well as data provided by the insurance industry. Additionally, we talked to industry officials from both the insurance and securities industries to obtain their views, and we interviewed government agency officials as. To determine the disclosure and educational requirements needed, we spoke to officials from the Securities and Exchange Commission (SEC), the Department of Labor’s (DOL) Pension and Welfare Benefits Administration (PWBA), the Pension Benefit Guaranty Corporation, and the Social Security Administration (SSA). We also spoke to private sector officials about the educational requirements that would be needed for an individual account program. Additionally, we reviewed various studies that have looked at the best ways to educate people about investment and retirement education. Because of the wide-ranging nature of the numerous proposals being advanced, our report focuses on the common, or generic, elements that underlie various proposals to reform Social Security financing rather than on a complete evaluation of specific proposals. We did our work in accordance with generally accepted government auditing standards between October 1998 and June 1999 in Washington, D.C., and New York, NY. We requested comments on a draft of this report from SSA, SEC, DOL, the Department of Treasury, and the Federal Reserve Board. SSA provided written comments that are included in appendix I. A discussion of these comments appears at the end of chapters 2 and 3. SSA and the other agencies also provided technical and clarifying comments, which we incorporated in this report where appropriate. Capital and Annuities Markets Able to Absorb Individual Account Investments Individual accounts can affect the capital markets in several ways depending on how the accounts are funded, how the funds are invested, how people adjust their own savings behavior in response to having individual accounts, and the restrictions placed on using funds in individual accounts for anything other than retirement income. Most of the proposals use either the Social Security cash flow or federal general revenues as a source of funds. As a result, the primary capital market effect is a purely financial one: borrowing in the Treasury debt market (or retiring less debt) to provide funding for investment in private debt and equity markets. Although the amounts involved are likely to be sizeable, the effect would primarily be one of redirecting funds and readjusting the composition of financial portfolios. There may also be some effect on the difference between the return on Treasury debt and that paid on riskier assets, although the effect is not likely to be large. Although substantial inflows into the private debt market could, in certain circumstances, result in some increased volatility, both the private equity and debt markets should be able to absorb the inflows without significant long-term disruption. There could eventually be a significant increase in the amount of new funds flowing into the annuities market. However, the magnitude of annuity purchases is likely to build gradually over time as more retirees build larger balances, allowing the market sufficient time to adjust. Another potential effect of individual accounts would be an increase or decrease in national savings—the overall level of domestic financial resources available in the economy for the purpose of investing in plant and equipment. Whether individual accounts would increase or decrease national savings depends on how they are financed, how private savings changes as a result of individual accounts, and whether there are restrictions on households’ ability to borrow. Redirection of Funds Could Affect Composition of Portfolios Most proposals use either the Social Security cash flow or federal general revenues as a source of funds for individual accounts. The funds raised are then to be invested in private equity or debt markets. As a result, there would be an increase in the relative supply of Treasury debt available to the public and an increase in the relative demand for private debt and equities to be held in individual accounts. This redirection of funds— selling Treasury debt for the cash to invest in private debt and equity—is a purely financial effect. It is likely to result in a change in the composition of private sector holdings as businesses and households absorb the extra government debt and provide new or existing private debt and equity, thereby adjusting their portfolios. Whether the resources for individual accounts come from Social Security contributions or general revenues, the level of government debt held by the public would increase, or not fall as much as it otherwise would. The only cases in which an increase in debt held by the public would not occur would be those in which the resources come from an additional source of funding—either a tax increase, an expenditure reduction, or the result of some voluntary private saving—that would not otherwise have occurred. Increased government borrowing from the public could put some upward pressure on the interest rate at which the government borrows, if private sector borrowers are to be persuaded to hold the increased supply of government debt. Funds diverted to private equity and debt markets could have the effect of raising the prices and therefore lowering the yields (rates of return) on these higher risk assets. The combined effect could narrow somewhat the difference between the more risky and least risky assets. Debt Held by the Public Will Likely Rise to Provide Funding Whether resources used to finance individual accounts come from new revenues, additional borrowing, or surpluses, the amounts flowing into private capital markets are likely to be substantial. Funding of individual accounts will come directly or indirectly from increased government borrowing from private markets, unless funded by a tax increase or spending reduction. To fund most individual account proposals, the government would need to raise resources either by borrowing in the market or—under a surplus scenario—by not retiring as much maturing debt as it otherwise would. For certain proposals, changes in borrowing may not arise because these proposals rely on a tax increase or benefit reduction so that current cash flow is not affected. If the source of funding for individual accounts is a carve-out from the current Social Security cash flow, this loss in cash flow would have to be made up from increased borrowing, a reduction in benefits, or some other program change. Alternatively, if the source of funding is general revenues, either additional borrowing from the public or less debt retired will be necessary depending on whether the overall budget is in deficit or surplus. Only if the government raises taxes or reduces spending, and uses those revenues to finance individual accounts, is there not likely to be any effect on borrowing because the remaining cash flow would not be affected. Funds Would Be Redirected Into Private Capital Markets The uses of the funding for individual accounts will depend on the options available to investors and the choices they make within those options. To the extent that investors choose to invest in Treasury debt, there is that much less flowing into private capital markets, and any effects on those markets would be reduced. However, investors or their agents are likely to put at least some, if not most, of the funds into the private equity or debt market, and some proposals call for all of the funds to be invested in private markets. The size of this potential flow of funds into the private sector depends on whether individual account investments are mandatory or voluntary as well as the percentage of payroll that forms the basis for the program. The actual amounts allocated to private equity and debt will depend upon individual choice to the extent such choice is allowed, or on selected percentages if those are set by law. The initial annual dollar amount flowing into the capital markets as a result of individual account investments could be about $70 billion (2 percent of payroll) in 1998 dollars. According to our analysis of Social Security Administration (SSA) data, the effective taxable payroll for all working individuals will steadily increase well into the future. As a result, the annual dollar amount from individual account investments is likely to increase. For instance, our analysis of SSA data indicates that in the year 2020, the effective taxable payroll will be almost $11 trillion. On the basis of that dollar amount, if 2 percent is the designated percentage, the amount flowing into the private equity and debt markets from individual accounts would be about $220 billion in the year 2020. Current Size of the Private Capital Markets U.S. capital markets are the largest and most liquid in the world. The total market value of U.S. equities outstanding at the end of 1998 was about $15 trillion. The total value of corporate bonds outstanding in the United States was about $4 trillion at the end of 1998. The amount of Treasury debt outstanding was also about $4 trillion. As shown in table 2.1, the amounts outstanding for corporate equities and corporate bonds have been increasing. For instance, in 1997 there was about $13 trillion in equities outstanding, up from $10 trillion in 1996. The amounts outstanding for corporate bonds has increased from about $3 billion in 1996 to about $4 billion in 1998. On the basis of the current size of the corporate equity and bond markets, the amount representing individual accounts is likely to be a small percentage of private capital markets, at least for a number of years. For instance, using a payroll percentage of 2 percent, if $70 billion were to come from individual accounts, it would represent less than 0.5 percent of the $15 trillion in equity outstanding in 1998 and less than 2 percent of the $4 trillion in corporate bonds outstanding in 1998. Various officials have expressed concern that over time, individual account investments would represent significant portions of the corporate equities and bond markets. It is likely that investments from individual accounts could eventually rival current holdings of other major sectors of the market and represent a sizeable portion of equity and corporate bond holdings. For instance, if 2 percent of payroll is placed in individual accounts annually, SSA estimates that stock holdings in individual accounts could grow to between $1 trillion and $2 trillion in 1996 dollars over the next 15 years. The overall market will grow at about the market rate of return, although individual components may grow faster or slower depending on strategies and relative demands by mutual funds, pension plans, and other investors. For instance, as shown in table 2.2, the total value of equity holdings of mutual funds was $2.5 trillion in 1998, and the total value of corporate and foreign bond holdings was about $339 billion. The holdings of various sectors, such as private pension plans, were about $2.2 trillion of equities and about $301 billion of corporate bonds in 1998. Thus, although individual account holdings are likely to increase over time, the holdings of many other sectors of the economy are also likely to rise, although certain individual sectors may not. In general, it is difficult to predict how rapidly the sum of these sectors holdings will grow, especially in the presence of individual accounts. Current Flows Into Private Capital Markets Even if the annual flows from individual accounts into private capital markets were a small percentage of the total market value of outstanding debt and equities, these amounts could still represent a substantial increase in the annual flows into those markets. The actual amounts will depend on the options available to individuals as well as the choices they make. If a large percentage of funds from individual accounts flowed into the equity markets, it could represent an increase of approximately 15 to 20 percent in the flow of funds into and out of the equity market, according to data from the Federal Reserve Flow of Funds. It is not clear that such an increase would have much effect on the pricing, or volatility, of the equity markets. However, the corporate bond market, which is smaller, could be affected, at least in the short term, depending on how much of the funds flow into the market and, to some extent, on the timing of those flows. Current Stock Market Flows Most U.S. equities markets are very liquid—it is easy for investors to buy and sell equities without moving the price. Various sectors of the economy, such as the household sector, mutual funds, private pension plans, and life insurance companies, purchase and sell equities every day. The equities market is a secondary market in which much of the transaction volume and value reflects movement of equities between purchasers and sellers. The annual net purchases can be positive or negative, reflecting the difference between the value of new equities issued and the value of equities repurchased; however, the amounts purchased and sold by specific sectors can be quite large. For instance, the annual net purchases of equities were minus $3 billion in 1996, minus $79 billion in 1997, and minus $178 billion in 1998. As can be seen in table 2.3, the three largest purchasers bought in the range of $300 billion in securities each year from 1996 to 1998. In terms of sellers, the household sector sold almost $300 billion in 1996 and about a half of a trillion dollars in both 1997 and 1998. Annual flows within the equities market were in the hundreds of billions of dollars between 1996 and 1998. Over that period, mutual funds, life insurance companies, and state and local government retirement plans were the primary purchasers, and private pension plans and households were the major sellers of equities. Compared to these annual amounts, an additional tens of billions of dollars generated by individual accounts is not likely to cause major disruptions and could potentially be absorbed without significant price or volatility effects. There is a greater chance of some possible disruption, however, if all of the individual account funds were to flow in at once rather than regularly, but not too predictably, over the course of the year. For instance, $70 billion distributed evenly over the year would be unlikely to cause much disruption. However, concentrating that same flow into one quarter of the year could have some short-term effect on the market because it would represent a substantial increase in quarterly flows. As a result, to minimize the likelihood of disruption, it would make sense, to the extent practicable, to smooth out the inflows so that they do not all come into the market within a short time period. If the inflows are lumpy and predictable, the market may be able to anticipate the inflows and adjust prices somewhat, which could mean that individual account purchases would pay slightly higher prices than they otherwise would. Corporate Debt Flows The corporate debt markets are not as transparent as the corporate equities markets; for example, there are no central listings for the prices of the bonds or the volume of corporate bonds sold. They also do not have as much depth as the equities markets—there are fewer buyers and sellers in the corporate bond markets. Many corporate bond transactions are done through private placements; i.e., they are not offered to the corporate debt market as a whole. The result is a market with less liquidity reflected in a greater spread between the bid price (what you will pay for the bond) and the ask price (the price at which you would sell the bond). As stated previously, the value of outstanding corporate debt is substantially less than the market value of corporate equities. On an annual flow basis, corporate debt issues have been running in the hundreds of billions of dollars over the last decade. However, some proportion of that is short term (less than 1 year in maturity) so that the total is not easily comparable to the annual amounts of equities purchased and sold. As shown in table 2.4, the annual net purchases of corporate bonds by various sectors ranged from as low as $17 billion for state and local government retirement plans of in 1996 to as high as $79 billion for life insurance companies in 1996. On the basis of annual flows, it is difficult to say what the effect on the bond market is likely to be. However, if we compare the corporate bond and equity markets, we can draw some tentative conclusions about the likelihood of individual accounts having a disruptive effect on either market. The corporate bond market is relatively smaller and less liquid than the equity market. As a result, an inflow into the bond market is more likely to affect the market price and the volatility of the market, compared to an equivalent inflow into the equity market, especially if it is concentrated in a short period of time. Any disruption is still likely to be short term in nature and can be mitigated if the inflow is spread over time, so that other market participants are less able to predict the inflows and raise prices in anticipation of the inflow. Treasury Debt Although there are various types of Treasury debt, the overall market for U.S. Treasuries is far more liquid and transparent than the corporate bond market. A large secondary market—in which Treasury securities are bought and sold subsequent to original issuance—exists for Treasuries and helps to make it one of the most liquid markets in the world. Annual net purchases of Treasuries were $23 billion in 1997 and minus $55 billion in 1998. The effect on the Treasury debt market from a movement to individual accounts will depend not only on the choices available to individuals but also on the extent to which the government borrows from the private capital markets to fund individual accounts. As stated previously, to fund any individual account proposal that does not increase Social Security contributions, the government would need to raise resources either by borrowing in the market or by not retiring as much maturing debt as it otherwise would. The Treasuries market, therefore, could be affected in two ways: (1) by how much the government borrows to fund individual accounts, and (2) by how much individuals choose to invest in Treasuries. However, the depth and liquidity of the Treasury debt market is such that the market is unlikely to be significantly disrupted even by a large flow of funds resulting from individual accounts. Affect of Individual Accounts on the Annuities Markets Annuities protect against the possibility of outliving one’s financial resources by guaranteeing a stream of income for the remainder of one’s life, regardless of how long that may be. Annuities basically convert savings into income and may be sold individually or as a group product. In a group annuity a pension plan provides annuities at retirement to a group of people under a master contract. It usually is issued by an insurance company to an employer plan for the benefit of employees. The individual members of the group hold certificates as evidence of their annuities. Depending on the structure of individual accounts, individuals may be required to purchase individual annuities or, similar to pension and other retirement plans, fall under a group annuity. One measure of the size of the annuities market is the level of the insurance industry’s policy reserves—the sum of all insurers’ obligations to their customers arising from annuity contracts outstanding. Each company is required by state insurance regulators to maintain its policy reserves at a level that will ensure payment of all policy obligations as they fall due. As shown in table 2.5, policy reserves for individual annuities were about $693 billion and for group annuities about $762 billion. Insurance industry officials told us that the annuities industry is likely to be able to absorb the flows from either mandatory or voluntary annuitization. Once again, we are talking about a movement of financial resources from one form to another rather than a new source of funds. The funds will be moved out of whatever investment instruments (assets) workers were using for accumulation purposes into a potentially different combination of assets held by companies supplying annuities. Insurance industry officials believe that, generally, annuities resulting from the liquidation of the individual accounts would be phased in gradually and over a number of decades. In the early years, few if any retirees would have built up substantial individual account balances. As time passes, both the number of retirees with individual account balances and the average size of those balances would gradually increase, allowing the industry and the market time to adjust without difficulty. One issue raised by insurance industry officials was that an individual account proposal that made annuity purchases mandatory at retirement could result in the demand for a significant number of very small annuities. For instance, at least initially, there would be many small accounts below $2,000. Currently, annuity purchases average about $100,000. Although the industry could absorb a significant number of small accounts, industry officials said that providing annuities that small could be uneconomical for the industry because the cost of issuing a monthly check, and other administrative costs, would be prohibitive. Effect of Individual Accounts on National Savings Depends on Financing, Structure, and Behavioral Effects Although the financial effects of individual accounts are an important consideration, a related but somewhat separate issue is the potential for individual accounts to increase or decrease national saving. Along with borrowing from abroad, national savings provides the resources for private investment in plant and equipment. The primary way in which a movement to individual accounts could change the overall capacity of the economy to produce goods and services would be if individual accounts were to lead to a change in the overall level of national saving. The extent to which individual accounts affect national saving depends on how they are financed (existing payroll tax, general revenues)—the effect on government saving; how private savings—the savings of households and businesses—respond to an individual account system; the structure of the individual account system (mandatory or voluntary); and the limitation or prohibition of the pre-retirement distribution or loans to make sure retirement income is preserved. Savings Affected by Funding Source One important determinant of the effect of individual accounts on national savings is the funding source. There are several possible funding sources, although most involve a movement of funds from or through the federal government and each has its own effects on the federal government’s portion of national saving. For some funding sources these savings effects are clearer than others. As previously stated, the funds can come from (1) within the current Social Security system, i.e., the surplus or current cash flows; (2) a change in the system resulting from increased payroll taxes or reduced benefits; or (3) outside the system using a general fund surplus or general revenues. Using either the Social Security surplus or more generally the current Social Security cash flow is likely to reduce government saving. If part of the cash flow is diverted to individual accounts but there is no change in the benefits paid or the taxes collected, the lost cash flow will either result in a smaller addition to the surplus or be replaced by borrowing. In either case the result is a reduction in the measured government surplus—the sum of the Social Security surplus and the general fund surplus—or an increase in the deficit. From the government’s perspective, its saving has gone down to provide the resources for increased personal savings through individual accounts. This is a case of a carve-out from Social Security. If the resources for individual accounts are financed by additional Social Security taxes or reduced benefits instead, there will be no direct effect on government savings. The increased outlays for individual accounts will be offset by higher government revenues or lower government benefit payments. In the absence of other changes in Social Security cash flows, government savings remain constant, and any increase in private saving would be an increase in national saving. This is a case of an add-on to both Social Security and to the overall government budget. The most complicated case involves the use of funds that are outside of the Social Security system but part of the overall government budget. There are proposals to use the overall budget surplus or general government revenues as a source of funds for individual accounts. Although on its face this appears to reduce government savings by the amount diverted, the actual effect on government savings depends on what would have been done with the surplus or revenue if it had not been used to finance individual accounts. For example, if the resources would have been used to finance additional government spending, and the diversion of the funds to individual accounts means that such spending is not undertaken, government saving would not be reduced by individual accounts. In this case, any increase in private saving would be an increase in national saving. Similarly, if the resources would have been used to finance a tax cut, then diverting funds to individual accounts does not directly reduce government savings if the tax cut is not undertaken. In the case of a tax cut, national saving will go up if individual accounts generate more private saving than the tax cut. If the funds would have been used to pay down debt, the direct effect of diverting those resources to individual accounts would be to reduce government saving. The full effect on national saving depends on the extent to which individuals adjust their own savings behavior. If they do not adjust, national saving is on balance unaffected. To the extent individuals or businesses reduce their saving, national saving will fall. Behavioral Effects Are Difficult to Predict The effects of various individual account proposals on national saving depend not only on how the proposals affect government savings but also on how private savings behavior will respond to such an approach. Regardless of the financing source, the effect of individual accounts will be to raise, at least to some extent, the level of personal or household saving unless households fully anticipate and offset through a reduction in their own saving. For example, a carve-out from the existing Social Security cash flow would provide funding for individual accounts for everyone (under a mandatory approach) or for those who wished to participate (under a voluntary approach). Such a carve-out is likely to reduce government saving and raise private saving by an equivalent amount in the absence of any behavioral effects. If households are forgoing current consumption by saving for their retirement, then, in response to this potential increase in future retirement benefits, they may reduce, to a greater or lesser extent and in various ways, their own savings, including retirement saving. To the extent that household responses lead to reduced personal saving, national savings as a whole would fall under a carve-out. In general, the result would be similar under any proposal that reduced government saving to fund private saving through individual accounts. This includes proposals that use general revenues that would have been saved by the government; i.e., used to reduce the deficit or retire debt outstanding. The overall level of consumption in the economy is not likely to change as a result of the movement of funds. Any significant change in the level of consumption resulting from such proposals would result from some households reducing their retirement savings to fund consumption because they now had individual accounts. Behavioral Change Depends on Preferences and Opportunities The extent of these behavioral effects will depend on the structure of the program and any limitations that are placed on the use of funds in individual accounts, such as restrictions on preretirement withdrawals. If such a program is mandatory rather than voluntary, it is more likely to affect those households who currently either do not save or do not save as much as the amounts in their individual accounts. A mandatory program would increase savings for those who do not usually save, who are usually low-income people. Household behavior in response to individual accounts will depend on the extent that the household is currently saving for retirement and how the set of options available to households is changed by the presence of individual accounts. One group of households, those that are currently saving as much as they choose for retirement, given their income and wealth, would probably reduce their own saving in the presence of individual accounts. For those households for whom individual accounts closely resemble 401(k)s and IRAs, a shift to individual accounts might lead them to decrease their use of these accounts. They would have additional retirement income possibilities available and might choose to reduce their retirement or other saving to use for consumption in the present rather than in the future. However, unless they were target savers, i.e., savers who were trying to reach a specific retirement income goal, they might not reduce their other savings dollar for dollar with individual accounts. Therefore, we might expect some reduced saving by a significant number of households; for certain households, we might expect a substantial reduction. Under a voluntary approach, the households that are most likely to participate are those households that are currently saving but that face some constraint in terms of the type of retirement saving they can do or the amount of tax-preferred saving they are allowed. For example, someone whose employer offered only a defined benefit retirement plan or a defined contribution plan with very limited options might find that voluntary individual accounts offered a new opportunity. In addition, someone who was already contributing as much as he or she was legally allowed to tax-deferred savings would find a voluntary program attractive if it allowed an additional amount of tax-deferred saving. These and others who take advantage of a voluntary program may be more likely to reduce other forms of saving in response. Households that are currently not saving, either because they are resource constrained or because they are not forward-looking, would be forced to save some amount by a mandatory individual account system. Households in such situations may welcome the additional resources, especially if they do not come from a direct reduction in their own consumption. However, such households may also try to transform some of the additional resources into consumption if they are able to borrow from the accounts or otherwise tap into the accounts before retirement. To maintain retirement income adequacy and to keep savings from being dissipated, it may be necessary to prohibit or restrict borrowing or other methods of drawing down individual accounts prior to retirement. Even with such restrictions, it may not be possible to completely eliminate all options that households could use to indirectly increase consumption from individual accounts. For example, households with little or no retirement saving or other financial wealth could have wealth in some other form, such as home equity. It is conceivable that such households could borrow against that home equity as a way of turning their increased future consumption into present consumption. In addition to the effects of individual accounts on household savings there are also other potential indirect effects on private saving. For example, the incentives for employers to provide retirement benefits, either through defined benefit or defined contribution plans, could be affected by individual accounts. In addition, if less compensated workers in a defined contribution plan reduce their contributions to the plan, higher compensated workers may be required to reduce their own contributions under the antidiscrimination rules. Offsetting these tendencies to reduce saving, however, there are some economists who believe that individual accounts might encourage certain individuals to save more for retirement and thus not reduce their current savings. Such an effect is more likely to be present if there is some form of matching by the government as part of the individual account proposal. Others believe that to the extent that a lack of saving is based on people not taking a long enough view, the presence of individual accounts and watching them accumulate could give people a better sense of how saving small amounts can add up over time. This, plus observing how compounding works, could induce some to save who otherwise would not. National saving is more likely to be increased by some approaches to individual accounts than by others. Using sources of government funding that would more likely have resulted in spending rather than saving decreases the likelihood that government saving would be reduced. Proposals that are mandatory are more likely to increase private saving because a mandatory program would require that all individuals, including those who do not currently save, place some amount in an individual account. Certain prohibitions or restrictions on borrowing or other forms of preretirement distributions would also limit the ability of some households to reduce their savings in response to individual accounts. Agency Comments SSA commented that we needed to discuss the savings implications of the President’s proposal. This report was not intended to comment on specific reform proposals. Return and Risks Are Likely to be Higher With Individual Accounts There is a risk/return trade-off for individuals under an individual account program; instituting such a program would likely raise both the risks and the returns available to participants compared to the current system. In order to receive higher returns, individuals would have to invest in higher risk investments. The return that individuals receive would depend on both their investment choices and the performance of the market. Individuals who earn the same wages and salaries and make the same contributions to Social Security could have different retirement incomes because of the composition of their portfolios and market fluctuations. As with any investment program, diversification and asset allocation could reduce the risks while still allowing an individual to earn potentially higher returns. Most advocates of individual accounts state that the expected return on investments under an individual account program would be much higher for individuals than the return under the current Social Security program. Proponents of individual accounts usually point out that equities have historically substantially yielded higher returns than U.S. Treasuries, and they expect this trend to continue. Others are skeptical about the claims for a continuation of such a high expected return on equities. They state that history may not be a good predictor of the future and that the expected premium generated by investing in equities has steadily been declining. Furthermore, they state that even if expected equity returns are higher than other investments, equity returns are risky. Thus, in order to determine what returns individuals might expect to receive on their individual account investments, the riskiness of the investment should be taken into account. Adjusting returns to include risks is important, but there are many ways to do this, and no clearly best way. Lastly, comparing the implicit rate of return that individuals receive on their Social Security contributions to expected rates of return on market investments may not be an appropriate comparison for measuring whether individuals will fare better under an individual account system. Such comparisons do not include all the costs implied by a program of individual accounts. In particular, the returns individuals would effectively enjoy under individual accounts would depend on how the costs of the current system are paid off. Rates of return would also depend on how administrative and annuity costs affect actual retirement incomes. Instituting an Individual Account Program Means Greater Risk to Individuals for Potentially Greater Return An individual account program would offer individuals the opportunity to earn market returns that are higher than the implicit returns to payroll under the current Social Security program. However, investing in private sector assets through individual accounts involves a clear trade-off-- greater return but more risk or more variability in future rates of return. Under the current Social Security program, risks are borne collectively by the government. Moving to an individual account program would mean that individuals reap the rewards of their own investments, but they also incur risk—not only about future returns, but also the possibility of losing money and even having inadequate income for retirement. However, holding assets for the long term, diversification, and the proper asset allocation can mitigate certain risks and improve an individual’s risk/return trade-off. Risk/Return Trade-Off A trade-off exists between risk and return in investments. If an individual is willing to consider the possibility of taking on some risk, there is the potential reward of higher expected returns. The capital markets offer a wide variety of investment opportunities with widely varying rates of return, which reflect variations in the riskiness of those investments. For instance, Treasury Bills are considered to be relatively risk free because they have almost no default risk and very little price risk. Alternatively, equities are considered to be relatively risky because the rate of return is uncertain. Because debt holders are paid out of company income before stockholders, equity returns are more variable than bonds. Overall, annual returns on equities are more volatile than returns on corporate bonds or Treasuries. On a long-term average basis, the market compensates for this greater risk by offering higher average returns on equities than on less risky investments. Thus, among the three types of investments, corporate equities are the riskiest investments but pay the highest returns, followed by corporate debt and then Treasuries. However, holding riskier investments such as equities over long periods of time can substantially diminish the risk of such investments. The degree of risk and the size of potentially higher returns with individual accounts depend on the equities chosen as well as the performance of the market. A stock’s value is tied to the expected performance of the issuing company. If the company does well, investing in individual equities could be very lucrative for investors. However, if the company does poorly, investing in individual equities could result in low returns or losses to the investor. Many financial analysts go through intensive research to try and pick the best stocks. Choosing the right stock, however, can be mostly a matter of a “random walk.” Diversification Improves Risk/Return Trade-Off Individuals may mitigate the risk of holding equities and bonds by diversifying their portfolios and allocating their investments to adjust their risk exposure and to reflect their own risk tolerance and circumstances. Ultimately, the composition of an individual portfolio, along with the performance of the market, determines the return individuals receive and the risk they bear. In constructing a portfolio investors combine equities and bonds and other “securities” in such a way as to meet their preferences and needs, especially their tolerance for risk. Individuals manage their portfolios by monitoring the performance of the portfolios and evaluating them compared to their preferences and needs. Many people have been managing portfolios for years. There are, however, many others who either do not have portfolios or do not consider what they have as a portfolio. With individual accounts, all individuals would eventually have to manage their portfolios as they start to own various investments, especially if they have options over individual securities or types of securities. A well-diversified portfolio could help to diminish risk without lowering the return, thereby improving the risk/return trade-off. For instance, a properly selected combination of risky assets can have a lower risk than any of its individual assets because the risk is spread out among different assets allowing for gains in some assets to offset losses in others. Such portfolios could provide higher average returns over the long term than a single asset with equal risk. Furthermore, diversifying an equity portfolio across companies and industries reduces both default and concentration risk and reduces the likelihood that a portfolio’s return will vary widely from the expected market return. In order to quantify the diversification of a portfolio, concepts like correlation and covariance are used to measure how much the returns on assets move in tandem with one another. For instance, if annual returns on different investments are not very correlated, their risks can offset each other even though they still individually earn higher average returns. Such techniques, however, are very sophisticated, require substantial data analysis, and would require the help of professional advisors for the average investor. However, there are ways for individuals to take advantage of many of the benefits of diversification without needing to calculate correlation and covariance measures. Indexing is one way to broadly diversify an equity portfolio and to match the approximate market return. Typically, investing in broad-based stock indexes such as the Standard & Poor’s 500 index—which represents about two-thirds of the value of the U.S. stock market—diversifies an individual’s portfolio by reducing the likelihood of concentrating investments in specific companies. Such investments also tend to reduce turnover and lower administrative costs because they do not involve as much research or expensive investment advice. A diversified stock portfolio, however, does not protect against the risk of a general stock market downturn. One way to mitigate U.S. stock market risk is to diversify into international markets. An investor can also shield against general stock market risk by diversifying into other types of assets, such as corporate bonds. To minimize exposure to short-term stock market fluctuations, an investor can hold less risky, albeit lower yielding, assets to cover liquidity needs in the short run. Asset allocation can provide an approach to portfolio diversification. For example, percentages can be allocated to equities (including indexes), bonds, and Treasuries. These allocations will generally reflect preferences for risk as well as an individual’s life-cycle phase. Those with a higher tolerance for risk and those who are younger would generally invest more in equities. Those in later life-cycle phases might invest more in bonds or Treasuries. Individuals Bear Most of the Risk The primary risk that individuals would face with diversified or indexed individual account investments is “market risk,” the possibility of financial loss caused by adverse market movements. When the stock market drops, prices of some equities fall and can stay depressed for a prolonged period of time. Although a long investment time horizon provides the individual more time to recover from short-term fluctuations, an individual also would have more time to encounter a prolonged stock market downturn. Thus, although long periods of time can help mitigate the effects of market risk, it does not disappear over time. Under most individual account programs, individuals would bear much if not all of the market risk. Although market risk would not increase with the introduction of an individual account program, more people would be exposed to it under an individual account program than are under the current Social Security system. Some individuals would do very well under such an individual account program, but others may not do as well and could experience a significant drop in their expected retirement income compared to others in the same age group or to the current Social Security program. Furthermore, those who are reluctant to invest in the stock market may not benefit from the potentially higher returns of equity investing. Thus, the investment choices individuals make, as well as the performance of the market, would determine the return they would receive under an individual account program. Individual Returns May Vary Under an Individual Account Program Individuals who retire at the same time may receive different pay-outs from individual account investments because of the choices they have made. Although some individuals could make the same choices, individuals are more likely to make different choices. In part, differences may come about due to luck; other differences may be more systematic. For instance, higher income people may be willing to take on more risk— and possibly earn higher returns—than lower income people. For this reason, higher income individuals could earn higher rates of return than lower income individuals under an individual account program, which is not the case under the current Social Security program. Many programs also provide for a default option for those who do not wish to take an active part in investing in individual accounts. One type of default option would provide investments in Treasuries with very low risk and a low return. Others could provide an asset allocation, possibly age related, with more equities included for younger workers and more Treasuries for older workers. Returns could vary across cohorts as well under an individual account program. Even if some cohorts made the same choices, given the volatility of the stock market, the returns could vary substantially across different time periods and affect cohorts differently. For instance, even if the market experienced no dramatic or long-lasting downturns, the market will create “winners” and “losers” depending on when and how individuals invest their individual account investments and when they liquidate their holdings. As long as workers are aware of and accept the idea that returns may vary across individuals as well as cohorts, there will probably not be calls to fix the “unfair benefits outcomes.” However, if large differences in outcomes become commonplace, many participants could become dissatisfied with the program and demand some payment from the government to make up for any losses they incur or even if substantial differences result. For instance, those that have incurred losses may expect the government to mitigate their losses when they do not receive the return they believe they were led to expect. Furthermore, individual accounts are at least in part an attempt to finance the unfunded liability with the excess returns of equities over nonmarketable Treasuries. To the extent that individuals receive low or even negative returns over time, individual account investments could actually lead to an increase in the unfunded liability of the current Social Security program. The Expected Market Return for Individual Account Investments The expected return from investments of individual accounts is likely to be higher than the average implicit rate of return of the current system, but it is unlikely to be as high as many advocates presume. Advocates and opponents of individual accounts have estimated what the likely market return would be for an individual’s investments under an individual account program. When discussing equity returns, advocates often point to the fact that equities have historically yielded higher returns than Treasuries. They expect returns on equities to continue to be higher than Treasuries and to boost individual returns on individual account investments. Other economists are skeptical that the higher returns presumed under an individual account program will be realized. They state that history may not be a good predictor of the future. Others state that even if expected equity returns are higher than other investments, equity returns are risky. For instance, the average historical return reveals nothing about how variable that return has been from year to year. Thus, in an estimation of an expected return to investments of individual accounts, the riskiness of the investment should be taken into account. Estimating expected returns without mention of the risk and costs of the investments will overstate the benefits of investing in marketable securities because the return on marketable securities varies substantially with the riskiness of those investments. Future Returns to Equities Uncertain Advocates of individual accounts have stated that individuals would receive higher returns by investing in the stock market than they receive under the current Social Security program. Although,comparing investment returns with the rate of return paid by Social Security is always problematic, advocates of individual accounts point out that the rate of return on equities has been significantly higher than other rates of returns. For instance, compounded annual average rates of return on equities have averaged about 7 percent per year since 1900 and 6 percent per year since 1957. Alternatively, the compounded annual average return on Treasuries has been between 1 and 2 percent per year on an inflation-adjusted basis, and long-term corporate bonds have averaged 2 percent. The capital markets generally offer higher potential rates of return on riskier investments such as equities. Figure 3.1 shows the annual returns of Standard & Poor’s (S&P) 500 Index, which is a measure of the performance of the stocks of 500 large companies traded on the U.S. stock exchange. Actual nominal (non-inflation-adjusted) returns for large company stocks varied widely from the annualized average return over long periods and have ranged from a low of minus 26.5 percent in 1974 to a high of 52.6 percent in 1954. As can be seen in figure 3.1, returns are variable. An average return over a long period of time can obscure the reality that equity returns fluctuate substantially from year to year. There have also been years in which equities have yielded negative returns. For instance, over the past 70 years or so, equity returns were negative in nearly 1 out of every 4 years. Even taking into account the variability of returns, some analysts have suggested that historic U.S. returns may overstate future returns. They state that the equity markets in the United States have tended to outperform the equity markets in other countries. Thus, when relying on historical data as the basis for estimates of long-term market growth, if one looks not just at U.S. data, but also at the historical returns of other countries, then the high historical returns to equities in the United States could be an exception rather than the rule. Historical returns are the only empirical basis with which to judge equity returns, but there is no guarantee that the future will mirror the averages of the past in the United States as opposed to some subperiod of the U.S. market or, alternatively, returns to foreign stock markets. Equity Premium Diminishing In general, investors, tend to be averse to risk and demand a reward for engaging in risky investments. The reward is usually in the form of a risk premium—an expected rate of return higher than that available on alternative risk-free investments. For instance, the historical advantage enjoyed by equity returns over the returns of other assets is what is known as the equity premium. The premium is said to exist because equities have historically earned higher rates of return than those of Treasuries to compensate for the additional risk associated with investing in equities. However, the equity premium has slowly been declining. Studies have shown that the equity premium has declined since the 1950s. A number of studies have attempted to measure the equity premium as well as explain its size. One study found that the premium appeared to be quite high in the 1930s and 1940s and was caused by the perception of the high volatility in the stock market in the late 1920s and the early 1930s. This led investors to favor less risky securities as opposed to equities, generating a high equity premium. However, as the volatility of stock market declined after the 1929 stock market crash, the appeal of investing in equities began to increase; and although an equity premium continues to exist, it has steadily declined. However, in the 1970s the equity premium increased somewhat from its general downward trend; this was attributed to inflation. The study concluded that decreases in the equity premium were the result of increases in expected bond rates and decreases in the expected rates of returns to equities. It has also been suggested that the shrinking premium reflects a structural change in that the economy appears less susceptible to recessions. To the extent that corporate profits fluctuate with general economic conditions, fewer downturns translate into less volatility in corporate earnings. If investors perceive that the outlook for corporate earnings is more certain and that equities may be less risky than they have been historically, equity investing might carry a lower premium and, therefore, relatively lower returns. As a result, the equity premium diminishes. It is unclear whether the equity premium will continue to decline. However, if individual accounts affect equity prices in the short run, the equity premium could decrease. For instance, if the demand for equities increases as a result of individual accounts, the prices of equities are likely to increase. This in turn lowers the expected return on equities. As the expected return on equities decreases, the equity premium decreases because the difference between the return on equities and the risk-free asset such as Treasury bills would diminish. The decreasing equity premium could imply that people do not view the stock market to be as risky as they once did. One possible implication is that if people view the stock market as not very risky, and they prove to be right, they will continue to invest in it, and the equity premium is likely to continue decreasing. Alternatively, if the stock market is in fact riskier than investors believe, then investors will be surprised by underperformance and volatility over time and will begin to reduce their equity holdings, which could eventually cause the equity premium to go back to values consistent with past decades. The size of the equity premium has implications for analyzing the benefits of an individual account program. The potential gain from equity investing under an individual account program depends on what future equity returns are and in particular how much return might be expected for taking on additional risk. A significant part of the gain that might be generated from diversifying into equities comes from the equity premium. To the extent that the equity premium continues to decline, individuals are unlikely to receive as high a return from stock investing as they have in the past. The Returns of Investments The return that individuals are likely to receive from individual account investments would depend on what they are allowed to invest in, e.g. stocks, bonds, indexed mutual funds, as well as the risk of the asset being invested in. When estimating expected returns under an individual account program, most proposals have tended to focus on equities. However, other assets may offer different returns. Corporate equities have tended to have higher market returns than other investments because they are riskier. Other investments, such as corporate bonds, have also tended to offer high yields. For instance, corporate bonds offer higher yields than Treasuries to entice investors to buy these securities, which have some risk of default. As in the case of corporate equities, investors are offered a higher reward for taking on the additional risk that the company may default. If an individual account system were to provide for mutual funds, depending on the type of mutual fund allowed, individuals would receive various returns. For instance, a government bond mutual fund may yield a lower return to investors than an equity indexed mutual fund. Overall, the capital markets offer higher market returns only by having investors take on additional risk. Thus, in estimating expected returns for individual account investments, it is important to not only consider the type of asset invested in but also the riskiness of the investment. Adjusting the Rate of Return for Risk Higher returns are possible for individuals investing through individual accounts than under the current Social Security program, but only if individuals take on more risk. Individuals should therefore not only be interested in the returns of various assets but also in the risks that have to be incurred to achieve higher returns under an individual account program. The difficulty is how to measure risk and how to adjust rates of return for risk so that investors would be able to compare various returns to investments. Risk is often considered to be the uncertainty of future rates of return, which in turn are equated with variability. In fact, one of the underlying concepts of risk is inherent volatility or variability. For instance, the variability of equity prices is among the key factors that cause investors to consider the stock market risky. The price at which an individual purchases shares of a company early in the morning is not guaranteed even later in the day. Bond prices also vary due to changing interest rates and inflation. There are Many Ways to Measure Risk There are a number of different ways to try to measure variability or risk. All such measures give some estimate of the riskiness of investments. Classic risk measures such as variance or the standard deviation are often used to measure the risk of an asset. However these measures are often considered to be difficult for investors to understand and may not reflect how people perceive risk. For instance, investors do not generally take a symmetrical view of the variability of returns—downward deviations are perceived as economic risks, but upward deviations are regarded positively or as unexpected gains. Furthermore, quantifying uncertainty or risk is usually done using probability distributions. As long as the probability distribution falls symmetrically about the mean or average—what is known as a normal distribution—the variance and standard deviation are adequate measures of risk. However, to the extent that the probability distributions are asymmetrical, as is the case with the returns from a combination of securities, those measures are not as meaningful in terms of measuring risk. Other ways to measure risk include (1) the value at risk (VAR) --how much the value of a portfolio can decline with a given probability in a given time period, or (2) the beta of a security--the tendency of a security’s returns to respond to swings in the broad market. VAR is an approach used by money risk managers to measure the riskiness of their portfolios. It is an estimate of the maximum amount a firm could lose on a particular portfolio a certain percent of the time over a particular period of time. For example, if an investor wanted to put money into a mutual fund and wanted to know the value at risk for the investment of a given time period, the investor could determine the percentage or dollar amount that their investment could lose, e.g., a 2-percent probability that the investor could lose at least $50 of a $1,000 investment over a certain period of time. VAR models construct measures of risk using the volatility of risk factors, such as interest rates or stock indexes, which is helpful for mutual funds that have a wide variety of investments. Measuring the beta is another way to measure risk. In essence, if an investor wanted to know how sensitive a particular asset’s return is to market movements, calculating the beta would do so. Beta measures the amount that investors expect the equity price to change for each additional 1-percent change in the market. The lower the beta, the less susceptible the stock’s return is to market movements. The higher the beta, the more susceptible the stock’s return is to market movements. Thus, the beta would measure the risk that a particular stock contributes to an individual’s portfolio. Adjusting for Risk As previously stated, estimating a return on investments without taking in to account the riskiness of the investment is likely to overstate the benefit of investing in that asset. Adjusting returns to account for risk is important because risk-adjusted returns are likely to be lower than unadjusted returns but more comparable across asset classes. There are different ways to adjust returns for risk, but there is no clear best way to do so. The appropriate risk-adjusted measurements depend on what is being evaluated. For instance, in terms of evaluating the returns of mutual funds, various risk-adjusted performance measures could be used.One measure used is the Sharpe Ratio, which basically measures the reward to volatility ratio and is the most commonly used measure for determining the risk-adjusted performance of mutual funds. A high Sharpe ratio means that a mutual fund delivers a high return for the level of volatility of the fund’s investments. Thus, if individuals were trying to determine the mutual fund that had the best combination of return for risk, they would choose the fund that had the highest Sharpe Ratio. An alternative to the Sharpe Ratio is the Modigliani Measure, which measures a fund’s performance relative to the market. The measure uses a broad- based market index, such as the S&P 500, as a benchmark for risk comparison. In essence, the measure is equivalent to the return a mutual fund would achieve if it had the same risk as a market index. Another measure is one calculated by Morningstar, Incorporated. Unlike the Sharpe Ratio, which compares the risk-adjusted performance of any two mutual funds, Morningstar measures the risk-adjusted performance of mutual funds within the same asset class. It usually assigns ratings to mutual funds on the basis of the risk-adjusted return and risk of a mutual fund. Thus, if individuals wanted to know how various mutual funds did within their asset groups, they would look at the Morningstar rating. There are other risk-adjusted measures that are used. However, there is no clear best way to adjust a return for risk, and there is no one risk- adjusted measure that everyone agrees is the correct measure. Many of the measures are complicated and may require more sophistication to understand than could be expected of individual account investors. It should be noted, however, that although risk-adjusted rates of return are the appropriate measure for individual account investments, an investor’s entire portfolio has a different risk than that of its individual components. Thus, risk-adjusted returns depend fundamentally on how portfolios are managed. Comparing Rate of Return From Social Security to Expected Return With Individual Accounts Requires Careful Consideration Comparing rates of return on Social Security and private market investments has frequently been discussed in evaluating options for reforming Social Security, but comparing the two does not capture all the relevant costs and benefits that reform proposals imply. Such comparisons often do not factor in the costs of disability and survivors insurance when determining a rate of return on Social Security contributions for retirement. Individual accounts would generally increase the degree to which retirement benefits are funded in advance. Today’s pay-as-you-go Social Security program largely funds current benefits from current contributions, but those contributions also entitle workers to future benefits. The amount necessary to pay the benefits already accrued by current workers and current beneficiaries is roughly $9 trillion. Any changes that would create individual accounts would require revenues both to deposit in the new accounts for future benefits and to pay for existing benefit promises. Rate of return estimates for such a program should reflect all the contributions and benefits implied by the whole reform package, including the costs of making the transition. Administrative and annuity costs could also affect actual retirement incomes. Agency Comments SSA commented that we needed to clarify that comparisons between the rate of return implicit in the Social Security system and those of individual accounts were problematic for many reasons including the fact that Social Security provides survivors and disability insurance. We have further clarified issues regarding the rate of return comparisons and have referred to our forthcoming report that provides a more detailed discussion on comparing the rate of return implicit in the Social Security system with those of market investments. Enhanced Education is Necessary for an Individual Account Program Under many of the individual account programs that have been proposed, individual accounts to varying extents would be managed by participants themselves. To operate fairly and efficiently, such a system would have to provide participants with information adequate for their decisionmaking as well as to protect against misinformation that could impair that process. Existing SEC disclosure and antifraud rules and related doctrines provide for the disclosure of information that is material to an investment decision. However, such disclosure alone would not enable participants in an individual account program to understand how best to use such information for purposes of their retirement investment decisions. To provide participants with a clear understanding of the purpose and structure of an individual account program, an enhanced educational program would be necessary. Such an enhanced and broad-based educational effort would have to be undertaken in order to provide individuals with information they need and can readily understand, as well as with tools that can help both improve the decisionmaking process and awareness of the consequences of those decisions. Individuals would need education on the benefits of saving in general, the relative risk-return characteristics of particular investments, and how different distribution options can affect their retirement income stream. If a wide variety of choice is offered individuals so that they could potentially choose less diversified investments, such as individual equities, a more broad-based educational program would be necessary. The wider the variety of choices, and thus more potential risks, offered individuals under an individual account program, especially a mandatory program, the more broad-based the education will need to be. If fewer, well-diversified choices are provided under an individual account program, the educational effort could be targeted more to the purpose for investing and the potential long-term consequences. It is also likely that some sort of provision, such as a default option--either a default to the defined benefit part of Social Security (staying in the current Social Security program) or to a mandatory allocation--may be needed for those individuals who, regardless of the education provided, will choose not to make investment choices. The Significance of Disclosure Rules Would Depend Upon Available Investment Choices Existing disclosure rules require that material information be provided about a particular instrument and its issuer. Such disclosure would be essential to an individual account program, with some rules having more significance than others, depending on the investment choices offered. For example, if participants were allowed to acquire corporate securities such as stocks and bonds, the disclosure and reporting requirements of the Securities Acts of 1933 and 1934, such as those applicable to the governance, activities, and financial status of the issuer, would be particularly important to participants choosing such instruments. If investment choices were limited to mutual funds, disclosure about the funds would have primary importance, and information about the issuers of the securities owned by the funds would be relatively less significant for participants. In addition, the Employee Retirement Income Security Act of 1974 (ERISA) requires disclosures in connection with pension funds (covered by Title I of ERISA). If products offered by banks and insurance companies were permitted, special disclosure rules would apply. Disclosures in Connection with Securities and Pension Plans The Securities Acts of 1933 and 1934 generally require disclosure and reporting of detailed information about an issuer of securities, such as its management, activities, and financial status. The Securities Act of 1933 (1933 Act) primarily focuses upon the disclosure of information in connection with a distribution of securities; the Securities and Exchange Act of 1934 (1934 Act) concentrates upon the disclosure of information trading, transactions, and sales involving securities. The 1933 Act requires the disclosure of information intended to afford potential investors an adequate basis upon which to decide whether or not to purchase a new security and to prevent fraudulent conduct in connection with the offering. This disclosure generally takes place through a registration statement filed with SEC (and made available to the public, except for confidential information) and a related prospectus. Both documents contain detailed factual information about the issuer and the offering, including statements about the specifics of the offering as well as detailed information about the management, activities, and financial status of the issuer. The 1934 Act, among other things, contains extensive reporting and disclosure requirements for issuers of securities registered under the act. Issuers must file current, annual, and quarterly reports with SEC, and the annual report must be distributed to security holders. The 1934 Act also governs brokers, dealers, and others involved in selling or purchasing securities. The act contains a broad prohibition against fraud in connection with securities transactions that frequently has served as a basis for disclosing to customers an abundance of details about a particular instrument or transaction. ERISA and DOL regulations require the administrator of a plan covered by Title I of ERISA to file certain information about the plan with DOL and distribute it to plan participants and beneficiaries receiving benefits. One of the principal disclosure documents, the summary plan description (SPD), must include information specified in the regulations, which includes details about the structure, administration, and operation of the plan as well as the participant’s or beneficiary’s benefits and rights under the plan. The SPD must be written in a manner “calculated to be understood by the average plan participant” and must be “sufficiently comprehensive to apprise the plan’s participants and beneficiaries of their rights and obligations under the plan.” Moreover, in fulfilling these requirements the plan administrator is to take into account “such factors as the level of comprehension and education of typical participants in the plan and the complexity of the plan.” In addition to general reporting and disclosure requirements, DOL regulations contain special disclosure rules for participant-directed accounts. A participant-directed account plan is one that permits participants and beneficiaries to direct the investment of assets in their individual accounts. The special rules arise in the connection with the obligations of a fiduciary to a plan that permits such accounts. Under DOL regulations, a fiduciary can avoid liability for any loss arising from the participant’s exercise of control over account assets, provided that the participant has the opportunity to exercise control over the account assets and may choose, from a broad range of investment alternatives, the manner in which assets are invested. The regulations further provide that a participant has the opportunity to exercise control only if, among other things, the participant is provided or can obtain information sufficient for him or her to make informed investment decisions. This information includes (a) a description of investment alternatives and associated descriptions of the investment objective, risk and return characteristics of each such alternative; (b) information about designated investment managers; (c) an explanation of when and how to make investment instructions and any restrictions on when a participant can change investments; and (d) a statement of fees that may be charged to an account when a participant changes investment options or buys and sells investments. Disclosure in Connection With Mutual Fund Shares The information that the 1933 and 1934 Acts require issuers to disclose pertains to details about the issuers of securities and the securities themselves. Such information is significant to a person investing in a specific issuer. For the purchaser of shares in an investment company, such as a mutual fund, which is the vastly prevalent form of investment company, information about the company itself, rather than individual issuers, is most significant. Mutual funds are subject to the Investment Company Act of 1940, which deals with the registration, formation, and operation of investment companies, as well as provisions of the 1933 and 1934 Acts governing disclosure and prohibiting fraud. Disclosure about the fund, such as information concerning its investment strategies and its management, is provided in the registration statement filed with SEC; the prospectus or an alternative, less detailed document known as a “profile”; and periodic reports filed with the Commission and distributed to shareholders. Disclosure Concerning Certain Products Offered by Depository Institutions and Insurance Companies The expansion of products offered by depository institutions (primarily federally insured banks and thrifts and their subsidiaries or affiliates) and insurance companies carries with it the potential for confusion about the nature and risk of investment products offered by such institutions. For example, bank sales of nondeposit instruments, such as mutual fund shares and variable annuities, could lead an investor to conclude that such instruments are federally insured bank products. Investment products sold by insurance companies, such as certain variable annuities and equity- indexed agreements, might be viewed as traditional insurance products, under which the insurer assumes the payment risk. If such products are securities, they are subject to the requirements of federal and state securities laws. The activities of institutions in connection with the products would be subject to regulation under the securities laws as well as regulation by their supervising agencies. NonDeposit Bank Products The federal bank regulators have promulgated rules, guidelines, and policies containing standards for disclosure in connection with a banking institutions’ involvement in sales of nondeposit instruments such as securities. These regulators issued an Interagency Statement on Retail Sales of Non-Deposit Investment Products (“Interagency Statement”) together with subsequent statements that focuses on issues specifically pertaining to the retail sale of investment products to customers on depository institution premises. Among other things, the standards seek to prevent customer confusion over whether such products are FDIC-insured, primarily through disclosure and separation of sales of investment products from other banking activities. New products being offered by insurance companies can also confuse investors about whether such a product is insurance (the insurer accepts the repayment risk) or a security (the purchaser of the product faces some or all repayment risk). States typically regulate disclosure about insurance products by prohibiting unfair, deceptive, or misleading statements about a product. However, to the extent such instruments are securities, their purchase and sale are subject to federal and state securities laws. Initiatives to Facilitate Understanding of Information To address concerns about the effectiveness of disclosures regarding investing, particularly with respect to mutual funds, SEC and some states have established programs to provide for disclosing information to investors in a more understandable way. SEC’s “plain English” program is an example. The Commission instituted the program because much of the disclosure provided in prospectuses and other documents often is complex, legalistic, and too specialized for investors to understand. Under this program, the Commission revised its rule for the presentation of information in a prospectus to require that the prospectus comply with plain English writing principles listed in the regulation. SEC also amended its Form N-1A, the registration form used by mutual funds for registration, to provide for the use of plain English principles and simplified descriptions of information essential to an investor’s evaluation of the fund. In March 1998, SEC adopted a rule permitting mutual funds to offer investors a new disclosure called a profile. The document summarizes key information about the fund, including its investment strategies, risks, performances, and fees, in a concise, standardized format. A fund offering a profile can give investors a choice about the amount of information they wish to consider before making a decision about investing in the fund. Investors have the option of purchasing the fund’s shares on the basis of the profile, in which case they are to receive the fund’s prospectus along with the purchase confirmation. Among other things, the new SEC rules are designed to reduce the complexity of information provided to mutual fund customers and the potential for confusion that sometimes accompanies such information. They are an attempt to make the disclosure of material information more useful to those who invest in mutual fund securities. Enhanced Education Is Necessary for an Individual Account Program Whether an individual account program is mandatory or voluntary, giving millions of working Americans the responsibility for investing part of their Social Security payroll taxes on their own requires enhanced education. Social Security has provided a safety net for millions of people for a long time in that it has been the foundation of the nation’s retirement income system, providing income for millions of Americans. Introducing an individual account program would change the nature of the current Social Security program and would require increased education if people are to understand the individual account program and what may be required of them. Although education would be necessary regardless of whether the program was voluntary or mandatory, the government would have a special responsibility under a mandatory program to provide individuals with the basic investment knowledge that they would need in order to make informed investment decisions affecting their retirement. The extent to which enhanced education would be necessary would depend upon the available investment choices and the fees and expenses associated with an individual account program. An individual account program that offers many investment choices—especially one that is mandatory—would likely require a substantial amount of education because the wider the options provided an individual, the greater the chances are that the individual could lose money. If fewer well-diversified options are offered under an individual account program the fewer risk factors the individual has to consider and the more targeted the education could be. It would also be important to educate individuals about how to interpret the fees associated with individual account investments and how fees would affect their account balances. Enhanced Education Is Important for All Individuals The Social Security program includes workers from all levels of income, those who currently invest in equity and bond markets and those who do not. It is unlikely that a “one size fits all” educational effort would be appropriate for an individual account program. Because a mandatory individual account program would require everyone to participate, including those who do not currently make investment decisions, educational efforts would be especially crucial and would need to reach all individuals. Enhanced Education Is Important for Those Who Do Not Currently Make Investment Decisions Large segments of the working population do not currently make investment decisions for various reasons. For instance, some people do not believe that they have enough money to save or at least to save in any vehicle other than a bank account. Others do not know the benefits of investing. Lastly, there are those who do not appear to understand the benefits of saving and investing or the necessity of doing so for retirement. Whatever the reason, millions of people have never made investment decisions. Investor education is especially important for individuals who are unfamiliar with making investment choices, including low-income and less well-educated individuals who may have limited investing experience.Thus, one of the primary areas of enhanced education under an individual account program would be to educate those who do not know the basics about savings or diversification, especially if the individual account program is mandatory. Those individuals and households who do not currently make investment decisions, but rely on Social Security as their primary source of retirement income, are likely to be the ones who are most affected by a mandatory individual account program and thus most in need of education. Current Initiatives Focus on Saving, Fraud, and Retirement Income Congress and various agencies and organizations have instituted programs to educate people about the benefits of saving and investing. In the Savings Are Vital to Everyone’s Retirement Act of 1977, Congress mandated an education and outreach program to promote retirement income savings by the public. The act also required the Secretary of Labor, in consultation with other federal agencies selected by the President, to plan and conduct a National Summit on Retirement Savings. As part of this mandate, the act required the Secretary to bring together retirement and investment professionals, Members of Congress, state and local officials, and others to discuss how to educate the public--employers and individuals--about the importance of saving and about the tools available to enable individuals to retire and remain financially independent. Pursuant to this mandate, DOL sponsored the National Summit in 1998. Other efforts have been made to reach out to investors to educate them about both how to protect themselves against fraud. SEC has realized that an important part of its role in combating fraud is to educate the public about what to be aware of and how to avoid being taken advantage of. If investors are adequately informed about the risks associated with potential securities frauds, then they will be less likely to fall victim to scams. SEC has implemented several programs to advise the investing public about potential frauds. For instance, SEC has issued numerous pamphlets about what types of questions investors should ask about investing and the people who sell those products. Additionally, SEC has held local “town meetings” across the United States to discuss investment risks. It also coordinates the “Facts on Savings and Investing Campaign” with federal, state, and international securities regulators. SEC officials said that in order to have a successful education program, it is necessary to determine what people do and do not know. This has entailed determining people’s level of literacy and math knowledge in order to design a program that could provide education for individuals with various levels of investment knowledge. DOL’s Pension Welfare and Benefits Administration has several educational outreach efforts for encouraging employers to establish retirement programs and employees to save for retirement. The basic program is a joint effort with a wide range of private sector partners, including the American Savings Education Council, the Employee Benefit Research Institute, banks, insurance companies, consumer groups, retiree groups, participant rights’ groups, mutual funds, and other large companies. This joint effort was designed to provide very basic information to individuals and employers about the different types of savings vehicles available under the law and to encourage the private sector to provide employees with models of pension programs. The educational program tries to target special groups whose pension coverage is low, including such groups as women and minorities as well as small businesses; only about one-fifth of small businesses offer pension plans to their employees. DOL has issued numerous pamphlets on what individuals should know about their pension rights and what businesses can do to start pension plans for their employees. For instance, they regularly use the Small Business Administration’s newsletters to encourage members to establish pension plans and have developed a Web site for small businesses to give them information on various pension plan options, depending on how much each business can afford to contribute to a pension fund. These current programs have a limited ability to reach the overall population. One clear constraint is the low level of resources, including funding directed to investor education. Another limitation is that they are targeted to circumscribed audiences, such as companies that do not have retirement programs as opposed to individuals who do not invest. Furthermore, most efforts are reaching those individuals who choose to take it upon themselves to find out what they need to do to save more or to learn how to make better investment decisions. Thus, even as a result of the various targeted efforts undertaken, large segments of the population are still not being reached. Education Is Also Important for Those Individuals Who Currently Make Investment Decisions Numerous studies have been done that have looked at how well individuals who are currently investing understand investments and the markets. On the basis of those studies, it is clear that among those who save through their company’s retirement programs or on their own, there are large percentages of the investing population who do not fully understand what they are doing. For instance, one study found that a little more than a third of American workers have tried to calculate how much money they would need to retire comfortably. Another study found that 47 percent of 401 (k) plan participants believe that stocks are components of a money market fund, and 55 percent of those surveyed thought that they could not lose money in government bond funds. Another study on the financial literacy of mutual fund investors found that less than half of all investors correctly understood the purpose of diversification. Further, SEC reported that over half of all Americans do not know the difference between a stock and a bond, and only 16 percent say they have a clear understanding of what an IRA is. Although individuals who currently make investment decisions are likely to have some familiarity with investing, education would also be important for them because of their increased responsibility under an individual account program. Furthermore, according to the studies cited above, there would be a real need for enhanced education about such topics as investing, risk and return, and diversification. As the Chairman of SEC has said, there is a wide gap between financial knowledge and financial responsibilities. Closing that knowledge gap is imperative under an individual account program. Enhanced Education Is Important for Individual Accounts Program Moving to an individual account program is going to require a thorough education effort for everyone to understand the program and how it is different from the current Social Security program. The government has much more responsibility for educating individuals under a mandatory program because people would effectively be forced by the government to save and to make decisions about what to do with that saving as well as bear the consequences of a decision. Even with a default option for those who do not choose to participate, the government needs to explain why the option was provided and what are its implications. Many people do not understand the current Social Security program, how their contributions are measured, and how their benefits are computed, even though the program is over 60 years old. Yet, millions of individuals rely on the program as their sole source of retirement income. In order to increase people’s understanding of Social Security, SSA has implemented various efforts to educate people. Such efforts have included providing a 1-800 number for recipients to ask questions, having a public education service campaign, and providing educational packages to individuals. Despite these efforts, SSA officials said that people still have a hard time understanding the program. Implementing an individual account program is likely to require enhanced education not only about individual accounts but also about how an individual account program would change the nature of Social Security and what that means for the individual. At a minimum, under an individual account program, educational efforts would be needed to help people understand how individual accounts would work and how the accounts would affect their retirement income security. Many proposals do not specify what entity would be responsible for the public education program that would be needed for an individual account program. On the basis of the type of information experts in employee education say is needed, education about an individual account program could include the following information: Goals of the program — individuals need to know what the goals of the program are and why they are participating. Responsibilities — individuals need to know what their responsibilities are under the program. Retirement Income — individuals need to know what their retirement income needs are and how their retirement needs will be affected under an individual account program. Materials — individuals need materials that convey the message of the program and what will be required of them. Amount of Education Necessary is Directly Linked to the Choices Offered The amount of education that would be necessary under an individual account program depends on the range and type of investment choices offered to individuals. There are basic issues that individuals will need to be educated about regardless of how the program is structured. Such issues include (1) the choices they have to make; (2) the consequences of those choices; (3) what the investment options are, such as stocks, bonds, and indexed mutual funds; (4) rates of return of different investment vehicles; and (5) the risks of investment vehicles. However, as a wider variety of choice is offered to individuals, more education beyond the basics would be necessary because broader issues would need to be considered. With more variety of choice, investors would need to choose among various assets, which requires the investor to have certain skills to evaluate the risks and his or her own preference for risks. If the structure allows for an even broader variety of choices such as real estate, the educational requirements would mount. When choices are limited to a few well-diversified choices (such as a few indexed mutual funds), many decisions are made by those managing the funds or by rules governing the fund (such as what an indexed mutual fund can invest in). If the investor has the option of frequently moving funds from one investment to another, the educational effort needs to include analytical tools to aid such decisions and advice about the importance of a long-term horizon. Thus, the fewer well-diversified choices offered, the less risk to the individual and the more targeted the education could be. A variety of choices may benefit people in that it offers them a wider selection from which to choose, allowing them to choose the option that is in line with their preferences. However, it also increases their risk in that they could potentially choose less diversified investments, such as individual equities, that could result in financial loss. Furthermore, the wider the variety of choice offered, the greater the need for people to consider other issues. For instance, because offering a wide variety of investment options is likely to promote competition among financial institutions to provide a range of investment vehicles, investors would need to be educated about fraud and how to avoid it. When Great Britain went to an individual account program, individuals purchased unsuitable investments because of high-pressured sales tactics that resulted in individuals losing billions of dollars. The Chairman of the SEC has stated that allowing a broad range of investment options under individual accounts provides opportunities for fraud and sales practice abuses. Thus, education about fraud becomes important. For example, an investor would need to know what to look for, what type of questions to ask, what type of advice is biased, what the investor’s rights are, or what the law requires. When investment options are limited, the chances of fraud are reduced. Moreover, the wider the variety of choice that is offered individuals, the more they will need education about understanding the value of diversification and the possible consequences of not having a diversified portfolio. If choices are limited to indexed mutual funds, less education about diversification would be needed because indexed funds are by nature diversified. Education is also necessary for understanding risks and the various returns that are likely with different investment options. With a wider variety of investment options, understanding risk and being able to manage the risk become important. It is important to explain to people that historical returns may not always be good predictors of future returns, especially when risks are ignored. As stated in chapter 3, measuring risk and comparing risk-adjusted returns can be a difficult process. Furthermore, being able to understand the rates of returns of various options and pick the appropriate investment vehicles become more difficult, as more variety is offered. Individuals would need more expertise to understand differences in the rates of return of equities, bonds, equity mutual funds, indexed funds, and so on. Fewer Investment Choices, Less Education Needed If the program has fewer well-diversified choices, limits would be placed on the ways that people could lose money. The educational effort could, therefore, focus more on getting individuals to be informed participants in the program. Educational issues that become relevant when individuals are offered numerous options are of less concern when they are offered fewer, well-diversified options. With fewer, well-diversified investment choices, the educational effort could be more targeted to the purpose of retirement savings, e.g., educating people about how much they would need to save and invest for retirement or determining their goals for retirement. Other issues, such as compounding—the calculation of interest earned on a daily, quarterly, semiannual, or annual basis—or the impact of inflation on returns are issues that individuals need to fundamentally understand. For example, with compounding interest individuals could earn interest on the money they save and on the interest that the money earns, e.g., if they invested $1,000 at 3-percent interest they could double their money in 24 years, but at 4 percent interest they could double it in 18 years. With inflation, or rising prices, the money that individuals earn on their investments would potentially be worth less and less as prices rose. In addition, seemingly small annual fees can eat away at the accumulated value. Offering fewer, more well-diversified options enables the education effort to be targeted on basic issues that would be helpful for individuals to understand in order to save for retirement. Default Option Despite current efforts to increase people’s awareness to save more, many people are still not saving and making the retirement choices they need to make, effectively relying on Social Security to be their primary source of retirement income. It is unlikely that moving to individual accounts will result in active participation by all individuals. Thus, various officials have suggested that a default option be provided for those individuals who, regardless of educational effort, will not make investment choices. Default options could include a default to the defined benefit portion of Social Security (staying in the current Social Security program) or to some type of mandatory allocation. One example would be an investment vehicle in which, depending on the age of the individual, certain portions of the investment could be in equities and certain portions in bonds. The portion in bonds would increase with the age of the individual. Alternatively, the default option could be invested totally in Treasuries. As with any option, a default option with less risk is also likely to provide lower returns.
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Pursuant to a congressional request, GAO provided information on the issues associated with individual social security accounts, focusing on how such accounts could affect: (1) private capital and annuities markets as well as national savings; (2) potential returns and risks to individuals; and (3) the disclosure and educational efforts needed to inform the public about such a program. GAO noted that: (1) individual investment accounts could affect the capital markets in several ways; (2) as a source of funds for the accounts, most proposals use either the cash collected from social security taxes or federal general revenues; (3) as a result, the primary capital market effect is a purely financial one: borrowing in the Treasury debt market to provide funding for investment in private debt and equity markets; (4) although the annual flows are likely to be sizeable, both the private debt and equity markets should be able to absorb the inflow without significant long-term disruption; (5) there could eventually be a significant increase in the amount of new funds flowing into the annuities market; (6) however, the magnitude of annuity purchases is likely to build gradually over time as more retirees build larger balances, allowing the market sufficient time to adjust; (7) individual account proposals could also affect the level of financial resources available for private investment by increasing or decreasing national savings; (8) the extent to which individual accounts affect national savings will depend on how they are financed, the structure of the program, and any behavioral responses of businesses and individuals; (9) national savings is more likely to increase if: (a) the government funds would have been spent but instead are not; (b) the program is mandatory and prohibits pre-retirement distributions; and (c) households do not fully adjust their retirement saving; (10) to the extent that households use the opportunities offered by an individual account program to invest in private equities and debt rather than Treasury securities, they could increase both the returns they receive and the risks they face compared to the Social Security program; (11) although asset diversification offers mitigation against certain risks, the returns that individuals receive would depend on and vary with their investment choices and the performance of the private debt and equity markets; (12) most advocates of individual accounts state that the expected future returns on private investments would be much higher for individuals than the implicit return available under the Social Security program; (13) some argue that historical returns may not be a good predictor of future returns; and (14) to provide participants with a clear understanding of the purpose and structure of an individual account program, an enhanced educational program would be necessary.
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SECTION 1. SHORT TITLE.
This Act may be cited as the ``Hudson-Mohawk River Basin Act of
2012''.
SEC. 2. FINDINGS.
Congress finds the following:
(1) The Hudson-Mohawk River Basin together with the Erie
Canal connects the Great Lakes to the Atlantic Ocean and
includes the 13,400 square mile area encompassing five large
sub-basins: the Upper Hudson River sub-basin, the Mohawk River
sub-basin, the Lower Hudson River sub-basin, the Passaic River
sub-basin, and the Raritan River sub-basin.
(2) The Hudson-Mohawk River Basin played an essential role
in the birth of our Nation and its westward expansion. The
water of the Hudson-Mohawk Basin is the ink used to write the
early United States history of European settlement and the
American Revolution. The Basin's rivers served as a major
transportation corridor connecting the communities along it
from the Atlantic Ocean to the Great Lakes.
(3) The Hudson-Mohawk River Basin includes the largest
metropolitan area of the country: the New York-New Jersey
metropolitan area. This metropolitan area, together with the
many communities in the Upper Hudson, Mohawk, and Lower Hudson
sub-basins, makes the area one of the most densely and heavily
populated river basins in the country with over 15,000,000
people.
(4) The water resources of the Hudson-Mohawk River Basin
are functionally interrelated and their uses are
interdependent. A single entity is essential to provide
effective communication, coordination, and cooperation among
Federal, State, and local governments, non-governmental
organizations, and the private sector for this area.
(5) The New York-New Jersey Harbor Estuary is a complex
natural harbor at the junction of three major water bodies, the
New York Bight, the Hudson River and the Long Island Sound. In
addition, it receives freshwater inputs from the Raritan and
Passaic Rivers. The health and productivity of the New York
Bight is affected directly by the quality of the freshwater
inputs to the estuary from the Hudson, Passaic, and Raritan
Rivers.
(6) The headwaters of the Hudson originate within the
Adirondack Mountains, a treasured northeastern wilderness area,
protected under the New York State constitution since 1894. The
Hudson's path south through the Hudson River Highlands, and the
Mohawk's path south east to its junction with the Hudson,
provides the only natural break in the Appalachian Mountain
chain.
(7) The Mohawk Valley's abundant natural resources, and
fertile floodplain soils provided a rich endowment that first
supported the Mohawk nation and the Iroquois Confederacy and
later supported European settlement and the development of
industry and commerce.
(8) The Mohawk River and its watershed drain directly into
the Hudson River providing the largest freshwater input to the
brackish water mix that characterizes the Hudson River Estuary
and supports a biologically rich and productive ecosystem.
(9) The Mohawk River is integrated with the Erie Canal
along much of its channel. Therefore, tying the operation of
the Canal system to the health of the Mohawk and the Hudson
Rivers.
(10) Individuals in many communities throughout the Basin
have experienced devastating flooding that led to tremendous
costs for businesses, State, and local governments. A holistic
approach to river and stream monitoring, updated floodplain
maps, and development of floodplain management strategies based
upon improved understanding of the Basin's hydrology would make
communities safer and more resistant and resilient to flood
events.
(11) Each of the subwatersheds of the Hudson-Mohawk River
Basin receives support of programs administered by Federal,
State, regional, and local organizations.
(12) There has been little integration of planning and
program implementation to address the Hudson-Mohawk River Basin
in a holistic manner.
(13) New York, New Jersey, Vermont, Massachusetts, and
Connecticut have a long history of achievements working
together on resource management issues through their
memberships in the Delaware River Basin Commission, the
Susquehanna River Basin Commission, the Appalachian Regional
Commission, the New England Interstate Water Pollution Control
Commission, and the Lake Champlain Basin Program.
(14) Development and implementation of projects to control
flooding and improve water quality must be done with the full
participation of local communities and citizens, address the
needs they identify, and be conducted in a manner that respects
private property and is consistent with the authorities of
state and local jurisdictions.
SEC. 3. DEFINITIONS.
(a) Hudson-Mohawk River Basin.--The term ``Hudson-Mohawk River
Basin'' means the area of drainage of the Hudson, Mohawk, Passaic and
Raritan Rivers and their tributaries into the New York-New Jersey
Harbor Estuary. This includes areas in New York, New Jersey, Vermont,
Massachusetts, and Connecticut.
(b) Commission.--The term ``Commission'' means the Hudson-Mohawk
River Basin Commission established under section 4.
(c) Water Resources.--The term ``water resources'' means all
surface waters and ground waters contained or otherwise originating
within the Hudson-Mohawk River Basin.
SEC. 4. HUDSON-MOHAWK RIVER BASIN COMMISSION.
(a) Establishment.--The President shall--
(1) establish the Hudson-Mohawk River Basin Commission in
cooperation with the Governors of the States included in the
Hudson-Mohawk River Basin to coordinate activities being
undertaken by the States, advisory committees, local
governments, institutions of higher education, and non-
governmental organizations to address environmental, economic,
and cultural issues associated with the management and use of
resources in the Hudson-Mohawk Watershed; and
(2) designate the Secretary of Interior to serve as a
member of the Commission and as coordinator of participation of
relevant Federal agencies in the activities of the Commission.
(b) Membership.--The Commission shall include a Federal
representative designated by the President, and the Governors of the 5
States whose territory is encompassed by the Hudson-Mohawk River Basin
and its associated ground waters; New York, New Jersey, Connecticut,
Massachusetts, and Vermont. Each of the 4 Governors shall appoint an
alternate to act on the Governor's behalf including attendance at
meetings of the Commission and with the power to vote in the absence of
the member.
(c) Duties of the Commission.--The Commission shall--
(1) develop and implement plans, policies, and projects
relating to the water resources of the Hudson-Mohawk River
Basin;
(2) adopt and promote uniform and coordinated policies for
management and conservation of water resources in the Hudson-
Mohawk River Basin;
(3) adopt an annual capital budget, including all projects
the Commission proposes to undertake or continue during the
budget period with a statement of the estimated cost of each
project and the method of financing the project; and
(4) coordinate and direct the development, implementation,
operation, and financing of water resources projects consistent
with its plans and policies.
SEC. 5. COMPREHENSIVE PLAN.
(a) Plan Development.--The Commission shall develop and adopt a
comprehensive plan for the development and use of water resources of
the Hudson-Mohawk River Basin. In developing the plan the Commission
shall--
(1) consult with State and Federal agencies with
jurisdiction over water resources, local governments, non-
governmental organizations, public utilities, water users, and
other interested parties;
(2) prior to adoption of the plan or any subsequent
revision of the plan, publish a draft plan and provide
opportunity for public comment; and
(3) periodically review and revise the plan.
(b) Plan Contents.--The plan shall address all projects and
facilities required for development, conservation, use, management, and
control of the water resources of the Hudson-Mohawk River Basin to meet
present and future needs. The plan shall--
(1) identify water resource needs in the Hudson-Mohawk
River Basin related to water supply, water quality, flooding,
ecosystems, fisheries, energy production, navigation,
recreation, agriculture, and economic development and establish
goals for protection or enhancement of water resources to
address the identified needs;
(2) inventory the historic and cultural resources of the
Hudson-Mohawk River Basin and identify projects to provide for
cultural enrichment, preservation of cultural resources, public
education about local heritage and historical significance of
properties, canals, and other historic sites within the Hudson-
Mohawk River Basin;
(3) provide a comprehensive assessment of the status of
water resources in the Hudson-Mohawk River Basin and identify
additional research and information required to support
management of water resources in the Hudson-Mohawk River Basin;
and
(4) provide a mechanism to promote communication and
coordination among the organizations engaged in water resource
management activities to encourage efficient use of scarce
resources, avoid conflicts and inconsistencies, to promote
consistent and fair treatment of all water users, and to
promote collaborative working relationships among all entities
working in the Hudson-Mohawk River Basin.
SEC. 6. WATER RESOURCES PROGRAM.
The Commission shall adopt a water resources program on an annual
basis, based upon the comprehensive plan, that identifies specific
projects and facilities to be undertaken by the Commission, other
governmental and private entities, educational institutions, non-
governmental organizations, and individuals during the immediate 5-year
period. The water resources program shall include a systematic
presentation for each of the five sub-basins of--
(1) the specific needs to be addressed by the water
resources program;
(2) the existing and proposed projects, studies, and
facilities required to satisfy the identified needs;
(3) the subset of projects and studies that will be
undertaken by the Commission during such period; and
(4) the budget for the identified projects and studies.
SEC. 7. SAVINGS PROVISIONS.
Nothing in this Act shall be construed to repeal, modify, or limit
the authority of--
(1) the Federal Government or the State government members
of the Commission to enact legislation or enforce any
additional conditions or restrictions within their
jurisdictions; and
(2) local governments to regulate land use as provided for
by law or regulation.
SEC. 8. AUTHORIZATION OF APPROPRIATIONS.
(a) Commission.--There is authorized to be appropriated to the
Commission $500,000 for each fiscal year to carry out the duties of the
Commission.
(b) Comprehensive Plan.--There is authorized to be appropriated to
the Secretary of Interior $25,000,000 for each of fiscal years 2014
through 2020 to carry out projects consistent with the comprehensive
plan that are identified in the annual Hudson-Mohawk Water Resources
Program adopted by the Commission in accordance with section 6.
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Hudson-Mohawk River Basin Act of 2012 - Directs the President to: (1) establish the Hudson-Mohawk River Basin Commission, in cooperation with the governors of the states included in the Hudson-Mohawk River Basin (New York, New Jersey, Vermont, Massachusetts, and Connecticut), to coordinate activities being undertaken by the states, advisory committees, local governments, institutions of higher education, and nongovernmental organizations to address environmental, economic, and cultural issues associated with the management and use of resources in the Hudson-Mohawk Watershed; and (2) designate the Secretary of the Interior to serve as a member of the Commission and as coordinator of participation of relevant federal agencies in the Commission's activities.
Requires the Commission to: (1) develop and implement plans, policies, and projects relating to the Basin's water resources; (2) adopt and promote uniform and coordinated policies for management and conservation of such resources; (3) coordinate and direct the development, implementation, operation, and financing of water resources projects consistent with its plans and policies; and (4) develop and adopt a comprehensive plan for the development and use of such resources, which shall address all projects and facilities required for development, conservation, use, management, and control of the Basin's water resources to meet present and future needs.
Directs the Commission to adopt a water resources program on an annual basis, based upon the comprehensive plan, that identifies specific projects and facilities to be undertaken during the immediate five-year period.
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Background Aquatic invasive species can be found in all U.S. states and territories. They can enter and travel in aquatic habitats by several common pathways, including through the discharge of ships’ ballast water; hull fouling, such as barnacle growth, on commercial vessels and recreational boats; and accidental or intentional release of organisms into aquatic habitats through aquaculture, bait, aquaria (fish tanks), or the pet trade. Once established in a particular location, an aquatic invasive species can spread to other locations and ecosystems. Figure 1 is an interactive map of the United States with some examples of aquatic invasive species and their known locations (i.e., reported presence of a species) as well as common pathways of invasion—these examples do not represent all types of aquatic invasive species or pathways, but rather serve as illustrative examples (see app. II for a printable version). Scientists and officials from several federal agencies said that the presence and impacts of aquatic invasive species are, and are likely to continue, growing, such as from the warming of ocean waters and the opening of shipping channels through the Arctic, allowing new species to potentially thrive in habitats previously too cold or inaccessible. The Task Force, created by the 1990 Act, is co-chaired by the U.S. Fish and Wildlife Service (FWS) and NOAA. FWS provides funding for the administration of the Task Force, including conducting annual meetings, publishing Federal Register notices, and supporting an Executive Secretary and other FWS staff that work as regional coordinators. To implement its aquatic invasive species program, the Task Force relies on its 13 member agencies—each of which has a different set of responsibilities related to aquatic invasive species, based on their overall mission and areas of programmatic responsibility (see table 1). These member agencies conduct aquatic invasive species activities and commit resources to achieve the goals of the aquatic invasive species program. According to the Task Force’s 1994 program overview, implementation of the program is a cooperative effort that will build on and fill gaps in existing activities and programs, and individual agencies will implement the program in line with their specific authorities, priorities, expertise, and funding. In addition, the Task Force is advised by six regional panels— consisting of representatives of state, tribal, and nongovernmental organizations, commercial interests, and neighboring countries—that help identify regional priorities and coordinate regional activities. Some funding is provided to each regional panel as well as to state governments and other entities to support implementation of species- or region-specific aquatic invasive species management plans and other activities. Together, these federal, state, and nonfederal agencies and organizations work to prevent and control aquatic invasive species and implement the 1990 Act. Activities to address aquatic invasive species can be categorized using the seven general activity categories developed by the National Invasive Species Council. These categories reflect common activities agencies conduct along the continuum of an invasion of a species, from preventing the arrival or spread of an invading species to controlling or eradicating that species from the ecosystem. Table 2 describes each activity category. Preventing the introduction of aquatic invasive species into ecosystems is generally the most effective means of avoiding their establishment and spread, according to numerous academic reports, as well as the Task Force and several of its member agencies. According to a 2006 study, the difficulties and expense of reversing biological invasions means investment in prevention is likely to be the most successful and cost- effective response to biological invasions. Further, eradication (the elimination of an invading species from the ecosystem) and control (limiting an invasive species to a specific ecosystem) becomes increasingly difficult and costly as a species becomes established and spreads, as shown in figure 2. Task Force Member Agencies Estimated Expending an Average of About $260 Million Annually to Address Aquatic Invasive Species in Fiscal Years 2012 through 2014 Task Force member agencies estimated expending an average of about $260 million annually for fiscal years 2012 through 2014 to address aquatic invasive species. Several of the member agencies identified challenges and limitations associated with the expenditure information they provided in response to our questionnaire. As a result, the information reported by Task Force member agencies on annual expenditures through our questionnaire generally reflects the agencies’ best estimates, rather than actual expenditures. Table 3 provides the estimated annual expenditures for each Task Force member agency during fiscal years 2012 through 2014. Based on information reported through our questionnaire, estimated expenditures by Task Force member agencies for fiscal year 2014 ranged from a high of about $149 million by the U.S. Army Corps of Engineers (Corps) to a low of $70,000 by the Bureau of Land Management. Specifically, the Corps reported that the majority of its estimated annual expenditures were for controlling and managing existing aquatic invasive species at multiple projects it manages, and mostly came from the respective project’s operations and maintenance funding. The Bureau of Land Management’s estimates for fiscal year 2014 comprised the annual cost to develop and place aquatic invasive species awareness advertisements in print materials focusing on outdoor activities such as hunting, fishing, and boating. Also, for fiscal year 2014, the Bureau of Land Management reported that it did not have funding to provide to its state offices to coordinate or carry out aquatic invasive species activities in their local areas, as it did in fiscal years 2012 and 2013. Estimates for Task Force member agencies generally reflected a variety of activities undertaken or funded by the respective agency spanning multiple species and regions within their areas of programmatic responsibility. In contrast, estimates for some agencies reflected efforts specific to a particular region or activity. For example, the Environmental Protection Agency (EPA) reported that its estimates mostly reflected expenditures of funding transferred to other agencies to carry out activities in support of the Great Lakes Restoration Initiative—a program launched in 2010 to protect and restore the Great Lakes ecosystem. One of the Initiative’s main focus areas includes prioritizing efforts to prevent the introduction of new invasive species into the Great Lakes. In responding to our questionnaire, several of the Task Force member agencies identified challenges and limitations in collecting information on how much they estimated expending to address aquatic invasive species. These included the following: Expenditures on aquatic invasive species activities are not specifically tracked. Seven of the 13 Task Force member agencies reported that their budget structures and financial accounting systems were not designed to specifically track expenditures on aquatic invasive species activities. For instance, the U.S. Forest Service reported that many aquatic invasive species related activities are conducted throughout the agency, but the agency’s program management and financial accounting systems do not separately track aquatic invasive species expenditures. Specifically, U.S. Forest Service officials said they could not identify the portion of funding expended directly for aquatic invasive species because these activities were often integrated into larger projects—such as inspecting and cleaning equipment used in fighting wildfires. For example, the agency has developed specific protocols to inspect, assess, and decontaminate equipment, such as the inside of a fire pump, to help make sure it is clear of any invasive algae or mussels that may be unintentionally transferred to a new watershed when moving water between areas to fight fires. U.S. Forest Service officials further explained that this is one step of many in cleaning and preparing the equipment for its next use, and its management and financial accounting systems are not set up to capture or break out activities to this level of detail. Similarly, the Bureau of Reclamation reported that expenditures for aquatic invasive species activities at its water projects—such as clearing water control structures to maintain water delivery through pipes and canals—are funded mostly through the operations and maintenance budget for each project and are not tracked as expenditures specific to aquatic invasive species. Decisions on expenditures for aquatic invasive species are made at the local or regional level. Four of the 13 member agencies reported that decisions on expenditures for aquatic invasive species activities are delegated to a regional or local level and are not tracked at the national level. For example, the National Park Service reported that once funding is provided to a national park, headquarters management does not generally direct how the funding is expended at that park. Instead, park management generally determines how the funding will be used to accomplish park objectives, including whether and how to prioritize funding for aquatic invasive species activities. Similarly, the Bureau of Land Management reported that numerous decisions and activities take place at its local or state office level that are not tracked by headquarters, including expenditures on aquatic invasive species, and, therefore, annual expenditures on aquatic invasive species across the agency are unknown. The U.S. Forest Service also reported in its questionnaire that many of its aquatic invasive species activities are conducted through cooperative partnership agreements at the local and regional level and expenditures for these activities are not reported at the national level. Task Force Member Agencies Conducted a Wide Range of Activities and Identified Several Challenges in Addressing Aquatic Invasive Species Through our questionnaire and interviews with officials from the Task Force and its member agencies, we found that member agencies conducted a wide range of activities and faced several challenges in addressing aquatic invasive species. Most member agencies reported conducting activities across the seven general activity categories developed by the National Invasive Species Council, including taking actions to prevent introductions of new aquatic invasive species and control the spread of existing ones (see app. III). Task Force member agencies also identified several challenges in addressing aquatic invasive species. Some of these challenges are overarching, and others relate to how member agencies plan or conduct aquatic invasive species activities specific to the activity categories. Regarding overarching challenges, several Task Force member agencies—including officials from the Departments of the Interior and Agriculture, the Corps, and NOAA—expressed concern that their activities, though numerous, may not be adequate relative to the growing magnitude and impacts of aquatic invasive species amid decreasing or constrained agency resources. Task Force representatives further said that many of the member agencies have faced competing priorities in carrying out aquatic invasive species-related activities, with some member agencies having limited flexibility to conduct work in multiple areas. According to officials from the U.S. Geological Survey (USGS), for example, much of the agency’s aquatic invasive species activities have been focused on identifying methods to treat and control Asian Carp in accordance with the Great Lakes Restoration Initiative and other funding for this work. USGS officials said that though their work on Asian Carp has been critical, it has sometimes meant that they have not been able to prioritize other needs, such as identifying marine invaders from nonballast water sources or new marine and arctic threats given the warming of ocean waters. The following are examples of activities Task Force member agencies conducted to address aquatic invasive species along with challenges they identified related to specific activity categories, based on the responses we received to our questionnaire and interviews with officials from the Task Force and its member agencies. These examples include activities from each of the seven activity categories—(1) prevention, (2) early detection and rapid response, (3) control and management, (4) restoration, (5) research, (6) education and public awareness, and (7) leadership and international cooperation. These examples do not represent all activities conducted or challenges identified by member agencies, but rather they illustrate the nature and type of activities and challenges discussed. Prevention Eleven of the 13 Task Force member agencies reported conducting a range of prevention activities, often related to managing specific pathways to help prevent the introduction of aquatic invasive species into new aquatic habitats. Task Force member agencies repeatedly highlighted the importance of conducting prevention-oriented activities as a cost-effective means of addressing aquatic invasive species. Officials from some member agencies also said that they would like to conduct more prevention-oriented activities, but that they have faced challenges in doing so, in part because of policy or funding decisions within their respective agencies. For example, Corps officials said they believed that it would be most cost-effective to treat certain aquatic invasive plants upstream from project boundaries before the species spreads downstream and potentially threatens project infrastructure; however, it is generally the agency’s policy to treat areas within rather than outside project boundaries. Some Task Force member agencies also told us that prevention activities cannot be conducted at the expense of activities aimed at controlling aquatic invasive species already established, and that a more balanced approach between prevention and control activities may be warranted. Prevention Efforts to Control the Spread of Quagga and Zebra Mussels Several Task Force member agencies are involved in activities to prevent the spread of invasive Quagga and Zebra Mussels throughout the western United States. For example, U.S. Fish and Wildlife Service (FWS) and the National Park Service support implementation of the Quagga-Zebra Mussel Action Plan, which was developed by several state and federal agencies, as well as nongovernmental organizations in the western United States. This plan serves as a road map for identifying and prioritizing specific actions needed to prevent the further spread of Quagga and Zebra Mussels, respond to new infestations, and manage existing ones. FWS has installed signs at National Wildlife Refuges to alert boaters about the risk of these species and has funded training in 18 states on inspecting boats and other watercraft to identify and remove the mussels. The National Park Service expended approximately $2 million in fiscal year 2014 on mussel prevention and control and monitoring at nine western parks. In addition, the Bureau of Reclamation has conducted a series of public education and outreach efforts, including the dissemination of informational pamphlets at boat shows, designed to educate the public on practices they can follow to help prevent the spread of Quagga and Zebra Mussels. Examples of prevention activities include the following: Regulations. The U.S. Coast Guard and EPA regulate the management of ballast water—a primary pathway for the introduction of new aquatic invasive species into and within the United States— and other vessel discharges into waters of the United States. In 2012, the Coast Guard updated its ballast water regulations to include a standard for the allowable concentrations of living organisms allowed in a vessel’s ballast water discharged in waters of the United States. In 2013, EPA issued a general permit that contains numeric technology-based limitations on acceptable concentrations of living organisms in ballast water discharge. Inspections. FWS’s Office of Law Enforcement inspects certain wildlife shipments to help ensure that prohibited species, including certain aquatic invasive species, do not enter the country. FWS’s has about 120 inspectors at 49 ports of entry nationwide that review import documentation and conduct visual inspections of some shipments to help prevent species listed as injurious wildlife under the Lacey Act from being illegally brought into the country or across state lines. Physical barriers. The Corps operates a series of electric barriers in the Chicago Area Waterway System located approximately 25 miles from Lake Michigan to prevent the entry of Asian Carp and other aquatic invasive species from the Mississippi River Basin into the Great Lakes. These barriers send out pulses to form an electric field in the water that discourages fish from crossing. Early Detection and Rapid Response Ten of the 13 Task Force member agencies reported conducting early detection and rapid response activities—activities to detect the presence of aquatic invasive species in an area and remove any newly detected species while they are localized and before they become established and spread to new areas. Aside from preventing introductions, the most cost- effective way to address an invasive species is to detect and respond to invasions early, according to documents from the U.S. Forest Service and NOAA. However, coordinated rapid response efforts have been challenging to implement due, in part, to constraints in existing funding, according to officials from some agencies. Consequently, 11 Task Force member agencies are part of a federal work group, co-led by the Department of the Interior and the National Invasive Species Council, that in January 2015 started developing a framework for a national early detection and rapid response program and a plan for an emergency rapid response fund. The work group reported in July 2015 that it plans to issue a report of recommendations to implement an early detection and rapid response framework, including mechanisms for funding, to the White House and the Council on Climate Preparedness and Resilience in the fall of 2015. Early Detection Technique Using Environmental DNA Detection methods such as the use of environmental DNA have become widespread among Task Force member agencies, such as the U.S. Geological Survey (USGS), the U.S. Army Corps of Engineers (Corps), the National Park Service, the Bureau of Reclamation, and the U.S Fish and Wildlife Service (FWS). Environmental DNA—genetic material shed into the environment by organisms that can be detected in samples of air, water, or soil—is a relatively new tool being used to detect invasive species, particularly in areas where the species is not abundant or is difficult to detect. For example, because they are well camouflaged in the environment, visual detection of Burmese Pythons in South Florida is difficult, with detection rates of less than 1%. Use of environmental DNA methods, however, can increase python detection rates to more than 90%, according to USGS officials. Since spring 2015, USGS researchers have been working with FWS to test water from the Loxahatchee National Wildlife Refuge in Florida to determine whether Burmese Pythons may have spread to the refuge. Although environmental DNA helps confirm the presence of an aquatic invasive species in an area, it neither confirms whether the species has become established in the area, nor does it provide information on the number or current location of any species detected. Examples of early detection and rapid response activities include the following: National early detection database. The USGS maintains the Nonindigenous Aquatic Species Database, a publicly accessible database, to track information on the locations of aquatic invasive animals throughout the United States. Federal agencies, as well as state and local agencies and the public, can report aquatic invasive species sightings and when verified, the sightings are added to the database and updated daily by the USGS. Rapid response strike teams. The FWS has five regional strike teams in place to help eradicate any new invasions as soon as possible after they are detected in the nation’s 563 wildlife refuges. These strike teams survey a small portion of the acreage within national wildlife refuges when new invasions are suspected, according to FWS officials, to determine the presence of any invasions and then take actions to eradicate or contain confirmed invasions before populations spread. Control and Management Eleven of the 13 Task Force member agencies reported conducting activities designed to lessen and mitigate the impact or spread of aquatic invasive species on the facilities or areas they manage. Such activities may be designed to eradicate an invading species, but where eradication is not deemed feasible, such activities are designed to manage the invader by controlling the impact of the species and its spread. Activities aimed at controlling or managing the impact and spread of invasions represent a substantial portion of overall aquatic invasive species-related activities conducted, in terms of both effort and funding, according to Task Force representatives and officials from several member agencies. Some of these officials stressed the importance of sustaining efforts to control and manage aquatic invasive species to avoid reintroductions or spread of the species. For example, Corps officials said that, after eliminating infestations of Melaleuca, an invasive wetland tree, over a prescribed 10- year treatment period, periodic treatments would still be necessary to ensure new populations do not become established. Officials from several member agencies including the Corps noted, however, that limited or inconsistent funding has, at times, made it challenging to consistently manage areas as prescribed—potentially leading to the reemergence of aquatic invasive species. Multipronged Method to Control and Manage Melaleuca Melaleuca, an Australian tree that has destroyed many southern Florida wetlands, can be managed through a combination of biological, chemical, and physical and mechanical controls. For instance, through the introduction of weevils, a type of beetle that serves as a biological control, Melaleuca can be controlled. Researchers from the U.S. Department of Agriculture said, however, that the ability of Melaleuca trees to grow in various water depths has prevented the weevils— which require ground to burrow in—from successfully reproducing and eating the Melaleuca in swampy areas. According to National Park Service officials, Melaleuca can also be controlled if it is consistently treated over a 10-year period using the method in which the trees are first cut or hacked down with a machete or mechanical device and then sprayed with herbicides designed to kill them on the first, second, fourth, seventh, and tenth years of treatment. If this process is not followed as prescribed, however, the trees may regrow and spread. The National Park Service Exotic Plant Management Team and Everglades National Park have contributed to control of Melaleuca in South Florida, as shown in the photo below. Examples of control and management activities include the following: Biological controls. To control and manage the spread of Alligatorweed, a leafy aquatic invasive plant found in the southeastern United States and California, officials from the Corps told us they are using a beetle that feeds and reproduces only on Alligatorweed. According to officials from the Corps and the U.S. Department of Agriculture, the beetle has been successful in controlling the weed, and the need for additional treatments, such as herbicide applications, has been nearly eliminated in Florida. Chemical controls. The Department of State, through the Great Lakes Fishery Commission, along with the Corps, FWS, USGS and other federal and state partners, are primarily using chemicals called lampricides to kill Sea Lamprey, an invasive fish, in their larval stage before they can attach and prey upon native fish. According to Department of State officials, as of 2015, chemical controls have led to a 90 percent reduction in the Sea Lamprey population over its historical high level. Physical and mechanical controls. The Bureau of Reclamation uses physical and mechanical control methods to remove Water Hyacinth, an aquatic invasive plant, from one of its California facilities. Bureau of Reclamation officials said that, if left untouched, Water Hyacinth clogs canals, pumps, and fish screens, which can kill the fish they are working to protect. Bureau of Reclamation officials told us that, between 2013 and 2015, they removed between 10,000 and 20,000 truckloads of Water Hyacinth from the area surrounding the facility—with a dump truck filled with Water Hyacinth leaving the facility every 5 minutes during the height of its growing season. Restoration Ten of the 13 Task Force member agencies reported conducting a variety of activities to restore aquatic habitats adversely affected by aquatic invasive species. Officials from a few Task Force member agencies said that it may be possible to begin restoring habitats or ecosystems while control and management activities are under way, but in some cases aquatic invasive species may need to first be controlled or contained. According to a few member agencies, this creates a challenge in that restoration activities must wait until control activities are finished, meaning that restoration may be delayed. Examples of restoration activities include the following: Habitat restoration. NOAA reported providing funding and technical expertise for community-based habitat restoration projects, such as providing about $925,000 in 2012 for the Lower Black River Habitat Restoration Project in Ohio. The goal of this project is to restore fish and wildlife habitat in the lower Black River through actions such as the removal of aquatic invasive plants by chemical and manual techniques followed by the planting of native shrubs. Native fish restoration. The National Park Service reported removing nonnative fish from waters in a number of parks to restore native species and enhance natural aquatic biodiversity. Officials told us that they have been expending about $1 million per year since 2013 at Yellowstone National Park on lake trout removal efforts in Yellowstone Lake. These efforts include contracting with commercial fishing crews to remove invasive lake trout that have caused a significant decline in populations of the native Yellowstone Cutthroat Trout. Research All 13 Task Force member agencies reported conducting or sponsoring research designed to support activities to help prevent, detect, or control the impacts or spread of aquatic invasive species, as well as determine their impacts on aquatic habitats. Research is critical to identify effective techniques for prevention, detection, control, and management of aquatic invasive species and to help clarify and quantify the effects aquatic invasive species have on native species and habitats, as well as economic costs and impacts to human health, according to Task Force documents. Officials from several member agencies and Task Force representatives noted that significant gaps in knowledge in certain areas related to aquatic invasive species is a challenge and, therefore, would like to see additional research, such as a comprehensive study to identify and assess the environmental impacts and economic costs associated with invasive species in the United States. Such information is critical to understanding the magnitude of the impacts from aquatic invasive species and for obtaining funding to address problems they are causing, according to these officials. In addition, limits in scientific knowledge about newly introduced species and the levels at which they may become established or harmful, especially in ballast water, affect member agencies’ ability to manage the ballast water pathway, according to officials from NOAA and the Smithsonian Environmental Research Center. Officials from the U.S. Coast Guard said that it is difficult to set regulations or establish allowable concentrations of organisms that can be safely released in ballast water when the threshold for establishment of a new potentially invasive species may not be well understood. Federal Research on Hydrilla Federal research on Hydrilla, a submerged invasive plant that has clogged navigation channels and other water systems across the United States, involves efforts by several Task Force member agencies. For example, the U.S. Army Corps of Engineers (Corps) conducted research on the biology of Hydrilla during 2015 to provide a better understanding of the invasion ecology of this species in northern rivers and glacial lakes. The Corps has also researched chemical treatments and application strategies to control or alter the reproduction of Hydrilla. Chemical treatments developed through research have been successful in controlling some strains of Hydrilla, according to Corps officials. Aquatic herbicides developed through research have also been successful in controlling Hydrilla, but some strains have become resistant. In addition, the Animal and Plant Health Inspection Service, in collaboration with the Corps, is researching biological controls for Hydrilla, such as releasing insects that will eat the plant. Examples of research activities include the following: Species research. The Corps is researching various types of invasive aquatic vegetation and options for managing such species through its Aquatic Plant Control Research Program, which is authorized by statute. In 2014, Corps’ researchers completed field studies in Montana that used selective management strategies to control Eurasian Watermilfoil, a plant that is invasive throughout most states, including Alaska. Impacts research. Officials from USGS and NOAA have conducted research aimed at improving scientific knowledge about how aquatic invasive species may be adversely affecting ecosystems. In 2015, USGS continued research to identify whether newly established nonnative species may warrant being considered “high priority invaders,” such as the Burmese Python in the Everglades. Since 2009, NOAA has conducted research to determine how certain aquatic invasive species have affected endangered salmon feeding behavior and habitat in the Pacific Northwest as part of its effort to understand the impacts that aquatic invasive species have on these native species and the ecosystems upon which they depend. Pathways research. The Maritime Administration sponsors the operation of three research facilities—in California, Maryland, and Wisconsin—that are testing the capability of treatment systems for ballast water to determine whether those systems may be approved by the U.S. Coast Guard pursuant to its ballast water regulations. Education and Public Awareness Eleven of the 13 Task Force member agencies reported engaging in education and public awareness activities to increase awareness about aquatic invasive species and their impacts and help minimize or prevent further introductions. According to Task Force documents, the lack of public awareness about the impacts and threats posed by some invasive species and how they are introduced is a substantial challenge for Task Force member agencies in addressing aquatic invasive species. Lionfish Education and Public Awareness Several Task Force member agencies are involved in raising awareness about Lionfish, a highly invasive fish that has spread throughout coastal waters of the southeast and the Caribbean. To help raise awareness, the National Oceanic and Atmospheric Administration, along with nonprofit partners, has sponsored numerous Lionfish derbies since 2010, including 10 public tournaments in 2014 in which divers could hunt the edible fish with spears. The National Park Service produced a Lionfish Response Plan in 2012 that aims to help inform the public about the Lionfish invasion and prevent and mitigate impacts to parks. Biscayne National Park, in Florida, conducts an education program in which Lionfish removed from the park are sent to classrooms for safe dissection by students. National Park Service officials told us that concentrated education efforts like this have been effective in educating the public about Lionfish. In addition, the Department of State provided funding to work with partners in the Gulf of Mexico and the Caribbean to launch a web portal that provides managers and the public with access to the latest information on Lionfish and impacts in the Atlantic Ocean. Examples of education and public awareness activities include the following: National awareness campaigns. The Task Force, Bureau of Land Management, FWS, U.S. Forest Service, and the U.S. Coast Guard are among the federal agencies that collaborate on the “Stop Aquatic Hitchhikers!” campaign. Since 2002, this multimedia campaign has used television, billboards, and social and print media to encourage users of outdoor recreational areas to help stop the transport and spread of aquatic invasive species by, for example, making sure they clean, drain, and dry their boats and boat trailers before transporting them to different aquatic areas. Local awareness events. The National Park Service, along with state agencies and nongovernmental organizations, hosted the inaugural 5K “Race Against Invasives” run through Everglades National Park in February 2015 to raise awareness about invasive species, especially those in Florida. Leadership and International Cooperation Ten of the 13 Task Force member agencies have been involved in activities to provide leadership to the aquatic invasive species community—which includes federal and nonfederal as well as international agencies working on aquatic invasive species issues—and to enhance cooperation and collaboration, such as by participating and serving as members in a range of international, national, regional, state, and local task forces, councils, and other entities. Given the often complex and widespread nature of aquatic invasive species, working across jurisdictional boundaries is the most effective approach to combating aquatic invasive species, according to Task Force officials and documents. Moreover, working with other federal and nonfederal agencies and organizations helps the Task Force to identify areas where legislation may be needed to fill gaps in statutory authority, suggest priority policy issues, and define roles and responsibilities for managing aquatic invasive species, according to Task Force documents. Officials from the regional panels told us, however, that one challenge in such work is that constrained agency funding has meant that they have not been able to consistently attend Task Force, regional panel, or other cooperative meetings. Examples of leadership and international cooperation activities include the following: Aquatic Nuisance Species Task Force activities. The Task Force conducts semiannual meetings that provide an open and public forum for members to exchange information and coordinate their aquatic invasive species activities. For example, the Task Force’s May 2015 meeting included presentations on a wide range of topics, from the adoption of species-specific national management plans to recommendations from its regional panels on issues of local significance. International cooperation. Officials from the Corps and the U.S. Department of Agriculture have collaborated with scientists in China, South Korea, and Switzerland to identify and develop insect biological control agents to target invasive aquatic plants such as Hydrilla and Eurasian Watermilfoil. For example, in fiscal year 2014, Corps officials reported expending about $450,000 on developing such control agents, which included collecting 350 plant samples from more than 90 field sites to help match invasive plants located in the United States with their countries of origin to improve the success of identifying insects to control these species. The Task Force Has Not Taken Key Steps to Measure Progress in Achieving Its Strategic Goals The Task Force has not taken key steps to measure progress in achieving the goals laid out in its 2013-2017 strategic plan. In 2012, the Task Force developed its 2013-2017 strategic plan, which serves to guide Task Force member agencies in conducting aquatic invasive species- related activities to implement the aquatic invasive species program. The strategic plan identifies eight goals for the program—which generally align with the seven activity categories developed by the National Invasive Species Council—as well as a number of targeted action items for Task Force member agencies to achieve these goals (see table 4). The action items identified in the strategic plan were intended to be completed over the 5-year period of the plan, but the strategic plan also stated that accomplishing the items would be dependent upon the budgets of individual agencies. The strategic plan did not identify or describe roles or activities to be conducted by specific member agencies or measures to track progress in achieving its eight strategic goals. Rather, the strategic plan called for the Task Force to develop an operational plan to specify how Task Force member agencies would put the strategic plan into operation. According to the strategic plan, the function of the operational plan was to ensure the strategic goals were measurable and accountable. Specifically, the operational plan was intended to contain the following elements: (1) a description of short-term efforts to support and implement the strategic plan and its goals; (2) the roles of Task Force member agencies; (3) when available, the time frames, lead agencies or groups, and funding; and (4) regular updates with its actions reported annually to measure progress toward accomplishing the goals of the strategic plan. The elements envisioned for the operational plan are also largely required by the 1990 Act. Before the strategic plan went into effect, however, the Task Force decided not to develop an operational plan as envisioned in the strategic plan. Instead, the Task Force decided to develop a reporting matrix in the form of a spreadsheet to collect information on member agencies’ aquatic invasive species-related activities, according to the Task Force’s autumn 2012 meeting minutes. This reporting matrix was designed to collect information on the aquatic invasive species activities that member agencies had planned to conduct related to the goals of the strategic plan. This reporting matrix was also designed to collect funding information associated with each of these activities, which could serve as a starting point for the Task Force to identify funding gaps and priorities and develop recommendations for funding to implement elements of its aquatic invasive species program as required by the 1990 Act. The reporting matrix was disseminated to Task Force member agencies in August 2012, but fewer than half (6 of 13) of the Task Force member agencies provided information to the Task Force. According to Task Force representatives, the Task Force did not disseminate or collect additional information using the reporting matrix after 2012. According to Task Force representatives, the Task Force decided not to develop an operational plan or use the reporting matrix after 2012 because of constrained funding and limited resources. In particular, they said they were limited in their efforts because of the constrained funding environment that emerged from sequestration in 2013 and 2014. According to Task Force representatives, the retirement in 2013 and the continued vacancy of its Executive Secretary has resulted in the Task Force being without dedicated staff to support updates to the reporting matrix. Task Force representatives further explained that, given the limited staff devoted directly to the Task Force, they rely on staff from member agencies to contribute to the administration of the program, but member agencies have had competing priorities and have not had the resources to contribute to developing an operational plan in the way that was originally envisioned when the strategic plan was developed. In addition, Task Force representatives said that, since 2014, the Task Force along with member agency staff, has been focused on drafting a report to Congress, an annual requirement under the 1990 Act. Since its inception, the Task Force has provided one report to Congress, in 2004. Task Force representatives said they expect to finalize and issue their draft report by the end of 2015. In reviewing a draft of the report, we found that the draft provided an overview and examples of aquatic invasive species activities conducted by the Task Force, member agencies, regional panels, and states since the Task Force’s 2004 report, as well as some information on the role of Task Force member agencies in aquatic invasive species management. After they finalize the 2015 report, Task Force representatives have not indicated that they would begin submitting reports annually to meet this reporting requirement in the future. Task Force representatives also said they have no plans to develop an operational plan, as called for in the strategic plan, but acknowledged the importance of developing a means to regularly track various member agencies’ aquatic invasive species activities and measure progress toward meeting the strategic goals. Specifically, in response to our inquiry into the status of an operational plan, Task Force representatives told us in May 2015 that they planned to discuss the possibility of reviving or modifying the reporting matrix they had used in 2012. Task Force representatives subsequently told us that, during a June 2015 meeting, member agencies agreed that a tracking mechanism was important. However, they also told us that they did not determine what such a mechanism would look like, how it would be implemented and by whom, or how to address concerns expressed by some member agencies that the mechanism not burden agency staff already working at capacity in light of constrained funding. Task Force representatives said they plan to further discuss the idea of reviving or modifying the reporting matrix at their next semiannual Task Force meeting in November 2015. But, representatives could not tell us when they planned to make a decision on the approach they would take or provide specifics on what information they would collect or how they would measure progress in achieving their strategic goals. By developing and regularly using a tracking mechanism—that would include the elements envisioned for an operational plan and required by the 1990 Act—the Task Force could better position itself to (1) measure progress in achieving its strategic goals and (2) comply with certain requirements in the 1990 Act for the aquatic invasive species program. Addressing aquatic invasive species is a complex, interdisciplinary issue with the potential to affect many sectors and levels of government operations. Strategic planning is a way to respond to this governmentwide problem on a governmentwide scale. Our past work on crosscutting issues has found that governmentwide strategic planning can integrate activities that span a wide array of federal, state, and local entities, as well as provide a comprehensive framework for making resource decisions and holding agencies accountable for achieving strategic goals. With its strategic plan, the Task Force has a framework in place to guide and integrate the numerous and varied aquatic invasive species activities spanning many member agencies. In addition to measuring progress in achieving the Task Force’s strategic goals, developing and regularly using a tracking mechanism could also help the Task Force meet the 1990 Act’s requirements to describe its members’ roles and specific activities and to report annually to Congress on the program’s progress. Conclusions Aquatic invasive species, a serious and growing problem affecting all states and U.S. territories, have been likened to a never-ending oil spill, given that they are notoriously difficult to eradicate once they become established. Though hard to calculate, the economic and ecological harm caused by aquatic invasive species is vast. Capturing how much federal agencies have expended—and will likely need to expend—to effectively address aquatic invasive species is also challenging. Consequently, it is not possible to identify how much may be needed to fully address aquatic invasive species, both in terms of current invasions or measures to prevent future invasions. Capturing how much progress federal agencies have made in combatting aquatic invasive species is similarly challenging. The Task Force and its member agencies have taken significant steps— including conducting a wide array of activities and developing a strategic plan to guide their efforts—to address the threats and impacts of aquatic invasive species. However, the Task Force has not met several of the 1990 Act’s requirements, including reporting annually to Congress on the program’s progress, or developed a mechanism to ensure its strategic goals are measurable and accountable, such as through an operational plan, as called for in its strategic plan, because of constrained funding and limited resources. Task Force member agencies agreed that a mechanism to track activities and measure progress was important, but the Task Force has not decided what the mechanism would look like, how it would be implemented and by whom, or how to address concerns that it not burden agency staff already working at capacity. Developing and regularly using a tracking mechanism could help the Task Force measure progress in achieving its strategic goals, as well as help the Task Force meet the 1990 Act’s requirements to describe its members’ roles and specific activities and to report annually to Congress on the program’s progress. Moreover, such a mechanism could provide a starting point for identifying funding gaps and priorities, better positioning the Task Force to meet the 1990 Act’s requirement to include recommendations for funding to implement elements of its aquatic invasive species program. Recommendation for Executive Action As the Aquatic Nuisance Species Task Force considers how to measure progress toward accomplishing its strategic goals, we recommend that the Task Force develop and regularly use a tracking mechanism, to include elements envisioned for an operational plan and to largely meet requirements in the 1990 Act, including: specifying the roles of member agencies related to its strategic plan, tracking activities to be conducted by collecting information on those activities and associated funding, measuring progress member agencies have made in achieving its reporting to Congress annually on the progress of its program. Agency Comments and Our Evaluation We provided the Secretaries of Agriculture, Commerce, Defense, Homeland Security, Interior, State, and Transportation and the Administrator of the EPA a draft of this report for their review and comment. Only the Department of the Interior and the Department of Commerce’s NOAA provided written comments, which are included in appendixes V and VI, respectively. Interior generally agreed with the report’s findings and recommendation, and NOAA disagreed, as further discussed below. The Department of Defense’s U.S. Army Corps of Engineers, the Department of State, and EPA indicated that they had no comments on our report through e-mail communications provided through departmental audit liaisons on October 19, October 21, and October 23, 2015, respectively. We also received e-mails provided through audit liaisons from the following departments that stated that the departments agreed with the report’s findings and recommendation and had no other comments: The Department of Agriculture’s Animal and Plant Health Inspection Service and U.S. Forest Service (dated October 29, and October 30, 2015, respectively); the Department of Transportation (dated October 26, 2015); and the Department of Homeland Security (dated October 15, 2015). In its written comments, the Department of the Interior stated that it generally agreed with the findings of our report and concurred with our recommendation. Interior stated that it appreciated our review of the challenges faced by the Task Force in addressing and managing risks posed by the introduction and proliferation of aquatic invasive species. Interior stated that the Task Force, of which its FWS is a co-chair, is currently evaluating the reporting matrix to improve its utility as a tracking mechanism. Additionally, Interior stated that, at its November 2015 meeting, the Task Force agreed to track accomplishments using a modified activity tracking tool while its members continue to evaluate how best to track their activities going forward. Interior also stated that the Task Force’s report to Congress is undergoing final agency review, and it is expected to be delivered to Congress in the coming months, which, together with its tracking efforts, will help provide the Task Force with a mechanism to both measure and communicate progress toward its strategic goals, as called for in our report. We agree that using a modified activity tracking tool and completing the report to Congress will be positive first steps in the Task Force’s measuring progress toward accomplishing its strategic goals and meeting requirements in the 1990 Act, in accordance with our recommendation. Interior also provided technical comments, which we incorporated, as appropriate. In its written comments, NOAA disagreed with several aspects of our findings, conclusions, and recommendation. In addition, NOAA stated that our report did not sufficiently address certain aspects of the mandate to conduct the review contained in section 1039(a)(2) of the Water Resources Reform and Development Act of 2014. First, NOAA stated that the report did not mention future costs to mitigate the impacts of aquatic invasive species and that, although it may be difficult to give specific numbers, some information could be speculated upon. In the opening paragraph of our report, we state that the impacts of invasive species in the United States are widespread and expected to increase, with profound consequences for the economy and the environment. We cite a 2005 academic study—the most recent comprehensive study of its kind— that estimates the environmental impacts and economic costs associated with invasive species at almost $120 billion per year. Additionally, through our questionnaire, we requested that federal member agencies provide planned activities and estimated expenditures for future years. However, as we describe in the scope and methodology appendix (app. I) of our report, we decided not to report future estimated expenditures given the limited information provided by some member agencies. We believe that reporting partial information could be misleading and could underestimate likely future expenditures. Second, NOAA stated that our analysis could have gone into more detail about current federal spending on prevention activities. We limited our reporting of expenditures for fiscal years 2012 through 2014 to estimates of total annual expenditures for each Task Force member agency because many member agencies reported that they could not provide estimates of their expenditures by activity category, including prevention. Third, NOAA stated that we did not address whether federal spending is adequate for the maintenance and protection of services provided by federal facilities. As we note in our report, capturing how much federal agencies have expended—and will likely need to expend—to effectively address aquatic invasive species is challenging. Given the limited information available from the Task Force member agencies on current and planned expenditures related to aquatic invasive species, we determined we would not be able to reliably conduct an analysis of the adequacy of federal spending. Lastly, NOAA stated that we chose to focus on the Aquatic Nuisance Species Task Force and its strategic plan rather than documenting other legislative and programmatic efforts that target the prevention, control, and management of aquatic invasive species. The scope of our review includes all federal member agencies of the Task Force, and in discussing activities and challenges those member agencies face in addressing aquatic invasive species, our report highlights many of the legislative and programmatic efforts those agencies are undertaking, such as efforts by the U.S. Coast Guard and EPA to regulate and manage ballast water through updated regulations. NOAA also stated that our report did not mention federal mandates intended to address aquatic invasive species other than the Nonindigenous Aquatic Nuisance Prevention and Control Act of 1990, the National Invasive Species Act of 1996, and Executive Order 13112. NOAA stated that at its exit conference with us on July 14, 2015, it noted that many federal agencies receive additional directions or mandates to address or respond to aquatic invasive species and their impacts and that each agency must balance these mandates. We agree that federal agencies may have multiple responsibilities in addressing aquatic invasive species—we outline many of these responsibilities in table 1 of the background of our report where we describe the key roles and responsibilities of Task Force member agencies under various federal laws. Also, in describing examples of the activities and challenges member agencies face in addressing aquatic invasive species in the second objective of our report, we identify and describe many of the requirements and mandates member agencies must follow. For example, we describe efforts of the FWS’ Office of Law Enforcement to enforce the Lacey Act, which prohibits the importation and interstate transport of wildlife listed as injurious, among other things. NOAA also stated that balancing and responding to various requirements ultimately affects the agencies’ ability to adequately respond to this national issue. We agree with this statement, and in our discussion of challenges faced by member agencies in addressing aquatic invasive species, we report that many of the member agencies have faced competing priorities in carrying out aquatic invasive species-related activities, with some member agencies having limited flexibility to conduct work in multiple areas. In addition, NOAA stated that the interactive map (fig. 1) may be misleading, inaccurate, or confusing. First, NOAA stated that the reported presence of a species in USGS’ Nonindigenous Aquatic Species database (one of two key sources we used to prepare species’ location information for the map) does not mean that the species is established in a particular state’s waters as the map portrays. In our draft report, in a note to the figure, we included a statement to clarify that species distributions in the map represent the reported presence of a species in at least one, but not necessarily all, bodies of water in the state, and do not necessarily indicate establishment of the species in any part of the state. To further clarify this point so as not to potentially mislead readers, in response to NOAA’s comment, we have updated the figure title and note and also added a statement to this effect in the body of the report. Second, NOAA stated that Caulerpa, one aquatic invasive species we highlighted in the figure, had been eradicated. Upon receipt of this information from NOAA and in light of obtaining additional supporting data, we removed Caulerpa from the figure. Third, NOAA stated that providing points of pathways of invasion as part of the interactive figure was confusing or inaccurate in some cases. We agree that the manner in which we linked our description of the pathways of invasion to the map in the draft report could be misinterpreted; consequently, in response to NOAA’s comment, we disassociated the description of pathways from the map. We believe that providing a description of various pathways aquatic invasive species may use to enter and spread into new areas is important context for our report. Furthermore, concerning our recommendation that the Task Force develop and regularly use a tracking mechanism, to include elements envisioned for an operational plan and to largely meet requirements in the 1990 Act, NOAA stated that it does not believe the recommendation can address problems faced by the Task Force. NOAA stated that, with respect to measuring progress, the Task Force agreed to use an activity matrix to compile information, but the matrix has not been updated since 2012 for several reasons, including because of uncertainties in funding, shifting priorities, and the loss of the Task Force Executive Secretary position, which has not been filled since the former Executive Secretary retired in 2013. NOAA further stated that the report does not address the underlying causes that have hindered Task Force efforts to track progress, including the limited budget under which the Task Force operates, which has been reduced significantly in recent years. Our recommendation was not intended to comprehensively address the problems faced by the Task Force, but rather was more narrowly focused. Specifically, the intent of our recommendation is to help the Task Force regularly track progress toward achieving its strategic goals in a manner that ensures it also largely meets requirements in the 1990 Act, such as reporting to Congress annually on the progress of its program. In our report, we discuss the constrained funding environment and limited resources the Task Force and its member agencies reported working under, including having limited staff devoted directly to the Task Force and facing the constrained funding environment that emerged from sequestration in 2013 and 2014. We believe that by implementing our recommendation—that is, by developing and regularly using a tracking mechanism to include the roles of member agencies, activities conducted and associated funding, and progress made in achieving strategic goals—the Task Force would be in a better position to identify and communicate its progress, as well as funding or resource needs to address problems faced by the Task Force. As we note in our report, capturing how much federal agencies have expended—and will likely need to expend—to effectively address aquatic invasive species is challenging. But by developing and regularly using a tracking mechanism, we believe the Task Force would be better-positioned to assess funding gaps and priorities and begin to identify solutions to address the challenges member agencies face in addressing aquatic invasive species. Finally, NOAA identified examples where it stated information portrayed in our report could have evolved into recommendations. For example, NOAA commented that a recommendation that calls for a more balanced approach in conducting prevention activities would be beneficial. In our report, we state that member agencies repeatedly highlighted the importance of conducting prevention-oriented activities as a cost-effective means of addressing aquatic invasive species. We also note that officials from some member agencies said they would like to conduct more prevention-oriented activities, but that prevention activities cannot be conducted at the expense of activities aimed at controlling aquatic invasive species already established, and that a more balanced approach between prevention and control activities may be warranted. We include this and the other examples NOAA references in our report to provide context on an issue, provide examples of activities being undertaken by member agencies, or describe challenges faced by member agencies in addressing aquatic invasive species—consistent with the objectives and scope of work conducted for this review. Consistent with government auditing standards, we are to have sufficient, appropriate evidence to provide a reasonable basis for findings and conclusions before we can develop recommendations. Based on our work, we did not have sufficient evidence to provide a reasonable basis for making recommendations on the examples NOAA identified. We encourage NOAA to continue to work with Task Force member agencies and others to pursue areas they identify as needing additional work, such as identifying ways to take a more balanced approach across prevention and control activities. We believe that by implementing our recommendation, NOAA, as one of the co-chairs of the Task Force, would be in a better position to identify funding gaps and priorities, and determine recommendations for funding based on emerging needs. NOAA also provided technical comments, which we incorporated, as appropriate. We are sending copies of this report to the appropriate congressional committees; the Secretaries of Agriculture, Commerce, Defense, Homeland Security, the Interior, State, and Transportation; the Administrator of the Environmental Protection Agency; and other interested parties. In addition, the report is available at no charge at the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to the report are listed in appendix VII. Appendix I: Objectives, Scope, and Methodology This report examines (1) how much the Aquatic Nuisance Species Task Force (Task Force) member agencies expended addressing aquatic invasive species from fiscal year 2012 through 2014; (2) activities conducted by Task Force member agencies and challenges in addressing aquatic invasive species; and (3) the extent to which the Task Force has measured progress in achieving the goals of its 2013-2017 strategic plan. For all three objectives, we reviewed aquatic invasive species-related laws, including the Nonindigenous Aquatic Nuisance Prevention and Control Act of 1990, as amended (the 1990 Act), regulations, and academic studies. We conducted interviews with, and obtained documentation from, the co-chairs of the Task Force and other Task Force representatives; officials from the 13 Task Force federal member departments and agencies (member agencies); and representatives from each of the Task Force’s six regional panels to learn about their roles and responsibilities, aquatic invasive species-related activities, and any expenditure information they maintain related to those activities. In addition, we interviewed staff from the National Invasive Species Council to learn about their efforts to collect information on federal expenditures for invasive species activities. To determine how much Task Force member agencies expended addressing aquatic invasive species for fiscal years 2012 through 2014 and obtain information on activities conducted, we developed and disseminated a questionnaire to the 13 Task Force member agencies, requesting information on their estimated expenditures and activities conducted to address aquatic invasive species. Specifically, the questionnaire requested member agencies to provide estimates of their expenditures for the activities they conducted in each of the following seven aquatic invasive species activity categories: (1) prevention, (2) early detection and rapid response, (3) control and management, (4) research, (5) restoration, (6) education and public awareness, (7) and leadership and international cooperation. These were the same activity categories used by the National Invasive Species Council to collect and report information for its annual invasive species interagency “crosscut” budget summary. The council’s annual budget summary includes estimates of federal agency expenditures and planned funding on activities to address all types of invasive species, but it does not include a breakdown of expenditure by type, including expenditures specific to aquatic invasive species. Therefore, the council’s annual budget summary provided a framework for us to follow in developing our questionnaire, but we could not use information from the budget summary to obtain or report information on federal expenditures specific to aquatic invasive species. Several Task Force member agency officials recommended that we follow the council’s framework for our questionnaire since many of the member agencies provide information to the council, and they suggested that following a similar framework would facilitate their ability to respond to our request. In developing our questionnaire, we worked with staff from the National Invasive Species Council and conducted pretests with three member agencies to obtain their comments, which were incorporated as appropriate. In our questionnaire, we requested that each member agency provide (1) its estimated expenditures for fiscal years 2012 through 2014 (the most recent years for which member agencies reported reliable data were available), (2) examples of aquatic invasive species activities conducted during this time period, and (3) its planned activities and estimated expenditures for future years, which we defined as fiscal years 2015 and 2016. We also included questions about how the Task Force member agencies prepared their estimates, their sources of information, any challenges or limitations in preparing the estimates, and whether the estimates were reviewed by their budget or financial offices. Appendix IV provides a blank copy of our questionnaire. We received completed responses from all 13 of the Task Force member agencies. The member agencies provided information on their activities conducted to address aquatic invasive species, but member agencies varied in the level of detail they provided about their estimated expenditures. Twelve of the 13 member agencies included at least some information on their estimated expenditures for fiscal years 2012 through 2014, but the U.S. Forest Service reported that it was unable to provide estimates. For the other 12 agencies, they varied in their ability to provide consistent and complete information on their estimated expenditures at the level of detail we requested in our questionnaire. With respect to the expenditure information for fiscal years 2012 to 2014, some agencies were able to provide estimates of their expenditures by activity category, but many reported that they could not provide estimates at this level of detail. For example, the Environmental Protection Agency reported its expenditures supported activities for five of the seven activity categories, but because it could not provide separate estimates for each of these categories it reported all of its expenditures under the prevention category. Similarly, the National Park Service reported conducting activities in all seven activity categories in fiscal years 2012 and 2013, but provided estimates for two activity categories (research and restoration) and reported that it was unable to determine how much of its estimated expenditures went toward the other five activity categories in these years. Based on inconsistencies and incomplete responses across the 13 member agencies, we decided to limit our reporting for fiscal years 2012 through 2014 to estimates of total annual expenditures for each Task Force member agency. With respect to future expenditures for fiscal years 2015 to 2016, a few member agencies indicated they did not have estimates of expenditures for future years, though others had partial estimates. To avoid reporting potentially misleading information that could underestimate likely future expenditures compared to amounts reported for fiscal years 2012 through 2014, we decided not to report the future expenditure estimates provided to us. Similarly, 9 of the 13 member agencies reported that they were not able to provide estimates for how much they expended addressing specific aquatic invasive species, citing reasons such as expenditures being tracked at a project level rather than by a specific species. Therefore, we do not include species-specific expenditure information in our report. After receiving completed questionnaires, we followed up with Task Force member agency officials to obtain clarification or additional information, as needed. We did not independently verify the accuracy of the estimated expenditures reported by the member agencies, which likely include some over- and some under-estimates. For example, in its response, the U.S. Fish and Wildlife Service (FWS) described various activities that were implemented through projects supported with grant funding from the Wildlife Sport Fish Restoration Program. But, FWS did not include expenditure estimates for these project activities because it could not reliably estimate how much of the grant funding should be attributed to the aquatic invasive species component of the grant-funded projects. We asked each of the Task Force member agencies for their assessment of whether their estimated expenditures for fiscal years 2012 to 2014 were an underestimate, overestimate, or about right. Ten of the member agencies responded that their estimates were “about right,” and two indicated they were underestimates (one member agency did not provide estimates). Accordingly, the expenditures reflect the agencies’ best estimates of how much they expended on aquatic invasive species activities during these years. Based on our assessment of these responses, along with the responses provided through the questionnaire, we determined that the expenditure estimates for fiscal years 2012 through 2014 were sufficiently reliable for purposes of this report—to provide general estimates of total annual expenditures by Task Force member agencies on activities to address aquatic invasive species. To describe the activities conducted by Task Force member agencies and any challenges in addressing aquatic invasive species, we built on the information gathered through our questionnaire and conducted a series of interviews with officials from the 13 member agencies, the federal ex- officio member of the Task Force (the Smithsonian Environmental Research Center), and each of the Task Force’s six regional panels. Through these interviews, we collected information and documentation on aquatic invasive species activities conducted and any challenges agencies identified in addressing aquatic invasive species. Many of the activities and challenges relate to ongoing activities that span multiple fiscal years and thus the information we collected often highlights, but is not limited to, fiscal years 2012 through 2014. We also conducted site visits in Southern Florida, Northern California, and Western Washington to interview local federal officials and observe activities at the sites, such as inspections of shipments of live fish to search for aquatic invasive species and research being conducted at research facilities. We selected these locations based on the number and variety of aquatic invasive species and federal agencies, as well as the types of activities conducted in those locations. Information we obtained from our interviews and site visits on activities conducted and challenges identified are not generalizable, but we believe the examples we obtained provide important insights into the wide array of aquatic invasive species activities being undertaken across the 13 Task Force member agencies and the challenges agencies face in conducting those activities. To determine the extent to which the Task Force has measured progress in achieving the goals of its 2013-2017 strategic plan, we conducted interviews with and obtained documentation from Task Force representatives, officials from the 13 Task Force member agencies, and officials representing the six regional panels. We reviewed the Task Force’s 2013-2017 strategic plan, its 2012 reporting matrix, and other documentation related to the Task Force’s efforts to collect information related to its strategic plan. We then analyzed and compared this information to program requirements identified in the 1990 Act, our previous reports on leading practices provided by the GPRA Modernization Act of 2010, and our executive guide on strategic planning, as appropriate. We conducted this performance audit from November 2014 to November 2015 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: Map of the United States with Examples of Aquatic Invasive Species and Their Reported Presence by State, and Common Pathways (Corresponds to fig. 1) Appendix II: Map of the United States with Examples of Aquatic Invasive Species and Their Reported Presence by State, and Common Pathways (Corresponds to fig. 1) Figure 3 shows examples of aquatic invasive species and their known locations (i.e., reported presence of a species) as well as common pathways of invasion (see interactive fig. 1) and includes the figure’s rollover information. Table 5 provides descriptions of the aquatic invasive species used as examples, and table 6 provides descriptions of common pathways of invasion. Appendix III: Aquatic Invasive Species Activities Conducted by Task Force Member Agencies Through our questionnaire to the 13 federal member agencies of the Aquatic Nuisance Species Task Force (Task Force), we requested that member agencies identify the types of aquatic invasive species activities they conducted during fiscal years 2012 through 2014, including how those activities fell within the seven general activity categories developed by the National Invasive Species Council. The Task Force member agency responses are summarized in table 7. Appendix IV: Copy of GAO Questionnaire Disseminated to Task Force Member Agencies Appendix V: Comments from the Department of the Interior Appendix VI: Comments from the Department of Commerce Appendix VII: GAO Contact and Staff Acknowledgments GAO Contact Anne-Marie Fennell, (202) 512-3841 or [email protected]. Staff Acknowledgments In addition to the individual named above, Alyssa M. Hundrup (Assistant Director), Natalie Block, Mark Braza, Greg Campbell, Virginia Chanley, Armetha Liles, Michael Meleady, Kelly Rubin, Jeanette Soares, Anne Stevens, Sara Sullivan, Kiki Theodoropoulos, and Tama Weinberg made key contributions to this report.
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Aquatic invasive species—harmful, nonnative plants, animals, and microorganisms living in aquatic habitats—damage ecosystems or threaten commercial, agricultural, and recreational activities. The Nonindigenous Aquatic Nuisance Prevention and Control Act of 1990 created the Task Force and required it to develop an aquatic nuisance (which GAO refers to as invasive) species program. The Water Resources Reform and Development Act of 2014 includes a provision that GAO assess federal costs of, and spending on, aquatic invasive species. This report examines (1) how much Task Force member agencies expended addressing aquatic invasive species for fiscal years 2012-2014; (2) activities conducted by Task Force member agencies and challenges in addressing aquatic invasive species; and (3) the extent to which the Task Force has measured progress in achieving the goals of its 2013-2017 strategic plan. GAO sent a questionnaire to member agencies to obtain expenditures for fiscal years 2012-2014; interviewed member agency officials; and analyzed laws and strategic planning documents. The 13 federal member agencies of the Aquatic Nuisance Species Task Force (Task Force) estimated expending an average of about $260 million annually for fiscal years 2012 through 2014 to address aquatic invasive species. However, several member agencies identified in their questionnaire responses challenges in developing their estimates. For example, some member agencies reported that their activities to address aquatic invasive species were often integrated into larger projects, making it difficult to isolate the portion of expenditures specific to aquatic invasive species out of total expenditures for the projects. As a result, expenditure information reported by GAO generally reflects member agencies' best estimates of total expenditures, rather than actual expenditures. Task Force member agencies conducted a wide range of activities and identified several challenges in addressing aquatic invasive species. Member agencies reported conducting activities across several activity categories, including taking actions to prevent introductions, control the spread of existing invaders, and research ecological impacts of aquatic invasive species. For instance, most conducted prevention activities—such as constructing a series of electric barriers to prevent the entry of Asian Carp from the Mississippi River Basin into the Great Lakes—recognizing that prevention activities may be the most cost-effective method of addressing aquatic invasive species. Additionally, officials from several member agencies expressed concern that their activities, though numerous, may not be adequate relative to the growing magnitude and impacts of aquatic invasive species amid decreasing or constrained agency resources. The Task Force—which is co-chaired by the U.S. Fish and Wildlife Service and National Oceanic and Atmospheric Administration (NOAA)—developed a 2013-2017 strategic plan to guide its member agencies but has not taken key steps to measure progress in achieving the goals laid out in its strategic plan. As called for in its strategic plan, the Task Force in 2012 planned to develop an operational plan to track and measure aquatic invasive species activities and progress. However, the Task Force did not develop an operational plan because of constrained funding and limited resources, according to Task Force representatives. The Task Force also did not meet several of the 1990 Act's requirements including describing its members' roles and activities and reporting annually to Congress on the program's progress. The representatives agreed that a mechanism to track activities and measure progress is important and said they plan to discuss the possibility of doing so at their November 2015 meeting. Task Force representatives, however, had not established a time frame or specifics for their approach. Developing and regularly using a tracking mechanism could help the Task Force measure progress in achieving its strategic goals, as well as help the Task Force meet the 1990 Act's requirements to describe its members' roles and specific activities and to report annually to Congress on the program's progress.
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Vajtauer, appellant, was arrested in deportation proceedings on a warrant issued April 4, 1924, by the Assistant Secretary of Labor charging that Vajtauer, an alien, had entered the United States December 1, 1923, in violation of the Act of October 16, 1918, c. 186 (40 Stat. 1012), as amended by the Act of June 5, 1920, c. 251 (41 Stat. 1008), printed so far as relevant in the margin.1 The particular violations of the statute alleged were that prior to or at the time of his entry, appellant (1) believed in and advocated the overthrow of the government of the United States or all forms of law; (2) wrote, published, circulated or had in his possession for circulation written or printed matter advocating opposition to all organized government; (3) wrote, published, circulated or had in his possession for circulation written or printed matter advocating the overthrow by force or violence of the government of the United States or of all forms of law. After a hearing before an immigration inspector, and a review of all the proceedings by the Board of Review, the Secretary of Labor, upon the recommendation of that board, ordered deportation. While in the custody of the Commissioner of Immigration at the port of New York, the alien assailed the legality of his detention in a petition for a writ of habeas corpus which was issued by the District Court for Southern New York. Upon the return of the writ and after a hearing, that court dismissed the writ, remanded appellant to the custody of the Commissioner and stayed deportation pending an appeal. 15 F.(2d) 127. The case comes here on direct appeal, on the ground that appellant was denied rights guaranteed by the Fifth Amendment of the federal Constitution. Section 238, Judicial Code (Comp. St. § 1215), prior to the amendment of February 13, 1925 (43 Stat. 936). The constitutional questions assigned are (1) that the deportation order was unsupported by any substantial evidence and consequently appellant was denied a fair hearing and deprived of his liberty without due process; (2) that the action of the immigration authorities in drawing certain inferences from his refusal to answer questions asked, deprived him of the protection against self-incrimination accorded by the Fifth Amendment. Deportation without a fair hearing or on charges unsupported by any evidence is a denial of due process which may be corrected on habeas corpus. Cf. Chin Yow v. United States, 208 U. S. 8, 28 S. Ct. 201, 52 L. Ed. 369; Kwock Jan Fat v. white, 253 U. S. 454, 40 S. Ct. 566, 64 L. Ed. 1010. But a want of due process is not established by showing merely that the decision is erroneous, Chin Yow v. United States, supra, 208 U. S. 13 (28 S. Ct. 201), or that incompetent evidence was received and considered. See Tisi v. Tod, 264 U. S. 131, 133, 44 S. Ct. 260, 68 L. Ed. 590. Upon a collateral review in habeas corpus proceedings, it is sufficient that there was some evidence from which the conclusion of the administrative tribunal could be deduced and that it committed no error so flagrant as to convince a court of the essential unfairness of the trial. Tisi v. Tod, supra. The ultimate question presented by this record, therefore, is one of fact, whether the warrant of deportation was supported by any evidence that the alien when he entered the United States advocated opposition to all organized government or the overthrow of the United States government by force and violence, within the meaning of the statute. This requires a review of the evidence. At the hearing before the immigration authorities on May 14, 1924, appellant, who was represented by counsel, was sworn as a witness, gave his name as Emanuel Vajtauer and his occupation as 'Doctor of Psychology,' and editor of the 'Spravedlvost,' a Bohemian newspaper published in Chicago. He testified that he resided in Illinois; that he entered the United States on December 1, 1923; and that he was a citizen of Czechoslovakia by birth. After answering other preliminary questions, he was then asked: 'Why did you come to the United States?' Appellant's attorney then stated: 'I will advise the alien not to answer any further questions until the evidence upon which the warrant is based will be presented here.'2 Appellant then stated that he would follow his attorney's advice, and gave no further testimony. The immigration inspector introduced in evidence a pamphlet, stated by him to bear the name of Dr. E. M. Vajtauer as author. An interpreter testified that it was Dr. Vajtauer's study of the Ressian Revolution. The title, as printed in the record, was: 'Revolution and the Dictatorship of the Proletariat, by Dr. E. Dajtauer, written in Moscow in the Spring of 1920.' Translations of certain passages from the pamphlet by the interpreter were spread upon the record. Some of these excerpts merely gave an account of the Russian revolution and the revolutionists' own justification for their overthrow of the Russian government. Others, printed in the margin, purported on their face to advocate the overthrow of government by revolution or force.3 The inspector also placed in evidence a newspaper published by the Slovak Labor Socialist Federation of America, containing a report of a speech stated in the record to have been made by a Dr. Vajtauer, the editor of the Bohemian daily, 'Spravedlvost.' In this address the causes and effects of the World War and of the revolutionary movements in Europe were described from the viewpoint of the proletariat. The speaker predicted a much fiercer revolutionary struggle in this country than that which took place in Europe and the concluding paragraphs, printed in the margin,4 suggest at least that the speaker advocated such a revolution. Other documentary evidence received consisted of an abridged report of the 'Fourth Congress of the Communist International, Meetings held at Petrograd and Moscow, November 7 and December 3, 1922,' containing a statement purported to have been made by a Dr. Vajtauer, Czechoslovakia, on Cezchoslovakian affairs. Under instructions of his attorney, appellant refused to answer further questions calculated to establish his identity with the author of the pamphlet and with the Dr. Vajtauer who made the address reported in the newspaper article and the Dr. Vajtauer who addressed the Congress of the Communist International. A point much argued before us was whether section 23 of the Immigration Law of May 26, 1924, c. 190 (43 Stat. 165 (Comp. St. § 4289 3/4kk)), which took effect before the hearing was closed, placed on appellant the burden of proving that he was not a member of a class of aliens excluded from entering the United States by the immigration laws. Section 23 provides in part: 'And in any deportation proceeding against any alien the burden of proof shall be upon such alien to show that he entered the United States lawfully.' It was plausibly urged that the language of the statute was well as its legislative history indicates that this clause relates only to the proof of the regularity of the alien's entry with respect to time, place, manner and the like, and not to his membership in an excluded class. But we find it unnecessary to consider this question, as we think that the record taken as a whole and without the aid of any statutory presumption presents some evidence supporting the deportation order. We disregard the Moscow address as having no substantial bearing on appellant's membership in an excluded class. But the extracts from the pamphlet and the report of the Chicago speech, taken together, are at least some evidence tending to show that the author of them advised and advocated opposition to all organized government and the overthrow of the United States government by violence, and therefore could, as an alien, be excluded from admission into the United States by the provisions of section 1 of the Act of June 5, 1920, supra, or if admitted, deported if found to have been a member of an excluded class at the time of entry (section 2). Statements made before or after entry may be taken to indicate that he was subject to exclusion at the time of entry. The only other issue on which the government was required to present evidence, assuming that the burden of proof rested on it, was the identity of the appellant, admittedly an alien, with the author of the pamphlet and the address. The similarity of names; the fact that each was known as 'Doctor'; that a Dr. Vajtauer, also of Czechoslovakia, as was appellant, addressed the Fourth Congress of the Communist International on Czechoslovakian affairs in Moscow, where the pamphlet was written, and that after the arrival of appellant in the United States and his proceeding to Chicago, a Dr. Vajtauer, who was editor of the Bohemian daily paper, 'Spravedlvost,' as was appellant, made a public address in Chicago, discussing the Russian revolution and suggesting the possibilities of a similar revolution here, all taken together admit of the inference that the appellant and the author of the pamphlet and speech were one and the same person. This inference was strengthened when the appellant, confronted by this record, stood mute. 'Conduct which forms a basis for inference is evidence. Silence is often evidence of the most persuasive character.' Bilokumsky v. Tod, 263 U. S. 149, 153, 154, 44 S. Ct. 54, 56 (68 L. Ed. 221). Appellant as a witness was called upon to testify whether he was the author of the pamphlet and the Chicago speech, facts within his knowledge. If the author, he was in a position to challenge or explain away if possible any unfavorable inference which might be drawn from the passages read into the record. His silence without explanation other than that he would not testify until the entire evidence was presented, was in itself evidence that he was the author. In addition, it fortified the inferences drawn from the pamphlet and speech by the immigration authorities. Attention is directed to the fact that the refusal to testify was based upon a supposed right of the witness not to be called upon to testify until all the evidence in support of the warrant was presented, and it is said that, if silence is induced by a person's 'doubts of his rights, by a belief that his security will be best promoted by his silence, then no inference of assent can be drawn from that silence.' Commonwealth v. Kenney, 12 Metc. (Mass.) 235, 237 (46 Am. Dec. 672); People v. Pfanschmidt, 262 Ill. 411, 449, 104 N. E. 804, Ann. Cas. 1915A, 1171. But these cases merely apply the rule that no inference may be drawn from silence where there is no duty to speak, a rule which is not applicable where the witness is sworn and under a legal duty to give testimony which is not privileged. Undoubtedly, inferences from silence should be cautiously drawn (Bilokumsky v. Tod, supra), but the weight to be given to silence is for the tribunal conducting the trial. It is said also that the evidentiary effect of silence was limited by the decision in Bilokumsky v. Tod, supra, to a refusal to testify as to non-incriminating facts only. Although the inference from silence in that case pertained to nonincriminating facts, there was no intimation there that inferences could not be drawn from a failure to testify to incriminating matter which are not privileged. Here, as in that case, the objection to drawing the inference can have force only in so far as there was a denial of the constitutional immunity. It is insisted that answers to the questions put to appellant at the hearings which were held in Chicago might have tended to incriminate him under the Illinois Syndicalism Law (Cahill's Ill. R. S. 1925, c. 38, pars. 587-593), which condemns as a felony the advocacy or publication of matter advising crime or violence or other unlawful means of accomplishing the reformation or overthrow of the government. Assuming that the constitutional immunity against self-incrimination may be violated as well by inferences drawn from silence with respect to incriminating matters as by testimony which the witness is compelled to give, still it is necessary to inquire whether the appellant here has brought himself within the protection of the immunity. Throughout the proceedings before the immigration authorities, he did not assert his privilege or in any manner suggest that he withheld his testimony because there was any ground for fear of self-incrimination. His assertion of it here is evidently an afterthought. It is for the tribunal conducting the trial to determine what weight should be given to the contention of the witness that the answer sought will incriminate him, Mason v. United States, 244 U. S. 362, 37 S. Ct. 621, 61 L. Ed. 1198; a determination which it cannot make if not advised of the contention. Cf. In re Edward Hess & Co. (D. C.) 136 F. 988; Ex parte Irvine (C. C.) 74 F. 954, 960. The privilege may not be relied on and must be deemed waived, if not in some manner fairly brought to the attention of the tribunal which must pass upon it. See In re Knickerbocker Steamboat Co. (D. C.) 139 F. 713; United States v. Skinner (D. C.) 218 F. 870, 876; United States v. Elton (D. C.) 222 F. 428, 435. This conclusion makes it unnecessary for us to consider the extent to which the Fifth Amendment guarantees immunity from self-incrimination under state statutes, or whether this case is to be controlled by Hale v. Henkel, 201 U. S. 43, 26 S. Ct. 370, 50 L. Ed. 652; Brown v. Walker, 161 U. S. 591, 608, 16 S. Ct. 644, 40 L. Ed. 819. Compare United States v. Saline Bank, 1 Pet. 100, 7 L. Ed. 69; Ballmann v. Fagin, 200 U. S. 186, 195, 26 S. Ct. 212, 50 L. Ed. 433. Judgment affirmed.
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1. Want of due process in proceedings for the deportation of an alien is not established by showing merely that the decision was erroneous or that incompetent evidence was received and considered. P, 106, 2. Insofar as concerns proofs, an order of deportation is upheld, in habeas corpus, if there was some evidence to support it and no error so flagrant as to convince a court of the essential unfairness of the trial. P. 106. 3. Statements of an alien tending to show that he belonged to an excluded class at time of entry may be used in deportation proceedings, whether made before or after his admission. P. 110.. 4. Evidence of identity of an alien with the author of seditious pamphlets and speeches may be found in a similarity of names, appellations, nativity, etc. P. 111. 5. The silence of the alien without sufficient explanation, when called upon to testify, may be persuasive evidence against him, even as to incriminating matters, when they are not privileged. P. 111. 6. The privilege against self-incrimination may be waived if not timely asserted. P. 113. 15 Fed. (2d) 127, affirmed.
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On June 16, 1970, appellant was arrested on a charge of armed robbery and, immediately thereafter, the State of Illinois instituted forfeiture proceedings against appellant's automobile pursuant to the Illinois vehicle forfeiture statute, Ill.Rev.Stat., c. 38, § 36—1 et seq. (1969). Appellant was held in custody in the Cook County jail from June 16, 1970, to October 7, 1970, awaiting trial. Nevertheless, the State mailed notice of the pending forfeiture proceedings, not to the jail facility, but to appellant's home address as listed in the records of the Secretary of State.1 It is undisputed that appellant, who remained in custody throughout the forfeiture proceedings, did not receive such notice until his release.2 After an ex parte hearing on August 19, 1970, the circuit court of Cook County ordered the forfeiture and sale of appellant's vehicle. Upon learning of the forfeiture after his release, appellant filed a motion for rehearing, requesting that the order of forfeiture be set aside because the manner of notice did not comport with the requirements of the Due Process Clause of the Fourteenth Amendment. The circuit court of Cook County denied the motion. On appeal, the Supreme Court of Illinois, three justices dissenting, held that, in light of the in rem nature of the proceedings, substituted service as utilized by the State did not deny appellant due process of law. People ex rel. Hanrahan v. One 1965 Oldsmobile, 52 Ill.2d 37, 284 N.E.2d 646 (1972). We cannot agree. In Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865 (1950), after commenting on the vagueness of the classifications 'in rem or more indefinitely quasi in rem, or more vaguely still, 'in the nature of a proceeding in rem", this Court held that 'the requirements of the Fourteenth Amendment to the Federal Constitution do not depend upon a classification for which the standards are so elusive and confused generally and which, being primarily for state courts to define, may and do vary from state to state.' Id., at 312, 70 S.Ct., at 656. 'An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.' Id., at 314, 70 S.Ct., at 657. More specifically, Mullane held that notice by publication is not sufficient with respect to an individual whose name and address are known or easily ascertainable. Similarly, in Covey v. Town of Somers, 351 U.S. 141, 76 S.Ct. 724, 100 L.Ed. 1021 (1956), we held that, in the context of a foreclosure action by the town, notice by mailing, posting, and publication was inadequate where the individual involved was known by the town to be an incompetent without the protection of a guardian. See also Schroeder v. New York, 371 U.S. 208, 83 S.Ct. 279, 9 L.Ed.2d 255 (1962); Walker v. City of Hutchinson, 352 U.S. 112, 77 S.Ct. 200, 1 L.Ed.2d 178 (1956); City of New York v. New York, N.H. & H.R. Co., 344 U.S. 293, 73 S.Ct. 299, 97 L.Ed. 333 (1953). In the instant case, the State knew that appellant was not at the address to which the notice was mailed and, moreover, knew also that appellant could not get to that address since he was at that very time confined in the Cook County jail. Under these circumstances, it cannot be said that the State made any effort to provide notice which was 'reasonably calculated' to apprise appellant of the pendency of the forfeiture proceedings.3 Accordingly, we grant the motion for leave to proceed in forma pauperis, reverse the judgment of the Supreme Court of Illinois, and remand for further proceedings not inconsistent with this opinion. Reversed and remanded.
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Notwithstanding its knowledge that appellant was in the Cook County jail awaiting trial, the State of Illinois mailed notice of automobile forfeiture proceedings to appellant at his home, which he did not receive until his release, when he learned that the car had been forfeited. The circuit court rejected appellant's motion for rehearing. The Illinois Supreme Court affirmed. Held: The procedure followed here did not comport with due process requirements as the State made no effort to provide appellant with notice "reasonably calculated" to apprise him of the pendency of the forfeiture proceedings. 52 Ill. 2d 37, 284 N. E. 2d 646, reversed and remanded.
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The Pastore Rule Under the rules and precedents of the Senate, debate on the Senate floor is largely unrestricted. In most cases, once recognized, a Senator may speak without time limit and on almost any subject of his or her choosing. Paragraph 1(b) of Senate Rule XIX, however—commonly known as the Pastore rule, after its author, former Rhode Island Senator John Pastore—requires Senate floor debate to be germane during specific periods of a Senate work day. The rule states (b) At the conclusion of the morning hour at the beginning of a new legislative day or after the unfinished business or any pending business has first been laid before the Senate on any calendar day, and until after the duration of three hours of actual session after such business is laid down except as determined to the contrary by unanimous consent or on motion without debate, all debate shall be germane and confined to the specific question then pending before the Senate. In practice, the Pastore rule rarely affects what Senators speak about on the floor. The presiding officer typically will not on his or her own initiative instruct a speaking Senator to keep remarks germane. Instead, another Senator would have to raise a point of order against the speech. For reasons discussed below, these points of order are infrequent in modern practice. The rule, nevertheless, remains in force, and this report discusses related precedents and past instances of enforcement on the floor. Pursuant to the Pastore rule, all floor debate must be germane and confined to the specific question then pending before the Senate for the first three hours after (1) the conclusion of the Morning Hour occurring at the beginning of a new legislative day (in the rare event the Senate should hold a Morning Hour) or (2) after the unfinished business or any pending business has been laid before the Senate on any calendar day. The practical effect of the rule is to require Senators to remain on topic in debate for the first three hours after the Senate begins considering its daily business. Three hours of actual Senate session must occur to fulfill the requirements of the Pastore rule. Recess periods taken prior to three hours of session elapsing are not counted toward the three-hour total. Once three hours of actual session have passed, Senators are no longer bound by the germaneness requirement. The Pastore rule's germaneness requirement can be waived by unanimous consent (UC) or by nondebatable motion. Any Senator may request unanimous consent to speak out of order on a nongermane subject while the Pastore rule is in effect. A Senator might also request UC to waive the rule on behalf of another Senator or request a blanket waiver to allow all Senators to speak on nongermane topics. The Senate also frequently by UC establishes periods for "morning business," when Senators can speak on topics of their choice for a period of time set by the UC agreement (typically 10 minutes). UC agreements can also structure the extent to which the Pastore rule will apply at any given time. For example, in one instance, by UC, the period during which the rule's germaneness of debate requirement applied was expanded from three hours to five hours. Enforcing Germaneness in Debate A Senator may be called to order during the three-hour window described in the Pastore rule if his or her remarks are not germane to the specific question then pending before the Senate. Chamber precedents permit the presiding officer to call a Senator to order under the rule on his or her own initiative. The precedents point out, however, that the rule is "not necessarily self-enforcing," and as such, the rule is customarily enforced only by a call to order from the floor. In current practice, the germaneness requirements of the Pastore rule are rarely formally invoked on the Senate floor. If a Senator calls another Senator to order under the rule, enforcement first results in a reminder from the presiding officer that debate must be germane to the question then pending before the Senate. A Senator does not need to be recognized by the chair in order to call another Senator to order under the rule. The raising of this point of order does not remove speaking privileges from the offending Senator, although the Senator must suspend his or her remarks until the chair rules on the question. Depending on the ruling of the presiding officer on such a point of order, a Senator may either continue speaking (if his or her debate is ruled germane), pivot to a germane topic (if ruled not germane), or yield the floor (if ruled not germane). History of the Pastore Rule Before paragraph 1(b) of Rule XIX was adopted in 1964, there was no rule or precedent requiring the germaneness of debate during regular Senate proceedings. What would become the present-day Pastore rule first appeared with the introduction of S.Res. 89 on February 19, 1963, by Senator Pastore for himself and 30 bipartisan cosponsors. The resolution, as submitted, included two key differences from what would ultimately be adopted: It called for four hours of germane debate (as opposed to three) and placed a germaneness requirement not just on debate but also on motions (except "amendments offered to the bill or resolution under consideration when reasonably related thereto"). During hearings held on S. Res. 89 by the Senate Rules Committee's Subcommittee on Standing Rules of the Senate, Senator Pastore expressed his view that the Senate was unable to sufficiently focus on debating important legislation I am very much disturbed by such a situation as where a member is charged with the responsibility of managing a bill on the floor. He must be there prepared to assume his responsibilities and present the matter to the Senate. But time and time again what has been our experience?... You sit there as the manager of the bill, and someone comes down on the floor with an extraneous speech, which he has a perfect right to deliver, because he must meet a press deadline. All I am saying here is that a period of 4 hours from the time we conclude the morning hour, for those 4 hours we devote ourselves to the business at hand. Senator Pastore argued that his proposed rule would increase attendance and allow the Senate to proceed in a more orderly fashion First of all, [the proposed rule] would accomplish this: The Members of the Senate, knowing that the business at hand will be discussed, will be more readily available on a quorum call. It will not have to take 20 minutes or a half hour, and then probably get into live quorums. Members would know that for 4 hours, if they arrange their program, they would sit on the floor, that they could discuss the business at hand and conclude it, without interruption. I think it would help immensely. The Senate Committee on Rules and Administration adopted three amendments to S.Res. 89 before reporting the resolution, as amended, favorably to the Senate on September 19, 1963. The first amendment inserted language clarifying that the germaneness period in the rule would occur just once each calendar day. By its second amendment, the committee struck language from the resolution that allowed only the introduction of amendments "reasonably related" to the pending business. This second amendment was adopted for the express purpose of continuing "the present practice of permitting legislative riders." The third and final amendment reported by the committee changed the germaneness period from four hours to three hours, as found in the current rule. Regarding this final change, the committee report accompanying S.Res. 89 noted In the opinion of the committee, it is important that there be flexibility of debate in the Senate, but the committee believes it equally important that there be some reasonable limitation on that flexibility. The adjustment in Senate procedure involved in Senate Resolution 89 would probably result in a larger participation in meaningful and coordinated debate on vital and major bills on the floor of the Senate. At the same time adoption of the measure reserves ample opportunity for the discussion of general topics. S.Res.89 was considered on the Senate floor over parts of eight days in January 1964. As noted above, at the time, no Senate rule or precedent existed that required a germaneness of debate during regular Senate session. As such, the resolution was viewed by some as proposing a significant change in chamber procedures. Minority Leader Everett Dirksen of Illinois, among others, took to the floor to express strong opposition to the idea of placing any limits on the rights of Senators in debate Let us make no mistake about it. If I read my history correctly, past and present, whenever the freedom of a parliamentary body is impaired, we go down the road to tyranny. What was the first thing that Hitler did to Germany? He demeaned the Bundestag. He made them, its members, appear to be like a group of urchins who had no sense. What was the first thing Mussolini did to Italy? The Chamber of Deputies was made to appear as if it had no sense, no value, no usefulness. Show me any place in the world where a parliamentary body and its freedoms are impaired and I will show an instance of freedom in retreat. On January 10, 1964, the Senate adopted a floor amendment to S.Res. 89 proposed by Senator Pastore himself to strike the resolution's germaneness requirement for motions and apply the requirement to debate only, as in the present rule. All other floor amendments to the resolution were rejected. Ultimately, S.Res. 89 was agreed to, as amended, in the Senate by a 57-25 vote on January 23, 1964. The resolution, as passed, inserted the new germaneness requirement into Senate Rule VIII, relating to the Order of Business. The language would later be recodified without change as paragraph 1(b) of Rule XIX with the adoption of S.Res. 274 on November 14, 1979, in the 96 th Congress (1979-1980). Use of the Pastore Rule As noted above, the Pastore rule has seen sporadic enforcement since its adoption. In the decade or so after the rule's adoption, Senator Robert Byrd of West Virginia, who served as majority whip and later as both majority and minority leader, was a frequent observer of the rule, often seeking clarification on whether the Senate was operating within the three hours of required germaneness or seeking unanimous consent to waive the rule to allow him or others to speak without restriction. On occasion, Senators have taken to the floor to proclaim an expectation of adherence to the Pastore rule for the duration of the consideration of a particular bill. Despite, or perhaps because of, the sporadic observance of the Pastore rule, a report issued in 1983 by the Study Group on Senate Practices and Procedures—an entity established to examine Senate procedures and recommend improvements to them—recommended that the Senate "require debate to be relevant at all times during the discussion of legislation and executive business." On May 9, 1983, the Senate Committee on Rules and Administration held a hearing on the study group report. The Senate took no further action on the proposal. CRS identified several instances between 1964 and 2017 where a point of order or parliamentary inquiry was raised under the Pastore rule in relation to germaneness of debate or when other actions were taken that appeared to be efforts to enforce the rule, such as objections to unanimous consent requests to waive the germaneness requirement. The earliest instance identified occurred in 1968, four years after adoption of the rule; the most recent identified occurred in 2003. These instances are identified in Table 1 and were identified through full-text electronic searches of the Congressional Record in LIS.gov and the HeinOnline database as well as through a review of relevant chapters in Floyd M. Riddick and Alan S. Frumin, Riddick's Senate Procedure: Precedents and Practices, 101 st Cong., 1 st sess., S.Doc. 101-28 (Washington, DC: GPO, 1992). Not included in the table are simple references to the Pastore rule in debate (e.g., parliamentary inquiries as to whether the Senate was operating under the rule), instances when the requirement for germane debate would expire for the day, or Senators noting that they or others were in violation of the rule without an accompanying point of order made against the Senator holding the floor.
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Paragraph 1(b) of Senate Rule XIX—commonly known as the Pastore rule, after its author, former Rhode Island Senator John Pastore—requires Senate floor debate to be germane during specific periods of a Senate work day. The rule has been enforced sporadically since its adoption in 1964. In current practice, the germaneness requirements of the Pastore rule are rarely formally invoked on the Senate floor. Pursuant to the rule, all floor debate must be germane and confined to the specific question then pending before the Senate for the first three hours after (1) the conclusion of the Morning Hour occurring at the beginning of a new legislative day (in the rare event the Senate should hold a Morning Hour) or (2) after the unfinished business or any pending business has been laid before the Senate on any calendar day. The Pastore rule's germaneness requirement can be waived by unanimous consent or by nondebatable motion. A Senator may be called to order during the three-hour window described in the Pastore rule by the presiding officer or by another Senator if his or her remarks are not germane to the specific question then before the Senate. If a Senator calls another Senator to order under the rule, enforcement first results in a reminder from the presiding officer that debate must be germane to the question then pending before the Senate. The raising of a point of order does not remove speaking privileges from the offending Senator. Depending on the ruling of the presiding officer on such a point of order, a Senator may either continue speaking (if ruled germane), pivot to a germane topic (if ruled not germane), or yield the floor (if ruled not germane).
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The motion for leave to proceed in forma pauperis and the petition for a writ of certiorari are granted. The Court is of the view that on the record the petitioner is an indigent. Therefore, the judgment must be reversed. Griffin v. People of State of Illinois, 351 U.S. 12, 76 S.Ct. 585, 100 L.Ed. 891.
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Certiorari granted and judgment reversed. Reported below: 276 Ala. 654, 165 So. 2d 742.
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The people of the State of California do enact as follows:
SECTION 1.
Section 116681 of the Health and Safety Code is amended to read:
116681.
Except as provided in paragraph (2) of subdivision (j) of Section 116686, the following definitions shall apply to this section and Sections 116682, 116684, and 116686:
(a) “Adequate supply” means sufficient water to meet residents’ health and safety needs.
(b) “Affected residence” means a residence within a disadvantaged community that is reliant on a water supply that is either inadequate or unsafe.
(c) “Consistently fails” means a failure to provide an adequate supply of safe drinking water.
(d) “Consolidated water system” means the public water system resulting from the consolidation of a public water system with another public water system, state small water system, or affected residences not served by a public water system.
(e) “Consolidation” means joining two or more public water systems, state small water systems, or affected residences not served by a public water system, into a single public water system.
(f) “Disadvantaged community” means a disadvantaged community, as defined in Section 79505.5 of the Water Code, that is in an unincorporated area, is in a mobilehome park, or is served by a mutual water company.
(g) “Extension of service” means the provision of service through any physical or operational infrastructure arrangement other than consolidation.
(h) “Receiving water system” means the public water system that provides service to a subsumed water system through consolidation or extension of service.
(i) “Safe drinking water” means water that meets all primary and secondary drinking water standards.
(j) “Subsumed water system” means the public water system, state small water system, or affected residences not served by a public water system consolidated into or receiving service from the receiving water system.
SEC. 1.5.
Section 116681 of the Health and Safety Code is amended to read:
116681.
Except as provided in paragraph (2) of subdivision (j) of Section 116686, the following definitions shall apply to this section and Sections 116682, 116684, and 116686:
(a) “Adequate supply” means sufficient water to meet residents’ health and safety needs.
(b) “Affected residence” means a residence within a disadvantaged community that is reliant on a water supply that is either inadequate or unsafe.
(c) “Consistently fails” means a failure to provide an adequate supply of safe drinking water.
(d) “Consolidated water system” means the public water system resulting from the consolidation of a public water system with another public water system, state small water system, or affected residences not served by a public water system.
(e) “Consolidation” means joining two or more public water systems, state small water systems, or affected residences not served by a public water system, into a single public water system.
(f) “Disadvantaged community” means a disadvantaged community, as defined in Section 79505.5 of the Water Code, that is in an unincorporated area, is in a mobilehome park, or is served by a mutual water company or a small public water system.
(g) “Extension of service” means the provision of service through any physical or operational infrastructure arrangement other than consolidation.
(h) “Receiving water system” means the public water system that provides service to a subsumed water system through consolidation or extension of service.
(i) “Safe drinking water” means water that meets all primary and secondary drinking water standards.
(j) “Small public water system” has the same meaning as provided in subdivision (b) of Section 116395.
(k) “Subsumed water system” means the public water system, state small water system, or affected residences not served by a public water system consolidated into or receiving service from the receiving water system.
SEC. 2.
Section 116682 of the Health and Safety Code is amended to read:
116682.
(a) Where a public water system or a state small water system, serving a disadvantaged community, consistently fails to provide an adequate supply of safe drinking water, the state board may order consolidation with a receiving water system as provided in this section and Section 116684. The consolidation may be physical or operational. The state board may also order the extension of service to an area within a disadvantaged community that does not have access to an adequate supply of safe drinking water so long as the extension of service is an interim extension of service in preparation for consolidation. The state board may set timelines and performance measures to facilitate completion of consolidation.
(b) Before ordering consolidation or extension of service as provided in this section, the state board shall do all of the following:
(1) Encourage voluntary consolidation or extension of service.
(2) Consider other enforcement remedies specified in this article.
(3) Consult with, and fully consider input from, the relevant local agency formation commission regarding the provision of water service in the affected area, the recommendations for improving service in a municipal service review, and any other relevant information.
(4) Consult with, and fully consider input from, the Public Utilities Commission when the consolidation would involve a water corporation subject to the commission’s jurisdiction.
(5) Consult with, and fully consider input from, the local government with land use planning authority over the affected area, particularly regarding any information in the general plan required by Section 65302.10 of the Government Code.
(6) Consult with, and fully consider input from, all public water systems in the chain of distribution of the potentially receiving water systems.
(7) (A) Notify the potentially receiving water system and the potentially subsumed water system, if any, and establish a reasonable deadline of no less than six months, unless a shorter period is justified, for the potentially receiving water system and the potentially subsumed water system, if any, to negotiate consolidation or another means of providing an adequate supply of safe drinking water.
(B) During this period, the state board shall provide technical assistance and work with the potentially receiving water system and the potentially subsumed water system to develop a financing package that benefits both the receiving water system and the subsumed water system.
(C) Upon a showing of good cause, the deadline may be extended by the state board at the request of the potentially receiving water system, potentially subsumed water system, or the local agency formation commission with jurisdiction over the potentially subsumed water system.
(8) Obtain written consent from any domestic well owner for consolidation or extension of service. Any domestic well owner within the consolidation or extended service area who does not provide written consent shall be ineligible, until the consent is provided, for any future water-related grant funding from the state other than funding to mitigate a well failure, disaster, or other emergency.
(9) (A) Hold at least one public meeting at the initiation of this process in a place as close as feasible to the affected areas. The state board shall make reasonable efforts to provide a 30-day notice of the meeting to the ratepayers, renters, and property owners to receive water service through service extension or in the area of the subsumed water system and all affected local government agencies and drinking water service providers. The meeting shall provide representatives of the potentially subsumed water system, affected ratepayers, renters, property owners, and the potentially receiving water system an opportunity to present testimony. The meeting shall provide an opportunity for public comment.
(B) An initial public meeting shall not be required for a potentially subsumed area that is served only by domestic wells.
(c) Upon expiration of the deadline set by the state board pursuant to paragraph (7) of subdivision (b), the state board shall do the following:
(1) Consult with the potentially receiving water system and the potentially subsumed water system, if any.
(2) (A) Conduct a public hearing, in a location as close as feasible to the affected communities.
(B) The state board shall make reasonable efforts to provide a 30-day notice of the hearing to the ratepayers, renters, and property owners to receive water service through service extension or in the area of the subsumed water system and to all affected local government agencies and drinking water service providers.
(C) The hearing shall provide representatives of the potentially subsumed water system, affected ratepayers, renters, property owners, and the potentially receiving water system an opportunity to present testimony.
(D) The hearing shall provide an opportunity for public comment.
(d) Before ordering consolidation or extension of service, the state board shall find all of the following:
(1) The potentially subsumed water system has consistently failed to provide an adequate supply of safe drinking water.
(2) All reasonable efforts to negotiate consolidation or extension of service were made.
(3) Consolidation of the receiving water system and subsumed water system or extension of service is appropriate and technically and economically feasible.
(4) There is no pending local agency formation commission process that is likely to resolve the problem in a reasonable amount of time.
(5) Concerns regarding water rights and water contracts of the subsumed and receiving water systems have been adequately addressed.
(6) Consolidation or extension of service is the most effective and cost-effective means to provide an adequate supply of safe drinking water.
(7) The capacity of the proposed interconnection needed to accomplish the consolidation is limited to serving the current customers of the subsumed water system.
(e) Upon ordering consolidation or extension of service, the state board shall do all of the following:
(1) As necessary and appropriate, make funds available, upon appropriation by the Legislature, to the receiving water system for the costs of completing the consolidation or extension of service, including, but not limited to, replacing any capacity lost as a result of the consolidation or extension of service, providing additional capacity needed as a result of the consolidation or extension of service, and legal fees. Funding pursuant to this paragraph is available for the general purpose of providing financial assistance for the infrastructure needed for the consolidation or extension of service and does not need to be specific to each individual consolidation project. The state board shall provide appropriate financial assistance for the infrastructure needed for the consolidation or extension of service. The state board’s existing financial assistance guidelines and policies shall be the basis for the financial assistance.
(2) Ensure payment of standard local agency formation commission fees caused by state board-ordered consolidation or extension of service.
(3) Adequately compensate the owners of a privately owned subsumed water system for the fair market value of the system, as determined by the Public Utilities Commission or the state board.
(4) Coordinate with the appropriate local agency formation commission and other relevant local agencies to facilitate the change of organization or reorganization.
(f) (1) For the purposes of this section, the consolidated water system shall not increase charges on existing customers of the receiving water system solely as a consequence of the consolidation or extension of service unless the customers receive a corresponding benefit.
(2) For purposes of this section, fees or charges imposed on a customer of a subsumed water system shall not exceed the cost of consolidating the water system with a receiving system or the extension of service to the area.
(g) Division 3 (commencing with Section 56000) of Title 5 of the Government Code shall not apply to an action taken by the state board pursuant to this section.
SEC. 3.
Section 116686 is added to the Health and Safety Code, to read:
116686.
(a) (1) To provide affordable, safe drinking water to disadvantaged communities and to prevent fraud, waste, and abuse, the state board may do both of the following, if sufficient funding is available and if the state board finds that consolidation with another system or extension of service from another system is either not appropriate or not technically and economically feasible:
(A) (i) Contract with an administrator to provide administrative and managerial services to a designated public water system to assist the designated public water system with the provision of an adequate and affordable supply of safe drinking water.
(ii) To fulfill the requirements of this section, the state board may contract with more than one administrator, but only one administrator may be assigned to provide services to a given designated public water system.
(iii) An administrator may provide administrative and managerial services to more than one designated public water system.
(B) Order the designated public water system to accept administrative and managerial services, including full management and control, from an administrator selected by the state board.
(2) In performing its duties pursuant to paragraph (1), the state board may use criteria from the policy handbook adopted pursuant to Section 116760.43.
(b) Before the state board determines that a public water system is a designated public water system, the state board shall do both of the following:
(1) Provide the public water system with notice and an opportunity to show either of the following:
(A) That the public water system has not consistently failed to provide an adequate and affordable supply of safe drinking water.
(B) That the public water system has taken steps to timely address its failure to provide an adequate and affordable supply of safe drinking water.
(2) (A) Conduct a public meeting in a location as close as feasible to the affected community.
(B) The state board shall make reasonable efforts to provide a 30-day notice of the meeting to affected ratepayers, renters, and property owners.
(C) Representatives of the public water system, affected ratepayers, renters, and property owners shall be provided an opportunity to present testimony at the meeting.
(D) The meeting shall provide an opportunity for public comment.
(c) The state board shall make financial assistance available to an administrator for a designated public water system, as appropriate and to the extent that funding is available.
(d) An administrator may do any of the following:
(1) Expend available moneys for capital infrastructure improvements that the designated public water system needs to provide an adequate and affordable supply of safe drinking water.
(2) Set and collect user water rates and fees, subject to approval by the state board. The provisions of this section are subject to all applicable constitutional requirements, including Article XIII D of the California Constitution.
(3) Expend available moneys for operation and maintenance costs of the designated public water system.
(e) The state board shall work with the administrator of a designated public water system and the communities served by that designated public water system to develop, within the shortest feasible timeframe, adequate technical, managerial, and financial capacity to deliver safe drinking water so that the services of the administrator are no longer necessary.
(f) A designated public water system shall not be responsible for any costs associated with an administrator.
(g) Administrative and managerial contracts pursuant to this section shall be exempt from Chapter 2 (commencing with Section 10290) of Part 2 of Division 2 of the Public Contract Code and may be awarded on a noncompetitive bid basis as necessary to implement the purposes of this section.
(h) For purposes of this section, a local government, as defined in Article XIII C of the California Constitution, that sets water rates in accordance with Article XIII D of the California Constitution shall be deemed to be providing affordable water.
(i) This section does not apply to a charter city, charter county, or charter city and county.
(j) For purposes of this section, the following terms have the following meanings:
(1) “Administrator” means a person whom the state board has determined is competent to perform the administrative and managerial services of a public water system, as described in subdivision (d). In determining competency, the state board may consider demonstrated experience in managing and operating a public water system.
(2) “Designated public water system” means a public water system that serves a disadvantaged community, as defined in Section 79505.5 of the Water Code, and that the state board finds consistently fails to provide an adequate and affordable supply of safe drinking water.
SEC. 4.
Section 1.5 of this bill incorporates amendments to Section 116681 of the Health and Safety Code proposed by this bill, Assembly Bill 1611, and Senate Bill 839. It shall only become operative if (1) this bill and Assembly Bill 1611 or Senate Bill 839, or both of those bills, are enacted and become effective on or before January 1, 2017, (2) Assembly Bill 1611, Senate Bill 839, or both, as enacted, amend Section 116681 of the Health and Safety Code, and (3) this bill is enacted last of these bills that amend Section 116681 of the Health and Safety Code, in which case Section 116681 of the Health and Safety Code, as amended by Assembly Bill 1611 or Senate Bill 839, shall remain operative only until the operative date of this bill, at which time Section 1.5 of this bill shall become operative, and Section 1 of this bill shall not become operative.
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Existing law, the California Safe Drinking Water Act, provides for the operation of public water systems and imposes on the State Water Resources Control Board various responsibilities and duties. The act authorizes the state board to order consolidation with a receiving water system where a public water system, or a state small water system within a disadvantaged community, consistently fails to provide an adequate supply of safe drinking water. The act authorizes the state board to order the extension of service to an area that does not have access to an adequate supply of safe drinking water so long as the extension of service is an interim extension of service in preparation for consolidation. Existing law, for these purposes, defines “disadvantaged community” to mean a disadvantaged community that is in an unincorporated area or is served by a mutual water company.
This bill would authorize the state board to order consolidation where a public water system or a state small water system is serving, rather than within, a disadvantaged community, and would limit the authority of the state board to order consolidation or extension of service to provide that authority only with regard to a disadvantaged community. This bill would make a community disadvantaged for these purposes if the community is in a mobilehome park, even if it is not in an unincorporated area or served by a mutual water company.
The act requires the state board, before ordering consolidation or extension of service, to take certain actions, including consulting with specified entities, to hold at least one initial public meeting, as specified, and to obtain written consent from any domestic well owner for consolidation or extension of service. The act provides that any affected resident within the consolidation or extended service area who does not provide written consent is ineligible, until consent is provided, for any future water-related grant funding from the state, except as specified.
This bill would also require the state board, before ordering consolidation or extension of service, to consult with public water systems in the chain of distribution of the potentially receiving water system. The bill would provide that an initial public meeting is not required for a potentially subsumed area that is served only by domestic wells. The bill would apply to the domestic well owner, instead of to an affected resident, within the consolidation or extended service area the written consent requirement for eligibility for water-related grant funding.
The act requires the state board, upon ordering the consolidation or extension of service, to adequately compensate the owners of a privately owned subsumed water system for the fair market value of the system as determined by the Public Utilities Commission for water corporations subject to the commission’s jurisdiction or the state board for all other systems. The act prohibits a consolidated water system from increasing charges on existing customers of the receiving water system solely as a consequence of the consolidation or extension of service unless the customer receives a corresponding benefit.
This bill would instead authorize the Public Utilities Commission or the state board to determine the fair market value of a subsumed water system, without regard to whether the system is a water corporation subject to the commission’s jurisdiction. The bill would prohibit fees or charges imposed on a customer of a subsumed water system from exceeding the cost of consolidating the water system or the cost of extension of service to the area.
The act exempts the consolidation or extension of service pursuant to these provisions from the Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000, which governs the procedures for the formation and change of organization of cities and special districts.
This bill would instead exempt an action taken by the state board pursuant to these provisions from the Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000.
This bill would authorize the state board, for the purpose of providing affordable, safe drinking water to disadvantaged communities and preventing fraud, waste, and abuse, to contract with an administrator to provide administrative and managerial services to a designated water system and to order the designated public water system to accept those services if sufficient funding is available and if the state board makes a certain finding. The bill would define designated water system as a public water system that serves a disadvantaged community and that the state board finds consistently fails to provide an adequate and affordable supply of safe drinking water. The bill would require the state board to provide a public water system with notice, as specified, and to conduct a public meeting, as specified, before determining that the public water system is a designated public water system. The bill would authorize the administrator of a designated public water system to expend available moneys for capital infrastructure improvements that the designated public water system needs to provide an adequate and affordable supply of safe drinking water, to set and collect user water rates and fees, and to expend available moneys for the operation and maintenance costs of the designated public water system. The bill would require the state board to work with the administrator of the public water system and the communities served by that designated public water system to develop, within the shortest feasible timeframe, adequate technical, managerial, and financial capacity to deliver safe drinking water so that the services of the administrator are no longer necessary. The bill would not apply these administrator provisions to a charter city, charter county, or charter city and county.
This bill would incorporate additional changes to Section 116681 of the Health and Safety Code proposed by AB 1611 and SB 839 that would become operative if this bill and one or both of those bills are enacted and this bill is chaptered last.
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Introduction The U.S. energy pipeline network is integral to the nation's energy supply and provides vital links to other critical infrastructure, such as power plants, airports, and military bases. These pipelines are geographically widespread, running alternately through remote and densely populated regions—from Arctic Alaska to the Gulf of Mexico and nearly everywhere in between. Because these pipelines carry volatile, flammable, or toxic materials, they have the potential to injure the public, destroy pr operty, and damage the environment. Although they are generally an efficient and comparatively safe means of transport, pipeline systems are nonetheless vulnerable to accidents, operational failure, and malicious attacks. A series of accidents in California, Pennsylvania, and Massachusetts, among other places, have demonstrated this vulnerability and have heightened congressional concern about U.S. pipeline safety. The Department of Energy's first Quadrennial Energy Review (QER), released in 2015, also highlighted pipeline safety as a growing concern for the nation's energy infrastructure. The federal pipeline safety program resides primarily within the Department of Transportation's (DOT's) Pipeline and Hazardous Materials Safety Administration (PHMSA), although its inspection and enforcement activities rely heavily upon partnerships with the states. Together, the federal and state pipeline safety agencies administer a comprehensive set of regulatory authorities which has changed significantly over the last decade and continues to do so. The federal pipeline safety program is authorized through the fiscal year ending September 30, 2019, under the Protecting Our Infrastructure of Pipelines and Enhancing Safety Act of 2016 (PIPES Act; P.L. 114-183 ) signed by President Obama on June 22, 2016. This report reviews the history of federal programs for pipeline safety, discusses significant safety concerns, and summarizes recent developments focusing on key policy issues. It discusses the roles of other federal agencies involved in pipeline safety and security, including their relationship with PHMSA. Although pipeline security is not mainly under PHMSA's jurisdiction, the report examines the agency's past role in pipeline security and its recent activities working on security-related issues with other agencies. The U.S. Pipeline Network The U.S. energy pipeline network is composed of approximately 3 million miles of pipeline transporting natural gas, oil, and hazardous liquids ( Table 1 ). Of the nation's approximately half million miles of long-distance transmission pipeline, roughly 215,000 miles carry hazardous liquids—over two thirds of the nation's crude oil and refined petroleum products, along with other products. The U.S. natural gas pipeline network consists of around 300,000 miles of inter state and intra state transmission. It also contains some 240,000 miles of field and gathering pipeline, which connect gas extraction wells to processing facilities. However, with 7% of gathering lines currently under federal regulation (discussed later in this report), the total mileage of U.S. gathering lines is not known more precisely. Few state agencies collect this information. The natural gas transmission pipelines feed around 2.2 million miles of regional pipelines in some 1,500 local distribution networks serving over 69 million customers. Natural gas pipelines also connect to 152 active liquefied natural gas (LNG) storage sites, as well as underground storage facilities, both of which can augment pipeline gas supplies during peak demand periods. Safety in the Pipeline Industry Uncontrolled pipeline releases can result from a variety of causes, including third-party excavation, corrosion, mechanical failure, control system failure, operator error, and malicious acts. Natural forces, such as floods and earthquakes, can also damage pipelines. Taken as a whole, releases from pipelines cause few annual injuries or fatalities compared to other product transportation modes. According to PHMSA statistics, there were, on average, 12 deaths and 66 injuries annually caused by 32 pipeline incidents in all U.S. pipeline systems from 2009 through 2018. After steady decline between 2009 and 2013, the average incident count increased and recently shows no clear trend ( Figure 1 ). A total of 40 serious pipeline incidents was reported for 2018. Apart from injury to people, some accidents may cause environmental damage or other physical impacts, which may be significant, particularly in the case of oil spills or fires. PHMSA requires the reporting of such incidents involving $50,000 or more in total costs, measured in 1984 dollars, highly volatile liquid releases of 5 barrels or more or other liquid releases of 50 barrels or more, or liquid releases resulting in an unintentional fire or explosion. On average there were 260 such "significant" incidents (not involving injury or fatality) per year from 2009 through 2018. As with serious incidents, there is no clear trend for pipeline incidents affecting only the environment or property over the last five years ( Figure 2 ). It should be noted that federally regulated pipeline mileage overall rose approximately 7% over this period; neither the annual statistics for injury nor environmental incidents are adjusted on a per-mile basis. Although pipeline releases have caused relatively few fatalities in absolute numbers, a single pipeline accident can be catastrophic in terms of public safety and environmental damage. Notable pipeline and pipeline-related incidents over the last decade include the following: 2010 ―A pipeline spill in Marshall, MI, released 19,500 barrels of crude oil into a tributary of the Kalamazoo River. 2010 —An explosion caused by a natural gas pipeline in San Bruno, CA, killed 8 people, injured 60 others, and destroyed 37 homes. 2011― An explosion caused by a natural gas pipeline in Allentown, PA, killed 5 people, damaged 50 buildings, and caused 500 people to be evacuated. 2011 ―A pipeline spill near Laurel, MT, released an estimated 1,000 barrels of crude oil into the Yellowstone River. 2012 —An explosion caused by a natural gas pipeline in Springfield, MA, injured 21 people and damaged over a dozen buildings. 2013 —An oil pipeline spill in Mayflower, AK, spilled 5,000 barrels of crude oil in a residential community causing 22 homes to be evacuated. 2014 —An explosion caused by a natural gas distribution pipeline in New York City killed 8 people, injured 50 others, and destroyed two 5-story buildings. 2015 —A pipeline in Santa Barbara County, CA, spilled 3,400 barrels of crude oil, including 500 barrels reaching Refugio State Beach on the Pacific Ocean. 2015 — The Aliso Canyon underground natural gas storage facility in Los Angeles County, CA, released 5.4 billion cubic feet of gas, causing the temporary relocation of over 2,000 households and two schools in Porter Ranch. 2016 —An explosion caused by a natural gas distribution pipeline in Canton, OH, killed one person, injured 11 others, and damaged over 50 buildings. 201 8 —Explosions and fires caused by natural gas distribution pipelines in the Merrimack Valley, MA, killed one person, injured 21 others, damaged 131 structures, and required 30,000 residents to evacuate. Such incidents have generated persistent scrutiny of pipeline regulation and have increased state and community activity related to pipeline safety. Federal Agencies in Pipeline Safety Three federal agencies play the most significant roles in the formulation, administration, and oversight of pipeline safety regulations in the United States. As stated above, PHMSA has the primary responsibility for the promulgation and enforcement of federal pipeline safety standards. The Federal Energy Regulatory Commission (FERC) is not operationally involved in pipeline safety but examines safety issues under its siting authority for interstate natural gas pipelines. The National Transportation Safety Board (NTSB) investigates transportation accidents—including pipeline accidents—and issues associated safety recommendations. These agency roles are discussed in the following sections. Pipeline and Hazardous Materials Safety Administration The Natural Gas Pipeline Safety Act of 1968 (P.L. 90-481) and the Hazardous Liquid Pipeline Act of 1979 ( P.L. 96-129 ) are two of the principal early acts establishing the federal role in pipeline safety. Under both statutes, the Transportation Secretary is given primary authority to regulate key aspects of interstate pipeline safety: design, construction, operation and maintenance, and spill response planning. Pipeline safety regulations are covered in Title 49 of the Code of Federal Regulations . PHMSA Organization and Funding As of March 8, 2019, PHMSA employed 290 full-time equivalent (FTE) staff in its Office of Pipeline Safety (OPS)—including 145 regional inspectors—and in DOT offices outside of OPS that also support pipeline safety functions. Those staff include attorneys, data analysts, information technology specialists, and regulatory specialists required for certain enforcement actions, promulgating regulations, issuing pipeline safety grants, and issuing agreements for pipeline safety research and development. In addition to federal staff, PHMSA's enabling legislation allows the agency to delegate authority to intra state pipeline safety offices, and allows state offices to act as "agents" administering inter state pipeline safety programs (excluding enforcement) for those sections of inter state pipelines within their boundaries. According to the DOT, "PHMSA leans heavily on state inspectors for the vast network of intrastate lines." A few states serve as agents for inspection of interstate pipelines as well. There were approximately 380 state pipeline safety inspectors in 2018. PHMSA's pipeline safety program is funded primarily by user fees assessed on a per-mile basis on each regulated pipeline operator. The agency's total annual budget authority has grown fairly steadily since 2001, with the largest increase in FY2015 ( Figure 3 ). For FY2019, PHMSA's estimated budget authority is approximately $164 million—more than double the agency's budget authority in FY2008 (not adjusted for inflation). The Trump Administration's requested budget authority for PHMSA is approximately $151 million for FY2020, roughly 8% less than the FY2019 budget authority, with proposed reductions primarily in contract programs, research and development, and grants to states. PHMSA's Regulatory Activities PHMSA uses a variety of strategies to promote compliance with its safety standards. The agency conducts programmatic inspections of management systems, procedures, and processes; conducts physical inspections of facilities and construction projects; investigates safety incidents; and maintains a dialogue with pipeline operators. The agency clarifies its regulatory expectations through published protocols and regulatory orders, guidance manuals, and public meetings. PHMSA relies upon a range of enforcement actions, including administrative actions such as corrective action orders (CAOs) and civil penalties, to ensure that operators correct safety violations and take measures to preclude future safety problems. From 2014 through 2018, PHMSA initiated 943 enforcement actions against pipeline operators. Of these cases, 348 resulted in safety orders to operators. Civil penalties proposed by PHMSA for safety violations during this period totaled approximately $24.2 million. PHMSA also conducts accident investigations and system-wide reviews focusing on high-risk operational or procedural problems and areas of the pipeline near sensitive environmental areas, high-density populations, or navigable waters. Since 1997, PHMSA has increasingly required industry's implementation of "integrity management" programs on pipeline segments near "high consequence areas." Integrity management provides for continual evaluation of pipeline condition; assessment of risks to the pipeline; inspection or testing; data analysis; and follow-up repair; as well as preventive or mitigative actions. High consequence areas (HCAs) include population centers, commercially navigable waters, and environmentally sensitive areas, such as drinking water supplies or ecological reserves. The integrity management approach prioritizes resources to locations of highest consequence rather than applying uniform treatment to the entire pipeline network. PHMSA made integrity management programs mandatory for most oil pipeline operators with 500 or more miles of regulated pipeline as of March 31, 2001 (49 C.F.R. §195). Congress subsequently mandated the expansion of integrity management to natural gas pipelines, along with other significant changes to federal pipeline safety requirements, through a series of agency budget reauthorizations as discussed below. PHMSA Reauthorization and Pipeline Safety Statutes The PIPES Act of 2016 was preceded by a series of periodic pipeline safety statutes, each of which reauthorized funding for PHMSA's pipeline safety program and included other provisions related to PHMSA's authorities, administration, or regulatory activities. Pipeline Safety Improvement Act of 2002 On December 12, 2002, President George W. Bush signed into law the Pipeline Safety Improvement Act of 2002 ( P.L. 107-355 ). The act strengthened federal pipeline safety programs, state oversight of pipeline operators, and public education regarding pipeline safety. Among other provisions, P.L. 107-355 required operators of regulated natural gas pipelines in high-consequence areas to conduct risk analysis and implement integrity management programs similar to those required for oil pipelines. The act authorized DOT to order safety actions for pipelines with potential safety problems and increased violation penalties. The act streamlined the permitting process for emergency pipeline restoration by establishing an interagency committee, including the DOT, the Environmental Protection Agency, the Bureau of Land Management, the Federal Energy Regulatory Commission, and other agencies, to ensure coordinated review and permitting of pipeline repairs. The act required DOT to study ways to limit pipeline safety risks from population encroachment and ways to preserve environmental resources in pipeline rights-of-way. P.L. 107-355 also included provisions for public education, grants for community pipeline safety studies, "whistle blower" and other employee protection, employee qualification programs, and mapping data submission. Pipeline Inspection, Protection, Enforcement, and Safety Act of 2006 On December 29, 2006, President Bush signed into law the Pipeline Inspection, Protection, Enforcement and Safety Act of 2006 ( P.L. 109-468 ). The main provisions of the act address pipeline damage prevention, integrity management, corrosion control, and enforcement transparency. The act created a national focus on pipeline damage prevention through grants to states for improving damage prevention programs, establishing 811 as the national "call before you dig" one-call telephone number, and giving PHMSA limited "backstop" authority to conduct civil enforcement against one-call violators in states that have failed to conduct such enforcement. The act mandated the promulgation by PHMSA of minimum standards for integrity management programs for natural gas distribution pipelines. It also mandated a review of the adequacy of federal pipeline safety regulations related to internal corrosion control, and required PHMSA to increase the transparency of enforcement actions by issuing monthly summaries, including violation and penalty information, and a mechanism for pipeline operators to make response information available to the public. Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 On January 3, 2012, President Obama signed the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 (Pipeline Safety Act, P.L. 112-90 ). The act contains a broad range of provisions addressing pipeline safety. Among the most significant are provisions to increase the number of federal pipeline safety inspectors, require automatic shutoff valves for transmission pipelines, mandate verification of maximum allowable operating pressure for gas transmission pipelines, increase civil penalties for pipeline safety violations, and mandate reviews of diluted bitumen pipeline regulation. Altogether, the act imposed 42 mandates on PHMSA regarding studies, rules, maps, and other elements of the federal pipeline safety program. P.L. 112-90 authorized the federal pipeline safety program through the fiscal year ending September 30, 2015. Protecting Our Infrastructure of Pipelines and Enhancing Safety Act of 2016 On June 22, 2016, President Obama signed the Protecting Our Infrastructure of Pipelines and Enhancing Safety Act of 2016 (PIPES Act, P.L. 114-183 ). As noted earlier, the act authorizes the federal pipeline safety program through FY2019. Among its other provisions, the act requires PHMSA to promulgate federal safety standards for underground natural gas storage facilities and grants PHMSA emergency order authority to address urgent "industry-wide safety conditions" without prior notice. The act also requires PHMSA to report regularly on the progress of outstanding statutory mandates, which are discussed later in this report. Federal Energy Regulatory Commission One area related to pipeline safety not under PHMSA's primary jurisdiction is the siting approval of interstate natural gas pipelines, which is the responsibility of the Federal Energy Regulatory Commission (FERC). Companies building interstate natural gas pipelines must first obtain from FERC certificates of public convenience and necessity. (FERC does not oversee oil pipeline construction.) FERC must also approve the abandonment of gas facility use and services. These approvals may include safety provisions with respect to pipeline routing, safety standards, and other factors. In particular, pipeline and aboveground facilities associated with a proposed pipeline project must be designed in accordance with PHMSA's safety standards regarding material selection and qualification, design requirements, and protection from corrosion. FERC and PHMSA cooperate on pipeline safety-related matters according to a Memorandum of Understanding (MOU) signed in 1993. According to the MOU, PHMSA agrees to promptly alert FERC when safety activities may impact commission responsibilities, notify FERC of major accidents or significant enforcement actions involving pipelines under FERC's jurisdiction, refer to FERC complaints and inquiries by state and local governments and the public about environmental or certificate matters related to FERC-jurisdictional pipelines, and when requested by FERC, review draft mitigation conditions considered by the commission for potential conflicts with PHMSA's regulations. Under the MOU, FERC agrees to promptly alert PHMSA when the commission learns of an existing or potential safety problem involving natural gas transmission facilities, notify PHMSA of future pipeline construction, periodically provide PHMSA with updates to the environmental compliance inspection schedule, and coordinate site inspections, upon request, with PHMSA officials, notify PHMSA when significant safety issues have been raised during the preparation of environmental assessments or environmental impact statements for pipeline projects, and refer to PHMSA complaints and inquiries made by state and local governments and the public involving safety matters related to FERC-jurisdictional pipelines. FERC may also serve as a member of PHMSA's Technical Pipeline Safety Standards Committee which determines whether proposed safety regulations are technically feasible, reasonable, cost-effective, and practicable. In April 2015, FERC issued a policy statement to provide "greater certainty regarding the ability of interstate natural gas pipelines to recover the costs of modernizing their facilities and infrastructure to enhance the efficient and safe operation of their systems." FERC's policy statement was motivated by the commission's expectation that governmental safety and environmental initiatives could soon cause greater safety and reliability costs for interstate gas pipeline systems. National Transportation Safety Board The National Transportation Safety Board (NTSB) is an independent federal agency charged with determining the probable cause of transportation incidents—including pipeline releases—and promoting transportation safety. The board's experts investigate significant incidents, develop factual records, and issue safety recommendations to prevent similar events from reoccurring. The NTSB has no statutory authority to regulate transportation, however, and it does not perform cost-benefit analyses of regulatory changes; its safety recommendations to industry or government agencies are not mandatory. Nonetheless, because of the board's strong reputation for thoroughness and objectivity, over 82% of the NTSB's safety recommendations have been implemented across all transportation modes. In the pipeline sector, specifically, the NTSB's safety recommendations have led to changes in pipeline safety regulation regarding one-call systems before excavation ("Call Before You Dig"), use of pipeline internal inspection devices, facility response plan effectiveness, hydrostatic pressure testing of older pipelines, and other pipeline safety improvements. San Bruno Pipeline Incident Investigation In August 2011, the NTSB issued preliminary findings and recommendations from its investigation of the San Bruno Pipeline incident. The investigation included testimony from pipeline company officials, government agency officials (PHMSA, state, and local), as well as testimony from other pipeline experts and stakeholders. The investigation determined that the pipeline ruptured due to a faulty weld in a pipeline section constructed in 1956. In addition to specifics about the San Bruno incident, the hearing addressed more general pipeline issues, including public awareness initiatives, pipeline technology, and oversight of pipeline safety by federal and state regulators. The NTSB's findings were highly critical of the pipeline operator (Pacific Gas and Electric, PG&E) as well as both the state and federal pipeline safety regulators. The board concluded that "the multiple and recurring deficiencies in PG&E operational practices indicate a systemic problem" with respect to its pipeline safety program. The board further concluded that the pipeline safety regulator within the state of California, failed to detect the inadequacies in PG&E's integrity management program and that the Pipeline and Hazardous Materials Safety Administration integrity management inspection protocols need improvement. Because the Pipeline and Hazardous Materials Safety Administration has not incorporated the use of effective and meaningful metrics as part of its guidance for performance-based management pipeline safety programs, its oversight of state public utility commissions regulating gas transmission and hazardous liquid pipelines could be improved. In an opening statement about the San Bruno incident report, the NTSB chairman summarized the board's findings as "troubling revelations … about a company that exploited weaknesses in a lax system of oversight and government agencies that placed a blind trust in operators to the detriment of public safety." The NTSB's final incident report concluded "that PHMSA's enforcement program and its monitoring of state oversight programs have been weak and have resulted in the lack of effective Federal oversight and state oversight." The NTSB issued 39 recommendations stemming from its San Bruno incident investigation, including 20 recommendations to the Secretary of Transportation and PHMSA. These recommendations included the following: conducting audits to assess the effectiveness of PHMSA's oversight of performance-based pipeline safety programs and state pipeline safety program certification, requiring pipeline operators to provide system-specific information to the emergency response agencies of the communities in which pipelines are located, requiring that automatic shutoff valves or remote control valves be installed in high consequence areas and in class 3 and 4 locations, requiring that all natural gas transmission pipelines constructed before 1970 be subjected to a hydrostatic pressure test that incorporates a pressure spike test, requiring that all natural gas transmission pipelines be configured so as to accommodate internal inspection tools, with priority given to older pipelines, and revising PHMSA's integrity management protocol to incorporate meaningful metrics, set performance goals for pipeline operators, and require operators to regularly assess the effectiveness of their programs using meaningful metrics. Marshall, MI, Pipeline Incident Investigation In July 2012, the NTSB issued the final report of its investigation of the Marshall, MI, oil pipeline spill. In addition to finding management and operation failures by the pipeline operator, the report was critical of PHMSA for inadequate regulatory requirements and oversight of crack defects in pipelines, inadequate regulatory requirements for emergency response plans, generally, and inadequate review and approval of the response plan for this particular pipeline. The NTSB issued eight recommendations to the Secretary of Transportation and PHMSA, including auditing the business practices of PHMSA's onshore pipeline facility response plan programs, including reviews of response plans and drill programs, to correct deficiencies, allocating sufficient resources to ensure that PHMSA's facility response plan program meets all of the requirements of the Oil Pollution Act of 1990, clarifying and strengthening federal regulation related to the identification and repair of pipeline crack defects, issuing advisory bulletins to all hazardous liquid and natural gas pipeline operators describing the circumstances of the accident in Marshall, asking them to take appropriate action to eliminate similar deficiencies, to identify deficiencies in facility response plans, and to update these plans as necessary, developing requirements for team training of control center staff involved in pipeline operations similar to those used in other transportation modes, strengthening operator qualification requirements, and harmonizing onshore oil pipeline response planning requirements with those of the U.S. Coast Guard and the U.S. Environmental Protection Agency for oil and petroleum products facilities to ensure that operators have adequate resources for worst-case discharges. Merrimack Valley Pipeline Incident Investigation In October 2018, the NTSB issued a preliminary report of its investigation into the Merrimack Valley natural gas fires and explosions, which affected the communities of Lawrence, Andover, and North Andover, MA. The report concluded, based on an initial investigation, that the natural gas releases were caused by excessive pressure in a local distribution main during a cast iron pipeline replacement project. Due to an erroneous work order, pipeline workers improperly bypassed critical pipeline pressure-sensing lines. Without an accurate sensor signal from the bypassed pipeline segment, the pipeline pressure regulators allowed high-pressure gas into the distribution lines supplying homes and businesses—many of which failed and released natural gas as a result. The NTSB's formal incident investigation continues, so the agency has not yet released a final accident report. However, in response to its initial findings, the NTSB made a preliminary recommendation to the Commonwealth of Massachusetts to eliminate its professional engineer license exemption for public utility work and to require a professional engineer's seal on public utility engineering drawings. The NTSB also made recommendations to the natural gas distribution utility regarding its design and operating practices. It made no recommendations to PHMSA. Other Investigations The NTSB has made recommendations to PHMSA as a result of other pipeline incident investigations. Detailed discussion of NTSB findings and recommendations, including those described above, are publicly available in the NTSB's docket management system. In addition, in January 2015, the NTSB released a safety study examining integrity management of natural gas transmission pipelines in high consequence areas. The study identified several areas of potential safety improvement among such facilities expanding and improving PHMSA guidance to both operators and inspectors for the development, implementation, and inspection of operators' integrity management programs, expanding the use of in-line inspection, especially for intrastate pipelines, eliminating the use of direct assessment as the sole integrity assessment method, evaluating the effectiveness of the approved risk assessment approaches, strengthening aspects of inspector training, developing minimum professional qualification criteria for all personnel involved in integrity management programs, and improving data collection and reporting, including geospatial data. PHMSA maintains a list of NTSB's pipeline safety recommendations directed at the agency which are currently open. As of September 11, 2018, there were 25 open recommendations dating back to 2011. In many cases, NTSB has classified these recommendations as "Open—Acceptable Response" because they are being incorporated satisfactorily in ongoing PHMSA rulemakings, further discussed below. However, a few recommendations are classified as "Open—Unacceptable response," because NTSB is not satisfied with PHMSA's actions to implement them. PHMSA's Role in Pipeline Security Pipeline safety and security are distinct issues involving different threats, statutory authorities, and regulatory frameworks. Nonetheless, pipeline safety and security are intertwined in some respects—and PHMSA is involved in both. The Department of Transportation played the leading role in pipeline security through the late 1990s. Presidential Decision Directive 63 (PDD-63), issued during the Clinton Administration, assigned lead responsibility for pipeline security to DOT. These responsibilities fell to the Office of Pipeline Safety, at that time a part of DOT's Research and Special Programs Administration, because the agency was already addressing some elements of pipeline security in its role as safety regulator. The DOT's pipeline (and LNG) safety regulations already included provisions related to physical security, such as requirements to protect surface facilities (e.g., pumping stations) from vandalism and unauthorized entry. Other regulations required continuing surveillance, patrolling pipeline rights-of-way, damage prevention, and emergency procedures. In the early 2000s, OPS conducted a vulnerability assessment to identify critical pipeline facilities and worked with industry groups and state pipeline safety organizations "to assess the industry's readiness to prepare for, withstand and respond to a terrorist attack.... " Together with DOE and state pipeline agencies, OPS promoted the development of consensus standards for security measures tiered to correspond with the five levels of threat warnings issued by the Office of Homeland Security. OPS also developed protocols for inspections of critical facilities to ensure that operators implemented appropriate security practices. To convey emergency information and warnings, OPS established a variety of communication links to key staff at the most critical pipeline facilities throughout the country. OPS also began identifying near-term technology to enhance deterrence, detection, response, and recovery, and began seeking to advance public and private sector planning for response and recovery. On September 5, 2002, OPS circulated formal guidance developed in cooperation with the pipeline industry associations defining the agency's security program recommendations and implementation expectations. This guidance recommended that operators identify critical facilities, develop security plans consistent with prior trade association security guidance, implement these plans, and review them annually. While the guidance was voluntary, OPS expected compliance and informed operators of its intent to begin reviewing security programs and to test their effectiveness. PHMSA Cooperation with TSA In November 2001, President Bush signed the Aviation and Transportation Security Act ( P.L. 107-71 ) establishing the Transportation Security Administration (TSA) within DOT. According to TSA, the act placed DOT's pipeline security authority (under PDD-63) within TSA. The act specified for TSA a range of duties and powers related to general transportation security, such as intelligence management, threat assessment, mitigation, security measure oversight, and enforcement. On November 25, 2002, President Bush signed the Homeland Security Act of 2002 ( P.L. 107-296 ) creating the Department of Homeland Security (DHS). Among other provisions, the act transferred the Transportation Security Administration from DOT to DHS (§403). On December 17, 2003, President Bush issued Homeland Security Presidential Directive 7 (HSPD-7), clarifying executive agency responsibilities for identifying, prioritizing, and protecting critical infrastructure. HSPD-7 maintained DHS as the lead agency for pipeline security (paragraph 15), and instructed DOT to "collaborate in regulating the transportation of hazardous materials by all modes (including pipelines)" (paragraph 22h). In 2004, the DOT and DHS entered into a memorandum of understanding concerning their respective security roles in all modes of transportation. The MOU notes that DHS has the primary responsibility for transportation security with support from the DOT, and establishes a general framework for cooperation and coordination. The MOU states that "specific tasks and areas of responsibility that are appropriate for cooperation will be documented in annexes ... individually approved and signed by appropriate representatives of DHS and DOT." On August 9, 2006, the departments signed an annex "to delineate clear lines of authority and responsibility and promote communications, efficiency, and nonduplication of effort through cooperation and collaboration between the parties in the area of transportation security." In January 2007, the PHMSA Administrator testified before Congress that the agency had established a joint working group with TSA "to improve interagency coordination on transportation security and safety matters, and to develop and advance plans for improving transportation security," presumably including pipeline security. According to TSA, the working group developed a multiyear action plan specifically delineating roles, responsibilities, resources and actions to execute 11 program elements: identification of critical infrastructure/key resources, and risk assessments; strategic planning; developing regulations and guidelines; conducting inspections and enforcement; providing technical support; sharing information during emergencies; communications; stakeholder relations; research and development; legislative matters; and budgeting. P.L. 109-468 required the DOT Inspector General (IG) to assess the pipeline security actions taken by the DOT in implementing its 2004 MOU with the DHS (§23). The Inspector General published this assessment in May 2008. The IG report stated, PHMSA and TSA have taken initial steps toward formulating an action plan to implement the provisions of the pipeline security annex.... However, further actions need to be taken with a sense of urgency because the current situation is far from an "end state" for enhancing the security of the Nation's pipelines. The report recommended that PHMSA and TSA finalize and execute their security annex action plan, clarify their respective roles, and jointly develop a pipeline security strategy that maximizes the effectiveness of their respective capabilities and efforts. According to TSA, working with PHMSA "improved drastically" after the release of the IG report; the two agencies began to maintain daily contact, share information in a timely manner, and collaborate on security guidelines and incident response planning. Consistent with this assertion, in March 2010, TSA published a Pipeline Security and Incident Recovery Protocol Plan which lays out in detail the separate and cooperative responsibilities of the two agencies with respect to a pipeline security incident. Among other notes, the plan states, DOT has statutory tools that may be useful during a security incident, such as special permits, safety orders, and corrective action orders. DOT/PHMSA also has access to the Regional Emergency Transportation Coordinator (RETCO) Program…. Each RETCO manages regional DOT emergency preparedness and response activities in the assigned region on behalf of the Secretary of Transportation. The plan also refers to the establishment of an Interagency Threat Coordination Committee established by TSA and PHMSA to organize and communicate developing threat information among federal agencies that may have responsibility for pipeline incident response. DOT has continued to cooperate with TSA on pipeline security in recent years. For example, TSA coordinated with DOT and other agencies to address ongoing vandalism and sabotage against critical pipelines by environmental activists in 2016. In April 2016, the Director of TSA's Surface Division testified about her agency's relationship with DOT: TSA and DOT co-chair the Pipeline Government Coordinating Council to facilitate information sharing and coordinate on activities including security assessments, training, and exercises. TSA and DOT's Pipeline and Hazardous Materials Safety Administration (PHMSA) work together to integrate pipeline safety and security priorities, as measures installed by pipeline owners and operators often benefit both safety and security. In December 2016, PHMSA issued an Advisory Bulletin "in coordination with" TSA regarding cybersecurity threats to pipeline Supervisory Control and Data Acquisition (SCADA) systems. In July 2017, the two agencies collaborated on a web-based portal to facilitate sharing sensitive but unclassified incident information among federal agencies with pipeline responsibilities. In February 2018, the Director of TSA's Surface Division again testified about cooperation with PHMSA, stating "TSA works closely with [PHMSA] for incident response and monitoring of pipeline systems," although she did not provide specific examples. Key Policy Issues The 116 th Congress may focus on several key issues in its continuing oversight of federal pipeline safety and as it considers PHMSA's reauthorization, including incomplete statutory mandates, adequacy of PHMSA staffing, state program oversight, aging pipeline infrastructure, and PHMSA's role in pipeline security. These issues are discussed in the following sections. Overdue PHMSA Statutory Mandates Congress has used reauthorizations to impose on PHMSA various mandates regarding standards, studies, and other elements of pipeline safety regulation—usually in response to major pipeline accidents. The Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 ( P.L. 112-90 ) and the PIPES Act of 2016 ( P.L. 114-183 ) together included 61 such mandates. As of March 5, 2019, according to PHMSA, the agency had completed 34 of 42 mandates under P.L. 112-90 and 16 of 19 mandates under P.L. 114-183 . Some Members of Congress are concerned that major mandates remain unfulfilled years beyond the deadlines specified in statute. They have expressed frustration with PHMSA's failure to fulfill its statutory obligations, arguing that it delays important new regulations, undermines public confidence in pipeline safety, and does not allow Congress to evaluate the effectiveness of prior mandates as it considers PHMSA's next reauthorization. Among the overdue mandates, Congress has focused on several key regulations (rules) with potentially significant impacts on pipeline operations nationwide. Safety of Gas Transmission Pipelines Rule This rulemaking would require operators to (1) reconfirm pipeline maximum allowable operating pressure and (2) test the material strength of previously untested gas transmission pipelines in high-consequence areas ( P.L. 112-90 §23(c-d)). The statutory deadline for PHMSA to finalize these two rules was July 3, 2013. The rulemaking also would address the expansion of "integrity management" programs for gas transmission pipelines beyond high-consequence areas ( P.L. 112-90 §5(f)). Integrity management provides for continual evaluation of pipeline condition; assessment of risks; inspection or testing; data analysis; and follow-up repair; as well as preventive or mitigative actions. The deadline for PHMSA to finalize the integrity management provisions was January 3, 2015. The rulemaking also would address the application of existing regulations to currently unregulated gathering lines ( P.L. 112-90 §21(c)). PHMSA issued a Notice of Proposed R ule making incorporating the above provisions, and other requirements, on June 7, 2016. However, PHMSA subsequently decided to split its efforts into three separate rulemakings to facilitate completion. PHMSA anticipates publication of a final rule for the maximum allowable operating pressure and material testing provisions in July 2019. PHMSA anticipates publication of separate final rules for the integrity management provisions and for the gathering line provisions in December 2019. Safety of Hazardous Liquids Pipelines Rule Among other requirements, this rulemaking would require leak detection systems, where practicable, for hazardous liquids (i.e., oil and refined fuel) pipelines and would set standards for leak detection capability ( P.L. 112-90 §8(b)). It also would address the expansion of integrity management for liquids pipelines beyond high-consequence areas ( P.L. 112-90 §5(f)). The deadlines for PHMSA to finalize these rules were, respectively, January 3, 2014, and January 3, 2015. The rulemaking also would require additional integrity assessment measures for certain underwater onshore liquids pipelines ( P.L. 114-183 §25). PHMSA issued a prepublication final rule on January 13, 2017, but withdrew it on January 24, 2017, for further review in compliance with the "Memorandum for the Heads of Executive Departments and Agencies" issued by the White House. PHMSA anticipates publication of a final rule in May 2019 . Amendments to Parts 192 and 195 This rulemaking, which refers to Title 49 of the Code of Federal Regulations, involves requirements for pipeline valve installation and minimum rupture detection standards. These measures are intended to enhance the ability of pipeline operators to quickly stop the flow of a commodity (e.g., oil) in case of an unintended release by installing automatic or remote-controlled valves ( P.L. 112-90 §4). The rulemaking also would outline performance standards for pipeline rupture detection ( P.L. 112-90 §8(b)). The deadline for PHMSA to finalize these rules was January 3, 2014. PHMSA anticipates issuing a proposed rule in August 2019. Underground Natural Gas Storage Facilities This rulemaking would set minimum federal safety standards for underground natural gas storage facilities ( P.L. 114-183 §12). The deadline for PHMSA to finalize this rule was June 22, 2018. PHMSA issued an interim final rule on December 19, 2016. However, the agency temporarily suspended certain enforcement actions on June 20, 2017, and re opened the rule to public comment until November 20, 2017. DOT anticipates publishing the final rule in August 2019 . Emergency Order Authority This rulemaking would implement PHMSA's new authority to issue emergency orders, which would apply to all operators and/or pipeline systems to abate an imminent hazard ( P.L. 114-183 §16). The deadline for PHMSA to finalize this rule was March 22, 2017. The agency issued an interim final rule on October 14, 2016. PHMSA anticipates publication of a final rule in March 2019. PHMSA Rulemaking Oversight and Agency Response In response to questions during a 2015 hearing about overdue statutory mandates, a PHMSA official testified that rulemaking delays at that time did not reflect a lack of commitment but rather their complexity, the agency's rulemaking process, and limited staff resources. A 2016 audit report by the DOT Inspector General concluded that PHMSA lacked "sufficient processes, guidance, and oversight for implementing mandates" in a timely manner. On June 21, 2018, the current PHMSA administrator testified that the agency had adequate staffing and funding for its rulemaking activities and was working to streamline the agency's rulemaking process to accelerate finalization of the overdue rules. He stated that PHMSA would prioritize rulemaking in three areas: the safety of hazardous liquid pipelines, the safety of gas transmission and gathering pipelines, and pipeline rupture detection and automatic shutoff valves. Staffing Resources for Pipeline Safety The U.S. pipeline safety program employs a combination of federal and state staff to implement and enforce federal pipeline safety regulations. To date, PHMSA has relied heavily on state agencies for pipeline inspections, with over 70% of inspectors being state employees. As the PHMSA administrator remarked in 2018, PHMSA faces a manpower issue. It is obvious that an agency that employs about 536 people cannot oversee 2.7 million miles of pipeline all by itself. In fact, PHMSA makes no attempt to do so. Most actual safety inspections are performed by our state partners. Nonetheless, some in Congress have criticized inspector staffing at PHMSA for being insufficient to cover pipelines under the agency's jurisdiction. In considering PHMSA staff levels, issues of interest have been the number of federal inspectors and the agency's historical use of staff funding. PHMSA Inspection and Enforcement Staff In FY2019, PHMSA is funded for 308 full-time equivalent (FTE) employees in pipeline safety. As noted earlier, PHMSA employed 290 full-time equivalent staff in pipeline safety, including 145 inspectors, as of March 8, 2019. According to PHMSA officials, the agency continues hiring and anticipates employing additional staff in the second half of the fiscal year. While t he President's request ed budget authority for PHMSA's pipeline safety program in FY2020 is less than the FY2019 budget authority , it projects only a small reduction in funded staff . The budget includes an estimate of 306 FTEs for FY2020 , two fewer FTEs than the prior year . According to PHMSA, these two positions , which support pipeline safety data anal ysis and information technology, are to be transferred to DOT's Office of the Chief Information Officer as part of a centralization of all systems and technology within that office. If PHMSA's pipeline safety staffing were to be funded at the level of the President's FY2020 budget request, it would maintain the significant increase in PHMSA staff funding (mostly for inspectors) appropriated since FY2014 ( Figure 4 ). However, to the extent it reduces funding for grants available to the states, it potentially could reduce the number of staff in state pipeline safety agencies. It would also be a step back, in terms of funding, from the long-term expansion of PHMSA's pipeline safety program begun over 20 years ago in response to a series of pipeline accidents, the terrorist attacks of 9/11, implementation of PHMSA's integrity management regulations, and the boom in U.S. shale gas and oil production. PHMSA officials have offered a number of reasons for the persistent shortfall in inspector staffing. These reasons include a scarcity of qualified inspector job applicants, delays in the federal hiring process during which applicants accept other job offers, and PHMSA inspector turnover—especially to pipeline companies, which often hire away PHMSA inspectors for their corporate safety programs. Because PHMSA pipeline inspectors are extensively trained by the agency (typically for two years before being allowed to operate independently), they are highly valued by pipeline operators seeking to comply with federal safety regulations. The agency has stated that it is challenged by industry recruitment of the same candidates it is recruiting, especially with the rapid development of unconventional oil and gas shales, for which the skill sets PHMSA seeks (primarily engineers) have been in high demand. A 2017 DOT Inspector General (IG) report supported PHMSA's assertions about industry-specific hiring challenges and confirmed "a significant gap between private industry and Federal salaries for the types of engineers PHMSA hires." To overcome its pipeline inspector hiring challenges, PHMSA has implemented a "robust recruitment and outreach strategy" that includes certain noncompetitive hiring authorities (e.g., Veterans Employment Opportunities Act) and a fellows program. The agency also has offered recruitment, relocation and retention incentives, and a student loan repayment program. In addition to posting vacancy announcements on USAJOBS, PHMSA has posted job announcements using social media (Twitter and LinkedIn), has conducted outreach to professional organizations and veterans groups, and has attended career fairs and on-campus hiring events. PHMSA states that it has been "working hard to hire and retain inspector staff" but continues to experience staff losses due to an aging workforce and continued difficulty hiring and retaining engineers and technical staff because of competition from the oil and natural gas industry. Although PHMSA has taken concrete actions in recent years to shore up its workforce, there may still be room for improvement. Notably, the IG report concluded in 2017 that PHMSA did "not have a current workforce management plan or fully use retention tools," although the agency had improved how it integrates new employees in the agency. According to the IG, PHMSA concurred with the report's workforce management recommendations and proposed appropriate action plans. On a related issue, a 2018 study by the Government Accountability Office (GAO) reports that "PHMSA has not planned for future workforce needs for interstate pipeline inspections," and, in particular, has not assessed the resources and benefits available from its state partners. The GAO concluded that without this type of forward-looking analysis, "PHMSA cannot proactively plan for future inspection needs to ensure that federal and state resources are in place to provide effective oversight of interstate pipelines." According to GAO, PHMSA has concurred with its recommendation to develop a workforce plan for interstate pipeline inspections. What impact PHMSA's subsequent actions may have on its staff recruitment, retention, and deployment is an open question. Direct-Hire Authority One specific remedy PHMSA has pursued in its efforts to recruit pipeline inspectors is to seek direct-hire authority (DHA) from the Office of Personnel Management (OPM). This authority can expedite hiring, for example, by eliminating competitive rating and ranking, or not requiring veterans' preference. OPM can grant DHA to federal agencies in cases of critical hiring need or a severe shortage of candidates. In its 2013 appropriations report, the House Appropriations Committee stated The Committee is aware of several challenges PHMSA faces in hiring pipeline safety inspectors. One such challenge is the delay caused by the federal hiring process, which is compounded by other market dynamics. The Committee encourages the Office of Personnel Management to give strong consideration to PHMSA's request for direct-hire authority for its pipeline safety inspection and enforcement personnel. Such authority may enable PHMSA to increase its personnel to authorized levels and thereby demonstrate the need for additional resources. The same language appears in the committee's 2014 appropriations report. Consistent with the committee's recommendations, PHMSA applied to the OPM for direct-hire authority in April 2015 but was denied. According to PHMSA, the OPM informed agency officials of the denial verbally, but did not provide a formal, written explanation for the denial at the time. In 2016, the PHMSA administrator reiterated the agency's desire for DHA, stating that it "would complement our recruitment efforts by reducing the agency's time to hire from more than 100 days to less than 30 days." P.L. 114-183 did not grant PHMSA direct-hire authority, but did allow the agency to apply to the OPM for it upon identification of a period of macroeconomic and pipeline industry conditions creating difficulty in filling pipeline safety job vacancies (§9b). However, the aforementioned IG report concluded that direct hire authority might not provide PHMSA with the needed tools to recruit staff more effectively. According to the IG, while this authority might speed hiring of new employees, "it is not clear how it alone would resolve long-standing staffing challenges such as competing with a well-paying industry over a limited talent pool." State Pipeline Safety Program Oversight In the wake of several major safety incidents involving facilities under the jurisdiction of state pipeline safety regulators, some state programs have come under scrutiny regarding their overall effectiveness. After the San Bruno pipeline incident, the California state pipeline safety program—which had regulatory responsibility for the pipeline that ruptured—was criticized by the NTSB for its failure to detect the pipeline's problems. The NTSB was also critical of PHMSA's oversight of the state because the agency had not "incorporated the use of effective and meaningful metrics as part of its guidance for performance-based management" of state pipeline safety programs. A 2014 investigation by the DOT Office of Inspector General assessed the effectiveness of PHMSA's state program oversight as recommended by the NTSB. The IG report stated PHMSA's oversight of State pipeline safety programs is not sufficient to ensure States comply with program evaluation requirements and properly use suspension grant funds. Lapses in oversight have resulted in undisclosed safety weaknesses in State programs. The IG report recommended that PHMSA "take actions to further refine its policies and procedures for managing the program, including its guidelines to the States and improve its oversight to ensure States fulfill their role in pipeline safety." The report made seven specific programmatic recommendations to achieve these goals. In its response to a draft version of the IG report, PHMSA officials concurred or partially concurred with all of the IG reports' recommendations, describing actions it had taken to address the IG's concerns. The IG report therefore considered all but two of its recommendations resolved, but urged PHMSA to reconsider and clarify its response to the remaining two recommendations. These recommendations pertained to PHMSA's staffing formula and its annual evaluations of inspection procedures among the states. The Aliso Canyon and Merrimack Valley incidents again focused attention on the oversight and effectiveness of state pipeline safety programs. For example, during the Aliso Canyon incident, PHMSA expressed concern to state regulators about aspects of the state's safety oversight, including its review of historical well records showing facility anomalies and requirements for safety contingency plans to protect workers, the public, and property. A subsequent federal interagency task force concluded that "the practices for monitoring and assessing leaks and leak potential at the Aliso Canyon facility were inadequate to maintain safe operations." In the Merrimack Valley case, state legislators reportedly criticized Massachusetts' pipeline safety regulators for insufficient staffing and inadequate oversight of pipeline facilities. However, PHMSA's annual evaluation of the state's pipeline safety program—conducted the month before the natural gas releases—gave the state program a rating of 97.4 out of 100 maximum points. PHMSA's evaluation did note a shortfall in inspector staffing, which could impact the agency's inspection schedule, and that the state agency was working to hire additional inspectors. In light of these incidents, and the IG's prior recommendations, Congress may reexamine the adequacy of PHMSA's oversight of its state pipeline safety partners. Aging Pipeline Infrastructure The NTSB listed the safe shipment of hazardous materials by pipeline among its 2019-2020 Most Wanted List of Transportation Safety Improvements , stating "as infrastructure ages, the risk to the public from pipeline ruptures also grows." Likewise, Congress has ongoing concern about the safety of older transmission pipelines—a key factor in San Bruno—and in the replacement of leaky and deteriorating cast iron pipe in natural gas distribution systems—a key factor in Merrimack Valley. The construction work in Merrimack Valley, which led to the natural gas release, was part of a cast iron pipe replacement project. (Age was also a factor in the failure of the well casing which led to the uncontrolled natural gas release at the Aliso Canyon facility.) According to the American Gas Association and other stakeholders, antiquated cast iron pipes in natural gas distribution systems, many over 50 years old, "have long been recognized as warranting attention in terms of management, replacement and/or reconditioning." Old distribution pipes have also been identified as a significant source of methane leakage, which poses safety risks and contributes to U.S. greenhouse gas emissions. In April 2015, then-Secretary of Energy Ernest Moniz reportedly stated that safety and environmental risks from old, leaky distribution lines were "a big issue." Natural gas distribution system operators all have ongoing programs for the replacement of antiquated pipes in their systems, although some are constrained by state regulators who face challenges considering significant rate increases to pay for these upgrades. According to the Department of Energy, the total cost of replacing cast iron and bare steel distribution pipes is approximately $270 billion. Practical barriers, such as urban excavation and disruption of gas supplies, also limit annual replacement. Although the federal role in natural gas distribution systems is limited, because they are under state jurisdiction, there have been prior proposals in Congress and in the QER to provide federal support for the management and replacement of old cast iron pipe. The Pipeline Safety Act mandated a survey (with follow-up every two years thereafter) of pipeline operator progress in adopting and implementing plans for the management and replacement of cast iron pipes (§7(a)). The Merrimack Valley incident may refocus attention on PHMSA's regulation of pipe replacement (currently voluntary), pipeline modernization projects and work packages, older pipeline records, safety management systems, and other issues related to aging pipelines. Congress also may examine the industry's overall progress in addressing the safety of antiquated distribution lines and opportunities for federal support of those efforts. PHMSA and Pipeline Security Ongoing physical and cyber threats against the nation's pipelines since passage of the PIPES Act have heightened concerns about the security risks to these pipelines. In a December 2018 study , GAO stated that since the terrorist attacks of September 11, 2001, "new threats to the nation's pipeline systems have evolved to include sabotage by environmental activists and cyber attack or intrusion by nations." Recent oversight of federal pipeline security activities has included discussion of PHMSA's role in pipeline security. While PHMSA reports cooperation with TSA in pipeline security under the terms of the pipeline security annex and subsequent collaboration, questions remain regarding exactly what this cooperation entails and the ongoing roles of the two agencies. Congress has considered in the past whether the TSA-PHMSA pipeline security annex optimally aligns staff resources and capabilities across both agencies to fulfill the nation's overall pipeline safety and security missions. More recently, some in the pipeline industry have questioned PHMSA's focus on, and ongoing commitment to, pipeline security issues, especially in cybersecurity. In the 116 th Congress, the Pipeline and LNG Facility Cybersecurity Preparedness Act ( H.R. 370 , S. 300 ) would require the Secretary of Energy to enhance coordination among "appropriate Federal agencies," state government agencies, and the energy sector in pipeline security; coordinate incident response and recovery; support the development of pipeline cybersecurity applications, technologies, demonstration projects, and training curricula; and provide technical tools for pipeline security. What role PHMSA might play in any future pipeline security initiatives, and what resources it might require to perform that role, may be a consideration for Congress. Conclusion Both government and industry have taken numerous steps to improve pipeline safety over the last 10 years. In 2016, the Association of Oil Pipe Lines stated that "the oil and natural gas industry is committed to achieving zero incidents throughout our operations." Likewise, the American Gas Association, which represents investor-owned natural gas distribution companies, recently stated that "safety is the core value for America's natural gas utilities." Nonetheless, major oil and natural gas pipeline accidents continue to occur. Both Congress and the NTSB have called for additional regulatory measures to reduce the likelihood of future pipeline accidents. Past PHMSA reauthorizations included expansive pipeline safety mandates, such as requirements for the agency to impose integrity management programs, significantly increase inspector staffing, or regulate underground natural storage. In light of the most recent pipeline accidents or security incidents, Congress may consider new regulatory mandates on PHMSA or may impose new requirements directly on the pipeline industry. However, a number of broad pipeline safety rulemakings and many NTSB recommendations remain outstanding, and others have not been in place for long, so their effectiveness in improving pipeline safety have yet to be determined. As Congress continues its oversight of the federal pipeline safety program, an important focus may be the practical effects of the many changes being made to particular aspects of PHMSA's pipeline safety regulations. In addition to the specific issues highlighted in this report, Congress may assess how the various elements of U.S. pipeline safety activity fit together in the nation's overall strategy to protect the public and the environment. Pipeline safety necessarily involves various groups: federal and state agencies, pipeline associations, large and small pipeline operators, and local communities. Reviewing how these groups work together to achieve common goals could be an overarching concern for Congress.
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The U.S. energy pipeline network is composed of approximately 3 million miles of pipeline transporting natural gas, oil, and other hazardous liquids. Recent incidents in California, Pennsylvania, Massachusetts, and other states have drawn criticism from stakeholders and have raised concerns in Congress about pipeline safety. The Department of Energy's (DOE's) 2015 Quadrennial Energy Review also highlighted pipeline safety as an issue for the nation's energy infrastructure. Recent incident statistics suggest there is opportunity for safety improvement. The federal pipeline safety program is administered by the Department of Transportation's Pipeline and Hazardous Materials Safety Administration (PHMSA), which relies heavily on state partnerships for inspection and enforcement of its regulations. PHMSA's pipeline safety program is authorized through FY2019. For FY2019, PHMSA's estimated budget authority is approximately $164 million—more than double the agency's budget authority in FY2008 (not adjusted for inflation). Much of PHMSA's funding is for inspectors. However, due to private sector competition, the agency faces persistent challenges recruiting and retaining the staff for which it is funded. The Trump Administration's requested budget authority for PHMSA is approximately $151 million for FY2020, roughly 8% less than the FY2019 amount. The request would only slightly reduce PHMSA staffing but proposes cuts in state grants that could impact staffing at state pipeline safety agencies. In the wake of major incidents involving facilities under state jurisdiction, some state programs have come under scrutiny regarding their effectiveness and oversight by PHMSA. Congress has used past reauthorizations to impose various mandates on PHMSA regarding standards, studies, and other elements of pipeline safety regulation. The Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 (P.L. 112-90) and the PIPES Act of 2016 (P.L. 114-183) together included 61 such mandates. As of March 5, 2019, according to PHMSA, the agency had completed 34 of 42 mandates under P.L. 112-90 and 16 of 19 mandates under P.L. 114-183. PHMSA also has not satisfied a number of safety recommendations from the National Transportation Safety Board (NTSB). Some in Congress are concerned that major mandates and NTSB recommendations remain unfulfilled. The NTSB highlighted aging pipelines as a particular concern in its 2019-2020 Most Wanted List of Transportation Safety Improvements. Likewise, Congress has ongoing interest in the safety of older transmission pipelines and in the replacement of leaky and deteriorating cast iron pipe in natural gas distribution systems. Recent accidents involving older pipelines and related infrastructure may refocus attention on PHMSA's regulation of pipe replacement (currently voluntary), pipeline modernization projects and work packages, older pipeline records, safety management systems, and other issues related to aging pipelines. Ongoing physical and cyber threats against the nation's pipelines since passage of the PIPES Act have heightened concerns about pipeline security risks. Although the Transportation Security Administration (TSA) has the primary statutory authority over pipeline security, pipeline safety and security are intertwined—and PHMSA is involved in both. Under the terms of a 2006 agreement, PHMSA and TSA are directed to work together "to delineate clear lines of authority … in the area of transportation security." While PHMSA reports ongoing cooperation with TSA, questions remain about what this cooperation entails and the ongoing roles of the two agencies. In addition to these specific issues, Congress may assess how the various elements of U.S. pipeline safety and security fit together in the nation's overall approach to protect the public and the environment. This approach involves federal and state agencies, pipeline associations, large and small pipeline operators, and local communities. Reviewing how these various groups work together to achieve common goals could be an overarching consideration for Congress.
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This is an action of ejectment in which plaintiff in error was plaintiff below. On the trial, he proved title in Isaac Speer in August, 1857, at which time he recovered a judgment against said Speer, under which the land in controversy was sold July 8, 1863, and a deed made to plaintiff, founded on that sale, Feb. 24, 1865. There does not seem to be any question but that this vested in the plaintiff the legal title to the land some our years before the date of the commencement of this action, which was the fifteenth day the May, 1869. Defendant relied solely on the Statutes of Limitation of seven years as found in the acts of the Illinois legislature of 1835 and 1839, p. 675 of the Revised Statutes of 1874. We are not favored with any argument, oral or written, by the defendant in error, and have had to find out for ourselves on what he bases the defence of the court's ruling. It does not appear that the defence under the act of 1839 was established; but the court instructed the jury that if they believed certain facts were proved, which facts had reference to the seven years' possession under the act of 1835, their verdict should be for the defendant. The law of 1835 provides that, 'No person who has or may have any right of entry into any lands, tenements, or hereditaments, of which any person may be possessed by actual residence thereon, having a connected title in law or equity, deducible of record from this State or the United States, or from any public officer or other person authorized by the laws of this State to sell such lands, for non-payment of taxes, or from any sheriff, marshal, or other person authroized to sell such land on execution, or under any order, judgment, or decree of any court of record, shall make any entry therein, except within seven years from the time of such possession being taken; but, when the possessor shall acquire such title after the time of taking such possession, the limitation shall begin to run from the time of acquiring title.' The defendant has, we think, brought himself within the language of this section by sufficient proof, so far as actual possession for seven years under a connected title in equity deducible of record from the United States could do so. And, on this proposition alone, the court told the jury to find for the defendant; but this instruction failed to give effect to other evidence before the jury and undisputed, which, we think, had an important bearing on the case. Upon an examination of the plaintiff's title, it will be seen that he had no right of entry until Feb. 24, 1865. If the statute began to run against him at that time, it had not run seven years, but only a little over four, when the suit was brought. Nor was there a right of entry, or right of action, in any person against defendant during his entire possession, until the marshal's deed was made to the plaintiff; for the reason that the equitable title under which the defendant held possession was derived from Speer. That is to say, after the judgment of the plaintiff against Speer was rendered, and a lien on the land thereby established in favor of the plaintiff, Isaac Speer, the judgment debtor, conveyed the land to Thomas Speer, and Thomas Speer conveyed to Samuel Roberts, and Samuel Roberts to Charles L. Roberts. The defendant connected his possession with this title, by showing a contract of purchase from Charles L. Roberts. It is obvious, from this recital, that there was no one who could lawfully enter upon the land in the defendant's possession until the plaintiff's judgment lien had become perfected into a legal title by sale and conveyance. Was it the purpose of this statute that the period of limitation should begin against one who had a lien of record on the land, but who was in no condition to make entry or bring suit, and when the person in privity with him, that could otherwise have made entry or brought suit, had parted with that right to the defednant? The very first words of the section describe the person against whom the act is directed as a person having a right of entry. While no such strict construction can be maintained as that this right of entry must be in the same person during the entire seven years that possession is running in favor of the defendant, it seems reasonable that this period of seven years is not be begin when there was no right of entry in any one who could oust the defednant. The principle on which the Statute of Limitations is founded is the l ches of the plaintiff in neglecting to assert his right. If, having the right of entry or the right of action, he fails to exercise it within the reasonable time fixed by the statute, he shall be for ever barred. But this necessarily presupposes the existence of the right of entry or the right to bring suit. There can be no laches in failing to bring an action, when no right of action exists. There can be no neglect in asserting a right to the possession of property held by another, when that other is in the rightful possession. But the possession then rightful may, by the termination of the right under which it is held, or by the creation (in some legal mode) of a superior title, cases to be rightful. The right of possession may, in some of these modes, come into another. It is then that laches begins, if the person who has thus acquired the better right neglects to assert it. And it is then that the principle of the limitation of actions for recovery of the land first applies; and, if uninterrupted for the prescribed period, becomes a perfect bar to the recovery of the rightful owner. There is nothing in this statute which appears to conflict with this view. The possession must be continuous, and connected with color of title, legal or equitable. There must be a right of entry in some one else to be tolled by this seven years' possession, and the possession must be adverse to this right of entry. It is said that, under the decision of the courts of Illinois, such possession as that of the defedant in the present case is adverse to all the world. There is no doubt but the Supreme Court of Illinois has said this, and that, in a general sense, it is true. The defendant, having purchased the land of the person who had the legal title, does undoubtedly hold adversely to everybody else. He admits no better right in any one. He is no man's tenant. The right by which he holds possession is superior to the right of all others. He asserts this, and he acts on it. His possession is, in this sense, adverse to the whole world. But it is not inconsistent with all this that there exists a lien on the land,—a lien which does not interfere with his possession, which cannot disturb it, but which may ripen into a title superior to that under which he holds, but which is yet in privity with it. In the just sense of the term, his possession is not adverse to this lien. There can be no adversary rights in regard to the possession under the lien, and under the defendant's purchase from the judgment debtor, until the lien is converted into a title conferring the right of possession. The defendant's possession after this is adverse to the title of plaintiff; and then, with the right of entry in plaintiff, the bar of the statute begins to run. This is a question of the construction of the statutes of Illinois; and the case of Martin v. Judd (81 Ill. 488) is supposed to be in conflict with what we have here said. But we are unable to see any thing in that case to justify such a conclusion. It is ture that plaintiff in that case, as in this, asserted title under a judgment, a sale, and marshal's deed. The defendant asserted title under a judgment against the same party, and a sale and conveyance by the sheriff. The judgment under which plaintiff claimed was rendered July 14, 1854; sale, Sept. 1, 1856; and marshal's deed, June 28, 1858. The judgment under which defendant claimed was rendered March 4, 1858; sale, Nov. 7, 1859; sheriff's deed, Oct. 14, 1862. The defednant relied on the seven years' statute of limitation. The suit, however, was commenced April 7, 1873; and the plaintiff had his marshal's deed June 28, 1858, which was fifteen years before he brought his action. The plaintiff, therefore, had the right of entry and a right of action for fifteen years before he brought suit. During all this time, or at least during the last seven years of it, the defendant had a possession under a title which was in every sense adverse to that of plaintiff. In the case before us, plaintiff ued within five vears after his lien became a title. Two of the seven years' possession on which defendant relies was at a time when plaintiff had no title, and consequently no right of action, and while none existed in those from whom he derive title. Martin v. Judd cannot therefore raise the only question there is in this case. The instruction of the court to the jury, and the comments in the opinion of the Supreme Court, show that the point in controversy in that case was whether the defendant had shown a continuous possession adverse to the plaintiff. That it was adverse, there can be no doubt; though it was insisted that it was otherwise, because held under a title derived from the same person that plaintiff's was. But it is very clear that, after the deed of the sheriff under the sale on the junior judgment, the possession held under that deed was a possession in conflict with and adverse to the title then held by plaintiff; namely, his deed under the senior judgment. The opinion in Martin v. Judd refers to, and cites with approbation, the opinion of the court in Cook v. Norton et al., 48 Ill. 20. That case was twice before the Supreme Court of Illinois, and received (as is evident) a very careful consideration. It is reported in 43 Ill. 391, and in 48 id. 20. In that case, Ryan was the common source of title. A judgment was recovered against him, Aug. 14, 1845; and a sale under execution on that judgment was made April 8, 1846. No deed was made under this sale until July, 1860, more than fourteen years after the sale, though the certificate of sale was filed in the recorder's office when it was made. Ryan conveyed the property, in a few months after the judgment was rendered, to persons under whom the defendant held title and possession. The suit was commenced within the seven years after Cook abtained the sheriff's deed; but, as this was fourteen years after the sale, the question raised was when the statute began to run against Cook's title. A few extracts from the learned opinion of Mr. Justice Lawrence will show that the court is in accord with the views we have already expressed. 'Would any one deny,' he asks, 'that the purchaser in possession could protect himself, by proper proof, under the Statute of Limitations, if more than seven years had elapsed from the time when the prior purchaser has received or might have received his deed? . . . The defendant has never acknowledged a lessor, nor any title paramount to his own. It is true the Statute of Limitations did not begin to run in his favor until the expiration of fifteen months from the sheriff's sale; because until then there was no outstanding title upon which suit could be brought. But upon that day the purchaser at the sale was at liberty to take out his deed, clothe himself with the legal title, and demand possession; and from that day the statute began to run.' The fifteen months here alluded to was the time which was allowed after a sale under execution for the debtor, or any other judgment creditor of the debtor, to redeem the land, by paying the amount for which it sold, with interest. 'But,' continued the court, 'although the sheriff's deed made on that day would have divested the legal title from Clark and vested it in the purchaser, that fact would not have converted Clark into a tenant. From that moment he became a trespasser, and might have been sued as such.' Again, speaking of the defendant Clark, the court says: 'His possession began under his deed as a possession hostile to all other persons; and, though the Statute of Limitations did not begin to run until the expiration of fifteen months from the day of the sheriff's sale, it was not because there was no adverse possession in fact until that day, but because until then there was no person in being who could bring the suit. That the sheriff's deed must be considered as having been made when the right to it accrued, so far as the Statute of Limitations is concerned, is conceded by counsel for appellant.' These very clearly tated views of the Supreme Court of Illinois must control the present case. The plaintiff's right to the marshal's deed accrued July 8, 1863. The Statute of Limitation began to run on that day, and the bar of seven years would have become perfect on the 8th of July, 1870. This suit, however, was commenced on the 15th of May, 1869, more than a year before the statute bar was completed. If we are wrong in what we have supposed to be the law, it must follow that, in all cases in which the owner of real estate owes money which is a lien on the land in his hands, the Statute of Lomitation begins to run against tht lien as soon as he conveys the land with possession to some one else. It can make no difference in the principle asserted, whether the lien be created by a judgment or by a mortgage. Nor can it make any difference whether the debt secured by the lien be due when the conveyance is made, or has ten or twenty years to run before the lien can be enforced against the land. The principle asserted is applicable in all these cases; namely, that from the day of the conveyance, by the debtor, of the land on which the lien of the dobt exists to some third person, accompanied by transfer of possession, the possession of the purchaser is adverse to the lien-holder, and the limitation of seven years begins to run. If this be established to be the law, the owner of real estate may borrow money on ten years' time, to the value of that estate, and give a mortgage on it to secure payment; and by a sale and conveyance of the land to a third person, with delivery of possession week afterwards, the lien is utterly defeated. For, according to this doctrine, the Statute of Limitation begins to run against the mortgagee the moment the title and possession are vested in the purchaser, and the bar of the statute becomes perfect against all the world by seven years' possession; whereas the mortgagee can take no steps to foreclose his mortgage until his money comes due, three years later. And this doctrine is asserted in the face of the fact that there is a limitation law specially applicable to the enforcement of the judgment lien by sale under execution, and of the mortgage lien by foreclosure. This question came before the Supreme Court of Pennsylvania in the case of Coutler v. Phillips (20 Pa. St. 155), and was fully discussed. We will close this opinion by giving verbatim the closing remarks of the court in that case, so perfectly applicable to the one before us. 'Lien creditors are subject to a limitation of five years; but the statute of limitations that concerns the action of ejectment has no relation to them. They have no estate in the land, no right of entry, no action to be affected by the statute. The statute bars the right of action, and protects the occupant, not for his merit (for he has none), but for the demerit of his antagonist in delaying his action beyond the period assigned for it. Sailor v. Hertzogg, 2 Barr, 185. But what right of action has a lien creditor to delay? His only remedy is by levy and sale. He then has an estate and a right of entry. The statute may then attach; before, it cannot.' The peremptory instruction of the Circuit Court to the jury, that the facts we have stated established a good defence, was erroneous, and the judgment must be reversed, and a new trial had; and it is So ordered. MR. JUSTICE CLIFFORD dissenting. I dissent from the opinion of the court in this case, for two principal reasons: 1. Because it conflicts with the decisions of the State court upon the same subject. 2. Because the statute of limitations applicable to the case began to run when the defendant acquired the open, exclusive, adverse possession of the premises, by actual residence thereon, under claim and color of title: it appearing that he continued to reside there, without interruption, for the period of seven years prior to the commencement of the suit, having entered pursuant to a contract with the owner, who had a connected title to the same, dedu ible of record, from the United States; and that the defendant subsequently acquired the title to the premises, in pursuance of the contract, the rule being that such an adverse possession, if uninterrupted and continued for the period of seven years, is equivalent to an absolute title, when confirmed by a conveyance from the party having a connected title deducible of record, from the United States. Examined in the light of these suggestions, it is clear, in my opinion, that the case was properly submitted to the jury, and that the judgment founded on their verdict should be affirmed.
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1. The Statute of Limitations applicable to the action of ejectment has no relation to the lien of a judgment creditor on the lands, though the judgment debtor may sell and convey them with possession to the party setting up the statute. 2. That statute does not begin to run in such case until the lands have been sold under an execution sued out on the judgment, and the purchaser of them becomes entitled to a deed; because, until then, there is no right of entry or of action against the party so in possession. 3. That statute begins to run against the judgment creditor only when he is such purchaser, and can bring ejcctment. These propositions are applicable to the statute of Illinois of 1835 liniting actions for the recovery of lands to seven years.
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Background and History of the Issue Many innovations that have become familiar features of modern elections originated at leastin part as a way to reduce election fraud such as tampering with ballots to change the vote count fora candidate or party. For example, in much of nineteenth century America, a voter typically wouldpick up a paper ballot preprinted with the names of candidates for one party and simply drop theform into the ballot box. There was no need to actively choose individual candidates. (3) This ticketor prox ballot was subject to fraud in at least two ways. First, the number and sequence of ballotsprinted was not controlled, so it could be difficult to determine if a ballot box had been stuffed withextra ballots or if ballots had been substituted after votes were cast. Second, an observer coulddetermine which party a voter had chosen by watching what ballot the voter picked up and depositedin the ballot box -- votes could therefore be bought or coerced with comparative ease. Australian Secret Ballot. After a series of scandals involving vote-buying in the 1880s, calls for reform led to widespread adoption of theAustralian or mark-choice ballot. (4) Such ballots listthe names of all candidates, and the voter marksthe ballot to choose among them. The ballots are commonly printed with unique, consecutive serialnumbers, facilitating ballot control and thereby helping to prevent ballot stuffing and substitution. All printed ballots are otherwise identical, and voters typically fill them out in the privacy of a votingbooth. This ballot secrecy makes it difficult for anyone else to know with certainty what choices avoter has made. While providing improved security, the Australian secret ballot did not eliminatetampering. Ballots could still be removed, spoiled, or altered by corrupt pollworkers, or evensubstituted or stuffed, although with greater difficulty than with prox ballots. It also did noteliminate the possibility of vote-buying or coercion, but it made them more difficult. (5) Mechanical Lever Machine. One way to eliminate some means of ballot tampering is to eliminate document ballots. That became possiblewith the introduction of the lever voting machine in 1892. With this system, a voter enters the votingbooth and sees a posted ballot with a small lever near the name of each candidate or other ballotchoice. The voter chooses a candidate by moving the appropriate lever. Mechanical interlocksprevent voters from choosing more candidates than permitted for an office (such as two candidatesfor President). After completing all choices, the voter pulls a large lever to cast the ballot, and thevotes are recorded by advances in mechanical counters in the machine. The lever machine thereforeeliminates the need to count ballots manually. Instead, pollworkers read the numbers recorded bythe counters. Because there is no document ballot, recounts and audits are limited to review of totalsrecorded by each machine. Of course, tampering is also possible with lever machines. For example,the mechanisms could be adjusted so that the counter does not always advance when a particularcandidate is chosen. Computer-Assisted Counting (Punchcard and Optical Scan). Another major technological advance in voting -- the first use of computersto count votes -- came with the introduction of the punchcard system, first used in 1964. Theoptical-scan voting system, which also uses computers for vote-counting, was first used in the 1980s. In both kinds of voting system, document ballots are fed into an electronic reader and the talliesstored in computer memory and media. Tallying can be done at either the precinct or a centrallocation. Computer-assisted counting of document ballots can be done very rapidly, thus speedingthe reporting of election results. It is much more efficient for counting large numbers of ballots thanmanual tallying. It makes some kinds of tampering more difficult than with manual counting, butit does not eliminate them, and it creates possibilities for tampering with the counting software andhardware. Electronic Voting Machine. DREs (direct recording electronic systems) are the first completely computerized voting systems. They wereintroduced in the 1970s. DREs are somewhat analogous to (although more sophisticated than) levermachines. The voter chooses candidates from a posted ballot. Depending on the equipment used, theballot may be printed and posted on the DRE, as it is with a lever machine, or it may be displayedon a computer screen. Voters make their choices by pushing buttons, touching the screen, or usingother devices. The voter submits the choices made before leaving the booth, for example by pushinga "vote" button, and the votes are then recorded electronically. There is considerable variability in the design of DREs, but they can be classified into three basic types. The oldest design essentially mimics the interface of a lever machine. The entire postedballot is visible at once. Instead of moving levers to make choices, the voter pushes a button nextto a candidate's name, or pushes on the name itself, triggering an underlying electronic microswitchand turning on a small light next to the choice. With the second type, a ballot page is displayed ona computer screen, and the voter uses mechanical devices such as arrow keys and buttons to makechoices on a page and to change ballot pages. The third type is similar to the second except that ithas a touchscreen display, where the voter makes a choice by touching the name of the candidate onthe computer screen and casts the ballot by pressing a separate button after all choices have beenmade. In all kinds of DREs, when a ballot is cast, the votes are directly stored in a computer memorydevice such as a removable memory card or nonvolatile memory circuit. As with lever machines,there is no document ballot, although with a DRE each cast ballot may also be separately recorded. Touchscreen and other DREs using computer-style displays are arguably the most versatile anduser-friendly of any current voting system. Each machine can easily be programmed to displayballots in different languages and for different offices, depending on voters' needs. It can also beprogrammed to display a voter's ballot choices on a single page for review before casting the vote. It can be made fully accessible for persons with disabilities, including visual impairment. (6) Like levermachines, it can prevent overvotes and ambiguous choices or spoilage of the ballot from extraneousmarks, since there is no document ballot; but it can also notify voters of undervotes. (7) No other kindof voting system possesses all of these features. DREs and HAVA. The popularity of DREs, particularly the touchscreen variety, has grown in recent years, (8) and their use is expected to increasesubstantially under provisions of HAVA. Three provisions in the Act are likely to provide such animpetus. First, HAVA authorized $3.65 billion over four years for replacing punchcard and levermachines and for making other election administration improvements, including meeting therequirements of the Act. In FY2003, Congress appropriated $1.48 billion for these purposes ( P.L.108-7 ), and the Administration requested $500 million for FY2004. Second, beginning in 2006,HAVA requires that voting systems notify voters of overvotes and permit them to review theirballots and correct errors before casting their votes. (9) Third, the Act requires, also beginning in 2006,that each polling place used in a federal election have at least one voting machine that is fullyaccessible for persons with disabilities. DREs are the only machines at present that can fulfill theaccessibility requirement. They can also easily meet the requirements for error prevention andcorrection. Security Concerns about DREs. One thing that distinguishes DREs from document ballot systems is that with DREs, the voter does not see theactual ballot, but rather a representation of it on the face of the machine. With few exceptions,current DREs do not provide a truly independent record of each individual ballot that can be usedin a recount to check for machine error or tampering. The ballot itself consists of redundantelectronic records in the machine's computer memory banks, which the voter cannot see. This isanalogous to the situation with mechanical lever voting machines, where casting the ballot movescounters that are out of view of the voter. In a lever machine, if the appropriate counters do notmove correctly when a voter casts the ballot, the voter will not know, nor would an observer. Similarly, with a DRE, if the machine recorded a result in its memory that was different from whatthe voter chose, neither the voter nor an observer would know. (10) The same is true with a computerized counting system when it reads punchcards or optical scan ballots. Even if the ballot is tabulated in the precinct and fed into the reading device in the presenceof the voter, neither the voter nor the pollworker manning the reader can see what it is recording inits memory. However, with such a reader, the ballot documents could be counted on anothermachine or by hand if there were any question about the results. Lever machines also do not have an independent document ballot. That has led some observers to distrust those machines, but most who use them appear confident that tests and other proceduralsafeguards render them sufficiently safe from tampering. Is the same true for DREs? Somecomputer experts think not, arguing that the software could be modified in ways that could alter theresults of an election and that would be very difficult to detect. This concern appears to stem largelyfrom three factors: Malicious computer code, or malware, can often be written in such a way that it is very difficult to detect. (11) DRE software is moderately complex, and it is generally accepted that the morecomplex a piece of software is, the more difficult it can be to detect unauthorized modifications. (12) Most manufacturers of DREs treat their software code as proprietaryinformation and therefore not available for public scrutiny. Consequently, it is not possible forexperts not associated with the companies to determine how vulnerable the code is to tampering. (13) Voting System Standards and Certification. Concerns such as those described above have been voiced by some experts at least since the 1980s. (14) Thedevelopment of the Voluntary Voting Systems Standards (VSS) by the Federal Election Commission(FEC) in 1990, and the subsequent adoption of those standards by many states, helped to reducethose concerns. The VSS were developed specifically for computer-assisted punchcard, optical scan,and DRE voting systems. They include a chapter on security, which was substantially expanded inthe updated version, released in 2002. (15) Alongwith the standards, a voluntary testing andcertification program was developed and administered through the National Association of StateElection Directors (NASED). In this program, an independent test authority (ITA) chosen byNASED tests voting systems and certifies those that comply with the VSS. (16) Testing is done of bothhardware and software, and the tested software and related documentation is kept in escrow by theITA. (17) If questions arise about whether thesoftware used in an election has been tampered with, thatcode can be compared to the escrowed version. Systems that receive NASED certification may alsoneed to go through state and local certification processes before being used by an electionjurisdiction. HAVA creates a new mechanism for the development of voluntary voting system standards. It creates the Election Assistance Commission (EAC) to replace the FEC's Office of ElectionAdministration and establishes three bodies under the EAC: a 110-member Standards Boardconsisting of state and local election officials, a 37-member Board of Advisors representing relevantgovernment agencies and associations and fields of science and technology, and a 15-memberTechnical Guidelines Development Committee chaired by the Director of National Institute ofStandards and Technology (NIST). This last committee is charged with making recommendationsfor voluntary standards (called guidelines in the Act), to be reviewed by the two boards and theEAC. (18) HAVA also requires the EAC to provide for testing, certification, and decertification of voting systems and for NIST to be involved in the selection and monitoring of testing laboratories. TheEAC is also required to perform a study of issues and challenges -- including the potential for fraud-- associated with electronic voting, and periodic studies to promote accurate, secure, andexpeditious voting and tabulation. HAVA also provides grants for research and development onsecurity and other aspects of voting systems. The voting system requirements in the Act do notspecifically mention security but do require that each voting system produce a permanent paper auditdocument for use as the official record for any recount. This requirement is for the system, not foreach ballot. For example, most DREs can print a tally of votes recorded and therefore can meet thisrequirement. The Caltech/MIT Study. The problems identified after the November 2000 federal election prompted wide public concern about voting systems and led toseveral major studies (19) with recommendations,many of which were incorporated in HAVA. Themost extensive examination of security was performed by scientists at the California Institute ofTechnology and the Massachusetts Institute of Technology. Their report identified four mainsecurity strengths of the electoral process that has evolved in the United States: the openness of theelection process, which permits observation of counting and other aspects of election procedure; thedecentralization of elections and the division of labor among different levels of government anddifferent groups of people; equipment that produces "redundant trusted recordings" of votes; and thepublic nature and control of the election process. (20) The report expressed concern that current trendsin electronic voting are weakening those strengths and pose significant risks, but that properlydesigned and implemented electronic voting machines can improve, rather than diminish, security. The California Task Force Report. The concernsexpressed by the Caltech/MIT study and others were partially addressed by HAVA, but as statesbegan to acquire DREs, and the appointment of EAC members was delayed, (21) some observers beganexpressing concerns that states were purchasing flawed machines with no federal mechanism inplace for addressing the problems. In response to such concerns, the California secretary of stateestablished a task force to examine the security of DREs and to consider improvements. The report (22) recommended changes to how voting systems are tested at the federal, state, and local levels, as wellas other changes in security for software and for vendor practices. It also recommended theimplementation of a voter-verified audit trail -- that is, a mechanism, whether paper-based orelectronic, that produces an independent record of a voter's choices that the voter can verify beforecasting the ballot and that can be used as a check against tampering or machine error. Until such asystem can be implemented, the task force recommended the use of "parallel monitoring," in whicha selection of machines are tested while in actual use on election day to determine if they arerecording votes accurately. The Hopkins Study. Until recently, the concerns raised about DRE vulnerabilities were considered by many to be largely hypothetical. However, inearly 2003, some election-reform activists discovered (23) an open website containing large numbersof files relating to voting systems of Diebold Election Systems, a major voting system vendor whichhad recently won contracts with Georgia and Maryland to provide touchscreen DREs. Activistsdownloaded and posted many of those files on Internet sites, and the authors of the Hopkins studyused some of those files to analyze computer source code that "appear[ed] to correspond to a versionof Diebold's voting system." (24) Their analysisconcluded that the code had serious security flaws thatcould permit tampering by persons at various levels, including voters, election workers, Internet"hackers," and even software developers. Diebold quickly rebutted those claims, (25) arguing that theywere based on misunderstanding of election procedures and of the equipment within which thesoftware was used, and that the analysis was based on an "inadequate, incomplete sample" ofDiebold's software. Some computer scientists, while agreeing that the code contained security flaws,also criticized the study for not reflecting standard election procedures. (26) Shortly after the Hopkins study was released, Maryland Governor Robert Ehrlich ordered that the contract with Diebold be suspended pending the outcome of an independent security analysis. That analysis, (27) while agreeing with several ofthe criticisms of the Hopkins study, found that theDiebold system, as implemented in the state, had serious security flaws. The report concludesoverall that this voting system, "as implemented in policy, procedure, and technology, is at high riskof compromise" and made many recommendations for improvements. (28) The Maryland State Boardof Elections has developed a plan to implement those recommendations. (29) The extent to which the risks identified in the Maryland study may apply to other states or to other DREs may be worth examination by state officials. In Ohio, which has also been consideringthe purchase of Diebold DREs, secretary of state Kenneth Blackwell has also initiated a securityevaluation of electronic voting devices from four v endors. (30) Analysis of the Problem Elections are at the heart of the democratic form of government, and providing sufficientsecurity for them is therefore critical to the proper functioning of a democracy. There has been somedisagreement among experts about the seriousness of the potential security problems with DREs and,therefore, what is needed to ensure sufficient security. While it is generally accepted that tamperingis possible with any computer system given enough time and resources, some experts believe thatcurrent security practices are adequate. Others believe that substantial additional steps are needed. To determine the nature and extent of the problem and what solutions might be considered requiresan understanding of some general concepts in computer security, which are discussed in this section,along with their applicability to computer-assisted voting systems. The discussion is organized alongfour themes: threats, vulnerabilities, defense, and response and recovery after an incident occurs. The term threat can be used in several different ways, but in this report it refers to a possible attack -- what could happen. Descriptions of threats often include both the nature of the possibleattack, those who might perpetrate it, and the possible consequences if the attack is successful. Vulnerability usually refers to a weakness that an attack might exploit -- how an attackcould beaccomplished. Analysis of threats and vulnerabilities, when combined, can lead to an assessmentof risk . Statements of risk often combine both the probability of a successful attack and somemeasure of its likely consequences. (31) Defense refers to how a system is protected from attack. Response and recovery refer to how, and how well, damage is mitigated and repaired andinformation and functionality are recovered in the event of a successful attack. Threats Kinds of Attacks and Attackers. The best known type of attack on a voting system is one that changes the vote totals from what voters actually cast. Historically, such tampering has been performed by corrupt officials or partisans, one of the mostfamous examples being Tammany Hall in New York City, of which Boss Tweed said, "the ballotsmade no result; the counters made the result." (32) Sometimes, others who stood to benefit from aparticular outcome would be involved, as was reportedly the case with respect to allegations ofvote-buying in Indiana with money from some of New York's "robber barons" in the presidentialelection of 1888. (33) The goal of such tamperingwould generally be to influence the final vote tallyso as to guarantee a particular result. That could be accomplished by several means, such as adding,dropping, or switching votes. Many of the features of modern voting systems -- such as secretballoting and the use of observers -- are designed to thwart such threats. The impact of such vote tampering depends on several factors. Two of the most important are the scale of an attack and the competitiveness of the contest. An attack would have to have sufficientimpact to affect the outcome of the election. For that to happen, scale is critical. If tamperingimpacts only one ballot or one voting machine, the chances of that affecting the election outcomewould be small. But tampering that affects many machines or the results from several precinctscould have a substantial impact, although it might also be more likely to be detected. The scale ofattack needed to affect the outcome of an election depends on what proportion of voters favor eachcandidate. The more closely contested an election is, the smaller the degree of tampering that wouldbe necessary to affect the outcome. (34) While attacks that added, subtracted, or changed individual votes are of particular concern, other kinds of attacks also need to be considered. One type of attack might gather information thata candidate could use to increase the chance of winning. For example, if vote totals from particularprecincts could secretly be made known to operatives for one candidate before the polls closed, (35) theresults could be used to adjust get-out-the-vote efforts, giving that candidate an unfair advantage. Another type of attack might be used to disrupt voting. For example, malware could be used tocause voting machines to malfunction frequently. The resulting delays could reduce turnout, perhapsto the benefit of one candidate, or could even cause voters to lose confidence in the integrity of theelection in general. The latter might be of more interest to terrorists or others with an interest inhaving a negative impact on the political system generally. An Evolving Threat Environment. The kinds ofattacks described above are potential threats against any voting system. However, the growing useof information technology in elections has had unique impacts on the threat environment. It providesthe opportunity for new kinds of attacks, from new kinds of attackers. As information technologyhas advanced and cyberspace has grown, so too have the rate and sophistication of cyberattacks ingeneral: (36) The number of reported computer-security violations has grown exponentially in the past decade, from about 100 in 1989 to more than 100,000 in the first three quarters of 2003. (37) Potential threats may now come from many sources -- amateur or professionalhackers using the Internet, insiders in organizations, organized crime, terrorists, or even foreigngovernments. With respect to election tampering, some such attackers could benefit in traditionalways, but some, such as terrorists, might be interested instead in disrupting elections or reducing theconfidence of voters in the electoral process. New and more ingenious kinds of malware are constantly being invented andused. There are now tens of thousands of known viruses, and the sophistication of tools used todevelop and use new ones has increased. Malware in a voting system could be designed to operate in very subtle ways, for example,dropping or changing votes in a seemingly random way to make detection more difficult. Malwarecan also be designed to be adaptive -- changing what it does depending on the direction of the tally. It could also potentially be inserted at any of a number of different stages in the development andimplementation process -- from the precinct all the way back to initial manufacture -- and lie inwait for the appropriate moment. Several other kinds of attack could also be attempted in addition to malware. Among them are electronic interception and theft or modification of information during transport or transmission,modifications or additions of hardware, and bypassing system controls or misuse of authority totamper with or collect information on software or election data. (38) Vulnerabilities The threats discussed above, and others, are of course only harmful potentially. Their mere existence does not in itself imply anything about the likelihood that they are a significant risk in agenuine election. To be such a risk, there must be vulnerabilities in the voting system that can beexploited. For the purposes of this report, discussion of vulnerabilities is divided into two categories-- technical and social. Technical Vulnerabilities. This category includes weaknesses stemming from the computer code itself, connection to other computers, and the degreeof auditing transparency of the system. Computer Code. In the recent public debate about the security of DREs, much of the attention has focused on the computer code. Two significant potentialvulnerabilities relate to the use of cryptography in the system and the way the code is designed. Cryptography (39) is oneof the most powerful tools available for protecting the integrity of data. Robust cryptographic protocols are well-developed and in common use, for example in onlinefinancial transactions. Cryptography is important not only in making it difficult for unauthorizedpersons to view critical information (security), but also in making sure that information is notchanged or substituted in the process of being transferred (verification). This could be a concern forDREs; both the Hopkins and Maryland studies found weaknesses in the way encryption was used. The design of software can have a significant effect on its vulnerability to malware. Both the complexity of the code and the way it is designed can have an impact. It is a general principle ofcomputer security that the more complex a piece of software is, the more vulnerable it is to attack. That is because more complex code will have more places that malware can be hidden and morepotential vulnerabilities that could be exploited, and is more difficult to analyze for securityproblems. In fact, attackers often discover and exploit vulnerabilities that were unknown to thedeveloper, and many experts argue that it is impossible to anticipate all possible weaknesses andpoints of attack for complex software. With DREs, each machine requires relatively complex software, since it serves as a voter interface, records the ballot choices, and tallies the votes cast onthe machine. (40) The first function requires the mostcomplex software, especially if the machine isto be fully accessible to all voters. The code used in optical-scan and punchcard readers can besimpler, as it performs fewer functions. Software code that is not well-designed from a security perspective is more likely than well-designed code to have points of attack and weaknesses that could be exploited, as well as placesfor malware to be hidden. However, code can be designed so as to minimize such vulnerabilities,and well-developed procedures have been established to accomplish this goal. (41) These procedurescan be applied to both new and legacy systems. Good design involves not only the code itself, butalso the process by which it is developed and evaluated. DRE code has been criticized with respectto its design, (42) although the proprietary nature ofthe software has precluded thorough publicassessment. The systems may also use commercial off-the-shelf software for functions such as theoperating system, and that software could also have vulnerabilities. However, the software in themajor systems in use today has been evaluated and certified as meeting VSS requirements,includingthose for security. (43) Connection to Other Computers. This can be a vulnerability because it provides potential avenues for attack. The most well-known attack targetsare computers with direct Internet connections that hackers can exploit. Concerns about such attackshave made the adoption of Internet voting in public elections generally unattractive so far from asecurity perspective. (44) While a measure ofprotection can be provided by firewall programs andrelated technology, the safest approach is to ensure that the voting system computers, including notjust the voting machines themselves but also computers involved in ballot generation and votetallying, are not connected to the Internet or to any other computers that are themselves connectedto the Internet. This isolation is sometimes called "air-gapping." However, an effective air gap mustinclude sufficient security controls for removable media such as floppy disks, (45) CDs, and the memorycards that are often used to transport data from the precinct to the central election office. (46) Vendors and election jurisdictions generally state that they do not transmit election results from precincts via the Internet, but they may transmit them via a direct modem connection. However,even this approach can be subject to attack via the Internet, especially if encryption and verificationare not sufficient. That is because telephone transmission systems are themselves increasinglyconnected to the Internet (as exemplified, for example, by the increasing use of Internet-basedtelephony), and computers to which the receiving server may be connected, such as through a localarea network (LAN), may have Internet connections. In fact, organizations may be unaware of theextent of such connections. (47) This can be evenmore of an issue if the system uses wirelessconnectivity. The way that a voter interacts with the DRE may provide another possible source of connection. For example, with the Diebold DRE, a "smartcard" (48) is inserted into the voting machine to start thevoting process (some machines use other methods, such as a numerical code). The Hopkins studyclaims that voters or pollworkers could program their own smartcards and use them to voterepeatedly or to manipulate the voting machine. The Diebold rebuttal rejected this assertion. TheMaryland study, while not ruling out this vulnerability, states that software and physical controls,and the openness of the voting booth, (49) minimizethe likelihood of exploitation. Auditing Transparency. In current DREs, the actionsthat occur between ballot screen and the final vote tally are not subject to human observation. Thevoter sees a visual representation of the ballot on the computer screen or face of the DRE. When thevoter pushes the button to cast the ballot, the machine records the votes electronically. That meansthat a voter cannot know if the machine recorded the choices the voter saw on the screen or someother choices, and an observer also cannot check to see if all ballots cast are counted correctly. Theformer vulnerability also exists with a mechanical lever machine, and the latter with an optical scanor punchcard ballot reader, but with a reader, there is a document ballot that can be checkedindependently. While DREs are generally designed to make a separate recording of each ballotcast, (50) this is not an independent record but rathera copy in a different format of the information sentto the tallying registers. Social Vulnerabilities. A significant and increasingly sophisticated kind of attack -- dubbed "social engineering" by hackers -- involvesfinding and exploiting weaknesses in how people interact with computer systems. (51) Such socialvulnerabilities can include weaknesses relating to policy, procedures, and personnel. Of the 14specific risks identified in the Maryland study, most were of these types. (52) Policy. A security policy lays out the overall goalsand requirements for a system and how it is implemented, including the technology itself,procedures, and personnel. (53) An absent or weakpolicy, or even a good one, if it is not implemented,is considered a substantial vulnerability. Security policies of election administrators, vendors,third-party suppliers, and the ITAs are all relevant. The Maryland study found that the Dieboldsystem as implemented did not comply with the state's information security policy and standards. The study did not examine the security policies of Diebold or other relevant entities. Procedure. The security policy provides the basis from which procedures such as access controls are developed. Election administration is a complexeffort involving vendors, ITAs, state and local government, and pollworkers who are oftenvolunteers, as well as voters. Also, DREs are potentially targets of attack at virtually any point fromwhen they are initially developed and manufactured to when they are used in the polling place. Consequently, security procedures are especially important. Vulnerabilities can occur, for example,if the controls that the manufacturer uses to prevent insertion of malware are inadequate; if theanalyses performed by evaluators is not sufficient to detect security problems with the technology;if the chain of custody for software, including updates -- from when it is certified to when it is usedin an election -- is weak or poorly documented; or if auditing controls are insufficient. As withsecurity policy, absent or poor procedures, or even good ones if they are not properly implemented,can create serious vulnerabilities. The Maryland study did not examine vendor or ITA practices (54) but did raise several concerns with respect to the procedures used by the state. Personnel. Perhaps the most important single factor in determining the vulnerability of a system is the people involved. It is they who must implementsecurity policies and procedures and defend against any attacks. If they are not adequately skilledand trained, they may be unable to prevent, detect, and react to security breaches, and they maythemselves be more vulnerable to a "social engineering" attack. In addition, it can be particularlydifficult to defend against attack by an insider, so background checks and other controls to minimizethat risk are especially important. The Maryland study pointed out that the state training programfor the Diebold system did not include a security component. Defense Goals of Defense. It can be useful to think of three goals of defense from an attack on a computer-based system: protection, detection, andreaction. (55) Protection involvesmaking a target difficult or unattractive to attack. For example, goodphysical security can prevent attackers from accessing voting machines in a warehouse. Use ofencryption and authentication technologies can help prevent attackers from viewing, altering, orsubstituting election data when it is transferred. Currently, election jurisdictions and vendors appear to rely heavily on procedural mechanisms for protection. (56) These may include accesscontrols, certification procedures, pre-electionequipment-testing, and so forth. Such procedures are an essential element of an effective defense,although some observers dispute that they are sufficient to prevent tampering. Even if they are, theymust be implemented and followed properly if they are to ensure adequate protection. However, insome circumstances, the time and resources needed to follow such procedures may conflict withother important goals, such as the timely administration of an election, forcing election officials tochoose whether to risk bypassing or modifying security procedures. (57) Detection involves identifying that an attack is being or was attempted. For example, election observers can serve as detectors of a potential attack. One of the criticisms of DREs has been thatit is a "black box" system, and observers cannot detect suspicious activity within the machine. (58) Oneapproach to addressing this issue is the use of auditing. That can include engineering the DRE sothat it creates a log of all actions performed, especially those that might indicate tampering. It canalso include the creation of an audit trail for votes. HAVA requires such a trail for the votingsystem, but some observers have proposed the use of voter-verified ballots for auditing (discussedbelow (59) ). Cryptographic protocols may also beuseful in detecting attempts at tampering. (60) However, any specific mechanisms that might be built into the technology itself are proprietary andtherefore not discussed in this report. Reaction involves responding to a detected attack in a timely and decisive manner so as toprevent its success or mitigate its effects. For example, if an observer sees something suspiciousduring voting or tallying, the process can be stopped and the situation investigated. Also, a votingmachine may be programmed to shut down if certain kinds of problems are encountered. The systemmight have additional defense measures such as antivirus software. To be most effective, the countermeasure must be implemented before the attacker can do significant damage. Effective reaction therefore requires early detection of an attack. Given the lackof transparency of DRE operations, heavy reliance may need to be placed on technologicalcountermeasures. Elements of Defense. It is generally accepted thatdefense should involve a focus on three elements: personnel, technology, and operations. (61) The personnel component focuses on a clear commitment to security by an organization's leadership,assignment of appropriate roles and responsibilities, implementation of physical and personnelsecurity measures to control and monitor access, training that is appropriate for the level of accessand responsibility, and accountability. The technology component focuses on the development,acquisition, and implementation of hardware and software. The operations component focuses onpolicies and procedures, including such processes as certification, access controls, management, andassessments. A focus that is not properly balanced among those elements creates vulnerabilities. Computer security experts have criticized computer-assisted voting in part because they believe that thesecurity focus has emphasized procedural safeguards too heavily. The use of older, "legacy"hardware and software technology, and weak technology defenses, as well as lack of training ofelection personnel in security, are among the concerns experts have cited. The validity of suchconcerns has been disputed by others. (62) For applications where security considerations are a priority, techniques have been developed to engineer systems to the appropriate level of security corresponding to the specific needs for theapplication. Such systems are designed with carefully specified requirements and are thoroughlyreviewed and tested before implementation. (63) Some experts have proposed that such an approachbe used in the development of voting systems. (64) Another general principal is that an effective defense cannot be focused only on one particular location but needs to operate at all relevant points in the entire enterprise. (65) For voting systems,these points would likely include development (both software and hardware) by the manufacturer,the certification process, acquisition of the voting system (including software and hardware updates)by the state, state and local implementation, and use during elections. Because of the proprietarynature of vendor practices, the defenses used by them could not be determined for this report. (66) Stateprocedures are more transparent in many cases but vary from state to state. (67) Finally, an effective defense is based on the assumption that attackers will continuously attempt to breach the defenses (including devising new ways to attack) and that they will eventually find avulnerability to exploit. Therefore, a successful defense should be robust, so that security needs aremet even if an attack occurs. (68) One way toaccomplish this is through a layered defense, in whichmore than one defense mechanism is placed between the attacker and the target. (69) If the outer layeris breached, the next comes into play. Each layer should include both protection and detectioncapability. For example, a state will use a combination of physical security (e.g., lock and key),procedural controls (e.g., who is given access to the system and for what purpose) and auditing (arecord of what was done and by whom) to defend against tampering with voting systems. Georgiadoes additional validation testing on software installed on machines in a local election jurisdictionto ensure that it is the same as the certified software. (70) Other states may have similar procedures. Trade-Offs. The combined use of goals and elements as discussed above is known as defense in depth . Such a strategy requires balancing"protection capability and cost, performance, and operational considerations." (71) This balancing caninvolve difficult questions, especially with regard to resource allocation. For example, how mucheffort should be expended in threats that may have a significant probability but a comparatively lowimpact versus addressing those with very low probability but very high impact? The need to weighsuch trade-offs occurs throughout the security arena. In the area of homeland security, the numberof casualties from a terror attack using the smallpox virus could be much higher than from an attackwith explosives, but the latter is widely considered much more likely. Furthermore, there are manyother factors that must be weighed, such as balancing protection against the threat, on the one hand,against the safety of countermeasures (such as vaccines) and disruption to daily life (such asscreening for explosives) on the other. Setting priorities with respect to investment in defense in such cases is far from straightforward. This is true for election administration as well. Decisions about what kinds of security to provideand how to provide it must be made in complex circumstances. For example, with DREs, theprobability of successful tampering occurring may be very small, but the impact of a successfulattack could be very high. At the same time, current DREs arguably reduce the risks of certain kindsof tampering that can occur with paper ballots -- such as selectively spoiling certain ballots duringcounting. Many DREs also have other highly desirable features, as discussed earlier, (72) that cansubstantially reduce the number of votes lost because of voter error or other problems. Accordingto one study, over a million of such "lost votes" could have been prevented during the November2000 presidential election if better-designed voting technology had been used. (73) Also, security measures may have unanticipated impacts. Measures that made voting much more difficult or complicated and thereby discouraged voters from participating or increased the rateof voter or pollworker error would probably not be worth implementing. Furthermore, votingmachines are only part of the election administration system, and security must be integral to thewhole system to be effective. Response and Recovery The idea that no defense is perfect and that attackers try to find the imperfections means that defenders need to assume that an attack will at some point be successful. Some damage will occurbefore the attack is detected and stopped (assuming that the attack is detected -- in the case of votetampering, an attacker would usually prefer that the attack not be discovered and will make effortsto hide it (74) ). For this reason, mechanisms forminimizing and recovering from damage that occursare considered desirable. They are also desirable in the event of damage that can result from sourcesother than an attack, such as power outages, malfunctioning voting machines, or administrativeproblems. For example, DREs store vote data in redundant memory locations, in the event that onememory fails. As the difficulties with spoiled ballots from the November 2000 Presidential electionindicated, (75) recovery from some kinds of damagemay not be possible, and reliance must be placedon strengthening preventive measures. Thus, HAVA requires that voters be notified of overvotesbefore a ballot is cast and be given the opportunity to correct errors. (76) One criticism of DREs has been that if a problem is discovered during auditing, it is not clear what can be done to identify which votes were valid and which were not. For example, if a machineis suspected of harboring malware, should all votes from it be discarded, or would some be counted? How election officials answer such questions will depend on state law, regulations, and practices. One mechanism for recovery from some kinds of problems is the recount, in which ballots are counted a second time to address concerns about the accuracy of the original count. DREs, like levermachines, simplify recounts and reduce chances for error in them because the recounts are based onthe vote tallies from the machines, rather than individual ballots. However, problems with themachines themselves, including tampering, would probably not be discovered through a recount. Confidence in DREs There appears to be an emerging consensus among computer scientists that current DREs, and to a lesser extent other computer-assisted voting systems, do not adhere sufficiently to currentlyaccepted security principles for computer systems, especially given the central importance of votingsystems to the functioning of democratic government. (77) However, election administrators and thosewith related expertise tend to express more confidence in the systems as they are currently realized. (78) Also, the fact that security concerns exist does not in itself mean that voting systems have beencompromised or are likely to be. It does, however, suggest that the issues raised need to beaddressed expeditiously, especially given the evolving threat environment and vulnerabilitiesdiscussed above. The question of confidence in computer-assisted voting systems is important in general, since voters must have confidence in the integrity of the voting systems they use if they are to trust theoutcomes of elections and the legitimacy of governments formed as a result of them. If the concernsthat have been raised about DRE security become widespread, that confidence could be eroded,whether or not those concerns are well-founded. This potential problem could be exacerbated by twofactors. One is the likelihood, especially given the applicable provisions of HAVA, that the use ofDREs will increase. The other is the likelihood of increasing concentration of market share forvoting systems in a few companies. (79) Historically,election jurisdictions in the United States haveused a wide diversity of voting systems provided by a broad array of vendors. This diversity hasbeen considered an advantage by many, not only in meeting the diverse needs of electionjurisdictions, but also for security, especially in statewide and federal elections where more systemsmay be used. Some experts believe that it is much more difficult to successfully commit widespreadtampering with elections if many different systems need to be compromised than if only a few mustbe. In any case, as the usage of DREs increases, they and the companies that make and sell themmay be subjected to increased public scrutiny. For these and other reasons, many experts and observers have proposed actions to resolve the controversy over DRE security. Several of these ideas are discussed below. Proposals for Resolving the Issue Use Current Procedures Some observers have argued that existing security mechanisms are sufficient to resolve any problems and that no new solutions are necessary, although current procedures may need to beimproved, as recommended by the Maryland study. (80) These observers argue that the federal VotingSystem Standards (VSS); NASED, state, and local certification processes; and vendor and electionadministration procedures and controls, when properly implemented, provide sufficient security toprevent tampering. They also point to the lack of any proven case, despite many accusations, ofelection fraud involving computer tampering, (81) and that criminal penalties provide a deterrent toelection fraud. (82) Critics state, in contrast, thatthose processes and procedures are flawed, and thatrecommended or stated security procedures are not always followed. They also point out that theabsence of a proven case of tampering does not necessarily mean that it has not been attempted, andthat as the usage of DREs increases, the potential payoff for tampering, and hence the potentialthreat, will also increase. (83) Improve Security Standards and Certification of Voting Systems Some critics have stated that the security provisions in the VSS are insufficient, (84) and that theirdevelopment did not follow best practices in this area, as promulgated and practiced, for example,by national and international standards-setting organizations such as the American NationalStandards Institute (ANSI), the International Organization for Standardization (ISO), and NIST,which has been involved only marginally in the development and implementation of the VSS. (85) TheVSS have also been criticized for placing too many constraints on the development of newtechnology that can address security concerns. (86) Critics also point out that several of the problemsidentified by the Hopkins and Maryland studies occurred despite the certification by NASED thatthe Diebold system conforms to the VSS. HAVA requires changes in the processes for developing standards for and certifying voting systems. It establishes a Technical Guidelines Development Committee under the new ElectionAssistance Commission to assist the EAC in the development of voluntary voting system guidelines. These guidelines will essentially replace the current Voluntary Voting System Standards (VSS), butthe Act also stipulates that the initial set of guidelines will be the most recently adopted version ofthe VSS. The new Committee established by HAVA will be chaired by the Director of NIST and willinclude, among others, representatives of ANSI, the Institute of Electrical and Electronics Engineers(IEEE), and NASED. IEEE has already begun developing new draft voting system standards. (87) These standards would presumably be used to help inform the guideline-development process oncethe EAC and its support bodies are established. The importance of standards was reinforced with the initial adoption and implementation of the VSS, which led to significant improvements in computer-assisted voting systems. Standards areessential to security because they specify measurable attributes a system needs to be consideredtrustworthy, and they can reduce design flaws. (88) However, a particular challenge that arises withrespect to security standards is that it is not possible to anticipate all the ways a system might beattacked. In addition, standards can provide adversaries with information they can use in searchingfor vulnerabilities. (89) Therefore, security standardsneed to be continually reevaluated as new threatsand vulnerabilities are discovered. Also, it is considered risky to treat adherence to standards as anindication that a system is secure. (90) The federalgovernment requires that federal agencies adhereto a set of computer-security policies, standards, and practices, (91) but these do not apply to votingsystems, which are under the purview of state and local governments. Standards can be difficult and time-consuming to develop, especially under the commonly used consensus approach, in which stakeholders reach agreement on provisions to be included. Strengthsof this approach, when properly implemented, are that the resulting standards are less likely tocontain substantial omissions, and they are more likely to be acceptable to users and otherstakeholders. Efforts to develop the VSS began in the 1970s, but the standards were not approveduntil 1990. (92) The Common Criteria forInformation Technology Security Evaluation (ISO/IEC15408), which is a set of requirements for evaluating the security of information technology, tookfive years to develop, efforts having been begun in 1993 and completed in 1998. (93) The IEEE votingstandards project began in 2001 and has proceeded amid some controversy, which apparently is notatypical for standards panels addressing difficult issues. (94) Given those considerations and the delaysin establishing the EAC, it is not clear whether new standards or guidelines will be in place beforethe HAVA voting system requirements go into effect in January 2006; however, HAVA requires theTechnical Guidelines Development Committee to submit its initial recommendations to the EACwithin nine months of the Committee's appointment. (95) In any case, even after new standards areapproved, there remain issues relating to testing and certification. For example, should all votingsystems be required to adhere to the new guidelines or should those certified under the VSS continueto be accepted? The current process for testing and certification of voting systems was initiated by NASED in 1994. HAVA directs the EAC to provide for "testing, certification, decertification, andrecertification of voting system hardware and software by accredited laboratories" (Sec. 231(a)(1)). It gives NIST responsibility for recommending and reviewing testing laboratories. While HAVA maintains the voluntary nature of adherence by states to federal voting system standards and use of certified systems, most states have adopted the VSS. (96) Consequently, if theEAC decertifies voting systems that do not meet the new guidelines, many states would likelyreplace those systems, provided that funding were available to do so. However, the more stringenta set of standards is with respect to security, the more time-consuming and expensive it may be totest and certify the system (some have criticized the Common Criteria for this reason, althoughothers have suggested that they be applied to voting systems (97) ). More secure systems may also bemore expensive to manufacture. Consequently, there may be economic disincentives for investmentin highly secure voting systems, although such disincentives would likely become less important ifpublic concern grows. Under the current VSS, testing is performed under specific laboratory test conditions. Such tests are necessary to determine if the system meets the standards, but some experts have proposedthat they are not sufficient, that additional testing needs to be done under realistic conditions of use,involving actual voters, and that systems should be retested after use in the field. (98) Even if new guidelines and certification procedures can be developed that include state-of-the-art security features, some observers believe that this will not be sufficient. They pointto three problems: (1) Given the time required to develop and implement new voting systemguidelines and to test and certify systems under them, systems reflecting such guidelines will not bein place for several years, whereas the threat from cyberattacks is present and growing. (2)Overreliance on any one line of defense, such as security standards, runs counter to therecommended use of defense in depth. (3) The use of standards does nothing about the reducedobservability and transparency that characterizes computerized voting systems (99) in contrast to moretraditional systems, and therefore cannot sufficiently address concerns about public confidence inthe integrity of computer-assisted voting. Some experts also believe that certification and proceduralcontrols, including auditing, can never guarantee security of a voting system. (100) This problem, theysay, is further complicated by the need for ballot secrecy, which is not an issue, for example, incomputerized financial transactions. Use Open Source Software Some experts have proposed the use of open source software code for at least some voting system software. (101) Such code would beavailable for public inspection and undergo thoroughsecurity review, and these experts argue that it would therefore be more secure because the opensource review process would be more thorough and identify more potential security flaws than ispossible with proprietary code. Advocates of proprietary or closed source code argue, in contrast,that this approach makes potential flaws more difficult to discover and therefore to exploit. Evenif open source code is superior with respect to security (which remains unproven), DREs often usecommercial off-the-shelf (COTS) software (such as Microsoft Windows) that is proprietary. (102) Currently, the code for virtually all voting system software in the United States is closely heldby the vendors, who release it only to select parties, such as the ITAs, under nondisclosureagreements. The vendors argue that the use of proprietary software is important both to protect theirintellectual property rights and for security. While secrecy can be an important security tool(sometimes called "security through obscurity"), it has some weaknesses. First, it is fragile, in thatonce this defense is breached, the damage cannot be repaired -- the code cannot be made secretagain. Second, use of secrecy limits the number of people who can examine the code, therebylimiting the scrutiny it can receive for vulnerabilities. Both of these potential weaknesses weredemonstrated by the circumstances leading to the Hopkins study. Diebold code was posted (perhapsinadvertently) on an open Internet server; the authors analyzed this code and claimed to havediscovered several vulnerabilities (which Diebold disputed). Some have proposed resolving this issue by using a modular approach that separates the voterinterface or ballot choice function (equivalent to marking an optical-scan ballot) from thevote-casting function (putting the ballot in the optical-scan reader). (103) The software for the latterwould be open source and standardized and for the former proprietary and more flexible. Thereasons are that vote casting is a straightforward, well-defined process that requires high security toensure that the voter's actual choices are recorded and counted, whereas the voter interface is whereinnovations can provide the greatest advances in usability and other benefits for voters, and thesecurity requirements are not as stringent. The code used for vote casting and counting can be muchsimpler than that needed for the voter interface, making security potentially much easier to achievethan is currently the case with DREs, where both functions are housed within a single unit. Improve Verifiability and Transparency Verifiability in elections can be thought of as consisting of two components. One involves thecapability of the voter to verify that his or her ballot was cast as intended. This is what is usuallymeant by voter verifiability . The other involves the capability to determine that the final tallyaccurately reflects all votes as cast by the voters and that it includes no additional votes -- in otherwords, that no votes were improperly changed, omitted, or added. This has been called resultsverifiability . (104) If all voters can obtainboth voter and results verifiability, that is known as universalverifiability . (105) Roll-call voting providesrobust universal verifiability -- voters publicly record theirvotes, which are counted in the presence of all voters. However, this approach sacrifices ballotsecrecy and can be used only for very small electorates. While ballot secrecy reduces the risk of voteselling and coercion, it complicates verifiability, since voters cannot know directly if their ballotswere counted as cast. Hand-counted paper ballot systems, which can provide ballot secrecy, mayprovide universal verifiability only under some very limited circumstances and only for very smallelectorates. Such systems can provide a kind of surrogate results verifiability, if observers closelywatch the counting of ballots, but even that can be difficult to achieve. Lever machines andcomputer-assisted voting systems arguably exhibit neither voter nor results verifiability, althoughdocument-based systems such as optical scan and punchcards do retain the capacity for surrogateresults verifiability if manual recounts are done in the presence of observers. Some observers believe that the potential security problems associated with the lack of transparency and observability in vote casting and counting with DREs cannot be resolved throughthe use of security procedures, standards, certification, and testing. They assert that the only reliableapproach is to use ballots that voters can verify independently of the DRE and that these ballotsbecome the official record for any recounts. Others assert that voter verifiability is a highly desirablefeature but caution about some of the proposed ways of achieving it. Still others believe that thereare problems with the approach that make it undesirable. HAVA requires that each voting system produce a paper audit record for the system and that this be the official record for recounts. It also requires that voters have the opportunity to correcttheir ballots before that record is produced. However, it does not stipulate that that record consistof individual ballots or that it be verifiable by the voter. At least four different ways of achieving voter verifiability have been proposed. These are discussed below to illustrate the range of complexity and issues involved. Voter-Verifiable Paper Ballot. In the most widelydiscussed method, the DRE would print a paper ballot with the voter's choices listed. The votercould then verify that the ballot accurately reflected the voter's choices as made on the DRE. Anydiscrepancies could then be called to the attention of a pollworker. Once the voter was satisfied withthe paper ballot, it would be deposited in a ballot box (106) and kept in the event of a recount. A sampleof these ballots could also be counted as part of a standard audit for comparison with the total count. Some observers also believe that any recount using these paper ballots should be performed by handrather than machine. This approach has the following potential advantages: (1) Any recount would be based on an independent record that the voter had had an opportunity to verify. (2) Each election could beaudited, and any significant discrepancies between the electronic and paper tallies would trigger afull recount. (3) If the recount were performed by hand, that would take advantage of thetransparency and observability that can be associated with that approach. (4) The method could helpensure voter confidence in the legitimacy of election results, since voters would know that ballotsthey had verified would be available for recounts. The approach has also been criticized, with critics asserting the following: (1) It makes voting more complicated and time-consuming by requiring extra steps by the voter. (2) The use of printerswould substantially increase both the cost of administering an election and the risk of mechanicalfailure of a voting machine. (3) It is generally accepted that paper ballot systems cannot be made toconform to the HAVA accessibility requirements. (107) (4) Since the method is largely untested, it isnot clear to what extent it would improve security in practice and what impacts it might have onvoters. (108) (5) Hand counting of the paperballots would be time-consuming and arguably moreerror-prone than machine counting. (109) Votemeter. There is an electronic version of the above method, in which an electronic device would be attached to the DRE. This votemeter wouldhave a display on which the voter could verify choices and it would record those choicesindependently of the DRE. Those records would be used in any recount and could also be talliedseparately by an independent agency -- to provide a check on possible collusion with respect to theDREs. Advantages to such a system over a paper trail would be that it would not have the problemsof manual paper recounts, it could provide a fast, independent, full audit of the DRE vote, and itcould be accessible to blind persons via an audio input. However, it would still be more complexfor the voter than current systems, and voters would need to trust that the attached unit was secure. Modular Voting Architecture. A third way toprovide voter verifiability with DREs is analogous to optical scan or punchcard balloting withprecinct counting. (110) After a voter makeschoices on the voter interface (such as a touchscreen), themachine writes the ballot to a memory card or other device, called a frog, which the voter then takesto another machine that reads the ballot. This reader would be highly secure, as discussed above. (111) It would have a display so that the voter could verify choices before casting the ballot. A readercould even be provided with an audio program to allow blind voters to verify choices. (112) Theadvantages and disadvantages of this system are similar to those for the previous two, depending onits particular design. Encrypted Votes. All three of the above approaches essentially provide a second, independent audit channel for the voting system. Anotherway of providing verifiability uses cryptographic methods to provide a kind of electronicverification. (113) Proponents argue that aproperly designed system using encrypted votes isconceptually different from the "electronic ballot box" exemplified by DRE technology and that itprovides for privacy, transparency, auditability, and security in a superior way to any currentapproach. This can be part of a more comprehensive system that uses cryptographic methodsthroughout the election process -- from election preparation through auditing of the results -- thatpurports essentially to mimic electronically or even improve upon the observability and transparencyassociated historically with manually counted paper ballot systems. There are several different possible approaches using cryptographic protocols. (114) In one kindof system, the voter, before casting the vote in the voting booth, can see the ballot choices theencrypted information will correspond to. When the vote is cast, a receipt is generated withencrypted information, which could be in any of several different forms, such as a number or apattern printed on a piece of paper. (115) Afterthe election, each voter can also determine if his or hervote was counted as cast by comparing the receipt to posted information. (116) However, because theinformation on the receipt is encrypted, no one, including the voter, can prove what choices weremade. (117) The encryption is performed witha set of encryption keys that have been generatedindependently by different election trustees -- for example, an election administrator andrepresentatives of each of the major political parties. Votes, to be counted, must be decrypted, whichis accomplished by each trustee applying his or her key, and shuffling the votes before sending themto the next trustee. (118) Information related tothe encryption is also posted that makes it possible fora trustee or a member of the public to audit and authenticate the election. (119) If a trustee (or anyoneelse) attempts to change, omit, or add any ballot, that will be detected in the audit, because thechanges will show up as invalid, just as someone trying to modify an encrypted financial transactionwill be discovered. At least one proposed system also permits auditing by observers during thecourse of the election. Proponents of this approach claim that the capabilities of checking the vote before and after casting the ballot while maintaining ballot secrecy, along with the high probability of detecting anytampering through public auditing, means that, unlike with DREs, it is not necessary for voters orelection or party officials to trust the voting machines to produce the correct tallies. In this sense,the encrypted-vote system is even more transparent than paper ballots that are hand-counted in thepresence of observers. It is much closer in transparency to a roll-call vote, but it retains ballotsecrecy. Proponents also believe that use of this approach could reduce the costs of elections byreducing the need for physical security, testing, and other activities. They also state that the integrityof the system is not dependent on the secrecy of the encryption keys, although privacy might becompromised if all keys were broken or stolen or all trustees colluded. If successful, the approach could address many of the security issues with DREs that this report discusses. However, it does not yet appear to have been independently evaluated and therefore couldhave currently unknown disadvantages and vulnerabilities. Also, it is not clear that it would havethe same potential positive impact on voter confidence as paper-based voter verification might. Thatis because a voter who does not understand the technology behind the system -- and few voters arelikely to -- may have no greater basis for confidence in the correspondence between the encryptedreceipt and the choices the voter made than is currently the case with DREs. Some proponents,however, believe that those concepts are simple enough that they can be taught in secondaryschool. (120) If the system relies on printers at each voting booth, that raises issues similar to those with respect to printers for voter-verifiable paper ballots. Similarly, the verifiability feature increases thecomplexity of the voting process for voters, with unknown consequences. In addition, it is not clearto what extent valid ballots could be recovered in the event that tampering was found or malfunctionoccurred. Finally, some critics question whether encrypted receipts are in fact unable to show avoter's choices. Proponents argue that these concerns are either unlikely to be a problem in practiceor are relatively easy to address. Options That Might Be Considered The several methods proposed to address the verifiability issue -- ranging from printing paperballots to new electronic ways of voting -- each have different strengths and weaknesses, makingit difficult to determine at present whether any of these approaches should be adopted. At the sametime, many observers would agree that finding ways to increase the verifiability and transparencyof electronic voting is desirable. DRE technology is clearly evolving fairly rapidly and has not yetbecome settled, as witnessed by the diversity of available devices and features in comparison to otherkinds of voting systems. (121) This environmentmay promote developing improved security and otherdesirable properties of the technology. At the same time, as jurisdictions continue to adopt DREsin response to HAVA and other factors, pressures to resolve security issues quickly may increase. While a defense-in-depth approach would appear to be generally desirable for addressing security questions with DREs, as discussed above, any attempt to implement such an approach needsto take into account potential problems that can be associated with making substantial changes inthe way an election is administered. For example, when a voting system is replaced in a jurisdiction,the proportion of residual votes and problems administering the election may actually increaseinitially, at least in part because neither voters nor pollworkers are familiar with the new system. Inaddition, there are no proven cases of tampering with DREs or other computer-assisted votingsystems in public elections. (122) For these andother reasons, some observers argue that any changesto current technology and procedures should be incremental. Others, however, state that given theevolving threat environment and the concerns that have been identified, an incremental approach isnot sufficient to prevent undetected tampering that could change the outcome of an election. Policymakers will need to weigh such differences in determining what if any actions to take inresponse to this set of issues. Three general approaches are discussed below for addressing the issues raised in this report. First, action could be left to state and local jurisdictions that administer elections. Second, the EACcould address the issues. Third, Congress could take any of several possible actions. Theseapproaches and options, which are not mutually exclusive, are discussed in turn below. States. Elections are administered by state and local governments, with the federal government playing a circumscribed role. Although that rolewas substantially enhanced with the enactment of HAVA, the law stipulates that methods ofimplementation of its requirements are to be left to the discretion of the states (Sec. 305). States maytherefore address these issues individually, as, for example, California, Maryland, and Ohio havealready been doing. (123) The availability offederal funding under HAVA to improve electionadministration by state and local governments, as well as the creation of an independent federalagency whose purpose is to assist those governments in election administration, should improve theability of those governments to ensure the security of elections. Leaving action to the states wouldallow them to react to the issues in a timely fashion and in ways that are most responsive to theirindividual circumstances and could lead to a variety of options being tested by different states,making it easier to determine which approaches work best. However, this approach might also leadto a patchwork of responses, which could be challenging for vendors to meet and could lead to somestates being more vulnerable to tampering than others. EAC. The Election Assistance Commission created by HAVA will have some responsibilities to provide guidance and to perform studies andresearch specifically relating to the security of voting systems. Its work in this area will involveNIST and others with experience in computer security. The EAC and its supporting boards andcommittees may provide an effective venue for addressing fundamental questions regarding votingsystem security and helping states meet their needs and responsibilities in this regard as well asissues relating to voter confidence in the security of DREs. One option would be that the EAC couldperform an independent security review of current DREs. This might be especially useful if it couldbe done in cooperation with a selection of states exhibiting a range of security policies andprocedures. However, to address the issue, the EAC must first form the relevant boards andcommittees, and any study would require a significant amount of time to complete. The EAC maynot, therefore, be able to resolve the controversy before states need to make decisions about whichkinds of voting systems to acquire. Congress. Among the possible actions that Congress might consider are hearings, funding to address the controversy, and revisions to HAVA. Congress could choose to hold hearings on the issue for several purposes, such as clarifying issuesand options, providing guidance to the EAC, or exploring funding and legislative options. It couldalso use other means, such as legislative report language or direct communication from congressionalleaders, to encourage the EAC to address the controversy in an expedited manner. Given the range of proposals for addressing DRE security issues, and the uncertainties associated with those proposals, Congress might also consider supporting research and development(R&D) in this area to identify the most appropriate solutions. In the past, economic incentives forprivate investment in such R&D have been weak, given the small, fragmented nature of the marketfor voting systems and the relatively low demand for sophisticated security for those systems. Withthe funding for new voting systems that HAVA provides, the evolving threat environment, and otherfactors, that situation may be changing. HAVA also authorized grants for R&D to improve securityand other aspects of voting technology (Sec. 271), but Congress has not appropriated fundsspecifically for that program. Presumably, the EAC could use some of its general operating fundsfor such work, or Congress could appropriate funds specifically for it. Several options for revising HAVA might be considered for a legislative response to the controversy: (124) A specific security provision could be added to the voting system requirements, stipulating, for example, that voting systems must adhere to security requirements for federalcomputer systems as required under current law, (125) or requirements or a mechanism to develop themthat is specified in the provision. The voting system audit requirement in the Act could be revised to require avoter-verifiable paper ballot (126) or some othersystem of voter verifiability. Voting systems could be required to use open-sourcesoftware. The Act could specify a security review and certification process for all votingsystems. The Act could specify that experts in security be represented on the TechnicalGuidelines Development Committee. The EAC could be directed to provide security consultation services to stateand local jurisdictions. The deadlines for meeting relevant requirements, such as for accessibility ofvoting systems, could be delayed pending resolution of the controversy. Federal funding could be provided for upgrades or replacements for DREspurchased under HAVA if they are shown subsequently to have significant securitydefects. Some of the above options would themselves be controversial, as discussed earlier in this report with respect to voter verifiability and use of open source software. In addition, creating additionalrequirements would further increase the federal role in election administration, which may beopposed by those who believe that it should be left to the states as much as possible. Options thatwould strengthen the ability of the EAC to help address this controversy may themselves be lesscontroversial but might not lead to a timely resolution of the issues. Delays in meeting HAVArequirements are also likely to be controversial, and, some would argue, may not be necessary if thecontroversy can be resolved before 2006. Finally, additional funding authorization andappropriations may be difficult to enact in a constrained budget environment. Conclusions The purpose of this report has been to explain the controversy about the security of DREs andto lay out the issues raised and options for addressing them. The report does not attempt to resolvethe controversy. However, some conclusions can be drawn with respect to the questions asked atthe beginning of the report. Do DREs exhibit genuine security vulnerabilities? If so, could those vulnerabilities be exploited to influence an election? Given the worsening threat environment for information technology and the findings of several studies and analyses discussed in this report, at least some current DREs clearly exhibit securityvulnerabilities. Those vulnerabilities pose potential but not demonstrated risks to the integrity ofelections, in that no proven cases exist involving tampering with DREs. Observers differ in theirviews about whether these potential risks are significant enough that they need to be addressedurgently or whether they can be addressed incrementally. To what extent do current election administration procedures and other security measures protect against threats to and vulnerabilities of DRE systems? The answer to this question is a central point of contention in the controversy, with vendors and election administrators generally claiming that current measures are sufficient and certain otherexperts, most notably many computer scientists, and some activists claiming that they are not. Thesedifferences of opinion appear to be based in part on differences in philosophical perspective. Proponents of approaches such as voter verifiability believe that elections should rely for securityon openness, transparency, and observability of the entire election process, and that currently toomuch trust is placed in the behavior and capabilities of vendors, election officials, and other involvedparties. Many election administrators and vendors, and some other observers, believe that the viewsof such proponents are based on misunderstandings of how voting systems work and how electionsare administered. They also believe that approaches such as a voter-verifiable paper ballot wouldnot be of net benefit to the proper functioning of elections. Resolution of such fundamentaldifferences may require -- if it is in fact achievable -- that those on both sides of this controversydevelop better understanding of the bases for the views of the other side. Finding an effectivesolution may be easier if concerned computer scientists understand in detail how elections are run(perhaps by working directly with administrators) and if election administrators understandcybersecurity more clearly (perhaps by working with computer scientists). In any case, as indicated by some of the studies discussed in this report, significant improvements in the security of DREs may be found through careful analysis of current systems andhow they are implemented and administered, without requiring voter verifiability or other substantialchanges. However, such improvements in current systems are not likely to address the fundamentalconcerns raised by proponents of voter verifiability. Do those threats and vulnerabilities apply to computer-assisted voting systems other than DREs? The potential threats and vulnerabilities associated with DREs are substantially greater than those associated with punchcard or optical scan readers, both because DREs are more complex andbecause they have no independent records of the votes cast. However, document-ballot readers arepotentially subject to malware that could affect the count, to vulnerabilities associated withconnection to other computers, and some other kinds of tampering. Therefore, the security ofsystems using readers might also benefit from some of the same kinds of approaches that have beenproposed for DREs, such as improvements to current security policies and procedures, use of modernsoftware engineering techniques, and use of strong cryptographic protocols. What are the options for addressing any threats and vulnerabilities that do exist, and what are the relative strengths and weaknesses of the different options? The report discusses seven proposals for addressing the security issues raised about DREs. They include using current procedures and security mechanisms, with improvements as necessary;improving standards for the development and certification of voting systems; using open-sourcesoftware for voting systems; and several methods to improve the transparency and verifiability ofelections, including voter-verified paper ballots and an electronic version of that approach, use ofmodular electronic voting architecture that physically separates the voter interface from the castingand counting functions; and a system that uses cryptographic protocols to permit voters to verify thattheir ballots were cast as intended and that no votes were improperly changed, omitted, or added. These proposals vary in ease of implementation, the degree to which they have been tested inapplication, and the level of contention about both their ability to resolve the controversy and theiroverall desirability. Most of the public debate has centered around whether to rely on current procedures and mechanisms or adopt voter-verifiable paper ballots. However, these are clearly not the only options,and the debate might benefit from fuller consideration of other possibilities such as those discussedabove. In addition, several of the proposals discussed are not mutually exclusive, and a resolutionof the controversy may involve elements of several proposals. Three policy approaches, which are also not mutually exclusive, were discussed. The matter could be left to state and local governments, which administer elections; some states have alreadytaken action. The newly formed EAC could address the issues through its convening power andresponsibilities in the development of voluntary guidelines for and certification of voting systems. Congress could decide to use hearings or other mechanisms to provide guidance on the issues, or itmight decide that a legislative solution is necessary. Several legislative options exist, ranging fromfunding for research on the issue to adding requirements on DRE security to HAVA. The benefitsand disadvantages of these approaches depend on many factors, and a legislative solution maybecome more attractive if the controversy cannot be resolved through other means.
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In July 2003, computer scientists from Johns Hopkins and Rice Universities released a security analysis of software purportedly from a direct recording electronic (DRE) touchscreen votingmachine of a major voting-system vendor. The study drew public attention to a long-simmeringcontroversy about whether current DREs are vulnerable to tampering that could influence theoutcome of an election. Many innovations that have become familiar features of modern elections, such as the secret ballot and mechanical lever voting machines, originated at least in part as a way to reduce electionfraud and abuse. Computer-assisted counting of ballots, first used in the 1960s, can be done veryrapidly and makes some kinds of tampering more difficult. However, it does not eliminate thepotential for fraud, and it has created new possibilities for tampering through manipulation of thecounting software and hardware. DREs, introduced in the 1970s, are the first voting systems to becompletely computerized. Touchscreen DREs are arguably the most versatile and user-friendly ofany current voting system. Their use is expected to increase substantially under provisions of TheHelp America Vote Act of 2002 (HAVA, P.L. 107-252 ), especially the requirement that, beginningin 2006, each polling place used in a federal election have at least one voting machine that is fullyaccessible for persons with disabilities. With DREs, unlike document-ballot systems, the voter sees only a representation of the ballot; votes are registered electronically. Some computer security experts believe that this and otherfeatures of DREs make them more vulnerable to tampering than other kinds of voting systems,especially through the use of malicious computer code. While there are some differences of opinionamong experts about the extent and seriousness of those security concerns, there appears to be anemerging consensus that in general, current DREs do not adhere sufficiently to currently acceptedsecurity principles for computer systems, especially given the central importance of voting systemsto the functioning of democratic government. Others caution, however, that there are nodemonstrated cases of computer tampering in public elections, and any major changes that might bemade to improve security could have unanticipated negative effects of their own. Several proposalshave been made to improve the security of DREs and other computer-assisted voting systems. Theyinclude (1) ensuring that accepted security protocols are followed appropriately, (2) improvingsecurity standards and certification of voting systems, (3) use of open-source computer code, and (4)improvements in verifiability and transparency. Much of the current debate has focused on which such proposals should be implemented and through what means -- in particular, whether federal involvement is necessary. Some states arealready addressing these issues. The Election Assistance Commission established by HAVA willhave some responsibilities relating to voting system security and could address this controversydirectly. Some observers have also proposed federal funding for research and development in thisarea, while others have proposed legislative solutions including enhancement of the auditrequirements under HAVA.
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SECTION 1. SHORT TITLE; FINDINGS.
(a) Short Title.--This Act may be cited as the ``EAC
Reauthorization Act of 2017''.
(b) Findings.--Congress finds the following:
(1) The elections for Federal office which were held in
November 2016 were plagued with a number of problems,
including--
(A) foreign interference, as confirmed by the
United States intelligence community;
(B) a worsening voting machine infrastructure that
will continue to deteriorate without congressional
action; and
(C) a lack of resources at the State and local
level that will make election administration more
challenging.
(2) The Election Assistance Commission is the only Federal
agency charged with making elections more fair, accurate,
accessible, and efficient by providing best practices,
information, and voting machine certifications to States.
(3) The Election Assistance Commission should be equipped
with the tools necessary to undertake its nonpartisan mission
of helping State and local election officials administer their
elections and ensuring the accuracy, integrity, and security of
our elections.
SEC. 2. REAUTHORIZATION OF ELECTION ASSISTANCE COMMISSION.
Section 210 of the Help America Vote Act of 2002 (52 U.S.C. 20930)
is amended by striking ``for each of the fiscal years 2003 through
2005'' and inserting ``for each of the fiscal years 2017 through
2022''.
SEC. 3. ASSISTANCE TO STATES FOR SECURITY UPGRADES TO VOTER
REGISTRATION LISTS AND PROCESSES.
(a) Authorization of Funding.--Section 257(a) of the Help America
Vote Act of 2002 (52 U.S.C. 21007(a)) is amended by adding at the end
the following new paragraph:
``(5) For fiscal year 2018, such sums as may be necessary
for such payments, except that a State may use a requirement
payment made with funds authorized under this paragraph solely
to upgrade the security of the State's voter registration lists
and voter registration processes and to carry out other
activities necessary to meet the requirements of section
303(a)(3) (relating to the technological security of the
State's computerized voter registration list).''.
(b) Waiver of 5-Percent Match Requirement.--Section 253(b)(5) of
such Act (52 U.S.C. 21003(b)(5)) is amended--
(1) in subparagraph (A), by striking ``subparagraph (B)''
and inserting ``subparagraphs (B) and (C)''; and
(2) by adding at the end the following new subparagraph:
``(C) Subparagraph (A) shall not apply for purposes of
determining the eligibility of a State to receive a
requirements payment appropriated pursuant to the authorization
provided under section 257(a)(5) of this title for fiscal year
2018.''.
SEC. 4. ASSESSMENT OF ADEQUACY OF VOTING SYSTEMS AND MACHINES.
(a) Assessment.--In consultation with the election officials of
each State, the Election Assistance Commission shall carry out an
assessment of whether the voting systems, including the voting
machines, available for use in the elections for Federal office to be
held in 2018 are adequate to meet the demands of such elections.
(b) Plan for Replacement of Outdated and Inadequate Machines.--Not
later than December 31, 2017, the Commission shall submit to Congress
and the States a report on the assessment carried out under subsection
(a), and shall include in the report a plan for replacing voting
machines which the Commission determines, on the basis of such
assessment, are outdated or otherwise not capable of meeting the
demands of the elections for Federal office to be held in 2018.
(c) Definition.--In this section, the term ``State'' has the
meaning given such term in section 901 of the Help America Vote Act of
2002 (52 U.S.C. 21141).
SEC. 5. REQUIRING STATES TO PARTICIPATE IN POST-GENERAL ELECTION
SURVEYS.
(a) Requirement.--Title III of the Help America Vote Act of 2002
(52 U.S.C. 21081 et seq.) is amended by inserting after section 303 the
following new section:
``SEC. 303A. REQUIRING PARTICIPATION IN POST-GENERAL ELECTION SURVEYS.
``(a) Requirement.--Each State shall furnish to the Commission such
information as the Commission may request for purposes of conducting
any post-election survey of the States with respect to the
administration of a regularly scheduled general election for Federal
office.
``(b) Effective Date.--This section shall apply with respect to the
regularly scheduled general election for Federal office held in
November 2018 and any succeeding election.''.
(b) Conforming Amendment Relating to Enforcement.--Section 401 of
such Act (52 U.S.C. 21111) is amended by striking ``and 303'' and
inserting ``303, and 303A''.
(c) Clerical Amendment.--The table of contents of such Act is
amended by inserting after the item relating to section 303 the
following new item:
``Sec. 303A. Requiring participation in post-general election
surveys.''.
SEC. 6. REPORTS BY NATIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY ON
USE OF FUNDS TRANSFERRED FROM ELECTION ASSISTANCE
COMMISSION.
(a) Requiring Reports on Use Funds as Condition of Receipt.--
Section 231 of the Help America Vote Act of 2002 (52 U.S.C. 20971) is
amended by adding at the end the following new subsection:
``(e) Report on Use of Funds Transferred From Commission.--To the
extent that funds are transferred from the Commission to the Director
of the National Institute of Standards and Technology for purposes of
carrying out this section during any fiscal year, the Director may not
use such funds unless the Director certifies at the time of transfer
that the Director will submit a report to the Commission not later than
90 days after the end of the fiscal year detailing how the Director
used such funds during the year.''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply with respect to fiscal year 2018 and each succeeding fiscal year.
SEC. 7. RECOMMENDATIONS TO IMPROVE OPERATIONS OF ELECTION ASSISTANCE
COMMISSION.
(a) Assessment of Information Technology and Cybersecurity.--Not
later than December 31, 2017, the Election Assistance Commission shall
carry out an assessment of the security and effectiveness of the
Commission's information technology systems, including the
cybersecurity of such systems.
(b) Improvements to Administrative Complaint Procedures.--
(1) Review of procedures.--The Election Assistance
Commission shall carry out a review of the effectiveness and
efficiency of the State-based administrative complaint
procedures established and maintained under section 402 of the
Help America Vote Act of 2002 (52 U.S.C. 21112) for the
investigation and resolution of allegations of violations of
title III of such Act.
(2) Recommendations to streamline procedures.--Not later
than December 31, 2017, the Commission shall submit to Congress
a report on the review carried out under paragraph (1), and
shall include in the report such recommendations as the
Commission considers appropriate to streamline and improve the
procedures which are the subject of the review.
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EAC Reauthorization Act of 2017 This bill amends the Help America Vote Act of 2002 to: (1) reauthorize the Election Assistance Commission through FY2022, (2) authorize funding to states for FY2018 for security upgrades to voter registration lists and processes and waive the 5% match requirement for these funds, (3) require each state to furnish to the commission such information as the commission may request for the purposes of conducting any post-election surveys of the states with respect to the administration of a regularly scheduled general election, and (4) require the National Institute of Standards and Technology to report on its use of funds transferred from the commission. The commission shall carry out an assessment: (1) of whether the voting systems available for use in the elections for federal office to be held in 2018 are adequate to meet the demands of such elections, and (2) of the security and effectiveness of the commission's information technology systems. The commission shall carry out a review of the effectiveness and efficiency of the state-based administrative complaint procedures established and maintained under such Act for the investigation and resolution of allegations of violations.
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Petitioner argues that the Court of Appeals, in rejecting his conflict-of-interest claim, improperly failed to give a presumption of correctness to a state-court factual finding, in violation of 28 U.S.C. § 2254(d). We agree, and accordingly the motion for leave to proceed in forma pauperis and the petition for a writ of certiorari are granted. On August 1, 1981, petitioner was arrested on a charge of burglarizing his sister's house. Kenneth Kondritzer, a local public defender in a two-attorney public defender's office, was appointed soon thereafter to represent petitioner. While petitioner was awaiting trial on the burglary charge, his nephew, Henry Lee Dixon (the son of the alleged burglary victim), gave a statement to the police implicating petitioner in the unsolved 1974 murders of a woman and her three children. Based upon Dixon's statement, the police obtained warrants on or about September 15, 1981, charging both petitioner and Dixon with the murders. Kondritzer began representing Dixon at about that time, while continuing to represent petitioner. Dixon, however, was never indicted for the murders. At a preliminary hearing on November 19, 1981, in which Kondritzer appeared on Dixon's behalf, the judge ruled that although the State had sufficient evidence to hold Dixon as a material witness against Burden, it did not have sufficient evidence to hold him for the murders. Petitioner was indicted for the murders on December 7, 1981, while he was still represented by Kondritzer. Kondritzer, however, left the public defender's office at the end of December 1981, and the other public defender in the office, Michael Moses, assumed responsibility for representing petitioner. After a trial in March 1982, petitioner was convicted of four counts of murder and was sentenced to death. Dixon's testimony at trial provided the sole evidence directly linking petitioner to the murders. 903 F.2d 1352, 1356-1357 (CA11 1990). In addition, both Dixon on cross-examination and the prosecutor in his closing argument acknowledged that Dixon was testifying under a grant of immunity,1 a fact expressly credited by the trial court in its mandatory post-trial report, see Record, Respondent's Exh. 1, p. 54.2 After exhausting his state remedies, petitioner filed a petition for a writ of habeas corpus in the United States District Court for the Middle District of Georgia, alleging, inter alia, that he did not receive effective assistance of counsel because his counsel labored under a conflict of interest. Although the District Court credited petitioner's contention that Dixon had received immunity in exchange for his agreement to testify against petitioner, 690 F.Supp. 1040, 1045 (1988), it nevertheless denied relief because petitioner had not shown an adverse impact on the representation of his trial counsel, Moses. Ibid. On appeal, the United States Court of Appeals for the Eleventh Circuit determined that the record was not sufficient for it to evaluate petitioner's conflict-of-interest claim, and therefore remanded to the District Court for an evidentiary hearing on that issue, while retaining jurisdiction over the case. 871 F.2d 956 (1989). At the hearing, Kondritzer testified that while he was representing both petitioner and Dixon on the murder charges, he reached "an understanding" with the district attorney that "as long as [Dixon] testified [against petitioner] nothing would happen to him." Civ. Action No. 88-6-3-MAC (MD Ga., Sept. 20, 1989), p. 4. The District Court nevertheless concluded that petitioner had received representation free from a conflict of interest. The case then returned to the Court of Appeals, which affirmed the District Court's denial of habeas relief. Although the court recognized the potential conflict of interest in Kondritzer's simultaneous representation of petitioner and Dixon, it held that "the conflict never became actual in the sense that Kondritzer's representation of Dixon's interests required him to compromise [petitioner's] interests." 903 F.2d, at 1359. In addressing petitioner's argument that the dual representation adversely affected petitioner's interests because Kondritzer negotiated an immunity agreement for Dixon, the Court of Appeals stated: "[T]he assumption that Dixon received a grant of transactional immunity, negotiated by Kondritzer and the prosecutor in exchange for Dixon's testimony against [petitioner], is without factual support. . . . There is no documentary evidence of any sort that attests to Dixon's having received immunity. . . . Thus, [petitioner] can no longer base his conflict-of-interest claim on the mistaken assumption that the attorney representing him obtained or attempted to obtain immunity for one client in exchange for testimony that was instrumental in the conviction of another." Id., at 1359-1360. As petitioner argues, the Court of Appeals' finding that Dixon did not testify under an immunity agreement is contrary to the express finding in the state trial court's report that "Dixon was granted immunity from prosecution." Record, Respondent's Exh. 1, p. 54. This finding, made pursuant to statutory directive, see n. 2, supra, and based on Dixon's testimony and the prosecutor's closing argument at trial, see n. 1, supra, is a determination of historical fact "presumed to be correct" for purposes of a federal habeas corpus proceeding. See 28 U.S.C. § 2254(d).3 A habeas court may not disregard this presumption unless it expressly finds that one of the enumerated exceptions to § 2254(d) is met, and it explains the reasoning in support of that conclusion. See Sumner v. Mata, 449 U.S. 539, 549, 551, 101 S.Ct. 764, 771, 66 L.Ed.2d 722 (1981). The Court of Appeals did not even mention the trial court's finding that Dixon received immunity, much less explain why that finding is not entitled to a presumption of correctness. Respondent maintains that petitioner "waived" reliance on § 2254(d) in the Court of Appeals by failing sufficiently to emphasize the trial court's finding that Dixon received immunity. This contention mischaracterizes the record. In his first brief to the Court of Appeals, before remand, petitioner repeatedly stated, in support of his conflict-of-interest argument, that Dixon had testified under a grant of immunity. See Brief for Petitioner-Appellant in No. 88-8619, pp. 5, 6, 8, 11, 13-14, 15, 17, 22, 23. Indeed, that factual assertion was the crux of petitioner's argument. In his supplemental letter memorandum, after remand, the immunity agreement was again the central fact supporting his conflict-of-interest claim. The brief began by stating that petitioner did not understand why there was a dispute over Dixon's immunity, since the state trial judge had specifically found that Dixon had testified under a grant of immunity. Letter Memorandum for Petitioner-Appellant in No. 88-8619 (CA11), p. 1; see also id., at 9. Petitioner then asserted that the state court's finding was "entitled to the presumption of correct ness." Ibid. Thus, it seems clear that petitioner adequately raised the argument below. Consequently, we reverse and remand so that the Court of Appeals may consider petitioner's conflict-of-interest claim free from its erroneous failure to credit the state trial court's finding that Dixon testified under a grant of immunity. It is so ordered.
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At the time that they were charged with several murders, petitioner Burden and his nephew, Henry Dixon, were both represented by attorney Kondritzer. A different attorney represented Burden at his trial. However, Dixon was never indicted, and he provided the sole evidence linking Burden to the murders. Both Dixon and the prosecutor acknowledged that Dixon testified under a grant of immunity, a fact credited by the trial court in its mandatory post-trial report. Burden was convicted and exhausted his state remedies. Subsequently, he filed a petition for a writ of habeas corpus in the Federal District Court, alleging that he did not receive effective assistance of counsel because his counsel labored under a conflict of interest. The court denied relief on the ground that he had not shown an adverse impact on the representation of his trial counsel, and the Court of Appeals affirmed. That court rejected Burden's argument that his interest was adversely affected by Kondritzer's negotiation of an immunity agreement for Dixon, finding that there was no evidence that Dixon testified under such an agreement. Held: In rejecting Burden's conflict-of-interest claim, the Court of Appeals improperly failed to give a presumption of correctness to a state-court factual finding as required by 28 U. S. C. § 2254(d). A habeas court may not disregard the presumption unless it expressly finds that one of the enumerated exceptions to § 2254(d) is met, and it explains the reasoning in support of its conclusion. See Sumner v. Mata, 449 U. S. 539, 549, 551. However, the Court of Appeals neither mentioned the trial court's finding that Dixon received immunity nor explained why the finding was not entitled to a presumption of correctness. Respondent's contention that Burden waived reliance on § 2254(d) in the Court of Appeals by failing to sufficiently emphasize the trial court's finding mischaracterizes the record, since the immunity agreement was the central fact supporting his conflict-of-interest claim. Certiorari granted; 903 F. 2d 1352, reversed and remanded.
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Background Legislation related to telework began to emerge from Congress in the 1990s. For example, beginning in 1992, Congress provided funding to GSA to establish the first federal telework centers. Three years later, Congress permanently authorized federal agencies to spend money to install telephone lines and related equipment and pay monthly charges for federal workers authorized to work at home, in accordance with OPM guidelines. Within the legislation that evolved from 1992 through 2009, the most significant congressional action was the enactment of Section 359 of Pub. L. No. 106-346 in October 2000. This section required each executive-branch agency to establish a telework policy “under which eligible employees of the agency may participate in telecommuting to the maximum extent possible without diminished employee performance.” It also directed OPM to provide that the law’s requirements were applied to 25 percent of the federal workforce by April 2001 and to an additional 25 percent of the federal workforce in each subsequent year, until 2004 when the law was to be applied to 100 percent of the federal workforce. From 2005 through 2009, federal workforce participation in routine telework has remained low. In calendar year 2009, according to OPM’s latest survey of federal agency telework coordinators, less than 6 percent of federal employees employed by the 79 agencies that responded to the survey teleworked at least 1 day per month, while less than 4 percent of the federal workforce employed by these agencies teleworked at least 1 day per week. The estimated percentage of employees teleworking at least 1 day per month, relative to the number of the federal employees employed by the agencies that responded to the survey, has remained between 5 and 7 percent, since calendar year 2005. The legislation for telework provided both OPM and GSA with leadership roles in the implementation of telework in the federal government. However, in 2003, we reported that the lack of coordination between OPM and GSA had resulted in executive agencies receiving conflicting messages on several telework-related topics, including emergency closings of government offices. These conflicting messages had created confusion for federal agencies in implementing their individual telework programs. To provide federal agencies with consistent, inclusive, unambiguous support and guidance related to telework, we recommended that OPM and GSA better coordinate their efforts. In response, OPM and GSA agreed later that year on a Memorandum of Understanding (MOU). Under this MOU, OPM and GSA agreed to the respective responsibilities listed in table 1. The agencies also agreed in the MOU to continue to share draft telework documents to ensure mutual concurrence. Recently, Congress passed a framework for implementing a comprehensive federal telework program. Congress passed the Telework Enhancement Act of 2010 in November 2010, and the President signed it into law in December 2010. The law requires each executive agency to designate a telework managing officer, establish a telework policy, and submit an annual report to the Chair and Vice Chair of the Chief Human Capital Officers (CHCO) Council on the agency’s efforts to promote telework. Under the act, OPM is to play a leading role in helping agencies implement the new telework provisions. The law requires OPM to provide policy and policy guidance for telework in several areas, including pay and leave, agency closure, performance management, official worksite, recruitment and retention, and accommodations for employees with disabilities. In developing its telework policy and policy guidance, OPM is to consult with FEMA, GSA, and the National Archives and Records Administration (NARA) relative to their designated areas of policy responsibility, as listed in table 2. NARA provides guidance to agencies on ensuring the federal government’s essential records are, among other things, secure and accessible to key federal personnel during emergencies. The Telework Enhancement Act also includes several provisions related to the potential use of telework during emergencies. The law requires agencies to incorporate telework into their COOP plans. OPM is to report annually to Congress and provide its assessment of each agency’s progress toward its goals, such as the effect of telework on emergency readiness. Finally, the act requires the Director of OPM to research the utilization of telework that identifies best practices and recommendations for the federal government and review the outcomes associated with an increase in telework. Agencies with jurisdiction over such matters as energy consumption, urban transportation patterns, and planning the dispersal of work during periods of emergency, shall work cooperatively with the Director, as necessary, to carry out these research responsibilities. OPM, GSA, FEMA, and FPS Have Provided Agencies with Guidance Related to Using Telework during Emergencies OPM, GSA, FEMA, and FPS offer a host of guidance on telework or telework-related emergency planning. Several of these guidance documents have expanded significantly in recent years, broadening the scope of the topics that they address and describing broader responsibilities for the lead agencies. After Congress required agencies to establish a telework policy in 2000, OPM provided several telework guidance documents to agencies. OPM’s major telework guidance is contained in the Guide to Telework in the Federal Government. According to Federal Continuity Directive 1 (FCD 1), OPM is also responsible for developing and promulgating personnel guidance to support the operation of federal executive-branch agencies during emergencies. OPM has also issued regulations providing uniform instructions to agencies on making payments to employees evacuated due to, among other reasons, natural disasters and pandemic health crises. OPM also has the lead role, by mutual agreement with other agencies in the region, in determining when to close federal offices and dismiss employees in the Washington, D.C., area. According to OPM, these procedures, referred to as the Dismissal Guide, ensure a coordinated response to areawide disruptions, which is important given the concentration of federal employees in this area. According to an OPM official, its dismissal and closure procedures are updated annually. The latest procedures were issued in December 2010. While these procedures directly apply only to executive agencies in the Washington, D.C. area, OPM officials explained that agency leaders in other regions of the United States use OPM’s procedures as a model. In addition, OPM’s guidance on managing human-capital resources during emergencies and continuity events was included in FEMA’s directive to executive agencies on developing and implementing continuity plans. Table 3 lists examples of OPM guidance relating to the use of telework during various types of emergencies, as provided in OPM and FEMA documents. Since 2000, OPM has expanded the scope of its guidance on the use of telework in the federal government. For example, the telework guidance OPM issued in 2001 listed several topics agencies should address in their telework policies. The current version of OPM’s guidance for routine telework, the 2011 Telework Guide, provides guidance for managers and employees on an array of topics, such as the telework agreement, purchasing equipment, communications, and performance management. This guide also provides advice on using telework during emergencies, continuity events, and pandemics. Compared to the 20 06 Telework Guide, the immediate predecessor to the 2011 Guide, the 2011 Guide added a summary of the major sections of the Telework Enhancement Act; the checklist items that OPM used to evaluate telework policies to help agency officials assess and revise their policies; guidance on pay, leave, and work-schedule flexibilities, including the new option of unscheduled telework; and telework and reasonable accommodations for employees with disabilities. During the same period, OPM expanded some of its emergency-related pay and leave policies. For example, OPM broadened its regulations on pay during an evacuation to include, in the event of a pandemic health crisis, permission for agencies to order employees to work from home (or an alternative location), regardless of whether they have a telework agreement. As the lead agency in the management of federal workplaces, GSA provides governmentwide workplace guidance related to telework, emergency planning, and continuity planning and operations. Under its authority to provide guidance, assistance, and oversight on the establishment and operation of alternative workplace arrangements, such as telework, GSA has issued guidelines, through Federal Management Regulation (FMR) Bulletins, on the use of information and telecommunication technology to support telework and the implementation and operation of alternative workplace arrangements, as shown in table 4. GSA, under its responsibility to operate, maintain, and protect the buildings and grounds it controls, also leads the federal Occupant Emergency Program, which consists of short-term emergency- response programs for particular facilities. Under this program, each agency or facility develops and maintains an occupant emergency plan (OEP) which details the procedures for safeguarding lives and property, such as evacuation or shelter-in-place, in response to a wide range of emergencies. At the agency level, the OEP and the continuity plan are the principal emergency-response plans. According to GSA’s regulations, GSA approves OEPs for GSA-controlled facilities. Lastly, as described in FCD 1, GSA is also responsible for assisting FEMA and other federal agencies in continuity planning and operations. GSA’s ongoing responsibilities include coordinating the provision of facilities to support the continuity of the executive-branch agencies and providing data on alternate facilities. GSA issued regulations on telework in 2005. These regulations included references to existing statutory provisions on telecommuting and OPM’s 2001 guidance regarding telework and telework centers. In these regulations, GSA also described the statutory obligation of agencies to consider whether the need for space could be met by alternative workplace arrangements and offered to assist agencies with alternative workplace arrangements. In 2006, GSA issued an FMR Bulletin that provided significantly expanded guidance to agencies on using alternative workplace arrangements. In addition to what had been stated in the regulation, the bulletin provided detailed information on implementing alternative work arrangements, such as teleworking and telework centers. The bulletin addressed such topics as the agency’s provision of equipment, payment of telework-related expenses, and factors to consider in using alternative workplace arrangements, often with citations to related federal regulations or other guidance. GSA issued another FMR bulletin the following year that provided agencies with recommendations on the type of information technology (IT), telecommunications, and peripheral services and equipment, as well as security, needed to adequately support telework. Like its predecessor, the bulletin also provided citations to related federal regulations or guidance issued by other federal agencies. FEMA and FPS provide governmentwide guidance to federal agencies on responding to emergencies. FEMA is responsible for leading the nation in developing a national preparedness system, including serving as the executive branch’s lead agent on matters concerning the continuity of national operations. To help federal agencies develop continuity plans and programs, FEMA offers direction in the FCD 1. According to this directive, each federal agency has continuity responsibilities and certain agencies have leadership responsibility for providing governmentwide guidance or services. For instance, all federal agencies are responsible for, among other things, developing plans to ensure the continuation of their essential functions and incorporating continuity requirements into their daily operations. Among other continuity guidance FEMA has issued, FEMA has also provided agencies with a COOP plan template to help them develop their plans. Both FEMA documents, listed in table 5, include guidance relating to the potential use of telework. FPS is authorized to protect the buildings, grounds, and property that are under the control and custody of GSA, as well as the persons on the property. Towards that end, FPS provided agencies with a guide, template, and instructions on developing an OEP and guidelines on responding to various emergency situations. The OEP guide refers to the potential use of telework during emergencies. A GSA official indicated that those federal agencies that have delegated authority to own and operate their own, non-GSA facilities, are required to have their own version of the OEP. He said that most of these agencies follow FPS’s guidance in developing their OEPs. As with some of the OPM and GSA guidance documents, the current version of FEMA’s guidance on continuity planning, FCD 1, issued in 2008, has expanded since the original version was issued in 2004. For example, in the 2008 version of FCD 1, the description of GSA’s responsibilities included such additional duties as coordinating the provision of executive-branch facilities to support continuity operations. Similarly, the description of OPM’s additional responsibilities include providing guidance to agencies on developing personnel policies that address continuity plans and procedures, as well as alternate work options, and coordinating continuity efforts before, during, and after an emergency with the Federal Executive Boards (FEB). In addition, FEMA broadened the scope of the guidance to include such topics as using risk management to maximize an agency’s readiness, and aligning acquisition and budgeting to support the continuity program. Agencies May Need Assistance with Incorporating Telework into Emergency or Continuity Operations Recent Reports Point Out Potential Problems with Incorporating Telework into Emergency or Continuity Operations in Various Operational Areas Several recent reports from OPM, inspectors general, and GAO have identified several examples of potential problems with incorporating telework into emergency or routine operations at various agencies. These examples identified problems in such operational areas as planning, IT, personnel readiness, and program monitoring. For instance, in 2010 OPM evaluated the telework policies of 72 executive-branch departments and agencies to determine whether the policies provided a foundation for effective telework programs. Each policy was evaluated against two objectives: (1) whether the policy could be clearly understood and easily used and (2) whether the policy included elements essential to the development and support of an effective program, with respect to program implementation, participant responsibilities, and program operations. For each evaluation objective, OPM developed a checklist of items that OPM evaluators used to assess the agencies’ telework policies. One of the policy checklist questions asked the evaluators to assess whether the telework policy “references agency emergency policies (e.g., COOP and pandemic).” According to the report, OPM evaluators scored 25 of the 73 agency telework policies (35 percent) as not referencing the agencies’ emergency policies at all. Other recent reports indicated potential problems in such operational areas as IT, personnel, and program monitoring: In 2010, we reported that federal wireless networks were increasingly vulnerable to attack and that information on the networks was vulnerable to unauthorized use and disclosure. In 2009, on the basis of our review of a 2007 Department of Homeland Security (DHS) report, we concluded that, in the event of a protracted emergency where 40 percent or more of the population was absent from school or work, residential users in most locations in the United States, including federal teleworkers, would likely experience congestion when attempting to use the Internet. While OPM’s Telework Guide indicates that the potential to use telework during an emergency depends on agencies implementing routine telework as broadly as possible, OPM’s latest telework survey, as noted earlier, reported that less than 6 percent of federal employees employed by the 79 agencies responding to the 2009 survey teleworked at least 1 day per month. In 2010, the Inspector General for the U.S. Nuclear Regulatory Commission (NRC) reported that, as of October 2009, most of NRC’s offices had not identified all of the individuals needed to perform essential functions and high-priority tasks while teleworking during a pandemic. According to an OPM official, few agencies in the Washington, D.C., area during the winter of 2011 were able to provide data on employees’ use of telework during an emergency. In issuing its Dismissal Procedures in December 2010, OPM requested that agencies in this area provide data on the use of telework following any OPM-announced dismissal or closure. However, by March 2011, OPM withdrew its request because, according to an OPM official, few agencies in the area provided the requested data. Current Governmentwide Guidance Does Not Provide a Definition or Set of Practices for Incorporating Telework into Continuity and Emergency Planning Our review of the OPM, GSA, FEMA, and FPS governmentwide guidance on telework and telework-related emergency planning found that none of the documents provided a definition of what constitutes incorporating telework into continuity and emergency planning or operations, or a cohesive set of practices that agencies could use to achieve this type of incorporation. Such practices would address the wide range of factors that could affect the potential use of telework during emergency operations such as planning, training, IT infrastructure (equipment, software, and security), testing, facilities, data collection, and program monitoring. OPM’s Annual Telework Survey Does Not Define “Integration” of Telework into Emergency Plans OPM, in partnership with GSA, has conducted an annual survey of the executive-branch agencies since 2001 to ascertain the status of telework and gauge agency progress in various aspects of their telework programs, such as participation, policy, eligibility, cost savings, and technology. Since 2002, OPM has used the survey results to prepare its annual report to Congress on the status of telework in the federal government. Since 2004, the survey has asked agency telework coordinators about whether telework had been integrated or incorporated into the agency’s emergency or continuity plans, or both. In the latest survey, the 2009 Telework Survey, the question was worded as follows: “Telework has been integrated into your agency emergency preparedness / COOP plans.” The survey asks the coordinators to respond with either Yes or No. A review of the responses to this question, for calendar years 2004 through 2009, shows that the number of agencies reporting they had integrated telework into their emergency preparedness or continuity plans increased from 27 of 78 agencies responding for calendar year 2005 (or 35 percent), to 57 of 79 agencies responding for calendar year 2009 (or 72 percent). OPM reported that the 2009 Telework survey results were an example of an encouraging use of telework implementation practices. However, OPM’s survey instrument does not describe what OPM means by “integrating” telework into emergency or continuity planning and operations. The survey does not provide a definition or citation to another document. This is also the case for the 2004 through 2008 surveys. One reference the telework coordinators might have turned to was OPM’s 2006 Telework Guide, the version in use at the time of the 2007 through 2009 surveys. However, the 2006 guide did not provide a definition or describe a set of practices required to integrate telework into emergency or continuity planning and operations, or refer to other federal guidance containing such a definition or set of practices. This lack of a definition or description calls into question the reliability of the survey results for assessing agencies’ progress. As GAO has previously indicated, survey questions should use unambiguous language and concrete terms, and specify the conditions that the respondents are to report on. Without a common understanding of what OPM means by “integration,” the agency telework coordinators who responded to the survey would have applied their own understanding of what integration means. As a result, OPM officials could not describe what agencies meant when they reported they had integrated telework into agency emergency preparedness / COOP plans. The question is also vague in that it does not define what it means by emergency preparedness plans and seems to treat emergency preparedness plans the same as continuity plans. As noted earlier, agencies may have several different types of emergency preparedness plans. The question does not explain whether the agency is to reply “Yes,” if telework has been “integrated” into just one emergency preparedness plan, or only if telework has been “integrated” into all of the emergency preparedness plans, as well as the COOP plan. Lastly, the response choice of Yes or No does not permit the coordinator to report interim progress, as would be possible if the response choices reflected various stages of integration. Taken Together, Practices Suggested by Four Agencies Could Help to Define the Set of Practices Needed to Incorporate Telework in Continuity and Emergency Plans The Telework Enhancement Act of 2010 now requires that federal agencies incorporate telework into their COOP plans. However, the act itself does not define the standards for adequate incorporation. Nevertheless, we found that three lead telework agencies and FPS have provided some governmentwide guidance that could help agencies in their efforts to incorporate telework into their continuity and emergency plans and operations. In reviewing several current OPM, GSA, FEMA, and FPS guidance documents, we found a number of practices that could help agencies incorporate telework into aspects of their continuity or emergency planning. Appendix II provides a listing of practices that OPM, GSA, FEMA, and FPS have suggested in various telework or emergency- related guidance documents. These practices address a variety of operational areas, such as human capital, training, facilities, testing, and technology infrastructure. However, it would be difficult for an agency to use these practices to help achieve telework incorporation and assess their progress. First, the practices are included in guidance documents that are principally concerned with matters other than incorporating telework into emergency plans. For example, as noted earlier, OPM’s Dismissal Guide describes the announcements and procedures that federal executive agencies in the Washington, D.C., area are to follow when there are work disruptions in the region, but also reminds the agencies that they have a responsibility to ensure that their equipment and technical support have been tested, and their IT infrastructure can support a large number of teleworkers simultaneously. However, the guide does not provide a cross-reference to additional OPM or GSA guidance that would help agencies use IT equipment and services to support telework, or suggest consultation with the agencies’ chief information officers (CIO). Moreover, according to their 2003 MOU, OPM and GSA agreed to work together to help agencies use IT to support telework and facilitate the CIOs involvement in related planning. Second, these practices are scattered across a wide range of documents, so it is difficult to be certain that agencies would consider all operational areas required to fully incorporate telework into emergency or continuity planning. For example, as illustrated in appendix II, OPM guidance dealing with a range of human-capital topics, such as pay and leave and human-resource flexibilities, also includes practices that could help agencies incorporate telework into their continuity and emergency planning. But without lead agency collaboration and consensus on a comprehensive set of practices on incorporating telework into emergency and continuity planning, agencies and OPM cannot be sure that each agency has considered all of the relevant areas of its operations that may need to be adapted to support teleworkers during an emergency. It is also not unusual for a lead agency to draw practices, in whole or in part, from other lead agencies’ guidance. While this helps the reader become aware of the potential crosscutting implications of the guidance, the description of these practices often does not provide a reference to more-specific guidance available from the other lead agency, which would also be helpful. For example, FEMA’s FCD 1 suggests repeatedly that agencies consider using telework to support continuity operations, but does not reference OPM or GSA telework guidance. OPM and FEMA Coordinated Recently Issued Guidance with Some Stakeholders, but OPM Did Not Tap into the CIO Community OPM and FEMA’s Recent Telework-Emergency Guidance Was Coordinated with Some Stakeholders OPM and FEMA have both recently released updated guidance pertaining to telework and emergency planning, and both agencies reached out to some of their stakeholder communities. Following the extended closings of federal agencies in the Washington, D.C., area during the February 2010 snowstorms, OPM updated the Dismissal Guide to introduce “unscheduled telework,” a new option for federal employees to telework, to the extent possible, when severe weather conditions or other circumstances disrupt commuting. OPM officials believe this option will help maintain the productivity and resilience of the federal workforce during periods of heavy snow accumulation, national security events, and other regional emergencies and help ensure the safety of employees. This new option had effects in areas of policy and guidance, such as pay and leave, agency IT capacity, telework data collection, and emergency operations. Although only applicable to executive-branch agencies in the Washington, D.C., area, OPM officials indicated that the guide also serves as a reference and model for closures and dismissals due to snow and other emergencies in other regions. The guide notes that FEBs coordinate similar dismissal or closure procedures in other major metropolitan areas. Officials from OPM’s Pay and Leave Office led the development of the 2010 Dismissal Guide. The OPM officials’ goal was to coordinate among stakeholders and issue the guide before the arrival of winter storms. According to these officials, they developed potential revisions and began the process of coordination among many stakeholders on October 28, 2010, by briefing the deputy Chief Human Capital Officers (CHCO) on the new concepts and asking for their reactions. During November 2010, OPM officials continued to share concepts and drafts, receive comments, and incorporate revisions to the draft guide. During this period, they sought additional reviews of the draft guide from agency human-capital officials. The Executive Director of the CHCO Council distributed the draft for agency comment to the deputy CHCOs, requesting that they share the draft with the points of contacts within their agencies. In addition, OPM officials said they consulted with unions, the Metropolitan Washington Council of Governments, and the FEMA Office of National Capital Region Coordination, among others. In December 2010, the OPM officials completed their stakeholder reviews and OPM completed its internal clearance process to issue the guide. They presented the new Guide to the CHCO Council members and the White House staff on December 14 and held a media briefing on the new guide when it was issued on December 15. On the same day, OPM officials reported they also briefed the FEBs on the new guide. FEMA also provided updated guidance in 2010 to agencies on developing their continuity plans. In 2004 FEMA issued a template to help agencies develop continuity plans. The template provided general guidance, sample text, and a template containing all the elements of a viable continuity plan. This enabled agencies to insert information from the template into their continuity plans as they deemed appropriate. FEMA began developing its latest version of the template in 2009. By May 2009, FEMA National Continuity Programs (NCP) officials had developed the updated template sufficiently to share an initial version of it with departments and agencies to prepare for the 2009 continuity exercise called Eagle Horizon. FEMA NCP officials continued to update the template during 2010. According to NCP officials, the template was discussed during Interagency Continuity Working Group meetings and Continuity Advisory Group meetings. In September and October 2010, NCP officials e- mailed more than 100 members of the interagency community, including both continuity coordinators and continuity planners, requesting comments on the updated template draft. In addition, NCP officials provided the GSA Office of Emergency Response and Recovery, which has responsibility for policy guidance on alternate continuity facilities, the opportunity to review and comment on the template. FEMA finalized the continuity template in February 2011 and posted it on its website. The template provided agencies with more-detailed guidance for each section of the plan, including proposed language, citations for supporting authorities and a glossary of terms. This template included guidance on the use of alternative facilities, including telework. OPM and GSA Coordinated on the Dismissal Guide, but Did Not Involve the CIO Community Although OPM officials shared drafts of the Dismissal Guide with other federal agencies, including GSA, the coordination between OPM and GSA did not involve working together to involve the agencies’ CIO community. As noted earlier, to address coordination issues between OPM and GSA, in 2003, the two agencies committed to an MOU. Under the MOU, GSA agreed to develop innovative workplace policy and guidance and to seek resolution to issues regarding IT support for telework where concerns about home IT equipment continue to be a barrier to the successful implementation of telework programs. OPM is to work with GSA to reach appropriate groups of CIOs to facilitate their greater involvement in agency long-term planning. The Dismissal Guide noted that the new option of “unscheduled telework” could occasion large numbers of employees teleworking simultaneously. Consequently, the Dismissal Guide advised agencies that they should ensure that their IT infrastructure was in place to support this. IT infrastructure includes equipment, software, and security. However, in 2009, we reported that 12 agencies, including GSA, as indicated in table 6, had done some, little, or no testing of the ability of their IT infrastructure to handle telework or similar arrangements during a protracted emergency, such as a pandemic influenza. Without adequate testing of IT infrastructure, agencies would not know whether they could rely on unscheduled telework to sustain operations during emergencies. Some agencies may have limited IT capacity to support large numbers of employees attempting to telework simultaneously, and might have to take steps to distribute system load until the agency capacity is increased. For example, the Department of Energy’s (DOE) Inspector General reported in 2010 that DOE’s COOP plan estimates peak employee absenteeism during a pandemic event could be as high as 40 percent, or approximately 3,000 employees at DOE headquarters; however, DOE’s remote access server can only accommodate 800 concurrent users. GSA’s last assessment of the telework technology environment and the technologies required to support 25 to 50 percent of the federal workforce teleworking was conducted in 2006. At that time, GSA concluded, “In general most organizations do not provide their teleworkers the same level of access to agency applications, data, and technical support as their office workers, which can hinder a teleworker’s ability to perform all job duties from their telework site.” Despite the importance of agency IT capacity to support telework during emergencies, OPM and GSA did not work together, as outlined in their MOU, to reach out to the CIO community regarding potential agency capacity limitations. At the time of development of the new policy, each of the OPM and GSA officials responsible for coordinating on the MOU did not recognize the opportunity to involve the CIO community. The OPM official thought the agency telework coordinators and CHCOs were aware of the IT capacity issue and would consider this in implementing their telework programs. The GSA official thought the policy was targeted to the human-resources community and the technology issue would be more effectively dealt with in a document directed to the IT community. Consequently, GSA officials did not offer any governmentwide guidance on ways to address infrastructure limitations or provide direct assistance to agencies regarding the adequacy of their IT infrastructure. The senior OPM official responsible for telework programs acknowledged that consulting with the CIO Council prior to issuing the Dismissal Guide would have been worthwhile. Going forward, coordination will become even more important because the Telework Enhancement Act of 2010 requires OPM to consult with GSA on policy and policy guidance for telework in the areas of telework technology and equipment. Conclusions The Telework Enhancement Act of 2010 requires agencies to incorporate telework into their COOP plans. However, there is no governmentwide definition or cohesive set of practices for incorporating telework into COOP plans. Recent reports offered several examples of challenges agencies may face in supporting the use of telework during emergencies in such key areas as planning, IT, and personnel readiness. The absence of a definition of what constitutes incorporation of telework into emergency and continuity plans did not create these potential problems in readiness. However, a definition accompanied by a set of practices that acknowledged the broad range of operational areas affected by incorporating telework into emergency preparedness might help agencies identify, avoid, or address any operational problems. Such practices would help agencies take the appropriate steps, measure their progress, and know when they have achieved success. Some practices already in OPM, GSA, FEMA, and FPS guidance documents could provide a starting point. The lack of a definition for incorporating telework into emergency and continuity planning has also affected the reliability of recent OPM telework survey results and assessment of agency progress. Since 2004, OPM has used its annual survey of agency telework coordinators to report on the status of agencies’ telework program and policies, including agencies’ incorporation of telework into emergency plans. However, problems with OPM’s telework survey methodology, such as a lack of a definition for incorporation or integration into continuity and emergency planning, and vagueness in question construction, call into question the reliability of reported results with respect to this issue. Without reliable data, OPM is unable to assess the extent to which the federal government as a whole, or an individual agency, is making progress on incorporating teleworking into emergency planning and operations. Over the years, governmentwide telework and emergency-related guidance from OPM, GSA, FEMA, and FPS has broadened in scope to include references to the potential use of telework during emergencies. In addition, these guidance documents suggest practices drawn from other lead agencies’ guidance. While these guidance features can heighten agency officials’ awareness of the crosscutting considerations bearing on the potential use of telework during emergencies, without lead-agency collaboration and consensus on the crosscutting passages in the guidance, coordination with a key policy area may be missed. In a recent instance, while OPM coordinated with other agencies on its new Dismissal Guide, the guide did not address important areas of agency IT operations––despite the existence of an MOU between OPM and GSA intended to improve interagency coordination specifically on this issue. In developing future telework policy and policy guidance relating to emergency and continuity planning and operations, OPM will need to consult with agencies responsible for key policy areas, now including NARA, to ensure all key policy areas are fully considered. Recommendations for Executive Action To enhance the potential use of telework during emergencies, we recommend that the Director of OPM, in consultation with agencies responsible for key policy areas specified under the Telework Act and with other agencies providing governmentwide guidance on emergency preparedness, such as FPS, take the following three actions: Develop (1) a definition of what constitutes incorporating telework in emergency and continuity plans and (2) a cohesive set of practices that agencies should implement to achieve successful incorporation. Revise OPM’s data-collection methodology to ensure agencies and OPM report reliable results on the extent to which agencies have incorporated telework into their emergency and continuity planning and operations. Establish an interagency coordination process among OPM, FEMA, FPS, GSA, and NARA to ensure all major areas of agency operations are considered when OPM issues new or updated guidance related to using telework during emergencies. Agency Comments and Our Evaluation We provided a draft of this report to the Secretary of Homeland Security, the Administrator of GSA, and the Director of OPM for review and comment. The Director of OPM and the Director of the Departmental GAO/OIG Liaison Office for DHS provided written comments, which we have reprinted in appendixes III and IV. In summary, OPM concurred with our recommendations and highlighted a number of actions the agency has under way or plans to undertake in response. OPM and DHS also provided technical comments, which we incorporated as appropriate. GSA had no comments on the draft. We are sending copies of this report to the congressional committees with jurisdiction over DHS and GSA, and their activities; the Secretary of Homeland Security; the Administrator of GSA; and the Director of Office of Management and Budget. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you have any questions about this report, please contact me at (202) 512-6543 or [email protected]. Key contributors to this report are listed in appendix V. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Appendix I: Objectives, Scope, and Methodology This report (1) describes the guidance that the Office of Personnel Management (OPM), General Services Administration (GSA), Federal Emergency Management Agency (FEMA), and Federal Protective Service (FPS) have issued pertaining to the use of telework during emergencies; (2) assesses the extent to which OPM’s recent reviews of the agencies’ telework policies and programs address the incorporation of telework into continuity plans, and the extent to which OPM, FEMA, GSA, and FPS offer guidance on incorporating telework into emergency and continuity planning; and (3) assesses the extent to which OPM and FEMA coordinated with other agencies on the development of their recently released guidance documents pertaining to the use of telework during emergencies. To address these three objectives, we reviewed governmentwide telework and emergency-related statutes. We also reviewed regulations issued by OPM and GSA, and related governmentwide guidance that OPM, GSA, FEMA, and FPS had issued over the past 10 years. Lastly, we conducted interviews with key officials from each of these agencies regarding each objective. We conducted additional data collection and analyses to answer selected objectives, as described below. To assess the extent to which OPM’s recent reviews of the agencies’ telework policies and programs addressed the incorporation of telework into continuity plans, we reviewed OPM’s annual telework survey and its 2010 evaluation of agency telework policies. We compared the survey question relating to whether telework had been integrated into the agency’s emergency preparedness / continuity of operations (COOP) plans to generally accepted survey methodology. We also reviewed the survey results for this question from the first year it was included in the survey, in 2004, through the most recent survey, conducted in 2009. We also compared OPM’s description of the methodology it used to evaluate agency telework policies to GAO guidelines for developing and using checklists. We also reviewed the cumulative scores that OPM evaluators assigned to the checklist item—whether the telework policy “references agency emergency policies (e.g., COOP and pandemic).” In addition to reviewing OPM’s recent telework assessments, we reviewed recent GAO and inspector general reports to identify examples of problems agencies might be having with potentially using telework during emergencies. To identify practices suggested by OPM, GSA, FEMA, and FPS for incorporating telework into continuity or emergency planning, we reviewed these agencies’ related governmentwide regulations and guidance, and identified suggested practices for incorporating telework into continuity or emergency planning. We compared these practices to practices that GAO previously suggested for the same purpose and identified examples of OPM, GSA, FEMA, and FPS suggested practices that were similar to GAO-suggested practices. We conducted this performance audit from February 2010 through July 2011 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: Examples of Practices Suggested to Federal Agencies for Incorporating Telework into Emergency and Continuity Planning and Operations In reviewing several current guidance documents, we found that the Office of Personnel Management (OPM), General Services Administration (GSA), Federal Emergency Management Agency (FEMA), and Federal Protective Service (FPS) have suggested to federal agencies, in various telework or emergency-related guidance documents, several practices for incorporating telework into various aspects of continuity or emergency planning. Appendix III: Comments from the Office of Personnel Management Appendix IV: Comments from the Department of Homeland Security Appendix V: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, William Doherty, Assistant Director, and Patricia Farrell Donahue, analyst-in-charge, led the development of this report. Sharon Hogan and Robert Gebhart made significant contributions to this report. Gregory Wilmoth and Tom Beall assisted with the design and methodology. Karin Fangman provided legal counsel. Robert Love, Len Benning, and James Sweetman provided technical assistance. William Trancucci verified the information in the report. Related GAO Products Federal Work/Life Programs: Agencies Generally Satisfied with OPM Assistance, but More Tracking and Information Sharing Needed. GAO-11-137. Washington, D.C.: December 16, 2010. Human Capital: Telework Programs Need Clear Goals and Reliable Data. GAO-08-261T. Washington, D.C.: November 6, 2007. Human Capital: Greater Focus on Results in Telework Programs Needed. GAO-07-1002T. Washington, D.C.: June 12, 2007. Continuity of Operations: Agencies Could Improve Planning for Telework during Disruptions. GAO-06-740T. Washington, D.C.: May 11, 2006. Continuity of Operations: Selected Agencies Could Improve Planning for Use of Alternate Facilities and Telework during Disruptions. GAO-06-713. Washington, D.C.: May 11, 2006. Agency Telework Methodologies: Departments of Commerce, Justice, State, the Small Business Administration, and the Securities and Exchange Commission. GAO-05-1055R. Washington, D.C.: September 27, 2005. Human Capital: Key Practices to Increasing Federal Telework. GAO-04-950T. Washington, D.C.: July 8, 2004. Facilities Location: Progress and Barriers in Selecting Rural Areas and Using Telework. GAO-03-1110T. Washington, D.C.: September 4, 2003. Human Capital: Further Guidance, Assistance, and Coordination Can Improve Federal Telework Efforts. GAO-03-679. Washington, D.C.: July 18, 2003.
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When historic snowstorms forced lengthy closings of federal offices in the National Capital Region in 2010, thousands of employees continued to work from their homes, making clear the potential of telework in mitigating the effects of emergencies. GAO was asked to (1) describe the guidance lead agencies have issued pertaining to the use of telework during emergencies; (2) describe Office of Personnel Management (OPM) and other assessments related to agencies' incorporation of telework into emergency or continuity planning, and the extent to which the lead agencies have provided definitions and practices to support agency planning; and (3) assess the extent to which OPM and the Federal Emergency Management Agency (FEMA) coordinated with other agencies on recent guidance documents. To address these objectives, GAO reviewed relevant statutes, regulations, guidance documents, and OPM's telework survey methodology, and interviewed key officials of agencies providing telework and telework-related emergency guidance. OPM, the General Services Administration (GSA), FEMA, and the Federal Protective Service (FPS) offer a host of telework and telework-related emergency guidance. These lead agencies provide advice to other federal agencies through regulations, directives, guides, bulletins, and other documents. Several of these guidance documents have expanded significantly in recent years, broadening the scope of the topics that they address and describing broader responsibilities for the lead agencies. The Telework Enhancement Act of 2010 requires agencies to incorporate telework policies into their continuity of operations plans, but recent OPM reviews and other agency reports identify potential problems agencies may face in achieving this incorporation in various operational areas. GAO's review of the OPM, GSA, FEMA, and FPS governmentwide guidance on telework or telework-related emergency planning found that none of the documents provide a definition of what constitutes incorporating telework into continuity and emergency planning or a cohesive set of practices that agencies could use to achieve this type of incorporation. Additionally, this lack of a definition or description calls into question the reliability of the results of a survey OPM annually conducts to assess agencies' progress. In reviewing several lead-agency guidance documents, GAO found a number of practices, in areas such as information technology (IT) infrastructure and testing, that could help agencies incorporate telework in aspects of their continuity or emergency planning. However, because the practices are scattered among various documents principally concerned with other matters, it would be difficult for an agency to use these practices to help achieve telework incorporation and assess its progress. Both OPM and FEMA coordinated the development of their recent guidance. OPM updated its Washington, D.C., area dismissal and closure procedures to introduce "unscheduled telework," a new option for federal employees to telework when emergencies disrupt commuting. While developing these procedures, OPM officials reported coordinating with GSA, agency human-capital officials, FEMA, unions, and the Metropolitan Washington Council of Governments, among others. However, OPM and GSA did not work together to reach out to agency chief information officers regarding potential agency capacity limitations. Consequently, officials did not offer any governmentwide guidance on ways to address IT infrastructure limitations or provide direct assistance to agencies regarding the adequacy of their IT infrastructure. In February 2011, FEMA provided agencies with more-detailed guidance for developing continuity plans. According to FEMA officials, in 2010 they shared a draft of the guidance with the interagency community, including both continuity coordinators and continuity planners, and GSA.
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SECTION 1. DOMESTIC REFUGEE RESETTLEMENT REFORM AND MODERNIZATION.
(a) Definitions.--In this section:
(1) Community-based organization.--The term ``community-
based organization'' means a nonprofit organization providing a
variety of social, health, educational and community services
to a population that includes refugees resettled into the
United States.
(2) Director.--The term ``Director'' means the Director of
the Office of Refugee Resettlement in the Department of Health
and Human Services.
(3) National resettlement agencies.--The term ``national
resettlement agencies'' means voluntary agencies contracting
with the Department of State to provide sponsorship and initial
resettlement services to refugees entering the United States.
(b) Assessment of Refugee Domestic Resettlement Programs.--
(1) In general.--As soon as practicable after the date of
the enactment of this Act, the Comptroller General of the
United States shall conduct a study regarding the effectiveness
of the domestic refugee resettlement programs operated by the
Office of Refugee Resettlement.
(2) Matters to be studied.--In the study required under
paragraph (1), the Comptroller General shall determine and
analyze--
(A) how the Office of Refugee Resettlement defines
self-sufficiency and integration and if these
definitions adequately represent refugees' needs in the
United States;
(B) the effectiveness of Office of Refugee
Resettlement programs in helping refugees to meet self-
sufficiency and integration;
(C) technological solutions for consistently
tracking secondary migration, including opportunities
for interagency data sharing;
(D) the Office of Refugee Resettlement's budgetary
resources and project the amount of additional
resources needed to fully address the unmet needs of
refugees with regard to self-sufficiency and
integration;
(E) the role of community-based organizations in
serving refugees in areas experiencing a high number of
new refugee arrivals;
(F) how community-based organizations can be better
utilized and supported in the Federal domestic
resettlement process;
(G) recertification processes for high-skilled
refugees, specifically considering how to decrease
barriers for Special Immigrant Visa holders to use
their skills; and
(H) recommended statutory changes to improve the
Office of Refugee Resettlement and the domestic refugee
program in relation to the matters analyzed under
subparagraphs (A) through (G).
(3) Report.--Not later than 2 years after the date of the
enactment of this Act, the Comptroller General shall submit to
Congress the results of the study required under this
subsection.
(c) Refugee Assistance.--
(1) Assistance made available to secondary migrants.--
Section 412(a)(1) of the Immigration and Nationality Act (8
U.S.C. 1522(a)(1)) is amended by adding at the end the
following:
``(C) The Director shall ensure that assistance under this section
is provided to refugees who are secondary migrants and meet all other
eligibility requirements for such assistance.''.
(2) Report on secondary migration.--Section 412(a)(3) of
such Act (8 U.S.C. 1522(a)(3)) is amended--
(A) by inserting ``(A)'' after ``(3)'';
(B) by striking ``periodic'' and inserting
``annual''; and
(C) by adding at the end the following:
``(B) At the end of each fiscal year, the Director shall submit a
report to Congress that includes--
``(i) States experiencing departures and arrivals due to
secondary migration;
``(ii) likely reasons for migration;
``(iii) the impact of secondary migration on States hosting
secondary migrants;
``(iv) the availability of social services for secondary
migrants in those States; and
``(v) unmet needs of those secondary migrants.''.
(3) Amendments to social services funding.--Section
412(c)(1)(B) of such Act (8 U.S.C. 1522(c)(1)(B)) is amended--
(A) by inserting ``a combination of--'' after
``based on'';
(B) by striking ``the total number'' and inserting
the following:
``(i) the total number''; and
(C) by striking the period at the end and inserting
the following:
``(ii) the total number of all other eligible populations
served by the Office during the period described who are
residing in the State as of the beginning of the fiscal year;
and
``(iii) projections on the number and nature of incoming
refugees and other populations served by the Office during the
subsequent fiscal year.''.
(4) Notice and rulemaking.--Not later than 90 days after
the date of the enactment of this Act and not later than 30
days before the effective date set forth in paragraph (5), the
Director shall--
(A) issue a proposed rule for a new formula by
which grants and contracts are to be allocated pursuant
to the amendments made by paragraph (3); and
(B) solicit public comment regarding such proposed
rule.
(5) Effective date.--The amendments made by this subsection
shall become effective on the first day of the first fiscal
year that begins after the date of the enactment of this Act.
(d) Resettlement Data.--
(1) In general.--The Director shall expand the Office of
Refugee Resettlement's data analysis, collection, and sharing
activities in accordance with the requirements set forth in
paragraphs (2) through (5).
(2) Data on mental and physical medical cases.--The
Director shall--
(A) coordinate with the Centers for Disease Control
and Prevention, national resettlement agencies,
community-based organizations, and State refugee health
programs to track national and State trends on refugees
arriving with Class A medical conditions and other
urgent medical needs;
(B) examine the information sharing process, from
country of arrival through refugee resettlement, to
determine if access to additional mental health data
could--
(i) help determine placements; and
(ii) enable agencies to better prepare to
meet refugee mental health needs; and
(C) in collecting information under this paragraph,
utilize initial refugee health screening data,
including--
(i) a history of severe trauma, torture,
mental health symptoms, depression, anxiety,
and posttraumatic stress disorder recorded
during domestic and international health
screenings; and
(ii) Refugee Medical Assistance utilization
rate data.
(3) Data on housing needs.--The Director shall partner with
State refugee programs, community-based organizations, and
national resettlement agencies to collect data relating to the
housing needs of refugees, including--
(A) the number of refugees who have become
homeless; and
(B) the number of refugees who are at severe risk
of becoming homeless.
(4) Data on refugee employment and self-sufficiency.--The
Director shall gather longitudinal information relating to
refugee self-sufficiency, integration, and employment status
during the 2-year period beginning 1 year after the date on
which the refugees arrived in the United States.
(5) Availability of data.--The Director shall annually--
(A) update the data collected under this
subsection; and
(B) submit a report to Congress that contains the
updated data.
(e) Guidance Regarding Refugee Placement Decisions.--
(1) Consultation.--The Secretary of State shall provide
guidance to national resettlement agencies and State refugee
coordinators on consultation with local stakeholders pertaining
to refugee resettlement.
(2) Best practices.--The Secretary of Health and Human
Services, in collaboration with the Secretary of State, shall
collect best practices related to the implementation of the
guidance on stakeholder consultation on refugee resettlement
from voluntary agencies and State refugee coordinators and
disseminate such best practices to such agencies and
coordinators.
(f) Effective Date.--This section (except for the amendments made
by subsection (c)) shall take effect on the date that is 90 days after
the date of the enactment of this Act.
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Requires the Government Accountability Office to study the effectiveness of the Office of Refugee Resettlement's domestic refugee resettlement programs. Requires the Office to: (1) ensure that refugee assistance is provided to qualifying refugees who are secondary migrants; (2) report to Congress regarding states experiencing departures and arrivals due to secondary migration; and (3) expand the Office's data analysis, collection, and sharing activities to include data on mental and physical medical cases, housing needs, and refugee employment. Requires the Department of State and the Department of Health and Human Services to provide refugee resettlement guidance to appropriate national, state, and local entities.
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Background Statutory and VEI Task Force Changes to TAP Prior to the redesign initiated in 2011, TAP consisted of four core components: (1) pre-separation counseling, (2) an employment workshop, (3) an optional briefing on federal veteran benefits, and (4) the Disabled Transition Assistance Program. Pre-separation counseling, which includes VA benefits information, was required by law to be provided prior to the VOW Act. A number of revisions, new requirements, and components were added to TAP by the VOW Act and the VEI Task Force. For example, the VOW Act mandates that DOD require that transitioning servicemembers participate in an employment workshop, with some exceptions. Included among the VEI Task Force’s changes to the program are: an extended curriculum with segments on translating military skills to civilian job requirements, financial planning, and individual counseling and assessment with the goal of each servicemember developing an Individual Transition Plan; an updated employment workshop and briefings on federal veteran benefits divided into two sessions.embed information relevant for those who have or think they have a service-connected disability rather than as part of a separate Disabled Transition Assistance Program component; The VA benefits I and II briefings a series of 2-day, career-specific tracks that focus on (1) pursuing college education, (2) entering a technical skills training program, or (3) starting a business. The track that a servicemember chooses depends on his or her post-separation goals; a capstone event during which servicemembers are to demonstrate— and military service commanders verify—that they have met required career-readiness standards. The standards pertain to employment, education, and technical training, depending on the servicemember’s post-separation goals; and a referral process—called a “warm handover”—to connect servicemembers who do not meet the career readiness standards with the appropriate partner agency (VA or DOL) to provide continued support and services as veterans. Additional details about the previous TAP compared to the revamped program are shown in table 1. Figure 1 shows each of the components in the order a servicemember would currently participate in the redesigned program. The services generally implement these core components at the installation level and may include other components in addition to TAP. Rather than TAP continuing to be an end-of-career event, DOD plans to shift to a Military Life Cycle Transition Model after October 2014. This model is intended to integrate transition preparation—counseling, assessments, and access to resources to build skills or credentials— throughout the course of a servicemember’s military career. Administration of the Revamped TAP The VEI Task Force oversaw the design and development of the revised TAP and was led by DOD and VA. Other agencies participating on the VEI Task Force include DOL, the Department of Education, the Office of Management and Budget, the Office of Personnel Management, and the Small Business Administration (SBA). Members of the White House staff and senior representatives from each service also participated. Each agency is responsible for different activities. For example, DOD provides guidance and monitors compliance with TAP provisions, and DOL facilitates the employment workshop. Also, each service coordinates with agencies on scheduling TAP workshops and briefings. The respective roles and responsibilities are spelled out in a memorandum of understanding (MOU), which the agencies signed in January 2014. A new TAP governance structure, established in October 2013, steers implementation of TAP and will modify the program, as needed, through 2016. The new governance structure is co-led by DOD in 2014 and co- chaired by VA and DOL. Other Federal Employment Programs That Serve Transitioning Servicemembers and Veterans With the draw down from the wars in Iraq and Afghanistan and as the military makes ongoing and planned force structure reductions, many servicemembers are projected to depart the military through 2017. TAP is one of a number of federal programs to assist transitioning servicemembers and veterans in developing job skills and securing civilian employment. TAP serves as a gateway to additional information and services that are available, either while servicemembers are on active duty or after they have separated from the military. For example the DOL employment workshop highlights many of the skills and techniques helpful in obtaining employment. After completing the workshop, servicemembers can benefit further by returning to the TAP offices on installations, using services at local VA and DOL offices, or using websites introduced to participants during TAP training. Once servicemembers separate from the military, a number of other federal programs offer assistance. These programs include five employment and training programs overseen by DOL and VA that target veterans.to veterans. For example, DOL provides grants to states to support state workforce agency staff positions, Disabled Veterans’ Outreach Program Specialists and Local Veterans Employment Representatives, who serve veterans through the Jobs for Veterans State Grant Program. In addition, VA provides employment services to certain veterans with disabilities through the Vocational Rehabilitation and Employment Program. As of 2012, the program was offered in 56 regional offices and 169 satellite offices. In addition, DOD helps National Guard and Reserve members obtain civilian employment though its operation of other programs, including the Yellow Ribbon Reintegration Program and Employer Support of the Guard and Reserve. For example, the Yellow Ribbon Reintegration Program serves National Guard and Reserve members and their families by hosting events that provide information on employment opportunities, health care, education/training opportunities, finances, and legal benefits. Agencies Report That Most Locations Have Implemented Key TAP Components, but Some Locations Are Experiencing Delays As of December 2, 2013, DOD, DOL, and VA have implemented changes to the program’s key components at most of the 206 military installations that provide TAP. However, a few program components have not yet been fully implemented by the agencies. For example, the agencies are still using the previous version of the VA benefits briefing at a number of locations and are offering the career technical training track at fewer than half of the TAP locations. Although some agencies had planned to fully implement the revamped TAP at all locations by October 1, 2013, they missed their targeted time frame. According to the revised plan, agencies now expect to implement virtually all components by the end of March 2014, with full implementation planned by June 2014. The planned start dates and the status of agencies’ efforts to implement the key components at the 206 TAP locations are summarized in figure 2. Pre-separation counseling and DOD Core Curriculum: According to DOD officials, eligible servicemembers were participating in pre-separation counseling and the modules in the new DOD core curriculum by November 21, 2012 at all TAP locations. As noted previously, part of the DOD core curriculum includes a module on translating military skills to civilian job requirements. Current military crosswalks map the majority of military occupations to a single civilian occupation. Based on those crosswalks and supplemented by analyses from Army and Navy credentialing websites, tools like DOL’s My Next Move and My Next Move for Veterans can suggest multiple occupations for career exploration. To enhance the existing electronic tools used for the crosswalk, DOL contracted with an organization to identify equivalencies between military and civilian jobs, as required by the VOW Act. According to DOL officials, the results of the military equivalencies study will enhance the military- civilian crosswalk by enabling a mapping of a single military occupation into multiple civilian occupations based on an analysis of embedded skill sets in addition to the similarity of tasks performed. This will be done for a selected set of military occupations that represent 59 percent of current active duty servicemembers. DOL officials said they plan to complete the update of the electronic tools beginning in 2014. DOL Employment Workshop: Effective November 21, 2012, DOD was generally required to mandate participation in the program with some exceptions. According to DOD and DOL officials, the agencies met this participation requirement in the VOW Act by offering eligible servicemembers, with some exceptions, the previous or revised version of the DOL employment workshops at domestic and overseas locations by November 21, 2012. Moreover, as required by the act, the DOL employment workshops are being conducted by contractors at all TAP locations.offered at all TAP locations, according to DOD and DOL officials. As of the spring of 2013, the revised workshop was being VA Benefits Briefing: All departing servicemembers are generally required to be provided the VA benefits briefing. Officials from DOD and VA stated that this participation requirement was met by offering servicemembers the previous version of the VA benefits briefing while implementing a phased rollout of the revised VA benefits I and II briefings. As of December 2, 2013, the revised VA benefits I and II briefings were unavailable at about 8 percent of TAP locations. VA officials said that the revised VA benefits briefings are offered at all domestic locations. However, the revised briefings are not currently offered in all overseas locations, such as Air Force locations in Germany, South Korea, and Japan. Although VA planned to implement the revised benefits briefings by October 1, 2013, full implementation is now expected no later than March 31, 2014, according to VA officials. DOD and VA officials said that VA faced challenges, such as training enough personnel to facilitate the revised briefings at these overseas locations during the extended furlough and delays with negotiating agreements with foreign nations hosting U.S. military forces. Career-specific Tracks: Since late 2012 the agencies had been planning to fully implement these tracks by October 2013. However, as of December 2, 2013, the tracks were not fully implemented, particularly at overseas locations: Entrepreneurial Track: SBA offers the entrepreneurial track at least quarterly at all domestic locations, but this only meets 12 percent of the estimated total demand for the track, according to SBA officials. Moreover, the track is not offered at the majority of overseas locations. After reviewing a draft of this report, SBA officials stated that the track can be extended to meet domestic and overseas demand given additional funding recently provided in the fiscal year 2014 budget. Full implementation at all TAP locations is expected by the end of fiscal year 2014, according to SBA officials. Career Technical Training Track: VA is offering the career technical training track at about 43 percent of the TAP locations. In particular, many overseas locations lack this track. According to VA officials, the delays were mainly due to efforts to incorporate substantial feedback received from participants during the pilot phase. VA completely revised the curriculum and piloted it in the summer of 2013. As a result, VA delayed training the facilitators until the curriculum was finalized and began its roll out in September 2013. According to the services’ implementation plans, full implementation of this track is expected by April 30, 2014. Higher Education Track: DOD is offering the higher education track at about 72 percent of TAP locations. According to DOD officials, they plan to offer the track at all locations, but sequestration and other resource constraints as well as delays in hiring and training facilitators slowed the roll out of this track. Full implementation is expected by April 9, 2014, according to the services’ implementation plans. For servicemembers lacking access to the entrepreneurial track, content from the track is available online. The online version, however, is a poor substitute for the classroom-based track, according to SBA officials. Unlike the technical training and higher education tracks, the entrepreneurial track does not have associated readiness standards. According to SBA officials, the readiness standards for the other tracks were developed prior to the inclusion of this track in TAP. While they considered creating associated standards, SBA officials decided that the track’s main purpose is to help participating servicemembers determine whether or not starting a business in general or their specific ideas for a business is right for them, so standards were not needed. If the higher education or career technical training tracks are not available for servicemembers who wish to attend an institution of higher education or seek technical training, other options are available to meet the readiness standards associated with the tracks. For servicemembers in remote locations or who are rapidly separating from the military, one option is to access a virtual TAP curriculum, according to a draft DOD policy under consideration. However, classroom instruction is the preferred method. Another option for servicemembers located overseas is to take the track at a domestic location when they return to the United States, according to DOD officials. Moreover, according to DOD policy, a servicemember could meet the standards outside of the track by completing the required documents or activities associated with those standards, such as by completing a comparison of academic institution choices and a college or university application. While servicemembers may meet the readiness standards without taking the tracks, they would miss instruction, for example, on resources to cope with challenges transitioning into college as nontraditional students (those who are older or with family obligations). Capstone Event: The services, working with DOD, DOL, and VA, are finalizing implementation of a “capstone event”—a final check to verify that servicemembers have met TAP requirements—and a referral process, known as a “warm handover,” for those servicemembers who do not meet the requirements. Although as of December 2013 the services were holding capstone events at most locations, according to the services’ implementation plans, the details for how the capstone event and warm handover will work are still being finalized by DOD, DOL, VA, and the services. Specifically, the agencies and services must clarify the roles and responsibilities of servicemembers, TAP staff, commanders, and the partner agencies as well as develop policies and guidance that underpin this effort, according to a December 2013 DOD report about implementation of the capstone event at TAP locations. In addition to implementing the key components of TAP at military installations, the services continue to update physical infrastructure at a number of locations to provide an optimal experience for servicemembers participating in TAP components. General standards for infrastructure are set forth in DOD policy. Approximately 6 percent of locations lack computer availability and according to officials from DOD, the Navy and Marine Corps, other infrastructure is still being put in place at a number of their domestic and overseas locations. According to officials from DOD, they expect all of the TAP locations to meet infrastructure standards by March 31, 2014. Military Life Cycle Model: According to the agencies’ implementation plan, the envisioned end state for the redesigned TAP involves integrating transition preparation throughout the course of a servicemember’s career. The agencies refer to this end state as the military life cycle transition model. The services plan to fully implement the military life cycle by October 2014. Under this new transition model, for example, the Army intends for all new servicemembers to receive counseling and initiate an individual development plan regarding their military career goals within 30 days of reporting to their first permanent duty station. Overall, DOD intends such counseling and planning to continue throughout a servicemember’s military career at various “touchpoints”, such as when For example, servicemembers will be expected to they are promoted.create plans for achieving their military and post-military goals for employment, education, or starting their own business. Further, servicemembers are to be made aware of the career readiness standards they must meet long before they separate. Agencies’ Efforts for TAP Adequately Address Three of Five Key Elements Associated with Effective Program Implementation and Evaluation Agencies have efforts underway to address three of the five key elements associated with effective program implementation and evaluation for TAP. However, agencies’ efforts to address the remaining two elements are mixed. Agencies Are Adequately Addressing Three Elements Element 1: Tracking Attendance Effective training programs have systems to track data, and we found that DOD and the services have systems to collect and report on attendance rates and are taking steps to improve the reliability of these data. DOD developed a DOD-wide system to track attendance for all TAP components, which has been in use since October 2012. This system is populated with attendance data from the services. The Army and Air Force each input TAP attendance data into their own systems, which they then transmit to the DOD system, while the Navy and the Marines input TAP attendance data directly into the DOD system because they do not have service-level systems that allow for tracking individual TAP attendance. DOD and the services are taking steps to improve the reliability of these data. According to DOD officials, accuracy will improve now that the capstone event is in place because servicemember attendance at each of the three required TAP training components will be verified at this event. According to DOD officials, the services are taking other steps to improve the accuracy of TAP attendance data, as well. For example, the Navy plans to replace the paper data collection systems that exist at some installations with electronic attendance tracking, which may be less prone to data-entry error. DOD tracks attendance to measure progress toward its performance goal of eligible servicemembers attending the mandatory components each year, beginning in fiscal year 2013. In February 2014, DOD reduced the fiscal year 2014 performance goal from 90 percent to 85 percent. According to DOD officials, the expected attendance rate is less than 100 percent because some servicemembers do not complete all required TAP training for various reasons. For example, some may separate quickly, such as for medical or disciplinary reasons, and not have an opportunity to fully take TAP. For fiscal year 2013, DOD expects an attendance rate of about 75 percent, primarily because servicemembers that transitioned in that year may have taken several TAP components in fiscal year 2012, prior to when DOD and the services began tracking these rates. DOD anticipates meeting their goal in fiscal year 2014. Element 2: Ensuring Training Quality Effective training programs incorporate feedback into training efforts,and each agency involved in TAP plans to use this type of information, as well as monitor their respective components, to improve TAP. To measure participants’ reactions to each TAP component they attend, including the career-specific tracks, DOD launched a participant assessment in April 2013. The assessment seeks feedback on the quality of the instruction, content, and facilities.knowledge of the information presented in each component of the training. It also measures participants’ According to agency officials, the agencies plan to use the results from the assessment to monitor the performance and outcomes for the redesigned TAP, assess trends, determine areas of improvement, and modify TAP components as appropriate. DOD is leading this effort. To help facilitate this effort, DOD officials said that they plan to analyze feedback at the DOD, service, and installation levels and share this information with partner agencies and the four services in a quarterly report. For example, the participant assessment collects demographic information that will allow for a comparison of the responses of servicemembers in different military branches, locations, and groups, such as enlisted personnel and officers. DOD performed a similar analysis in mid-2013 for responses to two questions in the participant assessment. This analysis provided DOD with information that could be used to understand how the program’s usefulness is perceived by different populations. Moreover, according to DOD’s TAP evaluation plan, DOD plans to convene teams with the partner agencies on an as-needed basis to make recommendations to address challenges, concerns, and areas for improvement. According to VA and DOL officials, they also plan to analyze the feedback to improve their respective components. The agencies also monitor their respective TAP components through site visits or plan to do so. According to DOD’s monitoring plan, DOD visits installations to monitor the TAP components it is responsible for as well as overall TAP implementation. According to DOL officials, their staff intends to perform annual monitoring visits to each domestic installation where the employment workshop is provided, but not at overseas installations. They said that at overseas locations they plan to rely on feedback from participant assessments, the company hired to facilitate the workshops, and the military staff at those DOD sites who will monitor the facilitators’ instruction and whether they are engaging and knowledgeable. VA officials said that they have not completed their monitoring plan for the VA benefits I and II briefings and its career technical training track. However, they expect to have a quality assurance plan completed by March 2014. Also, in comments provided after reviewing a draft of this report, VA officials stated that VA is participating in the DOD site visits to installations to monitor the TAP components. These are joint, agency-administered, on-site staff assistance visits led by DOD. Also, VA currently has contract staff at each military installation to monitor implementation of the VA benefits I and II briefings and the career technical training track. that TAP participants have completed products, such as resumes and job applications, which demonstrate that they are career ready. Created a capstone event to verify that standards have been met; the capstone event can be completed one-on-one, in large groups, or in small groups. For example, the Marines model is one-on-one. Assigned the task of verifying career readiness to commanders and identified steps to ensure that commanders or their designees are properly trained to assess an individual servicemember’s career readiness. To document whether or not a servicemember is career ready, DOD developed a new form called the Individual Transition Plan (ITP) Checklist in which each one of the career readiness standards is listed. We have reprinted this form in appendix II. Developed procedures for providing a warm handover, or referral, for servicemembers not meeting the career readiness standards. Generally, the warm handover is to be a confirmed person-to-person contact. According to the December 2013 DOD capstone report, during the recent pilot of the capstone event, several implementation challenges emerged. For example, confusion exists among servicemembers, TAP staff, commanders, and the agencies as to their roles and responsibilities in the capstone event. According to the DOD capstone report, to address this challenge, the agencies are taking actions, such as the services implementing a training program for their TAP staff and planning efforts to educate commanders and servicemembers on the requirements, purpose, and importance of the capstone event. As noted previously, according to DOD guidance, if a servicemember has not met the career readiness standards at the time of the capstone event, they are to be referred to the appropriate curriculum or services before they transition. If they do not meet the standards before separating from the service, the services plan to provide them with a “warm handover”. The delivery of the warm handover may vary at domestic and overseas locations because DOL and VA have limited capacity at overseas According to the DOD capstone report, DOL staff will likely locations.not be present at capstone events overseas and will conduct the warm handover in other ways, and VA staff will be located only at larger overseas installations. For example, servicemembers overseas will be able to contact DOL’s call center within established hours, which, due to time differences, may limit opportunities to make a person-to-person contact. Agencies’ Efforts to Address the Remaining Two Elements are Mixed Element 4: Ensuring Participation and Completion Effective training programs encourage participation and hold both individuals and their leaders responsible. While DOD has taken steps that are consistent with most attributes of effective training programs, two services currently lack an oversight mechanism at the commander level to help ensure participation. DOD’s efforts underway include: (1) prioritizing training for servicemembers based on agreed-upon goals and priorities, (2) encouraging servicemembers to buy in to training goals, and (3) communicating the importance of training. For example, DOD and the services communicate the importance of TAP training by providing information on their websites, including how TAP aids in a successful transition, and through other communications, such as brochures with similar information. In addition, DOD has assigned unit commanders the responsibility of ensuring that eligible servicemembers have full access to and successfully complete required TAP components. However, only the Army and the Air Force possess the capability to gauge the rate at which servicemembers under an individual unit commander participate in TAP. Specifically, the Army and Air Force provide commanders and their leaders information on their unit’s participation levels. In contrast, the Navy and the Marines do not have such systems. According to Navy officials, they obtained funding and plan to develop such a system by late June 2014 and plan to start using the data for oversight no later than fiscal year 2015. Marine officials said that because they have a long-standing culture of requiring servicemembers to attend TAP training, such an oversight mechanism was not necessary. In our 2002 and 2005 reviews of TAP, we found that servicemembers sometimes faced difficulties being released from military duties to attend TAP because of the priority accorded their military mission or the lack of supervisory support for TAP.on the pilot of the capstone event, DOD reported that ensuring servicemember participation in capstone events was a challenge for most of the services. According to DOD, lack of servicemembers’ awareness of this requirement and lack of commanders’ support may have hampered participation in capstone events. Without routine information on servicemembers’ participation by commander, it may be difficult to hold accountable those directly responsible for ensuring participation. Element 5: Measuring Performance and Evaluating Results Outputs are the direct products and services delivered by a program, and outcomes are the results of those products and services. See GAO, Performance Measurement and Evaluation: Definitions and Relationships, GAO-11-646SP (Washington, D.C.: May 2011). basic end-of-course evaluations to higher level impact evaluations.agencies plan to evaluate TAP at lower levels. Their evaluation plan includes (1) gauging participant reaction to all TAP components through end-of-course evaluations and (2) determining whether servicemembers met the career readiness standards prior to separation. Higher level evaluations are also important to help gauge the effectiveness of TAP, and the agencies have not demonstrated a strategic approach to planning such evaluations. Since the program is administered by multiple agencies, planning an evaluation is more challenging than if it were administered by a single agency. In December 2011, the agencies stated, in an internal report, that they would develop a methodology to assess the effectiveness of TAP by engaging new veterans approximately six months after they have separated from the military. Despite the modular nature of TAP, this report did not specify whether this type of higher level evaluation would assess all of TAP or certain components. DOL and VA are considering higher level evaluations for the employment workshop and VA benefits briefings. For example, DOL is considering different methodologies it could use to conduct an impact evaluation of the employment workshop. However, the agencies could not provide a rationale for not using higher-level evaluations to assess either TAP overall or some of the other TAP components and career-specific tracks. Best practices call for the development of a written evaluation strategy, which the agencies prepared for lower evaluation levels, but not for higher levels. Without a written evaluation strategy that identifies the TAP components to be evaluated, and includes the appropriate level and timing of the evaluation and methods, the agencies may miss important opportunities to obtain information needed to make fully informed decisions on whether and how to modify TAP and may either over invest or under invest in evaluations. DOD Lacks a Process to Assess the TAP Experience of National Guard and Reserve Members Based on GAO’s prior work and interviews with stakeholders, we identified a key remaining challenge; namely, that DOD lacks a process to assess the TAP experience of National Guard and Reserve members. DOD’s policy generally requires all eligible servicemembers, including members of the National Guard and Reserve, to be exposed to the entire TAP experience even if their circumstances differ. Unlike active duty servicemembers, many members of the National Guard and Reserve hold civilian occupations, and federal law protects their employment rights when they return from active duty. If they can document their civilian employment or acceptance to an institution of higher education or accredited technical training, members of the National Guard and Reserve and other eligible servicemembers can be exempted from attending the DOL employment workshop. Nevertheless, they are generally required to complete pre-separation counseling, the VA benefits I and II briefings and, under DOD policy, participate in the capstone event. Further, the policy states that they must attend the DOD core curriculum and applicable career specific tracks if they cannot meet the career readiness standards associated with these two components. However, according to many stakeholders that we talked with, including officials from the services and organizations that support members of the National Guard and Reserve and other servicemembers, DOD has not resolved long-standing concerns that eligible members of the National Guard and Reserve attend TAP offerings in locations and on a timetable that diminish their experience. Specifically, given that eligible National Guard and Reserve members generally demobilize at locations where they neither work nor live, they may be distracted by their desire to return home, which can affect how much the training benefits them. Separating servicemembers need to be aware of the benefits and services and know how to access them to take advantage of them, such as the Post-9/11 GI Bill. In a January 2013 report, the Defense Business Board Task Group recommended that eligible National Guard and Reserve members be afforded the opportunity to demobilize and transition in their home unit’s geographical area. According to stakeholders, eligible National Guard and Reserve members also typically have less time to complete the program because they often demobilize more quickly than active duty servicemembers separate. For example, according to DOD’s 2011 Handbook, the Reserve demobilization timeline makes scheduling a pre- separation counseling appointment not later than 90 days prior to leaving active duty impractical for Reserve members. According to officials from DOD and the services, they took steps to help meet the needs of National Guard and Reserve members eligible for TAP. For example, the agencies tailored the content of TAP components to better suit the needs of National Guard and Reserve members after However, only one analyzing the results of feedback from pilots of TAP.of the steps taken directly addresses the concerns of stakeholders related to the location and timing of TAP. Specifically, eligible members of the Army National Guard are allowed to participate in the DOL employment workshop and the capstone event in their home unit’s geographical area, according to DOD and Army officials. These eligible Army National Guard members will remain on active duty while participating in these two components. Nonetheless, DOD may not be well positioned to determine whether its actions successfully address the long-standing challenges in designing transition services for the National Guard and Reserve. This is because while DOD collects participant feedback through the online assessment, this tool does not ask whether the timing and location met the needs of servicemembers, including the National Guard and Reserve. Moreover, DOD’s planned survey to active duty servicemembers contains questions about the timing of TAP, but DOD has not drafted similar questions for its survey to the National Guard and Reserve. According to OMB, being able to track and measure specific program data can help agencies diagnose problems, identify drivers of future performance, evaluate risk, support collaboration, and inform follow-up actions. Without a systematic process targeted to identify any remaining long-standing concerns, DOD will not be able to make fully informed decisions about the extent to which eligible members of the National Guard and Reserve reap the full benefits of TAP. Conclusions Helping servicemembers successfully transition to civilian life after their service ends is an important government goal. The agencies undertook an ambitious effort to redesign the 1990s-era program to provide servicemembers with training and skills to successfully transition to civilian life. The increase in the number of servicemembers attending the revised TAP components, along with the significant coordination effort among multiple agencies and military services, pose significant implementation challenges. Efforts to implement the redesigned program continue to evolve. The importance of serving the ongoing and projected wave of servicemembers departing the military increases the urgency to fully implement TAP components as well as to finalize related policies and procedures. To the extent that the program remains behind schedule in implementing TAP, some transitioning servicemembers may be denied the full benefit of the revamped program. Because TAP is not fully implemented, the full impact of the revamped TAP, particularly the warm handover—a key effort to serve those deemed at greater risk of not being career ready—remains to be seen. The revamped TAP exhibits elements important for the effective implementation and evaluation of the program. Yet, we found room for improvement in several key areas. In particular, while federal law generally requires DOD to mandate participation in the employment workshop and DOD policy requires that all eligible transitioning servicemembers participate in TAP overall, the Navy and the Marines lack the ability to provide unit commanders and their leaders with information on participation levels of servicemembers under their command. Without the capability to gauge and report participation in TAP components by unit commander—those directly responsible for ensuring servicemember participation—leaders may find that holding them accountable is difficult. While the administration cites the revamped TAP as a key strategy of its crosscutting goal to improve the career readiness of veterans, it may not be positioned to determine the extent to which the program prepared veterans to pursue their post-separation goals. Without a written evaluation strategy that identifies the TAP components to be evaluated and includes the appropriate level and timing of the evaluation methods, the agencies may miss important opportunities to obtain information needed to make fully informed decisions on whether and how to modify TAP and may either over invest or under invest in evaluations. The circumstances of National Guard and Reserve members differ from those of other active duty servicemembers. Many stakeholders have raised concerns that these circumstances diminish eligible National Guard and Reserve members’ TAP experience. Absent efforts to systematically collect information about eligible National Guard and Reserve members’ experiences under the revamped program, DOD may not be well positioned to determine whether there are problems with how TAP is provided to these groups. Recommendations for Executive Action Based on our review, we recommend that the Secretary of Defense take the following actions: 1. To better ensure servicemember participation in and completion of TAP, direct the Under Secretary for Personnel and Readiness to require that all services provide unit commanders and their leaders information on TAP participation levels of servicemembers under their command, similar to that provided by the Army and Air Force. Such information could be used to help hold leaders accountable for ensuring TAP participation and completion. 2. To provide information on the extent to which the revamped TAP is effective, direct the Under Secretary for Personnel and Readiness to work with the partner agencies to develop a written strategy for determining which components and tracks to evaluate and the most appropriate evaluation methods. This strategy should include a plan to use the results of evaluations to modify or redesign the program, as appropriate. 3. To ensure that decisions about the participation of eligible members of the National Guard and Reserves in TAP are fully informed, direct the Under Secretary for Personnel and Readiness to systematically collect information on any challenges facing demobilizing members of the National Guard and Reserves regarding the logistics of the timing and location to attend TAP. For example, agencies might add questions to their online assessment tool specific to eligible members of the National Guard and Reserves who participate in TAP. Agency Comments and Our Evaluation We provided a draft of this report to DOD, VA, DOL, and SBA for comment. In its comments, DOD agreed with one recommendation and disagreed with the other two recommendations. VA generally agreed with our findings. Written comments from DOD and VA are reproduced in appendices III and IV. DOL and SBA did not provide comments, but all four agencies provided technical comments, which we incorporated into the final report as appropriate. DOD agreed with our recommendation to work with partner agencies to develop a written strategy for determining which components and tracks to evaluate and the most appropriate evaluation methods. DOD stated that it will continue to support interagency collaboration, which, as of January 31, 2014, has been formalized in a memorandum of understanding among the agencies administering TAP. DOD disagreed with our recommendation to require that all of the services provide unit commanders and their leaders information on TAP participation levels of servicemembers under their command. DOD stated that we justified the need for a mechanism to ensure a servicemember’s completion of TAP by commander based on concerns that without such a mechanism, commanders will not support the release of servicemembers to attend TAP. DOD also said that these concerns are based on observations that preceded full implementation of the capstone event. In October 2013, DOD launched the capstone as a mandatory process by which commanders verify TAP participation and positively affirm that servicemembers have or have not met career readiness standards. In addition, DOD said that capstone event implementation was accompanied by a communications campaign to inform both commanders and the services’ TAP providers of this key requirement. Finally, DOD said that capstone event completion is monitored departmentwide to ensure compliance. We agree with DOD that departmentwide monitoring of capstone event completion is an important element in helping ensure compliance. However, such monitoring does not provide routine information to commanders and their leaders and not all TAP locations will be monitored routinely. As noted in our report, based on the pilot of the capstone event last fall, DOD reported that ensuring servicemember participation in capstone events was a challenge for most of the services (with the exception of the Air Force), adding that this challenge is possibly due in part to lack of commanders’ support. Commander support for the program has been a long-standing challenge for the program. Therefore, we continue to believe that our recommendation is needed because it would establish an accountability mechanism for TAP that mirrors the level at which responsibility has been assigned. DOD has assigned unit commanders the responsibility of ensuring that eligible servicemembers have full access to and successfully complete required TAP components. Providing information to unit commanders and their leaders on TAP participation levels of servicemembers under their command—similar to that provided by the Army and Air Force—could thus promote accountability and oversight. Servicemember participation in TAP is generally required by law and DOD policy, and also relates to a Cross- Agency Priority Goal, which reinforces the need for an appropriate accountability mechanism. DOD also stated that the Navy is funding IT system upgrades to provide the ability to analyze and report program compliance at the command level. DOD added that the Marine Corps has mandated participation since the program's inception, and Marine Corps commanders leverage the capabilities of the personnel system to identify eligible Marines and schedule their TAP attendance. DOD stated that despite the limitations of a data tracking system that underreports compliance figures, the Marine Corps had the highest compliance rate of all services, as of December 2013. DOD said it recommends that department-wide compliance data be allowed to normalize to show true compliance percentages before the services are required to fund and implement expensive systems for the sole purpose of providing an additional mechanism for commander accountability. However, we continue to believe that our recommendation is needed. Three of the services either have or are working to develop the kind of accountability mechanism that we are recommending, but the Marine Corps does not plan to develop such a system. While DOD reports that the Marine Corps has the highest TAP compliance rate of all services, DOD did not provide any data on these rates. Finally, in response to DOD’s recommendation to wait until compliance data normalize, we believe that this would not be appropriate. We do not see any advantage to delaying the implementation of appropriate accountability mechanisms to provide assurance that the ongoing and projected wave of servicemembers departing the military receive the expected level of services from TAP. DOD disagreed with our recommendation to systematically collect information on challenges facing demobilizing members of the National Guard and Reserve regarding the timing and location to attend TAP. Specifically, DOD stated that it has long understood that the National Guard and Reserves operate under schedules and logistical constraints that differ from those of active duty servicemembers. DOD stated that several processes (which we note in our report) are already in place to identity and rectify any misalignments between TAP services and the needs of eligible National Guard and Reserve members, including regular coordinating councils that include representation from the National Guard and Reserve and TAP managers, as well as a participant assessment that provides ample opportunity for eligible National Guard and Reserve members to voice concerns. In addition, DOD highlighted the implementation of the military life cycle transition model in which DOD plans to provide the services, including to the National Guard and Reserve, with the latitude to optimize placement of certain elements of TAP throughout a servicemember's military service. According to DOD, the military life cycle transition model may help address some of the challenges related to the timing and location of program delivery. As we note in the report, full implementation of the military life cycle transition model is planned by October 2014. Nonetheless, at this time DOD is not fully positioned to know whether or not the revamped program addresses the long-standing challenges facing eligible members of the National Guard and Reserve in taking TAP. As we describe in the report, all eligible servicemembers, including the National Guard and Reserve members, have an opportunity to provide feedback about the instruction, content, and facilities for TAP. However, the participant assessment does not ask questions specific to the National Guard and Reserve experience even though they face different circumstances than active duty servicemembers. Given these differences, we continue to believe that unless DOD systematically collects information on any challenges facing eligible members of the National Guard and Reserve, DOD is at risk of not fully knowing whether the revamped TAP addresses long-standing challenges. In addition, the move to a military life cycle transition model could enable active duty servicemembers and members of the National Guard and Reserve to benefit from transition-related assistance throughout their military service. Recognizing that the military life cycle transition model is not implemented and specific policies and plans are not completed, many unknowns remain about how it will work in general and how National Guard and Reserve members will fare specifically. During our review, we asked DOD how this program would work in practice, including for National Guard and Reserve members, but DOD did not provide us details. We are sending copies of this report to appropriate congressional committees; the Secretary of Defense; the Secretary of Veterans Affairs, the Secretary of Labor; the Acting Administrator of the Small Business Administration; and other interested parties. In addition, this report will be available at no charge on GAO’s website at http://www.gao.gov. If you or your staff members have any questions regarding this report, please contact me at (202) 512-7215 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix V. Appendix I: Technical Appendix This appendix summarizes our work to assess efforts to implement and evaluate the revamped TAP. Elements and Relevant Attributes and the Extent to Which They Have Been Addressed For each of the five elements that we identified as important for the effective implementation and evaluation of TAP, we identified relevant attributes that we used to determine the extent to which the elements were addressed in the revamped TAP (see table 2). To determine the extent to which agencies have addressed each element and attribute, we made our assessments in two steps. First, an analyst reviewed all of the evidence. Based on that review, the analyst documented evidence that conformed to the elements and attributes and made and documented a judgment about the status of these efforts. Then a second analyst separately reviewed the assessment and documented their agreement or disagreement. The two analysts discussed any differences in their assessments and made changes based on their verbal resolution of those differences. We assessed the status of the agencies’ efforts to address each relevant attribute as “completed”, “underway”, or “not completed”. Based on this analysis, we then determined the status of efforts to address each respective attribute overall. For example, for the status of efforts to address an attribute overall to be considered “completed”, efforts to address each relevant attribute had to be completed. For the status of efforts to be considered “underway”, it had to be documented that efforts to address each relevant attribute were progressing toward being finalized, or were a mix of underway efforts and finalized efforts. For the status of efforts to be considered “not completed”, efforts to address at least one relevant attribute were not determined to be finalized or underway. We considered the agency to be “adequately addressing” the element if the overall status of the efforts to address the relevant attributes was determined to be completed or underway. However, if some attributes related to an element had efforts completed or underway to address them, but one or more other attributes did not have efforts completed or underway to address it (them), then we consider the overall efforts to address the element to be “mixed”. We used the following general decision rules for characterizing the status of efforts to address each attribute as “completed”, “underway”, and “not completed”: “Completed” means interagency partners (or relevant agency) have a system, policy, or procedure in place to address a relevant attribute. “Underway” means interagency partners (or relevant agency) have an authoritative internal or public document that demonstrate progress toward implementing actions to address the attribute (e.g., agencies have draft policies, operating procedures, or guidance, or they have interim systems in place and/or are developing systems). “Not completed” means that interagency partners (or relevant agency) have shown little to no action toward implementing actions to address the attribute, meaning they lack an authoritative internal or public document (e.g., no draft policies, operating procedures, or guidance or interim systems). As we conducted this analysis, we kept in mind how far along agencies (mainly DOD and the military services) are in implementing each component of TAP (informed by objective 1). Because agencies were in the process of implementing the revamped TAP and the program was not fully operational at the time of our review, we were not able to determine whether the policies and procedures are in place at all sites or if they are working as intended. Similarly, we were not able to comment on whether the changes to TAP are yielding desired benefits or improvements in outcomes. Appendix II: DOD Form 2958, Individual Transition Plan (ITP) Checklist Appendix III: Comments from the Department of Defense Appendix IV: Comments from the Department of Veterans Affairs Appendix V: GAO Contact and Staff Acknowledgments GAO Contact Andrew Sherrill, (202) 512-7215 or [email protected]. Staff Acknowledgments In addition to the contact named above, individuals making key contributions to this report were Patrick Dibattista, Assistant Director; Julianne Hartman Cutts; and James Whitcomb. In addition, key support was provided by James Bennett, Rachael Chamberlin, David Chrisinger, Brett Fallavollita, Alex Galuten, Kathy Leslie, David Moser, and Michael Silver.
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Over the next few years, over a million military servicemembers are expected to transition to civilian life and some may face challenges such as finding employment. To help them, TAP provides departing servicemembers employment assistance and information on VA benefits, among other things. Begun in 2011, efforts to revamp TAP are underway based on the VOW to Hire Heroes Act of 2011 and the administration's recommendations. The act also mandated GAO to review TAP. This report addresses: 1) the status of TAP implementation; 2) the extent to which elements of effective implementation and evaluation of TAP have been addressed; and 3) any challenges that may remain. To do this GAO identified five elements of effective implementation and evaluation based on relevant federal laws and previously established GAO criteria for training programs; reviewed related GAO work; assessed reports, plans, and policies provided by agencies that administer TAP; interviewed officials from entities that support servicemembers and veterans; and conducted four nongeneralizable discussion groups with servicemembers who had taken TAP at three military installations. The Departments of Defense (DOD), Labor (DOL), and Veterans Affairs (VA) have implemented most of the key components of the Transition Assistance Program (TAP), a gateway to information and services available to servicemembers transitioning to civilian life. However, the agencies are still in the process of implementing other key components of TAP. While originally planned for October 2013, agencies now plan to implement virtually all components by the end of March 2014, with full implementation expected by June 2014. Agencies' efforts are underway to adequately address three of five elements that GAO identified as important for effective implementation and evaluation of TAP: 1-Track attendance : DOD has systems to collect and report on attendance, which help measure the extent to which TAP achieves its attendance goals. 2-Ensure training quality : The agencies collect and plan to use participant feedback on instruction, content, and facilities to improve training. Each agency also plans to monitor its respective TAP components through site visits. 3-Assess career readiness : The agencies developed standards to assess servicemembers' career readiness. During a capstone assessment, commanders are expected to verify and document whether standards were met. Agencies' efforts to address the remaining two elements are mixed: 4-Ensure participation and completion : DOD has assigned commanders the responsibility for overseeing participation and has required the services to schedule training and communicate its importance to servicemembers. While the Army and Air Force gauge participation at the command level, the Navy and Marines lack a similar oversight mechanism. 5-Measure performance and evaluate results : The agencies have established certain measures to assess program performance, but their TAP evaluation approach is incomplete. For example, the agencies have established measures to track program outputs, such as the percentage of servicemembers who have participated in TAP. However, the agencies' efforts to evaluate TAP results have focused on basic end-of-course evaluations and gauging servicemembers' readiness prior to separation instead of higher impact program evaluations, such as assessing the effectiveness of TAP on servicemembers 6 months after they have separated from the military. According to agency officials, such evaluations are being considered for certain components of TAP, but they could not provide GAO with a justification for including or excluding specific components of TAP in their evaluation planning efforts. Based on GAO's prior work and according to officials from the agencies and organizations GAO spoke with, a key remaining challenge for TAP may be the unfavorable timing and location of program delivery for National Guard and Reserve members. Unlike active duty servicemembers, National Guard and Reserve members receive TAP services closer to their transition and in locations that are generally neither where they work nor live. As a result, they may be distracted and have less time to benefit from TAP services. DOD is not well positioned to verify these concerns because it is not collecting data about these members' experiences with the timing and location of TAP service delivery.
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Background In October 1990, the Federal Accounting Standards Advisory Board (FASAB) was established by the Secretary of the Treasury, the Director of the Office of Management and Budget (OMB), and the Comptroller General of the United States to consider and recommend accounting standards to address the financial and budgetary information needs of the Congress, executives agencies, and other users of federal financial information. Using a due process and consensus building approach, the nine-member Board, which has since its formation included a member from DOD, recommends accounting standards for the federal government. Once FASAB recommends accounting standards, the Secretary of the Treasury, the Director of OMB, and the Comptroller General decide whether to adopt the recommended standards. If they are adopted, the standards are published as Statements of Federal Financial Accounting Standards (SFFAS) by OMB and by GAO. In addition, the Federal Financial Management Improvement Act of 1996, as well as the Federal Managers’ Financial Integrity Act, requires federal agencies to implement and maintain financial management systems that will permit the preparation of financial statements that substantially comply with applicable federal accounting standards. Issued in December 1995 and effective beginning with fiscal year 1997, SFFAS No. 5, Accounting for Liabilities of the Federal Government, requires the recognition of a liability for any probable and measurable future outflow of resources arising from past transactions. The statement defines probable as that which is likely to occur based on current facts and circumstances. It also states that a future outflow is measurable if it can be reasonably estimated. The statement recognizes that this estimate may not be precise and in such cases, it provides for recording the lowest estimate and disclosing in the financial statements the full range of estimated outflows that are likely to occur. SFFAS No. 6, Accounting for Property, Plant, and Equipment, which is effective beginning in fiscal year 1998, deals with various accounting issues pertaining to PP&E. This statement establishes several new accounting categories of PP&E, collectively called stewardship PP&E. Other PP&E is referred to as general PP&E. One of the new stewardship categories—federal mission PP&E—is defined as tangible items owned by a federal government entity, principally DOD, that have no expected nongovernmental use, are held for use in the event of emergency, war, or natural disaster, and have an unpredictable useful life. Federal mission PP&E, which includes ships, submarines, aircraft, and combat vehicles, is a major part of DOD’s total PP&E. SFFAS No. 6 also provides information on how SFFAS No. 5’s standard on liabilities should be applied to PP&E. Specifically, SFFAS No. 6 discusses how to recognize the liability for the clean up of hazardous waste in PP&E. While this statement modifies SFFAS No. 5 with respect to the timing of liability recognition for general PP&E, it has no effect on accounting for liabilities related to aircraft and other federal mission PP&E. Objectives, Scope, and Methodology We undertook this review to assist DOD in its efforts to meet the new federal accounting standard, SFFAS No. 5, and because of our responsibility to audit the federal government’s consolidated financial statements beginning with fiscal year 1997. Our objectives were to determine (1) the status of DOD’s efforts to implement the new federal accounting standard for disclosure of liabilities, such as aircraft disposal, and (2) whether an estimate of the minimum disposal liability for aircraft, including the removal and disposal of hazardous materials, could be made. The following was done to accomplish our objectives. To assess the status of DOD’s efforts to implement SFFAS No. 5, we reviewed DOD regulations and interviewed officials from the DOD Comptroller’s office. To gain an understanding of the procedures and the financial and logistical management information systems that can be used to accumulate and report on aircraft disposal costs, we (1) examined the management and financial reporting for these programs used by the services, (2) reviewed applicable DOD and service instructions and regulations, and (3) interviewed DOD, Air Force, Army, and Navy officials. To determine if the liability is reasonably estimable, we identified the financial and logistical management information systems and reporting mechanisms in place that contain information about the costs of aircraft disposal, including demilitarization and hazardous material disposal processes. We visited DOD’s designated aircraft storage, reclamation, and disposal facility at the Aerospace Maintenance and Regeneration Center (AMARC) where data were readily available for addressing removal and disposal costs of older, out of service aircraft systems. To determine if the liability could be estimated for newer aircraft, we selected five aircraft for review. The five aircraft selected were the Air Force’s F-16 and B-1B, the Navy’s F-14 and F-18, and the Army’s AH-64 Apache Helicopter. We chose these five aircraft because they represent the primary fighter or attack and bomber aircraft for each of the services, have the largest number in their class, and represent about 17 percent of the services’ combined active and inactive inventory. Because environmental costs are more variable and are likely to raise more complex estimation issues, we performed a more in-depth analysis of these costs. Using data initially obtained at AMARC, information in the DOD hazardous material disposal manual, and visits to maintenance depots, we prepared a list of hazardous materials associated with each of these aircraft. On a case-by-case basis, we then obtained depot level officials’ concurrence that these items represent the primary hazardous material on each of these aircraft. To compute the cost of removing hazardous materials from each aircraft, we reviewed documents that stated a standard or estimated removal time for each of the hazardous material items from the depot responsible for program depot maintenance on the applicable aircraft and AMARC’s hourly labor rate. We did not independently verify the data obtained from the inventory and financial systems or the reported removal times. We interviewed the services’ environmental engineers to determine which hazardous materials require disposal. To determine the costs of disposing of these materials, we reviewed disposal and shipping records at AMARC and the various depots. For those materials that were not scheduled for disposal, we interviewed various depot personnel to determine their methods for reusing and recycling them. We also discussed disposal procedures with various offices of the Defense Reutilization and Marketing Service. During our review, we contacted personnel and/or conducted work at various locations including the Army Aviation and Troop Command Headquarters, St. Louis, Missouri; Aerospace Maintenance and Regeneration Center, Davis-Monthan Air Force Base, Arizona; Air Logistics Centers at Hill Air Force Base, Utah, and Tinker Air Force Base, Oklahoma; Office of the Chief of Naval Operations; Naval Aviation Depots at Jacksonville, Florida and North Island, California; Corpus Christi Army Depot, Corpus Christi, Texas; offices of the Defense Reutilization and Marketing Service, Battle Creek, Michigan; and applicable headquarters offices in the Washington, D.C., area. We conducted our review from July 1996 through June 1997 in accordance with generally accepted government auditing standards. We provided a draft of this report to the Department of Defense for review and comment. We received oral comments which have been incorporated as appropriate. DOD Has Not Implemented SFFAS No. 5 Although SFFAS No. 5 is effective beginning with fiscal year 1997, as of the end of the fiscal year on September 30, 1997, DOD had not established a policy to implement this federal accounting standard. On September 30, 1997, the DOD Comptroller’s office posted revisions to the electronic version of DOD’s Financial Management Regulation to include SFFAS Nos. 1 through 4, but SFFAS No. 5 was not included. In addition, the DOD Comptroller, who is responsible for developing and issuing guidance on accounting standards, and the Under Secretary of Defense (Acquisition and Technology), who is responsible for the operational activities associated with aircraft disposal, have not provided implementation guidance to the services to assist them in estimating the disposal costs for aircraft. Service officials stated that they are reluctant to estimate a liability for their aircraft until they receive DOD-wide guidance. Unless prompt action to implement this standard is taken, it is unlikely that DOD’s fiscal year 1997 financial statements will include an estimate of aircraft disposal costs as required. Aircraft Disposal Liability Has Been Incurred One of the key criteria cited in SFFAS No. 5 for a liability to be reported is that a future cost is probable—that is, the future outflow of resources is likely to occur. While the likelihood of a future outflow may be difficult to determine and an entity may have difficulty deciding whether to record a liability for certain events, DOD continually disposes of aircraft and has an amount for disposal costs in its annual budget. Thus, because it is known at the time of acquisition that costs will be incurred for the disposal of aircraft, the probability criterion for recording a liability is met. The Congress has also recognized that disposal costs will be incurred and has emphasized the importance of accumulating and considering this information. For example, the National Defense Authorization Act for Fiscal Year 1995 requires the Secretary of Defense to determine, as early in the acquisition process as feasible, the life-cycle costs for major defense acquisitions, including the materials to be used and methods of disposal. The life-cycle cost estimates are required before proceeding with the major acquisition. Aircraft Disposal Process All aircraft are eventually disposed of using the same basic processes. Any estimate of the disposal liability must take into account these processes and use them as the basis for determining costs. The disposal process starts with the decision to remove an aircraft from service, referred to as retirement (Army), decommissioning (Air Force), and striking (Navy) of military aircraft. Aircraft disposal consideration begins when the services prepare an updated force structure plan. The plan shows the projected requirements for each type of aircraft and includes new procurement and various attrition factors including crashes, programmed retirements, airframe stress tests, parts reclamation needs, and foreign military sales. Active aircraft not needed to meet the services’ current and forecasted requirements are sent to AMARC, DOD’s designated storage and disposal facility for aircraft for temporary or long-term storage and eventual disposal. Aircraft arriving at AMARC are either placed in a flyable or temporary hold status, prepared for foreign military sales, salvaged for parts, or placed into long-term storage awaiting either eventual disposal or reuse determination. AMARC officials stated that, in general, planes that undergo the storage process are not recalled and are ultimately disposed of through sales or salvage. Once the military services have determined no further need exists for the aircraft, they are released for disposal. These aircraft and related parts are subjected to demilitarization processes to prevent further military use before they are transferred to the Defense Reutilization and Marketing Service (DRMS) for sale as scrap.Demilitarization may take place at the air base, at AMARC, or at the local DRMS field office. Part of the demilitarization process involves removing all remaining hazardous materials from the aircraft. Inventory of Aircraft Aircraft acquired by the services are, in general, considered mission assets. The Air Force’s Reliability and Maintainability Information System (REMIS), the Navy’s Aircraft Inventory Reporting System (AIRS), the Army’s Continuing Balance System-Expanded (CBS-X), and AMARC’s Aircraft Status Directory identify the number of active and inactive aircraft and are used by the services to keep track of their aircraft inventories. As shown in table 1, DOD reported about 18,000 active aircraft as of September 30, 1996, the most recent data available. The aircraft inventory serves as the basis for estimating the disposal liability although factors such as foreign military sales would have to be considered in adjusting the number of aircraft. According to a March 1997 AMARC report, about 4 percent of AMARC’s inventory at any given time is scheduled for foreign military sales. Aircraft lost during operations, however, are generally replaced to maintain the inventory at certain levels. As a result, operational losses may not reduce the total liability for aircraft disposal. Aircraft Disposal Liability Could Be Estimated The second key criterion in SFFAS No. 5 for reporting of a liability is that an amount be reasonably estimable. Information is available to develop cost estimates for each of the major aircraft disposal processes described in the previous section—demilitarization, storage maintenance, and hazardous materials removal and disposal. These processes account for most of the aircraft disposal costs. Our review focused on five aircraft (the Air Force’s F-16 and B-1B, the Navy’s F-14 and F-18, and the Army’s Apache Helicopter). Although data were available for each of the disposal processes, we performed a more detailed analysis of the costs associated with the removal and disposal of hazardous materials because these costs are more variable and likely to present more complex estimation issues. The information in the following sections indicates the types and sources of information available for DOD to develop an aircraft disposal cost estimate. As stated in SFFAS No. 5, this process may result in a range of potential aggregate costs, the lowest of which should be recorded unless an amount within the range which is most likely to occur is estimable. Estimated Demilitarization Costs Demilitarization includes removing weapons and other designated items from the aircraft and then taking the aircraft off line. Other demilitarization actions include removing equipment that has, directly or indirectly, a significant military utility or capacity, such as sensitive radar equipment. A salvage or residual value for the aircraft was deducted from the demilitarization costs, since historically the remains of aircraft are sold as scrap at the time of disposal. As shown in table 2, demilitarization costs varied considerably for the three aircraft in our review for which this information was readily available from program offices. Although the B-1B and the Apache Helicopter are newer aircraft for which demilitarization plans and costs have not yet been developed, disposal cost estimates could be based on cost experience for other aircraft with similar missions. AMARC officials stated that disposal tasks are generally similar among aircraft although the quantity and complexity of specific items may differ. For new weapons systems, including aircraft, the disposal costs, including demilitarization costs, are to be developed as part of the life-cycle costs required by the National Defense Authorization Act for Fiscal Year 1995. Jacksonville Naval Depot officials stated that the demilitarization cost for the F-14 was significantly more than the other two aircraft because of the complexity of the disposal work effort and the related costs. Estimated Cost to Maintain Aircraft in Storage Aircraft are stored at AMARC’s long-term storage facility. All openings, cracks, and joints have to be sealed and delicate surfaces protected from the hot sun, wind, and sand. The preservation process is repeated every 4 to 5 years to ensure that each aircraft is adequately protected. According to AMARC’s costing system, the maintenance costs of aircraft in long-term storage are about $400 per aircraft per year. According to an AMARC official, aircraft, on average, are kept in long-term storage for 20 years. They also stated that, in general, planes that undergo the storage process are not recalled and are ultimately disposed of through sales or salvage. Such storage costs could result in a significant liability. For example, if the current active inventory of 18,000 aircraft were all maintained in storage for the average of 20 years and AMARC’s estimated maintenance cost of $400 per aircraft per year were used, the storage costs would be at least $140 million. Removal and Disposal of Hazardous Materials All five aircraft types we reviewed contained hazardous materials that must be removed, and if necessary, disposed of when the aircraft are taken out of service. Some hazardous materials can be recycled and reused multiple times, but the materials may ultimately have to be disposed of appropriately. For the five aircraft, sufficient information was available in DOD’s and the services’ financial and management information systems to estimate a cost for the removal of hazardous materials contained in these aircraft. Costs associated with disposal of these materials are currently insignificant, but will need to be considered based on assumptions of final disposal methods. There are numerous sources available to DOD for identifying which materials used in aircraft are considered hazardous and have to be cleaned up before aircraft disposal. DOD Manual 4160.21-M, known as the Property Disposal Manual and 40 Code of Federal Regulations (C.F.R.) 261 identify which materials are considered hazardous. Environmental managers at the services’ program offices and at the depots responsible for the aircraft, as well as maintenance personnel, are knowledgeable about the hazardous materials unique to specific aircraft. In addition, environmental managers at various Defense Reutilization and Marketing Offices (DRMOs) are familiar with the hazardous materials on aircraft. The aircraft we reviewed contain various hazardous materials, as shown in table 3. See appendix I for definitions of these materials. Some hazardous materials in aircraft are not shown in the above table. For example, there are many items on the aircraft, such as cadmium-plated bolts and other small items, that are too numerous to separately remove and account for during the disposal process. Because the cadmium plated items are sold for scrap and the specific items and quantities are not separately identified, they were not included in the sample aircraft analysis. However, DOD and the services would have to consider the significance of such items in the aggregate on a servicewide or DOD-wide basis. Information on the removal costs of hazardous materials in older aircraft is generally available at AMARC and is based on its experience in aircraft disposal. However, AMARC officials said they did not yet have significant experience in dismantling and disposing of the five aircraft in our review. Therefore, the officials suggested that a reasonable estimation approach would be to use removal times that are reported by the cognizant depots that perform maintenance on these systems. The removal times for each hazardous material can then be multiplied by AMARC’s hourly labor rate. Using this estimation method, table 4 shows the estimated cost of removing hazardous materials from the five aircraft. The wide variance in hazardous material removal costs can be accounted for by differences in the size and complexity of the five aircraft. For example, the B-1B weighs about 190,000 pounds compared to the smaller F-16 which weighs about 18,000 pounds. Moreover, the B-1B has over 1,000 items associated with pyrotechnics that cost an estimated $92,000 to remove. The cost to remove pyrotechnics from the F-16 is only about $1,700 per aircraft. Similarly, it takes a significant number of staff hours, estimated at about $11,000, to remove the fuel from the B-1B tanks and fuel lines and to take the protective measures for the fuel system. For the F-16, the same procedures take just a few hours at an estimated cost of about $200. The fuel is removed from the aircraft because it can be reused. The Apache Helicopter hazardous material removal cost estimate is much less than for the other aircraft because it contains considerably less hazardous material. For example, it costs an estimated $68 per aircraft to remove pyrotechnics from the Apache compared to about $1,700 to remove pyrotechnics from an F-16. The F-16 cost estimate includes removing one or two ejection seats and canopies and related detonating cord devices, compared to removing only emergency escape explosive bolts and related material for the Apache’s crew doors. For some mission assets, such as nuclear submarines, the actual hazardous material disposal costs are significant. However, unlike the removal costs, hazardous material disposal costs for the five aircraft in our review appear not to be significant because these materials are often reutilized, recycled, consumed (as is the case for fuel), or sold. Also, DOD does not track disposal costs by specific aircraft system since hazardous materials are disposed of in bulk. For example, AMARC transfers its nonrecyclable fuel to Davis-Monthan Air Force Base, which then disposes of it along with the base’s waste fuel through its bulk disposal contract. For the first 6 months of fiscal year 1996, AMARC paid Davis-Monthan less than $54,000 to dispose of all of its hazardous material. However, although recycling and reuse accounts for much of the hazardous material disposal costs, currently the possibility that reuse or recycling needs and capacity will change in the future must be considered in estimating the ultimate disposal costs for hazardous materials. Reporting Total Disposal Costs by Future Time Periods Would Be Useful DOD officials have pointed out that the total disposal cost estimate for aircraft will result in a significant liability—much of which would not require outlays in the current year. Thus, one way to provide a proper context for this reported liability and make it more meaningful to decisionmakers would be to, in a footnote to the financial statements, provide a breakdown of the liability based on the approximate time periods the aircraft are expected to be taken out of service. Table 5 is a simplified illustration of how the aircraft disposal liability could be reported by time period. For the purposes of this illustration, the following assumptions were used: (1) all aircraft had the same disposal costs, (2) 50 percent of the aircraft were currently awaiting disposal and the remaining aircraft were to be disposed of over the next 10 years, and (3) the total estimated liability was $500. This information could provide an important context for congressional and other budget decisionmakers on the total liability by showing the potential annual impact of the actions that have already occurred or are expected to occur during various budget periods including those outside the annually submitted Future Years Defense Program. Further, if the time periods used to present these data are consistent with budget justification documents, such as DOD’s Future Years Defense Program, this type of disclosure would provide a link between budgetary and accounting information, one of the key objectives of the CFO Act. Conclusions As of September 30, 1997, DOD had not incorporated SFFAS No. 5 in its Financial Management Regulation. In addition, the DOD Comptroller and the Under Secretary of Defense (Acquisition and Technology) had not issued implementation guidance to the services to assist them in estimating aircraft disposal costs. Such costs are both probable and estimable and therefore meet the criteria stated in SFFAS No. 5 for reportable liabilities. DOD and the military services have information available to develop cost estimates on each of the major aircraft disposal processes. Development of the needed policy and implementing guidance is necessary to help ensure that an estimate of aircraft disposal costs is recorded in DOD’s fiscal year 1997 financial statements as required. Moreover, life-cycle cost estimates that include disposal costs will provide important information to the Congress and other decisionmakers on the true costs of aircraft as well as other weapon systems. Recommendations We recommend that you ensure that the DOD Comptroller incorporate SFFAS No. 5 in DOD’s Financial Management Regulation, the DOD Comptroller and the Under Secretary of Defense (Acquisition and Technology) promptly issue joint implementing guidance for the services on the SFFAS No. 5 requirements for recognition of a liability for aircraft disposal costs, and the DOD Comptroller include the estimated aircraft disposal liability in DOD’s fiscal year 1997 financial statements. Agency Comments and Our Evaluation In commenting on a draft of this report, Department of Defense officials concurred with our recommendations that SFFAS No. 5 be incorporated in DOD’s Financial Management Regulation and that joint implementing guidance be issued promptly on the SFFAS No. 5 requirements for recognition of a liability for aircraft disposal costs. In addition, DOD stated that current disposal cost estimates can be reasonably determined for aircraft that have been in the active inventory for some time. However, DOD stated that it would be necessary to delay the reporting of the aircraft disposal liability until fiscal year 1998 because the development and coordination of procedures and reporting guidance would take time to complete. They also stated that the cleanup cost provisions in SFFAS No. 6 must be considered. SFFAS No. 5 was issued almost 2 years ago, to allow agencies ample time to develop implementing policies and procedures prior to its fiscal year 1997 effective date. As stated in the report, information is available on all of the major aircraft disposal processes to develop a reasonable estimate of these costs. Such an estimate need not be precise—SFFAS No. 5 permits the reporting of a range. Also, as noted in this report, the cleanup cost provisions of SFFAS No. 6 do not affect the reporting of the aircraft disposal liability. Accordingly, we believe that DOD, with a concentrated effort, can develop an estimate of aircraft disposal costs for its fiscal year 1997 financial statements. This report contains recommendations to you. The head of a federal agency is required by 31 U.S.C. 720 to submit a written statement on actions taken on these recommendations. You should submit your statement to the Senate Committee on Governmental Affairs and the House Committee on Government Reform and Oversight within 60 days of the date of this report. A written statement also must be sent to the House and Senate Committees on Appropriations with the agency’s first request for appropriations made over 60 days after the date of this report. We are sending copies of this report to the Chairmen and Ranking Minority Members of the House and Senate Committees on Appropriations, the House and Senate Committees on the Budget, the Senate Committee on Armed Services, the House Committee on National Security, the Senate Committee on Governmental Affairs, the House Committee on Government Reform and Oversight and its Subcommittee on Government Management, Information, and Technology, and the Director of the Office of Management and Budget. We are also sending copies to the Acting Under Secretary of Defense (Comptroller), the Air Force Assistant Secretary for Financial Management and Comptroller, the Army Assistant Secretary for Financial Management and Comptroller, the Navy Assistant Secretary for Financial Management and Comptroller, the Under Secretary of Defense (Acquisition and Technology), the Deputy Under Secretary of Defense for Environmental Security, and the Acting Director, Defense Finance and Accounting Service. Copies will be made available to others upon request. Please contact me at (202) 512-9095 if you have any questions concerning this report. Major contributors to this report are listed in appendix II. Hazardous Materials in Aircraft Hazardous material - Any waste that, because of its quantity, concentration or toxicity, corrosiveness, mutagenicity or flammability, or physical, chemical, or infectious characteristics may (1) cause, or significantly contribute to, an increase in mortality or an increase in serious irreversible or incapacitating reversible illness or (2) pose a substantial present or potential hazard to human health or the environment when improperly treated, stored, transported, disposed of, or otherwise managed. Some of the hazardous materials contained in the aircraft we reviewed are discussed below. Batteries - Batteries consist of the following types: lead-acid, lithium-sulfur dioxide, magnesium, silver-bearing, mercury, and nickel cadmium. Unless batteries are to be recycled or reused, they must be turned in as hazardous material or hazardous waste. Composites - Carbon composite fiber material made of long carbon fibers mixed with bonding and hardening agents, such as epoxy resins. The health hazards associated with composite fibers appear to be similar to the effects of fiberglass, including inhalation of the fibers, which can cause bronchial irritation. Coolant - A fluid that circulates through a machine or over some of its parts in order to draw off heat. This includes chemical substances used in aircraft for cooling radar and related equipment. Certain forms of this material may be harmful if skin contact occurs. Fire suppressant - Substances used to keep materials on aircraft, such as fuel, from igniting and burning. Halon, one such suppressant, is an ozone-depleting substance that is reclaimed or recovered. Fuel cells - Fuel cells, which hold fuel, are not in themselves considered hazardous material, but because they are contaminated with fuel they can become hazardous. Aviation fuel contains benzene and toluene, both hazardous materials. Hydrazine - Supplemental liquid propellant, found only on the F-16, used to power an emergency power unit in the event of main engine failure. Hydrazine is an extremely dangerous material if inhaled and has to be specially handled during transfer by teams dressed in protective gear. Magnesium Thorium - Alloy of thorium and magnesium used to produce a strong, lightweight aircraft component. Thorium presents an internal and external radiation hazard. Petroleum, oil, and lubricants - Includes jet fuel, hydraulic fluid, antifreeze products, and other lubricants found on aircraft. In some states, these products are not considered hazardous. Pyrotechnics - Explosive devices used to jettison the canopy and activate the pilot’s ejection seat. On helicopters, these devices are used to shear off hinge pins on the fuselage doors to enable crew to extricate themselves in the event of a crash-landing. Major Contributors to This Report Accounting and Information Management Division, Washington, D.C. Kansas City Office Dieter M. Kiefer, Assistant Director Marshall S. Picow, Auditor in Charge Gary L. Nelson, Auditor Darryl S. Meador, Evaluator The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 37050 Washington, DC 20013 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (202) 512-6061, or TDD (202) 512-2537. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.
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Pursuant to a legislative requirement, GAO reviewed: (1) the status of the Department of Defense's (DOD) efforts to implement the new federal accounting standard for disclosure of liabilities, such as aircraft disposal; and (2) whether an estimate of the minimum disposal liability for aircraft, including the removal and disposal of hazardous materials, could be made. GAO noted that: (1) DOD has not implemented the federal accounting standard that requires recognizing and reporting liabilities such as those associated with aircraft disposal, nor has DOD provided guidance to the military services; (2) aircraft disposal is an ongoing process and the cost can be reasonably estimated; (3) accordingly, these activities meet the criteria for a reportable liability; (4) information on the three major disposal processes--demilitarization, storage and maintenance, and hazardous materials removal and disposal--is available to develop cost estimates; (5) Congress has recognized the importance of accumulating and considering disposal cost information; and (6) in the National Defense Authorization Act for Fiscal Year 1995, Congress required DOD to develop life-cycle environmental costs, including demilitarization and disposal costs, for major defense acquisition programs.
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SECTION 1. APPLICATION OF INDEMNIFICATION AUTHORITY.
(a) In General.--The discretionary authority under Public Law 85-
804 (50 U.S.C. 1431 et seq.) includes authority for the President to
provide under such law for the indemnification of a contractor or
subcontractor in connection with procurement of an anti-terrorism
technology or an anti-terrorism service from the contractor or
subcontractor for the purpose of preventing, detecting, identifying,
otherwise deterring, or recovering from acts of terrorism.
(b) Exercise of Authority.--The authority to provide under Public
Law 85-804 for indemnification of contractors and subcontractors in
connection with procurements described in subsection (a) includes
authority for the President to provide for--
(1) indemnification for economic damages not fully covered
by private liability insurance within the scope of the losses
or damages of the indemnification coverage;
(2) negotiation for inclusion of an indemnification clause
in a contract prior to the commencement of the performance of
the contract;
(3) coverage of information technology used to prevent,
detect, identify, otherwise deter, or recover from acts of
terrorism; and
(4) applicability of the authority to procurements by the
United States Postal Service.
SEC. 2. APPLICATION OF INDEMNIFICATION AUTHORITY TO STATE AND LOCAL
GOVERNMENT CONTRACTORS.
(a) Authority.--Subject to the limitations of subsection (b), the
President may exercise the discretionary authority under Public Law 85-
804 (50 U.S.C. 1431 et seq.) so as to provide under such law for
indemnification of contractors and subcontractors in procurements by
States or units of local government of an anti-terrorism technology or
an anti-terrorism service for the purpose of preventing, detecting,
identifying, otherwise deterring, or recovering from acts of terrorism.
(b) Limitations.--Any authority that is delegated by the President
under subsection (a) to the head of a Federal agency to provide for the
indemnification of contractors and subcontractors under Public Law 85-
804 (50 U.S.C. 1431 et seq.) for procurements by States or units of
local government may be exercised only--
(1) in the case of a procurement by a State or unit of
local government that--
(A) is made under a contract awarded pursuant to
section 3; and
(B) is approved, in writing, for the provision of
indemnification by the President or the official
designated by the President under section 3(a); and
(2) with respect to--
(A) amounts of losses or damages not fully covered
by private liability insurance and State or local
government-provided indemnification; and
(B) liabilities of a contractor or subcontractor
not arising out of willful misconduct or lack of good
faith on the part of the contractor or subcontractor,
respectively.
SEC. 3. PROCUREMENTS OF ANTI-TERRORISM TECHNOLOGIES AND ANTI-TERRORISM
SERVICES BY STATE AND LOCAL GOVERNMENTS THROUGH FEDERAL
CONTRACTS.
(a) In General.--
(1) Establishment of program.--The President shall
designate an officer or employee of the United States to
establish, and the designated official shall establish, a
program under which States and units of local government may
procure through contracts entered into by the designated
official anti-terrorism technologies or anti-terrorism services
for the purpose of preventing, detecting, identifying,
otherwise deterring, or recovering from acts of terrorism.
(2) Designated federal procurement official for program.--
In this section, the officer or employee designated by the
President under paragraph (1) shall be referred to as the
``designated Federal procurement official''.
(3) Authorities.--Under the program, the designated Federal
procurement official may, but shall not be required to, award
contracts using the same authorities as are provided to the
Administrator of General Services under section 309(b)(3) of
the Federal Property and Administrative Services Act (41 U.S.C.
259(b)(3)).
(4) Offers not required to state and local governments.--A
contractor that sells anti-terrorism technology or anti-
terrorism services to the Federal Government may not be
required to offer such technology or services to a State or
unit of local government under the program.
(b) Responsibilities of the Contracting Official.--In carrying out
the program established under this section, the designated Federal
procurement official shall--
(1) produce and maintain a catalog of anti-terrorism
technologies and anti-terrorism services suitable for
procurement by States and units of local government under this
program; and
(2) establish procedures in accordance with subsection (c)
to address the procurement of anti-terrorism technologies and
anti-terrorism services by States and units of local government under
contracts awarded by the designated official.
(c) Required Procedures.--The procedures required by subsection
(b)(2) shall implement the following requirements and authorities:
(1) Submissions by states.--
(A) Requests and payments.--Except as provided in
subparagraph (B), each State desiring to participate in
a procurement of anti-terrorism technologies or anti-
terrorism services through a contract entered into by
the designated Federal procurement official under this
section shall submit to that official in such form and
manner and at such times as such official prescribes,
the following:
(i) Request.--A request consisting of an
enumeration of the technologies or services,
respectively, that are desired by the State and
units of local government within the State.
(ii) Payment.--Advance payment for each
requested technology or service in an amount
determined by the designated official based on
estimated or actual costs of the technology or
service and administrative costs incurred by
such official.
(B) Other contracts.--The designated Federal
procurement official may award and designate contracts
under which States and units of local government may
procure anti-terrorism technologies and anti-terrorism
services directly from the contractors. No
indemnification may be provided under Public Law 85-804
pursuant to an exercise of authority under section 2
for procurements that are made directly between
contractors and States or units of local government.
(2) Permitted catalog technologies and services.--A State
may include in a request submitted under paragraph (1) only a
technology or service listed in the catalog produced under
subsection (b)(1).
(3) Coordination of local requests within state.--The
Governor of a State may establish such procedures as the
Governor considers appropriate for administering and
coordinating requests for anti-terrorism technologies or anti-
terrorism services from units of local government within the
State.
(4) Shipment and transportation costs.--A State requesting
anti-terrorism technologies or anti-terrorism services shall be
responsible for arranging and paying for any shipment or
transportation of the technologies or services, respectively,
to the State and localities within the State.
(d) Reimbursement of Actual Costs.--In the case of a procurement
made by or for a State or unit of local government under the procedures
established under this section, the designated Federal procurement
official shall require the State or unit of local government to
reimburse the Department for the actual costs it has incurred for such
procurement.
(e) Time for Implementation.--The catalog and procedures required
by subsection (b) of this section shall be completed as soon as
practicable and no later than 210 days after the enactment of this Act.
SEC. 4. CONGRESSIONAL NOTIFICATION.
(a) In General.--The President shall ensure that an appropriate
officer of the United States submits to the appropriate committees of
Congress a written notification of each contract for a procurement
described in this Act for which indemnification is provided under
Public Law 85-804 within 30 days after the contract is entered into.
(b) Congressional Committees.--In this section, the term
``appropriate committees of Congress'' means the following:
(1) The Committee on Appropriations, Committee of Armed
Services, and Committee on Governmental Affairs of the Senate.
(2) The Committee on Appropriations, Committee of Armed
Services, and Committee on Government Reform of the House of
Representatives.
SEC. 5. DEFINITIONS.
In this Act:
(1) Anti-terrorism technology and service.--The terms
``anti-terrorism technology'' and ``anti-terrorism service''
mean any product, equipment, or device, including information
technology, and any service, system integration, or other kind
of service (including a support service), respectively, that is
related to technology and is designed, developed, modified, or
procured for the purpose of preventing, detecting, identifying,
otherwise deterring, or recovering from acts of terrorism.
(2) Act of terrorism.--The term ``act of terrorism'' means
a calculated attack or threat of attack against any person,
property, or infrastructure to inculcate fear, or to intimidate
or coerce a government, the civilian population, or any segment
thereof, in the pursuit of political, religious, or ideological
objectives.
(3) Information technology.--The term ``information
technology'' has the meaning such term in section 11101(6) of
title 40, United States Code.
(4) State.--The term ``State'' includes the District of
Columbia, the Commonwealth of Puerto Rico, the Commonwealth of
the Northern Mariana Islands, and any territory or possession
of the United States.
(5) Unit of local government.--The term ``unit of local
government'' means any city, county, township, town, borough,
parish, village, or other general purpose political subdivision
of a State; an Indian tribe which performs law enforcement
functions as determined by the Secretary of the Interior; or
any agency of the District of Columbia Government or the United
States Government performing law enforcement functions in and
for the District of Columbia or the Trust Territory of the
Pacific Islands.
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States that the discretionary authority of the President to provide indemnification for government contractors in the interest of national defense shall include the authority to indemnify a contractor or subcontractor in connection with the procurement of an anti-terrorism technology or service for preventing, detecting, identifying, deterring, or recovering from acts of terrorism. Authorizes the President, under such authority, to provide for: (1) indemnification for economic damages not fully covered by private liability insurance; and (2) the applicability of such authority to procurements by the U.S. Postal Service.Authorizes the President to indemnify State and local contractors in the procurement of an anti-terrorism technology or service, with limitations.Requires the President to designate an official to establish a program under which States and local governments may procure, through contracts entered into by such official, anti-terrorism technologies or services. Requires the designated official to produce and maintain a catalog of anti-terrorism technologies and services suitable for such procurement. Outlines required procedures for participating States and local governments.Directs the President to ensure that an appropriate officer of the United States notifies specified congressional committees of each procurement contract providing such indemnification.
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SECTION 1. SHORT TITLE.
This Act may be cited as the ``Los Angeles Homeless Veterans
Leasing Act of 2015''.
SEC. 2. AUTHORITY TO ENTER INTO CERTAIN LEASES AT THE DEPARTMENT OF
VETERANS AFFAIRS WEST LOS ANGELES CAMPUS.
(a) In General.--The Secretary of Veterans Affairs may carry out
leases described in subsection (b) at the Department of Veterans
Affairs West Los Angeles Campus in Los Angeles, California.
(b) Leases Described.--Leases described in this subsection are the
following:
(1) An enhanced-use lease of real property under subchapter
V of chapter 81 of title 38, United States Code, for purposes
of providing supportive housing, as that term is defined in
section 8161(3) of such title.
(2) A lease of real property for a term not to exceed 50
years to a third party to provide services that principally
benefit veterans and their families and that are limited to one
or more of the following purposes:
(A) The promotion of health and wellness, including
nutrition and spiritual wellness.
(B) Education.
(C) Vocational training, skills building, or other
training related to employment.
(D) Peer activities, socialization, or physical
recreation.
(E) Assistance with legal issues and Federal
benefits.
(F) Volunteerism.
(G) Family support services, including child care.
(H) Transportation.
(I) Services in support of one or more of the
purposes specified in subparagraphs (A) through (H).
(3) A lease of real property for a term not to exceed 10
years to an institution of the State of California that has had
a medical affiliation with the Department at the campus
specified in subsection (a) for more than 20 years, if--
(A) the lease is consistent with the master plan
described in subsection (e);
(B) the provision of services to veterans is the
predominant focus of the activities of the institution
at the campus during the term of the lease; and
(C) the institution expressly agrees to provide,
during the term of the lease and to an extent and in a
manner that the Secretary considers appropriate,
services and support that--
(i) principally benefit veterans and their
families, including veterans that are severely
disabled, women, aging, or homeless; and
(ii) may consist of activities relating to
the medical, clinical, therapeutic, dietary,
rehabilitative, legal, mental, spiritual,
physical, recreational, research, and
counseling needs of veterans and their families
or any of the purposes specified in any of
subparagraphs (A) through (I) of paragraph (2).
(c) Limitation on Land-Sharing Agreements.--The Secretary may not
carry out any land-sharing agreement pursuant to section 8153 of title
38, United States Code, at the campus specified in subsection (a)
unless such agreement--
(1) provides additional health care resources to the
campus; and
(2) benefits veterans and their families other than from
the generation of revenue for the Department of Veterans
Affairs.
(d) Prohibition on Sale of Property.--Notwithstanding section 8164
of title 38, United States Code, the Secretary may not sell or
otherwise convey to a third party fee simple title to any real property
or improvements to real property made at the campus specified in
subsection (a).
(e) Consistency With Master Plan.--The Secretary shall ensure that
each lease carried out under this section is consistent with the new
master plan under development as of the date of the enactment of this
Act that will detail how the campus specified in subsection (a) will be
used to benefit all veterans.
(f) Compliance With Certain Laws.--
(1) Laws relating to leases and land use.--If the Inspector
General of the Department of Veterans Affairs determines, as
part of an audit report or evaluation conducted by the
Inspector General, that the Department is not in compliance
with all Federal laws relating to leases and land use at the
campus specified in subsection (a), or that significant
mismanagement has occurred with respect to leases or land use
at the campus, the Secretary may not enter into any lease or
land-sharing agreement at the campus, or renew any such lease
or land-sharing agreement that is not in compliance with such
laws, until the Secretary certifies to the Committee on
Veterans' Affairs of the Senate, the Committee on Veterans'
Affairs of the House of Representatives, and each Member of the
Senate and the House of Representatives who represents the area
in which the campus is located that all recommendations
included in the audit report or evaluation have been
implemented.
(2) Compliance of particular leases.--No lease may be
entered into or renewed under this section unless the lease
complies with chapter 33 of title 41, United States Code, and
all Federal laws relating to environmental and historic
preservation.
(g) Notification and Reports.--
(1) Congressional notification.--With respect to each lease
or land-sharing agreement intended to be entered into or
renewed at the campus specified in subsection (a), the
Secretary shall notify the Committee on Veterans' Affairs of
the Senate, the Committee on Veterans' Affairs of the House of
Representatives, and each Member of the Senate and the House of
Representatives who represents the area in which the campus is
located of the intent of the Secretary to enter into or renew
the lease or land-sharing agreement not later than 45 days
before entering into or renewing the lease or land-sharing
agreement.
(2) Annual report.--Not later than one year after the date
of the enactment of this Act, and not less frequently than
annually thereafter, the Secretary shall submit to the
Committee on Veterans' Affairs of the Senate, the Committee on
Veterans' Affairs of the House of Representatives, and each
Member of the Senate and the House of Representatives who
represents the area in which the campus specified in subsection
(a) is located an annual report evaluating all leases and land-
sharing agreements carried out at the campus.
(3) Inspector general report.--
(A) In general.--Not later than each of two years
and five years after the date of the enactment of this
Act, and as determined necessary by the Inspector
General of the Department of Veterans Affairs
thereafter, the Inspector General shall submit to the
Committee on Veterans' Affairs of the Senate, the
Committee on Veterans' Affairs of the House of
Representatives, and each Member of the Senate and the
House of Representatives who represents the area in
which the campus specified in subsection (a) is located
a report on all leases carried out at the campus and
the management by the Department of the use of land at
the campus, including an assessment of the efforts of
the Department to implement the master plan described
in subsection (e) with respect to the campus.
(B) Consideration of annual report.--In preparing
each report required by subparagraph (A), the Inspector
General shall take into account the most recent report
submitted to Congress by the Secretary under paragraph
(2).
(h) Rule of Construction.--Nothing in this section shall be
construed as a limitation on the authority of the Secretary to enter
into other agreements regarding the campus specified in subsection (a)
that are authorized by law and not inconsistent with this section.
(i) Principally Benefit Veterans and Their Families Defined.--In
this section the term ``principally benefit veterans and their
families'', with respect to services provided by a person under a lease
of property, land-sharing agreement, or revocable license agreement--
(1) means services--
(A) provided exclusively to veterans and their
families; or
(B) that are designed for the particular needs of
veterans and their families, as opposed to the general
public, and any benefit of those services to the
general public is ancillary to the intended benefit to
veterans and their families; and
(2) excludes services in which the only benefit to veterans
and their families is the generation of revenue for the
Department of Veterans Affairs.
(j) Conforming Amendments.--
(1) Prohibition on disposal of property.--Section 224(a) of
the Military Construction and Veterans Affairs and Related
Agencies Appropriations Act, 2008 (Public Law 110-161; 121
Stat. 2272) is amended by striking ``The Secretary of Veterans
Affairs'' and inserting ``Except as authorized under section 2
of the Los Angeles Homeless Veterans Leasing Act of 2015, the
Secretary of Veterans Affairs''.
(2) Enhanced-use leases.--Section 8162(c) of title 38,
United States Code, is amended by inserting ``, other than an
enhanced-use lease under section 2 of the Los Angeles Homeless
Veterans Leasing Act of 2015,'' before ``shall be considered''.
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Los Angeles Homeless Veterans Leasing Act of 2015 This bill authorizes the Department of Veterans Affairs (VA) to carry out certain leases at the VA's West Los Angeles Campus in Los Angeles, California, for: (1) supportive housing; (2) health, education, family support, vocational training, and other services that principally benefit veterans and their families; and (3) a lease of real property to a California institution that has had a long-term medical affiliation with the VA at such Campus.
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Background The Air Force began development of the B-2A in 1981 and reported on June 30, 1997, after 16 years, that the development and the initial operational test and evaluation had been completed. The Air Force reports of the initial operational tests were completed in November 1997. In 1986, the Air Force estimated that B-2A development could be completed for $14.5 billion, including a 4-year, 3,600-hour flight test program scheduled at that time to end in 1993. The flight test program ended June 30, 1997, and the estimated cost of the development program had grown to over $24 billion and the flight test program to about 5,000 flight test hours over 8 years. The development and testing programs were extended because of Air Force changes in the B-2 requirements and various technical problems. Major changes and problems contributing to the delays included (1) making the B-2A’s primary mission conventional rather than nuclear; (2) redesigning the aircraft to satisfy an added requirement to penetrate adversary air space at low altitudes; (3) difficulty in manufacturing test aircraft, resulting in late delivery of partially complete test aircraft; (4) difficulties achieving acceptable radar cross-section readings on test aircraft, which resulted in significant redesigning and retesting of certain components; and (5) correction of deficiencies in the aft deck structure because of the unanticipated effects of engine exhaust. Even though numerous problems hindered the scheduled completion of B-2A development, production began with no flight testing having been completed. This resulted in substantial overlap of development and production. Test and production aircraft were delivered that did not fully meet the Air Force requirements, and a 5-year post-delivery modification program was initiated to update all aircraft to the block 30 configuration. Since production began in 1986, the planned number of B-2As was reduced from 133 to 21 aircraft and both the total development and the average unit procurement costs increased. Table 1 shows the change in estimated total and unit cost from 1986 to 1998. The last two of the 21 B-2As were delivered to the Air Force in the block 30 configuration. The major effort remaining in the B-2A acquisition program is modification of the other 19 B-2As to the block 30 configuration, scheduled for completion in July 2000. Through April 1998, six B-2As have been delivered in, or modified to, the block 30 configuration and were operational at Whiteman Air Force Base, Missouri. Ultimately, the Air Force plans to have 21 B-2As, of which 16 will be available for missions (2 squadrons of 8 aircraft), and 5 will be in various maintenance and repair cycles. Deficiencies Must Be Corrected to Achieve Air Force Objectives To test the operational performance of the B-2A, the Air Force measured B-2A performance against five broad operational objectives that were derived from documented Air Force operational requirements and concepts related to nuclear and conventional missions. Figure 1 identifies these operational objectives and the key elements of each that were included in the operational testing. Although test results indicate that B-2As generally met operational objectives, four deficiencies were identified during testing that will limit or, under some circumstances, change the planned concepts for using the B-2As and slow its operational pace. These relate to mission planning, defensive avionics, low observable materials, and deployment. As the B-2A matures, numerous minor problems identified in the test reports are scheduled to be corrected or improved based on their relative priorities. These include corrections of minor software and hardware deficiencies, improvements to make crew operations easier or faster, improvements of selected radar modes, and relocation of certain buttons or displays. The corrections and improvements involve flight operation as well as maintenance and support of the aircraft. Mission Planning System Still in Development Ground mission planning, which is still in development, is important to the successful employment of the B-2A because very precise mission routes must be planned to maximize the benefits of the aircraft’s low observable features. Mission planning for the B-2A, done with the automated Air Force Mission Support System (AFMSS), currently takes more time than planned. This will limit the Air Force’s ability to rapidly strike targets and sustain operations. The goal of the AFMSS development program is to produce a mission planning system that can provide specific B-2A mission plans in 8 hours. Testing as of June 30, 1997, concluded that the system frequently malfunctioned, was not flexible or user friendly, and was complex and time consuming to use. Air Force operators at Whiteman Air Force Base told us that the developmental version of AFMSS had so many failures that they estimated it would take 60 hours to plan a conventional mission and 192 hours to plan a nuclear mission. AFMSS is an acquisition program separate from the B-2A and is being developed to support all Air Force combat aircraft. Interface of AFMSS with the B-2A began in 1994. According to the operational test report, AFMSS is a complex system made up of separate subsystems developed by different contractors. The Air Force has received various developmental versions of AFMSS subsystems, and additional upgrades to software and hardware are planned in fiscal years 1998 and 1999. The Air Force expects these upgrades to support preparation of mission plans in 8 hours by the third quarter of fiscal year 1999. Defensive Avionics Do Not Work as Planned The Air Force spent over $740 million to develop the defensive system for the B-2A; however, test reports concluded that this system is unsatisfactory. The lack of an effective defensive avionics system could affect the B-2A’s survivability in selected situations because it is supposed to provide B-2A crews with information on the location of threats, both known and unknown that they may encounter during a mission. Limited funds and time are available to correct all the deficiencies in the defensive system. The Air Force plans some software upgrades that are intended to provide the defensive system with a limited but useful capability. Air Force officials said the cost of making the defensive system meet originally planned capability is unaffordable at this time. Air Force officials told us that all the functions originally planned for the system are not required to successfully carry out the planned B-2A missions. The operational test report further stated that, although the defensive system is rated unsatisfactory, the system’s deficiencies do not prevent planning and executing B-2A missions. The test report indicated that the B-2A’s low observability to adversary threat systems permits use of other effective tactics that could ensure its effective employment. The defensive system is supposed to provide the crew information on enemy threat systems to enhance B-2A survivability. Known threat locations are included in computer files prior to the mission. The system is to correlate these with the actual threats as the B-2A flies its mission, but it is also to identify and locate unknown threats that pop-up during a mission. However, this system does not work as planned, limiting the utility of information provided the crew during critical portions of expected B-2 missions. For example, test reports indicate that the defensive system provided inaccurate or cluttered information to the crew and had unacceptably high workloads for the operators. The number and significance of problems with the defensive system were not identified until near the end of the flight test program, leaving Air Force program managers little time to correct problems. Flight testing, where most of the problems were discovered, did not begin for the defensive system until February 1993, almost 4 years after the flight test program started in July 1989 and almost 2 years after other avionics began flight testing in June 1991. According to Air Force officials and an independent review team, several issues contributed to the deficiencies and their discovery late in the developmental and test processes. These reasons included (1) development and testing began late, (2) successful early laboratory tests could not be repeated in flight tests, (3) test results from flight tests were not completely analyzed before tests were continued, (4) the contract provided incentives to move ahead with development rather than correct problems, (5) there was too much confidence that upgrades to computer software would solve the problems, and (6) there were inadequate engineering controls to prevent the overoptimistic view and approach to this development effort. The Air Force’s cost estimate does not include the cost of correcting all deficiencies but does cover some improvements in the defensive system. The Air Force plans to develop software changes that are scheduled to be available for use by 2000, if tests demonstrate the changes are effective in providing a useful capability. Air Force officials indicated some changes have been tested by operational crews with good success. These software changes are intended to provide capabilities that are useful but less than were expected in the original defensive system design. The Air Force believes these changes will meet their requirements. To achieve the original design would require more costly upgrades, including new computer processors. Expensive hardware upgrades are not included in current Air Force plans to enhance the B-2A. Historically, defensive avionics have experienced significant problems during development. The B-1B bomber had serious deficiencies with its defensive avionics and the Air Force is still working to provide an effective defensive capability for the B-1B. Other defensive avionics programs, like the Air Force’s ALQ-135 jammer and the Navy’s Airborne Self-Protection Jammer, also experienced costly development problems. Inadequate Reliability and Maintainability of Low Observable Materials Low observable materials and features on the B-2A frequently fail, requiring high amounts of maintenance. They also have time-consuming and environmentally controlled repair processes and long cure times for the materials repaired. This reduces the time aircraft are available for operational use, which keeps mission capable rates below the Air Force requirement. These problems increase the amount of time it takes to prepare a B-2A for its next combat flight, potentially reducing the number of sorties that could be flown in a given period of time. During operational testing, low observable materials and features accounted for 40 percent of unscheduled maintenance and 31 percent of the maintenance hours to repair the aircraft. Aircraft operating at Whiteman Air Force Base experienced results similar to those in the operational test. During a visit to Whiteman Air Force Base, we observed a block 20 B-2A aircraft after a 10-hour flight. The aircraft had damaged tape, caulk, paint, and heat tiles, all low observable materials. In addition, we observed hydraulic fluid leaks beneath the aircraft that further damaged tape and caulk. The Air Force is incorporating some new low observable tape materials into the block 30 aircraft, which should reduce some maintenance; however, according to Air Force officials, this improvement will not be adequate to achieve the operational pace currently planned for the aircraft. In addition to the frequent failure of these materials, the processes to repair them are time consuming and require an environmentally controlled repair facility. Cure times on some of the low observable tapes and caulks, items that most frequently fail, can be as long as 72 hours, but most materials require 24 or more hours. The poor durability and extensive maintenance required of low observable materials is an important factor keeping the B-2As from achieving desired mission capable rates—the Air Force measure of an aircraft fleet’s availability to perform its assigned missions. At maturity, the Air Force goal for a mission capable rate is 77 percent. On average, the mission capable rate in calendar year 1997, when including the effects of low observable features, was 36 percent, less than half the goal. The Air Force has prepared a comprehensive plan to develop, test, and install new and improved low observable materials, and to improve repair processes, reduce cure times, and develop new diagnostic tools that should allow the B-2A to meet operational requirements. The plan extends through 2005 and shows that funds required for research and development, procurement, and operations and maintenance could total about $190 million, of which $144 million is not in the current cost estimate. Lack of Environmental Shelters for Deployment The operational test report states that the block 30 B-2A aircraft must be sheltered to protect it from weather and provide a suitable environment in which to maintain low observables. The Air Force is studying options for providing shelters, including the purchase of portable shelters and use of existing facilities. The Air Force plans to buy a portable deployment shelter as a test article to determine if the portable shelters will be adequate to protect and maintain the B-2A’s low observable features. If the Air Force buys the shelters, at a minimum it will require 17—1 training shelter and 1 operational shelter for each of the 16 primary mission aircraft. Air Force officials stated they are dedicated to buying the deployment shelters but have not determined how many shelters are needed to support B-2A deployments or the shelter configuration. In addition, they said funding sources have not been identified, but the shelters will likely cost a total of between $15 and $25 million, depending upon the quantity purchased. Air Force officials said they have begun to practice deploying the B-2A and it is likely additional requirements will be identified when this happens. The Air Force completed one exercise, deploying two B-2As to Guam, in March 1998, and plans two more in 1998. Air Force officials advised us that the B-2As performed well in the March 1998 deployment, but an official report has not been issued on the results as of April 1998. Additional Funds Will Be Required to Complete the Program The fiscal year 1999 B-2A cost estimate indicates it will cost $44.3 billion then-year dollars to complete development, procurement, and modification. However, the Air Force will incur additional costs if it plans to correct the deficiencies identified during testing and achieve the full operational capability originally planned for the B-2A. At this time, there is no comprehensive plan that identifies the efforts required to achieve the full B-2A capability, the likely cost of these efforts, or a funding plan. Further, the Air Force has not yet determined all requirements needed to achieve some capabilities. Most B-2A Funds Have Been Appropriated The fiscal year 1999 B-2A cost estimate indicates the cost to complete development, procurement, and modification of the B-2A program is $44.3 billion then-year dollars. Through fiscal year 1998, the Air Force has been appropriated $43.3 billion, or 98 percent. Air Force estimates show the funding required from fiscal years 1999 to 2003 to complete development is $446.7 million and to complete procurement and modifications from fiscal years 1999 to 2005 is $599.4 million. Table 2 shows the major elements of costs for which funding is to be requested in fiscal years 1999 and beyond. Additional Costs Will Be Required As discussed above, testing identified four deficiencies that will require additional costs if the Air Force plans to fully correct all deficiencies. In addition to the cost increases needed for defensive avionics, low observable materials, and support needed for deployment, the Air Force will also incur costs to procure spares to support the nuclear mission of the B-2A. Table 3 shows estimated costs to fix deficiencies that are not in the current cost estimate as well as areas of other potential cost increases not yet fully defined by the Air Force. Block 30 Modification Schedule Issues The Air Force program to upgrade 19 B-2A aircraft to the block 30 configuration is falling behind schedule and further delays are possible. In addition, modified aircraft have been delivered with significant numbers of deficiencies. Air Force officials said Northrop Grumman has not been able to hire adequate numbers of workers; therefore, modifications have been delayed. Both the Air Force and Northrop Grumman were trying to complete modifications based on schedules that were 3 to 6 months ahead of the contract schedule. Because of delays and problems, these accelerated schedules have been discarded. As of April 1998, Northrop Grumman had delivered three modified aircraft later than, and one modified aircraft earlier than, the contract schedule. The Air Force is assessing schedule performance and studying the funding implications of a schedule slip. At this time, the Air Force believes adequate funds are available to complete the modifications. The Air Force is also assessing a planned schedule change that could significantly delay the modification program for one aircraft. This change would be to accommodate the need to provide an aircraft for flight testing planned upgrades. Until the assessment is complete, Air Force officials said it is not possible to determine if there will be a cost impact on the modification program. All four block 30 aircraft delivered from the modification line have a significant number of deficiencies. Air Force officials stated that some of these deficiencies are not operationally critical and will be corrected during regular scheduled maintenance activities. They said a team will be located at Whiteman Air Force Base, Missouri, to correct some of the deficiencies, and others will be corrected during normal aircraft maintenance cycles to maintain the aircraft in active operational service. The four aircraft have from 30 to 46 deficiencies each and, to ensure corrections are made, the Air Force has withheld contractor payments totaling $24.5 million for two of the delivered aircraft. Conclusions and Recommendations DOD should determine the nature and cost of those efforts that remain to be accomplished to bring the B-2A into compliance with operational requirements established by the Air Force. This report identifies various deficiencies that are unresolved and indicates the Air Force is still identifying other requirements that may require further effort and funding. We recommend that the Secretary of Defense direct the Secretary of the Air Force to identify remaining efforts to achieve full operational capability, the costs to complete these efforts, and the fiscal year funding requirements not currently in the fiscal year 1999 President’s Budget for the B-2A program. We further recommend that this information be provided to Congress with the fiscal year 2000 President’s Budget in the form of a comprehensive plan to complete the B-2A program. Agency Comments In commenting on a draft of this report, DOD partially concurred with the recommendations. DOD stated the B-2A is projected to meet full operational capability by the third quarter of fiscal year 1999 as a “baseline program” within currently programmed funding. DOD, therefore, states no additional reporting is required on baseline requirements. DOD defines the baseline program as being a block 30 aircraft. The DOD position assumes all operational problems discussed in this report will be resolved without additional cost, but, until these deficiencies have been proven to be corrected, some cost uncertainty remains. In addition, as this report points out, the Air Force has accepted the block 30 aircraft with less performance in some areas than originally planned in the baseline program. DOD agreed there is a need to identify to Congress future efforts and funding requirements to upgrade current B-2As. DOD said it is developing a long-range plan for upgrades to the bomber force and that funding requirements will be included in the normal budgeting process. This action is consistent with our recommendations. DOD’s comments are presented in their entirety in appendix I. DOD provided additional technical comments, which have been incorporated in this report, as appropriate. Scope and Methodology To identify deficiencies with the operational performance of the B-2A, we reviewed key test reports and summaries prepared by the B-2A Combined Test Force, which conducted the developmental test and evaluations, and the Air Force Operational Test and Evaluation Command, which conducted the initial operational test and evaluations. We also reviewed assessments of the B-2A operational testing prepared by the Office of the Secretary of Defense, Operational Test and Evaluation, and we reviewed various program management and engineering reports that summarized performance and testing efforts being conducted on the B-2A program. We interviewed Air Force engineers, test managers, and program management officials to determine the nature and extent of problems that were identified. We also discussed deficiencies identified during testing and current operational experience and performance of operational B-2As with Air Force officials at Whiteman Air Force Base, Missouri. To identify cost issues and plans to correct deficiencies, we reviewed the available planning documents that identified corrective plans and funding requirements for selected deficiencies. We reviewed the B-2A’s program office annual cost and budgetary estimates, financial and management reports, contract cost reports, program schedules and plans, and other documents. We also interviewed Air Force officials in the B-2A program and at Air Combat Command to determine cost and funding plans to correct deficiencies and complete efforts necessary to provide fully operational B-2A aircraft. To identify the status of the block 30 modification schedule, we reviewed the contract and planning schedules for the block 30 modification process, delivery documents identifying the delivery date and number of deficiencies on the delivered aircraft, and reports showing planned and actual manning at the contractor’s modification facility. We also discussed with Air Force managers of the modification process, the reasons for delayed deliveries, changing schedules, and the plans to correct remaining deficiencies. We performed our review from September 1997 to May 1998 in accordance with generally accepted government auditing standards. We are sending copies of this report to the Secretaries of Defense and the Air Force, the Director of Office of Management and Budget, and other interested parties. We will make copies available to others upon request. Please contact me on (202) 512-4841 if you or your staff have any questions concerning this report. Major contributors to this report are listed in appendix II. Comments From the Department of Defense Major Contributors to This Report National Security and International Affairs Division, Washington, D.C. Chicago Field Office Related GAO Products B-2 Bomber: Cost and Operational Issues (GAO/NSIAD-97-181, Aug. 14, 1997). B-2 Bomber: Status of Efforts to Acquire 21 Operational Aircraft (GAO/NSIAD-97-11, Oct. 22, 1996). B-2 Bomber: Status of Cost, Development, and Production (GAO/NSIAD-95-164, Aug. 4, 1995). B-2 Bomber: Cost to Complete 20 Aircraft Is Uncertain (GAO/NSIAD-94-217, Sept. 8, 1994). The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 37050 Washington, DC 20013 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (202) 512-6061, or TDD (202) 512-2537. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone. 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Pursuant to a legislative requirement, GAO reviewed the total acquisition costs of the B-2A bomber, focusing on: (1) deficiencies that must be corrected to achieve Air Force objectives for the B-2A; (2) additional costs to correct the deficiencies; and (3) the B-2A modification schedule. GAO noted that: (1) the Air Force evaluated the B-2A capability to meet several broad objectives--strike rapidly, sustaining operations, deploy to forward locations, survive in hostile environments, and accurately deliver weapons; (2) the November 1997 operational test reports concluded that B-2As, in the block 30 configuration, are operationally effective, but with several important deficiencies that limit the aircraft's ability to fully meet those objectives as planned; (3) the test reports identify four deficiencies: (a) incomplete development of the automated ground mission planning system, which is needed to rapidly plan and carry out B-2A strike missions; (b) unsatisfactory performance of the defensive avionics system, which is used to provide enemy threat information to the crews and increase their survivability in certain situations; (c) inadequate reliability and maintainability of low observable materials and structures, reducing the ability to sustain the defined pace of operations while maintaining a high degree of survivability for conventional B-2A missions; and (d) lack of environmental shelters to maintain low observable materials and to protect the aircraft from certain weather conditions during deployment; (4) the fiscal year 1999 B-2A cost estimate identifies the cost to complete the B-2A program for the block 30 configuration at $44.3 billion then-year dollars; (5) included in this figure is funding to correct or improve some, but not all, of the deficiencies listed above; (6) for example, the estimate does not include the additional costs that would be incurred if defensive avionics were to be required to achieve the originally planned capability, which Department of Defense officials said is no longer required at this time; (7) however, it does include funding for software upgrades to improve the system performance, which meets current operational objectives; (8) further, it does not include the cost to improve low observable materials, which are needed to sustain the pace of B-2A operations, and to provide for a sufficient number of deployment shelters to accommodate repairs to B-2As; (9) the estimate also excludes costs to buy spare parts that are being identified to support the B-2A's nuclear mission; (10) modifications of B-2As to the block 30 configuration have not been accomplished on schedule; (11) four modified aircraft were delivered as of April 1998--three later than scheduled and one ahead of schedule; and (12) according to the Air Force, the contractor has had difficulty hiring enough personnel to achieve the schedule.
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Petitioner Brotherhood of Railroad Trainmen is the collective bargaining representative for trainment employed by the petitioner Railroad. In accordance with Section 2, Eleventh (a) and (c) of the Railway Labor Act,1 the Brotherhood and the Railroad negotiated a union-shop contract in 1952, which required trainment employed by the Railroad to become members of and retain membership in the Brotherhood or in another labor organization 'national in scope' and 'organized in accordance with' the Railway Labor Act. Respondent Rychlik was employed as a trainman by the Railroad and was a member in good standing of the Brotherhood until February 1953. At that time he resigned from the Brotherhood and joined the United Railroad Operating Crafts (UROC), a competing union which respondent believed in good faith to be 'national in scope' and 'organized in accordance with' the Act, and therefore available for alternative membership under Section 2, Eleventh and the union-shop provision of the contract, even though UROC had never qualified itself under Section 3, First of the Act as one of the unions 'national in scope' eligible to elect the labor members of the National Railroad Adjustment Board.2 On July 31, 1954, Rychlik, continuing his membership in UROC, also joined the Switchmen's Union of North America, concededly a union 'national in scope' within the meaning of the statute and the contract. Following his resignation from the Brotherhood, Rychlik was charged with violation of the union-shop agreement. He received two hearings before a 'System Board of Adjustment,' a body established under the agreement, pursuant to Section 3, Second of the Act,3 to settle contract disputes, and composed of two representatives each from the Failroad and the Brotherhood.4 This Board determined that membership in UROC did not satisfy the union-shop provision of the contract, which mirrored the requirements of the Act, and that therefore Rychlike had failed to maintain continuous union membership in accordance with the contract, not having joined the Switchmen's Union until some 16 months after resigning from the Brotherhood. Accordingly, Rychlik was discharged by the Railroad. Rychlik, on behalf of himself and other employees of the Railroad similarly situated, thereupon brought this class suit in the United States District Court for the Western District of New York, seeking an injunction compelling petitioners to accept him as a member of the Brotherhood and an employee of the Railroad. He alleged that his discharge violated Section 2, Eleventh of the Railway Labor Act, and that the System Board's determination to the contrary could not be final and binding, since the presence on that Board of two representatives of the Brotherhood created an inherent and fatal bias which vitiated the proceeding. The District Court granted petitioners' motion to dismiss the complaint for lack of jurisdiction and for failure to state a cause of action.5 The Court of Appeals for the Second Circuit reversed and remanded for review on the merits of the System Board's decision that membership in UROC did not satisfy the Act.6 Accepting the premise that Section 2, Eleventh (c) conferred on respondent a right to belong to any union which is, in fact, 'national in scope' and organized in accordance with the Railway Labor Act, even though it has not qualified under Section 3, First of the Act as an elector of labor representatives on the National Railroad Adjustment Board,7 the court held (1) that, although the System Board had jurisdiction over this dispute between Rychlik and the Brotherhood,8 its decision that UROC was not a union 'national in scope' was subject to full review on the merits, because of the bias which must be attributed to a body half of whose members represented the Brotherhood, a party in interest; and (2) that this bias was not cured by the availability of the alternative procedure provided by Section 3, First of the Act, whereby it can be established that a union is 'national in scope' and organized in accordance with the Act.9 Because of a conflict between the decision of the court below and an earlier decision of the Court of Appeals for the Sixth Circuit,10 and the importance of these questions in the administration of the Railway Labor Act, we granted certiorari. 351 U.S. 930, 76 S.Ct. 789, 100 L.Ed. 1459. On our view of the case we do not reach either question decided by the Court of Appeals, for we disagree with its premise as to the meaning of Section 2, Eleventh (c). For reasons hereafter given, we hold that Section 2, Eleventh (c) allows alternative union membership only in those unions which have already qualified under Section 3, First of the Act, as electors of the union representatives on the National Railroad Adjustment Board, and not membership in any union which happens to be, as a matter of fact, national in scope and organized in accordance with the Railway Labor Act. Since UROC was not so qualified, respondent had no federal right to join it in lieu of the authorized bargaining representative under the union-shop provision of the Railroad-Brotherhood contract. His discharge by petitioners therefore did not give rise to a federal cause of action.11 In order to clarify the reasons for these conclusions, a brief outline of the relevant provisions of the Railway Labor Act is necessary. Section 2, Eleventh (a) of that Act authorizes railroads and labor unions to establish a union shop, that is, an agreement requiring as a condition of continued employment that employees join the union designated as their authorized bargaining representative.12 Section 2, Eleventh (c) then provides that in the case of operating employees the union-shop provision of a contract will be satisfied if an employee is a member of 'any one of the labor organizations, national in scope, organized in accordance with this Act and admitting to membership employees of a craft or class in any of said services * * *.'13 Section 3, First establishes the National Railroad Adjustment Board (NRAB), an agency designed to settle disputes arising under collective bargaining agreements. Subsection (a) provides that this Board shall consist of 36 members, 18 selected by the carriers, and 18 'by such labor organization of the employees, national in scope, as have been or may be organized in accordance with the provisions of section 2 * * *.'14 Subsection (f) then states that if a dispute arises as to the right of a union to participate in the election of the labor representatives on the NRAB, the Secretary of Labor will notify the Mediation Board if he feels the claim has merit.15 The Mediation Board then constitutes a 'board of three,' consisting of one representative of the claimant union, one representative of the unions already entitled to elect the labor members of the NRAB, and one neutral member selected by the Mediation Board. This board of three then decides whether the claimant union is entitled to be an elector for the NRAB, that is, whether it is 'organized in accordance with section 2 * * * and is otherwise properly qualified to participate in the selection * * *.'16 At first glance the language of Section 2, Eleventh (c) would appear to be disarmingly clear: union-shop contracts are satisfied if the employee belongs to any union which happens to be national in scope and organized in accordance with the Act. And if that be its meaning we would then have to deal with the questions reached by the Court of Appeals. However, as so often happens, when the language of the statute is read, not in a vacuum, but in the light of the policies this Section was intended to serve,17 it becomes clear that the purpose of Congress was not, as respondent contends, to give employees in the railroad industry any blanket right to join unions other than the authorized bargaining representative, or to help dissident or rising new unions recruit new members. Rather, the sole aim of the provision was to protect employees from the requirement of dual unionism in an industry with high job mobility, and thus to confer on qualified craft unions the right to assure members employment security, even if a member should be working temporarily in a craft for which another union is the bargaining representative. And this right is given only to those unions which have already qualified as being 'national in scope' and 'organized in accordance with' the Act for the purpose of electing the union members of the NRAB under Section 3. The purposes to be served by Section 2 are clearly revealed by its history. Until 1951 the Railway Labor Act did not permit union-shop contracts in the industry.18 In that year the Congress, persuaded by the established unions that it is unfair to allow nonunion employees to enjoy benefits obtained by the union's efforts in collective bargaining without paying any of the costs, passed Section 2, Eleventh of the Act, which authorized the union shop.19 However, the hearings on the bill20 revealed a problem, peculiar to the railroad industry, in establishing the union shop. Labor in this industry is organized largely on craft rather than industrial lines. Engineers, firemen, trainmen, switchmen, brakemen, and conductors, for example, each are separately organized for the purposes of bargaining. And normally different unions represent different crafts; thus, on the same railroad, firemen might be represented by the Brotherhood of Firemen and Enginemen, and engineers by the Brotherhood of Locomotive Engineers. Yet seasonal and other factors produce a high degree of job mobility for individual employees in the industry, that is, of shuttling back and forth between crafts. For example, a fireman may be temporarily promoted to engineer for a short time, or a conductor might have to serve temporarily as brakeman. Under the ordinary unionshop contract, such a change from craft to craft, even though temporary, would mean that the employee would either have to belong to two unions—one representing each of his crafts or would have to shuttle between unions as he shuttles between jobs. The former alternative would, of course, be expensive and sometimes impossible, while the latter would be complicated and might mean loss of seniority and union benefits.21 So Congress faced the problem of reconciling the union shop with some protection to employees who shifted from one craft to another one represented by a different labor organization under a union-shop contract.22 The solution, of course, was evident: to provide that if a fireman, for example, is temporarily promoted to engineer, he can satisfy the union-shop contract of the engineers although still remaining a member of the union representing the firemen. As a result, the Committee reporting the bill to the Senate offered on the Senate floor the following amendment to subsection (a) of Section 2, Eleventh: 'Provided further, That no such (union shop) agreement shall require membership in more than one labor organization.'23 Senator Hill, manager of the bill, explained the Committee amendment: 'This proviso was attached because some question was raised as to the status, under this bill, of employees who are temporarily promoted or demoted from one closely related craft or class to another. This practice, with minor exceptions, occurs only among the trainand engine-service employees. Thus a fireman may be promoted to a position as engineer for a short time and then due to a reduction in force be returned to his former position as fireman. It is the intention of this proviso to assure that in the case of such promotion or demotion, as the case may be, the employee involved shall not be deprived of his employment because of his failure or refusal to join the union representing the craft or class in which he is located if he retains his membership in the union representing the craft or class from which he has been transferred.'24 Due to a temporary adjournment of the Senate, no action was taken on this amendment. When the bill was again taken up, however, a substitute amendment, which had been drafted by the railroad brotherhoods, was offered by Senators Hill and Taft.25 The language of this substitute was that of the present Section 2, Eleventh (c), providing that the requirement of membership under a union-shop contract is satisfied if the employee belongs to 'any one of the labor organizations, national in scope, organized in accordance with this Act.'26 Senator Hill explained that the purpose of this substitute was the same as that of the previous amendment: '(The amendment does) nothing more nor less than what the committee desires to do, and what was the intent of the committee in offering its amendment, that no employee of a railroad should be required to belong to more than one labor organization. The only difference between the committee amendment and the amendments now before the Senate, which have been agreed upon by all the railroad organizations, is that the amendments now before the Senate spell out in must more detail the purposes of the committee amendment than did the committee amendment. But the intent and the purpose * * * are exactly the same.'27 This amendment passed as introduced28 and now forms subsection (c). It thus becomes clear that the only purpose of Section 2, Eleventh (c) was a very narrow one: to prevent compulsory dual unionism or the necessity of changing from one union to another when an employee temporarily changes crafts.29 The aim of the Section, which was drafted by the established unions themselves,30 quite evidently was not to benefit rising new unions by permitting them to recruit members among employees who are represented by another labor organization. Nor was it intended to provide employees with a general right to join unions other than the designated bargaining representative of their craft, except to meet the narrow problem of intercraft mobility. This is made particularly clear when the provision is taken in the context of American labor relations in general. The National Labor Relations Act contains no paralled to subsection (c), and employees under a union-shop contract governed by that Act must join and maintain membership in the union designated as the bargaining representative or suffer discharge.31 Similarly, subsection (c) does not apply to nonoperating employees, where the problem of seasonal intercraft movement does not exist. Railroad employees such as clerks working under a union-shop contract have no right at all to join a union other than the bargaining representative. In other words, once a union has lawfully established itself for a period of time as the authorized bargaining representative of the employees under a union-shop contract, Congress has never deemed it to be a 'right' of employees to choose between membership in it and another competing union. If Congress intended to confer such a right, it would scarcely have denied the right to nonoperating employees of the railroads or industrial employees under the National Labor Relations Act, 29 U.S.C.A. § 151 et seq. The purpose of Section 2, Eleventh (c) was simply to solve the problem of intercraft mobility under railroad union-shop contracts. There next arises for consideration the manner in which Congress achieved this purpose. Section 2, Eleventh (c) provides that for operating employees a union-shop contract can be satisfied by membership in 'any one of the labor organizations, national in scope, organized in accordance with this Act * * *.' At first blush this would appear to confer on employees a blanket right to choose between alternative unions which are, in the abstract, national in scope and organized in accordance with the Act. But when taken in the context of the Railway Labor Act as a whole, it becomes apparent that this language refers to a certain group of unions, a group already constituted. For the language was borrowed from Section 3, First of the Act, which had been on the books for some 17 years, and which establishes precisely the same qualifications for those unions which are permitted to elect the labor members of the NRAB. Subsection (a) of Section 3, First provides that unions may become electors if they are 'national in scope' and are 'organized in accordance with' the Act.32 Subsection (f) then spells out an impartial administrative method of tripartite arbitration whereby it can be decided whether a particular union meets these qualifications.33 In other words, by writing into Section 2, Eleventh (c), standards identical to those of Section 3, Congress in Section 2 was evidently making reference to those unions which had qualified as electors under Section 3 through the administrative procedure there expressly provided.34 This reference to an already constituted group of unions is emphasized by the fact that Congress in Section 2, Eleventh (c) did not say that an employee under a union-shop contract could join 'any' labor organization which was national in scope and organized in accordance with the Act; rather it said that such an employee could join 'any one of the' labor organizations which are national in scope and organized in accordance with the Act. In short, Congress in Section 2 was referring to a group of unions already defined and constituted under the Section 3 procedures. And therefore an employee has available to him alternative membership only in such unions as have already qualified as electors under Section 3 This interpretation of the Act solves the problem which Congress faced without conferring on employees 'floating' rights which Congress did not intend to grant. For the problem of intercraft mobility vanishes if the promoted fireman can remain in the firemen's brotherhood, even though his new craft is represented by a different union; and the firemen's brotherhood will, of course, already have qualified under the Act as an elector under Section 3. Furthermore, this interpretation avoids troublesome questions which would arise were we to hold that employees have a right to belong to any union which happens to be national in scope and organized in accordance with the Act. For, while Section 3, First provides an impartial administrative scheme to deal with precisely this question, Section 2, Eleventh (c), assuming it does not refer to an already defined group of unions qualified under Section 3, is silent on the procedure to determine whether a union meets its requirements. An entire new administrative scheme would have to be fashioned by the courts out of thin air to deal with this question, or the courts themselves would have to deal with it without prior administrative action. If System Boards, for example, are to be given jurisdiction to make such determinations, is there to be judicial review? What is to be the scope of such review? How is the inherent bias of the established-union members of these boards to be overcome? Would the determination of one Board (or one Circuit) that such a union as UROC is 'national in scope' be binding on another Board or another Circuit? Moreover, to sanction such a 'floating' right in employees would make only for confusion and uncertainty in labor relations in the railroad industry. No employee could with safety join an alternative union, for he could not know until after-the-fact adjudication whether that union meets the requirements of Section 2. On the other hand, interpreting Section 2 to refer to those unions which have already qualified as electors under Section 3 means that an employee will always know or can easily ascertain the unions which he can join as an alternative to his bargaining representative. A new union, such as UROC, could make itself available for such alternative membership by seeking certification as an elector through the impartial procedure of Section 3, First (f). And the decision of the 'board of three' provided by that Section would be prospective, uniform throughout the nation, and would be the ruling of an administrative body established to deal with precisely this question. We hold, therefore, that Section 2, Eleventh (c) of the Act makes only such unions available for alternative membership under a union-shop contract, such as this one, as have already qualified as electors for the labor members of the NRAB under Section 3, First. Since UROC has not so qualified, respondent has not stated a claim on which relief can be granted. The decision below must therefore be reversed and the case remanded to the District Court with instructions to dismiss the complaint. Reversed and remanded. Mr. Justice BLACK took no part in the consideration or decision of this case. Reversed and remanded with instructions to dismiss the complaint.
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Under § 2, Eleventh (a) and (c) of the Railway Labor Act, petitioners, a railroad and a union, entered into a union-shop contract requiring trainmen employed by the railroad to become and remain members of the petitioner union or another union "national in scope" and "organized in accordance with" the Act. A trainman employed by the railroad was a member of the petitioner union; but he resigned from that union and joined a competing union which he believed to be "national in scope" and "organized in accoidance with" the Act, but which had never qualified under § 3, First, as one of the unions eligible to elect the labor members of the National Railroad Adjustment Board. After hearings, a System Board of Adjustment established under § 3, Second, determined that the trainman's new union did not satisfy the unionshop provision of the contract, and the railroad discharged him. He sued for an injunction compelling petitioner union to accept him as a member and the railroad, to accept him as an employee. Held. Section 2, Eleventh (c) makes available for alternative membership under such a contract only such unions as have already qualified as electors under § 3, First; and the trainman did not state a claim on which relief can be granted. Pp. 481-497. (a) The purpose of § 2, Eleventh (c) wvas to prevent compulsory dual unionism or the necessity of changing from one union to another when an employee temporarily changes crafts. Pp. 489, 492. (b) The purpose was not to give employees a blanket right to join unions other than the designated bargaining representative of their craft. Pp. 488, 493. (c) Nor was it the purpose to benefit rising new unions by permitting them to recruit members among employees who are represented by another union. Pp. 488-489, 492-493. (d) Once a union has lawfully established itself for a period of time as the authorized bargaining representative of the employees under a union-shop contract, Congress has never deemed it to be the "right" of employees to choose between that union and a competing union. P. 494. (e) Under § 2, Eleventh (c), an employee has available to him alternative membership only in such unions as have already qualified as electors under § 3. Pp. 494-496. 229 F. 2d 171, reversed and remanded.
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During a strike against the Southern Bell Telephone and Telegraph Company, the petitioners and one McLeod were solicited in Chicago, Illinois, by a union official, Shelby, to dynamite facilities of the telephone company located in the States of Mississippi, Tennessee, and Louisiana. The four men met in Chicago where Shelby gave the petitioners and McLeod the plans of the facilities to be dynamited and instructed them as to the method to be used. After Shelby left Chicago the petitioners told McLeod that they would not go though with the plan. McLeod, however, obtained dynamite and went to Mississippi to destroy telephone company facilities located there. The petitioners thereupon disclosed the plot to the telephone company and the Chicago police. The petitioners, with Shelby and McLeod, were subsequently indicted by the State of Illinois for violating an Illinois statute making it a crime to conspire to injure or destroy the property of another.1 The indictment describes the property as 'communication facilities belonging to the Southern Bell Telephone & Telegraph Company' and 'belonging to the American Telephone and Telegraph Company.' The petitioners entered pleas of guilty to the indictment and were each sentenced to three months' imprisonment. Thereafter indictments were returned in the United States District Court for the Southern District of Mississippi against the petitioners and Shelby, and also against one Perry who pointed out to McLeod the property to be dynamited. This indictment does not refer to the facilities as belonging to the telephone companies, but charges the offense of violating 18 U.S.C. § 371, 18 U.S.C.A. § 3712 by conspiring to destroy, contrary to 18 U.S.C. § 1362, 18 U.S.C.A. § 1362,3 'certain works, property and material known as coaxial repeater stations and micro-wave towers * * * located in the States of Mississippi, Tennessee and Louisiana * * * which were essential and integral parts of systems and means of communication operated and controlled by the United States.' McLeod confessed to his part in the conspiracy and testified on the federal trial to petitioners' acts of participation in the conspiracy. These same acts were the basis of the Illinois convictions. The Government also introduced proof that the Strategic Air Command, the Civil Aeronautics Administration, the Navy and other federal agencies have the exclusive use of some of the circuits within the coaxial cables carried by the repeater stations and micro-wave towers that were to be destroyed. The federal jury found the four defendants guilty as charged. On appeal the Fifth Circuit Court of Appeals reversed the convictions of Shelby and Perry for error in the admission of evidence, but affirmed the convictions of the petitioners, 247 F.2d 410. We granted certiorari limited to consideration of the claim that the federal prosecutions, based on the same acts as were the prior state convictions, placed petitioners twice in jeopardy contrary to the Fifth Amendment, 355 U.S. 902, 78 S.Ct. 330, 2 L.Ed.2d 258. In Bartkus v. People of Illinois, 359 U.S. 121, 79 S.Ct. 676, the order of the prosecutions was the reverse of the order in this case. Here the federal prosecution came after the Illinois convictions. Thus this case squarely raises the question whether a federal prosecution of defendants already prosecuted for the same acts by a State subjects those defendants 'for the same offense to be twice put in jeopardy of life or limb' in violation of the Fifth Amendment.4 We do not write on a clean slate in deciding this question. As early as 1820 in Houston v. Moore, 5 Wheat. 1, 5 L.Ed. 19, it was recognized that this issue would arise from the concurrent application of state and federal laws.5 During the following three decades a number of state courts reached differing conclusions as to whether a state prosecution would bar a subsequent federal prosecution of the same person for the same acts.6 Against this background this Court thoroughly considered the question in three cases between 1847 and 1852. In Fox v. State of Ohio, 5 How. 410, 12 L.Ed. 213, the petitioner had been convicted of passing a counterfeit coin of the United States within the State of Ohio in violation of a state statute. She contended that the Fifth Amendment prohibited successive state and federal prosecutions for the same acts, and therefore that a prosecution under the Ohio statute would prevent federal authorities from prosecuting the same act under the federal counterfeiting laws. Thus, the argument continued, the Court should declare the Ohio statute unconstitutional under the Supremacy Clause in order to preserve the effectiveness of federal law enforcement. Houston v. Moore and some of the leading state authorities bearing on whether the Fifth Amendment applied to successive state and federal prosecutions were argued to the Court. All members of the Court agreed that the Fifth Amendment would not prohibit a federal prosecution even though based on the same act of passing the counterfeit coin that resulted in the state prosecution. There was a division, however, as to what disposition of the case was required by this conclusion. The majority reasoned that since the Ohio prosecution would not render the Federal Government powerless to enforce its counterfeit laws there was no basis for declaring the Ohio statute unconstitutional under the Supremacy Clause, Const. art. 6. Mr. Justice McLean, dissenting, thought that since 'the punishment under the State law would be no bar to a prosecution under the law of Congress,' 5 How. at page 439, this undesirable result should be avoided by declaring the state statute unconstitutional, for, he said, 'Nothing can be more repugnant * * * than two punishments for the same act,' id., 5 How. at page 440. Three years later, in United States v. Marigold, 9 How. 560, 13 L.Ed. 257, a unanimous Court affirmed a conviction under the federal counterfeiting statute that was discussed in Fox. The Court, in holding that a state and a federal statute could both apply to the same conduct, accepted the conclusion of Fox that 'the same act might * * * constitute an offense against both the State and Federal governments, and might draw to its commission the penalties denounced by either * * *.' 9 How. at page 569. The third case, Moore v. People of State of Illinois, 14 How. 13, 14 L.Ed. 306, gave clear expression to the emerging principle that the Fifth Amendment did not apply to a federal prosecution subsequent to a state prosecution of the same person for the same acts. That case involved a conviction of Moore under an Illinois statute for harboring an escaped slave. A federal statute outlawed the same act as an interference with the rights of the owner of the slave. Moore urged that the Illinois statute was void 'as it subjects the delinquent to a double punishment for a single offence,' 14 How. at page 19. The Court rejected this argument, saying: 'Every citizen of the United States is also a citizen of a State or territory. He may be said to owe allegiance to two sovereigns, and may be liable to punishment for an infraction of the laws of either. The same act may be an offence or transgression of the laws of both. * * * That either or both may (if they see fit) punish such an offender, cannot be doubted. Yet it cannot be truly averred that the offender has been twice punished for the same offence; but only that by one act he has committed two offences, for each of which he is justly punishable. He could not plead the punishment by one in bar to a conviction by the other; consequently, this court has decided, in the case of Fox v. State of Ohio, * * * that a State may punish the offence of uttering or passing false coin, as a cheat or fraud practised on its citizens; and, in the case of the United States v. Marigold, * * * that Congress, in the proper exercise of its authority, may punish the same act as an offence against the United States.' 14 How. at page 20. Justice McLean again dissented on the ground of his dissent in Fox, namely, that the state law should be declared invalid for the very reason that 'the conviction and punishment under the State law would be no bar to a prosecution under the law of Congress.' Id., 14 How. at page 21. The reasoning of the Court in these three cases was subsequently accepted by this Court, in dictum, in the following cases: United States v. Cruikshank, 92 U.S. 542, 550, 23 L.Ed. 588; Coleman v. Tennessee, 97 U.S. 509, 518, 24 L.Ed. 1118; Ex parte Siebold, 100 U.S. 371, 389, 25 L.Ed. 717; United States v. Arjona, 120 U.S. 479, 487, 7 S.Ct. 628, 631, 30 L.Ed. 728; Cross v. State of North Carolina, 132 U.S. 131, 139, 10 S.Ct. 47, 50, 33 L.Ed. 287; In re Loney, 134 U.S. 372, 375, 10 S.Ct. 584, 585, 33 L.Ed. 949; Pettibone v. United States, 148 U.S. 197, 209, 13 S.Ct. 542, 547, 37 L.Ed. 419; Crossley v. People of State of California, 168 U.S. 640, 641, 18 S.Ct. 242, 42 L.Ed. 610; Sexton v. People of State of California, 189 U.S. 319, 322—323, 23 S.Ct. 543, 544—545, 47 L.Ed. 833; Matter of Heff, 197 U.S. 488, 507, 25 S.Ct. 506, 511, 49 L.Ed. 848; Grafton v. United States, 206 U.S. 333, 353 354, 27 S.Ct. 749, 754—755, 51 L.Ed. 1084; Southern R. Co. v. Railroad Comm'n of Indiana, 236 U.S. 439, 445, 35 S.Ct. 304, 305, 59 L.Ed. 661; and McKelvey v. United States, 260 U.S. 353, 358 359, 43 S.Ct. 132, 134—135, 67 L.Ed. 301. Typical of the statements adopting the principle is that of Chief Justice Taney, on circuit, in United States v. Amy, C.C.D.Va.1859, 24 Fed.Cas. p. 792, at page 811, No. 14,445, that 'from the nature of our government, the same act may be an offence against the laws of the United States and also of a state, and be punishable in both.' Culminating this development was United States v. Lanza, 260 U.S. 377, 43 S.Ct. 141, 67 L.Ed. 314, where the issue was directly presented to this Court. Lanza was convicted by the State of Washington for 'manufacturing, transporting, and having in possession' a quantity of liquor in violation of a state statute. He was subsequently convicted in a Federal District Court of violating the Volstead Act, 41 Stat. 305, for performing the same acts with regard to the same liquor. The Court held that the prior state conviction did not bar the federal prosecution. It pointed out that the State could constitutionally make Lanza's acts criminal under its original powers reserved by the Tenth Amendment, and the Federal Government could constitutionally prohibit the acts under the Eighteenth Amendment. Thus this case presented the situation hypothesized in Fox v. State of Ohio and other early cases; two sovereigns had, within their constitutional authority, prohibited the same acts, and each was punishing a breach of its prohibition. A unanimous Court, in an opinion by Chief Justice Taft, held: 'We have here two sovereignties, deriving power from different sources, capable of dealing with the same subject-matter within the same territory. * * * Each government in determining what shall be an offense against its peace and dignity is exercising its own sovereignty, not that of the other. 'It follows that an act denounced as a crime by both national and state sovereignties is an offense against the peace and dignity of both and may be punished by each. The Fifth Amendment, like all the other guaranties in the first eight amendments, applies only to proceedings by the federal government, * * * and the double jeopardy therein forbidden is a second prosecution under authority of the federal government after a first trial for the same offense under the same authority.' 260 U.S., at page 382, 43 S.Ct. at page 142. The Lanza principle has been accepted without question in Hebert v. State of Louisiana, 272 U.S. 312, 47 S.Ct. 103, 71 L.Ed. 270, also a Volstead Act case, and in the following cases in this Court arising under other statutes: Westfall v. United States, 274 U.S. 256, 258, 47 S.Ct. 629, 71 L.Ed. 1036; People of Puerto Rico v. Shell Co., 302 U.S. 253, 264—266, 58 S.Ct. 167, 172—173, 82 L.Ed. 235; Jerome v. United States, 318 U.S. 101, 105, 63 S.Ct. 483, 486, 87 L.Ed. 640; Screws v. United States, 325 U.S. 91, 108, 65 S.Ct. 1031, 1039, 89 L.Ed. 1495. And see People of State of California v. Zook, 336 U.S. 725, 752—753, 758, 69 S.Ct. 841, 853 854, 856, 93 L.Ed. 1105 (dissenting opinion). Similarly, Lanza has been considered in many cases in the Courts of Appeals to have established the general principle that a federal prosecution is not barred by a prior state prosecution of the same person for the same acts.7 Petitioner asks us to overrule Lanza. We decline to do so. No consideration or persuasive reason not presented to the Court in the prior cases is advanced why we should depart from its firmly established principle. On the contrary, undesirable consequences would follow if Lanza were overruled. The basic dilemma was recognized over a century ago in Fox v. State of Ohio. As was there pointed out, if the States are free to prosecute criminal acts violating their laws, and the resultant state prosecutions bar federal prosecutions based on the same acts, federal law enforcement must necessarily be hindered. For example, the petitioners in this case insist that their Illinois convictions resulting in three months' prison sentences should bar this federal prosecution which could result in a sentence of up to five years. Such a disparity will very often arise when, as in this case, the defendants' acts impinge more seriously on a federal interest than on a state interest. But no one would suggest that, in order to maintain the effectiveness of federal law enforcement, it is desirable completely to displace state power to prosecute crimes based on acts which might also violate federal law. This would bring about a marked change in the distribution of powers to administer criminal justice, for the States under our federal system have the principal responsibility for defining and prosecuting crimes. See Screws v. United States, 325 U.S. 91, 109, 65 S.Ct. 1031, 1039, 89 L.Ed. 1495; Jerome v. United States, 318 U.S. 101, 104—105, 63 S.Ct. 483, 485—486, 87 L.Ed. 640. Thus, unless the federal authorities could somehow insure that there would be no state prosecutions for particular acts that also constitute federal offenses, the efficiency of federal law enforcement must suffer if the Double Jeopardy Clause prevents successive state and federal prosecutions. Needless to say, it would be highly impractical for the federal authorities to attempt to keep informed of all state prosecutions which might bear on federal offenses. The conclusion is therefore compelled that the prior Illinois conviction of the petitioners did not bar the instant federal prosecution. Affirmed. By Mr. Justice BRENNAN. The Government, in its brief and on oral argument in this case, urged that the judgment of the Court of Appeals should be affirmed on an alternative ground to that upon which the Court rests the decision. The Government argued that it was unnecessary to delimit the application of the Double Jeopardy Clause of the Fifth Amendment to successive state and federal prosecutions of the same acts beyond holding that the clause does not apply when those prosecutions, as in this case, are under statutes which require different evidence for a conviction and which protect different interests. The contention is that in this case additional evidence is necessary to convict under the federal statute, namely, proof that federal property was knowingly to be destroyed, and that the two statutes are designed to protect different interests, the state statute to protect 'the sanctity of privately-owned property' and the federal statute to prevent injury to 'means of communication, operated or controlled by the United States.' The gist of the argument is that two prosecutions are not 'for the same offense' within the meaning of the Fifth Amendment when they are based upon the violation of two statutes designed to vindicate different governmental interests and requiring different evidence to support convictions. Although the Court considered that it was unnecessary to discuss this suggested ground for decision, I consider its implications to be so disturbing as to require comment.1 I cannot escape the fact that this reasoning would apply equally if each of two successive federal prosecutions based on the same acts was brought under a different federal statute, and each statute was designed to protect a different federal interest. Indeed, the Government supports its argument by citing Blockburger v. United States, 284 U.S. 299, 52 S.Ct. 180, 76 L.Ed. 306; Gore v. United States, 357 U.S. 386, 78 S.Ct. 1280, 2 L.Ed.2d 1405; and Pinkerton v. United States, 328 U.S. 640, 66 S.Ct. 1180, 90 L.Ed. 1489, cases which involved only federal prosecutions, and Hoag v. State of New Jersey, 356 U.S. 464, 78 S.Ct. 829, 2 L.Ed.2d 913, which involved successive prosecutions by the same State. The argument then obviously is that the mere fact that there are two statutes which vindicate different interests and require different evidence of itself means that the Fifth Amendment does not prohibit successive prosecutions of the same acts under the respective statutes. However, whatever the case under the Fourteenth Amendment as to successive state prosecutions, Hoag v. State of New Jersey, supra, or under the Fifth Amendment as to consecutive federal sentences imposed upon one trial, e.g., Gore v. United States, supra, I think it clear that successive federal prosecutions of the same person based on the same acts are prohibited by the Fifth Amendment even though brought under federal statutes requiring different evidence and protecting different federal interests. It is true that this Court has said: 'where the same act or transaction constitutes a violation of two distinct statutory provisions, the test to be applied to determine whether there are two offenses or only one, is whether each provision requires proof of an additional fact which the other does not.' Blockburger v. United States, 284 U.S. 299, 304, 52 S.Ct. 180, 182, 76 L.Ed. 306. But, so far as appears, neither this 'same evidence' test nor a 'separate interests' test has been sanctioned by this Court under the Fifth Amendment except in cases in which consecutive sentences were imposed on conviction of several offenses at one trial.2 The accused, although punished separately and cumulatively for various aspects of a single transactions, is subject to only one prosecution and one trial. If the Government attempted multiple prosecutions of the same offenses, an entirely different constitutional issue would be presented, cf. Hoag v. State of New Jersey, 356 U.S. at page 467, 78 S.Ct. at page 832. The basis of the Fifth Amendment protection against double jeopardy is that a person shall not be harassed by successive trials; that an accused shall not have to marshal the resources and energies necessary for his defense more than once for the same alleged criminal acts. 'The underlying idea * * * is that the State with all its resources and power should not be allowed to make repeated attempts to convict an individual for an alleged offense, thereby subjecting him to embarrassment, expense and ordeal and compelling him to live in a continuing state of anxiety and insecurity * * *.' Green v. United States, 355 U.S. 184, 187, 78 S.Ct. 221, 223, 2 L.Ed.2d 199. In short, 'The prohibition is not against being twice punished, but against being twice put in jeopardy * * *.' United States v. Ball, 163 U.S. 662, 669, 16 S.Ct. 1192, 1194, 41 L.Ed. 300. Obviously separate prosecutions of the same criminal conduct can be far more effectively used by a prosecutor to harass an accused than can the imposition of consecutive sentences for various aspects of that conduct. It is always within the discretion of the trial judge whether to impose consecutive or concurrent sentences, whereas, unless the Fifth Amendment applies, it would be solely within the prosecutor's discretion to bring successive prosecutions based on the same acts, thereby requiring the accused to defend himself more than once. Furthermore, separate prosecutions, unlike multiple punishments based on one trial, raise the possibility of an accused acquitted by one jury being subsequently convicted by another for essentially the same conduct.3 See Hoag v. State of New Jersey, surpa; cf. Ciucci v. State of Illinois, 356 U.S. 571, 78 S.Ct. 839, 2 L.Ed.2d 983. Thus to permit the Government statutorily to multiply the number of offenses resulting from the same acts, and to allow successive prosecutions of the several offenses, rather than merely the imposition of consecutive sentences after one trial of those offenses, would enable the Government to 'wear the accused out by a multitude of cases with accumulated trials.' Palko v. State of Connecticut, 302 U.S. 319, 328, 58 S.Ct. 149, 82 L.Ed. 288. Repetitive harassment in such a manner goes to the heart of the Fifth Amendment protection.4 This protection cannot be thwarted either by the 'same evidence' test or because the conduct offends different federal statutes protecting different federal interests. The prime consideration is the protection of the accused from the harassment of successive prosecutions, and not the justification for or policy behind the statutes violated by the accused. If the same acts violate different federal statutes protecting separate federal interests those interests can be adequately protected at a single trial by the imposition of separate sentences for each statute violated. See, e.g., Bell v. United States, 349 U.S. 81, 82—83, 76 S.Ct. 620, 621—622, 99 L.Ed. 905; Gore v. United States, 357 U.S. 386, 78 S.Ct. 1280, 2 L.Ed.2d 1405. The holding of the Court In re Nielsen, 131 U.S. 176, 9 S.Ct. 672, 33 L.Ed. 118, establishes the governing principle. The defendant in that case, a Mormon with more than one wife, had been convicted of violating a congressional statute, applicable to the territory of Utah, which prohibited males from cohabiting with more than one woman. Subsequently he was prosecuted and convicted of adultery in violation of another congressional statute, the second prosecution being based on the same acts as the prior conviction. Despite the fact that it was necessary to prove a fact in the second prosecution not necessary for the first conviction, i.e., that the defendant was married to another woman, and that a different federal interest was protected by each statute, the Court held that the second prosecution unconstitutionally put the defendant twice in jeopardy for the same offense. In short, though the Court in Gore has found no violence to the guarantee against double jeopardy when the same acts are made to do service for several convictions at one trial, I think not mere violence to, but virtual extinction of, the guarantee results if the Federal Government may try people over and over again for the same criminal conduct just because each trial is based on a different federal statute protecting a separate federal interest.
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Indicted in an Illinois State Court for violating an Illinois statute making it a crime to conspire to injure or destroy the property of another, petitioners pleaded guilty, and each was sentenced to three mbnths' imprisonment. Thereafter, because of.the same conspiracy, they were indicted, tried and convicted in a Federal District Court for violating 18 U. S. C. § 371 by.conspiring to violate 18 U. S. C. § 1362, which forbids the injury or destruction of communications facilities "operated or controlled by the United States." Held: Their federal prosecution was not barred under the Double Jeopardy Clause of the Fifth Amendment by their earlier conviction in the State Court. United States v. Lanza, 260 U. S. 377. Pp. 187-196. 247 F'. 2d 410, affirmed.
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Introduction The nomination of a Justice to the Supreme Court of the United States is one of the rare moments when all three branches of the federal government come together: the executive branch nominates, and the legislative branch considers the nomination, deciding whether the nominee will become a member of the high court. Presidents and Senators have said that, short of declaring war, deciding who should be on the Supreme Court is the most important decision they will make while in office. The Constitution, in Article II, Section 2, divides the responsibility for selecting and confirming members of the Supreme Court between the President and the Senate. It says that the President "shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the Supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for...." The Senate has traditionally deferred to the President on nominations to the Cabinet, but they have shown less deference to a President's choice for the Supreme Court. Of the 160 nominations Presidents made to the Supreme Court since 1789, 36 were not confirmed. Of the hundreds of Cabinet officials nominated over the same time period, just 15 failed of confirmation. Some nominations to the Supreme Court have won confirmation with little debate and no procedural complications, while others have been debated extensively, with significant resort to parliamentary procedures during consideration. It appears that the Senate has never felt strictly bound by past practice in considering these nominations, but that it has used procedures and forms of consideration that the body has at the time deemed appropriate to each individual case. Nothing in Senate rules, procedures, or practice requires that the Senate proceed to a final vote on a nomination, for example, although in most instances it has done so. Of the 160 nominations for the Supreme Court, 12 never reached the floor and 13 others never received a final vote, although they were debated on the floor. The remaining 11 nominations that failed of confirmation reached a final vote, but were rejected by the Senate. This report examines the ways in which the Senate has handled the 160 Supreme Court nominations the President has sent to the Senate. As the purpose of this report is to examine the forms taken by Senate proceedings on these 160 nominations, it treats each nomination as a separate case. It is not couched in terms of the smaller number of different individuals nominated or the ultimate outcome the confirmation process may have had for each individual. Supreme Court confirmation debates, of course, do not occur in a vacuum. They are a product of the President making the choice, the state of the Senate at the time, the nominee and his or her views, and the prevailing mood of the country. These elements, while critical to understanding specific cases, are not considered in this report; discussions of them can be found in other reports on the Supreme Court. This report focuses on the kinds of actions the Senate has taken during consideration of Supreme Court nominees, how they have changed over time, and how they have affected the process of confirmation. The emphasis of this report is on the 148 nominations on which some form of formal proceedings took place on the Senate floor, not on the ways in which the nominations might have been handled in committee or other pre-floor stages. The information presented was drawn from a comprehensive search of the Executive Journals of the Senate, which are its official record of procedural actions taken in relation to executive business (i.e., nominations and treaties, which are the forms of business submitted to the Senate by the President). For recent Congresses for which the Journal was not yet available, information was taken from the Congressional Record and the Nominations data base of the congressional Legislative Information System. The following discussion first sketches the changing patterns of consideration that have been normal in successive historical periods since 1789, noting their relation to changes in the procedural rules and practice of the Senate. For each period, it not only describes normal and exceptional practice, but also provides examples of proceedings that were either typical or notable. The report then successively addresses three key characteristics of floor action on these nominations: the dispositions the Senate made of them, the length of floor consideration, and the kinds of procedural action taken during consideration. Historical Trends in Floor Consideration Although the Constitution mandates a role for the Senate in the consideration of nominees to the Supreme Court, it does not include any specific method for doing so. The process by which the Senate has considered these nominations has typically included several stages, from receipt and committee referral through committee consideration and reporting, to scheduling for floor action, followed by floor debate and a final vote. Within this broad outline, the Senate has answered the basic question—what should the procedure be for consideration of nominations?—in different ways at different times. A review of all Supreme Court nominations since 1789 yields two general conclusions about the procedures used. First, the Senate has not felt bound to consider each nomination in exactly the same way that the others before it were considered. Although some Supreme Court nominations, for example, never reached the Senate floor (and hence, did not receive a vote), the Senate spent numerous days debating other nominations. Neither of those practices has been routine, but their use shows how the Senate has reserved to itself the right to take the course of action that it believes best suits consideration of a particular nomination. This stance becomes even more evident when the Senate considers a well-known person for a Supreme Court seat. The Senate received, debated and confirmed the nomination of former President William Howard Taft to be Chief Justice on the same day, for example. Second, although the form of confirmation proceedings has varied, the Senate's process has tended to become longer and more formal over time. Although members of the first Supreme Court were confirmed just two days after their nominations were received, the norm in modern times has tended toward weeks, if not months, between the receipt of the nomination and disposition by the Senate. Early in the Senate's history, it was not typical for Supreme Court nominations to be referred to committee at all; by modern times, it was the norm for the Senate Committee on the Judiciary to spend significant time reviewing nominees. A study of the 160 nominations sent to the Senate finds that the Senate's floor consideration of Supreme Court nominations breaks down relatively naturally into five patterns over time. Beginning Patterns, 1789-1834 In the earliest years, the Senate normally considered a Supreme Court nomination, as a matter of course, on the second day after it had been received from the President. There was no routine referral to committee, although at least one nominee, Alexander Wolcott, was referred to a select committee in 1811 (his nomination was defeated). From the beginning, the Senate has considered nominations in executive session, that portion of the Senate's business that was established to consider business that comes directly from the President. At this time, executive session also meant that the doors were closed, only Senators and select staff were permitted to be in the chamber, and the proceedings were to remain secret. The first set of Senate rules, developed and adopted in 1789, did not include any specific provisions for handling nominations. In 1806, the Senate adopted a general revision of its rules, which included a new provision on nominations. This rule required that "when nominations shall be made in writing by the President of the United States to the Senate, a future day shall be assigned, unless the Senate unanimously direct otherwise, for taking them into consideration." Despite adoption of this rule, however, there is no indication that the Senate either fixed a date for consideration of nominations when they were received, or that the Senate waived this rule. The Executive Journal records no motion to consider these early nominations, instead stating simply that "the Senate proceeded to consider" the message from the President. The message from the President became the de facto method of organizing the nominations, apparently representing a precursor of the Calendar Call the Senate was to employ later. Of the 31 Supreme Court nominations sent to the Senate during this period, all 28 confirmations occurred by voice vote; the two rejections were by roll call (one nomination was considered by the Senate but left unfinished). Also, the normal period of floor consideration during this period was one day for each nomination. Five nominations were considered for more than one day: the three nominations not confirmed, Wolcott, John Rutledge (1795), and John J. Crittenden (1828); and two others, those of Alfred Moore (1799) and Robert Trimble (1826). This pattern of consideration is shown in the confirmation of the very first Supreme Court, in the following case study. The Original Court, 1789 The Court's first six members, a Chief Justice and five Associate Justices, were nominated by President George Washington on September 24, 1789. The nominations were not referred to committee. These men were personally known to many, if not all, members of the Senate, and there was no extensive investigation into their background. On September 26, the Senate proceeded to consider each of the six men, and in each case, "on the question to advise and consent thereto, it passed in the affirmative." There is no indication of lengthy debate; all six nominations were confirmed on the same day, in the same way. John Jay was confirmed as Chief Justice, and John Rutledge, of South Carolina; James Wilson, of Pennsylvania; William Cushing, of Massachusetts; Robert H. Harrison, of Maryland; and John Blair, of Virginia, were confirmed as Associate Justices. Although the vast majority of nominations during this time were handled in the same way as the above, there were instances of extraordinary procedure, particularly when the nomination appeared to be controversial, as shown in the following case study. John Crittenden, 1828 On December 17, 1828, President John Quincy Adams nominated John Crittenden, a Kentucky lawyer, to be an Associate Justice of the Supreme Court, to replace Justice Robert Trimble, who had died. The nomination took place after Adams' successor, Andrew Jackson, had been elected in November. Opposition to Crittenden by supporters of Jackson prevented the Senate from confirming him. Crittenden's supporters did not give in without a fight, and the Senate debated the nomination for nine days. In an unusual proceeding, rather than consider the nomination itself, the Senate debated a resolution, offered by opponents of the nomination. It read: Resolved, That it is not expedient to act upon the nomination of John I. Crittenden, as a Justice of the Supreme Court of the United States, until the Senate shall have acted finally on the report of the Judiciary Committee, relative to the amendment of the Judicial System of the United States. One purpose of the above report was to address the question of whether to change the size of the Supreme Court, which might have had the effect of abolishing the seat to which Adams had nominated Crittenden. Supporters of the nomination offered a lengthy amendment to the resolution, which, in essence, said that it was the duty of the President to fill vacant slots no matter at what point in a Presidency they occurred. An amendment to this amendment was then offered, declaring: That the duty of the Senate to confirm or reject the nominations of the President, is as imperative as his duty to nominate; that such has heretofore been the settled practice of the government; and that it is not now expedient or proper to alter it. The Senate rejected this amendment to the amendment by voice vote, voted 17-24 to reject the original amendment, and then voted 23-17 on February 12, 1829, to adopt the original resolution declaring it "not expedient" to act on the Crittenden nomination. By this action, the early Senate declined to endorse the principle that proper practice required it to consider and proceed to a final vote on every nomination. Committee Referral, 1835-1867 A new pattern of bringing up and considering Supreme Court nomination emerged in 1835, when the Senate began to refer nominations routinely to the Senate Committee on the Judiciary, which had been created, as a part of the Senate's first standing committee system, in 1816. Once the committee reported a nomination to the Senate, the chamber tended to act upon it immediately. In most cases, the nomination was reported and then confirmed, almost as one action. As with the previous practice, most of these confirmations were accomplished by voice vote. The Senate followed this form of proceeding through 1867. In some cases, a Senator, apparently opposed to a particular nomination, would move to table the nomination immediately after it was reported from committee. The effect of a motion to table, however, was not the same as it is in current Senate parliamentary practice, where the motion, if successful, has the same effect as rejection. At this point in the development of the Senate, it appears that the motion to table had an effect more like a motion to postpone, and was used as a way to avoid taking action on the nomination on that day. When the Senate considered the nomination of Roger B. Taney to be Chief Justice in 1835, for example, the nomination was immediately tabled after the committee reported it. Later, however, the Senate voted 25-19 to proceed to consider the nomination, and he was confirmed. Robert C. Grier, 1846 The nomination of Robert C. Grier shows the typical features of this time period. President Polk nominated Grier on August 3, 1846, to replace Henry Baldwin, who had died. Grier had served as president judge of the District of Allegheny Court in Pennsylvania. The nomination was referred to the Judiciary Committee, which reported it out the next day. The Senate considered the nomination immediately after it was reported and confirmed Grier by voice vote. Tyler Presidency, 1844-1845 The major departure from the normal pattern of consideration for Supreme Court nominations during this time period took place during the presidency of John Tyler. He had been elected Vice President on the Whig ticket with William Henry Harrison in 1840. Harrison died 31 days after taking the oath of office, and Tyler became President. His relations with the Whig party were strained, and after he vetoed a banking bill, Tyler's entire Cabinet but for one resigned, and Tyler was later expelled from the Whig party. Not surprisingly, Tyler had difficulties winning confirmation of his Supreme Court nominations from a Whig-dominated Senate. Tyler tried nine times to win Senate confirmation of a Supreme Court nomination, but he was successful only once, with the nomination of Samuel Nelson in 1845. Tyler nominated four other men over the course of more than a year to fill vacancies on the Court. He sent the name of Edward King to the Senate twice, that of John C. Spencer twice, and that of Reuben H. Walworth three times. The Senate responded with disdain. Four times the Senate voted to table Tyler nominations (and took no further action on them); one, the 1844 nomination of Spencer, the Senate rejected outright by a vote of 21-26. The standoff between the President and the Senate took on such intensity that in one day, June 17, 1844, Tyler changed his mind about whom to nominate twice. At the time, the Senate had tabled the nomination of Walworth to be an Associate Justice. According to the Senate Executive Journal , Tyler sent the following message to the Senate: I have learned that the Senate has laid on the table the nomination, heretofore made, of Reuben H. Walworth, to be associate justice of the Supreme Court, in place of Smith Thompson, deceased. I am informed that a large amount of business has accumulated in the second district, and that the immediate appointment of a judge for that circuit is essential to the administration of justice. Under those circumstances, I feel it is my duty to withdraw the name of Mr. Walworth, whose appointment the Senate by their action seems not now prepared to confirm, in the hopes that another name might be more acceptable. The circumstances under which the Senate heretofore declined to advise and consent to the nomination of John C. Spencer have so far changed as to justify me in my again submitting his name to their consideration. I, therefore, nominate John C. Spencer, of New York, to be appointed as an associate justice of the Supreme Court, in the place of Smith Thompson, deceased. JOHN TYLER Tyler then sent several other appointment messages to the Senate, which were read. The Senate confirmed several of the other appointments. The journal then records a dispute over whether the Senate should receive a further message from the President, as the time previously set to end the Congress had arrived. Senators agreed to hear the message, which read "I withdraw the nomination of John C. Spencer to be associate justice of the Supreme Court of the United States, and I renominate Reuben H. Walworth to be associate justice of the Supreme Court of the United States." A motion was made to consider Walworth, but objection was heard, and the Senate then adjourned sine die. George E. Badger, 1853 Another signal that confirmation ceased to be virtually automatic for Supreme Court nominations, was the case of George E. Badger, a sitting Senator. On January 10, 1853, President Millard Fillmore nominated George E. Badger to be an Associate Justice, to replace Justice John McKinley, who had died. Although Fillmore, a Whig, was a "lame duck" President following the fall election of Democrat Franklin Pierce, he nevertheless desired to place a nominee on the Supreme Court. Badger, an incumbent Senator from North Carolina and who served as Secretary of the Navy under Presidents Harrison and Tyler, would seem to have been a good choice, because "It was thought that the Senate would exercise Senatorial courtesy and not reject a fellow a Senator," according to historians. The Senate, however, was controlled by Democrats, by a margin of 38 Democrats to 22 Whigs and 2 Free Soilers. The Senate debated the Badger nomination for portions of four days. The Senate postponed consideration several times, and in the course of one day's debate on the nomination, it voted 26-25 to adjourn. Finally, on February 11, the Senate agreed by a vote of 26-25 to postpone consideration of the nomination until March 4, the date when the term of the Congress would expire and the new President would take office. Increased Formalization, 1868-1922 In 1868, the Senate adopted another general revision of its rules. It contained a lengthier and far more specific method for dealing with nominations. When nominations shall be made by the President of the United States to the Senate, they shall, unless otherwise ordered by the Senate, be referred to appropriate committees; and the final question on every nomination shall be "Will the Senate advise and consent to this nomination?" which question shall not be put on the same day on which the nomination is received nor on the day on which it may be reported by committee, unless by unanimous consent of the Senate. Nominations neither approved nor rejected by the Senate during the session at which they are made shall not be acted upon at any succeeding session without being again made by the President; and if the Senate shall adjourn or take a recess for more than thirty days, all nominations pending and not finally acted upon at the time of such adjournment or recess shall be returned to the President and shall not be afterwards acted upon, unless again submitted to the Senate by the President; and all motions pending to reconsider a vote upon a nomination shall fall on such adjournment or recess; and the Secretary of the Senate shall thereupon make out and furnish to the heads of departments and other officers the list of nominations rejected or not confirmed, as required by law. This rule codified what had since 1835 become the practice of the Senate, at least in regard to Supreme Court nominations, to refer the nomination to committee. It also called for a layover of at least one day from the time a committee reported on a nomination to Senate action on that nomination, unless the Senate decided by unanimous consent to do otherwise. Despite the rule, however, the Senate did tend to decide otherwise. Of the 41 nominations in this period, nearly half, 18, were considered by the Senate by unanimous consent on the same day they were reported out of committee. Nine other nominations were considered within two days of the committee's report. The remaining 10 nominations which saw floor action came up on the floor more than two days after the committee reported, sometimes significantly more than two days later. In the case of Melville W. Fuller to be Chief Justice (1888), for example, the Senate took up the nomination 17 days after the committee reported it. In a change from past practice, the Senate Committee on the Judiciary began issuing reports that characterized the committee's support for the nomination: the committee would usually report favorably, but sometimes adversely. Prior to 1869, the committee had simply reported the nomination, without such characterizations. Roll call votes on the confirmation of the pending nomination became more common during this period, occurring on 16 of the 41 nominations. The Senate rejected three nominations decided by roll call votes and confirmed the 13 others. William B. Woods, 1880 The nomination of William B. Woods illustrates the key patterns of consideration at this time. When Associate Justice William Strong resigned, President Rutherford B. Hayes looked for a southerner to replace him. Woods was born and educated in the North, and had been a leader in the Ohio legislature and subsequently a Union general. After the war, however, he had settled in Alabama, and had become a circuit court judge on the Fifth Circuit. Hayes nominated Woods on December 15, 1880. The nomination was referred to the Judiciary Committee, which reported it favorably on December 20. The next day the Senate considered the nomination and, by a vote of 39-8, confirmed it. Ebenezer Rockwood Hoar, 1869 Debates on Supreme Court nominations during these years still took place behind closed doors, and Senators were supposed to maintain the secrecy of these proceedings. The nomination of Ebenezer Rockwood Hoar is one of the few instances in which some information is available about what went on during the Senate debate. Hoar, who was serving as Attorney General, was nominated for the Supreme Court by President Grant in 1869. Republicans then controlled the Senate by a large margin, 62-12, and it was thought, at first, that Hoar would have no trouble winning confirmation. But, as it turned out, Hoar had badly alienated the Senate as Attorney General during implementation of the law which authorized new circuit court judges throughtout the country in early 1869. The law created a series of new federal judgeships, and Hoar was responsible for choosing names to recommend to the President for filling these positions. Hoar undertook the job without consulting Senators on those positions. According to Hoar's biography, "Nearly every Senator had a candidate of his own for the Circuit Court, but in almost every instance the President took the Attorney General's advice." The same biography also notes that "Unhappily, the judge's manner in discharging his duty was not engaging. He had the plain speech and trying sincerity of latitude 42 degrees N., in an extreme degree, and it proved hard to bear at Washington." The Senate received Hoar's nomination on December 15, 1869. It was referred to the Judiciary Committee, and on December 22 the committee reported it out with an adverse recommendation. The Senate began debate on the nomination on the same day it was reported. A motion was offered to adjourn, which failed by a vote of 23-31, as was a motion to table the nomination, which also failed 24-30. But supporters of the nomination evidently saw the writing on the wall and eventually agreed later that same day, by voice vote, to table the nomination, which, at that time, still meant only to delay its further consideration, and not necessarily to kill it. In a letter to Hoar, Massachusetts Senator Henry Wilson said it had been a difficult fight. "I write simply to say that your friends for more than four hours battled for you, that all was said and done that could be. When it was clearly seen that a majority had determined on a vote of rejection, we struggled for more than two hours against coming to a vote, before we secured an adjournment. Never have I seen such action in the Senate." Another letter, from J.D. Cox, a former House Member who was then Secretary of the Interior, said he had met with several senators about the nomination fight. He said of those opposed to Hoar: "They were determined to be content with nothing but a prompt rejection, and did not even consent to a motion to table the business, after four hours exciting struggle, until [Alexander G.] Cattell [a Senator from New Jersey] told them he would make dilatory motions all night before he would permit such an outrage. The result was the tabling of the question, with (as the opposition claim) an understanding that it shall not be again taken up." The Senate reconvened in 1870 and, on February 3, rejected Hoar's nomination by a vote of 24-33. The Calendar Call Becomes Formalized, 1922-1967 Beginning in 1922, the Senate began to call up Supreme Court nominations under a system known as the Call of the Calendar or a Calendar Call. Under this procedure, the Senate would consider the nominations that had been reported by committee and placed on the Executive Calendar in the order in which they appeared on that calendar. Under this system, there was no need to make a motion or ask unanimous consent to take up a Supreme Court nomination. The Senate would instead begin with the first available nomination and work its way through the calendar until reaching the Supreme Court nomination. If a nomination was experiencing difficulty, the Senate could pass it over when it was reached on the Calendar Call. It would come up again the next time the Senate took up the Calendar. Particularly in cases for which there was no controversy, on the other hand, the Senate could call up a nomination out of order by unanimous consent. These practices appear to represent a formalization of the process used from 1868 to 1922. Twenty of the 30 Supreme Court nominations during this time period came up when their place on the Calendar had been reached. Several others were considered out of order by unanimous consent, including Edward T. Sanford in 1923 and Byron White and Arthur J. Goldberg in 1962. Another major development, as well, took place early in this period: debate on nominations became public. After years of debating the issue, in 1929 the Senate decided to conduct its executive business in open session. Although the doors had been closed and debate on nominations was supposed to remain secret, increasingly in the preceding years details of the sessions would leak out to the press. In addition, the rule of secrecy had been set aside several times, so that certain debates, such as that on Louis D. Brandeis to be an Associate Justice in 1916, could be opened to the public. The immediate trigger for the rules change was the disclosure, by the United Press, of the roll call vote on the nomination of Roy O. West to be Secretary of the Interior. Soon after, UP also published the vote on the nomination of former Senator Irvine Lenroot to be a judge of the Customs Court of Appeals. The Senate Rules Committee began an investigation into who leaked the Lenroot vote, and, for a variety of reasons, it was forced to hold this inquiry in open session. The reporter, Paul Mallon, refused to disclose who his source had been, and the committee came to no conclusion on the matter. The Senate then considered a rules change that would have allowed a majority to vote to open any executive session. An alternative was proposed to make all debates open unless a majority voted to close them. The Senate approved this amendment, 69-5. John J. Parker, 1930 The case of Judge Parker shows one of the first nominations to be debated in open session. John J. Parker, an appeals court judge in North Carolina, was nominated by President Hoover to be an Associate Justice of the Supreme Court on March 21, 1930, to replace Edward T. Sanford, who had died. At the time, Republicans also controlled the Senate, by a sizeable margin of 56 seats to 39 seats for the Democrats, with one Farmer-Labor member. Opposition to the nomination soon surfaced, with special attention paid to two issues: a ruling Parker had made as a member of the Fourth Circuit on "yellow dog" labor contracts and a remark on race issues he had made during a 1920 campaign for Governor of North Carolina. "Yellow dog" contracts were ones under which employers required their prospective employees to sign an agreement promising that they would not join a labor union, a position opposed by many in the Republican Senate majority. Parker's court opinion upheld the use of such contracts. The opposition also focused on Parker's remark, in the course of his 1920 gubenatorial campaign, that the African American man did not want to participate in politics and that "the Republican party of North Carolina does not desire him to do so." This remark motivated the National Association for the Advancement of Colored People to oppose his nomination. The nomination had been referred to the Judiciary Committee. As the committee was debating it, Parker announced he would be willing to come before the panel and discuss the issues of controversy. The Judiciary Committee rejected his offer by a vote of 10-4, then voted to report his nomination with an unfavorable recommendation by a vote of 10-6, with both votes taking place on April 21. The Senate considered the nomination on the floor for large portions of eight days that were marked by repeated calls for a live quorum. Such repeated calls can be indications of contention on the floor. A reading of the debate and a review of the news stories, however, seems to indicate that this did not seem to be the case here. Several times one of the floor leaders, who supported Parker's nomination, asked for the quorum call, sometimes to make announcements and sometimes, it appears, to bring Senators to the floor to listen to the debate. Twice opponents of the nomination made the quorum call request, but both times it appears that the Presiding Officer was preparing to put the question of the nomination (and thus force the Senate to vote) and the quorum call forestalled that move. Opponents of the nomination did object to a unanimous consent request that debate on the nomination not start until the senior Senator from North Carolina was able to return to Washington. The nomination also was briefly interrupted by a motion from a Senator that allegations made by another Senator—that judgeships were being offered as rewards for those who would vote for Parker—be investigated before the chamber voted on the nomination. That motion was later withdrawn. Finally, the Senate set the time for the vote on Parker by unanimous consent. News reports say the galleries were packed with people like Alice Longworth, daughter of Theodore Roosevelt and wife of the House Speaker; Frank Morrison, a labor leader; and Representative Oscar S. De Priest, then the only African American in the Congress, who attended the debates and watched from the back of the chamber. When the final vote came on May 7, other Members of the House "drifted into the Senate chamber and lined its walls three deep. The utmost silence prevailed as the Senators answered their names." The vote was 39-41 against Parker's confirmation. William O. Douglas, 1939 The nomination of William O. Douglas also shows how the Calendar Call operated when there was controversy. President Roosevelt nominated Douglas to be an Associate Justice on March 20, 1939, to replace retiring Justice Louis D. Brandeis. Douglas was the head of the Securities and Exchange Commission, and he seemed well-known to the Senate. The Senate Committee on the Judiciary referred the nomination to a subcommittee, which held a hearing at which no one testified. The subcommittee unanimously reported the nomination to the full committee, which then unanimously reported the nomination favorably to the full Senate on March 27. A news report stated that Douglas attended the full committee's meeting so that he could "meet the members." Between the committee session and floor debate, however, opposition developed. Senator Lynn Frazier of North Dakota argued Douglas had an improper relationship with the leaders of the New York Stock Exchange. The nomination was passed over twice on the Call of the Calendar, in order to facilitate fuller debate. In particular, the first time the nomination was passed over it was because Senator Frazier could not be in the chamber, and he wanted the Senate to wait until he was able to be a part of the debate. Three live quorum calls were taken during consideration of the nomination. The first of these was demanded at the start of the debate, and the second during the middle of Senator Frazier's speech. The third live quorum call was demanded just prior to the final speech of the debate, made by Senator Maloney in favor of the nomination. The vote to confirm Douglas was 62-4, with 30 Senators not voting. Unanimous Consent Agreements, 1968 to present In the modern era, Senate practices of floor consideration generally have come to be dominated by the use of unanimous consent agreements, under which Senators agree to limit their rights to debate and to take procedural actions. The pervasiveness of these agreements has extended to the consideration of Supreme Court nominations. From about 1968 to the present, unanimous consent agreements have been reached that typically provide for when the Senate will take up nominations, limit and structure the debate, and, in many instances, provide for a final confirmation vote. These agreements allow the Senate leadership to move to consider each nomination at a time, and in a way, they desire, instead of waiting until the nomination is reached on the Calendar. In fact, majority leaders began to ask unanimous consent to go into executive session to consider a specific Supreme Court nomination. This proceeding had been used as early as 1959 for the consideration of the nomination of Potter Stewart, and it was the method used, for example, when Majority Leader Mike Mansfield called up Harry A. Blackmun for Senate floor consideration in 1970. Under a later precedent of the Senate, a motion to go into executive session to consider a specific nomination is not debatable, though the nomination itself is. Another change also took place roughly around the same time. The Senate routinely began to decide the question of confirmation by roll call votes. Since 1967, indeed, the Senate has evidently come to consider it appropriate always to take roll call votes on Supreme Court nominations. In addition, nominations during this period have typically received longer floor consideration than in any previous period. A further characteristic of the modern era is the use of the cloture motion. The Senate cloture rule, which permits a super-majority to limit the time for consideration of a matter by a roll call vote, did not exist until 1917, and it could not be applied to nominations until 1949. Since then, supporters have attempted to use the motion to impose limits on the consideration of only four Supreme Court nominations. The first attempt was on the motion to proceed to the 1968 nomination of Abe Fortas, already a member of the Court, to be Chief Justice. Cloture failed, as did the 1971 cloture attempt on the nomination of William H. Rehnquist to be an Associate Justice (though Rehquist was confirmed, while Fortas was not). The Senate did invoke cloture on the consideration of the 1986 elevation of Rehnquist to the position of Chief Justice and the 2005 nomination of Samuel Alito to be an Associate Justice. William H. Rehnquist, 1971 The 1971 nomination of William H. Rehnquist illustrates the use of cloture on a Supreme Court nomination. President Nixon named Rehnquist to be an Associate Justice of the Supreme Court on October 26, 1971, to replace retiring Justice John Marshall Harlan. Rehnquist had been Assistant Attorney General for two years and was well known on Capitol Hill, but opponents contended that he had shown insufficient commitment to civil rights and civil liberties. The Judiciary Committee held five days of hearings on the Rehnquist nomination, and opponents delayed the committee vote on recommending the nomination to the full Senate for a week. The committee voted 12-4 to report the nomination favorably. The nomination was debated on the Senate floor for five days. A motion to invoke cloture, and limit debate on the nomination, failed on the fifth day by a vote of 52-42 (at that time, a vote of two-thirds of Senators present and voting was required to succeed, which would have been the votes of 63 Senators in this case). A motion that consideration of the nomination be postponed until mid-January was defeated by a vote of 22-70. Only then did the Senate agree, by unanimous consent, to take a vote on the nomination at 5:00 p.m. that day. Rehnquist was confirmed by a vote of 68-26. (Subsequently, in 1986, he was confirmed as Chief Justice of the United States by a Senate vote of 65-33, after proceedings in which cloture was invoked.) John G. Roberts, 2005 The case of John Roberts, 2005, shows how unanimous consent agreements are used in current practice. President George W. Bush originally nominated Roberts for an Associate Justice position on the Supreme Court, to replace Sandra Day O'Connor, who had announced her retirement. Following the death of Chief Justice William H. Rehnquist, however, Bush withdrew that initial nomination and instead nominated Roberts to be Chief Justice (the Senate had referred the initial nomination to the Judiciary Committee, but the committee had not acted on it). The Committee on the Judiciary considered President Bush's nomination of Roberts to be Chief Justice for five days. The full Senate also debated the nomination for five days. Three separate unanimous consent agreements set the time for debate each day and, in some cases, specifically divided the time between specific Senators. Roberts was confirmed by a vote of 78-22, with no procedural actions other than the unanimous consent agreements that structured the time for consideration of the nomination. Characteristics of Floor Action Senate floor proceedings on Supreme Court nominations might be distinguished in terms of a wide variety of different characteristics. The present study focuses chiefly on three that are readily identifiable and often referred to the kind of vote (or other action) by which the Senate disposed of the nominations; the amount of time the Senate spent considering them on the floor; and the forms of procedural action that occurred during their consideration. Each of these represents a salient element of the procedural context in which a nomination is considered. Together, they may afford an indication of the amount of controversy, contention, or opposition that surrounds a nomination. For example, if the Senate approves a nomination by a voice vote after a single day of consideration, during which no procedural actions occur, one might reasonably conclude that it involved little opposition or controversy. As the following discussion indicates, however, none of these three characteristics, in itself, can simply be equated with the level of controversy. Forms of Disposition Varieties of Disposition An obvious initial distinction among the 160 nominations concerns the ways the Senate disposed of them. In the broadest terms, the Senate confirmed 124 and failed to confirm the remaining 36. This breakdown, however, conflates the 11 nominations that the Senate affirmatively rejected with the 25 on which no final vote occurred. Further, the 25 without a final vote include 12 that never received floor consideration at all and 13 that were called up, but on which the Senate never finished action. The meaning and implications of each form of disposition may differ. Nominations Confirmed The 124 nominations confirmed make up 92% of the 135 on which the Senate reached a final vote. Well over half the 124 confirmations (73, or 59% of the 124 confirmed) took place by voice vote, and the remaining 51 (41% of confirmations) by roll call. In earlier periods of American history, both voice and roll call votes occurred, but, as noted in the preceding section, in recent decades roll calls have become universal. The closest vote by which a nomination was confirmed was that of Matthews (1881-2), by 24-23; other close votes to confirm include those for Thomas (1991), by 52-48; Lamar (1888), by 32-28; and Clifford (1857), by 26-23. Nominations Rejected The 11 Supreme Court nominations the Senate has rejected make up the remaining 8% of those on which the Senate reached a final vote. All 11 of these rejections occurred on roll calls; the Senate has never rejected a nominee by voice vote. As with confirmations, these 11 rejections occurred at points scattered throughout American history. The earliest was Rutledge for Chief Justice in 1795; the most recent, the nomination of Robert Bork in 1987 to be an Associate Justice. Bork's was also the nomination rejected by the widest margin (42-58); the closest was that of Parker (1930), who was rejected by 39-41. The median margin of defeat, however, has been nine votes. Only in one instance (Spencer, 1844-2) has a President resubmitted a nomination the Senate had previously rejected, and then, not surprisingly, without success. Nominations Without Final Vote The Senate conducted no final vote on 25 nominations. Table 1 lists these 25 nominations and notes some pertinent contextual features of each. They make up 16% of the total number of high court nominations submitted, an indication of the extent to which the Senate has not always considered itself obligated to proceed to a final up-or-down vote on every Supreme Court nomination presented to it. These 25 nominations fall into two groups discussed separately in the following two subsections: (1) 13 on which the Senate initiated floor action, but never completed it; and (2) 12 that never reached the floor at all. For purposes of this report, all formal proceedings in the full Senate in relation to a nomination, once it was available for floor consideration, were counted as floor action. For example, a nomination was treated as receiving floor action even if the Senate never actually proceeded to its consideration, but did decline to grant unanimous consent to do so. Overall, by this standard, the Senate has taken some floor action on nearly 93% of all nominations submitted, and proceeded to a final vote on 84%. No Floor Action The 12 occasions on which the Senate has failed to bring a nomination to the floor have also been scattered throughout history. The circumstances of their occurrence have varied, as well. Five of the 12 were submitted quite late in a session, so that the Senate may simply have lacked time to act. Six others were withdrawn before floor consideration could commence, including instances from Paterson in 1793 (first nomination) to Miers in 2005. The last of the 12 (Stanbery, 1866) became moot because Congress reduced the size of the Court, thereby abolishing the vacancy. This distribution of conditions for the lack of floor action suggests that the Senate has exhibited little tendency to leave Supreme Court nominations without a final vote simply out of reluctance to act, or to use inaction as an indirect means of denying confirmation. Four of the five nominations late in a session, and two of the six withdrawn, were later resubmitted (usually at the following session), and the Senate proceeded to a final vote on each of the resubmitted nominations. The other four withdrawn nominations were never resubmitted. Overall, therefore, only two of these 12 nominations continued to be available to the Senate and yet never received floor action. These included one of the late-session nominations and the one that became moot. These observations show that the simple absence of floor consideration cannot be taken to imply that the Senate found the nomination less than acceptable. Of the five nominations in this group that were later resubmitted, the Senate confirmed four, rejecting only one. In addition, at least some of the withdrawals evidently occurred for reasons unrelated to Senate sentiment about the nomination. Paterson (1793-1), for example, who was among those later resubmitted and confirmed, was initially withdrawn only because he was constitutionally ineligible to sit on the Court at that point, as he had previously been elected to a Senate term that had not yet expired, and during which the salary of the Justices had been increased. The nomination of Roberts (2005-1) was withdrawn because the President decided to nominate him instead for the post of Chief Justice, which became available subsequent to his original submission of the Roberts' nomination. Among nominations not resubmitted, Thornberry's (1968) was withdrawn simply because the vacancy he was to fill was eliminated by the failure of a concurrent nomination of a sitting Justice to be Chief Justice. The late nomination of Micou (1853) presents a more ambiguous case, but the immediate reason it was not resubmitted was that the lame duck President who originally submitted it had left office. On other nominations in this group, circumstances suggest that the Senate's inaction did reflect the presence of opposition. Most clearly, the congressional action to abolish Stanbery's vacancy (1866) appears to reveal emphatic objection to his nomination. Also, after Hornblower's initial nomination received no action late in a session (1893-1), the Senate rejected his renomination outright (1893-2). In the case of Spencer, as discussed earlier, the Senate had already rejected the nomination once before President Tyler later resubmitted and withdrew it on the same day (1844). There also appears reason to conclude that the withdrawals of both Cushing (1874) and Miers (2005) represent responses to expressed opposition. Floor Action Without Final Vote The 13 nominations that received floor action, but no final vote, reflect a different distribution of circumstances. Consideration of one of the 13 (Read, 1845) appears simply to have begun too late in a session to be completed, but the Senate appears to have laid aside each of the other 12 as a consequence of unfavorable action on some procedural motion. The specific actions taken in these cases, noted in Table 1 and described in more detail in the section on " Procedural Complexity ," were seldom ones that conclusively precluded further consideration. Instead, the Senate seems simply to have taken these actions as demonstrating a lack of sufficient support for confirmation. The President, correspondingly, subsequently withdrew six of these nominations. The frequency of these proceedings may indicate the extent to which the Senate, in the presence of opposition to a Supreme Court nomination, has been willing to give it consideration and yet decline to proceed to an "up-or-down" vote. In recent times, the Senate has not often resorted to this form of proceeding. Nine of the 13 instances occurred in the decade from 1844 to 1853, and only two took place after the Civil War. The earliest instance occurred in 1828, when the Senate set aside the Crittenden nomination until after a reorganization of the Judiciary (by which point the nominating President would have left office). The most recent case was the Fortas nomination for Chief Justice, which President Johnson withdrew in 1968 after supporters mustered only 45 votes for cloture on the motion to proceed to consider the nomination. Dispositions and the Extent of Opposition The left-hand group of columns in Table 2 summarizes the preceding discussion of how the Senate has disposed of Supreme Court nominations, showing that the Senate has confirmed more than three-quarters of all nominations submitted to it, and more than nine of every ten on which it voted. Indeed, as the middle group of columns shows, the Senate has confirmed almost half of all Supreme Court nominations ever submitted to it without even requiring a roll call vote. Roll calls, on the other hand, have by no means been uncommon, occurring on four of every nine final votes, including every one since 1967. Neither the type nor the outcome of a vote, in itself, can be taken as affording a clear indication of the extent of the opposition a nomination may have generated. In particular, although a voice vote may reasonably be viewed as failing to indicate the presence of opposition, it could be rash to presume that it demonstrates an absence of opposition. Conversely, although a roll call vote may reflect the presence of extensive opposition, it may also occur when no such level of opposition is present. In the years since 1968, for example, eight of the 19 roll calls have registered fewer than four "no" votes. More broadly, as Table 2 shows, half of all roll call votes on Supreme Court nominations throughout history have involved fewer than 10 votes in opposition. Taking the appearance of at least 10 "nay" votes as a rough threshold for the presence of significant opposition permits a more meaningful judgment of the significance of these data on the disposition of nominations. By this standard, 26 of the 51 roll calls by which nominations were confirmed revealed "significant" opposition. Combining these 26 nominations with the 11 that were rejected, it may be said that just 37 of the Senate's 135 votes on confirmation indicated the presence of "significant" opposition. By incorporating nominations that received no final vote into this approach, a unified account may be given of what different outcomes on these nominations mean. The earlier discussion of nominations that received floor action but no final vote suggested that this outcome typically reflected the presence of opposition. The discussion of nominations that received no floor action, on the other hand, concluded that this outcome has come about, on different occasions, both when significant opposition was present and not. Accordingly, this disposition cannot, in itself, be taken as an indicator of either circumstance. The results of these considerations are summarized in the right-hand columns of Table 2 . The 13 nominations on which floor action failed to result in a final vote are counted as cases of "significant" opposition, but the 12 that never reached the floor are treated as permitting no definite conclusion about opposition. This classification yields a total of 50 nominations with dispositions that imply "significant" opposition. From this perspective, accordingly, it can be held that just about two-thirds of the 148 Supreme Court nominations reaching the Senate floor have met no more than scattered opposition. Length of Floor Action Days of Floor Action Another salient characteristic in terms of which Supreme Court nominations vary is the length of consideration they receive on the floor. As with forms of disposition, of course, length of consideration can be established only for those nominations on which consideration occurs. Accordingly, the data discussed in this section again reflect only the 148 nominations that reached the floor. The length of consideration of Supreme Court nominations is identified in Table 3 in terms of the number of calendar days on which Senate floor action took place on the nomination. In general, each day (post-committee if reffered) was counted on which any formal procedural action in relation to a nomination occurred, even if the nomination itself was not formally under consideration on that day. For example, a day was counted on which a motion to proceed to consider a nomination was offered or debated, even if the motion was defeated, or was not adopted until the following day. Otherwise, for example, all Senate floor action on the Fortas nomination for Chief Justice (1968), which occurred in its entirety pending a motion to proceed to consider the nomination, would not be counted. Similarly, in relation to the 1828 Crittenden nomination, days on which the Senate debated the resolution to postpone action are counted as days of floor action on the nomination. On the other hand, days were not counted on which Senators made individual speeches in relation to a nomination, but the Senate did not formally have it under consideration on the floor, as happened extensively, for example, on the Rehnquist nomination for Associate Justice (1971). The data presented, accordingly, are more precisely described as presenting the length of "floor action" than of formal "consideration" or of "debate." In compiling these data, however, a few actions were treated as exceptions to the standard just identified. Especially during the first half of the 19 th century, for example, the Senate commonly referred newly received nominations to committee through action taken on the floor. In more recent times, the Senate has sometimes reached a unanimous consent agreement setting terms for consideration of a nomination in advance of any actual consideration. When either such action was the only one taken in relation to a nomination on a given day, the day was not counted as a day of consideration. A contrary practice would tend to overstate the length of consideration of these nominations relative to others to which the Senate actually devoted similar time, but on which similar actions occurred not on a preceding day, but on the same day as other steps. Extended Consideration and Opposition Table 3 shows that, historically, the Senate has found a single day sufficient for floor action on more than two-thirds of all the nominations submitted (although this form of action has ceased to be the norm in the years since 1967). For nominations receiving longer consideration, numbers decline quickly as length of consideration rises, so that 10% of those reaching the floor remained there for more than three days. The more extended consideration given to this relative handful of nominations may rest on a variety of causes. Assessment of their nature is likely to begin from the well understood circumstance that opponents of a matter in the Senate may engage in extended debate as a means of delaying or blocking final action. Accordingly, it might be natural to take the length of floor action as an indicator of the intensity of opposition to a nomination, and specifically of the determination with which opponents attempted to delay its confirmation. Such a supposition might be supported by the observation that none of the six nominations receiving more than five days' consideration was confirmed. Other considerations, however, also may be pertinent. It may be significant, for example, that four of the 15 nominations considered for more than three days were for Chief Justice; it may plausibly be supposed that the Senate has generally tended to find these nominations as necessitating more sustained consideration. More broadly, the Senate may well have been likely to devote more time to nominations that were considered particularly important, for example, to the balance or future course of the Court. In addition, the data in Table 3 also suggest a trend toward longer consideration in more recent times. Although extended consideration was not unheard of even in very early years (e.g., Wolcott, 1811, and Crittenden, 1828), seven of the 10 nominations receiving more than four days' consideration occurred in 1968 or later, beginning with the Fortas nomination for Chief Justice. This trend may be associated either with generally observable developments in the way the Senate handles its business or with increases in controversy specifically over nominations to the Court. These considerations suggest that the occurrence of extended consideration on Supreme Court nominations cannot, in itself, be taken as a definitive indicator of strong opposition. Not only may extended consideration occur for other reasons, but it is also not necessarily the case that even determined opponents have always expressed their position by attempting to protract proceedings. On the other hand, lengthy consideration may reasonably be viewed as a sign of the possibility that opposition may have been present. Correspondingly, although the completion of consideration on a single day cannot be taken to demonstrate an absence of opposition, it may appropriately be viewed, more cautiously, as failing to afford evidence that significant opposition was present. Procedural Complexity Optional Procedural Actions Senate floor proceedings on Supreme Court nominations, like those on other matters, are distinguishable not only in terms of the means of disposition and the length of time consumed, but also by the procedural actions that may occur in the course of consideration. As with these other characteristics of floor action, procedural actions can be identified only for the 148 nominations that reached the floor. Table 4 lists various forms of procedural action that have occurred in the course of Senate floor consideration on these nominations and how often each has appeared. It shows that no single procedure was used on more than about one in seven of the Supreme Court nominations reaching the floor, but also that a half-dozen different procedures were used at least half that often. No single procedure either stands out as especially characteristic of proceedings on these nominations or clearly identifies any distinctive subgroup among them. Instead, floor proceedings on Supreme Court nominations are more readily categorized, in this respect, simply in terms of whether or not any procedural actions at all occurred beyond those required in the course of consideration itself. Throughout history, floor action on Supreme Court nominations has most often remained procedurally simple in this sense. Proceedings on 78 of the 148 nominations were procedurally simple in the sense of involving no optional procedural actions. The remaining 70 nominations (47% of the total) may be identified, in this minimal sense, as "procedurally complex." Procedurally complex nominations might be further distinguished in several ways, such as by the number of procedural actions that occurred in the course of floor action or the extent to which procedural actions were applied to other procedural actions (e.g., a motion to table a motion to postpone). A more readily applicable criterion for this purpose, however, is whether any of the procedural actions taken resulted in a roll call vote. Again as Table 4 shows, procedural roll calls occurred on 26 of the 70 nominations on which any optional procedures were used (18% of the total 148 nominations on which floor action occurred). This further distinction affords a rough indicator of the intensity with which procedural action was pursued. For some kinds of optional procedure used in relation to Supreme Court nominations, the principal effect would have been to expedite rather than delay consideration. These included chiefly (1) actions, taken either by motion or unanimous consent, to proceed to consider a nomination on the same day reported; and (2) consent agreements assuring a final vote (either by limiting debate or setting a time certain) that were reached before consideration began or on its first day. In order to examine the potential use of optional procedures as means of pursuing opposition to Supreme Court nominations, it is appropriate to exclude these forms of action from consideration. The second column of Table 4 presents a count of optional procedures that could potentially have been used for purposes of delay or opposition. Using this criterion, 90 of the total 148 nominations reaching the floor (61%) may be said to have been subject to no optional procedures that could have had the effect of delaying or terminating consideration. This percentage is comparable to the 62% of nominations reaching the floor that faced no significant opposition and the 68% that received action on only a single day. As with those other characteristics of consideration, it would not be appropriate to take the absence of procedural complexity as demonstrating the absence of opposition. It could reasonably be said, nevertheless, that when nominations involve no procedural complexity, no positive inference may be drawn from the procedural features of consideration that opposition or contention was present. Conversely, the occurrence of procedural complexity, or even of procedural roll calls, cannot be regarded as sufficient in itself to demonstrate the presence of opposition or contention, but may reasonably be taken as cause to think that such opposition may have been present. The occurrence of optional procedural actions is also related to the occasions, previously detailed in Table 1 , on which nominations reached the floor but failed to reach a final vote on confirmation. In 12 of the 13 cases of incomplete consideration listed in Table 1 , some optional procedural action was the last one that occurred, and had the effect of terminating consideration. In order to indicate some potential effects of optional procedural actions, the last column of Table 4 reproduces this information in summary form. These 12 instances show that the effect of a procedural action in any individual case depends only in part on the prescribed effect of the action. It is also affected, in some cases, by the procedural context in which the action is undertaken, and in particular on whether it is integral to or divergent from the routine practice of the time. Procedural context changes from case to case, normal practice also has changed over the course of Senate history, and in some cases, the prescribed effect of procedural actions has changed as well. Accordingly, the potential significance of optional procedural actions may be clarified by reference to some of the points initially developed in the section on " Historical Trends in Floor Consideration ." For this purpose, it is useful to look separately at actions that affect how the Senate has taken up nominations and those that can occur in the course of consideration. In both cases, however, the periods during which distinctive patterns of optional procedural action characteristically appear differ from those discussed in earlier sections, which were defined by changes in the normal terms of consideration. Each of the following sections, accordingly, is couched in terms of its own appropriate periodization. Calling Up Nominations The Senate has always taken up nominations under procedures that govern action in executive session, which are in some respects separate from those regulating legislative action. It has usually done so by going into executive session to consider the nomination, but occasionally by granting unanimous consent to consider the nomination "as in" executive session, without actually leaving legislative session for the purpose. As described earlier, in the section on " Historical Trends in Floor Consideration ," it appears that the normal practice of the Senate for most of its history (from 1789 until roughly 1967) was to take up each nomination automatically when it was reached in the course of considering executive business. In order to be eligible for consideration under this procedure, a nomination apparently had to have become available for floor action at least one day previously. Initially, nominations became available when received from the President; after 1835, when nominations to the Supreme Court began routinely to be referred to committee, they normally became available for consideration when reported. After about 1922, it appears, this proceeding was formalized as a Call of the Calendar of nominations. Sometimes, however, by unanimous consent, the Senate has taken up a nomination on the same day reported or submitted. As previously noted, in fact, this proceeding was used for nearly half of all nominations reaching the floor (18 of 41) from 1868 to 1922. No departure from these routine forms of proceeding occurred before 1835, when the nominations of Taney and Barbour, though eligible for the normal procedures, were called up instead by a roll call vote on a motion to proceed to consider. Complications of a similar kind were faced by Badger in 1853, when the Senate was unable to reach a vote on a motion to proceed, and by Black in 1861, when the Senate defeated a motion to proceed on a roll call vote. During roughly this same period, however (1844-1874), motions to proceed to consider were also offered on seven other nominations that were eligible for normal consideration, but the Senate adopted these motions in short order and by voice vote. In the cases of both Badger and Black, the Senate also attempted to bring the nomination to the floor through a special order providing that it proceed to consideration on a specified later day. The Senate ultimately adopted a special order of this kind for Badger by voice vote, but never accepted one for Black. On five Supreme Court nominations thereafter, through 1930, the Senate used unanimous consent to establish special orders of this kind. These special orders represent forerunners of the contemporary practice of reaching agreements in advance, by unanimous consent, to take a matter up. In these earlier times, however, special orders seem to have been used for these nominations only in unusual circumstances, to overcome difficulties in bringing a matter to the floor, and their effect was to put off its consideration until after the point at which it would normally have come up. Another form of action that indicated an attempt to delay consideration appeared on four scattered occasions before 1967 when an attempt to call a nomination up on the same day it was reported or submitted was prevented by objection. A more definite, though still only temporary, form of delay was imposed on five nominations during this period (all after 1880), each of which was passed over for consideration at least once, upon demand of a Senator, when reached in its normal order. From 1968 on, the Call of the Calendar of nominations fell into disuse for the consideration of Supreme Court nominations, and a different set of practices for initiating floor action on these nominations has become standard. All but one of the 21 nominations that have reached the floor since that time did so pursuant to a request for unanimous consent that the Senate proceed to consider it. For eleven nominations, this consent agreement provided for immediate consideration; for the remaining nine, it provided, like the earlier special orders, for consideration to begin at some future date. In addition, some of these consent agreements provided for the Senate not only to take up the nomination, but to go into executive session for the purpose, and some also limited debate or set a time certain for a final vote. Whether or not they included these additional provisions, however, these agreements represent a routine proceeding for taking up the nomination and fail to suggest any potential difficulties in bringing it to the floor. The only nomination in this recent period to experience difficulty at the point of calling up has been that of Fortas in 1968, on which a motion to proceed to consider was found necessary and could not be brought to a vote. Proceedings in the Course of Floor Action Senate rules do not establish separate procedures for the consideration of nominations and of legislation to the same extent that they do for calling up business of the two kinds. The most evident differences in forms of proceeding between the two kinds of matter may be that nominations, of course, cannot be amended. Otherwise, most of the same procedural mechanisms used for legislative business are also available on nominations. 1789-1835 The only optional procedures used during consideration of Supreme Court nominations in these years were motions to postpone temporarily, to commit with instructions, and to lay on the table. The use of any of these motions was uncommon, occurring on only five of the 31 nominations reaching the floor before 1835. Motions to postpone temporarily, however, were used as early as 1795, motions to commit with instructions by 1811, and motions to table by 1826. During this period, a motion to postpone or table was sometimes offered at the point when the Senate was just proceeding to consider a nomination, so that the motions might in these instances have been treated as part of the proceedings for calling up nominations. In order to present a consolidated view of the use of each motion, however, the present discussion views all of them as having been offered in the course of consideration. Occasionally, as well, action with effect similar to one of these motions also was proposed by resolution. For example, the Senate several times entertained a resolution that it postpone or table a nomination until enactment of legislation reorganizing the circuit courts (which could have the effect of eliminating the nominee's vacancy), or one that directed a committee to investigate a nominee further, but did not formally recommit the nomination. Table 4 includes these proceedings in the count of corresponding motions. In most instances during this period, when motions to postpone, commit, or table were offered, the Senate adopted them by voice vote. At that time, adoption of a motion to table evidently did not have the effect of a final negative disposition, as it does today, but only of putting off action for the time being. The normal effect of adopting any of these motions, accordingly, was only to delay further action by taking the nomination off the floor temporarily. The only exception to this pattern occurred in 1828, when adoption (by roll call) of the resolution postponing the Crittenden nomination until after a circuit court reorganization effectively terminated consideration of the nomination. 1835-1845 During the decade between 1835 and 1845, by contrast with earlier years, only five of the 16 Supreme Court nominations that reached the floor were considered without the intervention of optional procedures. The procedures used continued to include only motions to postpone, commit, and table, but the consequences of their use became more varied. Some of these motions continued to be adopted by voice vote, but others were either adopted or rejected on roll call votes. Adoption by voice vote may most likely suggest that supporters of the nomination may have been using the motion either to gain time or for routine purposes of agenda management; rejection by roll call suggests that the motions may have been offered by opponents seeking to bring about delays in consideration. Either of these results, however, normally permitted consideration to continue. Especially when one of these motions was adopted by roll call, on the other hand, it often had the effect of terminating consideration before an up-or-down vote could occur. In 1835, the Senate tabled a resolution to postpone the Taney nomination until a circuit court reorganization, then adopted a motion to postpone it indefinitely. In 1844, the Senate, by roll call votes, tabled President Tyler's nominations of Walworth and King, and in the following year it did the same to their renominations, but by voice vote. The motion for indefinite postponement has the explicit purpose of terminating consideration, but, under the practice of the time, a similar consequence followed from adopting the motions to table only because the Senate never subsequently chose to resume consideration of the nomination. It appears highly likely that in taking these actions, the Senate understood that leaving consideration unfinished was their proponents' intent and would be the practical effect. 1845-1890 In the decades after 1845, political circumstances varied widely, but the overall incidence of procedural complexity on Supreme Court nominations declined, although not to early levels. A solid majority of the nominations reaching the floor between 1845 and 1890 (20 of 31) experienced no optional procedural action at all after being called up. (This figure, however, includes the five nominations confirmed during the Civil War, when any substantial opposition to the administration was absent from the Senate.) During this period, the motions to postpone, to commit, and to table continued to be used on Supreme Court nominations, except that, because initial committee referral had become routine, the motion to recommit largely replaced the motion to commit. These three motions continued to be used in ways similar to the previous period, and continued to have a similar range of consequences. In 1870, however, a resolution was offered to lay two Supreme Court nominations on the table until Congress completed a circuit court reorganization, and this proved to be the last occasion on which an attempt was made in the Senate to table such a nomination. The Senate, accordingly, has never attempted to use this motion on Supreme Court nominations during the era when it would have the effect of a final negative disposition. Beginning in 1853, however, the Senate also started to use motions to adjourn with the effect or apparent intent of putting off consideration of a Supreme Court nomination. On the Badger nomination in 1853, such a motion was adopted by a roll call vote. Thereafter, the motion to adjourn was offered on six other nominations through 1889. On one occasion it was adopted by voice vote, but otherwise a roll call always rejected it. For a brief period beginning in 1870, motions to reconsider a vote to confirm also appeared. The first such motion (on Strong in 1870) was withdrawn after three days' debate and the failure of a motion to postpone it. The second (on Harlan in 1877) never reached a vote. The last (on Woods in 1880) was tabled by roll call after a quorum failed on an initial roll call on the motion itself. After this third unsuccessful attempt, the Senate abandoned use of this motion in this context as well. Neither the motion to adjourn nor the motion to reconsider was ever used with the effect of terminating consideration. The motions to postpone, to recommit, and to table, on the other hand, which had continued to appear since earlier times, were still occasionally used with this effect. The Bradford nomination was tabled in 1852 and received no further action, and the Badger nomination in the following year was postponed until a date after Congress was to adjourn. In 1873, the Williams nomination became the only one on which a recommittal ever terminated consideration. On only one subsequent occasion (Fortas, 1968; see below) has the Senate ever again resorted to optional procedural actions to terminate action on a Supreme Court nomination short of an up-or-down vote. With this one exception, accordingly, such terminations came about only in the half century from 1828 through 1873. This period included not only the nine nominations on which floor action was terminated before a vote through optional procedures during consideration, but also the two on which this effect followed from Senate action on a motion to proceed to consider. As already suggested in the case of the tabled Tyler nominations, it appears likely that in these instances, even when the procedures used did not, in themselves, definitively terminate consideration, the Senate understood in using them that this would be their practical effect. 1890-1967 After 1890, the frequency of optional procedural action during consideration declined further; from then through 1967, such action appeared on just 14 of the 50 nominations that reached the floor. Additional shifts also occurred in the forms of procedural action used. These shifts amounted principally to a substantial decline in the use of motions that required a vote of the Senate, and an increasing resort instead to live quorum calls, which can be demanded by a single Senator, and unanimous consent agreements, which can be blocked by the objection of any single Senator. Although the votable motions could potentially be used in ways that would have the effect of terminating consideration, such a result was not likely from either of these procedures that newly came into use on Supreme Court nominations during this period. Early in this period, the Senate continued to adopt motions to recommit and to postpone by voice vote, and to reject them by roll call. After 1930, however, these motions became more unusual, and the motion to adjourn ceased to be used at all in this context. A motion to recommit or postpone has been offered on just four nominations since 1930, most recently in 1971 (on Rehnquist for Associate Justice), and all have been rejected on roll calls. Only routine motions to adjourn or recess have been offered during consideration of any Supreme Court nomination since 1890, except for one occasion (on the nomination of Hughes for Chief Justice in 1930) on which a roll call rejected a motion to recess. As noted earlier, the motion to reconsider had already become disused in this context, perhaps because the Senate had already begun to adopt its current practice of tabling this motion immediately after every successful action. Beginning with the Stone nomination for Associate Justice in 1925, live quorum calls came to be used with some regularity during consideration (although a single such call had already occurred once previously, on the Woods nomination of 1880). At least 10 such calls each were demanded on the Hughes and Parker nominations in 1930. This procedure can be used to bring about a certain amount of delay even if it succeeds in producing a quorum, although only once (in the consideration of Parker) did such a call ever result in the actual failure of a quorum. After 1930, live quorum calls occurred on seven more nominations, most recently in 1971, but no more than three times on any single nomination. The unanimous consent agreements that are to be taken into account in this connection include only those that assured the ability of the Senate to reach a final vote on a nomination, usually by setting either a time certain for the vote or an overall limit on the time for debate. Such an agreement was first reached for Brewer (1889), but appeared on just three other nominations between then and 1967. Three of these four agreements were reached either in advance of consideration or on its first day, and accordingly appear likely to represent consensual arrangements to facilitate consideration. The fourth agreement, by contrast (on Parker in 1930), was not reached until the seventh day of consideration, and so appears more likely to represent a response to attempts to delay or extend consideration. 1968-Present From 1968 onward, however, consent agreements became the standard means of regulating consideration of Supreme Court nominations, as they increasingly did for other major matters. Such agreements appeared on 17 of the 21 nominations that have reached the floor during this period, and six of the 17 were established only after the first day of consideration. Many of these agreements, on the other hand, may have represented collegial arrangements rather than attempts to overcome any difficulties in consideration, especially inasmuch as, on 12 of the 17 nominations in question, the consent agreement was the only optional procedural action taken. Overall, indeed, consideration of 16 of the 21 nominations reaching the floor since 1968 involved no optional procedural actions other than the consent agreement. On the remaining five of these 21 recent nominations, the only optional procedures used were to postpone (once), to recommit (once), and for cloture. The motion for cloture, which allows a super-majority to limit the time for consideration of a matter, started to be used on Supreme Court nominations at about the same time as consent agreements became routine. As noted in the section on " Historical Trends in Floor Consideration ," this motion did not become available for use on nominations until 1949. It was not used on any nomination, however, until 1968, when the Senate rejected cloture on a motion to proceed to consider the Fortas nomination for Chief Justice (and thereafter abandoned action on the nomination). This action represents the only time since 1873 when the Senate has terminated floor action on a Supreme Court nomination short of an up-or-down vote. Subsequently, cloture was moved also on the two Rehnquist nominations, as noted in the case study presented earlier. On a 1971 nomination for Associate Justice the motion failed, but a consent agreement was subsequently reached that permitted the Senate to reach a vote on confirmation. On a 1986 nomination for Chief Justice, the Senate invoked cloture, the first time it had done so on a Supreme Court nomination. Cloture was invoked also on the fourth Supreme Court nomination on which it was moved, that of Alito in 2006. Procedural Complexity and Opposition As was the case for forms of disposition and length of consideration, the significance of procedural complexity is more difficult to ascertain than is its occurrence. The preceding discussion shows that, on some occasions, optional procedures may have been used routinely, with the apparent purpose of managing the flow of business, and with a potential effect only of expediting action. On other occasions, optional procedures may have been used as means of delaying consideration or even placing obstacles in the way of a final disposition. In cases when the occurrence of optional procedural action resulted in consideration being terminated before a final vote, for example, it might reasonably be conjectured that the procedural action in question could have been undertaken with the intent of bringing about this result. It is equally reasonable to suppose that similar actions, undertaken on other nominations, may at least sometimes have reflected similar intentions, even if the results did not successfully fulfill those intentions. No definitive conclusions, of course, might be drawn about the purpose of optional procedural actions in any specific case in the absence of information about the intentions of Senators undertaking them. Even to offer inferences about specific occasions on which such intentions were present would require examination of the political and historical circumstances surrounding each nomination, a task beyond both the scope and the purpose of this report. The preceding discussion, nevertheless, permits some assessment about which optional procedures may have afforded the possibility of delaying consideration or forestalling a final vote, and, accordingly, which of them might, in principle, have been used in some instances for such a purpose. As with the level of opposition manifested in the final vote and in the length of floor action, it is plausible to consider the occurrence of procedural actions, or procedural roll calls, as an indication that contention or controversy may have been present, but it is insufficient to demonstrate that substantial contentiousness actually was present. At most, it may be appropriate to consider that the absence of optional procedural actions that could have been used for delay presents an absence of indication of controversy. Relation Among Characteristics of Proceedings That none of the three indicators examined in this part of the report may be taken as a definitive demonstration of the presence or absence of controversy is substantiated by the observation that these three criteria do not always identify the same nominations as possibly controversial. On the other hand, substantial overlap does exist among the nominations picked out by each indicator. This circumstance suggests that a more reliable and comprehensive measure of the level of controversy on each nomination might be derived from a simultaneous consideration of all three indicators together. Such an analysis, however, is beyond the scope of this report. Appendix. Selected Characteristics of Senate Action on Supreme Court Nominations Selected Characteristics of Floor Proceedings Table A-1 provides information on the extent of opposition to, length of consideration of, and procedural actions taken on, each Supreme Court nomination submitted by the President from 1789 through 2005. This table identifies each nomination by the name of the nominee, and nominations for Chief Justice are distinguished by italics . Each nomination is also identified by the year in which it was submitted (action on some nominations extended into the following year). Nominations that received no floor consideration, or that were withdrawn by the President, are identified in the "Notes" column, and for those that received no floor consideration, the columns for characteristics of floor proceedings are blank. The column on "final vote" gives the tally of each roll call vote on confirmation. Nominations confirmed by a voice vote are identified by the entry of "voice" in this column. If no vote on confirmation occurred, the column is left blank. For nominations confirmed by voice vote, by unanimous consent, or with fewer than 10 "nay" votes, the "Extent of Opposition" column is left blank. Other entries in this column identify those nominations that received no final vote, by an entry of "unfinished;" were rejected, by an entry of "rejected;" and were confirmed with more than more than 10 "nay" votes, by an entry of "opposition." The column on "Optional Procedural Actions" is blank only for those nominations on which no floor action occurred. For nominations on which floor action occurred, the extent of optional procedural actions is identified by entries of "n" if no such actions occurred; "op" if such actions occurred, but with no procedural roll calls; and "opr" if procedural actions with roll calls occurred. Selected Characteristics of Committee Action Table A-2 provides information about the course of committee action on Supreme Court nominations which, like that in Table A-1 , may shed light on the extent and intensity of opposition thereto. Also like Table A-1 , this table identifies nominees by name and by year of submission (which in some cases is not the year in which action was concluded), distinguishing nominations for Chief Justice by italics . Table A-2 addresses only committee action that occurred before initial floor consideration. If a nomination was not referred to committee before initial floor consideration, the columns on "Days from receipt to committee report (or other final action)," and on ""Form of reporting (or other final committee action)" are left blank. Similarly, the column on "Days of open committee hearings" is left blank for cases in which no open committee hearings are known to have been held. Finally, the column on "floor disposition" is left blank for nominations that were confirmed. For nominations not confirmed, a summary indication of floor disposition appears in this column, but greater detail appears in Table A-1 , above. The table provides the "Form of reporting (or other final committee action)" for each nomination that was referred to committee. In cases in which the committee action took any form other than the normal form of favorable action, the entry in this column is given in bold face . "Reported" was the normal form of favorable committee action from 1835 to 1865; "reported favorably" thereafter.
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From 1789 through 2009, the President submitted to the Senate 160 nominations for positions on the Supreme Court. Of these nominations, 148 received action on the floor of the Senate, and 124 were confirmed. On August 5, 2010, the Senate confirmed the nomination of Solicitor General Elana Kagan to be an Associate Justice of the Supreme Court, making her the 124th Justice on the Court. The forms of proceeding by which the Senate considered the 148 nominees to reach the floor break down relatively naturally into five patterns over time. First, from 1789 through about 1834, the Senate considered the nominations on the floor on the day after they were received from the President. The second period (1835-1867) was distinguished by the beginning of referral of nominations to the Committee on the Judiciary. The third period (1868-1921) was marked by rule changes that brought about more formalization of the process. During the fourth period (1922-1967), the Senate began using the Calendar Call to manage the consideration of Supreme Court nominations, and the final time period, 1968 to the present, is marked by routine roll call votes on confirmation and the use of unanimous consent agreements to structure debate. Of the 124 votes by which the Senate confirmed nominees, 73 took place by voice vote and 51 by roll call, but on only 26 of the roll calls did 10 or more Senators vote against. Of the 36 nominations not confirmed, the Senate rejected 11 outright, and 12 others never received floor consideration (some, apparently because of opposition; others were withdrawn). The remaining 13 nominations reached the floor but never received a final vote, usually because some procedural action terminated consideration before a vote could occur (and the President later withdrew some of these). Including those that received incomplete consideration, were rejected, or drew more than 10 negative votes, just 50 of the 160 total nominations experienced opposition that might be called "significant." Of the 148 nominations that reached the floor, 100 received one day of consideration, while 26 received more than two days, including four on which floor action took seven days or more. Of these 148 nominations, optional procedural actions that indicate the presence of an attempt to delay or block a confirmation vote occurred on 58, of which 26 involved procedural roll calls. Among a wide variety of procedural actions used, the more common ones have included motions to postpone, recommit, and table; motions to proceed to consider or other complications in calling up; live quorum calls, and unanimous consent agreements. Neither extended consideration, the presence of extra procedural actions, nor the appearance of "significant" opposition affords definitive evidence, by itself, that proceedings were contentious. For example, some nominations considered for one day still faced procedural roll calls, some considered for three days or more faced no optional procedures, and some opposed by more than 10 Senators were still considered only briefly and without optional procedures. Of the 148 nominations to reach the floor, however, 76 were confirmed in a single day of action with neither optional procedural actions nor more than scattered opposition. This report will be updated to reflect action on additional nominations to the Court.
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SECTION 1. SHORT TITLE.
This Act may be cited as the ``Family Foreclosure Rescue
Corporation Act''.
SEC. 2. PURPOSES.
The purposes of this Act are to provide emergency relief with
respect to home mortgage indebtedness through the establishment of a
corporation to directly refinance home mortgages to homeowners
currently in foreclosure, serious default, or with a reasonable
expectation of imminent, sustained default and--
(1) to extend relief to the owners of homes occupied by
them and who are unable to amortize their debt elsewhere,
including those homeowners whose outstanding mortgage
indebtedness exceeds the value of their home due to recent
declines in the housing market;
(2) to provide necessary funds for refinancing without
reliance on liquidity and credit availability in private
markets;
(3) to stabilize neighborhoods by reducing foreclosures and
the downward impact on house prices created by the threat of
widespread foreclosure;
(4) to encourage loan originators and servicers to modify
the terms of existing non-performing loans to obligations that
borrowers can reasonably repay;
(5) to provide mortgage assistance in an efficient manner
at minimal to no cost to the taxpayer, with corporate profits
returned to the Treasury of the United States; and
(6) to minimize the impacts of the current mortgage crisis
on the broader economy.
SEC. 3. DEFINITIONS.
For purposes of this Act, the following definitions shall apply:
(1) Corporation.--The term ``Corporation'' means the Family
Foreclosure Rescue Corporation established under section 4.
(2) Board.--The term ``Board'' means the Board of Directors
of the Corporation.
(3) Home mortgage.--The term ``home mortgage'' means a
first mortgage on real estate--
(A)(i) in fee simple, upon which there is located a
dwelling for not more than four families;
(ii) on a leasehold under a renewable lease for not
less than 99 years, upon which there is located a
dwelling for not more than four families; or
(iii) that is a single unit in a condominium; and
(B) has a value not exceeding the lower of--
(i) 125 percent of the local area median
home price; or
(ii) 175 percent of the dollar amount
limitation for a single-family residence then
in effect under section 305(a)(2) of the
Federal Home Loan Mortgage Corporation Act (12
U.S.C. 1454(a)(2)) .
(4) Secretary.--The term ``Secretary'' means the Secretary
of the Treasury.
SEC. 4. ESTABLISHMENT.
The Secretary of the Treasury shall establish a corporation to be
known as the Family Foreclosure Rescue Corporation, which shall be an
instrumentality of the United States, and which shall have authority to
sue and to be sued in any court of competent jurisdiction, Federal or
State.
SEC. 5. BOARD.
(a) In General.--The Corporation shall be under the direction of a
Board of Directors and shall be operated by the Board under such
bylaws, rules, and regulations as the Board may prescribe for the
accomplishment of the purposes and intent of this Act.
(b) Members.--The Board shall consist of seven members, as follows:
(1) Two of the members shall be appointed by the President.
(2) Four of the members shall be appointed by President
from among a list of 10 nominees selected jointly by the
Speaker of the House of Representatives and the majority leader
of the Senate.
(3) The Secretary shall serve as an ex officio member of
the Board.
SEC. 6. CAPITAL STOCK.
(a) In General.--The Corporation shall have capital stock
subscribed to by the Secretary on behalf of the United States
Government in such amount as the Secretary may determine to be
appropriate, to the extent provided in advance in an appropriation Act
for any fiscal year, but not to exceed in the aggregate $200,000,000.
(b) Certificates.--Certificates evidencing shares of nonvoting
capital stock of the Corporation shall be issued by the Corporation to
the Secretary, to the extent of payments made for the capital stock of
the Corporation.
(c) Public Debt Transaction.--For the purpose of purchasing shares
of capital stock of the Corporation, the Secretary may use as a public-
debt transaction the proceeds of any securities issued under chapter 31
of title 31, United States Code.
SEC. 7. BORROWING.
(a) Issuance.--The Corporation may issue bonds in an aggregate
amount not to exceed $150,000,000,000, which may be sold by the
Corporation to obtain funds for carrying out the purposes of this Act,
or exchanged as hereinafter provided. Such bonds shall be issued in
such denominations as the Board shall prescribe, shall mature within a
period of not more than 30 years from the date of their issue, shall
bear interest at a rate not to exceed 5 percent annually, and shall be
fully and unconditionally guaranteed as to principal and interest by
the United States, and such guaranty shall be expressed on the face
thereof.
(b) Payment.--The Corporation shall make bond payments of accrued
interest plus principal in the amount sufficient to return the
principal within a period not to exceed 30 years, and such payments may
be made monthly, quarterly, semi-annually, or annually, in the
discretion of the Corporation. Outstanding principal and accrued
interest shall be paid to the bond holder in the event that the
mortgage issued in exchange for that bond is paid off or title to the
underlying property is transfered by sale or foreclosured.
(c) Treasury Borrowing.--In the event that the Corporation is
unable to pay upon demand, when due, the interest on any such bonds,
the Secretary shall pay to the Corporation the amount of such interest,
which is hereby authorized to be appropriated to the Corporation, and
the Corporation shall pay the amount of such interest to the holders of
the bonds. Upon the payment of such interest by the Secretary, the
amount so paid shall become an obligation of the Corporation to the
United States and shall bear interest at the same rate as that borne by
the bonds upon which the interest has been so paid.
(d) Treatment.--The bonds issued by the Corporation under this
section shall be exempt, both as to principal and interest, from all
taxation (except surtaxes, estate, inheritance, and gift taxes) now or
hereafter imposed by the United States or any District, Territory,
dependency, or possession thereof, or by any State, county,
municipality, or local taxing authority.
SEC. 8. TREATMENT OF CORPORATION.
The Corporation, including its franchise, its capital, reserves,
and surplus, and its loans and income, shall be exempt from taxation
referred to in section 7(c), except that any real property of the
Corporation shall be subject to taxation to the same extent, according
to its value, as other real property is taxed.
SEC. 9. EMERGENCY MORTGAGE RELIEF.
(a) Acquisition of Mortgages.--The Corporation may, during the
three-year period that begins upon the date of the enactment of this
Act--
(1) acquire in exchange for bonds issued by the
Corporation, home mortgages and other obligations and liens
secured by real estate (including the interest of a vendor
under a purchase-money mortgage or contract) recorded or filed
in the proper office or executed prior to the date of the
enactment of this Act, which are currently in default or at
foreseeable risk of default, except that--
(A) in the event that the home mortgage was placed
in a trust or other qualified special purpose vehicle
for the purposes of securitization, acceptance of
Corporation bonds by a duly appointed servicer as
payment in full for the purchase of the home mortgage
shall be construed as a non-foreclosure alternative to
the termination of a loan, equivalent to a short sale
or short payoff;
(B) the face value of the bonds so exchanged and
the cash so advanced shall not exceed, in any case, the
principal balance plus accrued interest on that balance
(exclusive of additional fees incurred as part of
lender workouts and similar actions), as of the time of
acquisition by the Corporation, as determined by an
appraisal made by the Corporation; and
(C) in any case in which the amount of the face
value of the bonds exchanged plus accrued interest
thereon and the cash advanced is less than the amount
the homeowner owes with respect to the home mortgage or
other obligation or lien so acquired by the
Corporation, the Corporation shall credit the
difference between such amounts to the homeowner and
shall reduce the amount owed by the homeowner to the
Corporation, to that extent; and
(2) in connection with any such exchange, make advances in
cash to pay the taxes and assessments on the real estate, to
meet the incidental expenses of the transaction, and to pay
such amounts, not exceeding $750, to the holder of the
mortgage, obligation, or lien acquired as may be the difference
between the face value of the bonds exchanged and the purchase
price of the mortgage, obligation, or lien;
(b) Amortization.--Each home mortgage or other obligation or lien
so acquired shall be carried as a first lien or refinanced as a home
mortgage by the Corporation on the basis of the price paid for the
mortgage, obligation, or lien by the Corporation, and shall be
amortized by means of monthly payments sufficient to retire the
interest and principal within a period of not to exceed 30 years; but
the amortization payments of any homeowner may be made quarterly,
semiannually, or annually, if in the judgment of the Corporation the
situation of the homeowner requires it.
(c) Maximum Interest Rate.--Interest on the unpaid balance of the
obligation of the homeowner to the Corporation shall be at a rate not
exceeding 7.5 percent annually.
(d) Extensions.--The Corporation may at any time grant an extension
of time to any homeowner for the payment of any installment of
principal or interest owed by the homeowner to the Corporation if, in
the judgment of the Corporation, the circumstances of the homeowner and
the condition of the security justify such extension.
(e) Redemption and Recovery of Foreclosed Properties.--The
Corporation may, during the three-year period described in subsection
(a), exchange bonds and advance cash subject to the limitations
provided in subsection (a), to redeem or recover homes lost by the
owners by foreclosure or forced sale by a trustee under a deed of trust
or under power of attorney, or by voluntary surrender to the mortgagee
within two years prior to such exchange or advance.
(f) Real Estate.--As used in this section, the term ``real estate''
includes only real estate described in section 3(3).
SEC. 10. NONDISCRIMINATION.
(a) Location of Real Estate.--No discrimination shall be made under
this Act against any home mortgage by reason of the fact that the real
estate securing such mortgage is located in a municipality, county, or
taxing district which is in default upon any of its obligations.
(b) Characteristics of Applicants.--The Corporation is prohibited
from discriminating in its lending behavior based on the race, color,
religion, sex, national origin, age, disability, or familial status of
the applicant or applicants.
SEC. 11. DENIAL OF APPLICATIONS.
(a) Authority To Deny.--The Corporation may deny a home mortgage
application on the grounds of an applicant's inability to pay or excess
indebtedness, as determined by credit score, household income and
assets, or other criteria, to be determined by the Board or its
designees.
(b) Counseling.--The Corporation shall provide applicants who are
denied a home mortgage issued by the Corporation information sufficient
to identify and contact a housing counseling provider serving the local
area in which the applicant resides who has been certified pursuant to
section 106(f) of the Housing and Urban Development Act of 1968 (12
U.S.C. 1701x(f)).
SEC. 12. DISPOSITION OF REAL ESTATE.
In the event the Corporation takes possession of real estate
through foreclosure, voluntary transfer of title, or otherwise, the
Corporation shall dispose of the real estate in a manner that minimizes
adverse impacts on neighboring property values by staggering sales so
as not to create an excess supply of properties for sale or by offering
properties for rent until disposition is possible. The Corporation may
make necessary repairs to Corporation-owned property to maintain the
value of the property and to prepare it for disposition.
SEC. 13. APPRAISALS.
The Board shall make rules for the appraisal of the property on
which loans are made under this Act, to accomplish the purposes of this
Act.
SEC. 14. OTHER PROVISIONS.
(a) Officers and Employees.--The Corporation shall have power to
select, employ, and fix the compensation of such officers, employees,
attorneys, or agents as shall be necessary for the performance of its
duties under this Act, without regard to the provisions of other laws
applicable to the employment or compensation of officers, employees,
attorneys, or agents of the United States. No such officer, employee,
attorney, or agent shall be paid compensation at a rate in excess of
the rate provided for the members of the Board.
(b) Use of Mails.--The Corporation may use the United States mails
in the same manner and under the same conditions as other departments
and agencies of the United States.
(c) Salaries and Expenses.--The Corporation shall pay such
proportion of the salary and expenses of the members of the Board and
of its officers and employees as the Board may determine to be
equitable, and may use the facilities of Federal Home Loan Banks, upon
making reasonable compensation for such use, as determined by the
Board.
(d) Bylaws, Rules, and Regulations.--The Board may make such
bylaws, rules and regulations, not inconsistent with the provisions of
this Act, as may be necessary for the proper conduct of the affairs of
the Corporation.
(e) Retirement of Stock.--The Corporation shall retire and cancel
the bonds and stock of the Corporation as rapidly as the resources of
the Corporation will permit. Upon the retirement of such stock, the
reasonable value thereof as determined by the Board shall be paid into
the Treasury of the United States and the receipts issued therefor
shall be canceled.
SEC. 15. LIQUIDATION.
The Board shall proceed to liquidate the Corporation when its
purposes have been accomplished, and shall pay any surplus or
accumulated funds into the Treasury of the United States. The
Corporation may declare and pay such dividends to the United States as
may be earned and as in the judgment of the Board it is proper for the
Corporation to pay.
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Family Foreclosure Rescue Corporation Act - Instructs the Secretary of the Treasury to establish the Family Foreclosure Rescue Corporation to acquire, via the sale of bonds, home mortgages and other obligations and liens secured by real estate which are currently in default or at foreseeable risk of default.
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This is a motion to dismiss an appeal for want of a citation The facts are these: A decree was entered by the supreme court of the District of Columbia on the twenty-first of November, 1882, dismissing the bill in a suit between Robert C. Hewitt, complainant, and Lewis S. Filbert and others, defendants. On the same day an appeal was allowed in open court, but that appeal was never docketed in this court by the appellant. It was, however, docketed by the appellee, and dismissed under rule 9, on the fifteenth of October, 1883, but the mandate was not sent down until March 25, 1885. In the mean time, on the twenty-sixth of June, 1884, Hewitt appeared in the supreme court of the district, at general term, and, on his ex parte application, an order was entered allowing him a second appeal upon his giving security in the sum of $500. After the close of the term at which this order was made, and on the eighteenth of August, a bond was approved by one of the justices and filed in the office of the clerk of that court. The case was docketed in this court on the twentieth of August, 1884, but no citation has ever been issued or served. Except in cases of appeals allowed in open court during the term at which the decree appealed from was rendered, a citation returnable at the same term with the appeal or writ of error is necessary to perfect our jurisdiction of the appeal or the writ, unless it has been in some proper form waived. The San Pedro, 2 Wheat. 142; Yeaton v. Lenox, 7 Pet. 220; Villabolos v. U. S.,, 6 How. 90; U. S. v. Curry, Id. 111; Castro v. U. S., 3 Wall. 50; Alviso v. U. S., 5 Wall. 824. In Dayton v. Lash, 94 U. S. 112, it was held that, if a citation was actually issued, but not served before the first day of the term to which it was returnable, leave might be granted to make the service during that term. In this way the language of the court in Villabolos v. U. S. and U. S. v. Curry, which seemed to require service as well as issue of the citation before the return-day of the appeal or writ of error, was to some extent qualified; but the authority of those cases as to the necessity of an actual issue of the citation and service before the end of the return-term was in no way impaired. On the contrary, it was fully recognized. So, in Railroad Co. v. Blair, 100 U. S. 661, where an appeal was allowed in open court at a term subsequent to that in which the decree appealed from was rendered, but when the solicitors of the appellee were present and had actual notice of what was done, leave was granted to issue a citation and have it served during the return-term of the appeal. Appeals allowed by the court in session and acting judicially at the term when the decree was rendered have always been given a different effect from appeals allowed after the term or writs of error. Thus, in Reily v. Lamar, 2 Cranch, 349, decided in 1805, only two years after the act allowing appeals in cases of equity and admiralty and maritime jurisdiction was passed, (2 St. 244, c. 40, § 2,) it was stated by Chief Justice MARSHALL 'to be the opinion of the court that, the appeal having been prayed pending the court below, a citation was not necessary, and therefore the case was properly before the court' without a citation. It has since been decided that if the appeal is allowed in open court at the term, but the appeal-bond is not accepted until after the term, a citation will be necessary to bring in the parties. Sage v. Railroad Co., 96 U. S. 715. But if an appeal allowed in such a way is docketed in this court at the return-term, our jurisdiction of the appeal becomes perfect, and what remains to be done to get in the parties is matter of procedure only, and not jurisdictional, so far as the bringing of the appeal is concerned. Dodge v. Knowles, 114 U. S. 438; S. C. 5 Sup. Ct. Rep. 1109, 1197. As was said in that case: 'The judicial allowance of an appeal in open court, at the term in which the decree has been rendered, is sufficient notice of the taking of an appeal. Security is only for the due prosecution of the appeal. The citation, if security is taken out of court or after the term, is only necessary to show that the appeal which was allowed in term has not been abandoned by the failure to furnish the security before the adjournment. It is not jurisdictional. Its only purpose is notice. If by accident it has been omitted, a motion to dismiss an appeal, allowed in open court and at the proper term, will never be granted until an opportunity to give the requisite notice has been furnished; and this, whether the motion was made after the expiration of two years from the rendition of the decree or before.' The reason of this is that the allowance by the court in session before the end of the term at which the decree was rendered, and when both parties are either actually or constructively present, is in the nature of an adjudication of appeal, which, if docketed here in time, gives this court jurisdiction of the subject-matter of the appeal, with power to make all such orders, consistent with the practice of courts of equity, as may be appropriate and necessary for the furtherance of justice. In legal effect the judicial allowance of an appeal in this way transfers the cause to this court, if the appellant dockets the appeal here at the proper time. If not docketed, the appeal which has been allowed becomes inoperative for want of due prosecution. Grigsby v. Purcell, 99 U. S. 506, and cases there cited. But a citation is one of the necessary elements of an appeal taken after the term; and if it is not issued and served before the end of the term to which it must be made returnable, the appeal becomes inoperative. The rule is thus stated in Castro v. U. S., 3 Wall. 46, which was a case of an appeal taken after the term and in which a citation was necessary: 'The writ of error, or the allowance of appeal, together with a copy of the record and the citation, when a citation is required, must be returned to the next term of this court after the writ is sued out or the appeal allowed; otherwise the writ of error, or the appeal, as the case may be, will become void, and the party desiring to invoke the appellate jurisdiction will be obliged to resort to a new writ of error or a new appeal.' There is nothing in any of the cases to the contrary of this. As, without a citation or its waiver, we cannot take jurisdiction of this appeal, and it is conceded that none has been issued or served, and there is no sufficient evidence of a waiver, the motion to dismiss is granted.
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Except in cases of appeals allowed in open court during the term at which the decree appealed from was rendered, a citation returnable at the same term with the appeal or writ of error is necessary to perfect the jurisdiction of this court over the appeal or the writ, unless it sufficiently appears that citation has been waived. -This court has no jurisdiction to issue citation in an appeal docketed here after the term to which the appeal was returnable.
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The people of the State of California do enact as follows:
SECTION 1.
The Legislature finds and declares all of the following:
(a) The federal Patient Protection and Affordable Care Act provides millions of previously uninsured Californians access to health services, including physician care. As a result of this additional demand for physician services, the projected statewide physician shortfall is 17,000 for 2015.
(b) The San Joaquin Valley, which runs from Stockton to Bakersfield, is rich in cultural diversity and is the nation’s leading agricultural region. However, the valley is disproportionately affected by the state’s physician shortage, which is expected to intensify in the years ahead given the high rate of population growth in the area. Access to health care is 31 percent lower in the San Joaquin Valley than in the rest of California.
(c) Several regions of the San Joaquin Valley are federally designated Medically Underserved Areas (MUAs). The calculation of MUAs involves four variables: the ratio of primary medical care physicians per 1,000 population, the infant mortality rate, the percentage of the population with incomes below the poverty level, and the percentage of the population 65 years of age or over.
(d) To help address California’s physician workforce needs, the Regents of the University of California engaged in a comprehensive strategic planning process and, in May 2008, approved moving forward with planning efforts leading to the development of a possible medical school at the campus of the University of California, Merced (UC Merced). At that time, the regents also approved moving forward with other preparations, such as planning for the initial basic sciences and clinical infrastructure. Upon completion of these and other activities, the regents envisioned that a formal proposal to establish a new medical school eventually could be developed.
(e) The medical schools of the University of California, including a possible future medical school at UC Merced, will play an important role in addressing California’s physician shortages.
(f) Medical education and a possible future UC Merced School of Medicine will further contribute to the economic growth of the San Joaquin Valley and the state, as well as expand educational opportunities for valley residents, and will further support UC Merced’s trajectory toward becoming a top-tier university.
(g) UC Merced’s San Joaquin Valley Program in Medical Education (PRIME) is providing a key interim resource for training valley health care providers. This program accomplishes all of the following:
(1) Strengthens the desire for new physicians to practice in the San Joaquin Valley, which is one of California’s most medically underserved areas.
(2) Reduces health disparities and inequalities in the San Joaquin Valley.
(3) Forms lasting relationships between the program and communities, hospitals, clinics, and physicians to enhance health care in the region.
(h) Students who take part in PRIME benefit from firsthand experience with interdisciplinary health care by providing care in medically underserved communities, working with patients and families from culturally diverse backgrounds, and developing a true understanding of the issues and conditions that impact access to and quality of health care in the region.
(i) Despite its numerous benefits for its region, PRIME lacks an ongoing source of funding for its current enrollment as well as the financial resources to expand capacity to meet the needs of the valley.
(j) Given the San Joaquin Valley’s health care needs and the critical role that a possible future medical school at UC Merced would play in addressing those needs, it is essential for the State of California to continue developing the valley’s health care resources by sustaining the current PRIME enrollment, expanding that program’s capacity, and continuing to move toward the establishment of a medical school at UC Merced.
SEC. 2.
The sum of one million
eight
two
hundred fifty-five thousand dollars
($1,855,000)
($1,255,000)
is hereby appropriated from the General Fund to the Regents of the University of California each fiscal year, commencing with the 2016–17 fiscal year, for allocation to the University of California to support expansion of the San Joaquin Valley PRIME program to admit up to 12 students per year and operate the program with up to 48 student participants from across the four-year curriculum annually.
SEC. 3.
The sum of one million dollars ($1,000,000) is hereby appropriated from the General Fund to the Regents of the University of California during the 2016—17 fiscal year for allocation to the University of California, to support a two-year planning effort geared toward the establishment of a separate traditional medical school at the University of California, Merced. The effort shall include determination of the necessary program components such as basic and clinical science courses, curriculum, capital needs, one-time and ongoing operational funding, student support services, and other necessary components. The University of California shall submit a report to the appropriate policy and fiscal committees of the Legislature by March 1, 2019, summarizing its planning efforts and providing recommendations and estimates for the infrastructure, personnel, and funding, and time necessary to establish and maintain such a program.
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Existing provisions of the California Constitution establish the University of California as a public trust under the administration of the Regents of the University of California. The University of California system includes 10 campuses, which are located in Berkeley, Davis, Irvine, Los Angeles, Merced, Riverside, San Diego, San Francisco, Santa Barbara, and Santa Cruz.
This bill would express findings and declarations of the Legislature relating to the role of the University of California with respect to access to health care in the San Joaquin Valley.
The bill would appropriate
$1,855,000
$1,255,000
from the General Fund to the regents each fiscal year, commencing with the 2016–17 fiscal year, for allocation to the University of California to support expansion of the San Joaquin Valley Program in Medical Education, as specified.
The bill would appropriate $1,000,000 from the General Fund to the Regents of the University of California during the 2016–17 fiscal year for allocation to the University of California to support a 2-year planning effort geared toward the establishment of a separate traditional medical school at the University of California, Merced, as specified.
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Background Federal agency collection or use of personal information is governed primarily by two laws: the Privacy Act of 1974 and the privacy provisions of the E-Government Act of 2002. The Privacy Act places limitations on agencies’ collection, disclosure, and use of personal information maintained in systems of records. The act describes a record as any item, collection, or grouping of information about an individual that is maintained by an agency and contains his or her name or another personal identifier. The act defines a “system of records” as a group of records under the control of any agency from which information is retrieved by the name of the individual or by an individual identifier. The Privacy Act requires that when agencies establish or make changes to a system of records, they must notify the public through a system-of- records notice in the Federal Register that identifies, among other things, the categories of data collected, the categories of individuals about whom information is collected, the intended “routine” uses of data, and procedures that individuals can use to review and correct personally identifiable information. Several provisions of the act require agencies to define and limit collection and use of personal information to predefined purposes. For example, it requires that, to the greatest extent practicable, personal information should be collected directly from the individual when it may affect that person’s rights or benefits under a federal program. It also requires agencies to indicate whether the individual’s disclosure of the information is mandatory or voluntary; the principal purposes for which the information is intended to be used; the routine uses that may be made of the information; and the effects on the individual, if any, of not providing the information. Further, in handling information they have collected, agencies are generally required to allow individuals to review their records, request a copy of their record, and request corrections to their information, among other things. The E-Government Act of 2002 was passed, among other reasons, to enhance the protection for personal information in government information systems or information collections by requiring that agencies conduct privacy impact assessments (PIA). PIAs are analyses of how personal information is collected, stored, shared, and managed in a federal system. Title III of the E-Government Act, known as the Federal Information Security Management Act of 2002 (FISMA), established a framework designed to ensure the effectiveness of security controls over information resources that support federal operations and assets. According to FISMA, each agency is responsible for, among other things, providing information security protections commensurate with the risk and magnitude of the harm resulting from unauthorized access, use, disclosure, disruption, modification, or destruction of information collected or maintained by or on behalf of the agency and information systems used or operated by an agency or by a contractor of an agency or other organization on behalf of an agency. These protections are to provide federal information and systems with integrity—preventing improper modification or destruction of information, confidentiality—preserving authorized restrictions on access and disclosure, and availability— ensuring timely and reliable access to and use of information. The privacy protections incorporated in the Privacy Act are based primarily on the Fair Information Practices—a set of widely recognized principles for protecting the privacy of personal information first developed by an advisory committee convened by the Secretary of Health, Education and Welfare in 1972 and revised by the Organization for Economic Cooperation and Development (OECD) in 1980. These practices underlie the major provisions of the Privacy Act and privacy laws and related policies in many countries, including Germany, Sweden, Australia, and New Zealand, as well as the European Union. They are also reflected in a variety of federal agency policy statements, beginning with an endorsement of the OECD principles by the Department of Commerce in 1981. The OECD version of the principles is shown in table 1. The Privacy Act gives the Office of Management and Budget (OMB) responsibility for developing guidelines and providing assistance to and oversight of agencies’ implementation of the act. OMB also has responsibility under the E-Government Act for developing PIA guidance and ensuring agency implementation of the PIA requirement. In July 1975, OMB issued guidance for implementing the provisions of the Privacy Act and has periodically issued additional guidance since then. OMB has also issued guidance on other data security and privacy-related issues including federal agency website privacy policies, interagency sharing of personal information, designation of senior staff responsible for privacy, data breach notification, and safeguarding personally identifiable information. Technological Changes Have Made Key Elements of Privacy Laws Outdated Technological developments since the Privacy Act became law in 1974 have radically changed the way information is organized and shared among organizations and individuals. Such advances have rendered some of the provisions of the Privacy Act and the E-Government Act of 2002 inadequate to fully protect all personally identifiable information collected, used, and maintained by the federal government. For example, we reported in 2010 on privacy challenges associated with agencies using Web 2.0 technologies, such as web logs (“blogs”), social networking websites, video- and multimedia-sharing sites, and “wikis.” While the Privacy Act clearly applies to personal information maintained in systems owned and operated by the federal government, agencies often take advantage of commercial Web 2.0 offerings, in which case they have less control over the systems that maintain and exchange information, raising questions about whether personal information contained in those systems is protected under the act. While OMB subsequently issued guidance to federal agencies for protecting privacy when using web-based technologies, we reported in June 2011 that agencies had made mixed progress in updating privacy policies and assessing privacy risks associated with their use of social media services, as required by OMB’s guidance. A number of agencies had not updated their privacy policies or conducted PIAs relative to their Accordingly, use of third-party services such as Facebook and Twitter.we recommended that 8 agencies update their privacy policies and that 10 agencies conduct required PIAs. Most of the agencies agreed with our recommendations; however, 5 have not yet provided evidence that they have updated their privacy policies and 4 have not yet provided documentation that they have conducted PIAs. Another technology that has been increasingly used is data mining, which is used to discover information in massive databases, uncover hidden patterns, find subtle relationships in existing data, and predict future results. Data mining involves locating and retrieving information, including personally identifiable information, in complex ways. In September 2011, we reported that the Department of Homeland Security (DHS) needed to improve executive oversight of systems supporting counterterrorism. We noted that DHS and three of its component agencies—U.S. Customs and Border Protection, U.S. Immigration and Customs Enforcement, and U.S. Citizenship and Immigration Services—had established policies that largely addressed the key elements and attributes needed to ensure that their data mining systems were effective and provided necessary privacy protections. However, we also noted, among other things, that DHS faced challenges in ensuring that all of its privacy-sensitive systems had timely and up-to- date PIAs. We recommended that that DHS develop requirements for providing additional scrutiny of privacy protections for sensitive information systems that are not transparent to the public through PIAs and investigate whether the information-sharing component of a certain data-mining system, the U.S. Immigration and Customs Enforcement Pattern Analysis and Information Collection program, should be deactivated until a PIA is approved that includes the component. DHS has taken action to address both of these recommendations. Given the challenges in applying privacy laws and overseeing systems that contain personally identifiable information, the role of executives in federal departments and agencies charged with oversight of privacy issues is of critical importance. In 2008 we reported on agencies’ designation of senior officials as focal points with overall responsibility for privacy.organizational structures used by agencies to address privacy requirements and assess whether senior officials had oversight over key functions. Although federal laws and OMB guidance require agencies to designate a senior official for privacy with privacy oversight responsibilities, we found that the 12 agencies we reviewed had varying organizational structures to address privacy responsibilities and that Among other things, we were asked to describe the designated senior privacy officials did not always have oversight of all key privacy functions. Without such oversight, these officials may be unable to effectively serve as agency central focal points for information privacy. We recommended that six agencies take steps to ensure that their senior agency officials for privacy have oversight of all key privacy functions. Of the six agencies to which recommendations were made, four have provided evidence that they have fully addressed our recommendations. Privacy Laws May Not Consistently Protect Personally Identifiable Information In 2008, we issued a report on the sufficiency of privacy protections afforded by existing laws and guidance, in particular the Privacy Act, the E-Government Act, and related OMB guidance.that while these laws and guidance set minimum requirements for agencies, they may not consistently protect personally identifiable information in all circumstances of its collection and use throughout the federal government and may not fully adhere to key privacy principles. We identified issues in three major areas: Applying privacy protections consistently to all federal collection and use of personal information. The Privacy Act’s definition of a system of records, which sets the scope of the act’s protections, does not always apply whenever personal information is obtained and processed by federal agencies. For example, if agencies do not retrieve personal information by identifier, as may occur in data-mining systems, the act’s protections do not apply. We previously reported that among the 25 agencies surveyed, the most frequently cited reason for collections of records not being considered Privacy Act systems of records was that the agency did not use a personal identifier to retrieve the information. Factors such as these have led experts to agree that the Privacy Act’s system-of-records construct is too narrowly defined. An alternative for addressing these issues could include revising the system-of-records definition to cover all personally identifiable information collected, used, and maintained systematically by the federal government. GAO, Privacy Act: OMB Leadership Needed to Improve Agency Compliance, GAO-03- 304 (Washington, D.C.: June 30, 2003). specified purpose. Yet current laws and guidance impose only modest requirements for describing the purposes for personal information and limiting how it is used. For example, agencies are not required to be specific in formulating purpose descriptions in their public notices. While purpose statements for certain law enforcement and antiterrorism systems might need to be phrased broadly enough so as not to reveal investigative techniques or the details of ongoing cases, very broadly defined purposes could allow for unnecessarily broad ranges of uses, thus calling into question whether meaningful limitations had been imposed. Examples for alternatives for addressing these issues include setting specific limits on the use of information within agencies and requiring agencies to establish formal agreements with external government entities before sharing personally identifiable information. Establishing effective mechanisms for informing the public about privacy protections. According to the openness principle, the public should be informed about privacy policies and practices, and the accountability principle calls for those who control the collection or use of personal information to be held accountable for taking steps to ensure privacy protection. Public notices are a primary means for establishing accountability for privacy protections and giving individuals a measure of control over the use of their personal information. Yet concerns have been raised that Privacy Act notices may not serve this function well. Although the Federal Register is the government’s official vehicle for issuing public notices, an expert panel convened for GAO questioned whether system-of-records notices published in the Federal Register effectively inform the public about government uses of personal information. Among others, options for addressing concerns about public notices could include setting requirements to ensure that purpose, collection, and use limitations are better addressed in the content of privacy notices and revising the Privacy Act to require that all notices be published on a standard website. Updating the Privacy Act Can Provide Benefits Addressing these three areas could provide a number of benefits. First, ensuring that privacy protections are applied consistently to all federal collection and use of information could help ensure that information not retrieved by identifier (such as may occur in data-mining applications, for example) is protected in the same way as information retrieved by identifier. Further, limiting the use of personally identifiable information to a stated purpose could help ensure a proper balance between allowing government agencies to collect and use such information and limiting that collection and use to what is necessary and relevant. Lastly, a clear and effective notice can provide individuals with critical information about what personal data are to be collected, how they are to be used, and the circumstances under which they may be shared. An effective notice can also provide individuals with information they need to determine whether to provide their personal information (if voluntary), or who to contact to correct any errors that could result in an adverse determination about them. We noted that some of these issues—such as those dealing with limitations on use and mechanisms for informing the public—could be addressed by OMB through revisions of or supplements to existing guidance. However, we further stressed that unilateral action by OMB would not have the benefit of public deliberations regarding how best to strike an appropriate balance between the government’s need to collect, process, and share personally identifiable information and the rights of individuals to know about such collections and be assured that they are only for limited purposes and uses. Accordingly, we suggested that Congress consider amending applicable laws, such as the Privacy Act and E-Government Act, according to the alternatives we outlined, including revising the scope of the laws to cover all personally identifiable information collected, used, and maintained by the federal government; setting requirements to ensure that the collection and use of personally identifiable information is limited to a stated purpose; and establishing additional mechanisms for informing the public about privacy protections by revising requirements for the structure and publication of public notices. In commenting on a draft of our report, OMB officials noted that they shared our concerns about privacy and listed guidance that the agency has issued in the areas of privacy and information security. The officials stated that they believed it would be important for Congress to consider potential amendments to the Privacy and E-Government Acts in the broader contexts of other privacy statutes and that it would be important for Congress to evaluate fully the potential impact of revisions. In addition, in October 2011, you, the Chairman, introduced a bill to amend the Privacy Act. This bill—The Privacy Act Modernization for the Information Age Act of 2011—would, among other things, revise the Privacy Act to cover all personally identifiable information collected, used, and maintained by the federal government and ensure that collection and use of personally identifiable information is limited to a stated purpose. However, revisions to the Privacy and E-Government Acts have not yet been enacted. Agencies Can Take Action to Mitigate the Risks of Data Breaches, But Such Breaches Have Continued to Proliferate In addition to relevant privacy laws and federal guidance, a key component of protecting citizens’ personal information is ensuring the security of agencies’ information systems and the information they contain by, among other things, preventing data breaches and reporting those breaches when they occur. In 2006, in the wake of a security breach at the Department of Veterans Affairs resulting in the compromise of personal data on millions of U.S. veterans, we testified on preventing and responding to improper disclosures of personal information in the federal government. We observed that agencies can take a number of actions to help guard against the possibility that databases of personally identifiable information are compromised. In particular, we noted two key steps agencies should take: Develop PIAs whenever information technology is used to process personal information. These assessments are a tool for agencies to fully consider the privacy implications of planned systems and data collections before implementation, when it may be easier to make critical adjustments. Ensure the implementation of a robust information security program as required by FISMA. Such a program includes periodic risk assessments; security awareness training; security policies, procedures, and practices, as well as tests of their effectiveness; and procedures for addressing deficiencies and for detecting, reporting, and responding to security incidents. We also noted that data breaches could be prevented by limiting the collection of personal information, limiting the time such data are retained, limiting access to personal information and training personnel accordingly, and considering the use of technological controls such as encryption when data need to be stored on mobile devices. OMB subsequently issued guidance that specifies minimum agency practices for using encryption to protect personally identifiable information. Memorandums M-06-15, Safeguarding Personally Identifiable information, and M-06-16, Protection of Sensitive Agency Information, reiterated existing agency responsibilities to protect personally identifiable information, and directed agencies to encrypt data on mobile computers and devices and follow National Institute of Standards and Technology (NIST) security guidelines regarding personally identifiable information that is accessed outside an agency’s physical perimeter. In addition, OMB issued memorandum M-07-16, Safeguarding Against and Responding to the Breach of Personally Identifiable Information, which restated the M-06-16 recommendations as requirements and also required the use of NIST-certified cryptographic modules for encrypting sensitive information In 2008, we reported on the extent to which 24 major agencies had implemented encryption technologies. We found that agencies’ implementation of encryption and development of plans to implement encryption of sensitive information varied, and that from July through September 2007, the agencies collectively reported that they had not yet installed encryption technology on about 70 percent of their laptop computers and handheld devices. Accordingly, we made recommendations to selected agencies to strengthen practices for planning and implementing the use of encryption. The agencies generally agreed with the recommendations and we have assessed that 6 of the 18 recommendations have been addressed. Despite preventive measures, data breaches can still occur, and when they do it is critical that proper response policies and procedures be in place. We testified in 2006 that notification to individuals affected by data breaches and/or the public has clear benefits, such as allowing people to take steps to protect themselves from identity theft. Such notification is consistent with agencies’ responsibility to inform individuals about how their information is being accessed and used, and it promotes accountability for privacy protection. GAO-06-833T. information to US-CERT within 1 hour of discovery of the incident. In addition, OMB memorandum M-07-16 requires agencies to develop and implement breach notification policies governing how and under what circumstances affected parties are notified in the event of a data breach. Further, in a memorandum issued in September 2006, OMB recommended that agencies establish a core management group responsible for responding to the loss of personal information. OMB also established requirements for reporting breaches within the government. In memorandum M-06-20, FY 2006 Reporting Instructions for the Federal Information Security Management Act and Agency Privacy Management, OMB asked agencies to identify in their annual FISMA reports any physical or electronic incidents involving the loss of or unauthorized access to personally identifiable information. Agencies are also required to report numbers of incidents for the reporting period, the number of incidents the agency reported to US-CERT, and the number reported to law enforcement. In 2007 we reported that while requiring agencies to notify affected consumers of a data breach may encourage better security practices and help mitigate potential harm, it also presents certain costs and challenges. Federal banking regulators and the President’s Identity Theft Task Force had advocated a notification standard—the conditions requiring notification—that was risk based, allowing individuals to take appropriate measures where the risk of harm existed, while ensuring they are only notified in cases where the level of risk warrants such action. Use of such a risk-based standard could avoid undue burden on organizations and unnecessary and counterproductive notifications to consumers about breaches that present little risk. Data Breaches Continue to Proliferate in the Public and Private Sectors Over the last several years, we have continued to report that federal agency systems are vulnerable to cyber attacks and the potential compromise of sensitive information, including personally identifiable For fiscal year 2011, agency inspector general and GAO information.assessments of information security controls revealed that most major federal agencies had weaknesses in most of five major categories of information system controls. Further, over the past several years, we and agency inspectors general have made hundreds of recommendations to resolve similar previously identified significant control deficiencies. We have also recommended that agencies fully implement comprehensive, agency-wide information security programs as required by FISMA, including by correcting weaknesses in specific areas of their programs. The effective implementation of these recommendations will strengthen the security posture at these agencies, which will in turn help ensure the protection of personally identifiable information they collect and use. Federal agencies have also reported increasing numbers of security incidents that placed sensitive information at risk, with potentially serious impacts on federal operations, assets, and people. Over the past 6 years, the number of incidents reported by federal agencies to US-CERT has increased from 5,503 incidents in fiscal year 2006 to 42,887 incidents in fiscal year 2011, an increase of nearly 680 percent. (See fig. 1.) Of the incidents occurring in 2011, 15,560 involved unauthorized disclosure of personally identifiable information, a 19 percent increase over the 13,017 personally identifiable information incidents that occurred in 2010. Reported attacks and unintentional incidents involving federal, private and critical infrastructure systems involve a wide range of incidents including data loss or theft, computer intrusions, and privacy breaches, underscoring the need for improved security practices. The following examples from news media and other public sources illustrate some of the risks: In May 2012, the Federal Retirement Thrift Investment Board reported a sophisticated cyber attack on a computer belonging to a third party, which provided services to the Thrift Savings Plan. As a result of the attack, 123,000 participants had their personal information accessed. According to the board, the information accessed included 46,587 individuals’ names, addresses, and Social Security numbers, and 79,614 individuals’ Social Security numbers and other Thrift Savings Plan-related information. In April 2012, hackers breached a server at the Utah Department of Health to access thousands of Medicaid records. Included in the breach were Medicaid recipients and clients of the Children’s Health Insurance Plan. About 280,000 people had their Social Security numbers exposed. In addition, another 350,000 people listed in the eligibility inquiries may have had other sensitive data stolen, including names, birth dates, and addresses. In March 2012, a news wire service reported that the senior commander of the North Atlantic Treaty Organization (NATO) had been the target of repeated cyber attacks using Facebook that were believed to have originated in China. According to the article, hackers repeatedly tried to dupe those close to the commander by setting up fake Facebook accounts in his name in the hope that his acquaintances would make contact and answer private messages, potentially divulging sensitive information about the commander or themselves. In March 2012, it was reported that Blue Cross Blue Shield of Tennessee paid out a settlement of $1.5 million to the U.S. Department of Health and Human Services arising from potential violations stemming from the theft of 57 unencrypted computer hard drives that contained protected health information of over 1 million individuals. Incidents such as these illustrate that sensitive personally identifiable information remains at risk and that improved protections are needed to ensure the privacy of information collected by the government. While OMB has taken steps through the guidance I described to set requirements for agencies to follow, it is unclear the extent to which all agencies, including smaller agencies such as the Federal Retirement Thirst Investment Board, are adhering to OMB’s guidelines. In summary, ensuring the privacy and security of personal information collected by the federal government remains a challenge, particularly in light of the increasing dependence on networked information systems that can store, process, and transfer vast amounts of data. These challenges include updating federal laws and guidance to reflect current practices for collecting and using information while striking an appropriate balance between privacy concerns and the government’s need to collect information from individuals. They also involve implementing sound practices for securing and applying privacy protection principles to federal systems and the information they contain. Without sufficient attention to these matters, Americans’ personally identifiable information remains at risk. Chairman Akaka, Ranking Member Johnson, and members of the Subcommittee, this concludes my statement. I would be happy to answer any questions you have at this time. Contact and Acknowledgments If you have any questions regarding this statement, please contact Gregory C. Wilshusen at (202) 512-6244 or [email protected]. Other key contributors to this statement include John de Ferrari, Assistant Director; Melina Asencio; Sher’rie Bacon; Anjalique Lawrence; Kathleen Lovett Epperson; Lee McCracken; David Plocher; and Jeffrey Woodward. Appendix I: Related GAO Products Cybersecurity: Challenges in Securing the Electricity Grid. GAO-12-926T. Washington, D.C.: July, 17, 2012. Cybersecurity: Threats Impacting the Nation. GAO-12-666T. Washington, D.C.: April 24, 2012. Information Security: Additional Guidance Needed to Address Cloud Computing Concerns. GAO-12-130T. Washington, D.C.: October 6, 2011. Information Security: Weaknesses Continue Amid New Federal Efforts to Implement Requirements. GAO-12-137. Washington, D.C.: October 3, 2011. Personal ID Verification: Agencies Should Set a Higher Priority on Using the Capabilities of Standardized Identification Cards. GAO-11-751. Washington, D.C.: September 20, 2011. Data Mining: DHS Needs to Improve Executive Oversight of Systems Supporting Counterterrorism. GAO-11-742. Washington, D.C.: September 7, 2011. Cybersecurity: Continued Attention Needed to Protect Our Nation’s Critical Infrastructure. GAO-11-865T. Washington, D.C.: July 26, 2011. Defense Department Cyber Efforts: DOD Faces Challenges in Its Cyber Activities. GAO-11-75. Washington, D.C.: July 25, 2011. Information Security: State Has Taken Steps to Implement a Continuous Monitoring Application, but Key Challenges Remain. GAO-11-149. Washington, D.C.: July 8, 2011. Social Media: Federal Agencies Need Policies and Procedures for Managing and Protecting Information They Access and Disseminate. GAO-11-605. Washington, D.C.: Jun 28, 2011. Cybersecurity: Continued Attention Needed to Protect Our Nation’s Critical Infrastructure and Federal Information Systems. GAO-11-463T. Washington, D.C.: March 16, 2011. High-Risk Series: An Update. GAO-11-278. Washington, D.C.: February 2011. Information Security: Federal Agencies Have Taken Steps to Secure Wireless Networks, but Further Actions Can Mitigate Risk. GAO-11-43. Washington, D.C.: November 30, 2010. Cyberspace Policy: Executive Branch Is Making Progress Implementing 2009 Policy Review Recommendations, but Sustained Leadership Is Needed. GAO-11-24. Washington, D.C.: October 6, 2010. Privacy: OPM Should Better Monitor Implementation of Privacy-Related Policies and Procedures for Background Investigations. GAO-10-849. Washington, D.C.: September 7, 2010. Information Management: Challenges in Federal Agencies’ Use of Web 2.0 Technologies. GAO-10-872T. Washington, D.C.: July 22, 2010. Cyberspace: United States Faces Challenges in Addressing Global Cybersecurity and Governance. GAO-10-606. Washington, D.C.: July 2, 2010. Cybersecurity: Continued Attention Is Needed to Protect Federal Information Systems from Evolving Threats. GAO-10-834T. Washington, D.C.: June 16, 2010. Information Security: Federal Guidance Needed to Address Control Issues with Implementing Cloud Computing. GAO-10-513. Washington, D.C.: May 27, 2010. Information Security: Concerted Effort Needed to Consolidate and Secure Internet Connections at Federal Agencies. GAO-10-237. Washington, D.C.: March 12, 2010. Cybersecurity: Progress Made but Challenges Remain in Defining and Coordinating the Comprehensive National Initiative. GAO-10-338. Washington, D.C.: March 5, 2010. National Cybersecurity Strategy: Key Improvements Are Needed to Strengthen the Nation’s Posture. GAO-09-432T. Washington, D.C.: March 10, 2009. Health Information Technology: HHS Has Taken Important Steps to Address Privacy Principles and Challenges, Although More Work Remains. GAO-08-1138, Washington, D.C.: September 17, 2008. Information Security: Federal Agency Efforts to Encrypt Sensitive Information Are Under Way, but Work Remains. GAO-08-525. Washington, D.C.: June 27, 2008. Privacy: Congress Should Consider Alternatives for Strengthening Protection of Personally Identifiable Information. GAO-08-795T. Washington, D.C.: June 18, 2008. Privacy: Agencies Should Ensure That Designated Senior Official Have Oversight of Key Functions. GAO-08-603. Washington, D.C.: May 30, 2008. Privacy: Alternatives Exist for Enhancing Protection of Personally Identifiable Information. GAO-08-536. Washington, D.C.: May 19, 2008. Health Information Technology: Efforts Continue but Comprehensive Privacy Approach Needed for National Strategy. GAO-07-988T. Washington, D.C.: June 19, 2007. Personal Information: Data Breaches are Frequent, but Evidence of Resulting Identity Theft Is Limited; However, the Full Extent is Unknown. GAO-07-737. Washington, D.C.: June 4, 2007. Privacy: Lessons Learned about Data Breach Notification. GAO-07-657. Washington, D.C.: April 30, 2007. Homeland Security: Continuing Attention to Privacy Concerns Is Needed as Programs Are Developed. GAO-07-630T. Washington, D.C.: March 21, 2007. Health Information Technology: Early Efforts Initiated but Comprehensive Privacy Approach Needed for National Strategy. GAO-07-238. Washington, D.C.: January 10, 2007. Privacy: Preventing and Responding to Improper Disclosures of Personal Information. GAO-06-833T. Washington, D.C.: June 8, 2006. Data Mining: Agencies Have Taken Key Steps to Protect Privacy in Selected Efforts, but Significant Compliance Issues Remain. GAO-05- 866. Washington, D.C.: August 15, 2005. Privacy Act: OMB Leadership Needed to Improve Agency Compliance. GAO-03-304. Washington, D.C.: June 30, 2003. This is a work of the U.S. government and is not subject to copyright protection in the United States. 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The federal government collects and uses personal information on individuals in increasingly sophisticated ways, and its reliance on information technology (IT) to collect, store, and transmit this information has also grown. While this enables federal agencies to carry out many of the governments critical functions, concerns have been raised that the existing laws for protecting individuals personal information may no longer be sufficient given current practices. Moreover, vulnerabilities arising from agencies increased dependence on IT can result in the compromise of sensitive personal information, such as inappropriate use, modification, or disclosure. GAO was asked to provide a statement describing (1) the impact of recent technology developments on existing laws for privacy protection in the federal government and (2) actions agencies can take to protect against and respond to breaches involving personal information. In preparing this statement, GAO relied on previous work in these areas as well as a review of more recent reports on security vulnerabilities. Technological developments since the Privacy Act became law in 1974 have changed the way information is organized and shared among organizations and individuals. Such advances have rendered some of the provisions of the Privacy Act and the E-Government Act of 2002 inadequate to fully protect all personally identifiable information collected, used, and maintained by the federal government. For example, GAO has reported on challenges in protecting the privacy of personal information relative to agencies use of Web 2.0 and data-mining technologies. While laws and guidance set minimum requirements for agencies, they may not protect personal information in all circumstances in which it is collected and used throughout the government and may not fully adhere to key privacy principles. GAO has identified issues in three major areas: Applying privacy protections consistently to all federal collection and use of personal information. The Privacy Acts protections only apply to personal information when it is considered part of a system of records as defined by the act. However, agencies routinely access such information in ways that may not fall under this definition. Ensuring that use of personally identifiable information is limited to a stated purpose. Current law and guidance impose only modest requirements for describing the purposes for collecting personal information and how it will be used. This could allow for unnecessarily broad ranges of uses of the information. Establishing effective mechanisms for informing the public about privacy protections. Agencies are required to provide notices in the Federal Register of information collected, categories of individuals about whom information is collected, and the intended use of the information, among other things. However, concerns have been raised whether this is an effective mechanism for informing the public. The potential for data breaches at federal agencies also pose a serious risk to the privacy of individuals personal information. OMB has specified actions agencies should take to prevent and respond to such breaches. In addition, GAO has previously reported that agencies can take steps that include assessing the privacy implications of a planned information system or data collection prior to implementation; ensuring the implementation of a robust information security program; and limiting the collection of personal information, the time it is retained, and who has access to it, as well as implementing encryption. However, GAO and inspectors general have continued to report on vulnerabilities in security controls over agency systems and weaknesses in their information security programs, potentially resulting in the compromise of personal information. These risks are illustrated by recent security incidents involving individuals personal information. Federal agencies reported 13,017 such incidents in 2010 and 15,560 in 2011, an increase of 19 percent.
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Background The model for data-driven performance reviews was established in the early 1990s by New York City Police Department (NYPD) leadership as a strategy to reduce crime. Dubbed “CompStat,” the NYPD’s weekly reviews grew from the premise that use of crime data could enable leadership to make better-informed, more effective decisions. CompStat followed four key tenets: 1. Accurate and timely intelligence. 2. Effective tactics. 3. Rapid deployment. 4. Relentless follow-up and assessment. As the law enforcement community observed NYPD’s improved accountability and bottom-line results in crime reduction, many police departments nationwide began to replicate CompStat in their own organizations. The CompStat model was subsequently adopted by many cities, municipalities, and some states—most notably Washington and Maryland—as a general performance management tool. Many of these efforts were patterned on the same four tenets as CompStat. Nearly two decades later, the Obama administration began to encourage the use of data-driven review meetings as a performance management tool through several memorandums issued by OMB in 2010 and 2011, and a June 2011 executive order. During this timeframe, GPRAMA introduced the concept of data-driven performance reviews at the federal level with a provision that federal agencies conduct quarterly performance reviews on progress toward their APGs. Specifically, agencies are required to assess how relevant programs and activities contribute to achieving APGs; categorize goals by their risk of not being achieved; and for those at risk, identify strategies to improve performance. GPRAMA also specified that the reviews must occur on at least a quarterly basis and involve key leadership and other relevant parties both within and outside the agency. GPRAMA required agencies to begin conducting quarterly performance reviews by June 2011. Some agencies began conducting data-driven reviews earlier, in response to the executive order, OMB guidance, or other performance management efforts. Several efforts aid agencies in implementing the GPRAMA-required quarterly performance reviews. The PIC established a working group on internal agency performance reviews. The working group meets monthly to share leading practices and discuss strategies for improving performance. Participation in the working group is voluntary and according to OMB, PIOs or designees from 21 agencies across the federal government are currently represented. In addition, OMB supported performance review implementation by issuing new guidance in OMB Circular A-11 during August 2012. DOE, SBA, and Treasury each had experience with data-driven performance reviews before the June 2011 GPRAMA implementation deadline. Officials at both SBA and Treasury said that when new leadership came in, they brought interest in data-driven decision making, along with key staff that were experienced at data-driven review or data analysis. DOE officials said that their experience with the American Recovery and Reinvestment Act of 2009 (Recovery Act) work led them to begin data-driven performance reviews along with the GPRAMA requirements. DOE built on its Recovery Act-related performance reviews with the establishment of its quarterly performance reviews, called business quarterly reviews, in 2011. According to DOE officials, the Deputy Secretary leads the review meetings with participation by under secretaries, and each review covers the department’s 8 priority goals, 15 mission-related key goals, and 8 management and operations key goals. The Associate Deputy Secretary, who is responsible for agency-wide management and operations goals, also participates in the reviews. The review meeting follows a structured format, with the first half focusing on performance goals and the second half focusing on fiscal issues, such as budget execution. SBA began conducting reviews, called quarterly performance reviews, during the third quarter of 2009. SBA started by holding separate meetings by program area but changed the review format in early 2010 to include all program offices at each review meeting. According to SBA officials, the Deputy Administrator leads SBA’s quarterly performance reviews with support from the chief operating officer (COO) and the PIO. The PIO also assembles the data and disseminates follow-up action items. Review meetings also include senior officials from functional management areas (e.g., information technology, human capital, procurement, etc.). In addition to discussing agency priority goals, SBA reviews cover the rest of the agency’s performance goals and objectives, as time permits. Treasury started conducting department-level performance reviews, called Stats, in 2010. Treasury’s reviews, led by the Deputy Secretary, are performed on an agency component-by-component basis. Reviews also involve senior officials responsible for functional management areas such as information technology, financial management, and procurement, as well as policy officials. The Stat process is managed by Treasury’s Office of the Deputy Assistant Secretary for Management and Budget, which reports to the PIO. The Stats cover Treasury’s two priority goals along with a range of other department programmatic and operational goals and priority projects. Practices that Promote Successful Data-Driven Performance Reviews at the Federal Level Agency Leaders Use Data- Driven Reviews as a Leadership Strategy to Drive Performance Improvement Our analysis confirmed that to be successful, data-driven reviews should be used as a leadership strategy to drive performance improvement. Agency leadership must be directly and visibly engaged in the review process and invest the time necessary to understand and interpret the data being discussed during the meetings. Moreover, GPRAMA requires an agency head and deputy head to conduct quarterly priority progress reviews which fosters ownership and helps ensure that participants take the reviews seriously and that decisions and commitments can be made. OMB Circular No. A-11 also emphasizes the importance of leadership involvement in quarterly performance reviews, allowing the COO, the agency head, or both to conduct the review. Our survey of PIOs indicated that agency leadership, with the exception of agency heads, actively participated in these reviews. This was consistent with what we found at DOE, SBA, and Treasury. The sidebar at left shows the survey results on the participation of key positions. At Treasury, where we observed two Stat meetings, the Deputy Secretary used the Stat meetings to challenge participants to stretch toward ambitious performance goals and to provide possible solutions for any issues that were discussed. By holding separate reviews for all of Treasury’s bureaus and key offices, the Deputy Secretary committed a significant amount of time to these reviews. Other Treasury officials—at both the department headquarters and bureau levels—were appreciative of the amount of time the Deputy Secretary devoted to the reviews. The Deputy Secretary’s high-level position allowed him to speak with clear authority in the department and garner the attention of component agency leaders on performance issues. For example, during one review meeting that we observed, the Deputy Secretary challenged Treasury’s bureau leaders to develop new strategies for the department to collect delinquent debt payments owed to the federal government. We did not observe quarterly performance meetings at DOE or SBA. However, officials we interviewed said that top leadership was actively driving performance discussions. At DOE, the Deputy Secretary led the quarterly review sessions and guided performance discussions with the department’s under secretaries on progress made toward achieving their respective performance goals. DOE’s Deputy Secretary noted that it is important that under secretaries take ownership of the performance review process to ensure the reviews are useful. At SBA, the Deputy Administrator led the reviews with support from the COO and PIO. According to officials, SBA’s leadership asks probing questions of program heads concerning SBA’s performance goals. Officials from DOE, SBA, and Treasury expressed concern about maintaining the continuity of leadership engagement in performance review meetings and pointed to ways to help ensure that the review process continues with transitions to new agency leadership. For example, officials at DOE pointed out that they have a responsibility to remind new leadership of the legislative requirement for performance reviews as well as OMB’s guidance on these reviews. In addition, SBA officials noted that having a mix of career and political leadership involved in the reviews can facilitate continuity of the review practices since career officials generally span successive administrations. At Treasury, performance budgeting staff developed written standard operating procedures as a way to document the review process and pave the way for new leadership engagement at the department. To encourage new leadership to take ownership of the performance reviews, several agency officials noted the importance of designing the reviews to fit the leadership style and preferences of the incoming leader. For example, one official said that it is critical for the incoming leader of the review meetings to provide input into the presentation format and structure of the review based upon personal preferences. At Treasury, headquarters staff responsible for managing the performance reviews worked closely with the Deputy Secretary to develop a review template and meeting format that met his needs. Key Players Attend Reviews to Facilitate Problem Solving Our analysis indicated that performance review meeting participants should include high-level leaders and managers with an agency-wide perspective as well as those with programmatic knowledge and responsibility for the specific performance issues likely to be raised. In addition, participants should typically include those with agency-wide functional management responsibilities, such as information technology, budget, and human capital. This enables the reviews to facilitate problem solving by breaking down information silos and providing managers from across the agency and other contributing organizations with a forum to communicate with each other and identify improvement strategies and agree upon specific next steps. At the city and state level, data-driven performance reviews typically include senior management from multiple agencies. In addition to the benefit of in-person meeting attendance, there is also value in having key players participate in other parts of the review process, such as the data review and analysis leading up to the meetings and the follow-up actions that arise from the meetings. Consistent with this practice, OMB’s guidance directs agencies to include, as appropriate, relevant personnel from within and outside the agency in the review meetings. According to our survey, most PIOs—21 of 24—reported that their reviews included the participants needed to facilitate problem solving and identify performance improvements the majority of the time. Further, 19 PIOs reported that goal leaders had large involvement in their agency’s performance reviews, and 15 PIOs reported that internal contributors to agency goals and functional management chiefs, such as the CFO, had large involvement in their agency’s reviews. At DOE, SBA, and Treasury, officials said they found that including senior management responsible for specific mission program areas—as well as those with functional management responsibilities in areas such as budget, information technology, human capital, procurement, and legal counsel—enhanced performance improvement efforts at review meetings. For example, both DOE and Treasury officials said discussions with budget officials concerning performance goals provided an opportunity for performance issues to be discussed in the context of budget issues where relevant. However, differences in the scope of the reviews influenced which key players attended the review meetings. For instance, while Treasury’s reviews focused primarily on a specific component organization, such as a bureau or policy office, representatives from multiple components attended the review meetings when the achievement of a performance goal crossed component lines, or when the components had other commonalities. One Treasury official noted that the Bureau of Engraving and Printing and the U.S. Mint were asked to sit in on each others’ sessions, as they both work under the Treasurer and have similar operations. Treasury officials indicated that one of the reasons why they chose to focus their performance reviews on individual component agencies—such as IRS and the Bureau of the Fiscal Service—was that their performance goals are generally aligned by component rather than shared by components. In addition, according to a senior Treasury official, focusing reviews on components allows time for more in-depth reviews. Treasury’s reviews include officials with department-level responsibilities in functional management areas such as budget, procurement, and legal counsel who can contribute to problem solving or who may be called on to take follow- up actions. In addition, Treasury officials noted that component-by- component reviews enable Treasury not only to have attendance from the bureau head, but also from more members of the bureau’s leadership team, such as the bureau CFO and others. Officials said that if reviews were held with all of Treasury’s components at one time it would be impractical to gather all key members of bureau leadership because of the limited time which would be available for discussion on any particular topic. Treasury officials said that their practice of using the same information template for the Stat review with each component enables the reviews to cover similar issues across components and identify actions that should be addressed collaboratively, even though all components do not participate in the review meetings at the same time. Conversely, at DOE and SBA, each review meeting included leadership participation from across all agency mission areas. However, DOE and SBA were similar to Treasury in that they included officials with agency- wide functional management responsibilities in the reviews. Officials noted that DOE’s reviews provided an opportunity for senior leadership to discuss the context around their performance goals and improve results with help from other areas of the department. In addition, the presence of senior officials across DOE’s programs provided an opportunity to share leading practices in various areas across program lines. At SBA, officials noted that many senior career officials attending these reviews had experience managing multiple programs and their broader experiences helped them understand and identify relevant performance metrics across program areas. In addition, officials mentioned that, in contrast to a large department with many discrete mission areas, SBA’s programs are focused on achieving a relatively narrow mission of supporting small businesses, which creates more opportunities for cross-program collaboration. According to our survey results, PIOs did not see getting the right personnel included in the meetings as a challenge: Only 2 of 24 PIOs reported a challenge in including those managers or staff needed to facilitate problem solving and identify improvement opportunities. However, officials from DOE, SBA, and Treasury did note challenges in getting the right mix and number of participants to most effectively facilitate performance improvement efforts at the meetings. See figure 1. According to survey results, 16 of 24 PIOs indicated that there was little to no involvement in the reviews from external officials who contribute to the achievement of agency goals. This is consistent with what we found at DOE, SBA, and Treasury, as stakeholders from outside the agencies did not participate in their performance review meetings. At Treasury, officials said they addressed performance issues requiring external collaboration by conducting follow-up meetings with relevant external participants. These meetings were scheduled as part of Treasury’s practice of following up on issues raised during the review sessions. For instance, during a Treasury review meeting we observed, the Deputy Secretary directed staff to arrange a meeting with OMB to help address an obstacle to achieving a performance goal. Likewise, DOE and SBA officials said they undertook collaborative actions as a result of discussions in their quarterly performance reviews, but neither planned to invite external representatives to their meetings. For example, SBA’s reviews led to multiple discussions with other federal agencies on whether some of their government contracts that were going to large businesses could go to small businesses instead. Officials we interviewed cited several concerns that may explain why, at present, agencies are generally not including external participants—from other federal agencies or other relevant organizations—in their reviews. First, officials did not include external stakeholders because they wanted to keep discussions focused on internal problem-solving and were concerned that including external parties might inhibit open discussions on performance issues. Second, reviews at DOE, SBA, and Treasury mainly focused on goals achieved through internal contributors at each agency or office and officials noted that it would not currently be an efficient use of time to include external parties, even though external issues are discussed. One official said that the logistics of including high- ranking agency managers from other agencies could make it difficult to schedule review meetings on a timely basis. Another official who had experience managing data-driven performance reviews at different levels of government noted that city- and state-level reviews tend to be run by a mayor or governor with direct authority over the various agencies that participate in the reviews. This official pointed out that circumstances are different at the federal level, where an agency head could invite but not require outside participation and would not have control over the information shared or whether follow-up action was carried out. However, we have previously reported that agencies can collaborate more effectively across organizational lines when presented with a clear and compelling rationale to do so and when agency leaders demonstrate their commitment to working collaboratively. Agency goals that require the efforts of more than one agency could serve as such a compelling rationale—even in the absence of direct authority requiring such collaboration. Moreover, our prior work has shown that agencies which participated in various planning and decision-making forums together— such as interagency councils or planning bodies—reported that such interactions contributed to achieving their goals. Specifically, agencies reported that such participation opened lines of communication, fostered trust, and helped build relationships, which can in turn lead to more effective collaboration across agency lines. Despite the concerns that DOE, SBA, and Treasury raised about including external participants in their reviews, our survey results indicate that some agencies are doing so: 4 of 24 PIOs reported moderate to large involvement of external officials who contribute to the achievement of agency goals. In addition, OMB officials provided an example of two agencies which have been successfully making use of quarterly performance reviews to collaborate on their APGs. These officials told us that the Departments of Housing and Urban Development and Veterans Affairs—which both contribute to efforts to reduce veterans’ homelessness—had conducted several Stat meetings jointly. According to OMB officials, program staff members from both agencies regularly participate in HUD Stat meetings, where they jointly analyze performance data to understand trends, identify best practices, and prioritize the actions needed to achieve veteran homelessness goals. Officials reported that these collaborative meetings have contributed to better outcomes. Moreover, officials from both OMB and the PIC indicated that agencies have increasingly been observing others’ review meetings as a means of learning about different practices with no apparent harm to the effectiveness of the meetings. This suggests that the challenges, if any, to outside participation can be overcome. While there are many approaches to managing performance to achieve goals that rely on multiple agencies, few are likely to provide the benefit of bringing together the leadership and all the key players to solve problems and motivate performance improvement. Moreover, when key players are excluded from quarterly performance reviews, agencies may be missing opportunities to have all the relevant parties participate in developing solutions to performance problems. Instead, agencies will need to rely on potentially duplicative parallel coordination mechanisms, which could result in less than optimal performance improvement strategies. Reviews Ensure Alignment between Agency Goals, Program Activities, and Resources Our analysis showed that quarterly performance reviews should be used to align an organization’s resources, programs, and activities to ensure they are contributing to the achievement of agency goals. To help ensure that reviews are focusing on the appropriate interim goals and measures, agencies can develop models that describe the logical relationship between an agency’s inputs, activities, outputs, and outcomes. These logical relationships, sometimes called logic models, should be periodically assessed to determine if outcomes are being achieved as expected, and should be revised if necessary. Our survey results indicated that PIOs do not find goal alignment to be a challenging aspect of implementing quarterly performance reviews, with 13 of 24 PIOs reporting that ensuring alignment between performance reviews and strategic goals and performance objectives was easy. Only one PIO reported this as being a challenge. Moreover, 22 PIOs reported that the majority of their reviews are aligned with strategic goals and performance objectives. Consistent with our survey results, we found that DOE, SBA, and Treasury had selected performance metrics, initiatives, and other areas of focus in their reviews that were linked to the accomplishment of APGs and other goals, such as strategic plan objectives and key operational goals. Officials from both DOE and Treasury described the processes they undertook to choose useful performance information to frame the performance review discussion. For example, DOE narrowed its list of more than 190 performance measures to provide leadership with a focused view of the department’s key goals, while also providing sufficient depth of information to be meaningful. Treasury officials responsible for designing the department’s quarterly performance reviews described extensive interactions with the Deputy Secretary and the bureaus to identify performance measures that could be used to promote discussion of performance issues and opportunities for improvement. In addition, the three agencies described efforts to use logic models, project milestones, and other approaches to identify early information on how they were progressing toward long-term outcome goals, which officials said could be challenging to monitor. For example, DOE’s Office of Energy Efficiency and Renewable Energy created a template for program managers to develop logic models linking program inputs and outputs to longer-term performance objectives, such as achieving clean generation of 80 percent of the nation’s electricity by 2035. DOE identified outputs or intermediate outcomes that contribute to the clean generation of energy, such as reducing the cost of solar energy, which the department measures to indicate progress toward its 2035 goal. According to officials, logic models helped program staff communicate a coherent story about how the program’s key activities contribute to its goals. At Treasury, performance budgeting staff said they included the status of priority projects—such as IRS plans to develop a streamlined, user- friendly website—in its quarterly performance review information (see figure 2). Officials explained that these priority projects were designated as such because Treasury sees them as the critical path to achieving agency priority goals and other key longer-term outcomes, which could not always be tracked on a quarterly basis. For example, the Deputy Secretary wanted to monitor the status of IRS’s website update because it is seen to be a lever toward the agency’s priority goal to improve the voluntary tax compliance rate, which can only be measured with data that lags by approximately five years. Our analysis showed that because data-driven reviews are to foster improved performance, the focus of accountability should be on the responsible manager’s role in addressing problems and bringing about positive change. Agency leaders should hold goal leaders and other responsible managers accountable for knowing the progress being made in achieving goals and, if progress is insufficient, understanding why and having a plan for improvement. If data is insufficient for gauging progress, managers should be held accountable for improving the quality of the data so that it is sufficient for decision making. Managers should also be held accountable for identifying and replicating effective practices to improve performance. In addition, the goals addressed in the reviews should be aligned with managers’ and staff’s individual performance goals to create a line of sight that reinforces the connection between strategic goals and day-to-day activities of managers and staff. GPRAMA introduced specific roles and responsibilities for agency heads, COOs, PIOs, and goal leaders in conducting quarterly performance reviews. For each APG, agency heads and COOs, with support from the PIO, must: review with the appropriate goal leader the progress achieved during the most recent quarter, overall trend data, and the likelihood of meeting the planned level of performance; assess whether relevant organizations, program activities, regulations, policies, and other activities are contributing as planned to agency priority goals; categorize agency priority goals by risk of not achieving the planned level of performance; and identify prospects and strategies for performance improvement, including any needed changes to agency program activities, regulations, policies, or other activities for agency priority goals at greatest risk of not meeting the planned level of performance. Across the government, a majority of PIOs reported that their agency’s reviews met these GPRAMA requirements, as indicated in figure 3. Our survey results indicated that most PIOs—21 of 24—reported using the reviews to identify actionable opportunities for performance improvement at least half the time. Consistent with the survey results, DOE, SBA, and Treasury reported that top agency leadership held officials accountable for identifying performance problems and opportunities for improvement. For example, Treasury officials said—and the sessions we observed confirmed—that their Stat meetings focus on performance and are a vehicle for the Deputy Secretary to challenge bureau heads to ensure their bureaus continually improve. For example, the Deputy Secretary reported that many of the bureaus had not reviewed their management metrics, such as internal controls, diversity issues and employee survey scores, for some time and the Stat reviews are an opportunity to engage the bureaus on these issues. At the Stat reviews we attended, we observed the Deputy Secretary discussing such management metrics. For example, he asked bureau leadership to explain why their scores on a government- wide employee satisfaction survey had dipped during the past year, questioned a decline in survey response rates, and discussed specific next steps that he could take to support plans for improvement. At DOE, officials said that their quarterly performance reviews focused on areas where they were not on track to meet performance goals and ways to address this. One official at DOE noted that the Deputy Secretary expected the under secretaries to be accountable for all of their goals at the meeting. At SBA, officials said the focus of the meetings is to fix problems and that it is important to be prepared because the Administrator asks probing questions and managers are called out when progress is not being made and asked to explain what is being done to resolve the issues. Each agency also reported taking steps to ensure that managers’ individual performance objectives are aligned with priority and other agency performance goals. For example, SBA’s performance agreements incorporate performance objectives which cascade from the agency’s priority goals and other performance goals and are aligned with its strategic plan. Samples of performance agreements we reviewed identified “performance elements linked to organizational goals.” For example, a district manager had a performance objective to hold outreach events to connect small businesses to contracting opportunities. This objective clearly links to SBA’s APG to increase small business participation in government contracting. Agency Has Capacity to Collect Accurate, Useful, and Timely Performance Data Our analysis indicated that the capacity to collect and analyze accurate, useful, and timely data is critical to successful data-driven reviews. Agencies should track both outputs and outcomes. Agencies should also look for opportunities to leverage data produced by other agency components or outside entities. In addition, having the capacity to disaggregate data according to demographic, geographic, or other relevant characteristics can aid in highlighting significant variation, which can help meeting participants to pinpoint problems and identify solutions. Agencies also need to plan for the time and resources required to generate and communicate performance data in a timely manner. Easy access to relevant databases and systems-generated analysis, such as providing analysts with the ability to develop performance reports without relying on information technology staff, can streamline the data collection and analysis processes. While having accurate, timely, and useful data available is critical to successful performance reviews, 16 of 24 PIOs reported that this was a challenge—more than any other practice we asked about. However, all 16 of those PIOs also responded that accurate, timely, and useful data is available for their agency’s reviews about half the time or more, which may indicate that some agencies have found ways to address this challenge. Our review of DOE, SBA, and Treasury illustrates how agencies can overcome some challenges to data availability. Our analysis of quarterly performance review documents indicated that each agency was producing data-rich analyses that identified trends and potential performance issues. However, agency officials described initial challenges in these areas and said that improving their capacities for data collection and analysis took time. For example, SBA’s Office of Government Contracting and Business Development collects data on the percentage of all federal agency contracts being awarded to small businesses. The office is dependent on a General Services Administration database, the Federal Procurement Database System- Next Generation (FPDS-NG), for its information. SBA officials were concerned about the quality of the data since each federal agency enters its own information. To address this concern, SBA officials said they provided agencies with individualized reports of potential anomalies in their small business contracting data. This process allowed agencies to verify and correct if necessary the anomalies before SBA published the annual Small Business Procurement Scorecard report. For example, if an agency listed a contract in FPDS-NG as a small business set-aside at the same time that the agency listed the contract as an open procurement competition, this would be flagged. SBA would then notify the responsible agency and give it an opportunity to correct the anomaly in FPDS-NG. In addition, SBA noted instances where performance data lag behind the performance review cycle. For example, the Department of Defense holds its procurement data back from FPDS-NG for one quarter for national security purposes. SBA officials said that instead of waiting for the next quarter, they obtain preliminary information from the Department of Defense. Agency Staff Have Skills to Analyze and Clearly Communicate Complex Data for Decision Making Our analysis indicated that agencies need staff with the skills to assess performance data for coverage and quality and to identify key trends, areas of strong or weak performance, and possible causal factors. In addition, those messages need to be effectively communicated to management and staff that will play a role in identifying and solving performance problems and making related decisions. Analysts and managers should carefully consider the type and amount of information that will be useful for performance reviews, as well as how to present the information to audiences with varying levels of technical or quantitative skills. Providing the right amount of easy-to-understand performance information can promote effective decision making during the quarterly performance reviews. For example, focusing the presentation on the message the data tell about performance, using well-designed graphics, and grounding the data in relevant context are effective communication techniques. Our PIO survey results included information on 15 specific competencies associated with performance improvement responsibilities. For each of these competencies, the majority of PIOs reported the competencies were present among performance improvement staff to a large extent. However, survey results were less positive about 2 competencies specifically related to analytic abilities. Of the 24 PIOs, 9 reported that performance measurement competencies and 10 reported that organizational performance analysis competencies were present among their performance improvement staff to a small or moderate extent. PIOs at DOE, SBA, and Treasury each described the teams they had assembled to support their performance improvement efforts. For example, SBA’s Deputy PIO had performance analysts to support the quarterly performance reviews and many other performance management activities, such as the production of a weekly dashboard of key performance metrics. However, SBA officials acknowledged that some staff were less comfortable working with data and they perceived this as a skills gap that needed to be addressed. These officials said they are addressing this through a combination of training and hiring. For example, as part of its leadership training, SBA began developing courses related to “decision support;” officials said the courses were designed to lead to competencies in spreadsheet development and analysis, presentation delivery, development of decision support datasets, and other analytic and presentation skills. Participants began training in late summer of 2012 with courses titled Principles of Analytics and Analytic Boot Camp. Having staff with abilities to communicate analyses effectively is an important factor in successful performance reviews, and most PIOs—22 of 24—reported that data and relevant analyses are presented effectively to participants in their agency’s reviews about half the time or more. However, 11 of those 22 PIOs also reported that effective presentation of data and relevant analysis was challenging—the second largest challenge cited by the PIOs among the practices we asked about. Consistent with our survey results, officials we interviewed at SBA and Treasury described the challenges they faced in developing skills sets that bridge the gap between data analysis and effective communication. At SBA, the Office of Performance Management developed internal training to help SBA managers improve their ability to communicate the message that the data suggest. One official recounted initial struggles to interpret data and then effectively communicate the key points relevant to performance improvement to those who were not analysts. He noted that the SBA Administrator told senior management that a “data dump” was not helpful, which helped them to realize what was needed. Training was developed to move managers and staff beyond basic analytic skills, with a focus on structuring presentations effectively, using data to drive management decisions, and in general, “telling your story so you’re drawing out insights, rather than just summarizing facts.” See figure 4. At Treasury, performance budgeting staff developed a PowerPoint presentation template that was distributed to each bureau to complete in advance of the Stat meetings. The template provided a uniform data collection tool that incorporated data presentation design principles, to guide the bureaus in effectively communicating their message to the Deputy Secretary. For example, templates for line charts prompted bureaus to indicate whether the desired trend line direction was up or down, since this is not always immediately apparent to high-ranking reviewers who may not have the depth of background into the particular program or operation. According to a Treasury official, designing an effective presentation is as important as doing relevant, high-quality data analysis. One official pointed out, “If no one reads or understands the analysis, it doesn’t matter how good it was.” SBA and Treasury officials responsible for managing the reviews also described challenges in balancing presentation uniformity with the need to provide context that varies. These officials noted that consistency was key to making performance information quick and easy to absorb, especially for leadership that has limited time to review such information. However, SBA noted that the down side of consistency is people’s tendencies to tune out information that appears to be repetitive. SBA’s PIO and COO said they have to continually look for ways to keep the performance review meetings engaging to participants and that “meeting fatigue” can be a problem. Further, several bureau officials at Treasury we interviewed said that while they understood the need for uniformity, the templates did not always provide them with enough flexibility to provide sufficient context for their performance information. While bureau officials we interviewed said that the process and template had improved over time, some felt that in the early days of the Stat reviews, they were so limited in their ability to “tell their story” to the Deputy Secretary that they did not think he was getting an accurate understanding of the issues. However, our review of multiple Stat documents indicated that there was a specific page in the template left open for issues the bureaus wanted to raise, and further, that some bureaus appended information to the template to provide additional context. Rigorous Preparations Enable Meaningful Performance Discussions Our analysis found that sufficient preparation for the performance review meeting is critical for a successful review. Key participants must be prepared to discuss agenda items related to their performance measures and progress toward goals as well as any other issues to be addressed. The time allotted to prepare for reviews also provides a prompt for participants to continuously update their performance data, assess progress toward their performance goals, and develop a response to any performance issues identified. Also, data to be presented during the reviews must be fully vetted prior to the meeting so that participants can focus discussions on data trends and analysis rather than on whether the data itself is correct. According to our survey results, 22 of 24 PIOs reported that review participants are adequately prepared for performance reviews more than half the time, and 20 reported that, overall, it is not challenging for participants to be prepared for the reviews. Nevertheless, several agency officials from DOE, SBA, and Treasury said that there was a significant time investment in preparing information and coordinating among managers and analysts across headquarters and components or offices. Officials at Treasury noted that the process of preparing for the reviews forced the department and its component agencies to closely examine performance data and make sure they could explain it to the Deputy Secretary, and said this process was a valuable part of the performance review. As one bureau-level official explained, nobody wants to go before the Deputy Secretary with data that indicates a performance problem, unless they are able to explain the issue and show that they have already thought of strategies for improvement. As a result, preparing for the reviews sometimes prompted participants to conduct additional analysis and have advance discussions on how to address performance problems. At DOE, SBA, and Treasury, we found several practices in place to prepare participants for review meetings. Officials at each agency stressed the importance of meeting preparation to ensure that the review sessions were productive. For example, Treasury employed a rigorous pre-meeting process which started with the performance budgeting staff developing a PowerPoint template, in consultation with the Deputy Secretary, specifying the performance information to be provided by each component agency for its Stat session. Treasury officials said that performance budgeting staff then met with component staff to discuss the new template and any changes. The templates we reviewed were organized into several categories, such as priority projects, management metrics, and other issues, and were distributed in advance of the Stat meeting and used as the meeting agenda. Treasury officials said there were typically several rounds of revisions to the PowerPoint template prior to the review session, with management and analysts at the component level coordinating with their counterparts at the department. Officials said that one of the goals of developing the template was to ensure that all participants are fully prepared and able to engage in meaningful discussions about performance. In particular, one official explained that a guiding principle is that none of the participants should ever be surprised by any of the topics to be discussed. In advance of each review session, Treasury’s Deputy Secretary reviews the completed document along with an explanatory briefing memo prepared by performance budgeting staff, which provides relevant context for any issues, suggests lines of questioning, and highlights particular decisions to be made. Performance budgeting staff also review the completed Stat template with component staff to discuss the contents and ensure that the component is aware of issues likely to be brought to the attention of the Deputy Secretary. Treasury’s senior officials emphasized the importance of ensuring that data discussed at the meeting were sufficiently vetted during meeting preparation so as not to spend time during the sessions determining whether the information is correct. Several officials pointed to instances in early review meetings that used valuable meeting time on data issues because department-level and component staff disagreed on baseline data used during the reviews. DOE’s pre-meeting practices included briefings with the Deputy Secretary and under secretaries and development of a Business Quarterly Review binder that included descriptions of the program offices’ performance and budget information, a list of attendees, and background notes, as well as a list of actions from the previous performance review. Reviews Are Conducted on a Frequent and Regularly Scheduled Basis Our analysis showed that in-person meetings which are both frequent and regularly scheduled are a defining characteristic of data-driven reviews. Regularly scheduled meetings foster a culture of performance management and continuous improvement. The frequency of the meeting schedule should depend on the urgency of the problems to be fixed, frequency with which the data are collected, and speed with which agency action can have an impact on these data. GPRAMA requires that starting no later than June 2011, agencies must conduct meetings at least quarterly, but agencies may meet more frequently if it meets their needs. According to our survey, all 24 of the PIOs reported that their agencies were conducting performance reviews at least quarterly, with 7 of those 24 reporting conducting reviews more frequently. At DOE, SBA, and Treasury, we found each agency had frequent, regularly scheduled performance review meetings. Treasury’s Deputy Secretary met separately with each of the bureaus two or three times a year. Generally, one or two of the meetings with each Treasury bureau focused on performance, and the other meetings focused on budget. Treasury also holds Stat meetings on certain department-wide goals related to human capital, procurement, and strategic sourcing. As a result, Treasury conducted more than three dozen performance review meetings throughout the year, with more than 100 reviews conducted as of November 2012. DOE and SBA both met quarterly with representatives from across their entire departments. Our survey results indicated that while holding performance reviews as scheduled is generally occurring, it may present challenges at some agencies. Of 24 PIOs, 20 reported that their agency held the performance reviews as scheduled more than half the time, with 2 of these PIOs reporting scheduling as a challenge. In addition, the 4 PIOs who reported that this practice was occurring about half of the time or less also reported that it was a challenge. Experiences at Treasury illustrated how it can be challenging to schedule performance review meetings with high-ranking officials. At one bureau, officials said that last-minute cancellations due to the Deputy Secretary’s schedule caused inefficiencies since extensive meeting preparations, including performance data analyses, had to be redone each time. Officials from this bureau also commented that the performance review meetings sometimes coincided with times during which the bureau had heavy workloads. The officials noted that scheduling all of the meetings at the beginning of the year would be helpful so that they could plan around them. According to Treasury officials, currently sessions are scheduled 4 to 8 weeks in advance. SBA found that it was best to schedule a standing date for the performance review meetings, which are held on the third Tuesday after the end of every quarter, rather than try to coordinate with numerous senior officials’ schedules every time. By selecting this meeting time, SBA was also able to leverage an existing weekly operations meeting, rather than scheduling a separate meeting for the quarterly performance review. Participants Engage in Rigorous and Sustained Follow-up on Issues Identified During Reviews Rigorous and sustained follow-up on issues identified during the meetings is also critical to ensure the success of the reviews as a performance improvement tool. Important follow-up activities include identifying the individual or office responsible for each action item as well as who will be monitoring the follow-up. Follow-up actions should be included as agenda items for subsequent reviews to hold responsible officials accountable for addressing the issues raised and communicating what was done. According to our survey results, follow-up activities are generally occurring even though some PIOs reported that this practice was challenging. In particular, 21 of 24 PIOs reported that follow-up activities occurred at their agencies more than half the time. Although 7 PIOs reported that follow-up activities were challenging, 5 of those 7 PIOs also reported that this practice was occurring more than half the time, which may indicate that some agencies have found ways to overcome these challenges. DOE, SBA, and Treasury each had a different approach to ensure that follow-up items were carried out as agreed to at the review meetings and to ensure responsible parties were held accountable. At DOE, post- meeting activities included asking program offices questions that were generated by their review and assigning an analyst from headquarters performance staff to work with mission program staff to prepare answers to these follow-up questions and have them ready for the next performance review meeting. According to an SBA official, follow-up action items were typically discussed at weekly operations meetings, which helped officials to integrate their action plans into these other performance discussions. One example of an SBA follow-up item was to develop new strategies related to increasing federal contracts with small businesses. Officials said they ranked agencies by the total dollar value of contracts they issued, and they targeted procurement representatives at the top seven purchasing agencies for their outreach efforts. At Treasury, its performance budgeting staff generated follow-up memorandums immediately after the review meetings, naming action items, responsible parties, and due dates. The status of follow-up items from the previous review meetings was also incorporated into the materials for the next review meeting so the Deputy Secretary could see if there was any lagging action. In addition, performance budgeting staff tracked overall performance on post-review follow-up to ensure that this part of the process was being managed effectively (see figure 5). Several officials from Treasury and SBA noted the importance of receiving feedback from meeting participants to help improve the review process. For example, Treasury conducted a formal feedback meeting with bureau heads after the first round of review meetings and learned that components wanted more data from the department’s performance staff to help substantiate their program performance. More recently, Treasury developed a survey to obtain formal feedback from participants and other management and staff that contribute to the review process. The survey included questions on the amount of time invested in preparation and follow-up and asked respondents to rate their satisfaction with various aspects of the review process, including the template design and the guidance provided by performance budget staff. Respondents were also asked to rate the importance of the various aspects of the review to their bureau or office, among other questions. According to Treasury officials who manage the Stat reviews, they have made specific improvements based on the survey results, such as sending out templates earlier to give components more time to prepare. SBA also solicited feedback from meeting participants and made some changes as a result. For example, an SBA official said that the agency used to schedule its quarterly performance review meeting after all the data were available, which was 45 days after the end of each quarter. However, the official said that participants wanted the meeting to be held when the majority of the data was available—only one of its offices’ data lagged—to allow them to take any needed action on a timely basis. As a result, the officials said SBA started scheduling the quarterly review meeting on the third Tuesday after the end of each quarter and conducting a separate meeting with the one SBA office that receives its data after that date. DOE, SBA, and Treasury Officials Attributed Improvements in Performance and Decision Making to Quarterly Performance Reviews, although Some Reported Minimal Impact Reviews Fostered Intra- agency Collaboration and Problem Solving to Improve Performance DOE, SBA, and Treasury officials said their quarterly performance reviews allowed different functional management groups and program areas within each agency to share information and ideas for performance improvement. Officials said these reviews helped them to solve problems that were impeding progress toward performance goals or to develop new performance improvement strategies. In some cases, officials were able to point to specific performance improvements that they attributed to the reviews. DOE officials said that quarterly reviews helped them take a more critical look at subordinate activities contributing to the achievement of their APGs. For instance, they examined barriers to achieving their weatherization goals and found they could produce better results by targeting not only individual homes but also multiuse buildings for retrofitting. Therefore, they created a program to leverage resources from nonprofit and private sector organizations focused on large scale retrofit projects for buildings. In another example, DOE identified barriers to achieving its solar energy cost reduction APG related to slow local permitting processes for solar installations along with other local-level activities that contributed toward the goal. To address these barriers, DOE funded a new program called the Rooftop Solar Challenge in which teams develop actions plans to standardize permit processes, update planning and zoning codes, improve standards for connecting solar power to the electric grid, and increase access to financing. Officials said they expected these new approaches to improve DOE’s performance in reducing solar energy costs. According to officials, performance reviews at DOE also facilitated information sharing across the agency that led to better results. For example, officials said discussions at DOE’s quarterly performance reviews led offices to share effective procurement practices. In this case, offices have been sharing best practices related to strategic sourcing to identify areas of cost reduction. For example, a recent reorganization between Environmental Management and National Nuclear Security Administration presented an opportunity for Environmental Management to leverage existing capabilities in strategic sourcing. The performance reviews have allowed for additional DOE-wide discussions on strategic sourcing lessons-learned and partnerships to potentially achieve greater efficiencies and cost savings. Another example provided by SBA officials illustrated how using the reviews to increase visibility of the small business contracting goal at higher management levels led to the adoption of new performance improvement strategies. After discussing contracting goal data at a quarterly review, officials said the Administrator and Deputy Administrator decided to call department secretaries at those federal agencies with the most potential for awarding small business contracts to emphasize the importance of the goal. Officials said other strategies, such as providing more training for procurement center representatives, who, among other things, assist small businesses in obtaining federal contracts, came out of discussion at the reviews. Officials said they anticipated that the new strategies that came out of the reviews would lead to better performance toward the small business contracting goal. SBA officials also provided an example that illustrated how the reviews facilitated intra-agency collaboration that improved SBA’s bottom line. Officials said that during a quarterly performance review meeting, the head of the Office of Capital Access described anticipated staffing shortfalls and the head of SBA’s Office of Disaster Assistance noted that he expected to have staff members available during the slower season in disaster assistance work, which is cyclical in nature. SBA’s Administrator instructed the two offices to work together, and as a result, officials said they were able to reduce the Office of Capital Access’s labor costs by 20 to 30 percent compared to the cost of paying employees overtime or hiring temporary contractor labor. Leadership Communication of Priorities at Reviews Motivated Performance Improvements DOE, SBA, and Treasury officials said the quarterly performance reviews provided a venue for top leadership to directly communicate their priorities and the priorities of the administration, which led to performance improvements in these areas. For example, at Treasury, nearly all of the bureau-level officials we interviewed said the Stat meetings were valuable because they allowed for a firsthand understanding of the Deputy Secretary’s priorities for their bureaus. Bureau officials said that the Deputy Secretary used these meetings to challenge their performance targets and approaches to addressing performance problems and to identify new opportunities for improvement. For example, the Bureau of the Public Debt Commissioner said that upon hearing about the Deputy Secretary’s interest in one of his ideas for improving how the agency communicates its bond pricing approach to customers, he moved ahead with developing an actionable strategy which he believes will ultimately lead to better customer service. Treasury officials said the Stat review process improved decision making by creating an environment where meaningful discussions on improving performance were held, citing performance improvements at the U.S. Mint as an example (see figure 6). Citing another example, Treasury officials said that the Deputy Secretary had made contracting with small business a department-wide priority. Although increasing small business participation in government contracting was a SBA priority goal, Treasury, like all federal agencies subject to the Small Business Act, had its own target to meet to contribute to the goal. Officials attributed increases in the department’s percentage of contracts with small businesses—Treasury was the only agency to achieve all of its fiscal year 2011 SBA small business prime contracting goals—to the Deputy Secretary’s “relentless attention” at the Stat meetings. At every Stat session with every bureau, the Deputy Secretary reviewed the individual bureau’s performance against the small business target goals. Officials said that Treasury’s chief procurement officer was present at every Stat meeting to facilitate goal achievement. The Financial Management Service (FMS) Commissioner cited another example of how the Stat meetings provided a venue for the Deputy Secretary to communicate his priorities, which led to better performance. FMS has been pursuing several priority projects to modernize its payments, collections, and central accounting systems that serve federal agencies across the government. For example, one project is to replace a paper process that many agencies use to accept vendor invoices with a central invoicing system. FMS’ analysts estimated that a central invoicing system could save the federal government $400 to $500 million annually, as well as provide vendors with online access to the status of their payments. FMS piloted the new system with the Bureau of Engraving and Printing. The new system enabled the Bureau of Engraving and Printing to pay their vendors more quickly than before, which resulted in the vendors having to provide “prompt pay” discounts. The decision was made to move forward government-wide, but to start with Treasury’s own bureaus. Following a Stat meeting in which the FMS Commissioner cited delays in adoption by other Treasury bureaus, the Deputy Secretary made it clear that implementing the new system was a priority. The FMS official said that, while he believed the adoption of the new system would have happened eventually even without the Stat meetings, he credited the Stat meetings with speeding up the process by three to four years. A small number of Treasury bureau officials we interviewed had mixed views on whether the Stat meetings had actually improved performance, with some pointing out that certain performance improvements may have occurred without the Stat meetings. For example, Treasury leadership said they used the Stat sessions to closely monitor the consolidation of Bureau of the Public Debt and FMS into a single bureau, the Bureau of the Fiscal Service. Some officials thought they would have achieved the various consolidation milestones and goals without the Stat reviews and one said that the reviews added another layer of reporting that was time consuming. However, Treasury department officials noted that component management may not be aware of how the Deputy Secretary uses the reviews to better understand performance issues, including, in some cases, to ensure that the department is providing necessary support to improve performance. Conclusions Our review of DOE, SBA, and Treasury—as well as our survey of 24 PIOs—indicated that data-driven quarterly performance reviews hold promise as an effective management tool at the federal level. However, unlike city- and state-level data-driven reviews, which typically include representatives from multiple agencies, officials at DOE, SBA, and Treasury viewed their quarterly performance review meetings as an internal management tool and therefore did not open the reviews to outside participation. Officials said they relied on other means of collaborating with outside agencies and other partners that contribute to achieving cross-cutting goals. Furthermore, the majority of PIOs we surveyed indicated that there was little to no involvement in the reviews from external officials who could contribute to achieving agency goals. Successful data-driven performance reviews, which require extensive preparation and significant leadership time, do not come without a cost, so it is critical that agencies implement their reviews in a way that maximizes their effectiveness. As the implementation of the various GPRAMA provisions continues, agencies may need to reevaluate the most effective way to engage outside contributors in the quarterly performance review process for APGs and other performance goals that depend on other organizations to achieve desired outcomes. While there are many approaches to managing performance toward such goals, agency quarterly performance reviews could provide opportunities to bring together the leadership and all the key players needed to improve cross-agency and internal agency performance. Recommendation for Executive Action To better leverage agency quarterly performance reviews as a mechanism to manage performance toward agency priority and other agency-level performance goals, we are recommending that the Director of the Office of Management and Budget—working with the Performance Improvement Council and other relevant groups—identify and share promising practices to help agencies extend their quarterly performance reviews to include, as relevant, representatives from outside organizations that contribute to achieving their agency performance goals. Agency Comments and Our Evaluation We provided a draft of this report to DOE, OMB, SBA, and Treasury for review and comment. Each agency provided technical comments which we incorporated as appropriate. OMB staff generally concurred with the recommendation in our report. DOE and Treasury provided written comments, which are reproduced in appendixes IV and V, agreeing with our conclusions. We are sending copies of this report to the appropriate congressional committees and the Secretaries of Energy and Treasury, the Administrator of SBA, and the Director of OMB. In addition, the report is available at no charge on GAO’s Web site at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-6806 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix VII. Appendix I: Objectives, Scope, and Methodology As part of our mandate to review the implementation of the Government Performance and Results Act Modernization Act of 2010 (GPRAMA), our reporting objectives were to (1) identify practices that can promote successful data-driven reviews at the federal level and examine how these reviews are being implemented at selected agencies and across the government, and (2) examine the impact of quarterly data-driven performance reviews on selected agencies’ progress toward high priority and other performance goals. This report is the second in a series that examines how agencies are implementing various GPRAMA requirements. To identify practices that can promote successful data-driven reviews at the federal level, we conducted a review of relevant academic and policy literature, including our previous reports. Based on our literature review, we developed a broad set of practices associated with the major contributors to success for data-driven reviews. We refined these practices with additional information obtained from practitioners at the local, state, and federal level who shared their experiences and lessons learned. As part of this engagement, we also compared these practices with recent GPRAMA-related guidance in the Office of Management and Budget’s (OMB) Circular No. A-11 and found them broadly consistent. We observed two data-driven review meetings at the Department of the Treasury (Treasury), which was one of the agencies selected to address our reporting objectives. To examine how these reviews are being implemented at agencies across the government, we surveyed the performance improvement officer (PIO) at each of the 24 federal agencies subject to the Chief Financial Officers (CFO) Act. We surveyed these agencies because GPRAMA directs us to focus on them in our reporting on the act. Additionally, several provisions of the act apply specifically to these agencies, including that the Performance Improvement Council (PIC) include them as members. We received responses from 24 PIOs—a 100 percent response rate. The web-based survey was administered from October 18, 2012, to December 14, 2012. Respondents were sent an e-mail invitation to complete the survey on a GAO web server using a unique username and password. During the data collection period, we sent reminder e-mails and made phone calls to nonresponding agencies. Because this was not a sample survey, it has no sampling errors. The practical difficulties of conducting any survey may also introduce nonsampling errors, such as difficulties interpreting a particular question, which can introduce unwanted variability into the survey results. We took steps to minimize nonsampling errors by pretesting the questionnaire in person with PIOs and Deputy PIOs at three different agencies. We conducted pretests to make sure that the questions were clear and unbiased, the data and information were readily obtainable, and the questionnaire did not place an undue burden on respondents. We made appropriate revisions to the content and format of the questionnaire after the pretests and independent review. All data analysis programs used to generate survey results were independently verified for accuracy. Additionally, in reviewing the answers from agencies, we confirmed that PIOs had correctly bypassed inapplicable questions (skip patterns). Based on our findings, we determined that the survey data are sufficiently reliable for the purposes of this engagement. To evaluate how effectively selected agencies are applying the practices of data-driven reviews in their GPRAMA-mandated quarterly performance reviews, and the effectiveness of these reviews toward achieving agency priority and other performance goals, we chose three agencies— Department of Energy (DOE), Small Business Administration (SBA), and Department of the Treasury (Treasury). Because one of our goals was to describe challenges and lessons learned that will be useful to as many federal agencies as possible—as well as to the administration and to Congress—we selected agencies for case study that could provide a new illustration of challenges or lessons learned, that is, agencies that were not the recent or current subject of GAO or other public administration or public policy case studies. We also looked for agencies that could provide broadly applicable case illustrations, based on the scope of their mission, organizational complexity, and the mix of government tools—such as direct service, regulations, grants, loans, and tax expenditures—used to achieve their performance goals. In addition, we excluded agencies that were undergoing significant management changes—such as leadership turnover or consolidation review—that could prevent us from gaining a clear picture of performance management or could interfere with our ability to make practicable recommendations. We also excluded agencies that had less than one year of experience in conducting data-driven reviews at the time that we started our field work. At each selected agency, we focused on two agency priority goals (APG) to examine how quarterly performance reviews affected the agency components responsible for achieving performance outcomes. Because the scope of our review was to examine data-driven performance reviews as a leadership strategy, we did not evaluate whether these goals were appropriate indicators of agency performance, sufficiently ambitious, or met other dimensions of quality. The following are the complete sets of the agencies’ 2013 APGs. An asterisk indicates the ones we focused on in our review: Save low-income families money and energy through weatherization Reduce the department’s Cold War legacy environmental footprint. Reduce the cost of batteries for electric drive vehicles to help increase the market for plug-in-hybrids and all electric vehicles and thereby reduce petroleum use and greenhouse gas emissions. Make solar energy as cheap as traditional sources of electricity.* Reduce consumer energy use and costs for household appliances. Prioritization of scientific facilities to ensure optimal benefit from federal investments. Make significant progress toward securing the most vulnerable nuclear materials worldwide within four years. Maintain the U.S. nuclear weapons stockpile and dismantle excess nuclear weapons to meet national nuclear security requirements as assigned by the President through the Nuclear Posture Review. Process business loans as efficiently as possible.* Increase small business participation in government contracting.* Process disaster assistance applications efficiently. Expand access to long term capital. Increase electronic transactions with the public to improve service, prevent fraud, and reduce costs.* Increase voluntary tax compliance.* To address both of our objectives, we reviewed memorandums, internal briefings, and other materials agencies used to prepare for the reviews, as well as documents used during the reviews and follow-up materials. We conducted interviews with officials at OMB, the Performance Improvement Council, and senior-level officials involved in each agency’s performance review process to gain various perspectives on these reviews. DOE: We met with the Deputy Secretary, who also serves as DOE’s chief operating officer (COO), and other senior-level officials including but not limited to the PIO, the Deputy PIO, and budget officials. In addition, we met with two APG goal leaders: the Deputy Assistant Secretary for Energy Efficiency and the Deputy Assistant Secretary for Renewable Energy. SBA: We met with senior-level officials, including but not limited to the SBA’s PIO, Deputy PIO, and COO. In addition, we met with SBA’s Associate Administrator/Office of Capital Access, who serves as the goal leader for one of the AGPs we reviewed. Treasury: We met with the Deputy Secretary, who also serves as Treasury’s COO, and other senior-level officials at the department level, including the PIO, who also serves as the CFO, the Deputy PIO, and budget officials. We also met with senior-level officials at Treasury’s Bureau of the Fiscal Service, Bureau of the Public Debt, Financial Management Service, and the Internal Revenue Service. In addition, we met with the Assistant Fiscal Secretary who serves as the goal leader for one of the APGs we reviewed. We asked to observe at least one review meeting at each agency. Treasury allowed us to observe two of its quarterly performance review meetings—one focused on the Bureau of the Fiscal Service and one on the Internal Revenue Service. DOE and SBA did not allow us to observe their meetings, citing concerns that our presence could inhibit open discussion. During the interviews, we asked officials to identify any challenges to effective implementation they faced as the process evolved or any lessons they learned. We also asked officials to identify examples of any impacts on performance that they attributed to the reviews. We conducted our work from April 2012 to February 2013 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: Responses to Selected Questions from GAO’s Survey on Agency Performance Management Positions and Responsibilities To address several research objectives related to implementation of the Government Performance and Results Act Modernization Act of 2010 (GPRAMA) we distributed a web-based survey to the performance improvement officer (PIO) at each of the 24 agencies subject to the Chief Financial Officers Act. We received responses from all 24 PIOs. There were 45 survey questions; tables 1 through 9 below show questions and responses for the nine questions that were directly applicable to the research objectives in this report. We will publish the full survey results in a report in the spring of 2013 on the implementation of key management positions under GPRAMA. For more information about our methodology for designing and distributing the survey, see appendix I. Appendix III: Federal Agencies Subject to the Chief Financial Officers Act Appendix IV: Comments from the Department of the Treasury Appendix V: Comments from the Department of Energy Appendix VI: Full Text for Interactive Figure 1 on Finding the Right Meeting Size and Composition for Effective Performance Reviews This appendix includes the print version of the text contained in interactive figure 1. Several officials noted challenges in achieving the proper balance between having a small number of meeting participants, which can allow more air time for each participant, compared to a larger group which might not be a productive use of time for those attending. Picture: Treasury Deputy Secretary and COO Neal Wolin (top) leads the department’s quarterly performance reviews, with support from Assistant Secretary for Management Nani Coloretti, who also serves as Treasury’s PIO. In addition, balancing depth of knowledge and numbers of staff attending these reviews is another consideration for finding the right meeting size. One official pointed out that having a relatively small group can help participants feel more comfortable in revealing performance problems but that there is a risk of leaving out key players that need to be part of a performance solution. Officials from each agency described different approaches to finding the right meeting size and composition for effective performance reviews, with several officials acknowledging that it takes time to get it right. Table 10 contains the rollover information from interactive figure 1 about how the Department of Energy (DOE), the Small Business Administration (SBA), and the Department of the Treasury (Treasury) conduct their quarterly performance review meetings. Appendix VII: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments Elizabeth Curda and Laura Miller Craig managed this assignment. Darnita Akers, Virginia Chanley, Don Kiggins, and Bob Yetvin made contributions to all aspects of the report. Kim Gianopoulos, Kay Kuhlman, Judith Kordahl, Jill Lacey, Sarah M. McGrath, Tim Minelli, Kathleen Padulchick, William B. Shear, Albert Sim, and Meredith Trauner also provided assistance. In addition, Sabrina Streagle provided legal support and Donna Miller developed the report’s graphics. Selected Bibliography Behn, Robert. “Collaborating for Performance: Or Can There Exist Such a Thing as CollaborationStat?” International Public Management Journal, vol. 13, no. 4 (2010): 429-470. Behn, Robert. “The Core Drivers Of CitiStat: It’s Not Just About the Meetings and the Maps,” International Public Management Journal, vol. 8, no. 3 (2005): 295-319. Behn, Robert. “The Varieties of CitiStat,” Public Administration Review, vol. 66, no. 3 (2006): 332-340. Behn, Robert. “What All Mayors Would Like to Know About Baltimore’s CitiStat Performance Strategy,” IBM Center for the Business of Government Managing for Performance and Results Series (Washington, D.C.: 2007). Campbell, Mary. “Bringing Performance Excellence to the Public Sector: Washington State’s Odyssey,” ASQ World Conference on Quality and Improvement Proceedings, vol. 59 (2005): 279-288. Esty, Daniel, and Reece Rushing. “The Promise of Data-Driven Policymaking,” Issues in Science and Technology, vol. 23, no. 4 (Summer 2007): 67-72. Fillichio, Carl. “Getting Ahead of the Curve: Baltimore and CitiStat,” Public Manager, vol. 34, no. 2 (Summer 2005): 51-53. Godown, Jeff. “The CompStat Process: Four Principles for Managing Crime Reduction,” The Police Chief, vol. LXXVI, no. 8 (August 2009), accessed on September 5, 2012, http://www.policechiefmagazine.org/magazine/index.cfm?fuseaction=displ ay&article_id=1859&issue_id=82009. Griffith, John, and Gadi Dechter. “Performance Reviews That Work: Four Case Studies of Successful Performance Review Systems in the Federal Government,” Center for American Progress (Washington, D.C.: February 2011). Hatry, Harry and Elizabeth Davies, “A Guide to Data-Driven Performance Reviews,” IBM Center for the Business of Government Improving Performance Series (Washington, D.C.: 2011). Henderson, Lenneal. “The Baltimore CitiStat Program: Performance and Accountability,” IBM Endowment for the Business of Government Managing For Results Series (Arlington, VA: May 2003). Kettl, Donald. “China Looks West for Performance Management,” Governing, August 2011, http://www.governing.com/columns/potomac- chronicle/china-looks-west-performance-management.html. Kingsley, Christopher. “Smart Cities: PerformanceSTAT at 15,” University of Pennsylvania Fels Institute of Government (Philadelphia, PA; October 2010). Malinowski, Chris, and Sasha Page. “Top 10 Performance Measurement Dos and Don’ts,” Government Finance Review, vol. 20, no. 5 (October 2004): 28+. Moynihan, Donald, and Stéphane Lavertu. “Do Performance Reforms Change How Federal Mangers Manage?” The Brookings Institution Issues in Governance Studies Series, 52 (Washington, D.C.: October 2012). O’Connell, Paul, and Daniel Forrester. “Think Differently: Update Your Stats to Unlock Outcomes,” The Public Manager, vol. 38, no. 4 (Winter 2009-2010): 5-9. O’Connell, Paul. “Using Performance Data for Accountability: The New York City Police Department’s CompStat Model of Police Management,” The PricewaterhouseCoopers Endowment for the Business of Government Managing for Results Series (Arlington, VA: 2001). Partnership for Public Service. “From Data to Decisions: The Power of Analytics,” IBM Center for the Business of Government (Washington, D.C.: November 2011). Perez, Teresita and Reece Rushing. “The CitiStat Model: How Data- Driven Government Can Increase Efficiency and Effectiveness,” Center for American Progress (Washington, D.C.: April 2007). Queensland Audit Office. Better Practice Guide Performance Reviews. Brisbane, Australia: 2010. Sanger, Mary Bryna. “From Measurement to Management: Breaking through the Barriers to State and Local Performance,” Public Administration Review, S1 (December 2008): S70-85. Scofield, Jennifer. “Asking Why Cuyahoga CountyStat,” Government Finance Review, vol. 27, no. 6 (December 2011): 40-43. Serpas, Ronal, and Matthew Morley. “The Next Step in Accountability- Driven Leadership: “CompStating” the CompStat data,” The Police Chief, vol. LXXV, no. 5 (May 2008), accessed on September 5, 2012, http://www.policechiefmagazine.org/magazine/index.cfm?fuseaction=displ ay_arch&article_id=1501&issue_id=52008. Shane, Jon. “Compstat Process,” FBI Law Enforcement Bulletin, vol. 73, no. 4 (April 2004): 12-21. Sharp, Cathy, Jocelyn Jones, and Alison Smith. “What Do We Measure and Why? An Evaluation of the Citistat Model of Performance Management and its Applicability to the Scottish Public Sector,” Scottish Executive Social Research (Edinburgh, UK: 2006). Solan, David. “The EPAStat Quarterly Report and Lessons Learned,” Public Performance & Management Review, vol. 33, no. 2 (December 2009): 222-240. Steinberg, Harold. “Using Performance Information to Drive Performance Improvement,” Association of Government Accountants Corporate Partner Advisory GroupResearch Series: Report No. 29 (Alexandria, VA: 2011). Useem, Greg. “Moving from Reporting Performance Information to Using It,” Government Finance Review, vol. 25, no. 2 (April 2009): 47-50. Weitzman, Beth, Diana Silver, and Caitlyn Brazill. “Efforts to Improve Public Policy and Programs through Data Practice: Experiences in 15 Distressed American Cities,” Public Administration Review, vol. 66, no. 3 (May/June 2006): 386-399. Related GAO Products Managing for Results: Key Considerations for Implementing Interagency Collaborative Mechanisms. GAO-12-1022. Washington, D.C.: September 27, 2012 Strategic Sourcing: Improved and Expanded Use Could Save Billions in Annual Procurement Costs. GAO-12-919. Washington, D.C.: September 20, 2012 Solar Energy: Federal Initiatives Overlap but Take Measures to Avoid Duplication. GAO-12-843. Washington, D.C.: August 30, 2012. Entrepreneurial Assistance: Opportunities Exist to Improve Programs’ Collaboration, Data-Tracking, and Performance Management. GAO-12-819. Washington, D.C.: August 23, 2012. Managing for Results: GAO’s Work Related to the Interim Crosscutting Priority Goals under the GPRA Modernization Act. GAO-12-620R. Washington, D.C.: May 31, 2012. 2012 Annual Report: Opportunities to Reduce Duplication, Overlap and Fragmentation, Achieve Savings, and Enhance Revenue. GAO-12-342SP. Washington D.C: February 28, 2012. Department of Energy: Additional Opportunities Exist to Streamline Support Functions at NNSA and Office of Science Sites. GAO-12-255. Washington, D.C.: January 31, 2012. Small Business Administration: Progress Continues in Addressing Reforms to the Disaster Loan Program. GAO-12-253T. Washington, D.C.: November 30, 2011. U.S. Coins: Replacing the $1 Note with a $1 Coin Would Provide a Financial Benefit to the Government. GAO-11-281. Washington, D.C.: March 4, 2011. Government Performance: Strategies for Building a Results-Oriented and Collaborative Culture in the Federal Government. GAO-09-1011T. Washington, D.C.: September 24, 2009. Government Performance: Lessons Learned for the Next Administration on Using Performance Information to Improve Results. GAO-08-1026T. Washington, D.C.: July 24, 2008. Results Oriented Cultures: Creating a Clear Linkage between Individual Performance and Organizational Success. GAO-03-488. Washington, D.C.: March 14, 2003.
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Given the federal government's central role in addressing many of the American public's most pressing concerns, it is critical that government performance is managed effectively. GAO's previous work has shown that many federal agencies have struggled to adopt effective performance management practices. Congress took steps to improve federal performance management with the passage of the Government Performance and Results Act Modernization Act of 2010 (GPRAMA), which included a provision for agency leaders to conduct quarterly, data-driven performance reviews. As part of GAO's mandate to review GPRAMA implementation, this report (1) identifies practices that can promote successful data-driven performance reviews at the federal level and examines how they are being implemented at selected agencies and across the government, and (2) examines the impact of quarterly datadriven performance reviews on selected agencies' progress toward high priority and other performance goals. To address these objectives, GAO reviewed academic and policy literature; information from practitioners at the local, state, and federal level; and Office of Management and Budget (OMB) guidance. GAO surveyed performance improvement officers at 24 federal agencies and examined review implementation at three agencies--DOE, SBA, and Treasury. GAO identified nine leading practices to promote successful data-driven performance reviews--referred to as quarterly performance reviews--at the federal level. Agency leaders use data-driven reviews as a leadership strategy to drive performance improvement. Key players attend reviews to facilitate problem solving. Reviews ensure alignment between agency goals, program activities, and resources. Agency leaders hold managers accountable for diagnosing performance problems and identifying strategies for improvement. Agency has capacity to collect accurate, useful, and timely performance data. Agency staff have skills to analyze and clearly communicate complex data for decision making. Rigorous preparations enable meaningful performance discussions. Reviews are conducted on a frequent and regularly scheduled basis. Participants engage in rigorous and sustained follow-up on issues identified during reviews. Most officials GAO interviewed at the Department of Energy (DOE), Small Business Administration (SBA), and Department of the Treasury (Treasury) attributed improvements in performance and decision making to the reviews. DOE, SBA, and Treasury officials said their reviews allowed different functional management groups and program areas within their agencies to collaborate and identify strategies which led to performance improvements. GAO's survey of performance improvement officers indicated that there was little to no involvement in the reviews from other agencies that could help achieve agency goals. This was also true at DOE, SBA, and Treasury, where officials expressed concerns about including outsiders in their reviews and described other means of coordinating with them. However, OMB guidance--along with a leading practice GAO identified--indicates that including key players from other agencies can lead to more effective collaboration and goal achievement.
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SECTION 1. SHORT TITLE.
This Act may be cited as the ``United States Capitol Fire
Protection Act of 2000''.
SEC. 2. FINDINGS; PURPOSE.
(a) Findings.--Congress finds that--
(1) although progress has been made in recent years, the
Capitol, House and Senate Office Buildings, and Library of
Congress still do not provide staff and visitors with the fire
safety and protection they deserve;
(2) the Architect of the Capitol must place great emphasis
on the need to ensure that these and other properties
administered by the Architect, and individuals who visit or
work in these properties, enjoy the maximum protection that
modern technology and human diligence can provide against fire
and related threats to life and property; and
(3) properties and structures of the United States Capitol
Complex are of historical and architectural significance and
are an essential public and national resource, and it is
essential that they be preserved and rehabilitated in such a
manner as to retain their historical and architectural
significance.
(b) Purpose.--It is the purpose of this Act to establish the
position of the Director of Fire Safety and Protection to assist the
Architect of the Capitol in meeting the Architect's responsibilities
for fire safety and protection so that the properties of the United
States Capitol Complex will be protected from fire and serve as a safe
environment for those who work or visit there.
SEC. 3. ESTABLISHMENT OF POSITION OF DIRECTOR OF FIRE SAFETY AND
PROTECTION.
(a) Establishment.--There is hereby established in the Office of
the Architect of the Capitol the position of Director of Fire Safety
and Protection.
(b) Appointment; Compensation.--
(1) Appointment.--The Director of Fire Safety and
Protection shall be appointed by the Architect of the Capitol
from among individuals with the knowledge, skills, and
abilities necessary to carry out the duties described in this
Act.
(2) Compensation.--The Architect of the Capitol shall fix
the rate of basic pay and benefits for the Director of Fire
Safety and Protection at such rate as the Architect considers
appropriate, except that such rate may not be less than the
rate of pay and benefits for the Director of Engineering under
the Architect of the Capitol.
(c) Duties.--
(1) In general.--Working under the direction and control of
the Architect of the Capitol and reporting directly to the
Architect, the Director of Fire Safety and Protection shall--
(A) be responsible for all fire safety and
protection activities of the Architect of the Capitol;
(B) ensure that Architect properties meet the
applicable codes and standards established by the
National Fire Protection Association, except that the
Architect may modify the application of such codes to
the properties to take into account the historic and
architecturally significant features of such properties
so long as a reasonable degree of safety and protection
is maintained; and
(C) carry out the duties specified in paragraph
(2).
(2) Duties specified.--The duties specified in this
paragraph are as follows:
(A) The routine periodic testing and maintenance of
all fire alarm, fire suppression, and fire protection
systems in all Architect properties.
(B) The conduct of comprehensive inspections and
risk assessments on a regular basis (but not less
frequently than once each year) of all Architect
properties to identify conditions which constitute fire hazards and to
develop plans for the prompt abatement of such conditions, in
accordance with the requirements specified in paragraph (1)(B).
(C) The development and implementation of programs
to train employees of the Architect of the Capitol and
others in the proper use and maintenance of fire alarm,
fire suppression, and fire protection systems and in
the proper use and storage of hazardous chemicals and
materials.
(D) The identification of structural changes and
repairs which may be necessary to assure maximum fire
protection and safety in Architect properties, and the
development of comprehensive plans to carry out such
changes.
(E) The preparation of semi-annual reports on the
efforts made by the Director to carry out the duties
required under this subsection.
(F) Consultation with experts in fire safety and
protection regarding the modification of codes and
standards carried out pursuant to paragraph (1)(B) and
such other matters relating to the Director's duties as
the Director considers appropriate.
(G) Such other steps as may be reasonably necessary
to protect Architect properties from fire and provide a
safe environment for employees and visitors.
SEC. 4. RESPONSIBILITIES OF ARCHITECT.
(a) In General.--The Architect of the Capitol shall provide the
Director of Fire Safety and Protection with such staff and other
resources as the Director may reasonably require to carry out duties
under this Act, except that the Architect of the Capitol shall assign
not fewer than 12 full-time-equivalent employees to the Director for
carrying out such duties.
(b) Budget Request.--Beginning with fiscal year 2002, the Architect
of the Capitol shall include in the budget request for the Architect
for a fiscal year a separate statement of the total amount to be used
to carry out the duties of the Director of Fire Safety and Protection
in the fiscal year.
(c) Submission of Reports.--The Architect shall submit to the
Committees on Appropriations of the House of Representatives and
Senate, the Committee on House Administration of the House of
Representatives, the Committee on Transportation and Infrastructure of
the House of Representatives, and the Committee on Rules and
Administration of the Senate the semi-annual reports prepared by the
Director of Fire Safety and Protection under section 3(c)(2)(E).
SEC. 5. ARCHITECT PROPERTIES DEFINED.
In this Act, the term ``Architect properties'' means any properties
under the jurisdiction of the Architect of the Capitol, including the
Capitol, House and Senate Office Buildings, the Library of Congress,
the United States Botanic Garden, and the Capitol Power Plant.
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Directs the Architect of the Capitol to assign at least 12 full-time employees to the Director.
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