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Introduction The 115 th Congress continues its interest in U.S. research and development (R&D) and in evaluating support for federal R&D activities. The federal government has played an important role in supporting R&D efforts that have led to scientific breakthroughs and new technologies, from jet aircraft and the internet to communications satellites, shale gas extraction, and defenses against disease. In recent years, widespread concerns about the federal debt, recent and projected federal budget deficits, and federal budget caps have driven difficult decisions about the prioritization of R&D, both in the context of the entire federal budget and among competing needs within the federal R&D portfolio. While these factors continue to exist, increases in the budget caps for FY2018 and FY2019 may reduce some of the pressure affecting these decisions. The U.S. government supports a broad range of scientific and engineering R&D. Its purposes include specific concerns such as addressing national defense, health, safety, the environment, and energy security; advancing knowledge generally; developing the scientific and engineering workforce; and strengthening U.S. innovation and competitiveness in the global economy. Most of the R&D funded by the federal government is performed in support of the unique missions of individual funding agencies. The federal R&D budget is an aggregation of the R&D activities of these agencies. There is no single, centralized source of R&D funds. Agency R&D budgets are developed internally as part of each agency's overall budget development process. R&D funding may be included either in accounts that are entirely devoted to R&D or in accounts that include funding for non-R&D activities. Agency budgets are subjected to review, revision, and approval by the Office of Management and Budget (OMB) and become part of the President's annual budget submission to Congress. The federal R&D budget is then calculated by aggregating the R&D activities of each federal agency. Congress plays a central role in defining the nation's R&D priorities as it makes decisions about the level and allocation of R&D funding—overall, within agencies, and for specific programs. Some Members of Congress have expressed concerns about the level of federal spending (for R&D and for other purposes) in light of the federal deficit and debt. Other Members of Congress have expressed support for increased federal spending for R&D as an investment in the nation's future competitiveness. As Congress acts to complete the FY2019 appropriations process, it faces two overarching issues: the amount of the federal budget to be spent on federal R&D and the prioritization and allocation of the available funding. This report begins with a discussion of the overall level of President Trump's FY2019 R&D request, followed by analyses of the R&D funding request from a variety of perspectives and for selected multiagency R&D initiatives. The remainder of the report then provides discussion and analysis of the R&D budget requests of selected federal departments and agencies that, collectively, account for approximately 99% of total federal R&D funding. Selected terms associated with federal R&D funding are defined in the text box on the next page. Appendix A provides a list of acronyms and abbreviations. The President's FY2019 Budget Request On February 12, 2018, President Trump released his proposed FY2019 budget. In addition, on the same day, OMB issued an addendum that includes a request for an additional $12.9 billion in nondiscretionary R&D funding. According to OMB, the request for these additional funds was made possible by changes to spending caps in the Budget Control Act (BCA; P.L. 112-25 ) that were enacted on February 9, 2018, in the Bipartisan Budget Act of 2018 ( P.L. 115-123 ). In FY2018, the Trump Administration began using a new definition for development in its R&D calculations ("experimental development"). The new definition excludes some development activities, primarily at the Department of Defense (DOD) and the National Aeronautics and Space Administration (NASA), that had been characterized as development in previous budgets. The new definition (experimental development) is used throughout this report for FY2017 and FY2019, except in the section " Department of Defense ." According to OMB, the funds no longer included in the definition of development are, nevertheless, "requested in the FY 2019 budget request and support the development efforts to upgrade systems that have been fielded or have received approval for full rate production and anticipate production funding in the current or subsequent fiscal year." (See box below entitled "Caveats with Respect to Analysis of the FY2019 Budget Request" for additional information.) Subsequent to the release of the President's budget, Congress enacted the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), appropriating full-year funding for FY2018, rendering the CR levels identified in the budget no longer relevant. Therefore, the analysis of government-wide R&D funding in this report preceding the individual agency analyses compares the President's request for FY2019 to the FY2017 level. As information about the agencies' FY2018 R&D levels becomes available, the agency sections of this report will be updated to reflect that information and to make comparisons to the President's FY2019 request; some agency sections have been updated. Under the new definition of R&D, and including the $12.9 billion proposed in the addendum, President Trump is proposing approximately $131.0 billion for R&D for FY2019, an increase of $5.7 billion above the FY2017 level (4.5%). Adjusted for inflation, the President's FY2019 R&D request represents a constant-dollar increase of 1.2% from the FY2017 actual level. The President's R&D request includes continued funding for existing single-agency and multiagency programs and activities, as well as new initiatives. This report provides government-wide, multiagency, and individual agency analyses of the President's FY2019 request as it relates to R&D and related activities. Additional information and analysis will be included as the House and Senate act on the President's budget request through appropriations bills. Federal R&D Funding Perspectives Federal R&D funding can be analyzed from a variety of perspectives that provide different insights. The following sections examine the data by agency, by the character of the work supported, and by a combination of these two perspectives. Federal R&D by Agency Congress makes decisions about R&D funding through the authorization and appropriations processes primarily from the perspective of individual agencies and programs. Table 1 provides data on R&D funding by agency for FY2017 (actual) and FY2019 (request). Funding data for FY2018 were not included in the Trump Administration's FY2019 budget because the FY2018 budget had not been completed at the time the FY2019 budget request was released. Under President Trump's FY2019 budget request, eight federal agencies would receive more than 96% of total federal R&D funding: the Department of Defense, 48.4%; Department of Health and Human Services (HHS), primarily the National Institutes of Health (NIH), 20.9%; Department of Energy (DOE), 10.7%; National Aeronautics and Space Administration, 9.0%; National Science Foundation (NSF), 3.5%; Department of Agriculture (USDA), 1.6%; Department of Commerce (DOC), 1.2%; and Veterans Affairs (VA), 1.1%. This report provides an analysis of the R&D budget requests for these agencies, as well as for the Department of Homeland Security (DHS), Department of the Interior (DOI), Department of Transportation (DOT), and Environmental Protection Agency (EPA). Excluding the $12.9 billion in R&D funding requested in the addendum, nearly every federal agency would see its R&D funding decrease under the President's FY2019 request compared to their FY2017 levels. The only agencies with increased R&D funding in FY2019 would be DOD (up $7.959 billion, 16.2%), the Patient-Centered Outcomes Research Institute, (up $159 million, 34.3%), and the Smithsonian Institution (up $20 million, 8.0%). The largest declines (as measured in dollars) would occur in the budgets of HHS (down $9.480 billion, 27.7%), DOE (down $2.211 billion, 14.8%), NSF (down $1.761 billion, 29.7%), USDA (down $671 million, 26.0%), and the DOC (down $433 million, 24.1%). Federal R&D by Character of Work, Facilities, and Equipment Federal R&D funding can also be examined by the character of work it supports—basic research, applied research, or development—and by funding provided for construction of R&D facilities and acquisition of major R&D equipment. (See Table 2 .) President Trump's FY2019 request includes $27.341 billion for basic research, down $6.986 billion (20.4%) from FY2017; $31.648 billion for applied research, down $6.500 billion (17.0%); $56.696 billion for development, up $6.333 billion (12.6%); and $2.371 billion for facilities and equipment, down $80 million (3.3%). Federal Role in U.S. R&D by Character of Work A primary policy justification for public investments in basic research and for incentives (e.g., tax credits) for the private sector to conduct research is the view, widely held by economists, that the private sector will, left on its own, underinvest in basic research from a societal perspective. The usual argument for this view is that the social returns (i.e., the benefits to society at large) exceed the private returns (i.e., the benefits accruing to the private investor, such as increased revenues or higher stock value). Other factors that may inhibit corporate investment in basic research include long time horizons for achieving commercial applications (diminishing the potential returns due to the time value of money), high levels of technical risk/uncertainty, shareholder demands for shorter-term returns, and asymmetric and imperfect information. The federal government is the nation's largest supporter of basic research, funding 44% of U.S. basic research in 2016. Business funded 27% of U.S. basic research in 2016, with state governments, universities, and other nonprofit organizations funding the remaining 29%. For U.S. applied research, business is the primary funder, accounting for an estimated 53% in 2016, while the federal government accounted for an estimated 35%. State governments, universities, and other nonprofit organizations funded the remaining 12%. Business also provides the vast majority of U.S. funding for development. Business accounted for 82% of development funding in 2016, while the federal government provided 16%. State governments, universities, and other nonprofit organizations funded the remaining 2% (see Figure 1 ). Federal R&D by Agency and Character of Work Combined Federal R&D funding can also be viewed from the combined perspective of each agency's contribution to basic research, applied research, development, and facilities and equipment. ( Table 3 lists the three agencies with the most funding for each character of work classification.) The overall federal R&D budget reflects a wide range of national priorities, including supporting advances in spaceflight, developing new and affordable sources of energy, and understanding and deterring terrorist groups. These priorities and the mission of each individual agency contribute to the composition of that agency's R&D spending (i.e., the allocation among basic research, applied research, development, and facilities and equipment). In the President's FY2019 budget request, the Department of Health and Human Services, primarily NIH, would account for nearly half (44.3%) of all federal funding for basic research. HHS would also be the largest federal funder of applied research, accounting for about 39.0% of all federally funded applied research in the President's FY2019 budget request. DOD would be the primary federal funder of development, accounting for 87.4% of total federal development funding in the President's FY2019 budget request. Multiagency R&D Initiatives For many years, presidential budgets have reported on multiagency R&D initiatives and have often provided details of agency funding for these initiatives. Some of these efforts have a statutory basis—for example, the Networking and Information Technology Research and Development (NITRD) program, the National Nanotechnology Initiative (NNI), and the U.S. Global Change Research Program (USGCRP). These programs generally produce annual budget supplements identifying objectives, activities, funding levels, and other information, usually published shortly after the presidential budget release. Other multiagency R&D initiatives have operated at the discretion of the President without such a basis and may be eliminated at the discretion of the President. President Trump's FY2019 budget is largely silent on funding levels for these efforts and whether any or all of the nonstatutory initiatives will continue. Some activities related to these initiatives are discussed in agency budget justifications and may be addressed in the agency analyses later in this report. This section provides available multiagency information on these initiatives and will be updated as additional information becomes available. Networking and Information Technology Research and Development Program (NITRD)10 Established by the High-Performance Computing Act of 1991 ( P.L. 102-194 ), the Networking and Information Technology Research and Development program is the primary mechanism by which the federal government coordinates its unclassified networking and information technology R&D investments in areas such as supercomputing, high-speed networking, cybersecurity, software engineering, and information management. In FY2018, 21 agencies are NITRD members; non-member agencies also participate in NITRD activities. NITRD efforts are coordinated by the National Science and Technology Council (NSTC) Subcommittee on Networking and Information Technology Research and Development. P.L. 102-194 , as reauthorized by the American Innovation and Competitiveness Act of 2017 ( P.L. 114-329 ), requires the director of NITRD to prepare an annual report to be delivered to Congress along with the President's budget request. This annual report is to include, among other things, detailed information on the program's budget for the current fiscal year, previous fiscal year, and proposed for the next fiscal year. The latest annual report was published in August 2018. President Trump is requesting $5,277.6 million for NITRD research in FY2019, $126.1 million (2.4%) more than the estimated FY2018 level. In FY2017, NNI funding was $5,126.4 million. Additional NITRD information can be obtained at https://www.nitrd.gov . U.S. Global Change Research Program (USGCRP)12 The U.S. Global Change Research Program coordinates and integrates federal research and applications to understand, assess, predict, and respond to human-induced and natural processes of global change. The program seeks to advance global climate change science and to "build a knowledge base that informs human responses to climate and global change through coordinated and integrated Federal programs of research, education, communication, and decision support." In FY2018, 13 departments and agencies participated in the USGCRP. USGCRP efforts are coordinated by the NSTC Subcommittee on Global Change Research. The Global Change Research Act of 1990 ( P.L. 101-606 ) requires annual reporting to Congress on federal budget and spending by agency on global change research. In almost each of the past 17 years, language in appropriations laws has required the President to submit a comprehensive report to the appropriations committees "describing in detail all Federal agency funding, domestic and international, for climate change programs, projects, and activities … including an accounting of funding by agency…." The most recent report was submitted in December 2016 for FY2017. This section will be updated when the USGCRP updates its budget information. Additional USGCRP information can be obtained at http://www.globalchange.gov . National Nanotechnology Initiative (NNI)16 Launched in FY2001, the National Nanotechnology Initiative is a multiagency R&D initiative to advance understanding and control of matter at the nanoscale, where the physical, chemical, and biological properties of materials differ in fundamental and useful ways from the properties of individual atoms or bulk matter. In 2003, Congress enacted the 21 st Century Nanotechnology Research and Development Act ( P.L. 108-153 ), providing a legislative foundation for some of the activities of the NNI. NNI efforts are coordinated by the NSTC Subcommittee on Nanoscale Science, Engineering, and Technology (NSET). In FY2019, the President's request includes NNI funding for 16 federal departments and independent agencies and commissions with budgets dedicated to nanotechnology R&D. The NSET includes other federal departments and independent agencies and commissions with responsibilities for health, safety, and environmental regulation; trade; education; intellectual property; international relations; and other areas that might affect or be affected by nanotechnology. The 21 st Century Nanotechnology Research and Development Act ( P.L. 108-153 ) requires the NSTC to prepare an annual report to be delivered to Congress at the time the President's budget request is sent to Congress. This annual report is to include detailed information on the program's budget for the current fiscal year and the program's proposed budget for the next fiscal year, as well as additional information and data related to the performance of the program. The latest annual report was published in August 2018. President Trump is requesting $1,395.6 million for NNI research in FY2019, $81.8 million (5.5%) less than the estimated FY2018 level. In FY2017, NNI funding was $1,552.3 million. Additional NNI information can be obtained at http://www.nano.gov . Other Initiatives Presidential initiatives without statutory foundations in operation at the end of the Obama Administration, but not explicitly addressed in President Trump's FY2018 or FY2019 budgets, include the Advanced Manufacturing Partnership (AMP, including the National Robotics Initiative [NRI] and the National Network for Manufacturing Innovation [NNMI]), the Cancer Moonshot, the BRAIN Initiative, the Precision Medicine Initiative (PMI), the Materials Genome Initiative, and an effort to doubling federal funding for clean energy R&D. Some of the activities of these initiatives are discussed in agency budget justifications and the agency analyses later in this report. FY2019 Appropriations Status The remainder of this report provides a more in-depth analysis of R&D in 12 federal departments and agencies that, in aggregate, receive nearly 99% of total federal R&D funding. Agencies are presented in order of the size of their FY2019 R&D budget requests, with the largest presented first. Annual appropriations for these agencies are provided through 9 of the 12 regular appropriations bills. For each agency covered in this report, Table 7 shows the corresponding regular appropriations bill that provides primary funding for the agency, including its R&D activities. Because of the way that agencies report budget data to Congress, it can be difficult to identify the portion that is R&D. Consequently, R&D data presented in the agency analyses in this report may differ from R&D data in the president's budget or otherwise provided by OMB. Funding for R&D is often included in appropriations line items that also include non-R&D activities; therefore, in such cases, it may not be possible to identify precisely how much of the funding provided in appropriations laws is allocated to R&D specifically. In general, R&D funding levels are known only after departments and agencies allocate their appropriations to specific activities and report those figures. As of the date of this report, the House had completed action on six of the 12 regular appropriations bills; the Senate had completed action on nine of the bills. Five of the 12 had been enacted as law: the Department of Defense Appropriations Act; Energy and Water Development and Related Agencies Appropriations Act; Departments of Labor, Health and Human Services, and Education, and Related Agencies Appropriations Act; Legislative Branch Appropriations Act; and Military Construction and Veterans Affairs, and Related Agencies Appropriations Act. Division C of P.L. 115-245 provides for continuing appropriations for the agencies included in the remaining seven bills until "the enactment into law of an appropriation for any project or activity provided for in this Act; (2) the enactment into law of the applicable appropriations Act for fiscal year 2019 without any provision for such project or activity; or (3) December 7, 2018." This report will be updated as Congress takes additional actions to complete the FY2019 appropriations process. In addition to this report, CRS produces individual reports on each of the appropriations bills. These reports can be accessed via the CRS website at http://www.crs.gov/iap/appropriations . Also, the status of each appropriations bill is available on the CRS web page, Status Table of Appropriations , available at http://www.crs.gov/AppropriationsStatusTable/Index . Department of Defense20 The mission of the Department of Defense is "to provide the military forces needed to deter war and to protect the security of our country." Congress supports research and development activities at DOD primarily through the department's Research, Development, Test, and Evaluation (RDT&E) funding. These funds support the development of the nation's future military hardware and software and the science and technology base upon which those products rely. Nearly all of what DOD spends on RDT&E is appropriated in Title IV of the annual defense appropriations bill. (See Table 8 .) However, RDT&E funds are also appropriated in other parts of the bill. For example, RDT&E funds are appropriated as part of the Defense Health Program, the Chemical Agents and Munitions Destruction Program, and the National Defense Sealift Fund. The Defense Health Program (DHP) supports the delivery of health care to DOD personnel and their families. DHP funds (including the RDT&E funds) are requested through the Defense-wide Operations and Maintenance appropriations request. The program's RDT&E funds support congressionally directed research on breast, prostate, and ovarian cancer; traumatic brain injuries; orthotics and prosthetics; and other medical conditions. Congress appropriates funds for this program in Title VI (Other Department of Defense Programs) of the defense appropriations bill. The Chemical Agents and Munitions Destruction Program supports activities to destroy the U.S. inventory of lethal chemical agents and munitions to avoid future risks and costs associated with storage. Funds for this program are requested through the Defense-wide Procurement appropriations request. Congress appropriates funds for this program also in Title VI. The National Defense Sealift Fund supports the procurement, operation and maintenance, and research and development associated with the nation's naval reserve fleet and supports a U.S. flagged merchant fleet that can serve in time of need. In some fiscal years, RDT&E funding for this effort is requested in the Navy's Procurement request and appropriated in Title V (Revolving and Management Funds) of the appropriation bill. RDT&E funds also have been requested and appropriated as part of DOD's separate funding to support efforts in what the George W. Bush Administration termed the Global War on Terror (GWOT), and what the Obama and Trump Administration have referred to as Overseas Contingency Operations (OCO). In appropriations bills, the term Overseas Contingency Operations/Global War on Terror (OCO/GWOT) has been used; President Trump's FY2019 budget uses the term Overseas Contingency Operations. Typically, the RDT&E funds appropriated for OCO/GWOT activities go to specified Program Elements (PEs) in Title IV. In addition, OCO/GWOT-related requests/appropriations have included money for a number of transfer funds. In the past, these have included the Iraqi Freedom Fund (IFF), the Iraqi Security Forces Fund, the Afghanistan Security Forces Fund, and the Pakistan Counterinsurgency Capability Fund. Congress typically has made a single appropriation into each such fund and authorized the Secretary to make transfers to other accounts, including RDT&E, at his discretion. These transfers are eventually reflected in Title IV prior-year funding figures. It should be noted that the FY2018 enacted funding levels were not known at the time the President's FY2019 budget was prepared, as the budget process had not been completed. For FY2019, the Trump Administration is requesting $92.365 billion for DOD's Title IV RDT&E PEs (base plus OCO/GWOT), $1.783 billion (2.0%) above the enacted FY2018 level. (See Table 8 .) In addition, the request includes $710.6 million in RDT&E through the Defense Health Program (DHP; down $1.329 billion, 65.2% from FY2018), $886.7 million in RDT&E through the Chemical Agents and Munitions Destruction program (up $47.3 million, 5.6% from FY2018), and $1.6 million for the Inspector General for RDT&E-related activities (down $1.2 million, 42.9% from FY2018). The FY2019 budget included no RDT&E funding via the National Defense Sealift Fund, the same as the FY2018 enacted level. On June 28, 2018, the House passed the Department of Defense Appropriations Act, 2019 ( H.R. 6157 ). The bill includes $91.241 billion for Title IV base RDT&E funding and $1.181 billion in OCO/GWOT base RDT&E funding for a total of $92.422 billion. This represents an increase of $1.840 billion (2.0%) over the FY2018 enacted Title IV RDT&E funding level (base and OCO/GWOT), and an increase of $57 million (0.1%) above the request level. The House-passed bill would provide DHP with $1.466 billion in R&D funding for FY2019, $573 million (28.1%) below the FY2018 enacted level and $756 million (106.3%) above the FY2019 request; the Chemical Agents and Munitions Destruction program with $887 million for RDT&E, up $47 million (5.6%) from the FY2018 level and equal to the request; no funding for National Defense Sealift Fund RDT&E, the same as the FY2018 enacted level and the FY2019 request; and $1.6 million for the Inspector General for RDT&E-related work, $1.2 million (42.9%) below the FY2018 enacted level and equal to the FY2019 request. On August 23, 2018, the Senate passed the Department of Defense Appropriations Act, 2019 ( H.R. 6157 , as amended). The bill includes $95.132 billion for Title IV base RDT&E funding and $1.176 billion in OCO/GWOT base RDT&E funding for a total of $96.308 billion. This represents an increase of $5.726 billion (6.3%) over the FY2018 enacted Title IV RDT&E funding level (base and OCO/GWOT), an increase of $3.943 billion (4.3%) above the request, and an increase of $3.885 billion (4.2%) above the House-passed level. The Senate-passed bill would provide DHP with $1.674 billion in R&D funding for FY2019, $365 million (17.9%) below the FY2018 enacted level, $963 million (135.6%) above the request, and $208 million (14.2%) above the House-passed level; the Chemical Agents and Munitions Destruction program with $887 million for RDT&E, up $47 million (5.6%) from the FY2018 enacted level, and equal to the request and House-passed levels; the National Defense Sealift Fund with no funding for RDT&E, the same as the FY2018 enacted level, FY2019 request, and House-passed level; and the Inspector General with $4.0 million for RDT&E-related work, $1.2 million (42.0%) above the FY2018 enacted level, $2.4 million (148.6%) above the request and House-passed levels. For FY2019, Division A of P.L. 115-245 , the Department of Defense and Labor, Health and Human Services, and Education Appropriations Act, 2019 and Continuing Appropriations Act, 2019, provides $94.897 billion for Title IV base RDT&E funding and $1.193 billion in OCO/GWOT base RDT&E funding for a total of $96.090 billion. This represents an increase of $5.508 billion (6.1%) over the FY2018 enacted Title IV RDT&E funding level (base and OCO/GWOT), an increase of $3.725 billion (4.0%) above the request, an increase of $3.668 billion (4.0%) above the House-passed level, and $217 million (0.2%) below the Senate-passed bill. For FY2019, Division A of P.L. 115-245 also provides: $2.181 billion for DHP RDT&E, $142 million (6.9%) above the FY2018 enacted level, $1.470 billion (206.9%) above the request, $715 million (48.7%) above the House-passed level, and $507 million (30.3%) above the Senate-passed level; $887 million for Chemical Agents and Munitions Destruction program RDT&E, up $47 million (5.6%) from the FY2018 enacted level, and equal to the request, House-passed, and Senate-passed levels; no funding for National Defense Sealift Fund RDT&E, equal to the FY2018 enacted, FY2019 request, House-passed, and Senate-passed levels; and $4.0 million for Inspector General RDT&E activities, $1.2 million (42.0%) above the FY2018 enacted level, $2.4 million (148.6%) above the request and House-passed levels, and equal to the Senate-passed level. The military departments each request and receive their own RDT&E funding. So do various DOD agencies (e.g., the Missile Defense Agency and the Defense Advanced Research Projects Agency), through the Defense-wide account. The Director, Operational Test and Evaluation (OTE), receives a separate appropriation. For FY2019, Division A of P.L. 115-245 provides: the Army with $11.384 billion in RDT&E funding (base plus OCO/GWOT), $481 million (4.4%) above the FY2018 enacted level, $900 million (8.6%) above the request, $971 million (9.3%) above the House-passed levels, and $247 million (2.2%) above the Senate-passed level; the Navy with $18.678 billion in RDT&E funding (base plus OCO/GWOT), $440 million (2.4%) above the FY2018 enacted level, $29 million (0.2%) above the request, $852 million (4.8%) above the House-passed level, and $482 million (2.5%) below the Senate-passed level; the Air Force with $41.551 billion in RDT&E funding (base plus OCO/GWOT), $3.738 billion (9.9%) above the FY2018 enacted level, $1.059 billion (2.6%) above the request, $320 million (0.8%) above the House-passed level, and $367 million (0.9%) above the Senate-passed level; the Defense-wide account with $24.095 billion in RDT&E funding (base plus OCO/GWOT), $679 million (2.9%) above the FY2018 enacted level, $1.578 billion (7.0%) above the request, $1.365 billion (6.0%) above the House-passed level, and $350 million (1.4%) below the Senate-passed level; and OTE with $381 million in RDT&E funding (base plus OCO/GWOT), $170 million (80.7%) above the FY2018 enacted level, $160 million (72.4%) above the request and the House-passed level, and equal to the Senate-passed level. RDT&E funding can also be characterized by budget activity (i.e., the type of RDT&E supported). Those budget activities designated as 6.1, 6.2, and 6.3 (basic research, applied research, and advanced technology development) constitute what is called DOD's Science and Technology (S&T) program. Budget activities 6.4 and 6.5 focus on the development of specific weapon systems or components for which an operational need has been determined and an acquisition program established. Budget activity 6.6 provides management support, including support for test and evaluation facilities. Budget activity 6.7 supports the development of system improvements in existing operational systems. Many congressional policymakers are particularly interested in DOD S&T program funding since these funds support the development of new technologies and the underlying science. Some in the defense community see ensuring adequate support for S&T activities as imperative to maintaining U.S. military superiority into the future. The knowledge generated at this stage of development may also contribute to advances in commercial technologies. The FY2019 request for Title IV S&T funding (base plus OCO/GWOT) is $13.700 billion, $1.194 billion (8.0%) below the FY2018 enacted level. The House-passed bill would provide $14.648 billion in FY2019 level for Title IV S&T funding, $426 million (2.9%) below the FY2018 level and $768 million (5.6%) above the FY2019 request. The Senate-passed bill would provide $15.441 billion for Title IV S&T funding, $547 million (3.7%) above the FY2018 level, $1.740 billion (12.7%) above the request, and $972 million (6.7%) above the House-passed level. Division A of P.L. 115-245 provides $15.973 billion for Title IV S&T funding in FY2019 (base plus OCO/GWOT), $1.079 billion (7.2%) above the FY2018 enacted level, $2.273 billion (16.6%) above the request, $1.505 billion (10.4%) above the House-passed levels, and $533 million (3.5%) above the Senate-passed level. Within the S&T program, basic research (6.1) receives special attention, particularly by the nation's universities. DOD is not a large supporter of basic research when compared to NIH or NSF. However, over half of DOD's basic research budget is spent at universities, and it is among the largest sources of federal funds for university research in some areas of science and technology, such as electrical engineering and materials science. The Trump Administration is requesting $2.269 billion for DOD basic research for FY2019, $74.0 million (3.2%) below the FY2018 enacted level. The House-passed bill would provide $2.298 billion in FY2019 for DOD basic research, $45 million (1.9%) below the FY2018 level and $29 million (1.3%) above the FY2019 request. The Senate-passed bill would provide $2.798 billion in FY2019 for DOD basic research, $455 million (19.4%) above the request, $529 million (23.3%) above the request, and $500 million (21.8%) above the House-passed level. Division A of P.L. 115-245 provides $2.530 billion in Title IV (base plus OCO/GWOT) FY2019 for DOD basic research, $186 million (8.0%) above the FY2018 enacted level, $260 million (11.5%) above the request, $231 million (10.1%) above the House-passed levels, and $269 million (9.6%) below the Senate-passed level. Department of Health and Human Services The mission of the Department of Health and Human Services (HHS) is "to enhance and protect the health and well-being of all Americans ... by providing for effective health and human services and fostering advances in medicine, public health, and social services." This section focuses on HHS research and development funded through the National Institutes of Health, an HHS agency that accounts for more than 95% of total HHS R&D funding. Other HHS agencies that provide funding for R&D include the Centers for Disease Control and Prevention (CDC), the Centers for Medicare and Medicaid Services (CMS), the Food and Drug Administration (FDA), the Agency for Healthcare Research and Quality (AHRQ), Health Resources and Services Administration (HRSA), and the Administration for Children and Families (ACF). National Institutes of Health28 NIH is the primary agency of the federal government charged with performing and supporting biomedical and behavioral research. It also has major roles in training biomedical researchers and disseminating health information. The NIH mission is "to seek fundamental knowledge about the nature and behavior of living systems and the application of that knowledge to enhance health, lengthen life, and reduce illness and disability." The agency's organization consists of the NIH Office of the Director (OD) and 27 institutes and centers (ICs). The OD sets overall policy for NIH and coordinates the programs and activities of all NIH components, particularly in areas of research that involve multiple institutes. The ICs focus on particular diseases, areas of human health and development, or aspects of research support. Each IC plans and manages its own research programs in coordination with OD. As shown in Table 9 , separate appropriations are provided to 24 of the 27 ICs, to OD, and to an intramural Buildings and Facilities account. The other three centers, which perform centralized support services, are funded through assessments on the IC appropriations. NIH supports and conducts a wide range of basic and clinical research, research training, and health information dissemination across all fields of biomedical and behavioral sciences. About 10% of the NIH budget supports intramural research projects conducted by the nearly 6,000 NIH scientists, most of whom are located on the NIH campus in Bethesda, MD. More than 80% of NIH's budget goes out to the extramural research community in the form of grants, contracts, and other awards. This funding supports research performed by more than 300,000 nonfederal scientists and technical personnel who work at more than 2,500 universities, hospitals, medical schools, and other research institutions. Funding for NIH comes primarily from the annual Labor, HHS, and Education (LHHS) appropriations act, with an additional amount for Superfund-related activities from the Interior/Environment appropriations act. Those two appropriations acts provide NIH's discretionary budget authority. In addition, NIH has received mandatory funding of $150 million annually that is provided in the Public Health Service (PHS) Act for a special program on type 1 diabetes research and funding from a PHS Act transfer. The total funding available for NIH activities, taking account of add-ons and transfers, is known as the NIH program level. President Trump's FY2019 budget requested an NIH program level total of $34.792 billion, a decrease of $2.519 billion (6.8%) from the FY2018 program level of $37.311 billion (see Table 9 ). The FY2019 program level request included $33.847 in discretionary budget authority, $741 million in PHS Act transfers, $150 million in mandatory type 1 diabetes research, and $54 million for Superfund-related research. Under the request, Buildings and Facilities would have received a 55% increase in funding for FY2019 compared to FY2018, and all other ICs would have received a decrease compared to FY2018. (Readers should be aware that final FY2018 appropriations had not been enacted during the period in which the FY2019 President's request was being formulated. While the total request for NIH represented a decrease from FY2018 enacted levels, it represented an increase from FY2017 enacted levels and the FY2018 continuing resolution levels that were in place at the time FY2019 request levels were being determined). The FY2019 NIH budget request proposed the consolidation of other existing HHS research programs to establish three new NIH Institutes: the National Institute for Occupational Safety and Health (NIOSH), the National Institute on Disability, Independent Living, and Rehabilitation Research (NIDILRR), and the National Institute for Research on Safety and Quality (NIRSQ) (formerly the Agency for Healthcare Research and Quality (AHRQ)). The creation of three new NIH Institutes would require an amendment to the Public Health Service Act, considering that a provision in the NIH Reform Act of 2006 ( P.L. 109-482 ; PHS Act §401[d]) states that the number of NIH ICs "may not exceed a total of 27." The budget request would have provided discretionary budget authority for these three new institutes at the levels proposed in Table 9 , with an additional $55 million in mandatory funding also provided for the Energy Employees Occupational Illness Compensation Program Act for NIOSH. The main funding mechanism NIH uses to support extramural research is research project grants (RPGs), which are competitive, peer-reviewed, and largely investigator-initiated. Historically, over 50% of the NIH budget is used to support RPGs, which include salaries for investigators and research staff. The President's FY2019 budget proposal included two initiatives designed to "stretch available grant dollars" by placing limits on salaries for investigators. The FY2019 budget proposed to cap the percentage of an investigator's salary that can be paid with grant funds to 90%. It also proposed to cap investigator salaries at $152,000, a 19% reduction from the current $187,000 limit. The FY2019 Trump budget proposed shifting the $150 million in mandatory funding for research on type 1 diabetes authorized under the PHS Act §330B to discretionary funding within the budget of the National Institute of Diabetes and Digestive and Kidney Diseases (NIDDK). Additionally, the FY2019 program level request proposed $741 million in funding transferred to NIH by the PHS Program Evaluation Set-Aside, also called the evaluation tap. Discretionary funding for certain programs at NIH and other HHS agencies that are authorized under the PHS Act can be subject to an assessment under Section 241 of the PHS Act (42 U.S.C. §238j). This provision authorizes the Secretary to use a portion of eligible appropriations to study the effectiveness of federal health programs and to identify improvements. Although the PHS Act limits the tap to no more than 1% of eligible appropriations, in recent years, annual LHHS appropriations acts have specified a higher amount (2.5% in FY2018) and have also typically directed specific amounts of funding from the tap for transfer to a number of HHS programs. The assessment has the effect of redistributing appropriated funds for specific purposes among PHS and other HHS agencies. NIH, with the largest budget among the PHS agencies, has historically been the largest "donor" of program evaluation funds; until recently, it had been a relatively minor recipient. Provisions in recent LHHS appropriations acts have directed specific tap transfers to NIH, making NIH a net recipient of tap funds. The FY2019 total NIH budget request also included $711 million in resources made available through the 21 st Century Cures Act (see text box below). Per the authorization, $400 million would be transferred to the National Cancer Institute (NCI) for the Cancer Moonshot initiative; $57 million to the National Institute of Neurological Disorders and Stroke (NINDS) and $57 million to the National Institute on Mental Health (NIMH) for the Brain Research through Advancing Innovative Neurotechnologies (BRAIN) Initiative; and the remaining $196 million in the Innovation Account for the Precision Medicine Initiative and regenerative medicine research. The House Appropriations Committee-reported version of the FY2019 LHHS appropriations bill ( H.R. 6470 ) would have provided the NIH with a total of $37.411 billion in discretionary budget authority. Adding to this total the amounts for the evaluation tap ($923 million), Superfund-related activities ($80 million), and the mandatory type 1 diabetes program ($150 million), would have brought the program-level total to $38.564 billion (see Table 9 ). The Senate Appropriations Committee-reported version of the FY2019 LHHS appropriations bill ( S. 3158 ) recommended a total of $38.066 billion for NIH in discretionary budget authority. Adding to this total the amounts provided by the evaluation tap ($1.018 billion), Superfund related activities ($78 million), and the mandatory type 1 diabetes program ($150 million) would have brought the NIH program level total to $39.312 billion (see Table 9 ). S. 3158 did not receive floor consideration in the Senate, but the text of this bill was substantially similar to the LHHS division that was incorporated into H.R. 6157 for the purposes of initial Senate floor consideration. The Senate passed an amended version of this bill on August 23. None of the amendments adopted at that time affected the amounts to be appropriated to NIH. The bill included a provision indicating that the report accompanying the earlier committee-passed bill (S. 3158; S.Rept 115-289) should be used to guide, where possible, the allocation of funds and the implementation of the bill. Ultimately, the House and the Senate agreed to resolve differences with regard to H.R. 6157 via a conference committee and both chambers adopted the conference report (H.R. 115-952) that was filed on the bill. The bill was signed into law by President Trump on September 28, 2018 ( P.L. 115-245 ). P.L. 115-245 provides the NIH with $37.937 billion in discretionary LHHS budget authority. Adding to this total, the amounts for the evaluation tap ($1.147 billion), the mandatory type 1 diabetes program ($150 million) and assuming a conservative estimate for Superfund related activities ($78 million) brings the program-level total to an estimated $39.312 billion ( Table 9 ). This program level provides the NIH with $2 billion (5.4%) more than the FY2018 program level and $4.52 billion (13.0%) more than President Trump's budget request for the NIH. This program level is $748 million (1.9%) more than the House committee recommendation, but the same as the earlier Senate-passed program level recommendation. According to the conference report accompanying P.L. 115-245 ( H.Rept. 115-952 , p. 529), each of the ICs at the NIH would receive a funding increase. For specific research areas and programs, the conference report recommends a $425 million increase (+22%) of funding on Alzheimer's research, a $37 million increase (+7%) for antibiotic resistant bacteria research, a $40 million increase (+40%) to develop a universal flu vaccine, and an $11 million increase (+3%) for the Institutional Development Awards (IDeA) program. Established based on a provision of the National Institutes of Health Revitalization Act in 1993 ( P.L. 103-43 ), the IDeA program supports faculty development and institutional research infrastructure in states that have historically received lower levels of NIH funding. The program includes 23 eligible states along with Puerto Rico. The funding increases for Alzheimer's research, antibiotic resistant bacteria, and for the IDeA program match the funding recommendations from the earlier Senate committee report. The funding increase for the universal flu vaccines exceeds the recommendations from both the House committee report ($30 million) and the Senate committee report ($20 million). Until recently, Congress has not usually specified amounts for particular diseases. Generally, specific amounts are appropriated to each IC; NIH and its scientific advisory panels allocate the funding to various research areas. This allows maximum flexibility for NIH to pursue scientific opportunities that are important to public health. Some bills may propose authorizations for designated research purposes, but previously funding generally remained subject to the NIH peer review process as well as the overall discretionary appropriation to the agency. This pattern has changed in recent years, most notably starting in FY2016 with Alzheimer's disease research, and in FY2017 with the NIH Innovation account established by the 21 st Century Cures Act ( P.L. 114-255 , see text box above). The report accompanying H.R. 6470 stated that the committee did not include the general provision in the budget request to limit the percentage of a researcher's salary that may be paid for using NIH grant funds, as the impact of such a change is unclear. The report stated, "The Committee requests an analysis of the projected impact of such a policy change on the number and average cost of NIH grants, as well as on academic institutions, in the fiscal year 2020 Congressional Justification." The Senate committee report and the conference report did not comment on this proposal from the president's budget request. The report accompanying S. 3158 , stated that "The Committee rejects the budget's request to create 3 new Institutes at the NIH: (1) the National Institute for Research on Safety and Quality; (2) the National Institute for Occupational Safety and Health; and (3) the National Institute on Disability, Independent Living, and Rehabilitation Research. The Committee also does not move the Energy Employees Occupational Illness Compensation Program from CDC to NIH." The House report also rejected the creation of the three new institutes. With regard to NIOSH, it stated "The Committee does not move NIOSH into NIH, as proposed in the budget request. The Committee believes NIOSH's mission does not align with NIH's focus on biomedical research and is better achieved within CDC." The House committee report made a similar statement about NIDILRR, but did not address AHRQ/NIRSQ. The conference report did not address any of the recommendations from the president's budget request to create three new institutes. The enacted law did not include the proposal in President Trump's budget request to shift the $150 million in type 1 diabetes authorized under the PHS Act §330B to discretionary funding within the budget of the National Institute of Diabetes and Digestive and Kidney Diseases (NIDDK). Therefore Table 9 includes the type 1 diabetes research mandatory funding for all FY2019 budget columns including the budget request, as displayed in the conference reported NIH budget table. The President's FY2019 budget identified several research priorities for NIH in the coming year. The overview below outlines these priority themes in the budget request. Selected responses from congressional report language are also provided. 1. Tackling Complex Challenges by Leveraging Partnerships. NIH partners with other government agencies and private entities to collaborate on research. The President's budget proposal stated that "public-private partnerships can create efficiencies of scale and facilitate development of innovative technologies or treatments, thereby increasing the pace of biomedical research." For example, the Accelerating Medicines Partnership is a public-private partnership between NIH, FDA, and several biopharmaceutical companies and nonprofit organizations. With the goal of increasing the number of new diagnostics and therapies for patients, the Partnership aims to jointly identify promising biological targets for therapeutics. Since 2014, the Partnership has been addressing Alzheimer's disease, type 2 diabetes, and two autoimmune disorders (rheumatoid arthritis and systemic lupus erythematosus); a new Parkinson's disease initiative was also recently inaugurated. NIH will also enhance existing research efforts using a public-private partnership model to address the opioid crisis. The goal of this endeavor is to develop new formulations of medications to treat opioid misuse and accelerate the development of non-addictive pain therapies The FY2019 budget proposal also called for further dedicated investments in NIH research on opioids, serious mental illness, and pain. The FY2019 conference report ( H.Rept. 115-952 , p. 530) notes that the agreement includes $500 million for NIH research on opioid addiction, development of opioid alternatives, pain management, and addiction treatment. The conference report also notes that this $500 million is in addition to $774 million that NIH is expected to spend in base funding for research on opioid misuse, addiction treatment, and pain research. 2. Supporting Basic Research to Drive New Understanding of Health and Disease in Living Systems. NIH is the largest funder of basic biomedical research in the United States. As mentioned previously, each year more than half of the NIH budget goes toward basic research, which provides "a critical research foundation for both the public and private sectors to build upon." NIH funds a broad spectrum of basic science research. For example, addressing the opioid crisis requires understanding how pain is sensed and perceived, and how changes in neural circuits create a state of dependency. Basic research on neural pathways in the brain related to pain and substance use may provide an avenue for better treatments for pain, without the potential for addiction. The Senate committee report stated, "The Committee recognizes that many revolutionary discoveries often come from unexpected, untargeted research. The Committee continues to support these basic advances through the general increase to all Institutes and Centers." 3. Investing in Translational and Clinical Research to Improve Health. NIH builds on the foundation of basic research by supporting translational and clinical research that seeks to convert this basic science knowledge into interventions. Translational research aims to "translate" findings from basic science into medical practice to produce meaningful health outcomes. The Senate committee report noted that it "targets investment towards clinical and translational research that moves basic discoveries from 'bench-to-bedside.'" Clinical research, which uses human subjects, helps professionals find new and better ways to understand, detect, control, and treat illness. NIH is investing in large population studies to learn more about the similarities and differences among individuals and facilitate integrated understanding of health and disease at all levels, from the molecular to the social. For example, as previously mentioned, NIH would continue to establish a group of 1 million or more volunteers through the Precision Medicine Initiative's All of Us Research Program. This research project involves the collection of health, genetic, environmental, and other data from participants for use in research studies designed to identify novel therapeutics and prevention strategies. Additionally, the conference report directs the National Cancer Institute to design a study on providing navigation and patient expense reimbursement to improve participation of underrepresented and minority communities in clinical research for cancer, and to report its plans to Congress within 90 days of enactment. In addition to the above three priorities, the President's budget also identified the following as goals for FY2019: Updating the infrastructure of NIH facilities . An independent review is currently being conducted of the capital needs of the 281 facilities located on NIH's main campus, including its research hospital, laboratories, and offices. Fostering a diverse and talented research workforce . The FY2019 budget proposal includes $100 million in dedicated funding to the OD for the Next Generation Research Initiative to "address longstanding challenges faced by researchers trying to embark upon and sustain independent research careers." The House committee report recommended the NIH use increases in available grants to target early-stage investigators and investigators seeking first time renewals. Advancing data science. The FY2019 budget would have continued to support the Big Data to Knowledge (BD2K) initiative established in 2012. The FY2019 budget included $30 million for NIH to build on the progress of the BD2K as this initiative enters its final stages. Encouraging innovation through prize competitions . The FY2019 budget proposal would have allocated $50 million for prize competitions to improve health outcomes, particularly for research for which there is potential for significant return on investment. Department of Energy68 The Department of Energy (DOE) was established in 1977 by the Department of Energy Organization Act ( P.L. 95-91 ), which combined energy-related programs from a variety of agencies with defense-related nuclear programs that dated back to the Manhattan Project. Today, DOE conducts basic scientific research in fields ranging from nuclear physics to the biological and environmental sciences; basic and applied R&D relating to energy production and use; and R&D on nuclear weapons, nuclear nonproliferation, and defense nuclear reactors. The department has a system of 17 national laboratories around the country, mostly operated by contractors, that together account for about 40% of all DOE expenditures. The Administration's FY2019 budget request for DOE includes about $11.720 billion for R&D and related activities, including programs in three broad categories: science, national security, and energy. This request is 21.9% less than the enacted FY2018 amount of $15.011 billion. The House bill would provide $15.473 billion. The Senate bill would provide $15.362 billion. (See Table 10 for details.) The request for the DOE Office of Science is $5.391 billion, a decrease of 13.9% from the FY2018 appropriation of $6.260 billion. Within that total, funding for Advanced Scientific Computing Research would increase by $89 million (11.0%), largely to support the DOE-wide Exascale Computing Initiative. The office's other major research programs would all receive decreases. Funding for Fusion Energy Sciences would decrease by $192 million (36.1%), including a decrease to $75 million (from $122 million in FY2018) for the U.S. contribution to construction of the International Thermonuclear Experimental Reactor (ITER), a fusion energy demonstration and research facility in France. Funding for Biological and Environmental Research would decrease by $173 million (25.7%), with reductions concentrated in the Earth and Environmental Systems Sciences subprogram (relative to FY2017; the FY2018 appropriation did not specify an allocation between subprograms). Funding for Science Laboratories Infrastructure, which supports DOE laboratory facilities, infrastructure, and construction, would decrease by 50.7%, from $257 million in FY2018 to $127 million in the FY2019 request. The House bill would provide $6.600 billion for the Office of Science, including $15 million more than the request for Advanced Scientific Computing Research; $250 million more than the request for Fusion Energy Sciences (including $163 million for ITER); $173 million more than the request for Biological and Environmental Research (but again no specified allocation by subprogram); and $290 million for Science Laboratories Infrastructure. The Senate bill would provide $6.650 billion, including $81 million more than the request for Advanced Scientific Computing Research; $85 million more than the request for Fusion Energy Sciences (including $122 million for ITER); $215 million more than the request for Biological and Environmental Research (including $39 million more than the FY2017 amount for Earth and Environmental Systems Sciences); and $302 million for Science Laboratories Infrastructure. The request for DOE national security R&D is $4.268 billion, an increase of 0.5% from $4.249 billion in FY2018. Funding for the Naval Reactors program would increase (up $169 million, 10.4%). In the Weapons Activities account (down $39 million, 1.9%) requested increases for most programs would be offset by a decrease of $126 million (23.1%) for Inertial Confinement Fusion. Within Inertial Confinement Fusion, nearly half of the proposed decrease would be in the Ignition subprogram (down $57 million, 71.8%), and support for the Laboratory for Laser Energetics ($68 million in FY2017, not specified for FY2018, $45 million in the FY2019 request) would be phased out over three years. The House bill would provide $4.371 billion for national security R&D, including the requested amount for Naval Reactors and $33 million more than the request for Weapons Activities. Within Weapons Activities, it would provide $91 million more than the request for Inertial Confinement Fusion, including $68 million for the Omega Laser Facility at the Laboratory for Laser Energetics. The Senate bill would provide $4.182 billion, including the FY2018 amount for Naval Reactors and $47 million more than the request for Weapons Activities. Within Weapons Activities, it would provide $126 million more than the request for Inertial Confinement Fusion, including $80 million for the Omega facility. The request for DOE energy R&D is $2.061 billion, a decrease of 54.2% from $4.502 billion in FY2018. Funding for energy efficiency and renewable energy R&D would decrease by 65.5%, with reductions in all major research areas and a shift in emphasis toward early-stage R&D rather than later-stage development and deployment. Funding for fossil energy R&D would decrease by 30.9%, with reductions focused particularly on coal carbon capture and storage ($40 million, down from $198 million in FY2018) and natural gas technologies ($6 million, down from $50 million in FY2018). Funding for nuclear energy would decrease by 37.2%, with no funding requested for the Integrated University Program ($5 million in FY2018) or the Supercritical Transformational Electric Power (STEP) R&D initiative ($5 million in FY2018) and $60 million requested for fuel cycle R&D (down from $260 million in FY2018). The Advanced Research Projects Agency–Energy (ARPA-E), which is intended to advance high-impact energy technologies that have too much technical and financial uncertainty to attract near-term private-sector investment, would be terminated. The House bill would provide $4.502 billion for energy R&D. This total would include $1.080 billion more than the request for energy efficiency and renewable energy R&D; $283 million more than the request for fossil energy R&D (including $192 million for coal carbon capture and storage and $50 million for natural gas technologies); $589 million more than the request for nuclear energy (including $5 million for the Integrated University Program, $5 million for STEP R&D, and $255 million for fuel cycle R&D); and $325 million for ARPA-E. The Senate bill would provide $4.531 billion, including the FY2018 amount ($1.321 billion more than the request) for energy efficiency and renewable energy R&D; the FY2018 amount ($225 million more than the request) for fossil energy R&D (including $207 million for coal carbon capture and storage and $53 million for natural gas technologies); approximately the FY2018 amount ($449 million more than the request) for nuclear energy (including $5 million for the Integrated University Program, no funding for STEP R&D, and $267 million for fuel cycle R&D); and $375 million for ARPA-E. National Aeronautics and Space Administration69 The National Aeronautics and Space Administration (NASA) was created in 1958 by the National Aeronautics and Space Act (P.L. 85-568) to conduct civilian space and aeronautics activities. NASA has research programs in planetary science, Earth science, heliophysics, astrophysics, and aeronautics, as well as development programs for future human spacecraft and for multipurpose space technology such as advanced propulsion systems. In addition, NASA operates the International Space Station (ISS) as a facility for R&D and other purposes. Because final FY2018 funding was not available at the time the FY2019 budget was prepared, requested R&D funding is compared to the FY2017 actual funding. The Administration is requesting about $16.474 billion for NASA R&D in FY2019. This is 1.6% less than the FY2017 level of about $16.743 billion. For a breakdown of these amounts, see Table 11 . NASA R&D funding comes through five accounts: Science; Aeronautics; Exploration Research and Technology (formerly Space Technology); Deep Space Exploration Systems (formerly Exploration); and the ISS, Commercial Crew, and Commercial Low Earth Orbit (LEO) Development portions of LEO and Spaceflight Operations (formerly Space Operations). The FY2019 request for Science is $5.895 billion, an increase of 2.3% relative to FY2017. Within this total, funding for Earth Science would decrease by $124 million (6.5%); funding for Planetary Science would increase by $407 million (22.3%); and funding for Astrophysics would decrease by $167 million (12.3%). The request for Earth Science assumes the termination of three items in the Earth Systematic Missions program: the Pre-Aerosol, Clouds, and Ocean Ecosystem (PACE) mission; the Climate Absolute Radiance and Refractivity Observatory (CLARREO) Pathfinder mission; and the NASA-provided instruments on the Deep Space Climate Observatory (DSCOVR) mission. These were also proposed for termination in the FY2018 budget; Congress funded them for FY2018 in legislation enacted after the release of the FY2019 budget. The proposed increase for Planetary Science includes $90 million in new funding for the Double Asteroid Redirection Test (DART), a mission to demonstrate the redirection of an asteroid for the purpose of planetary defense; and an increase of $199 million to fund a new Lunar Discovery and Exploration program, including public-private partnerships for research using commercial lunar landers. In Astrophysics, a proposed decrease of $265 million for the James Webb Space Telescope (JWST, previously a separate budget item) is consistent with that mission's previous plans; a proposed decrease of $100 million for Exoplanet Exploration reflects the proposed cancellation of the Wide Field Infrared Space Telescope (WFIRST). The FY2019 request for Aeronautics is $634 million, a decrease of 3.4% relative to FY2017. The request includes $88 million (up from $19 million in FY2017) for the Low Boom Flight Demonstrator, intended to demonstrate quiet supersonic flight. This increase would be offset by a decrease of $50 million for the Airspace Operations and Safety program and a $44 million decrease for the Advanced Air Vehicles program. The FY2019 request for Exploration Research and Technology is $1.003 billion, an increase of 21.3% relative to FY2017. This account supports the Space Technology Mission Directorate, the Human Research Program, and certain activities previously in the Advanced Exploration Systems program. Funding for Technology Maturation would increase by $82 million. Funding for Technology Demonstration would increase by $70 million, but within Technology Demonstration, funding for the Restore-L mission and other in-space robotic satellite servicing activities would decrease by $85 million. Funding for the Human Research Program would be the same as in FY2017. The FY2019 request for Deep Space Exploration Systems is $4.559 billion, an increase of 9.0% relative to FY2017. This account funds development of the Orion Multipurpose Crew Vehicle and the Space Launch System (SLS) heavy-lift rocket, the capsule and launch vehicle mandated by the NASA Authorization Act of 2010 for future human exploration beyond Earth orbit. The first test flight of SLS carrying Orion but no crew (known as EM-1) is now expected no earlier than December 2019. The first flight of Orion and the SLS with a crew on board (known as EM-2) is now expected in late 2022 or early 2023. Funding for Orion, the SLS, and related ground systems (collectively known as Exploration Systems Development) would decrease by $259 million relative to FY2017. The account also funds Advanced Exploration Systems, which would increase by $791 million relative to FY2017. That increase would include $504 million in new funding for a platform in lunar orbit (known as the Gateway) to serve as a test bed for deep space human exploration capabilities. In the LEO and Spaceflight Operations account, the request for Commercial Crew is $173 million, a decrease of 85.4% relative to FY2017; the request for the ISS is $1.462 billion, an increase of 0.8%; and the request for Commercial LEO Development, a new program, is $150 million. The reduction in Commercial Crew funding reflects the expected transition of commercial crew activities from development to operations. Boeing and SpaceX are both expected to begin postcertification crewed flights to the ISS in the first half of 2019. The Commercial LEO Development program is intended to stimulate a commercial space economy in low Earth orbit, including the commercial provision of NASA's requirements for research and technology demonstration after the proposed end of direct ISS funding in 2025. National Science Foundation70 The National Science Foundation supports basic research and education in the non-medical sciences and engineering. Congress established the foundation as an independent federal agency in 1950 and directed it to "promote the progress of science; to advance the national health, prosperity, and welfare; to secure the national defense; and for other purposes." The NSF is a primary source of federal support for U.S. university research, especially in mathematics and computer science. It is also responsible for significant shares of the federal science, technology, engineering, and mathematics (STEM) education program portfolio and federal STEM student aid and support. NSF has six appropriations accounts: Research and Related Activities (RRA, the main research account), Education and Human Resources (EHR, the main education account), Major Research Equipment and Facilities Construction (MREFC), Agency Operations and Award Management (AOAM), the National Science Board (NSB), and the Office of Inspector General (OIG). Appropriations are generally provided at the account level, while program-specific direction may be included in appropriations acts, or accompanying conference reports or explanatory statements. Because final FY2018 funding was not available at the time the FY2019 budget request was prepared, requested R&D funding is compared to the FY2017 actual funding. FY2018 funding levels, enacted March 23, 2018, are included for reference. These amounts are available only at the account level; FY2018 R&D breakouts and subaccount funding amounts are not yet available for comparison. Funding for R&D is included in the RRA, EHR, and MREFC accounts. (The RRA and EHR accounts also include non-R&D funding.) Together, these three accounts comprise 95% of the total requested funding for NSF. Actual R&D obligations for each account are known after NSF allocates funding appropriations to specific activities and reports those figures. The budget request specifies R&D funding for the conduct of research, including basic and applied research, and for physical assets, including R&D facilities and major equipment. Funding amounts for FY2017 actual and FY2019 requested levels are reported by account, including amounts for R&D conduct and physical assets where applicable, in Table 12 . Overall . The Administration is requesting $7.47 billion for the NSF in FY2019, $295.4 million (3.8%) less than the FY2018 enacted amount, and equal to the FY2017 actual amount. The requested amount reflects an additional $2.20 billion provided for NSF in the Addendum to the President's FY19 Budget to Account for the Bipartisan Budget Act of 2018 . The request would decrease budget authority in two accounts relative to the FY2017 enacted level: MREFC by $128.1 million (57.5%) and AOAM by $48.4 million (12.7%). The request would provide slight increases to the RRA (2.4%, $144.1 million), OIG (1.6%, $0.25 million), and NSB (1.2%, $0.05 million) accounts, and no change for the EHR account. Overall, NSF estimates that, under the FY2019 request, agency-wide funding rates (i.e., the percentage of submitted proposals that are successfully awarded funding) would decrease slightly from 23% to 22%, resulting in 300 fewer grants awarded, compared to FY2017. As a proportion of NSF's total funding, R&D activities account for approximately 82%. For FY2019, $6.12 billion is requested for R&D activities, a 3% increase from FY2017 actual funding for R&D of $5.95 billion. The total request includes $5.68 billion (93%) for the conduct of R&D, and $441 million (7%) for R&D facilities and major equipment. Of funding requested for the conduct of R&D, 87% is requested for basic research, and 13% for applied research. Overall funding for R&D facilities and major equipment supports not only the construction and acquisition phases, funded through MREFC ($94.7 million requested), but also the planning, design, and post-construction operations and maintenance, funded through RRA ($346.3 million requested). Research . The Administration seeks $6.151 billion for RRA in FY2019, a $183.8 (2.9%) decrease compared to the FY2018 enacted funding, and a $144.2 million (2.4%) increase compared to FY2017 actual funding. Compared to the FY2017 actual levels, the FY2019 request includes decreases for 7 of the 10 RRA subaccounts. The largest percentage increase would go to Integrative Activities (27%, $116 million increase). The largest percentage decrease would go to Social, Behavioral, and Economic Sciences (SBE, 9.1%, $24.7 million decrease) The FY2019 request also includes $160 million for the RRA Established Program to Stimulate Competitive Research (EPSCoR) program, equal to the $160 million directed in the explanatory statement for FY2017 enacted funding. Within the RRA account, the FY2019 request includes $5.617 billion for R&D, an increase of $162.5 million (3.2%) compared to the FY2017 actual amount. Of this amount, the majority ($5.270 billion, 94%) is requested for the conduct of research, including $4.79 billion for basic research and $483 million for applied research. Education . The FY2019 request for the EHR account is $28.6 million (3.2%) less than the FY2018 amount and equal to the FY2017 actual level of $873.37 million. By program division, the Division of Human Resource Development would receive an increase of $37.7 million (25.5%) over the FY2017 actual level. The divisions of research on learning in formal and informal settings, graduate education, and undergraduate education would receive decreases of 8.8% ($203.0 million requested), 5.0% ($187.2 million requested), and 2.0% ($224.6 million requested), respectively. EHR programs of particular interest to congressional policymakers include the Graduate Research Fellowship (GRF) and National Research Traineeship (NRT) programs. The FY2019 request for GRF is $270.7 million, a reduction of $48.8 million (15.3%) from the FY2017 actual level. The FY2019 request for NRT is $52.1 million, a $0.7 million (1.4%) decrease from FY2017. Within EHR, requested funding for R&D is $410 million, which is nearly equal to the FY2017 actual funding amount and accounts for approximately 6.7% of the agency's total R&D request. All of the requested funding would support the conduct of R&D, including $131 million for basic research and $279 million for applied research. Construction . The MREFC account supports large construction projects and scientific instruments, with all of the funding supporting R&D facilities. The Administration is seeking $94.6 million for MREFC in FY2019, $88.2 million (48.2%) less than the FY2018 enacted amount, and $128.1 million (57.5%) less than the FY2017 actual amount. Requested MREFC funding would support three main projects, including continued construction of the Large Synoptic Survey Telescope (LSST, $48.8 million requested, 18.9% decrease from FY2017) and the Daniel K. Inouye Solar Telescope (DKIST, $16.1 million requested, 19.4% decrease from FY2017). The request includes $28.7 million for the Regional Class Research Vessels (RCRV) program to build ships to support science in U.S. coastal waters, a decrease of $93.2 million (76.4%) from FY2017, about which NSF notes the following: In FY 2017, P.L. 115-31 appropriated $121.88 million in funding to facilitate the planning and construction of three vessels. In the context of the President's overall fiscal goals intended to maintain spending restraint, this Budget Request supports construction of two vessels. Other initiatives . The FY2019 NSF budget request includes funding for three multiagency initiatives. This funding is included in multiple NSF appropriations accounts and R&D amounts are not separately provided. The National Nanotechnology Initiative would receive $385 million, $78 million (17%) less than in FY2017. The Networking and Information Technology Research and Development program would receive $1.152 billion, a decrease of $85.7 million (6.9%). The U.S. Global Change Research Program would receive $238 million, $4.6 million (1.9%) less than in FY2017. Department of Agriculture78 The U.S. Department of Agriculture (USDA) was created in 1862, in part to support agricultural research in an expanding, agriculturally dependent country. Today, USDA conducts intramural research at federal facilities with government-employed scientists, and supports external research at universities and other facilities through competitive grants and formula-based funding. The breadth of contemporary USDA research spans traditional agricultural production techniques, organic and sustainable agriculture, bioenergy, nutrition needs and composition, food safety, animal and plant health, pest and disease management, economic decisionmaking, and other social sciences affecting consumers, farmers, and rural communities. Four agencies carry out USDA's research and education activities, grouped together into the Research, Education, and Economics (REE) mission area. The agencies involved are the Agricultural Research Service (ARS), National Institute of Food and Agriculture (NIFA), National Agricultural Statistics Service (NASS), and Economic Research Service (ERS). The House-reported bill ( H.R. 5961 ) recommends $3,109.0 billion for FY2019, and the Senate-passed bill (S. 6147) is recommending a total for the four agencies of $2,985.7 billion. The FY2018 Omnibus Appropriations Act ( P.L. 115-141 ) provides a total of $3.09.7 billion in discretionary funding for the four research agencies. For FY2019, the Administration requested a total of $2,486.5 billion, a $543.2 million (18.0%) reduction from FY2018 (see Table 1 3 ). In addition to discretionary appropriations, agricultural research is also funded by state matching contributions and private donations or grants, as well as mandatory funding from the farm bill. USDA's FY2018 discretionary appropriations for the four research agencies are profiled below. Agricultural Research Service The Agricultural Research Service is USDA's in-house basic and applied research agency. It operates approximately 90 laboratories nationwide with about 6,600 employees. ARS laboratories focus on efficient food and fiber production, development of new products and uses for agricultural commodities, development of effective controls for pest management, and support of USDA regulatory and technical assistance programs. ARS also operates the National Agricultural Library, one of the department's primary information repositories for food, agriculture, and natural resource sciences. For FY2019, the Senate-passed bill recommends $1,301.0 billion for ARS salaries and expenses, a +8.2% increase over FY2018 ($1,202.8 billion). The House-reported bill recommends $1,259.9 billion, a +4.8% increase over FY2018. The Administration had requested $1,019.0 billion for ARS for FY2019. The House-reported bill also provides $136.0 million for buildings and facilities, while the Senate-passed bill provides no appropriation for buildings and facilities, the same as requested by the Administration ( Table 13 ). In FY2019, ARS will assume ownership of the National Bio and Agro-Defense Facility (NBAF) from the Department of Homeland Security (DHS). The FY2018 enacted bill provides $4.0 million for NBAF. For FY2019, the Senate-passed bill recommends $10.6 million for the NBAF to address one-time costs associated with the transfer of the science program from the Plum Island Animal Disease Center to NBAF, and $42 million to address stand-up activities to operate NBAF. The Senate-passed bill also recommends an additional $5 million for ARS to increase research efforts on foreign animal diseases. The Administration requested $53 million for the facility for FY2019. With respect to the pending move to the NBAF, the House committee directs ARS, in collaboration with other USDA agencies and in consultation with DHS, to report to Congress within 120 days of enactment with an estimate of the funding needs for NBAF for each fiscal year FY2019-2023. The committee also directs ARS to include in the report strategic research goals based on NBAF's enhanced research capabilities and for stakeholder engagement. National Institute of Food and Agriculture The National Institute of Food and Agriculture (NIFA) provides federal funding for research, education, and extension projects conducted in partnership with the State Agricultural Experiment Stations, the State Cooperative Extension System, land grant universities, colleges, and other research and education institutions, as well as individual researchers. These partnerships include the 1862 land-grant institutions, 1890 historically black colleges and universities (HBCUs), established by the Morrill Acts, the 1994 tribal land-grant colleges, and Hispanic-serving institutions. Federal funds enhance capacity at universities and institutions through statutory formula funding, competitive awards, and grants. For FY2019, the House-reported bill recommends $1,452.6 billion in discretionary spending for NIFA activities, an increase of +3.2% over FY2018 ($1,407.8 billion).The Administration's FY2019 request for NIFA is $1,257.6 billion, a reduction of $150.2 million (10.6%) over FY2018. The Senate-passed bill recommends $1,423.2 billion, a +1.1% increase over FY2018 ( Table 13 ). The Senate-passed bill recommends $243.7 million to support Hatch Act funding for 1862 land grant university research and education activities, the same as FY2018 and the same as requested. The House-reported bill recommends $259.0 million for Hatch fund, a +6.3% increase over FY2018. For McIntire-Stennis cooperative forestry research support, the Senate-passed bill recommends $36.0 million, the same as the House-reported bill, and $2 million more than for FY2018. For research at the 1890 HBCUs, the House-reported bill recommends $60.0 million and the Senate-passed bill recommends $54.2 million, the same as enacted for FY2018, and nearly the same as requested ($53.8 million). The Senate-passed bill also recommends $405.0 million for the Agriculture and Food Research Initiative (AFRI)—USDA's flagship competitive research grants program. The House-reported bill recommends $415.0 million. For FY2018, AFRI has an appropriation of $400.0 million. The Administration had requested $25 million less ($375.0 million) for AFRI in FY2019.This budget line currently represents about 28% of the NIFA discretionary budget. For Cooperative Extension support under Smith-Lever Sections (b) and (c) formula funding for FY2019, the House-reported bill recommends a total of $315.0 million, a +5.0% increase over FY2018 ($300 million), and the Senate-passed bill recommends $300 million, the same as enacted for FY2018. The House-reported bill also recommends $180.6 million and the Senate-passed bill would provide $186.7 million to support other Smith-Lever extension activities. National Agricultural Statistics Service The National Agricultural Statistics Service conducts the quinquennial Census of Agriculture and provides official statistics on agricultural production and indicators of the economic and environmental status of the farm sector. For FY2019, the Senate-passed bill recommends $174.8 million to NASS, of which $45.3 million is reserved to support data collection for the 2017 Census of Agriculture. The House-reported bill recommends $173.7 million, and also reserves $45.3 million for Census of Agriculture activities. The FY2018 enacted appropriation provides $191.7 million to NASS. The Administration had requested $165.0 million for FY2019. Economic Research Service The Economic Research Service supports economic and social science analysis about agriculture, rural development, food, commodity markets, and the environment. It collects and disseminates data concerning USDA programs and policies. For FY2019, both House-reported and Senate-passed bill would provide $86.8 million for ERS, the same as enacted for FY2018. The Administration had requested $45.0 million for ERS in FY2019, a 48% decrease. Department of Commerce Two agencies of the Department of Commerce have major R&D programs: the National Institute of Standards and Technology (NIST) and the National Oceanic and Atmospheric Administration (NOAA). National Institute of Standards and Technology82 The mission of the National Institute of Standards and Technology is "to promote U.S. innovation and industrial competitiveness by advancing measurement science, standards, and technology in ways that enhance economic security and improve our quality of life." NIST research provides measurement, calibration, and quality assurance methods and techniques that support U.S. commerce, technological progress, product reliability, manufacturing processes, and public safety. NIST's responsibilities include the development, maintenance, and custodial retention of the national standards of measurement; providing the means and methods for making measurements consistent with those standards; and ensuring the compatibility of U.S. national measurement standards with those of other nations. It should be noted that the FY2018 enacted funding levels were not known at the time the President's FY2019 budget was prepared, as the budget process had not been completed. The President is requesting $629.1 billion in funding for NIST in FY2019, a decrease of $569.4 million (47.5%) from the FY2018 enacted appropriation of $1,198.5 million. (See Table 14 .) NIST discretionary funding is provided through three accounts: Scientific and Technical Research and Services (STRS), Industrial Technology Services (ITS), and Construction of Research Facilities (CRF). The President's FY2019 request includes $573.4 million for R&D, standards coordination, and related services in the STRS account, a decrease of $151.1 million (20.9%) from the FY2018 enacted level. The FY2019 request would provide $15.1 million for the Industrial Technology Services (ITS) account, down $139.9 million (90.3%) from the FY2018 enacted level. Within the ITS account, the request would provide no funding for the Manufacturing Extension Partnership (MEP) program, a reduction of $140.0 million from the FY2018 enacted level; MEP centers in each state would be required to become entirely self-supporting. The request provides $15.1 million provided for Manufacturing USA (also referred to as the National Network for Manufacturing Innovation or NNMI), essentially unchanged from the FY2018 enacted level. Of these funds, $10.0 million would be for continued support of the NIST-sponsored National Institute for Innovation in Manufacturing Biopharmaceuticals (NIIMBL) manufacturing institute, with the balance ($5.1 million) to be used for coordination of the Manufacturing USA network. The President is requesting $40.5 million for FY2019 for the NIST CRF account, down $278.5 million (87.3%) from the FY2018 enacted level. National Oceanic and Atmospheric Administration88 The National Oceanic and Atmospheric Administration conducts scientific research in areas such as ecosystems, climate, global climate change, weather, and oceans; collects and provides data on the oceans and atmosphere; and manages coastal and marine organisms and environments. NOAA was created in 1970 by Reorganization Plan No. 4. The reorganization was intended to unify elements of the nation's environmental programs and to provide a systematic approach for monitoring, analyzing, and protecting the environment. NOAA's Research Council developed a five-year plan (2013-2017) to guide the agency's R&D efforts. R&D efforts support the long-term goals and enterprise objectives of NOAA's Next Generation Strategic Plan . The strategic plan is organized into four categories of long-term goals including (1) climate adaptation and mitigation, (2) a weather-ready nation, (3) healthy oceans, and (4) resilient coastal communities and economies; and three groups of enterprise objectives including (1) stakeholder engagement, (2) data and observations, and (3) integrated environmental modeling. To achieve the strategic plan's goals and objectives, NOAA has identified gaps in knowledge and capabilities. NOAA's R&D plan attempts to address these gaps by asking key questions. Key questions are used in the plan to frame and organize R&D objectives and to identify tasks associated with achieving these objectives. One of the main challenges identified in the NOAA R&D plan is the need to integrate the diverse perspectives and professional expertise required by the agency's mission. The plan states that "holistically understanding the earth system is not only understanding its individual components, but understanding and interpreting the way each of the components interact and behave as an integrated composite that is more than the sum of its parts." For FY2019, President Trump requested $623.6 million in R&D funding for NOAA, a decrease of $269.5 million (30.2%) below the FY2018 enacted level of $893.1 million. R&D funding for FY2018 consisted of $528.6 million for research (59.2% of total R&D funding), $143.5 million for development (16.1%), and $221.0 million for R&D equipment (24.7%). In FY2018, R&D was 15.1% of NOAA's total discretionary budget of $5.909 billion. The FY2019 request for R&D funding includes $367.1 million for research (58.9% of total R&D funding), $83.2 million for development (13.3%), and $173.3 million for R&D equipment (27.8%). The President's request for R&D is 13.7% of NOAA's total discretionary budget request of $4.553 billion. NOAA's administrative structure is organized by five line offices that reflect its diverse mission: the National Ocean Service (NOS); National Marine Fisheries Service (NMFS); National Environmental Satellite, Data, and Information Service (NESDIS); National Weather Service (NWS); and Office of Oceanic and Atmospheric Research (OAR). In addition to NOAA's five line offices, two major funding categories include Mission Support (formerly Program Support) and the Office of Marine and Aviation Operations (OMAO). Mission support is a cross-cutting budget activity, which provides administrative functions related to planning, information technology, human resources, and infrastructure. OMAO is responsible for the agency's ships and aircraft that collect data in support of NOAA's environmental and scientific missions. Table 15 provides R&D funding levels for FY2018 enacted and the Administration's FY2019 request for each NOAA office. Most of NOAA's R&D activities are conducted by OAR, and in most years OAR accounts for over half of NOAA's R&D funding. The FY2019 request would provide OAR with $321.7 million for R&D, a decrease of $195.8 million (37.8%) below the FY2018 enacted funding level of $517.4 million. OAR conducts research in three major areas: weather and air chemistry; climate; and oceans, coasts, and the Great Lakes. A significant portion of these efforts is implemented through partnerships between NOAA and cooperative research institutes. NOAA supports 16 cooperative research institutes that work with seven NOAA laboratories in all three of the main OAR research areas. The President's FY2019 request would fund the cooperative institutes at $167.4 million, $14.4 million (7.9%) less than the FY2018 enacted funding level of $181.8 million. The President's FY2019 request would also reduce OAR R&D funding for the National Sea Grant Program and Climate Research. The National Sea Grant College Program is composed of 33 university-based state programs. Sea Grant programs support scientific research and engage constituents to identify and solve problems faced by coastal communities. The President's FY2019 request would terminate federal support of the National Sea Grant College Program and Sea Grant Marine Aquaculture Research. In FY2018, the National Sea Grant College Program was funded at $65.0 million and Sea Grant marine aquaculture research was funded at $11.5 million. Climate research includes funding for laboratories and cooperative institutes, regional climate data and information, and competitive research. The President's FY2019 request would provide climate research with $98.6 million, $59.4 million (37.6%) less than the FY2018 enacted funding level of $158.0 million. Department of the Interior100 The Department of the Interior was created to protect and manage the nation's natural resources and cultural heritage and to provide scientific and other information about those resources. DOI has a wide range of responsibilities including, among other things, mapping, geological, hydrological, and biological science; migratory bird, wildlife, and endangered species conservation; surface-mined lands protection and restoration; and historic preservation. Because final FY2018 funding was not available at the time the FY2019 budget was prepared, requested R&D funding is compared to the FY2017 actual funding. The Administration is requesting $11.7 billion in net discretionary funding for DOI in FY2019. Of that amount, $758.9 million is requested for R&D funding, $235.5 million below (23.7%) the FY2017 enacted level of $994.3 million. Of the President's FY2019 DOI R&D funding request, 5.3% is for basic research, 76.4% is for applied research, and 18.3% is for development. The U.S. Geological Survey (USGS) is the only DOI component that conducts basic research. Funding for DOI R&D is generally included in appropriations line items that also include non-R&D activities. How much of the funding provided in appropriations legislation is allocated to R&D specifically is unclear unless funding is provided at the precise level of the request. In general, R&D funding levels are known only after DOI components allocate their appropriations to specific activities and report those figures. As passed by the House on July 19, 2018, the Interior, Environment, Financial Services and General Government, Agriculture, Rural Development, Food and Drug Administration, and Transportation, Housing and Urban Development Appropriations Act, 2019 ( H.R. 6147 ) would provide $13.118 billion for DOI, a $2.530 billion (23.9%) increase over the FY2019 request and approximately equal to the FY2018 enacted amount. These amounts includes both R&D and non-R&D funding. As passed by the Senate on August 1, 2018, the Interior, Environment, Financial Services and General Government, Agriculture, Rural Development, Food and Drug Administration, and Transportation, Housing and Urban Development Appropriations Act, 2019 ( H.R. 6147 ) would provide $13.171 billion for DOI, a $52.6 million (0.4%) increase over the House-passed level, $2.583 billion (24.4%) above the FY2019 request, and $56.0 million (0.4%) above the FY2018 enacted amount. U.S. Geological Survey The USGS accounts for more than two-thirds of all DOI R&D funding. A single appropriations account, Surveys, Investigations, and Research (SIR), provides all USGS funding. USGS R&D is conducted under seven SIR activity/program areas: Ecosystems; Climate and Land Use Change; Energy, Minerals, and Environmental Health; Natural Hazards; Water Resources; Core Science Systems; and Science Support. The President's total FY2019 budget request for USGS is $859.7 million. Of this amount, $502.6 million would be for R&D, a decrease of $184.9 million (26.9%) over the FY2017 enacted level of $687.6 million. As passed by the House, H.R. 6147 would provide $1.173 billion for USGS, a $24.6 million (2.1%) increase over the FY2018 enacted amount and $313.4 million (36.5%) more than the FY2019 request. These amounts include both R&D and non-R&D funding. As passed by the Senate, H.R. 6147 would provide $1.148 billion for USGS, $24.6 million (2.1%) below the House-passed amount, $288.8 million (33.6%) above the FY2019 request, and equal to the FY2018 enacted amount. These amounts includes both R&D and non-R&D funding. Other DOI Components The President's FY2019 request also includes R&D funding for the following DOI components: Bureau of Reclamation (BOR): $82.5 million in applied research and development funding for FY2019, down $24.5 million (22.9%) from FY2017. Bureau of Ocean Energy Management (BOEM): $84.6 million in applied research and development funding for FY2019, up $12.6 million (17.4%) from FY2017. Fish and Wildlife Service (FWS): $15.4 million in applied research for FY2019, down $17.0 million (52.5%) from FY2017. Bureau of Land Management (BLM): $24.2 million in applied research and development for FY2019, down $2.0 million (7.5%) from FY2017. National Park Service (NPS): $24.0 million in applied research and development for FY2019, down $3.0 million (11.0%) from FY2017. Bureau of Safety and Environmental Enforcement (BSEE): $20.5 million in applied research for FY2019, down $6.2 million (23.1%) from FY2017. Bureau of Indian Affairs (BIA): $5.0 million in applied research for FY2019, down $4.5 million (47.4%) from FY2017. Wildland Fire Management (WFM): No funding requested for R&D for FY2019, down $6.0 million (100.0%) from FY2017. Office of Surface Mining Reclamation and Enforcement (OSMRE): $5.0 million in applied research was requested in FY2017, though no funding was enacted; the office has not requested any R&D funding in FY2019. Table 16 summarizes FY2017 enacted R&D funding and the President's FY2019 R&D funding request for DOI components. Department of Veterans Affairs109 The Department of Veterans Affairs operates and maintains a national health care delivery system to provide eligible veterans with medical care, benefits, and social support. As part of the agency's mission, it seeks to advance medical R&D in areas most relevant to the diseases and conditions that affect the health care needs of veterans. Because final FY2018 funding was not available at the time the FY2019 budget was prepared, requested R&D funding is compared to the FY2017 actual funding. The President is proposing $1.346 billion for VA R&D in FY2019, an increase of $137.1 million (11.3%) from FY2017. (See Table 17 .) VA R&D represents 0.68% of the agency's overall FY2019 budget request and is funded through two accounts—the Medical and Prosthetic Research account and the Medical Care Support account. As the Medical Care Support account also includes non-R&D funding, the amount of funding that will be allocated to R&D through appropriations legislation is unclear unless funding is provided at the precise level of the request. In general, R&D funding levels from the Medical Care Support account are only known after the VA allocates its appropriations to specific activities and reports those figures. The FY2019 request includes $727.4 million for VA's Medical and Prosthetic Research account, an increase of $54 million (8.0%), and $618.3 million in funding for research supported by the agency's Medical Care Support account, an increase of $83.1 million (15.5%). According to the President's request, VA R&D priorities for FY2019 include efforts to treat veterans at risk of suicide; research to address pain management, opioid addiction, and Gulf War Veterans Illness; an expansion of efforts focused on women veterans' health issues; and the use of the Million Veteran Program—a genomic research program that is collecting genetic samples and detailed health information from one million veterans—to advance precision medicine. The Medical and Prosthetics R&D program is an intramural program managed by the Veteran Health Administration's Office of Research and Development (ORD) and conducted at VA Medical Centers and VA-approved sites nationwide. According to ORD, the mission of VA R&D is "to improve Veterans' health and well-being via basic, translational, clinical, health services, and rehabilitative research and to apply scientific knowledge to develop effective individualized care solutions for Veterans." ORD consists of four main research services each headed by a director: Biomedical Laboratory R&D conducts preclinical and clinical research to understand life processes at the molecular, genomic, and physiological levels. Clinical Science R&D supports research, including human subjects research, to determine the feasibility and effectiveness of new treatments such as drugs, therapies, or devices. Health Services R&D conducts studies to identify and promote effective and efficient strategies to improve the quality and accessibility of the VA health system and patient outcomes, and to minimize health care costs. Rehabilitation R&D develops novel approaches to improving the quality of life of impaired and disabled veterans suffering from traumatic amputation, central nervous system injuries, loss of sight or hearing, or other physical and cognitive impairments. In addition to intramural support, VA researchers are eligible to obtain funding for their research from extramural sources, including other federal agencies, private foundations and health organizations, and commercial entities. According to the President's FY2019 budget request, these additional R&D resources are estimated at $570 million in FY2019. However, unlike federal agencies, such as the National Institutes of Health and the Department of Defense, VA does not have the authority to support extramural R&D by providing research grants to colleges, universities, or other non-VA entities. On June 8, 2018, the House passed H.R. 5895 , the Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs Appropriations Act, 2019. H.R. 5895 would provide $732.3 million in funding for the Medical and Prosthetic Research account, an increase of $4.9 million, or 0.7% above the FY2019 request. On June 25, 2018, the Senate passed H.R. 5895 providing the Medical and Prosthetic Research account $779 million, an increase of $51.6 million, or 7.1% above the FY2019 request Table 17 summarizes R&D program funding for VA in the Medical and Prosthetic Research and the Medical Care Support accounts. Table 18 details amounts to be spent in Designated Research Areas (DRAs) which VA describes as "areas of particular importance to our veteran patient population." Funding for research projects that span multiple areas may be included in several DRAs; thus, the amounts in Table 18 total to more than the appropriation or request for VA R&D. Department of Transportation111 The primary purposes of the research and development activities of the Department of Transportation (DOT) as defined by Section 6019 of the Fixing America's Surface Transportation Act ( P.L. 114-94 ) are improving mobility of people and goods; reducing congestion; promoting safety; improving the durability and extending the life of transportation infrastructure; preserving the environment; and preserving the existing transportation system. Funding for DOT R&D is generally included in appropriations line items that also include non-R&D activities. How much of the funding provided by appropriations legislation is allocated to R&D is unclear unless funding is provided at the precise level of the request. In general, R&D funding levels are known only after DOT agencies allocate their final appropriations to specific activities and report those figures, and because of this, the President's FY2019 request is compared to FY2017 actual funding rather than FY2018 enacted levels unless otherwise indicated. The Administration is requesting $836.2 million for DOT R&D activities and facilities in FY2019, a decrease of $103.3 million (11%) from FY2017. (See Table 19 .) Three DOT agencies—the Federal Aviation Administration (FAA), the Federal Highway Administration (FHWA), and the National Highway Traffic Safety Administration (NHTSA)—would account for nearly 90% of DOT R&D under the FY2019 request. Federal Aviation Administration FAA's R&D activities focus on improving the capacity and safety of the national airspace systems and reducing environmental impacts. The President's FY2018 request of $350.9 million for R&D activities and facilities at FAA would be a decrease of $82 million (18.9%) from FY2017. The request includes $74.4 million for the agency's Research, Engineering, and Development (RE&D) account, a reduction of $102.1 million (57.8%) from FY2017 and $114.5 million (60.6%) below the FY2018 enacted level. Funding within the RE&D account seeks to improve aircraft safety through research in fields such as fire safety, advanced materials, propulsion systems, aircraft icing, and continued airworthiness. On August 1, 2018, the Senate passed H.R. 6147 incorporating the Transportation-HUD and Agriculture appropriations bills. The Senate-passed bill would provide $191.0 million for the RE&D account, $116.6 million (156.7%) above the request, and $2.1 million (1.1%) above the FY2018 enacted level. Federal Highway Administration According to the President's budget request, Innovations developed and/or advanced through FHWA's R&T [research and technology] program enable and supports achievement and management of a safer and more reliable transportation system that is cost-effective and sustainable, thus improving overall economic competitiveness and quality of life. The President's request of $336.5 million for R&D activities and facilities at FHWA would be an increase of $18.8 million (5.9%) from FY2017. The request includes $85 million for FHWA's Highway Research and Development program which seeks to improve safety, enhance the transportation infrastructure, and reduce congestion. The program supports highway research in such areas as innovative materials, new construction techniques, durability and resilience, and the factors that contribute to death and injury related to roadway design, construction, and maintenance. The request also includes $79 million for research to facilitate the development of a connected, integrated, and automated transportation system under the agency's Intelligent Transportation Systems program. National Highway Traffic Safety Administration The President is requesting $63.7 million in R&D and R&D facilities funding in FY2019 for NHTSA, $5.2 million (7.6%) below FY2017. NHTSA R&D focuses on automation, advanced vehicle safety technology, ways of improving vehicle crashworthiness and crash avoidance, reducing unsafe driving behaviors, and alternative fuels vehicle safety. Other DOT Components R&D activities are also supported by several other DOT components or agencies (see Table 19 ). The President's FY2019 request includes DOT R&D and R&D facilities funding for the Federal Railroad Administration (FRA), totaling $23.4 million, $20.5 million (46.7%) below the FY2017 level of $43.9 million; the Federal Transit Administration (FTA), totaling $28 million, the same amount as FY2017; the Pipeline and Hazardous Materials Safety Administration (PHMSA), totaling $11.7 million, $9.8 million (45.5%) below the FY2017 level of $21.5 million; the Office of the Secretary (OST), totaling $12.9 million, $4.5 million (25.8%) below the FY2017 level of $17.4 million; and the Federal Motor Carrier Safety Administration (FMCSA), totaling $9.1 million, slightly below the FY2017 level of $9.2 million. Sources: U.S. Department of Transportation, Fiscal Year 2019 Budget Estimates , https://www.transportation.gov/mission/budget/fy-2019-budget-estimates ; and H.R. 6147 . Department of Homeland Security114 The Department of Homeland Security (DHS) has identified five core missions: to prevent terrorism and enhance security, to secure and manage the borders, to enforce and administer immigration laws, to safeguard and secure cyberspace, and to ensure resilience to disasters. New technology resulting from research and development can contribute to achieving all these goals. The Directorate of Science and Technology (S&T) has primary responsibility for establishing, administering, and coordinating DHS R&D activities. Other components, such as the Countering Weapons of Mass Destruction Office, the U.S. Coast Guard, and the Transportation Security Administration, conduct R&D relating to their specific missions. Because final FY2018 funding was not available at the time the FY2019 budget was prepared, requested R&D funding is compared to the FY2017 actual funding. The President's FY2019 budget request for DHS includes $485 million for activities identified as R&D. This would be a reduction of 28.6% from $678 million in FY2017. The total includes $311 million for the S&T Directorate and smaller amounts for six other DHS components. See Table 20 . The S&T Directorate performs R&D in several laboratories of its own and funds R&D performed by the DOE national laboratories, industry, universities, and others. It also conducts testing and other technology-related activities in support of acquisitions by other DHS components. The Administration's FY2019 request of $311 million for the S&T Directorate R&D account is a decrease of 33.8% from $471 million in FY2017. About half of the $140 million (32.6%) reduction for Research, Development, and Innovation would result from transferring the Cyber Security/Information Analysis thrust area to the National Protection and Programs Directorate. The other thrust areas within Research, Development, and Innovation would all receive decreased funding except Counter Terrorist, which would receive a 3% increase including first-time funding for detection of opioids and fentanyl at ports of entry and mail-handling facilities. Funding for University Programs, which primarily funds the S&T Directorate's university centers of excellence, would decrease by 46.3% as the number of supported centers would drop from seven to five. In addition to its R&D account, the S&T Directorate receives funding for laboratory facilities and other R&D-related expenses through its Operations and Support account (not shown in the table). The FY2019 request for S&T Directorate Operations and Support is $272 million, down 12.6% from $311.1 million in FY2017. Within this account, Laboratory Facilities would receive $111 million, down 17.5% from $134 million in FY2017. The Laboratory Facilities request includes no funding for the National Bio and Agro-Defense Facility (NBAF), as DHS is proposing to transfer operational responsibility for NBAF to the USDA. The request also includes reduced funding for the National Biodefense Analysis and Countermeasures Center (NBACC), as the Federal Bureau of Investigation has agreed to assume 40% of NBACC's operational costs. The request for R&D in the recently established Countering Weapons of Mass Destruction Office is $80 million. Most if not all of this amount would support programs previously funded in the former Domestic Nuclear Detection Office ($155 million for R&D in FY2017). The request for the R&D account of the National Protection and Programs Directorate is $48 million, up from $6 million in FY2017. This increase reflects the transfer of cybersecurity R&D activities from the S&T Directorate. While the $42 million increase is large in percentage terms, it is less than the $71 million that cybersecurity R&D programs in the S&T Directorate received in FY2017. Environmental Protection Agency115 The U.S. Environmental Protection Agency (EPA), the federal regulatory agency responsible for administering a number of environmental pollution control laws, funds a broad range of R&D activities to provide scientific tools and knowledge that support decisions relating to preventing, regulating, and abating environmental pollution. Since FY2006, Congress has funded EPA through the Interior, Environment, and Related Agencies appropriations act. Appropriations for EPA R&D are generally included in line-items that also include non-R&D activities. Annual appropriations and the accompanying committee reports and explanatory statements do not identify precisely how much funding is allocated to EPA R&D alone. EPA determines its R&D funding levels in operation through the allocation of appropriations to specific activities and reports those amounts. The agency's Science and Technology (S&T) appropriations account funds much of EPA's scientific research activities, which include R&D conducted by the agency at its own laboratories and facilities, and R&D and related scientific research conducted by universities, foundations, and other nonfederal entities that receive EPA grants. The S&T account receives a base appropriation, and a transfer from the Hazardous Substance Superfund (Superfund) account for research on more effective methods to clean up contaminated sites. EPA's Office of Research and Development (ORD) is the primary manager of R&D at EPA headquarters and laboratories around the country, as well as external R&D. A large portion of the S&T account funds EPA R&D activities managed by ORD, including research grants. Programs implemented by other offices within EPA also may have a research component, but the research component is not necessarily the primary focus of the program. Division A of H.R. 6147 as passed in the House on July 19, 2018, and the Senate amendment to H.R. 6147 as passed in the Senate on August 1, 2018 ( S.Amdt. 3399 ), includes the Department of the Interior, Environment, and Related Agencies Appropriations Act, 2019. Title II of Division A in House-passed H.R. 6147 would provide $659.3 million for FY2019 for the EPA S&T account including a $7.4 million rescission of unobligated balances within the S&T account and a $15.5 million transfer from the Superfund account. Title II of Division A in the Senate-passed amendment would provide $723.9 million for the S&T account for FY2019 including an account-specific rescission of $11.3 million and a transfer of $17.4 million. Including a $17.4 million transfer from the Superfund account, the President's FY2019 budget request proposed $466.4 million for EPA's S&T account, $255.6 million (35.4%) less than the $722.0 million FY2018 enacted appropriations (Consolidated Appropriations Act, 2018; P.L. 115-141 ) including a $15.5 million transfer and $7.4 million account-specific rescission. Including account-specific rescissions and transfers, the total FY2019 proposed appropriations for the S&T account in H.R. 6147 as passed in the House would be $62.7 million (8.7%) less than the FY2018 enacted level, and $192.9 million (41.4%) more than the President's FY2019 budget request (including transfers but not rescissions ). The amount included in the Senate amendment to H.R. 6147 as passed would be $1.9 million (0.3%) more than FY2018 enacted and $257.5 million (55.2%) more than the FY2019 request. The $15.5 million transfer from the Superfund account included in H.R. 6147 as passed in the House is the same as enacted for FY2018. The $17.4 million transfer in the Senate-passed amendment, the same as the FY2019 requested transfer, is $1.9 million more than the FY2018 enacted amount which accounts for the difference in the total S&T funding compared to FY2018 enacted after rescissions. The proposed $7.4 million rescission of unobligated balances within the S&T account included in House-passed H.R. 6147 is the same level as included in the FY2018 enacted appropriations for EPA (Title II of Division G in P.L. 115-141 ), and the rescission amount in the Senate amendment as passed is $3.9 million greater than enacted. The President's FY2019 budget request did not specify a rescission within the S&T account. Table 21 at the end of this section presents proposed FY2019 funding in H.R. 6147 as passed in the House and the amendment to H.R. 6147 as passed in the Senate for the EPA's S&T account and certain program activities below the account level compared to the President's FY2019 budget request, and FY2018 enacted appropriations. Consistent with recent House and Senate Appropriations Committee fiscal year reports and explanatory statements, reports accompanying the FY2019 proposed appropriations did not specify funding for all sub-program areas reported in EPA's budget justification. S&T subprogram areas not reported in congressional reports and statements are noted in the Table 21 as "NR" (not reported). Additionally, the President's FY2018 and FY2019 requests and EPA's congressional budget justifications have modified the titles for some of the program areas relative to previous Administrations' budget requests and congressional committee reports presentations. The House and Senate Appropriations Committees have adopted the modified program area titles. During the House and Senate Committees' on Appropriations hearings regarding the President's FY2019 budget request for EPA, some Members expressed concerns regarding a number of proposed reductions and eliminations of funding for EPA, including those proposed for scientific research programs. Reductions proposed in the FY2019 budget request below the FY2018 enacted levels were distributed across EPA operational functions and activities as well as grants for states, tribes, and local governments. Although proposed funding for some program areas and activities within EPA's 10 appropriations accounts would increase or remain constant, the FY2019 budget request proposed to reduce funding below the FY2018 enacted levels for 8 of the 10 accounts, including the S&T account. The $6.19 billion FY2019 request for EPA overall was $2.70 billion (30.3%) less than the total $8.89 billion (including rescissions) FY2018 total enacted appropriations for EPA. The FY2019 total request for the S&T account including transfers represents 7.5% of the President's FY2019 total budget request for EPA. As shown in Table 21 , with few exceptions the requested FY2019 amount for the S&T account for individual EPA program area and activity line items would be less than the FY2018 enacted appropriations. Similarly, with respect to House-passed H.R. 6147 program area and activity funding as proposed would be below or the same as the FY2018 enacted levels, but above the FY2019 requested level. For the Senate passed amendment, proposed funding for program areas and activities would be virtually the same as FY2018 enacted with few exception, and above the FY2019 requested amounts. In addition to clarifying certain funding allocations within the S&T account and consistent with the explanatory statement accompanying P.L. 115-141 for FY2018, House and Senate committee reports accompanying the proposed House and Senate FY2019 appropriations include discussion under "Additional Guidance" for certain program areas and activities within the S&T account. Topics discussed include: Alternative Testing; Computational Toxicology; Enhanced Aquifer Use; Integrated Risk Information System (IRIS); National Air Toxic Trends Station Network; Nanomaterials Research; Innovative Research Partnerships; Intramural Animal Testing; Science to Achieve Results (STAR) Grants; Harmful Algal Blooms; and Water Distribution Systems and Security Test Beds The House and Senate Committee reports also proposed $4.1 million and $5.0 million respectively for "national priorities" within the S&T account for FY2019 to fund competitive grants for not-for-profit organizations that focus on "high-priority water quality and availability research." P.L. 115-141 included $4.1 million for FY2018 S&T national priorities, the same level included for FY2017. As in previous Administrations' fiscal year requests, the President's FY2019 budget request did not include funding for these national priorities. Workforce Reshaping The largest proposed increase in the FY2019 budget request for a specific S&T program area in terms of dollar amount and percentage is for the "Operations and Administration" program area. The FY2019 request for the program area is $74.8 million, a $6.5 million (9.5%) increase above the FY2018 enacted level of $68.3 million. The additional funding is proposed for agency "Workforce Reshaping" and efforts to improve the management of EPA's laboratories. As shown in Table 21 House-passed H.R. 6147 would provide the same level funding for FY2019 for this program area requested, the Senate-passed amendment to H.R. 6147 proposed the same level as the FY2018 enacted level. In its report S.Rept. 115-276 as cited in the Senate amendment to H.R. 6147 as passed, the Senate Appropriations Committee specifies that the agreement "does not include any requested funding for workforce reshaping." For FY2018, Congress explicitly did not include funding for workforce reshaping activities as proposed in the FY2018 budget request. The size and structure of the agency's workforce, as was the case during consideration for the FY2018 appropriations, was a topic of debate during the debate regarding EPA's FY2019 appropriations. "Workforce Reshaping" was introduced in the FY2018 request described as agency-wide organizational restructuring, "reprioritization of agency activities," and reallocation of resources. According to the FY2019 congressional budget justification, this program area supports EPA's FY2018-FY2022 Strategic Plan Goal "Improve Efficiency and Effectiveness" in which the agency will examine statutory functions and practices to "eliminate and streamline" it's processes. According to the EPA FY2019 and FY2018 budget justifications, the funding for the workforce reshaping program area would include support for voluntary early-out retirement authority, voluntary separation incentive pay, and costs for relocation of staff associated with realignment of work assignments. In addition to the workforce reshaping and reprioritization efforts described above, EPA's summary under the heading for its "Reform Plan" in the FY2019 congressional budget justification includes a discussion under a sub-heading "Improving Management of EPA Laboratories." As presented in the FY2019 congressional budget justification, "EPA's reform plan represents a series of projects that EPA will complete to implement the goals of Executive Order 13781: Comprehensive Plan for Reorganizing the Executive Branch ." With respect to EPA laboratories, the FY2019 congressional budget justification proposes an initial effort to identify and implement "... an enterprise-wide framework to manage laboratory capabilities and capacity to meet the scientific demands associated with achieving the Agency's mission." General and Administrative Provisions Division A of H.R. 6147 as passed in the House proposed a number of "General Provisions" in Title IV, many adopted as amendments during floor debate, that generally would restrict or prohibit the use of FY2019 funds by EPA for implementing or proceeding with a number of regulatory actions, including in some instances conducting research to support these actions. Title IV general provisions included in the amendment to H.R. 6147 as passed in the Senate were not as extensive and generally similar to general provisions contained in Title IV of Division G in P.L. 115-141 for FY2018, most of which have been included in previous fiscal year appropriations. Additional proposed directives for the use of FY2019 funds were included in the form of "administrative provisions" within Title II of Division A of the House and Senate-passed H.R. 6147 . Appendix A. Acronyms and Abbreviations Appendix B. CRS Contacts for Agency R&D The following table lists the primary CRS experts on R&D funding for the agencies covered in this report.

President Trump's budget request for FY2019 includes approximately $131.0 billion for research and development (R&D), of which $118.056 billion is included in the President's budget and an estimated additional $12.9 billion in nondefense discretionary R&D is requested as part of an addendum to the President's budget. The additional funding requested in the addendum followed enactment of the Bipartisan Budget Act of 2018 (P.L. 115-123), which raised defense and nondefense discretionary spending caps for FY2018 and FY2019. In April 2018, the Administration issued amendments to the President's request, including language needed to clarify the funds requested in the addendum. Agencies appear to have included this proposed funding in their budget justifications, and this funding is included in the agency analyses in this report. Final FY2018 funding had not been enacted at the time the President's FY2019 budget was prepared; therefore, the budget included the FY2017 actual funding levels, 2018 annualized continuing resolution (CR) levels, and the FY2019 request levels. Subsequent to the release of the President's budget, Congress enacted the Consolidated Appropriations Act, 2018 (P.L. 115-141), appropriating full-year funding for FY2018, rendering the CR levels identified in the budget no longer relevant. The analysis of government-wide R&D funding in this report preceding the individual agency analyses compares the President's request for FY2019 to the FY2017 level. As information about the agencies' FY2018 R&D levels becomes available, the agency sections of this report will be updated to reflect that information and to make comparisons to the President's FY2019 request; some agency sections have been updated. As of the date of this report, the House had completed action on 6 of the 12 regular appropriations bills; the Senate had completed action on 9; 5 had been enacted as law. Division C of P.L. 115-245 provides for continuing appropriations for the agencies included in the remaining seven bills until December 7, 2018. This report will be updated as Congress acts to complete the FY2019 appropriations process. In FY2018, OMB adopted a change to the definition of development, applying a more narrow treatment it describes as "experimental development." This approach was intended to better harmonize the reporting of U.S. R&D funding data with the approach used by other nations. The new definition is used in this report. Under the new definition of R&D (applied to both FY2017 and FY2019 figures), and including the estimated $12.9 billion included in the budget addendum, President Trump is requesting approximately $131.0 billion for R&D for FY2019, an increase of $5.7 billion (4.5%) above the FY2017 level. OMB notes that under the previous definition, total federal R&D would be $38.7 billion higher, or approximately $170 billion. Adjusted for inflation, the President's FY2019 R&D request represents an increase of 1.2% above the FY2017 level. Funding for R&D is largely concentrated among a few departments and agencies. In FY2017, eight federal agencies received 96.3% of total federal R&D funding, with the Department of Defense (39.3%) and the Department of Health and Human Services (27.3%) combined accounting for more than two-thirds of all federal R&D funding. President's Trump's FY2019 budget is largely silent on funding levels for a number of multiagency R&D initiatives. However, some activities supporting these initiatives are discussed in agency budget justifications and are reported in the agency analyses in this report. The request represents the President's R&D priorities; Congress may opt to agree with none, part, or all of the request, and it may express different priorities through the appropriations process. In recent years, Congress has completed the annual appropriations process after the start of the fiscal year. Failure to complete the process by the start of the fiscal year and the accompanying use of continuing resolutions can affect agencies' execution of their R&D budgets, including the delay or cancellation of planned R&D activities and the acquisition of R&D-related equipment.

CRS_R43893

Introduction The President is responsible for appointing individuals to positions throughout the federal government. In some instances, the President makes these appointments using authorities granted to the President alone. Other appointments, generally referred to with the abbreviation PAS, are made by the President with the advice and consent of the Senate via the nomination and confirmation process. This report identifies, for the 112 th Congress, all nominations submitted to the Senate for full-time positions on 34 regulatory and other collegial boards and commissions. This report includes a profile on the leadership structure of each of these 34 boards and commissions as well as a pair of tables presenting information on each body's membership and appointment activity as of the end of the 112 th Congress. The profiles discuss the statutory requirements for the appointed positions, including the number of members on each board or commission, their terms of office, whether they may continue in their positions after their terms expire, whether political balance is required, and the method for selecting the chair. The first table in each pair provides information on full-time positions requiring Senate confirmation as of the end of the 112 th Congress and the pay levels of those positions. The second table for each board or commission tracks appointment activity within the 112 th Congress by the Senate (confirmations, rejections, returns to the President, and elapsed time between nomination and confirmation) as well as further related presidential activity (including withdrawals and recess appointments). In some instances, no appointment action occurred within a board or commission during the 112 th Congress. Information for this report was compiled using the Senate nominations database of the Legislative Information System (LIS) at http://www.lis.gov/nomis/ , the Congressional Record (daily edition), the Weekly Compilation of Presidential Documents , telephone discussions with agency officials, agency websites, the United States Code , and the 2012 Plum Book ( United States Government Policy and Supporting Positions ). Related Congressional Research Service (CRS) reports regarding the presidential appointments process, nomination activity for other executive branch positions, recess appointments, and other appointments-related matters may be found at http://www.crs.gov . Positions on Regulatory and Other Collegial Bodies Federal executive branch boards and commissions discussed in this report share, among other characteristics, the following: (1) they are independent executive branch bodies located, with four exceptions, outside executive departments; (2) several board or commission members head each entity, and at least one of these members serves full time; (3) the members are appointed by the President with the advice and consent of the Senate; and (4) the members serve fixed terms of office and, except in a few bodies, the President's power to remove them is restricted. For most of the boards and commissions included in this report, the fixed terms of office for member positions have set beginning and end dates, irrespective of whether the posts are filled or when appointments are made. In contrast, for a few agencies, such as the Chemical Safety and Hazard Investigation Board, the full term begins when an appointee takes office and expires after the incumbent has held the post for the requisite period of time. The end dates of the fixed terms of a board's members are staggered so that the terms do not expire all at once. The use of terms with fixed beginning and end dates is intended to minimize the occurrence of simultaneous board member departures and thereby increase leadership continuity. Under such an arrangement, an individual is nominated to a particular position and a particular term of office. An individual may be nominated and confirmed for a position for the remainder of an unexpired term to replace an appointee who has resigned (or died). Alternatively, an individual might be nominated for an upcoming term with the expectation that the new term will be under way by the time of confirmation. Occasionally, when the unexpired term has been for a relatively short period, the President has submitted two nominations of the same person simultaneously—the first to complete the unexpired term and the second to complete the entire succeeding term of office. On some commissions, the chair is subject to Senate confirmation and must be appointed from among the incumbent commissioners. If the President wishes to appoint, as chair, someone who is not on the commission, the President simultaneously submits two nominations for the nominee—one for member and the other for chair. As independent entities with staggered membership, executive branch boards and commissions have more political independence from the President than do executive departments. Nonetheless, the President can sometimes exercise significant influence over the composition of a board or commission's membership when he designates the chair or has the opportunity to fill a number of vacancies at once. For example, President George W. Bush had the chance to shape the Securities and Exchange Commission during the first two years of his presidency because of existing vacancies, resignations, and the death of a member. Likewise, during the same time period, President Bush was able to submit nominations for all of the positions on the National Labor Relations Board because of existing vacancies, expiring recess appointments, and resignations. Simultaneous turnover of board or commission membership may result from coincidence, but it also may be the result of a buildup of vacancies after extended periods of time in which the President fails to nominate, or the Senate fails to confirm, members. Two other notable characteristics apply to appointments to some of the boards and commissions. First, for 26 of the bodies in this report, the law limits the number of appointed members who may belong to the same political party, usually to no more than a simple majority of the appointed members (e.g., two of three or three of five). Second, advice and consent requirements also apply to inspector general appointments in four of these organizations and general counsel appointments in three. Appointments During the 112th Congress During the 112 th Congress, President Barack H. Obama submitted nominations to the Senate for 63 of the 149 full-time positions on 34 regulatory and other boards and commissions (most of the remaining positions were not vacant during that time). He submitted a total of 76 nominations for these positions, of which 45 were confirmed, 8 were withdrawn, and 23 were returned to the President. The number of nominations exceeded the number of positions because the President submitted multiple nominations for some positions. In some cases, for example, the President submitted one nomination for the end of a term in progress and a second nomination of the same person to the same position for the succeeding term. In other cases, the President submitted a second nomination after his first choice failed to be confirmed. The President also submitted "extra" nominations for the three individuals to whom he had given recess appointments to comply with a law affecting the payment of those appointees. Table 1 summarizes the appointment activity for the 112 th Congress. At the end of the Congress, 26 incumbents were serving past the expiration of their terms. In addition, there were 20 vacancies among the 149 positions. Length of Time to Confirm a Nomination The length of time a given nomination may be pending in the Senate has varied widely. Some nominations have been confirmed within a few days, others have been confirmed within several months, and some have never been confirmed. In the board and commission profiles, this report provides, for each board or commission nomination that was confirmed in the 112 th Congress, the number of days between nomination and confirmation ( days to confirm ). For those nominations that were confirmed, a mean (average) of 156.0 days elapsed between nomination and confirmation. The median number of days elapsed was 130.0. The difference between these two numbers suggests the mean was pulled upward by a small number of unusually high numbers. Organization of the Report Board and Commission Profiles Each of the 34 board or commission profiles in this report is organized into three parts: a paragraph discussing the body's leadership structure, a table identifying its membership as of the end of the 112 th Congress, and a table listing nominations and appointments to its vacant positions during the 112 th Congress. The leadership structure sections discuss the statutory requirements for the appointed positions, including the number of members on each board or commission, their terms of office, whether these members may continue in their positions after their terms expire, whether political balance is required, and the method for selecting the chair. Data on appointment actions during the 112 th Congress appear under both the "Membership as of the End of the 112 th Congress" and the "Appointment Action in the 112 th Congress" sections. The former identify the agencies' positions requiring Senate confirmation and the incumbents in those positions as of the end of the 112 th Congress. Incumbents whose terms have expired are italicized. Most incumbents serve fixed terms of office and are removable only for specified causes. They generally remain in office when a new administration assumes office following a presidential election. For those agencies requiring political balance among their members, the party affiliation of an incumbent is listed as Democrat (D), Republican (R), or Independent (I). These sections also include the pay levels of each position. For presidentially appointed positions requiring Senate confirmation, the pay levels fall under the Executive Schedule, which ranges from level I, for Cabinet-level offices, to level V, for the lowest-ranked positions. Most of the chair positions are at level III, and most of the other positions are at level IV. For each board or commission, the "Appointment Action" section provides information about each nomination, in chronological order, including the name of the nominee, the position to which he or she was nominated, the date of submission, the date of confirmation (if any), and the number of days that elapsed between submission and confirmation. It also notes actions other than confirmation (i.e., nominations rejected by the Senate, nominations returned to or withdrawn by the President, and recess appointments). Occasionally, where a position was vacant and the unexpired term of office was to end within a number of weeks or months, the President submitted two nominations for the same nominee: the first to complete the unexpired term, and the second for a full term following completion of the expired term. In addition, in the three instances during the 112 th Congress in which the President recess appointed a nominee for a position covered by this report while the nomination was awaiting Senate action, he submitted a second, follow-up nomination to comply with the requirements of 5 U.S.C. §5503(b). Tables that show more than one confirmed nomination provide the mean number of days to confirm a nomination. This figure was determined by calculating the number of days between the nomination and confirmation dates, adding these numbers for all confirmed nominations, and dividing the result by the number of nominations confirmed. For tables with instances of one individual being confirmed more than once (to be a chair and a member, for example), the mean was calculated by averaging all values in the "Days to Confirm" column, including the values for both confirmations. Additional Appointment Information Appendix A provides two tables. Table A-1 includes information on each of the nominations and appointments to regulatory and other collegial boards and commissions during the 112 th Congress, alphabetically organized and following a similar format to that of the "Appointment Action" sections discussed above. It identifies the board or commission involved and the dates of nomination and confirmation. The appendix also indicates if a nomination was withdrawn, returned, or rejected or if a recess appointment was made. In addition, it provides the mean and median number of days taken to confirm a nomination. Table A-2 contains summary information on appointments and nominations by organization. For each of the 34 independent boards and commissions discussed in this report, the appendix provides the number of positions, vacancies, incumbents whose term had expired, nominations, individual nominees, positions to which nominations were made, confirmations, nominations returned to the President, nominations withdrawn, and recess appointments. A list of organization abbreviations can be found in Appendix B . Chemical Safety and Hazard Investigation Board The Chemical Safety and Hazard Investigation Board is an independent agency consisting of five members (no political balance is required), including a chair, who serve five-year terms. The President appoints the members, including the chair, with the advice and consent of the Senate. When a term expires, the incumbent must leave office. (42 U.S.C. §7412(r)(6)) Commodity Futures Trading Commission The Commodity Futures Trading Commission consists of five members (no more than three may be from the same political party) who serve five-year terms. At the end of a term, a member may remain in office, unless replaced, until the end of the next session of Congress. The chair is also appointed by the President, with the advice and consent of the Senate. (7 U.S.C. §2(a)(2)) Consumer Product Safety Commission The statute establishing the Consumer Product Safety Commission calls for five members who serve seven-year terms. No more than three members may be from the same political party. A member may remain in office for one year at the end of a term, unless replaced. The chair is also appointed by the President, with the advice and consent of the Senate. (15 U.S.C. §2053) Defense Nuclear Facilities Safety Board The Defense Nuclear Facilities Safety Board consists of five members (no more than three may be from the same political party) who serve five-year terms. After a term expires, a member may continue to serve until a successor takes office. The President designates the chair and vice chair. (42 U.S.C. §2286) Election Assistance Commission The Election Assistance Commission consists of four members (no more than two may be from the same political party) who serve four-year terms. After a term expires, a member may continue to serve until a successor takes office. The chair and vice chair, from different political parties and designated by the commission, change each year. (52 U.S.C. §20923) Equal Employment Opportunity Commission The Equal Employment Opportunity Commission consists of five members (no more than three may be from the same political party) who serve five-year terms. An incumbent whose term has expired may continue to serve until a successor is appointed, except that no such member may continue to serve (1) for more than 60 days when Congress is in session, unless a successor has been nominated or (2) after the adjournment of the session of the Senate in which the successor's nomination was submitted. The President designates the chair and the vice chair. The President also appoints the general counsel, with the advice and consent of the Senate. (42 U.S.C. §2000e-4) Export-Import Bank Board of Directors The Export-Import Bank Board of Directors comprises the bank president, who serves as chair; the bank first vice president, who serves as vice chair; and three other members (no more than three of these five may be from the same political party). All five members are appointed by the President, with the advice and consent of the Senate, and serve for terms of up to four years. An incumbent whose term has expired may continue to serve until a successor is qualified, or until six months after the term expires—whichever occurs earlier (12 U.S.C. §635a). The President also appoints an inspector general, with the advice and consent of the Senate. (5 U.S.C. App., Inspector General Act of 1978, §3) Farm Credit Administration The Farm Credit Administration consists of three members (no more than two may be from the same political party) who serve six-year terms. A member may not succeed himself or herself unless he or she was first appointed to complete an unexpired term of three years or less. A member whose term expires may continue to serve until a successor takes office. One member is designated to serve as chair for the duration of the member's term. (12 U.S.C. §2242) Federal Communications Commission The Federal Communications Commission consists of five members (no more than three may be from the same political party) who serve five-year terms. When a term expires, a member may continue to serve until the end of the next session of Congress, unless a successor is appointed before that time. The President designates the chair. (47 U.S.C. §154) Federal Deposit Insurance Corporation Board of Directors The Federal Deposit Insurance Corporation Board of Directors consists of five members, of whom two—the comptroller of the currency and the director of the Consumer Financial Protection Bureau—are ex officio. The three appointed members serve six-year terms. An appointed member may continue to serve after the expiration of a term until a successor is appointed. Not more than three members of the board may be from the same political party. The President appoints the chair and the vice chair, with the advice and consent of the Senate, from among the appointed members. The chair is appointed for a term of five years (12 U.S.C. §1812). The President also appoints the inspector general, with the advice and consent of the Senate. (5 U.S.C. App., Inspector General Act of 1978, §3) Federal Election Commission The Federal Election Commission consists of six members (no more than three may be from the same political party) who may serve for a single term of six years. When a term expires, a member may continue to serve until a successor takes office. The chair and vice chair, from different political parties and elected by the commission, change each year. Generally, the vice chair succeeds the chair. (52 U.S.C. §30106) Federal Energy Regulatory Commission The Federal Energy Regulatory Commission, an independent agency within the Department of Energy, consists of five members (no more than three may be from the same political party) who serve five-year terms. When a term expires, a member may continue to serve until a successor takes office, except that such commissioner may not serve beyond the end of the session of the Congress in which his or her term expires. The President designates the chair. (42 U.S.C. §7171) Federal Labor Relations Authority The Federal Labor Relations Authority consists of three members (no more than two may be from the same political party) who serve five-year terms. After the date on which a five-year term would expire, a member may continue to serve until the end of the next Congress, unless a successor is appointed before that time. The President designates the chair. The President also appoints the general counsel, with the advice and consent of the Senate. (5 U.S.C. §7104) Federal Maritime Commission The Federal Maritime Commission consists of five members (no more than three may be from the same political party) who serve five-year terms. When a term expires, a member may continue to serve until a successor takes office. The President designates the chair. (46 U.S.C. §301) Federal Mine Safety and Health Review Commission The Federal Mine Safety and Health Review Commission consists of five members (no political balance is required) who serve six-year terms. When a term expires, the member must leave office. The President designates the chair. (30 U.S.C. §823) Federal Reserve System Board of Governors The Federal Reserve System Board of Governors consists of 7 members (no political balance is required) who serve 14-year terms. When a term expires, a member may continue to serve until a successor takes office. The President appoints the chair and vice chair, who are separately appointed as members, for 4-year terms, with the advice and consent of the Senate. (12 U.S.C. §§241-242.) Federal Trade Commission The Federal Trade Commission consists of five members (no more than three may be from the same political party) who serve seven-year terms. When a term expires, the member may continue to serve until a successor takes office. The President designates the chair. (15 U.S.C. §41) Financial Stability Oversight Council The Financial Stability Oversight Council consists of 10 voting members and 5 nonvoting members, and is chaired by the Secretary of the Treasury. Of the 10 voting members, 9 serve ex officio, by virtue of their positions as leaders of other agencies. The remaining voting member is appointed by the President with the advice and consent of the Senate and serves full time for a term of six years. Of the five nonvoting members, two serve ex officio. The remaining three nonvoting members are designated through a process determined by the constituencies they represent, and they serve for terms of two years. The council is not required to have a balance of political party representation. (12 U.S.C. §5321) Foreign Claims Settlement Commission The Foreign Claims Settlement Commission, located in the Department of Justice, consists of three members (political balance is not required) who serve three-year terms. When a term expires, the member may continue to serve until a successor takes office. Only the chair, who is appointed by the President with the advice and consent of the Senate, serves full time. (22 U.S.C. §§1622, 1622c) Merit Systems Protection Board The Merit Systems Protection Board consists of three members (no more than two may be from the same political party) who serve seven-year terms. A member who has been appointed to a full seven-year term may not be reappointed to any following term. When a term expires, the member may continue to serve for one year, unless a successor is appointed before that time. The President appoints the chair, with the advice and consent of the Senate, and designates the vice chair. (5 U.S.C. §§1201-1203) National Credit Union Administration Board of Directors The National Credit Union Administration Board of Directors consists of three members (no more than two members may be from the same political party) who serve six-year terms. When a term expires, a member may continue to serve until a successor takes office. The President designates the chair. (12 U.S.C. §1752a) National Labor Relations Board The National Labor Relations Board consists of five members who serve five-year terms. Political balance is not required, but, by tradition, no more than three members are from the same political party. When a term expires, the member must leave office. The President designates the chair. The President also appoints the general counsel, with the advice and consent of the Senate. (29 U.S.C. §153) National Mediation Board The National Mediation Board consists of three members (no more than two may be from the same political party) who serve three-year terms. When a term expires, the member may continue to serve until a successor takes office. The board annually designates a chair. (45 U.S.C. §154) National Transportation Safety Board The National Transportation Safety Board consists of five members (no more than three may be from the same political party) who serve five-year terms. When a term expires, a member may continue to serve until a successor takes office. The President appoints the chair from among the members for a two-year term, with the advice and consent of the Senate, and designates the vice chair. (49 U.S.C. §1111) Nuclear Regulatory Commission The Nuclear Regulatory Commission consists of five members (no more than three may be from the same political party) who serve five-year terms. When a term expires, the member must leave office. The President designates the chair. The President also appoints the inspector general, with the advice and consent of the Senate. (42 U.S.C. §5841 and 5 U.S.C. App., Inspector General Act of 1978, §3) Occupational Safety and Health Review Commission The Occupational Safety and Health Review Commission consists of three members (political balance is not required) who serve six-year terms. When a term expires, the member must leave office. The President designates the chair. (29 U.S.C. §661) Postal Regulatory Commission The Postal Regulatory Commission consists of five members (no more than three may be from the same political party) who serve six-year terms. After a term expires, a member may continue to serve until his or her successor takes office, but the member may not continue to serve for more than one year after the date upon which his or her term otherwise would expire. The President designates the chair, and the members select the vice chair. (39 U.S.C. §502) Privacy and Civil Liberties Oversight Board The Privacy and Civil Liberties Oversight Board consists of five members (no more than three may be from the same political party) who serve six-year terms. When a term expires, the member may continue to serve until a successor takes office. Only the chair, who is appointed by the President with the advice and consent of the Senate, serves full time. (42 U.S.C. §2000ee) The Implementing Recommendations of the 9/11 Commission Act of 2007, P.L. 110-53 , Title VIII, Section 801 (121 Stat. 352) established the Privacy and Civil Liberties Oversight Board. As of the end of the 112 th Congress, four nominees were confirmed to the four part-time positions on the Board. Previously, the Privacy and Civil Liberties Oversight Board functioned as part of the White House Office in the Executive Office of the President. That board ceased functioning on January 30, 2008. Railroad Retirement Board The Railroad Retirement Board consists of three members (political balance is not required) who serve five-year terms. When a term expires, the member may continue to serve until a successor takes office. The President appoints the chair and an inspector general with the advice and consent of the Senate. (45 U.S.C. §231f and 5 U.S.C. App., Inspector General Act of 1978, §§3, 12) Securities and Exchange Commission The Securities and Exchange Commission consists of five members (no more than three may be from the same political party) who serve five-year terms. When a term expires, the member may continue to serve until the end of the next session of Congress, unless a successor is appointed before that time. The President designates the chair. (15 U.S.C. §78d) Surface Transportation Board The Surface Transportation Board, located within the Department of Transportation, consists of three members (no more than two may be from the same political party) who serve five-year terms. When a term expires, the member may continue to serve until a successor takes office but not for more than one year after expiration. The President designates the chair. (49 U.S.C. §701) United States International Trade Commission The United States International Trade Commission consists of six members (no more than three may be from the same political party) who serve nine-year terms. A member of the commission who has served for more than five years is ineligible for reappointment. When a term expires, a member may continue to serve until a successor takes office. The President designates the chair and vice chair for two-year terms of office, but they may not belong to the same political party. The President may not designate a chair with less than one year of continuous service as a member. This restriction does not apply to the vice chair. (19 U.S.C. §1330) United States Parole Commission The United States Parole Commission is an independent agency in the Department of Justice. The commission consists of five commissioners (political balance is not required) who serve for six-year terms. When a term expires, a member may continue to serve until a successor takes office. In most cases, a commissioner may serve no more than 12 years. However, Section 11017(c) of P.L. 110-273 , enacted on November 2, 2002, provides that this limitation does not "apply to a person serving as Commissioner" when the act took effect. The President designates the chair (18 U.S.C. §4202). The commission was previously scheduled to be phased out, but Congress has extended its life several times. Under P.L. 112-44 , Section 2 (125 Stat. 532), it was extended until November 1, 2013. (18 U.S.C. §3551) United States Sentencing Commission The United States Sentencing Commission is a judicial branch agency that consists of seven voting members who are appointed to six-year terms and two nonvoting members. The seven voting members are appointed by the President, with the advice and consent of the Senate. Only the chair and three vice chairs, selected from among the members, serve full time. The President appoints the chair, with the advice and consent of the Senate, and designates the vice chairs. At least three members must be federal judges. No more than four members may be of the same political party. No more than two vice chairs may be of the same political party. No voting member may serve more than two full terms. When a term expires, an incumbent may continue to serve until he or she is reappointed, a successor takes office, or Congress adjourns sine die at the end of the session that commences after the expiration of the term, whichever is earliest. The Attorney General (or designee) serves ex officio as a nonvoting member (28 U.S.C. §§991-992). The chair of the United State Parole Commission also is an ex officio nonvoting member of the commission. (18 U.S.C. §3551 note) Appendix A. Summary of All Nominations and Appointments to Collegial Boards and Commissions Appendix B. Board and Commission Abbreviations

The President makes appointments to positions within the federal government, either using authorities granted to the President alone or with the advice and consent of the Senate. There are some 149 full-time leadership positions on 34 federal regulatory and other collegial boards and commissions for which the Senate provides advice and consent. This report identifies all nominations submitted to the Senate for full-time positions on these 34 boards and commissions during the 112th Congress. Information for each board and commission is presented in profiles and tables. The profiles provide information on leadership structures and statutory requirements (such as term limits and party balance requirements). The tables include full-time positions confirmed by the Senate, pay levels for these positions, incumbents as of the end of the 112th Congress, incumbents' parties (where balance is required), and appointment action within each executive department. Additional summary information across all 34 boards and commissions appears in the appendix. During the 112th Congress, the President submitted 76 nominations to the Senate for full-time positions on regulatory boards and commissions (most of the remaining positions on these boards and commissions were not vacant during that time). Of these 76 nominations, 45 were confirmed, 8 were withdrawn, and 23 were returned to the President. The President also made three recess appointments to full-time positions on a regulatory board. At the end of the 112th Congress, 26 incumbents were serving past the expiration of their terms. In addition, there were 20 vacancies among the 149 positions. Information for this report was compiled using the Senate nominations database of the Legislative Information System (LIS) at http://www.lis.gov/nomis/, the Congressional Record (daily edition), the Weekly Compilation of Presidential Documents, telephone discussions with agency officials, agency websites, the United States Code, and the 2012 Plum Book (United States Government Policy and Supporting Positions). This report will not be updated.

CRS_RL32618

Introduction Medicare has a long-standing history of offering its beneficiaries managed care coveragethrough private plans as an alternative to the traditional fee-for-service (FFS) program, in which apayment is made for each Medicare-covered service provided to a beneficiary. Beginning in the1970s, private health plans were allowed to contract with Medicare on a cost-reimbursement basis. In 1982, Medicare's risk contract program was created, allowing private entities, mostly healthmaintenance organizations (HMOs), to contract with Medicare. Then, in 1997, Congress passed the Balanced Budget Act of 1997 (BBA, P.L. 105-33 ),replacing the risk contract program with the Medicare+Choice (M+C) program. The M+C programestablished a new payment structure, designed to achieve two major goals: (1) reduce spending, and(2) reduce the variation in payments across the country. In general, the program made monthlypayments in advance to participating private health plans for each enrolled beneficiary in a paymentarea (typically a county). In exchange, the plans agreed to furnish all required Medicare-covereditems and services, except hospice services, to each enrollee. Several legislative changes have beenenacted since 1999, to address some of the issues arising from the passage of the BBA. (1) Most recently, Congress made substantial changes to the M+C program with the passage ofthe Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA, P.L.108-173 ). The act creates the Medicare Advantage (MA) program to replace the M+C program and introducesseveral enhancements intended to increase the availability of private plans to Medicare beneficiaries. In addition to the immediate payment increases to plans, beginning in 2006, the MA program willchange the payment structure for local plans and introduce regional plans that operate like PreferredProvider Organizations -- a popular option in the private health insurance market. The MA programprovides financial incentives for plans to participate in this new regional option. Additionally, in2006 beneficiaries will have access to a Medicare Part D prescription drug plan whether they are inFFS Medicare or enrolled in Medicare managed care. (2) Finally, beginning in 2010 a limited number of geographic areaswill be selected to examine enhanced competition among local MA plans and competition betweenthose private plans and FFS Medicare. Overview of Payment Changes in MMA The MMA made many changes to the payments for Medicare managed care plans, includingimmediate changes, effective March 2004, and then other changes that do not take effect until 2006and 2010. This set of changes creates a multi-tiered payment system, one for local plans, anotherfor regional plans and then beginning in 2010 another one for local plans in areas designated as costcontainment areas. The immediate changes became effective on March 1, 2004. First, a fourth paymentmechanism was added to the calculation of MA payments, so that in 2004, plans are paid the highestof the floor, minimum percent increase, the blend, or a new amount. (See below for a description ofthe three previous payment amounts.) The new payment amount is 100% of fee-for-service (FFS)payments made for persons enrolled in traditional Medicare. The FFS payment is calculated basedon the adjusted average per capita costs for the year for an MA payment area (a county), for servicescovered under Medicare Parts A and B for beneficiaries entitled to benefits under Part A, enrolledin Part B and not enrolled in an MA plan. Other immediate changes were also made to modify thestatutory formulas used to calculate MA payments. All of these immediate changes, discussed inmore detail below, had the effect of increasing payments to MA plans. Additional changes to payments for local MA plans will be made, beginning in 2006. TheSecretary will determine MA payment rates by comparing plan bids (the plan's estimated averagerevenue requirement, (i.e., their estimate of the cost of providing required Medicare Parts A and Bservices) to a benchmark (the maximum amount the federal government is willing to pay a plan forproviding these required benefits). After plans submit their bids, the Secretary will have theauthority to negotiate the bid amount, similar to the authority of the Director of the Office ofPersonnel Management (OPM) with respect to the Federal Employees Health Benefits program. TheSecretary will calculate the benchmark by updating the previous year's payment in a local area bythe statutorily required increase. If a plan's bid is less than the benchmark, its payment will equalits bid plus a rebate of 75% of the difference (between the benchmark and the bid). The rebate maybe used to provide additional benefits, reduce cost sharing, or may be applied towards the monthlyPart B premium, prescription drug premium, or supplemental premium (for services beyond requiredMedicare benefits). The remaining 25% of the difference will be retained by the federal government. If a plan's bid is equal to or above the benchmark, its payment will be the benchmark amount andeach enrollee in that plan will pay an additional premium equal to the amount by which the bidexceeds the benchmark. Although the program is identified as competitive beginning in 2006, in fact the localbenchmark will not be determined in a competitive manner; that is, a payment to one plan in an areawill not be based on any other plan's bid to provide the standard package of Medicare services. Local plans will still continue to compete with one another in order to attract beneficiaries, butpayments to plans in local areas will continue to be based solely on statutorily defined increases. Beginning in 2006, MA plans that choose to offer prescription drug coverage, will also receive abenchmark payment for Part D prescription drug benefits. The benchmark will be competitivelydetermined, based on an adjusted average of all plan bids for the area. By basing the benchmark forPart D benefits on the bids submitted by other plans, the payment methodology applied to MA plansfor providing prescription drug coverage introduces a new form of competition into the program. Also beginning in 2006, the MA program will begin to offer MA regional plans in 26 regionsacross the country. MA regional plans cover both in- and out-of-network required services and haveboth a limit on out-of-pocket expenses and a unified Parts A and B deductible. Each year anorganization will submit a separate monthly bid amount for each plan it intends to offer in a region. The regional benchmark , will include two components; (1) a statutorily determined increase, and (2)a weighted average of plan bids. As with the Part D benchmark for MA plans that offer aprescription drug benefit, the addition of the second component introduces a new form ofcompetition among plans, by basing part of the benchmark on the bids submitted by the plans. Similar to local plans, plans with bids below the benchmark will be given a rebate while plans withbids above the benchmark will require an additional enrollee premium. Additional financial incentives will be provided to encourage regional plan participation. First, starting in 2007, the MMA establishes a stabilization fund to provide incentives for regionalplans to enter into and to remain in the MA program. There will be $10 billion initially provided tothe stabilization fund in 2007 and additional amounts will be added to the fund. Second, during2006 and 2007, Medicare will share risk with an MA regional plan if its costs fall above or belowa statutorily-specified risk corridor. Third, there will be $25 million available beginning in 2006(with an increased amount each year) for additional payments to certain hospitals in regional areasthat demonstrate they have high costs, that would otherwise prevent them from joining an MAnetwork. The MMA requires the Secretary to establish a program for the application of comparativecost adjustment (CCA) in CCA areas. The six-year CCA program is required to begin January 1,2010, and to end December 31, 2015, in a fixed number of geographic locations. The program isdesigned to examine the efficiency both among local private plans and between the MA program andtraditional Medicare. For that purpose (1) payments to local MA plans will, in part, be based oncompetitive bids (similar to payments for regional MA plans), and (2) Part B premiums forindividuals enrolled in traditional Medicare may be adjusted, either up of down, depending on therelative costs of Medicare FFS and managed care. This program will be phased-in so that paymentsand Part B premium adjustments will be fully phased in by the beginning of the fourth year. Thereis also a 5% annual limit on the Part B premium adjustment, so that the amount of the adjustmentfor a year can not exceed 5% of the amount of the monthly Part B premium, in non-CCA areas. In addition to these payment changes, all MA plans will be able to offer Part D Medicareprescription drug coverage beginning in 2006. As part of the annual bidding process, managed careorganizations offering MA plans with prescription drug coverage must include their estimate for thecost of the Part D prescription drug coverage for each MA plan they intend to offer. Plans may alsochoose to offer supplemental benefits, such as vision or dental coverage, which are not included inthe basic Medicare package. Plans will be required to submit a bid for any supplemental benefitsthey intend to offer. Each part of the MA local, regional, and CCA payment structure is discussed in more detailbelow, along with an analysis of the effect of the change in the MMA on Medicare managed care. Payments for Local MA Plans The Medicare statute for the M+C program set the annual managed care per capita rate fora payment area (for a contract in a calendar year) at the highest of one of three amounts calculated for each county : a rate calculated as a blend of an area-specific (local) rate and a nationalrate, a minimum payment (or floor) rate, or a rate reflecting a minimum increase from the prior year's rate. The revised law for the MA program added a fourth payment type so that beginning March2004, MA plans are paid the highest of the floor, minimum percent increase, the blend, or a newamount. The new payment amount is 100% of fee-for-service (FFS) payments made for personsenrolled in traditional Medicare in the county. Beginning in 2005, the law no longer allows MApayments to be annually updated by the floor or blend, although the increase that was applied to boththe floor and blend, the national growth percentage, is incorporated into the minimum increaseamount. Beginning in 2006, the MMA changes the payment structure for MA local plans byestablishing benchmarks. In general, the benchmark amount is the maximum amount that the federalgovernment would be willing to pay to private plans in an area for the provision of requiredMedicare Parts A and B benefits. The benchmark amount for a local plan will be calculated byincreasing the previous year's payment rate by the minimum increase, or in certain years, (3) by the greater of the minimumincrease or 100% of the per capita FFS amount. Although many of the components of the MA payment structure are not in effect after 2004,each is described in more detail below, in part to provide an historical perspective and in part toprovide a better understanding of the effect of the MMA on Medicare managed care. The majorfactors for determining Medicare's annual local MA per capita rates are summarized in Table 1 . Blended Rates The goal of the blended rate was to reduce variation in payments across the country bygradually shifting county rates away from solely local rates (reflecting wide variations infee-for-service costs) toward a national average rate. Blending is designed to reduce payments incounties where the adjusted average per capita costs (AAPCCs) (4) historically were higher thanthe national average rate, and to increase payments in counties where AAPCCs were lower. Theblended rate in effect for 2004 was based on 50% of the annual area-specific M+C per capita ratefor the year for the payment area and 50% of the input-price adjusted annual national M+C per capitarate for the year. The component of the blend determined by the area-specific (local) rate is based on the 1997AAPCC for the payment area with two adjustments. First, the area-specific rate is reduced toremove an amount corresponding to graduate medical education (GME) (5) payments. Second, rates areupdated each year by a national growth percentage (described below). The component of the blenddetermined by the national rate is a weighted average of all local area-specific rates. This componentof the blend is adjusted to reflect differences in certain input prices, such as hospital labor costs, bya formula stated in the law. Each year, the blended rates are raised or lowered to achieve budgetneutrality; however, there was no budget neutrality adjustment for payments effective March 2004(described below). Effect of MMA. Although the blend will not be used to update payments after 2004,eliminating it will have almost no material effect on payments to plans. Because of the budgetneutrality requirement, the blend was used only once to update payments between 1998 and 2003. The MMA waives budget neutrality for 2004, only, so that plans in about 3% of counties (coveringabout 8% of enrollees) were paid the blend in 2004. (See budget neutrality, below.) Additionally,for 2004, the MMA required an adjustment to the local component of the blend to include additionalpayments that would have been made to plans if Medicare beneficiaries entitled to benefits fromfacilities of the Department of Veteran Affairs (VA) and the Department of Defense (DOD) had notused those services (VA/DOD adjustment). Including the adjustment may have increased paymentsto plans; however, CMS did not implement this adjustment as it did not have the necessary data. Minimum Payment (Floor) Rate Each county is also subject to a floor rate, designed to raise payments in certain countiesmore quickly than would occur through the blend alone. Initially, the BBA provided for a floor ratethat would apply to all counties within the United States and for 2000 this minimum rate was $402per month. A separate minimum was also established for areas outside (i.e., territories) the UnitedStates. Beginning March 2001, BIPA established multiple floor rates, based on population andlocation. For 2001, the floor was $525 for aged enrollees within the 50 states and the District ofColumbia residing in a Metropolitan Statistical Area (MSA) with a population of more than 250,000. For any other areas within the 50 states and the District of Columbia, the floor was $475. For anyarea outside the 50 states and the District of Columbia, the $525 and $475 floor amounts were alsoapplied, except that the 2001 floor could not exceed 120% of the 2000 floor amount. As requiredby law, these payment amounts are increased annually by a measure of growth in program spending(see discussion of national growth percentage, below). In 2002, the floor was $553 for the largerMSAs and $500 for any other areas within the 50 states. The 2003 floors were lower than the 2002floors; $548 for the larger MSAs and $495 for any other areas within the 50 states. (6) The March 2004 floors were$614 for the larger MSAs and $555 for any other areas within the states. Effect of MMA. The floor will not be used to update payments after 2004. The floor amountwas included in the original M+C payment structure as a means to achieve one of its goals --reducing variation in payments across the country. The BBA established a minimum amount thatcould be paid to a plan; increasing the lowest plan payments in the country. For example, prior toM+C the lowest payment to a plan in 1997 was $221 and with the introduction of the floor, thatpayment was increased to $367 in 1998, a jump of 67%. In 1997, the gap from lowest to highestpayment was $546, declining to $416 with the introduction of the floor. Payments for the floor werereset in 2001, which further decreased variation. In 2004, plans in about 67% of counties (coveringabout 29% of enrollees) were paid based on the floor. The gap from lowest to highest paymentincreased in 2004 to $592 and is expected to continue to increase under the new payment rules forMA plans created in the MMA. Minimum Percentage Increase Historically, the minimum increase rule was included to protect counties that wouldotherwise receive only a small (if any) increase. In 1998, the minimum rate for any payment areawas 102% of its 1997 AAPCC. For 1999 and 2000, the increase was 102% of the annual M+C percapita rate for the previous year. BIPA applied a 3% minimum update for 2001, beginning in March. For subsequent years, the minimum increase returned to an annual January update of an additional2% over the previous year's amount. The minimum percentage increase was the only positive updatefor 2003 M+C payments. The MMA changed the calculation of the minimum percentage increase. For 2004 and beyond the minimum percentage increase will be the greater of a 2% increase over theprevious year's payment rate (as under current law), or the previous year's payment increased by thenational growth percentage (discussed below). Effect of MMA. Previously, the national growth percentage was only applied to the floor rateor the local portion of the blend rate. (7) Plans received the minimum update rate only if they fared betterwith a (2% or 3%) minimum update to their previous year's rate, than if they received a paymentcalculated by increasing the floor by the national growth percentage. This was the case for minimumupdate counties because their payment rate from the prior year was so much higher than the floorrate. Under the new MA payment rules, a plan has its prior year amount increased by the higher ofthe minimum update or the increase in the national growth percentage. This could result in higherpayments to plans than under the previous system. Adding the second component to the minimumincrease (the national growth percentage) incorporates the increase that had been used to update thefloor and blend, both of which will no longer be used after 2004. Another difference is that the calculation of the national growth percentage includes anadjustment for prior year's errors. MMA eliminated the effect of prior years errors for years before2004. In 2004, plans in about 4% of counties (covering about 23% of enrollees) were paid based onthe new minimum increase. In 2005, about 21% of counties (covering about 53% of enrollees) arepaid based on the new minimum increase. In 2006, all counties will receive the minimum updatepayment. Fee-for-Service Rate For payments, effective March 2004, a fourth payment type was added. The new paymentamount is 100% of fee-for-service (FFS) payments made for persons enrolled in traditionalMedicare. The FFS payment is calculated based on the adjusted average per capita cost for the yearfor an MA payment area (a county), for services covered under Medicare Parts A and B forbeneficiaries entitled to benefits under Part A, enrolled in Part B and not enrolled in an MA plan. This payment is adjusted to remove payments for direct medical education costs and to include theVA/DOD adjustment. (8) Effect of MMA. In 2004, payments in about 26% of counties (covering about 40% ofenrollees) were based on the FFS payments. In future years, the Secretary must rebase FFS at leastonce every three years, but could choose to rebase more often, such as each year or every two years. For 2005, the Secretary decided to rebase FFS. Rebasing FFS rates means that the Centers forMedicare and Medicaid Services (CMS) actuaries recalculate the per capita FFS expenditures foreach county (for End Stage Renal Disease (ESRD) beneficiaries FFS expenditures are calculated bystate) so that FFS rates reflect more recent growth in FFS expenditures. In 2005, payments in about21% of counties are based on the updated FFS rates. In these counties, the rebased FFS local growthrates were larger than the national growth percentage (used in the minimum percentage increase) forthat year, and the MA payment increase was be based on 100% FFS service. However, about 80%of counties had slower (or negative) growth in FFS compared to national rates, and in those countiesthe minimum update was applied. In 2006, the Secretary will not rebase FFS rates. In years inwhich the Secretary chooses to rebase more frequently than required by statute, the announcementwill be provided in the annual "Advance Notice" (released 45 days prior to the first Monday inApril). Exclusion of Payments for Graduate Medical Education (GME) The BBA required that payments for GME, including both indirect and direct medicalexpenses, must be excluded or "carved out'" of the payments to M+C plans, phased in over fiveyears (by 2002). According to the BBA, GME payments can only be carved out of the blendpayment amount, not the floor or minimum increase payment. As a result, the GME carve out couldnot occur in a year in which no payment was based on the blended rate. The MMA allows a GMEcarve-out for payments to MA plans when based on 100% of FFS, but only for Direct Medicaleducation costs. Effect of MMA. Beginning in 2005, when the blend payment is no longer used to updatepayments for plans, there will no longer be any carve-out for Indirect Medical education costs. Further, any adjustment for Direct Medical education costs will be limited to those MA plans whosepayments are based on 100% of FFS. Payments can only be based on 100% FFS in years in whichthe Secretary rebases FFS. However, as previously discussed, Medicare payments to plans haverarely been based on the blend, the only payment mechanism that allowed a GME adjustment priorto the passage of MMA. Therefore, this change should have very little material impact on MApayments to local plans. Budget Neutrality The BBA required that once the preliminary rate was determined for each county, a budgetneutrality adjustment would be applied to determine final payment rates. This adjustment was madeso that estimated total M+C payments in a given year would equal total payments that would bemade if payments were based solely on area-specific rates. A budget neutrality adjustment was onlyapplied to the blended rates because rates could not be reduced below the floor or minimum increaseamounts. As a result of this limitation, it was not always possible to achieve budget neutrality. Thelaw made no provision for achieving budget neutrality after all county rates were assigned either thefloor or minimum increase. When this situation occurred for the 1998, 1999, 2001, 2002, and 2003rates, the Centers for Medicare and Medicaid Services (CMS) chose to waive the budget-neutralityrule rather than the floor or minimum rate rules. While the cost of waiving budget neutrality wasnot significant in 1998 and 1999 (less than $100,000 each year), the cost was about $1 billion in2002, and $900 million in 2003. In 2004, the MMA did not allow the budget neutrality adjustmentto be applied to blend payments and beginning in 2005, the blend will no longer be used to updatepayments. Effect of MMA. Budget neutrality is only eliminated for 2004. However, it only affects theblend, which will not be used after 2004. Eliminating budget neutrality in 2004 ensured that theblend payment did not have to be reduced and plans in 3% of counties were able to get a paymentbased on the blend. National Growth Percentage The national per capita M+C growth percentage is defined as the projected per capita increasein total Medicare expenditures minus a specific reduction set in law for certain years. (9) Because this increase is tiedto total Medicare expenditures, it maintains a link between national Medicare fee-for-servicespending and managed care spending. Starting with the 1999 M+C payments, adjustments were alsomade for errors in the previous years' spending projection. The national growth percentage for 2001, after the reduction and adjustments, was -1.3%. However because BIPA set the floor rates in 2001, the national growth percentage was not used tocalculate the floor rate in 2001. It was only used to calculate the blend rate for 2001. For 2002, the estimated national growth percentage increase over the pre-BIPA paymentamount (used for January and February of 2001) was 8.3%. This figure was based on a 5.6%projected per capita increase in total Medicare expenditures, a 0.3 percentage point reduction set bythe BBRA, a minus 0.3% adjustment for errors in the previous years' projection of spending (1998- 2001), and an increase of 3.2% to account for the impact of BIPA. (10) The increase used tocalculate the floor payment for 2002 was 5.3%, reflecting only the projected per capita increase intotal Medicare expenditures of 5.6% and the 0.3 percentage point reduction set by the BBA. Therewas no adjustment for prior year errors, as the floor amounts were reset by the amounts establishedin BIPA. For 2003, the projected national growth percentage increase was actually a decrease of 2.9%. This decrease reflected a 0.9% increase in per capita costs and a negative 3.8% adjustment for prioryears' errors. The -2.9% factor was used to update the 2002 blend rate. The 2003 update for thefloor was -1%, reflecting the same 0.9% increase in per capita costs, but only a 1.9% decrease forthe prior year error in 2002 estimates. (11) Because both of these updates were negative, the minimumpercentage increase was the only positive update for 2003, yielding the highest M+C payment formost counties. For 2004, the projected national growth percentage increase for January and February was9.5% for the blend and 8.2% for the floor. The revised projection, due to the passage of the MMAwas 12.9% for the blend and 12.1% for the floor, beginning in March. As required by the MMA,the revised increases did not include an adjustment for prior year's errors. For 2005, the projected national growth percentage increase is 6.6%. This increase reflectsa .5% correction for prior year's (2004) estimates. For 2006, the projected national growth percentage is 4.8%. This increase reflects a -.3%correction for prior years (2004 and 2005) estimates. Effect of MMA. Although both the blend and floor payments will not be used to updatepayments after 2004, the same increase that was applied to these payments every year, the nationalgrowth percentage, will continue to be a part of the "MA payment calculation," as it will become oneof the two possible increases to the minimum increase amount. Historically, the adjustment forprior year's errors was negative each year. The MMA wipes the slate clean of prior year adjustments,so that there will be no adjustments for prior year's errors before 2004. However, for 2004 payments,the adjustments would have been positive, so that in fact if these adjustments had been included inthe calculation of the national percentage growth increase, the increase for MA payments in 2004would have been higher; 29.4% for the blend instead of a 12.9% and 16.9% for the floor instead of12.1%. Had this occurred, the increase is large enough that payments in many more counties wouldhave been based on either the blend or the floor. Table 1. Major Factors for Determining Medicare Payments toLocal Medicare Advantage Plans Source : Congressional Research Service (CRS) analysis of provisions in BBA, BBRA, BIPA, andMMA. Note : Information for payment rules is not provided beyond 2004 if rule no longer applies. a. Beginning in 2001, there is a higher floor payment for counties within MSAs with a populationof more than 250,000 and a lower floor payment for any other county in the United States. Risk Adjustment MA (formerly M+C) payments are risk adjusted to control for variations in the cost ofproviding health care among Medicare beneficiaries. For example, if sicker and older patients allsign up for one plan, risk adjustment is designed to compensate the plan for their above averagehealth expenses. The former Medicare risk contract program adjusted the AAPCCs for demographicrisk factors, and when the M+C program was implemented, it also used these demographic riskadjusters. Demographic risk adjusters include those for age, gender, working status, Medicaidcoverage, whether the beneficiary originally qualified for Medicare on the basis of disability, andinstitutional (nursing home) status. However, these demographic risk adjusters accounted for only a very limited portion of thevariation in health care costs, and as a result, the BBA required the Secretary of HHS to develop anew risk adjustment mechanism that would also account for variations in health status. Beginningin January 2000, CMS implemented this new risk adjustment mechanism built on 15 principalinpatient diagnostic cost groups (PIP-DCGs). Payments were adjusted based on inpatient data usingthe PIP-DCG adjuster and demographic factors, so that this new system accounted for bothdemographic and health-status variations. In addition to a demographic adjustment, under thismechanism, the per capita payment made to a plan for an enrollee was also adjusted if that enrolleehad an inpatient stay during the previous year. Separate demographically-based payments were usedfor newly eligible aged persons, newly eligible disabled Medicare enrollees, and others without amedical history. The BBRA and BIPA made changes to the Secretary's proposed phase-in schedule of thisnew system, through 2002. Plans were concerned because this new risk adjustment methodologyreduced aggregate M+C payments; slowing down its implementation lessened the reduction. Through 2003, 10% of payments included risk adjustment adding the PIP-DCG method and 90%were based solely on the older demographic method. BIPA made additional changes to risk adjustment, in order to account for more of thevariation in health status. A new risk adjustment methodology began in 2004, which adds data fromambulatory settings. This new risk adjustment will be phased in at the rate of 30% in 2004, 50% in2005, 75% in 2006 and 100% beginning in 2007. In March 2002, CMS announced that the new riskadjustment methodology would be based on a "selected significant condition" model comprised ofapproximately 61 disease groups chosen because of their statistical and clinical significance for theMedicare population. Beginning July 1, 2002, M+C organizations have been required to collectinformation on the selected diagnoses and they have been required to submit that data to CMS sinceOctober 2002. Effect of MMA. Starting in 2006, MMA expands risk adjustment in two ways. First, itintroduces a new measure of risk when adjusting beneficiary rebates. MMA directs the Secretaryto adjust the benchmark and the bid for the average of demographic and health history riskcharacteristics of MA enrollees, as described in the law, when calculating a beneficiary rebate. Forlocal plans, the Secretary has the discretion to calculate average risk based on the demographic andhealth characteristics of enrollees in each state, or on a basis other than states, such as the enrollmentof an individual plan. The beneficiary rebate for a local MA plan is calculated as 75% of the amountby which the MA area-specific non-drug monthly benchmark, adjusted with the average riskadjustment factor, exceeds the MA statutory non-drug monthly bid, adjusted with the average riskadjustment factor. By applying the average risk adjustment factor to the benchmark and the bid, allprivate plans that are equally efficient will offer the same rebate to beneficiaries in a particularmarket. Second, MMA expands the Secretary's discretion when risk adjusting payments to privateplans. Previously, payments to plans were adjusted based solely on the demographic and healthstatus risk factors associated with each enrollee. MMA expands the Secretary's ability to adjustpayments by directing the Secretary to consider variation in local payment rates within an area. Ultimately, the Secretary is directed to ensure that the sum of the payment from CMS, and the basicbeneficiary premium do not exceed a plan's risk adjusted bid. This provision ensures that plans arenot paid more than their estimated cost of serving beneficiaries. Summary of Local MA Plan Payments A summary of payments made to local MA plans is provided in Table 2 . The table includesthe payment made to a plan for covered Medicare services, depending on whether the plan's bid orbenchmark is higher. It also includes any required enrollee basic beneficiary premium or rebate. The table provides an explanation of how risk adjustment is applied to the different payments. Notincluded, are any payments made to plans that choose to offer a Medicare prescription drug program.Plans that provide Medicare prescription drug coverage will receive a separate additionalpayment. (12) Table 2. Total Non-Drug Payments to MA Local Plans forRequired Parts A and B Services, Starting in 2006 Source : The Congressional Research Service (CRS) analysis of MMA provisions. a. The Secretary must adjust payments to local MA plans to ensure that the sum of the payment fromCMS and the Basic Beneficiary Premium does not exceed the plan bid, adjusted for thedemographic and health history risk factors of plan enrollees. b. The rebate to be paid to the plan, the beneficiary rebate, may only be used to provide additionalbenefits, reduce cost sharing, or applied towards the monthly Part B premium, prescriptiondrug premium, or supplemental premium (for services beyond required Medicare benefits). Variations in Local MA Payment Rates As noted above, between 1997 and 2003, under the M+C program, each county rate was setat the highest amount calculated under three rules (blend, minimum increase, and floor), and thenadjusted for budget neutrality. In 2004, plans were paid the highest amount calculated under fourrules, with 100% of FFS payments for persons enrolled in traditional Medicare added to thecalculation. Figure 1 shows the distribution of payment types by year, since the beginning of theM+C program. Because of the low national growth percentage in 1998 and 1999, no county rate wasset by the blended-rate rule after applying the budget neutrality adjustments. In 2000, the nationalgrowth percentage was sufficiently large (5%), so that payments in 63% of counties were based onthe blended-rate rule. However, the national growth percentage for 2001 was -1.3%, as previouslydiscussed. Therefore, in 2001, no county was paid using the blended-rate rule and about 72% of allcounty payments were set at the floor, with the remainder of counties receiving the minimum 3%increase. Similarly in 2002, no county was paid using the blended-rate rule, and about 79% of allcounties had their payment set at the floor with the remainder of payments set at the minimumupdate of 2%. For 2003, all but six counties had their payments set at the minimum update of 2%,with the remaining six set at the higher floor payment ($548). In 2004 about 26% of counties werepaid 100% of FFS, while most counties, about 67%, were paid the floor; 4% were paid the minimumupdate and 3% received the blend. In 2005, the Secretary chose to rebase payment rates, or in otherwords, allow the county rate to equal 100% of FFS if that rate was higher than the previous year'srate increased by the minimum percentage increase (6.6% in 2005). As a result, in 2005, about 20%of county payment rates are based on the 100 percent of FFS payment rate, with the remaining 80%based on the minimum percentage increase. In 2006, the Secretary will not rebase payment rates andall county rates will be based on the minimum percent increase (4.8%) above the county's 2005 rate. Figure 1. Rule Used to Determine County Payment Rates, by Year, 1998-2006 Calculations for selected 2004 county payment rates are shown in Table 3 . The table showsthe calculation under the four rules. For the eight counties selected, two have their rate set using theminimum update (Los Angeles, California; Dade, Florida;), two set at the floor amount (Hennepin,Minnesota; and Fairfax, Virginia), two set at the blended rate (Bristol Bay, Alaska and San Benito,California) and two set at 100% FFS ( Lackawanna, Pennsylvania and Queens, New York). Startingin 2005, county payment rates will be based on the minimum update rate, or, if larger, 100% of FFSin years when the Secretary rebases payment rates. The floor and blend payments will be eliminatedin 2005. Table 3. Calculation of Monthly Payment Rates for SelectedCounties, 2004 Source : Congressional Research Service (CRS) analysis of CMS data. Geographic Payment Rates Large variation in county payment rates was one of the motivating forces behind changesenacted in the Balanced Budget Act. The M+C payment method was designed to reduce thisvariation. Raising the floor in 2001 supported the goal of reducing both the overall variation andincreasing the average payment. However, the effect of "negative" updates for both the blend andfloor payments in 2003 slightly increased variation in payments across counties. The effect of thepayment rule changes in the MMA will no longer decrease variation, and in fact over time, variationwill begin to increase. Examining variations across all counties, Figure 2 shows that the substantial range aboveand below the average payment rate will continue to exist in 2006. Although the differences betweenhighest and lowest payment had diminished each year since the start of the M+C program through2002, in 2004, the gap increased a to $592. For example, in 1997, the average monthly payment rateweighted by the number of Medicare beneficiaries in each county was $467. The lowest rates in thecountry were $221 in two rural Nebraska counties (Arthur and Banner). The highest rates in 1997were $767 and $748, respectively, in Richmond County, New York (Staten Island), and DadeCounty, Florida (Miami). Examining the variation, from highest to lowest payments, the range was$546 in 1997. By 2002, the range had diminished to $356, as the lower floor rate was $500 and thehighest rate (Richmond County) was $856. The average payment in 2002 was $571. Although notshown in the table, in 2003, the range from lowest to highest payment increased to $363 (an increaseof $7 per month per beneficiary, i.e., 2% higher than $356). The average payment increased to $582,an increase of $11 per month per beneficiary over the 2002 amount. While the low floor paymentdecreased from $500 to $495, no M+C plan was paid that amount. The lowest rate in the countrywas $510, representing a 2% increase over the low floor rate of $500 for 2002. The highest rate in2003 was again in Richmond County at $873, with Dade County (Miami) at $851 and Bronx, NewYork at $828. In 2004, the highest rate was in St. Bernard (New Orleans) at $1,147, with DadeCounty (Miami) at $905. The lowest rate, the floor in non-MSA areas, was $555 in areas such asChampaign (Illinois), San Luis Obispo (California), Santa Cruz (Arizona), and Chautauqua (NewYork). In 2005, the difference between the highest and lowest payments is $630, with the highestrate, again, in St. Bernard (New Orleans) at $1,222. The lowest rate in 2005 is $592, in areas thathad previously received the low floor payment, such as Champaign (Illinois), San Luis Obispo(California), and Santa Cruz (Arizona). In 2006, all payment rates will be increased by a 4.8%increase over the 2005 payment. Even though all county rates will increase by the same percentage,the difference between the highest and lowest rates will increase to $661. The highest rate in 2006will be $1,281 in St. Bernard (New Orleans). The lowest rate in 2006 will be $620 in counties thathad in prior years received a low floor payment. Payment rates vary geographically, as well, with higher payments generally occurring in moreurban areas ( Figure 2 ). Because the blend rate was only paid in 2000 and 2004, the large variationsin payment rates that existed prior to the M+C program, have been only partially reduced. The 2001floor rate (increased by BIPA) mostly affected rural counties, but it raised rates for some urbancounties as well. Payments continue to be higher in urban areas and lower in most rural areas. The2005 average payment is $758 in central urban counties, $82 above that for other urban counties,$131 above that for rural-urban fringe counties, and $145 above that for other rural counties. (13) In 2006, the averagepayment rate will be approximately $794 in central urban counties, $85 above that for other urbancounties, $167 above that for rural-urban fringe counties, and $152 above that for other ruralcounties. The range within each of the urban -- rural categories remains substantial as well. Figure 2. Range of County Medicare Managed Care Payment Rates for the Aged, by Location, 1997-2006 Payment rates range widely across geographic areas, as well as withingeographic areas, as shown in Table 4 . For example, plans serving Miami are paidan average of $986 per month in 2005, compared with $654 in Fairfax County,Virginia. But even within neighboring geographic areas, there can be wide variationin payment rates. The payment rate for Dade County in southern Florida is $123more than the rate for neighboring Palm Beach County in 2005 and $128 more in2006. Furthermore, plans competing in the same market may receive substantiallydifferent payments for beneficiaries who live on opposite sides of a county boundary. As illustrated in the Washington, DC metro area and the New Orleans metro area,these differing payment levels may affect plan participation and enrollment. Table 4. Monthly Payment Rates for AgedEnrollees in Selected Areas, in 2005 and 2006 Source : Centers for Medicare and Medicaid Services. Payments for Regional MA Plans Starting in 2006, the MA program will allow plans to operate regionally. MAplans may serve a single region or multiple regions (including all 26 regions) as partof a new regional program. The regional program is designed to encourage plans toserve areas they had not previously served, particularly rural areas. Regional planswill operate like Preferred Provider Organizations -- a popular option in the privatehealth insurance market so that a plan participating in the new regional program will(1) have a network of providers who agree to a contractually specified reimbursementfor covered benefits, and (2) provide for reimbursement for all covered benefits,regardless of whether the benefits are provided within the network. In addition, bothMedical Savings Account (MSA) plans and Private Fee-for-Service (PFFS) plansmay serve one or more regions. (14) The Secretary established 26 regions taking into account such factors as (1)an adequate number of eligible beneficiaries, (2) presence of existing commercial andFederal Employees Health Benefits plans that may consider serving an MA region,(3) limiting the variation of payment rates within regions, and (4) preservation ofexisting patient flow in areas where beneficiaries have a tendency to seek careoutside of their state of residence. Table 5 shows the 26 MA regions, the number ofbeneficiaries in each region, the range of risk adjusted county-level MA rates in theregion, the difference between the highest and lowest risk adjusted county-level MArate in each region, and an average risk adjusted region-level MA rate. The numberof eligible beneficiaries in each MA region range from a high of about 4 million inRegion 24 (California), to a low of approximately 50 thousand in Region 26(Alaska). The difference between the highest and lowest risk adjusted MA rate ineach region range from a high of $493 in Region 17 (Texas) to a low of $64 inRegion 1 (Maine and New Hampshire), Region 21 (Arizona) and Region 25(Hawaii). Because the Secretary has the discretion to make adjustments to accountfor intra-regional variation, the spread of MA rates within a region might not pose asmuch of a risk to plans as it might otherwise have. An MA regional plan may chooseto serve more than one region, or may serve the entire nation, but it can not segmentits service area to offer either different benefits or different cost-sharing requirementsto beneficiaries within the same region. Only the regional plans (not local plans) will be required to have both a singledeductible for Parts A and B services and a catastrophic limit on expenditures. Thedeductible may be applied differently for in-network services and may be waived forpreventive or other items and services. The law specifies that there be onecatastrophic limit for in-network required Parts A and B services and another for allrequired Parts A and B services, although the amount of the catastrophic limit is notspecified in the law. Table 5. Medicare Advantage Regions,Beneficiaries and Per Capita Monthly Payments for Aged Beneficiaries,2005 Source : Table created by the Congressional Research Service (CRS) based on CMSanalysis. Note : Payment rates in this table are risk adjusted. Region level rates are adjustedusing average state aggregate risk scores multiplied by the weighted 2005 countyrates in each state. Payments to regional plans, like local plans, will also be based on abenchmark amount. However, the calculation of regional benchmarks will bedifferent than the calculation of the local benchmarks. For a region, the benchmarkfor part A ad B benefits is comprised of two components, one determined accordingto statute and one based on plan bids. The regional statutory component is theweighted average of all the statutorily determined local payment rates in the region. The weight for the statutory component is based on the percent of eligible individualsin the area, as opposed to enrollees. (15) The plan-bid component is the weighted averageof all the MA regional bids submitted in a region. This weight is based onenrollment by plan. Similar to local plans, each regional plan will submit a bid toprovide coverage of all required benefits, but unlike the benchmark for local plans,the regional benchmark depends on all plan bids. By incorporating the plan bid intothe calculation of the benchmark, the payments amount to any one plan thatparticipates in a region will depend on the bids submitted by other plans in theregion. This introduces a new type of competition, not previously used indetermining Medicare payments. Calculation of the Regional Monthly Benchmark The MA monthly region-specific non-drug benchmark amount will becalculated according to the following formula, for a region for a month in a year. 1. The statutory component of the benchmark is calculated as follows, for aregion and year: a. The statutory region-specificnon-drug amount is equal to the sum (for each of the MA local areas within theregion) of the calculations for the followingformula: (MA area-specific non-drugmonthly benchmark amount for the area and the year) x (number of MA eligibleindividuals residing in the local area/total number of MA eligible individuals residingin the region) b. The statutory national market sharepercentage is the proportion of MA eligible individuals nationally who were not enrolled in an MA plan during the reference month. The reference month is definedas the most recent month during the previous year for which data areavailable. 2. The plan-bid component of the benchmark is calculated as follows, for aregion and a year: a. The weighted average of plan bidsfor an MA region and a year is equal to the sum (for all MA regional plans in thatregion and year) of the calculations of the followingformula: (unadjusted MA statutorynon-drug monthly bid (16) amount for the plan for the year) x (number ofindividuals who reside in the region who were enrolled under that regional planduring the reference month/total number of individuals for all MA regional plans forthat region and year, for plans offered in the region in the referencemonth) b. The non-statutory market sharepercentage is the complement of the statutory market share percentage (1-statutorymarket share percentage) and is the proportion of MA eligible individuals who wereenrolled in an MA plan. Plans not offered in the previous year are excluded. The Secretary willcompute the benchmark for each region before the beginning of each annual electionperiod. Risk Adjustment Beginning in 2006, the Secretary will annually determine the average of therisk adjustment factors to be applied to regional plan payments. If no plan wasoffered in the region in the previous year, the Secretary will generate an estimateusing factors such as the average for comparable regions or the national average. TheSecretary could apply risk adjustment factors other than on a regional basis, includinga state basis, or a plan-specific basis. Both the plans bids and benchmarks will be risk-adjusted for demographicfactors (including age, disability, gender, institutional status), health status,intra-regional variation, and if applicable, a monthly rebate. To adjust forintra-regional variation, the Secretary will adjust the amounts to take into accountvariation in MA local payment rates among the different MA local areas included inthe region. The Secretary shall adjust payments to MA regional plans to ensure thatthe sum of the monthly payment and any required basic beneficiary premium equalsthe unadjusted MA statutory non-drug bid amount, adjusted for the demographicfactors and intra-regional variation. Stabilization Fund The MMA establishes a regional plan stabilization fund to encourage regionalplans to serve at least one or even all regions, and to encourage plans to stay inregions they might otherwise leave. Initially, in 2007, $10 billion is to be availableto the fund, but additional amounts may be added. (17) The fundsare to be available through December 2013. The Secretary will be responsible fordetermining the amounts that may be given to MA regional plans from this fund,based on statutory requirements. These funds can be offered either on a national or regional basis. Thenationally based bonus payment will be available for one year to an MA organizationthat offers a MA regional plan in all regions, but only if there was no national planin the previous year. The national bonus amount is 3% of the benchmark amountotherwise applicable for each MA regional plan offered by the organization (thenational plan is comprised of regional plans offered in all regions). More than onenational plan could qualify for this bonus, if the plans were first offered in the sameyear. However, there would be no regional bonus in a year that a national bonus wasawarded. If no national plan was offered in a year, regional bonuses could be awarded. To encourage participation in regions, the Secretary may increase the benchmark ina region that offered no regional MA plans in the previous year. The Secretary willdetermine the bonus amount which will be based on the bids submitted for eachqualifying plan and could vary across regions. Funding could be available for morethan one year. Further, if a plan indicates that it will leave a region, the Secretary mayincrease the benchmark, within limits for up to two years, in that region in order toretain and attract new plans. In this situation, the plan exits must result in fewer thantwo remaining regional organizations, and the percentage of MA enrollment in theregion must be less than the national percentage enrollment. Plans receiving anincreased payment for entering an area would not be able to receive an increasedpayment for retention, in the following year. The increased payment amount wouldbe the greater of: (1) 3% of the benchmark amount in the region, or (2) an amountthat makes the following two ratios equal to each other -- (a) the benchmark plusbonus amount divided by the adjusted average per capita cost for the region, as riskadjusted and (b) the weighted average of the benchmarks for all regions, divided bythe average per capita cost for the United States, as risk adjusted. For payments from the stabilization fund, the Secretary must certify that thethere are adequate funds to cover payments and may limit enrollment in regionalplans receiving the bonus to ensure adequate funding. Risk Corridors To further encourage plan participation in the regional program, Medicarewill initially share risk with MA regional plans in 2006 and 2007. If a plan's costsfall outside of a specified range or "risk corridor," plans will assume only a portionof the risk for unexpected high costs and plans will be required to return a portion ofthe savings to Medicare for unexpected low costs. A plan's allowable costs will bemeasured against a target amount. (18) If allowable costs are between 97% and 103% of the target amount for theplan for the year, there will be no payment adjustment for the plan. If the Secretarydetermines that a plan's allowable costs are over 103% but no greater than 108% ofa specified target amount, the plan will receive an additional payment equal to 50%of the difference between the allowable costs and 103% of the target amount. Forcosts above 108% of the target amount, the Secretary will increase the payment bythe sum of 2.5% of the target and 80% of the difference between allowable costs and108% of the target. Conversely, if a regional plan's allowable costs are less than 97% but greaterthan or equal to 92% of the target amount, the Secretary will reduce the payments by50% of the difference between 97% of the target amount and allowable costs. Ifallowable costs are less than 92% of the target amount for the plan and year, theSecretary will reduce the monthly payment by the sum of 2.5% of the target amountand 80% of the difference between 92% of the target amount and such allowablecosts. Essential Hospitals The MMA also allows the Secretary to provide for an increased paymentamount for certain hospitals that provide inpatient hospital services to MA regionalplan enrollees. This provision was designed to aid MA organizations who offerregional plans to meet the provider access requirement. To qualify for thesepayments, an MA organization offering a plan must certify to the Secretary that theorganization was unable to reach an agreement with an essential hospital (19) to provide inpatient hospital services to plan enrollees. Further, the hospital must prove that thecosts of serving the plan's enrollees exceeds the Medicare Part A payment. In suchcases, the plan must also pay the hospital at least the Medicare Part A payment forinpatient hospital services provided to enrollees. Beginning in 2006, there is to be$25 million available (with an increased amount each year) for these payments. Summary of Regional MA Plan Payments A summary of payments made to regional MA plans is provided in Table 6 . The table includes the payment made to a plan for covered Medicare services,depending on whether the plan's bid or benchmark is higher. It also includes anyrequired enrollee basic beneficiary premium or rebate. The table provides anexplanation of how risk adjustment is applied to the different payments. Notincluded, are any payments made to plans that choose to offer a Medicareprescription drug program. Plans that provide Medicare prescription drug coveragewill receive an separate additional payment. Table 6. Total Non-Drug Payments to MARegional Plans for Required Part A and B Services, Starting in2006 Source : The Congressional Research Service (CRS) analysis of MMA provisions. a. The Secretary must adjust payments to regional MA plans to ensure that the sumof the payment from CMS and the Basic Beneficiary Premium do not exceedthe plan bid, adjusted for the demographic and health history risk factors ofplan enrollees and subject to intra-regional variation. b. The rebate to be paid to the plan, the beneficiary rebate, may only be used toprovide additional benefits, reduce cost sharing, or applied towards themonthly Part B premium, prescription drug premium, or supplementalpremium (for services beyond required Medicare benefits). Payments for MA Plans and FFS Premiums in Cost Containment Areas Beginning in 2010, the Secretary will establish a program for the applicationof comparative cost adjustment (CCA) in CCA areas. The six-year program willbegin January 1, 2010 and end December 31, 2015. The program is designed to testdirect competition among local MA plans, as well as competition between local MAplans and fee-for-service Medicare. This program will only occur in a limited number of statutorily qualifyingareas in the country. The Secretary will select CCA areas from among thoseMetropolitan Statistical Areas (MSAs), or such similar areas as the Secretaryrecognizes, which meet the following requirements for the relevant reference month: (1) at least 25% of MA eligible individuals who reside in the MSA were enrolled inan MA local plan; and (2) before the beginning of 2010, at least two MA local planswill be offered by different organizations in the MSA during the annual coordinatedelection period, each meeting the current law minimum enrollment requirements fora plan. The total number of CCA areas will be the lesser of six MSAs or 25% of thenumber of MSAs meeting the requirements. Additionally, an MA local area (acounty) in an MSA will be excluded from the CCA area, if, in 2010 it does not offerat least two MA local plans, each offered by a different MA organization. If an MAlocal area meets the requirement for 2010 it will continue to be included in the CCAarea for subsequent years, even if it no longer meets the requirements as long as thereis at least one MA local plan offered in the local area. The benchmark for MA local plans in a CCA area will be calculated using aformula that weights the FFS portion and a local plan portion, described below. TheFFS portion is based on the projected FFS amount for the area, with certainadjustments for demographics and health status. The local plan portion is based ona weighted average of bids for plans in the area. For Medicare beneficiaries in FFS, Part B premiums in CCA areas will beadjusted either up or down, depending on whether the FFS amount is more or lessthan the CCA area benchmark. If the FFS amount is greater than the benchmark,beneficiaries in traditional Medicare FFS will pay a higher Part B premium than otherFFS beneficiaries in non-CCA areas. If the FFS amount is less than the benchmark,the Part B premium for FFS beneficiaries will be reduced by 75% of the difference.These increases and decreases are subject to a 5% limit, that is, adjustments to PartB premiums in CCA areas cannot exceed 5% of the national part B premium.Beneficiaries in traditional Medicare FFS with incomes below 150% of poverty, whoqualify for low-income subsides under the Medicare prescription drug program, willnot have their Part B premium increased. Calculation of the "Comparative Cost Adjustment (CCA) Benchmark Amount Beginning in 2010, the CCA non-drug monthly benchmark amount will becalculated according to the following formula, for a CCA area for a month in a year. 1. The MA local component is calculated as follows, for an area in a year: a. The weighted average (20) of the MAplan bids is equal to the sum (across each of the MA local plans for the area) ofthe calculations for the following formula: (the accepted unadjusted MAstatutory non-drug monthly bid) x (number of individuals who reside in the area andwho were enrolled under the plan during the reference month for that year/totalenrollees for all MA plans for that area and year, for plans offered in the CCA in thereference month). b. The MA (non FFS) market sharepercentage is the proportion of MA eligible individuals who, during the referencemonth, were enrolled in an MA plan, or if greater, the same proportion determinedon a national basis. 2. The FFS component is calculated as follows, for an area in a year: a. The FFS area-specific non-drug amount is the adjusted average per capita cost, which is risk adjusted and alsoexcludes direct graduate medical education and includes the additional payments thatwould have been made if Medicare beneficiaries entitled to benefits from facilitiesof the Department of Veteran Affairs (VA) and the Department of Defense (DOD)hadn't used those services. b. The FFS market share percentage iscomplement of the MA market share percentage (1- MA market share percentage). It is the proportion of MA eligible individuals who, during the reference month, were not enrolled in an MA plan, or if greater, the same proportion determined on anational basis. Plans not offered in the previous year are excluded. The Secretary willcompute the benchmark for each CCA area before the beginning of each annualelection period, beginning in 2010 and continuing until the end of the program. TheCCA program will be phased-in over four years, so that in 2010 only one-fourth ofthe benchmark will be based on the CCA benchmark and three-fourths of thebenchmark will be calculated in the same manner as the benchmark for local MAplans. By 2013, the benchmark will be 100% CCA. Payments to MA Plans for Part D Medicare Prescription Drug Benefits Beginning in June 2004, MA plans could begin offering Medicare-endorseddrug discount cards, that were effective in July 2004, to their own enrollees throughthe newly established drug discount card program under MMA. The cards canprovide discounts on drug prices even if the plan does not have a drug benefit, or ifthe plan benefit cap is reached. Beginning in 2006, MA plans may, but are not required to, offer Part Dprescription drug coverage. Furthermore, enrollment in Part D is voluntary and asa result, beneficiaries who chose to enroll in MA plans will not be required to enrollin an MA-Prescription drug (MA-PD) plan. However, the requirements placed onMA plans could lead to a situation in which the only MA plans available in an areaare those offering prescription drug coverage. At least one plan offered by an MAorganization in an area is required to be an MA-PD plan, one that offers Part Dprescription drug coverage. Therefore, if only one organization offers an MA planin an area and it offers only one plan, that plan would have to be an MA-PD and thebeneficiary would have to enroll in Part D in order to enroll in an MA plan. In thissituation, a beneficiary who did not want to enroll in Part D would have to receiveMedicare services through traditional FFS Medicare. If an MA organization offersmore than one plan in an area, only one is required to provide Part D prescriptiondrug coverage. Each organization in an area is subject to this standard, so that evenif there are multiple plans in an area, each organization must offer at least one planthat includes prescription drug coverage. MA-PD plans will receive drug subsidies, for their enrollees. MAorganizations offering prescription drug coverage will receive a direct subsidy foreach enrollee in an MA-PD plan equal to the plan's risk adjusted standardized bidamount (reduced by the base beneficiary premium). The plan will also receive thereinsurance payment amount (21) for the federal share. Finally, an MA-PD planwill also receive reimbursement for premium and cost-sharing reduction for itsqualifying low-income enrollees. Beneficiaries who enroll in a plan offering Part D, must pay the standard PartD premium. However, MA-PD plans offering a rebate, may use all or part of thatrebate as a credit toward the MA monthly prescription drug beneficiary premium. The prescription drug programs offered through MA plans have the potentialto be very different than coverage offered to FFS beneficiaries, and as a result, costsand/or enrollment in MA plans could be affected. Plans might be able to decreasecosts or increase services, thus becoming a more attractive benefit, for the followingreasons: (1) MA plans that currently offer prescription drug coverage will have moreexperience working with Medicare beneficiaries and may be more efficient; (2) MAplans could augment funds they already use for prescription drugs and offer moregenerous coverage than the standard benefit; (3) MA plans could also transfer their"old" prescription drug money to offer other services; and (4) MA plans cover PartsA and B benefits and may therefore be able to realize some savings (which could bepassed onto the beneficiary), such as reduced hospitalization, from Medicare'sprescription drug coverage. On the other hand, enrollment in MA plans coulddecrease if beneficiaries move from MA plans to FFS, once they can receiveprescription drug coverage without the restrictions of a more limited providernetwork. Conclusion The MMA made many substantial changes to the Medicare managed careprogram, ranging from increasing funds to creating a new regional program. By2010, a limited number of geographic areas will be selected to examine enhancedcompetition among local MA plans and competition between private plans and FFSMedicare. These changes are designed to increase private plan participation inMedicare and thus provide more Medicare beneficiaries with an alternative to FFScoverage. The M+C program had difficulty meeting similar goals and the MMAchanges were designed to address some of these problems. As the major programchanges in MA will not take effect until 2006, it will take a few years, at a minimum,to determine the success of these changes. Part of the success will depend onwhether private plans are receptive to providing services in accordance with thesenew statutes.

Medicare has a long-standing history of offering its beneficiaries managed care coveragethrough private plans as an alternative to the traditional fee-for-service (FFS) program, in which apayment is made for each Medicare-covered service provided to a beneficiary. Beginning in the1970s, private health plans were allowed to contract with Medicare on a cost-reimbursement basis. In 1982, Medicare's risk contract program was created, allowing private entities, mostly healthmaintenance organizations (HMOs), to contract with Medicare. Then, in 1997, Congress passed theBalanced Budget Act of 1997 (BBA, P.L. 105-33 ), replacing the risk contract program with theMedicare+Choice (M+C) program. Most recently, Congress passed the Medicare Prescription Drug,Improvement and Modernization Act of 2003 (MMA, P.L.108-173 ) which included provisions tocreate the Medicare Advantage (MA) program offering a variety of managed care options forMedicare beneficiaries. The MA program replaces the M+C program. The newly created MA program offers a new payment structure and provides more optionsthan its predecessor, the M+C program. In addition to the immediate payment increases to plans,beginning in 2006, the MA program will change the payment structure and introduce regional plansthat operate like Preferred Provider Organizations -- a popular option in the private health insurancemarket. The MA program provides financial incentives for plans to participate in this new regionaloption. Additionally, in 2006, beneficiaries will have access to a Medicare Part D prescription drugplan whether they are in fee-for-service Medicare or enrolled in Medicare managed care. Finally,beginning in 2010, for a six-year period, a limited number of geographic areas will be selected toexamine enhanced competition among local MA plans and competition between private plans andFFS Medicare. This report focuses on MA payments. For a discussion on the effect of the MMA onMedicare managed care, see CRS Report RS21761 , Medicare Advantage: What Does It Mean forPrivate Plans Currently Serving Medicare Beneficiaries? This report will be updated as necessaryto reflect significant changes to the program.

CRS_RS21685

RS21685 -- Coup in Georgia [Republic]: Recent Developments and Implications Updated December 4, 2003 Background (1) Former President Eduard Shevardnadze had led Georgia since 1972, except for 1985-1992, during which he primarily served as the pro-Western foreignminister of the Soviet Union. Shevardnadze's constitutional limit of two terms in office expired in 2005, whichmade the November 2, 2003, legislativeelection a critical bell-weather of who might succeed him. Nine party blocs and twelve parties contested 150legislative seats in a party list vote, and another 75seats were contested in single constituencies. Shevardnadze's party, the Citizens' Union of Georgia (CUG), had become deeply unpopular as economic conditions failed to noticeably improve. Tostrengthen its chances in the election, in April 2003 the CUG formed an alliance termed "For a New Georgia" (FNG)with other pro-Shevardnadze parties. Three opposition parties that had split from the CUG contested for seats: the National Movement (led by formerJustice Minister Mikhail Saakashvili); theUnited Democrats (led by former Speaker Zurab Zhvania and Speaker Nino Burjanadze); and the businessmen-ledNew Right Party. Other major partiesincluded the Revival Party (led by Ajaria's regional leader Aslan Abashidze), and the populist Labor Party. Campaigning tended to focus on personal attacksrather than ideology or platforms. Saakashvili called for forcing Shevardnadze to resign, raising pensions andwages, taxing the rich, and fighting corruption. Abashidze also criticized Shevardnadze's policies, but some observers speculated that Revival and FNG had covertlyformed an alliance (Center for Strategicand International Studies, Caucasus Election Watch , Oct. 27). The pro-Shevardnadze and oppositioncamps both appealed to nationalism by accusing eachother of selling out Georgia's sovereignty to Russia. Post-Election Crisis The observer mission of the Organization for Security and Cooperation in Europe (OSCE) reported on November 3 that the electoral processes appearedsomewhat more democratic than in the past, but still did not meet the standards of a free and fair election. It mainlyfocused on problems with voters' lists, butalso mentioned ballot box-stuffing in Ajaria and some districts. It also raised concerns that pro-government partymembers dominated district and precinctelectoral commissions and that Ajaria carried out its own electoral processes virtually independently and blockedmost opposition party campaigning in theregion. Ajaria's announcement on November 6 of its large vote for Revival seemed to overwhelm and marginalize the partial vote counts being announced for theopposition parties, galvanizing their resistance to Shevardnadze. Voter turnout in Ajaria was reportedly 98%, ofwhom 95% endorsed the Revival Party. These results meant that Revival would be a major force in the legislature, which was unacceptable to those whofelt that Ajaria's vote tally was a sham. TheDutch ambassador to the OSCE reportedly stated later that the "gross manipulation" of the vote in Ajaria was theworst of the irregularities in the election ( AP ,Nov. 26). Opposition leaders broke off negotiations with Shevardnadze on November 9, after he refused theirdemand to hold a new election. To displaysupposed mass support for the election results, the next day he traveled to Ajaria to address an assembled crowdof ostensible supporters, and Abashidze senthundreds of police and other supporters to Tbilisi to march in support of the election. Final electoral results were announced on November 20. The FNG bloc won the highest percentage of the party list vote, 21.3%, and Revival the secondhighest, 18.8%, prospectively giving the pro-Shevardnadze forces the largest share of seats. The NationalMovement received 18.8% of the party list vote, theLabor Party 12%, the United Democrats 8.8% and the New Right 7.8% of the vote. In single constituencies,FNG-affiliated or independent (but probablypro-presidential) candidates won the largest number of seats. Unlike the other opposition parties, New Right didnot challenge the electoral returns and did notjoin opposition street protests. The crisis deepened in Georgia following the announcement of final vote counts, with major demonstrations in the capital by pro-presidential Ajarian policeand opposition supporters prominently led by Saakishvili, who demanded Shevardnadze's resignation and newelections. Protestors were galvanized by pollsbefore and during the election (conducted with the guidance of U.S. and British NGOs) that indicated that theNational Movement and the United Democratscould each expect over 20% of the vote. Georgians also were motivated by extensive coverage of the election bythe independent Rustavi-2 television station. Saakashvili eschewed violence, urging his followers to emulate the peaceful protesters who helped oust formerYugoslav dictator Slobodan Milosevic in 2000. Georgian activists over the past few months had closely conferred with democracy advocates in Serbia on campaignand demonstration tactics ( WashingtonPost , Nov. 25). Although many in Georgia at first viewed Shevardnadze's role in the suspect vote count as uncertain, they saw his bid for support from Abashidze and defenseof the results as indicating that he at least condoned, if not orchestrated, the suspect tally ( FBIS , Nov.22, Doc. No. CEP-16). Shevardnadze hurriedly convenedthe rump legislature on November 22 (National Movement and the United Democrats boycotted the session), buthe was chased from the podium whendemonstrators broke into the chamber. Burjanadze announced that she was assuming the presidency pendingelections. Shevardnadze declared emergency rule,but cautioned his security forces not to use force. In an ultimatum delivered to the protestors the next day,Shevardnadze insisted that the new legislature hadconvened, replacing the old, and was now the supreme representative body. However, he seemingly offered todiscuss moving up the date for new legislativeand presidential elections. Shevardnadze's Ouster. Russian Foreign Minister Igor Ivanov mediated between opposition leaders andShevardnadze on the evening of November 23 in the face of Saakashvili's threat to storm the president's residence. Reportedly with U.S. concurrence, Ivanovstressed to Shevardnadze that he should not risk civil war by resorting to force against the opposition, but shouldnegotiate a settlement, presumably to includenew legislative elections ( Washington Post , Nov. 25; see below for an alternative explanation). Alsocritical to Shevardnadze's decision to resign were reportsthat top defense, security, and internal (police) officials -- whom Shevardnadze stated he would rely on to suppressthe protests -- told him that they would notaccept such orders. Faced with this lack of support, Shevardnadze and the opposition leaders reached agreementon his resignation. Saakashvili hailed thiscoup a "rose revolution" to signify that it had not been violent. In a speech to the country on November 24, acting president Burjanadze called for order to be re-established and for presidential elections within aconstitutionally-mandated 45 days. She directed that the prorogued 1999 legislature would resume its work untilnew legislative elections could be held. Shequickly met with security officials, and Tedo Japaridze (who broke with Shevardnadze during the crisis) wasconfirmed as secretary of the presidential SecurityCouncil (composed of the heads of the security ministries). He later was named foreign minister. She also declaredthat Georgia would continue its existingforeign policy aimed at integration with Europe and NATO. The Georgian Constitutional Court the next day lentsome legitimacy to the coup and plans fornew elections by ruling that the November 2 election was a fraud. On November 26, the three opposition leaders announced their plans for sharing power, with Burjanadze stating that her party would back Saakashvili forpresident. She appointed Zhvania the minister of state (the top executive branch office under the president), butrecommended that the constitution be changedto give the office more power. Saakashvili, in turn, stated that the opposition hoped to sweep both the presidentialand legislative elections, and that Burjanadzewould top the party list, perhaps assuring that she would become the speaker of a new legislature. Perhaps toalleviate some concerns raised among many ofShevardnadze's supporters by a statement by Burjanadze that investigations were being opened into electoralirregularities and that the guilty would bepunished, Saakashvili called for a unity government that would include all progressive Georgians of all parties, andpledged that no one in the old governmentwould be prosecuted. He called for the police to maintain order and for the military to suppress possible dissidentelements in its ranks. The Central Electoral Commission announced on December 2 that fifteen people had applied to gather signatures for the January presidential election. OSCEforeign ministers met in early December and pledged up to $6 million to help administer presidential and legislativeelections (OSCE, Press Release , Dec. 2). Implications for Georgia According to most observers, the legislative race marked an extraordinarily determined struggle for power as a prelude to the presidential election in 2005. Ensconced and corrupt officials were determined to gain dominant legislative influence in order to maintain theirpower and to control the prospectivepresidential race, and the opposition parties were determined to block these efforts, in this view ( FBIS ,Nov. 25, Doc. No. CEP-274; Transitions Online , Nov.3). It was anticipated that the new pro-presidential legislature would elect a kindred politician as speaker, a crucialpost in the run-up to the 2005 presidentialrace. The speaker becomes the interim head of state in case the president resigns or dies. According to thisspeculation, Abashidze, with tacit Russian militarybacking, aimed to assume the speakership and perhaps later the presidency. All the political players in the crisis seemed intent on avoiding a repeat of the bloody 1992 coup that toppled independent Georgia's first president. The threeprincipal opposition leaders agreed on power-sharing and quickly moved to reaffirm or appoint able individuals tothe critical finance, foreign, and defenseministries. Nonetheless, some observers warn that there is no pre-eminent political figure behind which the countrycan rally, so factional disputes couldeventually lead to violence. Some observers argue that Saakashvili's personal volatility may not make him apresident able to unify and bring stability toGeorgia (Institute for Advanced Strategic and Political Studies, Policy Briefings , Nov. 19; TheDaily Telegraph , Nov. 24). Some observers warn thatindependent Georgia has witnessed frequent violence and uprisings by military and paramilitary groups. Saakashvili, concerned about rumors that reactionarygroups might be mobilizing, on November 28 urged the avoidance of bloodshed but also threatened that "we willdeal with [armed attacks] mercilessly" ( FBIS ,Nov. 28, Doc. No. CEP-282). If the prospective government receives a solid mandate as expected at the polls, it may receive the legitimacy and time it needs to implement changes that mightotherwise tax an impatient populace. The prospective government faces widespread poverty, official corruption,and separatism in its Abkhazia and SouthOssetia regions. Among the immediate domestic problems it must address are a budget deficit and rising crime. The new government also will need to carryout confidence-building with Ajaria, Abkhazia, and South Ossetia. Abashidze has asserted that Ajaria will notaccept orders from the interim government. Atthe same time, however, he has firmly stated that Ajaria will not formally secede. South Ossetia has re-emphasizedthat it wants to join Russia. The prospective government must also reassure its neighbors. Azerbaijan's President Ilkham Aliyev, who had just won a controversial election himself,supported Shevardnadze during the crisis and has appeared cool toward the interim leadership. Japaridze met withAliyev in late November to pledge thatexisting cooperation would continue. Armenia, which depends on energy from Russia that transits Georgia, calledfor peaceful elections and economic reformsthat would bolster regional trade. Russia's Ivanov made clear that Russia was not happy that the coup had occurred,but accepted it and would pursue closestrategic ties with Georgia. He also stated that Russia was concerned that "outside pressure" had contributed to thecoup ( ITAR-TASS, Nov 25; Nov. 26). According to some observers, Putin was critical of the coup because it appeared to negate the added influence thatRussia would have gained throughAbashidze's increased power. But he also accused Shevardnadze of bringing on his own downfall by failing tomaintain "traditional" close ties to Russia or toprotect, he seemed to imply, the legacy of Soviet-style economic and political rule ( FBIS , Nov. 24, Doc.No. CEP-252; Nov. 25, Doc. No. CEP-141). Ivanovmet with several CIS foreign ministers on November 25, and they seemed to accept the change of government inGeorgia, but pointedly called fornoninterference by "outside powers" (seemingly referring to U.S. interests) in Georgia's domestic affairs( ITAR-TASS , Nov. 25). Implications for U.S. Interests According to the State Department, "Georgia plays a key role in furthering U.S. interests" in the Caspian region. Georgia cooperates in the war on terrorismand is a "key conduit" for Caspian oil and gas pipelines to Western markets, thereby increasing the diversity of worldenergy suppliers. The United States seeksto strengthen civil society and the rule of law in Georgia, and provides military assistance to combat terrorism,secure borders, and enhance participation inNATO's Partnership for Peace and interoperability with U.S. and coalition forces ( Congressional BudgetJustification for FY2004 ). Congress has earmarked orallocated $1.1 billion in aid to Georgia (among the highest for Eurasia in per capita terms) over the period1992-2002 to buttress these goals. The StateDepartment on November 21 indicated that the Administration had spent $2.4 million to support a democraticelection on November 2. Most of the Georgianparties running in the November election endorsed cooperation with the United States on these goals, and the leadersof the acting government have reaffirmedthese goals. The Administration's assessment of the November election became more negative after the final results were announced. The U.S. State Department issuedstatements on November 20-21, 2003, expressing deep disappointment that "massive vote fraud" had taken place,and in the face of rising protests in Georgia,called for all sides to abjure violence. Secretary of State Colin Powell on November 22 encouraged Shevardnadzeto peacefully resolve the crisis, but did noturge him to resign or hold new elections, according to the State Department. After Shevardnadze resigned, Powellcalled to thank him for peacefully resolvingthe crisis and the State Department issued a statement praising Shevardnadze as a "towering figure in Georgia'shistory and a close friend of the United States,"and as contributing to freeing millions from Soviet communism. The United States quickly recognized Burjanadze as interim president, with Secretary Powell reportedly telephoning her on November 23 to offer U.S. supportand to urge that new elections be free and fair. Burjanadze reported that she talked with President Bush onNovember 26 and that he offered electoral aid andthat the United States "will guarantee Georgia's safety if the country is threatened." He also asked for and receivedassurances about Shevardnandze's personalsafety ( FBIS , Nov. 26, Doc. No. CEP-309). The European Union on November 24 also expressedsupport for the interim government and called for democraticelections. U.S. strategic interests in stability in Georgia seemed underlined by State Department spokesman Richard Boucher on November 25, when he announced thatseveral U.S. agencies would send advisors to the interim government to discuss aid for the upcoming elections andhelp in democratization. The next day, theWhite House announced that President Bush in his phone call to Burjanadze pledged continued U.S. support forGeorgia's sovereignty, independence, territorialintegrity, and democratic and economic reforms. On November 28, Burjanadze met with the head of the AzerbaijanInternational Oil Consortium (a group ofU.S. and other international energy firms that are developing Caspian offshore oilfields) and reassured him that theinterim government backed the completionof the pipeline. Georgia's interim government also has indicated that its peacekeepers will remain on duty withNATO in Kosovo and with the U.S.-ledcoalition in Iraq. The backgrounds of several of the new officials, including Saakashvili, who was educated in theUnited States, and Japaridze, the formerambassador to the United States, also appeared reassuring to many U.S. observers. Many oppositionists in Georgia hailed the U.S. censure of the November election as a major contribution to Shevardnadze's decision to resign. Otherscriticized the United States for not sending a top emissary to Georgia and instead depending on Russia to defusethe crisis. Some also were critical of what theyviewed as long-term U.S. efforts to prop up Shevardnadze's rule. Some pro-Shevardnadze supporters were highlycritical of what they viewed as U.S.indifference to -- if not active support for -- Shevardnadze's ouster. Shevardnadze lent credence to this view onNovember 26 when he ruefully questionedthe U.S. role, stating that "I was one of the biggest supporters of U.S. policy" ( The Daily Telegraph, Nov. 27; FBIS , Nov. 25, Doc. No. CEP-227; and Nov. 24,Doc. No. CEP-358). Some observers supposed that different U.S. groups may have operated at cross-purposes, withsome supporting the Shevardnadzegovernment and others the opposition parties ( FBIS , Nov. 24, Doc. No. CEP-142). Russian FederationCouncil head Mikhail Margelev on November 22seemed to suggest that the United States had criticized the election results without fathoming that this couldencourage Shevardnadze's overthrow ( Interfax ,Nov. 22; FBIS , Nov 22, Doc. No. CEP-148). Commentators varied widely on whether Shevardnadze's resignation would bolster U.S. or Russian influence in Georgia. Some viewed Shevardnadze'sputative "tilt" toward Russia as a feint to spur the United States to rush to his aid. One advocate of this view statedthat the coup amounted to the replacementof one pro-U.S. government by another that would be even more pro-American ( FBIS , Nov. 25, Doc.No. CEP-259). Such a government could press harder formore U.S. aid and for integration into Western institutions, including admission into NATO (Alexander Rahr, FBIS , Nov. 24, Doc. No. CEP-287). Othersargued that Shevardnadze's alliance with Abashidze threatened a strategic tilt toward Russia (Center for Strategicand International Studies, Caucasus ElectionWatch , Nov. 18). Supporting this view, a German analyst concluded that Russia was playing an increasingrole in Georgia that the West would have toaccommodate ( Hamburg Financial Times , Nov. 25). A third view is expressed by those who suggestthat both U.S. and Russian interests in Georgia couldsuffer if it becomes a harbor for terrorism or otherwise becomes more unstable, so that U.S.-Russian cooperationthere is essential (Dmitriy Trenin, FBIS , Nov.24, Doc. No. CEP-287). On November 27, Saakashvili appeared to endorse this perspective, arguing that Georgiashould seek security and economicassistance from both Russia and the United States. Zhvania too has argued for economic ties with both the UnitedStates and Russia.

This report examines the ouster of Georgia's President Eduard Shevardnadze in thewake of a legislative electionthat many Georgians viewed as not free and fair. Implications for Georgia and U.S. interests are discussed. Thisreport may be updated as events warrant. Seealso CRS Report 97-727, Georgia; and CRS Issue Brief IB95024, Armenia, Azerbaijan, andGeorgia, updated regularly.

CRS_R42653

Introduction and Overview1 Congress addresses numerous water issues annually. Issues range from responding to natural disasters, such as droughts and floods, to improving the nation's water resource and water quality infrastructure, and protecting fish, wildlife, and other aquatic resources. Many congressional committees address these issues and are involved in legislating, funding, and overseeing the water-related activities of numerous federal agencies. More than two centuries of such involvement have resulted in a complex web of federal activities related to water. As a result, Congress often faces challenges related to overlap and gaps in federal water resource activities and in coordination and consistency among federal programs. Further, many federal authorities are discretionary or funded by discretionary appropriations. Consequently, there can be a significant difference between what federal agencies are authorized to do and what they are doing, and no one committee in Congress oversees this dichotomy. The responsibility for development, management, protection, and allocation of the nation's water resources is spread among federal, state, local, tribal, and private interests. Despite multiple calls for the coordination of federal water-related activities, observers seldom focus on the origins of laws and policies authorizing myriad federal activities. The purpose of this report is to provide insight into the congressional involvement in establishing, overseeing, and funding federal water-related activities. Thus, the report focuses on the complexity of federal activities related to water. It aims to serve as a guide to federal water-related activities, including the administering agency (or agencies), the primary or overarching authorities for such activities, and House and Senate committee jurisdictions. In most cases, the primary authorities listed are authorizing statutes and accompanying U.S. Code citations; in some instances, constitutional or other authorities are provided. This analysis does not cover every aspect of federal water policy. Instead, the authors have attempted to address the major federal activities authorized by Congress that affect water resource development, management, protection, and use in the United States. Similarly, this analysis does not cover every aspect of House and Senate committee jurisdiction affecting water issues. For definitive evaluation of committee jurisdictions related to water, the views of the House and Senate Parliamentarian Offices are official. Lastly, programs known to have expired and for which reauthorization legislation is pending may be noted; however, given the breadth of the report and constant executive and legislative branch activity, it is not possible to provide comprehensive status reports for all entries. Selected Federal Water Activities: Agencies, Authorities, and Congressional Committee Jurisdictions The federal government has been involved in water resources development since the earliest days of the nation's creation. Congress first directed water resource improvements to facilitate navigation, then to reduce flood damages and expand irrigation in the West. For much of the 20 th century, the federal government was called upon to assist and pay for a multitude of water resource development projects—large-scale dams such as Hoover and Grand Coulee, as well as navigation locks throughout the country's largest rivers. In recent decades, Congress has enacted legislation to regulate water quality; protect fish, wildlife, and threatened and endangered species; manage floodplain development; conduct research; and facilitate water supply augmentation via support for water reclamation and reuse facilities and desalination. Congress maintains an active role in overseeing implementation of this legislation, as well as enacting new laws and appropriating funding for water resources activities. Specific federal water laws have been enacted for the diverse purposes noted above. Development and implementation of these laws have involved the action of numerous congressional committees and federal agencies. At the congressional level, this action has resulted in a set of diverse and sometimes overlapping committee jurisdictions dealing with various aspects of water policy and addressing the interests of differing constituencies. At the executive branch level, this has resulted in many agencies and organizations being involved in different and sometimes overlapping aspects of federal water policy. The activities identified in this report fall into the jurisdiction of numerous congressional standing committees (and generally exclude appropriations and other committees in the relevant chambers that deal with banking, taxes, and finance issues.) Similarly, the activities identified in this report are addressed in some form by many federal executive branch agencies. Report Organization The following tables describe federal water-related activities and programs in the United States and identify the primary administering federal agency(ies), primary authorities, and examples of congressional committees of jurisdiction for each agency activity or program. The tables are arranged under broad areas, subtopics, and topic terms. The four areas covered by the report are as follows: Water Resources Development, Management, and Use ; Water Quality, Protection, and Restoration ; Water Rights and Allocation ; and Research and Planning . Each thematic area begins with a brief introduction and is followed by a table(s) of relevant agencies, activities and programs, and House and Senate committees of jurisdiction. Each table covers more focused areas of water issues—subtopics—based on agency function and the historical development of federal water programs. In organizing these tables, a series of topic terms was developed under which both members of the general public and those more familiar with water policy might categorize federal water-related activities. These topic terms were determined by the CRS analysts and legislative attorneys involved in developing the report. The "Water Resources Development, Management, and Use" theme includes subtopics that relate to supply and reservoir development, drought and flood management, hydropower, and navigation. The "Water Quality, Protection, and Restoration" theme addresses issues relating to water quality and aquatic resources protection and management, including selected regional aquatic ecosystem restoration authorities. The "Water Rights and Allocation" theme addresses water allocation and interstate compacts, river basin commissions, federal reserved water rights, and tribal water rights. The "Research and Planning" theme includes subtopics related to research and data collection, such as water cycle and climate change research, water-related technologies, and watershed planning. Significant overlaps occur both within and among the different categories. This analysis generally excludes marine or ocean issues and international and boundary water issues, except for jointly managed dams at the U.S.-Mexican border and Environmental Protection Agency (EPA) programs along the U.S.-Mexican border. Additionally, Congress has established various economic development programs that include water supply and/or treatment projects among the categories of purposes eligible for federal assistance; however, this report does not include programs for which water-related activities are not the major focus. Also excluded are broad environmental remediation or waste management statutes, such as the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and the Solid Waste Disposal Act. Water activities affecting Indian tribes are also not uniformly addressed in the accompanying tables but instead are covered where they are known to interact with broader federal agency water-related programs and activities, such as water supply development and water quality infrastructure. Because federal environmental laws, such as the Endangered Species Act and the National Environmental Policy Act, apply to all federal agencies, federal agency activities under those laws are not identified in this report. Appendix A discusses considerations in determining House and Senate committee jurisdictions and provides an example of the complexity in water topics and jurisdictional coverage. Appendix B and Appendix C present the official language from House Rule X and Senate Rule XXV, respectively, as indicators of congressional jurisdiction over water resources. Both the House and the Senate tables also address subcommittee jurisdiction, and the Senate table provides information on executive branch nominations handled by Senate committees. Appendix D provides a glossary of abbreviations for federal agencies and House and Senate committees. Program abbreviations generally are spelled out where they first occur in each table. In sum, the nine tables that make up the body of the report define water based on the topic terms determined by CRS. These tables underscore the intricacy of the federal programs affecting water resource development, management, protection, and use in the United States. As apparent throughout the tables, numerous standing committees in the House and Senate have jurisdiction over various components of federal water policy; moreover, committees listed here generally exclude the extensive responsibilities of the appropriations committees in both chambers, as well as the direct and indirect activities of other committees in the relevant chambers that deal with banking, taxes, and finance issues. Water Resources Development, Management, and Use Historically, the federal government played a large role in development of the nation's water resources—in particular constructing large water resource infrastructure projects (e.g., canals, locks, levees, and dams)—for navigation, flood damage reduction, and irrigation water supply in the West. The largest federal dams typically serve multiple purposes, including those noted above, as well as producing hydropower and providing water supplies for municipal and industrial uses. More recently, Congress has authorized activities and programs to augment water supplies via water conservation programs, including groundwater recharge (aquifer storage and recovery), and water reclamation and reuse programs, including desalination. This section focuses on federal activities related to water resource development, management, and use and includes three tables: Table 1 lists activities related to water supply and reservoir development and includes topic areas such as dams and dam safety; general water supply development; groundwater supply; irrigation assistance; rural water supply; water conservation; and water reclamation, reuse and desalination. Table 2 lists activities related to drought and flood management and includes topic areas such as drought planning, mitigation, and response; emergency flood response; flood damage reduction; and flood mitigation. Table 3 lists activities related to hydropower and navigation and includes topic areas such as federal hydropower development; nonfederal hydropower development; and navigation. Water Quality, Protection, and Restoration Federal efforts to protect and improve water quality and water resources range from technical and financial assistance programs to help communities build sewage treatment and drinking water treatment works, to regulatory programs for preventing or controlling water pollution. Most federal programs focus on surface water quality, while states have a dominant role in matters related to groundwater protection. One exception is where Congress has authorized EPA to regulate the underground injection of fluids to protect underground sources of drinking water. In addition to protecting and improving water quality, Congress has enacted numerous bills to manage, protect, and restore aquatic ecosystems—including estuaries, and wetlands. Over the last 30 years, the United States has provided billions of dollars toward restoring some specific large aquatic ecosystems such as the Chesapeake Bay, the California Bay-Delta, the Everglades, and the Great Lakes. These ecosystems cover large areas and affect millions of people. Ecosystem restoration in a policy context has gone beyond just restoring the natural environment, and now encompasses other objectives such as improving water supply and conveyance, improving navigation, managing natural resources, and implementing watershed management plans. Ecosystem restoration legislation can be intricate and involve several agencies, and therefore involve multiple committees. Fisheries management and oversight of aquaculture also involve many committees. Generally, Congress has acted where interstate issues arose (e.g., pollution of rivers), where significant gaps in protection existed among the states (drinking water quality), where funding needs were related to federal mandates (various water infrastructure funding programs), or where other national interests were perceived (e.g., conservation of agricultural lands and fisheries, and preservation of wild and scenic rivers). This section focuses on federal activities related to water quality in general, and regional aquatic resource protection and restoration efforts. The section includes two tables: Table 4 lists activities related to surface water quality, drinking water quality, groundwater quality, source water protection, nonpoint source pollution, and wastewater and drinking water quality infrastructure. Table 5 lists activities related to aquaculture, aquatic ecosystem protection and restoration, coastal zones and estuaries, fisheries, invasive species, wetlands, and wild and scenic rivers. Water Rights and Allocation Although water rights and allocation traditionally are issues that are regulated by states, the federal government retains significant authority related to federal water resources management and federal water rights. Congress has broad authority under the Commerce Clause of the U.S. Constitution to regulate interstate waterways and promote navigation throughout the nation's waterways. Accordingly, though rarely exercised, Congress may allocate interstate waters directly. Alternatively, Congress may defer to states to reach an agreement (i.e., interstate compact) on the allocation of water in an interstate dispute, but Congress generally must provide its consent to such a compact before it may take effect. Congress also has provided for the establishment of river basin commissions, which typically include representatives from basin states and any relevant federal agencies. In 1908, the U.S. Supreme Court recognized the creation of federal reserved water rights. The Court explained that when Congress creates an Indian reservation, it also implicitly reserves the water necessary to fulfill the purposes for which the reservation was established. These rights, sometimes referred to as tribal water rights, are often senior to other water users' rights but typically are not quantified, which may lead to extensive litigation between tribes and other water users or settlement agreements that must be approved by Congress. The Court later held that the principle of reserved rights extended not only to reservations for tribal land but also to reservations for other federal purposes, including national forests, wildlife refuges, national parks, wild and scenic rivers, etc. Thus, congressional proposals to make additions to these systems implicate federal authority related to water resources. Many federal laws also indirectly affect water allocation and use. For example, the development of dam and diversion facilities over time has favored certain purposes or uses over others. Such development has sometimes resulted in unintended consequences, including in some cases, over allocation of water supplies. Implementation of laws aimed at addressing water quality and threatened and endangered species (e.g., the federal Clean Water Act and Endangered Species Act ) may indirectly or directly affect water allocation. However, because such laws—like many other federal laws—are primarily related to federal project operations, they are not included in this section. Table 6 lists activities related to water allocation and includes such topic areas as water allocation generally and river basin commissions. Table 7 lists activities related to water rights and includes such topic areas as federal reserved water rights and tribal water rights. Research and Planning Federal water research and planning authorities are spread across numerous federal agencies, and the congressional committees with oversight roles and responsibilities are also numerous. This division derives in part from the distinct roles that water plays in relation to each of these agencies' missions and the committees' jurisdictions. The evolution of federal water research authorities and planning activities generally mirrors the development of the water-related agencies and authorities discussed in earlier sections of this report. Federal water research and planning began largely to support the development of navigation, flood control, and storage of water for irrigation. The 1960s saw federal research and planning expand to include reducing pollution problems. Efforts to coordinate water research and planning in the 1960s and 1970s were undertaken as part of broader efforts to coordinate federal water activities. Administrations of the 1980's and 1990's asserted a more limited federal role in water research and planning. Federal water planning was scaled back primarily to support federal projects and activities. Federal research funds were focused on topics closely connected to helping federal agencies meet their missions and to address problems beyond the scope of the states and private sector. One result has been that federal research in recent decades has principally supported regulatory activities (e.g., water quality research and monitoring of aquatic ecosystem and species), while federal research promoting economic growth through water development has decreased. In the last two decades, new technologies and data (e.g., water-related satellite and radar data) and concerns (e.g., climate trends, species decline, ecosystem health) have prompted both the involvement of new agencies and programs in federal water research and the expansion of authorities and topics covered by traditional water agencies. This section focuses on federal authorities related to water research and planning and includes two tables: Table 8 lists authorities related to general water research; research on use, supply augmentation, efficiency, and engineering works; monitoring, data, and mapping; water resource assessments; water cycle, drought, and climate change; and water quality and treatment. Table 9 lists authorities related to planning for water development projects, watersheds, and water quality. While these two tables are not exhaustive, they represent the cross-section of federal research and planning authorities. Appendix A. Committee Jurisdiction Determining Committee Jurisdiction Committee jurisdiction is determined by a variety of factors. Paramount are House Rule X and Senate Rule XXV, which designate the subject matter within the purview of each standing committee. House Rule X and Senate Rule XXV, however, are both broadly written and the product of an era in which governmental activity was not as extensive, and relations among policies not as common or intertwined as now. Due to topic omissions and a lack of clarity, as well as overlaps among committees in areas of jurisdiction, the formal provision of the rules is supplemented by an intricate series of precedents and informal agreements governing the referral of legislation. In general, once a measure has been referred to a given committee, it remains the responsibility of that committee; if the measure is enacted into law, amendments to the law are presumed to be within the originating committee's responsibility. Relatedly, bills which are more comprehensive than the measure they amend or supersede are presumed to be within the jurisdiction of the committee reporting the more comprehensive measure. The resultant accretions of subject responsibility greatly broaden the range or shift the scope of jurisdictional subjects assigned to each committee. Several other factors also should be considered in determining committee jurisdiction, although these are not formal or even acknowledged in rules or precedents. These factors may include the expertise of a measure's sponsor, the timing of a bill, or the appropriations subcommittee that considers appropriations requests for the program authorized. Subcommittees are not officially authorized in either the rules of the House or the Senate. Subcommittees are creatures of the full committee that established them. Accordingly, determining official subcommittee jurisdictions is imprecise. Therefore, although some information regarding subcommittee jurisdiction is included in Appendix B and Appendix C , information on subcommittee jurisdiction is not uniformly provided in this report. The subcommittees listed in Appendix B and Appendix C reflect the framework established for the 115 th Congress. House Referral In 1974, with the adoption of the Committee Reform Amendments, the House authorized the Speaker to refer measures to more than one committee, in a joint, split, or sequential manner. In 1995, with the rules changes adopted in the 104 th Congress, the Speaker could no longer refer measures jointly; he was authorized instead to designate a primary committee. Split and sequential referrals were still allowed. Further, the Speaker could impose time limitations on any committee receiving a referral. In 2003, with the rules changes adopted in the 108 th Congress, the Speaker was authorized to refer measures to more than one committee without designation of a primary committee under "exceptional circumstances." Senate Referral A measure introduced in the Senate, or passed by the House and sent to the Senate, will likely be referred to a Senate committee. Measures are referred to Senate committees in accordance with their official jurisdictions in Senate Rule XXV, and precedents established by prior referrals. A series of formal agreements among committees over time also can supplement Rule XXV, and generally are regarded as setting precedent for future referrals. Ad hoc agreements may be made to govern the consideration of particular measures, but these are not binding on future referrals. Referral of measures is formally the responsibility of the presiding officer of the Senate, but in practice the Senate parliamentarian advises on bill referrals. Under Senate Rule XVII, in general each measure is referred to a single committee based on "the subject matter which predominates" in the legislation. Predominance usually is determined by the extent to which a measure deals with a subject. However, there appear to be exceptions; most notably, a measure containing revenue provisions is likely to be referred to the Committee on Finance, even where the subject does not appear to predominate. Individual Jurisdictional Issues This section briefly discusses an example of water issues that are either within the jurisdiction of more than one committee or contested among committees. If the issue is clearly within the purview of one panel, it is not addressed in this section. Jurisdiction over Dams and Land Necessary for their Development House Rule X identifies several committees to which bills authorizing federal dam construction might be referred. The Natural Resources Committee has jurisdiction over "irrigation and reclamation, including water supply for reclamation projects, and easements of public lands for irrigation projects, and acquisition of private lands when necessary to complete irrigation projects." As such, it has jurisdiction over most activities of the Bureau of Reclamation (Department of the Interior). The Committee on Transportation and Infrastructure is responsible for "flood control and improvement of rivers and harbors ... public works for the benefit of navigation, including bridges and dams (other than international bridges and dams) ... water power." Consequently, most activities of the Army Corps of Engineers fall under the jurisdiction of the House Transportation and Infrastructure Committee. The Committee on Agriculture has jurisdiction over "water conservation related to activities of the Department of Agriculture." Senate Rule XXV also identifies several committees for which bills authorizing federal dam construction might be referred. The Energy and Natural Resources Committee has jurisdiction over "hydroelectric power, irrigation, and reclamation projects," and, hence, most activities of the Bureau of Reclamation; whereas, the Environment and Public Works Committee (EPW) has jurisdiction over "public works, bridges, and dams" and "flood control." Consequently, EPW has jurisdiction over most activities of the Army Corps of Engineers. Additionally, the Agriculture, Nutrition and Forestry Committee has jurisdiction over "soil conservation ... food from fresh waters ... rural development, rural electrification, and watersheds." As is shown in Table 1 , multiple committees in each chamber are principally involved in jurisdiction over dams, which is not readily apparent from perusal of the rules language alone. Private dams must be licensed by the Federal Energy Regulatory Commission, which is under the jurisdiction of the House Energy and Commerce and the Senate Energy and Natural Resources committees. Further, several different executive branch departments and agencies are responsible for implementing the laws under the jurisdiction of these committees. This arrangement complicates management of river systems and resources comprising large watershed areas where multiple federal dams are present, such as the Columbia and Colorado River Basins, and the Sacramento and San Joaquin Rivers' delta confluence with San Francisco Bay, and even smaller systems, especially where anadromous fisheries (fish that live in both freshwater and marine environments) are found. Appendix B. House Rule X Language Table B-1 includes official excerpts from House Rule X. Appendix C. Senate Rule XXV Language Table C-1 includes official excerpts from Senate Rule XXV. Appendix D. Glossary of Abbreviations

Congress addresses numerous issues related to the nation's water resources annually, and over time it has enacted hundreds of water-related federal laws. These laws—many of which are independent statutes—have been enacted at different points in the nation's history and during various economic climates. They were developed by multiple congressional committees with varying jurisdictions. Such committees are involved in legislating, funding, and overseeing the water-related activities of numerous federal agencies. These activities include responding to natural disasters such as droughts and floods, conducting oversight over federal water supply management, improving water resource and water quality infrastructure, and protecting fish and wildlife. More than two centuries of federal water resource activity have resulted in a complex web of federal involvement in water resource development, management, protection, and use. As a result, Congress faces challenges related to overlap and gaps in federal water resource activities and in coordination and consistency among federal programs. Further, many federal authorities are discretionary or funded by discretionary appropriations. Consequently, there can be a significant difference between what federal agencies are authorized to do and what they are actually doing, and no one committee in Congress oversees this dichotomy. Although the responsibility for development, management, protection, and allocation of the nation's water resources is spread among federal, state, local, tribal, and private interests, this report focuses on federal activities related to water and the congressional committees that authorize and oversee these activities. The report covers multiple topics and individual water-related subtopics ranging from water supply and water quality infrastructure to fisheries management and water rights. The report is not exhaustive; instead, the authors have attempted to cover the major federal activities authorized by Congress that affect water resource development, management, protection, and use in the United States. Similarly, the analysis does not cover every aspect of House and Senate committee jurisdiction affecting water issues. For definitive evaluation of committee jurisdictions related to water, the views of the House and Senate Parliamentarian Offices are official. The report covers four general areas, or themes: (1) "Water Resources Development, Management, and Use"; (2) "Water Quality, Protection, and Restoration"; (3) "Water Rights and Allocation"; and (4) "Research and Planning." The sections addressing these themes are further divided into tables that list topic areas and individual water-related subtopics. For each subtopic, CRS has identified selected federal agencies and activities related to the subtopic, authorities for such activities, and relevant House and Senate committee jurisdictions, as specified in House and Senate rules. Appendixes address considerations in determining House and Senate committee jurisdictions and present the official language from House Rule X and Senate Rule XXV, respectively, which are indicators of congressional jurisdiction over water resources. The report also includes a glossary of abbreviations for federal agencies and House and Senate committees. The nine tables that make up the body of this report underscore the complexity of federal activities affecting water resource development, management, protection, and use in the United States. As apparent throughout these tables, numerous standing committees in the House and the Senate have jurisdiction over various components of federal water policy. The wide range of federal executive responsibilities for water resources reflects comparably complex congressional legislative responsibilities and directives.

CRS_R44571

C hief Justice Marshall of the U.S. Supreme Court defined a presidential pardon as "an act of grace, proceeding from the power entrusted with the execution of laws, which exempts the individual, on whom it is bestowed, from the punishment the law inflicts for a crime he has committed." Indeed, the President's power to pardon is descended from authority that had been vested in English kings since at least the eighth century, and has been described as a power "exercised from time immemorial by the executive of that nation whose language is our language and to whose judicial institutions ours bear a close resemblance." The exercise of executive clemency is an extraordinary remedy, as several thousand petitions are submitted each year to the President and few are granted. This report briefly reviews the historical underpinnings of the text of the Pardon Clause of the U.S. Constitution before delving into the types of pardons the clemency power includes, when pardons may be issued, and how pardons are granted. The remainder of the report analyzes the effect of a presidential pardon on collateral consequences, which are generally considered the post-sentence civil penalties or disqualifications that flow from a federal conviction. Because full presidential pardons are not often granted, also discussed in the report are some alternative ways in which a former federal felon may have his or her civil rights restored and certain legal disabilities removed absent a pardon. Lastly, the report covers what role, if any, Congress may play in defining the scope of the pardon power and its effect on collateral consequences. Pardon Power and Origins Article II, Section 2, Clause 1 of the Constitution provides the following: "The President … shall have Power to Grant Reprieves and Pardons for Offences against the United States, except in Cases of Impeachment." The language of the clause explicitly sets forth the limits of the federal pardon power. First, the pardon power is limited to "Offences against the United States," which prevents the President from intruding upon state criminal or civil proceedings. Second, the pardon power does not extend to "Cases of Impeachment," which prevents the President from interfering with Congress's power to impeach. The establishment of the pardon power in the Constitution was derived from English custom and the view of the Framers that "there may be instances where, though a man offends against the letter of the law … peculiar circumstances in his case may entitle him to mercy." Moreover, this power was properly vested in the President, according to Alexander Hamilton, as "it is not to be doubted that a single man of prudence and good sense, is better fitted, in delicate conjunctures, to balance the motives, which may plead for and against the remission of the punishment, than any numerous body whatever." In determining that the President should exercise the pardon power, the Framers further decided that minimal limitations should be placed on the power. For instance, the Framers rejected a proposal that the Senate have consent power over pardons, as well as Edmund Randolph's amendment that treason should be excepted from the pardon power. Types of Pardons But for the limitations articulated in the Constitution, the President's authority to grant pardons for federal offenses is essentially unfettered. The clemency power conferred upon the President gives him "plenary authority … to 'forgive' the convicted person in part or entirely, to reduce a penalty in terms of a specified number of years, or to alter it with conditions which are in themselves constitutionally unobjectionable." There are five specific types of clemency recognized under American law: (1) pardon; (2) amnesty; (3) commutation, or the substitution of a milder punishment for the one imposed by the court; (4) remission of criminal fines and forfeiture; and (5) reprieve or the temporary postponement of punishment. Pardon and amnesty are the broadest forms of clemency, and carry virtually identical effects under American law. Commutations are occasionally referred to as conditional pardons, but they do not have the same legal effect of a full pardon. As described by one court: "'Pardon' exempts from punishment, bears no relation to term of punishment and must be accepted or it is nugatory; while 'commutation' merely substitutes lighter for heavier punishment, removes no stain, restores no privilege, and may be effected without consent and against the will of the prisoner." With the exception of the section " How Pardons Are Granted ," which includes a discussion of standards for commuting sentences, this report discusses only full pardons, which may be unconditional or have conditions attached, as mentioned below. When Pardons May Be Issued The Supreme Court has stated that the pardon power "may be exercised at any time after [the commission of an offense], either before legal proceedings are taken, or during their pendency, or after conviction and judgment." Indeed, Presidents have exercised the pardon power quite freely, granting pardons to specific offenders for a broad range of crimes, some of which may stem from a series of related events. For example, President Jefferson pardoned all those convicted under the Alien and Sedition Acts. Presidents Lincoln and Johnson, after the Civil War, granted amnesty to anyone who assisted the Confederacy, on the condition that such recipients voluntarily take an oath to uphold the Constitution. In the modern era, President Ford issued a pardon to President Nixon "for all offenses … which he … has committed or may have committed or taken part in," precluding any prosecution of President Nixon related to the Watergate Scandal. Likewise, President George H. W. Bush granted "full, complete, and unconditional pardons" to several high-ranking officials who had either pleaded guilty, been convicted, or were facing trial for having made false statements to Congress in relation to the Iran-Contra affair. How Pardons Are Granted As a practical aid to the consideration of requests for presidential clemency, the Office of the Pardon Attorney within the Department of Justice (DOJ) is charged with accepting and reviewing applications for clemency, and preparing recommendations as to the appropriate disposition of applications. DOJ has issued regulations that set forth the process for persons "seeking executive clemency by pardon, reprieve, commutation of sentence, or remission of fine." The regulations provide that a petition for a pardon should not be filed "until the expiration of a waiting period of at least five years after the date of the release of the petitioner from confinement or, in case no prison sentence was imposed, until the expiration of a period of at least five years after the date of the conviction." After a petition for executive clemency is received, the Pardon Attorney conducts an investigation by employing the services of appropriate governmental agencies such as the Federal Bureau of Investigation (FBI). Subsequently, the Pardon Attorney presents the petition and related material to the Attorney General via the Deputy Attorney General, along with a recommendation as to the proper disposition of the petition. From there, the Attorney General reviews the petition and all related information, and makes the final decision as to whether the petition merits approval or disapproval by the President. A written recommendation is submitted to the President. Notably, DOJ's regulations on considering pardon petitions do not appear to impose rigid restrictions on the Pardon Attorney, but, rather, are identified as being advisory in nature. Courts have stated that these regulations are "primarily intended for the internal guidance" of DOJ personnel. Moreover, the process established by the aforementioned regulations does not have any binding effect, does not create any legally enforceable rights in persons applying for clemency, and does not circumscribe the President's "plenary power under the Constitution to grant pardons and reprieves" to any individual he deems fit, irrespective of whether an application has been filed with the Office of the Pardon Attorney. Standards for Granting Clemency DOJ has articulated its standards for reviewing pardon petitions. Factors taken into consideration include (1) post-conviction conduct, character, and reputation; (2) seriousness and relative recentness of the offense; (3) acceptance of responsibility, remorse and atonement; (4) need for relief; and (5) official recommendations and reports. With respect to reviewing petitions related to a commutation of sentence, DOJ's traditional position has been that it is an "extraordinary remedy that is rarely granted." Factors for commutation of sentence include "disparity or undue severity of sentence, critical illness or old age, and meritorious service rendered to the government by the petitioner, e.g., cooperation with investigative or prosecutive efforts that has not been adequately rewarded by other official action." Also taken into consideration is "the amount of time already served and the availability of other remedies (such as parole) are taken into account in deciding whether to recommend clemency." In April 2014, however, DOJ announced a new clemency initiative, where it announced six criteria the Department would consider when reviewing clemency applications for commutation of sentence. The Department announced that it would prioritize the clemency applications of federal inmates who meet the six factors. These factors are that the applicant (1) is currently serving a federal sentence in prison and, by operation of law, likely would have received a substantially lower sentence if convicted of the same offense(s) today; (2) is a nonviolent, low-level offender without significant ties to large-scale criminal organizations, gangs, or cartels; (3) has served at least 10 years of his or her prison sentence; (4) does not have a significant criminal history; (5) has demonstrated good conduct in prison; and (6) has no history of violence prior to or during his or her current term of imprisonment. An applicant who does not meet these criteria may still apply for commutation of sentence, but will be considered under the "standard principles" described above. Under this initiative, according to DOJ, President Obama appears to have received more petitions for commutation than his predecessors. Warrants of Pardon For a pardon to become legally effective, it appears that a warrant of pardon must be physically delivered to the recipient. In United States v. Wilson , Chief Justice Marshall declared that a " pardon is a deed, to the validity of which delivery is essential, and delivery is not complete without acceptance." A recipient may reject the pardon , and if it is rejected, the court has no power to force it on him. Moreover, a pardon is a private act "and not officially communicated to the court." A warrant of pardon must be pleaded like any other private instrument before any court may take judicial notice thereof. The Court re emphasized the notion of delivery and acceptance in Burdick v. United States , where it upheld the petitioner's right to refuse a pardon and instead assert his constitutional right against self-incrimination. The Burdick Court stressed that it had already rejected the contention that pardons have automatic effect by their "mere issue , " and stated that the petitioner could refuse the pardon because i ts acceptance may involve "consequences of even greater disgrace than those from which it purports to relieve." Under the current DOJ regulations, a warrant of pardon is mailed to the petitioner. A warrant of pardon may also be revoked at any time prior to acceptance and delivery. In In re De Puy , a federal district court addressed a situation where a pardon issued by President Andrew Johnson on March 3, 1869, was revoked on March 6, 1869 , by incoming President Ulysses S. Grant. The court held that the pardon had been properly withdrawn, as it had not yet been delivered to the grantee, a person on his behalf, or to the official with exclusive custody and control over him. In an analogous situation, President George W. Bush sent a master warrant of clemency to the Pardon Attorney on December 23, 2008, for 19 individuals. One day later, the President "directed the Pardon Attorney not to execute and deliver" a pardon to one of the individuals, Isaac R. Toussie, a real estate developer who had ple a d ed guilty to mail fraud and using false documents to recei ve government-insured mortgages. It had been disclosed that Mr. Toussie's relatives had contributed significant sums of money to various politicians before his clemency petition was filed with the White House. Because Mr. Toussie's clemency application had only been reviewed and rec ommended by White House Counsel , the President directed that Mr. Toussie's application should be reviewed by the Pardon Attorney pursuant to the DOJ guidelines, discussed above, before making a decision on whether to grant clemency. Legal Effects of Receiving a Pardon The Supreme Court in the 19 th century had an expansive view of the nature and effect of a pardon. In Ex parte Garland , the Court, when considering the effect of a full pardon, stated the following: A pardon reaches both the punishment prescribed for the offence and the guilt of the offender; and when the pardon is full, it releases the punishment and blots out of existence the guilt, so that in the eye of the law the offender is as innocent as if he had never committed the offence. If granted before conviction, it prevents any of the penalties and disabilities consequent upon conviction from attaching; if granted after conviction, it removes the penalties and disabilities, and restores him to all civil rights; it makes him, as it were, a new man, and gives him a new credit and capacity. Despite this broad view, the Court stated that a pardon "does not restore offices forfeited, or property or interests vested in others in consequences of the conviction and judgment." The Court in Knote v. United States reiterated that a pardon " releases the offender from all disabilities [i]mposed by the offence, and restores to him all his civil rights. In contemplation of law, it so far blots out the offence, that afterwards it cannot be imputed to him to prevent the assertion of his legal rights." Since Garland and Knote , courts have consistently opined that a full par don restores basic civil rights such as the right to vote, serve on juries, and the right to work in certain professions. In other words, a pardon should generally remove any collateral consequences that may legally attach to a person as a result of the commission or conviction of the pardoned offense. However, as discussed below, the recipient of a pardon may still be unable to exercise certain rights or engage in certain activities , depending on the qualifications imposed under state or federal law. This may be due, in part, to the fact that the Court, in the 20 th century, appears to have backed away from its position in Garland , that a pardon wip es away the existence of guilt. In 1915, the Court, in Burdick v. United States , affirmed that the full pardon, had the petitioner accepted, would have "absolv[ed] him from the consequences of every such criminal act." In allowing the petitioner to refuse the pardon and instead assert his constitutional right against self-incrimination, the Burdick Court had acknowledged that a "confession of guilt [is] implied in the acceptance of a pardon." Similarly, in Carlesi v. New York , the Court concluded that a presidential pardon for a federal offense did not prevent the state from considering the pardoned offense under a state statute that permits enhanced sentencing upon the commission of a second offense. The Carlesi Court reasoned that the state's action "was not in any degree a punishment for the prior crime," and that the state's action could not be constitutionally void because it did not "destroy[] or circumscrib[e] the effect" of a presidential pardon. In 1974, the Court decided Schick v. Reed , in which it affirmed the President's authority to commute a sentence upon the condition that the prisoner not be paroled. The Court emphasized the President's plenary authority under the pardon power to reduce or alter a penalty, but the Court did not address whether such power includes erasing the underlying guilt or the conviction itself. At least one scholar has opined that these cases, from the early 20 th century to the present, demonstrate the Court's implicit shift away from its broad declaration in Garland regarding the effect of a pardon, now "suggest[ing] that a pardon does not wipe away all guilt from its recipient." Notably, Schick examined the commutation of a sentence, in which it may have been unnecessary for the Court to discuss whether the altered sentence erased the recipient's underlying guilt, as it may have been clear that the commutation did not. Current Interpretation of the Effect of a Presidential Pardon As one court noted, there are three prevailing views regarding the effect of a presidential pardon. The first view, following Garland , "holds that a pardon obliterates both conviction and guilt which places the offender in a position as if he or she had not committed the offense in the first place." The second view "is that the conviction is obliterated but guilt remains." In deciding the effect of pardons issued by the President or a state governor, many courts appear to adhere to this second view, as discussed below. The third view "is that neither the conviction nor guilt is obliterated." Two decisions stemming from the pardon of high-ranking officials involved in the Iran-Contra Affair illustrate the courts' adoption of the second, hybrid view of a pardon's effect. In In re North , the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) reviewed whether the recipient of a pardon, a former Central Intelligence Agency official, could claim attorneys' fees under the Ethics in Government Act. The act authorizes a court to award certain attorneys' fees incurred by the subject of an independent counsel investigation, but only if no indictment is brought against that person. The petitioner, citing Garland , argued that the full pardon he received from President George H.W. Bush entitled him to petition for attorneys' fees under the act, notwithstanding the return of an indictment against him during the investigation. The D.C. Circuit, noting that four Justices dissented in Garland , opined that the Court "implicitly rejected" the dictum in Garland when it decided Burdick , where it had "recognized that the acceptance of a pardon implies a confession of guilt." Applying Burdick , the D.C. Circuit concluded that "[b]ecause a pardon does not blot out guilt ..., one can conclude that a pardon does not blot out probable cause of guilt or expunge an indictment." Accordingly, the court held that a pardon did not nullify the indictment against the petitioner, thereby precluding his recovery of attorneys' fees under the act. A similar result was reached in In re Abrams , where the Court of Appeals for the District of Columbia, sitting en banc, reviewed whether the recipient of a pardon, a former official with the Department of State, could be disciplined under the District of Columbia Rules of Professional Conduct, which prohibit a lawyer from engaging in criminal acts of "dishonesty, fraud, deceit, or misrepresentation." The petitioner argued that Garland prevented the court "from considering the wrongful conduct in assessing his moral character for the purpose of bar discipline." The court, following "the virtually unanimous weight of authority," held that though the pardon set aside the petitioner's convictions and the consequences the law attached to his convictions, "it could not and did not require the court to close its eyes to the fact that Abrams did what he did." Accordingly, the court ordered the petitioner be publicly censured, as it determined that the commission of his pardoned offense could be used to assess his moral character. Examples of Potential Effect of Presidential Pardon Under Current Interpretation Though there may be underlying debate as to whether a pardon eliminates an individual's guilt for having committed the pardoned offense, courts generally agree that a full presidential pardon restores federal as well as state civil rights to remove consequences that legally attach as a result of a federal conviction (i.e., legal disabilities). For instance, if an individual is prevented under state and federal law from possessing a firearm due to a felony conviction, a full and unconditional pardon for the federal conviction would remove the firearm disability. Federal firearms laws, unlike other federal laws that impose collateral consequences upon conviction, specifically provide that a person shall not be considered a convicted felon for purposes of the statute if such person "has been pardoned or has had civil rights restored," unless the pardon, expungement, or restoration of civil rights expressly provides that one may not possess or receive firearms. It appears that only a handful of federal laws specifically address the effect of a pardon on one's eligibility. Yet such express provisions may not be warranted because of the long-standing principle, affirmed by the courts, that a pardon removes legal disabilities that attach as a result of one's conviction. Moreover, as discussed later, there appears to be no general federal statutory process whereby civil rights lost as a result of a federal conviction may be restored or "judicial records of an adult federal criminal conviction expunged." Therefore, a presidential pardon is essentially the only method for restoring rights under federal law, although eligibility may be regained after a defined passage of time, as discussed below. Nevertheless, the courts' reasoning in cases such as In re North and In re Abrams demonstrates that a pardon will not preclude a court or other entity from considering the pardoned offense for certain eligibility purposes, especially where an individual's character may be reflected by the mere commission of an offense (irrespective of whether there had been a conviction). For example, a federal court of appeals upheld the Commodity Futures Trading Commission's (CFTC's) denial of an individual's post-pardon application for registration as a floor broker. The court determined that the CFTC could consider the conduct underlying the pardoned conviction in ascertaining whether the applicant would be fit to act as a floor broker. In upholding the agency's action, the court also concluded that the CFTC's denial did not violate the pardon power because its action did not further punish the applicant based on his pardoned conviction alone. Likewise, federal law authorizes the Attorney General to consider past drug-related convictions as a factor in her decision to issue a license to a manufacturer of controlled substances. Were an applicant to receive a presidential pardon for a federal drug offense, the Attorney General still could consider the pardoned offense in issuing the license because its commission may be related to the applicant's suitability for the license. If the Attorney General denied a license, it is probable that this would not violate the pardon power because the denial likely would not be construed as a further punitive legal consequence that would have otherwise stemmed from the conviction of the pardoned offense. Along similar lines, courts have held that consideration of a pardoned offense for purposes of sentencing enhancement does not violate the pardon power because such use does not undermine the effect of that pardon, nor does it "constitute separate punishment for the pardoned conviction." Accordingly, even if the recipient of a pardon were to regain eligibility for a position or program from which he was originally barred due to his conviction, it is possible that he may still be disqualified if one's character is a necessary qualification for eligibility purposes. Restoration of Rights Without a Presidential Pardon Given that many petitions for presidential pardons are denied, this section briefly discusses expungements and other avenues by which federal felons could potentially have some civil rights, affected by their federal criminal convictions restored absent a pardon. Expungement of Records As discussed, a pardon recipient may still encounter hurdles when character is a factor of eligibility because a pardon does not eliminate underlying guilt or the commission of the offense itself. T he reason it is possible for a third party to know of and consider a pardon recipient's conviction is that, according to the Office of the Pardon Attorney, a presidential pardon "does not erase or expunge the records of a conviction." Rather, the Office of the Pardon Attorney notifies, among others, the FBI so that the pardoned individual's criminal history record will reflect the grant of a pardon. As such, the conviction for which one is pardoned, along with a notation of the pardon, will continue to be reported when a background check is conducted on the pardoned individual. The continued presence of a conviction on a person's record, notwithstanding a pardon, could still raise barriers with respect to such person's suitability. In the employment context, for example, the recipient of a pardon could face employment challenges in jurisdictions where employers are permitted to inquire into an applicant's criminal history. As a result of interpretations of the pardon power, it is possible that an employer could disqualify a person on the basis of her pardoned offense because the person's commission of the underlying offense may be considered a reflection of the applicant's character and suitability for the position. However, an expungement of one's records generally appears to go a step beyond the effect of a pardon and remove s the record of the conviction as well as the underlying guilt. Absent a pardon, s eeking an expungement may be an alternative method for poten tially re gaining civil rights or legal privileges lost as a result of a federal conviction , as an expungement would preclude the conviction from being reported on a background check and therefore potentially eliminate the barriers that a pardon recipient would face even after receiving a pardon. Notably, there may be some circumstances where an expungement of one's records may be the only way for a legal disability to be removed despite receiving a pardon. For instance, Utah provides the following: "A person who has been convicted of a felony which has not been expunged is not competent to serve as a juror." This provision appears to indicate that even if a person residing in Utah has received a pardon, he is still barred from serving as a juror unless he has obtained an expungement of his records. As discussed above, i t is generally acknowledged that a pardon does not compel an expungement of related criminal and judicial records. At least one fe deral court has addressed this issue, declaring: "[N] o proclamation of the executive has the power and authority … to order expunction of court records under the aegis of restoring to the pardoned person 'full ... other rights.'" Unlike states, many of which outline the circumstances under which a person may petition for an expungement of records, there is no general federal statutory procedure addressing how a federal felon can seek an expungement. Moreover, the courts have described expunction as an extraordinary remedy. Restoration of Rights by Operation of Law or Upon Application to State A former federal felon may be able to regain certain rights, such as the ability to vote or serve on a jury, under a state's process or laws addressing the restoration of rights. This will, however, likely vary from state to state because many state laws dealing with restoration of rights do not always expressly address how state legal disabilities that attach as a result of a federal offense may be regained, absent a federal pardon. For example, state laws determine voter qualifications for both federal and state elections, including the circumstances under which a felony conviction disqualifies a person from voting . Laws on voter qualifications range from those that impose no restriction on the right to vote—that is, permitting felons to vote from prison by absentee ballot—to those that impose permanent disenfranchisement, unless restored by executive pardon. The processes for restoring voting rights, absent a pardon, likewise vary by state, though several automatically restore voting rights upon completion of one's sentence. For example, Utah provides that a right to vote for a convicted state or federal felon is restored when (1) the felon is sentenced to probation; (2) the felon is granted parole; or (3) the felon has successfully completed the term of incarceration to which the felon was sentenced. State juror qualifications also vary by state, and the right to jury service is sometimes described as the most difficult right to regain. Many states generally indicate that a pardon will restore one's competency to be a juror. Absent a pardon, however, some states either permit ex-felons to serve on a jury upon completion of a sentence, either automatically or after a defined period of time, or require them to individually apply to the governor for restoration of rights. Notably, there are limited circumstances under federal law where a person may regain eligibility after a certain amount of time. For example, a student receiving a federal grant, loan, or work assistance under Title 20 of the United States Code will have his eligibility suspended if convicted under federal or state law for the possession or sale of a controlled substance. However, the suspension terminates and a student may regain eligibility after a prescribed amount of time if the student meets certain conditions, such as successful participation in a drug rehabilitation program. Alternatively, federal law sometimes permits an official to grant a waiver allowing a person to be eligible notwithstanding his disqualifying conviction. For example, individuals who have committed felonies are generally ineligible to enlist in the military, except that the Secretary of the affected branch "may authorize exceptions, in meritorious cases, for the enlistment of ... persons convicted of felonies." Under these circumstances, a person who would otherwise be prohibited from participation need not have a presidential pardon in order to regain eligibility. Role of Congress in the Pardon Power and Legal Effects on Collateral Consequences The Court has consistently held that the President's pardon power may not be circumscribed by Congress. In Garland , the Court held that the pardon power "is not subject to legislative control. Congress can neither limit the effect of his pardon, nor exclude from its exercise any class of offenders. The benign prerogative of mercy reposed in him cannot be fettered by any legislative restrictions." In United States v. Klein , the Court found unconstitutional a congressional provision that purported to limit the use and effect of the President's pardon. In finding that the congressional provision infringed on the President's pardon power, the Court stated: "[T] he legislature cannot change the effect of such a pardon any more than the executive can change a law." Likewise, the Court in Schick declared that the President's pardon power "flows from the Constitution alone, not any legislative enactments," and it "cannot be modified, abridged, or diminished by Congress." These judicial pronouncements appear to indicate that Congress can take no action that would limit the effect or use of a presidential pardon, nor can Congress direct how or when the President may exercise his pardon authority. Generally, Members of Congress have turned to introducing resolutions expressing the sense of Congress that the President either should or should not grant pardons to certain individuals or groups of individuals. It is unclear, however, whether a reviewing court would reach the same conclusion were Congress to pass a measure that expanded the effect of a presidential pardon. Notably, some states have passed legislation that clarifies the effect of a state pardon. Colorado, for example, provides the following: "A pardon issued by the governor shall waive all collateral consequences associated with each conviction for which the person received a pardon unless the pardon limits the scope of the pardon regarding collateral consequences." "Collateral consequences" are defined as "a penalty, prohibition, bar, disadvantage, or disqualification, however denominated, imposed on an individual as a result of the individual's conviction of an offense, which penalty, prohibition, bar, or disadvantage applies by operation of law regardless of whether the penalty, prohibition, bar, or disadvantage is included in the judgment or sentence." Similarly, Congress could enact a provision that reaffirms the existing principle that a presidential pardon restores civil rights and removes collateral consequences imposed under federal or state law as a result of a federal conviction, unless otherwise provided for by the pardon or by the state (with respect to state-imposed legal disabilities). However, if a congressional measure specified collateral consequences to be restored, this could be construed as limiting the effect of the pardon. By expressly reinstating some rights over others, a reviewing court could view such a measure as modifying or abridging the effect of a presidential pardon. Moreover, it may be possible for Congress to change the current judicial interpretation by providing that a presidential pardon erases both the underlying guilt and the existence of the federal offense itself. Although the issuance of a pardon does not automatically grant an expungement of criminal records, at least one federal court has noted: "The President's power, if any, to issue an order of expunction of a criminal record must stem from an act of Congress or from the Constitution itself." As it has done with simple drug possession, Congress could require, upon application of a presidential pardon recipient, a federal court to enter an expungement order. In this way, a pardon recipient could avoid the current hurdles he or she may face when a background check is conducted or when the commission of the offense itself may be used to evaluate such person's eligibility. Another possibility for Congress, without addressing the effect of a pardon, could be to mirror states that have passed so-called "ban the box" or "fair chance" legislation. Such measures remove the conviction history question on job applications, thereby preventing covered employers (either public or private) from considering one's criminal history until later in the hiring process. In November 2015, President Obama announced that he had directed the Office of Personnel Management (OPM) to "take action where it can by modifying its rules to delay inquiries into criminal history until later in the hiring process." OPM issued a proposed rule in May 2016 that would specify to federal agencies that "unless an exception has been requested by a hiring agency and granted by OPM, agencies cannot begin collecting background information unless the hiring agency has made a conditional offer of employment to an applicant." In the 114 th Congress, bills have been introduced that would prohibit federal agencies and federal contractors from requesting that an applicant disclose his or her criminal history record before receiving a conditional offer.

Article II of the U.S. Constitution vests the President with the power "to Grant Reprieves and Pardons for Offences against the United States, except in Cases of Impeachment." The President's pardon power, which derives from English custom, is an extraordinary remedy that is sought by many but received by few. The President may use his clemency authority only for criminal penalties, not civil. Moreover, he may use his clemency authority to pardon federal offenses but not state offenses. Typically, individuals receive either a pardon or a commutation of sentence, each of which is a type of executive clemency with different legal effects. The Department of Justice in 2014 announced a clemency initiative to prioritize the applications of federal inmates seeking a commutation of sentence, which has reportedly led to an influx of petitions. A commutation of sentence generally results in a reduced sentence, either totally or partially, but such individual will still likely face collateral consequences, that is post-sentence civil penalties or disqualifications that flow from a federal conviction. In contrast, a pardon is the President's forgiveness for commission of the offense, which removes civil disabilities and collateral consequences. However, given the evolution of jurisprudence on the President's pardon power, some recipients of a pardon may still face legal consequences from a criminal conviction despite receiving a pardon. This report reviews the text and jurisprudence of the Pardon Clause of the U.S. Constitution, as well as the types of pardons the clemency power includes, when pardons may be issued, and how pardons are granted. The remainder of the report analyzes the effect of a presidential pardon on collateral consequences. Also discussed in the report are some alternative ways in which a former federal felon may have his or her civil rights restored and certain legal disabilities removed absent a pardon. Lastly, the report covers what role, if any, Congress may play in defining the scope of the pardon power and its effect on collateral consequences.

CRS_R43650

State and federal governments have long regulated safety practices at chemical facilities because of the potential harm that a large, sudden release of hazardous chemicals could cause to nearby people. Even before the terrorist attacks of 2001, congressional policy makers expressed concern about the security vulnerabilities of these facilities, which historically engaged in security activities on a voluntary basis. After the 2001 attacks and the decision by several states to begin regulating security at chemical facilities, Congress again considered requiring federal security regulations to mitigate risks. In 2006, the 109 th Congress passed legislation providing the Department of Homeland Security (DHS) with statutory authority to regulate chemical facilities for security purposes. The statute explicitly identified some DHS authorities and left other aspects to the discretion of the Secretary of Homeland Security. The Secretary exercised that discretion when implementing this authority through regulations called the Chemical Facility Anti-Terrorism Standards (CFATS). The statute contains a "sunset provision" that causes the statutory authority to expire. Subsequent Congresses have extended the termination date of this authority to October 4, 2014. Advocacy groups, industry stakeholders, and policy makers have called for Congress to reauthorize this authority, though they disagree about the preferred approach. Members of Congress have introduced bills taking several different approaches to the issue of reauthorization in the current and previous Congresses. Congress may extend the existing authority, revise the existing authority to resolve potentially contentious issues, or allow the authority to lapse. In the 113 th Congress, Members have introduced several proposals in the House and the Senate that would extend the statutory termination date, modify the underlying statutory authority, or both. The House of Representatives passed H.R. 4007 , the Chemical Facility Anti-Terrorism Standards Program Authorization and Accountability Act of 2014, on July 8, 2014. The House Committee on Homeland Security had amended the bill as forwarded by its Subcommittee on Cybersecurity, Infrastructure Protection, and Security Technologies and reported it to the House of Representatives with a favorable recommendation, as amended. This report compares H.R. 4007 , as passed by the House, to the existing statutory authority. It provides a brief overview of H.R. 4007 , as passed by the House; identifies select differences for comparison; analyzes each section of H.R. 4007 , as passed by the House, in the context of the existing statutory authority; and discusses several policy issues raised by the Obama Administration in the context of chemical facility security legislation. Overview of H.R. 4007, as Passed by the House H.R. 4007 has both similarities and differences with the existing statute. H.R. 4007 , as passed by the House, incorporates much of the language in the existing statutory authority. Consequently, its authorities would generally encompass the existing authorities, and its implementation by DHS may retain a similar regulatory structure. Indeed, the bill expressly would allow DHS to use existing CFATS regulations to implement its provisions. In contrast with the existing statute, H.R. 4007 , as passed by the House, would amend the Homeland Security Act of 2002 ( P.L. 107-296 , as amended). It would create a new title, Title XXI, called Chemical Facility Anti-Terrorism Standards. Another key difference between H.R. 4007 , as passed by the House, and the existing statute is the absence of a statutory termination date. The statutory authority would be permanent, though H.R. 4007 , as passed by the House, explicitly authorizes appropriations for three years. H.R. 4007 , as passed by the House, contains additional legislative language that would add to the Secretary's responsibilities. For example, H.R. 4007 , as passed by the House, would require certain outreach to chemical facilities, assistance to regulated small chemical facilities, and reporting by DHS and the Government Accountability Office (GAO) on program performance. Finally, H.R. 4007 , as passed by the House, would modify the discretion of the Secretary of Homeland Security in various areas. The Secretary's existing discretion to establish criteria for risk-based performance standards would be maintained. H.R. 4007 , as passed by the House, would limit the Secretary's discretion when it expressly requires DHS to accept alternative security programs with respect to site security plans, mandate specific approaches with respect to personnel surety, and restrict the Secretary's ability to require covered chemical facilities to submit information to DHS about personnel at the facility. Finally, H.R. 4007 , as passed by the House, would expand the discretion of the Secretary by no longer limiting application of the statutory authority to high-risk facilities. Some experts might argue that modifying the Secretary's discretion might lead to a less efficient regulatory program. Other experts might argue that the Secretary's discretion might need further modification in order to reflect congressional intent. Table 1 below highlights selected differences between H.R. 4007 , as passed by the House, and P.L. 109-295 , Section 550, as amended. For a fuller comparison of legislative text, see Table A-1 in the Appendix . Section by Section Discussion This section of the report discusses each section of H.R. 4007 , as passed by the House, and provides policy analysis regarding selected provisions in the context of the existing statutory authority and CFATS regulation. For a direct comparison of the bill language and the existing statutory authority, see Table A-1 . H.R. 4007 , as passed by the House, contains three sections. Section 1, Short Title Section 1 of H.R. 4007 , as passed by the House, contains the act's short title. The existing authority has no comparable provision. Section 2, Chemical Facility Anti-Terrorism Standards Program Section 2 of H.R. 4007 , as passed by the House, consists of amendments to the Homeland Security Act of 2002 and contains four subsections. Subsection 2(a) would create a new title, Title XXI, called Chemical Facility Anti-Terrorism Standards, in the Homeland Security Act. This new title would have ten sections as described below. Section 2101, Chemical Facility Anti-Terrorism Standards Program Section 2101 of the new title has six subsections that are analyzed below. Establishment of Risk-Based Performance Standards Subsection 2101(a) of the new title would establish a Chemical Facility Anti-Terrorism Standards Program and direct the Secretary to establish risk-based performance standards under that program. These standards would be designed to protect chemical facilities that the Secretary determines are either a "covered chemical facility" or a "chemical facility of interest" from acts of terrorism and other security risks. Later provisions would define a "chemical facility of interest" as a facility that holds certain chemicals above a certain quantity as determined by the Secretary and a "covered chemical facility" as a chemical facility of interest that the Secretary determines meets certain security risk criteria. This subsection would also require both chemical facilities of interest and covered chemical facilities to submit security vulnerability assessments and develop and implement site security plans. The existing statutory authority specifically directs the Secretary to issue regulations establishing risk-based performance standards for the security of chemical facilities. These regulations are to apply only to chemical facilities that the Secretary determines present high levels of security risk. The regulations are to require vulnerability assessments and the development and implementation of site security plans from these high-risk chemical facilities. The vulnerability assessment and site security plan requirements of Subsection 2101(a) of the new title would likely affect more chemical facilities than the existing statutory requirements. Under the current CFATS regulation, DHS does not require all chemical facilities with greater than screening threshold quantities of chemicals of interest to submit vulnerability assessments and site security plans. Only those facilities identified by DHS as high-risk must submit vulnerability assessments and site security plans. Approximately 36,000 facilities have reported possessing a chemical of interest above a screening threshold quantity, while DHS regulates approximately 4,000 of these facilities as high risk. The Subsection 2101(a) requirement that a chemical facility of interest must submit a vulnerability assessment and site security plan may lead to DHS receiving such documents from the approximately 36,000 facilities. Layered Security in Site Security Plans Subsection 2101(b) of the new title would, like the existing statutory authority, allow a facility to use layered security measures in its site security plan to address the security vulnerability assessment and the risk-based performance standards. Approval and Disapproval of Site Security Plans Subsection 2101(c) of the new title contains four provisions regarding approval and disapproval of site security plans. The first would, like the existing statute, require the Secretary to review and approve each security vulnerability assessment and site security plan and prohibit the Secretary from requiring the presence or absence of a particular security measure to obtain approval. The Secretary would be allowed to disapprove a site security plan that fails to satisfy the risk-based performance standards. The second provision would allow the Secretary to approve alternative private or governmental security programs that meet the Secretary's requirements. This provision would also explicitly allow a covered chemical facility to meet the site security plan requirement by adopting an alternative security program reviewed and approved by the Secretary. The existing statute permits the Secretary to approve an alternative security program, but does not provide explicit approval for a facility to use such a program to meet the site security plan requirement. The current CFATS regulation allows all regulated entities to meet the site security planning requirement through submission of an alternative security program. Consequently, some analysts may view this language as making the current regulatory approach explicit in statute. The third provision would require the Secretary to employ risk assessment policies and procedures developed under the new title when approving or disapproving a site security plan. However, it would prohibit the Secretary from requiring resubmission of site security information from a covered chemical facility that had received approval prior to the enactment of the new title, if the sole reason for resubmission was that enactment. The fourth provision would allow DHS to consult with GAO regarding the applicability of a third-party accreditation program. This provision is not present in the current statute. Audits and Inspections, Noncompliance, Personnel Surety, Facility Access, and Information Availability Subsection 2101(d) of the new title addresses compliance and contains five provisions. The first provision addresses audits and inspections. Like the existing statute, it requires the Secretary to audit and inspect covered chemical facilities. It differs from the existing statute in that it would expressly allow the Secretary to use non-DHS and nongovernmental inspectors in the inspection process. This subsection would also establish a reporting structure and certain standards and requirements for non-DHS and nongovernmental personnel who conduct such audits or inspections. In addition, it would require the Secretary to prescribe certain standards for training and retraining of auditors and inspectors employed by DHS. In 2007, during comment on the CFATS interim final rule, some stakeholders expressed concerns about DHS use of third-party inspectors. As described by DHS, these concerns included: potential conflicts of interest among third-party inspectors and members of the regulated community; potential disclosure of facility business and security information; potential inconsistency in training and inspection standards between federal and third-party inspectors; and the need for DHS to establish necessary qualifications, certification, and indemnification for third-party inspectors. Also, some stakeholders asserted that DHS might increase the rate of site security plan approvals through the use of third-party inspectors. The DHS itself raised questions about the appropriateness of DHS use of third-party auditors and if so, what their standards and requirements would be. The express authorization for DHS to use and set standards for non-DHS and nongovernmental inspectors as included in Subsection 2101(d) would likely resolve DHS questions regarding appropriateness of use and establishment of standards. The second provision in Subsection 2101(d) addresses noncompliance by a covered chemical facility. Like the existing statute, it would require the Secretary, upon discovering noncompliance, to provide the owner or operator of the facility with written notification, including an explanation of any deficiency; provide opportunity for consultation; and issue an order to comply by a specified date. If noncompliance continues, the Secretary would be allowed to issue an order for the facility to cease operation. Unlike the existing statute, this provision would require that written notification must occur no later than 14 days after a determination of noncompliance; would direct that consultation following a written notification of a facility be with "the Secretary or the Secretary's designee"; and would allow the Secretary to issue an order to cease operation only if noncompliance exists "after the date specified" in such an order to comply. The existing statute only requires written notification and identification of an opportunity for unspecified consultation. It does not expressly limit the Secretary's ability to issue an order to cease operation. It instead states that such an order may be issued in the case of an owner or operator continuing to be noncompliant. The third provision, which has no comparable provision in the existing statute, addresses personnel surety. It would direct the Secretary to establish a personnel surety program that would require submission of information only once, provide participating facilities with feedback about individuals submitted for vetting, and provide redress to individuals who believe the submitted information was inaccurate. It would allow a covered chemical facility to use any federal screening program that periodically vets individuals against the terrorist screening database to satisfy its obligation under a personnel surety performance standard. It would prohibit the Secretary from requiring a covered chemical facility to submit any information about an individual unless the individual is vetted under the DHS personnel surety program (in contrast to another federal screening program) or has been identified by the Secretary as presenting a terrorism security risk. Finally, it would require the DHS Security Screening Coordination Office to expedite the development of a common credential and would require DHS to report annually on progress toward this requirement. The use of other federal screening programs to meet a CFATS personnel surety requirement has been an issue of contention. The DHS has issued an information collection request proposing a personnel surety program. The personnel surety proposal issued by DHS would accept credentials that are vetted recurrently against the terrorist screening database and have their validity verified on a continuing basis by electronic or other means. The DHS has stated that it would not accept, in lieu of its own program, other personnel surety programs that vet individuals on a different schedule. This position would appear to conflict with the requirements in Subsection 2101(d). The fourth provision of the subsection addresses facility access. It would generally prohibit the Secretary from requiring a facility to submit any information about an individual who has been granted facility access. The DHS may require information submission only if DHS has vetted the individual under its personnel surety program or identified the individual as presenting a terrorism security risk. The DHS, under its proposed personnel surety program information collection request, would require facilities to submit information on personnel with access to the regulated areas of a facility. This submission would generally be regardless of credential possession, unless the facility installs electronic readers able to query an approved credential. Facilities would submit different information for individuals with recurrently vetted credentials than for other individuals. This provision would appear to prohibit a requirement to submit this information to DHS to obtain access to a facility. The fifth provision is not present in the current statutory authority. This provision would require the Secretary to share with the owner or operator of a covered chemical facility such information as the owner or operator needs to comply with Section 2101. The provision may raise questions such as whether the Secretary or the owner or operator determines what information is needed, how such information should be protected, and how such information should be requested and provided. This provision also affirmatively requires the Secretary to share information with owners or operators. A later provision that addresses information sharing with states and local government does not make such an affirmative requirement, but rather permits the Secretary to share as the Secretary deems appropriate. Responsibilities of the Secretary Subsection 2101(e) of the new title identifies certain responsibilities of the Secretary and contains three provisions: one on identifying chemical facilities of interest, one on risk assessment, and one on changes in facility tiering. None of these provisions are present in the existing statutory authority. The first provision would require the Secretary to consult with the heads of other federal agencies, states and political subdivisions thereof, and relevant business associations to identify all chemical facilities of interest. The second would require the Secretary to develop a risk assessment approach and corresponding tiering methodology incorporating all relevant elements of risk, including threat, vulnerability, and consequence. It would further require that the criteria for determining a facility's security risk include the relevant threat information, the potential economic consequences of a terrorism incident at the facility and the potential loss of human life, and the vulnerability of the facility to certain terrorist events. The third would require the Secretary to maintain records that reflect the basis for any determination that a facility is no longer subject to the regulatory requirements due to a change in risk tier. In addition to the basis for the determination, the records would include how that basis was confirmed by the Secretary. Definitions Subsection 2101(f) of the new title would define certain terms. It would define a "covered chemical facility" as a chemical facility of interest that the Secretary determines meets certain security risk criteria. This subsection would exempt from the definition of "covered chemical facility" those facilities regulated under the Maritime Transportation Security Act of 2002 (MTSA), public water systems as defined by Section 1401 of the Safe Drinking Water Act, wastewater treatment works as defined in Section 212 of the Federal Water Pollution Control Act, any facility owned or operated by the Department of Defense or the Department of Energy, and any facility subject to regulation by the Nuclear Regulatory Commission. The existing statute exempts facilities of these types from all regulation under the statute. It would define a "chemical facility of interest" as a facility that holds certain chemicals above a certain quantity determined by the Secretary. No types of facility are exempt from the definition of "chemical facility of interest." The existing statute does not contain a similar definition. The presence of exemptions to the definition of "covered chemical facility" but not to the definition of "chemical facility of interest" may have certain impacts. Facilities of the types exempt from the definition of covered chemical facility may have to meet requirements applying to both chemical facilities of interest and covered chemical facilities, such as those found in Subsection 2101(a) of the new title. Requirements established for chemical facilities of interest may apply to those facilities even though they are exempt from further requirements applying to covered chemical facilities. Section 2102, Protection and Sharing of Information Section 2102 of the new title has four provisions addressing protection and sharing of information. Three are similar to existing statutory authority. Subsection 2102(a) of the new title would protect information developed pursuant to the act from disclosure in a manner consistent with that established under MTSA. Subsection 2102(b) of the new title would allow for the sharing of information with state and local government officials, including law enforcement officials and first responders, who possess the necessary security clearances. Subsection 2102(d) of the new title would direct that in any enforcement proceeding, information submitted to or obtained by the Secretary shall be treated as if the information were classified material. These provisions in the existing statutory authority form the basis for DHS's designation of Chemical-terrorism Vulnerability Information (CVI). While Subsection 2102(a) and Subsection 2102(b) reference "information developed pursuant to this title," Subsection 2102(d) of the new title refers to proceedings and information "under this section." This reference, rather than "under this title," may limit the applicability and effectiveness of Subsection 2102(d), since Section 2102 addresses information sharing rather than the program as a whole. The equivalent language in P.L. 109-295 , Section 550, also states "under this section," but it applies to the entire existing statutory authority, since that is fully contained in Section 550. Subsection 2102(c) of the new title is not present in the existing statutory authority. It would require the Secretary to provide such information as is necessary to help ensure that first responders are prepared and provided with the situational awareness they need to respond to incidents at covered chemical facilities. It would require this information to be provided to state, local, and regional fusion centers and disseminated through the Homeland Security Information Network or the Homeland Security Data Network, as appropriate. Section 2103, Civil Penalties Section 2103 of the new title contains two provisions on civil penalties, both of which are in the existing statutory authority. As under the existing statute, Subsection 2103(a) of the new title would establish a civil penalty of not more than $25,000 per day of violation. Also as under the existing statute, Subsection 2103(b) of the new title would deny any person except the Secretary a right of action to enforce any provision of the new title against an owner or operator of a covered chemical facility. Section 2104. Whistleblower Protections Section 2104 of the new title would require the Secretary to publish on the DHS website, and in other publicly available materials, the protections that attach to an individual who provides DHS with "whistleblower" information about covered chemical facilities. The current statutory authority contains no comparable provision. Section 2105, Relationship to Other Laws Section 2105 of the new title contains three provisions addressing the relationship of the new title to other laws. Two of the provisions are present in the current statutory authority. Subsection 2105(a) of the new title would affirm that nothing in that title shall be construed to supersede, amend, alter, or affect any federal law that regulates the manufacture, distribution in commerce, use, sale, other treatment, or disposal of chemical substances or mixtures. Subsection 2105(b) of the new title would affirm that it would not preclude a state or political subdivision of a state from establishing more stringent requirements for covered chemical facilities unless an actual conflict exists. As in Section 2102 of the new title, this latter provision refers to standards "issued under this section" and "actual conflict between this Section and the law of that State" rather than referencing the new title as a whole. The third provision, Subsection 2105(c) of the new title, would require the Secretary to coordinate with the Assistant Secretary of Homeland Security (Transportation Security Administration) to "eliminate any provision of this title applicable to rail security" that would duplicate a security measure under 49 C.F.R. 1580. It also would clarify that in the case of a conflict between regulations established under the new title and those under the jurisdiction of TSA, the TSA regulation prevails. In addition, it would exempt rail transit facilities and rail facilities regulated under Subpart 3 of 49 C.F.R. 1580 (this likely refers to Subpart B of 49 C.F.R. 1580, which addresses rail cargo transportation security) from any requirement to submit Top-Screen information. This would create another statutory exemption from CFATS regulation. Currently, DHS does not require railroad facilities to submit Top-Screen information in order for DHS to determine their security risk under CFATS. Consequently, some analysts may view this language as making the current regulatory approach explicit in statute. Section 2106, Reports Section 2106 of the new title contains two provisions that would create reporting requirements. These reporting requirements are not present in the current statutory authority. Subsection 2106(a) of the new title would require the Secretary to submit to Congress, no later than 18 months after enactment, a report on the CFATS program. The report would include a certification by the Secretary of significant progress in identifying all chemical facilities of interest, a description of the steps taken to achieve such progress, and the metrics used to measure it. The report would also include a certification by the Secretary that he or she has developed a risk assessment approach and corresponding tiering methodology as directed by Section 2101 of the new title. Finally, the report would require the Secretary to assess the implementation of any recommendations made by the Homeland Security Studies and Analysis Institute as outlined in the Institute's "Tiering Methodology Peer Review" (Publication Number: RP12-22-02). Subsection 2106(b) of the new title would require the Comptroller General (i.e., the Government Accountability Office) to submit a report to Congress every six months assessing the act's implementation, starting 180 days after the date of enactment. This reporting requirement would expire three years after enactment. Section 2107, CFATS Regulations Section 2107 of the new title addresses the issuance and use of regulations to implement the new title and contains four provisions. Subsection 2107(a) would authorize the Secretary to promulgate regulations. Subsection 2107(b) would authorize the Secretary to promulgate or amend any CFATS regulation already in effect to carry out the requirements of the new title. Subsection 2107(c) would define "CFATS regulations" as guidance published or regulations promulgated under the existing authority granted by Section 550 of P.L. 109-295 . Subsection 2107(d) would require the Secretary to rely exclusively on the authority provided in the new title for identifying chemicals of interest, designating chemicals of interest, and determining a chemical facility's security risk. The existing statute states that regulations issued under Section 550 of P.L. 109-295 shall apply until expressly superseded. Section 2108, Small Covered Chemical Facilities Section 2108 of the new title would allow the Secretary to provide guidance and tools to small covered chemical facilities to assist in developing their physical security. It would define a small covered chemical facility as a covered chemical facility that employs fewer than 350 employees at the covered chemical facility, and is not a branch or subsidiary of another entity. The Secretary would be required to submit a report to Congress on best practices that may assist small chemical facilities in developing physical security best practices. This report would be delivered to the House Committee on Homeland Security and the Senate Committee on Homeland Security and Governmental Affairs. The existing statute contains no comparable provision. Section 2109, Outreach to Chemical Facilities of Interest Section 2109 of the new title addresses outreach to chemical facilities of interest. It would require the Secretary to coordinate with relevant business associations and federal and state agencies to establish an outreach implementation plan within 90 days of enactment. This implementation plan would be to identify chemical facilities of interest and make available compliance assistance materials and information on education and training. The existing statute contains no comparable provision. Section 2110, Authorization of Appropriations Section 2110 of the new title would authorize appropriations to carry out the new title for FY2015 through FY2017 at the level of $81 million per year. The existing statute contains no express authorization of appropriations. For FY2015, the Administration requested $87.436 million for the Infrastructure Security Compliance Division, which implements CFATS. For FY2014, the 113 th Congress provided $81 million. Other Provisions of Section 2, Chemical Facility Anti-Terrorism Standards Program Subsection 2(b) of H.R. 4007 , as passed by the House, would amend the table of contents of the Homeland Security Act to reflect the addition of the new title. Subsection 2(c) of H.R. 4007 , as passed by the House, would require the Secretary to commission a third-party study to assess vulnerabilities to acts of terrorism associated with the current CFATS program authorized under P.L. 109-295 , Section 550. Subsection 2(d) of H.R. 4007 , as passed by the House, would require the Secretary to submit a plan for using metrics to assess CFATS program effectiveness. This plan would include benchmarks for DHS use of the metrics and information on how DHS plans to use such information for program analysis. The plan would be due 180 days after enactment. Section 3, Effective Date Section 3 of H.R. 4007 , as passed by the House, would establish that the act would take effect 30 days after enactment. Issues Raised by the Administration Executive branch agencies have raised several issues with regard to chemical facility security in testimony or in official reports. H.R. 4007 , as passed the House, addresses some of these issues directly. This section does not attempt to discuss these issues in the broader policy context, but instead compares them with action taken in the context of H.R. 4007 , as passed by the House. For more information on these issues, including discussion of various policy alternatives, see CRS Report R42918, Chemical Facility Security: Issues and Options for the 113 th Congress , by [author name scrubbed]. Inclusion of Inherently Safer Technologies Previous debate on chemical facility security has included whether to mandate the adoption or consideration of changes in chemical processes to reduce the potential consequences following a successful attack on a chemical facility. Suggestions for such changes have included reducing the amount of chemical stored onsite and changing the chemicals used. In previous congressional debate, these approaches have been referred to as inherently safer technologies or methods to reduce the consequences of a terrorist attack. In 2010, the Obama Administration expressed its position on the use of inherently safer technologies to enhance security at high-risk chemical facilities in some circumstances. It established a series of principles directing its policy: The Administration supports consistency of inherently safer technology approaches for facilities regardless of sector. The Administration believes that all high-risk chemical facilities, Tiers 1-4, should assess [inherently safer technology] methods and report the assessment in the facilities' site security plans. Further, the appropriate regulatory entity should have the authority to require facilities posing the highest degree of risk (Tiers 1 and 2) to implement inherently safer technology methods if such methods demonstrably enhance overall security, are determined to be feasible, and, in the case of water sector facilities, consider public health and environmental requirements. The Administration believes that the appropriate regulatory entity should review the inherently safer technology assessment contained in the site security plan for all Tier 3 and Tier 4 facilities. The entity should be authorized to provide recommendations on implementing inherently safer technologies, but it would not have the authority to require facilities to implement the inherently safer technology methods. The Administration believes that flexibility and staggered implementation would be required in implementing this new inherently safer technology policy. H.R. 4007 , as passed by the House, maintains the existing statutory language that prohibits the Secretary from disapproving a site security plan based on the presence or absence of a particular security measure. The DHS has interpreted this statutory language as prohibiting it from requiring consideration or implementation of inherently safer technologies. Long-Term Authorization While the Obama Administration FY2015 budget request seeks an extension of the statutory authority until October 4, 2015, the Obama Administration has also supported enacting a longer or permanent statutory authority. In response to Executive Order 13650, Improving Chemical Facility Safety and Security , the Administration established a multi-agency Chemical Facility Safety and Security Working Group co-chaired by the Department of Homeland Security, Environmental Protection Agency, and Department of Labor. In May 2014, the working group issued a report to the President that called for congressional action to provide permanent statutory authorization for the CFATS program. H.R. 4007 , as passed by the House, lacks a statutory termination date and would provide a permanent statutory authorization. It also provides a three-year authorization of appropriations through FY2017. CFATS Enforcement Process The report of the Chemical Facility Safety and Security Working Group established in response to Executive Order 13650 also called for congressional action to change the CFATS enforcement process. The report notes that the current statute requires a multi-step enforcement process before DHS can fine or shut down a facility for noncompliance. It asserts that the ability to immediately issue orders to assess civil penalties or to close down a facility for violations, without having to first issue an order calling for correction of the violation, is an important ability that DHS lacks. The report states, "Congress should provide this streamlined enforcement authority so that, in circumstances in which a facility's noncompliance presents an immediate threat, DHS can act quickly to safeguard the facility and protect the public from potential acts of terrorism." H.R. 4007 , as passed by the House, would retain the existing statute's general enforcement structure, which requires that the Secretary provide the facility owner or operator with written notification, an opportunity for consultation, and issue an order to comply by a specific date before issuing an order for civil penalty or to cease operation. Removal of Water and Wastewater Exemptions Since 2008, DHS and the Environmental Protection Agency (EPA) have called for additional authorities to regulate water and wastewater treatment facilities: The Department of Homeland Security and the Environmental Protection Agency believe that there is an important gap in the framework for regulating the security of chemicals at water and wastewater treatment facilities in the United States. The authority for regulating the chemical industry purposefully excludes from its coverage water and wastewater treatment facilities. We need to work with the Congress to close this gap in the chemical security authorities in order to secure chemicals of interest at these facilities and protect the communities they serve. Water and wastewater treatment facilities that are determined to be high-risk due to the presence of chemicals of interest should be regulated for security in a manner that is consistent with the CFATS risk and performance-based framework while also recognizing the unique public health and environmental requirements and responsibilities of such facilities. In 2010, EPA testified that the Obama Administration believes that EPA should be the lead agency for chemical security for both drinking water and wastewater systems, with DHS supporting EPA's efforts. In contrast, the May 2014 report to the President by the Chemical Facility Safety and Security Working Group called for action from Congress to remove the exemption for water and wastewater treatment facilities. According to the report, DHS could then regulate security at these facilities in collaboration with the EPA. H.R. 4007 , as passed by the House, would exempt water and wastewater treatment facilities from the definition of covered chemical facility. According to the House report accompanying H.R. 4007 , as passed the House: The Committee did not alter these exemptions from Sec. 550. First required by Congress to do vulnerability assessments and emergency response plans in 2002 under the Public Health Security and Bioterrorism Preparedness and Response Act (Safe Drinking Water Act Sections 1433–1435), drinking water facilities are covered under a mature regulatory scheme that is working well. Moreover, according to the DHS Inspector General, the United States contains approximately 52,000 community water systems and 16,500 wastewater treatment facilities. Thus, although some have called for a removal of these exemptions, the Committee believes that to expand the CFATS mission to cover an additional 70,000 facilities—at precisely the time when the program is working to successfully manage its basic responsibilities—would be misguided. Therefore, DHS would not have authority to regulate public water systems, as defined by Section 1401 of the Safe Drinking Water Act, and wastewater treatment works, as defined in Section 212 of the Federal Water Pollution Control Act, as covered chemical facilities. Appendix. Side-by-Side Comparison of H.R. 4007, as Passed by the House, and P.L. 109-295, Section 550, as Amended

The 109th Congress provided the Department of Homeland Security (DHS) with statutory authority to regulate chemical facilities for security purposes through Section 550 of the Department of Homeland Security Appropriations Act, 2007 (P.L. 109-295). This statutory authority contains a termination date, after which the statutory authority expires. The current termination date is October 4, 2014. Subsequent Congresses have attempted to provide a new authorization for the current statutory authority, which DHS implements through the Chemical Facility Anti-Terrorism Standards (CFATS). In the 113th Congress, several bills have been introduced in the House of Representatives and the Senate. One, H.R. 4007, has passed the House. H.R. 4007, as passed by the House, incorporates much of the language in the existing statute. Consequently, its authorities would generally encompass the existing authorities, and its implementation by DHS may retain a similar regulatory structure. Indeed, the bill expressly would allow DHS to use existing CFATS regulations to implement its provisions. Unlike the existing statute, H.R. 4007, as passed by the House, would amend the Homeland Security Act of 2002 (P.L. 107-296, as amended). It would create a new title, Title XXI, called Chemical Facility Anti-Terrorism Standards. Another key difference between H.R. 4007, as passed by the House, and the existing statute is the absence of a termination date for the statutory authority. The statutory authority would be permanent, though H.R. 4007, as passed by the House, includes a limited three-year authorization of appropriations. Other provisions in H.R. 4007, as passed by the House, would add to the Secretary's responsibilities. For example, H.R. 4007, as passed by the House, would require certain outreach to chemical facilities, assistance to regulated small chemical facilities, and reporting by DHS and the Government Accountability Office (GAO) on program performance. Finally, H.R. 4007, as passed by the House, would modify the discretion of the Secretary of Homeland Security in various areas. The Secretary's existing discretion to establish criteria for risk-based performance standards would be maintained. H.R. 4007, as passed by the House, would limit the Secretary's discretion when it expressly requires DHS to accept alternative security programs with respect to site security plans, mandate specific approaches with respect to personnel surety, and restrict the Secretary's ability to require covered chemical facilities to submit information to DHS about personnel entering the facility. H.R. 4007, as passed by the House, would expand the discretion of the Secretary by no longer limiting application of the statutory authority to high-risk facilities. Some experts might argue that modifying the Secretary's discretion might lead to a less efficient regulatory program. Other experts might argue that the Secretary's discretion might need further modification in order to reflect congressional intent.

CRS_RS20855

Foreign Policy Budget for FY2002 RS20855 -- Foreign Policy Budget for FY2002 Updated April 12, 2001 Budget Overview President Bush seeks $23.85 billion in discretionary budget authority for U.S. foreign policy activities in FY2002,representing a nominal increase of 5.3% over levels enacted for FY2001. Administration officials, includingSecretaryPowell, have characterized the proposal as a "responsible increase" for international affairs programs within thecontext ofoverall budget constraints in which discretionary budget authority for all federal programs will rise by just 4% underthePresident's plan. They further emphasize that their highest priorities - State Department personnel, security, andtechnology needs - would grow by 18.6% above current spending. The proposal has met with a largely favorable reception in Congress. In the FY2002 budget resolution ( H.Con.Res. 83 ), the House approved the full $23.9 billion for international affairs. The Senate added $200million for HIV/AIDS and $50 million for global climate change programs beyond what President Bush requested. Callsfor higher international affairs spending have been fueled in recent years not only by appeals from theAdministration, butalso by the recommendations of numerous "expert" commissions that have cited inadequate resources anddysfunctionalorganizational structures as major impediments to the conduct of U.S. foreign policy. (1) PDF version In real terms, taking into account the effects of inflation, international affairs resources proposed for next year are2.6%more than for FY2001 (Figure 1). While higher than any year between FY1995 and FY1998, the FY2002 proposalwouldfall 4.8% and 2.8% short of FYs1999 and 2000, respectively. (2) Although the overall size of foreign policy resources would grow in FY2002, most of the increase is concentrated in thearea of State Department operations, with much smaller growth projected for foreign assistance programs andreductionssought for export promotion activities. Congress approves the bulk of international affairs resources in twoappropriationbills: Foreign Operations, which includes foreign aid and export programs, and Commerce, Justice, StateDepartments,which finances diplomatic, international organization payments, and educational exchange activities. (3) As seen in Table 1,Foreign Operations would receive an increase of 1.9%, in nominal terms, while State Department programs, funded intheDepartments of Commerce, Justice, and State appropriations, would grow by about 14%. Table 1. Foreign Policy Budget by Major Appropriation Components (discretionary budget authority in millions of dollars) a FY2000 includes $1 billion for Plan Colombia counternarcotics initiative. Source: Department of State. Export Promotion Funding Issues Two trade promotion programs - the Export-Import Bank and the Overseas Private Investment Corporation (OPIC) - arescheduled for reductions in FY2002, representing the only policy-based budget cut within the International Affairsaccount. The 25% reduced appropriation for the Export-Import Bank is the result of lower lending risks assumed for FY2002plus aneffort to concentrate Bank support on American exporters who cannot access private financing. OPIC, accordingtoAdministration estimates, will have sufficient unspent resources from prior years to continue operations at currentlevelswithout the need for new appropriations in FY2002. Both Eximbank and OPIC have been the target in recent yearsof somecongressional critics who believe that these export promotion activities generally benefit only a few, wealthybusinessesand represent the equivalent of "corporate welfare." Pro-business activists, however, are likely to challenge thebudgetrecommendation, arguing that export subsidies are necessary for American firms to compete with foreign-backedtradesubsidies. (4) Foreign Aid Funding Issues Funding for nearly all foreign aid programs are included in annual Foreign Operations spending bills for which the BushAdministration seeks a 4% nominal increase (after adjusting for export promotion programs). Major programs andpotential issues for Congress contained in this sector of the foreign policy budget include: Multilateral Development Bank (MDB) contributions. The FY2002 budget proposes $1.21 billionfor U.S. payments to the World Bank and other regional MDBs, a 5.8% increase over current levels. This amountwill fullyfund all U.S. scheduled contributions for next year, but it will not include resources to clear any of the approximate$450million American arrears owed to the Global Environment Fund, the Inter-American Development Bank'sMultilateralInvestment Fund, the Asian Development Fund, and other institutions. Bilateral development assistance. Congress funds development aid activities, aimed at reducingpoverty, improving health care and education, protecting the environment, and promoting good governance indevelopingnations, through two primary Foreign Operations accounts: Child Survival and Diseases and DevelopmentAssistance. Combined, these accounts would grow by $73 million, or 3.2% in nominal terms. But over two-thirds of theincrease willfund two priorities: HIV/AIDS (+$30 million) and basic education (+$20 million) The request for HIV/AIDS, anareawhere resources doubled in FY2001, increases resources by 10% to $330 million in FY2002. Most otherdevelopment aidprogram sectors will remain at approximate current levels. Population aid will receive the same $425 millionallocation asin FY2001, but remains a highly controversial issue due to President Bush's decision to re-impose restrictions oninternational family planning. (5) The Bush Administration is also proposingto reorient U.S. development aid strategiesaround three "spheres of emphasis" - Global Health, Economic Growth and Agriculture, and Conflict PreventionandDevelopment Relief. USAID will also introduce a Global Development Alliance, an initiative designed to forgeapublic/private partnership, with about $160 million in USAID resources, to promote a leverage sound developmentprograms. Debt reduction and the Heavily Indebted Poor Country (HIPC) initiative. Although the FY2002request cuts by nearly half - to $224 million - FY2001 spending on HIPC debt reduction, the proposal will fulfillallcurrent U.S. commitments to the multi-year HIPC initiative. Nevertheless, some debt relief proponents continueto pressthe United States and other major creditors to enhance and accelerate HIPC terms, actions which would requireadditionalresources. Counternarcotics activities. The largest foreign aid increase sought by the Bush Administrationwould supplement and broaden the $1 billion Colombia counternarcotics program funded in FY2000 with a new$731million Andean regional initiative. The objective is to address drug production and trafficking problems that may havemigrated from Colombia to surrounding states. It further differs from the FY2000 initiative by providing morefunding foralternative development programs. Security assistance. Strategic-oriented economic assistance, provided through the Economic SupportFund (ESF), non-proliferation, and military assistance accounts are heavily concentrated in the Middle East, asituation thatwill continue in FY2002. Military aid for Israel will grow by $60 million, but overall security assistance to Egyptand Israelwill decline by $100 million as part of a ten-year plan to reduce aid to these two countries. Nevertheless, Israel andEgyptwill remain the largest recipients of American aid, with amounts totaling about $2.76 billion and $1.96 billion,respectively. Due to the net aid cuts for Israel and Egypt, plus a small increase overall for security assistance, ESF and militaryaid wouldgain about $230 million in FY2002 that could be allocated for new members of NATO and selected recipients inLatinAmerica and Asia. State Department Funding Issues Secretary of State Colin Powell told the House International Relations Committee on March 15, "If we think it's importantfor our fighting men in the Pentagon to go into battle with the best weapons and equipment and tools we can givethem,then we owe the same thing to the wonderful men and women of the Foreign Service, the Civil Service, and theForeignService Nationals, who are in the front line of combat in this new world." The FY2002 budget places specialemphasis onfour aspects of State Department operations. Personnel. The FY2002 budget request would provide a 17% increase in State'sDiplomatic andConsular Affairs account which provides for salaries and expenses of the Department's personnel. This increaseisintended to"reinvigorate" a Foreign and Civil Service that has failed to attract or retain the "best and the brightest"in recentyears. State Department officials assert that the agency currently has a shortfall of about 1,100 people. TheAdministrationis proposing a multi-year program (for which the FY2002 budget request would provide an initial tranche) to fillthe currentgap in personnel, enhance retention and training, and provide for a float allowing personnel to take leaves of absencefortraining, without leaving a position empty. Initially, the State Department seeks to hire 360 personnel (both inForeign andCivil Service), 186 security professionals, and some FSN replacements. This hiring, according to State Departmentbudgetofficials, would be separate from filling positions due to attrition. Information technology. In recent years, State Department technology acquisition has not kept pacewith its needs and with technology advancements. This condition was exacerbated by the October 1999 merger ofthe U.S.Information Agency (USIA)-an agency whose mission includes providing information and outreach to foreignpublics-intothe Department of State where classified communication and information is required. The Capital Investment Fund(CIF),established by the Foreign Relations Authorization Act of FY1994/95 ( P.L. 103-236 ), provides funding for theDepartment's information technology and capital equipment. As recently as FY1997 the CIF appropriation was$24.6million but grew by FY2000 to $96 million. The Bush Administration is requesting $250 million to connect StateDepartment offices worldwide with classified local area network (LAN) capabilities as well as providing everydesktopwith unclassified internet capabilities. Security. Since the August 1998 bombing of two U.S. embassies in Africa, State has made personneland information security a top priority. The Administration is requesting $1.3 billion, an increase of 22% over theFY2001enacted $1.07 billion. Of the total security request, $665 million would be for construction of secure embassies,$211million for the continuation of perimeter security program, and $424 million for an ongoing security readinessprogram. State is requesting security funding within the Diplomatic and Consular Programs account, as well as the EmbassySecurityConstruction and Maintenance account. Embassy Infrastructure. The Bush Administration's FY2002 budget includes $60 million foroverseas infrastructure needs, such as replacing obsolete equipment, aging motor vehicles, and improvingmaintenancearound the embassies. State Department officials say these needs have been underfunded and have accumulatedover theyears.

The Bush Administration seeks a $23.85 billion foreign policy budget forFY2002, representing a nominal increase of 5.3% over FY2001 (2.3% in real terms when the effects of inflationare takeninto account). Most of the additional resources are concentrated in a few areas, especially for State Departmentoperationsand a new regional Andean counternarcotics initiative. The budget further proposes to cut funding for theExport-ImportBank by 25%. This report analyzes the FY2002 international affairs funding submission, compares it with recentlyenactedforeign policy budgets, identifies major priorities and recommended reductions, and discusses potentialcongressionalissues. It will be revised as the Administration provides further details in April and May about the FY2002 budget.

CRS_R43984

Introduction Songwriters are legally entitled to get paid for reproductions and public performances of the notes and lyrics they create (the musical works). Recording artists are entitled to get paid for reproductio ns, distributions, and certain digital performances of the recorded sound of their voices combined with instruments in some sort of medium, such as a digital file, record, or compact disc (the sound recordings). Yet these copyright holders do not have total control over their music. For example, although Taylor Swift and her record label, Big Machine, withdrew her music from the music streaming service Spotify in 2014, a cover version of her album 1989 recorded by the artist Ryan Adams could be heard on the service. Copyright law allows Mr. Adams to perform, reproduce, and distribute Ms. Swift's musical works under certain conditions as long as he pays Ms. Swift a royalty. Thus, as a singer who owns the rights to her sound recordings, Ms. Swift can withdraw her own recorded music from Spotify, but as a songwriter who owns the rights to her musical works, she cannot dictate how the music service uses other recorded versions of her musical works. The amount Ms. Swift gets paid for both her musical works and her sound recordings depends on market forces, contracts among a variety of private-sector entities, and federal laws governing copyright and competition policy. Congress wrote these laws, by and large, at a time when consumers primarily accessed music via radio broadcasts or physical media, such as sheet music and phonograph records, and when each medium offered consumers a distinct degree of control over which songs they could hear next. With the emergence of music distribution on the internet, Congress updated some copyright laws in the 1990s. It attempted to strike a balance between combating unauthorized use of copyrighted content—a practice some refer to as "piracy"—and protecting the revenue sources of the various participants in the music industry. It applied one set of copyright provisions to digital services it viewed as akin to radio broadcasts, and another set of laws to digital services it viewed as akin to physical media. Since that time, however, music distribution has continued to evolve. In addition to streaming radio broadcasts ("webcasting") and downloading recorded albums or songs, consumers can stream individual songs on demand via music streaming services. The result, as the U.S. Copyright Office has noted, has been a "blurring of the traditional lines of exploitation." Figure 1 illustrates the evolution of music consumption over the last 40 years. In 1999, recording industry revenues reached their peak of $21.3 billion. That same year, the free Napster peer-to-peer file-sharing service was introduced. In 2003, after negotiating licensing agreements with all of the major record labels, Apple launched the iTunes Music Store to provide consumers a legal option for purchasing individual songs online. The year 2012 marked the first time the recording industry earned more from retail sales of digital downloads ($3.2 billion) than from physical media such as compact discs, cassettes, and vinyl records ($3.0 billion). Apple had approximately a 65% market share of digital music downloads. After peaking in 2012, however, sales from digital downloads began to decline, as streaming services such as Spotify, which entered the U.S. market in 2011, became more popular. Facing a mounting threat to its iTunes store, Apple launched its own subscription streaming music service, Apple Music, in 2015. The popularity of subscription music services has significantly altered music consumption patterns. According to the Recording Industry Association of America (RIAA), the proportion of total U.S. recording industry retail spending coming from webcasting, satellite digital audio radio services and cable services (digital subscriptions), and streaming music services increased from about 9% in 2011 (out of $7.6 billion total) to about 67% in 2017 (out of $8.5 billion total). After 11 consecutive years of declining revenues, consumer spending on music was flat between 2014 and 2015, grew 10% between 2015 and 2016, and grew 14% between 2016 and 2017. Nevertheless, annual spending on music by U.S. consumers, adjusted for inflation, is still nearly two-thirds below its 1999 peak. These changing consumption patterns affect how much performers, songwriters, record companies, and music publishers get paid for the rights to their music. Overview of Legal Framework Under copyright law, creators of musical works and artists who record musical works have certain legal rights. They typically license those rights to third parties, which, subject to contracts, may exercise the rights on behalf of the composer, songwriter, or performer. Reproduction and Distribution Rights Owners of musical works and owners of certain sound recordings possess, and may authorize others to exploit, several exclusive rights under the Copyright Act, including the following: the right to reproduce the work (e.g., make multiple copies of sheet music or digital files) (17 U.S.C. §106(1)) the right to distribute copies of the work to the public by sale or rental (17 U.S.C. §106(3)) In the context of music publishing, the combination of reproduction and distribution rights is known as a "mechanical right." This term dates back to the 1909 Copyright Act, when Congress required manufacturers of piano rolls and records to pay music publishing companies for the right to mechanically reproduce musical compositions. As a result, music publishers began issuing mechanical licenses to, and collecting mechanical royalties from, piano-roll and record manufacturers. While the means of reproducing music have gone through numerous changes since, including the production of vinyl records, cassette tapes, compact discs (CDs), and digital copies of songs, the term "mechanical rights" has stuck. For sound recordings, federal copyright protection of reproduction and distribution rights applies only to recordings originally made permanent, or "fixed," after February 15, 1972. Works that were fixed prior to this date are protected, if at all, pursuant to a patchwork of state laws and court cases until February 15, 2067, but some music services have voluntarily negotiated agreements to pay royalties for use of sound recordings fixed prior to 1972. Public Performance Rights The Copyright Act also gives owners of musical works and owners of sound recordings the right to "perform" works publicly (17 U.S.C. §106(4) and 17 U.S.C. §106(6), respectively). However, for sound recordings, this right applies only to digital audio transmissions. Examples of digital audio transmission services include webcasting, digital subscription services (the SiriusXM satellite digital radio service and the Music Choice cable network), and music streaming services such as Pandora and Spotify. As with sound recording reproduction and distribution rights, sound recording public performance rights under federal copyright laws are granted only to recordings fixed after February 15, 1972. Rights Required Who pays whom, as well as who can sue whom for copyright infringement, depends in part on the mode of listening to music. Consumers of compact discs purchase the rights to listen to each song on the disc as often as they wish (in a private setting). Rights owners of sound recordings (record labels) pay music publishers for the right to record and distribute the publishers' musical works in a physical format (such as a CD, vinyl record, or digital download). Retail outlets that sell digital files or physical copies of sound recordings pay the distribution subsidiaries of major record labels, which act as wholesalers. Radio listeners have less control over when and where they listen to a song than they would if they purchased the song outright. The Copyright Act does not require broadcast radio stations to pay public performance royalties to record labels and artists, but it does require them to pay public performance royalties to music publishers and songwriters for notes and lyrics in broadcast music. As described below in " Broadcast Radio Exception ," Congress appears to have concluded in 1995 that the promotional value of broadcast radio airplay outweighs any revenue lost by record labels and artists. Digital services must pay record labels as well as music publishers for public performance rights. Both traditional broadcast radio stations and music streaming services that limit the ability of users to choose which songs they hear next (noninteractive services) make temporary copies of songs in the normal course of transmitting music to listeners. The rights to make these temporary copies, known as "ephemeral recordings," fall under 17 U.S.C. Section 112. (For more on ephemeral recordings, see " Reproduction and Distribution Licenses .") Users of an "on demand," or "interactive," music streaming service can listen to songs upon request, an experience similar in some ways to playing a CD and in other ways to listening to a radio broadcast. To enable multiple listeners to select songs, the services download digital files to consumers' devices. These digital reproductions are known as "conditional downloads," because consumers' ability to listen to them upon request is conditioned upon remaining subscribers to the interactive services. The services pay royalties to music publishers/songwriters for the right to reproduce and distribute the musical works and royalties to record labels/artists for the right to reproduce and distribute sound recordings. How the Industry Works The music industry comprises three distinct categories of interests: (1) songwriters and music publishers; (2) recording artists and record labels; and (3) the music licensees who obtain the right to reproduce, distribute, or publicly perform music. Some entities may fall into multiple categories. Songwriters and Music Publishers Many songwriters, lyricists, and composers (referred to collectively as "songwriters" in this report) work with music publishers. On behalf of songwriters, music publishers promote songs to record labels and others who use music. They are also responsible for licensing the intellectual property of their clients and ensuring that royalties are collected. Under agreements between a songwriter and a publisher, the publisher may pay an advance to the songwriter against future royalty collections to help finance the songwriter's compositions. In exchange, the songwriter assigns a portion of the copyright in the compositions he or she writes during the term of the contract. The publisher's role is to monitor, promote, and generate revenue from the use of music in formats that require mechanical licensing rights, including sheet music, compact discs, digital downloads, ringtones, interactive streaming services, and broadcast radio. Publishers often contract with performing rights organizations to license and collect payment for public performances on their behalf. (See " ASCAP and BMI Consent Decree Reviews .") Songwriters and publishers derive royalty income at each step, but may need to share this income with subpublishers and coauthors. For songwriters who are entering the music industry, the contract terms are generally standardized, with about a 50-50 division of income between the publisher and songwriter. Some songs have multiple songwriters, each with his or her own publisher, complicating the division of money. Music publishers fall into four general categories: 1. Major P ublishers. The three major publishing firms account for about 53.2% of U.S. music publishing revenue: (1) Sony/ATV Music Publishing (25.5%), (2) Universal Music Publishing Group (22.4%), and (3) Warner Music Group (5.3%). 2. Major Affiliates. These independent publishing companies handle the creative aspects of songwriting management (matching writers with performing artists and record labels and helping them fine-tune their skills), while affiliating with a major publisher to handle the administration of royalties. 3. Independent P ublishers. These firms administer their own catalogs of music, and are not affiliated with major publishers. 4. Writer-Publishers . Some songwriters control their own publishing rights. Examples are well-established songwriters who do not need help marketing their songs to performers and record labels, and songwriters who perform their own works. Writer-publishers may hire individuals, in lieu of companies, to administer their royalties. Recording Artists and Record Labels Record labels are responsible for finding musical talent, recording their work, and promoting the artists and their work. In addition, the parent companies of the three largest record labels (known as "majors") reproduce and distribute physical copies of sound recordings (compact discs and vinyl records) as well as electronic copies (MP3 files). The major labels have large distribution networks. Traditionally, these networks moved physical recordings from manufacturing plants into retail outlets. The distribution role of record labels is changing. Although the decline in consumption of physical recordings has alleviated the need to operate warehouses, the labels perform many functions with respect to selling digital copies of songs. Such functions include adding data to each recording to identify the parties entitled to royalties and keeping track of payments. In addition, they negotiate with the streaming services for the rights to use the sound recordings and monitor the sales and streaming of songs. Similar to songwriters, recording artists may contract with a record label or retain their copyrights and distribute their own sound recordings. Recording contracts generally require recording artists to transfer their copyrights to the record label for defined periods of time and defined geographic regions. In return, the recording artist receives a share of royalties from sales and licenses of the sound recording. Record companies also finance recordings of music, advance funds to artists to cover expenses, and attempt to guide the artists' careers. Major stars who have proven their earning potential may be able to negotiate full ownership of copyrights to future sound recordings. The three major record labels earned about 65% of the industry's U.S. revenue: (1) Sony Corporation (14.4%), (2) Universal Music Group (29.4%), and (3) Warner Music Group (21.2%). Each of these labels shares a corporate parent with one of the major music publishers described in " Songwriters and Music Publishers " (Sony Corporation, Vivendi SA, and Access Industries, respectively). The publishing and recording divisions of parent companies may not necessarily both publish and record the same song. While there are many smaller record labels specializing in genres such as country or jazz, few are truly independent, because they often rely on major record labels for the distribution of sound recordings. For example, Ms. Swift has a recording contract with an independent record label, Big Machine Records, which in turn has a distribution agreement with Universal Music Group. One recording artist who retains his copyrights and successfully distributes his own music, without signing a contract with the record label, is Chance the Rapper. Generally, instead of selling his music, Chance gives it away for free and earns money from touring and selling merchandise. The music streaming service Apple Music reportedly paid him $500,000 in exchange for being the exclusive outlet for his streaming-only album, Coloring Book . In May 2016, it became the first streaming-only album to rank among the 10 most popular U.S. albums during a week, as ranked by the trade publication Billboard . Producers, Mixers, and Sound Engineers A record producer is responsible for bringing the creative product into tangible form (a sound recording). This entails both creative tasks, such as finding and selecting songs and deciding on arrangements, and administrative tasks, such as booking studios and hiring musicians. In the past, record labels hired producers to produce entire albums. As it became more common for recording artists to work with multiple producers on a single album, the artists, rather than the labels, entered into contracts with the producers. The artist therefore controls the terms of the producer's compensation. Producers with negotiating leverage may demand royalties. A sound engineer generally runs recording sessions, with oversight from the producer; a mixer works with the output of recording sessions to piece together polished finished products. The roles may overlap. Generally, mixers get one-time payments per track; those who are in high demand, however, may be able to insist on receiving a portion of the artist's royalties, similar to producers. How Copyright Works Songwriters and Music Publishers Reproduction and Distribution Licenses (Mechanical Licenses) With the 1909 Copyright Act, Congress specifically recognized the exclusive right of the copyright owner to make mechanical reproductions of music. The 1909 Copyright Act applied to musical works published and copyrighted after the law went into effect. A mechanical license is a license that permits (1) the audio-only reproduction of music in copies that may be heard with the aid of "mechanical" devices such as a player piano, a phonograph record, a CD player, or a smartphone, among other devices; and (2) the distribution of such copies to the public for private use. When Congress considered the 1909 Copyright Act, some Members expressed concern about allegations that a large player-piano manufacturer, the Aeolian Company, was seeking to create a monopoly by buying up exclusive rights from music publishers. Aeolian's piano rolls did not work with the player pianos of Aeolian's competitors. Therefore, in order to be able to listen to most popular music, consumers would have to purchase Aeolian player pianos. To address this concern about a potential monopoly, Congress established the first compulsory license in U.S. copyright law. A music publisher/songwriter may withhold the right to reproduce a musical work altogether. However, once a sound recording (or player-piano roll) is distributed to the public, a publisher/songwriter must allow others to make similar use of it upon payment of a specified royalty. Thus, in 2015, when Ryan Adams recorded a cover version of Taylor Swift's album 1989 , Mr. Adams and his record label Pax-Americana Recording Company did not need to seek her permission. Instead, they paid her the rate set by the government for a compulsory mechanical license. The 1909 Copyright Act set the royalty rate at $0.02 per "part manufactured." The rate remained in place for nearly 70 years. Technological changes during the first half of the 20 th century enabled record manufacturers to extend the amount of music on each side of a record from 5 minutes to more than 20 minutes, the number of songs per record increased, and record labels began paying mechanical royalty rates on a "per song" basis rather than per "part manufactured." Congress revisited the mechanical license in the Copyright Act of 1976, codifying the compulsory license as 17 U.S.C. Section 115. Congress specified that the rates would be payable for each record made and distributed [emphasis added], rather than each record manufactured. The 1976 Copyright Act defines the term "phonorecord" to refer to audio-only recordings. Since then, Congress has amended the law several times and changed the statutory rate-setting process. Notice of Intention (NOI) The 1976 Copyright Act also set forth procedures, codified in regulations promulgated by the head of the U.S. Copyright Office, the Register of Copyrights, for licensees of music to obtain mechanical licenses. The licensee must serve a notice of intention (NOI) to license the music on the copyright owner, or, if the copyright owner's address is unknown, the Copyright Office. The licensee must file the NOI within 30 days of making the new recording or before distributing it. Licensees that cannot locate copyright owners set aside a pool of money owed until they can locate and pay the owners. The 1976 Copyright Act made it easier for copyright owners to sue in the following two respects: 1. It removed any limitation on liability and provided that a potential licensee who fails to provide the required NOI is ineligible for a compulsory license. If the potential licensee fails to obtain a negotiated license, its making and distribution of records of musical works constitutes infringement under 17 U.S.C. Section 501 and is subject to remedies provided by Sections 502-506. 2. It removed the requirement that copyright holders file a "notice of use" in the Copyright Office in order to recover against an unauthorized record manufacturer. Instead, a copyright holder's failure to identify itself to the Copyright Office precludes the holder only from receiving royalties under a compulsory license. Thus, under current law, there may be no public record of the fact that the copyright owner made and distributed a copyrighted work and thereby triggered the NOI requirements. In contrast to the performance rights licenses, reproduction and distribution licenses are not issued on a blanket basis. As discussed in " Developments and Issues ," NOIs and the Copyright Office's present database of musical works have led to controversy between rights holders and licensees. Copyright Royalty Board and Ratesetting In their 1982 article reviewing the history of the mechanical royalty, Frederick F. Greenman Jr. and Alvin Deutsch state that the idea of adjusting the statutory mechanical royalty rate periodically stemmed from a suggestion by a representative of the National Music Publishers Association (NMPA) in a 1967 hearing, who added that such adjustments should reflect the "accepted standards of statutory ratemaking." In testimony in 1975, then Register of Copyrights Barbara Ringer suggested that the complexity of administering the proposed compulsory licenses in addition to the mechanical license could be simplified by establishing a separate royalty tribunal, which would use standards established by Congress to set royalty rates. Congress created such a tribunal, consisting of five commissioners appointed by the President, in the 1976 Copyright Act. It also set forth in 17 U.S.C. Section 801(b)(1) four policy objectives for the tribunal to consider when determining the rates for mechanical licenses. These objectives include 1. maximizing the availability of public works to the public, 2. affording copyright owners a fair return on their creative works and copyright users a fair income under existing economic conditions, 3. reflecting the relative contributions of the copyright owners and users in making products available to the public, and 4. minimizing any disruptive impact on the structure of the industries involved and on generally prevailing industry practices. After replacing the tribunal with an arbitration panel (known as the Copyright Arbitration Royalty Panel) in 1993, Congress established the Copyright Royalty Board (CRB) in 2004. The CRB, composed of three administrative judges appointed by the Librarian of Congress, sets mechanical and certain other licensing rates (described in " Noninteractive Services ") every five years. While copyright owners and users are free to negotiate voluntary licenses that depart from the statutory rates and terms, the CRB‐set rate effectively acts as a ceiling for what an owner may charge. Digital Copies and Streaming Services In 1995, Congress passed the Digital Performance Right in Sound Recordings Act (DPRA). Among other provisions, this act amended 17 U.S.C. Section 115 to expressly cover the reproduction and distribution of musical works by digital transmission (digital phonorecord deliveries, or DPDs). Congress directed that rates and terms for DPDs should distinguish between "(i) digital phonorecord deliveries where the reproduction or distribution of a phonorecord is incidental to the transmission which constitutes the digital phonorecord delivery, and (ii) digital phonorecord deliveries in general." This distinction prompted an extensive debate about what constitutes an "incidental DPD." For several years, the Copyright Office deferred moving forward on a rulemaking, urging that Congress resolve the matter. In July 2008, the Copyright Office proposed new rules, determining that "[while] it seems unlikely that Congress will resolve these issues in the foreseeable future ... the Office believes resolution is crucial in order for the music industry to survive in the 21 st Century." CRB Rates In September 2008, after nearly seven years of administrative hearings and litigation, groups representing music publishers, the recording industry, songwriters, and music streaming services reached a landmark agreement regarding the applicability of mechanical licenses to streaming. Music publishers had feared that as consumers shifted from purchasing music to streaming music on-demand, the revenues they received from mechanical royalties would decline. Based on the agreement, in the form of draft regulations to the CRB, music streaming services would pay publishers a percentage of their revenues for interactive streams and limited downloads. In addition, pursuant to the agreement, noninteractive, audio-only streaming services (e.g., Pandora) would not need to obtain mechanical licenses. The CRB adopted a modified version of this agreement in 2009, to apply through 2012. In 2012, groups representing music publishers, the recording industry, songwriters, and online music services reached a new agreement, subject to formal approval by the CRB, setting mechanical royalty rates and standards for five additional categories of music streaming services. The CRB subsequently adopted the terms of the agreement to cover rates from 2013 through 2017. In January 2018, the CRB issued its initial determination of mechanical royalty rates and terms for the 2018-2022 period. For physical phonorecord deliveries (e.g., compact discs and vinyl records) and permanent digital downloads, licensees pay a flat rate (e.g., either 9.1 cents per song or 1.75 cents per minute of playing time or fraction thereof, whichever amount is larger). For interactive streaming, the rates are based on a set of formulas, taking into account the music service's revenues or total costs of licensing content (including the cost of licensing sound recording). Using the formulas, the services calculate the pool of money available for distribution to publishers for mechanical royalty payments. The amount of money each publisher receives for each song is based on another set of formulas. The rate formulas also set minimum per-subscriber payments, depending on the category of interactive music service. During free trial periods (e.g., during a three-month trial subscription to Apple Music), the mechanical royalty rate is zero. Musical Work Public Performance Royalties Depending on who collects public performance royalties on behalf of publishers and songwriters, the rates are either subject to oversight by the U.S. District Court for the Southern District of New York or are based on marketplace negotiations between the publishers and licensees. Congress granted songwriters the exclusive right to publicly perform their works in 1897. Thus, in order to legally publicly perform songwriters' works, establishments that featured orchestras and bands, operas, concerts, and musical comedies needed to obtain permission from songwriters and/or publishers. While this right represented a way for copyright owners to profit from their musical works, the sheer number and fleeting nature of public performances made it impossible for copyright owners to individually negotiate with each user for every use or to detect every case of infringement. To address the logistical issue of how to license and collect payment for public performances in a wide range of settings, several composers formed the American Society of Composers, Authors and Publishers (ASCAP) in 1914. ASCAP is known as a performance rights organization (PRO). Songwriters and publishers assign PROs the public performance rights secured by copyright law; the PROs in turn issue public performance licenses on behalf of songwriters and publishers. Most commonly, licensees obtain a blanket license, which allows the licensee to publicly perform any of the musical works in a PRO's catalog for a flat fee or a percentage of total revenues. After charging an administrative fee, PROs split the public performance royalties they collect among the publishers and songwriters. In 1930, an immigrant musician founded a competing PRO, SESAC (originally called the Society of European Stage Authors and Composers), to help European publishers and writers collect royalties from U.S. licensees. As broadcast radio grew more popular in the United States, SESAC expanded its representation to include U.S. composers as well. Growth in radio, as well as declining sales in sheet music and other traditional revenue sources for publishers, also prompted action from ASCAP. In 1932, ASCAP negotiated a public performance license with radio broadcasters that, for the first time, established rates based on a percentage of each station's advertising revenues. To strengthen their bargaining power vis-à-vis ASCAP, broadcasters in 1939 founded and financed a third PRO, Broadcast Music, Inc. (BMI), with the goal of attracting new composers as members and securing copyrights of new songs. In addition, BMI successfully convinced publishers previously affiliated with ASCAP to switch. (A fourth PRO, Global Music Rights [GMR], was established in 2013.) ASCAP and BMI originally acquired the exclusive right to negotiate on behalf of their members (music publishers and songwriters) and forbade members from entering into direct licensing agreements. Both offered music services only blanket licenses covering all songs in their respective catalogs. When the five-year licensing agreement between ASCAP and radio stations affiliated with the CBS and NBC radio networks expired in December 1940, three-quarters of the 800 radio stations then in existence adopted a policy prohibiting the broadcast of songs by composers affiliated with ASCAP due to disagreement over royalty rates. DOJ Consent Decrees The dispute between the broadcast stations and the PROs led the U.S. Department of Justice (DOJ) to investigate whether the PROs were violating antitrust laws. To avert an antitrust lawsuit threatened by DOJ, BMI agreed to enter a consent decree in 1941. After DOJ filed an antitrust lawsuit against ASCAP, ASCAP also agreed to enter a consent decree in 1941. Although the ASCAP and BMI consent decrees are not identical, they share many of the same features. Among those features are requirements that the PROs may acquire only nonexclusive rights to license members' public performance rights; must grant a license to any user that applies on terms that do not discriminate against similarly situated licensees; and must accept any songwriter or music publisher that applies to be a member, as long as the writer or publisher meets certain minimum standards. ASCAP and BMI are also required to offer alternative licenses to the blanket license. Prospective licensees that are unable to agree to a royalty rate with ASCAP or BMI may seek a determination of a reasonable license fee from one of two federal district court judges in the Southern District of New York. In contrast to the mechanical right, the public performance of musical works is not bound by compulsory licensing under the Copyright Act. While the rates charged by ASCAP and BMI are subject to oversight by the federal district court judges, pursuant to their respective consent decrees, the rates charged by SESAC and GMR are based on marketplace negotiations. When approving of rates charged by ASCAP and BMI, the federal district court must determine that the PROs have demonstrated that the rates are "reasonable." According to the U.S. Court of Appeals for the Second Circuit, the federal district court must also consider that ASCAP and BMI exercise "disproportionate power over the market for music rights." Current law, 17 U.S.C. Section 114(i), prohibits the judges from considering rates paid by digital services to record labels and artists for public performances of sound recordings when setting or adjusting public performance rates payable to music publishers and songwriters. This provision was included when Congress created a public performance right for sound recordings transmitted by digital services with the 1995 passage of the DPRA. (See " Sound Recording Public Performance Royalties .") According to a report of the House Judiciary Committee, Congress sought to "dispel the fear that license fees for sound recordings may adversely affect music performance royalties." Billboard magazine described the concern among writers and publishers as the "pie theory": once digital services began to pay a public performance licensing fee for sound recordings, they might claim that they have less money available to pay for public performances of musical works. Since entering into these consent decrees, DOJ has periodically reviewed their operation and effectiveness. The ASCAP consent decree was last amended in 2001, and the BMI consent decree was last amended in 1994. As described in " ASCAP and BMI Consent Decree Reviews ," DOJ completed a review of the consent decrees in 2016. In 2017, the Second Circuit Court of Appeals upheld BMI's challenge to DOJ's interpretation of the consent decrees. Recording Artists and Record Labels Reproduction and Distribution Licenses Congress first created copyright laws that specifically applied to sound recordings with enactment of the 1971 Sound Recording Act, P.L. 92-140. The prevalence of audiotapes and audiotape recorders in the 1960s made it easier for the public to create and sell unauthorized duplications of sound recordings. According to the House Judiciary Committee report, the best solution for combating the trend was to amend federal copyright laws. The 1971 Sound Recording Act applied to sound recordings fixed on or after February 15, 1972. The following year, the U.S. Supreme Court held that neither federal copyright law nor the Constitution preempted California's record piracy law, as it applied to pre-1972 sound recordings. Subsequently, several states passed their own antipiracy laws. In 1975, in a hearing leading up to passage of the 1976 Copyright Act, the U.S. Department of Justice recommended that federal copyright laws exclude pre-1972 sound recordings to preserve the antipiracy laws then in effect. The House Judiciary Committee also noted that absent such exclusion, many works would have automatically come into the "public domain." A work of authorship is in the "public domain" if it is no longer under copyright protection and therefore may be used freely without the permission of the former copyright owner. The 1976 Copyright Revision Act preempted state laws that provided rights equivalent to copyright, but exempted the pre-1972 works from federal protection. States may continue to protect pre-1972 sound recordings until 2067, at which time all state protection is to be preempted by federal law and pre-1972 sound recordings are to enter the public domain if they have not previously done so in accordance with state law. Recognizing that noninteractive digital services may need to make ephemeral server reproductions of sound recordings, in 1998 Congress established a related license under Section 112 of the Copyright Act specifically to authorize the creation of these copies. The rules governing licenses for temporary reproductions of sound recordings are somewhat analogous to those governing incidental reproduction and distribution of musical works described in Section 115(c)(3)(C)(i). The rates and terms of the Section 112 license are established by the CRB. Through SoundExchange, described in " Sound Recording Public Performance Royalties ," copyright owners of sound recordings (usually the record labels) receive Section 112 fees. Recording artists who do not own the copyrights, however, do not. Sound Recording Public Performance Royalties Noninteractive Services Until the 1990s, the Copyright Act did not afford public performance rights to record labels and recording artists for their sound recordings. Record labels and artists primarily earned income from retail sales of physical products such as CDs. With the inception and public use of the internet in the early 1990s, the recording industry once again became concerned that existing copyright law was insufficient to protect the industry from music piracy. Two amendments to the Copyright Act, the Digital Performance Right in Sound Recordings Act (DPRA) in 1995 and the Digital Millennium Copyright Act (DMCA) in 1998, addressed this concern. In the DPRA, Congress granted record labels and recording artists an exclusive public performance right for their sound recordings, but limited this right to certain digital audio services. The DPRA also created a compulsory license that compelled copyright owners to license sound recordings for certain subscription services (e.g., Music Choice's music channels available to cable television subscribers). According to Billboard magazine, music publishers and writers were apprehensive that if record companies had the ability to withhold licenses of sound recordings from multiple outlets, they could effectively thwart the ability of publishers and writers to earn their own public performance royalties. The provision thus represented a compromise between trade groups representing music publishers and record labels. Within two years after the DPRA's enactment, the Recording Industry Association of America and nonsubscription, advertising-supported, noninteractive streaming service providers debated whether or not (1) the compulsory license applied to those services, and (2) whether the services were obligated to pay public performance royalties for sound recordings. After RIAA and a group representing digital music services, Digital Music Association, reached a compromise, Congress adopted the DMCA. The DMCA expanded the statutory licensing provisions in Section 114 to cover noninteractive online music services. It also set up the following bifurcated system of rate-setting standards for the CRB: Services that existed as of July 31 , 1998 , prior to the enactment of the DMCA (SiriusXM satellite digital radio service as well as the Music Choice and Muzak subscription services), remained subject to the Section 801(b)(1) standard. Webcasters and other noninteractive music streaming services (including both subscription and advertising-supported music streaming services) that entered the music marketplace after July 31, 1998 , are subject to rates and terms "that most clearly represent the rates and terms that would have been negotiated in the marketplace between a willing buyer and a willing seller." One key difference between the two rate-setting standards is the Section 801(b)(1) standard's inclusion of the policy goal of "minimizing any disruptive impact on the structure of the industries involved and on generally prevailing industry practices." According to a 2010 report from the Government Accountability Office, this standard led to lower copyright royalty rates in one proceeding, but the overall effect is generally difficult to predict. The conference report stated the purpose of applying the Section 801(b)(1) rate-setting standard services in existence prior to July 31, 1998, was to prevent disruption of the services' existing operations. Interactive Services The DPRA enabled owners of the rights to sound recordings to negotiate directly with interactive music streaming services for public performance rights at marketplace-determined rates. The term "interactive service" covers only services that enable an individual to arrange for the transmission or retransmission of a specific recording. The Senate Judiciary Committee in 1995 explained that [C]ertain types of subscription and interactive audio services might adversely affect sales of sound recordings and erode copyright owners' ability to control and be paid for use of their work.... Of all of the new forms of digital transmission services, interactive services are the most likely to have a significant impact on traditional record sales, and therefore pose the greatest threat to the livelihoods of those whose income depends on revenues derived from traditional record sales. Broadcast Radio Exception Congress does not require broadcast radio stations to obtain public performance licenses from owners of sound recordings. The Senate Judiciary Committee explained in 1995 that it was attempting to strike a balance among many interested parties. Specifically, the committee stated that the sale of many sound recordings and the careers of many performers have benefitted considerably from airplay and other promotional activities provided by ... free over-the-air broadcast ... [and] the radio industry has grown and prospered with the availability and use of prerecorded music. This legislation should do nothing to change or jeopardize [these industries'] mutually beneficial relationship. The Senate Judiciary Committee further distinguished broadcast radio from other services by stating that "free over-the-air broadcasts ... provide a mix of entertainment and non-entertainment programming and other public interest activities to local communities to fulfill a condition of the broadcasters' licenses." Copyright Royalty Board Rate Proceedings The CRB sets statutory rates through rate determination proceedings. Participants generally include copyright users, copyright holders, and trade or other groups representing their respective interests. The proceedings include an initial three-month period during which parties may engage in voluntary negotiations. In the absence of an agreement during that period, participants submit written statements, conduct discovery, and attempt again to reach a negotiated settlement. At any time during the rate-setting proceeding, some or all participants may reach agreements regarding what they consider to be appropriate statutory rates. They then submit the proposed rates to the CRB, which in turn publishes the proposed rates to allow potentially affected parties to comment. The CRB may adopt and codify the proposed rates but also has the option to "decline to adopt the agreement as a basis for statutory terms and rates for participants that are not parties to the agreement." If the parties do not reach an agreement, the CRB generally hears live testimony at an evidentiary hearing, and subsequently issues a determination published in the Federal Register . Participants who disagree with the outcome can request a rehearing, which the CRB may choose to grant or deny. In addition, participants may challenge CRB determinations through an appeal filed with the U.S. Court of Appeals for the District of Columbia Circuit. In 2000, RIAA established SoundExchange as a designated common agent for the record labels to receive and distribute royalties. In 2003, RIAA spun off SoundExchange as an independent entity. Prior to distributing royalty payments, SoundExchange deducts costs incurred in carrying out its responsibilities. Webcaster Settlement Acts In general, using the "willing buyer-willing seller" standard, the CRB has adopted "per‐performance" rates for public performances of sound recordings by online music services. In contrast, using the Section 801(b)(1) standard, the CRB has adopted percentage‐of‐revenue rates for public performances of sound recordings by preexisting subscription services (Music Choice and Muzak) and satellite digital audio services (SiriusXM). Following complaints by some music streaming services and webcasters that the per‐performance rates ordered by the CRB were excessive, Congress has repeatedly passed legislation (collectively, the "Webcaster Settlement Acts") giving SoundExchange temporary authority to negotiate alternative royalty schemes binding on all copyright owners in lieu of the CRB‐set rates. The agreements enabled the music streaming services to pay royalties based on a percentage of their revenue in lieu of a "per-performance" rate. The most recent agreements reached pursuant to this temporary negotiating authority expired on December 31, 2015. CRB Rates In April 2015, the CRB began the hearing phase of its proceeding to set the royalty rates paid by noninteractive music streaming services for the years 2016-2020. In 17 U.S.C. Section 114(f)(5)(C), the CRB was barred from taking into consideration the provisions of agreements negotiated pursuant to the Webcaster Settlement Acts. During the CRB's rate proceeding, questions arose about the proper interpretation of this provision. Pandora Media, Inc., Clear Channel (now known as iHeartMedia, Inc.), and SoundExchange disagreed over whether the direct agreements, which were based in part on the Pureplay settlement, could be introduced as evidence in the CRB rate proceeding. SoundExchange argued that Congress enacted a "very broad rule of exclusion" to prevent the terms of a Webcaster Settlement Act agreement from being used against a settling party in subsequent proceedings. Pandora Media and Clear Channel contended that SoundExchange's interpretation would require disregarding every benchmark agreement proposed by parties, as all agreements are to some degree affected by the prevailing rates and terms negotiated pursuant to the 2009 Webcaster Settlement Act agreement. The CRB determined that these questions were novel material questions of substantive law and, as required by the Copyright Act, referred them to the Register of Copyrights for resolution. In September 2015, the Register ruled that the CRB may consider directly negotiated licenses that incorporate or otherwise reflect provisions in a Webcaster Settlement Act agreement. On December 16, 2015, the CRB issued its decision regarding rates for the 2016-2020 period. For 2016, streaming services (including those of broadcast radio stations as well as Pandora) must pay $0.17 per 100 streams on nonsubscription services. In a break from its past practice of setting rate increases in advance, the CRB tied the annual rate increases from 2017 through 2020 to the Consumer Price Index. Rather than setting forth ephemeral recording fees separately, the CRB includes them with the Section 114 royalties. For the 2016-2020 period, the CRB set ephemeral royalties fees at 5% of the total Section 114 royalties paid by streaming services. On December 14, 2017, the CRB issued its rate decision for preexisting digital subscription services and satellite digital audio radio services covering the 2018-2022 period. Table 1 describes how public performance rates vary, depending on the type of music service and when it began operating, and the rate-setting standard used by CRB. Allocation of Royalty Distributions The Copyright Act specifies how royalties collected under Section 114 are to be distributed: 50% goes to the copyright owner of the sound recording, typically a record label; 45% goes to the featured recording artist or artists; 2.5% goes to an agent representing nonfeatured musicians; and 2.5% goes to an agent representing nonfeatured vocalists. The act does not, however, include record producers in the statutorily defined split of royalties for public performances of sound recordings by noninteractive digital services. In order for producers to be compensated for these public performances via SoundExchange, the artist must provide a letter of direction to SoundExchange, directing SoundExchange to send a portion of the artist's royalties to the producer instead. (For information about proposed legislation addressing how producers get compensated for their work, see " Bills Introduced in the 115th Congress .") Developments and Issues "Interactive" Versus "Noninteractive" Music Services The distinction between interactive and noninteractive services has been a matter of debate. For the purposes of defining the process by which owners of sound recordings can set rates for public performance rights, 17 U.S.C. Section 114 provides that an interactive service is one that enables a member of the public to receive either "a transmission of a program specially created for the recipient," or, "on request, a transmission of a particular sound recording, whether or not as part of a program, which is selected by or on behalf of the recipient." As discussed in " Reproduction and Distribution Licenses (Mechanical Licenses) ," 17 U.S.C. Section 115 does not distinguish between interactive and noninteractive services for the purposes of specifying when a digital service must obtain mechanical rights from music publishers. The CRB has adopted these distinctions in setting or approving rates for mechanical licenses. In 2009, the U.S. Court of Appeals for the Second Circuit ruled that a music streaming service that relies on user feedback to play a personalized selection of songs that are within a particular genre or similar to a particular song or artist the user selects is not an "interactive" service. Noting that Congress's original intent in making the distinction was to protect sound recording copyright holders from cannibalization of their record sales, the court's decision rested on the following analysis: If a user has sufficient control over an interactive service such that she can predict the songs she will hear, much as she would if she owned the music herself and could play each song at will, she will have no need to purchase the music she wishes to hear. Therefore, part and parcel of the concern about a diminution in record sales is the concern that an interactive service provides a degree of predictability—based on choices made by the user—that approximates the predictability the music listener seeks when purchasing music. The court noted that the LAUNCHcast online radio service offered by the defendant, Launch Media, Inc., which at the time was owned by Yahoo!, Inc., created unique playlists for each of its users. Nevertheless, the court reasoned that uniquely created playlists do not ensure predictability. Therefore, the court determined, LAUNCHcast was a noninteractive service. In addition, in order to be eligible for compulsory licensing, noninteractive services (other than broadcast radio, SiriusXM, Music Choice, and Muzak) must limit the features they offer consumers, pursuant to the Copyright Act. For example, these services are prohibited from announcing in advance when they will play a specific song, album, or artist. Another example is the "sound recording performance complement," which limits the number of tracks from a single album or by a particular artist that a service may play during a three‐hour period. The Launch Media decision affirmed that personalized music streaming services such as Pandora and iHeartRadio could obtain statutory licenses as noninteractive services for their public performances of sound recordings. The CRB‐established rates do not currently distinguish between such customized services and other services that simply transmit undifferentiated, radio‐style programming over the internet. Spotify's services, on the other hand, allow users access to specific albums, songs, and artists on demand. For no charge, consumers can have limited access to songs if they use the site on their personal computers and see or hear an advertisement every few songs. In exchange for paying a monthly fee of about $10, users can listen to songs without advertisement interruption, use Spotify on mobile devices as well as personal computers, or listen to music offline. Designated Agents, Collectives, and Competition In 1995, Congress first provided antitrust exemptions to statutory licensees and to copyright owners of sound recordings, such as record labels, so that they could designate "common agents" to negotiate collectively with SiriusXM and preexisting subscription services over royalty rates for public performance rights on a nonexclusive basis. However, according to the House Judiciary Committee report, "The exemption is only available if any common agents designated are nonexclusive, thus preserving the ability to negotiate directly with and seek to secure a statutory license from a copyright owner directly. This should prevent copyright owners from using any common agent to demand supracompetitive rates from operators." With respect to licensing for interactive services (i.e., nonstatutory licensing), the DPRA does not create an antitrust exemption for the purpose of negotiating rates. However, copyright owners and entities wanting to perform sound recordings "may use common agents only to perform a clearinghouse function and not for rate-setting." In 1998, when Congress enacted the DMCA, it added Section 112 to address ephemeral server reproductions by webcasters and noninteractive online services; it also provided an antitrust exemption for copyright owners and licensees to designated common agents to negotiate, pay, and receive royalty payments for ephemeral recordings. In contrast to Section 114(e)(1), however, Section 112(e)(2) does not specify that the designation must be on a nonexclusive basis. The House Judiciary Committee report does not explain the omission; it states that "this subsection closely follows the language of existing antitrust exemptions in copyright law." When Congress created the CRB in 2004 with the enactment of the Copyright Royalty and Distribution Reform Act of 2004, P.L. 108-419 , it included the following provisions regarding the obligation of licensees to make payments: "whenever royalties ... are paid to a person other than the Copyright Office, the entity designated by the Copyright Royalty Judges [emphasis added] to which such royalties are paid by the copyright user ... shall ... return any excess amounts previously paid." This marked the first time that Congress specified that a government entity could designate an entity (i.e., agent) to receive royalties. The House Judiciary Committee report noted that this provision ensured that parties subject to statutory licensing, but who may claim that they have insufficient funds to pay royalties decided by the CRB, continue to make payments while they appeal the CRB's decision, until the final rates have been established (either by the CRB via a rehearing or the U.S. Court of Appeals for the D.C. Circuit via judicial review). SoundExchange as Sole Collective: Efficiency vs. Competition In 2006, the CRB, on an interim basis, designated SoundExchange as the sole "collective," which it defined as a "collection and distribution organization that is designated under the statutory license by ... determination of the Copyright Royalty Judges under section 114(f)(1)(B) or section 114(f)(1)C)." Subsequently, Royalty Logic, a for-profit subsidiary of Music Reports, Inc. requested that the CRB recognize it as a collective as well. Royalty Logic claimed that in order to compete with SoundExchange, it was necessary for the CRB to recognize it as a "designated agent." It also contended that competition between it and SoundExchange would benefit sound recording copyright owners. The CRB countered that pursuant to Sections 112(e) and 114(e) of the Copyright Act, it is copyright owners and performers who are designated agents, and therefore Royalty Logic need not be formally recognized by the CRB for it to have any involvement in the royalty distribution process. Moreover, the CRB contended that "While Royalty Logic's argument that multiple Collectives promote competition on pricing may make some sense in the direct licensing context where rates and terms are set by private agreement, it does not make sense where the rates and terms are governed by statutory licenses." In sum, the CRB found that consistent with the "willing buyer/willing seller" royalty rate-setting standard, the selection of a single collective represented the "most economically and administratively efficient system for collecting royalties under the blanket license framework created by the statutory licenses." In 2009, the U.S. Court of Appeals for the D.C. Circuit concurred with the CRB's decision. In that case, Royalty Logic argued that Congress's use of the word "nonexclusive" in 17 U.S.C. §114(e)(1) meant that the CRB could not give a single entity the exclusive ability to receive payments. In addition, Royalty Logic argued that by giving the CRB the authority to set "terms of royalty payments" in 17 U.S.C. §114(f)(2)(A), Congress intended the CRB only to determine how and when payments are made. The court countered that the phrase "the entity designated by the Copyright Royalty Judges to which such payments are made" in 17 U.S.C. §§803(c)(2)(E)(iii), 803(d)(2)(C)(iii) presupposes that in setting rates and terms for the statutory license, the CRB will "designate" a "single" entity to receive royalty payments. The court concluded that Royalty Logic's reading of the word "terms" in Section 114(f)(2)(A) was too narrow, and that by selecting SoundExchange as the sole collective, the CRB fulfilled Congress's expectation that the CRB would designated a single entity to receive royalty payments from licensees. The CRB also designated SoundExchange as the sole collective for the period 2011-2014. In making its determination, the CRB stated that no party had requested the designation of multiple collectives, and SoundExchange was the only party requesting to be a collective. CRB also noted that previously it had determined that a sole collective was the most economically and administratively efficient system for collecting royalties under the statutory licenses' blanket licensing framework. In 2015, SoundExchange reached agreements with public radio stations and college radio stations covering the rates paid to webcast sound recordings. The CRB approved the agreements and made them binding on all copyright owners and performers, including those who are not SoundExchange members. Once again, the CRB designated SoundExchange as the sole collective for purposes of collecting, monitoring, managing, and distributing sound recording royalties for the rate period January 1, 2016-December 31, 2020. The CRB stated that no one had objected to SoundExchange continuing its role as the collective, and that over its years of service SoundExchange had developed an administrative and technical knowledge base. Harry Fox Agency and Music Reports, Inc. Congress also created an antitrust exemption for owners and licensees of musical works to designate common agents to negotiate, collect, and distribute mechanical licenses for DPDs. In 2004, Congress extended the provision to negotiations and agreements related to traditional mechanical licenses. Congress also added the provision that owners and licenses must designate the common agents on a nonexclusive basis as a technical amendment. In the United States, music publishers collect mechanical royalties from recorded music companies and streaming services via third-party administrators. One major administrator is the Harry Fox Agency. After charging an administrative fee, this agency distributes the mechanical royalties to the publishers, which in turn distribute them to songwriters. In September 2015, the performing rights organization Society of European Stage Authors and Composers (SESAC) acquired the Harry Fox Agency from the National Music Publishers Association trade organization. (For a description of SESAC and other performing rights organizations, see " Musical Work Public Performance Royalties .") Music publishers may also issue and administer mechanical licenses themselves. In its mechanical licensing rate proceedings, the CRB has not specified an agent (or collective) for the purpose of administering mechanical licenses. In 2006, Royalty Logic, Inc. raised the issue of competition among agents for the licensing of musical works and/or the collection and distribution of mechanical royalties. Royalty Logic and copyright owners stipulated that Royalty Logic would not participate unless the issue regarding competition among collectives was raised by other parties in that rate proceeding; it was not raised. Equity Interests in Music Services Noncash considerations may be involved in determining the price interactive services pay for access to music. For example, the major labels acquired a reported combined 18% equity stake in Spotify in a transaction that reportedly hinged on their willingness to grant Spotify rights to use their sound recordings on its service. When Spotify began trading its shares on the New York Stock Exchange in April 2018, Sony sold a portion of its stake, and announced that it would share a portion of its proceeds with artists and the independent labels whose music Sony distributes. As described in " Reproduction and Distribution Licenses (Mechanical Licenses) ," the rates that interactive services pay music publishers are tied to the rates that the services pay record labels for performance rights, which are negotiated in the free market. This means that if a record label's deal includes an equity stake in an interactive digital music service provider or a guaranteed allotment of advertising revenues, those items are assigned a value when estimating the total cost, thereby enabling music publishers to participate in such deals when negotiating for mechanical royalties. In contrast, copyright law prohibits rates paid for public performances of musical works from being tied to rates paid for public performances of sound recordings (see " DOJ Consent Decrees "). Organizations representing songwriters and recording artists have expressed concern that payments received by music publishers and record labels from digital music services as part of direct deals are not being shared fairly, potentially resulting in lower payments than they might receive under statutory licensing schemes. ASCAP and BMI Consent Decree Reviews Together, ASCAP and BMI, which operate on a not-for-profit basis, represent about 90% of songs available for licensing in the United States. SESAC appears to have about a 5% share of songs, but it may be higher. Global Music Rights handles performance rights licensing for a limited number of songwriters. Music publishers may affiliate with multiple PROs; songwriters, however, may choose only one. Publishers have alleged that they have not received a fair share of the performance royalty revenues from streaming services, claiming that the ASCAP and BMI consent decrees (discussed in " DOJ Consent Decrees ") inhibited their ability to negotiate market rates. Beginning in 2011, publishers began pressuring ASCAP and BMI to allow them to withdraw their digital rights from their blanket licenses so that they could negotiate deals directly with digital services. Attempts to Partially Withdraw Public Performance Rights In 2011 and 2013, respectively, ASCAP and BMI each responded by amending their rules to allow music publishers the right to license their public performance rights for "new media" uses—that is, both interactive and noninteractive digital streaming services, so they could negotiate with digital streaming services at market prices in lieu of rates subject to oversight by the federal district court. Pandora Media, Inc., however, challenged the publishers' partial withdrawal of rights before both the ASCAP and BMI rate courts in the Southern District of New York. In each case—though applying slightly differing logic—the courts ruled that under the terms of the consent decrees, music publishers could not withdraw selected rights; rather, a publisher's song catalog must be either "all in" or "all out" of the PRO. After the rulings, the major music publishers and PROs asked the Department of Justice to join them in proposing modifications to the consent decrees. Specifically, both ASCAP and BMI sought to modify the consent decrees to permit partial grants of rights, to replace the current rate-setting process with expedited arbitration, and to allow ASCAP and BMI to provide bundled licenses that include multiple rights (e.g., mechanical as well as public performance of musical works). DOJ announced in June 2014 that it would evaluate the consent decrees. As part of that review, it solicited comments in 2015 about "100% licensing" versus "fractional licensing." Industry practice has been that when a song has several writers, each writer's publisher licenses only a portion of a song, a practice known as "fractional licensing." If, as DOJ proposed, the consent decrees required 100% licensing, any writer or rights holder of a musical work could issue a performance license without the consent of the other rights holders. DOJ Interpretation of Consent Decrees and Lawsuits On August 4, 2016, DOJ completed its review and announced that, pursuant to its interpretation, the consent decrees required the two PROs to issue 100% licenses to all of the songs in their catalogs. DOJ argued that this requirement promotes competition. It declined to propose modifications to the consent decrees, but called on Congress to reconsider how copyright law is applied to the music industry. It noted that the consent decrees are "limited in scope," and contended that "a more comprehensive legislative solution may be possible and preferable." The same day that DOJ issued its interpretation, BMI filed a lawsuit in the Southern District of New York, where Judge Louis Stanton is on permanent assignment overseeing the BMI consent decree. In September 2017, Judge Stanton ruled that contrary to the DOJ's interpretation, BMI's consent decree permits fractional licensing. The U.S. Court of Appeals for the Second Circuit upheld Judge Stanton's decision in December 2017. NOIs, Mechanical Licensing Databases, and Lawsuits As discussed in " Notice of Intention (NOI) ," a licensee must serve an NOI to the copyright holder before or within 30 days after making, and before distributing, any phonorecords, and pay the applicable royalties. If the Copyright Office's records do not identify the copyright owner and include an address at which the NOI can be served, then filing the NOI with the Copyright Office is sufficient. On April 12, 2016, the Copyright Office announced new procedures to allow licensees to file Notices of Intention to reproduce and distribute musical works under Section 115 (NOIs) with the Copyright Office in bulk electronic form. By allowing licensees to file an NOI for up to 100 songs at once, the procedural change significantly reduced the filing costs (from $2 per song to $0.10 per song, in addition to an upfront fee of $75 for each NOI). One week after the Copyright Office changed its NOI filing procedures, licensees, including Spotify, Amazon, and Google, began to file NOIs in bulk. In several NOIs, the licensees affirm that "with respect to the nondramatic musical work named in such row of this Notice of Intention, the registration records or other public records of the Copyright Office have been searched and found not to identify the name and address of the copyright owners of such work." According to the trade publication Billboard , digital music service companies contacted the U.S. Copyright Office in late 2015, arguing that digitizing the compulsory licensing process would ensure that songwriters and publishers receive proper compensation. Prior to that point, several songwriters and publishers filed lawsuits charging Spotify and other online music services with illegally streaming their copyrighted musical works. Some of these lawsuits have been settled; others remain pending. Bills Introduced in the 115th Congress Music Modernization Act (H.R. 5447) In April 2018, the House of Representatives voted 415-0 to pass H.R. 5447 , the Music Modernization Act, as amended. This bill encompasses provisions of several other bills introduced in the House, including H.R. 4706 , H.R. 1836 , H.R. 3301 , and H.R. 881 . The bill would create a new nonprofit "mechanical licensing collective," funded by online music services, that would offer and administer broad blanket mechanical licenses for online music services. It also would change the process of suing for infringement of mechanical licenses, the standards used to set royalty rates for musical works used by preexisting subscription services (Music Choice and Muzak) and satellite digital audio services (SiriusXM), and the process by which judges in the federal district court for the Southern District of New York are assigned to oversee cases related to the ASCAP and BMI consent decrees. The bill would extend limited federal copyright protection to sound recordings made prior to February 15, 1972, and would create procedures by which producers, mixers, and sound engineers can receive royalty payments for sound recordings, subject to contracts with the featured artists of those recordings. Mechanical Licensing Collective (MLC) and Digital Licensee Coordinator Pursuant to the bill, online music services could pay for a broad blanket mechanical license. Within nine months after enactment, the Register of Copyrights would be required to designate (1) a new nonprofit entity created by copyright owners as a "Mechanical Licensing Collective" (MLC) and (2) a new nonprofit entity representing digital music services as a "digital licensee coordinator," subject to certain criteria. Every five years, the Register would be required to solicit the views of copyright owners and licensees concerning whether the existing designations should continue. The MLC would have a 17-member board of directors (including 14 voting members and 3 nonvoting members). Online music services would fund the MLC by paying an assessment established by the CRB. CRB would review assessment rates every five years. Among the authorized duties of the MLC would be the following: maintaining a musical works database; offering and administering blanket licenses, including the collection of usage reports from online music services; engaging in efforts to identify musical works embodied in particular sound recordings and locating the copyright owners of those works; administering a process by which copyright owners can claim ownership of musical works; and initiating and participating in proceedings before the Copyright Office and the CRB. The MLC would be authorized to provide administrative services with respect to voluntary licenses that include the right of public performance in musical works. The MLC would be responsible for collecting and distributing royalties from online music services to rights holders. Songwriters would receive at least 50% of all royalties for unmatched works. The MLC would be prohibited from negotiating royalty rates or royalty terms and conditions on behalf of any party, and would not be permitted to grant licenses for the right of public performances of musical works. In addition, the MLC would be prohibited from engaging in government lobbying activities. Among the authorized duties of the digital licensing coordinator would be the following: establishing a governance structure, membership criteria, and any dues to be paid by its members; engaging in efforts to enforce notice and payment obligations with respect to the administrative assessment; initiating and participating in proceedings before the CRB to establish the administrative assessment rates; initiate and participate in proceedings before the Copyright Office with respect to the coordinators' activities; maintain records of its activities. The digital licensing collective would be prohibited from engaging in any government lobbying activities. Failure to provide monthly usage reports or royalties would put an online music service in default of the blanket license. An online music service could seek review in federal district court, if the service believed the collective improperly terminated a blanket license. A person could bring a claim in a federal district court for an issue not adequately resolved by the MLC's board of directors or an MLC committee. Mechanical Licensing Infringement Lawsuits Copyright owners of musical works would be prohibited from suing an online music service that obtains and complies with the terms of a valid blanket license for infringing their reproduction and distribution rights. If a musical works copyright owner filed a lawsuit filed after January 1, 2018, against an online music service that has allegedly engaged in unauthorized reproduction or distribution of a musical work prior to the blanket "license availability date" (defined by the legislation as the next January 1 following the expiration of the two-year period beginning on the enactment date of the Music Modernization Act), the copyright owner could recover only royalties owed under the new system. The copyright owner could not recover damages or other remedies that are normally available for infringement, provided that the online music service could show that it has complied with certain specified requirements, such as the use of good-faith, commercially reasonable efforts to identify and locate the copyright owner of musical work(s). Rate-Setting Standards The CRB would be required to use the "willing buyer/willing seller" standard rather than the Section 801(b)(1) factors in setting royalty rates for the reproduction and distribution of musical works and the public performance of sound recordings by preexisting subscription services (Music Choice and Muzak) and satellite digital audio services (SiriusXM). Judges in the Southern District of New York, when setting rates for public performances of musical works by online services, satellite digital audio services, and other digital subscription services (e.g., MusicChoice and Muzak), would be allowed to consider rates for public performances of sound recordings. The inclusion of sound recording public performance rates would not apply, however, to the setting of rates for public performances of music works by broadcast radio stations. Assignment of Judges to ASCAP and BMI Cases The current system of assigning judges in the Southern District of New York to oversee cases related to the ASCAP and BMI consent decrees would change. Currently, one judge is permanently assigned to all ASCAP cases, and another is assigned to all BMI cases. In lieu of the current system, the district court would use a random process to determine which judge shall hear rate setting cases. However, the original judge(s) who oversees the interpretation of consent decree(s) would not be permitted to oversee any rate proceedings. According to the House Judiciary Committee report, this change is not a reflection of any past actions by the Southern District of New York, but a reflection of the committee's belief that the rate decisions should be assigned on a random basis to judges not involved in the underlying consent decrees. Pre-1972 Sound Recordings Creators of sound recordings made prior to February 15, 1972, but on or after January 1, 1923, would be entitled to receive payments from digital music services that publicly perform those sound recordings, in addition to other legal remedies such as damages, injunctions, and attorney's fees. This entitlement under federal law would be in addition to any remedies available under state copyright law protections for these recordings, which would remain unchanged. In order to be entitled to receive statutory damages or attorney's fees for pre-1972 sound recordings, rights owners must file certain information with the Copyright Office that identifies the sound recordings. The Copyright Office must also issue regulations regarding the form, content, and procedures for the filing of (1) sound recording identification information by rights owners (within 180 days after the bill's enactment) and (2) contact information by licensees of sound recording public performance (within 30 days of the bill's enactment). This federal protection for pre-1972 sound recordings would apply until February 15, 2067. Producers, Mixers, and Sound Engineers Producers, mixers, and sound engineers would have statutory right to seek payment of their royalties via a nonprofit collective designated by the CRB when they have a letter of direction from a featured artist. The entity in charge of the distributions must be a nonprofit collective designated by the CRB. The collective must adopt and reasonably implement a policy that provides for such distributions. It also modifies 17 U.S.C. §114(g) by striking "agent" and substituting "nonprofit collective designated by the [CRB]." As discussed above, the CRB in 2007 stated that a collective need not be formally recognized by the CRB as a designated collective before it can have any involvement in the royalty distribution process. The CRB added that pursuant to Sections 112(e) and 114(e), copyright owners and performers may designate collectives for the receipt of royalties. Additional Bills Legislators have introduced several additional measures related to the music industry. In January 2017, Senator John Barrasso introduced S.Con.Res. 6 and Representative Michael Conaway introduced H.Con.Res. 13 , Supporting the Local Radio Freedom Act. The resolutions declare that Congress should not impose any new performance fee, tax, royalty, or other charge relating to the public performance of sound recordings on a local radio station for over-the-air transmissions, or on any business for such public performance of sound recordings. In April 2017, Representative Issa introduced the Performance Royalty Owners of Music Opportunity to Earn Act of 2017 (PROMOTE Act of 2017), H.R. 1914 . The bill would give copyright owners of sound recordings the exclusive right to withdraw their music from broadcast radio stations. Broadcast radio stations may publicly perform sound recordings without copyright owners' permission if (1) they pay royalties identical to those paid under the statutory license rates determined by the CRB for eligible nonsubscription transmission services that apply to radio streaming and webcasts; (2) the broadcast is of a religious service, by an educational terrestrial radio station, or by a low-power FM radio station; or (3) the broadcast is an incidental use. Also in July 2017, Representative Jim Sensenbrenner introduced the Transparency in Music Licensing and Ownership Act, H.R. 3350 . The bill would direct the Register of Copyrights to create and maintain a searchable database for musical works and sound recordings. The bill would also restrict remedies available to copyright owners if they fail to provide or maintain the minimum information required in the database. In October 2017, Representative Hakeem Jeffries introduced the Copyright Alternative in Small-Claims Enforcement (CASE) Act of 2017, H.R. 3945 . The bill would establish a Copyright Claims Board, an alternative forum to U.S. district courts, for copyright owners to protect their work from infringement. Participation would be voluntary. The board would be housed within the Copyright Office with jurisdiction limited to civil copyright cases capped at $30,000 in damages. In May 2018, Senator Ron Wyden introduced the Accessibility for Curators, Creators, Educators, Scholars, and Society (ACCESS) to Recordings Act, S. 2933 . The bill would provide federal copyright protection for sound recordings made prior to February 15, 1972, enabling rights holders to, among other things, receive payments from digital services that publicly perform their works, while preempting state copyright protection. During a limited three-year window beginning on the effective date of the bill, in order to receive statutory damages or attorney's fees for infringement of their copyright, pre-1972 sound recording copyright owners would have to provide timely notice to the alleged infringer of the sound recording's federal copyright registration and the alleged infringement of such copyright. However, if the alleged infringement has ceased as of the date on which the copyright owners bring such action, the owners would not be entitled to receive statutory damages or attorney's fees. Similar to sound recordings created after February 15, 1972, sound recordings made prior to this date would enter the public domain either 95 years after they were released or 120 years after they were recorded, whichever comes first. Works recorded between 1923 and 1930 would be protected until December 31, 2025, only if "the copyright owner engages in normal commercial exploitation" of the sound recording, complies with certain regulations that the Register of Copyrights may issue, and notifies the Register of such compliance and commercial exploitation; if these requirements are not satisfied, such recordings enter the public domain.

Songwriters and recording artists are legally entitled to get paid for (1) reproductions and public performances of the notes and lyrics they create (the musical works), as well as (2) reproductions, distributions, and certain digital performances of the recorded sound of their voices combined with instruments (the sound recordings). The amount they get paid, as well as their control over their music, depends on market forces, contracts among a variety of private-sector entities, and laws governing copyright and competition policy. Congress first enacted laws governing music licensing in 1909, when music was primarily distributed through physical media such as sheet music and phonograph records. At the time, some Members of Congress expressed concerns that absent a statutory requirement to make musical works widely available, licensees could use exclusive access to musical works to thwart competition. The U.S. Department of Justice (DOJ) expressed similar concerns in the 1940s, when it entered into antitrust consent decrees requiring music publishers to license their musical works to radio broadcast stations. As technological changes made it possible to reproduce sound recordings on tape cassettes in the late 1960s and in the form of digital computer files in the 1990s, Congress extended exclusive reproduction and performance rights to sound recordings as well. Many of the laws resulted from compromises between those who own the rights to music and those who license those rights from copyright holders. In some cases, the government sets the rates for music licensing, and the rate-setting standards that it uses reflect those compromises among interested parties. As consumers have purchased fewer albums over the last 20 years, overall spending on music has declined. Nevertheless, as streaming services that incorporate attributes of both radio and physical media have entered the market, consumer spending has increased during the last two years. In 2016, for the first time ever, streaming and other digital music services represented the majority of the recorded music industry's revenues. As these services have proliferated and the number of songs released has increased, the process of ensuring that the various copyright holders are paid for their musical works and their sound recordings has grown more complex. Performers, songwriters, producers, and others have complained that in some cases current copyright laws make it difficult to earn enough money to support their livelihoods and create new music. In addition, several songwriters and publishers have sued music streaming services, claiming that the services have streamed their songs while making little effort to locate and pay the rights holders. In April 2018, the U.S. House of Representatives voted 415-0 to pass H.R. 5447, the Music Modernization Act, as amended. The bill would, among other things, modify copyright laws related to the process of granting, receiving, and suing for infringement of mechanical licenses, would create a new nonprofit "mechanical licensing collective" through which musical work copyright owners could collect royalties from online music services, and would change the standards used by a federal agency, the Copyright Royalty Board, to set royalty rates for certain statutory music licenses.

CRS_R43362

Introduction The Foreign Intelligence Surveillance Act (FISA) of 1978 was the product of sweeping congressional investigation and deliberation prompted by perceived electronic surveillance abuses by the executive branch. Among other things, FISA established the Foreign Intelligence Surveillance Court (FISC) to review government applications to conduct electronic surveillance for foreign intelligence purposes and the Foreign Intelligence Surveillance Court of Review (FISA Court of Review) to review the decisions of the FISC. In the wake of revelations in June 2013 concerning the scope of orders issued by the FISC, many have questioned the efficacy of the current mechanisms for reviewing the executive branch's intelligence gathering practices. While some have proposed altering the underlying substantive law that regulates such surveillance, other proposals address the practice and procedures of authorizing such surveillance activities. This report begins with an overview of both the FISC and the FISA Court of Review, including the jurisdiction of these courts, how the judges are appointed, and the FISC's practices and procedures for reviewing and issuing surveillance orders. The report then discusses the scope and underlying legal principles behind congressional regulation of the procedures of the federal courts, and applies those principles with respect to the various proposals to reform the FISA judicial review process. These reforms include requiring the FISC to hear arguments from "friends of the court" or amici curiae , who would brief the court on the privacy or civil liberty interests implicated by a government application; mandating that in certain instances the FISC sit en banc —that is, with all 11 FISC judges; and altering the voting rules of the FISC and FISA Court of Review. Overview of the FISA Courts The creation of the foreign intelligence surveillance courts came about from the confluence of two major legal and political developments in the 1970s. First, in 1972, the Supreme Court suggested in the Keith case that while domestic security surveillance must be handled through traditional legal processes, Congress could establish a special legal framework for reviewing requests for foreign intelligence surveillance. Second, in 1975, Congress created the Senate Select Committee to Study Governmental Operations With Respect to Intelligence Activities, commonly known as the "Church Committee," to review the executive branch's intelligence gathering activities. The Church Committee unearthed widespread surveillance of American citizens and recommended tighter controls on intelligence activities. Deliberating in the context of both the Keith case and the Church Committee Report, Congress enacted FISA in 1978. At the heart of FISA is the FISC, a specialized Article III court that is empowered to "hear applications for and grant orders approving" of certain foreign intelligence gathering efforts. The FISC is wholly unique among federal courts in that its jurisdiction is narrowly tailored; the selection of its judges deviates from traditional constitutional appointments process; and its day-to-day operations are conducted almost entirely in secret. Before addressing some of the proposals to alter the current practices and procedures of the FISC and FISA Court of Review, this section will take a closer look at the current structure and operational processes of these foreign intelligence courts. Jurisdiction of the FISA Courts The jurisdiction of the FISC is narrow in scope in that it solely "relates to the collection of foreign intelligence by the federal government." As originally enacted, the FISC's authority was limited to hearing government applications for electronic surveillance. The court's jurisdiction was later expanded, however, to hear applications for and grant orders approving of four types of investigative methods: (1) electronic surveillance; (2) physical searches; (3) pen register/trap and trace surveillance; and (4) the use of orders compelling the production of tangible things. The FISA Court of Review has jurisdiction to "review the denial of any application" for electronic surveillance and or physical searches. Additionally, the Court of Review has jurisdiction to review "tangible things" orders appealed by either the government or a person receiving such a production order. Under the FISA Amendments Act of 2008 (FAA), the FISC is authorized to review the government's certifications, minimization and targeting procedures concerning the targeting of non-U.S. persons reasonably believed to be abroad, and applications regarding the targeting of U.S. persons reasonably believed to be located abroad. The FISC has jurisdiction to review petitions by electronic communication service providers to modify or set aside directives issued under the FAA. The FISC can also review requests by the Attorney General to compel an electronic communication service provider to comply with a directive. The FISA Court of Review has jurisdiction to review FISC decisions to modify or set aside a directive and decisions to compel compliance with a directive. Judges and Staff of the FISA Courts The FISC is composed of 11 district court judges selected by the Chief Justice from at least seven of the regional judicial circuits. Of these 11, at least 3 must reside within 20 miles of the District of Columbia. Unlike judges appointed to traditional Article III courts, FISA judges are not selected via presidential appointment and Senate confirmation, but are instead "designated" to those positions by the Chief Justice of the Supreme Court. Pursuant to the FISC's rules, the presiding judge of the FISC is selected by the Chief Justice. The FISA Court of Review is composed of three district court or court of appeals judges also designated by the Chief Justice. The Chief Justice also selects the presiding judge of the Court of Review. Judges of both courts serve one term of seven years and are not eligible for a second term. In addition to the judges, the FISC has a staff of five full-time legal advisors with expertise in foreign intelligence issues. These legal advisors are said to conduct a thorough "vetting" of all applications before the government presents them formally to the FISC judges. Operations of the FISA Courts In light of the sensitive nature of its docket, the FISA courts operate largely in secret and in a non-adversarial fashion. Court sessions are held behind closed doors, are generally held ex parte with the government as the only party presenting arguments to the court, and rarely are its opinions released. As noted by the FISC, whereas "[o]ther courts operate primarily in public, with secrecy the exception[,] the FISC operates primarily in secret, with public access the exception." That being said, there are several instances where non-governmental parties have appeared before the FISC. Generally, each of the 11 FISC judges sits for a one week period in a secure courtroom in a federal courthouse in Washington, DC on a rotating basis. The judge on duty each week is aptly referred to as the "duty judge." Additionally, the three FISC judges who reside in the District of Columbia, or if they are unavailable, other FISC judges as may be designated by the Chief Judge of the FISC, comprise a pool which has jurisdiction to review petitions filed under § 215 of the USA PATRIOT Act and § 702 of FISA. Applications submitted to the FISC are heard by a single judge, and if denied, cannot be heard by another judge of the FISC, except when sitting en banc . The application process generally begins when the government submits a "read copy" of its proposed application to the FISC, which, pursuant to FISC rules, must be submitted seven days before the government files a formal application. In many instances, the legal advisors or the FISC judges will have questions about these read copies, and will often have conversations with the government's attorneys—generally, attorneys from the Office of Intelligence of the National Security Division of the Department of Justice—to seek additional information or raise concerns about the application. The legal advisors will then prepare a written memorandum for the duty judge, identifying any weaknesses or flaws in the government's submissions. The duty judge will review the memorandum and make an initial determination of how he is inclined to resolve the application. This may include a determination that the application will be approved without a hearing, that additional information is required from the government, that conditions may be placed on the application, or that a hearing is required. Based on the judge's response, the government then decides whether to submit a formal application. In some instances, the questions raised by the judges or legal advisors may result in the withdrawal or non-submission of the final application. If the judge denies a formal application, he must prepare a statement of reasons of his decision. A hearing regarding an application can occur in several situations. The FISC judge may determine that a hearing is needed before deciding to issue an application. Alternatively, the government may request a hearing to challenge conditions that the judge has stated he would place on the approval of the application. Additionally, the FISC may, on its own initiative, or upon the request of the government in any proceeding, or a party in any proceeding under § 215 or § 702, hold a hearing or rehearing en banc . An en banc panel consists of all the judges that constitute the FISC. An en banc panel will be convened when ordered by a majority of the FISC judges upon a determination that "(i) the en banc consideration is necessary to secure or maintain uniformity of the court's decisions; or (ii) the proceeding involves a question of exceptional importance." An initial hearing, as opposed to a rehearing, will be heard en banc only if the matter "is of such immediate and extraordinary importance that initial consideration" is necessary and feasible "in light of applicable time constraints." Upon the denial of any application for electronic surveillance or physical searches, the government may request review from the FISA Court of Review. If the court determines that the application was properly denied, it "shall immediately provide for the record a written statement of each reason for its decision." The government may then file for a writ of certiorari to have such a denial reviewed by the Supreme Court. The Court of Review also has jurisdiction to review a petition by either the government or anyone receiving an order for the production of "tangible things" to affirm, modify, or set aside a FISC order. The Court of Review must provide a written opinion of the reasons for its decision, and upon petition by the government or the entity receiving the production order transmit the record to the Supreme Court, which has jurisdiction to review such decision. Congress's Power to Regulate the Practice and Procedures of Federal Courts Several congressional proposals attempting to reform United States foreign intelligence gathering efforts are aimed at changing the underlying practices of the FISC and FISA Court of Review. For example, some have suggested either explicitly permitting or mandating that the FISC hear from an amicus curiae or "friend of the court." Others have proposed mandating en banc panels of the FISC. Still others have suggested altering the voting rules of the FISC in an apparent attempt to create a higher threshold for government surveillance. Before delving into the specific legal questions prompted by such proposals, however, it is important to first explore the underlying legal principles animating the extent to which Congress can regulate an Article III court's practices and procedures. The starting point for that discussion is the nature of a federal court's power, which stems from the Constitution, statutory law, and federal common law. A federal court's power emanates first and foremost from the Constitution. Specifically, Article III of the Constitution vests the "judicial power" of the United States in the Supreme Court and any inferior courts established by Congress. Supreme Court case law has interpreted the judiciary's authority to consist of three primary elements. First, the judicial power encompasses the power to interpret laws. As stated in Federalist No. 78 and later echoed in Marbury v. Madison : "The interpretation of the law is the proper and peculiar province of the courts." Nonetheless, as the Supreme Court had noted, the judicial branch is not the only branch that interprets the law, as President must necessarily interpret laws in executing them, and Congress must necessarily engage in legal interpretation when enacting legislation. Accordingly, there is a second aspect of Article III judicial power, and it centers on when a court exercises the power to say what the law means. Specifically, a federal court exercises its authority in the context of certain "cases" or "controversies." The "cases" or "controversies" language of Article III connotes a source of authority for federal courts such that Article III courts are empowered to not "merely ... rule on cases, but to decide them, subject to review only by superior courts in the Article III hierarchy ... ." Put another way, the "judicial power" of Article III entails a power to render final, "dispositive judgments" in particular cases and controversies. Third, the structural protections the Constitution provides to courts suggest another distinct aspect regarding the federal judicial power. Section one of Article III stipulates that all federal judges in "good behaviour" shall have lifetime tenure and that their salary cannot be diminished within their term of office. The purpose of these provisions is to ensure that federal courts operate free from interference from the political branches in order to, in the words of Alexander Hamilton, "secure a steady, upright, and impartial administration of the laws." While the Constitution provides federal courts the "capacity" to exercise their power in certain cases, an act of Congress is "require[d] ... to confer" authority to a given Article III court, meaning that statutory law is another source of a federal court's power. Article I of the Constitution provides Congress with the discretion to create inferior tribunals to the Supreme Court. As a "necessary and proper" function of carrying into execution that power and the "[p]owers vested by [the] Constitution" in the judiciary, Congress can authorize the courts to "carry[] into execution all the judgments which the judicial department has the power to pronounce." In this vein, provisions codified in Title 28 of the United States Code empower the federal courts to do a host of activities, such as being able to hear disputes based on "federal questions" or assess certain fees to litigants. In addition to the powers bestowed on federal courts through Article III and certain statutory provisions, the Supreme Court has long recognized that the federal judiciary retains certain "inherent powers" or "implied powers" that are "necessary to the exercise of all others." A federal court's inherent powers are not governed by "rule or statute but by the control necessarily vested in the courts to manage their own affairs so as to achieve the orderly and expeditious disposition of case." In some sense, a federal court's inherent power can be conceptualized as a type of federal common law where a judge adopts practices and procedures as a gap-filling measure because the existing statutes and rules are insufficient. Nonetheless, the Supreme Court has recognized that a court's inherent powers are not exclusively exercised due to oversights by Congress or the rulemaking bodies, but instead inhere to broadly allow a federal court to properly function as an institution. Given the three central sources of power for the federal judiciary—the Constitution, statutory law, and federal common law—the issue that remains is to what extent can Congress restrict or regulate a court's power by prescribing rules of practice and procedure. As a starting point, the Supreme Court has recognized that Congress has "undoubted power to regulate the practice and procedure of federal courts." As Chief Justice Warren noted in Hanna v. Plumer, the "constitutional provision for a federal court system (augmented by the Necessary and Proper Clause) carries with it congressional power to make rules governing the practice and pleading in those courts." And, indeed, Title 28 includes numerous provisions through which Congress mandates how the federal judiciary conducts its business—from how many Justices sit on the Supreme Court, to what constitutes a quorum on the Court, to what types of evidence can be admitted into a federal court proceeding, to rules of precedence among federal district court judges. Accordingly, the Court has interpreted Congress to have the power to promulgate mandatory rules of procedure that Article III courts have "no more discretion to disregard ... than they do to disregard constitutional provisions." And Congress' power even extends to regulate the inherent powers of a court. Nonetheless, although some have described Congress's power over the federal judiciary's practices to be "plenary" in nature, the Supreme Court has recognized that Congress's authority to prescribe procedural rules for federal courts is not absolute. Specifically, Congress's power over procedure cannot extend so far as to erode functions of the federal judiciary that are at the heart of the Article III judicial power—namely the ability to independently and impartially resolve a case-or-controversy with finality. In other words, Congress cannot erode the "essential attributes of the judicial power" in the Article III courts. As a consequence, Congress cannot require a court to issue advisory opinions on matters of legal concern, as such a rule would require the judiciary to say what the law is outside of a case-or-controversy. Moreover, the legislature cannot subject a federal judicial opinion to review by a non-Article III body or retroactively command federal courts to reopen their final judgments, as such procedures would prevent an Article III court from ruling with finality and issuing dispositive judgments. Likewise, Congress cannot enact laws that erode the decisional or analytical independence of a federal court. In this regard, the Court has struck down congressional enactments that interfere with the judicial decision-making process as to effectively decide the outcome of a given case or essentially plunge the federal judiciary into a political role. In short, Article III places some limits on Congress's relatively broad authority to regulate the practice and procedures of federal courts. With these principles in mind, this report turns to several proposals attempting to regulate the practice of the FISA courts. FISA Reform and Amicus Curiae FISA proceedings primarily involve only one party, as the FISC is authorized to issue orders approving of electronic surveillance, certain physical searches, the use of a pen register or a trap and trace device, or the access to certain business records for foreign intelligence and international terrorism investigations upon a proper showing made in an application by a federal officer. Recent controversies over the nature of the government's foreign surveillance activity have prompted the argument that the ex parte nature of the judiciary's review of government surveillance requests under FISA deprives the court from hearing a "researched and informed presentation of an opposing view." In this vein, while some have suggested formally establishing an office for a permanent public interest advocate to represent "the interests of those whose rights of privacy or civil liberties might be at stake," others have proposed allowing or even requiring the FISC to, on a temporary or ad hoc basis , hear from certain individuals or interests groups who, as "friends of the court" or amici curiae , would brief the court on the privacy or civil liberty interests implicated by a government application. Proposals purporting to regulate the process by which the FISC hears from amici potentially raise several questions about their legal necessity and the extent to which Congress can mandate that a federal court hear from a particular party. Background on the Amicus Curiae Before delving into these issues, it is first important to note the historical origins of the amicus and the unique role that amicus curiae play in the federal courts. Amicus curiae , a Latin term literally meaning "friend of the court," has its roots in Roman law, where an amicus entailed a judicially appointed attorney who served to advise or assist a court in the disposition of cases by providing non-binding opinions on points of law with which the court was unfamiliar. The Roman amicus curiae became a forerunner for the Anglo-American amicus device. According to English common law pre-dating the American Revolution, a trial or appellate court could request or permit in its "uncontrolled discretion" an amicus to inform the court about various aspects of the law. In particular, an amicus functioned as an "impartial assistant to the judiciary," as an amicus 's "principal role" under the English common law was to "assist judges in avoiding error." With the continuation of English judicial traditions in the United States, American courts began embracing the use of amici in the early nineteenth century. Over time, federal courts have accepted an increasingly broad and flexible role for amici . For example, the Supreme Court has generally recognized the power of Article III courts to appoint an amicus curiae "to represent the public interest in the administration of justice." Some federal courts have allowed amici to participate in an overtly partisan or adversarial nature. Other courts have limited when an amicus can proceed to instances where the amicus would be offering (1) a different perspective than the named parties; (2) impartial information on matters of public interest; or (3) observations on legal questions, as opposed to "highly partisan ... account[s] of the facts." Nonetheless, the "classic role of amicus curiae" involves "assisting in a case of general public interest, supplementing the efforts of counsel, and drawing the court's attention to law that escaped consideration." Regardless of what type of party constitutes a proper amicus , participation remains a privilege generally governed by the inherent authority of a court . Put another way, absent a statute or rule, under federal common law there is typically "no right to compel [a] court to permit one to appear as amicus curiae ." Allowing the FISC to Hear from an Amicus Curiae Several have suggested that Congress should establish a formal mechanism whereby the FISC, in its discretion, could solicit the independent views of an amicus curiae in appropriate cases. For example, the FISA Improvements Act, which was approved by the Senate Select Committee on Intelligence (SSCI) in October of 2013, if enacted would authorize the FISC and the FISA Court of Review to designate, when needed, one or more individuals to serve as amicus curiae "to assist the court in the consideration of" certain government applications made under FISA, such as those that present a "novel or significant interpretation of the law." The SSCI bill provides examples of the needed expertise to be an amicus curiae , such as being an "expert on privacy and civil liberties," and outlines the duties for a FISA amicus , in that the FISC's "friend" may assist the court in reviewing "any application, certification, petition, motion, or other submission that the court determines is relevant to the duties assigned by the court." Congressional regulation of how the FISA courts hear from amici generally does not appear to raise serious constitutional questions. As noted earlier, the Supreme Court has stated that "Congress has undoubted power to regulate the practice and procedure of federal courts," which would presumably include the power to prescribe regulations with respect to amici that appear before a federal court. Indeed, Congress has in the past enacted several laws that allow courts to hear from a particular amici . Proposals like the FISA Improvements Act, which simply authorizes a court to appoint from a broad range of qualified individuals an amicus to assist in the proceedings, impose no firm mandates on the FISC that would threaten the "essential attributes of the judicial power," the constitutional limit to Congress's broad power to regulate federal practice and procedure. Instead of allowing "encroachment or aggrandizement of one branch at the expense of the other," the hallmark of a separation of powers violation, proposals that provide the FISA courts with formal statutory authority to appoint amici arguably enhance the power of the federal courts without simultaneously detracting from the power of the political branches. While providing broad statutory authority to the FISA courts allowing them to appoint amici likely does not raise serious constitutional issues, a question remains as to whether such a statute is needed as a legal matter. As noted above, the ability of a court to appoint an amicus curiae to assist in the judicial proceedings has a long history that predates the Constitution, and federal courts have held that they possess inherent authority to appoint amici and permit the filing of briefs by them. In this vein, both the FISC and the FISA Court of Review have accepted amicus briefs during their proceedings. While formally codifying the FISA courts' authority in statute could arguably clarify the scope of the courts' authority with respect to amici and encourage the courts to exercise that authority more frequently, it is unclear what legal difference a codification of the amicus authority ultimately makes, as the statutory authority is largely duplicative of the authority the FISA courts already possess as a matter of their inherent power. Requiring the FISC to Hear from an Amicus Curiae Not all of the proposals attempting to regulate the FISA's courts' amicus authority leave the decision to appoint a friend of the court up to the discretion of the FISC or the FISA Court of Review. Instead, several proposals contemplate requiring the FISA courts to hear from amici . Before discussing the legal issues raised by requiring the FISC to hear from an amicus , it is important to note that the nature of a "mandate" may ultimately depend on a matter of judicial interpretation. For example, the most recent version of the USA FREEDOM Act requires the FISC to hear the views of an amicus when considering an application for an order that "presents a novel or significant interpretation of the law." Under that bill, an application is considered to raise a novel or significant interpretation of law when "such application involves settled law to novel technologies or circumstances, or any other novel or significant construction or interpretation of any provision of law or of the Constitution of the United States, including any novel or significant interpretation of the term 'specific selection term.'" On the one hand, this language may be viewed as placing significant discretion with the court as to whether a particular case truly is "novel" or "significant" in nature. In other words, while this language may facially "require" the court to appoint an amicus in a particular case, if the determination of whether a case fits within this mandatory category depends on a discretionary decision of the court, the congressional provision may function much like the proposals that allow the FISC to appoint amici . On the other hand, defining "novel or significant interpretation of law" to include the application of settled law to new technologies or circumstances might limit the judge's discretion whether to appoint an amicus . Because of the uniqueness and ever-shifting nature of surveillance techniques and investigations, it could be argued that almost every surveillance application will involve the application of settled law to new circumstances. Indeed, arguably nearly every act of any court requires applying settled law to a new circumstance. Under this reasoning, the FISC would have to appoint an amicus when considering almost every application. In any event, legal questions could potentially arise from congressional attempts to mandate —as opposed to permit —an Article III court to hear from an amicus . First, it can be argued that a "mandatory amicus " proposal potentially conflicts with the constitutional norm that Article III courts, like the FISC, must have some degree of autonomy or independence in controlling their internal processes. A mandate that a federal court hear the views of an amicus in certain cases, contrasts with the historic amicus tradition which "hinge[d]" on the principle of providing the court with considerable flexibility and discretion as to when and how it may rely on a third party friend. If an amicus is viewed in the Anglo-American common law tradition as being an extension of the court itself, one could liken a congressional mandate as to who and when a federal court must hear from an amicus to a similar mandate as to who a court must hire as a member of the court's own staff. Such a restriction on an inherent judicial power could arguably limit the ability of a federal court to maintain its independence from the political branches, implicating a core Article III norm. Second, mandating that the FISC hear from a particular amicus may raise constitutional questions about the nature of the amicus . The mandatory amicus proposal would functionally transform the role of an amicus from an individual whose views are heard based on the "sound discretion of the court[]" to a party who has the unfettered right to be heard from in the course of litigation. It could be argued that such a transformation of the amicus process nearly elevates an amicus to having the "full litigating status of a named party or a real party in interest." It is generally recognized that "[o]nly a named party or an intervening real party in interest is entitled to litigate on the merits." To the extent that the mandatory amicus proposal could be characterized as providing an amicus with some of the rights that are traditionally exclusive to that of a party, one could potentially argue that a mandatory amicus proposal violates Article III. The proposal does this, according to this line of argumentation, by statutorily empowering an individual who lacks Article III standing with the right to be heard by a federal court, forcing the judiciary to say what the law is outside of a case or controversy between two parties with a genuine stake in the matter. This concern may be particularly pronounced if the amicus 's role functions in a way typically assigned only to parties to the case, such as having the guaranteed right to ask for an appeal of a decision. Indeed, a recent FISC opinion deciding whether to allow for amicus briefing in a case noted that "most courts have recognized that the role of an amicus curiae is limited, and does not rise to the level of a party to the litigation," perhaps signaling a reluctance by the FISA courts to affording an amicus rights equivalent to those of a named party. Nonetheless, such criticisms may very well be a result of the uncommon nature of a mandatory amicus proposal as opposed to any inherent constitutional infirmity in the proposal. One may question whether eliminating the court's discretionary power to hear from an amicus , while a historic power, truly erodes one of the "essential attributes of the judicial power" as encompassed by Article III. While having the discretionary power to appoint amici in a federal case is an ancient power for a court, it may be difficult to argue that such a power is "essential" to having the FISC function in line with the Constitution's envisioned scheme for federal courts. For example, even if the FISA courts were required to hear from a particular amicus , the court would not be obligated to adopt the views of the amicus or otherwise be unable to independently say what the law means. Indeed, requiring the court to hear from different perspectives on an issue arguably may ensure that the court's judgment remains independent and impartial, aligning with core Article III values. Moreover, while a mandatory amicus law would establish for the amicus a guaranteed right to be heard by the court, such a proposal does not go so far as to embed an amicus with the right to seek any sort of judicial relief from a federal court, such as having a right to appeal or the right to seek discovery, which would likely raise more serious concerns with respect to Article III standing. It should be noted that there have been few laws and rules that have attempted to curb the federal judiciary's discretionary power over the use of amici . The Federal Rules of Civil Procedure, for example, are silent on the topic of amici curiae , leaving appointment of an amicus to be a product of a district court's inherent power. In contrast, both the Federal Rules of Appellate Procedure and Rules of the Supreme Court of the United States do not require an amicus to obtain leave from a court to file an amicus brief if the brief is filed on behalf of the United States, its officer or agency, or a state. While such rules functionally limit the discretion of a federal court in allowing the appearance of an amicus , each rule is a product of a decision of the Supreme Court of the United States, which, through the Rules Enabling Act, has the power to "prescribe general rules of practice and procedure" in federal courts. The federal appellate and Supreme Court rules' waiver of the need for government amici to obtain leave of court before appearing is both a provision that enhances the rights of a type of amicus traditionally provided with broader rights —government amici —and is a restriction imposed by the judiciary on itself. In other words, such rules may not raise the same constitutional concerns as a congressional command to a court to appoint a private party as an amicus . Very few statutory provisions relating to amicus curiae go so far as to mandate that a federal court hear from a particular amicus . For example, several statutes permit certain executive branch officials to appear as amici in certain proceedings. Other statutes are phrased such that they impose a mandate on the government official in question to appear as an amicus without imposing a similar mandate on the court. However, the Commodity Exchange Act provides the Commodities Futures Trading Commission (CFTC) the "right to appear as an amicus in any proceeding brought by a state government in federal court under that Act." Another provision in Title 5 of the U.S. Code authorizes the head of the Office of Special Counsel to appear as an amicus in certain cases and requires a "court of the United States [to] grant the application of the Special Counsel to appear in any such action.... " While the plain language of these two laws appear to provide a mandate on the court to hear from certain government amici, no court has assessed the constitutionality of such a provision, leaving the constitutional status of a mandatory amicus statute judicially unresolved. In addition to the question whether Congress can mandate that the FISA courts hear from an amicus , proposals to install an amicus in FISA proceedings raise two other interrelated questions: first, what is the appropriate nature and scope of the amicus's briefings to the FISA courts, and, second, whether it is within Congress's authority to define this scope. As described above, the nature and scope of the authority of the amicus has shifted over the years from an "impartial assistant to the judiciary" to one who plays a more adversarial role in defending the legal interests of existing or absent parties to the litigation. Even judges who have been skeptical of this modern role of amici have accepted a limited adversarial role in certain instances. Judge Richard Posner of the Seventh Circuit Court of Appeals, for example, has explained that an amicus brief should be allowed only when: (1) "a party is not represented competently or is not represented at all"; (2) "when the amicus has an interest in some other case that may be affected by the decision in the present case (though not enough affected to entitle the amicus to intervene and become a party in the present case); or (3) "when the amicus has unique information or perspective that can help the court beyond help that the lawyers for the parties are able to provide." There do not appear to be any serious constitutional constraints to having a defined role for an amicus when that individual is briefing the FISA court; instead, at best, defining what an amicus can say to a court raises prudential questions about whether such an amicus 's role is appropriate. Amicus provisions like those proposed in legislation like the USA FREEDOM Act that require the amicus to "advocate as appropriate, in support of legal interpretations that advance individual privacy and civil liberties" would appear to align with even the most restricted views on the appropriate scope of what an amicus can discuss in briefing to a court. While the USA FREEDOM Act's language contemplates that the advocate would participate in FISA proceedings in an adversarial manner, the adversarial nature of such briefing, in and of itself, does not appear to breach the various prudential constraints limiting an amicus 's role when briefing a court. First, a FISA amicus would be utilized to represent an interest that is arguably not fully represented in current FISA proceedings. Second, because a FISA amicus must have expertise in "privacy and civil liberties, intelligence collection, telecommunications, or any other relevant area of expertise," the amicus will presumably be able to provide the court a unique perspective on the legal issues raised by the government's surveillance applications. Lastly, although a FISA amicus under the USA FREEDOM Act would be tasked with promoting legal interpretations that advance individual privacy and civil liberties, such a responsibility has to be done "as appropriate," a standard that is not very different from the current obligation of government attorneys to ensure that surveillance applications do not violate constitutional safeguards and a provision that may help ensure that the FISA amicus 's briefings do not become "highly partisan." Whether Congress, as opposed to the FISA courts, can define the role of an amicus during briefing raises similar questions as to whether Congress can mandate that the FISA courts hear from an amicus in the first place. While Congress has considerable power to regulate the procedures of the judiciary, a question could be raised as to whether Congress regulating an ancient power of a federal court, like its historically unfettered power regarding the amici that appear before the court, usurps the court's constitutional powers. As Congress has rarely attempted to regulate the amici process in federal courts, let alone regulate what an amicus can say before a court, there is simply no legal precedent available by which to assess whether a law defining the amicus 's role in briefing before a court is legally appropriate. Mandating an En Banc Panel of the FISC In 2008, FISA was amended to explicitly permit the FISC, on its own initiative, or upon the request of the government in any proceeding, or a party in a proceeding under § 215 or § 702, to hold a hearing or rehearing en banc . An en banc panel consists of all the judges that constitute the FISC. During debate of the FISA Amendments Act of 2008, lawmakers proposed mandating that the FISC sit en banc to make legal immunity determinations regarding telecommunication service providers who allegedly aided the federal government in surveillance gathering activities. In the wake of recent revelations about the NSA's foreign surveillance practices, at least one commentator has revived the mandatory en banc proposal for certain proceedings before the FISC. Congressionally mandating that the FISC sit en banc prompts questions regarding the constitutionality of such proposals. Before delving into those questions, it is first worth noting the background of en banc proceedings in federal courts. History of En Banc Proceedings En banc review—that is, review by all judges of a court—has its origins in the 1930s. In the wake of the Evarts Act of 1891, in which Congress created the three-tiered federal court system, growing caseloads in the appellate courts, coupled with the rise of certiorari review at the Supreme Court, led to an increasing number of inconsistent panel decisions within a given circuit. In 1938, the Ninth Circuit, faced with two conflicting panel rulings of that circuit, held that no mechanism existed in law to resolve the conflict and opted to certify the question to the Supreme Court. Two years later, the Third Circuit rejected the Ninth Circuit's reasoning and sat en banc to resolve the panel split. The Supreme Court granted certiorari to the Third Circuit's ruling and unanimously affirmed in Textile Mills Security Corp. v. Commissioner that the courts of appeals had the discretion to decide cases en banc . In doing so, the Supreme Court attached special importance to the capacity of the en banc hearing to promote the finality of decisions and to resolve internal circuit splits, as the courts of appeals "are the courts of last resort in the run of ordinary cases." Seven years later, Congress codified the result of Textile Mills in S ection 46(c) of the Judicial Code of 1948. The provision, as amended, states that cases in the courts of appeals shall be heard and decided by a three-judge panel, unless a majority of the judges in regular active service order a rehearing by the circuit sitting en banc. The Supreme Court subsequently interpreted S ection 46(c) to be permissive in nature, such that the courts of appeals were empowered, but not required to sit en banc . In turn, the Court allowed each of the courts of appeals to "devise its own administrative machinery to provide the means whereby a majority may order [an en banc ] hearing." The framework for determining when an en banc hearing is appropriate is established in Federal Rule of Appellate Procedure 35, which states that an en banc hearing is "not favored and ordinarily will not be ordered" unless consideration is necessary to "secure or maintain" the uniformity of a court's decisions or the proceeding involves a question of "exceptional importance." In this vein, en banc rulings in the United States Courts of Appeals are a relatively rare phenomenon. En banc hearings outside of the context of a federal appellate court are even more unusual, as there is no general statutory authority for federal trial judges to reach decisions as panels and apply those decisions as precedent for all judges in the district. In the late 1980s, some district courts proceeded en banc in evaluating the constitutionality of the federal sentencing guidelines. Other examples exist of district courts sitting en banc in complex criminal actions. Nonetheless, it remains anomalous for a court of first impression to review a matter by all of the judges on that court. Legal Issues with Requiring an En Banc Panel for "Significant Interpretations" of FISA There does not appear to be a major constitutional question raised by legislation requiring, as opposed to allowing, a federal court to sit en banc in certain circumstances. Requiring a federal court to sit en banc does not limit the ability of the court to independently adjudicate a matter to finality. Instead, a provision mandating more frequent use of the en banc process would merely require certain decisions to be made by a majority of the FISC instead of a single judge. Given this, it would appear that Congress can constitutionally require the FISC to sit en banc , because en banc decision-making does not, in and of itself, limit core Article III powers. After all, in Western P.R., the case in which the Supreme Court held that the en banc provisions of Section 46 of the Judicial Code were permissive in nature, the Courts' interpretation was not compelled by constitutional reasons. Instead, the Court reasoned that practical considerations, such as a contrary reading imposing "unwarranted extra burdens on the court," drove the Court's interpretation of Congress's intent in enacting the statute, implicitly conceding that Congress could impose mandatory en banc proceedings if it had had such an intent. Indeed, in a related context, Congress has mandated the use of three-judge panels to adjudicate various categories of cases in the federal courts. For instance, in 1903, Congress established three-judge panels of the circuit courts to adjudicate antitrust suits brought by the federal government. That statute provided that when the Attorney General attested that the case involved questions of "general public importance," that case "be given precedence over others and in every way expedited, and be assigned for hearing at the earliest practicable day, before not less than three of the circuit judges" of that circuit. Similarly, in 1910, Congress required that any suit seeking to enjoin a state officer from enforcing an allegedly unconstitutional law had to be submitted to a three-judge panel consisting of at least one justice of the Supreme Court or any circuit judge, and the other two either district court or circuit court judges. Although Congress has since narrowed the use of these panels, they are still employed in a limited category of cases, such as certain claims under the Civil Rights Act of 1964. In this sense, requiring the use of en banc panels in certain FISA cases appears to be a neutral regulation of the courts "procedures" that aligns with a long historic precedent and does not appear to offend core Article III norms. Altering Voting Rules of the FISC and the FISA Court of Review Another suggested procedural change to the FISA judicial review process is to alter the voting rules of the FISC and the FISA Court of Review. A judicial voting rule is simply the number of votes required for a court to decide and give precedential effect to a case. The FISA Court Accountability Act ( H.R. 2586 ) would require that before an en banc panel of the FISC could act, it must have the concurrence of 60% of the sitting judges. H.R. 2586 would also require that any decision in favor of the government by the three-judge FISA Court of Review must be made unanimously. This proposal to statutorily regulate the voting rules of federal courts is not unique. While it has never directly set the voting rules of the federal courts, Congress has established the number of Justices that sit on the Supreme Court and the number that constitute a quorum. Likewise, Congress has exercised considerable control over the lower federal courts, such as setting the number of judges that sit on each court of appeals and the number of appeals court judges needed to constitute a quorum. While Congress has made efforts to directly alter the voting rules of the Supreme Court and the courts of appeals, usually during periods of strong disagreement with the Court's rulings, none have been successful. Without congressional regulation, the federal courts have fallen back on the common law simple majority rule. While Congress has significant authority to regulate the practice and procedure of the federal courts, it is unclear whether directly setting the voting rules of a federal court falls within that power. Because Congress has never enacted a voting rule for federal courts, neither the Supreme Court nor the lower federal courts have had the opportunity to address the propriety of such a law. Nonetheless, various arguments have been made that Congress lacks the authority to set the voting rules of the Supreme Court. For instance, one theory holds that once Congress vests the courts with the "judicial power," sets the number of judges on that court, and sets the quorum, Congress's authority to regulate the Court's procedure terminates, and the Court can exercise the power of all similar deliberative bodies to decide cases by a simple majority. A similar argument has been made that the structure of the Constitution itself mandates the common law rule of a bare majority. One observer contends that Congress is powerless to alter the default majority rule that applies in all deliberative bodies in the absence of a specific constitutional provision providing for an alteration of this rule. For instance, the Constitution provides each House of Congress the authority to "determine the Rules of its proceedings," but does not expressly provide that Congress may alter the voting rules of the federal courts. However, there are several current voting practices that deviate from the bare-majority rule that would undercut this argument. For instance, Congress currently sets the quorum of the Supreme Court at six, which is greater than the common law rule of a simple majority. Likewise, the Court's own implementation of sub-majority rules including the Rule of Four, which requires only four justices to grant certiorari review, and the "hold rule," which requires only three justices to hold a case, may weaken the argument that the use of simple majorities is constitutionally compelled. Instead of an absolute bar on congressional regulation of the courts' voting rules, a more likely resolution of their constitutionality will turn on the degree of interference they might have on the FISA courts' exercise of the judicial function. As described above, while Congress has considerable authority to regulate the practice and procedure of the federal courts, it may not use this power to erode the core functions of the judiciary. Of particular concern with respect to altering the voting rules is the proposition enunciated in United States v. Klein , in which the Supreme Court refused to give effect to a statute that was said to "prescribe rules of decision to the Judicial Department of the government in cases pending before it[.]" Although the precise contours of Klein 's holding are subject to debate, one generally accepted interpretation is that Congress cannot regulate the jurisdiction of the federal courts in an attempt to dictate substantive outcomes. Requiring a 60%, rather than majority, concurrence in the en banc proceeding would not appear to unduly interfere with the essential functions of these courts. Under this proposed rule, if the 60% threshold is not met, the decision below would be affirmed. With respect to proceedings under Section 215 and Section 702, which have recently caused the most concern for Congress, this proposal would tilt the scales in favor of affirming the one-judge FISC decision, but on its face would not primarily favor one result over another. The judges would still be permitted to interpret the law and decide the matter before them free from interference. And because this rule would primarily have a neutral effect on the FISC's rulings, it may not violate the principles established in Klein . Some may argue that this proposal interferes with the FISC's prerogative to set its own rules and adjudicate cases free from congressional interference, but as discussed, Congress has wide latitude to set the rules of the federal courts, and this proposed rule appears to fall within that authority. The requirement of a unanimous vote in the FISA Court of Review for any decision in favor of the government poses a more serious risk of interfering with the independence of these courts. The proposal would not apply across the board to all decisions of the Court of Review, but instead singles out decisions in favor of the government. As a matter of course, this rule would prevent the court from entering an order in favor of one side even when two thirds of the court agrees with that decision. If viewed in that light, it could be interpreted as Congress seeking to dictate a substantive outcome in violation of Klein . Additionally, a broader argument could be made that by preventing the Court of Review from acting or issuing binding rulings with respect to certain cases, Congress is preventing it from acting as a duly constituted court. While the creation of the Court of Review was in Congress's sole discretion, it could be argued that once it was created, Congress cannot deprive it of the core functions of a federal court, including the ability to render final, "dispositive judgments" in cases before it. However, one may argue that while this rule may make it harder for the government to win on appeal, the proposal does not mandate a particular result and leaves the ultimate decision-making authority with the judges. Ultimately, like the other proposals altering the procedures and operations of the FISA courts, there is little judicial precedent to evaluate measures that would alter the courts' voting rules.

Recent disclosures concerning the size and scope of the National Security Agency's (NSA) surveillance activities both in the United States and abroad have prompted a flurry of congressional activity aimed at reforming the foreign intelligence gathering process. While some measures would overhaul the substantive legal rules of the USA PATRIOT Act or other provisions of the Foreign Intelligence Surveillance Act (FISA), there are a host of bills designed to make procedural and operational changes to the Foreign Intelligence Surveillance Court (FISC), a specialized Article III court that hears applications and grants orders approving of certain foreign intelligence gathering activities, and the Foreign Intelligence Surveillance Court of Review, a court that reviews rulings of the FISC. This report will explore a selection of these proposals and address potential legal questions such proposals may raise. Due to the sensitive nature of the subject matters it adjudicates, the FISC operates largely in secret and in a non-adversarial manner with the government as the only party. Some have argued that this non-adversarial process prevents the court from hearing opposing viewpoints on difficult legal issues facing the court. To address these concerns, some have suggested either permitting or mandating that the FISC hear from "friends of the court" or amici curiae, who would brief the court on potential privacy and civil liberty interests implicated by a government application. While formally codifying the FISA courts' authority in statute could arguably clarify the scope of the court's authority with respect to amici and encourage the courts to exercise that authority more frequently, it is unclear what legal difference a codification of the amicus authority ultimately makes, as the statutory authority is largely duplicative of the authority the FISA courts already possess as a matter of their inherent power. Proposals to mandate, rather than permit, that the FISC hear from an amicus might also fall within Congress's considerable power to regulate the practices and procedures of federal courts. Nonetheless, such mandatory amicus proposals are uncommon and could potentially raise constitutional issues concerning the independence of the FISC to control its internal processes. Such proposals may also prompt questions to the extent that they conflict with constitutional rules about who can appear before federal courts and what powers those individuals may wield when there. In another attempt to promote greater judicial scrutiny of FISA applications, some have suggested that Congress mandate that the FISC sit en banc—that is, conduct review by all 11 judges of the court—when making "significant" interpretations of foreign intelligence statutes. Under current law, the FISC is permitted in certain instances to hold a hearing or rehearing en banc, mainly to ensure uniformity of FISC decisions and when addressing legal questions of exceptional importance. Requiring that the FISC sit en banc does not appear to raise major constitutional questions as such a proposal would likely not hinder the FISC from performing its core constitutional functions, which primarily includes independently adjudicating matters before it with finality. There have also been calls to alter the voting rules of either the FISC, when sitting en banc, or the Foreign Intelligence Surveillance Court of Review apparently in an effort to create a higher threshold for government surveillance. While Congress has significant constitutional power to govern the practice and procedure of the federal courts, including the two foreign intelligence courts, it is unclear whether setting these voting rules falls within that power or, conversely, whether it may intrude upon the core judicial function of these federal tribunals.

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Introduction The Group of Twenty, or G-20, is a forum for advancing international economic cooperation and coordination among 20 major advanced and emerging-market economies. Originally established in 1999, the G-20 rose to prominence during the global financial crisis of 2008-2009. It is now considered to be the premier forum for international economic cooperation, a position in effect held for decades following World War II by a smaller group of advanced economies (the Group of 7, or G-7). G-20 countries account for about 85% of global economic output, 75% of world exports, and two-thirds of the world's population. The G-20 leaders meet annually, and meetings among lower-level officials are held throughout the year. The G-20's focus is generally on financial and economic issues and policies, although in recent years, the G-20 has also increasingly become a forum for discussing pressing foreign policy issues. The 2017 G-20 summit was unusually contentious, with the United States at odds with other G-20 countries on trade and climate change. Argentina is chairing the G-20 in 2018 and hosting the annual summit on October 4-5 in Buenos Aires. Argentina's theme is "building consensus for fair and sustainable development." Congress exercises oversight over the Administration's participation in the G-20, including the policy commitments that the Administration is making in the G-20 and the policies it is encouraging other G-20 countries to pursue. Additionally, legislative action may be required to implement certain commitments made by the Administration in the G-20 process. This report analyzes why countries coordinate economic policies and the historical origins of the G-20; how the G-20 operates; major highlights from previous G-20 summits, plus an overview of the agenda for the next G-20 summit; and debates about the U.S. role in the G-20 and its effectiveness as a forum for economic cooperation and coordination. The Rise of the G-20 as the Premier Forum for International Economic Cooperation Motivations for Economic Cooperation Since World War II, governments have created and used formal international institutions and more informal forums to discuss and coordinate economic policies. As economic integration has increased over the past 30 years, however, international economic policy coordination has become even more active and significant. Globalization may bring economic benefits, but it also means that a country's economy can be affected by the economic policy decisions of other governments. These effects may not always be positive. For example, if one country devalues its currency or restricts imports in an attempt to reverse a trade deficit, another country's exports may decline. Instead of countries unilaterally implementing these "beggar-thy-neighbor" policies, some say they may be better off coordinating to refrain from such negative outcomes. Another reason countries may want to coordinate policies is that some economic policies, like fiscal stimulus, are more effective in open economies when countries implement them together. Governments use a mix of formal international institutions and international economic forums to coordinate economic policies. Formal institutions, such as the International Monetary Fund (IMF), the Organisation for Economic Co-operation and Development (OECD), the World Bank, and the World Trade Organization (WTO), are typically formed by an official international agreement and have a permanent office with staff performing ongoing tasks. Governments have also relied on more informal forums for economic discussions, such as the G-7, the G-20, and the Paris Club. These economic forums do not have formal rules or a permanent staff. 1970s-1990s: Advanced Economies Dominate Financial Discussions Prior to the global financial crisis of 2008-2009, international economic discussions at the top leadership level primarily took place among a small group of developed industrialized economies. Beginning in the mid-1970s, leaders from a group of five developed countries—France, Germany, Japan, the United Kingdom, and the United States—began to meet annually to discuss international economic challenges, including the oil shocks and the collapse of the Bretton Woods system of fixed exchange rates. This group, called the Group of Five, or G-5, was broadened to include Canada and Italy, and the Group of Seven, or G-7, formally superseded the G-5 in the mid-1980s. In 1998, Russia also joined, creating the G-8. Russia did not usually participate in discussions on international economic policy, which continued to occur mainly at the G-7 level. Meetings among finance ministers and central bank governors typically preceded the summit meetings. Macroeconomic policies discussed in the G-7 context included exchange rates, balance of payments, globalization, trade, and economic relations with developing countries. Over time, the G-7's, and subsequently the G-8's, focus on macroeconomic policy coordination expanded to include a variety of other global and transnational issues, such as the environment, crime, drugs, AIDS, and terrorism. 1990s-2008: Emerging Economies Gain Greater Influence Although emerging economies became more active in the international economy, particularly in financial markets, starting in the early 1990s, this was not reflected in the international financial architecture until the Asian financial crisis in 1997-1998. The Asian financial crisis demonstrated that problems in the financial markets of emerging-market countries can have serious spillover effects on financial markets in developed countries, making emerging markets too important to exclude from discussions on economic and financial issues. The G-20 was established in late 1999 as a permanent international economic forum for encouraging coordination between advanced and emerging economies. However, the G-20 was a secondary forum to the G-7 and G-8; the G-20 convened finance ministers and central bank governors, while the G-8 also convened meetings among leaders, in addition to finance ministers. Emerging markets were also granted more sway in international economic discussions when the G-8 partly opened its door to them in 2005. The United Kingdom's Prime Minister Tony Blair invited five emerging economies—China, Brazil, India, Mexico, and South Africa—to participate in G-8 discussions but not as full participants (the "G-8 +5"). The presence of emerging-market countries gave them some input in the meetings but they were clearly not treated as full G-8 members. Brazil's finance minister is reported to have complained that developing nations were invited to G-8 meetings "only to take part in the coffee breaks." 2008-Present: Emerging Economies Get a Seat at the Table It is only with the outbreak of the global financial crisis in fall 2008 that emerging markets have been invited as full participants to international economic discussions at the highest (leader) level. There are different explanations for why the shift from the G-7 to the G-20 occurred. Some emphasize recognition by the leaders of developed countries that emerging markets have become sizable players in the international economy and are simply "too important to bar from the room." Others suggest that the transition from the G-7 to the G-20 was driven by the negotiating strategies of European and U.S. leaders. It is reported that France's president, Nicolas Sarkozy, and Britain's prime minister, [author name scrubbed], pushed for a G-20 summit, rather than a G-8 summit, to discuss the economic crisis in order to dilute perceived U.S. dominance over the forum, as well as to "show up America and strut their stuff on the international stage." Likewise, it is reported that President George W. Bush also preferred a G-20 summit in order to balance the strong European presence in the G-8 meetings. Some attribute the G-20's staying power to the political difficulties of reverting back to the G-7 after having convened the G-20 leaders. How the G-20 Operates Frequency of Meetings The G-20 meetings among heads of state, or "summits," are the focal points of the G-20 discussions. Starting in 2011, the G-20 leaders began convening annually, although various lower-level officials meet frequently before the summits to begin negotiations and after the summits to discuss the logistical and technical details of implementing the agreements announced at the summits. Specifically, the G-20 finance ministers and central bank governors meet several times a year, and other ministers may also be called to meet at the request of the G-20 leaders. In addition, there are meetings among the leaders' personal representatives, known as "sherpas." Overall, the G-20 process has led to the creation of a complex set of interactions among many different levels of G-20 government officials. Some argue that the high frequency of interactions is conducive to forming open communication channels, while others argue that the G-20 process has created undue administrative burden on the national agencies tasked with implanting and managing their countries' participation in the G-20 process. U.S. Representation Within the U.S. government, the Department of the Treasury is the lead agency in coordinating U.S. participation in the G-20 process. However, the G-20 works on a variety of issues, and the Department of the Treasury works closely with other U.S. agencies in the G-20 process, including the Federal Reserve, the State Department, the U.S. Agency for International Development, and the Department of Energy. The White House, particularly through the National Security Council and the U.S. Trade Representative, is also heavily involved in the G-20 planning process. The U.S. sherpa is the Deputy National Security Advisor for International Economic Affairs, a position recently held by Everett Eissenstat. Location of Meetings and Attendees Unlike formal international institutions, such as the United Nations and the World Bank, the G-20 does not have a permanent headquarters or staff. Instead, each year, a G-20 member country serves as the chair of the G-20. The chair hosts many of the meetings, and is able to shape the year's focus or agenda. The chair also establishes a temporary office that is responsible for the group's secretarial, clerical, and administrative affairs, known as the temporary "secretariat." The secretariat also coordinates the G-20's various meetings for the duration of its term as chair and typically posts details of the G-20's meetings and work program on the G-20's website. The chair rotates among members and is selected from a different region each year. Table 1 lists the G-20 chairs since 1999, as well as the countries scheduled to chair the G-20 through 2020. The United States has never officially chaired the G-20, although the United States did host G-20 summits in 2008 and 2009 during the height of the global financial crisis. In addition to the G-20 members, some countries attended the G-20 summits at the invitation of the country chairing the G-20. In 2010, the G-20 formalized the participation of five non-G-20 members at the leaders' summit, of which at least two would be African countries. Several regional organizations and international organizations also attend G-20 summits. For example, official participants typically have included representatives from the European Commission; the European Council; the International Labour Organization (ILO); the International Monetary Fund (IMF); the Organisation for Economic Co-operation and Development (OECD); the United Nations (U.N.); the World Bank; and the World Trade Organization (WTO). Agreements All agreements, comments, recommendations, and policy reforms reached by the G-20 finance ministers, central bankers, and leaders are done so by consensus. There is no formal voting system as in some formal international economic institutions, like the IMF. Participation in the G-20 meetings is restricted to members and invited participants and is not open to the public. After each meeting, however, the G-20 publishes online the agreements reached among members, typically as communiqués or declarations. The G-20 does not have a way to enforce implementation of the agreements reached by the G-20 at the national level beyond moral suasion; the G-20 has no formal enforcement mechanism and the commitments are nonbinding. This contrasts with the World Trade Organization (WTO), for example, which does have formal enforcement mechanisms in place. G-20 Summits The G-20 summits are the key meetings where major G-20 policy commitments are typically announced. The types of commitments or agreements reached at the G-20 summits have evolved as global economic conditions have changed, from the pressing height of the global financial crisis, to signs of recovery amid high unemployment in some advanced economies, to concerns about the Eurozone crisis. In addition, as the pressing nature of the global financial crisis has abated, the scope of issues covered by the G-20 has expanded to other issues, such as development and the environment. Table A-1 presents information about major highlights from the summits held to date. G-20 policy announcements and commitments are nonbinding, and the record of implementing these commitments is wide ranging. Examples of major G-20 initiatives include coordination of fiscal policies during the global financial crisis, a tripling of IMF resources, and strengthening the Financial Stability Board (FSB) to coordinate and monitor international progress on regulatory reforms, among others. However, progress on other G-20 commitments has been much slower, such as correcting global imbalances, concluding the WTO Doha Round of multilateral trade negotiations, and eliminating fossil fuel subsidies. Tracking progress on G-20 commitments can be complicated, as subsequent summits may extend the timelines for completing policy reforms, reiterate previous commitments, or drop discussion of prior policy pledges. Previous G-20 summits have typically attracted protesters from a broad mix of movements, including environmentalists, trade unions, socialist organizations, faith-based groups, antiwar camps, and anarchists. At the 2009 summit in Pittsburgh, for example, thousands of protestors gathered in the streets, holding signs with slogans such as "We Say No To Corporate Greed" and "G20=Death By Capitalism." Likewise, the 2017 summit in Hamburg attracted thousands of protestors. Protests turned violent, with more than 100 police officers injured and 45 protestors jailed. Not all G-20 summits are marked by large-scale demonstrations. For example, the 2014 summit in Australia and the 2016 summit in China were relatively quiet, which may be related to the distance required to travel to Australia and the tight control on protests in China. The 2017 Summit in Hamburg, Germany Since the G-20 leaders started meeting in 2008, the G-20 leaders have met 12 times, 10 of which were attended by then-President Barack Obama. The 2017 summit, hosted by Germany in Hamburg on July 7-8, was the first attended by President Donald Trump. In the lead-up to the summit, speculation focused on potential discord between President Trump and other G-20 leaders. President Trump, who campaigned on an "America First" platform and has signaled a reorientation of U.S. foreign policy, has clashed with other G-20 countries over key policy issues, particularly trade and climate change. In January 2017, President Trump withdrew from the Trans-Pacific Partnership (TPP), a free trade agreement between the United States and 11 Asia-Pacific countries. In June, he announced his intent to withdraw the United States from the Paris Agreement, an international agreement outlining goals and a structure for international cooperation to address climate change and its impacts over decades to come, a decision rebuked by France, Italy, and Germany in an unusual joint statement. Commitments to combat climate change and support free trade are traditionally core outcomes of G-20 summits. Given changes in U.S. policy under the Trump Administration, analysts speculated for the first time whether leaders would be able to reach consensus on a communiqué. Negotiations among the countries were reportedly heated, and some analysts argue that the United States was more isolated at this G-20 summit than any other. Key Negotiations and Agreements Although agreed unanimously, the communiqué reflects the split between the United States and other G-20 countries, most notably on climate change. The communiqué notes the U.S. decision to withdraw from the Paris Agreement and the United States' commitment to an approach that "lowers emissions while supporting economic growth and improving energy security needs." In contrast, leaders of the other G-20 members state that the Paris Agreement is "irreversible." It is unusual for a stark division among G-20 members to be reflected in a G-20 communiqué. Reportedly, the United States undertook efforts to persuade some countries, including Australia, Poland, Saudi Arabia, and Turkey, to move to the U.S. position on climate change, but such efforts were unsuccessful. On trade, discussions reflected key divisions between the United States and other G-20 countries, particularly in Europe. Reportedly, during the 2017 negotiations, several European leaders, including UK Prime Minister Theresa May and French President Emmanuel Macron, offered forceful defenses of free trade. German Chancellor Angela Merkel noted that, "the fact that negotiations on trade were extraordinarily difficult is due to the specific positions that the United States has taken." Ultimately, the communiqué reaffirms a commitment to keep markets open, which Merkel considered a win. The commitment went further than in March, when the G-20 finance ministers dropped their typical pledge to keep global trade free and open at the insistence of the Trump Administration. However, the communiqué also notes "the importance of reciprocal and mutually advantageous trade and investment frameworks" and a commitment to combat "all unfair trade practices and recognize the role of legitimate trade defense instruments in this regard." This language reflects trade priorities articulated by the Trump Administration, which has emphasized a need for both "reciprocal" trade relationships and countering " unfair" trade practices. In comparison, in 2016, leaders committed unequivocally to oppose protectionism in "all forms," and committed to a "standstill and rollback" of protectionist measures until the end of 2018, pledges dropped from the 2017 communiqué. Some analysts view the 2017 communiqué as a further rejection of free trade. Not all issues discussed at the G-20 meeting were as contentious, and several other agreements were reached. These include, among others, calling on the Global Forum on Steel Excess Capacity, created at the 2016 G-20 summit, to rapidly develop concrete policy solutions to reduce steel excess capacity; welcoming the launch of the Women Entrepreneurs Financing Initiative (We-Fi), a new World Bank Trust Fund, to which the United States has pledged $50 million amid broader foreign aid cuts; and launching a G-20 Africa Partnership to foster growth and development. The communiqué also reiterated pledges from previous summits, such as enhancing cooperation on the refugee crisis and bolstering the resiliency of the global financial system, with varying levels of consequence and specificity. The G-20 meeting and outcomes are contributing to ongoing debate about the U.S. leadership in the world under the Trump Administration. Some commentators are concerned that the United States was isolated at the G-20, reflecting a growing trend of abdication of U.S. leadership and abandonment of U.S. allies. Others are more optimistic, arguing that differences between the United States and other countries were overblown and that President Trump is pursuing foreign policies consistent with his campaign pledges. Trump Administration officials argued that the summit helped strengthen alliances around the world and demonstrated a resurgence of American leadership to bolster common interests, affirm shared values, confront mutual threats, and achieve renewed prosperity. The 2018 Summit in Buenos Aires, Argentina Argentina is chairing the G-20 in 2018 and hosting the annual summit on October 4-5 in Buenos Aires. Argentina's theme is "building consensus for fair and sustainable development." To advance this agenda, Argentina is proposing a focus on three key issues: (1) the future of work; (2) infrastructure for development; and (3) food security. In addition, Argentina will seek to build on previous G-20 work on empowering women, fighting corruption, strengthening financial governance, building a strong and sustainable financial system, improving the fairness of the global tax system, cooperating on trade and investment, taking responsibility on climate action, and transitioning toward cleaner, more flexible, and more transparent energy systems. There are questions about how discussions will proceed at the summit. The 2017 G-20 summit was contentious, with the United States increasingly isolated on trade and climate change issues. It is not clear that divisions on these issues have resolved over the past year. The G-7 summit hosted by Canada was also divisive, with President Trump taking the unprecedented step of withdrawing his initial support for the G-7 communiqué. Trade divisions have also arisen in G-20 discussions among finance ministers and central bank governors in July 2018, amid escalating tariffs among many G-20 countries. Meanwhile, Argentina is embroiled in its own financial crisis, with the government struggling to regain investor confidence following rapid depreciation of its currency and IMF program in June 2018, raising questions about the extent to which the Argentine government will be able to focus its energies on the G-20 process. Debating the G-20's Effectiveness The summit also raises questions about the G-20's usefulness. Some argue it is a vital forum for a diverse set of countries to discuss their differences. Others wonder whether the G-20, which initially brought together leaders to coordinate the response to the global financial crisis of 2008-2009, has become less consequential over time. Three broad scenarios for the future of the G-20 have been discussed. Specifically, the G-20 as a coordinating forum will be (1) effective; (2) ineffective; or (3) effective in some instances but not others. These possible scenarios are discussed in greater detail below. Scenario 1: Effective Some believe that the G-20 will be an effective forum for international economic cooperation moving forward. The G-20 will be able to play this role, it is argued, for three reasons. First, the G-20 includes all the major economic players at the table, but at the same time is small enough to facilitate concrete negotiations. Second, the involvement of national heads of state in the negotiations could serve to facilitate commitments in major policy areas. Third, as the issues discussed by the G-20 leaders expand, the G-20 may be able to facilitate cooperation by enabling trade-offs among major concerns, such as climate change and trade, that are not possible in issue-specific forums and institutions. G-20 optimists typically point to the G-20's successes at the height of the financial crisis, when the G-20 played a unique, strong, and central role in steering the recovery efforts. The G-20 was the source of major decisions regarding fiscal stimulus, regulatory reform, tripling the IMF's lending capacity, and other response efforts. The G-20 also tasked other international organizations, such as the Bank for International Settlements (BIS), the IMF, the World Bank, and the Financial Stability Board (FSB), with facilitating, monitoring, or implementing various aspects of the response to the crisis. Finally, G-20 proponents argue that, even if agreement on policies is not always reached, it is a critical forum for discussing major policy initiatives across major countries and encouraging greater cooperation. Scenario 2: Ineffective Others are skeptical that the G-20 will be an effective forum for international cooperation moving forward for at least four reasons. First, the G-20 includes a diverse set of countries with different political and economic philosophies. As economic recovery becomes more secure, it is argued that this heterogeneous group with divergent interests will have trouble reaching agreements on global economic issues. Some argue that the G-20 has failed to provide adequate leadership in responding to the Eurozone crisis or in helping forge a conclusion to the Doha negotiations. Second, some believe the G-20 does not include the right mix of countries. It is argued that Europeans are overrepresented at the G-20 (with Germany, France, Italy, the United Kingdom, and the European Union accounting for 5 of the 20 slots), while some important emerging-market countries are excluded. Poland, Thailand, Egypt, and Pakistan have been cited as examples (see Appendix B ). By concentrating European interests while excluding important emerging markets from the negotiating table, it will be difficult, it is argued, to achieve cooperation on economic issues of global scope. Third, some experts believe that the G-20 will be ineffective because it has no enforcement mechanism beyond "naming and shaming" and with little follow-up will not be able to enforce its commitments. As evidence that the G-20 is an ineffective steering body in the international economy, G-20 skeptics point to the portions of recent G-20 declarations that merely reiterate commitments made by countries in other venues and institutions or at previous G-20 summits. Likewise, some of the declarations identify areas that merit further attention or study, without including concrete policy commitments. Fourth, some argue that the G-20's effectiveness since the crisis has diminished because the issues covered by the G-20 have broadened, but there is now little follow-through from one summit to the next. For example, a major deliverable from the Toronto summit in June 2010 was targets for fiscal consolidation among advanced economies. However, these targets received little attention in the subsequent G-20 summit in Seoul in November 2010, where the focus shifted to development, among other issues. Likewise, France's focus for the November 2011 summit was on reform of the international monetary system, but it is not clear how much attention was focused on that issue at subsequent summits. Scenario 3: Effective in Some Instances, but Not Others A third scenario represents a middle ground between the previous two, namely, that the G-20 will be effective in some instances but not others. It is argued the G-20 could be an effective body in times of economic crisis, when countries view cooperation as critical, but less effective when the economy is strong and the need for cooperation feels less pressing. Proponents of this view point to the strong commitments achieved during the height of the crisis compared to what many view as the weaker outcomes of subsequent summits, when financial markets were more stable. Another variant is that the G-20 will prove effective in facilitating cooperation over some issue areas but not others. For example, the G-20 could be effective in coordinating monetary policy across the G-20 countries, by providing a formal structure for finance ministers, central bankers, and leaders to gather and discuss monetary policy issues. In most countries, central banks exercise largely autonomous control over monetary policy issues and would have the authority to implement decisions reached in G-20 discussions. Likewise, the G-20 may be effective at tasking other international organizations, such as the IMF and the FSB, with various functions to perform or reports to write. By contrast, it is argued that the G-20 could find coordination of other policies more difficult. One example may be fiscal policies, because although finance ministers and national leaders undoubtedly can influence fiscal policies at the national level, control over fiscal policies in many countries ultimately lies with national legislatures. It is not clear to what extent national legislatures will feel bound in their policymaking process by decisions reached at the G-20 and thus how effective G-20 coordination on these issues will be. Appendix A. G-20 Summits: Context and Major Highlights Appendix B. World's Largest Countries and Entities

The Group of Twenty (G-20) is a forum for advancing international cooperation and coordination among 20 major advanced and emerging-market economies. The G-20 includes Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, and the United States, as well as the European Union (EU). G-20 countries account for about 85% of global economic output, 75% of global exports, and two-thirds of the world's population. Originally established in 1999, the G-20 rose to prominence during the global financial crisis of 2008-2009 and is now the premier forum for international economic cooperation. Since the crisis, the G-20 leaders typically meet annually (at "summits"). Meetings among lower-level officials, including finance ministers and central bank governors, are scheduled throughout the year. G-20 meetings primarily focus on international economic and financial issues, although related topics are also discussed, including development, food security, and the environment, among others. Congress exercises oversight over the Administration's participation in the G-20, including the policy commitments that the Administration is making in the G-20 and the policies it is encouraging other G-20 countries to pursue. Additionally, legislative action may be required to implement certain commitments made by the Administration in the G-20 process. The G-20 in 2018 Argentina is chairing the G-20 in 2018 and hosting the annual summit on October 4-5 in Buenos Aires. Argentina's theme for the year is "building consensus for fair and sustainable development." To advance this agenda, Argentina is proposing a focus on three key issues: (1) the future of work; (2) infrastructure for development; and (3) food security. In addition, Argentina will seek to build on previous G-20 work on empowering women, fighting corruption, strengthening financial governance, building a strong and sustainable financial system, improving the fairness of the global tax system, cooperating on trade and investment, taking responsibility on climate action, and transitioning toward cleaner, more flexible, and more transparent energy systems. There are questions about how discussions will proceed at the summit. The 2017 G-20 summit was contentious, with the United States increasingly isolated on trade and climate change issues. It is not clear that divisions on these issues have resolved over the past year. The G-7 summit hosted by Canada was also divisive, with President Trump withdrawing his initial support for the communiqué. Trade divisions have also arisen in G-20 discussions among finance ministers and central bank governors earlier this year. Meanwhile, Argentina is embroiled in its own financial crisis, with the government struggling to regain investor confidence following rapid depreciation of its currency and IMF program in June 2018. U.S. Leadership and Effectiveness of the G-20 The G-20 meeting and outcomes are contributing to ongoing debate about the U.S. leadership in the world under the Trump Administration. Some commentators are concerned that U.S. isolation at international summits reflects a growing trend of abdication of U.S. leadership and abandonment of U.S. allies. Others are more optimistic, arguing that differences between the United States and other countries were overblown and that President Trump is pursuing foreign policies consistent with his campaign pledges. The summit also raises questions about the G-20's usefulness. Some argue it is a vital forum for a diverse set of countries to discuss their differences. Others wonder whether the G-20, which initially brought together leaders to coordinate the response to the global financial crisis of 2008-2009, has become less consequential over time.

CRS_RL33955

Introduction This CRS report summarizes three studies submitted to Congress in 2005 on potential future Navy ship force structures, and is intended as a lasting reference source on these three studies. The contents of this CRS report previously appeared as an appendix to another CRS report. Two of the three studies were conducted in response to Section 216 of the conference report ( H.Rept. 108-354 of November 7, 2003) on the FY2004 defense authorization act ( H.R. 1588 / P.L. 108-136 of November 24, 2003), which required the Secretary of Defense to provide for two independently performed studies on potential future fleet platform architectures (i.e., potential force structure plans) for the Navy. The two studies were conducted by the Center for Naval Analyses (CNA) and the Office of Force Transformation (OFT, which was then a part of the Office of the Secretary of Defense), and were submitted to the congressional defense committees in February 2005. OFT was disestablished on October 1, 2006, and its activities were transferred to other DOD offices. The third study was conducted by the Center for Strategic and Budgetary Assessments (CSBA), an independent defense-policy research organization, on its own initiative. The study was made available to congressional and other audiences in March 2005. The Three Studies Force Structure Recommendations CNA Report3 The CNA report uses essentially the same kinds of ships and naval formations as those planned by the Navy. The report recommends a Navy force structure range of 256 to 380 ships. The low end of the range assumed a greater use of crew rotation and overseas homeporting of Navy ships than the high end. Table 1 below compares the CNA-recommended force range to the Navy's 375-ship fleet proposal of 2002-2004 and the notional 260- and 325-ship fleets for FY2035 presented in a March 2005 Navy report to Congress. OFT Report4 The OFT report employs eight new ship designs that differ substantially from the designs of most ships currently in the fleet, under construction, or planned for procurement. Among the eight new ship designs were four types of large surface ships that would be built from a common, relatively inexpensive, merchant-like hull design developed in 2004 for the Navy's Maritime Prepositioning Force (Future) analysis of alternatives. These four types of ships, which would all displace 57,000 tons, include: An aircraft carrier that would embark a notional air wing of 30 Joint Strike Fighters (JSFs), 6 MV-22 Osprey tilt-rotor aircraft, and 15 unmanned air vehicles (UAVs). The total of 36 manned aircraft is about half as many as in today's carrier air wings, and the OFT architecture envisaged substituting two of these new carriers for each of today's carriers. This new carrier would also have support spaces for unmanned underwater vehicles (UUVs), unmanned surface vehicles (USVs), and mission modules for the 1,000-ton surface combatant described below. A missile-and-rocket ship that would be equipped with 360 vertical launch system (VLS) missile tubes and 4 trainable rocket launchers. Additional spaces on this ship could be used to support UUVs, USVs, and mission modules for the 1,000-ton surface combatant. Alternatively, these spaces could be used to provide limited stowage and working space for the 100-ton surface combatant described below, and mission modules for these 100-ton ships. An amphibious assault ship that would embark a notional air wing of either 30 CH-46 equivalents or 6 JSFs, 18 MV-22s, and 3 gyrocopter heavy-lift helicopters. It would also have spaces for Marine Corps equipment, unmanned vehicles, and mission modules for the 1,000-ton surface combatant. A " mother ship " for small combatants that would contain stowage and support spaces for the 100-ton surface combatant described below. The four other new-design ships in the OFT architecture are: A 13,500-ton aircraft carrier based on a conceptual surface effect ship (SES)/catamaran hull design developed in 2001 by a team at the Naval Postgraduate School. This ship would embark a notional air wing of 8 JSFs, 2 MV-22s, and 8 UAVs. The total of 10 manned aircraft is roughly one-eighth as many as in today's carrier air wings, and the OFT architecture envisages substituting eight of these new carriers for each of today's carriers. This new ship would have a maximum speed of 50 to 60 knots. A 1,000-ton surface combatant with a maximum speed of 40 to 50 knots and standard interfaces for accepting various modular mission packages. These ships would self-deploy to the theater and would be supported in theater by one or more of the 57,000-ton ships described above. A 100-ton surface combatant with a maximum speed of 60 knots and standard interfaces for accepting various modular mission packages. These ships would be transported to the theater by the 57,000-ton mother ship and would be supported in theater by that ship and possibly also the 57,000-ton missile-and-rocket ship. A non-nuclear-powered submarine equipped with an air-independent propulsion (AIP) system. These AIP submarines would be lower-cost supplements to the Navy's nuclear-powered submarines (SSNs) and would be transported from home port to the theater of operations by transport ships. The OFT architecture envisaged substituting four of these submarines for the SSN in each carrier strike group. The 1,000- and 100-ton surface combatants would be built as relatively inexpensive sea frames, like the Littoral Combat Ship (LCS). The OFT report combines these eight types of ships, plus the Navy's currently planned TAOE-class resupply ship, into a fleet that would include a much larger total number of ships than planned by the Navy, about the same number of carrier-based aircraft as planned by the Navy, and large numbers of unmanned systems. The OFT report presents three alternative versions of this fleet, which the report called Alternatives A, B, and C. The report calculates that each of these alternatives would be equal in cost to the equivalent parts of the Navy's 375-ship proposal. Each of these alternative force structures, like the equivalent parts of the Navy's 375-ship proposal, would be organized into 12 carrier strike groups (CSGs), 12 expeditionary strike groups (ESGs), and 9 surface strike groups (SSGs). The three alternative force structures are shown in Table 2 below. The totals shown in the table do not include SSNs, cruise missile submarines (SSGNs), and ballistic missile submarines (SSBNs) operating independently of the 12 CSGs, 12 ESGs, and 9 SSGs. The totals also do not include combat logistics ships other than the TAOEs (e.g., oilers, ammunition ships, and general stores ships) and fleet support ships. The Navy's 375-ship proposal, by comparison, included all these kinds of ships. As also can be seen from the table, the difference between Alternatives A and B is that the former uses 1,000-ton surface combatants while the latter uses 100-ton surface combatants that are transported into the theater by mother ships, and the difference between Alternatives B and C is that the former uses 57,000-ton aircraft carriers while the latter substituted 13,500-ton carriers. CSBA Report6 The CSBA report uses many of the same ship designs currently planned by the Navy, but also proposes some new ship designs. The CSBA report also proposed ship formations that in some cases are different than those planned by the Navy. Table 3 below compares the CSBA-recommended force structure to CNA's recommended force range, the Navy's 375-ship fleet proposal of 2002-2004, and the notional 260- and 325-ship fleets for FY2035 presented in the Navy's March 2005 report to Congress. The CSBA report makes numerous specific recommendations for ship force structure and ship acquisition, including the following: Aircraft Carriers When the George H.W. Bush (CVN-77) enters service in 2008 or 2009: Retire the two remaining conventional carriers—the Kitty Hawk CV-63) and the Kennedy (CV-67). Convert the Enterprise (CVN-65) into an afloat forward staging base (AFSB) with a mixed active/reserve/civilian crew, to be used in peacetime for aviation testing and in crises for embarking special operations forces, Army or Marine Corps forces, or joint air wings. Begin replacing the 10 Nimitz (CVN-68) class carriers on a one-for-one basis with CVN-21-class carriers procured once every five years using incremental funding. Redesignate the LHA(R) as a medium sized carrier (CVE) and procure one every three years starting in FY2007 using incremental funding. Submarines Maintain Virginia-class SSN procurement at one per year for the next several years, producing an eventual total of perhaps 20 Virginia-class boats. Begin immediately to design a new "undersea superiority system" with a procurement cost 50% to 67% that of the Virginia-class design, with the goal of achieving a procurement rate of two or three of these boats per year no later than FY2019. Study options for extending the service lives of the three Seawolf SSNs and the 31 final Los Angeles-class SSNs to mitigate the projected drop in SSN force levels during the 2020s. Reduce the SSBN force from 14 ships to 12 ships and convert an additional two SSBNs into SSGNs, for a total of six SSGNs. Study the option of reducing the SSBN force further, to 10 ships, which would permit another two SSBNs to be converted into SSGNs, for a total of eight SSGNs. Destroyers and Cruisers Procure a single DDG-1000 in FY2007, using research and development funding, as the first of three surface combatant technology demonstrators. Start a design competition for a next generation, modular surface combatant or family of combatants, with capabilities equal to or greater than the DDG-1000/CG(X), but with a substantially lower procurement cost. Build two additional surface combatant technology demonstrators to compete against the DDG-1000 design. Use the results of this competition to inform the design of a new surface combatant, called SCX, with a procurement cost perhaps one-third to one-half that of the DDG-1000. Begin procuring this new design in FY2015 as a replacement for the DDG-1000/CG(X) program. Consider modifying the LPD-17 design into a low-cost naval surface fire support ship carrying the Advanced Gun System (AGS) that was to be carried by the DDG-1000. Consider procuring two additional DDG-51s to help support the surface combatant industrial base in the near-term. Littoral Combat Ships and Coast Guard Deepwater Cutters Procure six LCSs per year for a total of 84 LCSs—42 of the Lockheed design, and 42 of the General Dynamics design. Organize these 84 ships into 42 divisions, each consisting of one Lockheed ship and one General Dynamics ship, so that each division can benefit from the complementary strengths of the two designs. Ensure that mission packages for the LCS and mission packages for the Coast Guard's large and medium Deepwater cutters are as mutually compatible as possible. Include the Coast Guard's Deepwater cutters when counting ships that contribute to the country's total fleet battle network. Begin a research and development and experimentation program aimed at building several competing stealth surface combatant technology demonstrators for operations in contested or denied-access waters. Amphibious Ships Complete LHD-8 to create a force of eight LHDs. Rather than stopping procurement of LPD-17s after the ninth ship in FY2007, as now planned by the Navy, increase the LPD-17 procurement rate to two ships per year and use multiyear procurement (MYP) to procure a total of 24 LPD-17s. Retire the 12 existing LSD-41/49 class ships, leaving a 32-ship amphibious fleet consisting of eight LHDs and 24 LPD-17s. Form eight "distributed expeditionary strike bases"—each of which would include one LHD, three LPD-17s, one Aegis cruiser, three Aegis destroyers, two LCSs, and one SSGN. MPF and Other Ships Retain the three existing MPF squadrons over the near- to mid-term. Reconfigure two of the squadrons for irregular warfare. Use the third squadron as a swing asset to either reinforce the two irregular-warfare squadrons or to provide lift for assault follow-on echelon amphibious landing forces. Develop high-speed intra-theater and ship-to-shore surface connectors. Design an attack cargo ship (TAKA) to help support sustained joint operations ashore, with a target unit procurement cost of $500 million or less, and begin procuring this ship in FY2014. Replace the two existing hospital ships, the four existing command ships, and existing support tenders with new ships based on the LPD-17 design. Initiate a joint experimental program for future sea-basing platforms and technologies. The CSBA report raises several questions about the Navy's emerging sea basing concept for conducting expeditionary operations ashore. The report states: The work done thus far on sea basing is intriguing, but neither the concept nor the supporting technologies appear sufficiently mature to justify any near-term decisions such as canceling LPD-17 [procurement] in favor of MPF(F) ships, or removing the well deck from the big deck amphibious assault platforms, both of which would severely curtail the [fleet's] ability to launch surface assaults over the longer term. Given these large uncertainties, no major moves toward the sea basing vision should be made without further exploring the sea basing concept itself, and experimenting with different numbers and types of sea base platforms, connectors, and capabilities. Observations Observations about the CNA, OFT, and CSBA reports can be made on several points, including the following: organizations and authors; analytical approach; use of prospective ship-procurement funding levels as a force-planning consideration; fleet size and structure; whether the recommended force qualifies as an alternative fleet architecture; fleet capability; transition risks; and implications for the industrial base. Each of these is discussed below. Organizations and Authors CNA Report CNA is a federally funded research and development center (FFRDC) that does much of its analytical at the Navy's request. The CNA report's discussion of how crew rotation may alter force-level requirements for maintaining day-to-day forward deployments is somewhat detailed and may have been adapted from other work that CNA has done on the topic for the Navy. OFT Report The OFT report was prepared under the direction of retired Navy admiral Arthur Cebrowski, who was the director of OFT from October 29, 2001 until January 31, 2005 and the President of the Naval War College (NWC) from July 24, 1998 to August 22, 2001. During his time at NWC and OFT, Cebrowski was a leading proponent of network-centric warfare and distributed force architectures. CSBA Report The CSBA report was prepared by Robert Work, CSBA's analyst for maritime issues. CSBA describes itself as "an independent, policy research institute established to promote innovative thinking about defense planning and investment strategies for the 21 st century. CSBA's analytic-based research makes clear the inextricable link between defense strategies and budgets in fostering a more effective and efficient defense, and the need to transform the US military in light of an emerging military revolution." CSBA's Executive Director is Dr. Andrew F. Krepinevich, Jr., whose previous experience includes work in DOD's Office of Net Assessment, the office directed by Andrew Marshall. Krepinevich is generally considered a major writer on defense transformation. Analytical Approach CNA Report The CNA report grounds its analysis in traditional DOD force-planning considerations and campaign modeling. The report cites past DOD force-planning studies that reflect similar approaches. The implicit argument in the CNA report is that its findings have weight in part because they reflect a well-established and systematic approach to the problem. OFT Report In contrast to the CNA report, the OFT report "calls into question the viability of the longstanding logic of naval force building." The OFT report grounds its analysis in four major force-design principles that the report identifies as responsive to future strategic challenges and technological opportunities. The report then seeks to design a fleet that it is consistent with these principles, and assesses that fleet using a new set of metrics that the report believes to be consistent with these principles. The implicit argument in the OFT report is that its findings have weight in part because they reflect major force-design principles that respond to future strategic challenges and technological opportunities. CSBA Report The CSBA report employs an extensive historical analysis of the missions and structure of the U.S. Navy and other navies. The report argues that the structure of the U.S. Navy has shifted over time in response to changes in technology and U.S. security challenges, and that U.S. military forces have entered a new security era (which the report calls the "Joint Expeditionary Era") during which the U.S. Navy will need to do three things. To do these three things, the report argues, the Navy should be structured to include four different force elements. The report constructs these four force elements and then combines them to arrive at an overall recommended Navy force structure. The implicit argument in the CSBA report is that its findings have weight in part because they reflect insights about future missions and force requirements gained through careful historical analysis of the missions and structure of the U.S. Navy and other navies. Prospective Ship-Procurement Funding Levels as Consideration CNA Report The CNA report aimed at designing a cost-effective fleet. It also mentions cost estimates relating to the option of homeporting additional attack submarines at Guam. Prospective ship-procurement funding levels, however, are not prominently featured in the CNA report as a force-planning consideration. OFT Report Prospective ship-procurement funding levels are a significant force-planning consideration in the OFT report. The report argues that an important metric for assessing a proposed fleet architecture is the ease or difficulty with which it can be scaled up or down to adapt to changes in ship-procurement funding levels. The OFT report contains a fairly detailed discussion of the Navy's budget situation that calls into question, on several grounds, the Navy's prospective ability to afford its 375-ship proposal. The report concludes that funding for Navy ship-procurement in future years may fall as much as 40% short of what would be needed to achieve the Navy's 375-ship fleet proposal. If the shortfall is 40%, the report estimates, the Navy could maintain a force of 270 to 315 ships, which is comparable in number to today's force of 282 ships, except that the future force would include a substantial number of relatively inexpensive LCSs. If proportionate reductions are applied to the OFT fleets shown in Table 2 , Alternative A would include 402 to 469 ships, Alternative B would include 557 to 650 ships, and Alternative C would include 609 to 711 ships. Again, these totals would not include certain kinds of ships (independently operating SSNs, etc.) that are included in the total of 270 to 315 ships associated with the Navy's currently planned architecture. CSBA Report As with the OFT report, prospective ship-procurement funding levels are a significant force-planning consideration in the CSBA report. The CSBA report estimates that in future years, the Navy may have an average of about $10 billion per year in ship-acquisition funding. The report then aims at designing a force whose ships could be acquired for this average annual amount of funding. Fleet Size and Structure CNA Report The 380-ship fleet at the high end of the CNA range is similar in size and composition to the Navy's 375-ship fleet proposal. The 256-ship fleet at the low end of the CNA range is similar in size and composition to the Navy's 260-ship fleet for FY2035, except that the 260-ship fleet has more LCSs and fewer ships in the "other ships" category. OFT Report The OFT-recommended fleet would have a much larger total number of ships than the Navy's planned fleet. The OFT fleet would also feature a much larger share of small combatants. Of the ships shown in Table 2 , the small combatants account for about 75% in Alternative A, about 79% in Alternative B, and about 72% in Alternative C. (Adding into the mix SSNs and other kinds of ships not shown in Table 2 would reduce these percentages somewhat.) In the Navy's notional 260- and 325-ship fleets, by contrast, LCSs account for about 25% of the total number of ships. The OFT architecture is similar in certain ways to a fleet architecture proposed by the Naval Surface Warfare Center (NSWC) between 1989 and 1992 and sometimes referred to as the Carrier of Large Objects (CLO) proposal. The NSWC architecture, like the OFT architecture, employed a common hull design for a large ship that could be built in several variants for various missions, including aviation, missile launching and fire support, amphibious warfare, logistics support, and mother-ship support of small, fast, surface combatants. The small, fast surface combatants in the NSWC architecture were called scout fighters and were in the same general size range as the 100- and 1,000-ton surface combatants in the OFT architecture. CSBA Report The CSBA force would have about the same total number of ships as the Navy's 375-ship fleet proposal. CSBA's subtotals for some ship categories are similar to subtotals in one or more of the other fleet proposals shown in Table 1 . Significant differences between the CSBA proposal and the other fleet proposals shown in Table 3 include: the four medium-sized aircraft carriers (CVEs); the conversion of a carrier into an afloat forward staging base; the composition of the cruiser-destroyer force (which would include SCXs rather than DDG-1000s and CG(X)s); the composition of the amphibious fleet (which would have additional LPD-17s in lieu of today's LSD-41/49s); and the composition of the maritime prepositioning force (which would continue to include, for a time at least, today's MPF ships rather than the Navy's planned MPF(F) ships). Does it Qualify as an Alternative Force Architecture CNA Report As mentioned earlier, the CNA report uses essentially the same kinds of ships and naval formations as those planned by the Navy. If an alternative fleet platform architecture is defined as one that uses ship types or naval formations that differ in some significant way from those currently used or planned, then the CNA-recommended force arguably would not qualify as an alternative fleet platform architecture. OFT Report Since the OFT report proposes building ships that are substantially different from those currently planned, and combines them ships into formations which, although similar in name to currently planned formations (i.e., CSGs, ESGs, and SSGs), might be viewed by some observers as substantially different in composition from the currently planned versions of these formations, the OFT-recommended force arguably would qualify as an alternative fleet platform architecture. CSBA Report Since the CSBA report proposes building ships that in some cases are different from those currently planned, and combines these ships into formations that in some cases are different in composition from those currently planned, the CSBA-recommended force arguably would qualify as an alternative fleet platform architecture, though less dramatically so than the OFT-recommended force. New Ship Designs CNA Report The CNA report does not propose any ship designs other than those already planned by the Navy. OFT Report The 57,000-ton aircraft carrier in the OFT report would be roughly the same size as the United Kingdom's new aircraft carrier design, and somewhat larger than the U.S. Navy's 40,000-ton LHA/LHD-type amphibious assault ships. Compared to the U.S. Navy's aircraft carriers, which displace 81,000 to 102,000 tons, this ship could be considered a medium-size carrier. The 57,000-ton missile-and-rocket ship in the OFT report could be considered similar in some respects to the Navy/DARPA arsenal ship concept of 1996-1997, which would have been a large, relatively simple surface ship equipped with about 500 VLS tubes. The 13,500-ton aircraft carrier in the OFT report would be slightly larger than Thailand's aircraft carrier, which was commissioned in 1997, and somewhat smaller than Spain's aircraft carrier, which was based on a U.S. design and was commissioned in 1988. Due to its SES/catamaran hull design, this 13,500-ton ship would be much faster than the Thai and Spanish carriers (or any other aircraft carrier now in operation), and might have a larger flight deck. This ship could be considered a small, high-speed aircraft carrier. The 1,000- and 100-ton surface combatants in the OFT report could be viewed as similar to, but smaller than, the 2,500- to 3,000-ton Littoral Combat Ship (LCS). Compared to the LCS, they would be closer in size to the Streetfighter concept (a precursor to the LCS that was proposed by retired admiral Cebrowski during his time at the Naval War College). The AIP submarine in the OFT report could be similar to AIP submarines currently being developed and acquired by a some foreign navies. CSBA Report The proposal in the CSBA report for an afloat forward staging base (AFSB) is similar to other proposals for AFSBs that have been reported in recent years, though other proposals have suggested using commercial ships or military sealift ships rather than converted aircraft carriers as the basis for the AFSB. The CVE in the CSBA report, like the 57,000-ton carrier in the OFT report, can be viewed as a medium-sized carrier. With a full load displacement of perhaps about 40,000 tons, the CVE would be somewhat smaller than the 57,000-ton carrier and consequently might embark a smaller air wing. The CVE, however, would be based on the LHA(R) amphibious ship design rather than a merchant-like hull, and consequently could incorporate more survivability features than the 57,000-ton carrier. Fleet Capability CNA Report The CNA report uses essentially the same kinds of ships and formations as planned by the Navy, and recommends generally the same numbers of ships as a function of force-planning variables such as use of crew rotation. As a consequence, the CNA-recommended force range would be roughly similar in overall capability to the Navy's planned architecture. OFT Report The OFT architecture differs so significantly from the Navy's planned architecture that assessing its capability relative to the Navy's planned architecture is not easy. As a general matter, the OFT report stresses overall fleet survivability more than individual-ship survivability, and argues that fleet effectiveness can be enhanced by presenting the enemy with a complex task of having to detect, track, and target large numbers of enemy ships. The OFT report argues that in addition to warfighting capability, a fleet can be judged in terms of its capability for adapting to changes in strategic demands and funding levels. Readers who agree with most or all of these propositions might conclude that the OFT-recommended architecture would be more capable than the Navy's planned architecture. Readers who disagree with most or all of these propositions might conclude that the OFT-recommended architecture would be less capable than the Navy's planned architecture. Readers who agree with some of these propositions but not others (or who agree with these propositions up to a certain point, but less fervently than OFT), might conclude that the OFT-recommended architecture might be roughly equal in total capability to the Navy's planned architecture. In addressing the question of fleet capability, the OFT report states: Alternative fleet formations consisting of small fast and relatively inexpensive craft combining knowledge and attaining flexibility through networking appear superior to the programmed fleet for non-traditional warfare in a variety of settings. This is due to increasing the complexity the enemy faces and increasing U.S. fleet options that in turn reduce enemy options. The speed and complexity of the alternative fleets can provide them with the capability to complicate and possibly defeat the attempts of non-traditional adversaries to elude surveillance. The enemy could have difficulty determining what to expect and how to defeat them all. The superior speed and more numerous participants than in the programmed fleet provide a stronger intelligence base and more numerous platforms from which to conduct strikes and interceptions. This appears to be true even if the smaller craft are individually somewhat less capable and less able to sustain a hit than the larger ships in the programmed fleet. If these circumstances are not achieved, and the enemy can continue to elude and deceive, the [Navy's] programmed fleet often is as good as the [OFT] alternatives, sometimes even better. It is not necessarily better in cases in which individual ship survivability dominates, a perhaps counterintuitive result until we realize that fleet survivability not individual ship survivability is what dominates. An area in which programmed fleets might have an advantage would be when the long loiter time or deep reach of CTOL [conventional takeoff and landing] aircraft on programmed big-deck CVNs [nuclear-powered aircraft carriers] is needed. That said, there need be no great sacrifice. With airborne tanking, the VSTOL [very short takeoff and landing] aircraft in the alternatives could meet the deep strike and long loiter demands. Also, as mentioned earlier, a combination of advances in EMALS [electromagnetic aircraft launch system] and modifications to the JSF will make it possible to launch the JSF with only a marginal range-payload capability penalty. Moreover, trends in technology are providing unmanned aircraft greater capability, including greater loiter time and sensor capability. CSBA Report The CSBA report argues that its architecture would provide a total capability equal to that of the Navy's planned architecture, but at a lower total cost, because the CSBA architecture would: employ new ship designs, such the new undersea superiority system and the SCX, that, because of their newer technologies, would cost less than, but be equal in capability to, current designs such as the Virginia-class SSN and DDG-1000 destroyer; and make more use of the LPD-17 hull design, whose basic design costs have already been paid, and which can be produced efficiently in large numbers and adapted economically to meet various mission requirements. It is plausible that using newer technologies would permit new, reduced-cost, ship designs to be more capable than such designs would have been in the past. Whether the increases in capability would always be enough to permit these ships to be equal in capability to more expensive current designs is less clear. The Navy may be able to achieve this with a new SSN design, because several new submarine technologies have emerged since the Virginia-class design was developed in the 1990s, but achieving this with a new large surface combatant design could be more challenging, because the DDG-1000 design was developed within the last few years and few new surface combatant technologies may have emerged since that time. If one or more of the reduced-cost designs turn out to be less capable than current designs, then the CSBA architecture would not generate as much total capability as the report projects. The CSBA report also argues that its architecture would produce a force with a mix of capabilities that would better fit future strategic demands. To achieve this, the report recommends, among other things, reducing currently planned near-term procurement of new destroyers and MPF(F) ships, increasing currently planned procurement of new amphibious ships, and a changing the currently planned investment mix for aircraft carriers. Readers who agree with CSBA's description of future strategic demands, and who agree that CSBA's recommended investment changes respond to those demands, might conclude that the CSBA-recommended architecture would be better optimized than the Navy's planned architecture to meet future needs. Readers who disagree with one or both of these propositions might conclude that the Navy's planned architecture might be better optimized, or that neither architecture offers clear advantages in this regard. Implementation Risks CNA Report Implementation risks associated with the force recommended in the CNA report include developing and designing the various types of ships included in the plan—including in particular the DDG-1000 destroyer, which is to incorporate a number of new technologies—and the issue of whether Navy funding levels in coming years would be adequate to build and maintain the recommended fleet. OFT Report The OFT report does not include a detailed plan for transitioning from today's fleet architecture to its proposed architecture, but such a plan could be developed as a follow-on analysis. The plan could involve replacing existing ship designs and associated formations as they retire with OFT's recommended new ship designs and associated formations. Implementation risks associated with the force recommended in the OFT report include developing and designing the eight new types of ships included in the plan, including the four types of large ships based on the 57,000-ton commercial-like hull, the 13,500-ton SES/catamaran aircraft carrier (since it would be much larger than other SES/catamaran ships), the AIP submarine (since the AIP technology is relatively new and a non-nuclear-powered submarine has not been designed and built for the U.S. Navy since the 1950s), and the 1,000- and 100-ton surface combatants (since new technologies are needed to achieve the increased payload fraction that these ships are to have). The OFT-recommended force could pose implementation risks due to the new kinds of naval formations that would be used, which could require development of new doctrine, concepts of operations, and tactics. CSBA Report A stated goal of the CSBA report is to provide a detailed, practical transition road map for shifting from today's fleet structure to the report's recommended fleet structure. The many specific recommendations made in the report could be viewed as forming such a road map. Implementation risks associated with the force recommended in the CSBA report include developing and designing the reduced-cost SSN and the reduced-cost SCX surface combatant, particularly since these two new ship designs are to be equal in capability to the more expensive designs they would replace. Implications for Industrial Base CNA Report Since the CNA report uses essentially the same kinds of ships and naval formations as those in use today or planned by the Navy, and recommends similar numbers of ships, the industrial-base implications of the CNA-recommended force would appear to be similar to those of the Navy's current plans. OFT Report The OFT report seeks to reduce unit shipbuilding costs, and thereby permit an increase in total ship numbers, by shifting the fleet away from complex, highly integrated ship designs that are inherently expensive to build and toward less-complex merchant-like hulls and small sea frames that are inherently less expensive to build. Similarly, the OFT report seeks to increase shipbuilding options for the Navy by shifting the fleet away from complex, highly integrated ship designs that can be built only by a limited number of U.S. shipyards and toward less-complex merchant-like hulls and small sea frames that can be built by a broader array of shipyards. The OFT report also aims to make it easier and less expensive to modernize ships over their long lives, and thereby take better advantage of rapid developments in technology, by shifting from highly integrated ship designs to merchant-like hulls and sea frames. As a consequence of these objectives, the OFT report poses a significant potential business challenge to the six shipyards that have built the Navy's major warships in recent years. The report's discussion on implementing its proposed architecture states in part: The shipbuilding industrial base would also need to start to retool to build different types of ships more rapidly. Smaller shipyards, which presently do little or no work for the Navy could compete to build the smaller ships, thereby broadening the capabilities base of ship design and construction available to the Navy. The change to smaller, lower unit cost ships would also open up overseas markets. With more shipyards able to build the ships and potential for a broader overall market, the U.S. shipbuilding industry would have the chance to expand its competence, innovation and relevance. Taken together this would sharpen the industry's ability to compete and provide alternatives to a ship procurement system that is beset by laws and regulations that frustrate, even pervert, market forces. The report's concluding section lists five "dangers" that "risk the Navy's 'losing the way.'" One of these, the report states, is "Shielding the shipbuilding industrial base from global competition," which the report states "guarantees high cost, limited innovation, and long cycle times for building ships." CSBA Report The CSBA report similarly raised significant potential issues for the six shipyards that have built the Navy's major warships in recent years. The report states that "Rationalizing the defense industrial base is... a critical part of DoN's [the Department of the Navy's] maritime competition strategy, and should be the subject of immediate consideration and deliberation by the Congress, DoD, and the DoN." The report states: Numerous studies have indicated that the six Tier I yards [i.e., the six yards that have built the Navy's major warships in recent years] have "exorbitant excess capacities," which contribute to the rising costs of [Navy] warships, primarily because of high industrial overhead costs. These capacities are the result of "cabotage laws and fluctuating national security acquisition policies that force shipbuilders of combatants to retain capacities to address required surges in coming years." This last point is especially important: the DoN contributes greatly to the problem of "exorbitant capacities" by its consistent tendency to portray overly optimistic ramp ups in ship production in budget "out years." The report recommends the following as part of its overall transition strategy: Minimize production costs for more expensive warships (defined in the report as ships costing more than $1.4 billion each) by consolidating production of each kind of such ship in a single shipyard, pursuing learning curve efficiencies, and requesting use of multiyear procurement (MYP) whenever possible. Minimize production costs for warships and auxiliaries costing less than $1.4 billion each by emphasizing competition, shifting production to smaller "Tier II" yards, using large production runs, and enforcing ruthless cost control. The report states that "the strategy developed in this report suggests that [Navy] planners might wish to:" maintain production of aircraft carriers at NGNN, consolidate production of large surface combatants and amphibious ships at NG/Ingalls, and consolidate submarine building GD/EB, or with a new, single submarine production company. The report states that the second of these possibilities is guided by the building sequence of LPD-17s and SCXs recommended in the report, NG/Ingalls' ability to build a wider variety of ships than GD/BIW, NG/Ingalls' surge capacity, and the availability of space for expanding NG/Ingalls if needed. The report states that the third of these possibilities is guided by the low probability that procurement of Virginia-class submarines will increase to two per year, the cost savings associated with consolidating submarine production at one yard, GD/EB's past experience in building SSBNs and SSNs, GD/EB's surge capacity, and the fact that building submarines at GD/EB would maintain two shipyards (GD/EB and NGNN) capable of designing and building nuclear-powered combatants of some kind. The report acknowledges that yard consolidation would reduce the possibilities for using competition in shipbuilding in the near term and increase risks associated with an attack on the shipbuilding infrastructure, but notes that DOD consolidated construction of nuclear-powered carriers in a single yard years ago, and argues that competition might be possible in the longer run if future aircraft-carrying ships, the SCX, and the new undersea superiority system could be built in Tier II yards. The report states: Given their current small yearly build numbers, consolidating construction of aircraft carriers, surface combatants, and submarines in one yard [for each type] makes sense. However, the same logic does not hold true for auxiliaries and smaller combatants. These ships can normally be built at a variety of Tier I and Tier II yards; competition can thus be maintained in a reasonable and cost-effective way. For example, competing auxiliaries and sea lift and maneuver sea base ships between NASSCO, Avondale, and Tier II yards may help to keep the costs of these ships down. Building multiple classes of a single ship [type] is another prudent way to enforce costs, since the DoN can divert production of any ship class that exceeds its cost target to another company/class that does not. Simultaneously building both the [Lockheed] and [General Dynamics] versions of [the] LCS, and the Northrop Grumman National Security Cutter, Medium [i.e., the medium-sized Deepwater cutter] gives the DoN enduring capability to shift production to whatever ship stays within its cost target.... Of course, Congress and the DoN may elect to retain industrial capacity, and to pay the additional "insurance premium" associated with having excess shipbuilding capacity. For example: Congress and the DoN might wish to retain two submarine yards until the [undersea superiority system] design is clear, and wait to rationalize the submarine building base after potential [undersea superiority system] yearly production rates are clear.... In a similar vein, Congress and the DoN might wish to retain two surface combatant yards until the design of the SCX is clear, and wait to rationalize the surface combatant building base after potential SCX yearly production rates are clear. In this regard, Congress could consider authorizing a modest additional number of [Aegis destroyers] to keep both BIW and Ingalls "hot" until the SCX is designed.... The key point is that the US shipbuilding infrastructure must be rationally sized for expected future austere shipbuilding budgets, and whatever fiscally prudent [Navy] transition plan is finally developed by DoN planners.

This CRS report summarizes three studies submitted to Congress in 2005 on potential future Navy ship force structures, and is intended as a lasting reference source on these three studies. Two of the three studies were conducted in response to Section 216 of the conference report (H.Rept. 108-354 of November 7, 2003) on the FY2004 defense authorization act (H.R. 1588/P.L. 108-136 of November 24, 2003). The two studies were conducted by the Center for Naval Analyses (CNA) and the Office of Force Transformation (OFT, which was then a part of the Office of the Secretary of Defense). They were submitted to the congressional defense committees in February 2005. The third study was conducted by the Center for Strategic and Budgetary Assessments (CSBA), an independent defense-policy research organization, on its own initiative. The study was made available to congressional and other audiences in March 2005. The CNA study presents a fairly traditional approach to naval force planning in which capability requirements for warfighting and for maintaining day-to-day naval forward deployments are calculated and then integrated. The CNA-recommended force parallels fairly closely Navy thinking at the time on the size and composition of the fleet. This is perhaps not surprising, given that much of CNA's analytical work is done at the Navy's request. The OFT study fundamentally challenges current Navy thinking on the size and composition of the fleet, and presents an essentially clean-sheet proposal for a future Navy that would be radically different from the currently planned fleet. This is perhaps not surprising, given both OFT's institutional role within DOD as a leading promoter of military transformation and the views of retired Navy admiral Arthur Cebrowski—the director of OFT until January 31, 2005—regarding network-centric warfare and distributed force architectures. (OFT was disestablished on October 1, 2006, and its activities were transferred to other DOD offices.) The CSBA study challenges current Navy thinking on the size and composition of the fleet more dramatically than the CNA report, and less dramatically than the OFT report. Compared to the CNA and OFT reports, the CSBA report contains a more detailed implementation plan and a more detailed discussion of possibilities for restructuring the shipbuilding industrial base. This CRS report will not be updated.

CRS_R44340

Overview of this Report The Goldwater-Nichols Act of 1986 led to major changes in officer training and career development through the establishment of a joint management system. This system includes four basic components: Joint Professional Military Education (JPME) in joint schools, a Joint Duty Assignment List (JDAL), Joint Specialty Officer (JSO) designation, and joint criteria for promotions. This report focuses mainly on JPME requirements in the context of the intent of the Goldwater-Nichols reforms. Although it refers to joint officer assignments and promotions, it does not address the joint officer management system as a whole. The first sections provide background on joint education and the changes put in place by GNA. The following sections discuss the implementation and evolution of JPME over the past 30 years. The final section lays out some of the stakeholders' concerns and issues with the current state of JPME that Congress may consider as they conduct their GNA review. Joint Military Education Pre-GNA The education of military officers in joint operations predates any legislation requiring both joint education and experience. The Army Industrial College had been established in 1924 to educate officers in mobilization, supply, and industrial support, but no similar school was devoted to the study of joint operations. During World War II, following the U.S. military's exposure to working with allies in joint operations, military leaders saw a critical need for officers to be trained and educated in joint and combined operations. To fill this void, the Joint Chiefs of Staff established the Army-Navy Staff College in 1943 to provide a four-month course for selected senior officers assigned to unified command and staff duties. A memo by General Henry H. "Hap" Arnold, then-Commanding General of the Army Air Forces, described the purpose of this War College as: (1) To train selected officers of the Army and Navy for command and staff duties with unified (Army-Navy) commands. (2) To develop methods and ideas for the most effective unified employment of all arms and services and to translate lessons learned in the field into appropriate doctrines. Conclusions reached should be spread through the services both by service publications and by the influence of the graduates of the College in planning and conducting operations. The original Army-Navy Staff College evolved into the National War College in 1946 and the Army Industrial College was later renamed the Industrial College of the Armed Forces (ICAF). The Armed Forces Staff College (AFSC) was also formed in 1946 to provide joint operational instruction to mid-grade officers (O-4 to O-6). By 1946, and primarily at the initiative of the senior military leadership, there were three military institutions devoted to various aspects of joint education—the National War College, the ICAF, and the AFSC. The services retained their service-centric professional military education schools. (A current listing of service and joint colleges and universities certified to provide JPME with geographic locations can be found in Figure A-1 .) Nevertheless, for much of the Cold War era, despite the availability of joint courses at these colleges, there was a general lack of enthusiasm among military officers for joint education and joint assignments. In 1981, only 13% of officers assigned to the Office of the Joint Chiefs of Staff had attended the joint course at AFSC and only 25% of O-6s (Colonels or Navy Captains) had graduated from the National War College or ICAF. Some argued that joint commitments were detrimental to an officer's career, as they took them away from service-specific education and assignments that were seen as more valuable for promotion. Goldwater-Nichols Act: A New Framework for Joint Officer Management By the early 1980s, a number of unsuccessful joint military operations, including the aborted rescue of American hostages in Iran, had generated questions by many in Congress about DOD's capability to execute joint operations. On June 16, 1980, during a nomination hearing before the Senate Armed Services Committee, General David C. Jones addressed what he saw as the main impediments to building a joint culture within DOD. One issue area that he raised was the need to "have greater incentives for the best people to go into joint jobs." Jones's comments sparked a broader reform effort that eventually became the 1986 Goldwater-Nichols Department of Defense Reorganization Act (GNA). The GNA reorganized the Department of Defense and established the first formal requirements for the services to train and operate in a joint environment. Title IV of the GNA established a number of requirements, guidelines, and goals as part of a joint officer management framework. The goals of the GNA in terms of personnel management were threefold: improving the (1) quality, (2) experience, and (3) education of joint officers (see Table 1 ). Under this framework established by GNA, completion of specific requirements for JPME, along with joint experience gained through assignments from the joint duty assignment list (JDAL), could result in joint qualification and designation as a joint specialty officer (JSO). The connection between joint criteria and promotion potential was intended to incentivize officers to qualify as JSOs. The designation of an officer as a JSO signified proficiency in "joint matters." Goldwater-Nichols focused on the effective management of military officers who were "particularly trained in, and oriented toward, joint matters." While JPME curriculum was not specifically defined, the legislation did define "joint matters" as "matters relating to the integrated employment of land, sea, and air forces." JPME requirements are noted in two sections of the original legislation: Section 661 (Management policies for Joint Specialty Officers) required successful completion of a JPME program prior to an officer being nominated for joint qualification or being assigned to a joint duty position, with minor exceptions. Section 663 (Education) contained additional requirements specifically related to JPME. It required (1) attendance at a Capstone Course for all new generals and flag officers, (2) periodic review of the curriculum for the National Defense University and other JPME schools by the Secretary of Defense with advice and assistance from the Chairman of the Joint Chiefs of Staff (CJCS), and (3) review of service schools' curricula to strengthen the focus on joint matters and to ensure that graduates were adequately prepared for joint duty assignments. The "Skelton Panel" and Implementation of Goldwater-Nichols (1987-1990) On November 13, 1987, Representative Les Aspin, then-Chairman of the House Armed Services Committee, appointed a panel on military education with a mandate to review Department of Defense plans for implementing the joint professional military education requirements of the Goldwater-Nichols Act with a view toward assuring that this education provides the proper linkage between the service competent officer and the competent joint officer. The panel should also assess the ability of the current Department of Defense military education system to develop professional military strategists, joint warfighters and tacticians. Representative Ike Skelton chaired what became known as the Skelton Panel. Between 1987 and 1989, the Skelton Panel held 28 hearings with 48 witnesses and published its final report on April 21, 1989. The House Armed Services Committee held additional hearings on JPME from August 2, 1989, to September 26, 1990. The key recommendation of the Skelton Panel with regard to JPME was to "establish a two-phase Joint Specialist Officer (JSO) education process with Phase I taught in service colleges with a follow-on, temporary, Phase II taught at the Armed Forces Staff College (AFSC)." Congress integrated this recommendation into the FY1990-1991 NDAA as a statement of congressional policy. It urged the Secretary of Defense to establish a JPME framework and the legislation specifically noted that the curriculum at AFSC should emphasize multiple "hands on" exercises. These two phases of instruction were intended to be sequential but exceptions were permitted "for compelling cause." The FY1990-1991 NDAA further stipulated that the course of instruction at AFSC had to be a minimum of three months long. Evolution of JPME Since its inception, the joint education and qualification system has undergone a number of statutory changes. Updated rules designate the institutions eligible to provide JPME and allow some portions of JPME to be done via "distance learning." Other changes have strengthened the incentive system for attendance by offering accredited master's degrees and offering more flexibility in follow-on assignments to manage individual career paths and service-specific requirements. Roles of Military Schools (1994) The National Defense Authorization Act for Fiscal Year 1994 provided a congressional finding concerning the roles of military schools in providing professional military education (PME) and JPME. It stipulated that: (1) the primary mission of the professional military education schools of the Army, Navy, Air Force, and Marine Corps is to provide military officers with expertise in their particular warfare specialties and a broad and deep understanding of the major elements of their own service; (2) the primary mission of the joint professional military education schools is to provide military officers with expertise in the integrated employment of land, sea, and air forces, including matters relating to national security strategy, national military strategy, strategic planning and contingency planning, and command and control of combat operations under unified command; and (3) there is a continuing need to maintain professional military education schools for the Armed Forces and separate joint professional military education schools. Other sections of the FY1994 NDAA allowed the National Defense University to confer masters of science degrees in national security strategy and national resource strategy (Section 922), and provided more flexibility in assignment of officers following graduation from a JPME school by allowing some to serve in a joint duty assignment as their second (rather than first) assignment after graduation (Section 933). Building a Strategic Approach to JPME and Joint Officer Management (2001-2005) As DOD was nearing the 20 th anniversary of Goldwater-Nichols reform, some in DOD and Congress questioned whether the joint officer management system should evolve to reflect changes in doctrine and operations. The National Defense Authorization Act for Fiscal Year 2002 required DOD to initiate an independent study of Joint Officer Management (JOM) and Joint Professional Military Education (JPME) to assess the ability of the existing practice, policy, and law to meet the demands of the future. In terms of JPME, the study was required to: 1. review the sequencing of JPME and the first joint duty assignment; 2. assess the continuing utility of the requirement for use of officers in joint billets following JPME; 3. recommend initiatives to ensure JPME occurred before the first joint duty assignment; 4. recommend goals for attendance at the Joint Services Staff College (JFSC); 5. determine whether all JPME programs should remain "in-resident" or, if not, to identify any potential role for distributed learning in JPME; and 6. examine options for increasing the training capacity of JFSC. The consultancy firm Booz Allen Hamilton conducted the independent study. While it was underway, the Government Accountability Office (GAO) published a study of the impediments to full implementation of Goldwater-Nichols and recommended that DOD develop a strategic approach to the development of officers in joint matters. In 2003, the completed independent study indicated that practice, policy, and law regarding joint officer management and JPME should be updated to meet the demands of a new era. Following these studies, DOD asked the RAND Corporation to develop a strategic approach for reforming the joint officer management system. RAND found that while DOD had become increasingly "joint" there was still some resistance to the development of joint officers within DOD. RAND recommended a strategic human resource approach for identifying joint positions, linking them to joint education and experience, and better managing officer career paths to fill those positions. Following the recommendations from these studies, as well as concerns expressed by the House Armed Services Committee that DOD lacked a "coherent, comprehensive context," and an "overall vision for joint officer management and education," the Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005 required DOD to develop a strategic plan for joint officer management and JPME that would ensure that sufficient numbers of qualified officers would be available to serve in the joint environment. The Secretary of Defense was required to submit the plan to the Committees on Armed Services of the Senate and House not later than January 15, 2006. As part of the submission to Congress, DOD was required to identify and assess any problems associated with the linkage of promotion eligibility to completion of JPME, the viability of the use of incentives for those successfully completing JPME (such as awarding military decorations), the feasibility and utility of a written entrance examination as part of the selection criteria for admission to a JPME school, the effects of enrolling additional private-sector civilians at NDU on the educational experience, and the implications of providing joint specialty qualification to reserve component officers who have completed JPME statutory prerequisites. The FY2005 NDAA also established a new chapter in Title 10 United States Code entitled "Professional Military Education," to consolidate JPME. This chapter specified definitions relating to JPME, Capstone Course requirements, curriculum content for Phase II, and student and faculty ratios for Phase II institutions. The legislation also established a new, tiered approach to JPME with the sequencing of Phase I, Phase II and the Capstone Course, and required completion of Phase I before proceeding to Phase II after September 30, 2009. A New Joint Qualification System (2007) In response to the FY2005 NDAA requirements, DOD submitted its strategic plan to Congress on April 3, 2006. The plan emphasized the importance of joint experience as a pathway to joint qualification; however, it gave less attention to the connection between JPME and joint duty assignments. In the National Defense Authorization Act for Fiscal Year 2007, Congress significantly modified joint officer personnel policy by allowing DOD to establish different levels of joint qualification, as well as the criteria for qualification at each level.... Each level shall, as a minimum have both joint education criteria and joint experience criteria. The legislation also removed the requirement that officers complete JPME I and II prior to a joint duty assignment. In response, DOD published its implementation plan for the new Joint Qualification System (JQS) on March 30, 2007. This plan established four levels of qualification and provided dual tracks—a standard/education path and an experience path—for earning joint qualifications (see Table 2 ). Under DOD's new policy, joint experience points could be earned in non-JDAL assignments such as joint or interagency assignments. The FY2007 NDAA also allowed the Secretary of Defense to waive the requirement for JPME for officers below the grade of O-7 (brigadier general or rear admiral), but only if the officer has completed two full tours in a joint duty assignment and the types of joint duty experiences completed by the officer have been of sufficient breadth to prepare the officer for service as a general or flag officer in a joint duty assignment position. The legislation replaced the previous terminology of "a joint professional military education school" with "a school within the National Defense University" and clarified that NDU included only the National War College, the Industrial College of the Armed Forces, and the Joint Forces Staff College. Professional Military Education Two Decades after the Goldwater-Nichols Act (2010) In April 2010, the House Armed Services Committee, Subcommittee on Oversight and Investigations released a committee print reporting the findings of a review of Professional Military Education (PME) to include JPME. Key committee findings in relation to JPME were as follows: Due to the removal of the statutory requirement for JPME prior to serving in a joint duty assignment it was not clear whether JDAL positions were being filled with appropriately qualified officers. Amid increasing joint and service-specific staff duty requirements, a significant number of officers serving in JDAL positions were too junior to have completed JPME I prior to their joint assignment. Approximately one-third of officers who had completed JPME II prior to a joint assignment considered the course to have low preparatory value and, on average, the 10- or 12-week JPME II courses were given practically the same rating as the 10-month course in terms of usefulness. JPME I provides insufficient preparation for the competencies needed to serve in joint duty assignments. Completion of and demand for JPME appear to be more closely tied to promotion potential than to developing required competencies to serve in joint duty assignments. Competing demands over the course of an officer's career for training, education, and operational experience, make it difficult to manage joint education and assignment. The JPME model for developing joint officers focuses on building generalists and does not adequately address a requirement for specific joint competencies. There is a greater need for joint subject matter to be taught at the primary level. The National Defense Authorization Act for Fiscal Year 2011 did not include any reference to JPME; however, it included a provision with respect to joint officer management that expanded how joint assignments and experience could be determined. Section 521 revised the definition of joint matters to specify that "integrated military forces" includes more than one military department, or one military department and one or more of the following: other departments and agencies of the United States, military forces or agencies of other countries, and non-governmental persons or agencies. Changes to JPME in Recent Congresses In the past five years Congress has made minor changes to JPME. Section 552 of the National Defense Authorization Act for Fiscal Year 2012 authorized DOD to carry out a five-year pilot program for JPME II instruction on a nonresident basis at not more than two combatant commands. In response, DOD established a JPME course at the Joint Special Operations University (JSOU) at MacDill Air Force Base, Florida, which is home to both the U.S. Special Operations Command (USSOCOM) and the U.S. Central Command (USCENTCOM). JSOU was established as a satellite program of the JFSC. Section 552 of the FY2012 NDAA also authorized credit for completion of JPME I at the National Defense Intelligence College (now known as the National Intelligence University). The National Defense Authorization Act for Fiscal Year 2015 amended 10 U.S.C. §2154 to authorize senior level service courses of at least 10 months to meet the requirements of JPME II if designated and certified by the Secretary of Defense. Previous law required JPME to be taught in residence at the Joint Forces Staff College or senior level service schools. This legislation appears to provide more flexibility to DOD in how JPME II coursework is completed. Acquisition as a "Joint Matter" Over the past few years, Congress has been concerned with how to improve recruitment, retention, and career management for the acquisition workforce. By statute, Joint Specialty Officers are those that are "particularly trained in or oriented toward, joint matters." "Joint matters," by statute, are currently defined as: matters related to the achievement of unified action by multiple military forces in operations conducted across domains such as land, sea, or air, in space, or in the information environment, including matters relating to – National military strategy; Strategic planning and contingency planning; Command and control of operations under unified command; National security planning with other departments and agencies of the United States; and Combined operations with military forces of allied nations. Provisions in the Senate-passed FY2016 NDAA ( S. 1356 ) added acquisition matters to this list of "joint matters," thus extending joint duty credit for military personnel who serve in acquisition-related assignments. The act also includes provisions that would allow officers to pursue a dual career track with a primary specialty in combat arms with a functional sub-specialty in an acquisition field. In addition, the conferees encouraged the Secretary to ensure that the curriculum for Phase II joint professional military education includes matters in acquisition to ensure the successful performance in the acquisition or acquisition-related fields. Other Issues for Congressional Consideration While there have been few substantial changes to JPME in recent years, some within DOD and Congress have raised concerns about the state of joint education. Secretary of Defense Ashton Carter announced in December 2015 that the Department of Defense (DOD) would be launching a review of the department's structure and efficiency in the context of the GNA reforms. A DOD memorandum dated January 4, 2016, outlined the key questions that would be addressed in this review. With respect to the joint officer management system, DOD plans to consider, Do current law and policy governing joint duty qualifications provide the right human capital development to meet our joint warfighting requirements? Are there adjustments that can be made to balance the often competing demands of joint professional development and other specialized expertise or other career development considerations? A spokesman for DOD indicated that this review might result in internal policy changes and/or legislative proposals. Other questions that have been raised by those in the defense community include Questions about faculty and staff at institutions certified to provide JPME: Are faculty knowledgeable and do they have the appropriate qualifications? Is there an appropriate mix of civilian and military faculty? Is faculty compensation appropriate? Are the students-to-faculty and administrator-to-faculty ratios appropriate? Questions about the adequacy of JPME curricula in providing necessary knowledge and skills: Does the curriculum adequately deliver desired leader attributes? Should the curriculum be expanded? Does the curriculum provide the right mix of tactical v. technical skills needed to serve in joint billets? Questions about how JPME is delivered: What is the appropriate mix of students (e.g., military-civilian, branch of service, officer-enlisted, foreign military/civilians)? Can JPME be adequately provided in a non-resident setting? Is there adequate coordination between JPME-granting institutions? Could JPME credit be earned at additional degree-granting institutions (e.g., additional service schools or civilian institutions)? Questions about the role of JPME in terms of career management and officer development: What should the appropriate balance be between service-centric PME and JPME? Should completion of JPME continue to be tied to officer promotion? What should the JPME requirements be for Reserve Component (RC) members? What should the balance be between joint experience and joint education in terms of joint officer qualification? Do existing assignment policies allow for return-on-investment for JPME? Congress may consider these and other questions with regard to JPME and the joint officer management system as part of the GNA review and in future legislative initiatives. Additional JPME Information Acronyms

In November 2015, the Senate Armed Services Committee initiated a review of the Goldwater-Nichols Act (GNA). This piece of legislation, enacted in 1986 and amended in subsequent years, led to major reforms in defense organization. The year 2016 will mark the 30th anniversary of this landmark legislation, and lawmakers have expressed interest in whether the changes, as implemented, are achieving the goals of the reform, and whether further reforms are needed to achieve current and future national security goals. One of Congress's main goals of the legislation was to improve joint interoperability among the military services through a series of structural changes and incentives for participation in joint matters. Joint matters, by statute (10 U.S.C. §661), are currently defined as, …matters related to the achievement of unified action by multiple military forces in operations conducted across domains such as land, sea, or air, in space, or in the information environment… Modifications of the officer management system under the GNA reforms were intended to enhance the quality, experience, and education of joint officers. The law required, for the first time, that officers complete Joint Professional Military Education (JPME) in order to be eligible for certain joint assignments and promotion categories. Some have questioned the extent to which these statutory JPME requirements are achieving the goals of the reform and whether they should be amended or repealed. Others have questioned whether the JPME curriculum, method of delivery and instruction, course structure, and career timing are appropriate in the context of today's strategic environment and force structure needs. In parallel to congressional efforts, Secretary of Defense Ashton Carter announced in December 2015 that the Department of Defense (DOD) would be launching a review of the department's structure and efficiency in the context of the GNA reforms. A DOD memorandum dated January 4, 2016, outlined the key questions that would be addressed in this review. With respect to the joint officer management system, DOD plans to consider, Do current law and policy governing joint duty qualifications provide the right human capital development to meet our joint warfighting requirements? Are there adjustments that can be made to balance the often competing demands of joint professional development and other specialized expertise or other career development considerations? A spokesman for DOD indicated that this review might result in internal policy changes and/or legislative proposals. Any reforms to the military personnel management system might also be considered in conjunction with DOD's "Force of the Future" initiative, the first phase of which was launched by Secretary Carter on November 18, 2015. The purpose of this initiative is to improve the department's ability to recruit and retain the talent it needs to adapt to future mission requirements.

CRS_R43710

Introduction During the 113 th Congress, the Obama Administration announced that certain federal agencies would not enforce specific aspects of the Affordable Care Act (ACA) for a period of time in order to allow the public to further prepare for proper compliance with the law in the future. This has led to numerous questions regarding how courts treat administrative delays of regulatory programs. This report will discuss the general legal principles applicable to judicial review of administrative delays in two different contexts: (1) delays in meeting a specific statutory deadline for implementing rules or completing particular adjudications, and (2) delays in the enforcement of a provision of law on the public at large. The report will then address whether the procedures outlined in the Administrative Procedure Act (APA) apply to these delays. The first type of agency delay—delays in meeting a specific statutory deadline for implementing rules or completing particular adjudications—arises when Congress has enacted a statute that expressly requires an agency to take a specific action by a specific date. For example, the ACA includes a number of mandatory rulemaking provisions that require agencies to issue certain substantive rules by certain dates. An agency's failure to meet this type of statutory deadline is generally assessed pursuant to a multi-factor balancing test established in Telecommunications Research & Action Center v. FCC , discussed further below. The second type of delay occurs when an agency delays the enforcement of a statutory prohibition or requirement that Congress has imposed on third parties. An agency generally implements this delay by announcing that, as an enforcement policy, the agency will not pursue or punish non-compliance with the law for a certain period of time. The underlying law takes legal effect and conduct in violation of that law remains unlawful, but the agency—in an exercise of its enforcement discretion—does not take action in response to violations of the provision until after a certain date. For example, although a provision in the ACA requiring that health plans meet certain minimum coverage requirements became effective in January 2014, the Center for Medicaid Services has announced that it will not enforce these requirements for certain plans for at least one year. This type of enforcement delay would generally be assessed, if at all, pursuant to standards established for determining whether non-enforcement decisions are "committed to agency discretion by law" under the APA. Given this framework, it would appear that the context in which an agency delay arises may alter the manner in which the court evaluates the delay. We now turn to the question of the legal standards to be applied in the two identified scenarios: where an agency delay has resulted in the failure to meet a statutory deadline, and where an agency is relying on enforcement discretion to delay the enforcement of a duly enacted law. Legal Standards and Limitations Applied to Administrative Delays Statutory Deadlines7 The APA does not provide concrete time limits for agency action—instead, it leaves most deadlines for Congress to establish, if at all, in the particular agency's enabling statute. Even absent a specific deadline, however, the APA states that an agency must "proceed to conclude a matter presented to it ... within a reasonable time." Further, Section 706 of the APA states that courts shall "compel agency action unlawfully withheld or unreasonably delayed." As such, the APA provides individuals with a cause of action when an agency takes an unreasonable amount of time to act. However, a claim of unreasonable delay can only be brought against an agency for actions that the agency is legally obligated to take. The Supreme Court has stated that "a claim under § 706(1) [of the APA] can proceed only when a plaintiff asserts that an agency failed to take a discrete agency action that it is required to take." If the decision to act is "committed to agency discretion by law," then no claim can be made against the agency for failing to take such an action. In other words, an agency must be required to act by law in order to establish a claim that the agency has unreasonably delayed in acting. Cases involving claims that an agency has unreasonably delayed taking required actions are typically brought when an agency has failed to meet a statutorily mandated deadline. For example, if Congress requires an agency to promulgate rules by a certain date, or to complete adjudications within a specified period of time, a claimant may file suit against the agency for unreasonable delay if the statutory deadline has passed. Although courts generally are more willing to compel an agency to act if it has missed a statutory deadline, they will not necessarily do so. Instead, courts will often undertake a balancing test to determine whether the court should force the agency to act. The balancing test commonly used by most federal courts is referred to as the TRAC factor test, after the case in which the test was first established, Telecommunications Research & Action Center v. FCC (" TRAC "). Under such an analysis, a court will assess whether Congress has established any indication for how quickly the agency should proceed; determine whether a danger to human health is implicated by the delay; consider the agency's competing priorities; evaluate the interests prejudiced by the delay; and determine whether the agency has treated any party less favorably than others. A court balances these TRAC factors on a case-by-case basis to determine whether agency action should be compelled. It can be difficult to predict which way a court will decide any particular case as "[t]here is no per se rule as to how long is too long to wait for agency action." Courts will often take a missed deadline into heavy consideration, but, generally, will still evaluate the remaining factors when determining the outcome of the case. If Congress is not satisfied with relying on judicial enforcement of statutory deadlines, Congress may insert "hammer" provisions into the text of certain statutes. These provisions dictate what is to happen if a regulatory deadline is missed. The consequences for missing a deadline vary. Some laws establish a regulatory scheme that will be put in place if an agency misses a deadline, while others mandate that the agency's proposed rule will go into effect if a final rule is not promulgated by the deadline. Finally, at least one law has withheld funding from an agency until certain rules are promulgated. Although these provisions can force an agency to act quickly, they can also be challenging for Congress to establish due to the extensive time that is often required to develop an effective regulatory scheme. In addition to these hammer provisions, Congress may always use political pressure, congressional hearings, and the appropriations process to influence agencies to act with more urgency. These types of administrative delay are relatively common as agencies may encounter difficulties in meeting statutory deadlines. However, they differ fundamentally from situations where agencies use "administrative enforcement discretion" when deciding whether to enforce a statute or regulatory scheme. Enforcement Discretion When an agency decides not to enforce a statute against regulated parties for a certain period of time, courts are likely to review this as an act of enforcement discretion. Federal agencies generally have flexibility in determining whether and when to initiate an enforcement action against a third party for violations of a law the agency is charged with administering. This freedom in setting enforcement priorities, allocating resources, and making specific strategic enforcement decisions is commonly described as "administrative enforcement discretion" and arises principally from a combination of the President's constitutionally assigned obligation to "take care that the laws be faithfully executed," and the APA's command that courts avoid reviewing discretionary agency decisions. Discretionary enforcement activities may include any range of actions, including, but not limited to, the imposition of penalties or the initiation of an agency investigation, prosecution, adjudication, lawsuit, or audit. In situations where an agency refrains from bringing an enforcement action, courts have historically been cautious in reviewing the agency determination—generally holding that such non-enforcement decisions are "committed to agency discretion" and therefore not subject to judicial review under the APA. The seminal case on this topic is Heckler v. Cha ney , a Supreme Court case in which death row inmates challenged the Food and Drug Administration's refusal to initiate an enforcement action to block the use of certain drugs in lethal injection. In rejecting the challenge, the Supreme Court held that "an agency's decision not to prosecute or enforce ... is a decision generally committed to an agency's absolute discretion." The Court noted that agency enforcement decisions involve a "complicated balancing of a number of factors which are peculiarly within [the agency's] expertise," including whether agency resources are best spent on this violation or another, whether the agency is likely to succeed if it acts, whether the particular enforcement action requested best fits the agency's overall policies, and, indeed, whether the agency has enough resources to undertake the action at all. An agency generally cannot act against each technical violation of the statute it is charged with enforcing. Agencies, the court reasoned, are "far better equipped" to evaluate "the many variables involved in the proper ordering of its priorities" than are the courts. Consistent with this deferential view, the Heckler opinion proceeded to establish the standard for the reviewability of agency non-enforcement decisions, holding that an "agency's decision not to take enforcement action should be presumed immune from judicial review ." However, the Court also clearly indicated that the presumption against judicial review of agency non-enforcement decisions may be overcome in certain situations. The Heckler Court suggested that a court may review an agency enforcement determination "where the substantive statute has provided guidelines for the agency to follow in exercising its enforcement powers." Additionally, the Court suggested that judicial review of non-enforcement may be appropriate when an agency has "consciously and expressly adopted a general policy that is so extreme as to amount to an abdication of its statutory responsibilities." However, lower federal courts have only rarely had the opportunity to clarify these exceptions to Heckle r's presumption of non-reviewability. It should be noted that dismissal of a challenge to an agency non-enforcement decision under the APA is not necessarily recognition by the court that the agency was acting within its authority. A legal distinction must be made between a decision in which a court reviews the merits of a challenge and approves of the agency action or inaction, and one in which a court dismisses the challenge for lack of jurisdiction before reviewing the merits. Although, as a practical matter, either decision results in the same outcome (i.e., the continuation of the agency decision), it would be inappropriate to state that a court that has dismissed a claim against an agency for lack of jurisdiction has accorded legal approval to the agency action or inaction. Statutory Guidelines The Heckler opinion specifically recognized Congress's authority to curtail an agency's ability to exercise enforcement discretion "either by setting substantive priorities, or by otherwise circumscribing an agency's power to discriminate among issues or cases it will pursue." Congress may, for instance, choose to remove an agency's discretion by indicating "an intent to circumscribe agency enforcement discretion" and "provid[ing] meaningful standards for defining the limits of that discretion." In this manner, Congress essentially overrides the inherent discretion possessed by the agencies in the enforcement of federal law and provides a reviewing court with a standard upon which to review the agency inaction. Although the exercise of agency discretion may therefore be influenced by congressional controls, it would appear that Congress's intent to curtail the agency enforcement discretion must be made explicit, as courts are hesitant to imply such limitations. In applying this standard, the Heckler Court held that the Food Drug and Cosmetic Act (FDCA) had not curtailed the FDA's discretion in a manner sufficient to allow the Court to review the agency's non-enforcement determination. The FDCA provided only that the Secretary was "authorized to conduct examinations and investigations" and not that he was required to do so. Moreover, the Court determined that the FDCA's requirement that any person who violates the act "shall be imprisoned ... or fined" could not be read to mandate that the FDA initiate an enforcement action in response to every violation. The FDCA's prohibition on certain conduct, although framed in mandatory terms, was insufficient to permit review of non-enforcement absent additional language delineating how and when the agency was to respond to violations. "The Act's enforcement provisions," held the Court, "thus commit complete discretion to the Secretary to decide how and when they should be exercised." However, in a pre- Heckler case, Dunlop v. Bachowski , the Court found that a statute had removed agency discretion with regard to its enforcement in a particular circumstance. In Dunlop , a union member challenged the Secretary of Labor's refusal to bring an enforcement action to set aside a union election. The Labor-Management Reporting and Disclosure Act (L-MRDA) provides that upon the filing of a complaint, "[t]he Secretary shall investigate such complaint and, if he finds probable cause to believe that a violation ... has occurred ... he shall ... bring a civil action." The Court rejected the agency's argument that the Secretary's determination of whether to bring a civil action was an unreviewable exercise of administrative discretion. In doing so, the Court cited approvingly to the appellate court's conclusion that [T]he factors to be considered by the Secretary, however, are more limited and clearly defined: § 482(b) of the L-MRDA provides that after investigating a complaint, he must determine whether there is probable cause to believe that violations of § 481 have occurred affecting the outcome of the election. Where a complaint is meritorious ... the language and purpose of § 402(b) indicate that Congress intended the Secretary to file suit. Thus, [] the Secretary's decision whether to bring suit depends on a rather straightforward factual determination, and we see nothing in the nature of that task that places the Secretary's decision "beyond the judicial capacity to supervise. In Heckler , the Supreme Court confirmed the continued validity of the Dunlop decision, but distinguished the two decisions, holding that unlike the FDCA, the L-MRDA "quite clearly withdrew discretion from the agency and provided guidelines for exercise of its enforcement power." As discussed above, the language held to override the presumption against review of agency non-enforcement in Dunlop contained an express trigger for when enforcement was to take place. Federal statutes that do not contain language defining how and when the agency is to exercise its enforcement discretion, even when framed in mandatory terms, generally have not been held to override agency enforcement discretion. For example, a congressional command that an agency "shall enforce" a particular statute, without additional guidelines as to the circumstances under which enforcement is to occur, is generally insufficient to permit review of a non-enforcement decision. The Heckler court suggested as much, noting that it could not "attribute such a sweeping meaning" to language that was commonly found in criminal provisions. Abdication of Statutory Responsibilities In Heckler , the Supreme Court also suggested that the presumption against the review of non-enforcement may be overcome if the agency has "'consciously and expressly adopted a general policy' that is so extreme as to amount to an abdication of its statutory responsibilities." The Court, however, was non-committal as to whether such an agency policy would in fact be reviewable, stating only that "[a]lthough we express no opinion on whether such decisions would be unreviewable under [the APA], we note that in those situations the statute conferring authority on the agency might indicate that such decisions were not "committed to agency discretion." In raising the "statutory abdication" argument, the Court cited to Adams v. Richardson , a decision from the United States Court of Appeals for the D.C. Circuit (D.C. Circuit). Adams involved a challenge to the Secretary of Health, Education, and Welfare's (HEW's) failure to enforce Title VI of the Civil Rights Act of 1964 (Title VI). The law in question "authorizes and directs" federal agencies to ensure that federal financial assistance is not provided to segregated educational institutions. The Secretary asserted that the law provided federal agencies with "absolute discretion" with respect to whether to take action to cut off funding. The court disagreed, holding—in language characteristic of the "statutory guidelines" exception—that "Title VI not only requires the agency to enforce the Act, but also sets forth specific enforcement procedures." The court appeared to give great weight to the scope of the Secretary's non-enforcement, noting, "More significantly, this suit is not brought to challenge HEW's decisions with regard to a few school districts in the course of a generally effective enforcement program. To the contrary, appellants allege that HEW has consciously and expressly adopted a general policy which is in effect an abdication of its statutory duty." The court determined that HEW had consistently and unsuccessfully relied on voluntary compliance as a means of enforcing Title VI without resorting to the more formal and effective enforcement procedures available to the agency. This "consistent failure" was a "dereliction of duty reviewable in the courts." Given the sparse case law associated with this exception, it is difficult to assess what level of non-enforcement constitutes an abdication of statutory responsibilities. It seems that if an agency announced that it would no longer enforce a provision of law against any individual at any time, regardless of the nature of the violation, a court could be willing to review the policy. Whether more limited non-enforcement policies—for instance if an agency announced that it will not enforce a particular provision against a particular group or that it will delay enforcement of a particular provision for a specified period of time—could also be subject to review would appear to be less clear. For example, in Schering Corp. v. Heckler , the D.C. Circuit held that the FDA decision not to pursue an enforcement action against a drug manufacturer for a specific period of time fell "squarely within the confines of [ Heckler ]" and was therefore not reviewable. It is clear, however, that announced agency policies of widespread non-enforcement are much more likely to satisfy the "statutory abdication" standard than more traditional, case-by-case, enforcement decisions. Indeed, in Crowley Caribbean Transportation v . Pena , the D.C. Circuit made a clear distinction between "single-shot non-enforcement decisions" on one hand, and "an agency's statement of a general enforcement policy" on the other. The court determined that an agency's "general enforcement policy" was reviewable where the agency had (1) "expressed the policy as a formal regulation"; (2) "articulated [the policy] in some form of universal policy statement"; or (3) otherwise "[laid] out a general policy delineating the boundary between enforcement and non-enforcement" that "purport[s] to speak to a broad class of parties." The court articulated its reasons for finding review of general enforcement policies to be appropriate as follows: By definition, expressions of broad enforcement policies are abstracted from the particular combinations of facts the agency would encounter in individual enforcement proceedings. As general statements, they are more likely to be direct interpretations of the commands of the substantive statute rather than the sort of mingled assessments of fact, policy, and law that drive an individual enforcement decision and that are, as Chaney recognizes, peculiarly within the agency's expertise and discretion. Second, an agency's pronouncement of a broad policy against enforcement poses special risks that it "has consciously and expressly adopted a general policy that is so extreme as to amount to an abdication of its statutory responsibilities," a situation in which the normal presumption of non-reviewability may be inappropriate. Finally, an agency will generally present a clearer (and more easily reviewable) statement of its reasons for acting when formally articulating a broadly applicable enforcement policy, whereas such statements in the context of individual decisions to forego enforcement tend to be cursory, ad hoc, or post hoc. Procedural Requirements for Implementing a Delay Whether an agency must follow notice and comment rulemaking procedures when it declares its intent to delay enforcement of certain provisions of a statute depends on whether the declaration is considered a "rule" for the purposes of Section 553 of the APA. Only "legislative rules" are subject to the informal rulemaking procedures outlined in the APA; an agency may promulgate guidance documents and interpretive rules without having to undergo notice and comment procedures. A party may challenge an agency's characterization of any action and argue that a particular statement should have been issued pursuant to notice and comment procedures. However, courts sometimes have difficulty differentiating between general statements of policy, such as guidance documents, and legislative rules. Courts have described a legislative rule to be a rule through which an agency "intends to create a new law, rights or duties," or a rule that is "issued by an agency pursuant to statutory authority and which implement[s] the statute." Similarly, one court explained that a rule is legislative if "in the absence of the rule there would not be an adequate legislative basis for enforcement action or other agency action to confer benefits or ensure the performance of duties." Notably, courts distinguish legislative rules from guidance documents because they have a binding effect: "[I]f a statement has a present-day binding effect, it is legislative." Guidance documents, which are not defined by the APA, generally are considered to be a particular type of agency rule, known as a "general statement of policy." The APA provides that an agency may issue these general statements of policy without having to undergo notice and comment rulemaking procedures. According to the Office of Management and Budget's (OMB's) Final Bulletin on Agency Good Guidance Practices, the term "guidance document" is defined as "an agency statement of general applicability and future effect, other than a regulatory action … that sets forth a policy on a statutory, regulatory or technical issue or an interpretation of a statutory or regulatory issue." Similarly, the Supreme Court has defined the term "general statement of policy" to be a statement "issued by an agency to advise the public prospectively of the manner in which the agency proposes to exercise a discretionary power." Therefore, guidance documents do not create new legal obligations on the public, but, instead, inform the public on how an agency intends to carry out certain agency functions. One court notes that a statement cannot be characterized as a guidance document, and is instead a legislative rule, if the pronouncement "narrowly limits administrative discretion or establishes a binding norm." Although it can be difficult to ascertain whether a court would characterize an agency statement delaying enforcement actions as a guidance document or a legislative rule, the following examples of such agency statements may provide some guidance on this issue. Exercising Enforcement Discretion It appears that, at least in some circumstances, a statement addressing agency enforcement priorities could qualify as a guidance document. When an agency declares that it will only enforce a particular law at a certain time or under certain circumstances, it is not imposing a new legal obligation on the public. In fact, the underlying legal obligation technically remains in effect. Instead, the agency has simply informed the public that it will not seek to enforce the provisions of the statute in the enumerated situations. As addressed in Heckler , it seems the agency could be viewed as exercising administrative discretion when it determines that enforcement of the law in a particular situation should not proceed. Because an agency's decision to enforce a statute in a given situation is discretionary, an agency's announcement of its enforcement policy would appear to qualify as a guidance document under the Supreme Court's decision in Lincoln v. Vigil , which describes a general statement of policy as a statement "issued by an agency to advise the public prospectively of the manner in which the agency proposes to exercise a discretionary power." Further, because such a declaration would not appear to impose any new legal obligations on the public, it would seem that a court could determine that such a statement would not require notice and comment procedures prior to promulgation. For example, on July 3, 2013, the Internal Revenue Service (IRS) issued Notice 2013-45 (Notice), stating that the IRS would not enforce the "employer mandate" of the ACA during 2014 in order to allow for "additional time for input from employers" on how the law can be effectively implemented. The Notice further encourages employers to "voluntarily comply with the information reporting provisions." The IRS promulgated the Notice without undergoing notice and comment rulemaking procedures. However, the IRS does not appear to impose a new legal obligation on any parties, but, rather, the IRS seems to notify the public of its intent to not enforce these provisions against employers during 2014. A court would likely find that such a statement is a guidance document, because it merely notifies the public on how the agency plans to perform a discretionary function—enforcement discretion. However, in other circumstances, an agency's declaration of a delay or enforcement policy could require notice and comment procedures. In February 2014, the IRS announced final regulations implementing the employer mandate from the Affordable Care Act. In those regulations, the IRS provided for "transition relief" from the employer mandate tax for certain employers—that is, qualifying employers would not have to pay the tax. In order to be eligible for transition relief, employers must certify that they have met certain requirements established by the agency. Here, because the IRS is requiring employers to conduct a specific activity in order to be eligible for the transition relief—that is, provide certification—the transition relief is imposing a legal obligation on a party in order to qualify for a specific form of tax treatment. It would appear that an agency taking this approach to delaying a statutory provision would have to use informal rulemaking procedures because the agency would impose a legal obligation on a party, who wanted to benefit from the delay. Missing Statutory Deadlines Under the other form of agency delay—that is, where an agency fails to take a discrete action by a statutory deadline—no rulemaking is required. Often the agency has simply not been able to accomplish the required action within the time provided by Congress. In this type of situation, the agency has not taken any action; therefore, no rulemaking procedures are required. However, as mentioned above, an agency may be subject to a suit by a party seeking to compel the agency to take action.

Congress regularly authorizes and requires administrative agencies to implement and enforce regulatory programs. As such, agencies routinely make decisions about when to promulgate regulations and when to enforce statutory requirements against parties who violate the law. During the 113th Congress, the Obama Administration announced that certain federal agencies would not enforce specific aspects of the Affordable Care Act (ACA) for a period of time in order to allow the public to further prepare for proper compliance with the law in the future. This has led to numerous questions regarding how courts treat administrative delays of regulatory programs. When can a suit be brought to force the agency to apply the law? It is important to distinguish between two distinct types of agency delays: (1) delays resulting from when an agency fails to meet a statutory deadline for promulgating rules or completing particular adjudications, and (2) affirmative decisions to withhold enforcement of a provision of law on the public at large. The former arises in a scenario in which Congress has enacted a statute that expressly requires an agency to take a specific action by a certain date that the agency fails to meet. Because agencies can often struggle to meet tight congressional deadlines imposed by laws, courts have established a balancing test, known as the TRAC test, to determine whether the agency should be compelled to take action. The second type of delay occurs in a scenario in which an agency refuses, for a period of time, to enforce a statutory prohibition or requirement that Congress has imposed on third parties. This type of delay is generally implemented by announcing a period of non-enforcement during which the agency will not pursue or punish non-compliance with the law. Courts determine whether these delays are reviewable in court by following the Supreme Court's holding in Heckler v. Chaney. This report will discuss the general legal principles applied in determining whether administrative delays are reviewable in court in these two different contexts and then address whether the procedures outlined in the Administrative Procedure Act (APA) are applicable to these delays.

CRS_RL32776

Introduction and Issue for Congress Some observers have proposed procuring Navy ships using funding approaches other than the traditional full funding approach that has been used to procure most Navy ships since the 1950s. These alternative funding approaches include incremental funding, which has been used to fund a few Navy ships in recent years, and advance appropriations, which has not been used for Navy ship procurement. Supporters of these alternative funding approaches believe they could increase stability in Navy shipbuilding plans and perhaps increase the number of Navy ships that could be built for a given total amount of ship-procurement funding. The issue for Congress is whether to maintain current practices for funding Navy ship procurement or change them by, for example, increasing the use of incremental funding or starting to use advance appropriations. Congress's decision on this issue could be significant because the full funding policy relates to Congress's power of the purse and its responsibility for conducting oversight of Department of Defense (DOD) programs. Consequently, the issue can be alternately expressed as how to procure Navy ships economically while maintaining key congressional prerogatives. Congress's decision on ship funding approaches could also affect future Navy capabilities, annual Navy funding requirements, and the shipbuilding industrial base. Portions of this report are adapted from another CRS report that discusses the full funding policy in DOD procurement generally. Background Full Funding Policy General Description Most Navy ships procured since the late 1950s have been funded in accordance with the full funding policy. Before then, many Navy ships were procured with incremental funding, which is discussed in the next section. For DOD procurement programs, the full funding policy requires the entire procurement cost of a usable end item (such as a Navy ship) to be funded in the year in which the item is procured. The policy applies not just to Navy ships, but to all weapons and equipment that DOD procures through the procurement title of the annual DOD appropriations act. In general, the full funding policy means that DOD cannot contract for the construction of a new weapon or piece of equipment until funding for the entire cost of that item has been approved by Congress. Sufficient funding must be available for a complete, usable end item before a contract can be let for the construction of that item. Under traditional full funding, no portion of a usable end item's procurement cost is funded in a year after the year in which the item is procured. Congress imposed the full funding policy on DOD in the 1950s to make the total procurement costs of DOD weapons and equipment more visible and thereby enhance Congress's ability to understand and track these costs. Congress's intent in imposing the policy was to strengthen discipline in DOD budgeting and improve Congress's ability to control DOD spending and carry out its oversight of DOD activities. Understanding total costs and how previously appropriated funds are used are key components of Congress's oversight capability. The full funding policy is consistent with two basic laws regarding government expenditures—the Antideficiency Act of 1870, as amended, and the Adequacy of Appropriations Act of 1861. Regulations governing the full funding policy are found in Office of Management and Budget (OMB) Circular A-11 and DOD Directive 7000.14-R, which provide guidelines on budget formulation. OMB Circular A-11 states, among other things, that Good budgeting requires that appropriations for the full costs of asset acquisition be enacted in advance to help ensure that all costs and benefits are fully taken into account at the time decisions are made to provide resources. Full funding with regular appropriations in the budget year also leads to tradeoffs within the budget year with spending for other capital assets and with spending for purposes other than capital assets. Full funding increases the opportunity to use performance-based fixed price contracts, allows for more efficient work planning and management of the capital project (or investment), and increases the accountability for the achievement of the baseline goals. When full funding is not followed and capital projects (or investments) or useful segments are funded in increments, without certainty if or when future funding will be available, the result is sometimes poor planning, acquisition of assets not fully justified, higher acquisition costs, cancellation of major investments, the loss of sunk costs, or inadequate funding to maintain and operate the assets. Support for the full funding policy has been periodically reaffirmed over the years by Congress, the Government Accountability Office (GAO), and DOD. Advance Procurement (AP) Payments Under Full Funding The executive branch regulations that implement the full funding policy for DOD procurement programs permit two circumstances under which advance procurement (AP) "down payments" on a usable end item can be provided in one or more years prior to the item's year of procurement: AP funding may be used to pay for long-lead items—components of a usable end item that have long manufacturing lead times—if needed to ensure that these items will be ready for installation into the end item at the appropriate point in the end item's construction process. AP funding may also be used to pay for economic order quantity (EOQ) procurement of a set of long-lead items for a set of weapons being acquired under a multiyear procurement (MYP) arrangement. Each of these is discussed below. AP Payments for Long-Lead Items Long-lead items are often manufactured not at the end item's final assembly facility (such as a shipyard) but at separate supplier firms. In Navy shipbuilding, AP payments have most commonly been used to pay for nuclear-propulsion components of nuclear-powered aircraft carriers and submarines. Congress in recent years has occasionally approved AP funding for conventionally powered Navy ships, such as destroyers and amphibious ships, for which the Navy did not request any AP funding for long-lead items. Congress in recent years has also occasionally approved AP funding for "advance construction" work on certain ships, which apparently refers to early shipyard activities for building the basic structure of a ship, as opposed to manufacturing long-lead components to be installed into the ship. The use of AP funding for shipyard advance construction activities is not recognized in executive branch budget regulations on the full funding policy, at least not in the same way as these regulations recognize the use of AP funding for long-lead components. Congressional decisions to approve AP funding for ships for which the Navy did not request such funding, or for shipyard advance construction activities, could be aimed at one or more of the following goals: generating shipyard construction work (and thus shipyard revenues and jobs) on a particular ship in a year prior to that ship's year of procurement; creating an early financial commitment to procuring a ship that is planned for procurement in a future year, which can enhance job security for construction workers at the yard that would build the ship; reducing the total construction cost of a ship through improved sequencing or year-to-year balancing of shipyard construction work; and reducing the portion of a ship's cost to be funded in the year of procurement. AP Payments for EOQ under Multiyear Procurement Most DOD procurement programs use annual contracting, under which DOD lets one or more contracts for each year's worth of procurement of a given item. Multiyear procurement is a special contracting authority, approved by Congress on a program-by-program basis, that permits DOD to use a single contract to procure a set of end items that are scheduled to be procured across a series of up to five fiscal years (i.e., the budget year in question, plus up to four future years). An MYP arrangement approved for the Navy's F/A-18E/F strike-fighter program, for example, permitted the Navy to use a single contract for a total of 198 to 224 F/A-18E/Fs procured during the five-year period FY2000-FY2004. Congress over the years has granted MYP authority for a relatively small number of procurement programs. The law governing MYP arrangements is set forth in 10 U.S.C. § 2306b. This provision permits AP funding to be used to finance, at the outset of an MYP arrangement, the procurement of long-lead components for all of the end items to be procured under the MYP arrangement. The MYP arrangement to procure a total of five Virginia (SSN-774) class nuclear-powered attack submarines over the five-year period FY2004-FY2008, for example permits the Navy to procure, in the first years of the arrangement, five sets of long-lead nuclear-propulsion components. This up-front batch procurement of long-lead items is called an economic order quantity (EOQ) because it procures (i.e., places an order for) these items in the form of a batch that can be manufactured in an efficient (i.e., economic) manner. "One Decision for One Pot of Money" Although some DOD weapons and equipment are procured with AP funding provided in prior years, most DOD procurement items are funded through a single decision by Congress to provide the entire cost of the item in the item's year of procurement. For this reason, the full funding policy for DOD procurement programs can be described in simplified terms as "one decision for one pot of money." Incremental Funding General Description In spite of the existence of the full funding policy, a few Navy and DOD ships have been procured in recent years, are currently being procured, or are proposed to be procured, with incremental funding. Examples include DOD sealift ships, the attack submarine SSN-23, the amphibious assault ships LHD-6, LHD-8, and LHA-6, the first two DDG-1000 (formerly DD(X)) destroyers, and the aircraft carrier CVN-78. The DOD sealift ships were procured through the National Defense Sealift Fund (NDSF), a DOD revolving and management fund that is outside the procurement title of the DOD appropriations act and therefore not subject to the full funding policy in the same way as DOD procurement programs funded through the procurement title. LHD-8 was incrementally funded by explicit legislative direction. SSN-23, LHD-6, LHA-6, the first two DDG-1000s, and CVN-78 amount to cases of de facto incremental funding. (For additional information on these ships, see Appendix C of this report.) These ships constitute recent exceptions to the use of full funding in the procurement of Navy ships. Prior to the imposition of the full funding policy in the 1950s, however, much of DOD weapon procurement was accomplished through incremental funding. Under incremental funding, a weapon's cost is divided into two or more annual portions, or increments, that can reflect the need to make annual progress payments to the contractor as the weapon is built. Congress then approves each year's increment as part of its action on that year's budget. Under incremental funding, DOD can contract for the construction of a weapon after Congress approves only the initial increment of its cost, and completion of the weapon is dependent on the approval of the remaining increments in future years by that Congress or future Congresses. A key feature of incremental funding is that a portion of the ship's cost is provided in one or more years beyond the item's year of procurement. "Multiple Decisions for Multiple Pots of Money" Since incremental funding divides the procurement cost of an end item into two or more annual increments, and since Congress typically approves one of these increments each year, incremental funding can be described in simplified terms as "multiple decisions for multiple pots of money." Advantages and Disadvantages Potential Advantages Supporters of incremental funding could argue that, compared to full funding, using incremental funding in DOD procurement can be advantageous because it can do one or more of the following: permit very expensive items, such as large Navy ships, to be procured in a given year while avoiding or mitigating budget "spikes" (i.e., lumps) that could require displacing other programs from that year's budget, which can increase the costs of the displaced programs due to uneconomic program-disruption start-up and start costs; avoid a potential bias against the procurement of very expensive items that might result from use of full funding due to the item's large up-front procurement cost (which appears in the budget) overshadowing the item's long-term benefits (which do not appear in the budget) or its lower life cycle operation and support (O&S) costs compared to alternatives with lower up-front procurement costs; permit construction to start on a larger number of items in a given year within that year's amount of funding, so as to achieve better production economies of that item than would have been possible under full funding; recognize that certain DOD procurement programs, particularly those incorporating significant amounts of advanced technology, bear some resemblance to research and development activities (which can be funded in increments), even though they are intended to produce usable end items; reduce the amount of unobligated balances associated with DOD procurement programs; implicitly recognize potential limits on DOD's ability to accurately predict the total procurement cost of items, such as ships, that take several years to build; and preserve flexibility for future Congresses to stop "throwing good money after bad" by halting funding for the procurement of an item under construction that has become unnecessary or inappropriate due to unanticipated shifts in U.S. strategy or the international security environment. Potential Disadvantages In spite of its potential advantages, Congress replaced incremental funding with the full funding policy in the 1950s, and has periodically reaffirmed the full funding policy since then, on the grounds that incremental funding did (or could do) one or more of the following: make the total procurement costs of weapons and equipment less visible to Congress and more difficult for Congress to understand and track; permit one Congress to "tie the hands" of one or more future Congresses—a kind of action that Congress traditionally tries to avoid—by providing initial procurement funding for a weapon whose cost would have to be largely funded by one or more future Congresses; create a potential for DOD to start procurement of an item without necessarily understanding its total cost, stating that total cost to Congress, or providing fully for that total cost in future DOD budgets—the so-called "camel's-nose-under-the-tent" issue; and increase weapon procurement costs by exposing weapons under construction to potential uneconomic start-up and stop costs that can occur when budget reductions or other unexpected developments cause one or more of the planned increments to be reduced or deferred. Split Funding In FY2007 and FY2008 Budget Submissions Split funding is a two-year form of incremental funding. Under split funding, a weapon's procurement cost is divided into two portions, one of which is funded in the item's year of procurement, the other the following year. The Navy in its FY2007 and FY2008 budget submissions proposed to procure LHA-6 and the first two DDG-1000s using split funding in FY2007 and FY2008, and to procure CVN-78 using split funding in FY2008-FY2009. Earlier Navy Proposal for Funding Lead Ships As part of its proposed FY2005 budget and FY2005-FY2009 Future Years Defense Plan (FYDP), the Navy in 2004 proposed funding the procurement of the lead DDG-1000 destroyer and the lead Littoral Combat Ship (LCS) program in the Navy's research and development (R&D) account rather than the Navy's ship-procurement account, which is known formally as the Shipbuilding and Conversion, Navy (SCN) account. Funding the procurement of lead ships through the R&D account would permit them to be incrementally funded without violating the full funding policy. Congress, in acting on the Navy's proposed FY2005 and FY2006 defense budgets, rejected the Navy's proposal to procure the lead DDG-1000 through the Navy's research and development account, directed the Navy to fully fund the lead DDG-1000 in the Navy's ship-procurement account, and fully funded the two lead LCSs in the Navy's research and development account. Advance Appropriations General Description Advance appropriations have not been used in Navy ship procurement, but have been used by other executive branch agencies to fund various programs. Advance appropriations is an alternate form of full funding that is permitted under executive branch budget regulations. As a funding approach, it can be viewed as lying somewhere between traditional full funding and incremental funding. Advance appropriations is not to be confused with advance procurement (AP) funding that can occur under traditional full funding. Under advance appropriations, as under traditional full funding, Congress makes a one-time decision to fund the entire procurement cost of an end item. That cost, however, can then be divided into two or more annual increments, as under incremental funding, that are assigned to (in budget terminology, "scored in") two or more fiscal years. In contrast to incremental funding, under which Congress must take a positive action each year to approve each year's funding increment, under advance appropriations, Congress, following its initial decision to fund the item, would need to take a positive action to cancel or modify an annual funding increment in a future-year budget. In this sense, advance appropriations can be thought of as a legislatively locked in form of incremental funding: the future-year funding increments will occur unless Congress takes action to stop them. OMB Circular A-11 allows for the use of advance appropriations to help finance capital assets under certain circumstances: Regular appropriations for the full funding of a capital project or a useful segment (or investment) of a capital project in the budget year are preferred. If this results in spikes that, in the judgment of OMB, cannot be accommodated by the agency or the Congress, a combination of regular and advance appropriations that together provide full funding for a capital project or a useful segment or an investment should be proposed in the budget. Explanation : Principle 1 (Full Funding) is met as long as a combination of regular and advance appropriations provide budget authority sufficient to complete the capital project or useful segment or investment. Full funding in the budget year with regular appropriations alone is preferred because it leads to tradeoffs within the budget year with spending for other capital assets and with spending for purposes other than capital assets. In contrast, full funding for a capital project (investment) over several years with regular appropriations for the first year and advance appropriations for subsequent years may bias tradeoffs in the budget year in favor of the proposed asset because with advance appropriations the full cost of the asset is not included in the budget year. Advance appropriations, because they are scored in the year they become available for obligation, may constrain the budget authority and outlays available for regular appropriations of that year. If, however, the lumpiness caused by regular appropriations cannot be accommodated within an agency or Appropriations Subcommittee, advance appropriations can ameliorate that problem while still providing that all of the budget authority is enacted in advance for the capital project (investment) or useful segment. The latter helps ensure that agencies develop appropriate plans and budgets and that all costs and benefits are identified prior to providing resources. In addition, amounts of advance appropriations can be matched to funding requirements for completing natural components of the useful segment. Advance appropriations have the same benefits as regular appropriations for improved planning, management, and accountability of the project (investment). "One Decision for Multiple Pots of Money" Because advance appropriations involves a one-time decision by Congress to approve the entire procurement cost of the end item, which can then be divided into two or more increments that are assigned to two or more fiscal years, advance appropriations can be described in simplified terms as "one decision for multiple pots of money." Advantages and Disadvantages Supporters of advance appropriations could argue that it offers many of the potential advantages of incremental funding outlined earlier—including avoiding or mitigating budget spikes—while avoiding some of its potential disadvantages, such as the risk of increasing weapon procurement costs created by uneconomic start-up and stop costs that can occur when budget reductions or other unexpected developments cause planned increments to be reduced or deferred. Opponents of advance appropriations could argue that it retains (or even expands) one of the key potential disadvantages of incremental finding—that of tying the hands of future Congresses—by committing a portion of one or more future-year budgets to the financing of an item procured in a prior year and requiring a positive action from future Congresses to undo those commitments. Opponents could also argue that compared to full funding, advance appropriations under certain circumstances could increase ship-construction costs by causing work on a ship to stop and then be restarted. Specifically, they could argue, if a given increment of construction work on the ship is completed before the end of a fiscal year and that year's funding increment is entirely expended, the Navy might have to halt work on the ship and wait until the start of the next fiscal year to access the next increment of funding and resume work. Under full funding, in contrast, the Navy would have access to funding for the ship's entire construction cost and consequently would not have to halt work until the start of the next fiscal year, avoiding the additional costs of halting and then resuming work. Navy Advocacy in 2001 In 2001, some Navy officials advocated the use of advance appropriations for Navy ship procurement, noting at that time that this funding approach is used by several federal agencies other than DOD. Although use of advance appropriations for Navy ship procurement was supported by some Navy officials and some Members of Congress, the Navy in 2001 apparently did not receive approval from the Office of Management and Budget (OMB) to use the approach for ship procurement, and did not officially propose its use as part of its FY2002 budget submission to Congress. Congress in 2001 did not adopt advance appropriations as a mechanism for funding Navy ships. The House Appropriations Committee, in its report ( H.Rept. 107-298 of November 19, 2001) on the FY2002 defense appropriations bill ( H.R. 3338 ), stated that it was dismayed that the Navy continues to advocate the use of alternative financing mechanisms to artificially increase shipbuilding rates, such as advanced appropriations, or incremental funding of ships, which only serve to decrease cost visibility and accountability on these important programs. In attempting to establish advanced appropriations as a legitimate budgeting technique, those Navy advocates of such practices would actually decrease the flexibility of future Administrations and Congresses to make rational capital budgeting decisions with regard to shipbuilding programs. Accordingly, the Committee bill includes a new general provision (section 8150) which prohibits the Defense Department from budgeting for shipbuilding programs on the basis of advanced appropriations. The general provision mentioned above (Section 8150) was not included in the final version of the bill that was passed by Congress and signed into law ( H.R. 3338 / P.L. 107-117 of January 10, 2002). Potential for Reducing Instability in Ship-Procurement Plans Could using incremental funding or advance appropriations reduce instability in Navy ship-procurement plans? Using incremental funding or advance appropriations could help reduce instability in Navy ship-procurement plans by avoiding or mitigating budget spikes that can occur when traditional full funding is used to procure ships that are very expensive and are procured once every few years. The ships that best fit this description are aircraft carriers and "large-deck" amphibious assault ships. Accommodating budget spikes for such ships within an overall ship-procurement or Department of the Navy budget for a given fiscal year can require the Navy to move to other fiscal years other ships that the Navy would have preferred to procure in the spike year, or, conversely, require the Navy to move the carrier or amphibious assault ship from a preferred year of procurement to a less-preferred year that happens to have fewer other Navy ships in it. Such movements of planned ship procurements can be a source of instability in Navy ship-procurement planning. Potential for Increasing Number of Ships Procured Could using incremental funding or advance appropriations increase the number of Navy ships that can be built for a given total amount of ship-procurement funding? Using incremental funding or advance appropriations could marginally increase the number of ships that could be built for a given total amount of ship-procurement funding (or, conversely, marginally reduce the total cost to procure a given number of ships). By avoiding instances in which budget spikes caused ships to be moved from one year to another in ship-procurement plans, using incremental funding or advance appropriations can avoid perturbations in the production schedules for these ships. Such perturbations can increase the cost of a ship, reducing at the margin the total number of ships that can be procured for a given total amount of ship-procurement funding. In addition, if a situation arises in which annual funding for ship procurement limits ship-procurement in the near term to low rates with poor production economies of sale, but is expected to rise in future years to levels that would be more than adequate to support higher, economic rates of ship procurement, then using incremental funding or advance appropriations could permit construction to begin on additional ships in the near term, improving near-term production economies of sale, while still permitting the Navy to procure ships in future years at economic rates of production. Improving near-term production economies of scale while preserving acceptable production economies of scale in later years might result in marginally higher average economies of scale for the entire period in question and thereby reduce, at the margin, the collective cost of all the ships procured in the near term and the later years. This second scenario, however, is dependent on realizing the expected increase in ship-procurement funding in the later years. If this increase is not realized, then using incremental funding or advance appropriations could simply trade poor production economies of scale in the near term for poor production economies of scale in future years. Put another way, it would simply trade an inability to afford something now for an inability to afford something later. In discussing the potential effects of using incremental funding or advance appropriations, it is possible to construct presentations showing how a decision today to begin using incremental funding or advance appropriations can increase, perhaps dramatically, the number of ships on which construction can be started in the near term. This is simply because using incremental funding or advance appropriations would defer much of the procurement cost of the ships in question to future years. In those future years, the remainder of the cost of these ships would still have to be paid. As a result, other things held equal, the number of new ships that could be procured in those future years for a given amount of ship-procurement funding will be reduced because portions of those future-year budgets would now be needed to pay for the ships on which construction had started in prior years. Presentations that show a dramatic near-term increase in the number of ships on which construction can begin by starting to use incremental funding or advance appropriations—if not tempered by cautions that it would also reduce the number of new ships that can be procured in future years for a given amount of shipbuilding funding—can mislead audiences into concluding that using incremental funding or advance appropriations can dramatically increase the total number of ships that can be procured over the long run for a given total amount of ship-procurement funding. Incremental funding or advance appropriations, by avoiding perturbations in ship production schedules or improving average production economies of scale over a period of several years, can marginally reduce ship-procurement costs and thereby marginally (rather than dramatically) increase the total number of ships that can be procured over the long run for a given amount of ship-procurement funding. The reduction in ship-procurement costs might be sufficient, for example, to increase from 20 to 21 the total number of ships that could be fully paid for with a certain total amount of funding. Under certain other circumstances, using incremental funding or advance appropriations could increase rather than reduce ship-procurement costs. As discussed earlier, using incremental funding can increase the procurement cost of a ship if one of more of the ship's funding increments is reduced or deferred and the ship's production schedule is consequently disrupted. In addition, if budget circumstances require reducing the ship-procurement budget for a given year and some portion of that year's budget is already devoted to paying for ships started in prior years with incremental funding or advance appropriations, then preserving that portion of the budget so as to avoid disrupting the production schedule of those prior-year ships would mean that the budget reduction would fall more heavily on the remaining part of the ship-procurement budget. This could increase the chance that the reduction would lead to a decision to defer to a future year the procurement of a ship planned for that year, which could increase the procurement cost of that ship. Lastly, if Congress decides to make more use of incremental funding or to start using advance appropriations, and then decides at a later point to return to a more exclusive reliance on full funding, it could temporarily reduce the number of new ships that could be procured because the full costs of new ships being procured and portions of the costs of ships started in prior years under incremental funding or advance appropriations would need to be funded at the same time. Options for Congress Options for Congress that arise out of proposals to make greater use of incremental funding or begin using advance appropriations for procuring Navy ships include (but are not limited to) the following: maintain current ship-procurement funding practices; strengthen adherence to the full funding policy in ship procurement; increase the use of incremental funding in ship procurement; begin using advance appropriations in ship procurement; and shift lead-ship detailed design/nonrecurring engineering (DD/NRE) costs to the Navy's research and development (R&D account). Each of these is discussed below. Maintain Current Funding Practices Current ship-procurement funding practices can be summarized as procuring almost all ships with full funding, procuring a small number (e.g., aircraft carriers and large-deck amphibious assault ships) with de facto or explicit incremental funding, and approving, for some ships being fully funded, advance procurement (AP) funding that the Navy did not request, or for purposes of shipyard advance construction activities rather than long-lead components. Supporters of this option could argue that current funding practices give DOD and the Congress the flexibility to use incremental funding on a limited basis for certain ships while not formally abandoning the full funding policy. They could similarly argue that current funding practices provide Congress with flexibility for using AP funding for purposes other than funding long-lead items requested by DOD. Such flexibility, they can argue, is important for meeting policy goals such as preserving the shipbuilding industrial base within available funding. Opponents of this option could argue that current practices weaken adherence to the full funding policy by making even limited use of incremental funding and by using AP funding for purposes other than funding long-lead items requested by DOD. Such practices, they could argue, increase the chance that supporters of other kinds of procurement items, such as aircraft and satellites, could seek to have them funded using incremental funding, and that such proposals have been made. Strengthen Adherence to Full Funding Policy This option would involve reducing or eliminating the use of incremental funding in Navy ship procurement and reducing or eliminating the use, in ships being fully funded, of AP funding for purposes other than funding the procurement of long-lead items requested by DOD. Supporters could argue that this option, by strengthening adherence to the full funding policy, would reduce the chance that supporters of other kinds of DOD procurement items, such as aircraft, would seek to have them funded using incremental funding. Budget spikes associated with procuring aircraft carriers or large-deck amphibious assault ships, they could argue, can be anticipated years in advance, permitting their effects to be carefully managed. They could argue that stability in Navy ship-procurement plans can be increased by encouraging the Navy and DOD to better define their thinking regarding Navy requirements, and that ship-procurement costs can be reduced through measures other than incremental funding or advance appropriations, such as multiyear procurement, contracts that are structured to provide incentives to shipbuilders to control costs, and investment in improved shipyard production capabilities. Opponents of this policy could argue that it would deprive Congress of the flexibility it has under current funding practices to use incremental funding on a limited basis when absolutely necessary and to use AP funding for purposes other than funding long-lead items requested by DOD. Congress, they could argue, should not deprive itself of tools that might help improve stability in Navy shipbuilding plans, reduce ship-procurement costs, and preserve the shipbuilding industrial base within available funding. Congress, they could argue, has recently taken steps to discourage the spread of incremental funding to DOD procurement items other than ships, and can continue doing this while preserving some flexibility for itself in funding ship procurement. Increase Use of Incremental Funding This option could involve explicitly (rather than tacitly) using incremental funding for aircraft carriers, using incremental funding to procure all (not just some) large-deck amphibious assault ships, or both. It could also involve funding the procurement of the lead ships of each new class of Navy ships in the Navy's research and development account rather than the ship-procurement account, as the Navy has proposed in previous years. Supporters of this option could argue that it would take maximum advantage of opportunities for avoiding or mitigating budget spikes associated with the procurement of these ships. They could also argue that it could strengthen the full funding policy by making it clear to observers that only certain ships, and no other DOD procurement items, may be procured with incremental funding. They could argue that current funding practices—under which aircraft carriers and selected other ships can be funded with incremental funding (either de facto or explicit)—can send confusing signals regarding adherence to the full funding policy, and that a clear, explicit policy of using incremental funding only for certain ships would send a clear signal that these ships represent special exceptions to an otherwise strict practice of adhering to the full funding policy. Opponents of this option could argue that any use of incremental funding weakens the full funding policy, increasing the likelihood of proposals to use it for funding other DOD procurement items. Incremental funding, they could argue, should be used to avoid or mitigate budget spikes only when doing so is necessary to avoid disruptions in ship-procurement programs that would substantially increase procurement costs. Depending on the composition of the ship-procurement plan, they could argue, the budget spike associated with a carrier or large-deck amphibious assault ship might or might not lead to a disruption that substantially increased procurement costs, and that such increases in any event would have to be weighed against the risk of an increase in cost of an incrementally funded ship due to a decision in a future year to reduce or delay a funding increment. Begin Using Advance Appropriations This option could involve starting to use advance appropriations for ships such as aircraft carriers or large-deck amphibious assault ships. Supporters could argue that this option, like the previous one, would take maximum advantage of opportunities for avoiding or mitigating budget spikes associated with the procurement of these ships. Since advance appropriations is a form of full funding, they could argue that this option would not weaken the full funding policy. They could also argue that compared to the previous option, this option would create less risk of an increase in the cost of an aircraft carrier or large-deck amphibious assault ship due to a decision to reduce or defer a funding increment because, under advance appropriations, funding increments occur automatically unless Congress takes a positive actions to stop them. Opponents of this option could argue that even though advance appropriations is a form of full funding, introducing its use into Navy ship procurement would still amount to a relaxation of the application of the full funding concept to DOD procurement that could serve as a precedent for subsequent proposals to relax its application still further. This option, they could argue, is unnecessary because a budget spike associated with the procurement of an aircraft carrier or large-deck amphibious assault ship can be accomplished through the currently accepted practice of occasionally using incremental funding. Starting to use advance appropriations for aircraft carriers or large-deck amphibious assault ships, they could argue, creates a risk of increasing the procurement cost of other ships as a result of concentrating potential reductions in future-year ship-procurement budgets on those ships. Transfer Lead-Ship DD/NRE Costs to R&D Account In Navy ship-procurement programs, the detailed design and nonrecurring engineering (DD/NRE) costs for each class of ship—the cost to create the detailed plans for building the class—are included in the procurement cost of the lead ship in the class. Since the DD/NRE costs for a complex combatant can be significant, including them in the procurement cost of the lead ship can make the lead ship significantly more expensive to procure than the second and subsequent ships in the class. Including DD/NRE costs in the procurement cost of the lead unit is a practice that is not followed by other DOD procurement programs, such as programs for procuring aircraft, ground vehicles, and missiles. If it were, the lead units of these other types of procurement programs would be significantly more expensive to procure. One response to the challenge of paying for lead ships whose procurement cost includes significant DD/NRE costs, would be to fund the procurement of lead ships through the Navy's research and development (R&D) account rather than the Navy's ship-procurement account, as the Navy has proposed in 2004 and 2005. This approach, which would permit both DD/NRE costs and the hands-on construction costs of lead ships to be funded incrementally while not violating the full funding policy, can be viewed as an example of the previously-discussed option of increasing the use of incremental funding. As discussed earlier, Congress, in acting on the Navy's proposed FY2005 and FY2006 defense budgets, rejected the Navy's proposal to procure the lead DDG-1000 through the Navy's research and development account, directed the Navy to fully fund the lead DDG-1000 in the Navy's ship-procurement account, and fully funded the two lead LCSs in the Navy's research and development account. An alternative approach to the challenge of paying for lead ships whose procurement cost includes significant DD/NRE costs would be to treat DD/NRE work as the final stage of the R&D process and transfer DD/NRE costs to the Navy's R&D account. Under this option, the DD/NRE costs for a ship class could be incrementally funded without violating the full funding policy, while the actual hands-on construction cost of the lead ship would be fully funded, in conformance with the full funding policy. This option can be viewed as an intermediate approach that is between the current practice of fully funding both DD/NRE costs and the lead ship's hands-on construction costs, and incrementally funding both these costs in the R&D account, as would occur under the Navy's proposal. Supporters of this option could argue that DD/NRE work is best viewed as the final stage of research and development and should be treated as such in the budget, and that shifting these costs to the R&D account would make Navy ship-procurement programs look more like DOD procurement programs for things such as aircraft, ground vehicles, and missiles. Opponents could argue that NN/NRE work is more closely related to production than to research, and that the current practice of including DD/NRE costs in the procurement cost of the lead ship makes these costs more visible to Congress, which is important because detailed design costs for certain past Navy ships have experienced significant cost growth. Legislative Activity for FY2008 H.R. 1585/S. 1547 (FY2008 Defense Authorization Bill) House The House Armed Services Committee, in its report ( H.Rept. 110-146 of May 11, 2007) on the FY2008 defense authorization bill ( H.R. 1585 ), approved the Navy's FY2008 request for the second of two increments of procurement funding for the amphibious assault ship LHA-6, the second of two increments of procurement funding for the first two DDG-1000 destroyers, and the first of two increments of procurement funding for the aircraft carrier CVN-78. Senate The Senate Armed Services Committee, in its report ( S.Rept. 110-77 of June 5, 2007) on the FY2008 defense authorization bill ( S. 1547 ), approved the Navy's FY2008 request for the second of two increments of procurement funding for the amphibious assault ship LHA-6, the second of two increments of procurement funding for the first two DDG-1000 destroyers, and (with a recommended $20-million reduction) the first of two increments of procurement funding for the aircraft carrier CVN-78. Appendix A. Legislative Activity for FY2007 H.R. 5122 / P.L. 109-364 (FY2007 Defense Authorization Act) House In its report ( H.Rept. 109-452 of May 5, 2006) on H.R. 5122 , the House Armed Services Committee recommended approval of the Navy's proposed use of split funding FY2007 and FY2008 for procuring LHA-6, but did not recommend approval of the Navy's proposal to use split funding in FY2007 and FY2008 for procuring the two lead DDG-1000s. The committee for FY2007 instead recommended full funding for one DDG-1000, and design funding for a second. The committee's report states: The budget request recommends incremental funding for 3 of the 7 ships in the request, including for the first time construction of a surface combatant, the next-generation destroyer DD(X). Furthermore, during the consideration of the National Defense Authorization Act for Fiscal Year 2006 ( P.L. 109-163 ), the Navy sought and was granted the authority to use incremental funding for the next aircraft carrier [CVN-78], which will be recorded as procured in 2008. The committee remains concerned that the use of incremental funding is not a solution to the Navy's problem in funding shipbuilding. While incremental funding can allow the Navy to smooth out the dramatic spikes in shipbuilding funding required as a result of aircraft carrier construction every four or five years, it does not fundamentally increase the number of ships that a given amount of money will purchase. During the committee's hearings on shipbuilding, all witnesses emphasized the importance of program and funding stability as the top priority for reducing the cost of shipbuilding and sustaining the shipbuilding industrial base. The committee notes that Congress adopted the full funding policy in the 1950s in part because of a concern that incremental funding was detrimental to funding stability. Future congresses may find themselves unwilling, or unable, to fund completion of ships begun in prior years and only partially funded. The committee remains convinced that the full funding policy is the correct policy for funding shipbuilding. The committee understands that the Department of Defense this year considered submission of a legislative proposal that would permanently authorize the use of "split funding" for aircraft carriers and large deck amphibious ships, and the Navy's fiscal year 2007 shipbuilding plan already assumes such authority for the second LHA class amphibious assault ship. The committee has approved the use of split funding for certain ships in certain cases. However, the committee does not believe that a blanket policy supporting incremental funding for any class of ship is appropriate, and has not included such a provision in the bill. (Pages 68-69) Senate Section 121 of the Senate version of the FY2007 defense authorization bill ( S. 2766 ) would authorize the use of four-year incremental funding for procuring CVN-78 and future aircraft carriers, rather than split funding (i.e., two-year incremental funding) as proposed by the Navy. Under four-year incremental funding, the main portion of the procurement cost of CVN-78, for example, would be divided into four increments that would be provided in FY2008, the ship's year of procurement, and the three following years. Section 121 would also authorize the Navy to contract in FY2007 for the procurement long-lead items for CVN-79 and CVN-80, aircraft carriers that the Navy plans to procure in FY2012 and FY2016, respectively. This authority resembles an economic order quantity (EOQ) arrangement, except that EOQs normally take place within the context of a multiyear procurement (MYP). These ships have not been approved for MYP, and under past practice would not qualify for it under the requirements set forth in the law governing MYP arrangements. MYP arrangements are permitted to cover items to be procured over a period of up to five years, while the authority granted under Section 121 would cover three ships that the Navy wants to procure over a period of nine years (FY2008-FY2016). In its report ( S.Rept. 109-254 of May 9, 2006) on S. 2766 , the Senate Armed Services Committee recommended approval of the Navy's proposed use of split funding FY2007 and FY2008 for procuring LHA-6 and the two lead DDG-1000s. The report states: The committee recommends a provision that would authorize the Secretary of the Navy to incrementally fund procurement of CVN-21 class aircraft carriers over four year periods, commencing with CVN-78 procurement in fiscal year 2008. The budget request included $739.1 million in Shipbuilding and Conversion, Navy (SCN) for CVN-78 advance procurement and $45.1 million in SCN for CVN-79 advance procurement. The provision would also authorize advance procurement for CVN-80, commencing in fiscal year 2007. In reviewing the budget request for fiscal year 2006, the committee received testimony from the Navy and industry that the low rate of shipbuilding was driving higher costs, which in turn further reduced shipbuilding rates, creating a downward spiral. The committee believes that stable ship requirements, increased funding in the shipbuilding budget, and increased flexibility for funding large capital ships are critical elements of any strategy to reverse this trend. The Secretary of the Navy's fiscal year 2007 report to Congress on the long-range plan for the construction of naval vessels identifies a requirement to procure the CVN-21 class aircraft carriers at 4-year intervals, commencing in fiscal year 2008. The Navy originally planned to procure the first CVN-21 class aircraft carrier, CVN-78, in fiscal year 2006. Since then, the Navy has delayed procurement to 2008, which has delayed fielding this vital capability, while significantly increasing the aircraft carrier's procurement cost. The committee believes that procuring and delivering the CVN-21 class aircraft carriers over 4-year periods in accordance with the Navy's long-range plan is vital to the National Defense Strategy, and is vital to the affordability of these capital ships. Elsewhere in this report, the committee has expressed concern with cost growth on the CVN-77 program, and has urged the Navy and the shipbuilder to identify opportunities to improve affordability of future aircraft carriers. Procurement delays, excess inflation, and material escalation have been reported as significant contributors to CVN-77 cost growth. The shipbuilder has proposed to achieve significant CVN-21 class program savings through a stable procurement plan, and through procurement of economic order quantity material for CVN-79 and CVN-80 in conjunction with CVN-78 procurement. In view of the potential for significant program savings, the committee recommends an increase of $50.0 million in SCN for CVN-21 class advance procurement, and directs the Secretary of the Navy to review economic order quantity and long lead time material procurement for the CVN-21 class. The Secretary is to submit a report to the congressional defense committees with the fiscal year 2008 budget request, outlining the advance procurement requirements to potentially optimize economic order quantity savings and escalation avoidance (to include offsetting factors) for the first three vessels of the CVN-21 class. Of the amount authorized to be appropriated for advance procurement for CVN-79 and CVN-80, none of the funds are available for obligation prior to 30 days following receipt of the Secretary's report. (Page 67) Conference Report Section 121 of the conference report on H.R. 5122 ( H.Rept. 109-702 of September 29, 2006) authorizes four-year incremental funding for the CVN-21 class aircraft carriers CVN-78, CVN-79, and CVN-80. Section 124 authorizes the procurement of the first two DDG-1000 destroyers in FY2007 using split funding in FY2007 and FY2008, as requested by the Navy. The section states in part: (c) SENSE OF CONGRESS ON FUNDING FOR FOLLOW-ON SHIPS.—It is the sense of Congress that there is sufficient benefit to authorizing the one-time exception provided in this section to the full funding policy in order to support the competitive procurement of the follow-on ships of the DDG-1000 Next-Generation Destroyer program. However, it is the expectation of Congress that the Secretary of the Navy will structure the DDG-1000 program so that each ship, after the first two ships, is procured using the method of full funding in a single year. H.R. 5631 / P.L. 109-289 (FY2007 Defense Appropriations Act) House In its report ( H.Rept. 109-504 of June 16, 2006) on H.R. 5631 , the House Appropriations Committee recommended approval of the Administration's proposed use of split funding FY2007 and FY2008 for procuring the amphibious assault ship LHA-6, but did not recommend approval of the Administration's proposal to use split funding in FY2007 and FY2008 for procuring the two lead DDG-1000 destroyers. The committee for FY2007 instead recommended full funding for one DDG-1000. The committee's report states: For fiscal year 2007, the Committee faces several challenges in recommending appropriations for the Department of Defense and the intelligence community. First, the President's budget proposes an unorthodox approach to funding two major procurement programs, the F-22 fighter of the Air Force and the DD(X) destroyer of the Navy. In both cases, the budget request includes incremental or partial funding, for these two programs. In the case of the F-22, incremental funding is requested in the middle of the production run. The use of incremental funding mortgages the future of the procurement budget of the Defense Department in a manner that is not acceptable to the Committee. In addition, the precedent of incremental funding for these programs could be applied to a variety of other procurements, leading to a loss of budget transparency and reducing the ability to perform oversight. Therefore, the recommendations in this bill include full funding for one DD(X) destroyer and the F-22 fighter program. Funding of $2,568,111,000 is recommended to complete full funding of one DD(X) vessel. This is the same level as the funding request for this item, but under the President's budget these funds would have been allocated on an incremental basis against two ships. (Page 4) The report also states: The Committee recommends $2,568,111,000 for the procurement of 1 DD(X) destroyer. The budget requested $2,568,111,000 to incrementally fund 2 ships, with the balance of funding to be provided in fiscal year 2008. The Committee cannot support such a far-reaching policy change which has implications beyond the Navy's shipbuilding program. Further, the Navy's proposal requires special legislative authority to be executed, and this authority is not included in the House-passed National Defense Authorization Act, 2007 ( H.R. 5122 ). (Page 139) Senate In its report ( S.Rept. 109-292 of July 25, 2006) on H.R. 5631 , the Senate Appropriations Committee recommends approving the Navy's request for FY2007 procurement funding for the first two DDG-1000 destroyers. The report states: Consistent with the Senate-passed authorization bill and the Navy's current acquisition strategy, the Committee recommendation supports the budget request of $2,568,111,000 for dual lead ships. The Committee reminds the Navy that this is a unique acquisition strategy and should not be used as a precedent for incrementally funding any future DDG—1000 or any other shipbuilding program. (Page 115) The report recommends funding the procurement of one Littoral Combat Ship, or LCS (rather than the requested two) in FY2007, and rescinding funding (in Section 8043) for one of the three LCSs procured in FY2006. The report states: With the fiscal year 2007 budget submission of $520,670,000 for the fifth and sixth LCS flight 0 ships, the Navy revealed the LCS unit cost estimate used as a basis for last year's appropriation was exclusive of contract change orders, planning and engineering services, program management support and other costs not included in the ship construction contract ... As a result, the Navy is unable to procure both the third and fourth LCS flight 0 ships without the availability of additional funding. The Committee is troubled by this revelation and recommends rescinding the insufficient fiscal year 2006 funds currently allocated to the fourth LCS flight 0 vessel. The Committee is further troubled by reports that the first two LCS flight 0 ships under construction are exceeding their cost as previously budgeted.... As a result, the Committee believes the fiscal year 2007 budget request is insufficient to procure two ships and recommends $300,670,000 to fully fund procurement of one LCS seaframe, which is a reduction of $220,000,000 and one seaframe from the request. The Committee notes that this recommendation puts the Navy on its previously established path of procuring four LCS flight 0 ships by the end of fiscal year 2007. (Pages 115-116) Conference Report The conference report on H.R. 5631 ( H.Rept. 109-676 of September 25, 2006) approves the Navy's request for the initial (FY2007) increment of procurement funding for the LHA(R) amphibious assault ship, which the Navy wants to procure in FY2007 using split funding in FY2007 and FY2008. The conference report approves the Navy's request for the initial (FY2007) increment of procurement funding for the first two DDG-1000 destroyers, which the Navy wants to procure in FY2007 using split funding in FY2007 and FY2008. The report states: The conferees agree to provide $2,568,111,000 for the DDG-1000 (formerly DDX) Destroyer Program, and agree to delete language proposed by the House requiring full funding of a single lead ship. The effect of the conference agreement would allow the Navy to split fund twin lead ships of the DDG-1000 class, if authorized in separate legislation by the Congress. This action is being taken based upon the expectation that the total cost of these two ships is well understood and low risk. The conferees are willing to make this one-time exception to the full funding principle because of the unique situation with the shipbuilding industrial base and with the DDG—1000 program. The conferees will not entertain future requests to fund ships other than under the full funding principle, except for those historically funded in this manner (aircraft carriers and some large deck amphibious ships). The unusual procurement of twin lead ships raises the risk that future design changes or production problems will impact two ships under construction simultaneously. This could raise costs significantly compared to other lead ship programs. However, the Navy believes the cost and schedule risk in the DDG-1000 program is low enough to permit the twin lead ship acquisition strategy. The Navy has identified the total cost to procure the twin lead ships of the DDG—1000 class as $6,582,200,000. The conferees insist that the Navy manage this program within that total cost, and will be unlikely to increase funding through a reprogramming or an additional budget request except in the case of emergency, natural disaster, or other impact arising from outside the Navy's shipbuilding program. (Page 180) Appendix B. Legislative Activity for FY2006 H.R. 1815 / P.L. 109-163 (FY2006 Defense Authorization Bill) House In its report ( H.Rept. 109-89 of May 20, 2005) on H.R. 1815 , the House Armed Services Committee states: [Chief of Naval Operations] Admiral [Vernon] Clark, in his posture statement before the House Committee on Appropriations, Subcommittee on Defense stated, "We need to partner with Congress and industry to regain our buying power. Acquisition and budget reforms, such as multi-year procurement, economic order quantity, and other approaches help to stabilize the production path, and in our view, reduce the per unit cost of ships and increase our shipbuilding rate." The committee does not agree that creative financing methodologies that delay recognizing the true cost of shipbuilding or that provide ever-increasing amounts of funding to cover the explosion in ship costs are responsible actions. Incremental funding, advanced procurement, multiyear procurement, and various creative shipyard work allocation arrangements have failed to control the cost growth of vessel classes such as the Virginia class submarine, the replacement amphibious assault ship (LHA(R)), the future major surface combatant ship (DD(X)), and the future aircraft carrier CVN-21. (Page 63) Section 1004 of the bill as reported by the committee states: Senate Section 122 of the FY2006 defense authorization bill ( S. 1042 ) as reported by the Senate Armed Services Committee ( S.Rept. 109-69 of May 17, 2005) would permit the aircraft carrier CVN-78 to be procured with split funding (i.e., incremental funding) during the period FY2007-FY2010. The section states: Section 123 of the bill would permit an amphibious assault ship LHA(R) to be procured with split funding (i.e., incremental funding) in FY2007 and FY2008. The section would also permit FY2006 funding to be used for advance construction of the ship. The section states: S.Rept. 109-69 states: The CVN-78 will be a new class of aircraft carrier, incorporating numerous new technologies. This budget request reflects the second one-year slip in the program in recent years. This slip would cause a delay in the delivery of the CVN-78 until fiscal year 2015, with the ship it is scheduled to replace, the USS Enterprise (CVN-65), scheduled to be decommissioned in fiscal year 2013. Additionally, this slip translates into a cost growth for CVN-78 of approximately $400.0 million, according to the Navy. The committee is concerned about this delay. The committee has been told there is no technical reason for the delay, but that the delay was driven by budget considerations. Both the Secretary of the Navy and the Chief of Naval operations testified that large capital assets such as aircraft carriers are difficult to fund under the traditional full-funding policy, and that more flexible methods of funding must be found and used. The program of record for CVN-78 has the detail design and construction funding split between two years. This provision would authorize that same funding to be split over four years, thereby allowing needed funding flexibility. The committee directs the Navy to provide an updated funding profile, fully funding the remaining costs of the ship from fiscal years 2007 through 2010, with delivery of the fiscal year 2007 budget request. Conference Report Section 128 of the conference report ( H.Rept. 109-360 of December 18, 2005) on H.R. 1815 / P.L. 109-163 of January 6, 2006 authorizes the use of incremental funding in FY2007, FY2008, and FY2009 for the procurement of the aircraft carrier CVN-78, subject to the availability of appropriations for those fiscal years. The provision states: Section 129 of the conference report authorizes the use of incremental funding in FY2007 and FY2008 for the procurement of the LHA(R) amphibious assault ship, subject to the availability of appropriations for those fiscal years. The provision states: H.R. 2863 / P.L. 109-148 (FY2006 Defense Appropriations Bill) House In its report ( H.Rept. 109-119 of June 10, 2005) on H.R. 2863 , the House Appropriations Committee stated, in the section on Navy shipbuilding, that it "supports the LHA(R) [amphibious assault ship] program, and it directs the Navy to reconsider its proposal to request split funding for LHA(R) over the FY2007-08 timeframe, and instead follow the full funding principle for this ship class, to ensure an adequate budget is in hand before contract award." (Page 146) Senate In its report ( S.Rept. 109-141 of September 29, 2005) on H.R. 2863 , the Senate Appropriations Committee stated: The Committee remains gravely concerned about the overall health and stability of Navy shipbuilding. Fleet inventory and capability requirements remain unstable as do program performance and costs. Of primary concern are soaring cost overruns. The Committee finds unanticipated cost overruns to be the root cause of much of the instability in the program. Until budget estimates become more realistic, requirements stabilize and penalties for exorbitant cost overruns are exercised, ship construction costs are unlikely to improve. The Committee is aware that the new Chief of Naval Operations [CNO] is actively reviewing shipbuilding programs and is considering several options for controlling long-term costs. In an effort to assist the Navy in the short-term, the Committee recommends providing the Navy financial management authorities that have previously been denied. For fiscal year 2006, the Committee recommends providing the Navy additional reprogramming authority. This authority allows the Navy, through above threshold reprogramming procedures, to increase funding for programs experiencing unforeseen shortfalls. The Committee understands that in fiscal year 2005 after exhausting the $100,000,000 of the transfer authority the Congress provided, the Navy sought to use dollars specifically appropriated for outfitting and post delivery to address funding shortfalls. The Committee is concerned about this change in Navy policy as it will only further obscure actual program costs. The new reprogramming authority is provided only with the understanding that this change will not be implemented in the future. The additional reprogramming authority essentially provides the Navy a reactive mechanism or approach to cost management. The Committee believes the situation requires more proactive program, budgetary and contract management and encourages the Department of Defense to consider whether using advance appropriations in future budgets will improve the shipbuilding program. (Page 126) The committee also stated: The fiscal year 2006 President's budget requests $225,427,000 for [the]DDG-51 [destroyer program] for what the Navy describes as "program completion requirements and shutdown costs." These funds are requested for a mix of Class and ship specific plan, basic construction, ordnance, certification, and inspection costs. Such costs are traditionally included in the budget request for each ship. However, when signing the multiyear contract for the construction of the final DDGs of the Class, the Department decided to change its policy and budget for these costs after the last ship was appropriated. The Committee finds this decision troubling. First, budgeting for such costs after procurement of the last vessel obscures the actual cost to procure each ship and overstates savings attributable to the multiyear contract authority under which these ships were purchased. The Congress approved the Navy's request for multiyear procurement authority in fiscal year 2002 assuming a level of savings to the taxpayer that are now not being realized. Most disconcerting about this change in policy and resultant budget request is the Navy's assertion that if these costs are not funded, the Navy will not be able to meet its contractual obligations and the Chief of Naval Operations will not be able to accept delivery of these ships. The Committee is alarmed that the Navy would knowingly sign a multibillion dollar contract for ships that would be both non-operational and undeliverable unless additional dollars, outside the contract, were provided. The Committee directs the Secretary of the Navy to provide a detailed report of all the costs required to complete each of the remaining 11 ships and a rationale for such a contractual arrangement by December 1, 2005. Until sufficient explanation is provided, the Committee recommends only providing funds for plans and those costs directly attributable to ships scheduled to deliver in the near-term. As such the Committee recommends reducing the budget request by $195,654,000. (Page 127) Conference Report The conference report ( H.Rept. 109-359 of December 18, 2005) on H.R. 2863 states: The conferees do not agree with House direction urging the Navy to reconsider split funding for the LHA(R) Program. The conferees agree to consider either split funding or full funding if proposed by the Administration. H.Con.Res. 95 (Concurrent Resolution on FY2006 Budget) Conference Report The conference report ( H.Rept. 109-62 of April 28, 2005) on H.Con.Res. 95 , the budget resolution for FY2006, states: The conference conferees understand the Navy may review whether advance appropriations can improve its procurement of ships and provide savings as it designs its 2007 budget. In addition, the conferees intend to request the Government Accountability Office [GAO] to assess the implications of using advance appropriations to procure ships. The report notes that Section 401 [of H.Con.Res. 95 ] reflects an overall limit on advance appropriations of $23.158 billion in fiscal year 2007, which is the same limit on advance appropriations as has been included in all previous limitations on advance appropriations in past budget resolutions. The report includes the Shipbuilding and Conversion, Navy (SCN) appropriation account in the list of accounts identified for advance appropriations in the Senate. S.Amdt. 146 to S.Con.Res. 18 S.Con.Res. 18 is the earlier Senate version of the budget resolution. Senate Amendment ( S.Amdt. 146 ) to S.Con.Res. 18 was sponsored by Senator Warner, co-sponsored by several other members, and submitted on March 15, 2005. It would amend Section 401 of S.Con.Res. 18 —the section that restricts use of advance appropriations—to increase the amount of advance appropriations in FY2007 and FY2008 by $14 billion, to $37.393 billion. The amendment would also insert a new provision (Section 409) that would include the Shipbuilding and Conversion, Navy (SCN) appropriation account on a list of accounts identified for advance appropriations in the joint explanatory statement of the managers to accompany S.Con.Res. 18 . The amendment was ordered to lie on the table. The Senate passed S.Con.Res. 18 on March 17, 2005. Appendix C. Recent Ships Procured with Incremental Funding This appendix discusses Navy and DOD ships that have been procured in recent years or are currently being procured using incremental funding. DOD LMSR-Type Sealift Ships As part of its action on the FY1993 defense budget, Congress created the National Defense Sealift Fund (NDSF)—a revolving fund in the DOD budget for the procurement, operation, and maintenance of DOD-owned sealift ships —and transferred procurement of new military sealift ships and certain Navy auxiliary ships from the Shipbuilding and Conversion, Navy (SCN) appropriation account, where they traditionally had been procured, to the NDSF. Since the NDSF is outside the procurement title of the defense appropriation act, sealift ships procured since FY1993, including DOD's Large, Medium-Speed, Roll-on/Roll-off (LMSR) ships (as well as Navy Lewis and Clark (TAKE-1) dry cargo ships procured since FY2003 ) have not been subject to the full funding policy as traditionally applied to DOD procurement programs. As discussed in a 1996 CRS report, although individual LMSRs were ostensibly fully funded each year by Congress, like ships procured in the SCN account, DOD in some cases actually applied LMSR funding provided in a given year to partially finance the construction of LMSRs authorized in various years. For example, although Congress ostensibly approved $546.4 million in FY1995 for the procurement of two LMSRs, the FY1995 funds were actually applied to help finance portions of 16 LMSRs whose construction contracts were awarded between FY1993 and FY1997. In explaining its use of funds in the LMSR program, DOD stated: The National Defense Sealift Fund (NDSF) is not a procurement appropriation but a revolving fund. Dollars appropriated by Congress for the fund are not appropriated to purchase specific hulls as in the case of, for example the Navy's DDG-51 program. Rather, dollars made available to the NDSF are executed on an oldest money first basis. Therefore, full funding provisions as normally understood for ship acquisition do not apply. SSN-23 Attack Submarine The Jimmy Carter (SSN-23), the third and final Seawolf (SSN-21) class attack submarine, was originally procured in the FY1992 defense budget, which Congress passed in 1991. In early 1992, the George H. W. Bush Administration terminated procurement of further Seawolf-class submarines and proposed rescinding funds for both the second Seawolf-class boat (SSN-22, which had been procured in FY1991) and SSN-23. In acting on this proposal, Congress rejected the request to rescind funding for SSN-22 (i.e., Congress affirmed the procurement of SSN-22), effectively suspended the procurement of SSN-23, and gave the Secretary of the Navy the choice of whether to reinstate procurement of SSN-23. In 1993, as part of its Bottom-Up Review (BUR) of U.S. defense policy and programs, the Clinton Administration decided to reinstate procurement of SSN-23 in FY1995 or FY1996 (it later settled on FY1996). By this point, $382.4 million had already been obligated and expended on SSN-23. Congress's action on the 1992 rescission proposal also made an additional $540.2 million in funding available for obligation to SSN-23. As a consequence, completing the approximate $2.4 billion cost of SSN-23 would require about $1.5 billion in additional funding. The Administration requested $1,507.5 million in FY1996 to complete the cost of SSN-23. Congress approved the procurement of SSN-23 in FY1996, but provided only $700 million in procurement funding, leaving about $807.5 million to complete the cost of the ship. Rather than requesting all $807.5 million or so in FY1997, the Administration requested $699.1 million in FY1997 for SSN-23 and deferred the final $105 million or so needed to complete the cost of the ship (as adjusted) to FY1998. Congress, as part of its action on the FY1996 defense budget, approved $649.1 million (rather than $699.1 million) for SSN-23, leaving about $155 million to complete the cost of the ship. The Administration requested $153.4 million in FY1998 to complete the cost of SSN-23 (as adjusted); Congress approved this amount. Thus, of the approximately $2.4 billion cost of SSN-23 as then estimated, a total of $802.5 million—about one-third of the total estimated cost of the ship—was appropriated by Congress in the two years (FY1997 and FY1998) following the year (FY1996) in which SSN-23 was (for a second time) procured. LHD-6 Amphibious Assault Ship Going into the conference on the FY1993 defense appropriation bill, the House had recommended fully funding procurement of the Wasp (LHD-1) class amphibious assault ship Bonhomme Richard (LHD-6)—a ship the Administration had not requested for procurement—at a cost of $1.205 billion, while the Senate recommended $1.050 billion. During the conference, however, competition among various programs for defense funding resulted in an agreement in which LHD-6 was approved for procurement in FY1993 but only $305 million in FY1993 funding was provided. The conference report on the bill stated: The conferees agree to provide $305,000,000 in funds to initiate the purchase of one LHD-1 class amphibious assault ship. The conferees have provided authority for the Navy Secretary to enter into a contract for this ship even though full funding has not yet been provided to the Navy. The conferees request that the Navy award a contract for the construction of this vessel and include the additional funds required for this program in its fiscal year 1994 budget request. The $893.8 million needed to complete the funding of the ship (as adjusted) was requested by the Administration in FY1994 and approved by Congress. Thus, LHD-6 was split-funded, with about three-quarters of the cost of LHD-6 provided the year after the ship's year of procurement. LHD-8 Amphibious Assault Ship Congress included a provision in the Shipbuilding and Conversion, Navy (SCN) sections of both the FY2000 and FY2001 defense appropriations acts stating "That the Secretary of the Navy is hereby granted the authority to enter into a contract for an LHD-1 [class] Amphibious Assault Ship which shall be funded on an incremental basis." The ship in question is LHD-8, which was funded on an incremental basis, with the final increment provided in FY2006. DOD records the ship in its budget presentations as having been procured in FY2002. LHA-6 Amphibious Assault Ship The Navy in its FY2007 budget proposed procuring the amphibious assault ship LHA-6 in FY2007 using split funding in FY2007 and FY2008. Congress, in acting on the proposed FY2007 budget, approved the Navy's requested first increment of funding for LHA-6. The Navy's proposed FY2008 budget requests the second increment of funding for the ship. First Two DDG-1000 Destroyers The Navy in its proposed FY2007 budget proposed procuring the first two DDG-1000 destroyers in FY2007 using split funding in FY2007 and FY2008. Congress, in acting on the proposed FY2007 budget, approved the Navy's requested first increment of funding for the two DDG-1000s. The Navy's proposed FY2008 budget requests the second increment of funding for the two ships. CVN-78 Aircraft Carrier The Navy in its proposed FY2007 and FY2008 budgets proposed procuring the aircraft carrier CVN-78 in FY2008 using split funding in FY2008 and FY2009. Under the Navy's proposed funding plan, the ship is to be funded over a total of nine years, with about 35.2% of its procurement cost provided in advance procurement funding between FY2001 and FY2007, about 26.1% to be provided in the procurement year of FY2008, and about 38.8% to be provided in FY2009.

Some observers have proposed procuring Navy ships using incremental funding or advance appropriations rather than the traditional full funding approach that has been used to procure most Navy ships. Supporters believe these alternative funding approaches could increase stability in Navy shipbuilding plans and perhaps increase the number of Navy ships that could be built for a given total amount of ship-procurement funding. The issue for Congress is whether to maintain or change current practices for funding Navy ship procurement. Congress's decision could be significant because the full funding policy relates to Congress's power of the purse and its responsibility for conducting oversight of defense programs. For Department of Defense (DOD) procurement programs, the full funding policy requires the entire procurement cost of a usable end item (such as a Navy ship) to be funded in the year in which the item is procured. Congress imposed the full funding policy on DOD in the 1950s to strengthen discipline in DOD budgeting and improve Congress's ability to control DOD spending and carry out its oversight of DOD activities. Under incremental funding, a weapon's cost is divided into two or more annual increments that Congress approves separately each year. Supporters could argue that using it could avoid or mitigate budget spikes associated with procuring very expensive ships such as aircraft carriers or "large-deck" amphibious assault ships. Opponents could argue that using it could make total ship procurement costs less visible and permit one Congress to budgetarily "tie the hands" of future Congresses. Under advance appropriations, Congress makes a one-time decision to fund the entire procurement cost of an end item. That cost can then be divided into two or more annual increments that are assigned to (in budget terminology, "scored in") two or more fiscal years. Supporters could argue that using advance appropriations could avoid or mitigate budget spikes without some of the potential disadvantages of incremental funding. Opponents could argue that advance appropriations retains (or even expands) a key potential disadvantage of incremental finding—that of tying the hands of future Congresses. Using incremental funding or advance appropriations could, under certain circumstances, marginally reduce the cost of Navy ships. Under certain other circumstances, however, it could increase costs. Options for Congress include maintaining current ship-procurement funding practices; strengthening adherence to the full funding policy; increasing the use of incremental funding; beginning to use advance appropriations; and transferring lead-ship detailed design and nonrecurring engineering costs to the research and development account. Arguments could be made in support of or against each of these options. This report will be updated as events warrant.

CRS_RS20902

Introduction Presidential establishment of national monuments under the Antiquities Act of 1906 (16 U.S.C. §§431-433) has protected valuable sites, but also has been contentious. President Clinton used his authority 22 times to proclaim 19 new monuments and to enlarge 3 others (see Appendix ). With one exception, the monuments were designated during President Clinton's last year in office, on the assertion that Congress had not acted quickly enough to protect federal land. The establishment of national monuments by President Clinton raised concerns, including the authority of the President to create large monuments; impact on development within monuments; access to monuments for recreation; and lack of a requirement for environmental studies and public input in the monument designation process. Lawsuits challenged several of the monuments on various grounds, described below. The Bush Administration examined monument actions of President Clinton and the Interior Department is developing management plans for DOI-managed monuments. Recent Congresses have considered, but not enacted, bills to restrict the President's authority to create monuments and to establish a process for input into monument decisions. Monument supporters assert that changes to the Antiquities Act are neither warranted nor desirable, courts have supported presidential actions, and segments of the public support such protections. The Antiquities Act of 1906 The Antiquities Act of 1906 authorizes the President to proclaim national monuments on federal lands that contain "historic landmarks, historic and prehistoric structures, and other objects of historic or scientific interest." The act does not specify particular procedures for creating monuments. It was a response to concerns over theft and destruction of archaeological sites, and was designed to provide an expeditious means to protect federal lands and resources. Congress later limited the President's authority in Wyoming (16 U.S.C. §431a) and Alaska (16 U.S.C. §3213). Presidents have designated about 120 national monuments, totaling more than 70 million acres, although most of this acreage is no longer in monument status. Congress has abolished some monuments outright, and converted many more into other designations. For instance, Grand Canyon initially was proclaimed a national monument, but was converted into a national park. Congress itself has created monuments on federal lands, and has modified others. President Clinton's 19 new and 3 enlarged monuments comprise about 5.9 million federal acres. Only President Franklin Delano Roosevelt used his authority more often—28 times—and only President Jimmy Carter created more monument acreage—56 million acres in Alaska. Monument Issues and Controversies Various issues regarding presidentially-created monuments have generated both controversy and lawsuits. Issues have included the size of the areas and types of resources protected, the inclusion of non-federal lands within monument boundaries, restrictions on land uses that may result, the manner in which the monuments were created, the selection of the managing agency, and other legal issues. Courts have upheld both particular monuments and the President's authority to create them. For instance, a court dismissed challenges to Clinton monuments which were based on improper delegation of authority by Congress; size; lack of specificity; non-qualifying objects; increased likelihood of harm to resources; and alleged violations of the National Forest Management Act of 1976 (NFMA, 16 U.S.C. §1601 et seq .), Administrative Procedure Act (APA, 5 U.S.C. §551 et seq .), and National Environmental Policy Act (NEPA, 42 U.S.C. §4321 et seq .). In another case, a court found that plaintiffs did not allege facts sufficient to support the court's inquiry into whether the President might have acted beyond the authority given him in the Antiquities Act. Monument Size and Objects Protected Critics assert that large monuments violate the Antiquities Act, in that the President's authority was intended to be narrow and limited. The monuments designated by President Clinton range in size from 2 acres to 1,870,800 acres. Defenders argue that the Antiquities Act gives the President discretion to determine the acreage necessary to ensure protection of the designated resources, while reserving "the smallest area compatible with the proper care and management of the objects to be protected" (16 U.S.C. §431). Critics also contend that President Clinton used the Antiquities Act for impermissibly broad purposes, such as general conservation and scenic protection. Supporters counter that the act's wording—"other objects of historic or scientific interest"—grants broad discretion to the President. Further, some claim that the Antiquities Act is designed to protect only objects that are immediately endangered or threatened, but others note that the Antiquities Act lacks such a specific requirement. To date, the courts have upheld the authority of the President on these issues. Inclusion of Non-Federal Lands Non-federal lands are contained within the boundaries of some national monuments. Some state and private landowners have been concerned that development of such non-federal land is, or could be, more difficult because it might be judged incompatible with monument purposes or constrained by management of surrounding federal lands. Monument supporters note that concerned state and local landowners can pursue land exchanges with the federal government. Effects on Land Uses State and local officials and other citizens have been concerned that monument designation can limit or prohibit development on federal lands. They argue that local communities are hurt by the loss of jobs and tax revenues that result from prohibiting or restricting future mineral exploration, timber development, or other activities. The potential effect of monument designation on energy development has been particularly contentious, given the current emphasis on energy production. Subject to valid existing rights, most of the recent proclamations bar new mineral leases, mining claims, prospecting or exploration activities, and oil, gas, and geothermal leases, by withdrawing the lands within the monuments from entry, location, selection, sale, leasing, or other disposition under the public land laws, mining laws, and mineral and geothermal leasing laws. Further, the FY2006 Interior, Environment, and Related Agencies Appropriations Act ( P.L. 109-54 ) continued a ban on using funds for energy leasing activities within the boundaries of national monuments as they were on January 20, 2001, except where allowed by the presidential proclamations that created the monuments. Mineral activities that would be allowed may have to adhere to a higher standard of environmental regulation to ensure compatibility with the monument designation and purposes. Others claim that monuments have positive economic impacts, including increased tourism, recreation, and relocation of businesses in those areas. Some maintain that development is insufficiently limited because recent monument proclamations typically have preserved valid existing rights for particular uses, such as mineral development, and continued certain activities, such as grazing. Some recreation groups and other citizens have opposed restrictions on recreation, such as hunting and off-road vehicle use. Proclamations typically have restricted some such activities to protect monument resources, and additional restrictions are being considered for management plans in development. Consistency of Antiquities Act with NEPA and FLPMA Critics of the Antiquities Act argue that its use is inconsistent with the intent of the Federal Land Policy and Management Act of 1976 (FLPMA, 43 U.S.C. §1701 et seq .) to restore land withdrawal policy to Congress. A withdrawal restricts the use or disposition of public lands, e.g., for mineral leasing. In enacting FLPMA, Congress repealed much of the President's withdrawal authority and limited the ability of the Secretary of the Interior to make land withdrawals. It required congressional review of secretarial withdrawals exceeding 5,000 acres, and contains notice and hearing procedures for withdrawals. Supporters note that in enacting FLPMA, Congress did not repeal or amend the Antiquities Act and thus desired to retain presidential withdrawal authority. Critics of the Antiquities Act also assert that there has been insufficient public input and environmental studies on presidentially-created monuments, and favor amending the Antiquities Act to require public and scientific input similar to that required under NEPA, FLPMA, and other laws. Others counter that such changes would impair the ability of the President to act quickly and could result in resource impairment or additional expense. They assert that Presidents typically consult in practice , and that NEPA applies only to proposed actions that might harm the environment and not to protective measures. Monument Management Whereas previously the National Park Service (NPS) had managed most monuments, President Clinton selected the Bureau of Land Management (BLM) and other agencies to manage many of the new monuments. Some critics have expressed concern that the BLM lacks sufficient expertise or dedication to land conservation to manage monuments. President Clinton chose BLM where its own lands were involved, to increase the agency's emphasis on land protection, and possibly both to protect the lands and manage them for multiple uses. Mineral development, timber harvesting, and hunting are the principal uses that would be legally compatible with BLM management but not with management by the NPS. Grazing also typically is allowed on BLM lands, but often precluded on NPS lands. Other Legal Issues The "Property Clause" of the Constitution (Article IV, sec. 3, cl. 2) gives Congress the authority to dispose of and make needed rules and regulations regarding property belonging to the United States. Some have asserted that the Antiquities Act is an unconstitutionally broad delegation of Congress' power, because the President's authority to create monuments is essentially limitless since all federal land has some historic or scientific value. A court dismissed a suit raising this issue, and this holding was affirmed on appeal. (See footnote 2 ). The recent monument designations renewed discussion of whether a President can modify or eliminate a presidentially-created national monument. While it appears that a President can modify a monument, it has not been established that the President, like Congress, has the authority to revoke a presidential monument designation. (For more information, see CRS Report RS20647, Authority of a President to Modify or Eliminate a National Monument , by [author name scrubbed] (pdf).) Administrative and Legislative Activity Administrative Action The Bush Administration examined the monument actions of President Clinton, including whether to exclude private, state, or other non-federal lands from the boundaries of newly-created monuments. There has been no comprehensive Administration effort to redesignate the monuments with altered boundaries. While the monument designation does not apply to these non-federal lands, most of President Clinton's monument proclamations stated that they will become part of the monument if the federal government acquires title to the lands from the current owners. Also, the Interior Department continues to develop management plans for new monuments within its jurisdiction. Further, President Bush reestablished one monument—the Governors Island National Monument in New York—on February 7, 2003. Legislative Action Legislation to amend the Antiquities Act of 1906 has not been introduced thus far in the 109 th Congress, but was considered in recent Congresses. For instance, H.R. 2386 of the 108 th Congress sought to amend the Antiquities Act to make presidential designations of monuments exceeding 50,000 acres ineffective unless approved by Congress within two years. The measure also would have established a process for public input into presidential monument designations and required monument management plans to be developed in accordance with the National Environmental Policy Act of 1969. Other legislation in recent Congresses has sought to alter particular monuments, for instance, to exclude private land from within their boundaries. Appendix. Monuments Proclaimed by President Clinton

Presidential creation of national monuments under the Antiquities Act of 1906 often has been contentious. Controversy was renewed over President Clinton's creation of 19 monuments and expansion of 3 others. Issues have related to the size of the areas and types of resources protected, the inclusion of non-federal lands within monument boundaries, restrictions on land uses, and the manner in which the monuments were created. The Bush Administration reviewed President Clinton's monument actions and continues to develop management plans for some of the monuments. Congress has considered measures to limit the President's authority to create monuments and to alter particular monuments. Monument supporters assert that these changes are not warranted and that the courts and segments of the public have supported monument designations. This report will be updated to reflect changes.

CRS_R45326

T he U.S. Army Corps of Engineers (USACE) is an agency within the Department of Defense with both military and civil works responsibilities. Congress directs USACE's civil works activities through authorizations legislation, annual and supplemental appropriations, and oversight activities. This report summarizes USACE's annual discretionary appropriations for civil works activities and its supplemental appropriations, principally following major flood and hurricane disasters. The appropriations described are for those accounts and activities that typically are funded through Title I of annual Energy and Water Development appropriations acts. As part of USACE's civil works activities, Congress has authorized and appropriated funds for the agency to perform the following: water resource projects for maintaining navigable channels, reducing flood and storm damage, and restoring aquatic ecosystems, among other purposes; regulation of activities affecting certain waters and wetlands activities; and remediation of sites involved in the development of U.S. nuclear weapons from the 1940s through the 1960s, administered under the Formerly Utilized Sites Remedial Action Program (FUSRAP). For FY2019, Congress has provided the agency with almost $7.00 billion for civil works activities; these funds are primarily used for the agency's water resource activities, and $200 million is available for USACE regulatory activities and $150 million is available for FUSRAP. In February 2018, Congress also provided more than $17.40 billion in emergency supplemental appropriations in the Bipartisan Budget Act of 2018 (BBA 2018; P.L. 115-123) to certain USACE accounts related to water resource projects. Most of these supplemental funds are directed to repairing damage to existing USACE facilities, paying for flood fighting and repair of certain levees and dams maintained by nonfederal entities and constructing new riverine and coastal flood control improvements. Although this report references USACE's FUSRAP and regulatory accounts, its discussion focuses on funding for the agency's water resources projects. Congress generally authorizes USACE water resource studies and construction projects prior to funding them. For information on the authorization process, see CRS Report R45185, Army Corps of Engineers: Water Resource Authorization and Project Delivery Processes, by [author name scrubbed]. The report first addresses USACE annual appropriations; second, it discusses USACE supplemental appropriations. These discussions address various policy issues for congressional and other decisionmakers associated with USACE funding. The Appendix to this report focuses on how the Trump Administration is using the monies provided to USACE through BBA 2018. Introduction to USACE USACE Structure USACE civil works activities are led by a civilian Assistant Secretary of the Army for Civil Works (ASACW), who reports to the Secretary of the Army. A military Chief of Engineers oversees the agency's civil and military operations and reports on civil works matters to the ASACW. A civilian Director of Civil Works reports to the Chief of Engineers. The agency's civil works responsibilities are organized under eight geographically based divisions, which are further divided into 38 districts. The Trump Administration released a proposal in June 2018 to remove USACE civil works from the Department of Defense. Although some Members of Congress have indicated support for looking at what USACE functions may not need to be in the Department of Defense, the conference report that accompanied the USACE appropriations for FY2019, H.Rept. 115-929 , opposed the Administration's proposal and indicated that "no funds provided in the Act or any previous Act to any agency shall be used to implement this proposal." USACE Projects USACE water resource projects attract congressional attention because these projects can have significant local and regional economic benefits and environmental effects. Unlike federal funding for highways and municipal water infrastructure, the majority of federal funds provided to USACE are not distributed by formula to states or through competitive grant programs. Instead, USACE generally has been directly engaged in the planning and construction of projects; the majority of its appropriations are used to perform work on geographically specific studies and projects authorized by Congress. USACE operates more than 700 dams; has built 14,500 miles of levees; and improves and maintains more than 900 coastal, Great Lakes, and inland harbors, as well as 13,000 miles of deep-draft channels and 12,000 miles of inland waterways. For most activities, Congress requires a nonfederal sponsor to share some portion of project costs. For some project types (e.g., levees), nonfederal sponsors own the completed works after construction and are responsible for operation and maintenance. As nonfederal entities have become more involved in USACE projects and their funding, these entities have expressed frustration with the time it takes USACE to complete studies and construction. Only a subset of authorized USACE construction activities are included in the President's budget request and funded annually by federal appropriations. Consequently, numerous authorized USACE projects or project elements have yet to receive federal construction funding. An estimated $96 billion in authorized USACE construction projects and dam safety work is eligible for USACE construction appropriations; discretionary appropriations for the USACE Construction account in annual Energy and Water Development appropriations bills have averaged $2 billion in recent years. Congress enacted an omnibus USACE authorization bill in 2014, the Water Resources Reform and Development Act of 2014 (WRRDA 2014; P.L. 113-121 ). Congress followed WRRDA 2014 with enactment in December 2016 of the Water Resources Development Act of 2016, which was Title I of the Water Infrastructure Improvements for the Nation Act ( P.L. 114-322 ). Among other things, these laws expanded authorities providing alternative ways to advance and deliver USACE studies and projects. To expand delivery options, Congress increased the flexibility in nonfederal funding of USACE-led activities and nonfederal leadership of USACE studies and projects. Competition for USACE discretionary appropriations also has increased interest in alternative project delivery and innovative financing , including private financing and public-private partnerships. In addition, Congress in WRRDA 2014 authorized new financing mechanisms for water resource projects. These statutes also provided that the costs of these nonfederally led activities generally are shared by the federal government largely as if USACE had performed them. That is, subject to the availability of federal appropriations, nonfederal entities advancing water resource projects may be eligible to receive credit or reimbursement (without interest) for their investments that exceed the required nonfederal share of project costs. These authorities typically require that the nonfederal entity leading the project comply with the same laws and regulations that would apply if the work were being performed by USACE. USACE Appropriations Congress typically funds USACE water resource activities through an annual Energy and Water Development appropriations bill. Because Congress in recent decades has authorized construction of water resource projects at a rate that exceeds the agency's annual construction appropriations, only a subset of authorized activities typically are included in the President's budget request and eventually funded by enacted appropriations. This situation results in competition for funds among authorized activities during the budget development and appropriations processes. Since the 112 th Congress, site-specific project line items added by Congress (i.e., congressionally directed spending , also referred to as earmarks ) have been subject to House and Senate earmark moratoriums. Consequently, appropriators generally have refrained from inserting in appropriations bills and accompanying reports funds for specific projects that were not requested in the President's budget. This practice has resulted in post-enactment agency work plans that identify how funds provided by Congress that were not requested by the President are being distributed across authorized USACE studies and projects. In the congressional reports and explanatory statements that accompany the annual appropriations bills for USACE, Congress has provided guidance to the Administration on activities to prioritize during the development of the work plan. Congress also has authorized the Chief of Engineers to undertake certain flood fighting activities and to repair damage to certain nonfederal flood control works. To fund these activities and repairs to USACE-operated projects (e.g., dredging to clear a navigation channel following a storm), Congress often has provided supplemental funds to certain USACE accounts. At times, including in BBA 2018, Congress also has funded construction of new flood control projects in areas affected by recent flood disasters. As discussed in detail later in this report (see below section, " USACE Annual Appropriations "), Congress has provided USACE accounts with almost $45 billion in supplemental appropriations in response to flood disasters since FY2005, of which almost $24 billion was for construction of flood control projects. Congress provided $15 billion of the $24 billion in construction funds in BBA 2018. USACE Annual Appropriations As shown in Figure 1 , Congress often appropriates more for USACE civil works than is requested by the President. In the text of enacted appropriations laws, Congress generally provides money to USACE at the account level. Accompanying appropriations reports (i.e., conference reports, committee reports, or explanatory statements), which sometimes are incorporated into law by reference, often identify specific USACE projects to receive appropriated funds. With the heightened attention to and restrictions on congressionally directed spending since FY2010, the projects identified in these reports have been limited largely to the projects included in the President's budget request; that is, Congress has not been adding new project-specific funding amounts. Instead, congressional action on USACE appropriations generally has been the provision of additional funding for various types of USACE activities (see below section, " Principal Documents and Process, Including Additional Funding ") and guidance on the use of the additional funding. In annual appropriations bills, Congress generally provides the majority of the agency's funding to two accounts—the Construction account and the Operations and Maintenance (O&M) account. The O&M account has made up a growing portion of the agency's use of annual appropriations, as shown in Figure 2 . The O&M account has increased from 39% of the USACE annual appropriations in FY2005 and 37% in FY2006 and FY2007 to 53% in FY2017, FY2018, and FY2019. This shift is consistent with efforts by recent Administrations and Congresses to limit funding for new construction activities (referred to as new starts or new construction starts ) and to focus instead on completing existing projects and on actions to address aging infrastruct ure. Enacted appropriations bills since FY2014 have allowed the agency to initiate a specified number of USACE new start studies and construction projects. For example, as in FY2018, Congress will allow FY2019-enacted funding to be used to initiate a maximum of five new construction projects. Congress uses the Flood Control and Coastal Emergencies (FCCE) account for USACE flood fighting and related emergency response preparedness and for repair of damage to certain nonfederal flood control works. For more on this account, see the below box titled "Flood Fighting and the Flood Control and Coastal Emergencies (FCCE) Account." The Mississippi River and Tributaries account (MR&T) account consists of flood control and navigation projects for the lower Mississippi River Valley. Principal Documents and Process, Including Additional Funding The President's budget request for USACE typically includes funding information at the account level (i.e., Investigation, Construction, and O&M), as shown in the appendix to the President's FY2019 budget request. More detailed information regarding the request is available in the agency's budget justification; the budget justification provides information for specific activities, such as identifying the level of funding requested for particular USACE studies and construction projects. USACE also publishes a summary of this information in a document it refers to as the p ress b ook . The press book shows the requested funding for USACE projects for each state, and it shows how the President's requests for various accounts are distributed across the agency's business line s (i.e., types of activities, such as navigation, restoration, and recreation). In recent years, the executive branch has justified decisions about which projects to fund and at what level through a number of metrics, including benefit-cost ratios and other metrics outlined in USACE budget development guidance each year. For decades through the annual discretionary appropriations process, Congress identified numerous USACE projects to receive funding that were not in the President's request and provided more funding than requested for others that were in the President's request. Since the 112 th Congress, congressional funding for site-specific projects has been subject to House and Senate earmark moratoriums. Since the 112 th Congress, in lieu of increasing funding for specific projects, Congress has provided additional funding for specific categories of work within some USACE budget accounts. That is, in recent appropriations cycles, Congress has included additional funding categories for various types of USACE projects (e.g., additional funding for ongoing maintenance of small, remote, or subsistence harbors), along with directions and limitations on the use of these funds on authorized studies and projects. USACE typically has been directed to report back to Congress in annual work plans on how these funds will be allocated at the project level. Recent levels of additional funding are shown below in Figure 3 . The work plan is developed by the Administration after enactment of the appropriations bill. For example, Congress in P.L. 115-244 provides $2.21 billion more than the President's request for FY2019; of this $2.21 billion, $2.07 billion is identified as additional funding for a total of 25 categories of USACE activities in four budget accounts. The accompanying conference report, H.Rept. 115-929 , calls for USACE, within 60 days of enactment, to issue a work plan that included the specific amount of additional funding to be used for each project. These work plans typically consist of a few pages of tables that list the projects, the amount of the additional funding that each project will receive, and in some cases a brief description of what is to be accomplished with the funds. For projects that were not in the budget justifications accompanying the President's initial budget request, the information included in the work plan is in many cases the extent of the Administration's explanation of how these funds are to be used. Trust Funds USACE administers two congressionally authorized trust funds, and both require annual appropriations to draw on their balances; that is, these funds are "on budget." The Harbor Maintenance Trust Fund (HMTF) and the Inland Waterways Trust Fund (IWTF) support cost-shared investments in federal navigation infrastructure for harbors and inland waterways, respectively. Use of HMTF monies is restricted largely to maintenance, and use of IWTF monies is limited largely to construction. Federal funding for harbor-related maintenance activities is funded in large part from the HMTF. This trust fund receives revenues from taxes on waterborne commercial cargo imports, domestic cargo, and cruise ship passengers at federally maintained ports. Similarly, the IWTF is authorized to fund roughly half of inland waterways construction; the IWTF receives the proceeds of a fuel tax on barge fuel for vessels engaged in commercial transport on designated waterways. In recent fiscal years, the HMTF has developed a surplus balance (nearly $10 billion at the start of FY2019), as appropriations from the fund have been less than receipts accruing to it. Conversely, the limited IWTF balance in recent years prevented the fund from supporting earlier levels of expenditures on waterway construction. Both trust funds were addressed in 2014 authorizing legislation, and spending from both funds has subsequently increased. Whether these trust funds will continue to provide for increased spending on inland and coastal navigation will depend in part on future appropriations legislation and actions on other legislative proposals. For example, H.R. 1908 , Investing In America: Unlocking the Harbor Maintenance Trust Fund Act, if enacted would make an amount equivalent to the harbor maintenance tax collections during the previous fiscal year available for authorized harbor maintenance. In January 2017, USACE estimated the cost to achieve and maintain constructed widths and depths of coastal navigation channels at $7.6 billion over the subsequent five-year period (i.e., $1.5 billion annually) and an additional $7.0 billion for the five years that follow. In FY2017, USACE used $1.2 billion (most of which was derived from the HMTF) on coastal navigation maintenance. The economic benefit of maintaining channels to these dimensions would vary from channel to channel depending on the cost of the dredging and the reduced transportation cost to shippers (and the benefits to the broader economy) resulting from improved navigation conditions. Most inland waterway construction and major rehabilitation costs are shared by the federal government (50%) and commercial users through the IWTF (50%). IWTF monies derive primarily from a fuel tax on commercial vessels on 27 designated federal waterways. At times, the level of collections from the fuel tax have been a limiting factor in the construction of inland waterways projects. In P.L. 113-295 , Congress authorized a $0.09 per gallon increase in the fuel tax, resulting in a barge fuel tax of $0.29 per gallon beginning in April 2015. As part of its FY2019 budget request, the Administration submitted a proposal that would establish a new user fee on vessels transporting commercial cargo on the inland waterways, allow the IWTF to cover 10% of O&M expenses, and designate additional federal waterways. P.L. 115-244 did not address the Administration's proposal; instead, Congress chose to alter the use of the IWTF by decreasing the IWTF contribution to the Chickamauga Lock construction on the Tennessee River from 50% to 15% during FY2019, thereby expanding the funding available for other inland navigation construction projects. This 85% General Treasury and 15% IWTF cost sharing is similar to what Congress enacted in WRRDA 2014 for the completion of the Olmsted Locks and Dam. The Olmsted project, which facilitates navigation on the Ohio River, had an extended construction period starting in the early 1990s. The project, which is anticipated to have a total construction cost of $2.78 billion (of which $1.00 billion derived from the IWTF), is anticipated to be completed in FY2019. USACE Supplemental Appropriations USACE also undertakes flood fighting activities and other natural disaster response and recovery activities. In recent years, Congress has provided supplemental appropriations through various pieces of legislation, primarily for flood disaster response and disaster recovery. From FY1990 through FY2018, Congress in total provided USACE accounts with almost $50.63 billion in supplemental appropriations, more than $49.20 billion of which was provided from FY2005 through FY2018. Of the more than $49.20 billion provided since FY2005, almost $44.63 billion (91%) was for response to and recovery from flooding and other natural disasters, and $4.58 billion (9%) was for economic stimulus under the American Recovery and Reinvestment Act ( P.L. 111-5 ). The majority of the $44.63 billion for disaster response and recovery was associated with storms in three years—storms including Hurricane Katrina in 2005 (approximately $16 billion); Hurricane Sandy in 2012 ($5.3 billion); and Hurricanes Harvey, Irma, and Maria in 2017 (at least $10.5 billion of the almost $17.4 billion of funds provided in BBA 2018). All USACE civil works supplemental funding from FY2000 through FY2018 is shown in Table 1 and Figure 4 . For context, annual appropriations for USACE flood-related activities nationally that were provided in Energy and Water Development appropriations acts from FY2005 though FY2018 totaled around $23.10 billion. Table 1 shows account-level funding in enacted USACE supplemental appropriations bills. Figure 4 , using data in Table 1 and adjusting the appropriations to 2018 dollars, shows how the amounts provided to USACE through supplemental appropriations have increased over the last three decades. During its deliberations on USACE supplemental appropriations, Congress often considers various issues and special conditions associated with the provision of these funds. These considerations include what type of flood damage reduction efforts to support (e.g., repair of existing infrastructure, construction of new infrastructure), Congress's role in authorizing the construction of USACE projects that receive supplemental funds, and whether to maintain or alter requirements for nonfederal cost sharing. For examples of the special considerations for USACE funds provided by BBA 2018, see the Appendix to this report. Supplemental USACE funding debates also raise broader questions for policymakers, such as the effectiveness and efficiency of processes such as those for post-disaster supplemental appropriations and USACE annual budget development, especially in regard to identifying and supporting priority investments in reducing the nation's flood risk. The following sections discuss three current policy topics related to USACE supplemental appropriations in more detail: transparency on the use of USACE supplemental appropriations; funding nonfederal interests to study and construct federal flood control projects; and the level of supplemental appropriations for construction activities. Transparency on the Use of USACE Supplemental Appropriations Enacted supplemental bills typically define what, if any, congressional reporting is required related to the use of USACE supplemental funds. For example, P.L. 113-2 , which provided funds to USACE largely for repair and recovery from Hurricane Sandy, required two reports of the agency. The second of the two reports identified on which projects USACE planned to spend roughly $2.16 billion of the $3.46 billion in construction funding provided to USACE; no further project-level public reporting was required. On August 9, 2018, the ASACW provided detailed policy guidance for how most of the USACE funds provided in BBA 2018 are to be implemented, including defining key terms and clarifying when nonfederal cost sharing would not be required. A few weeks earlier, on July 5, 2018, USACE released tables listing which USACE projects were to receive much of the funding provided by BBA 2018. Similar to the work plans, these tables provide little information beyond the project name and in some cases the estimated cost to be covered by the funds. For more information on the Trump Administration actions associated with the USACE accounts funded by BBA 2018, see the Appendix to this report. Funding Nonfederal Interests to Study and Construct Federal Control Projects The August 9, 2018, ASACW implementation guidance for BBA 2018 includes the following statement: "In addition the Corps should consider the use of various authorities (such as WRRDA 2014, Section 1043) that encourage expanded non-Federal participation in studies and projects." The statement appears in the portion of the guidance related to the long-term disaster recovery activities, which include activities funded through the Investigations, Construction, and Mississippi River and Tributaries accounts. Section 1043 of WRRDA 2014 authorizes a study and construction pilot program that can be used to transfer federal funds to nonfederal interests for them to perform studies and construct projects; unlike with other authorities that allow nonfederal interests to lead USACE studies and projects and then be reimbursed for what would have been the federal costs, the Section 1043 authority would allow the pilot studies and construction projects to have federal funds up front. As of the end of September 2018, USACE had not publicly released implementation guidance for Section 1043 of WRRDA 2014, and there is no publicly available indication that the provision's authority has been used to transfer to nonfederal interests annual or supplemental federal appropriations. Level of Supplemental Construction Appropriations Supplemental bills have funded various USACE accounts. For many years, Congress principally limited its supplemental funding for USACE to the FCCE account and the O&M account. Since FY2005, Congress also has regularly provided supplemental funding for other USACE accounts, such as the Construction account. BBA 2018 provided 87% ($15.055 billion) of its $17.398 billion to the USACE Construction account; $55 million of this was for repairs of USACE construction projects damaged by floods, and the remaining $15.0 billion was designated for construction of riverine and coastal flood risk reduction projects. Of the supplemental funds that Congress provided to USACE for Hurricanes Katrina and Sandy, 31% and 65%, respectively, went to the Construction account. In contrast, after other disasters, Congress has not provided supplemental appropriations for post-disaster USACE construction, including for the 2008 Hurricane Ike-impacted Texas coast, the Midwest areas impacted by the 2011 and 1993 floods, or the 1992 Hurricane Andrew-impacted areas. Of the amounts provided to the agency's Construction account from FY2005 through FY2018, supplemental construction appropriations totaled $23.76 billion (exclusive of the American Recovery and Reinvestment Act; P.L. 111-5 ), and annual Construction account appropriations for riverine and coastal flood control projects totaled almost $12.83 billion, as shown in Figure 5 . That is, with enactment of BBA 2018, supplemental funding for flood-related construction outpaced flood-related construction funded through annual appropriations from FY2005 through FY2018. Pursuant to the text of the supplemental appropriations legislation, these supplemental appropriations typically are available only for USACE activities in flood-affected areas, states, or territories. Although some of the funding has provided for (or is expected to provide for) the completion of ongoing construction projects in flood-affected areas, a significant portion of the funding has been allocated to construction projects that were not funded for construction prior to the flood event or the enactment of the supplemental appropriations law. Also supplemental bills often alter or waive various requirements that otherwise are standard for USACE activities, such as cost shares, project cost increase limitations, and congressional limits on new studies and new construction starts. Supporters of supplemental appropriations for the Construction account for USACE flood control projects in natural disaster-affected areas view these projects as part of recovery efforts and as means to improve the affected areas' flood resilience. Congress may provide these funds with special considerations (e.g., designated as emergency funding and not requiring budgetary offsets; and waiving nonfederal cost-share requirements). Other stakeholders support more funding for flood risk reduction in the annual appropriations process, in which authorized projects in all states and insular areas compete with one another for the annual funding. Still other stakeholders would prefer more attention and funding that supports other programs and measures to reduce the nation's flood risks. (For an overview of federal flood-related assistance programs, see CRS Report R45017, Flood Resilience and Risk Reduction: Federal Assistance and Programs , by [author name scrubbed] et al.) Conclusion: Trends and Policy Questions This report describes four shifts in the funding of USACE activities: Shift to Operations and Maintenance. An increasing share of annual discretionary appropriations is used on USACE O&M activities. The O&M account has increased from 39% of the USACE annual appropriations in FY2005 to 53% in FY2019. Shift to Administration Work Plans. Congress has provided an increasing portion of USACE annual appropriations to various additional funding categories of work. In FY2012 and FY2019, Congress provided $0.5 billion and $2.2 billion, respectively, in additional funding to USACE through the annual appropriations process. The Administration follows congressional guidance to develop post-enactment agency work plans that specify which projects receive the additional funding. Unlike the justification documents that accompany the President's budget request, the project-level details in the work plan are quite limited. Flood-Related Investments Occurring More Through Supplemental Ap p ropriations Than Annual Appropriations . Since FY2005, Congress has provided USACE with more than $44.6 billion in supplemental appropriations in response to flood disasters, of which almost $23.8 billion was for construction of control projects. The Administration identifies which eligible USACE projects or nonfederal-led USACE projects are to receive these funds. Nonfederal Entities Leading Studies and Construction May Expand to Activities Funded by Supplemental Appropriations . Since 2014, Congress has expanded authorizing authorities that allow nonfederal entities to lead USACE studies and construction projects; the Administration has released guidance indicating its interest in using the authority in Section 1043 of WRRDA 2014 to provide federal funds up front for nonfederal-led projects for BBA 2018 funds. At the same time, BBA 2018 eliminated the nonfederal cost share for studies and may fund ongoing construction projects. These trends may raise broader questions for policymakers. Examples of these policy questions include the following: How has Congress's role shifted vis-à-vis USACE and the agency's appropriations, and does that shift affect the type of information and engagement that Congress may pursue in the future regarding USACE's use of appropriations? How do these trends affect the effective, efficient, and accountable use of federal funding provided to USACE? What do these trends portend for USACE's long-term planning, budgeting, and duties? Do the ad hoc enactment of USACE supplemental appropriations and the waivers and geographic limitations often associated with supplemental appropriations result in an equitable use of federal funding? How effective and efficient are annual and supplemental appropriations processes in identifying and supporting priority investments in reducing the nation's flood risk? Appendix. Supplemental Funding in the Bipartisan Budget Act of 2018, P.L. 115-123 In the Bipartisan Budget Act of 2018 (BBA 2018; P.L. 115-123 ), Congress has provided $17.398 billion in supplemental appropriations to the following U.S. Army Corps of Engineers (USACE) accounts: $135 million for Investigations for flood risk reduction studies; $15,055 million for Construction (of which $15,000 million is specifically for construction of flood risk reduction projects and $55 million is for short-term repairs to damaged construction projects); $770 million for Mississippi River and Tributaries; $608 million for Operations and Maintenance; $810 million for Flood Control and Coastal Emergencies; and $20 million for Expenses. Congress has designated all funds provided to USACE accounts in the act "as being for an emergency requirement pursuant to section 251(b)(2)(A)(i) of the Balanced Budget and Emergency Deficit Control Act of 1985." This means that these funds are not subject to the statutory limits on discretionary spending. The study and construction funding represents 87% of the $17.398 billion in supplemental appropriations provided by BBA 2018 to USACE. Of the monies in the Construction account, Congress has provided that $15.000 billion was to be used for the following: $10.425 billion is designated for expedited construction of flood and storm damage reduction projects in states and territories affected by Hurricanes Harvey, Irma, and Maria. $4.575 billion is to be used for USACE flood and storm damage reduction construction activities in any state or territory with more than one flood-related major disaster declaration in calendar year (CY) 2014, CY2015, CY2016, or CY2017. Of this amount, $50 million is set aside for smaller projects that reduce the risk of flooding and storm damage being performed under the agency's programmatic authorities (known as continuing authorities programs). BBA 2018 establishes requirements for states and insular areas to be eligible for BBA 2018 study and construction funds. The geographic constraints on BBA 2018 funds mean that some states and territories are eligible for all the funding, some states and territories are eligible for some of the study and construction monies, and some states and territories do not meet the requirements for the BBA 2018 study and construction funds. USACE projects in five states (Florida, Georgia, Louisiana, South Carolina, and Texas) and two territories (U.S. Virgin Islands and Puerto Rico) meet the eligibility requirements for funding from both the $10.425 billion and the $4.575 billion, as shown in Figure A-1 . A total of 33 states and 3 territories meet the criterion of one flood-related major disaster declaration in CY2014, CY2015, CY2016, or CY2017, as shown in Figure A-1 ; that is, $4.575 billion in BBA 2018 funds are available for use on USACE construction projects in these 33 states and 3 territories. Seventeen states (e.g., North Carolina, which was affected by Hurricane Matthew in 2016 and Hurricane Florence in 2018) do not qualify for USACE supplemental construction appropriations provided by the BBA 2018. When using BBA 2018 construction funds (but not when using annual appropriations), projects in Puerto Rico and the U.S. Virgin Islands and ongoing construction projects are 100% federally funded; all other construction activities using these funds follow normal cost-sharing arrangements (e.g., typically 65% federal and 35% nonfederal for construction of flood control projects, but these percentages vary by project due to project-specific conditions). On July 5, 2018, USACE assigned most of the BBA 2018 funds provided for construction and studies to specific USACE projects; that is, of the $15.000 billion, $1.131 billion in construction funds remains unassigned. On August 9, 2018, the Office of the Assistant Secretary of the Army (Civil Works) issued Policy Guidance on Implementation of Supplemental Appropriations in the Bipartisan Budget Act of 2018 ; it provides a definition for key terms, including ongoing construction project, and whether the projects on the July 5, 2018, list qualify as ongoing construction. Table A-1 combines the project-level information for construction projects in the July 5, 2018, list and the August 9, 2018, guidance. The August 9, 2018, guidance identifies ongoing construction projects as: (1) authorized projects that had received funding from the USACE Construction account in FY2015, FY2016, or FY2017, and (2) authorized projects that a nonfederal sponsor was constructing during those three fiscal years pursuant to a potential reimbursement agreement with USACE. Of the $135 million for the Investigation account, BBA 2018 requires that $75 million be available for states and territories affected by Hurricanes Harvey, Irma, and Maria; the statute also states that the remainder (i.e., $60 million) is to be available for "high-priority studies of projects" in any state or territory with more than one flood-related major disaster declaration in CY2014, CY2015, CY2016, or CY2017. When using these funds (but not when using annual appropriations), study costs are 100% federal. Construction Authorization and Role of Congress BBA 2018 amends the role of Congress for some construction projects that receive supplemental USACE construction funds provided in the legislation. The standard process for USACE projects is that after the completion of a multistep project development process (which includes, among other measures, a completed feasibility study and environmental documentation and a report by the agency's Chief of Engineers known as a Chief's Report ), Congress authorizes the project's construction. The authorization is typically in an omnibus water project authorization bill. Division B, Title IV of BBA 2018 includes the following language, which allows for some projects to proceed to construction without project-specific congressional authorization: $15,000,000,000 is available to construct flood and storm damage reduction, including shore protection, projects which are currently authorized or which are authorized after the date of enactment of this subdivision, and flood and storm damage reduction, including shore protection, projects which have signed Chief's Reports as of the date of enactment of this subdivision or which are studied using funds provided under the heading "Investigations" if the Secretary determines such projects to be technically feasible, economically justified, and environmentally acceptable. A deviation from the standard authorization process also is provided for use of USACE funds from the Hurricane Sandy supplemental appropriation while maintaining a role for the House and Senate Committees on Appropriations. Division B, Title X, Chapter 4 of P.L. 113-2 states that upon approval of the Committees on Appropriations of the House of Representatives and the Senate these funds may be used to construct any project under study by the Corps for reducing flooding and storm damage risks in areas along the Atlantic Coast within the North Atlantic Division of the Corps that were affected by Hurricane Sandy that the Secretary determines is technically feasible, economically justified, and environmentally acceptable. Hurricane Sandy Projects in the Bipartisan Budget Act of 2018 In Section 20402, BBA 2018 transfers unobligated balances from the monies provided by P.L. 113-2 to the USACE Flood Control and Coastal Emergencies account ($518.9 million) and the USACE Operations and Maintenance account ($210.0 million) to the Construction account for Hurricane Sandy-related construction projects. The August 9, 2018, Assistant Secretary of the Army for Civil Works implementation guidance for BBA 2018 does not provide explicit guidance on how these transferred funds are to be implemented.

The U.S. Army Corps of Engineers (USACE) is an agency within the Department of Defense with both military and civil works responsibilities. The agency's civil works activities consist largely of the planning, construction, and operation of water resource projects to maintain navigable channels, reduce flood and storm damage, and restore aquatic ecosystems. Congress directs USACE's civil works activities through authorization legislation, annual and supplemental appropriations, and oversight. For Congress, the issue is not only the level of USACE appropriations but also how efficiently the agency is delivering flood control, navigation, and ecosystem restoration projects. These projects can have significant local as well as national economic and environmental benefits. Annual and Supplemental Appropriations USACE discretionary appropriations, which typically are provided through annual Energy and Water Development appropriations acts, have ranged from $4.7 billion to $7.0 billion during the decade from FY2009 to FY2019 and have been increasing since FY2013. In recent years, Congress has directed that more than 50% of the enacted appropriations be used for operation and maintenance of USACE's aging infrastructure. USACE also has a prominent role in responding to natural disasters, especially floods, in U.S. states and territories. Congress increasingly is using supplemental appropriations not only to perform emergency response and repair for damaged flood control works and USACE projects but also to study and construct new projects that reduce flood risks in areas recently affected by hurricanes and floods. From FY2005 through FY2018, Congress enacted 13 supplemental bills related to flooding and natural disasters, providing a total of almost $45 billion to USACE; for the same period, annual discretionary appropriations for USACE's flood-related projects and activities totaled $23 billion. Supplemental appropriations bills often alter or waive various requirements for USACE activities, such as cost shares and project cost limitations, and establish project selection and reporting requirements that differ from requirements for USACE activities funded through annual discretionary appropriations. Issues for Congress Issues for Congress include the significant role of supplemental appropriations in advancing studies and construction of flood control projects since FY2005 and the agency's backlog of authorized but unconstructed projects. The agency has reported a $96 billion backlog of authorized construction projects; for context, annual appropriations for the USACE Construction account (which funds most USACE construction projects) in FY2018 and FY2019 are $2.1 billion and $2.2 billion, respectively. Congress also has limited the number of new studies and construction projects initiated with annual discretionary appropriations (e.g., a limit of five new construction starts using FY2019 appropriations). Given that only a few construction projects typically are started each fiscal year, numerous projects authorized for construction by previous Congresses remain unfunded. USACE may fund some of the authorized flood control projects in its backlog with the more than $17 billion in emergency supplemental appropriations provided to USACE accounts in the Bipartisan Budget Act of 2018 (BBA; P.L. 115-123). Although no numerical limits on starting new studies or construction projects are associated with these funds, the study and construction funds have some geographic limitations that tie their use to areas affected by flooding by the hurricanes in 2017 or by more than one flood in calendar years 2014 through 2017. As a result of this limitation, seventeen states (including North Carolina, which was affected by Hurricane Matthew in 2016 and Hurricane Florence in 2018) did not qualify for USACE supplemental construction appropriations provided through the BBA 2018. Related policy questions for Congress and other decisionmakers include the following: How have the roles of Congress and the Administration shifted vis-à-vis USACE and its appropriations, and does that shift affect the type of information and engagement that Congress may pursue in the future regarding USACE's use of appropriations? How do trends in annual and supplemental appropriations amounts, processes, and requirements influence the effective, efficient, and accountable use of federal funding provided to USACE? What do these trends portend for USACE's long-term planning, budgeting, and duties?

CRS_R41744

Introduction This report discusses rare earth elements used in Department of Defense (DOD) weapon systems, current problematic oversight issues, and options for Congress to consider. Rare earth elements (also referred to as REEs and by the shorthand term "rare earths") include the lanthanide series of 15 elements on the periodic table, beginning with atomic number 57 (lanthanum) and extending through element number 71 (lutetium). Two other elements, yttrium and scandium, often occur in the same rare earth deposits and possess similar properties. These 17 elements are referred to as "rare" because while they are relatively abundant in quantity, they appear in low concentrations in the earth's crust and economic extraction and processing is both difficult and costly. The United States is a major consumer of products containing rare earth elements. These elements are incorporated into many sophisticated technologies with both commercial and defense applications. From the 1960s to the 1980s, the United States was the leader in global production of rare earths. Since that time, processing and manufacturing of the world's supply of rare earths and downstream value-added forms such as metals, alloys, and magnets have shifted almost entirely to China, in part due to lower labor costs and lower environmental standards. A series of events and ensuing press reports have highlighted the rare earth "crisis," as some refer to it. One such event occurred in July 2010, when China's Ministry of Commerce announced that China would cut its exports of rare earth minerals by about 72%. In September 2010, China temporarily cut rare earth exports to Japan, apparently over a maritime dispute. This dispute highlighted the potential for disruption of the world's supply of rare earth materials. Some Members of Congress are concerned with the potential for a nearly total U.S. dependence on foreign sources for rare earth elements and the implications of this dependence for national security. Congress has been interested in the rare earth issue largely because: the world is almost wholly dependent on a single national supplier—China—for rare earths; the United States has no production of some heavy rare earths (terbium to lutetium and yttrium); the United States has little production of rare earth metals, powders, and NeFeB magnets; there may be repercussions if these materials are not available for commercial and defense applications; and the rare earths supply chain vulnerability question may adversely affect the ability of the United States to plan strategically for its national security needs. In April 2010 Congress required the Government Accountability Office (GAO) to examine rare earths in the defense supply chain and also required the Secretary of Defense to assess the defense supply chain and develop a plan to address any shortfalls or other supply chain vulnerabilities, including a specific requirement to present a plan for the restoration of domestic NeFeB magnet production. GAO concluded that revamping the defense supply chain could take 15 years or more. Congress has required that the Secretary of Defense, pursuant to the Ike Skelton National Defense Authorization Act for FY2011 ( P.L. 111-383 ), conduct an assessment of the rare earths supply chain issues and develop a plan to address any supply chain vulnerabilities. DOD's report was released in March 2012. Congress may want answers to at least four important questions on rare earth elements: (1) Are rare earth elements essential to U.S. national security? (2) How would a scarcity of rare earths affect the delivery or performance of defense weapon systems? (3) Is the United States vulnerable to supply disruptions, and if so, are there readily available and equally effective substitutes? (4) What are the short-term and long-term options that DOD may consider in response to a lack of domestic rare earth element production and China's continued dominance? Major New Developments H.R. 1960, National Defense Authorization Act (NDAA) for FY2014 H.R. 1960 was introduced in the House on May 14, passed the House in a recorded vote (315-108) on June 14, and was referred to the Senate on July 8, 2013. The bill contains several provisions which would, if enacted into law, give the President more authority to conserve strategic and critical materials, as well as direct the Secretary of Defense to report on plans to assess the supply chain diversification for rare earth substitutes and develop risk mitigation strategies. The provisions appear below. Subtitle B—National Defense Stockpile Section 1411. Use of National Defense Stockpile for the Conservation of a Strategic and Critical Materials Supply Section 1411 would modify the President's authority to maintain and manage a national defense stockpile, and allow the Defense Logistics Agency to more proactively engage in the market. These changes would grant the President the authority to conserve strategic and critical materials. (a) Presidential Responsibility for Conservation of Stockpile Materials - Section 98e(a) of Title 50, United States Code, is amended: (1) by redesignating paragraphs (5) and (6) as paragraphs (6) and (7), respectively; and (2) by inserting after paragraph (4) the following new paragraph (5): "(5) provide for the recovery of any strategic and critical material from excess materials made available for recovery purposes by other Federal agencies;" (b) Uses of National Defense Stockpile Transaction Fund - Section 98h(b)(2) of Title 50, United States Code, is amended— (1) by redesignating subparagraphs (D) through (L) as subparagraphs (E) through (M), respectively; and (2) by inserting after subparagraph (C) the following new subparagraph (D): "(D) Encouraging the conservation of strategic and critical materials." (c) Development of Domestic Sources - Section 98h-6(a) of Title 50, United States Code, is amended, in the matter preceding paragraph (1), by inserting 'and conservation' after 'development'. Section 1412. Authority to Acquire Additional Materials for the National Defense Stockpile Section 1412 would provide authority to acquire certain additional strategic and critical materials for the National Defense Stockpile. The materials anticipated to be acquired have been identified to meet the military, industrial, and essential civilian needs of the United States. (a) Acquisition Authority - Using funds available in the National Defense Stockpile Transaction Fund, the National Defense Stockpile Manager may acquire the following materials determined to be strategic and critical materials required to meet the defense, industrial, and essential civilian needs of the United States: (1) Ferroniobium. (2) Dysprosium Metal. (3) Yttrium Oxide. (4) Cadmium Zinc Tellurium Substrate Materials. (5) Lithium Ion Precursors. (6) Triamino-Trinitrobenzene and Insensitive High Explosive Molding Powders. (b) Amount of Authority - the National Defense Stockpile Manager may use up to $41,000,000 of the National Stockpile Transaction Fund for acquisition of the materials specified in subsection (a). (c) Fiscal Year Limitation - The authority under this section is available for purchases during Fiscal Year 2014 through Fiscal Year 2019. Directive Report Language In H.R. 1960 , under Title XVI, Industrial Base Matters, there are two reporting requirements required by the House Armed Services Committee that address congressional concerns over maintaining a secure access and a diverse supply chain for rare earth elements to be used for national security purposes and in defense weapon systems. The first directive requires the Under Secretary of Defense for Acquisition, Technology and Logistics to submit a report to the congressional defense committees, by February 1, 2014, to outline a risk mitigation strategy focused on securing the necessary supplies of rare earth elements. The report language reads as follows: Title XVI – Industrial Base Matters Report on the Diversification of Supply Activities Related to Rare Earth Elements The committee is aware that in response to the report required by section 843 of the Ike Skelton National Defense Authorization Act for Fiscal Year 2011 ( P.L. 111-383 ) and based on forecasting demand for fiscal year 2013 only, the Under Secretary of Defense for Acquisition, Technology, and Logistics concluded that domestic production of rare earth elements could satisfy the level of consumption required to meet defense procurement needs by fiscal year 2013, with the exception of yttrium. However, the committee observes that the Future Years Defense Program indicates that consumption of rare earth elements is expected to increase after 2013. Specifically, the report on the feasibility and desirability of recycling, recovery, and reprocessing of rare earth elements required by the conference report ( H.Rept. 112-329 ) to accompany the National Defense Authorization Act for Fiscal Year 2012, states that each SSN-774 Virginia -class submarine would require approximately 9,200 pounds of rare earth materials, each DDG-51 Aegis destroyer would require approximately 5,200 pounds of these materials, and each F-35 Lightning II aircraft would require approximately 920 pounds of these materials. The committee is aware that the Department of Defense intends to pursue a three-pronged strategy to secure supplies of rare earth elements, which consists of diversification of supply, pursuit of substitutes, and a focus on reclamation of waste, as part of a larger U.S. Government recycling effort. The committee believes that diversification of supply activities related to rare earth elements is necessary in order to meet the growing demand for these materials, but the committee is concerned that some of these processes may prove to be technically difficult or so expensive that they are deemed cost-prohibitive. Therefore, the committee directs the Under Secretary of Defense for Acquisition, Technology, and Logistics to submit a report to the congressional defense committees by February 1, 2014, on the Department's risk mitigation strategy for rare earth elements, which should include, at a minimum, the following elements: (1) A list and description of the programs initiated or planned to reclaim rare earth elements by the Department, along with a description of the materials reclaimed or expected to be reclaimed from such programs; (2) An assessment of the cost of materials produced by these reclamation efforts compared to the cost of newly-mined materials; (3) An assessment of availability of reliable suppliers in the National Defense Industrial Base for the reclamation and reprocessing of rare earth elements; (4) A list of alternative sources of supply, such as mine tailings, recycled components, and consumer waste, that the Department has investigated or plans to investigate; (5) A physical description of alternative sources of supply with corresponding geologic characteristics, such as grade, resource size, and the amenability of that feedstock to metallurgical processing; (6) A description of the materials that the Department plans to obtain via the Defense Priorities and Allocations System; and (7) Other diversification of supply activities deemed relevant by the Under Secretary. The second directive requires DOD to perform an assessment of the potential for incorporating the substitution of non-rare earth materials into components of the Joint Strike Fighter, based on the supply chain challenges faced in securing components containing rare earth materials. Report on the Implementation of Rare Earth Elements Strategy in the Joint Strike Fighter Program The committee is aware that the Department of Defense intends to pursue a three-pronged strategy to secure supplies of rare earth elements, which consists of diversification of supply, pursuit of substitutes, and a focus on reclamation of waste as part of a larger U.S. Government recycling effort. However, it remains unclear how this strategy will be implemented in the Department's major defense acquisition programs (MDAPs). Several high-profile MDAPs, including the F-35 Lightening II program, may use significant amounts of rare earth elements in full-rate production. The committee is concerned that the introduction of substitute materials and components may increase acquisition and sustainment costs through the qualification of manufacturers for substitutes, implementation of engineering changes to accommodate substitutes, and the long-term costs associated with supplier networks. Therefore, the committee directs the Assistant Secretary of the Navy for Research, Development and Acquisition, in coordination with the Program Executive Officer for the F-35, to submit a report to the congressional defense committees by February 15, 2014, on the potential for substitution of components and materials into F-35 aircraft to reduce consumption of rare earth materials. The report, which may include a classified annex, should include the following: (1) A list and description of subsystems that contain rare earth elements and the approximate quantities of each rare earth element by subsystem; (2) An assessment of the potential to incorporate substitute components or materials in each subsystem based on technical acceptability, to include consideration of performance requirements, and engineering changes that may be necessary for integration of the substitute; and (3) An assessment of the potential to incorporate substitute components or materials in each subsystem based on cost acceptability to include consideration of material costs, qualification and testing costs, and engineering change costs. S. 1197, NDAA for FY2014 S. 1197 was introduced on June 20, 2013, referred to the Armed Services Committee. The bill was considered for Senate floor action on December 9, 2013. S. 1600, Critical Minerals Policy Act of 2013 S. 1600 , the Critical Minerals Policy Act of 2013, was introduced on October 29, 2013, and referred to the Energy and Natural Resources Committee. The bill would require the Secretary of Interior and the Secretary of Energy to amend current policies, including "facilitate the reestablishment of domestic, critical mineral designation, assessment, production, manufacturing, recycling, analysis, forecasting, workforce, education, research, and international capabilities in the United States." H.R. 761, National Strategic and Critical Minerals Production Act of 2013 H.R. 761 , the National Strategic and Critical Minerals Production Act of 2013 was introduced on February 15, 2013, and referred to the Committee on Natural Resources on July 8, 2013, ( H.Rept. 113-138 ). The bill passed in a recorded vote, 246-178, and was referred to the Senate Energy and Natural Resources Committee on December 19, 2013. The bill would require both the Secretary of the Interior and the Secretary of Agriculture to more efficiently develop domestic sources of the minerals and materials of strategic and critical importance to U.S. economic and national security, and manufacturing competitiveness. H.R. 981, RARE Act of 2013 H.R. 981 , the RARE Act of 2013, was introduced on March 6, 2013, referred to the Subcommittee on Energy and Mineral Resources on March 7, 2013, and ordered to be reported by Unanimous Consent on May 15, 2013. The bill would require the Secretary of Interior to conduct an assessment of current global rare earth element resources and the potential future global supply. H.R. 1063, National Strategic and Critical Minerals Policy Act of 2013 H.R. 1063 , the National Strategic and Critical Minerals Policy Act of 2013, was introduced on March 12, 2013, referred to the Subcommittee on Energy and Mineral Resources on March 15, 2013, and ordered to be reported by Unanimous Consent on May 15, 2013. The bill would require the Secretary of the Interior to conduct an assessment of the current and future demands for the minerals critical to United States manufacturing, agricultural competitiveness, economic and national security. President Obama's Announcement on the Joint World Trade Organization Dispute Resolution Case on China7 On March 13, 2012, President Obama made an announcement that the United States "had asked the World Trade Organization to facilitate formal consultations with China over its limits on rare-earth exports, in a case filed jointly with Japan and the European Union (EU)." In announcing the case against China, the United States believes that China is illegally limiting exports of rare earths and pressuring foreign companies to move to China to take advantage of lower prices for domestic rare earth customers. In its defense, China claims that reducing the size of exports will help alleviate environmental hazards resulting from rare earth mining. The U.S. Trade Representative issued the following statement: America's workers and manufacturers are being hurt in both established and budding industrial sectors by these policies. China continues to make its export restraints more restrictive, resulting in massive distortions and harmful disruptions in supply chains for these materials throughout the global marketplace," said Ambassador Kirk. "The launch of this case against China today, along with the President's creation of the Interagency Trade Enforcement Center, reflects the Obama Administration's commitment to make all of our trading partners play by the rules. We will continue fighting for a level playing field for American workers and manufacturers in order to grow our economy, and ensure open markets for products made in America." The United States recently won a WTO challenge against China's export restraints on nine other industrial inputs. China's export restraint measures on rare earths, tungsten, and molybdenum appear to be part of the same troubling industrial policy aimed at providing substantial competitive advantages for Chinese manufacturers. China imposes several different types of unfair export restraints on the materials at issue in today's consultations request, including export duties, export quotas, export pricing requirements as well as related export procedures and requirements. Because China is a top global producer for these key inputs, its harmful policies artificially increase prices for the inputs outside of China while lowering prices in China. This price dynamic creates significant advantages for China's producers when competing against U.S. producers – both in China's market and in other markets around the world. The improper export restraints also contribute to creating substantial pressure on U.S. and other non-Chinese downstream producers to move their operations, jobs, and technologies to China. In July 2012, a WTO panel was convened. Some estimates were that the panel of judges will have about six months to complete their inquiry and then issue a final report. The WTO joint dispute resolution panel estimated that a final report would be issued in November 2013. However, as of December 2013 no final report has been issued. 2013 Annual Industrial Capabilities Report to Congress In October 2013, DOD released its Annual Industrial Capabilities Report to Congress. The reported stated that, for a variety of reasons, the overall supply chain issues regarding the availability of rare earth materials first raised in 2010 and 2011 have improved, as discussed here. Rare earth elements constitute a group of materials with numerous commercial as well as defense applications. These materials gained considerable attention in 2011 as prices increased drastically and concerns rose over their availability especially due to one nation, China, being the source of over 95 percent of the global supply. However, global market forces are leading to positive changes in rare earth supply chains and a sufficient supply of most of these materials likely will be available to the defense industrial base. In fact, there has been a significant reversal in the situation in 2012 from the prevailing market conditions in 2011. Overall demand for rare earth materials has decreased considerably from the previous year. A leading global expert forecast in August 2012 that 2012 global demand is expected to be 20 percent less than forecast in early 2011. Similarly, this expert believes that demand in 2016 will be 20 percent less than forecast in 2011. One factor contributing to reduced demand is the substitution of other materials for rare earth materials. There has also been reduced rare earth usage in individual applications and a drawdown in inventories accumulated the previous year. In conjunction with these factors, there has been an increase in supply of material from outside of China. As a result, prices for most rare earth oxides and metals have declined approximately 60 percent from their peaks in the summer of 2011. A strengthening and diversification of the supply chain for rare earth materials, including in the U.S., is anticipated in the coming year. The private sector's reaction to market forces has been to increase exploration for rare earth materials and development of downstream processing capabilities. According to one industry expert, there are over 400 rare earth projects under review globally, approximately four dozen of which may be considered in advanced stages of development in over a dozen countries worldwide. Two new projects in particular should have a significant impact on markets in 2013. Rare earth oxide production that has commenced in the U.S. and Malaysia based on mined material from the U.S. and Australia, respectively, will add approximately 40,000 tons of oxide production capacity to global supply in 2013, close to one-third of forecasted demand. Furthermore, the facility in the U.S. will have the capability to increase its capacity by an additional 20,000 tons in 2013. 2013 Strategic and Critical Materials Report on Stockpile Requirements The Secretary of Defense is required to report to Congress, on a biannual basis, recommendations on defense planning and projections for stockpile requirements (the availability of supplies of strategic and critical materials) under certain national emergency planning assumptions. This report outlines the current state of strategic and critical materials for defense use, and the proposed mitigation strategies. These strategies include stockpiling, substitution with other materials, export reductions, and increasing procurement. This report found that of the 76 materials evaluated for the potential for shortfalls (as defined as insufficiently reliable production to meet demands), 23 materials were found to represent a potential shortfall. This study included all rare earth elements, except promethium. Six rare earth element shortfalls were identified: they are: yttrium, dysprosium, erbium, terbium, thulium, and scandium. Department of Defense Report Responding to Section 843 DOD released a seven-page report in March 2012. The report stated that "Seven of the 17 rare earth elements were found to meet the criteria established in Section 843." They are dysprosium, erbium, europium, gadolinium, neodymium, praseodymium, and yttrium. DOD's assessment of the forecast for a domestic supply for key rare earths concluded: "by 2012 U.S. production (for seven rare earths used in military applications) could satisfy the level of consumption required to meet defense procurement needs, with the exception of yttrium." In an April 2012 interview with Bloomberg News, the DOD head of industrial policy confirmed that DOD uses less than 5% of rare earths used in the United States, and that DOD was closely monitoring the rare earth materials market for any projected shortfalls or failures to meet mission requirements. Brett Lambert, Deputy Assistant Secretary of Defense for Manufacturing and Industrial Base Policy, suggested that if material shortages were projected, DOD would seek congressional approval to stockpile materials. Other measures could include the use of contingency contracting to meet DOD requirements. Background on Rare Earth Elements What Are Rare Earth Elements? According to the U.S. Geological Survey (USGS), there are 17 rare earth elements on the periodic table. The first 15 elements begin with atomic number 57 (lanthanum) and extend through element number 71 (lutetium); two other elements, yttrium and scandium, have similar properties. Rare earths are not particularly rare but are found in low concentrations in the earth's crust. The economics of locating and retrieving them are challenging. Rare earths are divided into two groups: light rare earth elements (LREE) - lanthanum, cerium, praseodymium, neodymium, promethium, and samarium, and heavy rare earth elements (HREE) - europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, lutetium, scandium, and yttrium. How Are Rare Earths Used in Defense Applications? It has been estimated that DOD uses less than 5% of domestic consumption of rare earths. Rare earth elements are found in two types of commercially available, permanent magnet materials. They are samarium cobalt (SmCo), and neodymium iron boron (NdFeB). NdFeB magnets are considered the world's strongest permanent magnets and are essential to many military weapons systems. SmCo retains its magnetic strength at elevated temperatures and is ideal for military technologies such as precision-guided missiles, smart bombs, and aircraft. The superior strength of NdFeB allows for the use of smaller and lighter magnets in defense weapon systems. The following illustrations (Figures 1-5) show the use of rare earth elements in a variety of defense-related applications: fin actuators in missile guidance and control systems, controlling the direction of the missile; disk drive motors installed in aircraft, tanks, missile systems, and command and control centers; lasers for enemy mine detection, interrogators, underwater mines, and countermeasures; satellite communications, radar, and sonar on submarines and surface ships; and optical equipment and speakers. How and Where Are Rare Earths Produced?22 In April 2010, GAO reported on the world's production of rare earths and stated that China produced 97% of rare earth ore, 97% of rare earth oxides, 89% of rare earth alloys, 75% of neodymium iron boron magnets (NeFeB), and 60% of samarium cobalt magnets (SmCo). The rare earth production process is complex and expensive. The stages of production consist of mining, separating, refining, alloying, and manufacturing rare earths into end-use items and components, as described in the GAO report. The first stage is the actual mining, where the ore is taken out of the ground from the mineral deposits. The second stage is separating the ore into individual rare earth oxides. The third stage is refining the rare earth oxides into metals with different purity levels; oxides can be dried, stored, and shipped for further processing into metals. The fourth stage is forming the metals, which can be processed into rare earth alloys. The fifth stage is manufacturing the alloys into devices and components, such as permanent magnets. From the 1960s to the 1980s, the United States was the leader in global production of rare earths and in the research and development of high-performance magnets. Since that time, as discussed above, production has shifted primarily to China, due to lower labor costs and lower environmental standards. China is the only exporter of commercial quantities of rare earth metals. Today, the United States almost entirely lacks the refining, fabricating, metal-making, alloying, and magnet manufacturing capacity to process rare earths. While the United States lacks domestic facilities that produce sintered NdFeB magnets, Molycorp does produce NeFeB and SmCo alloys which are used in permanent magnets. One U.S. company, Electron Energy Corporation (EEC) in Landisville, PA, produces SmCo permanent magnets. EEC, in its production of SmCo permanent magnets, uses predominately samarium metal and significant amounts of gadolinium, rare earths for which there is no U.S. production. Additional rare earth elements needed to produce rare earth magnets such as NeFeB include small amounts of dysprosium and possibly terbium. Currently, dysprosium and terbium are only available from China. EEC also imports metals for its magnet production from China through North American distributors and processes them into alloys in the United States before further processing into sintered SmCo magnets. Supply Chain Issues29 The supply chain for rare earth elements generally consists of mining, separation, refining, alloying, and manufacturing (devices and component parts). A major issue for REE development in the United States is the lack of refining, alloying, and fabricating capacity that could process any future rare earth production. One U.S. company, Electron Energy Corporation (EEC) in Landisville, PA, produces samarium cobalt (SmCo) permanent magnets, and Hitachi Metals, Ltd. of Japan is producing small amounts of the more desirable neodymium iron-boron (NdFeB) magnets (needed for numerous consumer electronics, energy, and defense applications) at its China Grove, North Carolina facility. EEC, in its production of its SmCo permanent magnet, uses small amounts of gadolinium—an REE of which there is no U.S. production. Even the REEs needed for these magnets that operate at the highest temperatures include small amounts of dysprosium and terbium, both available only from China at the moment. EEC imports magnet alloys used for its magnet production from China. Prior to multimillion dollar investments in mining, separation, and alloying facilities by Molycorp, and other exploration and development projects in the United States, there was a significant underinvestment in U.S. supply chain capacity (including processing, workforce development, and research and development (R&D) which has left the United States nearly 100% import dependent on all aspects of the REE supply chain and dependent on a sole source for much of the material. An April 2010 GAO report illustrates the lack of U.S. presence in the REE global supply chain at each of the five stages - mining, separation, refining oxides into metal, fabrication of alloys and the manufacturing of magnets and other components. According to the GAO report, China produces about 95% of the REE raw materials, about 97% of rare earth oxides, and is the only exporter of commercial quantities of rare earth metals (Japan produces some metal for its own use for alloys and magnet production). About 90% of the metal alloys are produced in China (small production in the United States) and China manufactures 75% of the NeFeB magnets and 60% of the SmCo magnets. Thus, even if U.S. rare earth production ramps up, much of the processing/alloying and metal fabrication would occur in China. According to investor analyst Jack Lifton, the rare earth metals are imported from China, then manufactured into military components in the United States or by an allied country. Lifton states that many investors believe that for financing purposes, it is not enough to develop REE mining operations alone without building the value-added refining, metal production, and alloying capacity that would be needed to manufacture component parts for end-use products. According to Lifton, vertically-integrated companies may be more desirable. It may be the only way to secure investor financing for REE production projects. Joint ventures and consortiums could be formed to support production at various stages of the supply chain at optimal locations around the world. Each investor or producer could have equity and offtake commitments. Where U.S. firms and U.S. allies invest is important in meeting the goal of providing a secure and stable supply of REEs, intermediate products, and component parts needed for the assembly of end-use products. Most experts have predicted where new mining capacity for rare earths is likely to come on-stream, but it is just as important to know where new downstream capacity (processing, refining, and metals alloying) is being built or likely to be built in the world as well as the likely investors in downstream capacity for rare earths. Additional questions that could be addressed by Congress include how long would it take to develop the skill set in the United States for downstream production activities? Would an international educational exchange program with those countries already involved in rare earth refining and recycling be appropriate? Molycorp's "Mine to Magnet" Vertical Integration Approach for Rebuilding the U.S. Rare Earth Supply Chain From the mid-1960s through the 1980s, Molycorp's Mountain Pass mine was the world's dominant source of rare earth oxides. The ramp up in production had been driven primarily by Molycorp's higher grade, its relatively low cost, and a rapid rise in the demand for the LREEs, particularly europium used for red phosphors in television and computer monitors, and cerium for glass polishing. However, by 2000, nearly all of the separated rare earth oxides were imported, primarily from China. Because of China's oversupply, lower cost production, and a number of environmental (e.g., a pipeline spill carrying contaminated water) and regulatory issues at Mountain Pass, Molycorp ceased production at its mine in 2002. Since then, the United States has lost nearly all of its capacity in the rare earth supply chain, including intellectual capacity. However, under new ownership since 2008, Molycorp has embarked upon a campaign to change the rare earth position in the United States with its "mine to magnet" (vertical integration) business model. After major energy producer Chevron purchased Union Oil Company of California (UNOCAL), which included the rare earth mine at Mountain Pass, Chevron wanted to focus on its energy business. They were willing to sell-off its non-energy Molycorp Mountain Pass asset. When investor groups purchased Molycorp from Chevron in 2008, they did not inherit the environmental liability that resulted from the pipeline spill. Chevron continued the cleanup that resulted from an earlier ruptured water disposal pipeline carrying some chemical contaminants from the oxide separation facility. Since its purchase by the new owners, Molycorp CEO and engineers have been adamant about minimizing their environmental footprint during the separation phase of the process. Molycorp designed a proprietary oxide separation process that would use fewer reagents and recycle the waste water, thus doing without a disposal pond. Molycorp broke ground for their new separation facility at the Mountain Pass mine in 2011. This complex process separates out the individual elements which follows the mining of the raw material. Molycorp engineers suggest that they will use one-half the amount of ore to get the same amount of usable end product. The chloralkali facility which would allow recycling of wastewater is now mechanically complete and is being commissioned. Molycorp recently acquired the Japanese subsidiary Santoku America in Tolleson, AZ, and renamed it Molycorp Metals and Alloys (MMA). This acquisition is part of the firm's strategy to become a vertically integrated company. It produces both NdFeB and SmCo alloys used in the production of permanent magnets. Molycorp Metals and Alloys is the sole U.S. producer of the NdFeB alloy. Their intention is to modernize the facility and expand metals and metal alloy production. Molycorp also recently purchased a 90.023% majority interest in AS Silmet, (renamed Molycorp Silmet) an Estonian-based rare earth element and rare metals processor, which will double its capacity for rare earth oxide and metal production (separation) in the near-term, according to Molycorp officials. The management at MMA is also examining ways to improve metal recycling. Much of their recycling research is focused on the magnets and the highly valued HREEs. They want to probe into the commercial feasibility of recycling materials contained in permanent magnets used in consumer goods. Sourcing sufficient quantities of end-use materials and understanding the metallurgical processes for extracting the heavy rare earth elements such as the dysprosium and terbium is an important part of the research. Testing the quality of the recyclable material and evaluating the economics will determine the project's success. Molycorp is also evaluating near-term opportunities to recycle energy efficient light bulbs for the phosphors. Molycorp has entered into a cooperative research and development agreement (CRADA) with U.S. Department of Energy's Ames Laboratory to study new methods to create commercial-grade permanent magnets used in commercial applications. Development of downstream activities such as refining, rare earth metals alloying, and permanent magnet manufacturing will require a large amount of financing, a skilled workforce, and a sizeable U.S. market, all of which could be more completely developed in the long term. Keeping and recruiting top talent (in engineering, science, and finance) that can help Molycorp achieve its plans for vertical integration is one of the company's top priorities, according to company officials. Their aim is to consistently invest in the right people and the right training to accomplish its goal. Recent supply chain developments by Molycorp include the acquisition of Neo Materials Technology, Inc.—a Toronto-based firm (renamed Molycorp Canada) with rare earth processing and permanent magnet powder facilities in China. According to Molycorp, 18% of Neo Materials production volume goes to domestic Chinese companies and 33% is directly exported to Japan plus an additional 11% goes to Japanese companies operating within China. One concern voiced by critics of this deal is that some of these highly valued materials could potentially become subject to Chinese export restrictions. Molycorp plans to ship some of its production capacity to its Neo Materials facility in China. Molycorp also entered a joint venture with Daido Steel and Mitsubishi Corporation of Japan and currently manufactures sintered permanent rare earth (NdFeB) magnets in Japan and sold on the world market. Selected Recent Supply Chain Developments Lynas and Siemens have entered into a joint venture for the manufacturing of magnets used in wind turbine generators. Lynas (45% stake) will provide raw material to Siemens (55% stake) from their Mt. Weld mine in Australia, which began production in 2012. Lynas is processing the concentrate at its Malaysian processing facility, which commenced operations in November 2012, after a long and contentious approval process with the Malaysian government. There are ongoing concerns in Malaysia over the proper disposal of thorium, which is contained in the mineral deposit and produced alongside the rare earth elements. The Great Western Mineral Group (GWMG) will form a joint venture with China's Ganzhau Qiandong Rare Earth Group to build an oxide separation facility in South Africa. The raw material for the separation facility will be produced at GWMG's SKK mine in South Africa. A feasibility study of the project is underway. Frontier Rare Earths, based in Luxemburg, along with Korea Resources Corp. formed a joint venture to build a separation facility also in South Africa. Frontier Rare Earths owns the nonproducing rare earth Zondkopsdrift mine in South Africa. A Historical Perspective on the Potential Impact of Chinese Policies on Rare Earth Materials35 China's near monopoly of rare earth production and efforts over the past few years to restrict rare earth exports have raised concerns among U.S. policymakers. For example, in July 2010, China announced that it would reduce its export quota of rare earth elements by 70% during the second half of 2010 over the previous year's level (or a 40% drop for the full year over 2009 levels). In December 2010, China announced its export quota allocations for the first half of 2011, which, reportedly, were 35% less than the quota allocation level in the first half of 2010. In July 2011, China announced that the quota level for the second half of 2011 (at 15,738 metric tons) would make the overall quota for 2011 roughly equal to 2010 levels. However, U.S. officials complained that China's second half 2011 quota levels included ferroalloys containing more than 10% rare earths, which had not been previously included in its rare earth quota levels, and hence, the new quota levels were more restrictive. A U.S. Trade Representative (USTR) official was quoted as saying that the USTR continues to be "deeply troubled" by China's use of market distorting export restrictions on raw materials, including rare earths. China's government responded by saying that it would apply the same policies to both domestic and overseas companies in rare earth production, processing, and export. In addition to export quotas, China imposes export tariffs of 15% to 25% on rare earth as well. In September 2010, China reportedly delayed shipments of rare earth to Japan (the world's largest rare earth importer) for about two months because of a territorial dispute. This has given rise to concerns that China may attempt use its control of rare earth as leverage to obtain its political and economic goals. The Chinese government has announced a number of initiatives over the past few years to further regulate the mining, processing, and exporting of rare earth elements, such as consolidating production among a few large state-owned enterprises and cracking down on illegal rare earth mining and exporting. The Chinese government contends that its goals are to better rationalize and manage its rare earth resources in order to slow their depletion, ensure adequate supplies and stable prices for domestic producers, obtain a more favorable return for exports, and reduce pollution. Critics of China's rare earth policies contend that they are largely aimed at inducing foreign high-technology and green technology firms to move their production facilities to China in order to ensure their access to rare earth elements, and to provide preferential treatment to Chinese high-tech and green energy companies in order to boost their global competitiveness. Such critics contend that China's restrictions of rare earth elements violate its obligations under the World Trade Organization (WTO). Some have urged the USTR to bring a dispute resolution case against China in the WTO, similar to a case the United States brought against China in 2009 over its export restrictions (such as export quotas and taxes) on certain raw materials (including bauxite, coke, fluorspar, magnesium, manganese, silicon metal, silicon carbide, yellow phosphorus, and zinc). In that case, the United States charged that such policies are intended to lower prices for Chinese firms (especially the steel, aluminum, and chemical sectors) in order to help them obtain an unfair competitive advantage. China claims that these restraints are intended to conserve the environment and exhaustible natural resources. In July 2011, a WTO panel issued a report that ruled that many of China's export restraints on raw materials violated WTO rules. In particular, the panel rejected China's argument that some of its export duties and quotas were justified because they related to the conservation of exhaustible natural resources for some of the raw materials. The panel stated that China was not able to demonstrate that it imposed these restrictions in conjunction with restrictions on domestic production or consumption of the raw materials so as to conserve the raw materials, protect the health of its citizens, or to reduce pollution. China is appealing the WTO panel's ruling. A March 2011 letter written by Senators Casey, Schumer, Stabenow, and Whitehouse urged the Obama Administration to instruct the U.S. executive director at each multilateral bank, including the World Bank, to oppose the approval of any new financing to the Chinese government for rare earth projects in China, including rare earth mining, smelting or separation, or production of rare earth products. The letter also urged the Administration to impose the same types of restrictions on Chinese investment in mineral exploration and purchases in the United States as China imposes on foreign investment in rare earth in China. Some rare earth observers are concerned that Molycorp's purchase of Neo Materials Technologies could potentially make it more difficult for Molycorp to supply U.S. defense needs for rare earths, given China's domination and the increased broadening of restrictions on exporting rare earth minerals. Are Rare Earths Critical Materials for U.S. Defense? DOD has not publicly stated whether rare earths fall within the context of materials considered strategic or critical for U.S. defense needs. There are several definitions of what constitutes a strategic or critical material; however, there is disagreement over which rare earth elements fall within these categories. Generally, strategic and critical materials have been associated with national security purposes. Some experts trace the first mention of strategic and critical materials to legislative language contained in both the Naval Appropriations Act of 1938 and the Strategic and Critical Materials Stockpiling Act of 1939 (P.L. 76-117, 50 U.S.C. 98 et seq.), which authorized the development of an inventory of strategic and critical materials for military use and provided funds for their purchase. DOD's current position on strategic materials was largely determined by the findings of the Strategic Materials Protection Board (SMPB). The purpose of the SMPB was to determine the need to provide a long-term domestic supply of strategic materials designated as critical to national security, and to analyze the risk associated with each material and the effect on national defense that not having a domestic supply source might pose. The SMPB was to meet as determined to be necessary by the Secretary of Defense, but not less frequently than once every two years. SMPB's last report was issued in December 2008. Given the two-year meeting requirement, the board would have met in December 2010, but no meeting was held. In the December 2008 report, the SMPB defined critical materials in this way: "the criticality of a material is a function of its importance in DOD applications, the extent to which DOD actions are required to shape and sustain the market, and the impact and likelihood of supply disruption." Based on DOD's definition for "critical material," the 2008 SMPD report defined one material, beryllium, as a "strategic material critical to national security." The SPMB offered the following justification: High purity beryllium is essential for important defense systems, and it is unique in the function it performs. High purity beryllium possesses unique properties that make it indispensable in many of today's critical U.S. defense systems, including sensors, missiles and satellites, avionics, and nuclear weapons. The Department of Defense dominates the market for high purity beryllium and its active and full involvement is necessary to sustain and shape the strategic direction of the market. There is a significant risk of supply disruption. Without DOD involvement and support, U.S. industry would not be able to provide the material for defense applications. There are no reliable foreign suppliers that could provide high purity beryllium to the Department. Recognizing that high purity beryllium meets all the conditions for being a critical material, the Department should take, and has taken, special action to maintain a domestic supply. The Department has used the authorities of Title III of the Defense Production Act to contract with U.S. firm Brush-Wellman, Inc. to build and operate a new high purity beryllium production plant. The House Armed Services Committee criticized this definition, as discussed in the following excerpt that appeared in the House report accompanying H.R. 2647 , the FY2010 National Defense Authorization Act. This definition limits the purview of the Board to only those materials for which the determinations the Board is tasked to make are presupposed in the definition of the materials themselves. Furthermore, such a definition fails to include a range of materials that Congress has designated as critical to national security and, as such, has provided significant protection or domestic preference in DOD policy and in statute. For example, Congress has determined that reliance on foreign sources of supply for materials such as titanium, specialty steel, and high performance magnets, poses a heightened risk. The Board's narrowing of the definition of materials critical to national security renders the Board unable to provide perspective on the adequacy, suitability, or effectiveness of those policies. Moreover, it limits the ability of the Board to consider any course of action, however minor, in relation to a material until the point at which potential damage to national security is imminent and severe. It also creates the perverse situation that a material could be critical to every element of the industrial base upon which the Department depends, but not considered critical to the Department itself if the material is also used significantly in commercial items. As an indication of the inadequacy of this definition for the Board's functioning, the Board currently identifies only one material as meeting the definition for consideration as a strategic material critical to national security. The committee does not find this conclusion to be plausible and expects that the Board will swiftly revisit this definition to ensure that it is able to identify gaps in our domestic defense supply chain and provide the President, the Secretary of Defense, and Congress with information, analysis, and advice on strategic materials which are critical to the operations of the Department of Defense. It should be noted that Congress has addressed this issue in the P.L. 111-383 , FY2011 National Defense Authorization Act ( H.R. 6523 ), where strategic materials are defined as "material essential for military equipment, unique in the function it performs, and for which there are no viable alternatives." Policy Issues for Congress Dependence on Foreign Sources for Rare Earth Materials Some Members of Congress have expressed concern with the nearly total U.S. dependence on foreign sources for rare earth elements. Some have raised questions about China's near dominance of the rare earth industry and the implications for U.S. national security. Yet the "crisis" for many policymakers is not the fact that China has cut its rare earth exports and appears to be restricting the world's access to rare earths, but the fact that the United States has lost its domestic capacity to produce strategic and critical materials, and that the manufacturing supply chain for rare earths has largely migrated to outside the United States. Still others are concerned about the impact of a potential supply chain vulnerability of materials critical for defense systems. Additionally, some Members of Congress have questioned the lack of knowledge of what specific materials are needed for defense purposes, which materials are strategic and critical to national security, and what steps might be taken to increase the domestic capability to produce these materials. In January 2011, three Members of Congress wrote a letter to Secretary of Defense Robert M. Gates outlining their concerns over what they perceived as a lack of action on DOD's part to ensure that adequate supplies of rare earths were available. They pressed for DOD to take immediate action, as described in excerpts below. Clearly, rare earth supply limitations present a serious vulnerability to our national security. Yet early indications are the DOD has dismissed the severity of the situation to date. Based on initial discussions with the DOD Office of Industrial Policy, we understand the effort to precisely ascertain and fully comprehend DOD consumption of certain rare earth elements is still an ongoing effort. In our view, it is a fundamental responsibility of DOD Industrial Policy to have a comprehensive understanding of the security of our defense supply chain, which requires understanding detailed knowledge of the sources and types of components and materials found in our weapon systems. As the ultimate customer, the Department has the right and responsibility to require their contractors to provide a detailed accounting of the various rare earth containing components within their weapon systems. This information should then be aggregated into an element by element overall demand for DOD. With that knowledge, DOD could compare expected supply and demand of each rare earth element with overall consumption by the Department to identify critical vulnerabilities in our supply chain. This will enable the Department to establish policies to ensure the defense supply chain has access to those materials. For example, one policy may be for the DOD to establish a limited stockpile of rare earth alloys that are in danger of supply interruption to ensure security of supply of both metals and magnets. Government Reports on Rare Earths GAO Report on the Rare Earth Supply Chain In response to congressionally directed requirements in Section 843 of the National Defense Authorization Act of 2010 ( P.L. 111-84 ), GAO was asked to examine the defense rare earth supply chain issues. An April 2010 GAO report noted the lack of U.S. presence in the global supply chain at each of the five stages of rare earth production—mining, separating, refining (oxides into metal), fabricating (of alloys), and manufacturing (of magnets and other components). GAO concluded that the United States lacks a domestic rare earth supply chain and offered the following assessment of the current defense rare earth supply: While rare earth ore deposits are geographically diverse, current capabilities to process rare earth metals into finished materials are limited mostly to Chinese sources. The United States previously performed all stages of the rare earth material supply chain, but now most rare earth materials' processing is performed in China, giving it a dominant position that could affect worldwide supply and prices. Based on industry estimates, rebuilding a U.S. rare earth supply chain may take up to 15 years and is dependent on several factors, including securing capital investments in processing infrastructure, developing new technologies, and acquiring patents, which are currently held by international companies. GAO was unable to determine whether DOD faces any supply chain vulnerability issues or the degree to which national security interests are potentially threatened by the current rare earth situation. Its assessment was limited, primarily because DOD stated that it was in the process of performing its own internal assessment and had not yet identified national security risks or taken steps to address any potential material shortages. Annual Industrial Capabilities Report to Congress Section 2504 of Title 10, United States Code, requires that the Secretary of Defense submit an annual report on industrial capabilities to the Committee on Armed Services of the Senate and the Committee on Armed Services of the House of Representatives. The 2009 report did not address the rare earth supply, but it did suggest that the issue warranted further study, as described in excerpts from the report. The lessons learned from the pre-slowdown economy will concentrate a global push for fuel efficiency and finding substitutes for hydrocarbon fuel products. This will drive up the demand for specialty metals and super alloys that are closely associated to battery manufacturing. These metals are typically not mined or melted within the United States and the E.U. countries. Therefore, this will likely become a growing strategic concern for the United States as resources will have to be utilized to secure the free flowing access to the limited supply of super alloys and specialty metals products (i.e., chromium, cobalt, lithium, rare earth and platinum group metals). U.S. Department of Energy Report on Critical Mineral Strategy In December 2010, the U.S. Department of Energy released a report that examined the role of rare earths in renewable energy technologies. While the report did not focus on the use of rare earths for national security and defense purposes, it does shed light on the steps DOD has reportedly undertaken to review the rare earth supply chain, as described in excerpts below. Recognizing the evolution of the market for rare earth elements (REEs), in the summer of 2009 the Office of Industrial Policy/AT&L, Department of Defense (DOD) self-initiated a review of the U.S. supply chain. The study is based on available forecasts and data from multiple sources and as a result, most of the data are available only at the aggregate level of all REE [Rare earth elements]. The study reviews the U.S. supply chain for both commercial and defense demand of REE. The study also assesses gaps in the supply chain and their potential implications for the Department. The rationale for this effort included the U.S. dependence on a sole supplier that is not domestic, the importance of REE in certain defense applications and forecasts for a surge in demand for commercial end uses that could strain global supplies. Recent events in the global market for REE have reinforced the Department's concern regarding reliable and secure supplies of REE. Coordination of the Federal Approach to Rare Earths Rare earths are used for both commercial and defense purposes, but the majority of domestic use of rare earths is for commercial purposes. There is no unified opinion on whether every rare earth element is considered "critical" or "strategic" for economic or national security purposes, or whether economic security is a national security issue. Working with the Departments of Commerce and Energy, the White House Office of Science and Technology Policy (OSTP) began gathering experts to hold interagency group discussions on rare earth elements from 2007 to 2008. Initially, an interagency working group (an ad hoc working group) was the result of a roundtable discussion on rare earths organized by the Department of Commerce. This group of subject-matter experts from various federal agencies discussed the potential usefulness of the White House taking a lead role on rare earth strategy. Absence of the Study of Rare Earth Application Sciences in Most U.S. Colleges and Universities There is a growing gap between the United States and China with regard to the academic study of rare earth elements. China employs thousands of scientists in both disciplines. The only U.S. public university with a rare earths specialty is the Colorado School of Mines (MINES); a public research university devoted to engineering and applied science. MINES is one of a few academic resources in the world that provides broad experience in mineralogy, resource exploration, mining, extraction, and production. In a hearing before the House Committee on Science and Technology, Subcommittee on Investigations and Oversight, Dr. Stephan Freiman, a scientist and former member of the National Research Council's (NRC) Committee on Critical Mineral Impacts on the U.S. Economy, discussed the conclusions of a study sponsored by the NRC to examine the role of nonfuel minerals in the U.S. economy and potential material supply vulnerabilities. Among the study's recommendations were the following: Federal agencies, including the National Science Foundation, Department of the Interior (including the USGS), Department of Defense, Department of Energy, and Department of Commerce, should develop and fund activities, including basic science and policy research, to encourage U.S. innovation in the area of critical minerals and materials and to enhance understanding of global mineral availability and use programs involving academic organizations, industry, and government to enhance education and applied research. The study also recommended funding scientific research on the entire mineral life cycle and building cooperative programs among academia, industry, and government to enhance education and applied research. Options for Congress Congress may consider both short-range and long-range options for securing a source for rare earth elements as part of its oversight role in addressing U.S. national security interests. Short-range options potentially include hearings on the "Section 843" rare earths report, convening defense suppliers to discuss rare earth material shortages, establishing rare earth material stockpiles for defense purposes, instituting a new critical minerals program, and reconvening the SMPB. Long-range options could include reducing DOD consumption of rare earth elements by identifying and securing equally effective alternatives to rare earths, establishing partnerships with foreign allies that could potentially offer a diversified source of foreign suppliers outside of China, and providing more financial assistance for rare earth production within the United States. Each of these potential options is discussed below. Congressional insight on these potential actions will largely depend on the findings and conclusions reached in DOD's long-overdue self-assessment on the defense rare earth supply chain. However, it is not clear if or when DOD will release its report. Hearings on the DOD Report on the Assessment of the Rare Earth Materials Supply Chain Congress could require DOD to release the report, and then hold hearings to examine DOD's assessment and conclusions. The report was required to be released within 180 days of the enactment of the act, which would have been on or about July 7, 2011. The reasons for the delay are uncertain. Convene Defense Suppliers to Discuss Supply Chain Issues Congress could meet with defense suppliers, at all tiers of the supply chain, to ascertain their knowledge of material shortages and bottlenecks. While DOD purchases the end product (the weapons system) from prime contractors and relies on prime contractors to deliver the finished product, rare earth elements are important throughout the supply chain from the prime contractor through successive subcontractor tiers. Some contractors at lower ends of the tiers may be reluctant to signal to DOD that there are supply chain issues or challenges. An issue that warrants further understanding is where there is convergence between the rare earth value supply chain and the defense supply chain. The rare earth supply chain starts with mining, flows from ore to concentrate, to oxide, to metal, to alloy, and then to the finished product, the magnet. In contrast, the defense supply chain starts with the prime contractor and moves through a successive number of subcontractors down to the ultimate "first line processor" who purchases a rare earth, value-added product such as metal, alloy, or permanent magnets for incorporation into a defense component. Convene the Strategic Materials Protection Board Congress could require DOD to convene the Strategic Materials Protection Board (SMPB). In its December 2008 report, as discussed above, the SMPB defined critical materials in this way: "the criticality of a material is a function of its importance in DOD applications, the extent to which DOD actions are required to shape and sustain the market, and the impact and likelihood of supply disruption." As a result, the SMPB defined only one rare earth element, beryllium, as a "strategic material critical to national security." Congress may convene the board because the present board might determine that some rare earth elements have moved into a position where they are now more critical to national security purposes. The next SMPB might determine that some rare earth elements have moved into a position where they are now more critical to national security. Congress might demand the 2010 statutorily required meeting of the board to commence immediately. The next SMPB will be required to use the new definition of "materials critical to national security" as defined in Section 829 of the FY2011 NDAA, which states the following: Sec. 829. Definition of Materials Critical To National Security (1) The term "materials critical to national security" means materials (A) upon which the production or sustainment of military equipment is dependent; and (B) the supply of which could be restricted by actions or events outside the control of the Government of the United States. In the short run, however, creating a stockpile could raise prices even further because of the increased demand. Require Stockpiling of Specific Materials Congress could require a strategic rare earth elements stockpile. Stockpiles might possibly increase the security of the domestic U.S. supply for rare earths. Congress may consider compiling a "virtual" stockpile database, with commitments and contracts with suppliers to buy the items when needed. One trade association, USMMA, advocates for a limited strategic reserve of rare earth alloys, metals, and magnets. USMMA asserts that government action is needed to ensure that there is a downstream domestic manufacturing capability. This strategic stockpile would ensure our Department of Defense has ready access to those materials needed to ensure our national security and to incentivize the return of domestic manufacturing. With defense critical materials such as dysprosium being sourced solely from China, it is critical that the Department of Defense have access to rare earth oxides from reliable producers and manufacturers in the United States and ally nations to perform value added processes, such as metal, alloy and magnet manufacturing. Fund the Downstream Supply Capacity Once DOD and its suppliers identify whether and where material shortfalls exist, Congress could determine which stages of the supply chain (e.g., mining or manufacturing) require federal funding. Fund Rare Earth Research With the growing strategic importance of rare earths, and in order to create interest and build additional U.S. leadership in rare earth research and development, Congress may consider funding rare earth application sciences in curriculums for military and other government institutes or in national research and development centers designed to train students, scientists, and engineers. Institute a New Critical Minerals Program Should DOD determine that rare earths fall into the classification of critical minerals, Congress could institute a new Critical Minerals Program. In the early 1980s, there existed a Critical Minerals Program aimed at warning Congress about potential supply shortages, protecting strategic materials, and keeping an inventory of those minerals on hand in order to mitigate a supply shock. This program ended in the 1990s as the consensus within Congress grew that the market could handle mineral supply disruptions without government intervention. Two decades later, at a 2010 hearing of the House Science and Technology Committee on rare earths, one policymaker suggested that the time has come to revive the program: This is not the first time the Committee has been concerned with the competitive implications of materials such as rare earths. In 1980—30 years ago—this Committee established a national minerals and materials policy. One core element in that legislation was the call to support for "a vigorous, comprehensive and coordinated program of materials research and development." Unfortunately, over successive administrations, the effort to keep that program going fell apart. Now, it is time to ask whether we need to revive a coordinated effort to level the playing field in rare earths. In particular, I want to learn if there is a need for increased research and development to help address this Nation's rare earth shortage, or if we need to re-orient the research we already have underway. Based on my review of the written submissions, it appears that we could benefit from more research both in basic and applied materials sciences. Develop Partnerships with Allies to Diversify the Supply Source Congress may encourage DOD to pursue joint ventures with other nations, as many other nations are seeking alternatives to a near total dependence on rare earths from China. These partnerships may take place at any stage of the supply chain. It is critical for DOD to consider the implications of sourcing used by these partner nations. For example, if DOD relies on a partner nation for rare earth metals, and that nation procures their oxides from China, this partnership may not provide the requisite security of supply. Appendix. Selected Legislative Activity Some Members of Congress have introduced rare-earth related bills during the 112 th and 111 th Congresses. Some selected measures, related to national defense issues, are described below. Legislation Introduced in the 112 th Congress P.L. 112-239 ( H.R. 3310 , 112 th Congress), the National Defense Authorization Act for FY2013 H.R. 4310 was introduced on March 29, 2012, passed the House on May 18, 2012, and referred to the Senate Armed Services Committee on June 19, 2012. The bill has several rare earth-related provisions, as described below. Section 901 . Additional Duties of Deputy Assistant Secretary of Defense for Manufacturing and Industrial Base Policy and Amendments to the Strategic Materials Protection. Appoints Assistant Deputy Secretary of Defense for Manufacturing and Industrial Base Policy as Chair of the Strategic Materials Protection Board Chair; Requires that Board's findings be reviewed by the Secretary of Defense, congressional defense committees of Congress, and published in the Federal Register within 90 days of the Board meeting; Broadens the scope of duties assigned to the Office of the Assistant Deputy Secretary of Defense for Manufacturing and Industrial Base Policy to better provide oversight of the defense supply chain, including contractors and strategic materials, to ensure that there are no supply chain vulnerabilities regarding the nation's defense requirements; Specifically, "ensuring reliable sources of materials critical to national security, such as specialty metals, armor plate, and rare earth elements." Section 160 3 . National Security Strategy for National Technology and the Industrial Base. Requires the Secretary of Defense to develop a national security strategy for the national technology and industrial base, based on a prioritized assessment of risks and challenges to the defense supply chain, and ensuring that the national technology and industrial base is capable of achieving certain national security objectives; Ensuring reliable sources of materials critical to national security, such as specialty metals, armor plates and rare earth elements; Reducing both the presence and risk of counterfeit parts in the supply chain. S. 3254 , the proposed National Defense Authorization Act for FY2013, was introduced on June 4, 2012, and referred to the Senate Armed Services Committee. While the enacted bill did not include a provision on rare earths, Senate Rept. 112-173 contained a statement that reflected the Committee's view on the role of rare earth materials for defense purposes, as repeated here. Essential role of rare earth materials Rare earth materials play an essential role in several critical weapons components and systems such as precision-guided munitions, electric ship drives, command and control centers, and aircraft, tanks, and missile systems. The committee notes the predominance of unreliable foreign sources for rare earth materials, including China, which provides roughly 94 percent of the world's rare earth oxides and nearly all rare earth metal within the defense-related supply chain and which has repeatedly decreased export quotas and imposed embargoes of these critical materials. Even with the development of the domestic-supply chain there may be continued reliance on production of certain heavy rare earth elements from China. The importance of rare earth materials for national defense applications necessitates a thorough understanding of vulnerabilities in the rare earth supply chain and the development of pragmatic, actionable risk mitigation plans to reduce the likelihood of supply interruptions. The committee encourages the Department of Defense to carefully consider the role of U.S. producers and potential means to develop reliable domestic sources to meet Department rare earth materials requirements. P.L. 1 11-393 , the Ike Skelton National Defense Authorization Act for FY2011 Section 843 of the Ike Skelton National Defense Authorization Act for FY2011 ( P.L. 111-383 ) and S.Rept. 111-201 (accompanying S. 3454 , the proposed Senate National Defense Authorization Act for FY2011) required the Secretary of Defense to conduct an assessment of rare earth supply chain issues and develop a plan to address any vulnerabilities. Section 843 Section 843 required the Secretary of Defense, within 180 days of enactment of the act, to report to Congress with an assessment of the supply and demand for rare earth materials in defense applications. The assessment would identify whether any rare earth materials would be: (1) Critical to the production, sustainment, or operation of significant United States military equipment; or (2) Subject to interruption of supply, based on actions or events outside the control of the Government of the United States. For every rare earth material identified that would meet these criteria, the Secretary of Defense would develop a plan for the long-term availability of such materials with the goal of establishing "an assured source of supply of such material in critical defense applications by December 31, 2015." The plan would consider the following: (1) An assessment of whether the material should be included in the National Defense Stockpile; (2) in consultation with the United States Trade Representative, the identification of any trade practices known to the Secretary that limit the Secretary's ability to ensure the long-term availability of such material or the ability to meet the goal of establishing an assured source of supply of such material by December 31, 2015; (3) An assessment of the availability of financing to industry, academic institutions, or not-for-profit entities to provide the capacity required to ensure the availability of the material, as well as potential mechanisms to increase the availability of such financing; (4) An assessment of the benefits, if any, of Defense Production Act funding to support the establishment of an assured source of supply for military components; (5) An assessment of funding for research and development (6) Any other risk mitigation method determined appropriate by the Secretary that is consistent with the goal of establishing an assured source of supply by December 31, 2015; and, (7) For steps of the rare earth material supply chain for which no other risk mitigation method, as described in paragraphs (1) through (6), will ensure an assured source of supply by December 31, 2015, a specific plan to eliminate supply chain vulnerability by the earliest date practicable. H.R. 4402 , the National Strategic and Critical Minerals Production Act H.R. 4402 , the National Strategic and Critical Minerals Production Act of 2012, was introduced on Apri19, 2012, passed the House on July 12, 2012, and was referred to the Senate on July 16, 2012. The bill would have required both the Secretary of the Interior and the Secretary of Agriculture to more efficiently develop domestic sources of the minerals and materials of strategic and critical importance to U.S. economic and national security, and manufacturing competitiveness. H.R. 3449 , Defense Supply Chain and Industrial Base Security Act H.R. 3449 was introduced by Representative Paul Ryan on November 16, 2011, and referred to the House Armed Services Committee. The bill would have required the Secretary of Defense to develop a defense supply chain and industrial base strategy, and subsequent plan, designed to secure the supply chain and industrial base sectors that the Secretary judges critical to U.S. national security. H.R. 2184 , Rare Earth Policy Task Force and Materials Act H.R. 2184 was introduced by Representative Mike Coffman on June 15, 2011. The bill would establish a Rare Earth Policy Task Force for a period of 10 years within the Department of the Interior for the purpose of developing a plan to ensure the long-term supply of rare earth materials. The Task Force would be directed to assist federal agencies in reviewing laws, regulations, and policies that discourage investment in, exploration for, and development of, domestic rare earths. The Task Force would also be required to submit an annual report that would provide a plan for research, development, demonstration, and commercial application to ensure the long-term, secure, and sustainable supply of rare earth materials sufficient to satisfy the national security, economic well-being, and industrial production needs of the United States (based on specific criteria). The bill was referred to the Committee on Natural Resources and to the Committee on Science, Space, and Technology. H.R. 2090 , Energy Critical Elements Advancement Act of 2011 H.R. 2090 was introduced by Representative Randy Hultgren on June 2, 2011, and was referred to the Subcommittee on Energy and the Environment. The bill would require the Secretaries of Energy and Interior to establish a research program to advance basic materials science, chemistry, physics, and engineering associated with energy critical elements. H.R. 2011 , National Strategic and Critical Minerals Policy Act of 2011 H.R. 2011 was introduced on May 26, 2011, by Representative Doug Lamborn and referred to the House Committee on Natural Resources, Subcommittee on Energy and Mineral Resources. On July 20, 2011, the committee ordered the bill to be reported, as amended. On October 14, 2011, the bill was amended by the Committee on Natural Resources and placed on the Union Calendar. The bill would require the Secretary of the Interior to (1) conduct an assessment of the United States' capability to meet current and future demands for the minerals critical to domestic manufacturing competitiveness, economic, and national security in a time of expanding resource nationalism; (2) conduct an assessment of the current mineral potential of federal lands, and an evaluation of mineral requirements to meet current and emerging needs for economic and national security, and U.S. industrial manufacturing needs (such an assessment would address the implications of any potential mineral shortages or supply disruptions, as well as the potential impact of U.S. dependence on foreign sources for any minerals); and (3) conduct an inventory of rare earth elements and other minerals deemed critical based on the potential for supply disruptions, including an analysis of the supply chain for each mineral. Finally, the bill would set policy goals for federal agencies to coordinate responsibilities for: facilitating the availability, development, and production of domestic mineral resources to meet national needs; promoting the development of economically sound and stable policies for domestic industries that promote mining, materials, and metals processing; creating a mechanism for assessing the U.S. mineral demand, supply, and needs; and minimizing duplication and delays in administering federal and state laws, regulations, and permit issuance and authorizations necessary to explore, develop, and produce minerals, and build and operate mineral-related facilities. H.R. 2284 , Responsible Electronic Recycling Act H.R. 2284 was introduced by Representative Gene Green on June 22, 2011, and on June 29 was referred to the Subcommittee on Energy and the Environment. This bill would include the establishment of a Rare Earth Materials Recycling Initiative, designed to assist in and coordinate the development of research in the recycling of rare earth materials found in electronic devices. H.R. 1875 , Building Our Clean Energy Future Now Act of 2011 H.R. 1875 was introduced by Representative David Cicilline on May 12, 2011, and referred to the House Committees on Ways and Means, Transportation and Infrastructure, Energy and Commerce, and Science, Space, and Technology. On May 26, 2011, the bill was referred to the Subcommittee on Energy and Environment. The bill seeks to lower gas prices by making investments in cleaner energy technologies and infrastructure. H.R. 1388 , the Rare Earths Supply Chain Technology and Resources Transformation Act of 2011. H.R. 1388 was introduced by Representative Mike Coffman on May 6, 2011, and referred to the House Committee on Science, Space, and Technology, Subcommittee on Energy and the Environment, and the Committees on Natural Resources and Armed Services. The bill is also referred to as the Restart Act of 2011. The bill seeks to reestablish a competitive domestic rare earths supply chain within DOD's Defense Logistics Agency (DLA). H.R. 1540 , the National Defense Authorization Act for FY2012 H.R. 1540 was introduced by Representative Howard McKeon on April 14, 2011. Section 835 would require the DLA Administrator for Strategic Materials to develop an inventory of rare earth materials to support defense requirements, as identified by the report required by Section 843 of the Ike Skelton National Defense Authorization Act for FY2011 ( P.L. 111-383 ). Also, Amendment #87 to H.R. 1540 would require the Secretary of Defense to report back to Congress on the feasibility and desirability of recycling, recovering, and reprocessing rare earth elements, including fluorescent lighting used in DOD facilities. H.R. 1540 ( H.Rept. 112-78 ) passed the House, May 26, 2011. On June 6, 2011, it was received in the Senate and referred to the Senate Committee on Armed Services. S. 734 , the Advanced Vehicle Technology Act of 2011 S. 734 was introduced by Senator Debbie Stabenow on April 5, 2011, and referred to the Committee on Natural Resources. The proposed bill would create a basic and applied research program, within the Department of Energy (DOE), focused on the development and engineering of new vehicle technologies. DOE is to promote, among many other goals, the exploration of substitutes and recycling of potential critical materials, including rare earth elements and precious metals. The Senate Committee on Energy and Natural Resources held a hearing on May 19, 2011. H.R. 1367 , the Advanced Vehicle Technology Act of 2011 H.R. 1367 was introduced by Representative Gary Peters on April 5, 2011, and referred to the Committee on Science, Space and Technology. On April 7, 2011, the bill was referred to the Subcommittee on Energy and Environment. S. 734 and H.R. 1367 are similar. H.R. 1314 , the Resource Assessment of Rare Earths (RARE) Act of 2011 H.R. 1314 was introduced by Representative Henry Johnson on April 1, 2011, and on April 6 was referred to the House Natural Resources Committee, Subcommittee on Energy and Mineral Resources. The bill would direct the Secretary of the Interior, through the Director of the U.S. Geological Survey, to examine the need for future geological research on rare earth elements and other minerals and determine the criticality and impact of a potential supply restriction or vulnerability. H.R. 952 , the Energy Critical Elements Renewal Act of 2011 On March 8, 2011, Representative Brad Miller introduced the Energy Critical Elements Renewal Act of 2011. The bill was referred to the Committee on Science, Space, and Technology. The bill would develop an energy critical elements program, amend the National Materials and Minerals Policy Research and Development Act of 1980, establish a temporary program for rare earth material revitalization, and serve other purposes. S. 383 , the Critical Minerals and Materials Promotion Act of 2011 On February 17, 2011, Senator Mark Udall introduced the Critical Minerals and Materials Promotion Act of 2011. One June 9, 2011, the bill was referred to the Committee on Energy and Natural Resources, Subcommittee on Energy. The bill was referred to the Committee on Energy and Natural Resources. The bill would require the Secretary of the Interior to establish a scientific research and analysis program to assess current and future critical mineral and materials supply chains, strengthen the domestic critical minerals and materials supply chain for clean energy technologies, strengthen education and training in mineral and material science and engineering for critical minerals and materials production, and establish a domestic policy to promote an adequate and stable supply of critical minerals and materials necessary to maintain national security, economic well-being, and industrial production with appropriate attention to a long-term balance between resource production, energy use, a healthy environment, natural resources conservation, and social needs. H.R. 618 , the Rare Earths and Critical Materials Revitalization Act of 2011 On February 10, 2011, Representative Leonard Boswell introduced the Rare Earths and Critical Materials Revitalization Act of 2011. The bill was referred to the Committee on Science, Space, and Technology. The bill seeks to develop a rare earth materials program and amend the National Materials and Minerals Policy, Research and Development Act of 1980. If enacted, it would provide for loan guarantees to revitalize domestic production of rare earths in the United States. S. 1113 , the Critical Minerals Policy Act of 2011 On May 26, 2011, Senator Lisa Murkowski introduced the Critical Minerals Policy Act of 2011, which was referred to the Committee on Energy and Natural Resources. On June 9, 2011, the Subcommittee on Energy held a hearing. The bill generally defines what critical minerals are but would request that the Secretary of the Interior establish a methodology (in consultation with others) that would identify which minerals qualify as critical. The Secretary of the Interior would direct a comprehensive resource assessment of critical mineral potential in the United States, including details on the critical mineral potential on federal lands. S. 1113 would establish a Critical Minerals Working Group to examine the permitting process for mineral development in the United States and facilitate a more efficient process, specifically, a draft performance metric for permitting mineral development and report on the timeline of each phase of the process. The DOI would produce an Annual Critical Minerals Outlook report that would provide forecasts of domestic supply, demand, and price for up to 10 years. DOE would lead research and development on critical minerals and workforce development that would support a fully integrated supply chain in the United States. Title II of the bill recommends mineral-specific action (led by DOE) for cobalt, helium, lead, lithium, low-btu gas, phosphate, potash rare earth elements, and thorium. Title III would, among other things, authorize for appropriation $106 million. Legislation Introduced in the 111 th Congress In the 111 th Congress, two bills were enacted that contain provisions affecting rare earth policy. The first was P.L. 111-84 ( H.R. 2647 ), the National Defense Authorization Act for FY2010. Section 843 of P.L. 111-84 required GAO to examine rare earths in the defense supply chain, and it also required the Secretary of Defense to assess the defense supply chain and develop a plan to address any shortfalls or other supply chain vulnerabilities. The second bill was P.L. 111-383 , the Ike Skelton National Defense Authorization Act for FY2011, which contains a provision (Section 843) that requires the Secretary of Defense to undertake an assessment of the supply chain for rare earth materials and determine which, if any, rare earths are strategic or critical to national security and to develop a plan to address any supply chain vulnerabilities. Other legislative provisions are listed below. H.R. 4866 , the Rare Earths Supply-Chain Technology and Resources Transformation Act of 2010 On March 17, 2010, Representative Mike Coffman introduced the Rare Earths Supply-Chain Technology and Resources Transformation Act of 2010 (RESTART). The bill was referred to three committees: the House Armed Services Committee, the House Ways and Means Subcommittee on Trade, and the House Financial Services Committee. The bill sought to create a new interagency initiative on rare earth supply chain issues. H.R. 4866 would have established a federal government-wide interagency working group, at the Assistant Secretary level, from the Departments of Commerce, Defense, Energy, the Interior, and State, with participants from the U.S. Trade Representative (USTR) and White House Office of Science and Technology Policy. The working group would have assessed the rare earth supply chain to determine which rare earths were critical to national and economic security. Based on a critical designation, rare earth elements would have been stockpiled by the Defense Logistics Agency (DLA) as part of the National Defense Stockpile. The DLA would have made, if necessary, a commitment to purchase rare earth raw materials for processing and refining, including purchases from China. Stockpiling would have been terminated when the working group agencies determined that rare earths were no longer critical to U.S. national security or economic well-being. H.R. 6160 , the Rare Earths and Critical Materials Revitalization Act of 2010 On September 22, 2010, Representative Kathleen Dahlkemper introduced the Rare Earths and Critical Materials Revitalization Act of 2010. The bill sought to develop a rare earth materials program and amend the National Materials and Minerals Policy, Research and Development Act of 1980. If enacted, the bill would have provided for loan guarantees to revitalize domestic production of rare earths in the United States. The bill was passed by the House on September 29, 2010, and forwarded to the Senate Committee on Energy and Natural Resources. S. 3521 , the Rare Earth Supply Technology and Resources Transformation Act of 2010 S. 3521 was introduced by Senator Lisa Murkowski on June 22, 2010. Congress held a hearing on the bill before the Senate Committee on Energy and Natural Resources, Subcommittee on Energy, on September 30, 2010. The text of the bill offered a "Sense of the Congress" statement that (1) the United States faces a shortage of key rare earth materials that form the backbone of both the defense and energy supply chains; (2) the urgent need to reestablish a domestic rare earth supply chain warrants a statutory prioritization of projects to support such reestablishment; (3) there is a pressing need to support innovation, training, and workforce development in the domestic rare earth supply chain; and (4) the Departments of Energy, of the Interior, of Commerce, and of Defense should each provide funds to academic institutions, federal laboratories, and private entities for innovation, training, and workforce development in the domestic rare earth supply chain. S. 4031 , the Rare Earths Supply-Chain Technology and Resources Transformation Act of 2010 S. 4031 was introduced by then-Senator Evan Bayh on December 15, 2010, and referred to the Senate Committee on Energy and Natural Resources. The bill would have promoted exploration and development of a domestic supply of rare earths, and reestablished a U.S. competitive rare earth supply chain for rare earths in the United States and in the countries of foreign allies.

Some Members of Congress have expressed concern over U.S. acquisition of rare earth materials composed of rare earth elements (REE) used in various components of defense weapon systems. Rare earth elements consist of 17 elements on the periodic table, including 15 elements beginning with atomic number 57 (lanthanum) and extending through number 71 (lutetium), as well as two other elements having similar properties (yttrium and scandium). These are referred to as "rare" because although relatively abundant in total quantity, they appear in low concentrations in the earth's crust and extraction and processing is both difficult and costly. From the 1960s to the 1980s, the United States was the leader in global rare earth production. Since then, production has shifted almost entirely to China, in part due to lower labor costs and lower environmental standards. Some estimates are that China now produces about 90- 95% of the world's rare earth oxides and is the majority producer of the world's two strongest magnets, samarium cobalt (SmCo) and neodymium iron boron (NeFeB) permanent, rare earth magnets. In the United States, Molycorp, a Mountain Pass, CA mining company, recently announced the purchase of Neo Material Technologies. Neo Material Technologies makes specialty materials from rare earths at factories based in China and Thailand. Molycorp also announced the start of its new heavy rare earth production facilities, Project Phoenix, which will process rare earth oxides from ore mined from the Mountain Pass facilities. In 2010, a series of events and press reports highlighted what some referred to as the rare earth "crisis." Some policymakers were concerned that China had cut its rare earth exports and appeared to be restricting the world's access to rare earths, with a nearly total U.S. dependence on China for rare earth elements, including oxides, phosphors, metals, alloys, and magnets. Additionally, some policymakers had expressed growing concern that the United States had lost its domestic capacity to produce strategic and critical materials, and its implications for U.S. national security. Pursuant to Section 843, the Ike Skelton National Defense Authorization Act for FY2011 (P.L. 111-383) and S.Rept. 111-201 (accompanying S. 3454), Congress had mandated that the Secretary of Defense conduct an assessment of rare earth supply chain issues and develop a plan to address any vulnerabilities. DOD was required to assess which rare earths met the following criteria: (1) the rare earth material was critical to the production, sustainment, or operation of significant U.S. military equipment; and (2) the rare earth material was subject to interruption of supply, based on actions or events outside the control of the U.S. government. The seven-page report was issued in March 2012. In October 2013, DOD released its Annual Industrial Capabilities Report to Congress in accordance with Section 2504 of Title 10, United States Code (U.S.C.). The report states that, due to global market forces, the overall demand for rare earth materials has decreased, as prices for most rare earth oxides and metals have declined since 2011. Given DOD's assessment of the supply and demand for rare earths for defense purposes, coupled with the recent announcement of Molycorp's proposed acquisition of Neo Material Technologies, Congress may choose to use its oversight role to seek more complete answers to the following important questions: Given Molycorp's purchase of Neo Material Technologies and the potential for the possible migration of domestic rare earth minerals to Molycorp's processing facilities in China, how may this move affect the domestic supply of rare earth minerals for the production of U.S. defense weapon systems? Given that DOD's assessment of future supply and demand was based on previous estimates using 2010 data, could there be new concern for a possible rare earth material supply shortage or vulnerability that could affect national security? Are there substitutes for rare earth materials that are economic, efficient, and available? Does dependence on foreign sources alone for rare earths pose a national security threat? Congress may encourage DOD to develop a collaborative, long-term strategy designed to identify any material weaknesses and vulnerabilities associated with rare earths and to protect long-term U.S. national security interests.

CRS_RL34193

Introduction In May of 2013, news broke that the Department of Justice (DOJ) had subpoenaed telephone toll records for numerous telephone lines, including some personal telephone lines, of reporters at the Associated Press (AP). The DOJ had issued these subpoenas and obtained the toll record information prior to notifying the AP The AP and many other news organizations have responded critically, noting that the DOJ's decision not to negotiate with the AP regarding the release of the records deprived AP of the ability to attempt to quash the subpoena in federal court. Some in the media argue this action enabled the DOJ to evade judicial review of its subpoenas. In defending its decision to issue the subpoenas, the DOJ argued that it had complied with its own internal guidelines regarding obtaining information from news media in the course of a criminal investigation, which allowed the agency to circumvent a requirement to negotiate with the affected news media entities if negotiations would pose a substantial threat to the integrity of the investigation. When controversies surrounding the government gaining access to reporters' confidential information arise, news media and other journalists often respond by arguing that journalists should receive special protection from government investigation and interference because the First Amendment's protections of a free press are of paramount importance in a free society. For example, on July 6, 2005, a federal district court in Washington, DC, found Judith Miller of the New York Times in contempt of court for refusing to cooperate in a grand jury investigation relating to the leak of the identity of an undercover CIA agent. The court ordered Ms. Miller to serve time in jail. Ms. Miller spent 85 days in jail. She secured her release only after her informant, I. Lewis Libby, gave her permission to reveal his identity. This incident drew attention to the question whether journalists should have a right to withhold information sought in judicial proceedings and a number of proposals were introduced in Congress to create a federal shield law. The circumstances surrounding the DOJ subpoenas of AP toll records have drawn attention to the issue again in 2013. Forty-nine states afford journalists some protection from compelled release of their confidential sources. The question remains, however, as to whether a concomitant federal privilege exists. The Supreme Court has addressed the issue of journalists' privilege under the First Amendment only once; in Branzburg v. Hayes , it held that the First Amendment provided no privilege to refuse to testify before a grand jury, but it left open the question of whether the First Amendment provides journalists with a privilege in any other circumstances. But, whether or not the First Amendment provides a privilege for journalists to refuse to reveal confidential sources, Congress may provide a privilege through legislation. Current Federal Law and Recent Developments The Supreme Court has written only one opinion on the subject of journalists' privilege: Branzburg v. Hayes , in which the Court decided three cases. After explaining the grounds on which journalists seek a privilege, the Court noted that the reporters in the cases it was considering were seeking only a qualified privilege not to testify: "Although the newsmen in these cases do not claim an absolute privilege against official interrogation in all circumstances, they assert that the reporter should not be forced either to appear or to testify before a grand jury or at trial until and unless sufficient grounds are shown for believing that the reporter possesses information relevant to a crime the grand jury is investigating, that the information the reporter has is unavailable from other sources, and that the need for the information is sufficiently compelling to override the claimed invasion of First Amendment interests occasioned by the disclosure." In Branzburg , however, the Court held that the First Amendment did not provide even a qualified privilege for journalists to refuse "to appear and testify before state or federal grand juries." The only situation it mentioned in which the First Amendment would allow a reporter to refuse to testify was in the case of "grand jury investigations ... instituted or conducted other than in good faith.... Official harassment of the press undertaken not for purposes of law enforcement but to disrupt a reporter's relationship with his news sources would have no justification." The reporters in all three of the cases decided in Branzburg had sought a privilege not to testify before grand juries. At one point in its opinion, however, the Court wrote that "reporters, like other citizens, [must] respond to relevant questions put to them in the course of a valid grand jury investigation or criminal trial." The reference to criminal trials should be considered dictum, and therefore not binding on lower courts. Branzburg was a 5-4 decision, and, though Justice Powell was one of the five in the majority, he also wrote a concurring opinion in which he found that reporters have a qualified privilege to refuse to testify regarding criminal conduct: Indeed, if the newsman is called upon to give information bearing only a remote and tenuous relationship to the subject of the investigation, or if he has some other reason to believe that his testimony implicates confidential source relationships without a legitimate need of law enforcement, he will have access to the Court on a motion to quash and an appropriate protective order may be entered. The asserted claim to privilege should be judged on its facts by the striking of a proper balance between freedom of the press and the obligation of all citizens to give relevant testimony with respect to criminal conduct. Powell's opinion leaves it uncertain whether the First Amendment provides a qualified privilege for journalists to refuse to testify before grand juries. But "courts in almost every circuit around the country interpreted Justice Powell's concurrence, along with parts of the Court's opinion, to create a balancing test when faced with compulsory process for press testimony and documents outside the grand jury context." Whether or not the First Amendment provides a journalists' privilege, Congress and state legislatures may enact statutory privileges, and federal and state courts may adopt common-law privileges. Congress has not enacted a journalists' privilege, though bills that would do so were introduced in the 110 th and 111 th Congresses. Thirty-three states and the District of Columbia have enacted journalists' privilege statutes, which are often called "shield" statutes. In federal courts, Federal Rule of Evidence 501 provides that "the privilege of a witness ... shall be governed by the principles of the common law as they may be interpreted by the courts of the United States in the light of reason and experience." The federal courts have not resolved whether the common law provides a journalists' privilege. The U.S. Court of Appeals for the District of Columbia, for one, "is not of one mind on the existence of a common law privilege [in federal court].... However, all [three judges on the panel for the case] believe that if there is any such privilege, it is not absolute and may be overcome by an appropriate showing." As for state courts, many states without statutory privileges provide common law protection, making a total of 49 states plus the District of Columbia that have a journalists' privilege. Wyoming is the state without either a statutory or common-law privilege. Outside of the potential existence of a qualified federal privilege, in 1980, the Department of Justice adopted a rule for obtaining information from media organizations, which remains in effect without amendment. The rule provides, in part, "In determining whether to request issuance of a subpoena to a member of the news media, or for telephone toll records of any member of the news media, the approach in every case must be to strike the proper balance between the public's interest in effective law enforcement and the fair administration of justice." In re: Grand Jury Subpoena, Judith Miller In re: Grand Jury Subpoena, Judith Miller is the federal court of appeals decision that declined to overturn the finding of civil contempt against journalists Judith Miller and Matthew Cooper for refusing to give evidence in response to subpoenas served by Special Counsel Patrick Fitzgerald in his investigation of the disclosure of the identity of a CIA agent. After the Supreme Court declined to review the decision, Matthew Cooper agreed to testify, but Judith Miller continued to refuse and was imprisoned as a result. The case was decided by a three-judge panel that issued an opinion for the court written by Judge Sentelle, with all three judges—Sentelle, Henderson, and Tatel—issuing separate concurring opinions. The court's opinion, citing Branzburg , held that the First Amendment does not permit journalists to refuse to testify before a grand jury and said (as quoted above) that the court was not of one mind on the existence of a common-law privilege but that, even if there is one, the special counsel had overcome it. As for the three concurring opinions, Judge Sentelle expressed his view that there is no common-law privilege; Judge Henderson expressed her view that, in the interest of judicial restraint, the court should not "decide anything more today than that the Special Counsel's evidentiary proffer overcomes any hurdle, however high, a federal common-law reporter's privilege may erect"; and Judge Tatel addressed the issues of both the constitutional privilege and the common-law privilege. As for the constitutional privilege, Judge Tatel said that he was "uncertain," in the light of Justice Powell's "enigmatic concurring opinion" in Branzburg , that there is no "constitutional reporter privilege in the grand jury context." Even if there is, however, he agreed that such a privilege would not benefit Miller or Cooper in the case before the court. As for the common-law privilege, Judge Tatel concluded that "'reason and experience' [quoting Federal Rule of Evidence 501] as evidenced by the laws of forty-nine states and the District of Columbia, as well as federal courts and the federal government, support recognition of a privilege for reporters' confidential sources." Judge Tatel found, however, that, in the present case, "the special counsel has established the need for Miller's and Cooper's testimony." The existence of a qualified reporters' privilege, whether constitutional or otherwise, therefore, remained unresolved following In re Grand Jury Subpoena, Judith Miller . DOJ Subpoena of AP Telephone Toll Records Up to this point, this report has discussed court cases analyzing the existence of a reporters' privilege in federal law, because the reporters in question had the opportunity to oppose the requirement that they produce the information or testimony in court. In a recent example, reporters did not have that opportunity because the government obtained the information without informing the journalists involved. As discussed above, the DOJ, without first consulting the AP, subpoenaed two months of telephone records for more than 20 telephone lines used by AP reporters. The records were presumably obtained from phone companies. While there is no federal statutory shield law, Department of Justice guidelines exist for determining whether to request subpoenas for the news media, or the telephone toll records of the news media. The DOJ acknowledges that the "approach in every case must be to strike the proper balance between the public's interest in effective law enforcement and the fair administration of justice." The guidelines say that negotiations with the affected members of the news media should be pursued in all cases where a subpoena may be issued for telephone toll records, provided that the responsible Assistant Attorney General determines that such negotiations would not pose "a substantial threat to the integrity of the investigation in connection with the records" being sought. The determination that negotiating would not pose a substantial threat to the integrity of the investigation must be authorized by the Attorney General. Furthermore, any subpoena issued for the toll records of a member of the news media must be authorized by the Attorney General. However, in this case, Attorney General Eric Holder recused himself, but later clarified that the deputy attorney general in charge of the case signed off on the subpoenas. Lastly, the guidelines say that if a subpoena is issued, it should be limited as to scope, time, and volume of unpublished material requested. Deputy Attorney General (DAG.) James M. Cole, in his letter to Gary Pruitt, the president and CEO of AP, explained that the toll records had been subpoenaed as part of a criminal investigation into the unauthorized disclosure of classified information. DAG Cole assured the AP that the DOJ had conducted a thorough investigation, exhausting all other avenues of obtaining the information needed before issuing the subpoenas. Cole also explained that the DOJ believed this to be a case in which a substantial threat to the integrity of the investigation existed; therefore, the DOJ did not negotiate with AP. Cole stated this was all accomplished in accordance with the DOJ's guidelines, and that the subpoenas were limited in scope, covering only a two-month period of time. The AP disagrees that the subpoenas were limited in scope and duration, as the DOJ claims, and instead contends that the obtained "records potentially reveal communications with confidential sources across all of the newsgathering activities undertaken by the AP during a two-month period, provide a road map to AP's newsgathering operations, and disclose information about AP's activities and operations that the government has no conceivable right to know." The Reporters Committee for Freedom of the Press has called the seizure of records in this case an unprecedented and overreaching dragnet that "puts an arctic chill on the invaluable information reporters glean from confidential sources every day." The organization has, therefore, asked the DOJ to return the records obtained through the subpoenas to the AP. Lynn Oberlander, the general counsel for The New Yorker , has argued that the AP should have been notified prior to the issuance of the subpoenas in order to give the AP the opportunity to fight the subpoenas in federal court. Other prominent news media organizations have voiced their criticism of the DOJ's actions, as well. It is unclear whether the DOJ adhered to its own guidelines based on the limited amount of information currently publicly available. Nonetheless, this incident, not unlike the case of Judith Miller in 2005, appears to have revived the debate over whether Congress should enact a federal statutory shield law for reporters. The Reporters Committee for Freedom of the Press has already suggested such a remedy. The White House announced its support for the enactment of a federal shield law, as well. Congressional Response in the 113th Congress Those supporting the enactment of a federal shield law argue that the controversy surrounding the subpoena of the AP toll records would have been avoided had there been a federal statute in place. The theory is that under a federal shield law, like the bills that would have created a qualified privilege for journalists proposed in previous Congresses, the DOJ likely would not have been permitted to seek the AP's toll records in secret. Instead, the DOJ would have been required to negotiate with the AP for the release of the records and the AP likely would have had the opportunity to oppose the subpoenas in federal court. While the DOJ may have obtained the records anyway, the process would have been subject to judicial review, and, it is possible that the scope of the records covered by the subpoena would have been narrowed. On May 14, 2013, Representative Poe introduced H.R. 1962 , which is a new version of the Free Flow of Information Act in the House of Representatives. The following day, Senator Charles Schumer introduced companion legislation in the Senate, S. 987 , also entitled the Free Flow of Information Act. The bills are substantially similar to legislation that was introduced and debated in 2007 and 2009. The bills would create statutory procedures by which federal entities would be required to abide when obtaining testimony or records from journalists and their communications service providers. The result of the enactment of these procedures would be a privilege for journalists against testifying or providing documents to the federal government unless the journalists were given notice and an opportunity to be heard in court and the government has met its burden for requiring the production of the documents or testimony. H.R. 1962, The Free Flow of Information Act of 2013 Where would the privilege apply? H.R. 1962 would apply the privilege in cases arising under federal law in which a "Federal entity" sought to compel testimony or the production of any document in the possession of a person covered by the privilege. The bill would define a "Federal entity" as "an entity or employee of the judicial or executive branch or an administrative agency of the Federal Government with the power to issue a subpoena or issue other compulsory process," but not the legislative branch. In other words, any time the federal government (with the exception of Congress or any legislative agency) sought to compel journalists to disclose information created as a part of engaging in journalism, the privilege would apply. The privilege would not apply in state court or to matters arising under state law. What would be protected from disclosure? H.R. 1962 would protect (subject to qualifications discussed below) any testimony and any documents, defined as "writings, recordings, and photographs, as those terms are defined by Federal Rule of Evidence 1001 (28 U.S.C. App.)," that were obtained or created by a "covered person as part of engaging in journalism." Even if one of the exceptions allowing disclosure applies, H.R. 1962 would place limitations on compelled disclosure. Disclosure that is compelled if the privilege is overcome could "not be overbroad, unreasonable, or oppressive and, as appropriate, be limited to the purpose of verifying published information or describing any surrounding circumstances relevant to the accuracy of such published information; and be narrowly tailored ... so as to avoid production of peripheral, nonessential, or speculative information." Who is a journalist? One of the thornier questions facing this legislation is the question of how to define the group of people covered by the privilege. It is clear that lawmakers and media advocates believe that the privilege should apply to journalists employed by The New York Times , the Associated Press, or the Cleveland Plain Dealer . However, the question of whether a person should be considered a journalist becomes murkier when the entity or person in question is a blogger, or a web site like Wikileaks.org. H.R. 1962 would define "covered person" to mean a person who, for financial gain or livelihood, is engaged in journalism, and includes any entity that employs that person, but does not include foreign powers or those designated as terrorist organizations. The bill goes on to define journalism as the "gathering, preparing, collecting, photographing, recording, writing, editing, reporting, or publishing of news or information that concerns local, national, or international events or other matters of public interest for dissemination to the public." In other words, people who earn money as journalists, and those entities that employ them, are covered by the bill. Whether an entity that acts solely as a host or conduit for information it receives from outside sources, such as Wikilieaks.org, could be said to be engaging in journalism under this definition is unclear, and would likely need to be determined by a court. When can the government compel disclosure from a journalist? H.R. 1962 would allow the government to compel testimony or the production of information from journalists after the journalist has been given notice and an opportunity to be heard in court if the government shows by a preponderance of the evidence that the information is necessary to a criminal investigation or civil matter. The burden of proof would be higher when the government is seeking information that would reveal the identity of a confidential source. In a civil case, a federal entity would not be permitted to compel disclosure of most testimony or information unless a court determined that the government had exhausted all reasonable alternatives for obtaining the information it sought, and that the testimony or document sought is necessary to the successful completion of the matter. In a criminal case, a federal entity would not be permitted to compel disclosure unless a court determined first that the government had exhausted all reasonable alternatives for acquiring the testimony or information, that there were reasonable grounds to believe a crime had occurred, and that the testimony or document is critical to the investigation, prosecution, or defense. If the information or testimony sought in either a criminal or civil case could lead to the revelation of the identity of a confidential source, in addition to the findings in the previous paragraph, the court also would have to find that one of three special circumstances were met before compelling the disclosure or testimony. First, confidential source information may be compelled if it was necessary to prevent an act of terrorism, or other significant harm to national security with the objective of preventing that harm. Second, confidential source information could be disclosed if the information is necessary to prevent imminent death or significant bodily harm. Third, disclosure of confidential source information could be compelled if it was necessary to identify a person who had disclosed a trade secret in violation of the law, individually identifiable health information in violation of federal law, or nonpublic personal financial information protected by the Gramm Leach Bliley Act. Noticeably, the exception for disclosure related to national security threats relates only to disclosure that would prevent terrorist attacks or other breaches of national security, and does not appear to cover identifying confidential sources that may have provided information about attacks or breaches that occurred in the past. Furthermore, it is also worth noting that the exceptions for revealing the identity of confidential sources that may have broken the law do not apply to those sources who may have leaked classified government information in violation of federal law. Lastly, after weighing all of the above factors in either a criminal or civil case where the government seeks to compel disclosure by a journalist, the court would then be required to determine that the public interest in compelling disclosure outweighs the public interest in gathering or disseminating news and information before ordering the journalist to produce the documents in question or provide testimony. How would the privilege apply when the records sought are in the possession of communications service providers? The bill's privilege also would apply to compelled disclosure from communications service providers. Generally, if the privilege would apply to the person whose records are being sought, the government must provide notice to that covered person and an opportunity for that person to be heard in court in the same manner described above, before the communications service provider may be compelled to produce that document, record or testimony, under this bill. A "communications service provider" would be defined as "any person that transmits information of the customer's choosing by electronic means; and ... includes a telecommunications carrier, an information service provider, an interactive computer service provider, and an information content provider (as such terms are defined in the sections 3 and 230 of the Communications Act of 1934 (47 U.S.C. 153, 230))." The bill would allow notice of the covered person to be delayed until after disclosure had been compelled only if a court determined by clear and convincing evidence that such notice would pose a substantial threat to the integrity of a criminal investigation. Under this exception, the government would be able to obtain the telephone or communications records of a journalist or a media company without the knowledge of the journalists involved, but the exception still would require a high burden of proof on the part of the government and the review and approval of a court. Furthermore, notice could only be delayed, not prevented entirely. The government would be required to disclose to the journalists that it did obtain the records after the threat to its criminal investigation had abated. S. 987, The Free Flow of Information Act of 2013 It should be noted that S. 987 would create a more narrow privilege, in general, than H.R. 1962 . S. 987 would cover only certain information gathered by covered persons, instead of all information. Furthermore, it would define those eligible to be covered by the privilege more narrowly than the House bill. Lastly, the bill would create a more narrow privilege in general, making compelled disclosure by the federal government easier, particularly in the case of criminal investigations that implicate national security, than the House version of the bill. Where would the privilege apply? Under the Senate's version of the Free Flow of Information Act of 2013, like the House version, the privilege would apply in cases arising under federal law in which a "Federal entity" seeks disclosure of "protected information" from a "covered person." An important distinction between the House and Senate bills is that H.R. 1962 's privilege would apply whenever any information is sought from a covered person by a federal entity, but S. 987 's privilege only would apply when the information sought is "protected information" as defined by the bill. This distinction will be discussed more fully below. Like H.R. 1962 , S. 987 defines a "Federal entity" as "an entity or employee of the judicial or executive branch or an administrative agency of the Federal Government with the power to issue a subpoena or issue other compulsory process," but does not include the legislative branch. The privilege provision in the bill would not apply in state courts or other state entities or to state law claims that were brought in federal court. Who would be journalists? S. 987 defines those eligible to invoke the privilege more narrowly than the House version described above. Under the Senate bill, "covered persons" would be defined as those individuals, and the organizations that employ them, who investigate events and procure material via collection of documents, interviews, personal observations, and analysis on a regular basis; have primary intent to disseminate such news and analysis at the inception of the information gathering process; and obtain the information or news in order to disseminate the news to the public by one of the many means of distributing media. One of the primary differences between this definition and the House bill's definition is that it explicitly requires that the person have the intent to disseminate the information at the beginning of the information gathering process. Furthermore, the Senate bill provides a longer list of individuals that would be excluded from the definition of covered persons including agents of foreign powers, individuals on the terrorist watch list, those affiliated with designated terrorist organizations, and those who have committed terrorist acts. What information may be protected from disclosure? Whereas H.R. 1962 would apply to all information obtained or created by covered persons as part of engaging in journalism, S. 987 would apply only to a subset of such information, which the bill would define as "protected information." The main difference between the bills is that S. 987 would protect information gathered by covered persons engaged in journalism if that information were obtained upon a promise of confidentiality or if the information would reveal the identity of a confidential source who had provided information to the covered person under a promise of confidentiality. When would the privilege apply? S. 987 would create a tiered system for the federal government to obtain information from covered persons in which it would be most difficult to obtain information in the course of a civil case, and least difficult to obtain information in the course of a criminal case or investigation, particularly one that involves matters of national security. More specifically, under the bill, federal entities would not be allowed to compel disclosure of "protected information" from a "covered person," unless a court, after notice and an opportunity for the "covered person" to be heard, determined that one of the following exceptions applied. For cases other than criminal investigations (civil cases and investigations), disclosure may be compelled if the court found, by a preponderance of the evidence, that the party seeking production of the testimony or document had exhausted "all reasonable alternative sources (other than the covered person) of the testimony or document," and, based on information obtained from sources other than the covered person, "the protected information sought [was]essential to the successful completion of the matter." Lastly, for disclosure to be compelled, the party seeking to compel the disclosure would be required to establish that the government interest in disclosure clearly outweighed the public interest in gathering and disseminating news. In criminal cases or prosecutions, the government would face a lower bar to compelling disclosure from covered persons. Furthermore, the government would not be required to demonstrate that disclosure is in the public interest in criminal cases. Instead, the burden would be on the covered person to demonstrate that disclosure is not in the public interest. In criminal cases under S. 987 , disclosure may be compelled if the court found, first, that the party seeking to compel disclosure had exhausted all reasonable alternative sources other than the covered person; second, that, based on information obtained from sources other than the covered person, "there [were] reasonable grounds to believe that a crime [had] occurred; the testimony or documents sought [were] essential to the investigation, or prosecution, or to the defense against prosecution"; if the information is being sought by the Justice Department, that the Attorney General certified that the decision to request the information be compelled was made in a manner consistent with the Justice Department's regulations for compelling disclosure from the media; and, finally, the covered person had not established by clear and convincing evidence that the disclosure of the protected information would be contrary to the public interest. What would be the exceptions to the privilege? Unlike H.R. 1962 , S. 987 enumerates three explicit instances in which the privilege is not available to covered persons when the federal government seeks to obtain protected information. In other words, in these enumerated scenarios, covered persons are not required to be given notice or an opportunity to be heard in court prior to being required to disclose the protected information, further narrowing the availability of the privilege under the Senate version of the bill. First, the privilege would not apply to any "information, record, document, or item obtained as a result of the eyewitness observations of alleged criminal conduct or commitment of alleged tortious conduct by the covered person," unless the alleged criminal or tortious conduct is the act of communicating the information at issue. Second, the privilege would not apply to any protected information that is "reasonably necessary to stop, prevent, or mitigate a specific case of death, kidnapping, substantial bodily harm," criminal conduct against a minor, or the incapacitation or destruction of critical infrastructure. Third, the privilege would not apply in a criminal investigation of the allegedly unlawful disclosure of classified information, if a federal court had found by a preponderance of the evidence that the protected information would assist in preventing an act of terrorism, or other significant and articulable harm to national security; and in any other criminal investigation, the privilege would not apply where the court found by a preponderance of the evidence that the information sought would materially assist the government in preventing, mitigating, or identifying the perpetrator of an act of terrorism, or other acts that have caused or are reasonably likely to cause significant harm to national security. In assessing whether the harm to national security is or would be significant, the court would be required to give deference to the executive branch's assessment. Lastly, S. 987 would limit the availability of this exception for cases involving the unauthorized disclosure of classified information to only those cases in which the information is sought in order to mitigate harm related to an act of terrorism or other significant harm to national security. As a result, not every criminal investigation into the unauthorized disclosure of classified information would be unprotected by the privilege; only those investigations related to acts of terrorism and threats to national security would be unprotected. What would the limits on the information which may be compelled be? When the court does find that documents or testimony may be compelled, under S. 987 , the content of those documents or testimony would be required, to the extent possible, to be "limited to the purposes of verifying published information or describing the surrounding circumstances relevant to the accuracy of published information." Furthermore, the documents and testimony compelled, to the extent possible, would be required to be "narrowly tailored in subject matter and period of time covered so as to avoid compelling production of peripheral, nonessential, or speculative information." These limitations are similar to the limitations in the House bill. How would the privilege apply when the records sought are in the possession of communications service providers? Under S. 987 , the privilege would apply to information pertaining to covered persons held by communications service providers in the same way that it would if the information were sought from the covered person, unless the disclosure was being sought pursuant to 18 U.S.C. §2709, which lays out procedures for disclosure to federal investigators of telephone toll records for counterintelligence purposes. If disclosure is sought pursuant to §2709, a modified privilege would apply. When information or records pertaining to a covered person is sought from a communications service provider, notice and an opportunity to be heard would be required to be provided to the covered person who is a customer or party to the communication sought to be disclosed. However, notice may be delayed if a federal court determines by "clear and convincing evidence that notice would pose a substantial threat to the integrity of a criminal investigation, a national security investigation, or intelligence gathering, or that exigent circumstances exist."

In May of 2013, news broke that the Department of Justice (DOJ) had subpoenaed telephone toll records for numerous telephone lines, including some personal telephone lines, of reporters at the Associated Press (AP). The DOJ had issued these subpoenas and obtained the toll record information prior to notifying the AP The AP and many other news organizations have responded critically, noting that the DOJ's failure to negotiate with the AP regarding the release of the records deprived AP of the ability to attempt to quash the subpoena in federal court. The media argues this action enabled the DOJ to evade judicial review of its subpoenas. In defending its decision to issue the subpoenas, the DOJ argued that it had complied with its own internal guidelines regarding obtaining information from news media in the course of a criminal investigation, which allowed the agency to circumvent a requirement to negotiate with the affected news media entities if negotiations would pose a substantial threat to the integrity of the investigation. When controversies surrounding the government gaining access to reporters' confidential information arise, news media and other journalists often respond by arguing that journalists should receive special protection from government investigation and interference because the First Amendment's protections of a free press are of paramount importance in a free society. The circumstances surrounding the DOJ subpoenas of AP toll records have been no different. The Supreme Court has only decided one case related to a constitutional privilege allowing journalists to refuse to divulge confidential information to the government. In Branzburg v. Hayes, 408 U.S. 665, 679-680 (1972), the Supreme Court held that the First Amendment did not provide even a qualified privilege for journalists to refuse "to appear and testify before state or federal grand juries." The only situation it mentioned in which the First Amendment would allow a reporter to refuse to testify was in the case of harassment or grand jury investigations instituted in bad faith. Nonetheless, a concurrence by Justice Powell that has been followed by a number of federal circuits suggested that there may be a qualified privilege for journalists in grand jury investigations. Despite the fact that there may be either limited or no constitutional protection for journalists, statutory and common law protections do exist. Though many states do have either judicially created or statutory "shield laws" in place, there is no federal statutory shield law. It has been argued that if there had been a federal shield law in place at the time the controversial AP toll record subpoenas were issued, many of the issues raised by the incident could have been avoided. The Obama Administration announced a renewed interest in enacting a federal statute that would grant a qualified evidentiary privilege to reporters. New versions of the Free Flow of Information Act, which has been debated by a number of Congresses in the past, have already been introduced in the House (H.R. 1962) and Senate (S. 987). This report will provide an overview of the constitutional status of a journalist's privilege under the First Amendment; a description of two recent cases in which the government sought confidential information from the press (the Judith Miller case, and the recent AP case); and an analysis of the current proposals for enacting a federal shield law.

CRS_R45321

Introduction The Trump Administration requested $76.2 billion for the Department of Transportation (DOT) for FY2019, 8.6% ($10 billion) less than DOT received in FY2018. The Administration proposed significant cuts in funding for competitive grant programs, zeroing out the BUILD (formerly TIGER) grant program and railroad discretionary grant programs, cutting the Essential Air Service (EAS) program significantly, and reducing funding for public transportation capital grants and Amtrak by half or more. On May 23, 2018, the House Committee on Appropriations reported H.R. 6072 , the FY2019 Transportation, Housing and Urban Development, and Related Agencies (THUD) appropriations bill. The committee recommended $87.8 billion for DOT, a 1.8% ($1.6 billion) increase over the comparable FY2018 amount and 15% ($11.6 billion) above the Administration request. On August 1, 2018, the Senate passed H.R. 6147 ; Division D of that bill is the FY2019 THUD appropriations bill. It would provide a total of $86.6 billion in new budget authority for DOT for FY2019, less than 1% ($427 million) above the comparable FY2018 amount and 14% ($10.4 billion) above the Administration request. With inflation forecast at 2.0% for FY2019, the House committee bill would result in roughly level inflation-adjusted funding for DOT compared to FY2018, while the Senate bill would likely result in a slight reduction in inflation-adjusted funding for DOT compared to its FY2018 level. Understanding the DOT Appropriations Act DOT's funding arrangements are unusual compared to those of most other federal agencies, in that most of its funding is mandatory budget authority coming from trust funds, and most of its expenditures take the form of grants to states and local government authorities. For most federal agencies most, if not all, of their annual funding is discretionary funding. But roughly two-thirds to three-fourths of DOT's funding is mandatory budget authority derived from trust funds. Around one-third to one-fourth of DOT's budget authority is discretionary authority. Table 1 shows the breakdown between the discretionary and mandatory funding in DOT's budgets in recent years. Two large trust funds, the Highway Trust Fund and the Airport and Airway Trust Fund, have typically provided around 90% of DOT's annual funding in recent years (92% in FY2017). That proportion changed significantly in FY2018 as a result of a large increase in the discretionary funding portion of DOT's appropriation (see Table 2 ). The scale of the funding coming from these trust funds is not entirely obvious in DOT budget tables, because most of the funding from the Airport and Airway Trust Fund is categorized as discretionary budget authority and so is combined with the discretionary budget authority provided from the general fund. Approximately 80% of DOT's funding is distributed to states, local authorities, and Amtrak in the form of grants (see Table 3 ). Of DOT's largest subagencies, only the Federal Aviation Administration, which is responsible for the operation of the air traffic control system and employs roughly 83% of DOT's 56,252 employees, many as air traffic controllers, has a budget whose primary expenditure is not grants. Reauthorization of Air Transportation Programs Since most DOT funding comes from trust funds whose revenues typically come from taxes, the periodic reauthorizations of the taxes supporting these trust funds, and the apportionment of the budget authority from those trust funds to DOT programs, are a significant aspect of DOT funding. The highway, transit, and rail programs are currently authorized through FY2020, but the authorization for the federal aviation programs is scheduled to expire on September 30, 2018. Reauthorization of this program may affect both its structure and funding level. DOT Funding Trend In current-year (nominal) dollars, DOT's nonemergency annual funding has risen from a recent low of $70 billion in FY2012 to $86 billion in FY2018. However, adjusting for inflation tells a different story. DOT's inflation-adjusted funding peaked in FY2010 at $87.5 billion (in constant 2018 dollars) and declined from that point until FY2015, then began rising again in FY2016 (see Figure 1 ). DOT's real funding, adjusted for inflation, was roughly the same in FY2016 and FY2017 as in FY2006; from FY2012-FY2017, DOT's inflation-adjusted funding was lower than during the FY2007-FY2011 period. DOT FY2019 Appropriations Table 4 presents a selected account-by-account summary of FY2019 appropriations for DOT, compared to FY2018. Selected Issues Highway Trust Fund Solvency Virtually all federal highway funding and most federal transit funding come from the Highway Trust Fund, the revenues of which come largely from the federal motor fuels excise tax ("gas tax"). For many years, annual expenditures from the fund have exceeded revenues; for example, for FY2018, revenues and interest are projected to be approximately $41 billion, while authorized outlays are projected to be approximately $54 billion, and this shortfall is expected to continue. Congress transferred about $143 billion, mostly from the general fund of the Treasury, to the Highway Trust Fund during the period FY2008-FY2016 to keep the trust fund solvent. One reason for the shortfall in the fund is that the federal gas tax has not been raised since 1993. The tax is a fixed amount assessed per gallon of fuel sold, not a percentage of the cost of the fuel sold: whether a gallon of gas costs $1 or $4, the highway trust fund receives 18.3 cents for each gallon of gasoline and 24.3 cents for each gallon of diesel. Meanwhile, the value of the gas tax has been diminished by inflation (which has reduced the purchasing power of the revenue raised by the tax) and increasing automobile fuel efficiency (which reduces growth in gasoline sales as vehicles are able to travel farther on a gallon of fuel). The Congressional Budget Office (CBO) has forecast that gasoline consumption will be relatively flat through 2024, as continued increases in the fuel efficiency of the U.S. passenger fleet are projected to offset increases in the number of miles driven. Consequently, CBO expects Highway Trust Fund revenues of $39 billion to $41 billion annually from FY2018 to FY2027, well short of the annual level of projected expenditures from the fund. National Infrastructure Investment (BUILD/TIGER Grants) Congress provided $1.5 billion for national infrastructure investment grants, also called BUILD (Better Utilizing Investments to Leverage Development) Transportation grants, for FY2018. (This program was previously known as the TIGER grant program.) The House Committee on Appropriations recommended $750 million, while the Senate-passed bill would provide $1 billion. In its committee report accompanying the bill, the Senate Committee on Appropriations noted that last year it had expressly forbidden DOT to use the federal share requested for a project as a criterion in selecting which projects would receive grants (i.e., giving preference to projects that requested a lower federal share), but that DOT had nevertheless said it would use an applicant's willingness to create new sources of nonfederal revenue for transportation projects as a selection criterion. The committee report prohibits DOT from using this criterion, and directs it to use the selection criteria listed in the FY2016 grant process. The TIGER grant program originated in the American Recovery and Reinvestment Act ( P.L. 111-5 ), where it was called "national infrastructure investment." It is a discretionary grant program intended to address two criticisms of the current structure of federal transportation funding: that virtually all of the funding is distributed to state and local governments, which select projects based on their individual priorities, making it difficult to fund projects that have national or regional impacts but whose costs fall largely on one or two states; and that most federal transportation funding is divided according to mode of transportation, making it difficult for projects in different modes to compete for funds on the basis of comparative benefit. Perhaps the best illustration of these challenges is Amtrak's Gateway Program, a set of projects concentrated in a short stretch of its Northeast Corridor rail line around the New York/New Jersey border. The biggest single component of the project is the replacement of a deteriorating tunnel under the Hudson River through which hundreds of Amtrak and New Jersey Transit trains pass each day. While this project would benefit Amtrak passengers (and arguably users of other modes) from Washington, DC, to Boston, MA, the burden of paying for the $13 billion-plus project falls on New York and New Jersey. For more information on the Gateway Program, see " The Hudson Tunnels and Amtrak's Gateway Program ," below. The BUILD program provides grants to projects of national, regional, or metropolitan-area significance in various modes on a competitive basis, with recipients selected by DOT. Although the program is, by description, intended to fund projects of national, regional, and metropolitan-area significance, in practice its funding has gone more toward projects of regional and metropolitan-area significance. In large part this is a function of congressional intent, as Congress has directed that the funds be distributed equitably across geographic areas, between rural and urban areas, and among transportation modes, and has set relatively low minimum grant thresholds ($5 million for urban projects, $1 million for rural projects). Congress has continued to support the BUILD/TIGER program through annual DOT appropriations. It is heavily oversubscribed, typically receiving applications totaling many times the amount of funding available for that year. In the past some critics have argued that TIGER grants went disproportionately to urban areas. For several years Congress directed that at least 20% of TIGER funding should go to projects in rural areas, which was roughly equivalent to the portion of the U.S. population living in rural areas. In FY2018 Congress increased the portion of funding that should go to projects in rural areas to 30%. The House Appropriations Committee report on the FY2019 appropriations bill specifies that 33% of the recommended funding should go to projects in rural areas (and directs that bridge projects in rural areas be prioritized); the Senate-passed bill repeats the 30% rural portion from FY2018. The House report also directs that another 33% of the recommended funding should go to projects in and around major seaports, with the remaining 33% for projects in urban areas over 200,000 in population. As Table 5 illustrates, the BUILD/TIGER grant appropriation process has followed two patterns in recent years. First, the Obama Administration would request as much as or more than Congress had previously provided, the House would propose a large cut, the Senate would propose an amount similar to the previously enacted appropriation, and Congress would agree on a final enacted amount similar to the previously enacted amount. In FY2018 the Trump Administration requested no funding, but Congress funded the program. This pattern appears to be playing out again in the FY2019 appropriations bills. Essential Air Service12 The Essential Air Service (EAS) program is funded through a combination of mandatory and discretionary budget authority. In addition to the annual discretionary appropriation, there is a mandatory annual authorization, estimated at $140 million for FY2019, financed by overflight fees collected from commercial airlines by FAA. These overflight fees apply to international flights that fly through U.S. airspace, but do not land in or take off from the United States. The fees are to be reasonably related to the costs of providing air traffic services to such flights. As Table 6 shows, the Trump Administration requested $93 million in discretionary funding for the EAS program in FY2019, $62 million less than the program received in FY2018. The House committee bill recommended a $175 million discretionary appropriation, $20 million more than the FY2018 level. The Senate-passed bill likewise recommends a $175 million discretionary appropriation. Combined with the estimated mandatory funding of $140 million ($9.5 million more than the FY2018 amount), $175 million in discretionary funding would result in a 10% ($29.5 million) increase over the FY2018 total funding level of $285.8 million. The EAS program seeks to preserve commercial air service to small communities by subsidizing service that would otherwise be unprofitable. The cost of the program in real terms has doubled since FY2008, in part because route reductions by airlines resulted in new communities being added to the program (see Table 7 ). Congress made changes to the program in 2012, including allowing no new entrants, capping the per-passenger subsidy for a community at $1,000, limiting communities that are less than 210 miles from a hub airport to a maximum average subsidy per passenger of $200, and allowing smaller planes to be used for communities with few daily passengers. Supporters of the EAS program contend that preserving airline service to small communities was a commitment Congress made when it deregulated airline service in 1978, anticipating that airlines would reduce or eliminate service to many communities that were too small to make such service economically viable. Supporters also contend that subsidizing air service to smaller communities promotes economic development in rural areas. Critics of the program note that the subsidy cost per passenger is relatively high, that many of the airports in the program have very few passengers, and that some of the airports receiving EAS subsidies are little more than an hour's drive from major airports. Positive Train Control In 2008 Congress directed railroads to install positive train control (PTC) on certain segments of the national rail network by the end of 2015. PTC is a communications and signaling system that is capable of preventing incidents caused by train operator or dispatcher error. Freight railroads have reportedly spent billions of dollars thus far to meet this requirement, but most of the track required to have PTC installed was not in compliance at the end of 2015; in October 2015 Congress extended the deadline to the end of 2018—with an option for individual railroads to extend to 2020 with Federal Railroad Administration (FRA) approval. In recent years Congress has provided some funding to help railroads with the expenses of installing PTC: $50 million in FY2016, $199 million in FY2017 (for commuter railroads), and at least $250 million in FY2018. The Trump Administration's FY2019 budget request did not include any funding for the cost of PTC implementation. The House-reported bill specified that $150 million (of the Consolidated Rail Infrastructure and Safety Improvement grant program funding) was for PTC projects; the Senate-passed bill does not set aside an amount for PTC projects, but the committee report directs DOT to prioritize PTC projects in making grants from the Consolidated Rail Infrastructure and Safety Improvements grant program. Amtrak and Intercity Passenger Rail Development The Passenger Rail Reform and Investment Act of 2015 (Title XI of P.L. 114-94 ) reauthorized Amtrak while changing the structure of its federal grants: instead of getting separate grants for operating and capital expenses, it now receives separate grants for the Northeast Corridor and the rest of its national network. This act also authorized three new programs to make grants to states, public agencies, and rail carriers for intercity passenger rail development: Consolidated Rail Infrastructure and Safety Improvement Grants Federal-State Partnership for State of Good Repair Grants Restoration and Enhancement Grants The Administration's FY2019 budget requested a total of $738 million for intercity passenger rail funding, all of it for grants to Amtrak; no funding was requested for the three grant programs. The House Appropriations Committee recommended $1.9 billion for Amtrak, a total of $800 million for two of the new grant programs, plus another $150 million for the Magnetic Levitation Technology Deployment Program, which has received no funding in over a decade. It specified that $150 million of the funding for the Consolidated Rail Infrastructure and Safety Improvement program was for PTC implementation projects. The Senate bill would provide $1.9 billion for Amtrak and a total of $565 million for the three new grant programs (see Table 8 ), and directed FRA to accelerate the pace of grant-making and to prioritize PTC projects in its grant-making. Congress has historically provided little or no funding for intercity passenger rail development other than annual grants to Amtrak. That changed briefly in FY2009 and FY2010, when Congress appropriated a total of $10.5 billion for DOT's high-speed and intercity passenger rail grant program. From FY2011 to FY2016, Congress returned to providing no funding for intercity passenger rail development (save for PTC implementation); at the beginning of that period, in FY2011, it also rescinded $400 million that had been appropriated in FY2010 for that purpose but not yet obligated. In FY2017 Congress provided $98 million for three new intercity passenger rail grant programs, rising to $863 million in FY2018. Federal Transit Administration Capital Investment Grants The majority of the Federal Transit Administration's (FTA's) roughly $13 billion in funding is funneled to state and local transit agencies through several programs that distribute the funding by formula. Of the few transit grant programs that are discretionary (i.e., awarding funding to applicants selectively, usually on a competitive basis), the largest is the Capital Investment Grants program (CIG), which is often referred to as the New Starts program, as that is the largest and best known of its component grant programs. It funds new fixed-guideway transit lines and extensions to existing lines. The program has three components: New Starts grants are for capital projects with total costs over $300 million that are seeking more than $100 million in federal funding; Small Starts grants are for capital projects with total costs under $300 million that are seeking less than $100 million in federal funding; and Core Capacity grants are for projects that will increase the capacity of existing systems that are already at full capacity, or will be in five years, by at least 10%. There is also an Expedited Project Delivery Pilot, intended to provide funding for eight projects that are eligible for any of the three programs, seek no more than a 25% federal share, and are supported, in part, by a public-private partnership. Grant funds for large projects are typically disbursed over a period of years. Much of the funding for this program each year is committed to projects with multiyear grant agreements signed in previous years that are now under construction. For FY2019 the Trump Administration requested $1.0 billion for Capital Investment Grants, $1.6 billion less than the $2.645 billion provided in FY2018. The Administration repeated its intention, announced in its FY2018 request, not to approve any new project, but to provide funding only to projects that have existing full funding grant agreements (FFGAs). The House Committee on Appropriations recommended $2.614 billion, slightly ($31 million) less than the FY2018 amount. The Senate-passed bill would provide $2.553 billion. Congress has expressed concern regarding the Administration's stance toward the CIG program. On the one hand, the Administration has championed infrastructure investment and easing of regulatory obstacles to speed project development, and has acknowledged the demand for transit projects. On the other hand, the Administration has broken with previous federal policy and taken the position that state and local governments should be responsible for funding transit projects, without any contribution from the federal government. Following this stance, it has not requested funding for any new transit projects in either its FY2018 or FY2019 DOT budget requests. Congress has not supported the Administration's policy proposal to end federal assistance for new transit projects. Congress provided more than twice as much funding as FTA requested for the CIG program in FY2018, and directed the agency to carry out the CIG program as described in statute. Similarly, both the House-reported bill and the Senate-passed bill for FY2019 would provide more than twice the amount requested by FTA for the CIG program, and the committee reports for these bills direct FTA to continue to advance eligible projects through the program. The Senate Appropriations Committee report also notes that the Government Accountability Office (GAO) found that FTA has failed to comply with congressional directives regarding improvements to the CIG program, and that FTA told GAO that it had no plans to comply with the statutory mandates because the Administration is not requesting funding for any new projects. The Senate Appropriations Committee report also expressed concern about FTA creating unnecessary delays for projects in the project development pipeline. Transportation for America, a transportation advocacy group, asserts that, contrary to the Administration's stated goal of reducing delays to transportation project development, FTA is deliberately delaying the project development process for transit projects. It asserts that, of $2.3 billion that Congress provided for new transit projects under the CIG program in the FY2017 and FY2018 DOT appropriations acts, FTA has issued only $533 million in grants, and that FTA is drawing out the review process for projects that have applied for funding. One alleged result is that project sponsors are facing increased costs due to this lengthened process; in some cases, bids received for construction have expired before FTA completed its review of agencies' applications, forcing the agencies to rebid the projects. FTA denies that it is delaying the project review process. A New Starts grant, by statute, can be up to 80% of the net capital project cost. Since FY2002, DOT appropriations acts have included a provision directing FTA not to sign any FFGAs for New Starts projects that would provide a federal share of more than 60%; in the FY2018 DOT appropriations act the limit was lowered to 51%. The House-reported FY2019 bill includes a provision prohibiting New Starts grant agreements with a federal share greater than 50%. The Senate-passed bill does not have such a provision. Critics of lowering the federal share provided for New Starts projects note that the federal share for highway projects is typically 80%, and in some cases is higher. They contend that the higher federal share makes highway projects relatively more attractive than public transportation projects for communities considering how to address transportation problems. Advocates of this provision note that the demand for New Starts funding greatly exceeds the amount available, so requiring a higher local match allows FTA to support more projects with the available funding. They also assert that requiring a higher local match likely encourages communities to estimate the costs and benefits of proposed transit projects more carefully, reducing the risk of subsequent cost overruns and of project ridership falling short of expectations. The Hudson Tunnels and Amtrak's Gateway Program Among the challenges to funding transportation infrastructure is that most federal transportation funding is distributed by mode, and most of the funding is distributed to states by formula. There are grant programs reserved for highways, for public transportation, for rail, and for airport development, but sponsors of projects involving multiple modes may have difficulty amassing significant amounts of federal funding. And while Congress provides some $55 billion annually for surface transportation programs, the vast majority of that funding is automatically divided among the states, making it difficult for a state to accumulate the funding needed for a major project in addition to meeting its other needs. One project that is highlighting this situation is Amtrak's Gateway Program, and specifically the Hudson Tunnel replacement project. Amtrak's Gateway Program is a set of projects intended to increase capacity and reliability of rail service between northern New Jersey and Manhattan, the most heavily used section of intercity and commuter rail track in the nation. The program would replace bridges, expand track capacity from two to four parallel tracks, and, most critically, add a new rail tunnel under the Hudson River. The existing tunnel, the only link connecting the Northeast Corridor from New Jersey to New York, is over a century old, was flooded with seawater during Hurricane Sandy in 2012, and is deteriorating. The estimated cost of the Gateway Program is at least $24 billion, and likely will increase as project planning advances; the estimated cost of just the new Hudson River Tunnel is $11.1 billion. Since the new tunnel would carry both intercity and commuter rail traffic, it is eligible for DOT funding from both the intercity rail program and the public transportation Capital Investment Grants program. But other than the annual grants to keep Amtrak going, relatively little funding has been available in recent years for intercity rail projects: the largest rail grant program in FY2017 was funded at $68 million, which was increased to $593 million in FY2018 (but $285 million was reserved for projects for which the Hudson Tunnel project would not qualify). The Capital Investment Grants program has significantly more funding to award—$2.6 billion in FY2018—but competition for that funding is intense, and the largest grant awarded to a single project in the past 10 years was $2.6 billion. In 2016, under the previous Administration, media reports indicated an agreement had been reached between DOT, Amtrak, and the States of New Jersey and New York to share the costs of building the new Hudson Tunnel, with one-third to be covered each by DOT/Amtrak, New Jersey/New Jersey Transit, and New York State. The Trump Administration has indicated that it does not feel bound by the previous agreement. In any case, it would be up to Congress to provide the money. Neither the House nor Senate Appropriations Committees mentioned the Gateway Program or Hudson Tunnel project in their FY2019 THUD committee reports. But both committees recommended significant funding for rail and transit grant programs that Gateway projects could be eligible for, as well as recommending $240 million more for Amtrak's Northeast Corridor account than Amtrak requested for FY2019. Grant to the Washington Metropolitan Area Transit Authority The Passenger Rail Investment and Improvement Act of 2008 authorized $1.5 billion over 10 years in grants to the Washington Metropolitan Area Transit Authority (WMATA) for preventive maintenance and capital grants, to be matched by funding from the District of Columbia and the States of Maryland and Virginia. This money is in addition to around $310 million WMATA receives under FTA formula programs. The Senate Appropriation Committee's report accompanying its FY2018 DOT appropriations bill noted that the FY2018 grant was the final installment of the $1.5 billion funding commitment Congress made in 2008, but that WMATA's budget assumed that the annual funding would continue to be provided. The Administration requested $120 million for this grant to WMATA for FY2019; the House Appropriations Committee recommended $150 million, and the Senate-passed bill would provide $150 million. The Senate Appropriation Committee's FY2019 committee report direct WMATA, the local jurisdictions, and FTA to continue working with the authorizing committees on extending the authorization for this grant. Both the House and Senate Appropriation Committee reports direct WMATA to continue working to implement the congressional directive that wireless service be provided throughout the rail system. WMATA is dealing with a backlog of maintenance needs due to inadequate maintenance investment over many years, and it has experienced several fatal incidents, most recently in January 2015. A number of other incidents have raised questions about the safety culture of the agency. An investigation that found numerous instances of mismanagement of federal funding led FTA to restrict WMATA's use of federal funds. An FTA audit of WMATA's safety practices in 2015 produced many recommendations for change, and in October 2015 FTA assumed oversight of WMATA's safety compliance practices from the Tri-State Oversight Committee, the agency created by the governments of the District of Columbia, Maryland, and Virginia to oversee WMATA safety performance. FTA continues to exercise safety oversight of WMATA, conducting inspections, leading accident investigations, and directing that federal funds received by WMATA are used to improve safety. In February 2017, FTA notified leaders of the three jurisdictions that it would withhold 5% of their FY2017 transit Urbanized Area formula funds until they meet the requirements to create a new State Safety Oversight Program to replace the Tri-State Oversight Committee. The jurisdictions passed legislation establishing a new safety oversight agency (the Metrorail Safety Commission) soon after, but the agency must be in operation before FTA will release the funding. On September 6, 2018, FTA outlined the steps the new Metrorail Safety Commission must take in order to complete the transition of oversight responsibility from FTA to the Commission. The National Transportation Safety Board has recommended that oversight of WMATA's rail operations be assigned to FRA, which has a long history of safety enforcement, rather than FTA, whi ch is primarily a grant management agency. However, Congress would have to act to give FRA authority to oversee WMATA, while FTA already has such authority.

The Trump Administration proposed a $76.2 billion budget for the Department of Transportation (DOT) for FY2019: $16 billion in discretionary funding and $60 billion in mandatory funding. That is approximately $11 billion less than was provided for FY2018. The budget request reflected the Administration's call for significant cuts in funding for transit and rail programs. The DOT appropriations bill funds federal programs covering aviation, highways and highway safety, public transit, intercity rail, maritime safety, pipelines, and related activities. Federal highway, transit, and rail programs were reauthorized in fall 2015, and their future funding authorizations were somewhat increased. There is general agreement that more funding is needed for transportation infrastructure, but Congress has not been able to agree on a source that could provide the additional funding. The federal excise tax on motor fuel, which is the primary funding source for federal highway and transit programs, has not been increased in over 20 years, and does not raise enough revenue to support even the current level of spending. To address this shortfall, Congress periodically transfers money from the general fund to the Highway Trust Fund to provide sufficient funding for the programs. The annual appropriations for DOT are combined with those for the Department of Housing and Urban Development (HUD) in the Transportation, Housing and Urban Development, and Related Agencies (THUD) appropriations bill. The House Appropriations Committee reported H.R. 3353, the THUD FY2019 appropriations bill, in which Division A provides FY2019 appropriations for DOT. The committee recommended $87.8 billion in new budget authority for DOT, approximately 1.8% ($1.6 billion) more than the comparable figure in FY2018. The Senate passed H.R. 6147, a bill containing appropriations for several federal agencies; Division D is an FY2019 THUD appropriations bill, in which Division A is DOT appropriations. The Senate bill would provide $86.6 billion in new budget authority, less than 1% ($427 million) more than the comparable FY2018 amount. Notable differences between the House-reported and Senate-passed bills include funding for the federal-aid highway program (the House committee bill would provide $900 million more than the Senate) and for intercity passenger rail (the House committee would provide $950 million for grants, including $150 million for the maglev program, compared to the Senate's $565 million, with no funding for maglev). With inflation forecast at 2.0% for FY2019, the House committee bill would result in roughly level inflation-adjusted funding for DOT compared to FY2018, while the Senate bill would likely result in a slight decrease in inflation-adjusted funding.

CRS_R43442

Introduction As a result of advanced oil drilling and extraction technologies (primarily horizontal drilling and hydraulic fracturing), crude oil production in the United States is growing and, according to Energy Information Administration (EIA) reference case projections, may reach 9.6 million barrels per day (bbl/d) by 2019 (see Figure 1 )—up from 5 million bbl/d in 2008 . Production of light tight oil (LTO) is, and is expected to be, the primary contributor to U.S. crude oil production growth in the near to medium term. As U.S. LTO production has increased, some have called for crude oil export restrictions to be either eased or lifted altogether. However, according to the EIA, U.S. crude oil demand is forecasted to be approximately 15 million bbl/d through 2040. EIA's reference case indicates that crude oil imports are projected to range between 6 million and 8 million bbl/d over the same period. However, EIA's high resource case projections, if realized, could result in lower crude oil import requirements (2 to 4 million barrels per day from 2020 to 2040). This apparent disconnect between expected import needs and the desire to export crude oil can be explained when considering crude oil prices can be influenced by the following: (1) the geographical location of LTO production, (2) the type/quality (i.e., light, sweet) of crude oil being produced, (3) the types of crude oil that some U.S. refineries are currently configured to optimally refine, (4) the petroleum products that are derived from different types of crude oil, and (5) transportation and infrastructure challenges associated with moving certain types of crude oil to demand centers. Each of these aspects is discussed in more detail throughout this report. While U.S. crude oil exports are restricted under current law, petroleum products such as naphtha , gasoline, diesel fuel, and natural gas liquids (NGLs) are not subject to export restrictions. As a result, production and export of these products have increased in recent years. In August 2014, approximately 4.1 million barrels per day (bbl/d) of petroleum products, NGLs, and other liquids were exported from the United States—up from an average of nearly 1.4 million bbl/d in 2007. Members of Congress have taken various positions regarding crude oil exports, including (1) calling for the Administration to lift export restrictions, (2) maintaining existing restrictions, (3) opposing attempts to lift restrictions through the World Trade Organization, and (4) proposing bills to eliminate crude oil export restrictions (see section below titled "Legislative Action"). The crude oil export policy debate has multiple dimensions and complexities. As U.S. LTO production has increased—along with additional oil supply from Canada—certain challenges have emerged that affect some oil producers and refiners. While the economic arguments both for and against U.S. crude oil exports are quite complex and dynamic, there are some fundamental concepts and issues that may be worth considering during debate about exporting U.S. crude oil. This report provides background and context about the crude oil legal and regulatory framework, discusses motivations that underlie the desire to export U.S. crude oil, and presents analysis of issues that Congress may choose to consider during debate about U.S. crude oil export policy. Background Current crude oil export restrictions date back to the 1970s, during an era of U.S. oil price controls that motivated producers to export and sell crude oil at unregulated world prices. In response, crude oil, petroleum products, and natural gas liquids were placed on the Commodity Control List established by the Export Administration Act of 1969. In 1973, the Organization of Arab Petroleum Exporting Countries (OAPEC) imposed a total embargo of crude oil delivered to the United States. The oil embargo motivated Congress to enact laws that would limit U.S. crude oil export opportunities. The embargo resulted in rapid and steep crude oil price increases, thereby creating a perception of oil resource scarcity and prompting concerns about U.S. crude oil import reliance. In response to these concerns Congress passed legislation—including the Energy Policy and Conservation Act (EPCA)—to restrict U.S. crude oil exports, with some exceptions as determined by the President. Using these exceptions, the United States has exported crude oil for decades, although in relatively low volumes. Crude oil exports reached a level of 287,000 bbl/d on average in 1980. In 2002, crude oil exports averaged 9,000 bbl/d. Since then, crude oil exports have steadily increased and reached 401,000 bbl/d during the month of July 2014. The majority of these exports were sent to Canada. In the context of exports, the Bureau of Industry and Security (BIS)—the Department of Commerce agency responsible for crude oil export licenses—defines "crude oil" as follows: "Crude oil" is defined as a mixture of hydrocarbons that existed in liquid phase in underground reservoirs and remains liquid at atmospheric pressure after passing through surface separating facilities and which has not been processed through a crude oil distillation tower. Included are reconstituted crude petroleum, and lease condensate and liquid hydrocarbons produced from tar sands, gilsonite, and oil shale. Drip gases are also included, but topped crude oil, residual oil, and other finished and unfinished oils are excluded. From 1970 to 2008, U.S. crude oil production was on a steady decline. During this time, there were periods when easing crude oil export restrictions was a national-level policy topic and presidential determinations were made to exempt crude oil exports that met certain criteria. In 2009, production of light/sweet crude in tight oil formations throughout the country started to increase rapidly, and production levels are expected to continue rising out to 2019, or perhaps later. The physical and chemical properties of LTO, when placed into context of the crude oil slate desired by U.S. refineries, is one important factor that underlies the crude oil export debate. For more information about crude oil characteristics, see the text box below. Prior to the advent of advanced drilling and extraction technologies, many U.S. refiners in the Midwest and Gulf Coast invested in equipment to process heavy crudes from Canada and Latin America. Generally, these investments were encouraged by price discounts for heavy crudes. Tight oil production has changed the situation and the entire industry is adjusting. Investments are being made to process more light crude. Transportation bottlenecks are being relieved. However, as LTO volumes increase, oil producers are bracing for continuing price discounts that may result from a structural oversupply of light crudes in certain regions. Whether the industry will be economically motivated to continue adjusting to accommodate expected light crude production and supply is uncertain. Legal and Regulatory Context The export of domestically produced crude oil has been significantly restricted since the 1970s by an array of federal laws and regulations, in particular the Energy Policy and Conservation Act of 1975 (EPCA) and the resultant Short Supply Control Regulations adopted and administered by the Bureau of Industry and Security (BIS). These laws and regulations are discussed below. The Energy Policy and Conservation Act EPCA directs the President to "promulgate a rule prohibiting the export of crude oil and natural gas produced in the United States, except that the President may ... exempt from such prohibition such crude oil or natural gas exports which he determines to be consistent with the national interest and the purposes of this chapter." The act further provides that the exemptions to the prohibition should be "based on the purpose for export, class of seller or purchaser, country of destination, or any other reasonable classification or basis as the President determines to be appropriate and consistent with the national interest and the purposes of this chapter." This general prohibition on crude oil exports and the exemptions to that prohibition mandated by EPCA are found in the BIS regulations on Short Supply Controls at 15 C.F.R. §754.2. The regulations provide that a license must be obtained for all exports of crude oil, including those to Canada. There are enumerated exceptions to the license requirement for foreign origin crude oil stored in the Strategic Petroleum Reserves, small samples exported for analytic and testing purposes, and exports of oil transported by pipeline over rights-of-way granted pursuant to Section 203 of the Trans-Alaska Pipeline Authorization Act. The regulations provide that BIS will issue licenses for certain crude oil exports that fall under one of the listed exemptions, including (1) exports from Alaska's Cook Inlet; (2) exports to Canada for consumption or use therein; (3) exports in connection with refining or exchange of Strategic Petroleum Reserve oil; (4) exports of heavy California crude oil up to an average volume not to exceed 25,000 barrels per day; (5) exports that are consistent with certain international agreements; (6) exports that are consistent with findings made by the President under certain statutes (see section below titled " Other Relevant Federal Statutes "); and (7) exports of foreign origin crude oil where, based on satisfactory written documentation, the exporter can demonstrate that the oil is not of U.S. origin and has not been commingled with oil of U.S. origin. The regulations also direct BIS to review applications to export crude oil that do not fall under one of these exemptions on a "case by case basis" and to approve such applications on a finding that the proposed export is "consistent with the national interest and the purposes of the Energy Policy and Conservation Act." However, the regulations suggest that only certain specific exports will be authorized pursuant to this case-by-case review. The regulations provide that while BIS "will consider all applications for approval," generally BIS will only approve those applications that are either for temporary exports (e.g., a pipeline that crosses an international border before returning to the United States), or are for transactions (1) that result directly in importation of an equal or greater quantity and quality of crude oil; (2) that take place under contracts that can be terminated if petroleum supplies of the United States are threatened; and (3) for which the applicant can demonstrate that for compelling economic or technological reasons, the crude oil cannot reasonably be marketed in the United States For additional information about these types of transactions, see the text box below. The Export Administration Act and the International Emergency Economic Powers Act Although EPCA directs the President to promulgate regulations that restrict crude oil exports, it does not provide the regulatory framework for enforcement of that restriction and the issuance of licenses for eligible exports. As mentioned above, the BIS is tasked with that duty, which is handled under its "short supply control" regulations. The source of this authority is somewhat complicated. The Export Administration Act of 1979 (EAA) confers upon the President the power to control exports for national security, foreign policy, or short-supply purposes, authorizes the President to establish export licensing mechanisms for certain items, and provides guidance and places certain limits on that authority. These restrictions are enforced by BIS. Crude oil restrictions and licensing are found in the BIS short supply controls authorized by the EAA. However, the EAA expired in August 2001. The provisions of the act, and the regulations issued pursuant to it, remain in effect by a presidential declaration of a national emergency and the invocation of the International Emergency Economic Powers Act (IEEPA). That act authorizes the President to "deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States, if the President declares a national emergency with respect to such threat." When the EAA most recently expired in 2001, the President cited this emergency authority in the issuance of Executive Order 13222, which provided for the continued execution of the EAA and the regulations issued pursuant to it. The continuation of emergency authority has been extended annually by the President since that time, most recently in August 2013. Other Relevant Federal Statutes In addition to the statutes described above, several other federal statutes either bar certain types of crude oil exports or mandate that certain crude oil exports be exempt from the general prohibition in EPCA. Section 201 of P.L. 104-58: Exports of Alaskan North Slope Oil Section 201 of P.L. 104-58 amended the Mineral Leasing Act (MLA) to authorize the export of oil transported by pipeline over the right-of-way granted pursuant to the Trans-Alaska Pipeline Authorization Act unless the President finds that export of this oil is not in the national interest. The President's national interest determination must, at a minimum, consider (1) whether the export will diminish the quantity or quality of petroleum available in the United States; (2) the results of an environmental review; and (3) whether the export might cause sustained material oil supply shortages or significantly increase oil prices above world market levels. The legislation required submission of this national interest determination within five months of November 28, 1995. In April 1996, President Clinton issued a determination that such exports were in the national interest. BIS administers authorizations of Trans-Alaska Pipeline System oil exports pursuant to 15 C.F.R. §754.2(j), which carves out an exception to the general crude oil export licensing requirements provided that certain conditions regarding the physical transportation of the crude oil are satisfied. MLA Limitation on Export of Crude Oil Transported via Federal Right-of-Way Section 28(u) of the MLA clarifies that all domestically produced crude oil (except oil exchanged for similar quantities for purposes of convenience or efficiency) transported through federal lands via rights-of-way granted pursuant to the MLA "shall be subject to all of the limitations and licensing requirements of the Export Administration Act." Section 28(u) also provides that before such exports may occur, the President must "make and publish an express finding that such exports will not diminish the total quantity or quality of petroleum available in the United States, and are in the national interest and are in accord with the provisions of the Export Administration Act." The MLA further directs the President to submit reports to Congress containing these findings, and provides that Congress "shall have a period of sixty days, thirty days of which Congress must have been in session, to consider whether exports under the terms of this section are in the national interest. If Congress ... passes a concurrent resolution of disapproval stating disagreement with the President's finding concerning the national interest, further exports ... shall cease." The MLA restriction on exports of crude oil that are transported through federal lands via a right-of-way is incorporated into the BIS regulations at 15 C.F.R. §754.2(c)(ii). Limitation on Export of Oil from the Naval Petroleum Reserves 10 U.S.C. §7430(e) provides that petroleum produced at the naval petroleum reserves (except petroleum exchanged for similar quantities for purposes of convenience or efficiency) "shall be subject to all of the limitations and licensing requirements of the Export Administration Act." Section 7430(e) also provides that before such exports can take place, the President must "make and publish an express finding that such exports will not diminish the total quantity or quality of petroleum available in the United States, and are in the national interest and are in accord with the provisions of the Export Administration Act." The Section 7430(e) restriction on exports of petroleum produced at the naval petroleum reserves is incorporated into the BIS regulations at 15 C.F.R. §754.2(c)(iv). Limitation on Export of Crude Oil Produced from the Outer Continental Shelf Section 28 of the Outer Continental Shelf Lands Act (OCSLA) provides that any oil or gas produced from the Outer Continental Shelf (OCS) "shall be subject to all of the limitations and licensing requirements of the Export Administration Act." As with the statutory export limitations discussed above, exports meeting this description are only authorized if the President makes "an express finding that such exports will not increase reliance on imported oil or gas, are in the national interest, and are in accord with the provisions of the Export Administration Act." The OCSLA requires the President to submit reports containing such findings to Congress and provides that Congress "shall have a period of sixty calendar days, thirty days of which Congress must have been in session, to consider whether exports under the terms of this section are in the national interest. If the Congress ... passes a concurrent resolution of disapproval stating disagreement with the President's finding concerning the national interest, further exports ... shall cease." The OCSLA restriction on exports of petroleum produced from the OCS is incorporated into the BIS regulations at 15 C.F.R. §754.2(c)(iii). The Role of the Bureau of Industry and Security (BIS) As noted above, exports of crude oil are licensed under the short supply controls of the Export Administration Act. The Export Administration Regulations (EAR) codify the requirements and provisions of the various statutes restricting crude oil exports, which are administered by the Bureau of Industry and Security. Except in certain instances, a license is required for the export of crude oil from the United States. License applications are examined by the Office of National Security and Technology Transfer Controls at BIS. Only a U.S. exporter or entity may apply for a license. License applications are made electronically, thus one must register on the BIS Simplified Network Application Process Redesign (SNAP-R). Once registered, the applicant must list the exporter, consignee, the volume of the export and its monetary value, a description of the product, its end-use, and a certification of origin for the product. All BIS license applications are handled according to Executive Order 12981. Within nine days, BIS must contact the applicant if additional information is required; return without action if additional information is required or if a license is not needed; or refer the application to another agency. Once an application has been submitted, BIS has 30 days to make a decision. However, unlike dual-use technology licenses, crude oil licenses are not referred to other agencies. Thus, most crude oil licenses are handled within a 7-10 day period. A license is good for one year and is non-transferable, unless it is part of the assets of a company being bought or sold. Certain crude oil exports can be shipped with a license exception. A license exception is an authorization to export or re-export, under certain conditions, items subject to the EAR that normally would require a license. Basically, under a license exception, the exporter certifies that a lawful transaction is taking place while maintaining proper documentation. The three license exceptions available for crude oil exports are (1) shipments of foreign-origin crude stored in the Strategic Petroleum Reserve; (2) shipments of samples for analytic or testing purposes; and (3) Trans-Alaska pipeline shipments. In order to use the TAPS license exception, certain tanker routing and environmental restrictions must be observed. Additionally, vessels used to export TAPS crude oil must be U.S.-owned and crewed. In addition, the licenses allow no re-exports, thus, prohibiting, for example, trans-shipments to foreign destinations through Canada. The number of crude oil license applications has steadily increased over the last few years, from 31 applications in FY2008 to 189 in FY2014. In the last several years, no licenses have been rejected, although some have been returned without action. This high approval rate is likely due to the specificity and exporters' knowledge of the regulations. The vast majority of licenses are for exports to Canada. For countries other than Canada, the exports can be attributed to re-exports of foreign crude oil (mostly Canadian crude) that has not been commingled with domestic crude. Crude Oil Export Motivations As tight oil production has rapidly increased, technical and economic factors are motivating some stakeholders to pursue lifting crude oil export restrictions. Some oil producers would like to receive higher prices for oil produced. However, some refiners are concerned that regional crude oil acquisition price discounts may narrow if exports are expanded. Narrow price discounts may affect refinery operating margins and may result in some refineries ceasing operations. Additionally, some refiners may need to consider capital investments necessary to absorb increasing volumes of LTO—along with the value of products yielded from refining LTO. As mentioned above, the geographic location of tight oil production, refinery configurations, infrastructure limitations, and prices received by some oil producers have been cited as justification for lifting export restrictions. However, it is important to realize that these factors are not static in nature. Rather, the industry is dynamic and is constantly changing. Refineries can adjust their operations. Transportation infrastructure can adjust based on market conditions. Therefore, oil values received by oil producers would likely adjust as well. In 2013, the Energy Information Administration stated: Some recent commentary has suggested that it was likely or even inevitable that the growth in U.S. oil production from tight resources would be significantly curtailed unless there was a relaxation of current U.S. policies toward crude oil exports. However, this is likely an overstatement of the actual situation, because there are several other midstream and downstream adjustments that could help to accommodate changing production patterns. The dynamic nature of the oil industry makes the debate about oil export policy inherently complex. Each of the three primary industry segments—production, transportation, and refining—will adjust based on changes to any one of the other segments. As a result, it can be difficult to assess the potential impacts of policy decisions on any one segment without considering how the other two might adjust to changing market conditions. With that caveat, additional detail about some of the motivations for crude oil exports is provided in the following sections. Tight Oil Production Has Increased In 2000, approximately 250,000 bbl/d of tight oil was produced in the United States. In 2013, U.S. tight oil production was approximately 3.5 million bbl/day, a nearly 14-fold increase. The Energy Information Administration (EIA) 2014 reference case projects that U.S. tight oil production will continue to increase in the near to medium term and projects that LTO production may peak at 4.8 million bbl/day in 2021. Most of this production is expected to come from three tight oil formations: (1) Eagle Ford in Texas, (2) Permian Basin in Texas, and (3) Bakken in North Dakota (see Figure 2 ). It is important to note that EIA projections for LTO production are subject to assumptions that are based on currently available information and current policies (e.g., export restrictions). These projections would likely change over time as new information becomes available and if policies are modified. For example, EIA's high resource case projects that tight oil may peak at 8.5 million barrels per day in 2035. Some degree of uncertainty exists in terms of how much LTO might be produced. Future projections, and actual production, may be either higher or lower than those included in EIA's 2014 Annual Energy Outlook. Timing for a potential oversupply, and resulting price discounts, of U.S. LTO is also uncertain and depends on several factors. Some analysts estimate that price discounts related to the combination of LTO production volumes and export restrictions may occur as early as 2015/2016 or sometime after 2020. Some of the factors that will likely impact the timing and magnitude of price discounts include (1) actual LTO production levels, (2) potential for U.S. exports to Canada, (3) LTO access to West Coast markets, (4) potential to displace light sour and medium grade crudes in refineries, and (5) the amount of additional LTO processing capacity at refineries. Based on EIA reference case projections in Figure 2 , LTO production is projected to rapidly increase and peak around 2019. The implication of the reference case production profile is that the window of opportunity for crude oil exports—depending on export volumes—may be temporary. The potential temporary nature of the export opportunity may reflect the continuous and rapid drilling that may be needed to maintain and increase LTO volumes. Although, EIA's high resource case indicates that LTO may continue growing out to 2035. As noted above, actual and projected production can, and does, change over time. The high resource case reflects how industry knowledge could expand and technologies could improve, thereby resulting in increased U.S. LTO production in the future. LTO production at scale is a relatively new industry development and, thus, it is likely too early to accurately predict the magnitude of future production levels. One element of LTO production is the increase in extremely light hydrocarbons that might be classified as lease condensate, which is subject to export restrictions. While there is no quality characteristic (i.e., API gravity) that defines lease condensate, increasing production volumes of condensate and condensate-like material is one aspect of the crude oil export debate. For additional information, see the text box below. Actual and projected LTO production levels are affecting the refining and infrastructure segments in a variety of ways, and vice versa. How these segments might adjust to changing market conditions (i.e., increased LTO production) will depend on multiple economic variables and investment considerations. U.S. Refinery Configurations71 As of October 2013, there were 115 oil refineries in the United States with a total operable capacity of 17.8 million barrels per day of crude oil throughput. Each refinery has its own unique configuration that is generally designed to economically optimize the use of a certain crude oil blend and the production of oil products that will maximize profit margins. In the context of exporting crude oil, refineries located in the Petroleum Administration for Defense District (PADD) 3 provide an illustration of some of the emerging complexities and economic decisions that are being considered as LTO production increases in the Gulf Coast area, and as Canadian and Midwest crudes are delivered to the region. There are 43 refineries located in PADD 3, with a total operable refining capacity of approximately 9.1 million barrels per day, the largest concentration of refining capacity in the country. Nearly half of the refineries in PADD 3 are equipped with coking units ( Figure 3 ), a refinery process that upgrades heavy residual material from a refinery's distillation unit and converts this material into higher-value products such as naphtha and distillate. Adding a coking unit to a refinery is an expensive endeavor, with estimated costs in the $1 billion+ range. Generally, the decision to add coking capacity to a refinery is based on an expectation that the refinery will be able to purchase heavier crude oils that generally sell at a discount, and can yield certain oil products that are highly valued in domestic and international markets. Approximately 60% of PADD 3 refiners are considered coking refineries ( Figure 3 ). Investments in coking capacity were made based on an expectation that price-discounted heavy crudes from Canada and Latin America would be increasingly available. Increased production—both actual and forecasted—of LTO in PADD 3, primarily from the Eagle Ford and Permian Basin tight oil formations, may cause some refiners in this region to assess their optimal economic operating parameters. Each individual refiner will likely evaluate economic conditions—crude oil prices and product values—to determine if processing additional volumes of LTO is economically justified. While it may be challenging for PADD 3 refiners to process increasing volumes of LTO based on a refinery's current configuration, investments can be made to handle additional volumes of LTO. However, LTO price discounts, product values and volume commitments, investment requirements, and economic optimization for each individual refinery will dictate the additional volume of LTO that is ultimately absorbed. Whether such investments might actually be made is beyond the scope of this report. In addition to making investments in refining equipment, reducing import volumes of light sweet crude into PADD 3 is one possible avenue for absorbing more domestically produced LTO, but some refiners may have already exhausted this option. Indications are that light sweet crude imports are approaching extremely low levels and there may be limited opportunities to further reduce light sweet imports—based on current refinery configurations—if U.S. LTO production continues to increase as projected. As an example, PADD 3 light sweet imports were near zero through August 2014 ( Figure 4 ). Additionally, some estimates project that total North American light crude oil imports may go to zero by the end of 2014. Once total light crude imports are reduced to zero, refiners may begin evaluating options to reduce medium- and heavy-quality crude imports. However, foreign oil suppliers—notably Saudi Arabia and Venezuela—have ownership positions in some U.S. refinery assets. These countries could choose to continue providing oil, in some cases at discounts compared to available U.S. crudes, to their U.S. refineries in order to maintain presence in the U.S. oil market. Should countries elect this option, there may be limits to reducing crude oil imports. The ability of refiners to utilize more LTO is one consideration. However, transporting crude oil from production fields to refiners is another issue that can impact LTO price discounts and refining economics. Infrastructure Challenges One consideration for U.S. oil producers is the availability and cost of transportation infrastructure to deliver crude oil to refineries. Delivery infrastructure, and the cost associated with various transportation modes, can affect the value of oil that is produced in certain locations. LTO production growth in certain parts of the country is resulting in some constraints associated with moving crude oil to refiners. Crude oil is transported via pipeline, rail, marine vessel, and truck. Pipelines are the primary means of crude oil transportation in the United States. Generally, the U.S. crude oil pipeline network was originally designed to move crude oil and petroleum products northward from the Gulf Coast to Cushing, Oklahoma, and other destinations (See Figure 5 ). The geographic distribution of LTO production—currently concentrated in North Dakota and Texas—is constraining the existing U.S. pipeline delivery system, thereby creating market access challenges for some oil producers. To address these challenges, the crude oil transportation network is evolving: (1) some pipelines are reversing oil flow direction, (2) new pipelines are being developed, (3) rail shipments are increasing to deliver LTO from North Dakota to the east and west coasts, as well as the Gulf Coast, and (4) LTO waterborne shipments are also increasing. Waterborne shipments must comply with Jones Act requirements. Transportation costs and constraints contribute to different oil values at various delivery points throughout the country. While infrastructure adjustments are occurring, it is unclear how much LTO volume these adjustments will ultimately accommodate. Depending on their location and the cost of transportation modes available, some oil producers may argue that allowing crude oil to be exported would serve to equalize prices by alleviating some of the infrastructure-related price discounts in the market. Infrastructure limitations and resulting price discounts will impact the volumes of oil produced as well as refiner decisions to utilize incremental LTO production. Crude Oil Producer Prices Ultimately, the objective of U.S. oil producers is to maximize the value, or selling price, of each barrel of oil produced. U.S. oil producers throughout the country receive different prices, which can be affected by oversupply in a certain region due to production levels, refinery demand, and/or infrastructure limitations. Figure A-1 in Appendix A provides price history information for selected crude oil types. Allowing crude oil to be freely exported may have the result, all other things being equal, of reducing producer price discounts in some parts of the country, thereby equalizing the value of LTO to match global crude prices, adjusted for quality and yield characteristics and the cost of transportation. However, allowing crude oil prices to normalize may negatively impact certain refiners that are currently profitable due, in part, to regional crude oil price discounts. For example, spot prices for Bakken LTO have experienced price discounts compared to the U.S. West Texas Intermediate (WTI) benchmark. EIA reports that Bakken discounts have been as high as $28 per barrel, but have since adjusted—a result of changes to the oil transportation network (see " Infrastructure Challenges " section above)—to lower levels as logistic constraints have been alleviated in the region. Eagle Ford LTO in Texas has not experienced significant price discounts like those observed in the Bakken, likely due to its relatively closer proximity to refining customers and fewer transportation challenges. Eagle Ford condensate prices are more difficult to assess (see "Condensate" text box above). While typical U.S. price information does not include a condensate category, some refiners do post prices for various crude types, including condensate. Price postings available to CRS indicate that condensate prices, and therefore discounts to crude oil benchmarks, can vary. December 2014 condensate price postings from two different refiners indicate discounts that range between $0.75 and $12 per barrel. This wide discount range suggests that specific refiners value condensate differently. As a result, certain, but not all, condensate producers may be financially impacted by condensate price discounts. As LTO production increases, transportation bottlenecks and limited refinery demand for LTO and condensate feedstock may put downward pressure on LTO producer prices. While refining and transportation adjustments will likely occur, lower prices may result in less oil production, depending on the severity of the price discount and the economics of specific oil production projects. Furthermore, the relationship between producer prices and refinery acquisition costs is dynamic. As transportation networks and refinery configurations adjust to a changing crude oil slate, prices should reflect bottlenecks and limitations that exist. Under constraint conditions, the price discounts needed to motivate system modifications, in combination with price levels needed to incentivize incremental oil production, are uncertain and can be difficult to estimate due to the integrated and dynamic nature of production, transportation, and refining. Such estimates are beyond the scope of this report. Considerations for Congress Debate about U.S. crude oil exports is complex, dynamic, multidimensional, and includes many different stakeholder views. As a result, there are several issues that Congress may consider during future debate about crude oil exports. The following sections discuss some of these considerations. Also, in 2014 several organizations published analytical studies that assessed the economic and price impacts of potentially removing U.S. crude oil export restrictions. Appendix B includes a table that summarizes results from four studies based on parameters that might be of interest to Congress. Price Effects According to the economic theory of international trade, opening markets to world trade tends to push the domestic price of the traded good toward the world price. Additionally, if the volume of products entering the world market is sufficiently large, the world price may also adjust to account for the new world supplies. Although the U.S. oil market has been open to world trade for many years, it has generally been in one direction. While large volumes of imported crude oil have helped to provide for the consumption of petroleum products, exports of crude oil have essentially been prohibited. The price of oil is determined on the world market, and any changes in demand and/or supply which might be expected to affect the price of oil must be set against world levels of market activity. As the United States considers whether to allow the export of domestic crude oil to the world market, price changes are likely to occur consistent with those suggested by international trade theory. Crude Oil Prices The price effects of allowing the export of crude oil from the United States to the world market are likely to be threefold. First, the domestic price of LTO, or other grades of exported oil, is likely to converge toward the world price. Second, the price of the U.S. reference crude grade—West Texas Intermediate (WTI)—is likely to adjust relative to world reference grade crude oils, notably Brent. Third, the world price of oil is likely to adjust to reflect added U.S. supplies to the world total, all else being equal. See Figure A-1 in Appendix A for price history information for selected crude oil types. The actual magnitude of these price effects will be determined by the volume of crude exports from the United States that actually materialize. For example, should U.S. exports of LTO settle at about 500,000 barrels per day, this would represent nearly one half of the total output from the Bakken field in 2013, 2.5% of total U.S. consumption, and 0.5% of world demand for oil. As a result, the observed price effects on Bakken, and other price-discounted domestic crude oils might be expected to be relatively large, while the effects on U.S. reference prices and the world price of oil might well be smaller. Shale based LTO, since its entry to the U.S. market, has sold at a discounted price relative to other domestic crude oils of similar quality. As described in this report, the location of the oil, the lack of infrastructure to move the oil to refineries, and the technological characteristics of U.S. refineries all contributed to the need of suppliers to discount the price to induce refiners to purchase available supplies. The EIA reported that since 2012 the price of Bakken crude oil has been discounted by as much as $28 per barrel compared to WTI. While price discounts were less during most of the years 2012-2013, discounts were necessary to help cover the added cost of rail shipment of Bakken crude oil, which averages $10 to $15 per barrel nationwide. Rail shipment costs are as much as three times the cost of shipping oil by pipeline. Allowing the export of LTO would likely create additional demand for these crude oils that could cause the price to rise from discounted levels in the U.S. market to approach those earned by other light, sweet crudes in the world market. This would have the effect of reducing or eliminating the discount experienced in the U.S. market. Transportation infrastructure limitations would likely limit the quantities of exportable oil and add to its cost, but the potentially higher price earned by producers could help expand the industry. Investment in the fields might increase and with it oil production and related job creation. Introduction of LTO exports might also affect the price spread between WTI and Brent crudes. This could happen as the result of two price effects. First, as domestic LTO becomes relatively less available on the domestic market, reflecting the quantities entering the world market, the price of WTI is likely to rise as the domestic market tightens. Second, the price of Brent has been especially high since the Libyan revolution, which led to reduced supplies of light, sweet crude oil to Europe. While the direction of change in both prices may be estimated based on market theory, the actual magnitude of the price change would likely depend on the quantity of U.S. crude oil exported. A reduction in the WTI-Brent price spread as a result of these factors would be favorable for oil production and producers in the United States, with somewhat higher product prices for some U.S. consumers. A reduction in the price of Brent would primarily benefit European consumers, although the benefits of lower prices could extend to the world market. An increase in supply of LTO to the world market of, for example, 500,000 barrels per day, or 0.5% of world demand, would not be expected to have a large effect on world oil prices. A qualification to this observation is that the elasticities of both demand and supply in the world market are very low. As a result, changes in the quantities demanded or supplied on the market can have exaggerated effects on price. Among the effects of U.S. exports might be a reduced call on Organization of the Petroleum Exporting Countries (OPEC) crude oil and an increase in effective spare oil production capacity in the world market. OPEC provides crude oil to fill the gap between world demand and the total production from all other, non-OPEC, oil producers. Nations tend to use domestic crude oil and the supplies available from close exporters before calling on OPEC producers for supply. If the call on OPEC producers is reduced, this amounts to an increase in spare capacity in the sense that supplies, if withdrawn from the market, could re-enter the market in the event of an unanticipated demand increase or a supply emergency. An increase in spare capacity might be expected to reduce the potential for price volatility in the oil market. The escalating prices of the summer of 2008 were associated with a period of high demand that strained available supply, which caused excess capacity to fall to low levels. Product Prices Changes in the prices of petroleum products directly affect consumer costs and behavior at the pump. According to EIA, 68% of the consumer's cost of gasoline and 57% of the consumer's cost of diesel fuel is directly attributable to the refiner's cost of crude oil. Therefore, changes in the price of crude oil are likely to result in proportional changes in the prices of petroleum products. This implies that the crude oil price effects analyzed in the previous section of this report will directly affect U.S. consumers. The observed price discounts on Bakken crude largely, but not entirely, accrued to refiners supplying the Midwest and Rocky Mountain regions. A result of the availability of discounted crude oil may be that gasoline and other petroleum product prices were lower in those regions, compared to the national average. For example, during the period January 2012 through January 2014 Midwest gasoline prices were lower than national average gasoline prices during 21 of 24 months. As the price of local crude oil supplies rises to reflect convergence with the world price of oil, the benefit of these lower prices to regional consumers is likely to be reduced. If world oil prices decline as a result of U.S. exports, this could result in somewhat lower petroleum product prices for U.S. consumers as refiners use a mixture of domestic and imported crude oils that are tied to the world price of oil. This could occur if the quantity weighted reduction in world prices more than offset the quantity weighted increase in regional domestic prices. Although a fall in world oil prices might be predicted, its magnitude may be small should the amount of U.S. crude oil exports be small relative to the world market. By contributing to an increase in world spare capacity, U.S. exports could contribute to less volatile prices in the world oil market. Price stability, coming from less reaction to the numerous supply problems that plague the supply side of the market, could reduce market uncertainty, possibly bringing benefits to national and international energy planners. Energy Security and Geopolitics Although there has been some debate over U.S. crude oil exports, the effects of rising U.S. oil production have already been felt in international markets and on geopolitics. While increased oil production has allowed the United States to alter its geopolitical posture, the U.S. government has not used its oil production as leverage over other countries, and has been critical of countries that do. Furthermore, the U.S. government does not directly control either oil production or the companies that produce oil. The rise in U.S. production has decreased the need for imports, improving the U.S. trade balance, and leaving more oil and spare production capacity on the world market. It has also contributed to an increase in refined petroleum product exports, an activity not prohibited by U.S. law. The change in perspective of the United States being a major oil importer to possibly an exporter has altered the United States' place in world energy. Countries that may have viewed the United States as a declining economic power may now view it as having competitive advantages in new sectors related to petroleum. Some oil producing countries that viewed the United States as a market destination may now view it as a competitor. If the United States changes its import/export position and potentially its rules regarding crude exports, the effects on geopolitics will differ depending upon how and when the changes occur in addition to the expected volume of exports. In the short term, as has already been raised, the United States may consider allowing more exports of crude oil to correct a possible market inefficiency due to refining capacity/configurations and crude oil specifications. In the medium term, whether U.S. laws will be changed to allow greater export of crude oil remains a key question. In the long term, if U.S. laws and regulations were changed to promote crude oil exports, how big of an exporter would the United States become remains the central question to the impact on geopolitics. The U.S. posture toward sanctions against Iran, including by some Members of Congress, has become more stringent, in part because of the rise in U.S. oil production. Additionally, the decline in U.S. imports has made the United States less reliant on certain OPEC countries, particularly countries that provide light sweet crude oil (see Figure 4 ), such as Nigeria. OPEC, at least publicly, has "welcomed" the rise in U.S. oil production as stabilizing to the market. Saudi Arabia, the world's largest crude oil exporter, has also indicated support for increased U.S. oil production as well as exports. However, some analysts argue that the United States is shifting its interest (i.e., military presence) from key oil-producing regions, like the Middle East, because of its newfound resources. Additionally, other industry analysts speculate that Saudi Arabia may discount its crude oil and refined product exports to the United States in order to stay in the U.S. market for strategic reasons. U.S. consumption of petroleum products was 19.04 million barrels per day in 2014 compared to the peak rate of 20.80 million barrels per day in 2005. In 2014, the United States produced 8.68 million barrels per day of crude oil and imported 7.34 million barrels per day with the difference between consumption and production plus imports being made up of non-crude oil inputs (i.e., natural gas liquids, biofuels, refinery gain) to the refining system. In 2005, the United States produced 5.18 million bbl/d and imported 10.13 million bbl/d. Over two-thirds of imports came from Canada, Saudi Arabia, Mexico, and Venezuela in 2012 and almost 60% in 2005. Canada and Mexico are considered to be reliable suppliers. Saudi Arabia and Venezuela, both OPEC members, own extensive refining assets in the United States (Motiva and Citgo refineries respectively) and as a result might be expected to maintain a presence in U.S. oil markets. Beyond these 4 countries, over 30 other countries supply the United States with crude oil, none at levels expected to be difficult to replace if emergency conditions might develop. Should the United States remove barriers to crude oil exports, the amount of exports may not matter as much as the psychological impact. The view that the United States is committed to the global energy market may have the greatest effect. Even in the long run, most industry analysts do not project that the United States will produce more crude oil than it consumes (see Figure 1 ). Nevertheless, any additional barrels that the United States produces will dilute OPEC's market share, assuming demand stays the same, and this may be viewed positively by most oil-consuming countries. Some countries have directly expressed interest in the United States removing crude oil and condensate export restrictions. For a brief overview of South Korea's interest, see the text box below titled "Global Interest in U.S. Crude Oil and Condensate." U.S. oil production is rising and is projected to rise, at least, through the beginning of the next decade. If the EIA reference case projections turn out correctly, the United States would likely eventually resume its role as a growing importer of oil, assuming no other market changes. Changing geopolitical relationships because of the current situation may prove short lived if oil production does not continue to increase. Despite having a cartel supplier trying to manipulate prices, the oil market remains robust and competitive. Being a part of this market has helped many countries, both producers and consumers. As an example, when the United States needed petroleum products after Hurricanes Katrina and Rita in 2005, European countries were able to supply them from their strategic reserves. Similarly, when Japan shuttered its nuclear reactors after the Fukushima tragedy in 2011, the energy market reacted by sending more natural gas, coal, and oil resources to the country in order to meet energy needs. Unlike earlier periods, the United States is now a participant in energy agreements through the International Energy Agency to share the burden of supply disruptions on the world market. As part of its IEA membership, the United States maintains a Strategic Petroleum Reserve that can offset disruptions in imported supplies. International Trade Policy The potential exportation of U.S. crude oil may have implications for U.S. trade policy. The United States has undertaken certain obligations as a member of the World Trade Organization (WTO) and is a signatory to several regional and bilateral free trade agreements (FTAs). As noted above, the United States licenses the export of crude oil under certain restrictive circumstances. The WTO generally discourages limitations on international trade such as import or export restraints. Underlying the WTO agreements are two basic principles: most-favored-nation (MFN) treatment and national treatment. MFN obligates a WTO member not to discriminate among the products of other member states. National treatment obligates a member not to treat another member's products as different from one's own. The General Agreement on Tariffs and Trade (GATT) Article XI, General Prohibition Against Quantitative Restraints, states: No prohibition or restrictions other than duties, taxes or other charges made effective through quotas, import or export licenses or other measures, shall be instituted or maintained by any contracting party on the importation of any product of the territory of any other contracting party or on the exportation or sale for export of any product destined for the territory of any other contracting party. However, some exceptions are available. Article XX provides a generalized exception that allows governments to restrict trade based on the conservation of exhaustible natural resources or the necessity to protect human health. However, these exceptions are subject to the provision that the objectives are not used as a disguised restriction on international trade or to arbitrarily discriminate between countries where the same conditions prevail. In this case, for example, restricting the export of crude oil may be dependent on a member's restriction of its own production. The crude oil restriction may also be subject to the WTO's Agreement on Subsidies and Countervailing Measures (ASCM) if it, by limiting demand, drives down the price, thereby conferring a subsidy for domestic industry. This was one facet of a successful U.S. challenge to Chinese raw materials and rare earth export restrictions. The United States is in negotiations on two multi-nation free trade agreements (FTAs): the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (T-TIP). TPP includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. T-TIP is a proposed agreement between the United States and the European Union (EU). Countries in both of these negotiations may be interested in obtaining access to U.S. energy supplies. Both these agreements are directly relevant to exports of U.S. liquefied natural gas; according to statute it is in the national interest to approve LNG exports to FTA countries. There is no such exception for exports of crude oil; however, the EU has sought to put access to U.S. energy—including crude oil—on the T-TIP negotiating agenda. The EU has sought a comprehensive energy chapter in the T-TIP that would guarantee access to U.S. energy supplies, which, according to a EU "non-paper," would include, "a legally binding commitment in the T-TIP guaranteeing the free export of crude oil and gas resources by transforming any mandatory and non-automatic export licensing procedure into a process by which licenses for exports to the EU are granted automatically and expeditiously." The United States reportedly has resisted EU attempts to include energy as a separate chapter, but to consider energy in terms of other goods trade in the agreement. On September 29, 2014, Senators Boxer and Markey wrote to U.S. Trade Representative Michael Froman contending that "automatic and unrestricted approval of U.S. oil and gas exports to the EU has the potential to harm consumers, our national security, and our environment" and urged him to oppose such provisions in T-TIP. EU attempts to lock in energy guarantees through T-TIP may take on increased urgency as a result of renewed tensions with Russia, a major oil and gas supplier to Europe. Environment Potential environmental issues that could arise from the removal of crude oil export restrictions are dependent on the specific consequences that might ensue from removing such restrictions. However, these consequences, particularly the long-term effects, are uncertain. A primary question for policy makers is the net effect on domestic oil production from removing the export restriction. As illustrated in Figure 2 , EIA projects domestic production of LTO to increase dramatically in the near future. However, some observers have argued that the export restriction, coupled with current refinery configurations (discussed above), will effectively create a production ceiling for specific resources. Assuming this is the case, the next question concerns magnitude: How much additional domestic production would occur if the crude oil export restriction is removed? Estimates for expected U.S. crude oil export volumes are uncertain and actual volumes will depend on multiple variables. As noted above in the " Price Effects " section, some estimate a potential excess of 500,000 bbl/d of light sweet crude oil by the 2015 to 2016 time frame. Assuming that lifting or modifying export restrictions would result in a substantial increase in domestic crude oil production—above what would otherwise occur—several environmental issues would likely receive some attention. These issues, discussed below, may include oil transportation, impacts related to oil extraction, and climate change. Oil Transportation A further increase in domestic crude oil production could amplify existing oil transportation concerns, which have received considerable attention. In particular, the current expansion of North American oil production has led to significant challenges in transporting crudes efficiently and safely using the nation's legacy pipeline infrastructure. In the face of continued uncertainty about the prospects for additional pipeline capacity, and as a quicker, more flexible alternative to new pipeline projects, crude oil producers are increasingly turning to rail as a means of transporting crude supplies to U.S. markets. According to EIA data, the volume of crude oil carried by rail increased 20-fold between 2008 and 2013. While oil by rail has demonstrated benefits with respect to the efficient movement of oil from producing regions to market hubs, it has also raised significant concerns about transportation safety and potential impacts to the environment. The most recent data available indicate that railroads consistently spill less crude oil per ton-mile transported than other modes of land transportation. Nonetheless, safety and environmental concerns have been underscored by a series of major accidents across North America involving crude oil transportation by rail. As with rail transport, crude oil transportation by barge has increased substantially in recent years, doubling between 2008 and 2013. However, the same dataset cited above indicates that tank vessels and barges consistently spill less crude oil per ton-mile transported than other modes of oil transportation. Nonetheless, spills from barges and tankers often occur in locations that may be particularly vulnerable to oil contamination. Oil Extraction Based on the geology of LTO, hydraulic fracturing ("fracking") is often required to extract the resource. While the use of high-volume hydraulic fracturing has enabled the oil and gas industry to markedly increase domestic production, questions have emerged regarding the potential impacts this process may have on both air quality and groundwater quality—particularly on private wells and drinking water supplies. The debate over the groundwater contamination risks associated with hydraulic fracturing has been fueled in part by the lack of scientific studies to assess the practice and related complaints. These issues could receive additional attention if LTO extraction were to increase, due to a change in the U.S. crude oil export policy. Climate Change Some environmental groups want to keep the crude oil export restrictions in place for climate change reasons. They argue that lifting the export restrictions would lead to increased crude oil development, which could potentially alter the "global carbon budget." The global carbon budget is a scientifically estimated maximum amount of net worldwide greenhouse gases that could be emitted without exceeding a proposed temperature target of 3.6°F above pre-industrial levels (a 2°C target). Some consider that such a temperature target could avoid the worst effects of greenhouse-gas induced climate change, and it has been agreed as a political consideration in international negotiations to address climate change under the United Nations Framework Convention on Climate Change. Assuming this estimation is correct, all countries' emissions (net of any sequestration or "sinks") would have to stay within the carbon budget to avoid exceeding the 2°C temperature cap. However, the degree to which a change in crude oil export policy would impact the carbon budget is beyond the scope of this report. Moreover, there is no political agreement in the United States on a domestic carbon budget, on the appropriateness of the global 2°C target, or on the validity of any target. Federal Revenue Collections As the debate about exporting crude oil has evolved, some groups have put forward proposals to assess a fee or tax on crude oil exports, should current laws be changed, as a way to increase federal revenues. However, Article 1, Section 9, Clause 5 of the U.S. Constitution directly states that "No Tax or Duty shall be laid on Articles exported from any State." This could be an obstacle to efforts that propose taxing crude oil exports. Additionally, an increase in federal revenue might result from increased tax receipts from crude oil producers and supporting industries, should profitability be improved as a result of exporting crude oil. However, calculating potential increases in federal revenues through additional tax receipts is complex and challenging and is typically based on multiplier assumptions as well as other income statement assumptions that could affect the amount of taxes collected. Policy Options In light of the considerations discussed above, and as the debate about exporting crude oil evolves, various proposals might emerge that fall within a spectrum of policy options that Congress may choose to consider. At one end of the spectrum are calls to remove export restrictions entirely. At the other end are calls to keep, maintain, and possibly expand current export restrictions. Additionally, there are various proposals to ease crude oil export restrictions on a limited basis. As of the date of this report, two industry groups have formed to advocate opposing positions to crude oil export policy changes: (1) CRUDE and (2) PACE. The following sections examine some policy options that may be considered. Remove Existing Restrictions One policy option that Congress may consider is to introduce legislation that amends EPCA. Legislation that modifies EPCA, and other export-limiting statutes, may be the most straightforward means of lifting crude oil export restrictions. However, some Members of Congress have called on the executive branch to use its existing powers to either lift or ease current export restrictions. For more information about executive branch powers related to crude oil export restrictions, see the text box below titled "Could the Executive Branch Amend or Eliminate Crude Oil Export Restrictions Absent Legislation?" Should export restrictions be lifted entirely, U.S. oil producers would have access to global markets, domestic and international prices would likely converge to some degree, and domestic crude oil production may increase if the economics are justified. While this scenario might potentially benefit crude oil producers, some U.S. refineries may be negatively affected as a result of reducing regional crude oil price discounts. Additional crude oil production may also result in environmental concerns associated with expanded extraction, transport, and consumption. While unrestricted crude oil exports—all else being equal—may be expected to put downward pressure on global crude prices and domestic gasoline prices, whether actual prices will be lower is uncertain. Global crude oil prices are determined by a number of factors that are outside the control of U.S. policy makers (e.g., supply disruptions, Saudi Arabia and OPEC decisions, and emerging demand from Asia). Ultimately, effects from crude oil exports on prices, the environment, and other considerations will be a function of the volume of crude oil that is produced and exported and will be further affected by the actions of other players in the global oil industry. Maintain Current Restrictions Congress could also leave current restrictions in place, thereby maintaining the requirement for the President to limit U.S. crude oil exports. According to supporters of this position, maintaining crude oil export restrictions is warranted since the United States is, and will be, reliant on imports, and crude oil price discounts in the United States will be eliminated as domestic and global prices converge. Should existing export restrictions remain in place, there may be several potential outcomes to consider. LTO production is expected to continue growing in the short/medium term and existing refinery configurations may result in an oversupply of certain types of crude oil in specific locations (e.g., Texas). While refineries can adjust their processes to accommodate changing crude oil qualities, they will likely make the necessary capital investments to do so only if the economics are warranted. Lower, or discounted, LTO prices would be an economic consideration—along with the expected longevity of price discounts—for refiners when making capital investment decisions. Lower/discounted oil prices may result in less LTO production from certain fields. However, the price discount needed to motivate refiners to make capital investments—and whether the price discount would be large enough to markedly reduce oil production—is uncertain. Additionally, the ability of oil producers to innovate and improve efficiencies that would allow for profitable operations in a price-discounted market environment is possible but also uncertain. Nevertheless, maintaining current export restrictions may result in some oil producers receiving lower prices—compared to global benchmarks—for oil produced. Lower prices may result in less U.S. oil production, and therefore less economic development associated with oil production. However, it is not clear at what price point oil producers might curtail production, and each producer location has different economic considerations. Financial break-even per barrel prices can vary significantly depending on a number of factors, such as the formation/well characteristics, liquid vs. gas content, and financial structure of the company producing the well. Analyst estimates for shale oil break-even prices range between $50 per barrel and $100 per barrel. Discounted crude oil prices in certain areas may also enable some refineries to operate profitably, especially those in locations that benefit from price discounts. Furthermore, crude oil export regulations are open to interpretation, and it is likely that oil producers will seek more export opportunities that might be allowed under the existing regulatory framework (see Appendix C ). Inconsistencies in the crude oil definition (see "Condensate" text box above) as well as a lack of clearly defined terms (i.e., topped crude oil and unfinished oils) may be an opportunity for producers to seek to determine the minimum amount of processing necessary that would result in an exportable product. Barring any legislative or administrative action to remove or modify crude oil export restrictions, this is the likely path forward for oil producers to export more material into the global market. However, it is unclear how widely or narrowly BIS will interpret existing laws and regulations and the level of additional exports that might occur should producers explore export options within the current regulatory framework. Modify Restrictions Between lifting oil export restrictions altogether and maintaining them in their current form are a variety of policy options that might be considered. Some examples of such policies might include the following: Exempt LTO from export restrictions: The increase in LTO production appears to be one of the underlying dynamics motivating exports. As a result, crude oil with a certain quality characteristic or crude oil that is produced in specific locations might be exempted from export restrictions. The President has some powers to exempt certain crude oil exports if doing so is determined to be in the national interest. Exempting exports of certain types of crude from specific locations has occurred in the past. In 1992, then-President George H. W. Bush issued an executive order allowing 25,000 bbl/d of California heavy crude to be exported. Remove "lease condensate" from the BIS crude oil definition: As discussed in this report, lease condensate is an aspect of the crude oil export debate that is receiving attention due to increased production of extra-light hydrocarbons. Removing the term "lease condensate" from the crude oil definition may result in some of that material being exported, thereby addressing some of the apparent oversupply, and price discount, issues that may emerge in the Gulf of Mexico region. However, crafting a definition for lease condensate may present some challenges, as there is not an industry standard for this material. Allow crude oil exports for a limited period of time: EIA 2014 reference case LTO projections indicate that production may reach an upper limit by 2019 and then start to decline. While actual LTO production levels are uncertain, one policy option may be to allow crude oil exports only for a defined period of time—five years, for example—after which the domestic production and export situation could be reassessed. There are a number of other options for modifying existing restrictions that might be considered. Each option could impact the market and individual stakeholders in different ways. Congress may choose to study and analyze various considerations associated with efforts to modify crude export restrictions. Legislative Action During the 113 th Congress, several bills were proposed that would eliminate current crude oil export restrictions. Essentially, each bill proposed to modify the Energy Policy and Conservation Act by removing the requirement that the President promulgate a rule prohibiting the export of domestically produced crude oil. Following is a list of four bills that were proposed in the 113 th Congress: H.R. 4286 : American Energy Renaissance Act of 2014 H.R. 4349 : Crude Oil Export Act S. 2170 : American Energy Renaissance Act of 2014 H.R. 5814 : To adapt to changing crude oil market conditions Appendix A. Crude Oil Price History Appendix A. Appendix B. Comparison of Economic Impact Studies As debate about U.S. crude oil export policy has continued, several organizations have published analytical studies that assess the potential economic effects associated with removing crude oil export restrictions. Table B-1 compares four of the published studies in terms of major areas covered that may be of interest to Congress. Comparing these studies on a truly equivalent basis is difficult since each study uses a different methodology, approach, model, and set of assumptions to derive results. Additionally, study results can be influenced by oil market conditions, which can change over time, at the point the study was conducted. Finally, one of the unknown factors in the studies that is quite difficult to assess is how the Organization of Petroleum Exporting Countries (OPEC) might respond (i.e., maintaining production and accepting potentially lower prices or reducing production levels as a means of possibly maintaining oil price levels) to additional crude oil in the international oil market. Exactly how, or even if, OPEC might respond to a change in U.S. crude oil export policy is highly uncertain. However, an OPEC action could affect the economic and market impacts of a change in export policy. Nevertheless, there are some general themes that are consistent among the compared studies. Assuming that crude oil export restrictions are removed, (1) U.S. domestic and international oil prices will likely converge, (2) there is expected to be downward pressure on U.S. gasoline and petroleum product prices, and (3) U.S. oil production and exports are expected to increase, along with economic activity needed to support this increase. The magnitude of these effects varies, in some cases considerably. Table B-1 provides an overview assessment of results from the included studies . However, there are a number of variables and caveats associated with each study. Therefore, readers are encouraged to review the full study reports in order to obtain context and understand the assumptions and caveats associated with individual study results. In addition to the four studies compared in Table B-1 , other impact studies and analysis from the Aspen Institute, the Government Accountability Office (GAO), and the Congressional Budget Office (CBO) have been published that consider economic, price, and budget effects associated with removing crude oil export restrictions. Appendix C. Processed Condensate Exports: A Change in Energy Policy? With some exceptions, crude oil exports are prohibited under current law, while many petroleum products may be freely exported without requiring a license from the Department of Commerce's Bureau of Industry and Security (BIS). Increasing U.S. production of light crude oil and condensate is resulting in price discounts—relative to domestic and international benchmarks—for some oil producers. Limited domestic marketability of "lease condensate," combined with crude oil export restrictions, is motivating oil producers to pursue export markets as a way to increase the value of this hydrocarbon material. In June 2014, it was reported that BIS ruled to allow processed condensate to be exported by two firms. Press reports about the BIS rulings resulted in debate about whether this represents either a change to crude oil export policy or an administrative ruling within the existing regulatory framework. Crude Oil Definition: Open to Interpretation The BIS crude oil definition specifically includes "lease condensate," which is subject to export restrictions: " Crude oil " is defined as a mixture of hydrocarbons that existed in liquid phase in underground reservoirs and remains liquid at atmospheric pressure after passing through surface separating facilities and which has not been processed through a crude oil distillation tower. Included are reconstituted crude petroleum, and lease condensate and liquid hydrocarbons produced from tar sands, gilsonite, and oil shale. Drip gases are also included, but topped crude oil , residual oil, and other finished and unfinished oils are excluded. [Emphasis added] However, the definition also includes language that may allow for processed crude oil and condensate to be exported. For example, the definition indicates that crude oil/lease condensate processed through a distillation tower is export eligible. As a result, the regulation allows for some degree of interpretation with regard to the amount of processing necessary to qualify as an exportable product. Lease condensate, typically produced with natural gas, is one aspect of the crude oil export debate with several complexities and considerations (i.e., no common definition, limited production and price data, and regulatory inconsistencies). Additionally, lease condensate has physical/chemical characteristics similar to exportable hydrocarbons such as naphtha, natural gasoline, and plant condensate. BIS Commodity Classification Restrictions on crude oil exports required by the Energy Policy and Conservation Act ( P.L. 94-163 ) and other statutes are administered by BIS through short-supply controls . Under the Export Administration Regulations (EAR), exporters must obtain a license to export crude oil. Some exports permitted by the regulations may be available for a license exception, under which the exporter certifies that a lawful transaction is taking place. For goods subject to the EAR, if an exporter is unsure about an item's classification and the resulting controls on that item, the exporter may request a commodity classification from BIS. Commodity classifications generally are used to determine the control status of sensitive or strategic "dual-use" products controlled for national security or foreign policy reasons. However, these procedures are available to classify any product subject to the EAR, including crude oil. To obtain a commodity classification, an exporter would provide BIS specifications for the good/technology, including blueprints, sales brochures, and catalogs. The end result is a determination that an item is described in an existing classification or is classified as an EAR99 . For raw material such as crude oil, BIS may concentrate on the process (i.e., distillation) by which the product is transformed. However, for most dual-use goods it is the control status of the product, not the process by which it is produced, that is being determined. Processed Condensate Applications Press reports indicate that two companies submitted separate applications to BIS requesting an official classification that would allow processed lease condensate to be exported as a product, without requiring a license. Details of the applications and BIS rulings, by law and in accordance with the Export Administration Act, are confidential. However, a July 2014 presentation provides some insight into the content and approach of one processed condensate application. According to the presentation, multiple parameters were used to argue that processed lease condensate being produced by this particular company should be eligible for export, including (1) the input lease condensate is processed enough whereby the output is distinctly different; (2) output from stabilization/distillation has suitable product uses—not just as a refinery feedstock (i.e., crude oil); and (3) resulting products have similar physical and chemical characteristics to hydrocarbons that are currently exported (See Figure C-1 ). After considering the application, BIS issued a ruling to the company that classifies the processed condensate as an EAR99—no export license required—product. Policy and Market Implications Some industry observers indicate that the BIS rulings represent a policy change and may result in large volumes of minimally processed crude oil being exported . However, the Administration has publicly stated that there has been no policy change and that the two rulings are within the scope of current regulations. Logic supporting the industry observers' argument is the following: Since, by definition, condensate is crude oil, then applying the same process to crude oil would result in exportable product. It is important to note that the rulings are specific to products that result from stabilizing and distilling condensate. Applying the same stabilization and distilling processes to crude oil may result in a different output stream and include products that may or may not be considered export eligible. However, the BIS crude oil definition does include language—exclusion of "topped" crude oil and "unfinished" oils—that could be interpreted and might allow for exports of minimally/partially processed crude oil. While the two BIS condensate rulings may not result in mass export volumes of domestically produced crude oil and condensate, they will likely result in an increased number of applications to BIS requesting classifications that push the envelope to determine how much crude oil and condensate processing is necessary to result in export-qualified products, especially in light of ambiguity and the lack of clearly defined terms within the crude oil definition. In July 2014, it was reported that processed condensate applications at BIS were being "held without action."

During an era of oil price controls and following the 1973 Organization of Arab Petroleum Exporting Countries oil embargo, Congress passed the Energy Policy and Conservation Act of 1975 (EPCA), which directs the President "to promulgate a rule prohibiting the export of crude oil" produced in the United States. Crude oil export restrictions are codified in the Export Administration Regulations administered by the Bureau of Industry and Security (BIS)—a Commerce Department agency. Generally, U.S. crude oil exports are prohibited, although there are a number of exemptions and circumstances under which crude oil exports are allowed. The President has authority to allow certain crude oil exports if an exemption is determined to be in the national interest. In 2009, a decades-long U.S. oil production decline was reversed due to the application of advanced drilling and extraction technologies to produce tight oil, generally light/sweet crude primarily located in Texas and North Dakota. Limited demand for tight oil and condensate being produced in the Texas/Gulf Coast region may result because certain refiners in that region are currently configured to process heavier crudes. As a result, oil producers and industry analysts are projecting an oversupply of light oil, which could lead to price discounts and lower production should export restrictions remain. However, the industry is dynamic, and refiners can modify operating configurations and add equipment in order to accommodate more light crude volumes. Price discounts may be needed to motivate such changes. The effect on domestic gasoline prices is a major consideration, among several, associated with allowing crude oil exports. Commercial studies and federal government analysis suggests that gasoline prices are correlated to international crude oil prices—since gasoline and other petroleum products can be exported without restriction—and U.S. gasoline prices could possibly decrease if crude oil exports were allowed. However, the projected decreases—assuming ~$100 per barrel crude oil prices—are relatively small and range from $0.02 to $0.12 per gallon. Congress may choose to consider crude oil export policy options that could range from maintaining existing restrictions to eliminating the prohibition on crude oil exports. During the 113th Congress, four bills were introduced that would have eliminated crude oil export restrictions: H.R. 4286, H.R. 4349, S. 2170, and H.R. 5814. Some Members of Congress have expressed the desire to maintain crude oil restrictions. However, maintaining restrictions might not prevent more crude-oil-like material from being exported, because varying interpretations of existing regulations may allow for more exports. The crude oil definition in the export regulations is open to interpretation and has many undefined terms that the industry may explore with the objective of determining the minimum amount of crude oil processing necessary that would result in an exportable product. It is not clear how broadly or narrowly BIS might interpret existing laws and regulations. Finally, Congress may choose to explore other options between eliminating and maintaining restrictions. Examples may include allowing exports of lease condensate—an ultralight hydrocarbon that is typically produced with natural gas—allowing unrestricted exports to Mexico since exports to Canada are not restricted, allowing a certain type of crude (i.e., light/sweet) from a certain location (i.e., Texas) to be exported—much like the California heavy crude oil export exemption—or allowing crude oil exports for a limited time period since U.S. oil production growth is uncertain and may, according to the Energy Information Administration, peak in 2020. The President has the authority to make national interest determinations that would allow for more crude oil exports.

CRS_RL33806

Natural Resources: The Policy Setting Natural resource management remains a significant issue for the federal government, and the availability of particular natural resources, such as energy resources, can be matters of broad public concern. Natural resource availability represents both an opportunity and constraint for human activities. Local, state, and federal government policies define the intertemporal distribution and use of the nation's natural capital stock of soil, minerals, forests, water, fisheries, etc. Growing demands and pressures for both resources and services from the nation's resources, plus heightened interest in how these resources are used, have increased the complexity of their management and administration. Resource management decisions have economic, social, and environmental implications, which may be local, national, or international. Who decides how natural resources should be managed and how the decisions are made remain topics of debate. The federal role in natural resource management continues to be controversial. Some stakeholders seek to maintain or enhance the federal role in resource management. Others support more local influence or international decision-making in some cases. Often the resource issues debated in Congress are focused on specific management tools and their effects (e.g., changing grazing fees, reforming mining laws, restructuring the Endangered Species Act), rather than on broader goals and objectives of resource policies. However, debate on specific management issues may encompass discussions of broad principles, such as the principles of multiple use and sustainable yield that underpin the management philosophies of some federal resource agencies and whether they remain appropriate for the current demands, constraints, and values of resources. Historic Resource Management The United States is one of the few countries that possesses a vast array of natural resources—only Canada, Russia, and Brazil have similar endowments. Initially, U.S. policy focused on disposal of federal lands and use of resources to encourage settlement and development of the country. Several waves of conservation, beginning in the 1870s, began to shift this vision. Establishment of Yellowstone as the first national park in 1872 and setting aside in 1891 of unreserved public timberlands as national forests for watershed protection were important early landmarks in development of new policies. Through the 1950s, government policies and institutions largely favored regional resource users (e.g., ranchers, miners, loggers, and irrigators). For example, the federal government often encouraged the settlement, use, and development of federal lands and resources at little cost to users. In the 1960s, more people began questioning the rationale behind federally supported resource use, and the politics began to change due to two main factors—the demand for recreation and amenity goods increased sharply, and the environmental-conservation movement gained political momentum and increasingly sought judicial rulings in favor of greater protection. These factors shifted policies away from those that favored traditional resource users. Tension between traditional and alternative uses and protection programs remains a prominent factor in the current debate over natural resource management. Management Challenges: Balancing Uses and Sustainability Certain themes are prevalent during consideration of many resource questions. Common themes include how to balance the tensions in multi-use management and protection programs, whether resources should be managed to produce national or local benefits, and how to balance current uses with future supplies and opportunities. Conflicting views reflect different values, needs, and perceptions of the condition of resources and the sustainability of uses. While specific management concerns are constantly in flux, many of the concerns fall under the same categories that have confronted policy-makers for decades: role of the federal government in establishing policies; interagency conflicts and overlaps; sources and levels of funding; information and role of science; and coordination of federal, state, and local efforts. Although these categories of issues are fairly constant and broader questions of resource goals and management objectives remain, Congress for many reasons typically confronts the resource issues based on the natural resource in question—lands and related resources, oceans and coasts, species and ecosystems, or water. Conflicting public values concerning federal and Indian lands raise many questions and issues, such as how much land the federal government should own, how managers should balance conflicting uses (e.g., grazing, timber, habitat, recreation), whether Congress should designate specially protected areas, and when and how agencies should collect and distribute fees for land and resource uses. Multiple use management is an approach to balancing use conflicts that can occur on federal lands. Federal land ownership and management continues to be controversial, especially in some western states where the federal government owns half or more of the land. Congress continues to examine the multi-use land management through legislative proposals, program oversight, and annual appropriations for the four major federal land management agencies. Energy production on federal lands, protection from wildfires, range management, and recreation have been at the forefront of congressional debates in recent Congresses. Indian land issues include energy rights-of-way across tribal lands, especially the amount of compensation sought by Indian tribes. Increasing use of coastal and marine resources is driving proposals to alter the relationship between environmental protection and sustainable resource management. Recent reports note declines in marine resources and shortcomings in the fragmented and limited approaches to resource protection and management in federal and state waters. A further concern is the increasing pressures and conflicts that arise from economic activity associated with continued human population growth in coastal areas. Within coastal areas, the most attractive and highest-valued properties often are the most hazardous, exposed to the forces of wind and waves that accompany ocean storms, hurricanes, and tsunamis. Increased use of coastal and nearshore areas has promoted conflict with ocean energy development and production from Outer Continental Shelf oil and gas platforms as well as wind farms. Current projections that sea levels will continue to rise will likely make coastal sites more hazardous in the future. The numbers of animal and plant species facing possible extinction are rising, and some of the ecosystems that they rely on are changing or degrading, raising both species-specific and ecosystem-based management questions and challenges. Some stakeholders contend that species loss may have social and economic impacts, and therefore assert that all species should be saved. However, others hold that the cost to society of protecting species with the aim (but not the certainty) of saving them is substantial, while the benefits are vague. Dwindling species are often indicators of habitat loss or alteration. Habitat loss often results from development, changes in land and water management practices, competition from invasive species, and other factors, nearly all affected by economic, political, or social interests. Because of the tradeoffs inherent in species and ecosystem management decisions, goals and objectives for species protection, ecosystem restoration, and invasive species control remain controversial. For example, is recovery of all species listed under the Endangered Species Act a realistic goal? Similarly, differences of opinion continue over the tradeoffs, performance, and expense of approaches being employed in restoration, species protection, and invasive species control. For example, can the multi-billion dollar wetlands restoration proposals for coastal Louisiana restore the coastal ecosystem without requiring significant changes to the management of the Mississippi River? Increasing pressures on the quality and quantity of available water supplies—due to growing population, environmental regulation, in-stream species and ecosystem needs, water source contamination, agricultural water demand, climate variability, and changing public interests—have resulted in heightened water use conflicts throughout the country, particularly in the West. The federal government has a long history of involvement in water resource development and management to facilitate water-borne transportation, expand irrigated agriculture, reduce flood losses, and more recently restore aquatic ecosystems. Although there is no broad federal water policy, Congress makes decisions that define the federal role in the planning, construction, maintenance, inspection, and financing of water resource projects. Congress makes these decisions within the context of multiple and often conflicting objectives, competing legal decisions, and long-established institutional mechanisms (e.g., century old water rights, contractual obligations, etc.). Hurricane Katrina raised questions about the federal role in water resources; in particular, the disaster brought attention to the trade-offs in benefits, costs, and risks of the current division of responsibilities among local, state, and federal entities. Many resource debates are shaped by the availability of information on the resources. Consequently, the role of science is another common theme in resource discussions. For example, science is instrumental in defining the uncertainty and potential extent and impact of climate change and weather on resource stocks and conditions. Similarly, resources availability and abundance may represent both opportunities and hazards, for example drought and flooding. Natural resources management often is intertwined with issues in other policy areas. For example, relationships between natural resources management and environmental protection are evident in many issues, such as groundwater contamination's effect on rural water supply. Cross-cutting issues are discussed in this report if the congressional concern revolves principally around resource conditions and supply. Similarly, debates on energy policy encompass questions of access to energy resources and the impact of energy production on lands and resources. While a few energy resource issues are covered in this report, information on energy policy broadly is contained in CRS Report RL31720, Energy Policy: Conceptual Framework and Continuing Issues , by [author name scrubbed]. Many natural resource issues, especially ones dealing with resource conditions and uses on private lands, overlap with agricultural topics. For information on federal conservation programs for agricultural lands, see CRS Report RL33556, Soil and Water Conservation: An Overview , by [author name scrubbed] and [author name scrubbed]. Management, Institutions and Issues: Natural Resources in the 110th Congress Congress deals with natural resource issues on a number of fronts. Key laws, programs, and issues are handled by several authorizing committees in the House and Senate. Many issues involve several committees, such as those involving wetlands protection and restoration. In addition, natural resource issues often are addressed during consideration of annual appropriations bills for natural resource agencies, programs, and activities. The 110 th Congress is likely to weigh whether federal funds for natural resources issues are adequate and focused on the appropriate resource priorities. In many cases, natural resource issues do not divide along clear party lines. Instead, they may be split along rural-urban, eastern-western, coastal-interior, or upstream-downstream interests. This section briefly discusses 31 selected natural resource issues that the 110 th Congress may consider through oversight, authorizations, or appropriations. The 31 issues have been grouped into five categories, as follows: Federal and Indian Lands and Resources Natural Hazards, Climate, and Earth Science Ocean and Coastal Affairs Species Management and Ecosystem Protection Water Resources Federal and Indian Lands and Resources Conceptual Framework The federal government manages about 650 million acres of land and resources—about 29% of the 2.27 billion acres of land in the United States. Four agencies, three in the Department of the Interior (DOI), administer about 95% of federal lands: the Forest Service (FS) in the Department of Agriculture (USDA), and the Bureau of Land Management (BLM), Fish and Wildlife Service (FWS), and National Park Service (NPS). The federal government, through DOI's Bureau of Indian Affairs (BIA), also is responsible for the management of lands held in trust for Indian tribes and individuals (whether on and off reservations), which cover an additional 56 million acres. Ownership of lands by the federal government has long generated controversy and may continue to do so in the 110 th Congress. A key area of debate is how much land the federal government should own—and hence whether some federal lands should be disposed to state or private ownership, or whether additional land should be acquired for conservation, open space, and other purposes. For lands retained in federal ownership, debates may involve whether to curtail or expand certain land designations or if current management procedures should be changed. Also, the extent to which federal lands should be preserved, made available for development or resource extraction, or opened to recreational uses raises a variety of resources policy matters, especially with respect to preserving wildlife habitat, designating wilderness areas, grazing livestock, harvesting timber, and developing energy resources. For instance, Congress may continue to consider whether to increase availability of onshore and offshore lands for energy and mineral development, and if so, under what if any restrictions. Management of Indian lands and resources also can be controversial, and Congress may be asked to address land claims, water rights, fishing, and energy and other development issues. Arctic Oil, Arctic Refuge (ANWR) The future of the biological resources, wilderness values, and energy potential of northeastern Alaska has been debated in Congress for more than 40 years. A question for the 110 th Congress is whether (1) to protect further the biological and wilderness resources of what is now the Arctic National Wildlife Refuge (ANWR) through a statutory wilderness designation, (2) to open a portion of the refuge to development of potentially the richest onshore oil source remaining in the United States (and if so, under what restrictions), or (3) to maintain the current status of the area. Unless Congress chooses to act, the entire refuge will remain closed to development under provisions of the 1980 Alaska National Interest Lands Conservation Act ( P.L. 96-487 ). The 109 th Congress rejected inclusion of ANWR development in omnibus energy legislation, although the House approved a separate bill to open the Refuge to development. An attempt to include ANWR development in a budget reconciliation package was not successful. Federal Land Funding Funding for federal lands continues to be contentious. Federal lands and natural resource programs compete against other federal priorities (defense, education, etc.) as well as internally among the several land and resource management agencies. Perennial questions relate to the Land and Water Conservation Fund (LWCF). This account is credited with deposits of $900 million annually, but funds can be spent only when Congress enacts appropriations. Congressional attention to this issue may continue to center on (1) the amount to appropriate annually to each of the four eligible federal land management agencies, and to the state grant program; (2) which lands should be acquired; and (3) use of LWCF funds for purposes other than land acquisition. The primary context for debating these issues may be the annual Interior appropriations legislation. Other policy questions for federal lands funding relate to setting fees. For instance, Congress may oversee agency efforts to establish, collect, and distribute fees for recreation at federal lands and waters. Another key funding issue is compensating counties for the tax-exempt status of federal lands. Appropriations for the primary compensation program, Payments in Lieu of Taxes (PILT), have not kept pace with the increasing authorized level. The 110 th Congress may address PILT funding as part of annual Interior appropriations legislation, and proposals to provide permanent appropriations for PILT may again be introduced. Another compensation program, the Secure Rural Schools and Community Self-Determination Act ( P.L. 106-393 ), was enacted to offset FS and BLM payments that had declined due to lower timber sales. This act expired at the end of FY2006; Congress may consider legislation to reauthorize the program. Forests and Fire Management Wildfires can kill firefighters, burn homes, threaten communities, and destroy trees. Reducing fuels in the federal forests is being undertaken to reduce the threats from fire, although the threats are not limited to federal forests. In December 2003, Congress enacted the Healthy Forests Restoration Act ( P.L. 108-148 ) to facilitate forest fuel reduction activities and for other purposes less directly related to wildfire protection. Legislation to expedite rehabilitation and recovery activities following significant forest-altering events, such as major forest fires, was debated but not enacted by the 109 th Congress. The 110 th Congress is likely to consider oversight and authorization of fire programs. The 110 th Congress also might address questions about the process, as well as the level, for federal firefighting funding. Spending on fire suppression and preparation now account for nearly half of the FS budget, and funds can be "borrowed" from any other FS account if suppression costs exceed appropriations. Repayment is contingent on subsequent appropriations. Recent severe fire seasons have led to significant borrowing, with implementation effects on other FS programs. The Bush Administration has made several regulatory changes related to forest management, public involvement in FS planning and decision making, environmental impacts of FS activities, and fuel reduction. Changes include: categorical exclusions from analysis and documentation under the National Environmental Policy Act (NEPA; 42 U.S.C. §§ 4321-4347), involving various activities, including fuel reduction, post-fire rehabilitation, and "small" timber sales; modified review procedures, for example, for administrative review and internal Endangered Species Act consultations; new rules governing national forest uses, such as for issuing special use permits and for protecting roadless areas; and new rules pertaining to national forest planning under the National Forest Management Act of 1976 (NFMA; 16 U.S.C. §§1600-1616, et al.). There continues to be substantial uncertainty over management of the national forests, and many of these regulations have been challenged in court. The 110 th Congress may conduct oversight of some of the regulatory changes and related litigation. Indian Lands and Resources American Indian reservations (trust and non-trust lands), off-reservation trust lands, and Alaska Native corporation (non-trust) lands cover more than 116 million acres (5%) of the United States—about 71 million acres in the lower 48 states (about 54 million in trust) and about 45 million acres in Alaska (about 1 million in trust). Indians also have interests in non-Indian lands, waters, and other natural resources, as subjects of legal rights, objects of legal claims, culturally important areas, or economic resources. Indian land issues include energy rights-of-way across tribal lands, especially the compensation sought by Indian tribes. This is the subject of a report mandated by §1813 of the Energy Policy Act of 2005 ( P.L. 109-58 ) and due from the Departments of Energy and the Interior. A draft "1813 report" report was issued for comment on August 8, 2006, and a final "1813 report" report currently is being prepared. Some tribes fear the report may recommend that Congress amend current laws requiring Indian consent for energy rights-of-way. Indian lands also are involved in royalty collection controversies, since the Minerals Management Service (MMS) collects royalties for oil and gas production on Indian lands as well as federal lands. (See "Onshore Energy Resources.") Significant topics for non-Indian areas include rights to water and to wildlife resources, and management of Indian sacred sites. In a number of western states, Indian tribes' assertion of water rights claims, while based on reservation or trust lands, may impinge heavily on non-Indian water use. Many tribes are participating in water negotiations or adjudications with states, local governments, and other water users. The 110 th Congress may be asked to consider California, Montana, and New Mexico tribal water rights claims, if settlements are reached. Fish and wildlife management on non-Indian lands and waters—involving, for instance, caribou in ANWR (see "Arctic Oil, Arctic Refuge (ANWR)"), or salmon and other fish in the Pacific Ocean and the Columbia, Klamath, and Trinity rivers—also has given rise to fishing, development, and water rights controversies that Congress has been asked to address. Numerous Indian sacred sites—many (perhaps most) of which are not identified—occur on federal lands. To protect sacred sites, Indians have unsuccessfully sought legislation setting general restrictions on agencies' management of federal lands for development, recreation, and other purposes, and may again seek such legislation in the 110 th Congress. Onshore Energy Resources A controversial management question is whether to increase availability of federal lands for energy and mineral development. In the 110 th Congress, oversight of the effectiveness and enforcement of current laws regarding oil and gas production on federal lands is likely. The U.S. Geological Survey estimates that significant oil and gas resources exist below some onshore federal lands that are now off-limits to energy development, particularly in the Rocky Mountain region. Industry and the Bush Administration contend that entry into some of these areas is necessary to ensure future domestic oil and natural gas supplies. Opponents maintain that there are environmental costs associated with exploration and development, and that the United States could meet its energy needs through increased exploration elsewhere and energy conservation. The permitting process to drill also has come under scrutiny from industry and environmental groups. The need to update Resource Management Plans (RMPs) is cited by BLM as the major cause for permitting delays. Comprehensive energy legislation ( P.L. 109-58 ) affects energy development on onshore federal lands with provisions to streamline the permitting process. The law establishes the Federal Permit Streamlining Pilot Project in seven BLM field offices. A report due to Congress in 2008 is to outline the results and advise whether a national program is appropriate. Additionally, BLM has implemented new management strategies intended to remove impediments and streamline the permitting process for developing onshore federal oil and gas resources. During FY2006, BLM processed 15% more applications for a permit to drill (APD), and the number of permit applications rose by 29% over FY2005. Environmental and outdoor groups assert that expediting the permitting process has been detrimental to hunting, fishing, and protecting wildlife areas. Onshore Mineral Resources The 110 th Congress may consider whether to reform the General Mining Law of 1872. The law grants free access to individuals and corporations to prospect for minerals in public domain lands, and allows them, upon making a discovery, to stake (or locate ) a claim on that deposit. A claim gives the holder the right to develop the minerals that may be patented to convey full title to the claimant. However, a patent is not necessary to develop the minerals. Since FY2005, Congress has imposed annual moratoriums on mining claim patents. A continuing policy issue is whether this law should be reformed, and if so, how to balance mineral development with competing land uses. The right to enter federal lands and freely prospect for and develop minerals is the feature of the claim-patent system that draws the most vigorous support from the mining industry. Critics consider the claim-patent system a giveaway of publicly owned resources because of the small amounts paid to maintain a claim and to obtain a patent. Also, mineral production generally occurs without paying royalties to the federal government, unlike the oil and gas leasing program on public lands. A key area of debate is whether to reform the General Mining Law of 1872 to include some form of royalty. The lack of direct statutory authority for environmental protection under the 1872 Law also has spurred reform proposals. Supporters of the current law contend that other laws provide adequate environmental protection. Critics assert that these general environmental requirements are inadequate to assure reclamation of mined areas, and that the only effective approach to protecting lands from the adverse impacts of mining under the current system is to withdraw them from development under the Mining Law. Further, critics charge that federal land managers lack regulatory authority over patented mining claims, and that clear legal authority to assure adequate reclamation of mining sites is needed. An additional policy issue is whether to respond to the mining industry's interest in removing what they view as delays in issuing permits to develop minerals on federal lands. Park Management and Recreation The NPS mission, to provide for the public enjoyment of parklands while protecting park resources, has fostered continuing management challenges. The 110 th Congress may oversee implementation of revised park management policies issued in 2006. Congress also likely will address the adequacy of funds for the National Park System, for instance, for general operations, facilities maintenance, and security. NPS continues to define and quantify its maintenance needs, but the extent of progress toward eliminating the agency's multibillion dollar backlog of deferred maintenance remains unclear. Congress also funds and oversees NPS efforts to enhance security for "national icon" parks and units along U.S. borders. Further, each Congress typically considers many park and recreation measures to designate or study sites for inclusion in the System and to expand or adjust park unit boundaries. The NPS provides technical and financial assistance to National Heritage Areas (NHAs), which are designated by Congress but are not federally owned. In view of the large number (37) of existing NHAs, and considerable interest to study and designate additional areas, Congress may again consider whether to enact legislation that would to provide consistent program criteria for NHA designation, management, and funding. Recreation in park units, as well as on BLM, FS, and other lands, is a focal point of debate over the management of federal lands. Primary topics of discussion include access for recreation generally, and the effect of recreation—especially motorized recreation—on natural resources, visitor experience, and local economies. Specific NPS conflicts center on snowmobiles in three Yellowstone area parks, air tour overflights and "natural quiet" at Grand Canyon National Park (GCNP), and implementation of the Colorado River Management Plan for GCNP to allocate river access for commercial and noncommercial boaters. While trail designation is often popular, quantity, quality, and funding for trails may continue to pose management challenges for the NPS and other federal agencies. Recreation issues also arise in other areas, such as reservoirs and waterways managed by the Army Corps of Engineers and Bureau of Reclamation. Potential subjects of congressional oversight include balancing recreational water needs and other purposes, financing maintenance of recreational facilities, and establishing fees for recreation at federal lands and waters. Rangelands Management of federal rangelands, particularly by the BLM and FS, presents an array of policy matters for Congress. The federal grazing fee for private livestock grazing on federal lands has been controversial for decades. Instances of grazing on federal land without a permit or payment of fees, and agency actions to fine and jail owners and impound and sell trespassing cattle, also have been contentious. Federal rangeland condition is a recurring interest for Congress, with differences over the effect of grazing on rangelands and the location and amount of grazing overall and in specific allotments. Many view invasive and noxious weeds as an expanding threat to the health and productivity of rangelands. (See "Invasive Species.") Restricting or eliminating grazing on some federal land because of environmental and recreational concerns may again be considered. These efforts are opposed by those who support ranching on the affected lands for lifestyle, environmental, and economic reasons. Some proposals have sought to compensate grazing permittees who voluntarily relinquish their permits, while others would provide compensation when agency decisions reduce or eliminate permitted grazing. Another policy issue involves whether to continue the automatic renewal of expiring grazing permits and leases, with one law authorizing temporary renewal without environmental studies for those permits and leases expiring through FY2008. Further, Congress may conduct oversight of changes BLM made in 2006 to its grazing regulations. In addition, there is continued interest in BLM's management of wild horses and burros, and efforts to remove them from the range to achieve "appropriate management levels." The adoption and sales programs and the slaughter of healthy animals have been of particular focus. Proposals may again be introduced to overturn the BLM's sale authority and other changes enacted in 2004, or to foster the sale and adoption of wild horses and burros. Wilderness and Roadless Areas Federal agencies manage some federal lands to preserve natural conditions for biological, recreational, or scenic purposes. In 1964, the Wilderness Act created the National Wilderness Preservation System, with statutory protections that emphasize preserving areas in their natural state. Wilderness areas included in the System generally cannot have permanent roads and structures, and use of machines and mechanized travel generally are prohibited. Designating new wilderness areas thus can be controversial, because it favors preservation values over uses requiring roads and motorized equipment. Units of the Wilderness System can only be designated by Congress. Many bills to designate wilderness areas typically are introduced in each Congress; more than 30 were introduced in the 109 th Congress, and 5 were enacted. The wilderness potential of many areas has been examined by BLM under the Federal Land Policy and Management Act (FLPMA). These areas—Wilderness Study Areas (WSAs)—are all managed to preserve their wilderness characteristics, regardless of whether BLM recommend them to be wilderness, until Congress designates them as wilderness or releases them for other uses. WSAs have raised legal questions, including whether FLPMA allows the BLM to conduct additional wilderness inventories or to create new WSAs, and whether legislation is needed to allow multiple use management of WSAs not designated as wilderness. In addition, some BLM lands do not include the headwaters of water sources flowing through the land, which may raise water rights and other issues as part of congressional consideration of designating BLM wilderness areas. Management of the national forest roadless areas remains controversial. The Clinton Administration promulgated nationwide rules to protect inventoried roadless areas in the National Forest System by precluding most roads and timber harvesting. Critics have called these roadless rules de facto wilderness management, while supporters note that more roads and timber cutting were allowed under the rules than for areas in the National Wilderness Preservation System. The validity of the Clinton rules was litigated, and implementation enjoined. The Bush Administration finalized new rules that eliminated the nationwide approach, returned management of roadless areas to the normal planning process for each forest unit, and gave state governors the option to petition for protecting roadless areas in their states. The Bush rules made moot the litigation over the previous rules. However, separate litigation successfully challenged the Bush rules, leading to reinstatement of the Clinton rules. The Bush Administration has continued to implement the state petition process under the Administrative Procedure Act. The 110 th Congress may conduct oversight of agency rulemaking and related litigation, and may consider legislation addressing roadless areas management. Natural Hazards, Climate, and Earth Science Conceptual Framework The costs of natural disasters in the United States are rising, and the 110 th Congress may examine policies that mitigate risk to lessen or avert the financial, social, and physical impacts of disasters. How the federal government addresses disasters may be complicated by potential impacts from a changing climate in vulnerable regions of the United States. For example, low-lying coastal regions may be faced with rising sea levels as well as the possibility of more intense or more frequent severe storms. Federal activities that enhance the nation's ability to mitigate or protect against losses to communities and degradation of natural resources include the Flood Map Modernization Initiative, operated by the Federal Emergency Management Agency (FEMA, in the Department of Homeland Security). The National Oceanic and Atmospheric Administration (NOAA, in the Department of Commerce) provides weather forecasts, conducts applied research, and issues warnings that serve to protect against natural hazards, such as tsunamis. Other federal agencies also generate geospatial data that contribute to new and updated hazard maps that help identify potential risks. Congress may consider whether authorization is needed to centralize geospatial data to enhance the nation's capability to reduce the impacts of natural disasters. Congress also may consider how a changing climate affects the ability of the federal government to develop, manage, and protect the nation's natural resources. Climate and Natural Resources There is general scientific agreement that the climate is changing, and that some parts of the country, such as Alaska, may experience faster rates of change and more severe impacts. The magnitude of climate change, the rate of change, the geographic distribution of its impacts, and whether particular impacts are beneficial or harmful remain key areas of uncertainty and research. The 110 th Congress may examine how the federal government considers climate change in its decisions on how to develop, manage, and protect the nation's resources. A changing climate may influence a wide range of natural resource management issues. Higher temperatures and, in some regions, dryer conditions will have implications for some federal forests, particularly their resistance to pest infestation and susceptibility to fire. Forest productivity also may be enhanced in some regions. Changing growing seasons and an intensifying hydrologic cycle may affect the condition of federal rangelands, increasing or decreasing their productivity and nutritional quality, and altering their susceptibility to invasive and noxious species, for example. Rising sea levels could exacerbate challenges for coastal resource management. Sea level rise, coupled with the potential for increased frequency and intensity of severe storms, may complicate existing multi-use conflicts in coastal regions between human activities and protection of natural resources. Warming sea temperatures could, for example, lead to increased coral bleaching. Exacerbation of drought and flood threats, changes in snowpack and snowmelt timing, and other changes in water supply and availability may have multiple impacts—both positive and negative—on the sustainable use of the nation's water resources and operations of federal infrastructure. Similarly, these changes to the hydrologic cycle, sea level rise, as well as other climate-related factors may influence the performance of large-scale ecosystem restoration, such as the $11 billion federal-state effort to restore the Florida Everglades. Natural Disaster Mitigation An ongoing issue for Congress is whether to modify the current federal role in natural disaster mitigation. Federal activities, programs, and regulations that pertain to natural disaster mitigation and that enhance community sustainability include federal disaster assistance programs (whose structure and administration are informed by mitigation principles), both pre- and post-disaster mitigation grant programs, mandates under the National Flood Insurance Program, and flood map modernization efforts. (See "Mapping Data Management and Natural Hazards.") Hazards are consequences of both the physical and social systems and interaction between them. Implementing policies to mitigate risk can avert or lessen the impact of natural hazards. Recent amendments to the Robert T. Stafford Disaster Relief and Emergency Assistance Act may influence the role of mitigation in natural disaster management. The 110 th Congress may evaluate the scope and effect of the amendments on mitigation. Mitigation of natural hazards can include (1) structural measures, such as construction of dams, or making the structure more resistant or resilient to specific hazards, such as wind or earthquakes through reinforcement (retrofitting) or modification, and (2) nonstructural options, such as land use regulation, zoning laws, and building codes. The 110 th Congress also may evaluate the effectiveness of two multi-agency programs: the National Earthquake Hazards Reduction Program and the National Windstorm Impact Reduction Program. The 110 th Congress also may address through legislation and oversight Hurricane Katrina recovery efforts. Congressional debates over policy choices are likely to be shaped by assessments of the long-term viability of investments in coastal Louisiana, as well as benefits and costs of mitigation activities, such as levee construction and wetlands restoration. Mapping Data Management and Natural Hazards New and updated hazard maps can be generated rapidly, since the advent of electronic instruments that generate digital mapping data and the geographic information system (GIS) which can manage and manipulate spatial (geographic) data. These computer-generated maps can assist decision-makers, scientists, engineers, and emergency managers in identifying potential natural hazard risks, such as of flooding, seismic damages, or landslides. They can assist emergency managers in evacuating populations, and governments and policy makers in making informed decisions about future development and land use. Federal agencies are subject to government-wide standards for spatial (geographic) data management, including digital storage, access, and mapmaking. The 110 th Congress might consider whether to authorize a spatial data clearinghouse to centralize federal mapping data to facilitate access. The Clinton Administration proposed a "National Spatial Data Infrastructure." The Bush Administration supports the "Geospatial One-stop," to make all federal geospatial data accessible on a centralized website. However, the Administration has not requested dedicated funding for the initiative, and appropriations have not been provided. FEMA operates a large-scale digital mapping program—the Flood Map Modernization Initiative. The National Flood Insurance Program gave FEMA responsibility for identifying potential flood hazard risks and creating maps to enhance the awareness of such risks in emergency planning, to inform land use and development, and to determine national flood insurance requirements. New flood maps, and those requiring revision as flood risks change, currently are produced digitally. These maps are more accurate in defining flood risks and more precise in locating risks and potentially affected structures. Recent major floods in coastal and riverine areas of the northern Gulf Coast states of Louisiana and Mississippi have increased demand for flood map updates so that affected communities can be assessed for flood insurance requirements. The 110 th Congress may consider whether FEMA has the necessary resources and authorities to meet these demands, and whether the FMMI is keeping pace in identifying new flood risk and providing for updates elsewhere. Weather, Atmospheric Research, and Environmental Observations Much of U.S. weather and climate research is performed by NOAA. A question for Congress is how to ensure continuity of NOAA's observations, services, and research. Some Members support an organic act for NOAA as a way to organize vital oceanic and atmospheric research programs and protect funding for such programs, human resources, and facilities at the agency. Some NOAA officials believe that such an act would limit the agency's flexibility to change its organizational structure to meet its changing mission. NOAA's research supports operational activities such as weather forecasts and warnings. NOAA's climate services advise U.S. transportation and agricultural sectors on long-term weather outooks and short-term climate variation. The scientific community relies on NOAA's environmental data for research validation. The public depends on continuity of critical weather and environmental observations and NOAA's daily operations and services. Climate research at NOAA includes detecting change and projecting possible impacts, and informs national and international assessments of change in the climate and global environment. NOAA operates critical instruments and sensors which collect and analyze environmental data, acquired from satellite observations and ground-based sensing technologies. Such technologies have served in detecting natural or man-made disasters, identifying natural hazard risk potential, and assessing post-disaster damages. Ocean and Coastal Affairs Conceptual Framework Use of coastal and marine resources is increasing, and Congress may consider proposals that alter the relationship between resource use and protection. Two reports issued in 2004—by the Pew Oceans Commission and the U.S. Commission on Ocean Policy—noted declines in marine resources and shortcomings in the fragmented and limited approaches to resource protection and management in federal and state waters. Both reports called for bold responses from Congress and the Administration. The 109 th Congress considered legislation related to specific ocean and coastal issues and comprehensive bills encompassing a broad array of management, policy, and institutional crosscutting concerns. The combination of more information about ocean and coastal issues, new recommendations on how these issues might be addressed, and expired authorities for appropriations to fund ocean programs may cause the 110 th Congress to give attention to these topics. Coastal Resources The country's coastal counties are only 17% of the land area, but they are home to about 50% of the country's population and jobs. These people and jobs are most heavily concentrated along the highly desirable shoreline portion of most coastal counties, where development can displace or disrupt beach systems, wetlands, estuaries, and other highly productive natural systems. Many sustainability and multi-use public policy issues in shoreline areas involve conflicts between human activities and protection of natural systems. These conflicts may increase in number and intensity as people and jobs continue to concentrate in these portions of coastal counties. Hazardous natural forces—strong winds, large waves, and flooding, for example—are also most intense in these same shoreline areas. Numerous hurricane landfalls in recent years, especially Hurricane Katrina in 2005, have brought the public policy challenges of expanding coastal development into sharper focus. The coastal zone management program is the central federal effort for coordinating coastal development with natural resource management and policies. The authorization for the program's appropriations expired at the end of FY1999, and the 110 th Congress, like earlier ones, may consider reauthorization legislation and possibly changes that would address emerging issues. This program provides federal grants to assist states and territories in administering federally approved plans for development and protection. Statutory and regulatory guidance gives the 35 eligible states and territories considerable latitude as to which topics they emphasize. The program also gives participants leverage over federal actions in or affecting the coastal zone by requiring those actions to be consistent with approved plans. Congress also may consider legislation for specific coastal and shoreline areas, such as coastal Louisiana and the Great Lakes, and for specific resources, such as coastal barrier beaches, wetlands, and estuaries. Many federal programs that apply more broadly have significant coastal components, such as resource protection programs for seashore units of the National Park System and refuge units in the National Wildlife Refuge System, and disaster mitigation response programs such as the National Flood Insurance Program. Fishery and Marine Mammal Policy The two ocean policy reports, discussed in the conceptual framework for this section, expressed concern over U.S. management and use of fish and marine mammals. These reports recommended measures to address declining fish stocks, to protect marine mammal populations, and to improve the sustainability and competitiveness of the U.S. commercial fishing industry. The Magnuson-Stevens Fishery Conservation and Management Act (MSFCMA) authorizes federal management of fishing in waters of the U.S. Exclusive Economic Zone beyond state jurisdiction to 200 miles offshore, and was reauthorized in the closing hours of the 109 th Congress ( P.L. 109-479 ). During the 110 th Congress, action may focus on oversight of Magnuson-Stevens Act implementation as well as measures to protect and restore fishery habitat. The Marine Mammal Protection Act (MMPA) prohibits taking of marine mammals unless permitted under several programs. Authorizations of appropriations for the MMPA have expired. The 110 th Congress may consider legislation to reauthorize and amend the MMPA, incorporating some of the recommendations of the two ocean policy reports. Topics of debate for amending the MMPA could include modifying management of commercial fishing interactions, robust wild stocks, and captive marine mammals. Actions fostering international cooperation on managing marine mammal populations also may be considered. Discussions of regulatory changes may encompass subsistence use of marine mammals by Native Americans, effects of underwater noise of human origin, and incidental takes of marine mammals. Marine Habitat Protection and Management There is growing recognition of the complex relationships among ocean uses, marine environmental quality, and marine resources. As the variety and magnitude of human activities expand in the ocean, estuaries, and adjacent coastal areas, environmental quality in some areas has declined and habitat has been altered. Related policy issues are sometimes broad in scope because causes and impacts are numerous and diverse; may occur over broad spatial and temporal scales; and often involve local, state, and federal authorities. For example, impacts may involve relatively narrow issues, such as potential impacts of active military sonar on marine mammals, or broader concerns, such as oil spill impacts on marine ecosystems. The 110 th Congress may address a variety of marine habitat protection and management issues. Issues of continuing interest include invasive species, oil spills, marine dead zones, chemical weapons disposal, and cruise ship pollution. Invasive species concerns may focus on ballast water management, with continued oversight of National Invasive Species Act implementation. Several bills related to ballast water management received attention in the 109 th Congress but were not enacted. Another key issue is whether existing U.S. laws adequately address cruise ship pollution. The 110 th Congress also may consider control and monitoring of wastewater discharges from large passenger vessels. Although oil spill incidents and volume have decreased despite increased oil consumption, Congress may review the adequacy of response actions to oil spills. There has been increasing support for the use of marine protected areas (MPAs) to protect and manage ocean resources. However, MPAs may restrict uses such as commercial and recreational fishing that provide economic and social benefits to local communities and the national economy. The 110 th Congress may conduct oversight related to the use of MPAs and the adequacy of related federal law. Finally, environmental activities of the Coast Guard, such as enforcement, also may be a topic of congressional oversight. Ocean Energy Resources The combination of high oil prices, technological advancement, and tax incentives is driving interest in increasing development of offshore energy resources. Offshore energy resources being considered include oil and gas on the Outer Continental Shelf (OCS), and proposals for wind energy along the mid-Atlantic, northeast, and Texas coasts. The 110 th Congress may examine the balance between developing energy resources and other offshore uses such as commercial fishing, recreational boating, and tourism. Offshore energy development raises questions about its effects on marine and air traffic navigation, military and civilian radar, and the environment. Congress also may consider federal regulatory and permitting responsibilities for new development projects and examine the potential conflicts between the federal interest in offshore energy and state and local interests. The U.S. Gulf of Mexico has been identified by the Energy Information Administration as the most promising region for new additions to U.S. oil reserves. The Minerals Management Service projects that by 2011 Gulf oil production could be 50% higher than current production, while natural gas production could double. These forecasts assume that current leasing moratoria will be retained for certain areas. The moratoria were imposed in response to economic and environmental concerns over drilling near coastal communities. The industry is interested in accessing areas under moratoria, and the 110 th Congress may again consider proposals to repeal the moratoria. P.L. 109-432 made available for exploration 8.3 million acres in the Gulf of Mexico, and made available offshore leasing revenues to selected coastal states—Texas, Louisiana, Mississippi and Alabama—and the Land and Water Conservation Fund. P.L. 109-432 also codified the offshore moratorium in nearly all of the Eastern Gulf of Mexico until 2022. In early 2006, the New York Times reported that the MMS would not collect royalties on oil and gas leases awarded in 1998 and 1999 because price thresholds were not in those lease agreements. The price threshold is the price per barrel of oil or per million BTUs of natural gas above which lessees would be required to pay royalties to the federal government. The MMS asserts that placing price thresholds in lease agreements is at the discretion of the Secretary of the Interior, that price thresholds were omitted by mistake, and that discussions are on-going to amend leases to include price thresholds. The 110 th Congress is examining the MMS royalty relief and royalty compliance programs through legislation and oversight. All commercial U.S. wind farms currently are operating onshore. Several proposed offshore projects, such as the Cape Wind project off the Massachusetts coast, are undergoing the permitting process. The federal government's handling of the Cape Wind proposal and other proposed offshore wind energy projects may influence the viability of offshore alternative energy projects. Ocean Research, Operations, and Services NOAA conducts many programs and activities related to oceans, coastal areas, and the Great Lakes. The agency's so-called wet programs include U.S. fishery management; marine endangered species protection; coastal and estuarine area conservation, recreation, and education; marine species habitat protection; ocean observation and monitoring of marine environmental heath; hazard response and recovery in coastal communities; scientific research in the coastal ocean; and deep ocean exploration that yields scientific discovery as well as marine-products development. NOAA also operates the National Sea Grant College Program, in conjunction with state Sea Grant programs, to train future marine scientists and engineers. All of these programs are funded under the Department of Commerce appropriations. (For other NOAA programs related to atmospheric research and weather, and the agency in general, see "Weather, Atmospheric Research, and Environmental Observations.") Since the December 2004 tsunami in the Indian Ocean, NOAA's National Weather Service (NWS) has had an enhanced role domestically, by expanding its detection capabilities to protect U.S. and trust territories' shores. The agency also is assisting affected nations around the Indian Ocean through international organizations by lending detection technology and providing communication equipment and planning assistance. With such networks in place, how to provide resources for long-term operations and maintenance may be an implementation issue for Congress both in terms of domestic needs and U.S. involvement in international protection programs. U.N. Convention on the Law of the Sea The 1982 United Nations Convention on the Law of the Sea and the 1994 Agreement Relating to Implementation of Part XI of the United Nations Convention on the Law of the Sea remain pending before the Senate Committee on Foreign Relations. The Convention, which established a legal regime governing activities on, over, and under the world's oceans, has entered into force, with more than 150 states parties. The United States is not a party. Since receiving the treaty from the President in October 1994, the Committee held hearings in October 2003 and, in February 2004, recommended that the Senate give its advice and consent to U.S. adherence. However, the treaty was not considered by the full Senate and was returned to the Committee. A prerequisite for possible Senate action either to approve, disapprove, or not act on the treaty in the 110 th Congress is further Committee consideration and its favorable recommendation for Senate advice and consent to U.S. adherence. An issue is whether those who oppose U.S. participation in this Convention might seek to prevent consideration. The Bush Administration supports U.S. adherence, as did the U.S. Commission on Ocean Policy and does the Joint Ocean Commission Initiative. Among assertions presented in support of U.S. adherence: participation would protect U.S. interests during ongoing deliberations by the Commission on the Limits of the Continental Shelf, which was created by the Convention, and enable the United States to submit its own limits; and participation would enhance U.S. efforts to amend the Convention. Some opponents to U.S. adherence assert that participation in the Convention would be contrary to U.S. national security interests, especially as the United States carries out its counter-terrorism programs, such as the Proliferation Security Initiative. Opponents to adherence also maintain that concerns related to the parts of the Convention that dealt with deep seabed resources beyond national jurisdiction and raised in 1982 by the Reagan Administration were not corrected by the 1994 Agreement; they are also concerned over the extent to which adherence would infringe on U.S. sovereignty. Species Management and Ecosystem Protection Conceptual Framework Wildlife and their habitats are addressed by laws that generally aim to manage, protect, and restore species, populations, and the ecosystems upon which they depend. For example, there are laws to protect species that face extinction by aiding their recovery and protecting habitat; and certain agricultural conservation laws to conserve water quality and wildlife habitat. The implementation of these laws sometimes generates controversy because the needs of species and ecosystems sometimes conflict, or are thought to conflict, with other social and economic interests and uses. These conflicts lead to calls to reassess programs and their implementation. These laws address issues at both national and local scales. Federal programs with national-level objectives generally have a significant federal role in setting goals and objectives. In contrast, some programs with local or regional perspectives are developed and implemented with greater input from state and local governments and stakeholders. Balancing national and regional interests and multiple uses of the nation's resources and ecosystem often pose challenges to implementing and governing wildlife and ecosystem programs, and Congress seeks to bridge competing interests. The 110 th Congress may address these issues through oversight of the implementation, progress, and funding of various wildlife and ecosystem programs and laws. Regional issues regarding endangered and threatened species, invasive species, and ecosystem restoration initiatives, as well as national issues, such as wetlands protection and agricultural conservation, also may be considered. Ecosystem Restoration In the last 25 years, the United States has devoted substantial effort to, and spent billions of dollars on, restoring some large ecosystems, such as the Florida Everglades, the Chesapeake Bay, and the San Francisco Bay and Sacramento and San Joaquin Rivers Delta (California Bay-Delta). Many of these efforts have multiple objectives and benefits, such as improving water supply and conveyance, and managing natural resources and watersheds. The 110 th Congress may address restoration-related policy issues at these and other locations. Policy issues range from the allocation of natural resources (e.g., agricultural and municipal water), to governance and funding of restoration initiatives, to the science supporting restoration. The 110 th Congress may consider authorizing additional activities for ongoing ecosystem restoration efforts in the Upper Mississippi River System, Puget Sound, Great Lakes (also discussed in "Transboundary Water Resources"), and coastal Louisiana (also discussed in "Wetlands Protection and Restoration"). For example, the 110 th Congress may consider authorizing a regional strategy for restoring the Great Lakes. One proposal was released in December 2005, calling for a $20 billion investment in restoration over the next five years. The 110 th Congress also may consider a Water Resources Development Act (see "Agency Management and Water Resources Policy"), which may contain provisions that authorize restoration activities in coastal Louisiana and other regional ecosystems. Oversight of ecosystem restoration also may occur in the context of broader resource issues, such as the potential impact of climate change on restoration activities. Endangered Species The Endangered Species Act of 1973 (ESA) has been one of the more contentious environmental laws. This may stem from its strict substantive provisions, which can affect the use of both federal and nonfederal lands and resources. Under ESA, species of plants and animals can be listed as endangered or threatened according to assessments of their risk of extinction. Once species are listed, powerful legal tools are available to aid their recovery and to protect their habitat. ESA also may be controversial because dwindling species usually are harbingers of resource scarcity or degradation—the most common reason to list a species is habitat loss. Authorization for spending under ESA expired on October 1, 1992. The prohibitions and requirements of ESA remain in force, even in the absence of authorization, and funds have been appropriated to implement the administrative provisions of ESA in each subsequent fiscal year. The 109 th Congress considered several proposals to amend ESA. Policy questions expected to continue into the 110 th Congress include changes to the role of science in decision-making; changes to the definition, extent, and process for designating critical habitat; further protections for private property owners' interests; and incentives for increased landowner protection of listed species. International Species Protection and Conservation The United States is involved in conserving foreign species and natural areas through various laws and international treaties, such as ESA and the Convention on International Trade in Endangered Species (CITES). CITES is an international agreement that aims to ensure that the trade in plants and animals does not threaten their survival. The ESA protects foreign endangered species by limiting or banning their import into the United States, and implements CITES. Overall, ESA has a more comprehensive approach to foreign species protection than CITES. For example, ESA protects species based on several criteria that may threaten their survival, whereas CITES protects species based solely on the threat of trade to survival. The 110 th Congress may conduct oversight on the implementation of ESA as it relates to the listing and protection of foreign threatened and endangered species. The fourteenth meeting of the Conference of the Parties under CITES is set for June 2007 and Congress may hold hearings to address potential issues of discussion at the Conference. International protection, management, and sustainability issues for congressional oversight may include the implementation of the Tropical Forest Conservation Act, illegal logging activities, and the conservation of international fisheries. The United States also assists in the conservation of some high-visibility foreign species (e.g., tigers and elephants) by providing funds for conserving their populations and habitat through the Multinational Species Conservation Fund. The United States further promotes the conservation of tropical forests in developing countries, most notably through debt-for-nature transactions under the Tropical Forest Conservation Act. Invasive Species Non-native species, introduced accidentally or intentionally, can cause both ecological and economic damage. The 110 th Congress may weigh whether new legislative authorities and additional funding are needed to address issues of non-native species and their increasing economic and ecological impacts. A major unanswered question is who should be responsible for ensuring economic integrity and ecological stability in response to the actual or potential impacts of non-native species. In addition to the possible aid to natural resources previously damaged by non-native species, legislation could help or harm many economic interests, including domestic and international trade and tourism, industries dependent on bringing in non-native species, and those dependent on keeping them out. Additional policy considerations include the balance between prevention and response, overlapping jurisdiction of congressional committees, and coordination of the many agencies and levels of government dealing with invasive species. The congressional response to problems posed by harmful non-native species generally has been to address specific non-native species, such as brown tree snakes on Guam and impure seed stocks. A few notable efforts have begun to address specific pathways (e.g., ship ballast water through the Nonindigenous Aquatic Nuisance Prevention and Control Act), but no current law addresses the general concern over non-native species and the wide variety of paths by which they enter this country. In the 109 th Congress, while hearings were held on several invasive species matters, committee action focused on ballast water and invasive carp species. Private Land Conservation Natural resource management and policy challenges related to private lands that attract congressional attention are many and varied. Some center on the effects of private land uses on natural resources, especially on agricultural lands in rural areas. Agricultural production occupies about 41% of the land in the coterminous United States, according to the National Agricultural Statistics Service in the Department of Agriculture (USDA). Production techniques can contribute to resource problems such as soil erosion, pesticide and nutrient runoff, air pollution, and loss of wildlife habitat. USDA administers voluntary programs which provide technical assistance, cost-shared funds, education, and research to help farmers address these problems. Some programs pay producers to retire lands from production that have high resource values, such as wetlands, while other programs help producers grow crops in ways that protect resources or environmental conditions. USDA has initiated a program to more precisely measure the resource and environmental accomplishments of conservation programs. Many of these conservation programs expire at the end of FY2007. The 110 th Congress may consider whether and in what form to reauthorize them during the farm bill. Another resource challenge is associated with residential and other development in rural areas that are within commuting distance of cities. This development can contribute to declines in habitat and environmental quality. Although this development is largely managed by local and state governments, Congress can act to limit, guide, or foster growth through programs that help fund construction of roads, sewer and water infrastructure, and public facilities. Congress also can influence landowner choices by providing federal funds to acquire easements on land to maintain its habitat, farmland, or other desired uses, and through tax policies that reward individuals who take specified land- or resource-conserving actions. Growth also could be addressed in measures that designate sites for particular uses or forms of protection, or that provide guidance for federal projects and facilities. Resource management and use conflicts can occur when private and public ownership abut. At these locations, land use and resource protection goals may be incompatible, leading to conflicts over such topics as weed and predator control and habitat for species. At the same time, private landowners often contend that public land management is inconsistent with their goals, and managers are unresponsive to their concerns. Congress has discussed some of these topics, largely on a case-by-case basis, but may look for systematic policy responses when addressing larger areas, such as watersheds, landscapes, or ecosystems. Wetlands Protection and Restoration The coterminous United States now has about 108 million acres of wetlands, less than half of the estimated 220 million acres that were present when the Europeans arrived, according to a 2006 Fish and Wildlife Service survey. These reductions were encouraged by federal policies in place through the late 1970s because wetlands were viewed as having little use or value; these policies encouraged conversion to other uses, primarily agricultural production. During the past 25 years, federal policies have been revised, and now seek to retain and restore wetlands for their many resource values. Starting with George H. W. Bush, Presidents have articulated a goal of either no-net-loss or net-gain of wetlands. The current Bush Administration announced wetland protection as a priority during the current term, with a goal of restoring or improving 3 million acres. The 110 th Congress may continue past efforts to encourage wetlands protection. However, the emphasis may change from recent Congresses, which focused on conflicts between the rights of landowners and protection efforts (almost 75% of all wetlands are on private lands). The 110 th Congress may hold oversight hearings on topics including the implementation of the permit program (under §404 of the Clean Water Act) by the Army Corps of Engineers, federal acquisition and easement programs, and the role of wetlands in large-scale restorations in the Florida Everglades and elsewhere. Perennial issues involve changes in wetland acreage, including where wetlands are being lost or gained; how different types of wetlands are affected by protection efforts; and the effectiveness of various protection approaches and programs. Ecosystem restoration in coastal Louisiana, which involves restoring existing wetlands and creating new ones, has attracted increased interest since Hurricane Katrina in 2005. Wetlands are believed to play important roles in buffering developed coastal areas from some storm surges. Wild Birds and Bird Flu Avian influenza is a virus that primarily infects birds, both domestic and wild. Certain strains of avian flu break the avian barrier and have been known to infect other animals and humans. Avian flu viruses are common among wild bird populations, which act as a reservoir for the disease. While rarely fatal in wild birds, avian flu is highly contagious in domestic poultry, prompting strict biosecurity measures on farms. A strain of highly pathogenic avian influenza (H5N1) has spread throughout Asia since 2003, infecting mostly poultry, some wild birds, and a limited number of humans through close domestic poultry-to-human contact. The mortality rate among the more than 250 people infected so far has exceeded 50%. Fears that the virus could mutate to allow efficient human-to-human transmission and cause a human pandemic have prompted a global political and public health response. The virus reached Europe in 2005, and the Middle East and Africa in early 2006. Veterinary and medical health officials believed the highly pathogenic strain might enter North America in the summer of 2006 with the arrival of asymptomatic wild breeding birds which had spent the winter of 2005-2006 in southern Asia or the tropical Pacific. Because wild birds are relatively resistant and reports of deaths among wild birds due to avian flu are very rare, testing is essential to any detection effort. As a result of the threat, several federal agencies (including the Fish and Wildlife Service and the U.S. Geological Survey in DOI), and state, tribal, and local governments increased surveillance among wild birds for the highly pathogenic H5N1 virus in 2006. Though the surveys occasionally detected a different, low pathogenicity strain of H5N1 among these bird populations, the highly pathogenic strain has not yet been detected. The low pathogenicity strain does not pose the same threat as highly pathogenic H5N1. The continued testing of wild birds is expected to be a major effort in coming years. Oversight of agency priorities and activities, as well as funding levels for the federal program, might be issues during the 110 th Congress. Water Resources Conceptual Framework The federal government has had a long history of involvement in surface water resource issues, from assisting with navigation and defense activities in the early days of the Republic, to later assisting states and localities with development projects for irrigation, flood control, and hydropower. While the federal government has traditionally deferred to the states on issues of surface water allocation and use (i.e., how much water may be used and where), numerous federal statutes and federally constructed and owned facilities affect allocation decisions and overall management of the nation's surface waters. Groundwater management has been left primarily to states, although federal statutes apply to its use for drinking water supplies and seek to protect its quality. The 110 th Congress is faced with numerous decisions about the nation's water resources, ranging from site-specific project authorizations to changes in the federal role in water resources management. Congress plays a major role in water resources through its authorizations of and appropriations for regional and site-specific activities. Congress makes these decisions within the context of multiple and often conflicting objectives, competing legal decisions, and long-established institutional mechanisms (e.g., century-old water rights, contractual obligations, etc.). Federal water resources planning, management, and development activities are spread among several congressional committees, and among many federal departments, agencies, and bureaus. Because of growing tensions related to water allocation and use, changes in river management, concerns about flood risk, and the viability of existing and new water projects, the 110 th Congress is likely to face many water resources issues. Bills that were acted on, but not enacted, in the 109 th Congress—a Water Resources Development Act (WRDA), water reuse program and project-specific legislation, bills related to a legal settlement on San Joaquin River (CA) restoration, and more—may receive attention during the 110 th Congress. Agency Management and Water Resources Policy Federal water resource construction activities shrank during the last decades of the 20 th century. Fiscal constraints, changes in national priorities and local needs, few remaining prime construction locations, and environmental and species impacts of construction all contributed to this shift. Although these forces are still active, there are proposals for greater federal financial and technical assistance to address growing pressures on developed water supplies and to manage regional water resources to meet demands of multiple water uses. The 110 th Congress may consider authorizing hundreds of site-specific Army Corps of Engineers (Corps) projects through WRDA. Prominent policy issues in the WRDA debate are independent review requirements for Corps studies and proposals to change the policies and procedures that guide the Corps' project development. Proposed authorizations of high-profile, multi-billion dollar projects (e.g., Gulf Coast hurricane protection and coastal Louisiana wetlands restoration, and the Upper Mississippi River navigation lock expansion and ecosystem restoration) and their effect on the agency and its backlog of projects also may well continue to be part of the WRDA debate. Whether policy and program changes are needed to set priorities among the Corps' backlog of construction projects and maintenance activities is a topic of debate both in the context of WRDA and annual agency appropriations. The Bureau of Reclamation operates hundreds of federal dams, reservoirs, and water distribution facilities throughout the western states. Perennial matters for Congress involve appropriations for authorized construction and maintenance activities. Other possible topics for the 110 th Congress involve project management and operations—particularly how project operations and water contract renewals may affect threatened and endangered species, and how requirements to alter project operations for species protection may affect long-term water users. Overarching legislation to address water and restoration issues in California (CALFED) was enacted at the end of the 108 th Congress. CALFED-related activities, such as progress on storage projects and federal spending, as well as efforts to increase pumping and renew long-term contracts, continue to be the subject of congressional oversight. Dams and Levees Recent disasters have brought attention to the safety and security of the nation's water resources infrastructure, including its dams and levees. Age, construction deficiencies, inadequate maintenance, and natural disasters may undermine the structural integrity of these projects, which fall under the auspices of dam safety programs. Preventing deliberate damage is generally considered a security issue. Existing structures are aging and require increasing maintenance and repair to perform their intended functions, such as reducing flood damages, facilitating navigation, storing irrigation water, and generating electricity. Interest in, and examples of, removal of existing dams for safety, economic, or environmental reasons has been growing in the last decade. While the nation's more than 79,000 federal and nonfederal dams provide the benefits of flood control, navigation, power generation, and irrigation water, they also pose risks. Approximately 10,000 U.S. dams are considered high-hazard dams, meaning that loss of life and significant property damage is probable in the event of failure. Immediately prior to adjournment, the 109 th Congress authorized continued funding of the National Dam Safety Program at an average of $9.6 million per year through FY2011 ( P.L. 109-460 ). The 110 th Congress may reauthorize programs for dam safety, rehabilitation, and removal. Hurricane Katrina prompted interest in improving the reliability and level of protection provided by the nation's 15,000 miles of flood damage reduction levees, particularly those protecting concentrated urban development and population centers. The federal agencies most involved in levee issues are the Army Corps of Engineers and FEMA. The Corps performs most of the federal inspections of levees, to determine eligibility for federal assistance for repairing levees damaged during floods, and to certify a levee's protection for a 100-year flood under the National Flood Insurance Program as administered by FEMA. Oversight topics may include levee inspection and certification as stricter post-Katrina inspections are resulting in a number of levees being decertified, and levee and other flood risk management issues for communities with high flood risk (e.g., Sacramento, CA). Legislative proposals for a national levee safety program similar to those proposed in the 109 th Congress also are anticipated. River Management Existing arrangements for river management and water use are being challenged by natural disasters and related damages, Indian water rights claims, drought conservation and preparedness measures, and judicial decisions affecting water allocation (e.g., decisions requiring management changes to support habitat for federally listed threatened and endangered species). River management may receive congressional and public scrutiny during the 110 th Congress. Rivers provide not only economic benefits—navigation, flood protection, and water supply for agriculture and municipalities—but also recreational opportunities, natural habitat, and other services. Increasingly, a central management question is how to balance or prioritize uses and related infrastructure and mitigation investments, while satisfying existing water rights and contractual obligations, especially during drought. In many cases, Bureau of Reclamation or Corps of Engineers facilities and their operation are central to debates over sustainable management of multi-purpose rivers. Other federal agencies also have a stake in river operations, such as the Federal Energy Regulatory Commission (FERC) that licenses nonfederal hydropower dams, and the four power marketing administrations (PMAs) that market the hydropower generated by federal dams. Actions by these federal agencies remain controversial on the Middle Rio Grande, Colorado, Klamath, Columbia, Snake, Mississippi, and Missouri Rivers and frequently are challenged in the courts. Oversight of existing laws, federal projects and decisions, and river management practices is expected, especially in cases of court decisions, agency actions, climate variability, or other circumstances challenging existing basin management regimes. Congress also may consider settling Indian water rights for specific river basins and tribes. Transboundary Water Resources U.S. boundary waters—water basins and aquifers shared by the United States and Canada or Mexico—often present contentious resource management issues, including water pollution, water withdrawals, and ecosystem restoration. International cooperation sometimes is hindered by competing economic interests, differences in governance, and varying levels of environmental and human health protection. In Southern California, litigation surrounding the lining of the federally owned All-American Canal has raised a number of legal and environmental issues, resulting in the halting of the project. For decades, Mexican farmers have irrigated their crops with water that seeps from the unlined canal into an aquifer that straddles the border. Environmentalists claim that the unlined canal nourishes a wetland south of the border. In the last days of the 109 th Congress, legislation was enacted ( P.L. 109-432 ) with provisions directing the Secretary of the Interior to carry out the lining project "without delay." The All-American Canal may continue to be of interest to the 110 th Congress. Congressional attention also may focus on the nation's largest shared freshwater resource—the Great Lakes. A concern for the 110 th Congress is the potential for water withdrawals from the Great Lakes and their effects on the environment and surrounding population. On December 13, 2005, the Council of Great Lakes Governors—a partnership of the governors of the eight Great Lakes states and the Canadian provincial premiers of Ontario and Quebec—released a final agreement and compact among themselves to create uniform water withdrawal standards. Some have questioned whether the agreement and compact will truly limit water diversions. The compact needs to be approved by each of the eight state legislatures, as well as by Congress, to achieve full legal force. Western Water Availability and Drought Increasing pressures on the quality and quantity of available water supplies—due to growing population, environmental regulation, in-stream species and ecosystem needs, water source contamination, agricultural water demand, climate variability, and changing public interests—have resulted in heightened water use conflicts throughout the country, particularly in the West. These factors, coupled with the severity of recent drought in much of the West, have fostered interest in new water supply development, supply augmentation, and security of water supplies. Historically, local, regional, or state agencies generally have been responsible for municipal water supply, and have been wary of federal involvement in allocating water. Both urban and rural communities, however, increasingly have come to Congress for financial assistance with water reuse and rural water supply projects. Urban communities have sought financial assistance with new technologies to augment water supply, primarily through desalination of seawater and brackish groundwater and municipal wastewater reclamation and reuse, and have sought water transfers to bolster existing supplies. Traditional users of water supplied by federal facilities (mainly for irrigation) often are wary of new water supply activities that may compete with limited federal funds or result in reduced deliveries to farms. Issues that may receive oversight in the 110 th Congress include the extent to which water transfers are occurring in the West, status of transfers of title to Bureau of Reclamation facilities, potential climate impacts on reservoir operation and water supply planning, and implementation of the Central Valley Project Improvement Act (e.g., contract renewals, tiered pricing, and fish and wildlife water). Other more programmatic issues may include the status of Reclamation's 2025 Water in the West program; reconsideration of new authorization language for the Title XVI water reuse program; possible early implementation of a new rural water supply program; and federal efforts to assist communities with drought awareness, planning, and coordinated information. Other policy questions for the 110 th Congress include how new municipal water supply activities mesh with the historical federal role in municipal water supply and existing federal programs to assist communities, and perhaps what is the future role of Reclamation and other federal agencies in an urbanizing and drought-prone west. Selected CRS Products Federal and Indian Lands and Resources CRS Report RL33523, Arctic National Wildlife Refuge (ANWR): Controversies for the 109 th Congress , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. CRS Report RL33792, Federal Lands Managed by the Bureau of Land Management (BLM) and the Forest Service (FS): Issues for the 110 th Congress , by [author name scrubbed] et al. CRS Report RL33484, National Park Management , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. CRS Report RS22056, Native American Issues in the 109 th Congress , by [author name scrubbed]. Natural Hazards, Climate, and Earth Science CRS Report RL33053, Federal Stafford Act Disaster Assistance: Presidential Declarations, Eligible Activities, and Funding , by [author name scrubbed] (pdf). CRS Report RL33264, FEMA ' s Flood Hazard Map Modernization Initiative , by [author name scrubbed]. CRS Report RL33602, Global Climate Change: Major Scientific and Policy Issues , by John R. Justus and [author name scrubbed]. Ocean and Coastal Affairs CRS Report RL33459, Fishery, Aquaculture, and Marine Mammal Legislation in the 109 th Congress , by [author name scrubbed]. CRS Report RL33493, Outer Continental Shelf: Debate Over Oil and Gas Leasing and Revenue Sharing , by [author name scrubbed]. CRS Report RS21890, The U.N. Law of the Sea Convention and the United States: Developments Since October 2003 , by [author name scrubbed]. Species Management and Ecosystem Protection CRS Report RL31975, CALFED Bay-Delta Program: Overview of Institutional and Water Use Issues , by [author name scrubbed] and [author name scrubbed]. CRS Report RS22276, Coastal Louisiana Ecosystem Restoration After Hurricanes Katrina and Rita , by [author name scrubbed]. CRS Report RL33779, The Endangered Species Act (ESA) in the 110 th Congress: Conflicting Values and Difficult Choices , by [author name scrubbed] et al. CRS Report RL33483, Wetlands: An Overview of Issues , by [author name scrubbed]. Water Resources CRS Report RL30478, Federally Supported Water Supply and Wastewater Treatment Programs , coordinated by [author name scrubbed]. CRS Report RL33565, Western Water Resource Issues , by [author name scrubbed] and [author name scrubbed]. CRS Report RL33504, Water Resources Development Act (WRDA) of 2007: Corps of Engineers Project Authorization Issues , by [author name scrubbed] et al.

Natural resources management remains a significant issue for the federal government. Growing demands on the nation's resources and interest in their protection and allocation among multiple uses have increased the complexity of management. The federal role in defining policy and institutional context shapes the combination of supported uses and protection measures. Certain themes are common to federal resource issues. Many conflicts center on balancing traditional versus alternative uses and protection programs, managing to produce national or local benefits, and supporting current or future resource consumption. Other challenges involve the effect of federal resource management on private lands, fees for using federal resources, and financing of management efforts. Interagency conflicts and overlaps and the coordination of federal, state, and local efforts also are common implementation problems. For many reasons, Congress often confronts resource issues based on the natural resource in question—lands and related resources, oceans and coasts, species and ecosystems, or water. Federal land issues include land ownership and management, prioritization of uses, designation of special areas, and fee collection and disbursement. Energy production and recreation on federal lands remain controversial. Indian land issues include energy rights-of-way across tribal lands and treaty rights. Ocean topics encompass broad policy questions, such as whether to respond to recommendations by two commissions for more coordinated ocean policies and institutions. More specific multi-use management challenges range from fisheries, marine mammal, and coastal zone management, to adherence to the U.N. Convention on the Law of the Sea. Species management and ecosystem protection topics include federal protection and habitat designations for threatened and endangered species, prevention and response to invasive species, protection of international species, wetlands protection, and large-scale ecosystem restoration. Increased competition for water has fostered interest in the federal role in water resources, particularly in relation to water supply in western states and multi-use river management. Other water topics are dam and levee safety and security, and transboundary water resources management. Natural resource science and management contributes to understanding and mitigating the nation's natural hazard risks. Science also is instrumental in defining the uncertainty and potential extent and impact of climate change and weather on resource conditions. Often natural resource management is intertwined with other topics of broad public concern, such as environmental protection, energy, and agricultural policy. The 110th Congress may pursue natural resources topics in the context of these other policy areas as well as through authorizations, appropriations, and oversight related to specific natural resources issues.

CRS_RL32149

Brief History of the Cloture Rule Proposals to limit Senate debate are as old as the Senate itself. Over the 216-year history of the body, numerous procedures have been proposed to allow the Senate to end discussion and act. The most important debate-limiting procedure enacted was the adoption in 1917 of the "cloture rule," codified in paragraph 2 of Senate Rule XXII. Under the current version of this rule, a process for ending debate on a given measure or matter may be set in motion following a super-majority vote of the Senate. Since the Senate's adoption of the cloture rule in 1917, proposals have been advanced to repeal or amend it in almost every session of Congress. At times, Senators of both political parties, as well as the parties themselves, have debated the merits of the Senate's tradition of free and unlimited debate and argued for and against making cloture easier to invoke. These debates occurred at different times and under different sets of circumstances, for example, as Senators attempted to prevent filibusters of civil rights measures, pass consumer protection legislation, or secure the confirmation of judicial or executive branch nominations. Debates on the cloture rule have frequently focused on whether or not the Senate must consider amendments to it under the body's existing rules, including Rule XXII itself. This argument rests on the principle that the Senate is a "continuing body" which regards its rules as staying in force from one Congress to the next. A contrary argument contends that this principle has the effect of "entrenching" the existing rules against change, a situation which amounts to an unconstitutional limit on the power of the body to set the terms of its own operation. To overcome these difficulties, Senators attempting to change Rule XXII have employed various procedural tactics, including seeking to invoke cloture by majority vote, seeking opinions by the Vice President acting as presiding officer that the cloture rule itself is unconstitutional, and arguing that the rules do not apply on the first day of a Congress. Although many attempts have been made to amend paragraph 2 of Rule XXII, only six amendments have been adopted since the cloture rule was enacted in 1917: those undertaken in 1949, 1959, 1975, 1976, 1979 and 1986. Each of these changes was made within the framework of the existing or "entrenched" rules of the Senate, including Rule XXII. In 1949, the cloture rule was amended to apply to all "matters," as well as measures, a change which expanded its reach to nominations, most motions to proceed to consider measures and other motions. A decade later, in 1959, its reach was further expanded to include debate on motions to proceed to consider changes in the Senate rules themselves. The threshold for invoking cloture was lowered in 1975 from two-thirds present and voting to three fifths of the full Senate except on proposals to amend Senate Rules. In a change made in 1976, amendments filed by Senators after cloture was invoked were no longer required to be read aloud in the chamber if they were available at least 24 hours in advance. In 1979, Senators added an overall "consideration cap" to Rule XXII to prevent so-called post-cloture filibusters, which occurred when Senators continued dilatory parliamentary tactics even after cloture had been invoked. In 1986, this "consideration cap" was reduced from 100 hours to 30 hours to meet the demands of a modern Senate whose proceedings were televised nationally. Features of the Present Cloture Rule In its current form, which was adopted in 1986, Rule XXII provides that a cloture motion must be signed by 16 senators and presented on the Senate floor. One hour after the Senate meets on the second calendar day after a cloture motion has been filed and after a quorum has been ascertained, the presiding officer puts the question, "Is it the sense of the Senate that the debate shall be brought to a close?" The cloture motion is then subject to a yea-and-nay vote. If three-fifths of Senators—60 if there are no vacancies in the body—vote for the cloture motion, the Senate must take final action on the matter on which it has invoked cloture by the end of 30 total hours of additional consideration. Invoking cloture on a proposal to amend the Senate's standing rules requires a higher threshold, approval by two-thirds of the Senators present and voting, or 67 senators if there are no vacancies and all Senators vote. Once cloture has been invoked, the clotured matter remains the pending business of the Senate until it is disposed of and no Senator may speak for more than one hour. Senators may yield all or part of their allotted hour to a floor manager or floor leader, who may then yield time to other Senators. Each floor manager and leader, however, can have no more than two hours in total yielded to him or her. As with most Senate procedures, any of these requirements may be waived by unanimous consent. After cloture has been successfully invoked, no dilatory amendments or motions are permitted, and all debate and amendments must be germane. Only amendments filed before the cloture vote may be considered, and Senators may not call up more than two amendments until every other Senator has had an opportunity to do likewise. Printed amendments that have been available for at least 24 hours are not read when called up. Time for votes, quorum calls, and other actions is charged against the 30-hour limit on consideration. This time limit may be extended by joint leadership motion if three-fifths of all senators vote for a non-debatable motion to do so. Senators who have not used or yielded ten minutes of their hour are guaranteed up to ten minutes to speak. When all time expires, the Senate immediately votes on any pending amendments and then on the underlying matter. Proposed Changes to Cloture Procedure Concern by some Senators over an inability to halt debate and obtain a confirmation vote on several pending judicial nominations led to a renewed interest in the 108 th Congress and the 109 th Congress in amending the Senate cloture rule. In the 108 th Congress several resolutions were introduced on the subject. Proposals currently under discussion include: The "Nuclear" or "Constitutional" Option6 Media reports have focused on the possible use of what has been called a "nuclear" parliamentary option to end debate and vote on certain stalled nominations. Under such a scenario, the chair, perhaps occupied by the Vice President serving as Presiding Officer or by the President Pro Tempore of the Senate, would set aside the existing provisions of Rule XXII and rule that cloture could be invoked by simple majority vote. Supporters of such an approach argue that if such a ruling were appealed by opponents or submitted to the Senate for decision, and then sustained by a majority vote, debate would end and the pending business could then be brought to a vote. In another version of this scenario, a Senator might raise a constitutional point of order against the decision that cloture had not been invoked on a matter, and the same end achieved if the point of order were sustained by a majority vote of Senators. Supporters argue that this proceeding would be permissible because under the Constitution, the Senate has the express right to make, or change, the rules of its proceedings at any time. They further point out that such constitutional questions are traditionally submitted to a vote of the full chamber for decision. Under this latter scenario, however, the chair would likely have to also ignore the precedent that constitutional questions are debatable, perhaps by stating that the body has a right to "get to the question" at hand. Those concerned about the filibuster of judicial nominations have also argued that the inability of the Senate to reach a final vote on a nomination represents an abdication of the Senate's duty to perform a constitutional duty, that of advising and consenting to nominations. Majority Leader Bill Frist told his Senate colleagues on January 4, 2005, that he was willing to take steps to use one of the "nuclear" or "constitutional" options in the 109 th Congress, if he felt it was necessary. So let me say this: If my Democratic colleagues exercise self-restraint and do not filibuster judicial nominees, Senate traditions will be restored. It will then be unnecessary to change Senate procedures. Self-restraint on the use of filibuster for nominations—the very same self-restraint that Senate minorities exercised for more than two centuries—will alleviate the need for any action. But if my Democratic colleagues continue to filibuster judicial nominees, the Senate will face this choice: Fail to do its constitutional duty or reform itself and restore its traditions, and do what the Framers intended. Right now, we cannot be certain that judicial filibusters will cease. So I reserve the right to propose changes to Senate Rule XXII and do not acquiesce to carrying over all the rules from the last Congress. Opponents have used the term "nuclear" to describe these scenarios because of their belief that its use would destroy the comity and senatorial courtesy necessary in a body that operates largely by unanimous consent. They further argue that such an approach might destroy the unique character of the Senate itself, making it more like the House of Representatives, where a majority has the ability to halt debate any time it wishes. Observers point out that such a parliamentary proceeding is not unprecedented. On several occasions, Vice Presidents acting as presiding officer, including Vice Presidents Richard Nixon, Hubert Humphrey and Nelson Rockefeller, offered advisory opinions from the chair that the provisions of Rule XXII can be changed by a majority vote of the Senate at the beginning of a Congress. In 1975, a ruling to this effect, submitted to the chamber by Vice President Nelson Rockefeller, was sustained by a vote of the Senate. The Senate later reversed itself by recorded vote, but whether this obliterated the precedent permitting cloture by majority vote has been a source of disagreement. For example, Senator Robert C. Byrd, the architect of the 1975 cloture amendment, observed that the reversal vote "erased the precedent of majority cloture established two weeks before, and reaffirmed the "continuous" nature of Senate rules." Others argued that such a precedent was established and was not overturned. Senator Walter F. Mondale observed, " ... the Rule XXII experience was significant because for the first time in history, a Vice President and a clear majority of the Senate established that the Senate may, at the beginning of a new Congress and unencumbered by the rules of previous Senates, adopt its own rules by majority vote as a constitutional right. The last minute votes attempting to undo that precedent in no way undermine that right." Frist Proposal In the 108 th Congress, Senator Frist introduced another proposal to amend the cloture rule. His resolution ( S.Res. 138 ) would have added a new section to the end of Rule XXII, and created a cloture process applicable only to the confirmation of nominees. Any nomination requiring Senate confirmation would have been subject to this new procedure, including nominees to the U.S. Supreme Court, the U.S. Court of Appeals, District Courts, members of the President's cabinet, and lower-level agency executives. As under the current rule, the new cloture procedure envisioned by Senator Frist's S.Res. 138 would have begun with the filing of a written cloture petition that contains the signatures of 16 Senators, which would lie over before being considered on the following calendar day plus one. Under S.Res. 138 , however, the number of votes needed to invoke cloture on a nomination would have diminished steadily over time. Under the procedure proposed by Senator Frist, as with current practice, the first cloture petition filed on a nomination would need the votes of 60 Senators for cloture to be invoked. If 60 Senators did not vote for cloture, a second petition could then be submitted. When the Senate voted on that petition, just 57 Senators would be required to invoke cloture. On the third petition, the required vote would fall to 54 Senators, and on a fourth petition the votes of 51 Senators would invoke cloture. The cloture threshold would never drop below a majority vote of the full Senate. As with current cloture procedure, there would be no guarantee that the Senate would actually debate the nomination during the time that the cloture petitions must lay over. Instead, as is current practice, the Senate could chose to consider other measures or matters. Senator Frist's proposal was similar to a proposal to amend Rule XXII offered in 1995 by Senators Tom Harkin and Joseph I. Lieberman. Under that proposal, the majority required to close debate on all measures on the executive and legislative calendars (not just nominees as in the Frist proposal) would decline on successive cloture votes from 60, to 57, to 54, and finally to 51. Additionally, the Frist resolution would have prohibited the filing of a further cloture petition on a nomination until the Senate had disposed of other pending cloture motions on that nomination. Currently, cloture petitions can be filed on successive days, or even on the same day, without first disposing of the previous petition. In addition, the Frist resolution would have required that no cloture petition be filed until a nomination had been pending in the Senate for 12 hours. The Senate Committee on Rules and Administration held a hearing on the Frist resolution on June 5, 2003 and ordered the resolution reported by voice vote on June 24. On November 12, 13 and 14, 2003, the Senate debated the Frist resolution and cloture motions on several judicial nominations for a period of 40 hours. Supporters of Senator Frist's resolution have argued that extended debate in the Senate is particularly troubling when it comes to presidential nominations. John C. Eastman, constitutional law professor at the Chapman University School of Law, told the Senate Rules and Administration Committee on June 5 that inherent in the Constitution is the requirement that nominations be confirmed only by majority vote. "The advice and consent role envisioned by the Constitution's text," Eastman argued, "is one conferred on the Senate as a body, acting pursuant to the ordinary principle [sic] of majority rule." Because it takes 60 votes to invoke cloture, the process of filibustering a nomination is inherently unconstitutional, he argued. Supporters of the Frist resolution contend that the filibuster of nominations takes power away from the President. "Obstructionist delay in the consideration of either executive or judicial nominations harms the separation of powers," said Douglas W. Kmiec, Dean of The Catholic University of America School of Law. "There is a constitutional duty to provide timely advice and consent on judicial nominees." While there are other avenues for a Senator trying to get a bill that is being filibustered through the process (such as by amending some other measure or with the aid of a House colleague), Senator Frist noted, there is no other way to have a nomination confirmed except by a vote of the full Senate. "There is no safety valve. Filibustering nominations is filibustering in its most potent and virulent form, and even if a majority of Senators stand ready to confirm, such filibusters can be fatal," he said. Those who oppose the Frist resolution argued that it would tilt the balance of power too heavily toward the President in the nomination and confirmation process. They also maintained that there is not enough evidence of a problem to merit changing one of the basic features of the Senate, the potential for unlimited debate. Finally, they asserted that such a change could challenge the Senate's ability to exercise its constitutional and institutional right to independently assess the qualifications of nominees. "If we cede power to the President, I don't think we'll ever get it back," said Christopher J. Dodd, ranking Democrat on the Senate Rules Committee at the June 5 hearing. "[The Frist] resolution ... would fundamentally undermine the Senate's role in our constitutional democracy, cede enormous powers to the Executive and upset the deliberate system of checks and balances intended by the Framers." Senator Dodd noted that the bulk of President George W. Bush's nominees have been confirmed, pointing out that in the 107 th Congress, President Bush submitted 347 nominations, of which 297 were confirmed, two were withdrawn and 48 were returned to him. During the 106 th Congress, President William Jefferson Clinton submitted 136 nominations and made 18 recess appointments to full-time positions requiring Senate confirmation. The Senate confirmed 108 nominations and returned 24; the President withdrew four nominations. "Our paramount and overriding concern should be to protect the role of the Senate under the Constitution," argued Senator Edward M. Kennedy. "Under the [Frist] proposal now before us, the number of votes required to terminate debate on nominations would be reduced from 60 to 51. A simple majority of the Senate would be able to end debate, and the Senate would put itself on a course to destroy the very essence of our constitutional role." The proposal, "would inevitably lead to pressure to make the same change for ending debate on legislation." William and Mary law professor Michael J. Gerhardt testified that a filibuster of a nominee does not completely block the President from filling the vacancy at issue, pointing out that the President can fill the seat by making a recess appointment, which would not require Senate confirmation (although the office would be filled only until the end of the next session) or appointing an acting official under the Federal Vacancies Reform Act. Miller Proposals Two other proposals to amend the cloture rule were introduced in the 108 th Congress by Senator Zell Miller. Senator Miller introduced a resolution ( S.Res. 85 ) that would have altered the cloture procedure for all measures, motions, or matters to come before the Senate. The new process was identical to that proposed by Senator Frist in S.Res. 138 , except where the Frist resolution would have applied only to presidential nominations, Senator Miller's proposal to have a gradually declining threshold for invoking cloture would have applied to all Senate business except changes to the Senate's standing rules. Changes to the standing rules would have still required the votes of two-thirds of those present and voting to stop debate. On October 22, 2003, Senator Miller introduced a second resolution ( S.Res. 249 ) that would delete paragraph 2 of Rule XXII entirely. Senator Miller argued that by removing provisions within Senate rules for invoking cloture, it would then require a simple majority to end a filibuster. The cloture rule, however, is the only mechanism by which debate can be stopped in the United States Senate. Before the cloture rule was enacted in 1917, it was not possible to stop debate without achieving unanimous consent. Statutes and Standing Orders Another option that has been suggested is to establish procedures to limit debate by means other than changing Senate standing rules. One example of this might be to amend the standing orders of the Senate, instead of its standing rules. Another possible example of such an approach would be to pass an expedited procedure statute. Expedited procedure statutes, often called "fast track" statutes, are laws that establish special procedures for the consideration of measures in one or both chambers of Congress. These laws frequently mandate timely floor scheduling, limit time for committee consideration, floor debate, and amendment, and establish mandatory 'hookup' procedures to ensure that both chambers act on the same measure. Numerous expedited procedure statutes are currently in effect and act as the equivalent of standing rules of the House and Senate, including such well-known examples as the Congressional Budget Act, the War Powers Act, the Nuclear Waste Policy Act, the Trade Act of 1974 and the Congressional Review Act, by which the Senate can vote on resolutions to disapprove proposed agency regulations. A potential advantage of an expedited procedure statute is that it presumably would only require 60, rather than, 67 Senators normally required to invoke cloture on such a proposal. This would presumably also apply to amendments to the Senate's standing orders. This is because the special provision for cloture on rules proposals is understood to apply only to amendments to the standing rules. By relying on statute, provisions of this type might be passed as a freestanding measure, or attached to another piece of legislation. If supporters thought it aided them, an expedited procedure statute limiting debate might even originate in the House of Representatives where they could be attached by special rule to one or more pieces of 'must pass' legislation, creating momentum for their consideration in the Senate. Why would it be appropriate for procedures governing nominations to be placed in statute? Supporters might argue that it is precisely because they deal with a power in which both the legislative and executive branches of government are involved. Such an approach might also offer proponents political arguments over attempts to change standing Senate rules. For example, supporters might argue, "If it is the law that the Senate must vote on disapproving government regulations on arcane subjects like migratory birds or the content of upholstered furniture, shouldn't it be the law of the land that something as important as nominations for our federal courts receive an up or down vote?" Opponents of using expedited procedures or changes in the standing orders might argue that it violates the spirit of Senate tradition by changing Senate rules outside the regular process for amending them. Opponents might also argue that while expedited procedures are fine for a few individual pieces of legislation or functions, such as disapproving agency regulations, they are not appropriate for an important constitutional function like the confirmation of presidential nominees. Additional Proposals to Limit Senate Debate In its 214-year history, numerous proposals have been put forth to limit Senate debate. These include the following: amending Rule XXII to provide for cloture by majority vote; adopting a rule providing for the use of a motion for the previous question, of the type used in the U.S. House of Representatives to end debate; adopting a rule that debate and amendment must be germane to the subject under consideration, either to all business at all times, or only to specific business or only at limited times. (For example, to appropriations and revenue bills, or in the closing days of a congressional session.); limiting the duration of debate by special rule, as in the House; enforcing the existing rules of the Senate by requiring a speaking Senator to stand and not sit or walk around; enforcing the rule that "no Senator shall speak more than twice upon any one question in debate on the same day without leave of the Senate, which shall be determined without debate"; taking a Senator "off his feet" for using unparliamentary language; making a point of order against frequent quorum calls that no business has intervened since the last roll call; having the chair rule against dilatory motions on points of order raised from the floor; objecting to the reading of papers; enforcing the provision of Jefferson's Manual that "No one is to speak impertinently or beside the question, superfluously, or tediously;" letting the chair reverse the precedent, established in 1872, that Senators may not be called to order for irrelevancy of debate; letting the chair make use of the power of recognition; letting there be objection to yielding, even though the Senator who has the floor consents to an interruption; and resorting to prolonged or continuous sessions to make it more difficult on those who want to stage a filibuster. Arguments in Support of Extended Debate34 Minority Rights It is a key safeguard of the American system of government that the Senate so strongly protects the rights of a block of Senators who do not command a majority (51). Supporters of this argument believe that legislative minorities have rights which no majority should be able to easily override. Further, they argue, obstruction is justified to prevent a majority from trampling upon the rights of a minority until a broad political consensus has developed on an issue. The structure of the Senate was intended to protect the rights of smaller states, and it is asserted that such a change would undermine this intent. No Harm Defenders of extended debate also contend that, in the long run, matters that are truly in the nation's best interest have not been permanently blocked by extended debate. Nearly every important bill blocked by a filibuster, they maintain, eventually has been enacted and those bills which ultimately failed because of an extended debate would have been bad for the country. Likewise, the Senate's tradition of debate has protected both political parties at different times in history. The cloture rule has been in effect for nearing 100 years with little ill effect, they contend. Unique Role Supporters of extended debate believe that the ability of any Senator to speak at length about virtually any topic at any time is a unique characteristic of the Senate which allows the chamber to play a vital role in the legislative process, cooling passions and forcing deliberation. Furthermore, supporters argue, this feature was one that was intended by the Framers, differentiating the Senate from the House. Removed of this deliberative function, the Senate would become a shadow of the larger House of Representatives, they say. In addition, because the Senate alone has the right to act on executive business, nominations and treaties, the function of extended debate can act as a check on the executive branch. Arguments in Favor of Strengthening Limitations on Debate Majority Rule The ability of a Senate minority to block actions supported by a clear majority thwarts one of the basic premises of American government, majority rule. Supporters of changing the system argue that it is undemocratic to allow a determined minority to prevent an institutional majority from working its will—the current process, they say, gives too much power to the minority at the expense of the majority. Further, they believe, it undermines public accountability of the majority, which is in charge of running the chamber, if they cannot get their agenda considered and passed by the Senate because of procedural problems. Efficient Action The Senate is a legislative body and should be able to act on matters before it in a timely and efficient manner. Extended debate by one Senator or a small group of Senators is to waste time and money, supporters of changing debate rules argue, and brings public disrepute because the Senate cannot act in a timely fashion on important issues. Much legislation and several qualified nominations have been delayed or defeated by extended debate, they contend. Speech Protected Changing the rules would not inhibit freedom of speech in the Senate. Current proposals to change the rules would provide those who oppose a bill or matter significant time to discuss the proposal, but would not allow them to block action on it if a majority of the Senate supported it. All a limitation on debate demands, supporters say, is the ability to have a fair up or down vote; it does not mandate a particular outcome. Additional Points Other points raised during discussion of the cloture issue include the following: Some argue that a number of Senators might view proposed changes to the cloture rule as a diminution of their rights, by making it much more difficult to block confirmation of a nominee. As a result, if the rules change is adopted, it raises the question whether it would increase pressure to require Senate confirmation for more executive branch positions, so as to allow the Senate to retain a robust role in the confirmation process. The rule change proposed by the Frist and Miller resolutions would apply to all presidential nominations. Some have wondered whether nominations for the courts, the third branch of government, should be treated the same as those to the executive branch or whether the two groups of nominations should have different thresholds for approval or different procedures for stopping debate. Could stronger enforcement of existing rules—such as the two speech rule—and disallowing informal but time consuming practices—such as suggesting the absence of a quorum—permit more efficient action on nominations or other matters? Is the greater use of filibusters a sign that traditional checks and balances in the nomination and confirmation system, such as the blue-slip which affords home-state Senators a great deal of say in selecting individuals for the federal bench, are no longer working as they were intended or have in the past?

Paragraph 2 of Senate Rule XXII, also known as the "cloture rule," was adopted in 1917. It established a procedure, amended several times over the intervening years, by which the Senate may limit debate and act on a pending measure or matter. Aside from unanimous consent agreements, cloture is the only way the Senate can limit debate. Recently, concern by some Senators over an inability to halt consideration and obtain a confirmation vote on several pending judicial nominations has led to a renewed interest in amending the Senate cloture rule. One option, called the "nuclear option" by some and the "constitutional" option by others, would seek to use a ruling by the presiding officer or a majority vote of the chamber to end debate outside of the terms of Rule XXII. It is possible that this option may be attempted in the 109th Congress. Several measures were introduced in the 108th Congress to amend the cloture rule. S.Res. 138, which was introduced by Senate Majority Leader Bill Frist would have established a diminishing threshold for invoking cloture on presidential nominations that were subject to Senate approval. S.Res. 85, which was introduced by Senator Zell Miller, would have applied the same idea to all Senate business, with the exception of amendments to the Senate's standing rules. A third proposal, S.Res. 249, also authored by Senator Miller, called for the elimination of the cloture rule altogether. This report provides a brief history of the Senate cloture rule, outlines past and present proposals to amend it, and presents arguments both in support of, and in opposition to, the Senate's tradition of unlimited debate. This report will be updated as events warrant.

CRS_R43504

Agricultural conservation began in the 1930s with a focus on soil and water issues associated with production and environmental concerns on the farm. By the 1980s, agricultural conservation policies broadened to include environmental issues beyond soil and water, especially issues related to production (off the farm). Many of the current agricultural conservation programs were enacted as part of the 1985 farm bill ( P.L. 99-198 , Food Security Act of 1985). These programs have been reauthorized, modified, and expanded, and several new programs have been created, particularly in subsequent omnibus farm bills. While the number of programs has increased and new techniques to address resource problems continue to emerge, the basic approach has remained unchanged—voluntary farmer participation encouraged by financial and technical assistance, education, and basic and applied research. The Conservation title (Title II) of the Agricultural Act of 2014 ( P.L. 113-79 ), the 2014 farm bill, was largely uncontroversial. Both the House-passed farm bill ( H.R. 2642 ) and the Senate-passed farm bill ( S. 954 ) reauthorized many of the largest conservation programs and consolidated others to create new ones. The major difference between the two bills was the extension of conservation compliance provisions to the federally funded portion of crop insurance and the total reduction in funding for the title. Total mandatory spending for the title is projected at $28.3 billion over 5 years (FY2014-FY2018) and $57.6 billion over 10 years (FY2012-FY2023). The estimated spending impact of the 2014 farm bill's Conservation title is projected to decrease by $208 million over 5 years and close to $4.0 billion over 10 years. Policy Issues Shaping the Conservation Title Agricultural conservation has been a stand-alone title in farm bills beginning with the Agriculture and Food Act of 1981 (1981 farm bill, P.L. 97-98 ). Its significance has grown with each passing omnibus farm bill. Debate on the 2014 farm bill focused on a number of controversial issues. While many did not consider conservation to be controversial, nonetheless, a number of policy issues shaped the final version of the title and ultimately its role in the enacted farm bill. Simplifying the Conservation Portfolio Before the 1985 farm bill, few conservation programs existed and only two would be considered large by today's standards. Prior to the 2014 farm bill, there were over 20 distinct conservation programs with annual spending greater than $5 billion. The differences and number of these programs created general confusion about the purpose, participation, and policies of the programs (see below for a list of conservation program acronyms). Discussion about simplifying or consolidating conservation programs to reduce overlap and duplication, and to generate savings, has continued for a number of years. The 2014 farm bill contained several program consolidation measures, including the repeal of 12 active and inactive programs, the creation of two new programs, and the merging of two programs into existing ones. Specific programmatic changes are discussed further in the " Program Changes " section. Compliance Requirements Federal policies and programs traditionally have offered voluntary incentives to producers to plan and apply resource-conserving practices on private lands. It was not until the 1985 farm bill that Congress took an alternative approach to agricultural conservation with the enactment of highly erodible land conservation (sodbuster) and wetland conservation (swampbuster)—collectively known as "conservation compliance." Both provisions remain significant today and require that in exchange for certain U.S. Department of Agriculture (USDA) program benefits, including commodity support payments, disaster payments, farm loans, and conservation program payments, to name a few, a producer agrees to maintain a minimum level of conservation on highly erodible land and to not convert wetlands to crop production. One of the most controversial issues in the 2014 farm bill debate was whether federal crop insurance subsidies should be included on the list of program benefits that could be lost if a producer were found to be out of compliance. Ultimately the 2014 farm bill did add federal crop insurance subsidies to the list of benefits that could be lost and extended limited protection for native sod in select states (sodsaver). Specific programmatic changes are discussed further in the " Compliance Programs " section below. Change in Program Type Land retirement programs (e.g., the Conservation Reserve Program, CRP) provide producers with financial incentives to temporarily remove from production and restore environmentally sensitive land. In contrast, working lands programs (e.g., the Environmental Quality Incentives Program, EQIP) allow land to remain in production and provide producers with financial incentives to adopt resource-conserving practices. Over time, high commodity prices, changing land rental rates, and new conservation technologies have led to a shift in farm bill conservation policy away from the more traditional land retirement programs toward an increased focus on conservation working lands programs. Some of this shift has already occurred in the last decade and was continued in the 2014 farm bill as the percentage of mandatory program funding for land retirement programs has declined relative to working lands programs (see Figure 1 ). Most conservation and wildlife organizations support both land retirement and working lands programs; however, the appropriate "mix" continues to be debated. Some are still divided between shorter-term land retirement programs such as CRP and longer-term easement programs such as the new wetland reserve easements under the Agricultural Conservation Easement Program (ACEP). Unlike land retirement programs, easement programs impose a permanent or longer-term land-use restriction that is voluntarily placed on the land in exchange for a government payment. Supporters of easement programs cite a more cost-effective investment in sustainable ecosystems for long-term wildlife benefits. Short-term land retirement program supporters cite the increased flexibility, which can generate broader participation than permanent or long-term easement programs. There has also been a rising interest in programs that partner with state and local communities to target conservation funding to local areas of concern. These partnership programs leverage private funding with federal funding to multiply the level of assistance in a select area. A number of these partnership programs were repealed in the 2014 farm bill and replaced with the new Regional Conservation Partnership Program (RCPP). RCPP is designed to allow local organizations to partner with USDA to address resource concerns specific to that area. Partners are required to supply a significant portion of the overall cost of the project. Budget and Baseline Most farm bill conservation programs are authorized to receive mandatory funding. The Conservation title makes up 6% of the total projected farm bill spending, or $58 billion of the total $956 billion in 10-year mandatory funding authorized in the 2014 farm bill. Like many titles in the farm bill debate, discussion was driven in part by the need for budget reduction. While a few titles did receive an increase in authorized mandatory funding over the projected baseline, three major titles did not, including Conservation. Ultimately the Conservation title was reduced by $3.97 billion over 10 years, or 24% of the total $16.5 billion in savings (see Figure 2 ). If the baseline to write the 2014 farm bill had not been reduced by sequestration, the enacted 2014 farm bill could have been credited for reducing conservation spending by about $6 billion over 10 years. But sequestration had already been factored into the baseline, so the official CBO score remains at $3.97 billion reduction from the Conservation title. In addition to sequestration, other budgetary dynamics may have an effect on farm bill conservation programs in the future. Since the 1996 farm bill, the number and size of conservation programs receiving mandatory funding has continued to grow. Currently the level of mandatory spending for conservation is roughly five times that of discretionary spending for conservation. For more than a decade, appropriators have placed limits on mandatory spending authorized in the farm bill, including a number of conservation programs. These limits are also known as CHIMPS, "changes in mandatory program spending." Many of these mandatory programs usually are not part of the appropriations process since funding is authorized in the farm bill for a specific time period (FY2014-FY2018) and is assumed to be available based on the statute and without further congressional action. Most of these conservation spending reductions, however, were at the request of both the Bush and Obama Administrations. The mix of programs and amount of reduction has varied from year to year. Some programs, such as CRP, have not been reduced by appropriators in recent years, while others, such as EQIP, have been repeatedly reduced below authorized levels. Even with these reductions, total mandatory funding for conservation programs has remained relatively constant at around $5 billion annually for the past five years. Conservation advocates are concerned that future CHIMPS would further deepen the cuts made by potential future sequestration and the 2014 farm bill reductions. Program Changes The 2014 farm bill reauthorized, repealed, consolidated, and amended a number of conservation programs. Generally, farm bill conservation programs can be grouped into the following categories based on similarities: working land programs, land retirement programs, easement programs, conservation compliance programs, and other programs and overarching provisions (see Table 1 and page 2 for a list of conservation program acronyms). Most of these programs are authorized to receive mandatory funding (i.e., they do not require an annual appropriation) and include authorities that expire with other farm bill programs at the end of FY2018. Other types of conservation programs—such as watershed programs, emergency programs, and technical assistance—are authorized in other non-farm bill legislation. Most of these programs have permanent authorities and receive appropriations annually through the discretionary appropriations process. These programs are not generally addressed in the context of a farm bill and are not covered in detail in this report, except for cases where the 2014 farm bill made amendments to the program. General programmatic amendments, reauthorizations, and consolidations are discussed in the sections below. The Appendix provides a series of tables detailing the changes enacted in the 2014 farm bill as compared to prior law. The 2014 farm bill included several program consolidation measures, including the repeal of 12 active and inactive programs, the creation of two new programs, and the merging of two programs into existing ones. Table 1 and Figure 3 illustrate these consolidation measures. Working Lands Conservation Programs Working lands conservation programs are typically classified as programs that allow private land to remain in production, while implementing various conservation practices to address natural resource concerns specific to the area. Program participants receive some form of conservation technical assistance and planning to guide the decision on the most appropriate practices to apply, given the natural resource concerns and land condition. If selected, participants receive federal financial support to defray a portion of the cost to install or maintain the vegetative, structural, or management practices agreed to in the terms of the contract. The two main working lands programs are the Environmental Quality Incentives Program (EQIP) and the Conservation Stewardship Program (CSP). Other working lands programs, such as the Wildlife Habitat Incentives Program (WHIP) and Agricultural Water Enhancement Program (AWEP), were repealed and incorporated into either new or existing programs. The Agricultural Management Assistance (AMA) program is generally amended in Title XI (Crop Insurance) because its original authorizing statute resides in the Federal Crop Insurance Act. However, 50% of the funding is used as a conservation working lands program. Both the House- and Senate-passed farm bills included amendments to AMA, but none were adopted in the conference agreement. Environmental Quality Incentives Program The 2014 farm bill reauthorized and amended EQIP at a total of $8 billion between FY2014 and FY2018. The program provides financial and technical assistance to producers and landowners to plan and install structural, vegetative, and land management practices on eligible lands to alleviate natural resource problems. Eligible producers enter into contracts to receive payment for implementing conservation practices. Approved activities are carried out according to an EQIP plan developed in conjunction with the producer that identifies the appropriate conservation practice(s) to address resource concerns on the land. The program is reauthorized through FY2018 with a graduating level of mandatory funding—$1.35 billion (FY2014); $1.6 billion (FY2015); $1.65 billion (FY2016-FY2017); and $1.75 billion (FY2018). A similar progression was authorized in the 2008 farm bill; however, EQIP funding has been reduced in the annual appropriations process (CHIMPS) since 2003, and has never received its full authorized level of funding (see " Budget and Baseline " discussion above). One of the major changes to EQIP in the 2014 farm bill was the incorporation of the WHIP. WHIP provided technical and financial assistance to private landowners to develop upland wildlife, wetland wildlife, threatened and endangered species, fish and other types of wildlife habitat. The program operated very similarly to EQIP, but had a direct focus on improving wildlife habitat. The 2014 farm bill repeals WHIP and amends EQIP to require that 5% of total EQIP payments benefit wildlife habitat. Other elements of WHIP are also incorporated, including the requirement for consulting with State Technical Committees annually to determine eligible wildlife habitat practices. The farm bill also reauthorizes the requirement that 60% of all EQIP payments benefit livestock. The two EQIP subprograms—AWEP and Conservation Innovation Grants (CIG)—are discussed further below. A detailed analysis of EQIP changes may be found in Table A-3 . Conservation Stewardship Program The 2014 farm bill also reauthorized and amended CSP. The program provides financial and technical assistance to producers to maintain and improve existing conservation systems, and adopt additional conservation activities. Under CSP, participants must meet a "stewardship threshold" for a set number of priority resource concerns when they apply for the program, and then must agree to meet or exceed the stewardship threshold for additional priority resource concerns by the end of the five-year contract. In exchange, participants receive annual payments that are based, in part, on conservation performance. The program is limited by the number of acres available for enrollment each fiscal year, not total funding. Enrollment is offered through a continuous sign-up and applications are accepted year-round. The 2014 farm bill amended CSP by making a whole-program substitution of statutory text. This did not mean, however, that all elements of the program changed as a result of the amendment. Primarily the changes reorganized the statutory language and refocused the program on generating additional conservation benefits. The amendments also raise the entry bar for participants, who are now required to address two priority resource concerns upon entry and meet or exceed one additional priority resource concern by the end of the contract. Contract renewal participants must meet the threshold for two additional priority resources concerns or exceed the threshold for two existing priority resource concerns. The 10% limitation on nonindustrial private forest land was lifted and flexible transition options are available for land coming out of CRP. Another major change was the reduction in enrollable acres. Under the 2008 farm bill, CSP could enroll up to 12.769 million acres annually. The FY2014 farm bill reduces this to 10 million acres annually. This reduction creates an estimated $2.272 billion in savings over 10 years (see Figure 2 ). CSP was reduced in FY2011 and FY2012, when appropriators placed limits on mandatory spending (CHIMPS). The program was further reduced in FY2013 by sequestration. If these reductions continue, then the lower 10 million acre cap authorized in the farm bill would continue to slow program growth. At the end of FY2013, 59 million acres were enrolled in CSP. A detailed analysis of the programmatic changes may be found in Table A-2 . Land Retirement Programs Land retirement programs provide federal payments to private agricultural landowners for temporary changes in land use or management to achieve environmental benefits. The primary land retirement program—the Conservation Reserve Program (CRP)—was reauthorized to enroll a decreasing number until FY2018. Other sub-programs of CRP, such as the Farmable Wetlands (FW) program, were also reauthorized and amended. Conservation Reserve Program CRP is the largest federal, private-land retirement program in the United States, spending more than $2 billion annually. The program provides financial compensation for landowners (annual rental rate) to voluntarily remove land from agricultural production for an extended period (typically 10 to 15 years) for the benefit of soil and water quality improvement and wildlife habitat. The 2014 farm bill reauthorized CRP and reduced the enrollment cap from the previous 32 million acres to 24 million acres in FY2018. While CRP enrollment has fluctuated since its creation in the 1985 farm bill, recent enrollment has declined from its peak in FY2007 (with 36.8 million acres enrolled) to 25.6 million acres in FY2013. Further reduction in the farm bill was viewed as inevitable, given the fiscal challenges. Conservation and wildlife groups, however, remain concerned that reduced enrollment will impact critical species habitat and soil and water quality. Others point to the reduced enrollment as a product of high commodity prices, low rental rates, and declining interest in retiring land from production. The 2014 farm bill enrollment reduction created an estimated savings of $3.3 billion over 10 years. The 2014 farm bill made several amendments to CRP, mostly centered on permitted activities. Emergency harvesting, grazing, and other use of forage are permitted, in some cases, without a reduction in rental rate, as well as livestock grazing for a beginning farmer or rancher. Other approved activities, such as annual or routine grazing, may continue to require a reduction in rental rate. The 2014 farm bill repealed the Grassland Reserve Program (GRP) and incorporated grassland contracts, similar to what was repealed under GRP, into CRP. The 2014 farm bill also allows CRP participants the opportunity to terminate their contract early if the land has been enrolled longer than five years and does not contain environmentally sensitive practices. A detailed analysis of the programmatic changes may be found in Table A-1 . Easement Programs Conservation easements impose a permanent land-use restriction that is voluntarily placed on the land in exchange for a government payment. The 2014 farm bill repealed the conservation easement programs—Wetlands Reserve Program (WRP), Farmland Protection Program (FPP), and GRP—and created a new Agricultural Conservation Easement Program (ACEP). Agricultural Conservation Easement Program The three repealed easement programs had similar but slightly different goals. All three programs were voluntary and sought to protect land from development by using permanent or long-term easements to achieve this goal. Participants were compensated based on a fair market easement value of the conservation easement. All three programs provided technical assistance and required some form of conservation planning and conservation practice adoption. The major distinctions among the three conservation easement programs were the type of land protected; whether production was allowed; the duration of the protection; and who held the easement. More information on these repealed programs is provided in the text box below. The 2014 farm bill provides permanent baseline funding for ACEP. Funding became an issue when the 2008 farm bill was not reauthorized and easement programs such as WRP and GRP did not have baseline funding. This meant that farm bill extensions did not restore funding for the programs, thus leaving them inactive until reauthorized. While permanent funding was seen as a victory by many, others pointed out that total funding for the three repealed programs (WRP, GRP, and FPP) was higher in the previous five years than the total authorized level for ACEP for the next five years. Additionally, the enacted level of funding for ACEP was less than the levels in both the House- and Senate-passed farm bills. ACEP retains most of the program provisions in the repealed easement programs by establishing two types of easements: agricultural land easements (similar to FPP and GRP) that limit non-agricultural uses on productive farm or grass lands, and wetland reserve easements (similar to WRP) that protect and restore wetlands. General program provisions are the same across both easement types, including ineligible land; subordination, exchange, modification, and termination procedures; and compliance requirements. Priority enrollment is given to expiring CRP acres. Agricultural Land Easements Similar to FPP, ACEP requires USDA to enter into partnership agreements with eligible entities to purchase agricultural land easements. Agreements with certified entities are a minimum of five years with a review and recertification required every three years thereafter. Agreements with non-certified entities are three to five years in length. The entities agree to share the cost of the easement; purchase easements according to USDA's requirements; and enforce and monitor easements purchased. Also similar to the repealed FPP and GRP easements, agricultural land easements allow production to continue on the land while prohibiting nonagricultural uses. ACEP provides funding to purchase easements through eligible entities and provides technical assistance for developing an agricultural land easement plan. The federal share of the easement may not exceed 50% of the fair market value of the easement. The nonfederal share must be provided by the eligible entity and should be equivalent to the USDA share. Up to 50% of the nonfederal share may be a charitable donation or qualified conservation contribution from the private landowner, assuming the remaining nonfederal share is a cash contribution from the eligible entity. These cost-share requirements may be waived for grasslands of "special environmental significance." In this case, the federal share may be up to 75% of the fair market value of the easement and the nonfederal share cash requirement may be waived entirely. Agricultural land easements are permanent or for the maximum duration allowed under state law. Wetland Reserve Easements Much like WRP, wetland reserve easements are used to restore, protect, and enhance wetlands through the use of 30-year or permanent easements, or the use of 30-year contracts for Indian tribes. Landowners who have owned the land for at least 24 months prior to enrollment may submit an offer to USDA that will be evaluated based on its conservation benefits, cost effectiveness, and financial leverage. If selected, the landowner agrees to restore and maintain the wetland according to an approved wetland reserve easement plan. USDA, in return, provides technical and financial assistance for wetland restoration. Landowners are compensated for the wetland reserve easement based on the fair market value of the land and the length of the easement or contract. USDA is also allowed to delegate the management, monitoring, and enforcement responsibilities of a wetland reserve easement to a separate authority. A comparison of repealed program provisions (where applicable) to the new ACEP provisions may be found in Table A-4 . Other Conservation Programs Regional Conservation Partnership Program Similar to the consolidation of the easement programs, the 2014 farm bill consolidated a number of the "other" conservation programs that provided partnership opportunities or multi-state funding for watershed-scale projects. The Regional Conservation Partnership Program (RCPP) creates partnership opportunities to target and leverage federal conservation funding for specific areas and resource concerns. A number of eligible activities are defined in statute. However, consistent with the repealed programs, water quantity and water quality concerns continue to have a large presence in RCPP. RCPP incorporates the Agricultural Water Enhancement Program (AWEP), the Cooperative Conservation Partnership Initiative (CCPI), the Chesapeake Bay Watershed Program (CBWP), and the Great Lakes Basin Program for soil erosion and sediment control (GLBP). Both AWEP and CCPI utilized partnership agreements to focus conservation program funds to targeted areas. The CBWP provided additional funds through existing conservation programs in the Chesapeake Bay watershed. The GLBP also targeted funding to a specific watershed, but unlike the other three programs, the GLBP did not receive mandatory funding and was last funded through appropriations in FY2010. RCPP uses 7% of available conservation program funds plus an additional $100 million annually in mandatory funding to address specific natural resource concerns in selected project areas. Project areas are defined by eligible partners and are selected through a competitive state or national competition. Partnership agreements (known as Regional Conservation Partnerships, RCPs) are for five years with a possible one-year extension. In addition to defining the project area, providing assistance, and possibly acting on behalf of the producers within the project area, partners must also provide a "significant portion" of the overall cost of the project. This leverages the partner's state, local, or private funding with RCPP's federal funding. Funds are also directed through "critical conservation areas" or CCAs. These areas are selected by USDA, are limited to eight nationwide, and expire after five years. To be eligible for an RCPP contract, a producer must be located in either a CCA or RCP, but is not required to work with the sponsoring RCP partner and may choose to work directly with USDA. Figure 4 gives a general illustration of how RCPP funding may be obligated to producer contracts based on the 2014 farm bill. RCPP contracts will follow the existing rules and requirements of the covered programs (i.e., EQIP, CSP, ACEP, and the Healthy Forest Reserve Program, HFRP). Alternative funding arrangements are allowed for multistate water resources agencies. Also, five-year payments may be made to producers participating in water quantity and quality projects, specifically, conversion from irrigated to dryland farming and improved nutrient management. A comparison of repealed program provisions (where applicable) to the new RCPP provisions may be found in Table A-5 . Conservation Innovation Grants The Conservation Innovation Grants (CIG) program is a sub-program of EQIP. The program is intended to leverage federal investment, stimulate innovative approaches to conservation, and accelerate technology transfer in environmental protection, agricultural production, and forest management. The program was reauthorized in the 2014 farm bill through FY2018 at an unspecified funding level of total EQIP funding. The farm bill reauthorized and reduced the air quality component, which requires that payments be made through CIG to producers to implement practices to address air quality concerns from agricultural operations in order to meet federal, state, and local regulatory requirements. This air quality component was previously authorized at $37.5 million annually and is reduced to $25 million annually (between FY2014 and FY2018) in the 2014 farm bill. The farm bill also adds a reporting requirement that no later than December 31, 2014, and every two years thereafter, a report must be submitted to Congress regarding CIG funding, project results, and technology transfer efforts. Compliance Programs The 1985 farm bill included a number of conservation provisions designed to conserve soil and water resources. Two of the provisions remain in effect today—highly erodible land conservation (sodbuster) and wetland conservation (swampbuster). The provisions, collectively referred to as conservation compliance, require that in exchange for certain USDA program benefits, a producer agrees to maintain a minimum level of conservation on highly erodible land and to not convert wetlands to crop production. One of the most significant changes made by the 2014 farm bill was the addition of federal crop insurance premium subsidies to the list of benefits that could possibly be lost if a producer were found out of compliance. How compliance is calculated, where compliance provisions apply, and traditional exemptions and variances were not amended. The 2014 farm bill did create separate considerations when addressing compliance violations and the loss of federal crop insurance premium subsidies. Highly Erodible Lands Conservation The highly erodible land conservation provision (sodbuster) applies to land classified as highly erodible that was not in cultivation between 1980 and 1985 (i.e., newly broken land, referred to as sodbuster) and to any highly erodible land in production after 1990, regardless of when the land was put into production. Land meeting this classification can be considered eligible for USDA program benefits if the producer agrees to cultivate the land using an approved conservation plan. In addition to the application of an approved conservation plan, a number of exemptions are possible before benefits would be lost. These provisions were unchanged by the 2014 farm bill. What did change under the 2014 farm bill was the list of USDA program benefits that could be lost if a producer were found out of compliance with the sodbuster provision. The list was expanded to "include any portion of the premium paid by the Federal Crop Insurance Corporation for a policy or plan of insurance under the Federal Crop Insurance Act." This does not mean that producers cannot purchase a crop insurance plan through the federal crop insurance program; rather, if found out of compliance, they would be ineligible to receive the insurance premium subsidy paid by the federal government. The loss of the insurance premium subsidy is not retroactive and would only take effect after all administrative appeals were exhausted. The 2014 farm bill also extends the list of exemptions, allowing producers new to compliance requirements additional time (five reinsurance years) to develop and comply with a conservation plan before the loss of federal crop insurance premium subsidies. Producers with compliance violations prior to the farm bill's enactment are allowed two reinsurance years to develop and comply with a conservation plan before the loss of the subsidies. Wetlands Conservation The "swampbuster" or wetland conservation provision extends the sodbuster concept to wetland areas. Producers who plant a program crop on a wetland converted after December 23, 1985, or who convert wetlands, making agricultural commodity production possible, after November 28, 1990, are ineligible for certain USDA program benefits. This means that, for a producer to be found out of compliance, crop production does not actually have to occur; production only needs to be made possible through activities such as draining, dredging, filling, or leveling the wetland. The wetlands compliance provision also includes a number of exempt lands. These provisions were unchanged by the 2014 farm bill. Similar to sodbuster, the 2014 farm bill amends the wetlands conservation provision to include crop insurance premium subsidies as an ineligible benefit if found to be out of compliance. The amendment treats the time of wetland conversion differently ( Table 2 ). The amendment also extends the list of exemptions for compliance violators, allowing additional time (one or two reinsurance years) for producers to remedy or mitigate the wetland conversion before losing crop insurance premium subsidies. Producers must continue to self-certify their compliance with the sodbuster and swampbuster provisions. USDA is required to review certifications in a "timely manner"; otherwise, producers will be held harmless with regard to eligibility even if a subsequent violation is found. Producers who do not self-certify and are found to be in violation must pay an "equitable contribution" to a wetland restoration fund, not to exceed the premium subsidy amount. USDA retains sole responsibility for implementing the conservation compliance provisions. The 2014 farm bill also amended the wetland mitigation banking program. Under wetlands conservation, compliance violators have the option of mitigating the violation through the restoration of a converted wetland, the enhancement of an existing wetland, or the creation of a new wetland. Debate over these wetland mitigation requirements arose during the 2014 farm bill and centered on the concern that some producers were required to mitigate wetlands with a greater than 1-to-1 acreage ratio. This is allowed by statute if "more acreage is needed to provide equivalent functions and values that will be lost as a result of the wetland conversion to be mitigated." The House-passed farm bill would have limited wetland mitigation to not more than a 1-to-1 acreage ratio. The Senate-passed farm bill would have required a study to assess the use of wetland mitigation, determine impacts on wildlife habitat, and provide recommendations for improving wetland mitigation procedures. Ultimately, the conference agreement adopted neither the House nor Senate provision and instead provided $10 million in mandatory funding for mitigation banking efforts. While the provision remains unchanged in statute, the conference report ( H.Rept. 113-333 ) includes language encouraging USDA to use a wetland mitigation ratio not to exceed 1-to-1 acreage. Sodsaver The 2008 farm bill created a compliance provision under the Crop Insurance title, known as sodsaver. The sodsaver provision would have made producers who planted crops (five or more acres) on native sod ineligible for crop insurance and the noninsured crop disaster assistance (NAP) program for the first five years of planting. The 2008 farm bill limited the provision to virgin prairie converted to cropland in the Prairie Pothole National Priority Area, but only if elected by the state. Ultimately no governors opted to participate in the program and sodsaver was never activated. The Crop Insurance title (Title XI) of the 2014 farm bill amended and expanded the sodsaver provision. Unlike the 2008 sodsaver provision, there is no opt-in requirement and the provision became effective upon enactment. The sodsaver provision also applies to native sod in six states—Minnesota, Iowa, North Dakota, South Dakota, Montana, and Nebraska—rather than only the area covered by the Prairie Pothole National Priority Area. Crop insurance premium subsidies will now be reduced by 50 percentage points for production on native sod during the first four years of planting. Crops planted on native sod will have reduced benefits under NAP. The farm bill also clarified that native sod may include land that has never been tilled or cases where the producer cannot substantiate that the ground has ever been tilled. Crop yield guarantees might also be affected for crop insurance policies. The yield guarantee for a crop insurance policy is a producer's "normal" crop yield based on actual production history (APH). In the absence of actual yield data (e.g., production on native sod or no yield documentation on existing fields), a "transition yield" (T-yield) is assigned, which is based on a portion of 10-year average county yields for the crop. The 2014 farm bill sets the T-yield factor on native sod equal to 65% of the 10-year average county yield for production on native sod. For other cropland, the percentage can be higher depending on the number of years of actual data included in the APH. Also, "yield substitution" is not allowed; that is, low farm yields must be used in the APH rather than replacing them with potentially higher T-yields as allowed for other cropland. This is expected to reduce the incentive to produce on native sod. Appendix. Comparison of Conservation Provisions Enacted in the 2014 Farm Bill to Prior Law This appendix includes a series of tables arranged by subtitle included in Title II of the Agricultural Act of 2014 ( P.L. 113-79 ). U.S. Code citations are included in brackets in the "Prior Law" column. Corresponding section numbers in P.L. 113-79 are included in brackets in the "Enacted 2014 Farm Bill" column. Funding for most Title II programs is covered in the "Funding and Administration" subtitle ( Table A-7 ). Where appropriate, funding levels are repeated within a program's corresponding subtitle table.

The Agricultural Act of 2014 (2014 farm bill, P.L. 113-79) was enacted on February 7, 2014. After years of debate and deliberation, the enacted 2014 farm bill included a number of changes to the Conservation title (Title II), including program consolidation and reauthorization, amendments to conservation compliance, and a reduction in overall funding. Debate on the 2014 farm bill focused on a number of controversial issues. While many did not consider conservation to be controversial, nonetheless, a number of policy issues shaped the final version of the title and ultimately its role in the enacted farm bill. Prior to the 2014 farm bill, there were over 20 distinct conservation programs. Discussion about simplifying or consolidating conservation programs to reduce overlap and duplication, and to generate savings, has continued for a number of years. The 2014 farm bill contained several program consolidation measures, including the repeal of 12 active and inactive programs, the creation of two new programs, and the merging of two programs into existing ones. Overall changes include the following. The act reauthorizes larger conservation programs through FY2018, including the Environmental Quality Incentives Program (EQIP), the Conservation Stewardship Program (CSP), and the Conservation Reserve Program (CRP). It authorizes a new Agricultural Conservation Easement Program (ACEP), which retains most of the program provisions in the repealed easement programs (Wetlands Reserve Program [WRP], easements under the Grasslands Reserve Program [GRP], and Farmland Protection Program [FPP]). ACEP establishes two types of easements: agricultural land easements and wetland reserve easements. It authorizes a new Regional Conservation Partnership Program (RCPP) from the repealed partnership programs (Agricultural Water Enhancement Program [AWEP], Cooperative Conservation Partnership Initiative [CCPI], Chesapeake Bay Watershed Program [CBWP], and Great Lakes Basin Program for soil erosion and sediment control [GLBP]). RCPP creates partnership opportunities to target and leverage federal conservation funding for specific areas and resource concerns. It incorporates other programs, such as the Wildlife Habitat Incentives Program (WHIP) and grazing contracts under GRP, into larger reauthorized programs—EQIP and CRP, respectively. One of the most controversial issues in the 2014 farm bill debate was whether federal crop insurance subsidies should be included on the list of program benefits that could be lost if a producer were found to be out of compliance with conservation requirements on highly erodible land and wetlands. Ultimately the 2014 farm bill did add federal crop insurance subsidies to the list of benefits that could be lost and extended limited protection for native sod in select states. The 2014 farm bill also reduced funding for the Conservation title by $3.97 billion over 10 years. Most farm bill conservation programs are authorized to receive mandatory funding, and the Conservation title makes up 6% of the total farm bill 10-year baseline, or $58 billion of the total $956 billion in mandatory funding authorized in the 2014 farm bill.

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Introduction Child welfare services are intended to prevent the abuse or neglect of children; ensure that children have safe, permanent homes; and promote the well-being of children and their families. As the U.S. Constitution has been interpreted, states have the primary authority to ensure the welfare of children and their families. At the state level, the child welfare "system" consists of public and private child protection and child welfare workers, public and private social services workers, state and local judges, prosecutors, and law enforcement personnel. These agents of various state and local entities assume interrelated roles while carrying out child welfare activities, including promoting child and family well-being through community-based activities; investigating, or otherwise responding to, allegations of child abuse and neglect; providing services to families to ensure children's safety in the home; removing children from their homes when that is necessary for children's safety; supervising and administering payments for children placed in foster care; ensuring regular case review and permanency planning for children in foster care; helping children leave foster care to permanent families via reunification with parents or, when that is not possible, via adoption or legal guardianship; offering post-permanency services and supports to maintain families; and helping older children in foster care, and youth who leave care without placement in a permanent family, to become successful adults. Federal involvement in child welfare is primarily tied to the financial assistance it provides to states and most federal dollars dedicated to child welfare purposes are provided to state child welfare agencies for the provision of foster care. As a condition of receiving these foster care and certain other child welfare program funds, states must typically provide nonfederal resources of between 20% and 50% of the program costs, and they are required to abide by a series of federal child welfare policies. Those policies are designed to ensure the safety and well-being of all children and families served. However, the most specific and extensive federal requirements concern the protection of children in foster care, especially to ensure them a safe and permanent home. Federal child welfare funding is primarily provided as part of the annual appropriations bill for the Departments of Labor, Health and Human Services (HHS), and Education and is included in the HHS, Administration for Children and Families (ACF) account. These funds are provided on both a mandatory and a discretionary basis and are administered by the federal Children's Bureau, which is a part of the Administration on Children, Youth, and Families (ACYF) within the ACF. Separately, discretionary funding for several child welfare programs authorized by the Victims of Child Abuse Act is provided in the annual appropriations bill for the Departments of Commerce and Justice. Those program funds are administered at the federal level in the Department of Justice (DOJ), Office of Justice Programs (OJP). Table 1 summarizes child welfare funding provided in recent years. Apart from the child welfare-specific (dedicated) federal funding shown in Table 1 and provided for programs described in this report, state child welfare agencies tap significant program resources—as much as $5.0 billion—from other federal funding streams. Often these include the Temporary Assistance for Needy Families (TANF) block grant, the Social Services Block Grant (SSBG), and Medicaid. These federal funding streams have federal statutory goals, or support activities, that overlap with child welfare purposes. However, they are not solely dedicated to child welfare purposes, and states are not necessarily required to use them for those specific purposes. Neither do states need to meet federal requirements specific to the conduct of their child welfare programs as a condition of receiving this "non-dedicated" funding. This report begins with an overview of FY2018 appropriations activities for child welfare programs through mid-January 2018, followed by a discussion of final appropriations actions for FY2017. It then includes a discussion of how annual funding levels are determined for child welfare programs and briefly discusses the effect of sequestration on that child welfare funding. The remainder, and largest part, of the report provides descriptions of each federal child welfare program, including its purpose and recent (FY2013-FY2017) funding levels. Status of FY2018 Appropriations FY2018 began on October 1, 2017, but final appropriations levels for that year have not yet been determined. In the meantime, to allow continuation of most federal activities, including for child welfare purposes, three short-term continuing resolutions (CRs) have been enacted. The first (Division D of P.L. 115-56 ) provided funding through December 8, 2017. The second (Division A of P.L. 115-90 ) extended funding for FY2018 through December 22, 2017. The current CR (Division A of P.L. 115-96 ) extends federal funding through January 19, 2018. The FY2018 CRs continue support for each of the child welfare programs that received funding in the previous year (FY2017). (For several of these programs, funding authority otherwise would have expired.) Until a final FY2018 appropriations bill is enacted, the total child welfare funding that will be provided remains uncertain and may be less (or more) than the annualized levels provided in the CR. Accordingly, the CR stipulates that in continuing projects and activities, only the most limited funding actions may be taken. Under the current CR, for each child welfare program that receives discretionary funding, the funding level provided is based on the program's FY2017 appropriation level, reduced by an "across-the-board" amount of 0.6791%. Child welfare funding provided on a discretionary basis for FY2017 totaled close to $597 million. On an annualized basis, a 0.6791% reduction of that overall sum would provide total child welfare discretionary funding of around $593 million (or about 99.3% of the FY2017 total). For those child welfare programs receiving annual appropriated mandatory funding, the CR provides that funding is available to maintain current law program needs under the authority and conditions provided for those programs in FY2017. Principally, those child welfare programs that are partially or entirely funded by appropriated mandatory dollars are the federal Title IV-E foster care, adoption assistance, and kinship guardianship assistance program; the Promoting Safe and Stable Families (PSSF) program; and the Chafee Foster Care Independence Program basic grants. FY2017 Appropriations The Consolidated Appropriations Act, 2017 ( P.L. 115-31 ), provides some $8.9 billion for child welfare programs, including an estimated $7.8 billion for foster care, adoption assistance, and kinship guardianship assistance, and $1.1 billion for all other child welfare activities, services, and research. Compared to FY2016 funding levels, HHS estimated support for foster care, adoption assistance, and kinship guardianship would increase for FY2017. Funding provided for all remaining child welfare activities remained generally unchanged from FY2016. Although FY2017 began on October 1, 2016, full-year FY2017 appropriations levels for most federal programs and operations were not enacted until May 5, 2017. To allow for continuation of these activities in the interim, Congress approved three short-term continuing resolutions. The first (Division C of P.L. 114-223 ) provided funding through December 9, 2016. The second continuing resolution (Division A of P.L. 114-254 ) extended funding through April 28, 2017, and the third continuing resolution ( P.L. 115-30 ) extended funding until enactment of the Consolidated Appropriations Act, 2017, on May 5, 2017 ( P.L. 115-31 ). How Is the Level of Federal Child Welfare Funding Determined Each Year? Nearly all child welfare funds are provided (appropriated) in annual appropriations acts. The amount of funding provided for a given program is controlled through the appropriations process, or in the case of programs receiving mandatory funding, via the authorizing legislation. The largest share of federal support for child welfare is provided to maintain children in foster care and for ongoing assistance to children who leave foster care for adoption or kinship guardianship. Funding for these purposes is authorized under Title IV-E of the Social Security Act on a "mandatory" and "open-ended" basis. Under this kind of funding authorization, the federal government is committed to paying a part of the cost of all eligible program expenditures made on behalf of children meeting federal eligibility criteria. Accordingly, the annual appropriation level specified by Congress for IV-E foster care, adoption assistance, and kinship guardianship assistance typically matches the amount of funding the Administration estimates (in its budget request) as necessary for the federal government to meet its commitment under the current program authorizing law. In the event this amount is underestimated, there is typically included in the appropriations act language that authorizes HHS to draw additional funds from the federal Treasury to meet federal program obligations for the year. Alternatively, if the Administration overestimates funding needed this amount will lapse (no longer be available for expenditure from the federal Treasury). Funding for all other child welfare programs is authorized on either a "discretionary" or a "capped mandatory" basis. A capped mandatory funding authorization includes a specific dollar amount written into the authorizing law. The primary child welfare programs with this type of funding authorization are the Chafee Foster Care Independence Program (general program) and the Promoting Safe and Stable Families (PSSF) program. Most child welfare programs have discretionary funding authorizations. For these programs, the level of funding is decided as part of the annual appropriations process. The Stephanie Tubbs Jones Child Welfare Services (CWS) program, Adoption Opportunities, Adoption and Legal Guardianship Incentive Payments, and various grants authorized under the Child Abuse Prevention and Treatment Act (CAPTA) are examples of child welfare programs with funding authorized on a discretionary basis. (For a complete list of programs by type of funding authority, see Appendix B .) Sequestration and Child Welfare Funding Sequestration generally means application of an across-the-board spending cut. For nonexempt mandatory programs, it is currently scheduled to apply in every year through FY2025. For nonexempt programs with discretionary funding, it ma y be required in any year through FY2021 (but only if one or both of the discretionary spending caps specified in the statute is exceeded). Mandatory child welfare funding provided under Title IV-E of the Social Security Act is specified in statute as exem pt from sequestration and is, for the most part, not subject to a required automatic reduction of appropriations. This exempt Title IV-E funding represents by far the largest share of all federal child welfare funding and includes the mandatory Title IV-E funding for foster care, adoption assistance, guardianship assistance, and the Chafee Foster Care Independence Program. Mandatory funding provided under Title IV-B of the Social Security Act as part of the Promoting Safe and Stable Families (PSSF) program is classified as non exempt. This means that, beginning with FY2013, mandatory funding provided for the PSSF program has been subject to annual reductions (or sequestration), ranging from a low of 5.1% to a high of 7.2%. For FY2018, the funding cut is 6.6%, a slightly smaller reduction than the 6.9% applied for FY2017 that reduced FY2017 PSSF mandatory dollars by roughly $24 million (applied proportionately across all the activities funded by mandatory PSSF dollars, such as child and family services, Regional Partnership Grants, and Court Improvement). The dollar effect of the FY2018 sequestration on mandatory PSSF funding cannot be determined until the final PSSF mandatory funding level has been given. All child welfare programs with discretionary funding are nonexempt, and each was subject to sequestration in FY2013 (resulting in a 5.0% reduction in appropriated funding). In each subsequent fiscal year through FY2017, however, the Office of Management and Budget (OMB) determined that discretionary funds appropriated did not exceed the caps established by the Budget Control Act (as amended) and thus no sequestration was applicable. A determination about any needed discretionary sequestration for FY2018 cannot be made until after final appropriations have been enacted. For a description of sequestration by year and a table showing child welfare programs by their type of funding authority and status as "exempt" or "nonexempt," see Appendix B . Federal Child Welfare Programs Federal child welfare programs are described below. Each description includes program purposes, the final funding level in each of FY2013-FY2017, and the type and status of the program's funding authority. Unless otherwise specified, the term states refers to the 50 states and the District of Columbia, and the term territories refers to Puerto Rico, Guam, American Samoa, Northern Mariana Islands, and the U.S. Virgin Islands. Title IV-B of the Social Security Act Title IV-B of the Social Security Act principally authorizes support for child welfare activities that is provided to states, territories, and tribes under two formula grant programs. Separately it authorizes funding for related research, training, and other projects; this funding is competitively awarded to eligible entities. Legislation authorizing these Title IV-B programs and activities is handled by the House Committee on Ways and Means and the Senate Committee on Finance. Stephanie Tubbs Jones Child Welfare Services Known as "Child Welfare Services," this program authorizes formula grant funding to states, territories, and tribes to support services and activities intended to protect and promote the welfare of all children; prevent child abuse, neglect, or exploitation; permit children to remain in their own homes or return to them whenever it is safe and appropriate; promote safety, permanency, and well-being for children in foster care and adoptive families; and provide training to ensure a well-qualified child welfare workforce. There are no federal eligibility criteria for recipients. Instead, states may elect to fund services and activities to meet these goals on behalf of any child or family that they determine to be in need of them. To receive these funds, states must meet federal requirements, many of which are designed to ensure all children in foster care receive certain permanency planning and other protections. Planned Use of Funds While state spending patterns vary, for FY2017 states collectively planned to spend the largest part of their federal Child Welfare Services funding (44%) on child protective services. These services may include investigations of child abuse and neglect, caseworker activities on behalf of children and their families (both those in foster care and those at home), counseling, emergency assistance, and arranging alternative living arrangements. Additionally, states planned to spend a combined 30% of this funding on three categories of services: family support, family preservation, and time-limited family reunification services. These services are intended to strengthen families to promote family and child well-being, as well as to enable children to remain safely at home, or if they have entered foster care, to be returned safely home. Collectively states expected to spend remaining federal FY2017 CWS funds as follows: 10% for foster care maintenance payments (to pay the room and board cost of a child's stay in foster care); 6% for program administration; 5% for services to promote and support adoption and for adoption and guardianship subsidies; and 5% for other activities, services, or planning, including training and foster and adoptive parent recruitment. Distribution All states receive a base allotment of $70,000 in CWS funding. The remaining program appropriations are distributed to states based on their relative share of the population of children (individuals under age 21), with a higher per child federal funding level provided to states with lower per capita income. Generally, to receive its full federal allotment of CWS funding, each state must provide nonfederal resources equaling no less than 25% of all funds spent under this program. Tribal allotments are reserved by HHS out of a state's Child Welfare Services allotment based in large part on a tribe's share of the state's child (under age 21) population. Funding Funding for Child Welfare Services was first authorized in 1935 as part of the original Social Security Act and is currently included at Title IV-B, Subpart 1 of that act. Most recently, annual discretionary funding of $325 million was authorized for the program through FY2016 (i.e., through September 30, 2016). Congress, however, may choose to extend CWS funding without explicit funding authorization, and with P.L. 115-31 it continued federal support for the program through FY2017 at just below $269 million; this is the same nominal dollar level provided for CWS in FY2016. Table 2 shows final funding for the program in each of FY2013-FY2017. Promoting Safe and Stable Families Program The Promoting Safe and Stable Families (PSSF) program authorizes formula grant funding to states, tribes, and territories for services to strengthen at-risk families and prevent maltreatment; preserve families and ensure children's safety and well-being by providing services that allow children to safely remain with (or return) to their families; address problems of families whose children have been placed in foster care (to enable timely reunification); and support adoptive families by providing supportive services necessary for them to make a lifetime commitment to their children. To receive these funds, states must meet certain federal requirements, which are primarily related to state planning for comprehensive services to children in families. The statute also provides that before PSSF funds are distributed to states for support of these services, a part of the program's funding must be reserved for other grants and activities, including grants under the Court Improvement Program and Regional Partnership Grants. (These, and other reservations of PSSF funds, are described further below.) Planned Use of Funds States receiving PSSF funds are required to spend a "significant" portion of this federal funding (generally interpreted in guidance as at least 20% of the federal dollars) on each of four defined service categories: family support, family preservation, time-limited family reunification, and adoption promotion and support. For FY2017, states collectively planned to spend their federal PSSF funding as follows: 26% for family support services, 23% for family preservation services, 22% for adoption promotion and support services, and 22% for time-limited family reunification services (i.e., services intended to enable children who have been in foster care for no more than 15-17 months to return safely to their homes). Remaining funds were to be spent for program administration (7%) or other program costs, including planning (2%). Funding The PSSF program was added to the Social Security Act (Title IV-B, Subpart 2) in 1993 ( P.L. 103-66 ). Most recently combined mandatory and discretionary funding for the program was authorized (through FY2016) at $545 million/year. Congress has never funded the program at its full authorized level. Final funding made available for PSSF (including all related activities) has for many years been less than the total authorized level. This is because (1) Congress has never provided the full level of discretionary funding authorized beginning in FY2002, and (2) in more recent years, some or all of the funding provided has been subject to sequestration. Across FY2013-FY2017, sequestration has reduced final PSSF funding by a combined $118 million (or, on average, a little less than $24 million in each of those five years). For FY2017, despite the expired funding authorizations, Congress provided PSSF (and related activities) funding totaling $381 million. This amount is comparable to the FY2016 funding level for the same program activities. Final FY2017 PSSF funding was provided in three (instead of two) parts: $325 million for mandatory PSSF purposes, $60 million for discretionary PSSF purposes, and $20 million in mandatory funds for two of the three Court Improvement Program (CIP) grants. After sequestration of 6.9% of mandatory funds, the total available for PSSF (including all CIP funding) summed to just under $381 million. Table 3 shows actual program funding (i.e., the amount made available after sequestration) for each of FY2013-FY2017. Distribution of PSSF Child and Family Services Funding PSSF funds for child and family services are distributed to states based on their relative share of the national population of children receiving Supplemental Nutrition Assistance Program (SNAP) benefits (most recent three-year average). To receive its full federal allotment, each state must provide nonfederal resources equaling no less than 25% of funds spent under this program. Reservation and Distribution of PSSF Funds for Other Grants and Activities Apart from funding child and family services, the statute requires specified amounts of PSSF funding to be reserved each year for related programs and activities. These include the Court Improvement Program, Regional Partnership Grants (to improve outcomes for children affected by parental substance abuse), Monthly Caseworker Grants, and program-related evaluation and research. Therefore, before PSSF funds are distributed to states and territories for provision of child and family services, the law provides specific dollar or percentage amounts that HHS must set aside for each of these programs or activities. Table 4 shows all PSSF funding (mandatory and discretionary) divided by purpose or activity for each of FY2013-FY2017. For FY2017, the funding shown includes the separate appropriation provided for the Court Improvement Program, as noted above. In all fiscal years, the amount shown as funding for "services to children and families" is what remains after the required reservations of funds for specific purposes or activities. Family Connection Grants Section 427 of the Social Security Act authorizes Family Connection Grants. Congress last provided funding for these grants in FY2014. Family Connection Grants were used to support and evaluate four kinds of services, each intended to enable children in foster care, or at risk of entering care, to stay connected with their families, including kinship navigator programs , which assist kin caregivers in finding and using services to meet their own needs and the needs of the children they are serving; family finding , which uses intensive search methods to locate biological family members who may serve as a child's permanent family; family group decisionmaking , which involves holding meetings to enable family members to develop a plan for the care and protection of children who have come to the attention of the child welfare agency; and residential family treatment , which enables parents to address substance abuse and mental health issues in a comprehensive treatment program while continuing to live with their children. Across the life of this program, Family Connection grants were awarded to 49 grantees, including 11 public child welfare agencies (state, local, and tribal) and 38 private nonprofit agencies located in 23 states. Projects supported with Family Connection Grant dollars were typically funded for three years, and grantees were required to provide nonfederal matching funds (between 25% and 50%, depending on the year of the grant) and to participate in coordinated evaluation activities. HHS also awarded a separate evaluation contract related to these grants. These grants were established as part of the Fostering Connections to Success and Improving Adoptions Act of 2008 ( P.L. 110-351 ) and were never funded via annual appropriations acts. Instead, P.L. 110-351 appropriated $15 million annually to support their initial five years of operation (FY2009-FY2013), and the Preventing Sex Trafficking and Strengthening Families Act ( P.L. 113-183 ) appropriated $15 million in FY2014 funding for these grants. (See Table 5 .) Child Welfare Research, Training, or Demonstration Projects Section 426 of the Social Security Act, established in the early 1960s, authorizes HHS to make grants, or to enter into contracts or cooperative agreements, to support research or demonstration projects that have regional or national significance, advance the practice of child welfare, encourage the use of research-based experimental or special types of child welfare services, and advance training for child welfare workers (including through traineeships). Entities eligible to conduct this work include public or nonprofit institutions of higher education, public or nonprofit agencies that conduct research or child welfare-related activities, and state or local (public) child welfare agencies. HHS is granted broad authority to design and administer these grants, contracts, or cooperative agreements. HHS describes the "critical" uses of the Section 426 funding as follows: administration of awards to colleges and universities that provide stipends for education of child welfare professionals; delivery of a child welfare training curriculum on leadership and effective change management; development of a comprehensive workforce framework; convening and providing leadership academies for state agency directors and middle managers, deans and directors of schools of social work, and online training for front-line supervisors; facilitating a national peer network of child welfare leaders focused on professional development of their workforce and strategic dissemination of effective and promising workforce practices. Beginning with FY2015, Congress has in each year stipulated that funds in this Section 426 account are available to support the National Survey of Child and Adolescent Well-Being (NSCAW). For more information about this survey, see the NSCAW discussion below. Section 426 of the Social Security Act authorizes annual funding for research, demonstration, and training activities on a permanent (no year limit) basis at "such sums as Congress may determine necessary." Final funding provided under this authority in FY2013-FY2017 is shown in Table 6 below. National Survey of Child and Adolescent Well-Being (NSCAW) Section 429 of the Social Security Act requires HHS to conduct (directly or by contract) a nationally representative study of children who are at risk of child abuse or neglect, or are determined by the state to have been abused or neglected. In response to this 1996 legislative directive, NSCAW was launched. Two surveys have been conducted (in 1999 and again in 2008), gathering initial ("baseline") information on a national sample of approximately 6,000 children living in families investigated for child abuse and neglect along with follow-up information on these children and their families collected at intervals (up to five years) following the initial surveys. HHS has begun work for a third NSCAW survey, which, following recruitment of participating agencies, is expected to begin initial data collection in late summer 2017. (This third survey, unlike the first two, is being supported with funds from the Child Welfare Research, Training, and Demonstration account, described in the preceding section. ) The survey data collected via NSCAW are unique from other child welfare administrative data reported by state child welfare agencies to HHS. NSCAW looks at a nationally representative sample of children in families investigated for child abuse and neglect—and without regard to whether child abuse or neglect was determined by a child protective services investigator to have occurred or whether a child entered foster care. Thus the survey provides a more complete portrait of the full spectrum of children and families served by child welfare agencies. Further, NSCAW gathers information from children, parents, and other caregivers, as well as teachers and caseworkers, to examine the socio-behavioral, education, health status, and other conditions of children and families served by child welfare agencies, and it uses a range of standardized questions ("instruments") to do this. Multiple reports, research briefs, and info-graphics have been produced for HHS from these survey data, and many researchers have accessed the data for additional published analyses. Title IV-E of the Social Security Act Title IV-E of the Social Security Act principally entitles states, tribes, and territories with an approved Title IV-E plan to reimbursement of part of their costs of providing foster care, adoption assistance, or kinship guardianship assistance on behalf of eligible children. Each of the 50 states and the District of Columbia has an approved IV-E plan. Puerto Rico has long been the only territory with such a plan; however, effective with FY2017, the U.S. Virgin Islands also has received approval of a Title IV-E plan. Additionally (as of November 2017), 10 tribal entities have an approved Title IV-E plan (see Appendix C ). Title IV-E also authorizes capped mandatory funding for support of services to children who are expected to leave foster care because they "age out" of care rather than because they are returned home or placed in a new permanent family, youth who have aged out of care, and youth who leave care at age 16 or older for adoption or legal guardianship. Authorized under the Chafee Foster Care Independence Program, any state, tribe, or territory with an approved Title IV-E plan is entitled to a part of this capped mandatory funding. Additionally, Title IV-E provides annual capped mandatory funding for technical assistance related to providing child welfare services to tribal children, and this includes competitive grants to tribes to support development of a Title IV-E plan. Finally, provisions included in Title IV-E also authorize discretionary funding for incentive payments to states and territories (with an approved Title IV-E plan) that increase adoptions and/or legal guardianships of children from foster care. Legislation authorizing these Title IV-E programs and activities is handled by the House Committee on Ways and Means and the Senate Committee on Finance. Foster Care When a child is found to be abused, neglected, or otherwise unsafe in his or her own home, the state may act to remove the child from that home and to place him or her in foster care. Foster care is a temporary living arrangement intended to ensure a child's safety and well-being until a permanent home can be reestablished or newly established for the child. Under the Title IV-E program, the public child welfare agency must work to ensure that each child who enters foster care is safely returned to his/her parents, or—if this is determined not possible or appropriate (by a court)—to find a new permanent home for the child via adoption, legal guardianship, or placement with a fit and willing relative. The number of children in foster care declined from a reported high of 567,000 on the last day of FY1999 to 397,000 on the last day of FY2012. However, that number has trended up since then, reaching close to 437,000 children as of the last day of FY2016. Funding Available for Costs of Providing Foster Care to Eligible Children Each state, tribe, or territory with an approved Title IV-E plan is entitled to partial federal reimbursement for every eligible cost related to providing foster care to eligible children. Title IV-E eligible criteria are spelled out in law and regulation. Eligible Children Nationally, there were more than 437,000 children in foster care on the last day of FY2016, and during that same fiscal year, more than 166,000 children received Title IV-E foster care maintenance payments in an average month. These figures suggest that considerably less than half of all children in foster care met federal Title IV-E foster care eligibility criteria. In general, those criteria stipulate that the child must be removed from a home with very low income (i.e., 50% or less of federal poverty level in about three-quarters of the states); require that the removal must have been accomplished through a judicial finding that the home was "contrary to the welfare" of the child, or through a voluntary placement agreement entered into by the child's parent/guardian and the state child welfare agency; provide that a child must be living in a licensed foster family home or a "child care institution;" and require the child to be under the age of 18 or, if the state, tribe, or territory has included assistance to older youth in its IV-E plan, under the age of 19, 20, or 21 (as elected by the state). As of April 2017, 29 jurisdictions (including 23 states, the District of Columbia, and 5 tribes) have approval to provide Title IV-E assistance for youth beyond their 18 th birthday. (See Appendix D for a list.) Eligible Costs Eligible Title IV-E costs include spending on foster care maintenance payments (for the eligible child's "room and board"); caseworker time to perform required activities on behalf of eligible children in foster care or children at imminent risk of entering foster care (e.g., finding a foster care placement for a child and planning services needed to ensure a child does not need to enter care, is reunited with his or her parents, has a new permanent home, or is otherwise prepared to leave foster care); program-related data system development and operation; program eligibility determinations; training and recruitment of foster care providers for eligible children and training for child welfare workers and certain professional partners working with eligible children; implementing procedures related to identifying child-welfare-involved children and youth who are victims of (or at risk of) sex trafficking, documenting this, determining any services needed, and reporting information regarding victims of sex trafficking to law enforcement agencies; and other program administration costs (related to eligible children in foster care). Federal support for these Title IV-E program costs is 75% of a state's IV-E program training costs, 50% of all other eligible program administration costs, and ranges between 50% and 83% of eligible foster care maintenance payment costs (the percentage is redetermined annually and varies by state, with higher federal support going to states with lower per capita income). Waivers Currently 28 jurisdictions (26 states, the District of Columbia, and the Port Gamble S'Klallam Tribe) have approved child welfare demonstration projects (i.e., "IV-E waivers"). Under the terms and conditions of their specific waiver agreements, each of these jurisdictions is permitted to use Title IV-E foster care funds to provide services or assistance to children (and their families)—even if those children or those services or assistance would not normally be considered eligible. Under current law, HHS is not authorized to grant any new child welfare waivers, and no state may operate a waiver project after September 30, 2019. ( Appendix E shows jurisdictions with current Title IV-E waiver projects, including implementation and current end dates.) First authorized by Congress in 1994, the goal of permitting waivers of specific Title IV-E requirements is to allow states to demonstrate alternative and innovative practices that achieve federal child welfare policy goals in a manner that is cost neutral to the federal Treasury. Each project has a specific approval period (usually five years), must be determined to cost the federal government no more in Title IV-E support than it would without the waiver project, and must be independently evaluated. Title IV-E waiver projects vary significantly in geographic and program scope. Some operate (or plan to) on a statewide basis, others are limited to specific regions or counties in the state. The interventions may focus on different age groups (e.g., children age 0-5 years; children ages 12-17) and different service needs or circumstances (e.g., children entering care for the first time; children at risk of entering care; children transitioning from group care to home; children with substance-abusing parents). At the same time, most of the approved waiver projects seek to use Title IV-E funds to demonstrate services or support that achieve one or more of the following: prevent child abuse or neglect or the recurrence of child abuse or neglect; prevent the need for children to enter (or reenter) foster care; and/or increase the speed and frequency with which children who are in foster care find permanency (through reuniting with family or placement in a new permanent adoptive or guardianship home). Additional focus, in a smaller number of projects, addresses other issues, such as preventing or reducing the use of group ("congregate") care for children in foster care; addressing behavioral health needs of children; addressing needs of caregivers with substance use disorders; and reducing placement instability for children in foster care. Before approving a Title IV-E waiver project, HHS, together with the OMB, must determine a method to ensure that the state will not receive more funding under the approved waiver than it would have received in the absence of the waiver. For most current waiver projects, this "cost neutrality" determination is based on a prenegotiated capped allocation of a specific part of their federal Title IV-E foster care funding. In some of those states, the cap applied to funding across the entire state and for nearly all foster care costs; in others the cap applied only to one or more counties/cities or for specific kinds of costs (e.g., cost of congregate care). In places without a cap, cost neutrality might rely on providing the same average per child cost for "usual care" as is provided for "treatment" care. While states are able to use waiver funds for more activities and to serve different populations than would be allowed generally under the Title IV-E program, they also must continue—out of this same funding—to provide any needed foster care services and to meet all applicable federal child protections for those children (e.g., case planning and review). Additionally, to receive funding under the waiver, each jurisdiction must continue to provide the nonfederal (state) share of program funding, which varies by type of program cost and may also vary by state (based on the amount of maintenance payment spending included in the cap). The state's share is always 50% for program administrative costs that are included in the capped funding (e.g., spending on case planning and management) and may not be more than 50% nor less than 17% for maintenance payments costs that are included in the cap. A survey of state child welfare spending in state FY2014 found that among 18 states that reported spending under the waiver project of more than $1 billion, most of this funding continued to be used to provide foster care to children who were eligible for Title IV-E foster care (58%, $614 million) or was spent on those same foster care costs for children in foster care who did not meet Title IV-E eligibility (32%, $339 million). The remainder was spent primarily on other services and activities, whether for Title IV-E eligible or ineligible children (9%, $75 million) and for program development or evaluation (1%, $26 million). Foster Care Funding Authorized Title IV-E entitlement (or mandatory) funding for foster care is authorized on a permanent basis (no year limit) and is provided in annual appropriations acts. Congress typically provides the amount of Title IV-E foster care funding (or "budget authority") that the Administration estimates will be necessary for it to provide state or other Title IV-E agencies with the promised level of federal reimbursement for all of their eligible Title IV-E foster care costs under current law. As of the mid-session review (released July 2017), HHS estimates Title IV-E foster care funding needed for FY2017 to be $5.091 billion. For federal Title IV-E funds obligated by HHS in FY2013-FY2016 and estimated budget authority needed for FY2017, see Table 7 . Adoption Assistance Under Title IV-E of the Social Security Act, states, territories, or tribes with an approved Title IV-E plan are required to enter into an adoption assistance agreement with the adoptive parents of any child who is determined by the Title IV-E agency to have "special needs." An adoption assistance agreement must specify the nature and amount of any payments, services, and assistance to be provided. To determine that a child has "special needs," that public agency must find that the child cannot or should not be returned to his/her parents; reasonable but unsuccessful efforts to place the child for adoption without assistance have been made (unless those efforts would not be in the child's best interest); and the child has a specific condition or factor making it unlikely that he/she would be adopted without provision of adoption assistance or medical assistance. Each state, territory, or tribe may establish its own "special needs" condition or factors and, as suggested in federal law, they frequently reference the child's age; membership in a sibling group; physical, mental, or emotional disability/disorder; and/or membership in a racial/ethnic minority. Nearly all special needs adoptees were previously in foster care. Nationally, states reported that some 82% of children adopted from foster care in FY2015 were determined by the state to have special needs, and the primary special needs identified were membership in a sibling group (32%); medical condition or physical, mental, or emotional disability (21%); "other—Title IV-E agency defined factor" (21%); age (16%); or race/ethnicity (9%). Eligibility for Title IV-E Adoption Assistance for Special Needs Adoptees For any child with special needs, federal reimbursement is available to states for a part of the cost of paying the adoptive parent's nonrecurring adoption expenses (i.e., one-time costs related to legally finalizing the adoptions). Federal reimbursement is also available for a part of the cost of providing ongoing (monthly) subsidies to adoptive parents on behalf of children with special needs. Under current law, some children with special needs are required to meet additional income and other criteria to be eligible for this ongoing assistance, but those additional rules are being phased out, primarily based on age of the special needs child in the fiscal year the adoption assistance agreement is finalized. During FY2016, ongoing monthly Title IV-E adoption assistance payments were paid on behalf of close to 456,700 children on an average monthly basis. States, territories, or tribes with a Title IV-E plan approved by HHS may seek federal reimbursement for a part of the cost of making payments agreed to under Title IV-E adoption assistance agreements and for related program administration costs, including training. As with Title IV-E foster care funding, Title IV-E adoption assistance funding is authorized on a permanent (no year limit) basis, and Congress typically provides the amount of annual funding for this open-ended entitlement that HHS estimates will be necessary to reimburse states for all eligible program costs. As of the mid-session review (released July 2017), HHS estimated it would need $2.658 billion in federal Title IV-E adoption assistance budget authority for FY2017. For federal Title IV-E adoption assistance funds obligated in FY2013-FY2016 and estimated budget authority need for FY2017, see Table 7 . Kinship Guardianship Assistance Beginning in FY2009, states or territories (and, as of FY2010, tribes) with an approved Title IV-E plan were permitted (but not required) to include provision of kinship guardianship assistance in those Title IV-E plans. As of June 2017, 44 jurisdictions, including 35 of the 50 states, the District of Columbia, and 8 tribes, had incorporated this kind of assistance in their Title IV-E plans. (For a list of these jurisdictions, see Appendix F .) Accordingly, these states and tribes may seek federal reimbursement for a part of the cost of providing ongoing kinship guardianship assistance payments on behalf of every eligible child. To be eligible for Title IV-E kinship guardianship, a child must have previously been in foster care and must have been eligible to receive Title IV-E foster care maintenance payments (while living in the home of the prospective legal relative guardian). During FY2016, ongoing monthly Title IV-E kinship guardianship assistance payments were paid on behalf of some 25,500 children on an average monthly basis. As with other Title IV-E program components, funding is authorized on a permanent basis (no year limit). Jurisdictions with an approved Title IV-E plan that includes the kinship guardianship assistance option are entitled to reimbursement for a part of the program costs, including guardianship assistance payments paid to legal relative guardians on behalf of eligible children, and for related program administration, including training. As of the mid-session review (released July 2017), HHS estimates that FY2017 federal budget authority needed for Title IV-E kinship guardianship assistance will be $136 million. For federal Title IV-E kinship guardianship funds obligated in FY2013-FY2016 and estimated budget authority needed for FY2017, see Table 7 . Obligations of Funds by Title IV-E Program Component Title IV-E funding is described as an "open-ended entitlement" because the law (Section 474 of the Social Security Act) provides that a state is entitled to reimbursement for a particular share (or percentage) of every eligible program cost incurred by a state or tribe operating a Title IV-E program. To meet this commitment in each annual appropriations act, Congress provides "definite budget authority" (a certain amount of funds) that enables HHS to reimburse states, territories, and tribes for their eligible Title IV-E costs. The amount needed for this purpose is estimated in the annual budget request of the President, and this is typically the amount of definite budget authority provided by Congress. In any year that Congress authorizes more funding than needed to make these reimbursements, the extra funding authority will eventually lapse (no longer be available from the federal Treasury). Alternatively, if the definite budget authority provided is not enough to provide the federal share (reimbursement) of the eligible Title IV-E program costs submitted by states, territories, or tribes, the annual appropriations acts typically also include an "indefinite budget authority." This authority allows HHS to access additional funds (within a specific time frame) to meet the statutory commitment to reimburse a part of every eligible program cost. Table 7 shows the amount of funding (actual or estimated) obligated by HHS in each of FY2013-FY2017 for Title IV-E foster care, adoption assistance, and kinship guardianship assistance. Tribal Title IV-E Plan Development and Technical Assistance Section 476(c) of the Social Security Act authorizes HHS to make grants to tribes, valued at up to $300,000, to assist them with the cost of preparing a Title IV-E plan for HHS approval. Among other things, this may include costs related to the development of a tribal data collection system, a cost allocation methodology (which is needed to seek federal reimbursement for any Title IV-E cost that is not an assistance payment), and agency and tribal court procedures necessary to meet the case review system requirements under the Title IV-E program. The grants are to be provided only to tribes that intend to submit a Title IV-E plan for HHS approval within 24 months. HHS awards these grants annually, on a competitive basis. Through the last day of FY2017 (September 30, 2017), 34 tribes (or tribal consortia) had received a plan development grant, and, as of November 2017, 10 tribes (or consortia) had approved Title IV-E plans (see Appendix C ). Additionally, Section 476(c) requires HHS to provide "information, advice, educational materials, and technical assistance" to tribes regarding providing services and assistance to tribal children under the child welfare programs authorized in Title IV-B and Title IV-E of the Social Security Act. This technical assistance must also be available for states regarding working with tribes to develop cooperative agreements (under which some IV-E funding received by the state is provided to the tribe) as well as consulting with tribes on the state's plan to comply with the Indian Child Welfare Act (ICWA). As part of responding to this requirement, HHS is currently funding the National Child Welfare Capacity Building Center for Tribes. The authorization for tribal technical assistance and IV-E plan development grants was added to the Social Security Act by the Fostering Connections to Success and Increasing Adoptions Act of 2008 ( P.L. 110-351 ). The law provides a permanent (no year limit) annual appropriation of $3 million. Chafee Foster Care Independence Program The John H. Chafee Foster Care Independence Program (CFCIP) (§477 of the Social Security Act) authorizes funding for states, territories, and tribes to provide services to help youth make a successful transition from foster care to adulthood. Under the program, states are expected to identify children or youth likely to remain in foster care until their 18 th birthday to ensure that they have regular and ongoing opportunities to engage in age- or developmentally appropriate activities and to help prepare them for self-sufficiency. States are also expected to provide financial, housing, counseling, education, employment, and other appropriate supports to former foster youth 18, 19, or 20 years of age and to promote and support mentoring or other connections with dedicated adults. CFCIP may also support services to youth who, after reaching 16 years of age, leave foster care for adoption or legal guardianship. States must ensure that youth served under CFCIP are actively involved in decisions about the services they receive. Beginning with FY2011, the 50 states, the District of Columbia, and Puerto Rico report to HHS on "independent living services" that were paid for by the agency that administers the CFCIP program. During FY2013, close to 100,000 youth (ages 14-26 years) received at least one such service, and many of those youth (58%) received three or more services. The most common services were academic support, career preparation, and education about housing and home management. Funding for the Chafee program is authorized on a permanent basis (no year limit) as a capped entitlement to states and territories, provided they have an approved Title IV-E plan. Tribes may also receive direct federal support under this program, with or without an approved Title IV-E plan. The authorized amount of funds, $140 million, is provided in annual appropriations bills. (Beginning with FY2020, this annual amount is slated to rise to $143 million.) The mandatory CFCIP funds are considered a part of the Title IV-E program and, apart from a small portion used for federal program administration, are not subject to sequestration. (See Table 9 .) Chafee Educational and Training Vouchers (ETVs) An additional purpose of the CFCIP is to provide Educational and Training Vouchers (ETVs) (§477(i) of the Social Security Act) to defray the cost of postsecondary education or training for any youth who is eligible for CFCIP general services. ETVs may be valued at up to $5,000 a year and may be used for the "cost of attendance" (including tuition, fees, books, room and board, supplies, and other items) at an "institution of higher education" (including public or private, nonprofit two- and four-year colleges and universities, as well as proprietary or for-profit schools offering technical training programs, among others). Discretionary funding for ETVs is authorized on a permanent (no year limit) basis, and program appropriations are distributed based on a state's relative share of children in foster care. Final funding provided for CFCIP, including Educational and Training Vouchers for each of FY2013-FY2017, is shown in Table 9 . Funding and Distribution for the CFCIP Program, Including ETVs HHS is required to reserve 1.5% of the funding appropriated for CFCIP, including ETV funding, to support evaluations, technical assistance, performance measurement, and data collection related to the program. The remaining general program funds are distributed to states and territories with an approved Title IV-E plan based on their relative share of the national population of children in foster care. However, no state or territory may receive an allotment of less than $500,000 or the amount it received under CFCIP's predecessor program (in FY1998)—whichever is greater. Chafee ETV funds are distributed based solely on the state's relative share of the national population of children in foster care. Additionally, to receive any CFCIP or ETV funding, states must give certain assurances to HHS related to their operation of the program. Finally, a state must provide nonfederal resources of no less than 20% of total spending under the program to receive its full CFCIP and ETV allotments. Adoption and Legal Guardianship Incentive Payments Adoption Incentive Payments were established in 1997, as part of a package of policy changes included in the Adoption and Safe Families Act, (ASFA, P.L. 105-89 ) that were intended to ensure children's safe and expeditious exit from foster care to permanent homes, including through adoption. Since ASFA's enactment in 1997, the annual number of children leaving foster care for adoption has risen from roughly 30,000 to more than 50,000, and the average length of time it took states to complete the adoption of a child from foster care declined by close to one year (from about four years to less than three). In FY2016, state child welfare agencies helped to complete more than 57,000 adoptions. The most recent reauthorization of the incentives, enacted in 2014 ( P.L. 113-183 ), added recognition of state success at finding permanent families for children through legal guardianship and renamed the program as Adoption and Legal Guardianship Incentive Payments. Close to 24,000 children left foster care for guardianship during FY2016. States do not earn an incentive payment for every adoption or guardianship completed. Instead, they earn incentives only when they increase the rate (or percentage) of children in their state who leave foster care for new and permanent families. Specifically, under the incentive structure established with the 2014 reauthorization, they may earn the following amounts: $5,000 for each adoption of a foster child (any age) that results from the increased rate; $4,000 for legal guardianship established for a foster child (any age) that results from the increased rate; $7,500 for each adoption or guardianship for foster children ages 9 to 13 that results from the increased rate; and $10,000 for each adoption or guardianship for foster children age 14 or older, that results from the increased rate. A state is found to have an increased rate if during the fiscal year the percentage of children leaving foster care in one or more of these categories exceeds the comparable percentage for either the most recent previous year or the average percentage for the three most recent previous years. States may spend adoption incentive payments earned toward any services authorized under the child welfare programs in Title IV-B or Title IV-E of the Social Security Act and, as of FY2014, they have a full 36 months from the month the award payment is made. In recent years, the amount of incentive payments earned by states in a single year (between $40 million and $55 million) has consistently outpaced the annual funding appropriated to pay those incentives ($38 million). Accordingly, to ensure states received the full incentives earned, HHS has awarded the payments across two years—using a part of the appropriations from both years. However, unless the final FY2018 funding provided for these payments is appropriated at a level higher than the $38 million appropriated in each recent year, even this two-year approach will not enable HHS to pay states the full $55 million in incentive payments they earned in FY2016. In September 2017, when it announced the FY2016 awards, HHS had just $5 million of the FY2017 appropriation incentive payments available to make these awards (because in June 2017 it used $23 million of the FY2017 appropriation to make states whole for their FY2015 incentive awards). Accordingly, and as it had done in past years, HHS made initial, prorated incentive payments with those funds—meaning each state received roughly 10% of the incentive payment amount it earned for FY2016. However, that leaves the outstanding balance to be paid out of the FY2018 appropriation at $50 million, or $12 million more than the $38 million that has been provided annually for the incentive payments in recent years. (See Appendix G for incentive awards earned by category and state for FY2016.) Although the discretionary funding authorization for Adoption and Legal Guardianship Incentive payments ($43 million/year) expired on September 30, 2016, Congress chose to continue the incentive program and provided FY2017 funding for them as part of P.L. 115-31 . See Table 10 for final funding in each of FY2013-FY2017. Child Abuse Prevention and Treatment Act (CAPTA) CAPTA was enacted in 1974 ( P.L. 93-247 ) at a time of growing awareness and concern about abuse of children in their own homes. It has been reauthorized many times since then, most recently by the CAPTA Reauthorization Act of 2010 ( P.L. 111-320 ). CAPTA authorizes formula grant funding to states to improve their child protective services (state grants); competitively awarded funds to support research, technical assistance, and demonstration projects related to prevention, assessment, and treatment of child abuse and neglect (discretionary activities); and funding to all states for support of community-based activities to prevent child abuse and neglect (community-based grants). Further, it incorporates program authority for what are commonly referred to as "Children's Justice Act grants." Legislation authorizing these programs and activities in CAPTA is handled by the House Education and the Workforce Committee and the Senate Health, Education, Labor and Pensions (HELP) Committee. CAPTA State Grants The focus of CAPTA is on providing a primarily social service (rather than a criminal justice) response to abuse or neglect of children carried out by their parents or other caretakers . The Justice for Victims of Trafficking Act of 2015 ( P.L. 114-22 ) amended CAPTA to require (as of May 29, 2017) that children identified as victims of sex trafficking (regardless of whether the trafficker is considered their parent or "caretaker") must also be counted as victims of child abuse and provided access to social services. In FY2015, state and local child protective services (CPS) agencies received 4.0 million calls or other referrals alleging abuse or neglect involving an estimated 7.2 million children. After screening those referrals they determined CPS response (investigation or assessment) was warranted for 2.2 million of the referrals, involving an estimated 3.4 million children. Under CAPTA State Grants (Section106 of CAPTA), each state and territory receives funds to make improvements to its CPS system. In recent years, funding provided via these state grants has offered less than $12 for each CPS investigation or assessment of child abuse or neglect carried out by states (on a national basis). Therefore, the bulk of the cost to receive and respond to child abuse or neglect allegations is assumed to be borne by states and localities out of their own treasuries or using other federal funding (e.g., Social Services Block Grant). The CAPTA statute lists 14 potential areas for CPS program improvement (or uses of funds). A little more than two-thirds of the states (67%) reported their intention to use their CAPTA state grant funds to improve the intake, assessment, screening, and investigation of reports of child abuse or neglect. Considerably more than half (58%) intended to use the funds to develop, improve, and implement risk and safety assessment tools and protocols, including use of differential response, and a similar share (56%) intended to use the funds to improve case management, ongoing case monitoring, and delivery of services and treatment provided to families. To receive CAPTA state grant funds each state, including the District of Columbia and Puerto Rico, must assure HHS that it has a statewide system in place to receive and screen reports of child abuse or neglect and to provide appropriate responses that ensure children's safety, including developing a plan of safe care for infants brought to the attention of CPS (by health care providers) as substance-exposed; state laws that mandate specific individuals to make reports of known or suspected child abuse or neglect and provide immunity from prosecution for individuals who make these reports in good faith; a technology system that allows the state to track reports of child abuse and neglect (from intake to final disposition); and statewide procedures that, among other things, maintain the confidentiality of child abuse and neglect records; offer training to CPS workers; provide an appropriately trained guardian ad litem or advocate for each child abuse or neglect victim involved in judicial proceedings; and provide for cooperation between state law enforcement agencies, appropriate state human services agencies, and courts in the investigation, assessment, prosecution, and treatment of child abuse and neglect. In addition, states, including the District of Columbia and Puerto Rico, must establish and support Citizen Review Panels to evaluate the effectiveness of their CPS policies and practices and they must, "to the maximum extent practicable," submit annual data to HHS regarding child abuse and neglect in their state. Selected Amendments in the 2010 CAPTA Reauthorization and Other Subsequent Changes The most recent reauthorization of funding for CAPTA state grants occurred in late 2010. That law ( P.L. 111-320 ) also made some amendments to the CAPTA state grant programs. More recently, the Justice for Victims of Trafficking Act of 2015 ( P.L. 114-22 ) and the Comprehensive Addiction and Recovery Act of 2016 (CARA, P.L. 114-198 ) also amended the program. CAPTA Reauthorization Act of 2010 The CAPTA Reauthorization Act of 2010 ( P.L. 111-320 ), which extended CAPTA funding authorization through FY2015, also made other changes to the law. Among these, it required every state to have a law regarding who is mandated to report known or suspected child abuse and neglect; describe how it uses "differential response," to vary how it interacts with families for whom a report of child abuse or neglect has been made; assure that it has a "technology system" capable of tracking child abuse and neglect cases; ensure it does not require a child to be reunited with a parent who has subjected the child to sexual abuse and/or who is required to register as a sex offender; and report information to HHS (to the maximum extent practicable) regarding the demographics and education/training of its CPS workforce and the states own established policies regarding education/training CPS workers as well as caseload standards for CPS workers and their supervisors. The 2010 law also called for collaboration between CPS agencies and agencies providing services to families including victims of both adult domestic violence and child abuse, and made other changes to the act. Justice for Victims of Trafficking Act of 2015 Effective May 29, 2017, the Justice for Victims of Trafficking Act ( P.L. 114-22 ) requires a state to assure (as part of its CAPTA state plan) that it has the following in place: procedures for the identification and assessment of all reports involving known or suspected child victims of sex trafficking; and provisions relating to training CPS workers to do this work and to provide services to victims of sex trafficking, including through coordination with other social service agencies. According to HHS, 43 states, the District of Columbia, and Puerto Rico had submitted signed assurances that they were in compliance with these trafficking-related provisions as of mid-June 2017. Assurances from three additional states (California, Hawaii, and Washington), were pending and expected to be submitted shortly. For the remaining four states (Arizona, Nevada, South Carolina, and West Virginia), the Children's Bureau was continuing to determine the status of implementation. It planned to require development of a "program improvement plan," if this was determined necessary for a state to reach compliance. The 2015 law also requires states, to the maximum extent practicable, to report to HHS the number of children determined to be victims of sex trafficking. HHS plans to begin collecting these data from states beginning in FY2018. Comprehensive Addiction and Recovery Act of 2016 (CARA) For more than a decade, each state receiving CAPTA basic grant funding has been required to have statewide policies mandating that health care providers notify CPS when an infant shows signs of prenatal exposure to, or withdrawal symptoms from, illegal drugs. Additionally, they have been required to develop a safe plan of care for any such infant. CARA ( P.L. 114-198 ) built on this prior policy to require this notice be made without regard to whether the drug was illegal or legal and describes a required plan of safe care as one addressing both the health and well-being needs of the child and the substance abuse treatment needs of the child's parent/caregiver. Additionally, it requires states to report to HHS (to the extent possible) on the numbers of children identified under these provisions, those for whom a plan of safe care was developed, and those for whom referrals to services were made. (HHS plans to begin collecting these data from states beginning in FY2018.) CARA also calls on states to monitor their own compliance with the CARA provisions and provides for heightened federal monitoring of state compliance with this requirement. Each state was required to detail its efforts to comply with these CARA provisions in a report that was submitted to HHS ACF regional offices by June 30, 2017. States unable to ensure compliance with the new requirements were able to enter into a "program improvement plan" (PIP) designed to allow them to meet the requirements. As of December 2017, 23 states had entered into a PIP for this purpose. Funding and Distribution The CAPTA Reauthorization Act of 2010 ( P.L. 111-320 ) extended annual discretionary funding for these grants through FY2015 (i.e., until September 30, 2015). Nonetheless, Congress chose to provide discretionary funding for these grants in FY2016 and again in FY2017. Each state and territory receives a base allotment of $50,000, and the remaining funds are distributed among the states and territories based on their relative share of the child (under age 18) population. For FY2015, the median CAPTA state grant award was $346,000, and among the 50 states, the grants ranged from a low of $87,000 (VT) to a high of $2.8 million (CA). To address low CAPTA grant amounts in states with small child populations, the 2010 reauthorization act added "minimum allotment" provisions. Under these provisions, no state is to receive an annual CAPTA grant of less than $100,000, provided overall funding appropriated for the grants was at least $27,535,000. This funding level trigger, which was designated at $1 million above the level Congress provided for the grants in FY2009, has not been reached. Funding has instead decreased for the grants, and therefore no change in the distribution of CAPTA state grant funding has been made. Final funding for CAPTA state grants in each of FY2013-FY2017 is shown in Table 11 . CAPTA Discretionary Activities With the enactment of CAPTA, Congress sought to create a federal focal point for efforts to prevent, identify, and treat child abuse and neglect. Funding for CAPTA discretionary activities is used to support research and demonstration projects, and to collect and disseminate data and information. These activities are intended to improve understanding and practice with regard to preventing, identifying and treating child abuse and neglect. Under current law, HHS is required to maintain a national clearinghouse concerning child abuse and neglect that gathers and disseminates information on best practices and effective programs that prevent and/or respond to child abuse; provides technical assistance to state and local public and private agencies related to preventing and responding to child abuse and neglect; and collects and annually publishes data on child maltreatment. HHS is further required to fund field-initiated and interdisciplinary research related to protecting children from abuse and neglect and improving their well-being and to support the study of the national incidence of child abuse and neglect. Current law also permits HHS to fund demonstration projects or grants on a range of suggested topics (many related to training CPS staff and other relevant individuals). Additionally, HHS is permitted to establish an office on child abuse and neglect for the purpose of carrying out CAPTA and to ensure inter- and intra-departmental coordination of activities related to child abuse and neglect. The Office of Child Abuse and Neglect (OCAN), within the Children's Bureau at HHS, carries out CAPTA and works to coordinate child abuse prevention and treatment activities within HHS and across federal agencies, including through its leadership of the Federal Interagency Work Group on Child Abuse and Neglect. The OCAN uses CAPTA discretionary funds to support inclusion of child abuse and neglect-related information on the online portal, Child Welfare Information Gateway ( http://www.childwelfare.gov ), collection of state data via the National Child Abuse and Neglect Data System (NCANDS), and publication of annual reports ( Child Maltreatment ) based on those data. Funding provided for CAPTA Discretionary Activities also currently supports efforts to build the capacity of public child welfare agency workers (and the public or private agencies they work with) to carry out and continuously improve their work; planning grants for developing a model intervention for youth with child welfare involvement who are at-risk of homelessness; and partnerships to demonstrate the effectiveness of supportive housing for families in the child welfare system. The Design Options for Understanding Child Maltreatment project is now under way and intends to identify new methods to obtain accurate and ongoing information on the incidence of child abuse and neglect, as well as key research priorities for the field. Finally, funds from this account have been used to help establish the National Advisory Committee on Sex Trafficking of Children and Youth in the United States. HHS awards CAPTA Discretionary Activities funds to eligible public and private entities (on a competitive basis) to carry out the required and/or authorized CAPTA activities. In some years, Congress has also indicated more specific uses for these funds as part of the appropriations process. For example, in each of FY2014-FY2017, report language or explanatory statements accompanying final appropriations bills have called for a part of this CAPTA funding to be used for "implementation of research-based court team models that include the court system, child welfare agency, and community organizations in order to better meet the needs of infants and toddlers in foster care." HHS has responded by funding the Quality Improvement Center (QIC) for Research-Based Infant-Toddler Court Teams. The CAPTA Reauthorization Act of 2010 ( P.L. 111-320 ) extended annual discretionary funding for CAPTA's discretionary activities through FY2015. Congress continued to provide funding for this account in FY2016 and FY2017. For final CAPTA discretionary activities funding for FY2013-FY2017, see Table 11 . Community-Based Grants to Prevent Child Abuse and Neglect Title II of CAPTA supports the efforts of community-based organizations to prevent child abuse and neglect. These prevention grants—referred to by HHS as Community-Based Child Abuse Prevention grants (CBCAP)—are distributed by formula to a lead entity in each state and territory. The lead entity is required to distribute the funds to community-based organizations in the state that work to prevent child abuse and neglect, including through support of parent education, mutual support, and self-help activities; provision of community and social service referrals, outreach services, voluntary home visiting, and respite care; and support for public information campaigns to prevent child abuse or neglect. The lead entity is often the state child welfare agency but may also be another statewide (public or private) entity (e.g., a state Children's Trust Fund). Out of funds provided for these grants, the law provides that 1% of funds must be set aside for tribal and migrant programs. In addition, it permits HHS to allocate whatever sums are necessary to support the work of state lead entities by creating, operating, and maintaining a peer review process, information clearinghouse, and computerized communication system between state lead entities and to fund a yearly symposium and biannual conference related to implementing the grants. As part of carrying out this requirement, HHS supports the National Resource Center for Community Based Child Abuse Prevention (also known as FRIENDS) to provide training and technical assistance for state lead entities. The CAPTA Reauthorization Act of 2010 ( P.L. 111-320 ) extended annual discretionary funding for CBCAP through FY2015 (i.e., until September 30, 2015). Congress chose to continue to provide funding for these grants in FY2016 and in FY2017. Final funding for CBCAP grants, for each of FY2013-FY2017, is shown in Table 11 . To receive its allotment under the program, a state lead agency must assure that it will provide no less than 20% in nonfederal matching funds. Further, each state's allocation of CBCAP funds is based in part on the amount of nonfederal money leveraged by the state for child abuse prevention activities. Specifically, 70% of the grant funding is distributed to each state and territory based on its relative share of children (individuals under age 18) in the nation (except that by statute no state may receive less than $175,000). The remaining 30% of the grant funding is distributed to each state (including Puerto Rico) based on the relative share of all nonfederal (private, state, local) funds that was directed through the state's lead entity to fund community-based child abuse prevention services and activities. Children's Justice Act Grants Children's Justice Act grants (Section 107 of CAPTA) administered by HHS are provided to help states and territories improve the assessment, investigation, and/or prosecution of child abuse and neglect cases—particularly cases involving suspected sexual abuse and exploitation of children, child fatalities suspected to be caused by abuse or neglect, and those involving children who are disabled and children with serious health disorders. Among other things, the improvements must aim to limit additional trauma to a child and/or child's family. To be eligible to receive these funds, a state or territory must meet the requirements necessary to receive CAPTA state grants, and it must establish and maintain a multidisciplinary taskforce to review how the state handles civil and criminal child abuse and neglect cases, including cases involving more than one jurisdiction (e.g., state and tribe, or more than one state). The taskforce must make recommendations for ways to improve handling of these cases through reform of state law, regulations, and procedures; training; and/or testing of innovative or experimental programs. States are further required to receive recommendations from the taskforce every three years and must implement the recommendations (or an alternative plan). While the program authority for Children's Justice Act grants is contained in Section 107 of CAPTA, that law does not authorize funding for them. Instead, the grants are funded out of the Crime Victims Fund (CVF). The CVF consists primarily of criminal fines and fees that are paid to the federal government. It is administered by the Office for Victims of Crime within the Department of Justice (DOJ). Section 1404A of the Victims of Crime Act (42 U.S.C. §10601, et seq.) requires DOJ to annually set aside up to $20 million for Children's Justice Act purposes, of which 85% is directed to HHS (for distribution to 50 states, the District of Columbia, and Puerto Rico), and the remaining 3% is retained by DOJ for competitive grants to tribal entities. FY2013-FY2017 funding for this program is shown in Table 12 . Victims of Child Abuse Act Title II of the Crime Control Act of 1990 ( P.L. 101-647 ) created the Victims of Child Abuse Act (VCAA). That act authorizes several child welfare programs that are administered by the Office of Juvenile Justice and Delinquency Programs (OJJDP), an agency within the Office of Justice Programs (OJP) at DOJ. Apart from these three programs, the VCAA includes provisions requiring specified professionals to report suspected child abuse or neglect that they learn about while carrying out their profession on federal land or in federally operated facilities , and provides criminal penalties for those failing to make such reports. Additionally, it requires federal agencies and agencies operated or contracted to operate by the federal government to ensure criminal background checks are conducted for any individual hired by the agency or facility to provide a wide range of care or services to children. The legislation establishing the VCAA was handled by the Senate and House judiciary committees. Improving Investigation and Prosecution of Child Abuse Cases Subtitle A (Sections 211-214B) of the Victims of Child Abuse Act supports the expansion and improvement of Children's Advocacy Centers (CACs). These centers are intended to coordinate a multidisciplinary response to child abuse (e.g., law enforcement, child protection/social service, medical, mental health) in a manner that ensures child abuse victims (and any nonoffending family members) receive the support services they need and do not experience the investigation of child abuse as an added trauma. CACs are widespread. The VCAA authorizes funds to directly support establishment and operation of local and regional children's advocacy centers, as well as training and technical assistance related to improving the investigation and prosecution of child abuse and neglect. Nationally there are close to 800 CACs located in all 50 states and the District of Columbia. Coverage varies significantly by state, and the National Children's Alliance reports that some 13.5 million children in the nation (about 1 in 5) live in areas without access to a CAC. Close to 325,000 children were served at CACs in 2016, including nearly 222,000 who received an onsite forensic interview (68.1%). Many children received more than one service, which might include counseling or referrals to counseling, medical exam or treatment, and in some instances offsite forensic interviews. Children served were most often female (62.8%) and 12 years of age or younger (72.2%). More than half (53.1%) were white, about 1 in 5 (20.5%) were black, and about 14.5% were Hispanic or Latino. Sexual abuse was the most commonly reported abuse, involving about two-thirds (66.4%) of the children served at CACs in 2016. Children served may have experienced more than one type of abuse. Other abuses reported among children served were physical abuse (19.6%), neglect (7.4%), witnesses to violence (6.9%), child drug endangerment (3.3%), or "other" (5.7%). More than 6 in 10 of the alleged abusers (60.3%) were related to the children served (i.e., parent, step-parent, or other relative). Among all alleged offenders, about 8% were 12 years of age or younger and a little more than 10% were 13 through 17 years of age. For purposes of the CACs' work (and related technical training and assistance), "child abuse" is defined to mean "physical or sexual abuse or neglect of a child." As provided in the Justice for Victims of Trafficking Act of 2015 ( P.L. 114-22 ), this includes "human trafficking and the production of child pornography." That law also authorized grants to develop and implement specialized programs to identify and provide direct services to victims of child pornography. Further, it established a Domestic Trafficking Victims Fund—to consist of financial penalties collected for certain human trafficking-related violations and other specified funds—and directed that a part of those dollars must be used (in each of FY2016-FY2019) to support those grants or enhance the programming related to responding to child pornography. Annually, DOJ awards the bulk of the CAC funding to the National Children's Alliance, which makes sub grants to support the work of local children's advocacy centers, establishes standards and provides accreditation to local and state chapter CACs, and offers other training and technical assistance. Federal law also requires the establishment and support of four regional children's advocacy centers to increase the number of communities with CACs, help improve their practice, and support development of state chapter organizations for CACs, including by serving as resource and training centers for those local CACs and state chapters. Currently the four regional centers are located in Huntsville, AL; Philadelphia, PA; St. Paul, MN; and Colorado Springs, CO. In addition, the law seeks to improve the prosecution of child abuse cases by authorizing additional funds specifically for training and technical assistance to attorneys and others involved in criminal prosecution of child abuse. Funding to support this purpose has frequently been awarded to the National Center for the Prosecution of Child Abuse. Annual discretionary funding authority to support regional and local CACs ($15 million) and training and technical assistance to improve criminal prosecution of child abuse ($5 million) was extended for each of five years (FY2014-FY2018) by P.L. 113-163 . For FY2017, Congress provided $21 million, $1 million more than was provided for this account in FY2016. Senate Appropriations Committee report language (made applicable to the funding by the explanatory statement accompanying the final FY2017 appropriations act) stipulates that not less than 90% of the funds are provided "for the purposes of developing and maintaining child advocacy centers, including training and accreditation" and that $5 million must be used to support Regional Children's Advocacy Centers. The additional $1 million, it notes, is provided to "support a pilot project to identify, develop, and operationalize best practices," whereby the CAC model and expertise can be used to help address child abuse on military installations. See Table 13 for FY2013-FY2017 final funding. Court-Appointed Special Advocates Subtitle B (Sections 215-219) of the Victims of Child Abuse Act provides funding to support access to advocates for victims of child abuse or neglect. Court Appointed Special Advocates (CASAs)—sometimes called guardians ad litem —are volunteers who are appointed by judges and who work to ensure that a child's best interest is presented to the judge in court proceedings related to child abuse and neglect. The first CASA pilot program began in Seattle in the late 1970s, and the National Court Appointed Special Advocate Association (National CASA Association) was founded in 1982 to help replicate and support CASA programs across the nation. In 1984, when the association incorporated, there were 107 state and local CASA programs in 26 states. As of 2015, close to 950 state, local, and tribal CASA programs located in 49 states and the District of Columbia were a part of the National CASA Association. As early as 1974, when Congress enacted CAPTA, it sought to ensure that every child who was a part of court proceedings because of child abuse and neglect had a guardian ad litem to represent their best interest. However, 16 years later, when it authorized funds specifically for CASA (as part of the 1990 Victims of Child Abuse Act), Congress found that only a small fraction of children in child abuse and neglect proceedings received CASA representation. It stated then that the purpose of the funding dedicated to CASA was to ensure that each of these children would have a CASA made available to them. In 2015, more than 250,000 children—most of who were in foster care—were served by nearly 77,000 CASA volunteers. However, the National CASA estimated that as many as 452,000 children in need of a CASA volunteer during 2015 did not have one. Each year funds appropriated for CASA authorization have been awarded to the National CASA Association, which awards sub grants (on a competitive basis) to be used for new local program development or expansion of existing programs and state CASA organizations. The National CASA Association also uses this federal funding to provide training and technical assistance to local CASA programs, child welfare professionals, attorneys, judges, social workers, and volunteer advocates. As part of the reauthorization of the Violence Against Women Act ( P.L. 113-4 ), Congress extended annual discretionary funding authority for the CASA program at $12 million for each of FY2014-FY2018. Final federal funding appropriated for the CASA program in each of FY2013-FY2017 (shown in Table 13 ) has been less than this authorized level. Child Abuse Training for Judicial Personnel and Practitioners Sections 221-224 of the Victims of Child Abuse Act of 1990 required OJJDP to make grants to improve the judicial system's handling of child abuse and neglect cases. The statute authorizes grants to be made to national organizations to develop model technical assistance and training programs. Beginning with FY1992, funding appropriated under this authority has been awarded to the National Council of Juvenile and Family Court Judges (NCJFCJ). Drawing on the experience and reform initiatives it has funded in 36 "model courts" across the nation, NCJFCJ has developed resource guidelines and provides technical assistance and training aimed at improving how courts handle child abuse and neglect cases. Since the early 1990s, Congress has provided annual funding dedicated to this training program (with or without current funding authority), and in early 2013, as part of reauthorization of the Violence Against Women Act ( P.L. 113-4 ), it extended annual discretionary funding authority for the program at $2.3 million for each of FY2014-FY2018. Final federal funding appropriated for Child Abuse Training for Judicial Personnel and Practitioners in each of FY2013-FY2017 is shown in Table 13 . Other Programs Additional child welfare programs are included in separate acts as described below. Legislation authorizing these programs and activities is handled by the House Education and the Workforce Committee and the Senate HELP Committee. Adoption Opportunities First enacted in 1978, the Adoption Opportunities program requires HHS to have an administrative structure that allows for centralized planning across all departmental programs and activities affecting foster care and adoption. It requires HHS to support adoption recruitment activities, including through a "national adoption information exchange" and to support a national resource center on special needs adoptions. Additionally, it authorizes federal funds to support projects or other activities that encourage and facilitate adoption of older children, children who are members of minority groups, and others with "special needs;" aim to eliminate barriers to cross-jurisdictional (including interstate) placement of children in need of adoption; and provide postadoption supports. Postadoption supports are described by the law as including individual, group, and family counseling; respite care; day treatment; case management; assistance to support groups for adoptive parents, adopted children, and siblings of adopted children; assistance to adoptive parent organizations; and training of public and private child welfare personnel, mental health professionals, and others to provide postadoption services. Adoption Opportunities funds are used by HHS to achieve program purposes, either directly or by competitive award of contracts, grants, or other agreements. Depending on the activity authorized, eligible entities include states, local government entities, public or private child welfare or adoption agencies, other public or private agencies or organizations, adoptive family groups, and adoption exchanges. Some of the Adoption Opportunities "major" program activities have included developing and implementing a national adoption information exchange system (which includes an online web portal known as AdoptUSKids featuring a national photo listing of children available for adoption as well as information about prospective foster or adoptive parents ); developing and implementing an adoption training and technical assistance program (current projects include the Quality Improvement Center on Adoption/Guardianship Support and Preservation and support for adoption-related information on the Child Welfare Information Gateway); conducting ongoing, extensive recruitment efforts on a national level to encourage the adoption of older children, minority children, and special needs children (current work includes support for the National Resource Center for Diligent Recruitment of Foster and Adoptive Parents and a series of Public Service Announcements intended to encourage adoption of children, especially older children and children who are part of sibling groups); increasing states' effective use of public and private agencies for the recruitment of adoptive and foster families and assistance in placement of children; promoting programs to increase the number of older children adopted from foster care; providing for programs aimed at increasing the number of minority children (in foster care and with the goal of adoption) who are placed in adoptive families, with a special emphasis on recruitment of minority families; and providing for postadoption services for families who have adopted children with special needs, and promoting programs that effectively meet the mental health needs of children in foster care, including addressing the effects of trauma. Reducing interstate barriers to placement of children has been a long-running concern of the program, and HHS has recently used Adoption Opportunities funding to extend support for the National Electronic Interstate Compact Enterprise (NEICE) project for three years. Six states initially participated in a NEICE pilot, which enabled electronic exchange of data needed to process interstate placement of children. Evaluation of the pilot found reduced placement time and other improved efficiencies. By funding a continuation of this project through May 2018 HHS hopes to extend use of the system to all states. As of June 2017, 15 of the 50 states and the District of Columbia were participating. Annual discretionary funding for the Adoption Opportunities program was authorized at $40 million for FY2010 and "such sums as necessary" for each of FY2011 through FY2015. Congress chose to continue appropriations for the program in FY2016, and again in FY2017. (See Table 14 for final Adoption Opportunities funding in FY2013-FY2017.) Report language intended to guide agency use of FY2017 Adoption Opportunities funding encourages HHS/ACF to "fund activities to improve hospital-based adoption support services for pregnant and expectant mothers, including training for hospital staff and doctors. Such activities would help ensure that mothers who wish to make an adoption have access to trained staff and comprehensive supports throughout the adoption process." Abandoned Infants Assistance The Abandoned Infants Assistance Act of 1988 ( P.L. 100-505 ) responded to congressional concerns about the number of infants who remained in hospital care beyond their medical need to do so and who, often because of parental drug use, were born with exposure to drugs, human immunodeficiency virus (HIV), or both. The act authorized funding for local demonstration projects to prevent and respond to the abandonment of infants and young children. Congress last provided funding for this program ($11 million) in FY2015. For purposes of this program, the terms abandoned and abandonment of infants or young children refer to infants or young children who are "medically cleared for discharge from acute-care hospital settings, but remain hospitalized because of a lack of appropriate out-of-hospital placement alternatives." To address the needs of these infants and young children it authorizes local demonstration projects to provide services to biological family members for any condition that increases the probability of the abandonment of infants and young children; identify and address the needs of abandoned infants and children; assist abandoned infants and young children so they can live with biological family members, or, if appropriate, in a foster family home—or, if neither of those is possible, by carrying out residential (group) care programs for them; recruit, train, and retain foster parents for abandoned infants and young children; provide respite care services to families and foster families of abandoned infants and young children who are infected with HIV, had perinatal exposure to HIV and/or a "dangerous drug," or who have a life-threatening illness or other special medical need; provide model programs offering health, educational, and social services for abandoned infants and young children at a single site; and recruit and train health and social services personnel to work with families, foster care providers, and residential care programs serving abandoned infants and young children. HHS awarded funds to public and private nonprofits seeking to carry out these local projects. Grantees were required to agree to give priority for services to abandoned infants or young children who are infected with HIV, had perinatal exposure to HIV or a controlled substance, or who have a life-threatening illness or other special medical need. From FY1991 through FY2015, HHS funded the National Abandoned Infants Assistance Resource Center, which disseminated findings from evaluations of the project (as required by the act) and offered training and technical assistance to local project grantees. The center is now closed. Survey data from the mid-2000s suggest that the number of infants who remain in hospital care beyond their date of medical discharge, as well as the number of infants in hospitals who are not yet medically cleared to leave the hospital but who are considered unlikely to do so with their biological parent(s), has declined. In 2006, the combined national estimate of such infants was a little less than 12,900. This was substantially fewer than the estimates of more than 30,600 such infants in 1998, and 21,600 in 1991. However, the 2006 survey found that while these infants used to be concentrated in urban area hospitals, they were now more widely dispersed across the nation, appearing in hospitals serving suburban and rural counties as well as those in urban areas. The 2006 survey concluded that positive trends it identified, including a decline in the number of infants "boarded" in the hospital and reduced lengths of stay for those who did stay beyond their medical need to do so, might be attributable to hospitals and child welfare agencies becoming more responsive to needs of these infants, including through better interagency coordination. Several legislative efforts were cited as possible contributors. These included an increased focus on timely permanency planning (a major focus of the Adoption and Safe Families Act [ASFA] of 1997), required communication between health care providers and child protection agencies for children born with substance exposure (added to CAPTA as part of its 2003 reauthorization, P.L. 108-36 ), and more than 20 years of federal support, provided under the Abandoned Infants Assistance Act ( P.L. 100-505 , as amended), for local projects to serve abandoned infants and children, and their families in communities across the nation. Beginning with its extension in 1996, funding for Abandoned Infants Assistance has been a part of legislation that reauthorizes CAPTA. Most recently the CAPTA Reauthorization Act of 2010 ( P.L. 111-320 ) extended discretionary funding authority for the program at $45 million for FY2010 and "such sums as may be necessary" for each of FY2011 through FY2015. Congress has not provided funding for this program since FY2015. (See Table 15 .) While noting the program's success, the Obama Administration in its FY2016 budget sought authority to use these program funds on behalf of a broader range of at-risk infants and toddlers. Congress, instead, chose not to provide funding for this program for FY2016. The Senate Appropriations Committee in its report on Labor-HHS-Education appropriations for FY2016 stated the following: The Committee recommendation does not include funding for this program. The budget request proposes significantly changing the focus of this program as part of a reauthorization proposal. The Abandoned Infants Assistance program was created in 1988 as a response to an acute child welfare crisis associated with the crack cocaine and HIV/AIDS epidemics of the 1980s. Specifically, the program funded demonstration projects to prevent the abandonment of infants and young children impacted by substance abuse and HIV. As the budget request discusses, over the last several decades, in part because of these demonstration projects, States have implemented more effective community responses to infants and families in these circumstances, the goal of these demonstration projects. Appendix A. Recent Funding by Program Table A-1 shows the funding amounts appropriated (or obligated) based on the part of the Social Security Act in which they are authorized (Title IV-B or Title IV-E) or their location outside of the Social Security Act (other programs). This mirrors the broad categories included in Table 1 . For more detail on funding for programs for which the amount shown below is a total of multiple activities or program components, see Table 3 and Table 4 (Promoting Safe and Stable Families program); Table 7 (Title IV-E foster care, adoption assistance, and kinship guardianship assistance); Table 9 (Chafee Foster Care Independence Program, including Education and Training Vouchers); Table 11 (Child Abuse Prevention and Treatment Act, or CAPTA, including state grants, discretionary activities, and community-based grants); and Table 13 (Victims of Child Abuse Act, or VCAA, including Children's Advocacy Centers, Court-Appointed Special Advocates, and Child Abuse Training for Judicial Personnel). Appendix B. Child Welfare Programs by Type of Funding Authority and Sequestration Status The Budget Control Act of 2011 (BCA, P.L. 112-25 ) included a combination of measures affecting discretionary and mandatory spending that are designed to reduce the federal deficit by a certain amount. With regard to discretionary spending, the BCA established certain spending caps for FY2012-FY2021. The caps provide limits on the total dollar amount of federal spending Congress may appropriate on a discretionary basis. If those caps are exceeded, automatic spending cuts called sequestration must be applied. The BCA has been amended several times. Most recently the Bipartisan Budget Act of 2015 ( P.L. 114-74 ) increased the level of discretionary spending permitted for both FY2016 and FY2017. The BCA of 2011 also included certain targets for reductions in mandatory spending and provided that if Congress did not achieve deficit reductions through other means, sequestration must be used to achieve those targets. The Bipartisan Budget Act of 2015 ( P.L. 114-74 ) extended the required sequestration of mandatory spending through FY2025. Sequestration Determinations by Fiscal Year For FY2013 only, sequestration was applied to both discretionary and mandatory accounts. For that year, the sequestration percentage determined necessary to bring nonexempt, nondefense discretionary-funded program spending under the statutory spending cap was 5.0%. Separately, to achieve the deficit reduction targets set in the law, sequestration of nonexempt, nondefense mandatory-funded program accounts was 5.1%. For each of FY2014 through FY2017, OMB determined that discretionary appropriations did not exceed the discretionary spending caps for nondefense program. Therefore, sequestration was not required for these discretionary programs. However, sequestration was required for mandatory-funded programs in each of those same years. The OMB issued sequestration orders, effective on the first day (October 1) of each of those fiscal years, which reduced spending for each nonexempt, nondefense mandatory program account by the following amounts: 7.2% for FY2014; 7.3% for FY2015; 6.8% for FY2016; and 6.9% for FY2017. Sequestration Status by Child Welfare Program Table B-1 lists each child welfare program described in this report by its type of funding authority (mandatory or discretionary) and notes whether program funds may be subject to sequestration. If the program is listed as one that may be subject to sequestration, it is referred to as "nonexempt" and is subject to automatic spending cuts in any fiscal year for which OMB determines spending has exceeded the statutory limit. If a program may not be subject to sequestration, it is referred to as "exempt," and automatic spending cuts do not apply to that program in any year. Appendix C. Tribes with an Approved Title IV-E Plan Beginning with FY2010, tribes with a Title IV-E plan approved by HHS may receive direct federal reimbursement for eligible costs related to providing foster care, adoption assistance, and, if they choose, kinship guardianship assistance. As of November 2017, the following 10 tribes/tribal entities had such an approved plan: Port Gamble S'Klallam Tribe (Kingston, WA) Confederated Salish and Kootenai Tribes (Pablo, MT) South Puget Intertribal Planning Agency (Shelton, WA) Keweenaw Bay Indian Community (Baraga, MI) Navajo Nation (Window Rock, AZ) Chickasaw Nation (Ada, OK) Eastern Band of Cherokee Indians (Cherokee, NC) Pascua Yaqui Tribe (Tucson, AZ) Tolowa Dee-ni' Nation (near Smith River, CA) Salt River Pima-Maricopa Indian Community (Scottsdale, AZ) Appendix D. States with Approval to Extend Title IV-E Assistance up to Age 21 Beginning with FY2011, states and any other jurisdiction operating a Title IV-E program were permitted to amend their Title IV-E plans to allow federal assistance (foster care, adoption assistance, or kinship guardianship assistance) to be provided to otherwise eligible youth up to their 19 th , 20 th , or 21 st birthday. To be eligible for this extended Title IV-E assistance, a youth must be in foster care or must have left foster care for adoption or guardianship at age 16 or older. As of April 2017, 29 jurisdictions, including 23 states, the District of Columbia, and 5 tribal entities had received approval to extend Title IV-E assistance to older youth. Indiana extends Title IV-E assistance to a youth's 20 th birthday. All other jurisdictions listed below currently extend Title IV-E assistance to a youth's 21 st birthday. Otherwise eligible youth may continue to receive Title IV-E assistance after their 18 th birthday provided they meet additional eligibility requirements related to participation in education, work, or work preparation (or be documented as unable to participate due to a medical condition). Wisconsin only extends support beyond age 18 if the youth is in high school, and West Virginia, only does so if the youth is in high school or college. All other jurisdictions listed below extend support to older age if youth meets any one or more of the education, work, other participation, or disability criteria. States that choose to extend Title IV-E foster care assistance beyond a youth's 18 th birthday must also provide Title IV-E adoption assistance and Title IV-E kinship guardianship assistance (if the state offers that kind of Title IV-E assistance) to the same older age (and under same eligibility requirements) for any child who was aged 16 or older when he or she left foster care for adoption or guardianship. Appendix E. States with Child Welfare Demonstration (Waiver) Projects Twenty-eight jurisdictions, including 26 states, the District of Columbia, and the Port Gamble S'Klallam Tribe, are currently approved to operate 28 child welfare demonstration projects. These demonstrations are often referred to Title IV-E waiver projects. Five states (California, Florida, Illinois, Indiana, and Ohio) have been operating their waiver projects for roughly a decade or longer. The remaining jurisdictions received approval to operate a waiver project between September 2012 and September 2014, and as of April 2017 have been implementing them for anywhere from a few months to several years. Three states that were approved to implement a Title IV-E waiver project between FY2012 and FY2014 (Idaho, Montana, and Texas) subsequently opted not to implement the project, or ended implementation early. Although the exact reasons varied, competing priorities for the child welfare agency and cost concerns appear to have played a role in each state. Table E-1 below lists each state with a Title IV-E waiver project operating as of April 2017 and lists the focus of the project as well as its start and (scheduled) end date. For additional information on current projects, see the following resources: Detailed Summary Table (updated March 2017) showing by jurisdiction each waiver project's core interventions , target population(s) (e.g., may be limited by age, service need, part of state), key outcomes to be followed, and cost neutrality methodology ; https://www.acf.hhs.gov/sites/default/files/cb/waiver_summary_table_active.pdf .Short report (August 2016) summarizing and categorizing current waiver projects by proposed intervention and evaluation design; includes some discussion of findings from previous waiver projects along with preliminary findings from the current round of projects; http://www.acf.hhs.gov/sites/default/files/cb/cw_waiver_summary2016.pdf . Additional resources, including findings from past projects, are also available from the Children's Bureau waiver site: http://www.acf.hhs.gov/cb/programs/child-welfare-waivers . Appendix F. Jurisdictions with Approval to Provide Title IV-E Kinship Guardianship Assistance As of June 2017, jurisdictions (including 35 of the 50 states, the District of Columbia, and 8 tribal entities) have received HHS approval to provide kinship guardianship assistance under their Title IV-E plans. Appendix G. Adoption and Legal Guardianship Incentive Payments In September 2017, HHS announced incentive payments earned by states for their performance in FY2016. As shown below, states earned more than $55.2 million in incentive payments, a record for the program. However, at the time of its announcement HHS had only about $5.3 million on hand to make these payments. This amount was distributed to states on a prorated basis (so that each state received roughly 10% of the amount it earned for its FY2016 performance). The $5.3 million awarded to states in September 2017 was the total of program funds that remained after HHS completed awarding states $41.1 million for their success at increasing the rate of adoptions and legal guardianships during FY2015. That amount was paid out in September 2016 (using $8.6 million in FY2016 program funding) and in June 2017 (using $32.5 million in FY2017 funding). Table G-1 shows the amount of incentive funding earned in FY2016 by state for each incentive category. The next to the last column shows the total earned for all categories in FY2016 ($55.2 million), and the final column shows the amount of that total that was paid as of September 30, 2016 ($5.3 million). Assuming full-year FY2018 appropriations for Adoption and Legal Guardianship Incentive Payments are made later this year, HHS may provide more of the outstanding incentive payments earned by states for FY2016 performance. However, unless FY2018 funding for the payments exceeds the recent annual appropriations level of $37.9 million, HHS will not be able to pay the full $49.9 million in outstanding payments earned.

Child welfare services are intended to prevent the abuse or neglect of children; ensure that children have safe, permanent homes; and promote the well-being of children and their families. As the U.S. Constitution has been interpreted, states bear the primary authority for ensuring the welfare of children and their families. The federal government has shown long-standing interest in helping states improve their services to children and families and, through the provision of federal support, requires states to meet certain child welfare requirements. For FY2017, an estimated $8.9 billion in federal support was made available for child welfare purposes. FY2018 began on October 1, 2017, but final funding levels for that year have not yet been determined. In the meantime, funding to continue child welfare programs in this new fiscal year has been provided via short-term funding measures, including P.L. 115-56 (through December 8, 2017), P.L. 115-90 (through December 22, 2017), and P.L. 115-96 (through January 19, 2018). Federal support for child welfare activities is provided via multiple programs. The largest share of this federal child welfare funding is provided for support of children in foster care, and for ongoing assistance to children who leave foster care for new permanent families (via adoption or legal kinship guardianship). Federal support for these child welfare purposes is authorized in Title IV-E of the Social Security Act. It is annually appropriated at the level needed to support a specified share of the cost incurred by states in providing foster care, adoption assistance, or kinship guardianship assistance to eligible children. The federal share of that cost was estimated at $7.5 billion in FY2016 and, as of the July 2017 mid-session budget review, was expected to be $7.8 billion in FY2017. Federal funding for all other child welfare activities remained at $1.1 billion in FY2017, which was the same level provided in FY2016. This funding is primarily authorized via Title IV-B of the Social Security Act (for child welfare related services to children and their families), as well as some separate authorizations of funding in Title IV-E of the Social Security Act (related to services for older youth in care and those who "age out" of care and for Adoption and Legal Guardianship Incentive Payments), and in multiple program authorizations included in the Child Abuse Prevention and Treatment Act (CAPTA), Adoption Opportunities, and the Victims of Child Abuse Act. Federal support provided annually for these various child welfare acts and activities is a fixed sum that is determined, for each program, during the yearly discretionary appropriations process or is based on a mandatory dollar amount specified in the program authorizing law. Legislation concerning welfare programs authorized under Title IV-E and Title IV-B is handled in the House Ways and Means and Senate Finance committees; legislation concerning grants and activities authorized by CAPTA and Adoption Opportunities is handled in the House Education and the Workforce and Senate Health, Education, Labor, and Pensions (HELP) committees; legislation concerning the grant programs in the Victims of Child Abuse Act is handled in the House and Senate Judiciary committees. At the federal level, these child welfare programs are primarily administered by the Children's Bureau, which is an agency within the Administration for Children and Families (ACF) at the U.S. Department of Health and Human Services (HHS). Nearly all federal child welfare dollars (97%) were provided to state, tribal, or territorial child welfare agencies (via formula grants or as federal reimbursement for a part of all eligible program costs). The remaining federal child welfare dollars (3%) are provided to a variety of eligible public or private entities, primarily on a competitive basis. This money supports research, evaluation, technical assistance, and demonstration projects to expand knowledge of, and improve, child welfare practice and policy.

CRS_R45106

Introduction Sequestration is the automatic reduction (i.e., cancellation) of certain federal spending, generally by a uniform percentage. The sequester is a budget enforcement tool that Congress established in the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA, also known as the Gramm-Rudman-Hollings Act; P.L. 99-177 ) intended to encourage compromise and action, rather than actually being implemented (also known as triggered ). Generally, this budget enforcement tool has been incorporated into laws to either discourage Congress from violating specific budget objectives or encourage Congress to fulfill specific budget objectives. When Congress breaks these types of rules, either through the enactment of a law or lack thereof, a sequester is triggered and certain federal spending is reduced. Sequestration is of recent interest due to its current use as an enforcement mechanism for three budget enforcement rules created by the Statutory Pay-As-You-Go Act of 2010 (Statutory PAYGO; P.L. 111-139 ) and the Budget Control Act of 2011 (BCA; P.L. 112-25 ). Currently, only the BCA mandatory sequester has been triggered and is in effect. However, the Statutory PAYGO sequester and the BCA discretionary sequester are current law and can be triggered if the budget enforcement rules are broken (and Congress does not take action to change or waive these rules). Medicare, which is a federal program that pays for covered health care services of qualified beneficiaries, is subject to a reduction in federal spending associated with the implementation of these three sequesters, although special rules limit the extent to which it is impacted. This report begins with an overview of budget sequestration and Medicare before discussing how budget sequestration has been implemented across the different parts of the Medicare program. Additionally, this report provides appendixes that include references to additional Congressional Research Service (CRS) resources related to this report and budget terminology definitions, as defined by BBEDCA. Budget Sequestration Under current law, sequestration is a budget enforcement tool that occurs because certain policy goals have not been met. When a sequester is triggered, all applicable budget accounts, unless exempted by law, are reduced by a percentage amount for a fiscal year. The percentage reduction varies between and within budget accounts depending on the categories of funding, as described below, contained within each budget account. After accounting for each category of funding within a budget account, sequestration reductions are spread evenly across all budget account subcomponents referenced in committee reports, budget justifications, and/or Presidential Detailed Budget Estimates – also known as programs, projects or activities. For budget accounts that contain only one category of funding, all sequestrable funds are reduced by the corresponding percentage. For accounts that contain multiple categories of funding, the total amount of each category of sequestrable funds is reduced by its corresponding percentage. The reduced budget resources are usually permanently cancelled. As currently used, a sequester applies to either discretionary or mandatory spending. Discretionary spending is associated with most funds provided by annual appropriations acts. While all discretionary spending is subject to the annual appropriations process, only a portion of mandatory spending is provided in appropriations acts. Mandatory spending is generally provided by permanent laws, such as the Social Security Act, which made indefinite budget authority permanently available for Medicare benefit payments. Some federal programs, such as Medicare, can receive both discretionary and mandatory funding. In the event that a sequester is triggered, the Office of Management and Budget (OMB) is responsible for calculating the across-the-board percentage reductions, and calculates separate percentages for Medicare, nondefense, and defense funding. Due to sequestration rules, which are covered later in this report, mandatory Medicare benefit payments receive a specific percentage reduction different from other types of federal spending. The methodologies used to calculate these percentages and the sequestered amounts are published in a report produced by OMB. Once the President issues a sequestration order, the associated report is made available to the public and transmitted to Congress. Budget Enforcement Rules Currently, there are three budget enforcement rules that can trigger sequestration. Two were established by the BCA and one was established by Statutory PAYGO. The three rules and their corresponding sequesters can be summarized as follows (and are presented in Table 1 ): Budget Control Act The BCA established a bipartisan Joint Select Committee on Deficit Reduction (Joint Committee), which was responsible for developing legislation that would reduce the deficit by at least $1.5 trillion from FY2012 to FY2021. However, the Joint Committee was unable to achieve this goal; therefore, Congress and the President were unable to enact corresponding deficit reduction legislation by a date specified in the law. As a result, two types of spending reductions were automatically triggered. One automatic spending reduction involved the sequestration of certain mandatory spending from FY2013 to FY2021. Through subsequent legislation, including, most recently, the Bipartisan Budget Act of 2018 (BBA 18; P.L. 115-123 ), Congress extended this reduction through FY2027. (This reduction is referred to in this report as the "BCA mandatory sequester".) Additionally, the BCA established statutory limits on discretionary spending for FY2013-FY2021. These discretionary spending limits (discretionary caps) restrict the amount of spending permitted through the annual appropriations process for defense and nondefense programs. Any breach of these discretionary caps results in the sequestration of nonexempt discretionary funding. (This reduction is referred to in this report as the "BCA discretionary sequester".) This was triggered once in FY2013 and can be triggered again if discretionary caps are breached in any fiscal year through FY2021 and Congress does not take action to raise these caps. Most recently, BBA 18 increased the discretionary spending caps for FY2018 and FY2019 so they would not be breached. Statutory PAYGO The Statutory PAYGO Act established a budget enforcement mechanism generally requiring that direct spending and revenue legislation enacted into law not increase the deficit over a 5- and/or 10-year period. If such legislation were to become law, a sequester of certain mandatory spending would be ordered. This budget enforcement rule does not have a sunset date and therefore remains in effect under current law. (This reduction is referred to in this report as "Statutory PAYGO sequester".) Although Congress has passed legislation that has been estimated to increase the deficit since the law went into effect, the Statutory PAYGO sequester has never been triggered due to the fact that Congress has voted to prohibit the effects of specific legislation from being counted under Statutory PAYGO. A recent example of this is the Bipartisan Budget Act of 2018 (BBA 2018; P.L. 115-123 ), which included language to reduce the "scorecards" tallying the total impact of legislation on the deficit to zero. For more information on budget sequestration, see CRS Report R42050, Budget "Sequestration" and Selected Program Exemptions and Special Rules , coordinated by Karen Spar, and CRS Report R42972, Sequestration as a Budget Enforcement Process: Frequently Asked Questions , by Megan S. Lynch. Medicare Overview Medicare, which is a federal program that pays for certain health care services of qualified beneficiaries, is subject to sequestration, although special rules limit the extent to which it is impacted. Due to the varying payment structures of the four parts of the program, sequestration is applied differently across Medicare. Medicare was established in 1965 under Title XVIII of the Social Security Act to provide hospital and supplementary medical insurance to Americans age 65 and older. Over time, the program has been expanded to also include certain disabled persons, including those with end-stage renal disease. In 2017, the program covered an estimated 58 million persons (49 million aged and 9 million disabled). The Congressional Budget Office (CBO) estimates that total Medicare spending will be about $718 billion in FY2018 and will increase to about $1,390 billion in FY2027. Almost all Medicare spending is mandatory spending that is primarily used to cover benefit payments (i.e., payments to health care providers for their services), administration, and the Medicare Integrity Program (MIP). The remaining Medicare outlays are discretionary and used almost entirely for other administrative activities that are described in more detail later in this report. Medicare consists of four distinct parts: 1. Part A (Hospital Insurance, or HI) covers inpatient hospital services, skilled nursing care, hospice care, and some home health services. Most persons aged 65 and older are automatically entitled to premium-free Part A because they or their spouse paid Medicare payroll taxes for at least 40 quarters (10 years) on earnings covered by either the Social Security or the Railroad Retirement systems. Part A services are paid for out of the Hospital Insurance Trust Fund, which is mainly funded by a dedicated 2.9% payroll tax on earnings of current workers, shared equally between employers and workers. 2. Part B (Supplementary Medical Insurance, or SMI) covers a broad range of medical services, including physician services, laboratory services, durable medical equipment, and outpatient hospital services. Enrollment in Part B is optional, but most beneficiaries with Part A also enroll in Part B. Part B benefits are paid for out of the Supplementary Insurance Trust Fund, which is primarily funded through beneficiary premiums and federal general revenues. 3. Part C (Medicare Advantage, or MA) is a private plan option that covers all Parts A and B services, except hospice. Individuals choosing to enroll in Part C must be eligible for Part A and must also enroll in Part B. About one-third of Medicare beneficiaries are enrolled in MA. Part C is funded through both the HI and SMI trust funds. 4. Part D is a private plan option that covers outpatient prescription drug benefits. This portion of the program is optional. About 76% of Medicare beneficiaries are enrolled in Medicare Part D or have coverage through an employer retiree plan subsidized by Medicare. Part D benefits are paid for out of the Supplementary Insurance Trust Fund, which is primarily funded through beneficiary premiums and federal general revenues. For more information on the Medicare program, see CRS Report R40425, Medicare Primer , coordinated by Patricia A. Davis. Beneficiary Costs Beneficiaries are responsible for paying Medicare Parts B and D premiums, as well as other out-of-pocket costs, such as deductibles and coinsurance, for services provided under all parts of the Medicare program. Under Medicare Parts A, B and D, there is no limit on beneficiary out-of-pocket spending, and most beneficiaries have some form of supplemental insurance through private Medigap plans, employer-sponsored retiree plans, or Medicaid to help cover a portion of their Medicare premiums and/or deductibles and coinsurance. Medicare Advantage has limits on out-of-pocket spending. Provider and Plan Payments Under Medicare Parts A and B, the government generally pays providers directly for services on a fee-for-service basis using different prospective payment systems and fee schedules. Under Parts C and D, Medicare pays private insurers a monthly capitated per person amount to provide coverage to enrollees, regardless of the amount of services used. The capitated payments are adjusted to reflect differences in the relative cost of sicker beneficiaries with different risk factors including age, disability, or end-stage renal disease. Health Care Fraud and Abuse Control Program The Health Care Fraud and Abuse Control Program (HCFAC) was established by the Health Insurance Portability and Accountability Act (HIPAA; P.L. 104-191 ) and is responsible for activities that fight health care fraud and waste. HCFAC is funded using both mandatory and discretionary funds and consists of three programs: (1) the HCFAC program, which finances the investigative and enforcement activities undertaken by the Department of Health and Human Services (HHS), the HHS Office of Office of Inspector General, the Department of Justice, and the Federal Bureau of Investigation, (2) Medicaid Oversight, and (3) MIP. Historically, MIP has focused on combating fee-for-service fraud in Medicare Parts A and B. However, increases in private Medicare enrollment—Parts C and D—have expanded program integrity efforts into capitated payment systems as well. While HCFAC is not a part of the Medicare program, MIP is authorized by the same title of the Social Security Act as Medicare and focuses entirely on the program. As a result, this portion of HCFAC is treated as a part of Medicare benefit payments under a sequestration order and would be subject to the Medicare mandatory sequestration percentage limits. Administrative Spending The administration of Medicare is funded through a combination of discretionary and mandatory resources that are subject to reductions under a discretionary or mandatory sequestration order, respectively. Discretionary administration funding includes amounts for payments to contractors to process providers' claims, beneficiary outreach and education, and maintenance of Medicare's information technology infrastructure. Mandatory administration funding includes amounts for quality improvement organizations and Part B premium payments for Qualifying Individuals (QI). Medicare Sequestration Rules Special rules limit the total effect of budget sequestration on Medicare (see Table 1 ). Most notably, BBEDCA, as amended by the BCA, prohibits Medicare benefit payments from being reduced by more than 2% under a BCA mandatory sequestration order. Similarly, Statutory PAYGO prohibits Medicare benefit payments from being reduced by more than 4% under a Statutory PAYGO sequestration order. The cap does not apply to Medicare mandatory and discretionary administrative spending, which is subject to the unrestricted percentage reduction under both BCA and Statutory PAYGO sequestration orders. Under the current mandatory sequestration order triggered by the BCA, the Medicare sequestration percentage is capped at 2%. Therefore, as OMB determines the percentage reductions for each budget category through FY2027, Medicare benefit payments cannot be reduced by more than 2%; as such, another budget category may be subject to a higher percentage reduction in order to achieve the necessary amount of savings. More specifically, if OMB determines that total nonexempt, nondefense mandatory funds need to be reduced by a percentage larger than 2% in order to achieve necessary savings under a BCA sequestration order for a given year, then a 2% reduction would be made to Medicare benefit spending, and the uniform reduction percentage for the remaining non-Medicare benefit, nonexempt, nondefense mandatory programs would be recalculated and increased by an amount to achieve the necessary level of reductions. If the uniform percentage reduction needed to achieve the total amount of savings is less than 2%, then the determined percentage would be applied to all nonexempt, nondefense, mandatory accounts, including Medicare. Of note, if a mandatory sequestration order were triggered by Statutory PAYGO, the process would be the same, but the reduction of payments for Medicare benefits would be capped at 4%. In addition to these percentage caps, BBEDCA also prohibits Statutory PAYGO and BCA mandatory sequestration effects from being included in the determination of annual adjustments to Medicare payment rates established under Title XVIII of the Social Security Act. (See " Reductions in Benefit Spending ".) Finally, certain Medicare programs and activities are explicitly exempted from Statutory PAYGO and BCA sequestration orders. Specifically, Part D low-income subsidies, Part D catastrophic subsidies (reinsurance), and QI premiums cannot be reduced under a mandatory sequestration order. Medicare Sequester Execution Timing Once a sequester is triggered, OMB issues a sequestration order for, at most, one fiscal year, and subsequent orders are reissued for each fiscal year, as necessary. These orders can be issued either before or during the fiscal year in which they apply, depending on the trigger. Reductions in budget resources are to be made during the effective period of a sequestration order; however special rules differentiate when a sequestration order is implemented for benefit payments. As a result, sequestration orders are applied to Medicare benefit payments on a different timeline than other mandatory and discretionary Medicare funds (i.e., Medicare administration and HCFAC). Once OMB issues a sequestration order, Medicare benefit payments are sequestered beginning on the first date of the following month and remain in effect for all services furnished during the following one-year period. In the event that a subsequent sequester order is issued prior to the completion of the first order, the subsequent order begins on the first day after the initial order has been completed. As an example, the first BCA mandatory sequester order (FY2013) was issued on March 1, 2013, and took effect April 1, 2013. It remained in effect through March 31, 2014. The FY2014 order was issued on April 10, 2013, (corrected on May 20, 2013) and was in effect from April 1, 2014, to March 31, 2015. All other sequestrable funding is reduced only during the fiscal year associated with the sequester report. Using the same example, the first BCA mandatory sequester order (FY2013) reduced appropriate administrative spending from March 1, 2013, to September 30, 2013. The second order for FY2014 sequestered funds from October 1, 2013, to September 30, 2014. While OMB uses current law to determine the amount of funds available to be sequestered and corresponding percentage reductions, actual Medicare outlays will not be known until after the end of the fiscal year. Since sequestration orders are issued either before or during the fiscal year in which they are applicable, OMB estimates the total sequestrable budget authority for Medicare, and other accounts with indefinite budget authority, in order to determine necessary sequestration percentages. If Medicare outlays exceed the estimated amount included in a sequestration order for that fiscal year, the additional outlays are sequestered at the established percentage for that fiscal year. If Medicare outlays are determined to be less than the estimated amount, no adjustments are made to the sequestration order. In other words, OMB does not adjust sequestration percentages for any category of budget authority once actuals are realized for accounts with indefinite budget authority. Similarly, OMB does not adjust future orders to account for any previous discrepancies between estimates and actuals. Reductions in Benefit Spending Parts A and B Under Medicare Parts A and B, participating providers, such as hospitals and physicians, are paid by the federal government on a fee-for-service basis for services provided to a beneficiary. According to guidance issued by the Centers for Medicare & Medicaid Services (CMS), any sequestration reductions are to be made to claims after determining coinsurance, deductibles, and any applicable Medicare Secondary Payment adjustments. Therefore, sequestration applies only to the portion of the payment paid to providers by Medicare; the beneficiary cost-sharing amounts and amounts paid by other insurance are not reduced. As an example, if the total allowed payment for a particular service is $100 and the beneficiary has a 20% co-insurance, the beneficiary would be responsible for paying the provider the full $20 in co-insurance. The remaining 80% that is paid by Medicare would be reduced by 2% under the FY2018 sequestration order, or $1.60 in this example, resulting in a total Medicare payment of $78.40. In total, the provider would receive a payment of $98.40. This reduced payment is considered payment in full and the Medicare beneficiary is not expected to pay higher copayments to make up for the reduced Medicare payment. Part A inpatient services are considered to be furnished on the date of the individual's discharge from the inpatient facility. For services paid on a reasonable cost basis, the reduction is to be applied to payments for such services incurred at any time during each cost reporting period during the sequestration period, for the portion of the cost reporting period that occurs during the effective period of the order. For Part B services provided under assignment, the reduced payment is to be considered payment in full and the Medicare beneficiary will not pay higher copayments to make up for the reduced amount. Medicare non-participating providers, which are providers that do not elect to accept Medicare payments on all claims in a given year, are not subject to the same rules. Medicare non-participating providers receive a lower reimbursement rate from Medicare on all services provided and may charge beneficiaries a limited amount more (balance bill charge) than the fee schedule amount on non-assigned claims. In these instances, instead of the Medicare check being sent to the provider, a check that incorporates the 2% reduction is mailed to the patient. The patient must then pay the provider an amount that incorporates the sequestered amount. More specifically, as payment, the beneficiary is responsible for paying the provider the amount listed on the check, any cost sharing, balance bill charges, and the sequestered amounts taken out of the provider check. Annual adjustments to Medicare payment rates are determined without incorporating sequestration. However, the Medicare Payment Advisory Commission does incorporate the effects of sequestration when assessing the adequacy of provider payments. The commission uses these annual assessments to develop payment adjustment recommendations to the HHS Secretary and/or Congress. Part C Under Medicare Advantage, private health plans are paid a per person monthly amount to provide all Medicare-covered benefits, except hospice, to beneficiaries who enroll in their plan. These capitated monthly payments are made to MA plans regardless of how many or how few services beneficiaries actually use. The plan is at risk if costs for all of its enrollees exceed program payments and beneficiary cost sharing; conversely, the plan can generally retain savings if aggregate enrollee costs are less than program payments and cost sharing. With respect to sequestration, reductions are uniformly made to the monthly capitated payments to the private plans administering Medicare Advantage (Medicare Advantage Organizations or MAOs). These fixed payments are determined every year with CMS approval through an annual "bid process" and the amounts can vary depending on the private plan. In general, CMS payments to MAOs are generally comprised of amounts to cover medical costs, administrative expenses, private plan profits, risk adjustments, and plan rebates to beneficiaries. MAOs have discretion to distribute any sequestration cut across these four different components but must still adhere to their legal obligations. Some MAOs have attempted to pass the reduction in their capitation rates onto providers through lower reimbursement rates; however MAOs may be limited in their ability to do so. CMS provided instructions regarding the treatment of contract and non-contract providers that provide services under Part C. Specifically, "whether and how sequestration might affect an MAO's payments to its contracted providers are governed by the terms of the contract between the MAO and the provider." Therefore, in order for MAOs to reduce provider payments by the sequestered amount, specific language within a contract must allow the reduction or the contract would need to be renegotiated. In certain instances, such as when beneficiaries receive emergency out-of-network care, MAOs need to reimburse the non-contracted providers; in such cases, the MAOs are required to pay at least the rate providers would have received if the beneficiaries had been enrolled in original Medicare. However, MAOs have the discretion whether or not to incorporate sequestration cuts into payments to non-contracted providers for those services. Non-contracted providers must accept any payments reduced by the sequestration percentage as payment in full. In addition, regulations in the annual bid process restrict MAO's potential responses to sequestration. Specifically, MAOs are limited to "reasonable" revenue margins and a set Medicare/non-Medicare profit margin discrepancy, among other requirements. Furthermore, MAOs are restricted from allowing sequestration to impact a beneficiary's plan benefits or liabilities, so it becomes difficult for MAOs to pass an entire sequestration cut onto beneficiaries through higher premiums or seek to offset lost revenue by increasing non-Medicare profits. As HHS computes annual adjustments to Medicare payment rates, the Secretary cannot take into account any reductions in payment amounts under sequestration for the Part C growth percentage. In other words, plan payment updates are to be determined as if the reductions under sequestration have not taken place. This results in larger annual adjustments as compared to baselines that incorporate sequestration cuts. Part D Under Medicare Part D, each plan receives a base capitated monthly payment, called a direct subsidy, which is adjusted to incorporate three risk sharing mechanisms (low-income subsidies, individual reinsurance, and risk corridor payments). While each plan receives the same direct subsidy amount for each enrollee regardless of how many benefits an enrollee actually uses, plans receive different risk sharing adjustments in their monthly payments. With respect to sequestration, reductions are uniformly made only to the direct subsidy amounts. Part D risk sharing adjustments are exempt from sequestration and are therefore not reduced. Part D also contains a Retiree Drug Subsidy Program, which pays subsidies to qualified employers and union groups that provide prescription drug insurance to Medicare-eligible, retired workers. Instead of a capitated monthly payment, each sponsor receives a federal subsidy at the end of the year to cover a portion of gross prescription drug costs for each retiree during that year. Under this program, sequestration reductions are applied to the annual subsidy amount. The HHS Secretary is prohibited from taking into account any reductions in payment amounts under sequestration for purposes of computing the Part D annual growth rate. HCFAC As noted, the HCFAC program is not part of Medicare but does receive mandatory and discretionary funds to ensure the programmatic integrity of the Medicare program. Under a BCA sequestration order of mandatory funds, MIP funds are treated as Medicare budget authority and are subject to the 2% sequester limit. HCFAC mandatory funding that does not exclusively address Medicare is reduced by the nondefense mandatory sequester rate, when applicable. Administrative Expenses Under either a mandatory or discretionary sequestration order, administrative spending within nonexempt Medicare and HCFAC programs is reduced by the nondefense rate determined by OMB. See Table 2 for past and current nondefense sequester percentages under the BCA mandatory sequester. Medicare and the BCA Mandatory Sequester Since the first BCA mandatory sequester order issued in FY2013, Medicare benefit payments have been subject to the 2% annual reduction limit established by the BCA. Nondefense mandatory budget authority reductions, which have applied to Medicare administrative spending, have fluctuated between 5.1% and 7.3% through FY2018. In the same sequestration order, Medicare administrative expenses will be sequestered by the nondefense mandatory percentage, 6.6%. The total reduction in Medicare administration budget authority, however, cannot be identified from the data presented in the OMB sequestration report. In total, Medicare benefit payments (not including administration) are estimated to account for 89% of all Medicare and non-Medicare resources available to be sequestered (sequestrable budget authority) under the FY2018 BCA mandatory sequester. Of the funds that are sequestered, Medicare benefit payments are estimated to account for 70% of sequestered funds. Traditionally, Medicare benefit payments comprise the largest single source of sequestered funds in a given mandatory sequestration order. In FY2018, Medicare benefit payments are estimated to account for the largest share of sequestrable budget authority and sequestered funds since the first BCA sequestration order was issued for FY2013, as shown in Figure 1 . Figure 2 shows how the FY2018 BCA sequestration order is estimated to apply to the various parts of Medicare. It is worth noting that although Medicare Part C is sequestered, OMB sequestration orders delineate at the trust fund level and do not distinguish each Medicare part. Part C is funded out of both the Part A and Part B trust funds and is included in these totals. For reference, from FY2016-FY2017, Medicare Advantage, on average, accounted for 32% of all HI Trust Fund benefit payments and 38% of all SMI Trust Fund benefit payments. These ratios could change in FY2018 based on actual spending. CBO estimates that Medicare benefit payment outlays will increase 96% from FY2018 to FY2027 ($708 billion to $1,387 billion), which is the last year of BCA mandatory sequestration. Most of this expected increase is due to an aging population and rising health care costs per person. In addition, most of this increase would be subject to sequestration. When Congress failed to enact legislation that reduced the deficit by at least $1.5 trillion before January 15, 2012, the BCA prompted savings from three sources: (1) the mandatory sequestration of funds, (2) reduced discretionary spending limits, and (3) lower expected interest payments on U.S. government debt, which resulted from the mandatory sequestration of funds and discretionary spending limits. Although Medicare benefit payments traditionally account for a large percentage of mandatory sequestered funds, they account for a much smaller portion of overall BCA savings—generally around 10%—because reduced discretionary spending limits account for a larger share of BCA savings than the mandatory sequester. In FY2018, sequestered Medicare benefit payments will account for approximately 10% of total FY2018 BCA savings, as determined by OMB and shown in Figure 3 . For more information on the Budget Control Act, see CRS Report R41965, The Budget Control Act of 2011 , by Bill Heniff Jr., Elizabeth Rybicki, and Shannon M. Mahan; and CRS Report R42506, The Budget Control Act of 2011 as Amended: Budgetary Effects , by Grant A. Driessen and Marc Labonte. Appendix A. Additional CRS Resources To gain a deeper understanding of the topics covered in this report, readers may also wish to consult the following CRS reports: CRS Report R40425, Medicare Primer , coordinated by Patricia A. Davis CRS Report R43122, Medicare Financial Status: In Brief , by Patricia A. Davis CRS Report R44766, Medicare Advantage (MA)–Proposed Benchmark Update and Other Adjustments for CY2018: In Brief , by Paulette C. Morgan CRS Report R40611, Medicare Part D Prescription Drug Benefit , by Suzanne M. Kirchhoff CRS Report R42506, The Budget Control Act of 2011 as Amended: Budgetary Effects , by Grant A. Driessen and Marc Labonte CRS Report R42050, Budget "Sequestration" and Selected Program Exemptions and Special Rules , coordinated by Karen Spar CRS Report R42972, Sequestration as a Budget Enforcement Process: Frequently Asked Questions , by Megan S. Lynch CRS Report R41157, The Statutory Pay-As-You-Go Act of 2010: Summary and Legislative History , by Bill Heniff Jr. CRS Report R41965, The Budget Control Act of 2011 , by Bill Heniff Jr., Elizabeth Rybicki, and Shannon M. Mahan CRS Report 98-721, Introduction to the Federal Budget Process , coordinated by James V. Saturno Appendix B. Budget Terminology Definitions As defined by Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA; P.L. 99-177 ) and simplified where appropriate: Budget Authority —Authority provided by federal law to enter into financial obligations that will result in immediate or future outlays involving federal government funds. Budgetary Resources —An amount available to enter into new obligations and to liquidate them. Budgetary resources are made up of new budget authority (including direct spending authority provided in existing statute and obligation limitations) and unobligated balances of budget authority provided in previous years. Discretionary Appropriations —Budgetary resources (except to fund direct-spending programs) provided in appropriation Acts. Mandatory Spending —Also known as direct s pending , refers to budget authority that is provided in laws other than appropriation acts, entitlement authority, and the Supplemental Nutrition Assistance Program. Medicare Benefit Payments — All payments for programs and activities under Title XVIII of the Social Security Act. Revised Nonsecurity Category —Discretionary appropriations other than in budget function 050. Revised Security Category —Discretionary appropriations in budget function 050. Sequestration —The cancellation of budgetary resources provided by discretionary appropriations or direct spending laws. For definitions of other budget terms mentioned in this report but not defined by BBEDCA, see U.S. Government Accountability Office, A Glossary of Terms Used in the Federal Budget Process , GAO-05-734SP, September 1, 2005, p. 23, https://www.gao.gov/assets/80/76911.pdf .

Sequestration is the automatic reduction (i.e., cancellation) of certain federal spending, generally by a uniform percentage. The sequester is a budget enforcement tool that was established by Congress in the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA, also known as the Gramm-Rudman-Hollings Act; P.L. 99-177) and was intended to encourage compromise and action, rather than actually being implemented (also known as triggered). Generally, this budget enforcement tool has been incorporated into laws to either discourage Congress from violating specific budget objectives or encourage Congress to fulfill specific budget objectives. When Congress breaks these types of rules, either through the enactment of a law or the lack thereof, a sequester is triggered and certain federal spending is reduced. Sequestration is of recent interest due to its current use as an enforcement mechanism for three budget enforcement rules created by the Statutory Pay-As-You-Go Act of 2010 (Statutory PAYGO; P.L. 111-139) and the Budget Control Act of 2011 (BCA; P.L. 112-25). At present, only the BCA mandatory sequester is triggered. Under the BCA, the sequestration of mandatory spending was originally scheduled to occur in FY2013 through FY2021; however, subsequent legislation, including the Bipartisan Budget Act of 2018 (BBA 18; P.L. 115-123), extended sequestration for mandatory spending through FY2027. The Statutory PAYGO sequester and BCA discretionary sequester are current law and can be triggered if associated budget enforcement rules are broken (and Congress does not take action to change or waive these rules). Medicare is a federal program that pays for certain health care services of qualified beneficiaries. The program is funded using both mandatory and discretionary spending and is impacted by any sequestration order issued in accordance with the aforementioned laws. Medicare is mainly impacted by the sequestration of mandatory funds since Medicare benefit payments are considered mandatory spending. Special sequestration rules limit the extent to which Medicare benefit spending can be reduced in a given fiscal year. This limit varies depending on the type of sequestration order. Under a BCA mandatory sequestration order, Medicare benefit payments and Medicare Integrity Program spending cannot be reduced by more than 2%. Under a Statutory PAYGO sequestration order, Medicare benefit payments and Medicare Program Integrity spending cannot be reduced by more than 4%. These limits do not apply to mandatory administrative Medicare spending under either type of sequestration order. These limits also do not apply to discretionary administrative Medicare spending under a BCA discretionary sequestration order. Generally, Medicare's benefit structure remains unchanged under a mandatory sequestration order and beneficiaries see few direct impacts. However, due to varying plan and provider payment mechanisms among the four parts of the program, sequestration is implemented somewhat differently across the program.

CRS_RS21283

RS21283 -- Homeland Security: Intelligence Support Updated February 23, 2004 Introduction Better intelligence is held by many observers to be a crucial factor in preventing terrorist attacks. Concerns have been expressed that no single agency or office in the federal government prior to September 11, 2001 was in aposition to "connect the dots" between diffuse bits of information that might have provided clues to the plannedattacks. Testimony before the two intelligence committees' Joint Inquiry on the September 11 attacks indicated thatsignificant information in the possession of intelligence and law enforcement agencies was not fully shared withother agencies and that intelligence on potential terrorist threats against the United States was not fully exploited. For many years, the sharing of intelligence and law enforcement information was circumscribed by administrative policies and statutory prohibitions. Beginning in the early 1990s, however, much effort has gone intoimprovinginteragency coordination. (1) After the September 11attacks, a number of statutory obstacles were addressed by the USA-Patriot Act of 2001 and other legislation. (2) Nevertheless, there had been no one place where theanalyticaleffort is centered; the Department of Homeland Security (DHS) was designed to remedy that perceived deficiencyas is the Terrorist Threat Integration Center announced by the President in his January 2003 State of the Unionaddress. Background The Homeland Security Act ( P.L. 107-296 ), signed on November 25, 2002 established within DHS a Directorate for Information Analysis and Infrastructure Protection (IAIP) headed by an Under Secretary for Information Analysisand Infrastructure Protection (appointed by the President by and with the advice and consent of the Senate) with anAssistant Secretary of Information Analysis (appointed by the President). The legislation, especially theInformation Analysis section, seeks to promote close ties between intelligence analysts and those responsible forassessing vulnerabilities of key U.S. infrastructure. The bill envisions an intelligence entity focused on receivingandanalyzing information (3) from other governmentagencies and using it to provide warning of terrorist attacks on the homeland to other federal agencies and to stateand local officials, and for addressing vulnerabilities that terroristscould exploit. DHS is not intended to duplicate the collection effort of intelligence agencies; it will not have its own agents, satellites, or signals intercept sites. Major intelligence agencies are not transferred to the DHS, although some DHSelements, including Customs and the Coast Guard, will continue to collect information that is crucial to analyzingterrorist threats. The legislation establishing DHS envisioned an information analysis element with the responsibility for acquiring and reviewing information from the agencies of the Intelligence Community, from law enforcementagencies, stateand local government agencies, and unclassified publicly available information (known as open source informationor "osint") from books, periodicals, pamphlets, the Internet, media, etc. The legislation is explicit that, "Except asotherwise directed by the President, the Secretary [of DHS] shall have such access as the Secretary considersnecessary to all information, including reports, assessments, analyses, and unevaluated intelligence relating to threatsofterrorism against the United States and to other areas of responsibility assigned by the Secretary, and to allinformation concerning infrastructures or other vulnerabilities of the United States to terrorism, whether or not suchinformation has been analyzed, that may be collected, possessed, or prepared by any agency of the FederalGovernment." (4) DHS analysts are charged with using this information to identify and assess the nature and scope of terrorist threats; producing comprehensive vulnerability assessments of key resources and infrastructure; identifying prioritiesforprotective and support measures by DHS, by other agencies of the federal government, state and local governmentagencies and authorities, the private sector, and other entities. They are to disseminate information to assist in thedeterrence, prevention, preemption of, or response to, terrorist attacks against the U.S. The intelligence element isalso charged with recommending measures necessary for protecting key resources and critical infrastructure incoordination with other federal agencies. DHS is responsible for ensuring that any material received is protected from unauthorized disclosure and handled and used only for the performance of official duties. (This provision addresses a concern that sensitivepersonalinformation made available to DHS analysts could be misused.) As is the case for other federal agencies that handleclassified materials, intelligence information is to be transmitted, retained, and disseminated in accordance withpolicies established under the authority of the Director of Central Intelligence (DCI) to protect intelligence sourcesand methods and similar authorities of the Attorney General concerning sensitive law enforcement information. (5) Concerns about DHS Intelligence Despite enactment of the Homeland Security Act, it is clear that significant concerns persisted within the executive branch about the new department's ability to analyze intelligence and law enforcement information. Mediaaccounts suggest that these concerns center on DHS' status as a new and untested agency and the potential risksinvolved in forwarding "raw" intelligence to the DHS intelligence component. (6) Another concern is that a new entity,rather than long-established intelligence and law enforcement agencies, would be relied on to produce all-sourceintelligence relating to the most serious threats facing the country. DHS Role in the Intelligence Community. The U.S. Intelligence Community consists of the Central Intelligence Agency (CIA) and some 14 other agencies; (7) it providesinformation in various forms to the White House and other federal agencies (as well as to Congress). In addition,law enforcement agencies, such as the Federal Bureau of Investigation (FBI), also collect information for use in thefederal government. (8) Within the IntelligenceCommunity, priorities for collection (and to some extent for analysis) are established by the DCI, (9) based in practice on inter-agency discussions. Being"at the table" when prioritiesare discussed, it is widely believed, helps ensure equitable allocations of limited collection resources. The Homeland Security Act makes the DHS information analysis element a member of the Intelligence Community, thus giving DHS a formal role when intelligence collection and analysis priorities are being addressed. DHSofficials have indicated that the new Department is actively participating in the process of setting priorities. The Question of "Raw" Intelligence. There has been discussion in the media whether DHS will have access to "raw" intelligence or only to finished analytical products, but thesereports may reflect uncertainty regarding the definition of "raw" intelligence. A satellite photograph standing byitself might be considered "raw" data, but it would be useless unless something were known about where and whenitwas taken. Thus, satellite imagery supplied to DHS would under almost any circumstances have to include someanalysis. The same would apply to signals intercepts. Reports from human agents present special challenges. Someassessment of the reliability of the source would have to be provided, but information that would identify a specificindividual is normally retained within a very small circle of intelligence officials so as to reduce the risk ofunauthorized disclosure and harm to the source. The issue of the extent and nature of information forwarded to DHS has proved to be difficult. Reviewing copies of summary reports prepared by existing agencies is seen by some observers as inadequate for the task ofputtingtogether a meaningful picture of terrorist capabilities and intentions and providing timely warning. On the otherhand, there is a need to ensure that DHS would not be inundated with vast quantities of data and that highly sensitiveinformation is not given wider dissemination than absolutely necessary. Analytical Quality. The key test for homeland security will of course be the quality of the analytical product -- whether terrorist groups can be identified and timely warning givenof plans for attacks on the U.S. A critical need exists for trained personnel. The types of information that have tobe analyzed come from disparate sources and require a variety of analytical skills that are not in plentiful supply. Academic institutions prepare significant numbers of linguists and area specialists, but training in the inner workingsof clandestine terrorist entities is less often undertaken. Analysts with law enforcement backgrounds may not beattuned to the foreign environments from which terrorist groups emerge. In July 2003 DHS had only some 53analysts and liaison officials with plans to increase this number to about 150. (10) The Terrorist Threat Integration Center President Bush, in his State of the Union address delivered on January 28, 2003, called for the establishment of a new Terrorist Threat Integration Center (TTIC) that would merge and analyze all threat information in a singlelocation under the direction of the DCI. According to Administration spokesmen, TTIC will eventually encompassCIA's Counterterrorist Center (CTC) and the FBI's Counterterrorism Division, along with elements of otheragencies, including DOD and DHS. TTIC's stated responsibilities are to "integrate terrorist-related informationcollected domestically and abroad" and to provide "terrorist threat assessments for our national leadership." (11) OnMay 1, 2003, TTIC began operations at CIA Headquarters under the leadership of John O. Brennan, who hadpreviously served as the CIA's Deputy Executive Director. By July 2003, it consisted of some 100 analysts andliaisonofficials with plans to increase to 300 by May 2004. (12) TTIC appears to be designed to assume at least some of the functions intended for DHS' information analysis division. Representative Cox, chairman of the Select Committee on Homeland Security, has welcomed theestablishment of TTIC, while noting that "The establishment of the Center in no way reduces the statutoryobligations of the Department [of Homeland Security] to build its own analytic capability. (13) " Making the DCI responsiblefor TTIC will facilitate its ability to use highly sensitive classified information and TTIC can expand upon therelationships that have evolved in the CTC that was established in CIA's Operations Directorate in the mid-1980s. According to testimony by Administration officials to the Senate Government Affairs Committee on February 26,2003, TTIC will in effect function as an information analysis center for DHS and DHS will require a smallernumber of analysts with less extensive responsibilities. Subsequent Administration testimony indicates that DHSwill receive much of the same intelligence data from other agencies and will undertake analysis. A key distinctionisthat DHS is not responsible for information relating to threats to U.S. interests overseas. (14) In FY2004, funds were appropriated for 206 intelligence analysts in IAIP;the Administration requested 225 for FY2005. Some observers express concern that the DCI's role in the TTIC -- responsibility for the analysis of domestically collected information and for maintaining "an up-to-date database of known and suspected terrorists that will beaccessible to federal and non-federal officials and entities," (15) -- may run counter to the statutory provision that excludes the CIA from "law enforcement orinternal security functions." (16) There are alsoquestions abouttransferring the FBI's Counterterrorism Division to the DCI. Some express concern about how the TTIC under theDCI will coordinate with state and local officials and with private industry as contemplated in provisions of theHouse-passed version of the FY2004 intelligence authorization bill ( H.R. 2417 ). The relationship between DHS and TTIC is also a continuing concern to Members of Congress. Some may consider modifications of the Homeland Security Act that could affect the analytical efforts of DHS. (17) Section 359 of theIntelligence Authorization Act for FY2004 ( P.L. 108-177 ) requires that the President report on the operations ofIAIP and TTIC by May 1, 2004. The report, which is to be unclassified (with the option of a classified annex), asksfor a delineation of the responsibilities of IAIP and TTIC and an assessment of whether areas of overlap, if any,"represent an inefficient utilization of resources." The President is asked to "explain the basis for the establishmentand operation of the Center [TTIC] as a 'joint venture' of participating agencies rather than as an element of theDirectorate [IAIP]...." The report is also to assess the "practical impact, if any, of the operations of the Center[TTIC]on individual liberties and privacy." Conclusion Legislation creating a homeland security department recognized the crucial importance of intelligence. It proposed an analytical office within DHS that would draw upon the information gathering resources of othergovernmentagencies and of the private sector. It envisioned the DHS information analysis entity working closely with otherDHS offices, other federal agencies, state and local officials, and the private sector to devise strategies to protectU.S.vulnerabilities and to provide warning of specific attacks. The Administration appears to prefer a modification to the approach originally envisioned in the legislation that created DHS. TTIC, under the direction of the DCI, will provide the integrative analytical effort that the draftersofhomeland security legislation and others in Congress have felt to be essential in light of breakdowns incommunication that occurred prior to September 11, 2001. Whether TTIC is consistent with the intent of Congressin passingthe Homeland Security Act and whether it is ultimately the best place for the integrative effort is current a matterof discussion in Congress. Regardless of where the integrative effort is ultimately located, the task will remainfundamentally the same. Pulling together vast amounts of data from a wide variety of sources concerning terroristgroups, analyzing them, and reporting threat warnings in time to prevent attacks is and will remain a dauntingchallenge.

Legislation establishing a Department of Homeland Security (DHS) (P.L. 107-296) included provisions for an information analysis element within the new department. It did not transferto DHS existing government intelligence and law enforcement agencies but envisioned an analytical office utilizingthe products of other agencies -- both unevaluated information and finished reports -- to provide warning ofterrorist attacks, assessments of vulnerability, and recommendations for remedial actions at federal, state, and locallevels, and by the private sector. In January 2003, the Administration announced its intention to establish a newTerrorist Threat Integration Center (TTIC) to undertake many of the tasks envisioned for the DHS informationalanalysis element, known as Information Analysis and Infrastructure Protection (IAIP), but some Members ofCongress argue that TTIC cannot be a substitute for a DHS analytical effort. This report examines differentapproaches to improving the information analysis function and the sharing of information among federal agencies.It willbe updated as circumstances warrant.

CRS_R43236

Introduction This report provides a status update on FY2014 appropriations actions for accounts traditionally funded in the appropriations bill for the Departments of Labor, Health and Human Services, and Education, and Related Agencies (L-HHS-ED). This bill provides discretionary and mandatory appropriations to three federal departments: the Department of Labor (DOL), the Department of Health and Human Services (HHS), and the Department of Education (ED). In addition, the bill provides annual appropriations for more than a dozen related agencies, including the Social Security Administration (SSA). Discretionary funds represent less than one-quarter of the total funds appropriated in the L-HHS-ED bill. Nevertheless, the L-HHS-ED bill is typically the largest single source of discretionary funds for domestic non-defense federal programs among the various appropriations bills (the Department of Defense bill is the largest source of discretionary funds among all federal programs). The bulk of this report is focused on discretionary appropriations because these funds receive the most attention during the appropriations process. The L-HHS-ED bill typically is one of the more controversial of the regular appropriations bills because of the size of its funding total and the scope of its programs, as well as various related policy issues addressed in the bill, such as restrictions on the use of federal funds for abortion and for research on human embryos and stem cells. See the Key Policy Staff at the end of this report for information on which analysts to contact at the Congressional Research Service with questions on specific agencies and programs funded in the L-HHS-ED bill. Report Roadmap and Useful Terminology This report is divided into several sections. The current section provides an explanation of the scope of the L-HHS-ED bill (and hence, the scope of this report), as well as an introduction to important terminology and concepts that carry throughout the report. Next is a series of sections describing major congressional actions on FY2014 appropriations and (for context) a review of the conclusion of the FY2013 appropriations process. The following section provides a high level summary and analysis of proposed and enacted mandatory and discretionary appropriations for FY2014, compared to FY2013 pre- and post-sequester funding levels. The body of the report concludes with overview sections for each of the major components of the bill: the Department of Labor, the Department of Health and Human Services, the Department of Education, and Related Agencies. These sections provide selected highlights of the FY2014 omnibus, compared to proposed appropriations in the Senate committee-reported bill ( S. 1284 ), the FY2014 President's request, and final FY2013 (pre- and post-sequester). Finally, an Appendix to the report provides a summary of budget enforcement activities. This includes a brief description of the Budget Control Act of 2011 (BCA), a discussion of sequestration in FY2013 and FY2014, and an overview of other budget enforcement issues, including congressional work on an FY2014 budget resolution and 302(b) allocations (i.e., budget enforcement caps). Scope of the Report This report is focused strictly on appropriations to agencies and accounts that are subject to the jurisdiction of the Labor, HHS, Education, and Related Agencies Subcommittees of the House and the Senate Appropriations Committees (i.e., accounts traditionally funded via the L-HHS-ED bill). Department "totals" provided in this report do not include funding for accounts or agencies that are traditionally funded by appropriations bills under the jurisdiction of other subcommittees. The L-HHS-ED bill provides appropriations for the following federal departments and agencies: the Department of Labor; the majority of the Department of Health and Human Services, except for the Food and Drug Administration (provided in the Agriculture appropriations bill), the Indian Health Service (provided in the Interior-Environment appropriations bill), and the Agency for Toxic Substances and Disease Registry (also funded through the Interior-Environment appropriations bill); the Department of Education; and more than a dozen related agencies, including the Social Security Administration, the Corporation for National and Community Service, the Corporation for Public Broadcasting, the Institute of Museum and Library Services, the National Labor Relations Board, and the Railroad Retirement Board. Note also that funding totals displayed in this report do not reflect amounts provided outside of the regular appropriations process. Certain direct spending programs, such as Old-Age, Survivors, and Disability Insurance and parts of Medicare, receive funding directly from their authorizing statutes; such funds are not reflected in the totals provided in this report because they are not subject to the regular appropriations process (see related discussion in the " Important Budget Concepts " section). Important Budget Concepts Mandatory vs. Discretionary Appropriations1 The L-HHS-ED bill includes both discretionary and mandatory appropriations. While all discretionary spending is subject to the annual appropriations process, only a portion of all mandatory spending is provided in appropriations measures. Mandatory programs funded through the annual appropriations process are commonly referred to as appropriated entitlements . In general, appropriators have little control over the amounts provided for appropriated entitlements; rather, the authorizing statute establishes the program parameters (e.g., eligibility rules, benefit levels) that entitle certain recipients to payments. If Congress does not appropriate the money necessary to meet these commitments, entitled recipients (e.g., individuals, states, or other entities) may have legal recourse. Most mandatory spending is not provided through the annual appropriations process, but rather through direct spending budget authority provided by the program's authorizing statute (e.g., Old-Age, Survivors, and Disability Insurance). The funding amounts in this report do not include direct spending budget authority provided outside of the appropriations process. Instead, the amounts in this report reflect only those funds, discretionary and mandatory, that are provided through appropriations bills. Note that, as displayed in this report, mandatory amounts for the FY2014 President's request reflect current law (or current services) estimates as reported in S.Rept. 113-71 ; they do not include any of the Administration's proposed changes to a program's authorizing statute that might affect total spending. (In general, such proposals are excluded from this report, as they typically require authorizing legislation.) Note also that the report focuses most closely on discretionary funding. This is because discretionary funding receives the bulk of attention during the appropriations process. (As noted earlier, although the L-HHS-ED bill includes more mandatory funding than discretionary funding, the appropriators generally have less flexibility in adjusting mandatory funding levels than discretionary funding levels.) Total Budget Authority Provided in the Bill vs. Total Budget Authority Available in the Fiscal Year Budget authority is the amount of money Congress allows a federal agency to commit or spend. Appropriations bills may include budget authority that becomes available in the current fiscal year, in future fiscal years, or some combination. Amounts that become available in future fiscal years are typically referred to as advance appropriations . Unless otherwise specified, appropriations levels displayed in this report refer to the total amount of budget authority provided in an appropriations bill (i.e., "total in the bill"), regardless of the year in which the funding becomes available. In some cases, the report breaks out "current year" appropriations (i.e., the amount of budget authority available for obligation in a given fiscal year , regardless of the year in which it was first appropriated). As the annual appropriations process unfolds, current year appropriations plus any additional adjustments for congressional scorekeeping are measured against 302(b) allocation ceilings (budget enforcement caps for appropriations subcommittees that traditionally emerge following the budget resolution process). Unless otherwise specified, appropriations levels displayed in this report do not reflect additional scorekeeping adjustments , which are made by the Congressional Budget Office (CBO) to reflect conventions and special instructions of Congress. Status of FY2014 Appropriations Table 1 provides a timeline of major legislative action toward full-year FY2014 L-HHS-ED appropriations for FY2014. The remainder of this section provides additional detail on these and other steps toward full-year L-HHS-ED appropriations. FY2014 Omnibus Appropriations On January 17, 2014, President Obama signed into law the Consolidated Appropriations Act, 2014 ( P.L. 113-76 ), providing omnibus appropriations for FY2014 (see Division H for L-HHS-ED). This law provided $164 billion in discretionary funding for L-HHS-ED, which is about 4% more than the FY2013 post-sequester funding level ($157 billion) and about 3% less than the FY2014 President's Budget request ($171 billion). In addition, the FY2014 omnibus provided an estimated $612 billion in mandatory L-HHS-ED funding, for a total of $776 billion for L-HHS-ED as a whole. (See Figure 1 for the breakdown of discretionary and mandatory L-HHS-ED appropriations in P.L. 113-76 .) The FY2014 omnibus followed two government-wide continuing resolutions (CRs), which had provided temporary funding earlier in the fiscal year ( P.L. 113-46 and P.L. 113-73 ). However, no government-wide CR was in place at the beginning of the fiscal year (October 1), resulting in a funding gap and government shutdown for affected projects and activities until the first government-wide CR for FY2014 was enacted (more on this below). FY2014 Funding Gap and Continuing Resolutions FY2014 appropriations were not enacted prior to the start of the fiscal year on October 1, 2013. This resulted in a funding gap and government shutdown that lasted until a short-term CR was enacted on October 17, 2013 ( P.L. 113-46 ). That CR provided government-wide funding through January 15, 2014. With limited exceptions, the CR generally funded discretionary programs (including those in the L-HHS-ED bill) at their FY2013 levels, post-rescission and post-sequestration. A second FY2014 CR was enacted on January 15 ( P.L. 113-73 ). This CR maintained temporary, government-wide funding until the omnibus bill was signed by the President on January 17 ( P.L. 113-76 ). Between October 2 and October 15, prior to the resolution of the FY2014 funding gap, action on appropriations was generally limited to a number of narrow CRs to provide funding for certain programs or classes of individuals, including several components of the L-HHS-ED bill (e.g., H.J.Res. 73 would have provided funding for the National Institutes of Health, H.J.Res. 83 would have provided funding for Impact Aid, and H.J.Res. 84 would have provided funding for Head Start). However, none of the L-HHS-ED-related CRs were enacted into law. In the absence of appropriations, federal agencies generally implemented contingency plans for staffing and program operations during this 16-day funding gap. Congressional Actions on a Stand-Alone L-HHS-ED Bill FY2014 Action in the Senate On July 11, 2013, the Senate Committee on Appropriations reported a bill that would have provided full-year FY2014 L-HHS-ED appropriations ( S. 1284 , S.Rept. 113-71 ). Prior to this, on July 9, 2013, the L-HHS-ED Subcommittee of the Senate Committee on Appropriations had approved a draft bill for full committee consideration. As reported by the full committee, S. 1284 would have provided $171 billion in discretionary funding for L-HHS-ED. This is about 9% more than the FY2013 post-sequester funding level and about 1% more than the FY2014 President's request. In addition, the Senate committee bill would have provided an estimated $613 billion in mandatory funding, for a combined total of nearly $783 billion for L-HHS-ED as a whole. FY2014 Action in the House The House did not take action on a stand-alone FY2014 L-HHS-ED appropriations bill. FY2014 President's Budget Request On April 10, 2013, the Obama Administration released the FY2014 President's Budget. The President requested $170 billion in discretionary funding for accounts funded by the L-HHS-ED bill (+8% from FY2013 post-sequester levels). In addition, the President's Budget requested roughly $612 billion in annually appropriated mandatory funding, for a total of roughly $782 billion (+4% from FY2013 post-sequester levels) for the L-HHS-ED bill as a whole. Conclusion of the FY2013 Appropriations Process On March 26, 2013, President Obama signed into law the Consolidated and Further Continuing Appropriations Act, 2013 ( P.L. 113-6 ). This law funded five of the 12 regular appropriations bills (including L-HHS-ED) via a full-year CR in Division F. With limited exceptions, the full-year CR generally funded discretionary L-HHS-ED programs at their FY2012 levels, minus an across-the-board rescission of 0.2% per Section 3004, as implemented by the Office of Management and Budget (OMB). This is a lower level of funding than had been provided by an earlier six-month CR for FY2013 ( P.L. 112-175 ), which generally funded discretionary L-HHS-ED programs at FY2012 rates, plus. 0.612%. When taking into account the 0.2% across-the-board rescission required by Section 3004, as implemented by OMB, the final FY2013 CR provided roughly $164 billion in discretionary funding for accounts traditionally funded by the L-HHS-ED bill. In addition, the law provided an estimated $592 billion in mandatory funding for L-HHS-ED accounts, for a total of roughly $757 billion. These FY2013 estimates are based on data in the committee report ( S.Rept. 113-71 ) accompanying the FY2014 Senate committee bill ( S. 1284 ) and do not account for the FY2013 sequester ordered by President Obama on March 1, 2013. Where possible, this report breaks out FY2013 "operating levels" separately from the pre-sequester amounts provided by the full-year FY2013 CR. In this report, operating levels are generally based on agency operating or expenditure plans for FY2013 (or FY2013 levels displayed in FY2014 President's Budget materials). For agencies funded in this bill, operating plans typically take into account the amounts provided in the FY2013 full-year CR (including, as appropriate, the 0.2% across-the-board rescission), reductions required by the FY2013 sequester, and transfers or reprogramming of funds across or within budget accounts pursuant to executive authorities. For more information on the FY2013 sequester, see related discussion in the Appendix to this report. Note that in addition to amounts provided by P.L. 113-6 , L-HHS-ED programs and activities received a total of $827 million in supplemental funding in FY2013 (pre-sequester). These funds were appropriated by the Disaster Relief Appropriations Act, 2013 ( P.L. 113-2 ) in response to the effects of Hurricane Sandy. The bulk of the L-HHS-ED disaster funding was directed to HHS for the Public Health and Social Services Emergency Fund, the Social Services Block Grant, and the Head Start program. FY2013 totals shown in this report do not include these supplemental funds. Summary of FY2014 L-HHS-ED Appropriations Table 2 displays the total amount of FY2014 discretionary and mandatory L-HHS-ED funding provided or proposed, by title, compared to comparable pre- and post-sequester FY2013 funding levels. The amounts shown in this table reflect total budget authority provided in the bill (i.e., all funds appropriated in the current bill, regardless of the fiscal year in which the funds become available), not total budget authority available for the current fiscal year. (For a comparable table showing current year budget authority, see Table A-2 in the Appendix to this report.) When taking into account both mandatory and discretionary funding, HHS received roughly 80% of total L-HHS-ED appropriations in FY2013 and FY2014 (see Figure 2 for the bill composition in FY2014). This is largely due to the sizable amount of mandatory funds included in the HHS appropriation, the majority of which is for Medicaid grants to states and payments to health care trust funds. After HHS, the Department of Education and Related Agencies represent the next-largest shares of total L-HHS-ED funding, accounting for about 9% apiece in FY2013 and the FY2014 omnibus. The majority of appropriations for ED are discretionary, while the bulk of funding for the Related Agencies goes toward mandatory payments and administrative costs of the Supplemental Security Income program at the Social Security Administration. Finally, the Department of Labor accounts for the smallest share of total L-HHS-ED funds: 2% in FY2013 and the FY2014 omnibus. When looking only at discretionary appropriations, however, the overall composition of L-HHS-ED funding is noticeably different (see Figure 2 ). HHS accounts for a smaller share of discretionary appropriations (43% in FY2013 and the FY2014 omnibus), while ED accounts for a larger share (41% in FY2013 and the FY2014 omnibus). Together, these two departments represent the majority (84%) of discretionary L-HHS-ED appropriations in FY2013 and FY2014. Meanwhile, the Department of Labor and Related Agencies combine to account for a roughly even split of the remaining 16% of discretionary L-HHS-ED funds in FY2013 and FY2014. Department of Labor (DOL) Note that all figures in this section are based on regular L-HHS-ED appropriations only; they do not include funds provided outside of the annual appropriations process (e.g., direct appropriations for Unemployment Insurance benefits payments). All amounts in this section are rounded to the nearest million or billion (as labeled). The dollar changes and percent changes discussed in the text are based on unrounded amounts. About DOL DOL is a federal department comprised of multiple entities that provide services related to employment and training, worker protection, income security, and contract enforcement. Annual L-HHS-ED appropriations laws direct funding to all DOL entities (see box for all entities supported by the L-HHS-ED bill). The DOL entities fall primarily into two main functional areas—workforce development and worker protection. First, there are several DOL entities that administer workforce employment and training programs, such as the Workforce Investment Act (WIA) state formula grant programs, Job Corps, and the Employment Service, that provide direct funding for employment activities or administration of income security programs (e.g., for the Unemployment Insurance benefits program). Also included in this area is the Veterans' Employment and Training Service (VETS), which provides employment services specifically for the veteran population. Second, there are several agencies that provide various worker protection services. For example, the Occupational Safety and Health Administration (OSHA), the Mine Safety and Health Administration (MSHA), and the Wage and Hour Division provide different types of regulation and oversight of working conditions. DOL entities focused on worker protection provide services to ensure worker safety, adherence to wage and overtime laws, and contract compliance, among other duties. In addition to these two main functional areas, the DOL's Bureau of Labor Statistics (BLS) collects data and provides analysis on the labor market and related labor issues. FY2014 DOL Appropriations Overview The FY2014 omnibus provided roughly $14.18 billion in combined mandatory and discretionary funding for DOL. This is about $703 million (+5.2%) more than the FY2013 post-sequester funding level and $457 million (-3.1%) less than the FY2014 request. (See Table 3 .) Of the total provided for DOL in the FY2014 omnibus, roughly $12.04 billion (85%) is discretionary. This amount is $195 million (+1.6%) more than the post-sequester FY2013 discretionary funding level and $457 million (-3.7%) less than the discretionary total requested in the FY2014 President's Budget. Selected DOL Highlights from FY2014 Appropriations Action The following are some DOL highlights from the FY2014 omnibus compared to comparable FY2013 funding levels and proposed funding levels from the FY2014 President's Budget. Employment and Training Administration (ETA) Overall, the law provided $4.8 billion for programs authorized under Title I of the Workforce Investment Act (WIA), which is $202 million more than the post-sequester FY2013 funding level and $115 million less than the Administration's FY2014 request. The FY2014 omnibus also changed a provision started in the FY2011 appropriations law, which limits the Governors' reserve of WIA state formula grants to 5% of the total received from the three state formula grants—Adult, Youth, and Dislocated Workers. The statutory limit is 15%, but the FY2011 appropriations law reduced this to 5% and the FY2012 and FY2013 appropriations laws maintained the 5% limitation. The FY2014 omnibus increased this reserve to 8.75% of the WIA state formula grant funds. The law also altered the manner in which program evaluation is funded. Rather than providing a specific appropriation of funds for the purpose of evaluation, the bill allowed the Secretary of Labor to reserve up to 0.5% of each appropriation made available in certain accounts for the purpose of program evaluation. Finally, the law provided the Community Service Employment for Older Americans (CSEOA) Program with $434 million. The law maintained DOL administration of CSEOA, rejecting a proposal from the FY2014 President's Budget to transfer administration of the program to HHS. Veterans Employment and Training (VETS) The law specified funding levels for particular activities within the Veterans' Employment and Training Service (VETS), as opposed to past practice of not specifying amounts for individual activities. In addition, the enacted bill provided authority to the Secretary to reallocate funds within VETS, not to exceed 3% of the appropriation from which the reallocation is made. Bureau of Labor Statistics (BLS) The joint explanatory statement accompanying the law indicated that the law provides funding necessary to ensure that data collection under the National Longitudinal Surveys of Labor Market Experience (NLS) occurs not less than biennially. In addition, the joint explanatory statement encouraged BLS to add an annual supplement to the Current Population Survey to include contingent work and alternative work arrangements. Department of Health and Human Services (HHS) Note that all figures in this section are based on regular L-HHS-ED appropriations only; they do not include funds for HHS agencies provided through other appropriations bills (e.g., funding for the Food and Drug Administration) or outside of the annual appropriations process (e.g., direct appropriations for Medicare or pre-appropriated mandatory funds provided by authorizing laws, such as the Patient Protection and Affordable Care Act [ACA, P.L. 111-148]). All amounts in this section are rounded to the nearest million or billion (as labeled). The dollar changes and percent changes discussed in the text are based on unrounded amounts. About HHS HHS is a sprawling federal department comprised of multiple agencies working to enhance the health and well-being of Americans. Annual L-HHS-ED appropriations laws direct funding to most (but not all) HHS agencies (see box for all agencies supported by the L-HHS-ED bill). For instance, the L-HHS-ED bill directs funding to five Public Health Service (PHS) agencies: HRSA, CDC, NIH, SAMHSA, and AHRQ. These public health agencies support diverse missions, ranging from the provision of health care services and supports (e.g., HRSA, SAMHSA), to the advancement of health care quality and medical research (e.g., AHRQ, NIH), to the prevention and control of infectious and chronic disease (e.g., CDC). In addition, the L-HHS-ED bill provides funding for annually appropriated components of CMS, which is the HHS agency responsible for the administration of Medicare, Medicaid, and the State Children's Health Insurance Program (CHIP), and consumer protections and private health insurance provisions of the ACA. The L-HHS-ED bill also provides funding for two HHS agencies focused primarily on the provision of social services: ACF and ACL. The mission of ACF is to promote the economic and social well-being of vulnerable children, youth, families, and communities. Meanwhile, ACL was formed with a goal of increasing access to community supports for older Americans and people with disabilities. Notably, ACL is a relatively new agency within HHS—it was established in April 2012 and brings together the Administration on Aging, the Office of Disability, and the Administration on Developmental Disabilities (renamed the Administration on Intellectual and Developmental Disabilities) into one agency. Finally, the L-HHS-ED bill also provides funding for the HHS Office of the Secretary, which encompasses a broad array of management, research, oversight, and emergency preparedness functions in support of the entire department. FY2014 HHS Appropriations Overview The FY2014 omnibus provided roughly $621 billion in combined mandatory and discretionary funding for HHS. This is about $22 million (+3.6%) more than the FY2013 post-sequester funding level and $2 million (-0.3%) less than the FY2014 request. (See Table 5 .) Of the total provided for HHS in the FY2014 omnibus, roughly $70 billion (11%) is discretionary. This is $4 million (+6.1%) more than the post-sequester FY2013 discretionary funding level and $2 million (-2.9%) less than the discretionary amount requested in the FY2014 President's Budget. Annual HHS appropriations are dominated by mandatory funding, the majority of which goes to CMS to provide Medicaid benefits and payments to health care trust funds. When taking into account both mandatory and discretionary funding, CMS accounted for roughly 87% of all HHS appropriations in FY2013 and FY2014. NIH and ACF account for the next largest shares of total HHS appropriations, receiving 5% apiece of total HHS appropriations in FY2013 and FY2014. By contrast, when looking exclusively at discretionary appropriations, CMS constituted only 6% of discretionary HHS appropriations in FY2013 and FY2014. Instead, the bulk of discretionary appropriations go toward the PHS agencies, which combined to account for over 60% of discretionary HHS appropriations in FY2013 and FY2014. NIH typically receives the largest share of all discretionary funding among HHS agencies (over 40% in FY2013 and FY2014), with ACF accounting for the second-largest share of all discretionary appropriations (24% in FY2013 and 25% in FY2014). See Figure 3 for an agency-level breakdown of HHS appropriations (combined mandatory and discretionary) in the FY2014 omnibus. Selected HHS Highlights from FY2014 Appropriations Actions This section discusses several important aspects of discretionary HHS appropriations. First, it provides an introduction to two special funding mechanisms included in the public health budget, the Public Health Service Evaluation Set-Aside and the Prevention and Public Health Fund. Next, it reviews a limited selection of FY2014 discretionary funding highlights across HHS. Finally, the section concludes with a brief overview of significant provisions from annual HHS appropriations laws that restrict spending in certain controversial areas, such as abortion and stem cell research. Public Health Service Evaluation Tap The Public Health Service (PHS) Evaluation Set-Aside, also known as the PHS Evaluation Tap, is a unique feature of HHS appropriations. The Evaluation Tap, which is authorized by Section 241 of the PHS Act, allows the Secretary of HHS, with the approval of appropriators, to redistribute a portion of eligible PHS agency appropriations across HHS for program evaluation purposes. The PHS Act limits the set-aside to 1% of eligible program appropriations. However, in recent years, L-HHS-ED appropriations laws have established a higher maximum percentage for the set-aside and have distributed specific amounts of "tap" funding to selected HHS programs. The tap provides more than a dozen HHS programs with funding beyond their regular appropriations and, in some cases, the tap may be the sole source of funding for a program or activity. The FY2014 omnibus maintained the set-aside level at 2.5% of eligible appropriations, the same percentage as FY2013. The omnibus rejected the FY2014 President's Budget proposal to increase the set-aside to 3.0%. Prevention and Public Health Fund21 The Patient Protection and Affordable Care Act (ACA) authorized and directly appropriated funding for three multi-billion dollar trust funds to support programs and activities within the PHS agencies. One of these, the Prevention and Public Health Fund (PPHF, ACA Section 4002, as amended), is intended to provide support each year to prevention, wellness, and related public health programs funded through HHS accounts. For FY2014, the ACA directly appropriated $1.5 billion in mandatory funds to the PPHF. However, Congress subsequently passed the Middle Class Tax Relief and Job Creation Act of 2012, which reduced ACA's annual appropriations to the PPHF over the period FY2013-FY2021 by a total of $6.25 billion. This reduced the FY2014 PPHF appropriation to $1 billion. PPHF funds are intended to supplement, sometimes quite substantially, the funding that selected programs receive through regular appropriations, as well as to fund new programs, particularly programs newly authorized in ACA. Congress may direct the Secretary to allocate PPHF funds to specific accounts. Otherwise, PPHF funds become available to the Secretary on October 1 of each year, for allocation as the Secretary decides. The FY2014 President's Budget included the Administration's proposed distribution of PPHF funds. The Joint Explanatory Statement accompanying the FY2014 omnibus recommended PPHF allocations that would, similar to prior years, distribute most of the funds to CDC, including $160 million for Immunization and Respiratory Diseases and $446 million for Chronic Disease Prevention and Health Promotion. HHS Highlights by Agency The discussion below reviews a limited selection of FY2014 discretionary funding highlights for programs supported by the HHS agencies funded in this bill. The discussion is largely based on the FY2014 omnibus, compared to FY2013 post-sequester funding levels and proposed funding levels from the FY2014 President's Budget. HRSA The FY2014 omnibus provided $6.1 billion in discretionary funding for HRSA. This amount is $200 million (+3.4%) more than the FY2013 post-sequester funding level and $39 million (+0.7%) more than the FY2014 President's request. The increases provided in the omnibus generally affected most HRSA programs, with Health Professions (Title VII) programs receiving the largest proportional increase (12% more than post-sequester FY2013 levels). The omnibus enacted the FY2014 President's Budget proposal to transfer administration of the Health Education Assistance Loan (HEAL) program from HRSA to the Department of Education. However, the omnibus rejected several President's Budget proposals to eliminate discretionary appropriations for three programs—Heritable Disorders, Poison Control Centers, and Universal Newborn Hearing Screening—and to fund these programs exclusively with PPHF transfers at or near FY2013 pre-sequester levels. Instead, the omnibus provided discretionary funding for these programs at or slightly above FY2013 post-sequester levels. The omnibus did not fund the Pediatric Loan Repayment program, which was authorized in the ACA but has not yet been funded; both the President's Budget and Senate committee-reported bill proposed funding this program at $5 million. Consistent with recent practice, the FY2014 omnibus provided no funding for the National Health Service Corps (NHSC). The NHSC has not received discretionary appropriations in the Labor-HHS-ED bill since FY2011. Instead, the NHSC has been supported with funds that were authorized and directly appropriated by the ACA. CDC The FY2014 omnibus provided $5.8 billion in discretionary funding for CDC. This amount is $370 million (+6.8%) more than the FY2013 post-sequester funding level and $591 million (+11.3%) more than the FY2014 President's request. The omnibus increased discretionary budget authority for many programs including Environmental Health (+43.7% from post-sequester levels); Emerging and Zoonotic Infectious Diseases (+16.4% from post-sequester levels); Global Health (+16.2% from post-sequester levels); and Injury Prevention and Control (+9.0% from post-sequester levels). The omnibus called for an increase in PPHF transfers to Chronic Disease and Health Promotion programs (+91% from FY2013) sufficient to more than make up for the decrease in discretionary appropriations (-3.8% from post-sequester levels). In FY2014, a share of the funds appropriated for CDC-wide activities (roughly $380 million) will support business services and implementation of the CDC Working Capital Fund (WCF). The WCF was first established in the FY2012 appropriations law ( P.L. 112-74 ) as a revolving fund for consolidated business services. Readers should be aware that amounts requested for CDC programs in the FY2014 President's Budget (as shown in Table 7 ) are not comparable to amounts shown in other columns due to differing display conventions related to WCF funding. The President's request embedded WCF funds within the line items for the various CDC programs and activities being supported by the WCF, while all other columns consolidate total WCF funding into the larger CDC-wide activities line item. NIH The omnibus provided $29.9 billion in discretionary budget authority for NIH. This is $1 billion (+3.5%) more than FY2013 post-sequester operating levels and $1.2 billion (-3.8%) less than the President's request. The omnibus provided most of the NIH Institutes and Centers with an increase of 3% compared to their FY2013 post-sequester operating levels. However, the omnibus provided larger increases (relative to FY2013 post-sequester levels) for selected Institutes and Centers, including the National Institute on Aging (+13%) to boost Alzheimer's disease research funding, and the National Center for Advancing Translational Sciences (+17%), allowing up to $9.8 million for the Cures Acceleration Network. SAMHSA The omnibus provided $3.4 billion in discretionary funding for SAMHSA. This is $3 million (+2%) more than FY2013 post-sequester operating levels and $32 million (-19%) less than the President's request. The Joint Explanatory Statement accompanying the omnibus directed $374 million (+38% from FY2013 post-sequester levels) to SAMHSA's Mental Health Programs of Regional and National Significance (PRNS) and $463 million (+11% from FY2013 post-sequester levels) to the Mental Health Block Grant (MHBG). According to the Joint Explanatory Statement, the MHBG is to be augmented with an additional $21 million from the PHS Evaluation Tap. Further, the omnibus called for a new 5% set-aside within the MHBG for evidence-based programs addressing the needs of individuals with early serious mental illness, including psychotic disorders. The omnibus also authorized SAMHSA to collect user fees for certain costs of publications, data, and data analysis. Previously, SAMHSA had no such authority. AHRQ AHRQ receives no discretionary budget authority in L-HHS-ED appropriations bills; rather, funding for almost all of its programs is provided by transfers from the PHS Evaluation Tap. An additional amount for one prevention program is transferred from the PPHF. The FY2014 omnibus provided $364 million in Evaluation Tap transfers. This is $1.4 million (-0.4%) less than the FY2013 post-sequester operating level and $30 million (+9.1%) more than the President's request. The omnibus provided increased support for patient safety research and research innovations, areas for which reductions had been proposed in the President's Budget. CMS The FY2014 omnibus provided nearly $4.0 billion in discretionary funding for CMS. This is $114 million (-2.8%) less than the FY2013 post-sequester discretionary operating level for CMS and nearly $1.6 billion (-28.3%) less than the President's request. The Program Management account received by far the largest share of discretionary CMS appropriations, $3.7 billion (-13% from FY2013 post-sequester levels). These funds support program operations (e.g., claims processing, information technology investments, provider and beneficiary outreach and education, appeals, and program implementation), as well as federal administration and other activities. The omnibus also appropriated $294 million for Health Care Fraud and Abuse Control (HCFAC) activities. This is roughly equivalent to HCFAC's FY2013 post-sequester funding level, though is well below the Senate committee-report recommendation of $611 million. The Joint Explanatory Statement accompanying the FY2014 omnibus also called for GAO to review the feasibility, cost, benefits, and barriers for CMS to implement a Medicare transactional system with "smart card" technology for validation and authentication of beneficiaries and providers. ACF The FY2014 omnibus provided $17.7 billion in discretionary funding for ACF. This is nearly $2 billion (+12%) more than ACF's FY2013 post-sequester funding level and $91 million (-0.5%) less than the President's request. The omnibus provided $1.5 billion for Refugee and Entrant Assistance programs (+48% from FY2013 post-sequester levels). The Joint Explanatory Statement expressed an expectation that the majority of these funds ($868 million; +131% from FY2013 post-sequester) would be directed toward the Unaccompanied Alien Children (UAC) program, which provides shelter and support services to unaccompanied alien children who have been apprehended in the United States. The increased funding for UAC reflects the growing number of unaccompanied alien children arriving in this country, up from about 16,100 in FY2011 to roughly 38,800 in FY2013, according to the U.S Border Patrol. The omnibus demonstrated support for ACF early childhood care and education programs, such as Head Start and the Child Care and Development Block Grant (CCDBG). For instance, the omnibus provided $8.6 billion for Head Start (+14% from FY2013 post-sequester). This amount allows for a cost-of-living adjustment of 1.3% for existing Head Start programs and provides $25 million for certain costs related to the Head Start Designation Renewal System, through which low-performing grantees are identified for re-competition. It also includes $500 million for a new initiative to develop Early Head Start-Child Care. Separately, the bill appropriated almost $2.4 billion for the CCDBG (+7% from FY2013 post-sequester). ACL The FY2014 omnibus provided $1.7 billion in discretionary funding for ACL. This is nearly $109 million (+7%) more than ALF's FY2013 post-sequester funding level and $432 million (-21%) less than the President's request. Readers should note that ACL was first established as an HHS agency in April 2012 and the first time funding was requested for ACL as an individual agency was in the FY2014 President's Budget. Previous President's Budgets included separate requests for the Administration on Aging, which is now a subcomponent of the larger ACL, along with several other offices. The omnibus rejected the FY2014 President's Budget proposal to transfer the Community Service Employment for Older Americans program from the Department of Labor to HHS/ACL, but accepted the Administration's proposal to transfer the State Health Insurance Programs (SHIPs) from CMS to ACL ($52 million in FY2014) and the Paralysis Resource Center from CDC to ACL ($6.7 million in FY2014). SHIPs provide one-on-one counseling and information assistance to Medicare beneficiaries and their families on Medicare and other health insurance issues. Many SHIPs are already housed in, or are partnered with, state aging services agencies. Meanwhile, the Paralysis Resource Center provides comprehensive information and referral services to people living with paralysis and their families. Funding Restrictions Related to Certain Controversial Issues Annual L-HHS-ED appropriations regularly contain restrictions related to certain controversial issues. For instance, annual appropriations laws generally include provisions limiting the circumstances under which L-HHS-ED funds (including Medicaid funds) may be used to pay for abortions. Under current provisions, (1) abortions may be funded only when the life of the mother is endangered or in cases of rape or incest; (2) funds may not be used to buy a managed care package that includes abortion coverage, except in cases of rape, incest, or endangerment; and (3) federal programs and state/local governments that receive L-HHS-ED funding are prohibited from discriminating against health care entities that do not provide or pay for abortions or abortion services. Similarly, annual appropriations since FY1997 have included a provision prohibiting L-HHS-ED funds (including NIH funds) from being used to create human embryos for research purposes or for research in which human embryos are destroyed. The FY2014 omnibus maintained each of these provisions for FY2014. The FY2012 law reinstated a provision, removed in FY2010, prohibiting L-HHS-ED funds from being used for needle exchange programs. This provision was maintained under the terms of the FY2013 full-year CR and the FY2014 omnibus. The FY2012 law also expanded a provision prohibiting CDC spending on activities that advocate or promote gun control so that it applied to all HHS appropriations; it also added a new, broader provision prohibiting the use of any L-HHS-ED funds (plus funds transferred from the Prevention and Public Health Fund) for the promotion of gun control. These provisions were maintained under the terms of the FY2013 full-year CR and the FY2014 omnibus. Department of Education (ED) Note that all figures in this section are based on regular L-HHS-ED appropriations only; they do not include funds provided outside of the annual appropriations process (e.g., certain direct appropriations for Federal Direct Student Loans and Pell Grants). All amounts in this section are rounded to the nearest million or billion (as labeled). The dollar changes and percent changes discussed in the text are based on unrounded amounts. About ED The federal government provides support for both elementary and secondary education, and postsecondary education. With regard to elementary and secondary education, the federal government provides roughly 12% of overall funding; the vast majority of funding comes from states and local districts. States and school districts also have primary responsibility for the provision of elementary and secondary education in the United States. Nevertheless, the U.S. Department of Education (ED) performs numerous functions, including promoting educational standards and accountability; gathering education data via programs such as the National Assessment of Education Progress; disseminating research on important education issues; and administering federal education programs and policies. ED is responsible for administering a large number of elementary and secondary education programs, many of which provide direct support to school districts with a high concentration of disadvantaged students and students with disabilities. One of the most important priorities for ED in elementary and secondary education is improving academic outcomes for all students; particularly disadvantaged students, students with disabilities, English language learners, Indians, Native Hawaiians, and Alaska Natives. With regard to higher education, the federal government supports roughly 73% of all direct aid provided to students to finance their postsecondary education. There are also many higher education programs administered by ED—the largest are those providing financial aid to facilitate college access, primarily through student loans and the Pell grant program. In addition, ED administers programs that address vocational rehabilitation, career and technical education, and adult education. FY2014 ED Appropriations Overview The FY2014 omnibus provided roughly $70.60 billion in combined mandatory and discretionary funding for ED. This is about $1.83 billion (+2.7%) more than the FY2013 post-sequester funding level and $3.91 billion (-5.2%) less than the FY2014 request. (See Table 8 .) Of the total provided for ED in the FY2014 omnibus, roughly $67.30 billion (95%) is discretionary. This is $236 million (+2.4%) more than the post-sequester FY2013 discretionary funding level and $3.91 billion (-5.5%) less than the discretionary amount requested in the FY2014 President's Budget. Selected ED Highlights from FY2013 Appropriations Actions The following are some ED highlights from the FY2014 omnibus compared to comparable FY2013 funding levels and proposed funding levels from the FY2014 President's Budget. Education for the Disadvantaged The FY2014 omnibus increased funding for Education for the Disadvantaged Grants to Local Educational Agencies (LEAs) to $14.38 billion. This is $625 million more than the FY2013 post-sequester funding level and $132 million less than the President's Budget request. Education for the Disadvantaged is the largest K-12 education program administered by ED and nearly all LEAs in the nation receive funding under this program. The omnibus included a new provision clarifying that these funds may be used to provide transportation for homeless students and to support the work of homeless liaisons. The FY2014 omnibus funded School Improvement Grants at $506 million; the same amount as the FY2013 post-sequester funding level and $153 million less than the President's Budget request. Impact Aid The FY2014 omnibus provided $1.29 billion for Impact Aid, which is $65 million more than the program's FY2013 post-sequester funding level. The majority of Impact Aid funds are provided directly to LEAs to compensate them for the financial burden resulting from federal activities, including federal ownership of certain lands and the enrollment in LEAs of children of parents who live or work on federal lands. Innovation and Improvement The FY2014 omnibus provided $250 million for the Race to the Top (RTT) program. This is $270 million less than the FY2013 post-sequester funding level and $750 million less than the FY2014 President's Budget request. The President's Budget and the Senate committee-reported bill for FY2014 would have directed RTT funding toward a new College Affordability and Completion initiative to incentivize state-level postsecondary education reform. However, the FY2014 omnibus directed the entire $250 million toward Preschool Development Grants. These grants are intended to support states in developing or expanding high quality preschool for four-year-olds from families with incomes at or below 200% of poverty. Note that this new RTT Preschool Development Program is distinct from the RTT Early Learning Challenge, for which funding was provided in each of FY2011-FY2013 to support states in implementing integrated early learning systems and serving low-income children from birth through age five. Safe Schools and Citizenship Education The FY2014 omnibus provided $57 million for the Promise Neighborhoods program, which awards competitive grants to distressed communities for comprehensive neighborhood programs designed to combat the effects of poverty and improve the educational and life outcomes of children from birth through college. The funding level provided by the FY2014 omnibus is equal to the FY2013 post-sequester funding level, but $243 million less than the FY2014 President's Budget request. Special Education The FY2014 omnibus provides $11.47 billion in funding for Individuals with Disabilities Act (IDEA), Part B State Grants program. This is $498 million more than the 2013 post-sequester funding level and $105 million less than the President's Budget request for FY2014. IDEA Part B State Grants provide federal funding for elementary and secondary education for children with disabilities. As a condition for the receipt of these funds, states are required to provide a free and appropriate public education (i.e., specially designed instruction that meets the needs of a child with a disability). Student Financial Aid The FY2014 omnibus provided $22.78 billion for the Pell Grants program. This amount is equal to the FY2013 post-sequester funding level, but is $46 million less than the FY2014 President's request. Under the FY2014 omnibus, the discretionary base maximum award for award year (AY) 2014-15 remained at $4,860, and the total maximum award for which a student is eligible in AY2014-15 is projected to be $5,730. Related Agencies Note that figures in this section are based on regular L-HHS-ED appropriations only; they do not include funds provided outside the annual appropriations process (e.g., direct appropriations for Old-Age, Survivors, and Disability Insurance benefit payments by the Social Security Administration). All amounts in this section are rounded to the nearest million or billion (as labeled). The dollar changes and percent changes in the text are based on unrounded amounts. FY2014 Related Agencies Appropriations Overview The FY2014 omnibus provided roughly $70.11 billion in combined mandatory and discretionary funding for related agencies funded through this bill. This is about $2.29 billion (+ 3.4%) more than the FY2013 post-sequester funding level and about $584 million (+0.8%) more than the FY2014 request. (See Table 10 .) Of the total provided for related agencies in the FY2014 omnibus, roughly $14.06 billion (20%) is discretionary. This amount is $725 million (+ 5.4%) more than the post-sequester FY2013 discretionary funding level and $591 million (+ 4.4%) more than the discretionary total requested in the FY2014 President's Budget. In general, the largest share of funding appropriated to related agencies in the L-HHS-ED bill goes to the Social Security Administration (SSA). When taking into account both mandatory and discretionary funding, the SSA accounted for 97% of the entire related agencies appropriation in FY2014. The bulk of mandatory SSA funding from the L-HHS-ED bill supports the Supplemental Security Income program which provides means tested benefits to disabled children and adults and to person 65 and older. When looking exclusively at discretionary funding, the SSA remains the largest component of the related agencies appropriation, constituting roughly 84% of discretionary funds in FY2014. The majority of discretionary SSA funding covers administrative expenses for Social Security, SSI, and Medicare. After the SSA, the next-largest agency of the related agencies appropriation is the Corporation for National and Community Service (CNCS), which constituted roughly 2% of all funding and 8% of discretionary funding in FY2014. Typically, each of the remaining related agencies receives less than $1 billion from the annual L-HHS-ED appropriations bill. For more information, see Table 11 . Selected Related Agencies Highlights from FY2014 Appropriations Actions49 The most significant highlight from the FY2014 budget and appropriations actions among the L-HHS-ED related agencies was SSA's proposal to largely remove funding for program integrity activities from the Limitation on Administrative Expenses (LAE) account and create, through authorizing legislation, a new source of mandatory annual funding for program integrity activities in a new Program Integrity Administrative Expenses (PIAE) account. No legislation creating the PIAE account or the mandatory funding for program integrity has been introduced in either house of Congress and no such provision was part of P.L. 113-76 . The SSA's total program integrity request for FY2014 was $1.5 billion, with $273 million requested as part of LAE and the remaining $1.2 billion requested via the proposed mandatory spending for the PIAE account. The FY2014 omnibus did not include the proposed PIAE or any mandatory program integrity spending, but did include $1.2 billion in program integrity funding as part of LAE, an increase of $441 million (+58%) over the pre-sequester program integrity funding provided for FY2013. Appendix. Budget Enforcement Activities Budget Control Act and Sequestration Congress considered FY2014 appropriations in the context of the Budget Control Act of 2011 (BCA, P.L. 112-25 ) which established initial discretionary spending limits for FY2012-FY2021. The BCA also tasked a Joint Select Committee on Deficit Reduction with developing a deficit reduction plan for Congress and the President to enact by January 15, 2012. The failure of Congress and the President to enact deficit reduction legislation by that date triggered an automatic spending reduction process consisting of a combination of sequestration and lower discretionary spending limits. FY2013 For FY2013, the BCA called for sequestration of both mandatory and discretionary spending. President Obama issued the required FY2013 sequestration order on March 1, 2013. Concurrently, the Office of Management and Budget (OMB) issued a report containing the amounts by which budgetary resources must be reduced in order to achieve the necessary spending reductions in FY2013. In general, OMB estimated that the joint committee sequester would require a 5.0% reduction in non-exempt nondefense discretionary funding, a 2.0% reduction in certain Medicare funding (subject to a special rule), and a 5.1% reduction for most other non-exempt nondefense mandatory funding. (OMB also reported on the required percent reductions of non-exempt defense spending—7.8% for non-exempt defense discretionary and 7.9% for non-exempt defense mandatory—but these do not apply to L-HHS-ED.) OMB applied these percentages to funding levels in place at that time (a six-month CR, P.L. 112-175 ) to determine dollar amount reductions for each budget account. These reductions were later applied to full-year FY2013 funding levels following the enactment of full-year funding in P.L. 113-6 . FY2014 and Beyond For FY2014-FY2021, the BCA requires annual reductions to both mandatory and discretionary spending. These reductions are to be achieved through a combination of (1) continued sequestration for non-exempt mandatory programs and (2) lower spending limits for discretionary programs. Subsequent laws ( P.L. 113-67 , P.L. 113-82 ) have amended the BCA to extend sequestration for non-exempt mandatory programs through FY2024. In addition, the discretionary spending limits for FY2014 and FY2015 have been modified by the American Taxpayer Relief Act of 2012 (ATRA, P.L. 112-240 ) and the Bipartisan Budget Act of 2013 (BBA, Division A of P.L. 113-67 ). The BCA does not call for sequestration of discretionary spending in FY2014 unless one or both of the statutory discretionary spending limits (also called budget caps) is breached. There are separate limits for defense (budget function 050) and nondefense spending, but the L-HHS-ED bill only includes funding in the nondefense category. On April 10, 2013, concurrent with the release of the FY2014 President's Budget, President Obama issued a sequestration order for non-exempt FY2014 mandatory spending. The sequester order took effect on October 1, 2013. OMB's FY2014 joint committee reductions report stated that the sequestration percentages were equal to 2% of nonexempt Medicare spending and 7.2% of non-exempt nondefense mandatory spending in FY2014. (The report also estimated reductions of 9.8% in non-exempt defense mandatory spending, but this is not applicable to the L-HHS-ED bill.) The OMB report's appendix displays the actual dollar amounts to be sequestered from each budget account. While the report displays reductions at the account level, the sequester itself is implemented at the program, project, or activity level. Sequestration of discretionary spending was not required in FY2014. According to OMB's analysis, after making allowable adjustments, the FY2014 omnibus did not violate the defense and nondefense spending limits. Cap Adjustments, Exemptions, and Special Rules The BCA (as amended by ATRA and the BBA) established discretionary spending caps for FY2012-FY2021. The law includes provisions allowing for limited adjustments to the caps. For L-HHS-ED, the most notable of these is for increases (up to a point) in new budget authority for specified program integrity initiatives at HHS and the Social Security Administration. In addition, although sequestration largely consists of automatic, across-the-board spending reductions, the law exempts a limited number of programs from sequestration and subjects others to special rules. The L-HHS-ED bill contains several programs that are exempt from sequestration, including Medicaid, payments to health care trust funds, Supplemental Security Income, Special Benefits for Disabled Coal Miners, retirement pay and medical benefits for commissioned Public Health Service officers, foster care and adoption assistance, and certain family support payments. The L-HHS-ED bill also contains several programs that are subject to special rules under sequestration, such as unemployment compensation, certain student loans, health centers, and portions of Medicare. FY2014 Budget Resolution and 302(b) Allocations The BBA, which was enacted December 26, 2013, resulted from negotiations between the Chairs of the House and Senate Budget Committees in association with the conference committee on the FY2014 budget resolution. The BBA includes a section titled, "Establishing a Congressional Budget" (Title I, Subtitle B), which provided an alternative mechanism for budget enforcement that could serve as a substitute for a traditional congressional budget resolution for FY2014 and potentially for FY2015. Following enactment of the BBA, the Chairs of the House and Senate Budget Committees submitted statements for publication in the Congressional Record that included committee spending levels (302(a) allocations) for the House and Senate Appropriations Committees for FY2014 "consistent with the discretionary spending limits" set forth in the BBA. Once filed, these levels became enforceable on the House and Senate floor. According to analysis by CBO and OMB, the discretionary appropriations in the FY2014 omnibus, enacted on January 17, 2014, adhered to these spending caps. Prior to congressional action on the BBA, both the House and Senate had taken action on their own budget resolutions. On March 23, 2013, the Senate agreed to an FY2014 budget resolution ( S.Con.Res. 8 ) by a vote of 50-49. On March 21, 2013, the House agreed to its own FY2014 budget resolution ( H.Con.Res. 25 ) by a vote of 221-207. On the basis of the overall spending levels established by H.Con.Res. 25 and S.Con.Res. 8 , the House and Senate took steps to adopt limits for each of the appropriations subcommittees. These subcommittee spending caps are commonly called 302(b) allocations. The House most recently reported revised 302(b) allocations for FY2014 on July 8, 2013. Meanwhile, the Senate Appropriations Committee adopted subcommittee spending guidance for FY2014 at a markup on June 20, 2013. No new subcommittee allocations were released publicly following the enactment of the BBA and the submission of the new budgetary levels into the Congressional Record by the House and Senate Budget Committee Chairs. See Table A-1 for an overview of the published L-HHS-ED 302(b) allocations for FY2014, as compared to the proposed FY2014 Senate committee bill and the enacted FY2014 omnibus. Note that the most recently published 302(b) allocations do not reflect the revisions to overall caps established by the BBA. Note also that compliance with the discretionary spending caps is evaluated based on budget authority available in the current fiscal year , adjusted for scorekeeping by the Congressional Budget Office. As such, totals shown in this table may not be comparable to other totals shown in this report. Current Year Budget Authority Table A-1 displays the total L-HHS-ED current year budget authority for FY2014 discretionary and mandatory appropriations provided or proposed, by title, compared to comparable pre- and post-sequester FY2013 funding levels. The amounts shown in this table reflect total budget authority available for obligation in the fiscal year, regardless of the year in which it was first appropriated. (For a comparable table showing total budget authority in the bill, rather than current year budget authority, see Table 2 in the body of this report.)

This report provides an overview of actions taken by Congress to provide FY2014 appropriations for accounts funded by the Departments of Labor, Health and Human Services, and Education, and Related Agencies (L-HHS-ED) appropriations bill. The L-HHS-ED bill provides funding for all accounts subject to the annual appropriations process at the Departments of Labor (DOL) and Education (ED). It provides annual appropriations for most agencies within the Department of Health and Human Services (HHS), with certain exceptions (e.g., the Food and Drug Administration is funded via the Agriculture bill). The L-HHS-ED bill also provides funding for more than a dozen related agencies, including the Social Security Administration (SSA). Enacted Appropriations: On January 17, 2014, President Obama signed into law the Consolidated Appropriations Act, 2014 (P.L. 113-76), which provided appropriations for FY2014 (see Division H for L-HHS-ED). This law provided $164 billion in discretionary funding for L-HHS-ED, which is about 4% more than the FY2013 post-sequester funding level ($157 billion) and about 3% less than the FY2014 President's Budget request ($171 billion). In addition, the FY2014 omnibus provided an estimated $612 billion in mandatory L-HHS-ED funding, for a total of $776 billion for L-HHS-ED as a whole. The FY2014 omnibus followed two government-wide continuing resolutions (CRs), which had provided temporary funding earlier in the fiscal year (P.L. 113-46 and P.L. 113-73). However, no government-wide CR was in place at the beginning of the fiscal year (October 1), resulting in a funding gap and government shutdown for affected projects and activities until the first government-wide CR for FY2014 was enacted on October 17, 2013 (P.L. 113-46). Earlier L-HHS-ED Congressional Action: Prior to the start of the fiscal year, the Senate Appropriations Committee initiated action on a full-year FY2014 L-HHS-ED bill. On July 11, 2013, the Senate Appropriations Committee reported this bill (S. 1284, S.Rept. 113-71). As reported, S. 1284 would have provided $171 billion in discretionary L-HHS-ED funding. This amount is about 9% more than the FY2013 post-sequester funding level and about 1% more than the FY2014 President's request. In addition, the Senate committee bill would have provided an estimated $613 billion in mandatory funding, for a combined total of nearly $783 billion for L-HHS-ED as a whole. The House did not take action on a stand-alone L-HHS-ED bill for FY2014. President's Request: On April 10, 2013, the Obama Administration released its FY2014 Budget. The President requested $170 billion in discretionary funding for accounts funded by the L-HHS-ED bill (+8% from FY2013 post-sequester levels). In addition, the President's Budget requested roughly $612 billion in annually appropriated mandatory funding, for a total of roughly $782 billion (+4% from FY2013 post-sequester levels) for the L-HHS-ED bill as a whole. DOL Snapshot: The FY2014 omnibus provided roughly $12.04 billion in discretionary funding for DOL. This is about 2% more than the FY2013 post-sequester funding level of $11.85 billion and 4% less than the FY2014 request of $12.50 billion. HHS Snapshot: The FY2014 omnibus provided roughly $70.44 billion in discretionary funding for HHS. This is about 6% more than the FY2013 post-sequester funding level of $66.41 billion and 3% less than the FY2014 request of $72.50 billion. ED Snapshot: The FY2014 omnibus provided roughly $67.30 billion in discretionary funding for ED. This is about 2% more than the FY2013 post-sequester funding level of $65.70 billion and 5% less than the FY2014 request of $71.21 billion. Related Agencies Snapshot: The FY2014 omnibus provided roughly $14.06 billion in discretionary funding for L-HHS-ED related agencies. This is 5% more than the FY2013 post-sequester funding level of $13.34 billion and 4% more than the FY2014 request of $13.47 billion.

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Background The Individuals with Disabilities Education Act (IDEA) authorizes federal funding for the education of children with disabilities and requires, as a condition for the receipt of such funds, the provision of a free appropriate public education (FAPE). The statute also contains detailed due process provisions to ensure the provision of FAPE and includes a provision for attorneys' fees. Originally enacted in 1975, the act responded to increased awareness of the need to educate children with disabilities, and to judicial decisions requiring that states provide an education for children with disabilities if they provided an education for children without disabilities. The attorneys' fees provisions were added in 1986 by the Handicapped Children's Protection Act, P.L. 99-372 . These provisions were amended in 1997. The P.L. 105-17 amendments allowed the reduction of attorneys' fees if the attorney representing the parents did not provide the LEA with timely and specific information about the child and the basis of the dispute, and specifically excluded the payment of attorneys' fees for most individualized education plan (IEP) meetings. The House and Senate bills leading to the 2004 law contained very different approaches to the attorneys' fees issue. The House bill, H.R. 1350 , 108 th Cong., would have changed the determination of the amount of attorneys' fees by requiring the Governor, or other appropriate state official, to determine rates. The Senate bill, S. 1248 , 108 th Cong., kept the same general framework as in previous law with several changes. The final 2004 IDEA reauthorization was closer to the Senate version and kept many of the previous provisions on attorneys' fees but also made several additions. These include allowing attorneys' fees for the state educational agency (SEA) or the local educational agency (LEA) against the parent or the parent's attorney in certain situations. P.L. 108-446 Language Relating to Attorneys' Fees3 Under the new law the general provisions regarding filing a complaint and appeals have not changed except that the local educational agency may also file a complaint. A parent or LEA may file a complaint with respect to the identification, evaluation, educational placement, provision of a free appropriate public education or placement in an alternative educational setting. The parents or LEA then have an opportunity for an impartial due process hearing with a right to appeal. At the court's discretion, reasonable attorneys' fees may be awarded as part of the costs to the parents of a child with a disability who is the prevailing party. The 2004 reauthorization also allows the award of reasonable attorneys' fees against a parent's attorney to a prevailing SEA or LEA in two situations. These are when the attorney files a complaint or subsequent cause of action that is frivolous, unreasonable, or without foundation, or continues to litigate after the litigation clearly becomes frivolous, unreasonable, or without foundation. P.L. 108-446 also allows for the award of attorneys' fees against the attorney of a parent of a child with a disability or a parent to a prevailing SEA or LEA if the parent's complaint or subsequent cause of action was for an improper purpose such as to harass, to cause unnecessary delay, or to needlessly increase the cost of litigation. In the Senate debate on the attorneys' fees amendment, Senator Grassley stated that the amendment regarding attorneys' fees would "in no way limit or discourage parents from pursuing legitimate complaints against a school district if they feel their child's school has not provided a free appropriate public education. It would simply give school districts a little relief from abuses of the due process rights found in IDEA and ensure that our taxpayer dollars go toward educating children, not lining the pockets of unscrupulous trial lawyers." Senator Gregg also emphasized the need for the attorneys' fee amendment. He noted that the concept that a defendant should be able to obtain attorneys' fees when a plaintiff's actions were "frivolous, unreasonable, or without foundation" has been applied to title VII of the Civil Rights Act of 1964. The Supreme Court in Christiansburg Garment Co. v. Equal Employment Opportunity Commission held that prevailing defendants should recover attorneys' fees when a plaintiff's actions were frivolous, unreasonable, or without foundation in order to "protect defendants from burdensome litigation having no legal or factual basis." Senator Gregg observed that the standard is "very high...and prevailing defendants are rarely able to meet it and obtain a reimbursement of their attorneys fees" and that case law "directs courts to consider the financial resources of the plaintiff in awarding attorney's fees to a prevailing defendant." The attorneys' fee provision also would allow defendants to recover fees if lawsuits were brought for an improper purpose. In the Senate debate, Senator Gregg noted that this concept was drawn from Rule11of the Federal Rules of Civil Procedure and that "in interpreting this language from Rule 11, courts must apply an objective standard of reasonableness to the facts of the case." Attorneys' fees are based on the rates prevailing in the community and no bonus or multiplier may be used. There are specific prohibitions on attorneys' fees and reductions in the amounts of fees. Fees may not be awarded for services performed subsequent to a written offer of settlement to a parent in certain circumstances: if the offer is made with the time prescribed by Rule 68 of the Federal Rules of Civil Procedure or ten days before an administrative proceeding begins; if the offer is not accepted within ten days; and if the court finds that the relief finally obtained by the parents is not more favorable to the parents than the offer of settlement. Also, attorneys' fees are not to be awarded relating to any meeting of the individualized education program (IEP) team unless the meeting is convened as a result of an administrative proceeding or judicial action or, at the state's discretion, for a mediation. The 2004 reauthorization added a requirement for a "resolution session" prior to a due process hearing. Essentially, this is a preliminary meeting involving the parents, relevant members of the IEP team, and a representative of the LEA who has decision-making authority. Attorneys' fees are not allowable for the resolution session. Like previous law, P.L. 108-446 specifically provides that an award of attorneys' fees and related costs may be made to a parent who is the prevailing party if the parent was substantially justified in rejecting a settlement offer. Attorneys' fees may be reduced in certain circumstances including where the court finds that the parent or the parent's attorney unreasonably protracted the final resolution of the controversy; the amount of attorneys' fees unreasonably exceeds the hourly rate prevailing in the community for similar services by attorneys of reasonably comparable skill, reputation and experience; where the time spent and legal services furnished were excessive considering the nature of the action or proceedings; or the attorney representing the parent did not provide the school district with the appropriate information in the due process complaint. This information includes the name of the child, the child's address and school, or available contact information in the case of a homeless child, a description of the problem, including facts relating to the issue, and a proposed resolution to the problem. As in previous law, P.L. 108-446 contains a specific exception to these circumstances where attorneys' fees may be reduced. There shall be no reduction if the court finds that the SEA or LEA unreasonably protracted the final resolution of the action or proceeding or there was a violation of the section. Final Regulations The final regulations for P.L. 108-446 were issued on August 14, 2006. Generally, the Department of Education (ED) declined to elaborate on the statutory language, observing that "further guidance on the interpretation of this statutory language is not appropriate since judicial interpretations of statutory provisions will necessarily vary based upon case-by-case factual determinations, consistent with the requirement that the award of reasonable attorneys fees is left to a court's discretion." One of the issues ED declined to address in the regulations involved whether a court could award fees to non-attorney advocates who accompanied and advised the parents at a due process hearing. ED stated that "[l]ay advocates are, by definition, not attorneys and are not entitled to compensation as if they were attorneys." ED also noted that the Supreme Court's recent decision in Arlington Central School District Board of Education v. Murphy held that if Congress wishes to allow recovery of experts' fees by prevailing parents, it must include explicit language authorizing such a recovery. Such explicit language was not added in the 2004 reauthorization of IDEA. The Supreme Court's rationale was found by ED to be controlling concerning the fees of non-attorney experts, and the Department of Education declined to add a regulatory provision on the subject.

The Individuals with Disabilities Education Act (IDEA) authorizes federal funding for the education of children with disabilities and requires, as a condition for the receipt of such funds, the provision of a free appropriate public education (FAPE). The statute also contains detailed due process provisions to ensure the provision of FAPE and includes a provision for attorneys' fees. Attorneys' fees were among the most controversial provisions in the 2004 reauthorization of IDEA. This report analyzes the attorneys' fees provisions in P.L. 108-446 and the final regulations. For a general discussion of the 2004 reauthorization, see CRS Report RL32716, Individuals with Disabilities Education Act (IDEA): Analysis of Changes Made by P.L. 108-446, by [author name scrubbed] and [author name scrubbed]. This report will be updated as necessary.

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Background Prior to the New Deal, decisions regarding classification of national security information were left to military regulation. In 1940, President Franklin Roosevelt issued an executive order authorizing government officials to protect information pertaining to military and naval installations. Presidents since that time have continued to set the federal government's classification standards by executive order, but with one critical difference: while President Roosevelt cited specific statutory authority for his action, later Presidents have cited general statutory and constitutional authority. The Supreme Court has never directly addressed the extent to which Congress may constrain the executive branch's power in this area. Citing the President's constitutional role as Commander-in-Chief, the Supreme Court has repeatedly stated in dicta that "[the President's] authority to classify and control access to information bearing on national security ... flows primarily from this Constitutional investment of power in the President and exists quite apart from any explicit congressional grant." This language has been interpreted by some to indicate that the President has virtually plenary authority to control classified information. On the other hand, the Supreme Court has suggested that "Congress could certainly [provide] that the Executive Branch adopt new [classification procedures] or [establish] its own procedures—subject only to whatever limitations the Executive Privilege may be held to impose on such congressional ordering." In fact, Congress established a separate regime in the Atomic Energy Act for the protection of nuclear-related "Restricted Data." Congress has directed the President to establish procedures governing the access to classified material so that generally no person can gain such access without having undergone a background check. Congress also directed the President, in formulating the classification procedures, to adhere to certain minimum standards of due process with regard to access to classified information. These standards include the establishment of uniform procedures for, inter alia , background checks, denial of access to classified information, and notice of such denial. There is an exception to the due process requirements, however, where compliance could damage national security, although the statute directs agency heads to submit a report to the congressional intelligence committees in such a case. With the authority to determine classification standards vested in the President, these standards tend to change when a new administration takes control of the White House. The differences between the standards of one administration and the next have often been dramatic. As one congressionally authorized commission put it in 1997: The rules governing how best to protect the nation's secrets, while still insuring that the American public has access to information on the operations of its government, past and present, have shifted along with the political changes in Washington. Over the last fifty years, with the exception of the Kennedy Administration, a new executive order on classification was issued each time one of the political parties regained control of the Executive Branch. These have often been at variance with one another ... at times even reversing outright the policies of the previous order. Various congressional committees have investigated ways to bring some continuity to the classification system and to limit the President's broad powers to shield information from public examination. In 1966, Congress passed the Freedom of Information Act (FOIA), creating a presumption that government information will be open to the public unless it falls into one of FOIA's exceptions. One exception covers information that, under executive order, must be kept secret for national security or foreign policy reasons. In 2000, Congress enacted the Public Interest Declassification Act of 2000, which established the Public Interest Declassification Board to advise the President on matters regarding the declassification of certain information. However, the act expressly disclaims any intent to restrict agency heads from classifying or continuing the classification of information under their purview, nor does it create any rights or remedies that may be enforced in court. Most recently, Congress passed the Reducing Over-Classification Act, P.L. 111-258 (2010), which, among other things, requires executive branch agencies' inspectors general to conduct assessments of their agencies' implementation of classification policies. Congress occasionally takes an interest in declassification of specific materials that might be deemed essential for some public purpose. The procedural rules of both the Senate and House provide a means for disclosing classified information in the intelligence committees' possession where the intelligence committee of the respective house (either the House Permanent Select Committee on Intelligence (HPSCI) or the Senate Select Committee on Intelligence (SSCI)) determines by vote that such disclosure would serve the public interest. In the event the intelligence committee votes to disclose classified information that was submitted by the executive branch, and the executive branch requests it be kept secret, the committee is required to notify the President. The information may be disclosed after five days unless the President formally objects and certifies that the threat to the U.S. national interest outweighs any public interest in disclosing it, in which case the question may be referred to the full chamber. It does not appear that either house has invoked its procedure for disclosing classified information. In fact, in at least one instance, Congress deferred to the executive branch even with respect to materials prepared by Congress, albeit perhaps using documents obtained from the executive branch. A recent example involved the 28 pages of classified text from the report of the Joint Inquiry of the HPSCI and the SSCI into the Intelligence Community Activities Before and After the Terrorist Attacks of September 11, 2001. The report of the Joint Inquiry was completed in 2002 and referred to the executive branch for a classification review, which determined that three of the four parts of the report could be disclosed to the public, but that the disclosure of a portion of the report would pose national security risks. Despite calls for the release of the 28 pages by some Members and former Members, and legislative proposals to mandate disclosure, the intelligence committees awaited a declassification review by the intelligence community before releasing the material in redacted form. One notable instance in which Congress sought and procured the declassification of government information involved records pertaining to prisoners of war and personnel listed as missing in action after the Vietnam War ("POW/MIA"). Congress initially required certain agencies to provide information regarding "live-sightings" of such personnel to next of kin, with the exception of "information that would reveal or compromise sources and methods of intelligence collection." Congress subsequently directed the Department of Defense (DOD) to create an accessible library of documents related to POW/MIA, excluding records that would be exempt under certain provisions of FOIA. The Senate Select Committee on POW/MIA Affairs considered invoking the procedural rule described above to declassify relevant documents, but deemed that untested avenue unsuitable because it would have required the Committee to identify the documents beforehand and to have had them in its possession. Furthermore, enforcement of the measure would have required the full vote of the Senate. Instead, Members wrote to President George H. W. Bush requesting an executive order to accomplish the declassification of relevant records. It was followed by a resolution expressing the sense of the Senate that the President should expeditiously issue an executive order for the declassification, without compromising national security, of relevant documents. President Bush complied. More recently, Congress has directed the President or agency heads to undertake a declassification review of records pertaining to specific matters and to release them as appropriate. For example, Congress in 2000 directed the President to "order all Federal agencies and departments that possess relevant information [about the murders of churchwomen in El Salvador] to make every effort to declassify and release" them to victims' families. In 2002, Congress directed the Secretary of Defense to submit to Congress and to the Secretary of Veterans Affairs "a comprehensive plan for the review, declassification, and submittal" of all information related to Project 112—a series of biological and chemical warfare vulnerability tests conducted by the Department of Defense —that would be relevant for that project's participants' health care. In 2004, Congress directed the Secretary of Defense to "review and, as determined appropriate, revise the classification policies of the Department of Defense with a view to facilitating the declassification of data that is potentially useful for the monitoring and assessment of the health of members of the Armed Forces who have been exposed to environmental hazards during deployments overseas." In 2007, Congress directed the Director of the Central Intelligence Agency (CIA) to make public a version of the executive summary of the CIA Office of the Inspector General report on "CIA Accountability Regarding Findings and Conclusions of the Joint Inquiry into Intelligence Community Activities Before and After the Terrorist Attacks of September 11, 2001," declassified "to the maximum extent possible, consistent with national security." And in 2014, Congress directed the Director of National Intelligence (DNI) to conduct a declassification review of documents collected during the raid that killed Osama bin Laden, requiring a justification for materials that remain classified after the review. Executive Order 13526 The current standards for classifying and declassifying information were last amended on December 29, 2009, in Executive Order 13526. Under these standards, the President, Vice President, agency heads, and any other officials designated by the President may classify information upon a determination that the unauthorized disclosure of such information could reasonably be expected to damage national security. Such information must be owned by, produced by, or under the control of the federal government, and must concern one of the following: military plans, weapons systems, or operations; foreign government information; intelligence activities, intelligence sources/methods, cryptology; foreign relations or foreign activities of the United States, including confidential sources; scientific, technological, or economic matters relating to national security; federal programs for safeguarding nuclear materials or facilities; vulnerabilities or capabilities of national security systems; or weapons of mass destruction. Information may be classified at one of three levels based on the amount of danger that its unauthorized disclosure could reasonably be expected to cause to national security. Information is classified as "Top Secret" if its unauthorized disclosure could reasonably be expected to cause "exceptionally grave damage" to national security. The standard for "Secret" information is "serious damage" to national security, while for "confidential" information the standard is "damage" to national security. Significantly, for each level, the original classifying officer must identify or describe the specific danger potentially presented by the information's disclosure. In case of significant doubt as to the need to classify information or the level of classification appropriate, the information is to remain unclassified or be classified at the lowest level of protection considered appropriate. The officer who originally classifies the information establishes a date for declassification based upon the expected duration of the information's sensitivity. If the office cannot set an earlier declassification date, then the information must be marked for declassification in 10 years' time or 25 years, depending on the sensitivity of the information. The deadline for declassification can be extended if the threat to national security still exists. Classified information is required to be declassified "as soon as it no longer meets the standards for classification." The original classifying agency has the authority to declassify information when the public interest in disclosure outweighs the need to protect that information. On December 31, 2006, and every year thereafter, all information that has been classified for 25 years or longer and has been determined to have "permanent historical value" under Title 44 of the U.S. Code will be automatically declassified, although agency heads can exempt from this requirement classified information that continues to be sensitive in a variety of specific areas. Agencies are required to review classification determinations upon a request for such a review that specifically identifies the materials so that the agency can locate them, unless the materials identified are part of an operational file exempt under the Freedom of Information Act (FOIA) or are the subject of pending litigation. This requirement does not apply to information that has undergone declassification review in the previous two years; information that is exempted from review under the National Security Act; or information classified by the incumbent President and staff, the Vice President and staff (in the performance of executive duties), commissions appointed by the President, or other entities within the executive office of the President that advise the President. Each agency that has classified information is required to establish a system for periodic declassification reviews. The National Archivist is required to establish a similar systemic review of classified information that has been transferred to the National Archives. Access to classified information is generally limited to those who demonstrate their eligibility to the relevant agency head, sign a nondisclosure agreement, and have a need to know the information. The need-to-know requirement can be waived, however, for former Presidents and Vice Presidents, historical researchers, and former policy-making officials who were appointed by the President or Vice President. The information being accessed may not be removed from the controlling agency's premises without permission. Each agency is required to establish systems for controlling the distribution of classified information. The Information Security Oversight Office (ISOO)—an office within the National Archives—is charged with overseeing compliance with the classification standards and promulgating directives to that end. ISOO is headed by a Director, who is appointed by the Archivist of the United States, and who has the authority to order declassification of information that, in the Director's view, is classified in violation of the aforementioned classification standards. In addition, there is an Interagency Security Classifications Appeals Panel (ISCAP), headed by the ISOO Director and made up of representatives of the heads of various agencies, including the Departments of Defense, Justice, and State, as well as the Central Intelligence Agency, and the National Archives. ISCAP is empowered to decide appeals of classifications challenges and to review automatic and mandatory declassifications. If the ISOO Director finds a violation of E.O. 13526 or its implementing directives, then the Director must notify the appropriate classifying agency so that corrective steps can be taken. Handling of Unauthorized Disclosures Under E.O. 13526, each respective agency is responsible for maintaining control over classified information it originates and is responsible for establishing uniform procedures to protect classified information and automated information systems in which classified information is stored or transmitted. Standards for safeguarding classified information, including the handling, storage, distribution, transmittal, and destruction of and accounting for classified information, are developed by the ISOO. Agencies that receive information classified elsewhere are not permitted to transfer the information further without approval from the classifying agency. Persons authorized to disseminate classified information outside the executive branch are required to ensure it receives protection equivalent to those required internally. In the event of a knowing, willful, or negligent unauthorized disclosure (or any such action that could reasonably be expected to result in an unauthorized disclosure), the agency head or senior agency official is required to notify ISOO and to "take appropriate and prompt corrective action." Officers and employees of the United States (including contractors, licensees, etc.) who commit a violation are subject to sanctions that can range from reprimand to termination. Executive Order 12333, United States Intelligence Activities, spells out the responsibilities of members of the Intelligence Community for the protection of intelligence information, including intelligence sources and methods. Under Section 1.7 of E.O. 12333, heads of departments and agencies with organizations in the Intelligence Community (or the heads of such organizations, if appropriate) must report possible violations of federal criminal laws to the Attorney General "in a manner consistent with the protection of intelligence sources and methods." Information Security Oversight Office ISOO Directive No. 1 (32 C.F.R. Part 2001) provides further direction for agencies with responsibilities for safeguarding classified information. Section 2001.41 states: Authorized persons who have access to classified information are responsible for: (a) Protecting it from persons without authorized access to that information, to include securing it in approved equipment or facilities whenever it is not under the direct control of an authorized person; (b) Meeting safeguarding requirements prescribed by the agency head; and (c) Ensuring that classified information is not communicated over unsecured voice or data circuits, in public conveyances or places, or in any other manner that permits interception by unauthorized persons. Section 2001.45 of ISOO Directive No. 1 requires agency heads to establish a system of appropriate control measures to limit access to classified information to authorized persons. Section 2001.46 requires that classified information is transmitted and received in an authorized manner that facilitates detection of tampering and precludes inadvertent access. Persons who transmit classified information are responsible for ensuring that the intended recipients are authorized to receive classified information and have the capacity to store classified information appropriately. Documents classified "Top Secret" that are physically transmitted outside secure facilities must be properly marked and wrapped in two layers to conceal the contents, and must remain under the constant and continuous protection of an authorized courier. In addition to the methods prescribed for the outside transmittal of Top Secret documents, documents classified at Secret or Confidential levels may be mailed in accordance with the prescribed procedures. Agency heads are required to establish procedures for receiving classified information in a manner that precludes unauthorized access, provides for detection of tampering and confirmation of contents, and ensures the timely acknowledgment of the receipt (in the case of Top Secret and Secret information). Section 2001.48 prescribes measures to be taken in the event of loss, possible compromise, or unauthorized disclosure. It states: "Any person who has knowledge that classified information has been or may have been lost, possibly compromised or disclosed to an unauthorized person(s) shall immediately report the circumstances to an official designated for this purpose." Agency heads are required to establish appropriate procedures to conduct an inquiry or investigation into the loss, possible compromise or unauthorized disclosure of classified information, in order to implement "appropriate corrective actions" and to "ascertain the degree of damage to national security." The department or agency in which the compromise occurred must also advise any other government agency or foreign government agency whose interests are involved of the circumstances and findings that affect their information or interests. Agency heads are to establish procedures to ensure coordination with legal counsel in any case where a formal disciplinary action beyond a reprimand is contemplated against a person believed responsible for the unauthorized disclosure of classified information. Whenever a criminal violation appears to have occurred and a criminal prosecution is contemplated, agency heads are to ensure coordination with the Department of Justice and the legal counsel of the agency where the individual believed to be responsible is assigned or employed. ISOO must be notified in case of a violation that (1) is reported to congressional oversight committees; (2) may attract significant public attention; (3) involves large amounts of classified information; or (4) reveals a potential systemic weakness in security practices. Intelligence Community The most recent intelligence community directives related to the safeguarding of classified information appear to be Intelligence Community Directive (ICD) 700, Protection of National Intelligence, effective June 7, 2012; ICD 701, Security Policy Directive for Unauthorized Disclosures of Classified Information, effective March 14, 2007; and ICD 703, Protection of Classified National Intelligence, Including Sensitive Compartmented Information, effective June 21, 2013. Damage assessments in the event of an unauthorized disclosure or compromise of classified national intelligence are governed by ICD 732, effective June 27, 2014. ICD 700 mandates an integration of counterintelligence and security functions for the purpose of protecting national intelligence and sensitive information and, among other things, to strengthen "deterrence, detection, and mitigation of insider threats, defined as personnel who use their authorized access to do harm to the security of the US through espionage, terrorism, unauthorized disclosure of information, or through the loss or degradation of resources or capabilities." Under ICD 701, Senior Officials of the Intelligence Community (SOICs) are to promptly notify the Director of National Intelligence (DNI) and, if appropriate, law enforcement authorities of any actual or suspected unauthorized disclosure of classified information, including any media leak, that is likely to cause damage to national security interests, unless the disclosure is the subject of a counterespionage or counterintelligence investigation. Disclosures to be reported include: Unauthorized disclosure to an international organization, foreign power, agent of a foreign power, or terrorist organization; National intelligence activities or information that may be at risk of appearing in the public media, either foreign or domestic, without official authorization; Loss or compromise of classified information that poses a risk to human life; Loss or compromise of classified information that is indicative of a systemic compromise; Loss or compromise of classified information storage media or equipment; Discovery of clandestine surveillance and listening devices; Loss or compromise of classified information revealing U.S. or a foreign intelligence partner's intelligence operations or locations, or impairing foreign relations; Such other disclosures of classified information that could adversely affect activities related to US national security; and Loss or compromise of classified information revealing intelligence sources or methods, US intelligence requirements, capabilities and relationships with the US Government. Upon determining that a compromise meeting the above reporting criteria has or may have occurred, the SOIC is required promptly to report it to the DNI, through the Special Security Center (SSC), and to any other element with responsibility for the material at issue. The SOIC is then required to provide updated reports as appropriate (or as directed). This process occurs in tandem with any required reporting to law enforcement authorities. The required formal notification to the DNI is to include a complete statement of the facts, the scope of the unauthorized disclosure, sources and methods that may be at risk, the potential effect of the disclosure on national security, and corrective or mitigating actions. SOICs are further required to identify all factors that contributed to the compromise of classified information and take corrective action or make recommendations to the DNI. Department of Defense Department of Defense Directive 5210.50, "Management of Serious Security Incidents Involving Classified Information" (October 27, 2014), prescribes policy and responsibilities for handling unauthorized disclosures of classified information to the public and other serious security incidents. More detailed procedures governing specific types of information possibly compromised are found in DOD Manual 5200.01, Volume 3, Enclosure 6, "Security Incidents Involving Classified Information," February 24, 2012. In the event of a known or suspected disclosure of classified information, the heads of DOD components must take prompt action to decide the nature and circumstances of the disclosure, determine the extent of damage to national security, and take appropriate corrective action. If the inquiry or investigation turns up information suggestive of a criminal or counterintelligence nature, component heads are to cease investigation pending coordination with the relevant Deputy Chief Information Officer (DCIO) or Defense Counter-Intelligence (CI) component. Security inquiries are to be initiated and completed within 10 duty days unless an extension is required. The inquiry is aimed at discovering: (a) When, where, and how did the incident occur? What persons, situations, or conditions caused or contributed to the incident? (b) Was classified information compromised? (c) If a compromise occurred, what specific classified information and/or material was involved? What is the classification level of the information disclosed? (d) If classified material is alleged to have been lost, what steps were taken to locate the material? (e) Was the information properly classified? (f) Was the information officially released? (g) In cases of compromise involving the public media: 1. In what specific media article, program, book, Internet posting or other item did the classified information appear? 2. To what extent was the compromised information disseminated or circulated? 3. Would further inquiry increase the damage caused by the compromise? (h) Are there any leads to be investigated that might lead to identifying the person(s) responsible for the compromise? (i) If there was no compromise, and if the incident was unintentional or inadvertent, was there a specific failure to comply with established security practices and procedures that could lead to compromise if left uncorrected and/or is there a weakness or vulnerability in established security practices and procedures that could result in a compromise if left uncorrected? What corrective action is required? Section 7(f) lists factors for determining whether to initiate an additional investigation by a DCIO or the Department of Justice (DOJ) in the event classified information appears in the public media: The accuracy of the information disclosed. The damage to national security caused by the disclosure and whether there were compromises regarding sensitive aspects of current classified projects, intelligence sources, or intelligence methods. The extent to which the disclosed information was circulated, both within and outside the Department of Defense, and the number of persons known to have access to it. The degree to which an investigation shall increase the damage caused by the disclosure. The existence of any investigative leads. The reasonable expectation of repeated disclosures. If classified DOD information appears in a newspaper or other media, the head of the appropriate DOD component is responsible for the preparation of a "DOJ Media Leak Questionnaire" to submit to the Under Secretary of Defense for Intelligence, who prepares a letter for the Chief, Internal Security Section of the Criminal Division at the Department of Justice. The following eleven questions are to be promptly and fully addressed: Date and identity of the media source (article, blog, television, or other oral presentation) containing classified information. Specific statement(s) that are classified, and whether the information is properly classified. Whether disclosed information is accurate. Whether the information came from a specific document, and if so, the originating office and person responsible for its security. Extent of official circulation of the information. Whether information has been the subject of prior official release. Whether pre-publication clearance or release was sought. Whether sufficient information or background data has been published officially or in the press to make educated speculation on the matter possible. Whether information is to be made available for use in a criminal prosecution and the person competent to testify on its classification. Whether information has been considered for declassification. The effect the disclosure of the classified data might have on the national defense. Department of State Information security at the State Department is governed by 12 FAM 500 and 600. The Bureau of Administration is responsible for implementing E.O. 13526 as it applies to the classification and declassification of material, the marking of classified material, and relevant training and guidance. The Bureau of Diplomatic Security (DS) is responsible for protecting classified information and special access programs. Senior agency officials have the primary responsibility for overseeing their respective agency's information security program, while supervisors are charged with safeguarding classified information within their organizational units. Individual employees having access to classified material are responsible for maintaining its security. Security incidents are to be reported through the appropriate security officer to DS by filling out a standard form. The employee suspected of having caused the incident is given an opportunity to provide a statement of defense or mitigating circumstances, after which the incident is referred to his or her supervisor and to DS. DS is responsible for evaluating security incidents and performing final adjudication of them and initiation of any further action deemed necessary. Investigations of loss, unauthorized disclosure, or serious compromise of classified information are covered in 12 FAM 228.4 and are the responsibility of the Professional Responsibility Division (DS/ICI/PR) of the Office of Investigations and Counterintelligence. In the event of a "media leak" of classified information, the originating agency is to undertake an initial investigation to determine if any other agency had access to the information, and if necessary request that such receiving agency conduct an appropriate investigation into the unauthorized disclosure. The manual notes that DOJ may decide to prosecute those who disclose classified information without authority, but does not provide a list of reporting criteria. Penalties for Unauthorized Disclosure In addition to administrative penalties agencies may employ to enforce information security, there are several statutory provisions that address the protection of classified information as such, but only certain types of information or in specific situations. There is no blanket prohibition on the unauthorized disclosure of classified information. The Espionage Act itself does not mention classified information, but prohibits transmittal of national defense information with the relevant intent or state of mind. Criminal Penalties Generally, federal law prescribes a prison sentence of no more than a year and/or a $1,000 fine for officers and employees of the federal government who knowingly remove classified material without the authority to do so and with the intention of keeping that material at an unauthorized location. Stiffer penalties—fines of up to $10,000 and imprisonment for up to 10 years—attach when a federal employee transmits classified information to anyone that the employee has reason to believe is an agent of a foreign government. A fine and a 10-year prison term also await anyone, government employee or not, who publishes, makes available to an unauthorized person, or otherwise uses to the United States' detriment classified information regarding the codes, cryptography, and communications intelligence utilized by the United States or a foreign government. Finally, the disclosure of classified information that reveals any information identifying a covert agent, when done intentionally by a person with authorized access to such identifying information, is punishable by imprisonment for up to 15 years. A similar disclosure by one who learns the identity of a covert agent as a result of having authorized access to classified information is punishable by not more than 10 years' imprisonment. Under the same provision, a person who undertakes a "pattern of activities intended to identify and expose covert agents" with reason to believe such activities would impair U.S. foreign intelligence activities, and who then discloses the identities uncovered as a result is subject to three years' imprisonment, whether or not violator has access to classified information. Civil Penalties and Other Measures In addition to the criminal penalties outlined above, the executive branch employs numerous means of deterring unauthorized disclosures by government personnel using administrative measures based on terms of employment contracts. The agency may impose disciplinary action or revoke a person's security clearance. The revocation of a security clearance is usually not reviewable by the Merit Systems Protection Board and may mean the loss of government employment. Government employees may also be subject to monetary penalties for disclosing classified information. Violators of the Espionage Act and the Atomic Energy Act provisions may additionally be subject to loss of their retirement pay. Agencies also rely on contractual agreements with employees, who typically must sign non-disclosure agreements prior to obtaining access to classified information, sometimes agreeing to submit all materials that the employee desires to publish to a review by the agency. The Supreme Court enforced such a contract against a former employee of the Central Intelligence Agency (CIA), upholding the government's imposition of a constructive trust on the profits of a book the employee sought to publish without first submitting it to CIA for review. In 1986, the Espionage Act was amended to provide for the forfeiture of any property derived from or used in the commission of an offense that violates the Espionage Act. Violators of the Atomic Energy Act may be subjected to a civil penalty of up to $100,000 for each violation of Energy Department regulations regarding dissemination of unclassified information about nuclear facilities. Under some circumstances, the government can also use injunctions to prevent disclosures of information. In at least one instance, a court upheld an injunction against a former employee's publishing of information learned through access to classified information. The Supreme Court also upheld the State Department's revocation of passports for overseas travel by persons planning to expose U.S. covert intelligence agents, despite the fact that the purpose was to disrupt U.S. intelligence activities rather than to assist a foreign government. Declassification vs. Leaks and "Instant Declassification" As noted above, E.O. 13526 sets the official procedures for the declassification of information. Once information is declassified, it may be released to persons without a security clearance. Leaks, by contrast, might be defined as the release of classified information to persons without a security clearance, typically journalists. In 2012, some allegedly high-profile leaks of information regarding sensitive covert operations in news stories that seemed to some to portray the Obama Administration in a favorable light raised questions regarding the practice of "instant declassification," or whether disclosure of classified information to journalists may ever be said to be an "authorized disclosure" by a senior official. The processes for declassification set forth in E.O. 13526 seem to presuppose that agencies and classifying officials will not have any need or desire to disclose classified information in their possession other than to comply with the regulations. Yet it has long been noted that there seems to be an informal process for "instant declassification" of information whose release to the public serves an immediate need. As Representative William Moorhead, at the time chairman of the Foreign Operations and Government Information Subcommittee of the House Government Operations Committee, stated in 1974: Critics of the present system of handling classified information within the Executive Branch point to an obvious double standard. On one hand, the full power of the Government's legal system is exercised against certain newspapers for publishing portions of the Pentagon Papers and against someone like Daniel Ellsberg for his alleged role in their being made public. This is contrasted with other actions by top Executive officials who utilize the technique of "instant declassification" of information they want leaked. Sometimes it is an "off-the-record" press briefing or "backgrounders" that becomes "on-the-record" at the conclusion of the briefing or at some future politically strategic time. Such Executive Branch leaks may be planted with friendly news columnists. Or, the President himself may exercise his prerogative as Commander in Chief to declassify specific information in an address to the Nation or in a message to the Congress seeking additional funds for a weapons system. E.O. 13526 does not address an informal procedure for releasing classified information. Section 1.1 of the E.O. provides that "[c]lassified information shall not be declassified automatically as a result of any unauthorized disclosure of identical or similar information," but does not address what happens in the event of a disclosure that was in fact authorized. By definition, classified information is designated as classified based on whether its unauthorized disclosure can reasonably be expected to cause a certain level of damage to national security. This definition may be read to suggest that disclosures may be authorized under such circumstances when no damage to national security is reasonably expected. Nothing in the order provides explicit authority to release classified information that exists apart from the authority to declassify, but it is possible that such discretionary authority is recognized to release information outside the community of authorized holders without formally declassifying it. Part 4 of the E.O. 13526 describes safeguarding of classified information from unauthorized disclosure and preventing access to such information by "unauthorized persons." Most of the provisions appear to envision classified documents or communications and storage devices used for classified information rather than the spoken word. Section 4.1(g) requires agency heads and the Director of National Intelligence to "establish controls to ensure that classified information is used, processed, stored, reproduced, transmitted, and destroyed under conditions that provide adequate protection and prevent access by unauthorized persons." If "transmitted" is interpreted to include oral dissemination and "unauthorized persons" is interpreted to mean persons who do not meet the criteria set forth in Section 4.1(a), then it would seem that agency heads who approve leaks could be in breach of their responsibilities under the Order. Moreover, there is a provision for "emergency disclosure" of classified information "when necessary to respond to an imminent threat to life or in defense of the homeland" to "an individual or individuals who are otherwise not eligible for access." Section 4.2(b) provides that such disclosures must be in accordance with implementing regulations or procedures the classifying agency implements; must be undertaken in such a way as to minimize the information disclosed and the number of individuals who receive it; and must be reported promptly to the originator. Information disclosed under this provision is not deemed to be declassified. The existence of this provision could be read to cut against an interpretation that permits selected release of classified information to reporters for broader dissemination. However, it could also be read to allow a different procedure by which an agency head, who is the original classifying authority for the information at issue, might simply authorize remarks to the press that reference classified information in such a way as to minimize harm to national security. As a practical matter, however, there is seemingly little to stop agency heads and other high-ranking officials from releasing classified information to persons without a security clearance when it is seen as suiting government needs. The Attorney General has prosecutorial discretion to choose which leaks to prosecute. If, in fact, a case could be brought that a senior official has made or authorized the disclosure of classified information, successful prosecution under current laws may be difficult because the scienter requirement (i.e., guilty state of mind) is not likely to be met. The Espionage Act of 1917, for example, requires proof that the discloser has the intent or reason to believe the information will be used against the United States or to the benefit of a foreign nation. Although the nature and sensitivity of the information that was released are elements for the jury to decide, knowledge that the information is classified may be enough to persuade a court that damage to national security can be expected. However, in the event the disclosure was made or authorized by a person who has the authority to make such determinations—as to whether the information will be used against the United States or to the benefit of a foreign nation—it would seem likely that such deference would potentially result in not meeting the scienter requirement absent some proof of ill intent. For example, a belief on the part of a lower level official that a particular disclosure was authorized could serve as an effective defense to any prosecution, and could entitle the defendant to depose high level government officials in preparation for his or her defense. Executive branch policy appears to treat an official disclosure as a declassifying event, while non-attributed disclosures have no effect on the classification status of the information. For example, the Department of Defense instructs agency officials, in the event that classified information appears in the media, to neither confirm nor deny the accuracy of the information. The Under Secretary of Defense for Intelligence is then advised to "consult with the Assistant Secretary of Defense for Public Affairs and other officials having a primary interest in the information to determine if the information was officially released under proper authority." The regulation does not clarify what happens in the event the disclosure turns out to have been properly authorized. It appears no further action need be taken, whether to inform employees that the information no longer needs to be protected or to make annotations in classified records to reflect the newly declassified status of the information. In any event, any documents that contain that information potentially contain other classified information as well, in which case each such document would retain the highest level of classification applicable to information in the document. Thus, it seems unlikely that the authorized disclosure of classified information to the media would often result in the public release of any records. The Intelligence Authorization Act for FY2013, P.L. 112-277 (2013) section 504 requires a government official who approves a disclosure of classified information to the media, or to another person for publication, to first report the decision and other matters related to the disclosure to the congressional intelligence committees. The provision applies to "national intelligence or intelligence related to national security" that is classified or has been declassified for the purpose of making the disclosure, where the disclosure is made by a government officer, employee, or contractor. According to the original committee report, the reporting is intended to keep the intelligence committees apprised of expected media disclosures of relevant classified information and to assist in distinguishing between "authorized disclosures" and "unauthorized leaks." Originally scheduled to sunset after a year, the provision was made permanent in the Intelligence Authorization Act for 2014. Any reports to Congress of authorized disclosures submitted pursuant to this provision apparently are classified. Insider Threat Risk Management In October 2011 President Obama issued Executive Order 13587, "Structural Reforms to Improve the Security of Classified Networks and the Responsible Sharing and Safeguarding of Classified Information." Among other measures, it established an interagency Insider Threat Task Force with a mandate to: develop a Government-wide program (insider threat program) for deterring, detecting, and mitigating insider threats, including the safeguarding of classified information from exploitation, compromise, or other unauthorized disclosure, taking into account risk levels, as well as the distinct needs, missions, and systems of individual agencies. This program shall include development of policies, objectives, and priorities for establishing and integrating security, counterintelligence, user audits and monitoring, and other safeguarding capabilities and practices within agencies. President Obama issued the resulting new policy and minimum standards for agencies in implementing their own insider threat programs in November 2012. Concerned about WikiLeaks and other disclosures of classified information by those with access, the 112 th Congress held at least two hearings on the topic of unauthorized disclosures of classified information. Congress also passed a measure as part of the National Defense Authorization Act for FY2012 to require the Defense Department to establish a "program for information sharing protection and insider threat mitigation for the information systems of the Department of Defense to detect unauthorized access to, use of, or transmission of classified or controlled unclassified information." The program is required to make use of both technology based solutions as well as a "governance structure and process" to integrate these technologies into existing security measures. As initially reported by the Senate Intelligence Committee, S. 3454 (112 th Cong.) contained a number of measures to address the disclosure of classified information by federal employees, whether authorized or not, especially if the disclosure were to the media. Opposition to these measures resulted in a manager's amendment to the bill with all but the reporting provision regarding authorized disclosures removed. Some of the measures that were eliminated from the bill involved restrictions on media access to government officials. One was a prohibition on federal officers, employees, and contractors who have security clearances, including some who have left government service within the prior year, from entering into agreements with the media to provide analysis or commentary on matters related to classified intelligence activities or intelligence related to national security. Another would have limited the individuals authorized to provide background or off-the-record information to the media regarding intelligence activities to the Director and Deputy Directors or their equivalents of each agency and designated public affairs officers. Another would have required the Director of National Intelligence to prescribe regulations regarding the interaction of cleared personnel with the media. Such persons would have been required to report all contacts with the media to the appropriate security office. Also eliminated was a prohibition on federal officers, employees, and contractors from possessing a security clearance after having made any unauthorized disclosure regarding the existence of, or classified details relating to, a covert action as defined in 50 U.S.C. Section 413(b) (now classified at 50 U.S.C. Section 3091). The insider threat issue was revisited in the Intelligence Authorization Act for FY2016, passed as Division M of the Consolidated Appropriations Act of 2016, P.L. 114-113 (2015). Section 306 added a requirement to Title 5, U.S. Code , for the DNI to direct agencies to each establish an "enhanced personnel security program" to integrate a broader data set into reassessments of the continuing eligibility of personnel to hold security clearances or sensitive positions. Specifically, The enhanced personnel security program of an agency shall integrate relevant and appropriate information from various sources, including government, publicly available and commercial data sources, consumer reporting agencies, social media and such other sources as determined by the Director of National Intelligence. The provision requires the agency programs to conduct random automated record checks of the selected sources of data at least twice within a five-year period for each covered person, unless that individual is subject to more frequent reviews. The deadline to implement the programs is five years after enactment (which will occur December 15, 2020) or the date on which the backlog of overdue periodic reinvestigations is eliminated, as determined by DNI.

This report provides an overview of the relationship between executive and legislative authority over national security information. It summarizes the current laws that form the legal framework protecting classified information, including current executive orders and some agency regulations pertaining to the handling of unauthorized disclosures of classified information by government officers and employees. The report also summarizes criminal laws that pertain specifically to the unauthorized disclosure of classified information, as well as civil and administrative penalties. Finally, the report describes some recent developments in executive branch security policies and relevant legislative activity.

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Overview and Key Questions The Lord's Resistance Army (LRA) is a small yet vicious armed group that originated in northern Uganda in 1987. Founded and led by Joseph Kony, the LRA currently operates in the remote border areas between the Central African Republic (CAR), Democratic Republic of Congo (DRC), South Sudan, and Sudan. The LRA's actions—which include massacres, abductions (notoriously of children), sexual assault, and looting—have caused humanitarian suffering and instability. The group is active in a region marked by other complex security and humanitarian challenges, and the conflict has eluded a negotiated or military solution. The Ugandan military has prevented the LRA from operating within Uganda since roughly 2005, and LRA's numbers have greatly declined from thousands of fighters in the late 1990s and early 2000s to a reported 150-200 "core combatants." Still, according to the nongovernmental LRA Crisis Tracker , the LRA has killed over 2,900 civilians and abducted more than 6,000 since December 2008, when an attempted peace process with the group broke down (see " Background on the LRA " below). In May 2010, Congress enacted the Lord's Resistance Army Disarmament and Northern Uganda Recovery Act of 2009 ( P.L. 111-172 ), which states that it is U.S. policy "to work with regional governments toward a comprehensive and lasting resolution to the conflict," and authorizes and calls for a range of U.S. humanitarian, security, and development responses. The act followed more than a decade of congressional activity related to the LRA, and it passed with 201 House cosponsors and 64 Senate cosponsors. The Administration's approach to the LRA, submitted to Congress in November 2010 as required under P.L. 111-172 , is organized around four broad objectives that closely respond to provisions of the legislation (see " U.S. Policy "). More broadly, the Administration has expressed a commitment to preventing and responding to "mass atrocities," including in its 2010 National Security Strategy and a Presidential Study Directive (PSD-10) issued in August 2011. Administration officials have cited U.S. support for efforts to counter the LRA as an example of their commitment to atrocity prevention. In October 2011, the Obama Administration announced the deployment of about 100 U.S. military personnel to act as advisors in support of Ugandan-led military efforts to capture or kill senior LRA leaders. The United States has provided significant logistical support for Uganda's counter-LRA operations beyond its borders since late 2008. Members of Congress have expressed support for the U.S. advisor deployment in statements and legislation, though some initially stated concerns about its duration, cost, unintended consequences, and the precedent that it might set. While P.L. 111-172 did not specifically authorize U.S. troop deployments, it directed U.S. policy to provide "political, economic, military, and intelligence support for viable multilateral efforts ... to apprehend or remove Joseph Kony and his top commanders from the battlefield," and the Administration has portrayed the counter-LRA deployment as consistent with congressional intent. Campaigns by U.S.-based advocacy groups have contributed to U.S. policymakers' interest in, and U.S. public awareness of, the LRA issue. In addition to the United States, other international actors have devoted resources to responding to the LRA, including African governments; United Nations (U.N.) agencies, political missions, and peacekeeping operations; the African Union (AU); and the European Union (EU). In 2012, the AU launched a Regional Task Force (AU-RTF) against the LRA, which is led by Uganda and has subsumed previous Ugandan, South Sudanese, and DRC operations. However, the AU-RTF has not reached its authorized troop strength of 5,000. Although the Ugandan military (Ugandan People's Defense Force or UPDF) is regarded as the most effective of the African forces involved, some observers have questioned its capacity and commitment to complete the mission. More broadly, the governments of LRA-affected countries each face other, arguably more vital, priorities with regard to their domestic security and to each other. Notably, internal security and humanitarian crises have burgeoned in South Sudan and the Central African Republic since 2013. The LRA's strength has significantly decreased since the U.S. advisors first deployed, and several senior LRA figures have been captured or killed by Ugandan troops in U.S.-supported operations. U.S. funding has also assisted with "early-warning" mechanisms in affected communities, the disarmament and reintegration of ex-LRA combatants, and other activities designed to improve civilian protection and lessen the group's strength. Despite these successes, Kony apparently remains at large, and the LRA "has demonstrated a remarkable ability to survive." According to U.S. Director of National Intelligence James Clapper, who testified to Congress in 2014 that regional operations had the LRA "on the run and in survival mode," "Joseph Kony is often on the move and has long been able to elude capture. Getting a 'fix' on his location will remain difficult in this very remote part of the world." In early 2015, Clapper testified that the LRA continued to "display great agility" and that "even in its weakened state, probably has the ability to regenerate if counter-LRA operations are reduced." It is difficult to assess whether the current approach of seeking to remove the remaining top commanders through military operations, in combination with efforts to lure LRA rank-and-file fighters into deserting, can fully eradicate the group. Analysts who follow the activities of the LRA agree that it is a vicious, brutal group that has caused great human suffering and instability. Where some disagree is over the extent to which the LRA poses a threat to core U.S. interests, if at all, and over the appropriate level and tactics of the U.S. response to the group. These questions are particularly pertinent in the context of the deployment of U.S. military personnel and assets. Key questions include What is, or should be, the relative priority of counter-LRA activities compared to other humanitarian, national security, and budgetary goals? What is the impetus for U.S. action, when compared to other foreign policy concerns? What is the appropriate level of funding for LRA-related activities, both military and nonmilitary? What are the benchmarks for success and/or withdrawal of U.S. forces? How are regional actors and local communities likely to react to an eventual withdrawal? If Uganda, the key military actor in counter-LRA efforts, were to withdraw before the key objectives of the Administration's strategy are achieved, how would that affect the U.S. response to the LRA? What more, if anything, should be done to advance civilian protection, support the reintegration of ex-LRA combatants, address humanitarian needs, and achieve other goals laid out in P.L. 111-172 ? To what extent, with U.S. support, are regional militaries willing and able to defeat the LRA? What is the likely impact of a "decapitation" approach on the LRA's activities and the humanitarian situation in affected areas? What are the potential unintended consequences, if any, of U.S. support to the Ugandan or South Sudanese forces participating in counter-LRA operations, in terms of regional relations and U.S. diplomatic influence? Recent Trends in LRA Activity LRA members reportedly travel in small, highly mobile bands, which include abductees forced to act as porters, scouts, sex slaves, and junior fighters. While senior command positions appear to remain in the hands of Ugandan nationals, the group's lower ranks presumably include individuals from countries more recently affected by the LRA. The level of command and control linking LRA leaders to each other and to their fighters is uncertain. The LRA's capacity appears to have diminished as Ugandan, Congolese, and South Sudanese troops, supported by the United States, have pursued operations against LRA cells, and as mid- and senior-ranking group figures have deserted or been captured or killed. Civilian killings by the group have decreased markedly in recent years, from 1,200 in 2009 to fewer than 20 in 2014. The number of people displaced as a direct result of LRA attacks, or out of fear of coming under attack by the LRA, has also reportedly declined. As of mid-2015, almost 200,000 people were estimated to be internally displaced or living as refugees in CAR, DRC, and South Sudan due to the LRA, compared to over 326,000 reportedly displaced as of December 2013. Recent Ugandan military estimates put the LRA's strength at about 200-300 fighters, down from a peak of over 2,000 in the late 1990s and early 2000s. Advocates of a continuing U.S. role in efforts to counter the LRA nevertheless warn that the group continues to pose a threat and could rebound, reporting that attacks and abductions attributed to the group increased in 2014, a trend that has continued into 2015, reversing a decline in 2011-2013. The most recent report of the U.N. Secretary-General on the situation in Central Africa raises concern with the reported movement of "the bulk of the LRA" into DRC, where a majority of reported LRA attacks occurred in 2015, according to LRA Crisis Tracker. Most of those incidents, primarily looting and/or abductions, took place in and around Garamba National Park, on the border with South Sudan. The remote, densely forested park, roughly the size of Delaware, had been a refuge for Kony and his fighters from 2006 through 2008, until they were scattered by a Ugandan-led regional offensive. The park's elephant population has increasingly been targeted by poachers, reportedly including LRA fighters—park rangers report that more than 170 elephants, more than 10% of the park's population, have been killed since the beginning of 2014. LRA Crisis Tracker analysts have warned that the LRA is likely exploiting instability in CAR to resupply its forces through looting and trafficking in illegal ivory, gold, and diamonds. U.S.-supported Ugandan operations in CAR ceased for several months in 2013 following the overthrow of the CAR government by a rebel movement, due to political and security challenges. Although Ugandan operations subsequently recommenced, reports suggest that the LRA is operating to the north and west of previous areas of activity in CAR. These areas may be beyond the reach of Ugandan troops, who are based in the far southeast of the country. In 2013, independent analysts reported that the LRA had established a safe-haven in Kafia Kingi, a disputed area on the border between Sudan and South Sudan. These analysts posited that the Sudanese government and/or military elements were purposefully allowing the LRA to operate in the area, noting a history of prior Sudanese government support to the LRA (see "Sudan and the LRA" textbox, below). In 2013, Ugandan troops serving in the AU-RTF reportedly entered Kafia Kingi and destroyed the LRA's bases there. However, in May 2014, the U.N. Secretary-General reported to the U.N. Security Council that "credible sources suggest that LRA leader Joseph Kony and senior LRA commanders have recently returned to seek safe haven in Sudanese-controlled areas" of Kafia Kingi, despite Sudanese government denials. According to recent media and nongovernmental reports, the LRA is using Kafia Kingi as a transit point for ivory poached from DRC and smuggled through eastern CAR for trafficking onward to Asia. In 2015, a State Department official stated in a National Geographic interview, "It's not a secret to anyone that Kony's in Sudan. It's his sanctuary." At the invitation of the Sudanese government, the AU Special Envoy for LRA Issues led a delegation to Khartoum in September 2015 to discuss the Kafia Kingi allegations. They have agreed to send a joint fact finding mission to the area. International humanitarian assistance to LRA-affected areas increased significantly between 2009 and 2013. However, according to the U.N. Office for the Coordination of Humanitarian Affairs (UNOCHA), despite donor efforts, "only a few humanitarian agencies and nongovernmental organizations [are] able to provide assistance in remote areas where no state institutions are present." Insecurity in CAR and South Sudan appears to have further reduced access since 2013, while nongovernmental organizations have begun to "phase out" from some LRA-affected areas of DRC as the number of displaced persons continues to decrease. Background on the LRA The LRA emerged in northern Uganda in 1987, the year after Yoweri Museveni, a rebel leader from southern Uganda, seized power, ending nearly a decade of rule by leaders from the north. Joseph Kony, then in his 20s, initially laid claim to the legacy of Alice Lakwena, an ethnic Acholi spiritual leader from northern Uganda. Lakwena was a key figure among northern rebel factions seeking to overthrow the Museveni government, but her Holy Spirit Movement (HSM) was defeated by the Ugandan military in 1987. Kony, reportedly a relative of Lakwena's, then founded the LRA. The group, primarily composed of ethnic Acholis, targeted civilians in Acholi areas of Uganda and sought support and protection from the government of Sudan. In the late 1980s, the Museveni government recruited Acholis into government-backed civilian defense forces, which led the LRA to escalate its attacks against Acholi civilians and contributed to deep distrust between the government and northern communities. Some analysts contend that President Museveni initially had little interest in defeating the LRA, either because his government and the UPDF were able to exploit the conflict for political and economic gain, or because the conflict was perceived as a way to further marginalize Acholis, who had dominated the Ugandan armed forces prior to Museveni. Ultimately, the Ugandan military succeeded in pushing the LRA out of the country in 2005-2006. LRA leaders then moved elsewhere in the region, notably to DRC and then to CAR. The LRA's current area of activity is vast and characterized by an extremely minimal government influence and a limited international humanitarian presence. The LRA has periodically laid out vague political demands, and in some ways its emergence and nearly 20-year sustainment in northern Uganda can be understood as a product of long-standing northern grievances against perceived southern political domination and economic neglect. The LRA has also fed off of proxy struggles between Sudan and Uganda. Yet the group does not have a clear political or economic agenda, and its operations appear to be motivated by little more than the infliction of violence and the protection of senior leaders. The LRA at one time had a civilian wing, which called itself the Lord's Resistance Movement and framed its demands as ethno-regional socioeconomic and political grievances, but its influence and ability to make commitments on Kony's behalf appeared limited. The LRA has a cult-like dimension: Kony claims to receive commands from traditional spirits, and has also at times cloaked his rhetoric in Christian and messianic terms. LRA commanders are infamous for mutilating and brutally killing their victims, and they rely on the mass abduction of children, who are often brutalized and forced to commit atrocities, to replenish their ranks. Regional and International Efforts to End the LRA In the 1990s, the Ugandan government conducted counterinsurgency operations against the LRA in the north and provided support to local anti-LRA militia groups. Uganda also sought to target LRA rear bases in what was then southern Sudan, which were established with reported Sudanese government support. Ugandan-led military operations continued as a new semi-autonomous government of Southern Sudan took shape in 2005, with the support of Southern authorities. In 2005, following a request by the Ugandan government, the International Criminal Court (ICC) unsealed warrants for five LRA commanders, including Kony. Three have since reportedly died—most recently, Okot Odhiambo, in late 2013. A fourth, Dominic Ongwen, surrendered to U.S. forces in CAR in January 2015 and has been delivered to the ICC at The Hague, where he faces seven counts of war crimes and crimes against humanity. Kony is reportedly still alive, though some defectors have alleged that his health is in decline. Between 2006 and 2008, the LRA and the Ugandan government engaged in internationally-backed peace talks, known as the Juba peace process, mediated by the then-semi-autonomous Government of Southern Sudan. As part of the process, LRA combatants were offered amnesty and senior leaders were given security guarantees. The government also committed to increasing development aid, security, and participation in government for northern communities. The talks broke down in 2008 when Kony refused to sign a final agreement. The ICC warrants, which Kony wanted repealed, were seen by some analysts as a key stumbling block in the negotiations. Others, however, doubted Kony's sincerity, noting that Kony seemed "to engage in peace talks sporadically as a tactic to reduce military pressure on the LRA and garner time and space to regroup his forces." President Museveni also appeared to oscillate between support for the talks and preference for a military offensive against the group. In late 2008, the UPDF, with the permission of Congolese and Southern Sudanese authorities, initiated "Operation Lightning Thunder" (OLT), a campaign intended to capture or kill senior LRA leaders in northeastern DRC, where they had established bases. The United States provided equipment, intelligence, and logistical assistance to the UPDF prior to the launch of the operation. The operation failed to kill or capture Kony; instead, the LRA splintered into small groups and launched brutal reprisals against civilians. Uganda was stridently criticized by human rights groups for alleged poor planning, intelligence leaks, and failure to protect civilians in the operation's aftermath. The UPDF subsequently deployed to LRA-affected regions of South Sudan and CAR, with host governments' permission and renewed U.S. support. Uganda has sought to encourage Ugandan nationals within the LRA to desert and return to their country through information operations, internationally assisted disarmament and reintegration programs, and the passage of an Amnesty Act in 2000, which has been applied to nearly all LRA combatants. Over 27,000 ex-LRA members have reportedly been granted amnesty under the law, though it is not clear how many were combatants. (The Ugandan government extended the amnesty in June 2015 for another two years .) Many ex-LRA combatants who have returned to Uganda reportedly remain in poverty, however, and are subject to trauma and social ostracizing. Some ex-combatants are recruited by the UPDF to assist with military operations. Uganda has also passed legislation designed to enable it to try senior LRA commanders for war crimes—part of a long-term effort to assert jurisdiction over individuals sought by the ICC (although the LRA situation was referred to the ICC by Uganda). Ugandan officials and northern civic leaders have called for traditional justice and reconciliation mechanisms to help end the conflict and reintegrate LRA figures into their communities of origin. The LRA is present within the areas of operation of multiple U.N. peacekeeping operations. These have contributed to counter-LRA efforts, although the LRA is not the primary focus of their mandates. Notably, the U.N. Stabilization Mission in DRC (MONUSCO) has supported Congolese military units in counter-LRA operations and has facilitated regional military and intelligence coordination. Also key among MONUSCO's efforts are its disarmament, demobilization, reintegration, repatriation, and resettlement (DDRRR) programs for ex-LRA combatants. Many analysts believe that such programs are crucial for encouraging desertions. U.S. Policy The United States has supported efforts to counter the effects of the LRA for more than a decade. When the LRA was in Uganda, the United States provided humanitarian assistance along with aid in support of the social and economic recovery of the north. The United States has significantly increased its engagement since 2008, after the Juba peace talks broke down and the LRA became mobile throughout a wider swath of Central Africa. U.S. involvement in counter-LRA efforts is largely premised on the group's infliction of widespread human suffering. It is also tied to an expanding security partnership with Uganda. In addition to its counter-LRA operations, Uganda is the leading troop contributor to the U.S.-supported AU stabilization operation in Somalia (AMISOM), which is linked to U.S. counterterrorism objectives. The U.S. relationship with Uganda has been strained by the Ugandan government's repression of its gay and lesbian community, which the Administration has condemned, but security cooperation has continued. The Administration's Strategy to Support the Disarmament of the Lord's Resistance Army , submitted to Congress in 2010 as required in P.L. 111-172 , lays out four "strategic objectives": 1. the increased protection of civilians from LRA attacks; 2. the apprehension or "removal" of Kony and other senior LRA commanders; 3. the promotion of defections from the LRA and the disarmament, demobilization, and reintegration of remaining LRA combatants; and 4. the provision of humanitarian relief to LRA-affected communities. The multi-year Strategy emphasizes that the United States will "work with national governments and regional organizations" to accomplish these goals. At the same time, it acknowledges that governments in the region have competing priorities and that "the capabilities of national, regional, and multinational forces to provide protection against the LRA are limited." The agencies involved in implementation, which is coordinated by the National Security Council, include the State Department, the Defense Department, and the U.S. Agency for International Development (USAID), with support from the intelligence community. As part of its multi-faceted approach, the Administration has pressed regional governments, other donors, and multilateral entities such as U.N. missions and the AU to prioritize LRA-related efforts and to develop plans to coordinate such efforts. For example, the Administration has used the U.S. voice and vote in the U.N. Security Council to support U.N. peacekeeping operations in DRC, South Sudan, and CAR—which help to coordinate counter-LRA activities—as well as the U.N. Regional Office for Central Africa, a U.N. political mission whose mandate includes the LRA. In addition, U.S. diplomacy has sought to mediate and de-escalate disputes between host countries and the Ugandan military over the duration and purpose of UPDF deployments. The following sections describe key components of the U.S. response to the LRA. Logistical and Equipment Support for African Forces The United States has provided logistical support and equipment for African counter-LRA operations since late 2008, when the UPDF launched "Operation Lightning Thunder" against LRA camps in northeastern DRC. This support is separate from the U.S. advisor effort, described below. The UPDF remains the primary recipient of such support, even as the UPDF's operations are now part of the AU Regional Task Force. The UPDF operates from bases in CAR and South Sudan, and U.S. assistance includes payment for contract airlift, fuel, and trucks, as well as the transfer of equipment such as satellite phones, night vision goggles, signaling devices, hydration packs, and compact pickup trucks. The U.S. embassy in Uganda plays a key role in implementing and overseeing U.S. support to counter-LRA operations. Between 2009 and 2012, the State Department allocated over $56 million for supplies, equipment, and logistics support to African forces engaged in counter-LRA operations—primarily the UPDF—using Peacekeeping Operations (PKO) funds. Much of this funding was provided under the State Department's Africa Conflict Stabilization and Border Security (ACSBS) initiative, or by reprogramming funds initially appropriated for other countries and/or purposes. Starting in FY2012, Congress authorized the Department of Defense (DOD) to fund logistical support, supplies, and services for African counter-LRA operations (see " Legislation ," below), which has freed up State Department resources for other activities. (The PKO account is a key vehicle for State Department funding of counterterrorism and security sector reform efforts in Africa.) Such funding from DOD totaled $22.5 million in FY2012 and $17.7 million in FY2013, less than the authorized level of $35 million per year in those years. The decrease in the FY2013 total compared to FY2012 may be attributable to the temporary cessation of U.S.-supported counter-LRA operations in CAR in early 2013. Beginning in FY2014, Congress increased the authorized funding level up to $50 million through FY2017; DOD allocated approximately $25 million for the effort in both FY2014 and FY2015. In FY2011, DOD also used its "Section 1206" authority to provide $4.4 million in counter-LRA-related training and equipment to the UPDF. DOD has also supported counter-LRA operations with intelligence, surveillance, and reconnaissance assets, as authorized by Congress (see " Legislation "). Such support totaled over $41 million in FY2013 and $54 million in FY2014, according to DOD's budget requests. Deployment of U.S. Military Forces Starting in October 2011, approximately 100 U.S. military advisors deployed to Uganda and to LRA-affected areas of CAR, South Sudan, and DRC to assist the Ugandan military in conducting counter-LRA operations. The U.S. advisors have also provided some training to small teams of DRC and South Sudanese forces engaged in counter-LRA operations. (DRC authorities have largely prohibited Ugandan troops from conducting counter-LRA operations within DRC since 2011, due to political sensitivities as well as allegations of Ugandan military involvement in resource smuggling.) Although some U.S. forces are combat-equipped, their rules of engagement state that they will not directly engage LRA forces unless necessary for self-defense. The U.S. advisor effort is known as Operation Observant Compass, or OOC. In March 2014, the President notified Congress, "consistent with the War Powers Act," that he was deploying U.S. military aircraft to assist with counter-LRA operations, and that this would involve the deployment of additional military personnel to Uganda and LRA-affected countries to "principally operate and maintain U.S. aircraft to provide air mobility support to foreign partner forces." The President's notification stated that the total number of U.S. military personnel deployed to Africa for the counter-LRA mission would number between 280 and 300 when the aircraft were deployed. The request to deploy the military aircraft, known as CV-22 Ospreys, reportedly originated with DOD in response to perceived UPDF capability gaps. The cost of Operation Observant Compass (OOC), according to DOD's budget requests, totaled roughly $78 million in FY2013 and more than $98 million in FY2014. An FY2015 figure is not yet available. When U.S. advisors first deployed, then-Assistant Secretary of State for African Affairs Johnnie Carson stated that, "this is not an open-ended commitment; we will regularly review and assess whether the advisory effect is sufficiently enhancing our objectives to justify continued deployment." Administration officials have continued to express support for the operation, as have Members of Congress (see " Legislation " below). In April 2014, U.S. Africa Command (AFRICOM) Commander General David Rodriguez referred to the counter-LRA effort as "a good success story" as the LRA "continue[s] to get weaker every day," adding, "And we're going to continue to support the efforts of the African Union regional task force to finish this off." In 2015, he testified before Congress that U.S. involvement in the effort "has significantly decreased [Joseph Kony's] impact on any civilian population." Humanitarian Relief, Early Warning, and Encouragement of Desertions The United States is the largest bilateral donor of humanitarian assistance to LRA-affected populations in CAR, DRC, and South Sudan. Between 2010 and 2014, the United States provided over $87.2 million to support food security, health programs, economic initiatives, and other relief activities in LRA-affected areas. Such aid is not generally appropriated for specific countries, but is allocated during the year according to need. U.S. humanitarian assistance funding has supported food aid, agricultural assistance, humanitarian protection, health programs, and other relief activities. U.S. efforts are "closely coordinated" with other donors, such as the European Union and United Kingdom. Despite reported improvements in donor coordination, however, humanitarian relief efforts continue to be hampered by poor infrastructure and insecurity in LRA-affected areas. The State Department and USAID have also provided funding for efforts to increase communication between and among rural communities affected by LRA raids and attacks. In support of early warning mechanisms, the State Department and USAID have funded communication networks, such as high-frequency radios, cell phone towers, and community radio networks, in LRA-affected areas of CAR and DRC. In DRC, cell phone towers have been financed through a public-private partnership with Vodacom. The United States is working with U.N. peacekeeping missions, the AU, and regional governments to facilitate the return, repatriation, and reintegration of those who desert the LRA's ranks. According to the State Department, U.S. military advisors and diplomats have expanded efforts to promote desertions by LRA combatants, using leaflet drops, radio broadcasts, aerial loudspeakers, and "the establishment of reporting sites where LRA fighters can safely surrender." In a 2014 fact sheet, the State Department pointed to the desertion of 19 individuals in CAR in December 2013, including nine Ugandan male nationals (generally Ugandan males in the LRA are assumed to have served in combatant roles, even if they were initially abducted), as evidence that these efforts are working. Similarly, in an August 2015 briefing, Paul Ronan, co-founder and project director of the LRA Crisis Tracker , noted that seven May 2015 defectors chose to bypass nearby towns and walk for weeks to reach an area in which U.S. troops were based because, according to his interviews with them, "they knew from these messaging campaigns that if they defected to U.S. troops then they would be safe." U.S. funding has also supported the rehabilitation and reintegration of former abducted youth in CAR and DRC. Terrorism Designations and "Rewards for Justice" Targeted sanctions and financial incentives for information leading to the apprehension of top LRA leaders are a component of U.S. policy. The State Department has included the LRA on its "Terrorist Exclusion List" since 2001. In 2008, the Treasury Department added Kony to its list of "Specially Designated Nationals and Blocked Persons" under Executive Order 13224 (signed by President George W. Bush in the aftermath of the terrorist attacks of September 11, 2001), enabling the freezing of assets under U.S. jurisdiction and prohibiting transactions with U.S. persons. It does not appear that Kony or other LRA leaders maintain assets under U.S. jurisdiction; the group is famous for its ability to survive despite its lack of substantial resources. In April 2013, the Secretary of State offered up to $5 million for information leading to the arrests, transfer, or conviction of three top LRA leaders sought by the ICC: Kony, Odhiambo, and Ongwen. The department stated that the reward offer would contribute to the objective of ending impunity and promoting justice, "a key pillar" of the Administration's Atrocity Prevention Initiative and National Security Strategy. The decision followed Congress's passage of legislation allowing the State Department to offer rewards for information related to individuals sought by international tribunals ( P.L. 112-283 ). The United States is not a state party to the ICC. Odhiambo was reportedly killed by Ugandan forces in late 2013; Ongwen surrendered to U.S. forces in CAR in January 2015 and has since been delivered to The Hague. Aid to Northern Uganda When the LRA was active in northern Uganda, the United States provided substantial humanitarian assistance to affected communities. Between 1997 and 2009, for example, such aid totaled over $436 million, including $370 million in food aid. Starting in 2006, USAID has gradually shifted the focus of its programs in the north from relief to recovery. As called for in P.L. 111-172 , the Administration has provided substantial support for post-conflict reconciliation and development aid programs in the north. In addition to global development aims, the focus on northern Uganda may also reflect the recommendations of analysts who contend that the LRA is rooted in deep-seated socio-political divisions between northern and southern Uganda. U.S. development assistance has included several flagship programs in the north totaling over $435 million between FY2009 and FY2011. Development assistance to the north continues as part of overall U.S. foreign assistance to Uganda, a top U.S. aid recipient in Africa. U.S. military civil affairs teams have also contributed to post-conflict recovery and development efforts in the area. Legislation Congress has played a key role in U.S. policy toward the LRA. Following the enactment of P.L. 111-172 , Congress has appropriated funding and created new authorities for the executive branch to carry out components of the U.S. response. Selected enacted legislation is described below. Consolidated Appropriations Act, 2012 ( P.L. 112-74 , December 23, 2011). Funds appropriated for the Department of State and foreign assistance "should be made available for programs and activities affected by the Lord's Resistance Army." The conference report accompanying the act stated that, "up to $10,000,000 be made available for peace and security in the affected region to address these issues, including programs to improve physical access, telecommunications infrastructure and early-warning mechanisms and to support the disarmament, demobilization, and reintegration of former LRA combatants, especially child soldiers." National Defense Authorization Act for Fiscal Year 2012 ( P.L. 112-81 , December 31, 2011). Authorized the Secretary of Defense, with the concurrence of the Secretary of State, to provide "not more than" $35 million for each of fiscal years 2012 and 2013 in "logistic support, supplies, and services for foreign forces participating in operations to mitigate and eliminate the threat posed by the Lord's Resistance Army." Department of State Rewards Program Update and Technical Corrections Act of 2012 ( P.L. 112-283 , January 15, 2013). Amended the State Department Basic Authorities Act of 1956 to authorize, among other things, the issuance of monetary rewards for information leading to the arrest or conviction in any country, or the transfer to or conviction by an international criminal tribunal, of any foreign national accused of war crimes, crimes against humanity, or genocide. Provided that "Nothing in this Act or the amendments made by this Act shall be construed as authorizing the use of activity precluded under the American Servicemembers' Protection Act of 2002" ( P.L. 107-206 , Title II), which prohibits material assistance to the ICC, among other provisions. National Defense Authorization Act for Fiscal Year 2013 ( P.L. 112-239 , January 2, 2013). Expressed the sense of Congress that the U.S. operation to support African counter-LRA efforts "should continue as appropriate to achieve the goals of the operation" and that the Secretary of Defense "should provide intelligence, surveillance, and reconnaissance assets" in support of the U.S. operation. Provided "an additional $50 million to enhance the intelligence, surveillance, and reconnaissance (ISR) support to AFRICOM's OOC [Operation Observant Compass]." National Defense Authorization Act for Fiscal Year 2014 ( P.L. 113-66 , December 26, 2013). Authorizes the Secretary of Defense, with the concurrence of the Secretary of State, to provide up to $50 million year fiscal year, through FY2017, in "logistic support, supplies, and services, and intelligence support, to foreign forces participating in operations to mitigate and eliminate the threat posed by the Lord's Resistance Army." Prohibits utilizing over $37.5 million in FY2014 until the Secretary of Defense provides a report on Operation Observant Compass describing its "specific goals," "the precise metrics used to measure progress," and "the actions that will be taken to transition the campaign if it is determined that it is no longer necessary for the United States to support the mission of the campaign." Consolidated Appropriations Act, 2014 ( P.L. 113-76 , January 17, 2014). Funds appropriated for foreign assistance "shall be made available for programs and activities in areas affected by the Lord's Resistance Army ... including to improve physical access, telecommunications infrastructure, and early-warning mechanisms and to support the disarmament, demobilization, and reintegration of former LRA combatants, especially child soldiers." Provided budget authority for $10 million in Economic Support Fund (ESF) for counter-LRA programs. Required the Secretary of State, in consultation with the Secretary of Defense and the USAID Administrator, to submit a report on progress toward implementing the Administration's counter-LRA strategy and the objectives included in P.L. 111-172 , including assistance provided for such purposes. National Defense Authorization Act for Fiscal Year 2015 ( P.L. 113-291 , January 3, 2014). Expresses that the U.S. advise and assist operation in support of regional counter-LRA operations "has made significant progress in achieving its objectives" and that "the Department of Defense should continue its support of Operation Observant Compass, particularly through the provision of key enablers, such as mobility assets and targeted intelligence collection and analytical support, to enable regional partners to effectively conduct operations against Joseph Kony and the Lord's Resistance Army," Also requires that Operation Observant Compass be "integrated into a comprehensive strategy to support the security and stability in the region." Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 , December 16, 2014). Funds appropriated for foreign assistance "shall be made available for programs and activities in areas affected by the Lord's Resistance Army ... including to improve physical access, telecommunications infrastructure, and early-warning mechanisms and to support the disarmament, demobilization, and reintegration of former LRA combatants, especially child soldiers." Directs the Secretary of State to continue the reporting requirement included in the Joint Explanatory Statement of P.L. 113-76 during FY2015. Pending resolutions include S.Res. 237 and H.Res. 394 , "condemning Joseph Kony and the Lord's Resistance Army for continuing to perpetrate crimes against humanity, war crimes, and mass atrocities," and broadly supporting counter-LRA efforts by the African Union as well as Central African governments and regional organizations. Additionally, there are several pending legislative provisions that address the future of the Department of Defense support for the counter-LRA mission. These provisions are described below. H.Rept. 114-102 accompanying H.R. 1735 (FY2016 National Defense Authorization Act ) . Expresses concern that the Secretary of Defense has not provided details on its plan to transition or terminate the counter-LRA mission should Joseph Kony be removed from the battlefield or when the authority expires in September 2017. Directs the Secretary of Defense to brief the House Committee on Armed Services on the post-LRA transition or termination plan by September 30, 2015. S.Rept. 114-49 accompanying S. 1376 (FY2016 National Defense Authorization Act ) . Notes the progress of the AU-RTF in combatting the LRA and encourages the Department of Defense to continue to provide logistic support, supplies, and services, as well as intelligence support, to foreign forces participating in counter-LRA efforts. S.Rept. 114-63 accompanying S. 1558 ( FY2016 Department of Defense Appropriations Bill). Provides that "the Department of Defense shall continue its support of Operation Observant Compass to enable regional partners to continue to conduct operations against Joseph Kony and the Lord's Resistance Army." H.R. 2685 (FY2016 Department of Defense Appropriations Act) . Provides that, of funding provided under "Operation and Maintenance, Defense-Wide ... up to $30,000,000 shall be for Operation Observant Compass." S. 1725 (FY2016 Department of State, Foreign Operations, and Related Programs Appropriations Act). Provides budget authority for $10 million in Economic Support Fund (ESF) for counter-LRA programs "including to improve physical access, telecommunications infrastructure, and early-warning mechanisms and to support the disarmament, demobilization, and reintegration of former LRA combatants, especially child soldiers." Potential Issues for Congress The deployment of U.S. military personnel in support of regional counter-LRA efforts may raise questions related to whether, and in what form, explicit legal authorization is required (see "War Powers" text-box, above). Additional issues of potential interest are outlined below. Funding and Resources Decisions regarding the resources that Members may decide to authorize or appropriate to counter the LRA are among the primary LRA-related matters under consideration by Congress. Alongside the financial resources dedicated to U.S. efforts, counter-LRA operations have involved the commitment of U.S. military personnel, equipment, and intelligence assets. In this context, a key question for Members is the relative importance of LRA-related policies compared to other strategic, humanitarian, and security goals. The Administration's Strategy document does not define the relative importance of the LRA issue compared to other U.S. policy initiatives and priorities, although it does note that "the extent to which the United States is able to engage in the full range of objectives described in the strategy is dependent on the availability of resources." P.L. 111-172 did not appropriate funding in support of its objectives. The Administration, in its annual Congressional Budget Justification for Department of State and Foreign Operations, has not comprehensively specified levels or sources of funding requested for LRA policy implementation. Congress has—as described above (" Legislation ")—authorized and/or appropriated funds for certain aspects of the U.S. response to the LRA, while other aspects have been funded through regional and country-specific programs or through the Administration's reallocation of funds initially appropriated for other purposes, in consultation with Congress. Strategic Objectives U.S. military advisors and assets have deployed in support of African counter-LRA operations amid broader discussions related to the global projection of U.S. force, foreign policy priorities, and federal fiscal debates. Members may seek to determine strategic benchmarks and a timeframe for declaring a draw-down of counter-LRA efforts, judge whether such benchmarks have been achieved, decide the relative prioritization (if any) of the various aspects of the U.S. response, and/or weigh LRA-related activities against competing policy goals and resource constraints. Provisions included in recent defense authorization measures require the Administration to report on strategic aspects of the U.S. military advisor deployment. Efforts to empower the UPDF and other African security forces to play a greater role in responding to regional crises correspond to a recent emphasis in U.S. national security policy on strengthening the capacity of partner countries to defend against internal and external threats and promote regional security. At the same time, prioritizing certain elements of the counter-LRA strategy may affect other policy goals related to Uganda and the wider region. With regard to multilateral engagement, including efforts to shape the mandates of U.N. peacekeeping operations, for example, policymakers may weigh LRA-related goals against other tasks, such as assisting with larger conflict-resolution efforts in eastern DRC, CAR, and South Sudan. Tensions between Uganda, South Sudan, and Sudan over the conflict in South Sudan could also present challenges to counter-LRA efforts. With regard to Uganda, policymakers may consider the relative priority of other operations in which Ugandan forces are engaged (such as Somalia), as well as the potential impact of additional U.S. military support for Uganda on U.S. human rights, democracy promotion, and good governance efforts (see " The Role of Uganda " below). Donor Coordination Administration officials have emphasized that implementation of the anti-LRA strategy involves close coordination with other donors and partners, in order to ensure that efforts are not duplicative and to encourage greater involvement and burden-sharing. Some progress in this domain may be exhibited by attention to the LRA's regional impact at the U.N. Security Council and within the African Union since 2011. Still, the level of coordination, particularly in the field, is likely to vary. Moreover, U.S. relationships with other possible donors and actors are characterized by competing priorities. The Role of Uganda The State Department characterizes Uganda as "a key partner to the United States in the region and an important force in regional stability," and the UPDF is widely viewed as one of the region's most effective military forces. At the same time, alleged past UPDF abuses in LRA-affected areas of northern Uganda and allegations of Ugandan support for rebel groups in DRC render its regional role sensitive. The UPDF's involvement in the internal conflict in South Sudan has also complicated regional security dynamics. Analysts have periodically questioned the UPDF's capacity and commitment to defeating the LRA, given Uganda's competing regional and internal security priorities and the fact that ongoing counter-LRA operations are linked to substantial U.S. military aid. Some observers further question whether U.S. support for the UPDF's engagement in multiple regional missions has encouraged a small country to maintain an otherwise unsustainably large military. As the International Crisis Group has noted, while the UPDF may be "essential, because no one else is prepared to send competent combat troops to do the job," it is also a "flawed and uncertain instrument for defeating the LRA." The U.S.-based advocacy group Resolve has reported on unease among some civilian communities and Central African officials regarding the UPDF's continued deployments, regarding whether the UPDF was profiting from its counter-LRA operations through U.S. military assistance and alleged involvement in resource smuggling. Some might question whether ongoing U.S. support to the Ugandan military is having unintended consequences for U.S. policy and the region, for example in relation to Uganda's military role in the internal conflict in South Sudan. The U.S. security partnership with the UPDF may also impede U.S. diplomatic leverage with regard to criticizing Uganda's record on democracy, governance, and human rights. U.S. officials have periodically expressed concerns about Uganda's governance trajectory—in 2014, President Obama described Uganda's Anti-Homosexuality Bill (subsequently enacted and later overturned) as "reflect[ing] poorly on Uganda's commitment to protecting the human rights of its people" and as "complicat[ing] our valued relationship." The State Department's Country Re port on Human Rights Practices for 2014 states that the Ugandan government has restricted speech and press freedoms as well as rights of assembly and association, at times with excessive force. Regional Coordination and Capacity The U.S. policy of supporting regional military operations relies on an assumption that local partners are willing and able to take potentially costly and risky steps to end the LRA conflict. The level of operational and intelligence coordination among the UPDF, host country forces, and civilian communities may be key to success. However, despite efforts by affected countries and multilateral entities to foster regional cooperation, African states have not fulfilled their troop commitments to the AU Regional Task force in full, and the coordination of counter-LRA efforts remains a thorny diplomatic issue. Difficulties related to coordination are attributable to several factors, including competing priorities and a lack of capacity among regional governments and militaries; language and communications gaps; civilian communities' distrust of UPDF capacities and motives; and distrust among political leaders linked to competition over external assistance as well as to recent history—as discussed above. The U.N. Group of Experts on the DRC has noted that the inability of military operations to neutralize transnational armed groups, including the LRA, "continually tests the level of trust" among leaders in the region. Tensions between the Congolese and Ugandan militaries have been particularly salient, and DRC authorities have prohibited UPDF forces from conducting counter-LRA operations within DRC territory since 2011. Congolese officials alleged at the time that there were no LRA fighters left in DRC, that the LRA was being used by the UPDF as an excuse to plunder Congolese resources and benefit from international military aid, and that Uganda was ultimately uninterested in defeating the group. Yet, reported LRA attacks have continued in northeastern DRC, and DRC security forces have reportedly conducted counter-LRA operations in coordination with their South Sudanese counterparts, with U.S. support. Such accusations point to Congolese sensitivities over Uganda's regional role, its related ability to benefit from U.S. assistance, and its troubled history in DRC. Similar tensions periodically surfaced in CAR prior to the current conflict there, as have civilian-military tensions that may have hindered UPDF operations. As noted above, the United States has provided some training and assistance to elements of the DRC and South Sudanese militaries engaged in counter-LRA operations; some nonlethal aid was provided to the CAR military prior to the 2013 rebel takeover. These armed forces suffer from limited capacity and competing security priorities. They are also implicated in serious human rights abuses, as particularly illustrated by the current conflict in South Sudan. President Obama has waived in part the application of the Child Soldiers Protection Act of 2008 ( P.L. 110-457 ; CSPA) to facilitate the participation of DRC and South Sudanese troops in counter-LRA operations. Some policymakers may see a need for options for responding to potential human rights abuses by partner militaries in cases where U.S. support is being provided. Outlook As the LRA's capacity has weakened amid U.S. military deployments to the region, some anti-LRA advocates have begun to call for a shift in U.S. focus toward preparing for a post-LRA environment. This might include reallocating resources from military operations and life-saving humanitarian relief toward recovery and development efforts. In May 2015, the U.N. Secretary-General suggested to the Security Council that the "lack of funding for protection, reintegration, and development programs in LRA-affected areas remains a serious challenge," noting that several projects in the area had recently closed. Given the areas where the LRA currently operates, any U.S. development assistance could face challenges related to the difficulty of overseeing implementation in remote areas—including in countries, like CAR, where diplomatic access to areas outside of Bangui is limited—and competing priorities for global aid resources. Some advocates have expressed concern that if/when the military objectives of the Strategy have been met, international support for programs in this remote region may fade. In addition to overarching questions identified at the outset of this report, additional questions for U.S. policy include the following: What is the ultimate end-game of U.S.-supported regional military efforts? What possible scenarios need to be considered? What safeguards are in place to ensure that U.S. support for counter-LRA operations does not contribute to human rights abuses by partner forces? Are additional safeguards needed? What more can be done to encourage African states to fulfill their troop commitments to the AU Regional Task force and improve regional cooperation? What are the practical and operational challenges associated with the area of operations for U.S. military advisors, and are U.S. policies and precautions sufficient to address them? To what extent are intelligence, surveillance, and reconnaissance (ISR) needs being met? Conversely, do military deployments and ISR allocations for counter-LRA efforts draw assets away from other U.S. missions and priorities? If regional operations are successful, what is the appropriate level of funding, if any, for any future humanitarian, recovery, and development assistance? Do P.L. 111-172 and the LRA Strategy provide a possible model for responding to other groups responsible for mass atrocities?

The Lord's Resistance Army (LRA), led by Joseph Kony, is a small, dispersed armed group active in remote areas of Central Africa. The LRA's infliction of widespread human suffering and its potential threat to regional stability have drawn significant attention in recent years, including in Congress. Campaigns by U.S.-based advocacy groups have contributed to policymakers' interest. Since 2008, the United States has provided support to Ugandan-led military operations to capture or kill LRA commanders, which since 2012 have been integrated into an African Union (AU) "Regional Task Force" against the LRA. The Obama Administration expanded U.S. support for these operations in 2011 by deploying U.S. military advisors to the field. In 2014, the Administration notified Congress of the deployment of U.S. military aircraft and more personnel to provide episodic "enhanced air mobility support" to African forces. The United States has also provided humanitarian aid, pursued regional diplomacy, helped to fund "early-warning" systems, and supported multilateral programs to demobilize and reintegrate ex-LRA combatants. The Administration has referred to these efforts as part of its broader commitment to preventing and mitigating mass atrocities. Growing U.S. involvement may also be viewed in the context of Uganda's role as a key U.S. security partner in East and Central Africa. U.S. security assistance to Uganda, including for counter-LRA efforts, has continued despite U.S. officials' criticism of Ugandan efforts to enact laws that would make homosexuality punishable by life in prison. The Administration's current strategy toward the LRA was formulated in response to the Lord's Resistance Army Disarmament and Northern Uganda Recovery Act (P.L. 111-172), enacted by Congress in 2010. Congress has since supported the Administration's approach through legislation providing the executive branch with new funding and authorities to counter the LRA. Since the U.S. military advisors first deployed in 2011, LRA attacks have significantly decreased, as have population displacements related to LRA activity. Several senior LRA figures have been captured or killed by U.S.-supported Ugandan troops. Dominic Ongwen, one of five LRA commanders against whom the International Criminal Court (ICC) issued arrest warrants in 2005, surrendered in January 2015 and was transferred to The Hague, where his trial is expected to begin in 2016. Kony, however, appears to remain at large, and the LRA has demonstrated a high degree of resilience. The LRA has been increasingly linked to poaching and illicit wildlife trafficking in recent years, and some observers fear that the group is exploiting insecurity in the region, including in the Central African Republic, to rebound. The U.S. approach to the LRA raises a number of policy issues, some of which have implications far beyond Central Africa. Some observers view the U.S. response to the LRA as a possible model for addressing mass atrocities, and decisions on this issue could potentially be viewed as a precedent for U.S. responses to similar situations in the future. At the same time, a key question for some is whether the response is commensurate with the degree to which the LRA impacts U.S. national interests. Other potential issues for Congress include funding levels for counter-LRA efforts; the prospects and benchmarks for "success" and the withdrawal of U.S. forces; and the relative priority of counter-LRA activities compared to other foreign policy and budgetary goals. Possible policy challenges include regional militaries' capacity and will to conduct U.S.-supported operations and these militaries' relative level of respect for human rights. President Obama has waived in part the application of the Child Soldiers Protection Act of 2008 (P.L. 110-457) to facilitate the participation of troops from the Democratic Republic of Congo and South Sudan in counter-LRA operations. The FY2015 Consolidated Appropriations Act (P.L. 113-235) and National Defense Authorization Act (P.L. 113-291), and other recent authorization and appropriations measures, include relevant provisions. See also CRS Report R43377, Crisis in the Central African Republic.

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Numerous insect epidemics appear to be damaging North American forests at unprecedented levels. Many fear that the dying trees will further increase wildfire threats, alter ecosystems, and disrupt wood supplies for current and future housing and other uses. In the past, Congress has created special research or control programs for insect epidemics. The continuing concern over wildfires and forest health may lead to congressional efforts to combat the epidemics. Some also assert that insect epidemics are exacerbated by global climate change, and that they may even contribute to that change. This report examines the mountain pine beetle ( Dendroctonus ponderosae ) epidemic because it is one of the most damaging insects affecting forests and because more is known about its life cycle than the cycles of many other forest pests. The Mountain Pine Beetle The mountain pine beetle is one of a number of bark beetles native to the western forests of North America, several of which are currently infested at epidemic levels. Mountain pine beetles inhabit most species of western pine, including ponderosa pine, white pine, sugar pine, limber pine, and whitebark pine, but epidemics are particularly associated with lodgepole pine. Lodgepole pine is a common tree from the Colorado Rockies and Sierra Nevada north to the Yukon Territory. It typically grows in dense, even-aged stands that have regenerated following intense wildfires that killed the previous stand. Life Cycle of the Mountain Pine Beetle The mountain pine beetle is a seasonally adapted insect, successfully reproducing and occasionally reaching epidemic levels where it is univoltine —completing an entire life cycle in one year. The majority of its life is spent as larva in the phloem (innermost bark layer) of pine trees. The eggs hatch 10-14 days after being laid, and the larvae feed on the phloem. In the fall, the larvae produce glycerol , a natural antifreeze that allows them to survive winter temperatures. Larvae are vulnerable to frosts in the fall, before producing glycerol, and when they pupate. During winter, temperatures below -30°F for at least five days can kill most larvae. Larvae pupate in very late spring or early summer (usually June). Adult mountain pine beetles usually emerge in midsummer, late enough to avoid harm from late spring frosts but early enough to allow eggs to hatch into larvae; ambient air temperatures determine the timing of emergence. The adults disperse, with preference for trees of larger diameter (thicker trees have thicker phloem, and thus more food) and trees under stress (e.g., injured, diseased, or suffering from drought, and thus offering less resistance to attack). Trees less than five inches in diameter are rarely attacked, even in an epidemic. Females first attacking a tree release chemicals called aggregating pheromones , which attract males and other females in a mass attack on the tree. The beetles cannot readily attack and kill any tree. Native predators, notably woodpeckers and clerid beetles, help to control populations. In addition, the trees "have evolved significant defensive chemistry that serves to protect them from beetle attack. The mountain pine beetle, in turn, has evolved a mass-attack strategy that overwhelms tree defenses through sheer numbers of attacking beetles." Also, the beetles introduce a blue-stain fungus into the trees they attack, which clogs water transport systems and contributes to killing the trees. Thus, trees under stress—from drought, disease, injury, or other cause—are more susceptible to attack by the mountain pine beetle and blue-stain fungus. When a widespread stress (e.g., a regional drought) affects a forest with many relatively large-diameter lodgepole pine trees, the stage is set for a mountain pine beetle epidemic. Mountain Pine Beetle Epidemics Mountain pine beetle epidemics have occurred in lodgepole pine forests for thousands of years. Epidemics lasting 5 to 20 years occur at irregular intervals, affecting large areas and often killing more than 80% of the trees of more than 10 centimeters (about 4 inches) in diameter. There is wide variability in the mortality of pure lodgepole pine forests, and even forests that appear to be completely killed will have lodgepole pine seedlings and saplings released from the competition in dense stands. There is no single, simple cause for a population to reach epidemic levels. Research has provided information about the population ecology of the mountain pine beetle in lodgepole pine, but not about the transition to epidemic populations. Widespread stress in a mature forest clearly provides a setting for an outbreak, but no specific trigger has been identified. One source suggests that prolonged warm periods, especially with warm winters, may trigger epidemics, but the evidence is not conclusive. During epidemics, natural controls (e.g., woodpeckers and clerid beetles) have little effect on mountain pine beetle population levels. The Current Mountain Pine Beetle Epidemics The current mountain pine beetle epidemic is actually three geographically or ecologically distinct epidemics, with quite different situations and consequences. One is in the lodgepole pine stands of the central Rocky Mountains—primarily in Colorado and Wyoming. Another is in the lodgepole pine stands of central British Columbia. The third is in high-elevation pines, primarily in Wyoming, Montana, and Idaho. The Lodgepole Pine Epidemic in the Central Rocky Mountains The current mountain pine beetle epidemic in Colorado and Wyoming is extensive, but it is unclear whether the current level is unprecedented. Most researchers note that mountain pine beetle epidemics are known to have occurred in lodgepole pine forests, but that the current epidemic is more extensive than has been seen in the past century. However, one source noted the loss of 15 billion board feet of lodgepole pine timber from mountain pine beetles in Idaho and Montana from 1911 to 1935. Although the current epidemic is extensive, it may be normal and natural. Some researchers have stated: Even though insect outbreaks greatly affect forest ecosystems, they may not be detrimental from a long-term ecological perspective. Such disturbances may in fact be crucial to maintaining ecosystem integrity, a situation ... described as "normative outbreaks." The current epidemic is extensive, largely because vast areas of lodgepole pine provide suitable habitat for the mountain pine beetle. This expanse of mature lodgepole pine forests in the central Rocky Mountains is the result of natural but widespread severe wildfires in the 19 th century. Thus, while the current epidemic is unsightly and may have significant consequences (as discussed below), it is an extreme version of an undesirable but normal, natural event. The epidemic may have been exacerbated by climate change. Climate change may have altered precipitation patterns, contributing to the current extended drought in the Rocky Mountain region. This drought has put stress on the trees, leaving them vulnerable to attack by insects and diseases, including the mountain pine beetle. Thus, climate change may be a contributing factor in the mountain pine beetle outbreak in the lodgepole pine ecosystems of the central Rockies. The Lodgepole Pine Epidemic in Canada The interior forests of British Columbia (BC), stretching west from the Rocky Mountain crest to the east side of the Coast Range, are similar to U.S. forests of the Rocky Mountains, and include extensive stretches of mature lodgepole pine. As with the lodgepole pine forests of the central U.S. Rockies, the mountain pine beetle is an endemic (native) species, with periodic epidemics. However, the current epidemic is the most severe ever recorded, and is expected to kill up to 80% of the mature lodgepole pine in BC within the next decade. The current mountain pine beetle infestation has reached farther north and east than previous epidemics. This is likely the result of climate change leading to insufficient freezing temperatures farther north than previously recorded. Thus, the mountain pine beetle can become univoltine (completing its life cycle in one year) farther north than previously recorded. While the mountain pine beetle outbreak in central and southern BC may be within historic norms, as in the central U.S. Rockies, the epidemic is likely to reach farther north than its historically normal distribution because of climate change. The Epidemic in High-Elevation Pines Mountain pine beetles are also endemic to whitebark, bristlecone, and other high-elevation pines. These trees inhabit upper mountain slopes (together with spruce and subalpine fir), and at the extreme grow in the krummholz form (German for twisted wood )—the classic stunted, wind-swept pines of timberline. Whitebark pine forests have generally been "climatically unsuited for outbreak populations of the mountain pine beetle." The high elevations have typically led to short summers (preventing univoltine populations) and to cold winters (which kill mountain pine beetles). However, a beetle epidemic in whitebark pine in central Idaho in the 1930s coincided with a series of unusually warm years. The dead trees are still standing, a stark reminder that not all forests are adapted to recover from devastating natural events. As with the mountain pine beetle outbreak in extreme northern BC, climate change is likely a significant factor in the current epidemic in high-elevation pine ecosystems, because warmer temperatures allow the mountain pine beetle to become univoltine in these areas. While insignificant for timber, the whitebark pine is a critical element in the northern U.S. Rocky Mountain ecosystems, because it produces an abundance of the large, high-protein seeds that are important mainstays for several animal species, particularly grizzly bears. The loss of whitebark pine, a key food in the fall prior to hibernation, could devastate bear populations by lowering reproductive success and forcing grizzlies to forage at lower elevations where there would be more human conflicts. These forests and animals are American symbols of wilderness and endangered species, and their decline might harm these values. Controlling Mountain Pine Beetle Epidemics Short-Term Control Little, if anything, can be done to halt or disrupt a mountain pine beetle epidemic. Because the beetles live under the bark, it is difficult to kill them with insecticides; getting the insecticide to the beetles involves injecting every infected tree—millions of trees over thousands of acres. As one group of researchers noted, "once MPB [the mountain pine beetle] infests a tree nothing practical can be done to save that tree." Preventing the mountain pine beetle from spreading to uninfested trees is also virtually impossible. Individually valuable trees, such as those near residences or in campgrounds, can be protected by insecticide sprays, but the cost is prohibitive at a landscape scale. Silvicultural treatments (timber harvests and other tree stand management practices) are sometimes discussed as a way to restrict the spread of the mountain pine beetle, but some observers have noted that such efforts are unlikely to make a difference, at least in the short run: In the current epidemic, it is impractical to expect that silvicultural treatment of lodgepole pine forests will prevent or even impede the advance of the epidemic in Colorado and southern Wyoming. There are simply too many suitable host trees over too large an area, and unusually high insect populations. Silvicultural treatments are unlikely to have a short-term effect on mountain pine beetle epidemics for two reasons. First, "the direction and spread rate of a beetle infestation is impossible to predict." Even though prevailing winds and warming temperatures provide general directionality, epidemics spread in a random fashion. Second, even though infestations usually spread only to neighboring trees, mountain pine beetles can travel long distances to infest trees—up to 200 kilometers (125 miles). Long-Term Control Researchers have suggested that active forest management could reduce the likelihood of future epidemics and the severity of the consequences when epidemics occur. Forest practices can provide diverse forest landscapes, with patches varying in tree age and size, and with more species diversity where feasible. Possible activities include reducing stand densities, removing unhealthy or stressed trees, and creating openings to regenerate seedlings. However, these activities can be expensive, even in places where a commercial timber industry exists to harvest and utilize the wood. Others caution that some activities, such as conventional timber harvests and salvage harvests, may have little effect on the future stand conditions. This type of harvesting might not reduce the potential for catastrophic wildfires or insect epidemics. A group of authors noted: Creating diverse patch ages and sizes (including young patches) and perhaps more mixed-species forests across the landscape may or may not reduce the spread of future mountain pine beetle outbreaks, but it likely would reduce the amount of forest susceptible through time to a monolithic [uniform, widespread] disturbance, including mountain pine beetle attack or fire. Thus while unproven, the increased landscape heterogeneity may be effective for limiting the scale and severity of future mountain pine beetle impacts. The effectiveness of such measures cannot be assured, nor are all the ecological consequences known, though even in the current epidemic, stands and patches of younger lodgepole pine trees appear to have survived the epidemic with no or only limited mortality. Creating a more diverse, less dense, less stressed forest landscape will not prevent all future mountain pine beetle epidemics. Other factors, such as temperature and precipitation, are also important in determining when and where outbreaks will occur. Researchers caution that eradicating mountain pine beetles is probably infeasible, and would be undesirable—they are a native species with important ecological roles, whose loss could harm natural ecological systems in unexpected ways. Consequences of Mountain Pine Beetle Epidemics The current mountain pine beetle epidemics may have various ecological and economic consequences. The impacts depend on several factors, such as the ecosystem affected and the socioeconomic responses to the epidemic. Ecological Consequences The mountain pine beetle epidemic has two primary impacts of concern: first, the possible increase in wildfire threat, and second, forest regeneration following the epidemic. The effects on lodgepole pines in the American Rockies and British Columbia are similar, and thus are discussed together. The effects on the high-elevation pines are different, and are discussed separately. In addition to these two primary concerns, trees killed by the mountain pine beetle will eventually release their carbon to the forest soils or to the atmosphere, either quickly through wildfires or more slowly through decay. Other than new forest stands to sequester carbon and long-term wood products to store some of the carbon from beetle-killed trees, little can be done to ameliorate the carbon release. Thus, mountain pine beetles release forest carbon to the atmosphere, creating a "positive feedback loop"—forest carbon release aggravates climate change, leading to further mountain pine beetle epidemics. Ecological Effects on Lodgepole Pine Ecosystems The initial concern about the ecological impacts of mountain pine beetles on lodgepole pines is the apparent increase in the threat of wildfire conflagrations from the large numbers of dead and dying trees. Two groups of researchers have examined this concern and found little evidence to support or refute the belief that extensive mountain pine beetle epidemics increase the threat of conflagrations. Thus, both groups chose to examine the impacts by assessing likely changes in wildfire behavior over time in lodgepole pine stands killed by mountain pine beetles. Both groups of researchers noted that wildfire is a complex phenomenon, with fire intensity depending on variations in weather (wind and fuel moisture content) as well as the level and the arrangement of fuels. Lodgepole pine forests historically burned occasionally, typically in crown fires (conflagrations that kill most of the trees in the stand) under extreme weather conditions. Both research groups concluded that the threat of a conflagration remains high while the dead needles remain on the trees—up to two years following the infestation. After the needles fall, the threat of a conflagration declines, because the forests lack the small-diameter fuels needed to start and spread the fire. After the dead trees fall—one to several decades after the outbreak—the risk increases for intense surface fires. However, both research groups also noted that even intense surface fires would be within the historic range of natural variability of lodgepole pine ecosystems, and not something unusual or catastrophic for lodgepole pine ecosystems. One of the groups did caution, however, that the magnitude and extent of the current mountain pine beetle outbreak has not been experienced since white settlers reached the Rocky Mountains, and thus: we are uncertain about fire behavior at landscape or regional scales because we have not seen systems with such heavy fuel loads over such extensive areas; and we know little about the ecological consequences of such fires at these scales. The other ecological concern is about the regeneration of lodgepole pine forests following the mountain pine beetle epidemic. Areas dominated by relatively small trees (less than 5 inches in diameter) are likely to remain green lodgepole pine forests, since trees of this size are rarely attacked. Areas with extensive beetle-killed trees will likely regenerate to lodgepole pine forests, but it may take time, since wildfire is needed to open the serotinous cones of the remaining live lodgepole pine trees. However, once such a fire occurs, vast areas can be reforested, since lodgepole pine is a prolific seed producer. As one group of researchers noted: Is re-establishment of lodgepole pine assured after the mountain pine beetle epidemic? Undoubtedly, but subtle or even large shifts in its location and plant associations are not out of the question. Others are more sanguine, suggesting that lodgepole pine trees killed by mountain pine beetles are important contributors to the stand-replacement fires that favor lodgepole regeneration. Ecological Effects on High-Elevation Pine Ecosystems Concerns about the effects of the mountain pine beetle outbreak on high-elevation pine ecosystems are the same as for lodgepole pine ecosystems—wildfire threats and forest regeneration—but the effects are different. As in lodgepole pine ecosystems, the wildfire threat is largely unchanged by tree mortality due to mountain pine beetles. Wildfires are still likely to be of mixed intensity, with some crown fires, especially in areas with spruce and fir (which are not affected by the mountain pine beetle) mixed with the high-elevation pines. The mountain pine beetle epidemic combined with other problems might prevent successful regeneration of these pine stands. The interspersed pattern of openings created by crown fires, together with the destruction of spruce and fir by wildfire, creates opportunities for whitebark pine and other high-elevation pines (such as bristlecone and foxtail pines) to regenerate. However, mountain pine beetles typically kill the largest-diameter trees—those that produce most of the seeds needed for regeneration. In addition, the high-elevation pines are susceptible to destruction by white pine blister rust. This introduced fungus slowly kills infected five-needle pines (including the high-elevation pines), especially seedlings and saplings. With the mountain pine beetle killing seed source trees and white pine blister rust killing regeneration, the future of high-elevation pine ecosystems is uncertain. Thus, climate change that is allowing univoltine outbreaks of mountain pine beetle in the high-elevation pines might eliminate the pines from high-elevation areas. Ecological Effects on Other Ecosystems One additional ecological concern relates exclusively to the mountain pine beetle outbreak in British Columbia. As noted above, the current epidemic has reached farther north and east than any previous epidemic. Figure 1 shows the historic distribution of the beetles reaching the eastern border of BC, about 150 miles from the forested area in central Alberta where lodgepole pine mixes with the jack pine forest that stretches east to the Atlantic Ocean. An outbreak has been reported in Alberta within 30 miles of the overlap. If the mountain pine beetle infests jack pine, it could lead to a rapid and devastating eastward spread across Canada and southward into the United States, because jack pine has not evolved the defenses against the mountain pine beetle that lodgepole pine has developed. "What we are describing, here, is a potential biogeographic event of continental scale with unknown, but potentially devastating, ecological consequences implied by an invasive, native species." Furthermore, if the mountain pine beetle spreads to the Great Lakes and farther east, the beetle could infest other pine species, such as eastern white pine, and even move south to infest the southern yellow pines. Figure 1 also shows the distribution of these various pine species, and thus the potential spread of the mountain pine beetle. The potential consequences are enormous, and the potential to prevent the spread is extremely limited, as discussed above. Economic Consequences There are several economic consequences of the extensive mountain pine beetle infestation. The most obvious economic impacts are on aesthetic values, from the expanses of dead trees, and on wood supplies. In addition, climate-change-induced or -exacerbated mountain pine beetle outbreaks can have additional effects, such as altering the timing and quality of water runoff in affected forests. Aesthetics Expanses of dead trees clearly hurt aesthetic values. People have built homes in these areas because they want to live in the forest. While the forests will eventually recover, as discussed above, many do not want to wait several years to decades for that recovery. These people will also face financial losses if they try to sell their homes in the woods, since others are less likely to want to buy a house surrounded by dead trees. Thus, home prices in areas with mountain pine beetle outbreaks will likely be depressed, probably for years. Also, homeowners and potential home buyers fear that the expanses of dead trees increase the vulnerability of the homes to wildfires. As noted above and discussed further elsewhere, however, expanses of dead lodgepole pine may pose little additional threat to structures, particularly if homeowners act to protect their homes. Nonetheless, home protection from wildfires might entail additional costs for homeowners. Another aesthetic effect of expanses of dead trees is the impact on tourism. In many areas of the intermountain West, beautiful scenery is a major attraction. Hillsides full of dead trees are likely to dissuade people from spending time, and money, in areas affected by mountain pine beetle outbreaks. Evidence from the wildfires in Yellowstone in 1988 clearly shows that tourism is hurt by vistas filled with dead trees. Wood Utilization Direct economic consequences of the mountain pine beetle epidemics relate to the enormous quantity of dead wood available in the short run, and the dearth of wood supplies in the period between the end of useful salvage operations and the maturing of the regenerated forest. While there is no threat of spreading the beetles in the wood products or energy produced, it is unclear whether transporting the unprocessed logs might exacerbate the beetle's spread. There are three primary opportunities for using trees killed by the mountain pine beetle—lumber, paper, and biomass energy. Lumber Production Beetle-killed trees can be used to produce lumber for at least five years after they die, and up to 18 years, depending on circumstances. The blue-stain fungus in beetle-killed trees alters the appearance of the wood products but has no effect on wood product strength or adhesion properties. Thus, wood products from beetle-killed trees are perfectly acceptable in virtually all traditional wood uses, such as residential construction and shipping containers. Since trees contain substantial quantities of carbon, their death and subsequent deterioration (through wildfires or decay) releases much of that carbon back to the atmosphere. Converting the dead wood into lumber for long-term uses, such as housing, can mitigate the carbon impacts of the dying trees. Through storage in wood products, it may be possible to ameliorate the impacts of the mountain pine beetle on climate change. There are limitations to converting beetle-killed trees into lumber. One problem is lack of lumber production capacity. Lumber production levels in interior western states have fallen substantially in the past 15 years. Lumber output has fallen so much in Colorado, Utah, and Wyoming that production in these states is no longer reported separately; 2007 lumber production in Montana and the Four Corners states was about half of 1992 production. Since trees are bulky, low-value commodities, shipping them more than about 100 miles for processing is economically impractical. With the decline in production, there might be insufficient capacity to convert more than a small portion of the beetle-killed lodgepole pine into lumber. A limitation for the high-elevation pines is the lack of market value, as well as distance from processing facilities and sometimes even from roads. Whitebark, bristlecone, and other high-elevation pines generally grow in relatively short, twisted forms that cannot be readily milled into lumber. Thus, this is not an option for these mountain pine beetle-killed trees. Canadian timber faces an additional limitation. It is unclear whether lumber production capacity is a constraint on using beetle-killed trees in Canada. However, lumber markets could be a problem. The largest market for Canadian lumber is the U.S. housing market. Even presuming that the current economic difficulties will be resolved quickly, and the U.S. housing market recovers from the doldrums, Canadian shipments to the U.S. market could continue to be constrained. In October 2006, the United States and Canada signed a Softwood Lumber Agreement to settle pending litigation over U.S. efforts to restrain allegedly subsidized Canadian lumber. The seven-year agreement (with an optional two-year extension) establishes Canadian export charges, varying by weighted average lumber prices and lowered if the Canadian exporting region accepts specified volume constraints. This agreement may limit the ability of Canadian companies to sell the lumber produced from beetle-killed trees. Paper Production As with lumber, it is feasible to produce paper from beetle-killed trees. The blue-stain fungus may require additional bleaching for some paper products. However, paper products generally do not provide the longer-term carbon storage afforded by lumber products. Thus, paper production offers little amelioration for the carbon release from beetle-killed trees. In addition, no roundwood (trees from the forest) in the West is used for paper production; all paper products in the region are made from sawmill wastes (log trimmings and sawdust) or plantations, typically of hybrid poplars, grown specifically for paper production. Biomass Energy Production Woody biomass can be used to produce energy in two primary manners—burning directly to produce heat or electricity, or to cogenerate both (also called combined heat and power, or CHP); and digesting to produce liquid fuel (e.g., ethanol) for transportation. Direct burning of wood for heat and energy has a very long history, and wood is still used as a primary home energy source in parts of the world (especially in the dry tropical forests of Africa). Modern use of CHP facilities has been expanding slowly. It is widely used by the wood products industry, utilizing waste wood, and its use in schools and government buildings continues to expand. A few free-standing energy facilities rely on wood. In contrast, transportation fuels from wood are still largely in the experimental or development stage. The technology exists, but commercial operations have yet to prove feasible. There are some limitations to the potential use of beetle-killed timber for energy production. Currently, little capacity exists to use the substantial volume of dead wood to produce energy, either through direct burning or for transportation fuels, and what capacity does exist is not particularly near the available beetle-killed trees. Transporting the wood to existing facilities is impractical, since wood is a high-volume, low-value product with limited economic mobility. Capacity could be built, and the wood might still be available for many years, but some of the capacity to use the substantial volume would become superfluous after the available beetle-killed timber was all used. Either facilities would be idled or energy production would persist on possibly unsustainable wood harvests, damaging the forests in the long run.

The mountain pine beetle is a native insect of western U.S. pine forests. It survives by killing infested trees, usually individually, but occasionally in epidemics. Mountain pine beetle epidemics are particularly associated with lodgepole pine, a common western tree that typically grows in dense, even-aged stands. The beetle is a seasonally adapted species that thrives in areas where it can complete its life cycle in one year. The beetle has evolved a mass-attack approach to overwhelm tree defenses through large numbers, and adults congregate on large trees under stress. Widespread stress (e.g., a regional drought) sets the stage for an epidemic. Mountain pine beetle epidemics are recurrent events in western forests. The current epidemic can be separated into three distinct events: the central U.S. Rocky Mountains, interior British Columbia (Canada), and high-elevation pines. Two aspects of the current epidemic are widely believed to have been exacerbated by climate change: (1) increased temperatures farther north and at higher elevations (allowing complete life cycles in areas previously not susceptible to the beetle) and (2) possibly regional drought (making trees more susceptible to beetle attacks). Controlling a mountain pine beetle epidemic can be problematic. Individual trees can be protected by insecticide sprays, but the cost of preventive spraying at a landscape scale is prohibitive. Once a tree is infested, nothing can be done to save the tree. In the long run, silvicultural treatments to provide less dense, more diverse forests may reduce the extent of future epidemics, but epidemics cannot be prevented. One concern about the consequences of the current epidemic is the possible increase in wildfire threats. Little research has been done to assess the change in threats and impacts of wildfires. The limited existing information suggests that tree mortality due to mountain pine beetles may have little effect on the threat or impacts of wildfire in the affected areas, because lodgepole pines (live or dead) naturally burn in extensive crown fires that typically kill most of the large trees. Furthermore, because of the natural regeneration cycle of lodgepole pine and because the beetles do not kill small trees, natural regeneration of the pine forests is likely. However, warming as a result of climate change could have two consequential ecological outcomes. First, the beetle outbreak in the high-elevation pine ecosystems could significantly alter these ecosystems, because these pines are much slower to regenerate and small high-elevation pines are highly susceptible to the white pine blister rust (an introduced fungus). The second concern is the potential for the mountain pine beetle to spread across northern Canada through the boreal jack pine forest, and become an invasive pest of eastern pine forests. There are economic consequences of the mountain pine beetle epidemic. The aesthetic values of the area—such as property values and tourism—will likely be harmed by the extensive tree mortality. Much of the beetle-killed timber could be used, for lumber or for biomass energy, but the substantial volume of timber available far exceeds existing capacity to use the wood, and expanding capacity could be unsustainable—a short-run surplus and long-run shortage. Also, Canadian lumber faces restrictions on shipments to U.S. markets.

CRS_RL30030

Introduction The principal law governing pollution of the nation's surface waters is the Federal Water Pollution Control Act, or Clean Water Act. Originally enacted in 1948, it was totally revised by amendments in 1972 that gave the act its current shape. The 1972 legislation spelled out ambitious programs for water quality improvement that have since been expanded and are still being implemented by industries, municipalities, and others. Congress made fine-tuning amendments in 1977, revised portions of the law in 1981, and enacted further amendments in 1987 and 2014. This report presents a summary of the law, describing the statute. It is excerpted from a larger document, CRS Report RL30798, Environmental Laws: Summaries of Major Statutes Administered by the Environmental Protection Agency . Many details and secondary provisions are omitted here, and even some major components are only briefly mentioned. Further, this report describes the statute, while other CRS products discuss implementation issues. Table 1 shows the original enactment and subsequent major amendments. Table 2 , at the end of this report, cites the major U.S. Code sections of the codified statute. Authorizations for appropriations to support the law generally expired at the end of FY1990 (September 30, 1990). Programs did not lapse, however, and Congress has continued to appropriate funds to carry out the act. Since the 1987 amendments, although Congress has enacted several bills that reauthorize and modify a number of individual provisions in the law, none comprehensively addressed major programs or requirements. Background The Federal Water Pollution Control Act of 1948 was the first comprehensive statement of federal interest in clean water programs, and it specifically provided state and local governments with technical assistance funds to address water pollution problems, including research. Water pollution was viewed as primarily a state and local problem, hence, there were no federally required goals, objectives, limits, or even guidelines. When it came to enforcement, federal involvement was strictly limited to matters involving interstate waters and only with the consent of the state in which the pollution originated. During the latter half of the 1950s and well into the 1960s, water pollution control programs were shaped by four laws that amended the 1948 statute. They dealt largely with federal assistance to municipal dischargers and with federal enforcement programs for all dischargers. During this period, the federal role and federal jurisdiction were gradually extended to include navigable intrastate, as well as interstate, waters. Water quality standards became a feature of the law in 1965, requiring states to set standards for interstate waters that would be used to determine actual pollution levels and control requirements. By the late 1960s, there was a widespread perception that existing enforcement procedures were too time-consuming and that the water quality standards approach was flawed because of difficulties in linking a particular discharger to violations of stream quality standards. Additionally, there was mounting frustration over the slow pace of pollution cleanup efforts and a suspicion that control technologies were being developed but not applied to the problems. These perceptions and frustrations, along with increased public interest in environmental protection, set the stage for the 1972 amendments. The 1972 statute did not continue the basic components of previous laws as much as it set up new ones. It set optimistic and ambitious goals, required all municipal and industrial wastewater to be treated before being discharged into waterways, increased federal assistance for municipal treatment plant construction, strengthened and streamlined enforcement, and expanded the federal role while retaining the responsibility of states for day-to-day implementation of the law. The 1972 legislation declared as its objective the restoration and maintenance of the chemical, physical, and biological integrity of the nation's waters. Two goals also were established: zero discharge of pollutants by 1985 and, as an interim goal and where possible, water quality that is both "fishable" and "swimmable" by mid-1983. While those dates have passed, the goals remain, and efforts to attain them continue. Overview The Clean Water Act (CWA) today consists of two parts, broadly speaking, one being the Title II and Title VI provisions, which authorize federal financial assistance for municipal sewage treatment plant construction. The other is regulatory requirements, found throughout the act, that apply to industrial and municipal dischargers. The act has been termed a technology-forcing statute because of the rigorous demands placed on those who are regulated by it to achieve higher and higher levels of pollution abatement. Industries were given until July 1, 1977, to install "best practicable control technology" (BPT) to clean up waste discharges. Municipal wastewater treatment plants were required to meet an equivalent goal, termed "secondary treatment," by that date. (Municipalities unable to achieve secondary treatment by that date were allowed to apply for case-by-case extensions up to July 1, 1988. According to EPA, 86% of all cities met the 1988 deadline; the remainder were put under administrative or court-ordered schedules requiring compliance as soon as possible. However, many cities continue to make investments in building or upgrading facilities needed to achieve secondary treatment, and funding needs remain high; see discussion below.) Cities that discharge wastes into marine waters were eligible for case-by-case waivers of the secondary treatment requirement, where sufficient showing could be made that natural factors provide significant elimination of traditional forms of pollution and that both balanced populations of fish, shellfish, and wildlife and water quality standards would be protected. The primary focus of BPT was on controlling discharges of conventional pollutants, such as suspended solids, biochemical oxygen demanding materials, fecal coliform and bacteria, and pH. These pollutants are substances that are biodegradable (i.e., bacteria can break them down), occur naturally in the aquatic environment, and deplete the dissolved oxygen concentration in water, which is necessary for fish and other aquatic life. The act also mandated greater pollutant cleanup than BPT by no later than March 31, 1989, generally requiring that industry use the "best available technology" (BAT) that is economically achievable. BAT level controls generally focus on toxic substances. Compliance extensions of as long as two years are available for industrial sources utilizing innovative or alternative technology. Failure to meet statutory deadlines could lead to enforcement action (see below). The CWA utilizes both water quality standards and technology-based effluent limitations to protect water quality. Technology-based effluent limitations are specific numerical limitations established by EPA and placed on certain pollutants from certain sources. They are applied to industrial and municipal sources through numerical effluent limitations in discharge permits issued by states or EPA (see discussion of " Permits, Regulations, and Enforcement ," below). Water quality standards are standards for the overall quality of water. They consist of the designated beneficial use or uses of a waterbody (recreation, water supply, industrial, or other), plus a numerical or narrative statement identifying maximum concentrations of various pollutants that would not interfere with the designated use. The act requires each state to establish water quality standards for all bodies of water in the state. These standards serve as the backup to federally set technology-based requirements by indicating where additional pollutant controls are needed to achieve the overall goals of the act. In waters where industrial and municipal sources have achieved technology-based effluent limitations, yet water quality standards have not been met, dischargers may be required to meet additional pollution control requirements. For each of these waters, the act requires states to set a total maximum daily load (TMDL) of pollutants at a level that ensures that applicable water quality standards can be attained and maintained. A TMDL is both a planning process for attaining water quality standards and a quantitative assessment of pollution problems, sources, and pollutant reductions needed to restore and protect a river, stream, or lake. Based on state reports, EPA estimates that more than 40,000 U.S. waters are impaired and require preparation of TMDLs. Control of toxic pollutant discharges has been a key focus of water quality programs. In addition to the BPT and BAT national standards, states are required to implement control strategies for waters expected to remain polluted by toxic chemicals even after industrial dischargers have installed the best available cleanup technologies required under the law. Development of management programs for these post-BAT pollutant problems was a prominent element in the 1987 amendments and is a key continuing aspect of CWA implementation. Prior to the 1987 amendments, programs in the Clean Water Act were primarily directed at point source pollution, wastes discharged from discrete and identifiable industrial and municipal sources, such as pipes and other outfalls. In contrast, except for general planning activities, little attention had been given to nonpoint source pollution (runoff of stormwater or snowmelt from agricultural lands, forests, construction sites, and urban areas), despite estimates that it represents more than 50% of the nation's remaining water pollution problems. As it travels across land surface towards rivers and streams, rainfall and snowmelt runoff picks up pollutants, including sediments, toxic materials, and conventional wastes (e.g., nutrients) that can degrade water quality. The 1987 amendments authorized measures to address such pollution by directing states to develop and implement nonpoint pollution management programs (Section 319 of the act). States were encouraged to pursue groundwater protection activities as part of their overall nonpoint pollution control efforts. Federal financial assistance was authorized to support demonstration projects and actual control activities. These grants may cover up to 60% of program implementation costs. The CWA provides for special regulation of the discharge of oil or hazardous substances, because of the potentially catastrophic effects of such events on public health and welfare. Section 311 prohibits the discharge of oil or hazardous substances into U.S. waters. It also requires higher standards of care in the management and movement of oil, including a requirement for spill prevention plans; it enables the government to recover the costs of cleaning up oil and hazardous substance discharges; and it provides for penalties for such discharges. In 1990, Congress enacted the Oil Pollution Act, which partially amended Section 311 and established a comprehensive system for the cleanup of oil spills, adding a mechanism to impose liability for such spills. While the act imposes great technological demands, it also recognizes the need for comprehensive research on water quality problems. This is provided throughout the statute, on topics including pollution in the Great Lakes and Chesapeake Bay, in-place toxic pollutants in harbors and navigable waterways, and water pollution resulting from mine drainage. The act also authorizes support to train personnel who operate and maintain wastewater treatment facilities. Federal and State Responsibilities Under this act, federal jurisdiction is broad, particularly regarding establishment of national standards or effluent limitations. The EPA issues regulations containing the BPT and BAT effluent standards applicable to categories of industrial sources (such as iron and steel manufacturing, organic chemical manufacturing, petroleum refining, and others). Certain responsibilities can be assumed by qualified states, in lieu of EPA, and this act, like other environmental laws, embodies a philosophy of federal-state partnership in which the federal government sets the agenda and standards for pollution abatement, while states carry out day-to-day activities of implementation and enforcement. Responsibilities under the act that may be carried out by qualified states include authority to issue discharge permits to industries and municipalities and to enforce permits; 46 states have been authorized to administer this permit program. EPA issues discharge permits in the remaining states—Idaho, Massachusetts, New Hampshire, New Mexico—the District of Columbia, and most U.S. territories. In addition, as noted above, all states are responsible for establishing water quality standards. Titles II and VI—Municipal Wastewater Treatment Construction Federal law has authorized grants for planning, design, and construction of municipal sewage treatment facilities since 1956 (Act of July 9, 1956, or P.L. 84-660). Congress greatly expanded this grant program in 1972 in order to assist cities in meeting the act's pollution control requirements. Since that time Congress has authorized $65 billion and appropriated more than $94 billion in CWA funds to aid wastewater treatment plant construction and other eligible projects. Grants are allocated among the states according to a complex statutory formula that combines two factors: state population and an estimate of municipal sewage treatment funding needs derived from a survey conducted periodically by EPA and the states. The most recent estimate indicated that, as of 2012, $271 billion more would be required to build and upgrade municipal wastewater treatment plants in the United States and for other types of water quality improvement projects that are eligible for funding under the act, a 20% decrease from the previous estimate from four years earlier. According to EPA, states' needs can change for a variety of reasons, such as actual changes in needs, availability of project documentation, and ability to fund and staff data collection and entry efforts. Under the Title II construction grants program established in 1972, federal grants were made for several types of projects based on a priority list established by the states. Grants were generally available for as much as 55% of total project costs. For projects using innovative or alternative technology (such as reuse or recycling of water), as much as 75% federal funding was allowed. Recipients were responsible for non-federal costs but were not required to repay federal grants. Policymakers have debated the balance between assisting municipal funding needs, which remain large, and the impact of assistance programs such as the Clean Water Act's on federal spending and budget deficits. In the 1987 amendments, Congress balanced these competing priorities by extending federal aid for wastewater treatment construction through FY1994, yet providing a transition towards full state and local government responsibility for financing after that date. Grants under the previous Title II program were authorized through FY1990. Under Title VI of the act, grants to capitalize State Water Pollution Control Revolving Funds, or loan programs, were authorized beginning in FY1989 to replace the Title II grants. States contribute matching funds, and under the revolving loan fund concept, monies used for wastewater treatment construction are repaid to the state, to be available for project loans to other communities. All states now have functioning loan programs, but the shift from federal grants to loans was easier for some than others. The new financing requirements have been a challenge for some cities (especially small towns) that have difficulty repaying project loans. Statutory authorization for grants to capitalize state loan programs expired in 1994; however, Congress has continued to provide annual appropriations. An issue affecting some cities is overflow discharges of inadequately treated wastes from municipal sewers and how cities will pay for costly remediation projects. Permits, Regulations, and Enforcement To achieve its objectives, the CWA embodies the concept that all discharges into the nation's waters are unlawful, unless specifically authorized by a permit. Thus, more than 65,000 conventional industrial and municipal dischargers must obtain permits from EPA (or qualified states) under the act's National Pollutant Discharge Elimination System (NPDES) program (authorized in Section 402 of the act). NPDES permits also are required for more than 150,000 industrial and municipal sources of stormwater discharges. An NPDES permit requires the discharger (source) to attain technology-based effluent limits (BPT or BAT for industry, secondary treatment for municipalities, or more stringent where needed for water quality protection). Permits specify the effluent limitations a discharger must meet, and the deadline for compliance. Sources also are required to maintain records and to carry out effluent monitoring activities. Permits are issued for up to five years and must be renewed thereafter to allow continued discharge. The NPDES permit incorporates numerical effluent limitations issued by EPA. The initial BPT limitations focused on regulating discharges of conventional pollutants, such as bacteria and oxygen-consuming materials. The more stringent BAT limitations emphasize controlling toxic pollutants—heavy metals, pesticides, and other organic chemicals. In addition to these limitations applicable to categories of industry, EPA has issued water quality criteria for more than 115 pollutants, including 65 named classes or categories of toxic chemicals, or "priority pollutants." These criteria recommend ambient, or overall, concentration levels for the pollutants and provide guidance to states for establishing water quality standards that will achieve the goals of the act. A separate type of permit is required to dispose of dredged or fill material in the nation's waters, including wetlands. Authorized by Section 404 of the act, this permit program is administered by the U.S. Army Corps of Engineers, subject to and using EPA's environmental guidance. Some types of activities are exempt from permit requirements, including certain farming, ranching, and forestry practices which do not alter the use or character of the land; some construction and maintenance; and activities already regulated by states under other provisions of the act. EPA may delegate certain Section 404 permitting responsibility to qualified states and has done so twice (Michigan and New Jersey). For some time, the act's wetlands permit program has been one of the most controversial parts of the law. Some who wish to undertake development projects in wetlands maintain that federal regulation intrudes on and impedes private land-use decisions, while environmentalists seek more protection for remaining wetlands and limits on activities that are authorized to take place in wetlands. Nonpoint sources of pollution, which EPA and states believe are responsible for the majority of water quality impairments in the nation, are not subject to CWA permits or other regulatory requirements under federal law. They are covered by state programs for the management of runoff, under Section 319 of the act. Other EPA regulations under the CWA include guidelines on using and disposing of sewage sludge and guidelines for discharging pollutants from land-based sources into the ocean. (A related law, the Ocean Dumping Act, 33 U.S.C. §§1401-45, regulates the intentional disposal of wastes into ocean waters. ) EPA also provides guidance on technologies that will achieve BPT, BAT, and other effluent limitations. The NPDES permit, containing effluent limitations on what may be discharged by a source, is the act's principal enforcement tool. EPA may issue a compliance order or bring a civil suit in U.S. district court against persons who violate the terms of a permit. The penalty for such a violation can be as much as $25,000 per day. Stiffer penalties are authorized for criminal violations of the act—for negligent or knowing violations—of as much as $50,000 per day, three years' imprisonment, or both. A fine of as much as $250,000, 15 years in prison, or both, is authorized for "knowing endangerment"—violations that knowingly place another person in imminent danger of death or serious bodily injury. Finally, EPA is authorized to assess civil penalties administratively for certain well-documented violations of the law. These civil and criminal enforcement provisions are contained in Section 309 of the act. EPA, working with the Army Corps of Engineers, also has responsibility for enforcing against entities who fail to obtain or comply with a Section 404 permit. While the CWA addresses federal enforcement, the majority of actions taken to enforce the law are undertaken by states, both because states issue the majority of permits to dischargers and because the federal government lacks the resources for day-to-day monitoring and enforcement. Like most other federal environmental laws, CWA enforcement is shared by EPA and states, with states having primary responsibility. However, EPA has oversight of state enforcement and retains the right to bring a direct action where it believes that a state has failed to take timely and appropriate action or where a state or local agency requests EPA involvement. Finally, the federal government acts to enforce against criminal violations of the federal law. In addition, individuals may bring a citizen suit in U.S. district court against persons who violate a prescribed effluent standard or limitation or permit requirement. Citizens also may bring suit against the Administrator of EPA for failure to carry out a nondiscretionary duty under the act.

The principal law governing pollution of the nation's surface waters is the Federal Water Pollution Control Act, or Clean Water Act. Originally enacted in 1948, it was totally revised by amendments in 1972 that gave the act its current dimensions. The 1972 legislation spelled out ambitious programs for water quality improvement that have since been expanded and are still being implemented by industries and municipalities. This report presents a summary of the law, describing the statute without discussing its implementation. Other CRS reports discuss implementation, including CRS Report R42883, Water Quality Issues in the 113th Congress: An Overview, and numerous products cited in that report. The Clean Water Act consists of two major parts, one being the provisions which authorize federal financial assistance for municipal sewage treatment plant construction. The other is the regulatory requirements that apply to industrial and municipal dischargers. The act has been termed a technology-forcing statute because of the rigorous demands placed on those who are regulated by it to achieve higher and higher levels of pollution abatement under deadlines specified in the law. Early on, emphasis was on controlling discharges of conventional pollutants (e.g., suspended solids or bacteria that are biodegradable and occur naturally in the aquatic environment), while control of toxic pollutant discharges has been a key focus of water quality programs more recently. Prior to 1987, programs were primarily directed at point source pollution, that is, wastes discharged by industrial and municipal facilities from discrete sources such as pipes and outfalls. Amendments to the law in that year authorized measures to address nonpoint source pollution (runoff from farm lands, forests, construction sites, and urban areas), which is estimated to represent more than 50% of the nation's remaining water pollution problems. The act also prohibits discharge of oil and hazardous substances into U.S. waters. Under this act, federal jurisdiction is broad, particularly regarding establishment of national standards or effluent limitations. Certain responsibilities are delegated to the states, and the act embodies a philosophy of federal-state partnership in which the federal government sets the agenda and standards for pollution abatement, while states carry out day-to-day activities of implementation and enforcement. To achieve its objectives, the act is based on the concept that all discharges into the nation's waters are unlawful, unless specifically authorized by a permit, which is the act's principal enforcement tool. The law has civil, criminal, and administrative enforcement provisions and also permits citizen suit enforcement. Financial assistance for constructing municipal sewage treatment plants and certain other types of water quality improvements projects is authorized under Title VI. It authorizes grants to capitalize State Water Pollution Control Revolving Funds, or loan programs. States contribute matching funds, and under the revolving loan fund concept, monies used for wastewater treatment construction are repaid to states, to be available for future construction in other communities.

CRS_R44443

What Is High-Frequency Trading? Broadly speaking, high-frequency trading (HFT) is conducted through supercomputers that give firms the capability to execute trades within microseconds or milliseconds (or, in the technical jargon, with extremely low latency ). In practice, depending on the particulars of the trade, trading opportunities can last from milliseconds to a few hours. This is by contrast to traditional trading, often called pit trading, in which traders would meet at a trading venue called the floor or pit, and communicate buy and sell orders via open outcry; and by contrast to slower electronic trading. HFT is a catch-all term used to describe "ultra-fast electronic trading in which participants hold positions for short periods." The term HTF has no universal or legal definition. Neither the Commodity Futures Trading Commission (CFTC) nor the Securities and Exchange Commission (SEC) has issued regulations defining it. In a 2012 CFTC Technical Advisory Committee meeting, its Sub-Committee on Automated and High Frequency Trading, a working group to examine such issues, developed the following loose and nonbinding definition: High frequency trading is a form of automated trading that employs: (a) algorithms for decision making, order initiation, generation, routing, or execution, for each individual transaction without human direction; (b) low-latency technology that is designed to minimize response times, including proximity and co-location services; (c) high speed connections to markets for order entry; and (d) high message rates (orders, quotes or cancellations). By most accounts, HFT has grown substantially over the past 10 years: it now accounts for roughly 55% of trading volume in U.S. equity markets and about 40% in European equity markets. In the futures markets, the percentages have also grown markedly. From October 2012 to October 2014, the CFTC found that algorithmic trading systems (ATS) were present on at least one side in nearly 80% of foreign exchange futures trading volume; 67% of interest rate futures volume; 62% of equity futures volume; 47% of metals and energy futures volume; and 38% of agricultural product futures volume. ATS has also risen to about 67% of trading in 10-year Treasury futures and 64% of Eurodollar futures markets. In general, traders that employ HFT strategies are attempting to earn small amounts of profit per trade. Some arbitrage strategies reportedly can earn profits close to 100% of the time. Earlier reports indicated that such strategies might make money on only 51% of the trades, but because the trades are transacted hundreds or thousands of times per day, the strategies may still be profitable. High-frequency traders employ a diverse range of trading strategies that may also be used in combination with each other. Some analyses broadly categorize these strategies into passive and aggressive trading strategies. Passive strategies involve the provision of limit orders—offers placed with a brokerage to buy or sell a set number of shares at a specified price or cheaper. An example of this is the market making strategy described in the next section. Aggressive strategies reportedly involve the provision of immediately executable trades such as market orders. Such strategies are said to include momentum ignition and order anticipation trading—also known as liquidity detection trading—further discussed in " HFT Strategies and Related Policy Issues ," below. The CFTC oversees any HFT, along with other types of trading, in the derivatives markets it regulates. These include futures, swaps and options on commodities, and most financial instruments or indices, such as interest rates. The SEC oversees HFT and other trading in the securities markets and the more limited securities-related derivatives markets in which it regulates. Although U.S. derivatives markets traditionally relied on human execution of trades, such as through open outcry trading pits, most trading today has moved to highly automated electronic systems that generate, transmit, manage, and execute orders through high-speed networks. Some recent research has observed generally shrinking profits among those who employ HFT due to factors such as heightened competition. For example, a January 2016 academic study found "that a continuous increase in competition—between high-speed trading algorithms themselves through predatory strategies and from professional human traders adapting and building adequate responses—has made the business more difficult and has led to shrinking profits for HFT." HFT Strategies and Related Policy Issues Much more attention has been paid to and written about HFT in an equity market context than in the futures market context. This section describes several major HFT equity market trading strategies. Some evidence, however, exists that these HFT strategies may also be employed in futures markets. Various observers, including SEC staff, have said that two related types of HFT, dubbed aggressive strategies in contrast to the other passive strategies should be a central focus of public policy concerns as they "… may present serious problems in today's market structure— order anticipation and momentum ignition ." Although the SEC did not elaborate on its concerns, this may be because order anticipation strategies, discussed below, can potentially share some similarities with an illegal practice called front-running . Momentum ignition strategies can potentially share certain similarities with a practice called spoofing , which is also illegal in some markets. Selected HFT Strategies The major HFT trading strategies described below draws upon the findings in a unique 2014 SEC staff literature research survey on HFT, Equity Market Structure Literature Review Part II: High Frequency Trading , to provide a sense of the research landscape on HFT's pros and cons. Going forward, however, the reader should be aware of a caveat in the SEC staff literature survey on its limitations: "The HFT [research] datasets [used in the literature survey] generally have been limited to particular products or markets, and the data time periods now are relatively outdated, particularly given the pace of change in trading technology and practices. Accordingly, while the recent economic literature has made great progress in beginning to fill in the picture of HFT, much of the picture remains unfinished." The following is not an exhaustive description of HFT strategies, but is meant to highlight several of the main strategies addressed in this report. Passive HFT Strategies Passive m arket m aking is when a firm provides liquidity by matching buyer and seller orders or by buying and selling through its own securities inventories if a market maker cannot immediately match buyers and sellers. In general, these market makers do so by submitting non-marketable resting orders (i.e., offers to buy and sell certain amounts of securities at threshold prices that are not immediately available) that provide liquidity to the marketplace. They profit on the difference between the bid prices buyers are willing to pay for a security and the ask prices sellers are willing to accept. Some of this kind of HFT market making is reportedly driven by the HFT firm's receipt of so-called liquidity rebates (usually a fraction of a penny a share) provided by Electronic Communication Networks (ECNs) and stock exchanges for the limit orders that they post to those trading centers. Some argue that the subsidies help to ensure sustained market participation regardless of market conditions. The profit-making opportunities for market making HFTs can be enhanced when markets are especially volatile. The SEC staff analysis found that on average primarily passive HFT strategies appear to have a beneficial impact on various market quality metrics by reducing bid-ask spreads and price volatility (significantly changing securities prices) during the trading day. It can be argued that high-frequency traders generally tend to be better informed than many non-high-frequency traders, an attribute that derives from their comparative speed in processing securities market data. Moreover, all things being equal, when better-informed traders interact with less-informed traders, the better-informed traders are apt to buy low and sell high, earning profits, whereas the less-informed traders are apt to buy high and sell low, generating losses. The phenomenon is called adverse selection because under this scenario less-informed traders tend to be disproportionately involved in unattractive trades. Other cited research in the SEC literature survey found that the entry of a high-frequency trader that primarily engaged in market making rather inexplicably resulted in a substantial decrease in adverse selection. This is the reverse of the outcome found for aggressive HFT strategies described in the next section. Arbitrage trading is profiting from price differentials for the same or related securities. These price differences may occur between an exchange-traded fund (ETF) and an underlying basket of stocks, that are traded on different market centers, such as the London Stock Exchange and the New York Stock Exchange (NYSE), or the same stock and its derivatives, such as a specific stock and its stock's options. Within this context, various HFT firms also employ something called slow market arbitrage wherein the firms attempt to arbitrage small price differences for stocks between various exchanges resulting from infinitesimal time differences in the trading prices that they report on the same securities, a practice described in Flash Boys , the controversial 2014 book on HFT by Michael Lewis. The SEC staff survey indicated that the research that it reviewed did not "reveal a great deal about the extent or effect of the HFT arbitrage strategies." Aggressive HFT Strategies Momentum ignition is a strategy in which a proprietary trading firm initiates a series of orders or trades aimed at causing rapid up or down securities price movements. Such traders "may intend that the rapid submission and cancellation of many orders, along with the execution of some trades, will spoof 22 the algorithms of other traders into action and cause them to buy (or sell) more aggressively. Or the trader may intend to trigger standing stop loss orders that would help facilitate a price decline." As such, by establishing an early position, the high-frequency trader is attempting to profit when it subsequently liquidates the position after it spurs an incremental price movement. ( Figure 1 below gives a detailed example of spoofing.) However, the line between spoofing per se—which the Dodd Frank Act made illegal by amending the Commodity Exchange Act (CEA) —and a momentum ignition strategy can be nuanced. Unlike the CEA, federal securities laws do not outlaw spoofing by name, although the SEC has attacked spoofing by characterizing it as a manipulative practice violating antifraud and anti-manipulation prohibitions elsewhere in securities laws. Order anticipation , also known as liquidity detection trading, involves traders using computer algorithms to identify large institutional orders that sit in dark pools or other stock order trading venues. High-frequency traders may repeatedly submit small-sized exploratory trading orders intended to detect orders from large institutional investors. The process can provide the high-frequency trader with valuable intelligence on the existence of hidden large investor liquidity, which may enable the trader to trade ahead of the large order under the assumption that the order will ultimately move the security's market pricing to benefit the HFT firm. The line between this strategy and front-running , which is not permitted, can be nuanced. Front-running generally means profiting by placing one's own orders ahead of a large order based on knowledge of that impending order. However, the SEC's 2010 Concept Release on Equity Market Structure emphasized that illegal front-running may occur when a firm or person violates a duty—such as a fiduciary duty—to a large buyer or seller by trading ahead of that firm to benefit from an expected price movement. When such a duty existed, the SEC explained, there was already a violation. "The type of order anticipation strategy [which the SEC was discussing] involves any means to ascertain the existence of a large buyer (seller) that does not involve violation of a duty, misappropriation of information, or other misconduct. Examples include the employment of sophisticated pattern recognition software to ascertain from publicly available information the existence of a large buyer (seller), or the sophisticated use of orders to 'ping' different market centers in an attempt to locate and trade in front of large buyers and sellers." In other words, the SEC appeared to distinguish high-frequency order anticipation strategies as possibly distinct from front-running based on front-running involving violation of a duty to the large buyer or seller, but still expressed a desire to examine the effects of such order anticipation strategies further. Policy Concerns Regarding Aggressive HFT Strategies In the HFT literature survey, the SEC staff analysis characterized momentum ignition and price anticipation, the two aggressive HFT strategies, as having both "positive and negative aspects." For example, one study found that these aggressive strategies can improve certain aspects of price discovery in the short run, whereas another study found that while the positive impact of price discovery is significantly higher than that by non-HFT for large-cap stocks, it is inconclusive for mid-cap stocks and significantly lower for small-cap stocks. Meanwhile, another study found that although aggressive HFT had a greater effect on price discovery in the short run (up to 10 seconds), passive non-high-frequency traders had a consistently higher impact on price discovery in the long run (up to two minutes). The staff analysis also referenced a study that found aggressive HFT increases the adverse selection costs that non-high-frequency passive traders are subject to. The staff analysis noted two studies that collectively found aggressive HFT potentially worsened the market trading transaction costs for institutional investors and helped foster extremely volatile market conditions. The SEC also flagged concerns with such strategies. For instance, in its 2010 Concept Release, the SEC cited research that referred to order anticipators as "parasitic traders" who "profit only when they can prey on other traders. They do not make prices more informative, and they do not make markets more liquid.... Large traders are especially vulnerable to order anticipators." The agency requested comments and public input on whether such order anticipation strategies significantly detract from market quality and harm institutional investors. In addition, regulators have expressed concern over whether certain aggressive HFT strategies may be associated with increased market fragility and volatility, such as that demonstrated in the "Flash Crash" of May 6, 2010; August 24, 2015 market crash in which the Dow Jones Industrial Average fell by more than 1,000 points in early trading; and October 15, 2014 day of extreme volatility in Treasury markets, among others. In an October 2015 speech analyzing the October 14, 2015 Treasury market meltdown, CFTC Chair Timothy Massad noted that CFTC staff had analyzed the frequency of "flash" events in Treasury futures and in five of the most active futures contracts: (1) corn; (2) gold; (3) West Texas Intermediate (WTI) crude oil; (4) E-mini S&P futures, which represent an agreement to buy or sell the cash value of an underlying stock index (i.e., the S&P 500) at a specified future date; and (5) the EuroFX, which reflects changes in the U.S. dollar value of the European euro. CFTC staff found that, "Movements of a magnitude similar to Treasuries on October 15 th were not uncommon in many of these contracts. In fact, corn, the largest grain futures market, averaged more than five such events per year over the last five years," Massad said. He noted there were more than 35 similar intraday flash events in 2015 alone just for WTI crude oil futures. Although the CFTC's analysis appeared to indicate an increase in such flash events, Massad did not postulate a specific cause for their increased frequency, concluding instead that regulators should "take a closer look at algorithmic—or automated—trading." Other regulators and researchers have also expressed concern over possible links between HFT and excessive market volatility or fragility. Recent CFTC Anti-Spoofing Efforts Section 747 of the Dodd Frank Act ( P.L. 111-203 ) amended the Commodity Exchange Act to expressly prohibit certain disruptive trading practices, including conduct that violates bids or offers and willful and intentional spoofing. This new provision in the CEA prohibits "any trading practice, or conduct on or subject to the rules of a registered entity that ... is, is of the character of, or is commonly known to the trade as, 'spoofing' (bidding or offering with the intent to cancel the bid or offer before execution)." This is the first U.S. provision in statute to specifically ban spoofing in commodity markets. Figure 1 provides an example of how spoofing works. Applying such a provision on spoofing to the HFT world, however, can be challenging. Since high-speed computers and algorithms can automatically generate many bids and offers in a millisecond, and cancel them quickly, it can be difficult to ascertain at times whether such automated trading practices rise to the level of spoofing. The CFTC released additional guidance in 2013 clarifying that the agency must prove a trader intended to cancel his or her bid before execution, and that reckless trading practices alone would not be considered spoofing. However, the CFTC would not need to prove that a trader intended to move the market for such activities to rise to the level of spoofing, the guidance indicated. The CFTC has used its new anti-spoofing authority in a number of recent enforcement actions. On November 3, 2015, Michael Coscia, the owner of New Jersey-based proprietary energy trading firm Panther Energy Trading, was convicted by a Chicago jury of six counts of spoofing and six counts of commodity fraud, and appears set to face jail time (sentencing is set for March 2016). The Department of Justice (DOJ) brought criminal charges against Coscia in October 2014 stemming from algorithmic trading strategies flagged by the CFTC. The CFTC in July 2013 ordered Coscia and Panther Energy to pay $2.8 million in fines, and imposed a one-year trading ban on them as the result of a CFTC enforcement action over algorithmic trading strategies Panther undertook in 2011. According to the CFTC, Panther placed orders with the intent to cancel them on a number of futures contracts traded on CME Group exchanges. These included contracts in crude oil, natural gas, wheat, and soybeans. In April 2015, the CFTC also accused U.K.-based trader Navinder Singh Sarao with unlawfully manipulating, attempting to manipulate, and spoofing—with regard to the E-mini S&P 500 futures contract. Sarao's trades allegedly contributed to the Flash Crash of May 6, 2010 when unusual market volatility caused major equity indices in both the futures and securities markets, each already down more than 4% from their prior-day close, suddenly plummeted a further 5%-6% in a matter of minutes before rebounding almost as quickly. In October, 2015, the CFTC filed a civil complaint charging Chicago-based proprietary trading firm 3Red Trading with spoofing and employing a manipulative and deceptive device while trading futures on energy, metals, equities, and stock-market futures on various futures exchanges. The CFTC's "Regulation Automated Trading" In more recent usage, the CFTC now often refers to HFT within the rubric of "automated trading." On November 24, 2015, the CFTC released a proposed rule, Regulation Automated Trading (Reg AT), governing certain HFT practices (without using the term HFT). In this regulation, the CFTC also refers frequently to algorithmic trading systems (ATS), which are computerized trading systems based on automated sets of rules or instructions used to execute a trading strategy. Much automated trading takes place now on futures exchanges. The largest two such exchange operators in the United States are (1) the CME Group, which owns the Chicago Mercantile Exchange, Chicago Board of Trade, and New York Mercantile Exchange; and (2) the Intercontinental Exchange (ICE). These exchanges have indicated in their public materials average order entry times of less than one millisecond in which trades can be electronically executed. The purpose of Reg AT broadly is to update the CFTC's rules on trading practices in response to the evolution from pit trading to electronic trading. According to the CFTC Chair Timothy Massad, the new regulation is aimed at minimizing the potential for disruptions and operational problems that may arise from automated trade order originations and executions, or malfunctioning algorithms. Reg AT mandates risk controls for the exchanges; large financial firms called clearing members of the exchanges; and firms that trade heavily on the exchanges for their own accounts. The rule also proposes requiring the registration of proprietary traders engaging in algorithmic trading on regulated exchanges through what is called direct electronic access . Direct electronic access generally refers to the practice of exchanges permitting, for a fee, certain trading customers to directly enter trades into the exchange's electronic trade matching system (rather than routing such trades through a broker). The apparent goal of Reg AT is to enhance CFTC oversight of such automated trading activities. Regulation AT is part of a series of recent measures undertaken by the CFTC in response to ATS' growth and particularly financial regulators' concerns regarding the impact of such systems on market volatility and market fragility. These concerns, for instance, came about from incidents such as the extreme volatility of October 15, 2014, in the U.S. Treasury securities and futures markets. In the report on this incident and in other recent regulations, the CFTC and other regulators have expressed the view that automated trading may have caused or exacerbated market disruptions particularly in times of market stress and should thus be subject to some greater level of regulation. The CFTC has also implemented rules concerning its authority to prohibit manipulative and deceptive devices and price manipulation, codified at 17 CFR 180.1 and 180.2. The majority of academic research and stated policy concerns over HFT in securities and derivatives have focused on whether it increases market volatility and diminishes trading liquidity. In Reg AT, for instance, the CFTC lists a number of policy concerns regarding risks from automated trading, such as operational risks, ranging from malfunctioning to incorrectly deployed algorithms reacting to inaccurate or unexpected data; market liquidity risks, stemming from abrupt changes in trading strategies even if a firm executes its trading strategy perfectly; risks that automated trading can provide new tools to engage in unlawful conduct (such as spoofing, discussed further below); market shocks risks , stemming from erroneous orders impacting multiple markets; the risk that, as more firms gain direct access to trading platforms, trades may not be subject to sufficient settlement risk mitigation; and the risk that increased speed of trade execution may make critical risk mitigation devices less effective. On the positive side, some research has found that HFT and automated trading can create a more efficient marketplace, by reducing bid-ask spreads (i.e., the spread or differential between the offered buying and selling prices) thereby lowering trading costs. Another study of HFT in the equities markets found that such activity lowers short-term volatility and has a positive effect on market liquidity, as well as narrowing bid-ask spreads. FINRA Registration for High-Frequency Securities Traders On the securities front, in 2015, the SEC took steps toward a registration requirement for certain HFT broker-dealers, which requires them to register with the Financial Industry Regulatory Authority (FINRA). FINRA is a self-regulatory organization created after the merger of the National Association of Securities Dealers and the New York Stock Exchange's regulation committee, which acts as the front-line regulator for broker-dealers. The SEC has regulatory oversight of FINRA, and most broker-dealers must register with it. Among other things, FINRA's registrants are subject to examinations, various disclosure requirements, and rules governing various aspects of their conduct. Under an existing SEC regulatory rule, Rule 15b9-1 of the Securities Exchange Act of 1934, many high-frequency traders who trade on other exchanges using a third-party broker-dealer, or trade on alternative trading systems, may be exempt from FINRA registration. In March 2015, the SEC voted for a proposal to limit this exemption so that previously exempt HFT broker-dealers would become subject to FINRA regulatory oversight as FINRA-registered entities. The SEC said that the regulatory change "would enhance regulatory oversight of active proprietary trading firms, such as high frequency traders." SEC Commissioner Luis Aguilar predicted that when the proposals become finalized they "will ensure that these [high frequency traders] can be held responsible for any potential misconduct." Recent SEC Enforcement Actions in HFT The SEC recently brought enforcement actions involving HFT against several firms, including Barclays, Credit Suisse, Athena Capital Research, and Briargate Trading. Barclays and Cred it Suisse . In January 2016, Barclays Plc and Credit Suisse each settled allegations with the New York attorney general (NYAG) and the SEC that they had misled their investors in managing their private trading platforms known as dark pools. As part of its settlement, Barclays agreed to pay $70 million, to be evenly divided between the NYAG and the SEC. Specifically, Barclays was alleged to have made client misrepresentations on how it monitored its HFT dark pools. Separately, Credit Suisse agreed to settle its charges by paying a $30 million penalty to the SEC, a $30 million penalty to the NYAG, and $24.3 million in disgorgement and prejudgment interest to the SEC for a total of $84.3 million. The SEC charged that Credit Suisse failed to operate its dark pool and alternate trading systems as advertised. Athena . In October 2014, the SEC reached a $1 million settlement with Athena Capital Research LLC, a HFT trader, which was charged with employing $40 million to rig prices of various stocks in 2009. Athena was charged with manipulating shares of Nasdaq-listed stocks, which weakened the exchange's end-of-day procedures for reducing stock price volatility, according to the SEC. More specifically, the agency charged that Athena "placed a large number of aggressive, rapid-fire trades in the final two seconds of almost every trading day during a six-month period to manipulate the closing prices of thousands of Nasdaq-listed stocks." It did so through an algorithm that was code-named Gravy to engage in this practice known as marking the close in which stocks are bought or sold near the close of trading to affect the closing price. Briargate. In October 2015, the SEC reached a $1 million settlement with Briargate Trading LLP and co-founder Eric Oscher. Between October 2011 and September 2012, Briargate was charged with orchestrating a scheme that involved placing sham trades called spoof orders for the purpose of creating "the false appearance of interest in [New York Stock Exchange] stocks" to manipulate their prices. After it entered spoof orders, Briargate's trading protocol reportedly placed bona fide orders on the opposite side of the market for the same stocks, taking advantage of the artificially inflated or depressed prices—then immediately after the bona fide orders were executed, it canceled the spoof orders. Congressional Interest The 114 th Congress has seen the introduction of some legislation potentially impacting HFT and has held hearings touching on the subject of HFT practices and regulation as part of congressional oversight authority over the SEC and the CFTC. Legislative Proposals Although no legislation has been introduced in the 114 th Congress directly impacting the regulation or oversight of HFT, several bills have been introduced imposing a tax on a broad array of financial transactions involving securities and derivatives. These include S. 1371 , S. 1373 , and H.R. 1464 , which would each impose a tax rate that varies depending on the underlying security. Specifically, the bills would subject transactions involving stocks and interests in partnerships and trusts to a 50 basis-point-tax (0.5%), transactions involving bonds and other forms of debt (other than tax-exempt state and local bonds, and bonds with a maturity of less than 60 days) to a 10 basis-point-tax (0.10%), and derivative transactions to a half basis-point-tax (0.005%). It is unclear, however, if these proposals would have an impact on certain HFT strategies that involve issuing and then canceling a large volume of bid orders (strategies related to spoofing). This is because the bills impose "a tax on the transfer of ownership in each covered transaction with respect to any security." In HFT cases, such as spoofing, where no transfer of ownership actually occurs because bids are canceled prior to any ownership transfer, the proposal potentially might not apply. In the 113 th Congress, congressional interest in HFT was also reflected in legislation that would levy securities transaction taxes on securities trades, presumably raising the cost and thus reducing the incidence of conducting HFT, and there was also one bill aimed specifically at regulating certain HFT practices. In the 113 th Congress, S. 410 , H.R. 880 , and H.R. 1579 would have levied taxes on various financial trades, including trades conducted by high-frequency traders. H.R. 2292 would have required the CFTC to provide a regulatory definition of HFT in the derivatives markets that the agency oversees. It would also have required high-frequency traders in derivatives to register with the CFTC, submit semiannual reports to the agency, and conform to business conduct requirements that the CFTC might issue. H.R. 2292 would also have granted the CFTC the authority to impose civil penalties under the Commodity Exchange Act for violations of a HFT regulation. The amount of the fine would have been based on the duration of the violation. Hearings: SEC Division Head Outlines Potential Changes in 2016 A number of committee and subcommittee hearings in the 114 th and 113 th Congresses have touched on the subject of HFT as part of congressional oversight authority over the SEC and the CFTC. In the 114 th Congress, a March 3, 2016 subcommittee hearing of the Senate Banking Committee discussed a number of issues related to the topic. In the hearing, Subcommittee Chair Senator Crapo and Subcommittee Ranking Member Senator Warner expressed concerns about increased market speed, complexity, and potential market fragility as a result of increased automated trading. They pressed the SEC's Division of Trading & Markets director, Stephen Luparello, and the chairman and CEO of FINRA, Richard Ketchum to speed up implementation of a number of pilot programs and proposals the SEC and FINRA have discussed for several years. These include implementation of a consolidated audit trail (CAT) aimed at improving surveillance and supervision of trading, including automated trading, and a possible pilot program aimed at temporarily eliminating rebates or inducements to brokers for routing client orders. In his March 3, 2016 testimony, SEC's Luparello noted that his division was examining introducing greater transparency into the disclosures by brokers regarding how they decide to route institutional customers' orders, to improve the "best execution" of institutional investors' trades. He also said SEC staff was working on a recommendation for the SEC to strengthen recordkeeping requirements for algorithmic trading so that key elements of the algorithm itself would be encompassed, as well as a record or orders generated by the algorithm. In addition, Luparello said SEC staff was developing a recommendation for the SEC to consider addressing the use of aggressive, destabilizing trading strategies that could exacerbate price volatility. He noted that the SEC staff was also developing a recommendation for the SEC to consider in 2016 that would subject certain active proprietary traders not registered as broker-dealers to rules surrounding broker-dealers by the SEC and by self-regulatory organizations. In addition to the March 3, 2016 hearing, which dealt more explicitly with issues related to high frequency trading in securities, the Senate Agriculture, Nutrition and Forestry Committee also held a hearing May 14, 2015, on the CFTC and market liquidity, which discussed HFT. A number of additional hearings in the 114 th Congress for oversight of the SEC and CFTC also touched upon HFT issues as part of a broader review of these agencies' missions and accomplishments.

High-frequency trading (HFT) generally refers to trading in financial instruments, such as securities and derivatives, transacted through supercomputers executing trades within microseconds or milliseconds (or, in the technical jargon, with extremely low latency). There is no universal or legal definition of HFT, however. Neither the Securities and Exchange Commission (SEC), which oversees securities markets, nor the Commodity Futures Trading Commission (CFTC), which regulates most derivatives trading, have specifically defined the term. By most accounts, high frequency trading has grown substantially over the past 10 years: estimates hold that it accounts for roughly 55% of trading volume in U.S. equity markets and about 40% in European equity markets. Likewise, HFT has grown in futures markets—to roughly 80% of foreign exchange futures volume and two-thirds of both interest rate futures and Treasury 10-year futures volumes. The CFTC oversees any HFT, along with other types of trading, in the derivatives markets it regulates. These include futures, swaps and options on commodities, and most financial instruments or indices, such as interest rates. The SEC oversees HFT and other trading in the securities markets and the more limited securities-related derivatives markets which it regulates. In general, traders that employ HFT strategies are attempting to earn small amounts of profit per trade. Broadly speaking, these strategies can be categorized as passive or aggressive strategies. Passive strategies include arbitrage trading—attempts to profit from price differentials for the same stocks or their derivatives traded on different trading venues; and passive market making, in which profits are generated by spreads between bid and ask prices. Aggressive strategies include those known as order anticipation or momentum ignition strategies. Various observers, including SEC staff, have said that these aggressive strategies should be a central focus of public policy concerns. This may be because such strategies can share some similarities to practices such as front-running and spoofing, which are generally illegal. In addition, regulators have expressed concern over whether certain aggressive HFT strategies may be associated with increased market fragility and volatility, such as that demonstrated in the "Flash Crash" of May 6, 2010; the October 15, 2014, extreme volatility in Treasury markets; and the August 24, 2015, market crash in which the Dow Jones Industrial Average fell by more than 1,000 points in early trading. The SEC and CFTC have taken recent steps to bring some HFT under closer scrutiny, both through recent regulatory proposals and enforcement actions. The SEC has proposed requiring certain HFT broker-dealers to register with the Financial Industry Regulatory Authority (FINRA), which oversees broker-dealers. In January 2016, the SEC announced settlements with Barclays and Credit Suisse totaling more than $150 million, over allegations that Barclays had misled its investors on HFT practices permitted on its private trading platforms known as dark pools, and that Credit Suisse failed to operate its trading systems as advertised. The CFTC has cracked down on spoofing, using the anti-spoofing authority granted in the Dodd-Frank Act (P.L. 111-203) in a number of recent enforcement actions involving algorithmic trading. On November 24, 2015, the CFTC released a proposed rule, Regulation Automated Trading (Reg AT), governing certain HFT practices. The purpose of Reg AT broadly is to update the CFTC's rules on trading practices in response to the evolution from pit trading to electronic trading. Reg AT mandates risk controls for the exchanges; large financial firms called "clearing members" of the exchanges; and firms that trade heavily on the exchanges for their own accounts. The rule also proposes requiring the registration of proprietary traders engaging in algorithmic trading on regulated exchanges through what is called "direct electronic access." Although no legislation has been introduced in the 114th Congress directly impacting the regulation or oversight of HFT, several bills have been introduced imposing a tax on a broad array of financial transactions that could impact HFT. These bills include S. 1371, S. 1373, and H.R. 1464. Congress has also held hearings in the 114th Congress touching on HFT issues as part of its oversight of the SEC and CFTC. This report provides background on various HFT strategies and some associated policy issues, recent regulatory developments and selected enforcement actions by the SEC and CFTC on HFT, and congressional action such as proposed legislation and hearings related to HFT.

CRS_R44923

Introduction Each year, the House and Senate armed services committees take up national defense authorization bills. The House of Representatives passed the National Defense Authorization Act for Fiscal Year 2018 ( H.R. 2810 ) on July 14, 2017. The Senate Armed Services Committee reported its version of the NDAA ( S. 1519 ) on September 18, 2017. These bills contain numerous provisions that affect military personnel, retirees, and their family members. Provisions in one version are sometimes not included in the other, are treated differently, or are identical in both versions. Following passage of each chamber's bill, a conference committee typically convenes to resolve the differences between the respective chambers' versions of the bill. The FY2018 NDAA conference report was passed by the House on November 14, 2017, and the Senate on November 16, 2017. On December 12, President Donald J. Trump signed the bill into law ( P.L. 115-91 ). This report highlights selected personnel-related issues that may generate high levels of congressional and constituent interest. CRS will update this report to reflect enacted legislation. Related CRS products are identified in each section to provide more detailed background information and analysis of the issues. For each issue, a CRS analyst is identified and contact information is provided. Some issues discussed in this report were previously addressed in the National Defense Authorization Act for Fiscal Year 2017 ( P.L. 114-328 ) and discussed in CRS Report R44577, FY2017 National Defense Authorization Act: Selected Military Personnel Issues , by [author name scrubbed] et al., or other reports. Those issues that were considered previously are designated with an asterisk in the relevant section titles of this report. *Active Duty End-Strength Background: The authorized active duty end-strengths for FY2001, enacted in the year prior to the September 11 terrorist attacks, were as follows: Army (480,000), Navy (372,642), Marine Corps (172,600), and Air Force (357,000). Over the next decade, in response to the demands of wars in Iraq and Afghanistan, Congress substantially increased the authorized personnel strength of the Army and Marine Corps. Congress began reversing those increases in light of the withdrawal of U.S. forces from Iraq in 2011, the drawdown of U.S. forces in Afghanistan beginning in 2012, and budgetary constraints. In FY2017, Congress halted further reductions in Army and Marine Corps end-strength and provided a slight end-strength increase. End-strength for the Air Force generally declined from 2004-2015, but increased in 2016 and 2017. End-strength for the Navy declined from 2002-2012, increased in 2013, and has remained essentially stable since then. Authorized end-strengths for FY2017 and proposed end-strengths for FY2018 are in Figure 1 . Discussion: In comparison to FY2017 authorized end-strengths, the Administration's FY2018 budget proposed no change for the Army and Marine Corps, slightly higher end-strength for the Navy (+1,400) and a more substantial increase for the Air Force (+4,000). The final bill approved end-strengths higher than the Administration request by 7,500 for the Army and 1,000 for the Marine Corps. Approved end-strengths for the Navy and Air Force were identical to the Administration's request. Section 402 of the House bill would adjust the minimum end-strengths required by 10 U.S.C. Section 619 to a level equal to the authorized end-strengths set in Section 401. References: Previously discussed in CRS Report R44577, FY2017 National Defense Authorization Act: Selected Military Personnel Issues , by [author name scrubbed] et al., and similar reports from earlier years. CRS Point of Contact: [author name scrubbed], x[phone number scrubbed]. *Selected Reserves End-Strength Background: The overall authorized end-strength of the Selected Reserves has declined by about 6% over the past 16 years (874,664 in FY2001 versus 820,200 in FY2017). Much of this can be attributed to the reductions in Navy Reserve strength during this period. There were also modest shifts in strength for some other components of the Selected Reserve. Authorized end-strengths for FY2017 and proposed end-strengths for FY2018 are in Figure 2 . Discussion: Relative to FY2017 authorized end-strengths, the Administration's FY2018 budget proposed increases for the Navy Reserve (+1,000 compared to FY2017 authorized), Air Force Reserve (+800), and Air National Guard (+900); and no change for the Marine Corps Reserve, Army National Guard, and Army Reserve. The final bill approved end-strengths identical to the Administration's request for all the reserve components except for the Army Reserve and Army National Guard. In comparison to the Administration's request, the final bill approved an extra 500 personnel for both the Army National Guard and Army Reserve. References: Previously discussed in CRS Report R44577, FY2017 National Defense Authorization Act: Selected Military Personnel Issues , by [author name scrubbed] et al., and similar reports from earlier years. CRS Point of Contact: [author name scrubbed], x[phone number scrubbed]. *Military Pay Raise Background: Concerns with the overall cost of military personnel, combined with long-standing congressional interest in recruiting and retaining high-quality personnel to serve in the all-volunteer military, have continued to focus interest on the military pay raise. Section 1009 of Title 37 United States Code provides a permanent formula for an automatic annual increase in basic pay that is indexed to the annual increase in the Employment Cost Index (ECI). The statutory formula stipulates that the increase in basic pay for 2018 will be 2.4% unless either (1) Congress passes a law to provide otherwise; or (2) the President specifies an alternative pay adjustment under subsection (e) of 37 U.S.C. Section 1009. Increases in basic pay are typically effective at the start of the calendar year, rather than the fiscal year. The FY2018 President's Budget requested a 2.1% military pay raise, lower than the statutory formula of 2.4%. Discussion: The final bill requires the statutory formula go into effect, resulting in a 2.4% pay raise for all servicemembers effective on January 1, 2018. Section 604 of the Senate bill, which would have modified the language allowing the President to make an alternative pay adjustment, was not adopted. Reference(s): For an explanation of the pay raise process and historical increases, see CRS In Focus IF10260, Defense Primer: Military Pay Raise , by [author name scrubbed]. Previously discussed in CRS Report R44577, FY2017 National Defense Authorization Act: Selected Military Personnel Issues , by [author name scrubbed] et al., and similar reports from earlier years. CRS Point of Contact: [author name scrubbed], x[phone number scrubbed]. *Housing Allowances Background: Under current law, all servicemembers are entitled to either government-provided housing or a housing allowance. For those living in the United States, the housing allowance is known as Basic Allowance for Housing (BAH). Some servicemembers entitled to BAH live on military bases in housing that has been privatized. During the mid-1990s, Congress granted DOD a number of special authorities to enable the department to provide incentives for private firms to partner with DOD to improve the quality of housing available to servicemembers living on military installations. Since then, the Military Housing Privatization Initiative (MHPI) has enabled DOD to rely on private sector financing, expertise, and innovation for the construction and operation of housing for both families and individual servicemembers. The FY2015 NDAA allowed the Secretary of Defense to reduce BAH payments by 1% of the national average monthly housing cost. The FY2016 National Defense Authorization Act extended this authority, authorizing an additional 1% reduction per year through 2019, for a maximum reduction of 5% of the national monthly average housing cost. Discussion: The amount of money paid to the companies that operate privatized housing is tied to the Basic Allowance for Housing (BAH) rates for the individual occupying the housing. As these payments may constitute a significant source of revenue for firms owning and operating privatized military housing, reductions in BAH could lower those firms' revenues. The final bill requires the Secretary of Defense to pay an amount equal to the 2018 BAH reduction throughout 2018 to the lessors of MHPI housing, effectively offsetting the reduction for that year. The final bill would also require the Comptroller General to provide to the House and Senate Armed Services Committees a report on several aspects of MHPI. Reference: CRS Report RL33446, Military Pay: Key Questions and Answers , by [author name scrubbed] and [author name scrubbed]. CRS Point of Contact: [author name scrubbed], x[phone number scrubbed]. *Defense Commissary System Background: Over the past few years, Congress has been concerned with improving the Defense Commissary Agency (DeCA) system, mandating several studies and reports on the topic. Recent reform proposals have sought to reduce DeCA's reliance on appropriated funds without compromising patrons' commissary benefits or the revenue generated by DOD's nonappropriated fund (NAF) entities. However, Congress has stopped short of major changes that would significantly reduce or eliminate the commissary subsidy. DeCA's Board of Directors establishes a desired average savings rate over commercial providers. A March 2017 GAO report found that DOD "lacks reasonable assurance that it is maintaining its desired savings rate for commissary patrons." This GAO report recommends that DOD address limitations identified in its savings rate methodology; develop a plan with objectives, goals, and time frames to improve efficiency in product management; and conduct comprehensive cost-benefit analyses for service contracts and distribution options. DOD concurred with the first two recommendations and partially concurred with the third, stating that "authorizing legislation is required." In the FY2017 NDAA, Congress authorized $1.2 billion in commissary funding. Discussion : Section 632 of the House bill would have required DOD to submit a report regarding management practices of military commissaries and exchanges no later than 180 days after enactment of the NDAA. The report would require a cost/benefit analysis with the joint goals of reducing operating costs of military commissaries and exchanges by $2 billion over FY2018-FY2022 and not raising patron costs. Section 5602 of the Senate-passed version would have required a similar report. Neither of these provisions was adopted. The conferees referred to previous reports required by the FY2015 and FY2016 NDAA and noted that "there is little additional benefit to be gained by requiring the Department to submit another report assessing methods of achieving cost savings in the commissary and military exchange systems." The President's FY2018 budget request for $1.39 billion included funding for DeCA to operate 240 commissary stores on military installations worldwide and employ a workforce of over 14,000 civilian full-time equivalent employees. H.R. 2810 , the House bill, would have authorized $1.34 billion for DeCA's commissary operations for FY2018. This is $45 million less than the Administration's proposal with reductions in civilian personnel compensation and benefits ($20 million) and commissary operations ($25 million). In the report to accompany S. 1519 ( S.Rept. 115-125 ), the Senate would have authorized $1.3 billion for DeCA in FY2018. Section 4501 authorizes the President's FY2018 budget request of $1.39 billion for commissary operations. Section 4601, military construction, authorizes $40 million for the construction of a new commissary in Stuttgart, Germany. Section 5601 of the Senate-passed bill would have required a report on use of second-destination transportation (SDT) to transport fresh fruit and vegetables to commissaries in the Asia-Pacific region no later than January 1, 2018. This provision was not adopted. References: CRS Report R44577, FY2017 National Defense Authorization Act: Selected Military Personnel Issues , by [author name scrubbed] et al.; CRS Report R44120, FY2016 National Defense Authorization Act: Selected Military Personnel Issues , coordinated by [author name scrubbed]; and CRS Report R43647, FY2015 National Defense Authorization Act: Selected Military Personnel Issues , coordinated by [author name scrubbed]. CRS Point of Contact : [author name scrubbed], x[phone number scrubbed]. *Survivor Benefits Background : Under the Survivor Benefit Plan (SBP), a military retiree may have a portion of his or her monthly retired pay withheld in order to provide, after his or her death, a monthly benefit to a surviving spouse or other eligible recipients. When an active duty servicemember dies, his or her survivor's payment through the SBP is usually 55% of the retired base pay that the member would otherwise have been eligible to receive. By law, surviving spouses who receive both an annuity from DOD as a beneficiary of the SBP and from the Department of Veterans Affairs' Dependency and Indemnity Compensation (DIC) must have their SBP payments reduced by the amount of DIC. Congress first authorized a payment to such surviving spouses to offset that reduction in the FY2008 NDAA. This benefit is called the Special Survivor Indemnity Allowance (SSIA). Monthly SSIA payments are currently $310 and are taxable. Section 646 of the FY2017 NDAA extended the payment of SSIA until May 31, 2018. Discussion: Section 621 of the House-passed bill would have expressed the sense of Congress that the SSIA was created as a "stop gap" measure to assist widowed spouses by reducing the SBP/DIC offset required by law. This section also stated that the dollar-for-dollar reduction in payment to surviving spouses should be fully repealed at the first opportunity. Section 638 of the Senate-passed version was adopted by the conferees. This provision amends 10 U.S.C. Section 1450 to permanently extend the authority to pay the SSIA and would require inflation adjustments to that allowance by the amount of the military retired pay cost-of-living adjustment for each calendar year beginning in 2019. Section 622 of the final bill adopts Senate Section 631 and modifies Sections 1447 and 1452 of Title 10, United States Code, to ensure equitable treatment under the SBP of members of the uniformed services covered by the modernized retirement system who elect to receive a lump sum of retired pay, as authorized under 10 U.S.C. §1415. References: CRS Report R44577, FY2017 National Defense Authorization Act: Selected Military Personnel Issues , by [author name scrubbed] et al., FY2017 National Defense Authorization Act: Selected Military Personnel Issues; CRS Report R40757, Veterans' Benefits: Dependency and Indemnity Compensation (DIC) for Survivors , by [author name scrubbed]; CRS Report RL34751, Military Retirement: Background and Recent Developments , by [author name scrubbed]; and CRS Report R40589, Concurrent Receipt: Background and Issues for Congress , by [author name scrubbed]. CRS Point of Contact : [author name scrubbed], x[phone number scrubbed] *Servicemember Education, Credentialing, and Transition Background: In the past few decades, Congress has enacted legislation and appropriated funds for servicemember off-duty education (tuition assistance), credentialing programs, and transition services to support servicemembers and veterans in translating military skills and experience into post-service education and employment opportunities. Three DOD programs of note are the Transition Assistance Program (TAP); the Credentialing Opportunities Online (COOL); and the DOD Skillbridge program, which is also known as the Job Training, Employment Skills Training, Apprenticeships, and Internships (JTEST-AI) program. Discussion : The TAP curriculum culminates in a one-week course in the months immediately preceding a member's separation, retirement, or release from active duty. Congress has required that certain information be provided and specific topics covered in the associated preseparation counseling. Provisions in the final bill (Sections 528 and 541) expand some of these statutory requirements. Not adopted were provisions that would have required a review of TAP to ensure that it is meeting the needs of female servicemembers, an annual report to Congress on the participation of members of the Armed Forces in TAP, and a report on possible ways to improve the handoff between DOD and the VA during servicemember transition. Also not adopted was Section 546 of the Senate bill that would have established a two-year pilot program to integrate and coordinate the various components of DOD's education, transition, and credentialing programs with state and local programs and agencies. Conferees noted that the military services have partnered closely with state and local communities to implement programs to help servicemembers gain post-military employment. The conferees are aware of several model re-employment initiatives in states such as Florida and Arizona. Therefore, the conferees encourage the Department of Defense to replicate these model programs in other states.... In terms of licensing and credentialing, the final bill contains a provision (§542) that seeks to improve the "accuracy and completeness" of employment skills verification and certification for members transitioning out of the military and seeking civilian employment. It requires DOD to establish a database to record all training relevant to civilian employment for the armed services and to make verifiable information available to states and potential employers. Section 616 of the House bill would have authorized DOD and DHS to reimburse a servicemember up to $500 for relicensing costs upon separation from the service and would also require the Secretaries to work with states on improving portability of licenses between states. This provision was not adopted; however, the conference report called for GAO to "assess the panoply of benefits and programs available government-wide to separating servicemembers" and to provide a report to Congress by October 1, 2018. The United Services Military Apprenticeship Program (USMAP) allows eligible servicemembers to complete civilian apprenticeships while on active duty and earn a nationally recognized "Certificate of Completion" from the Department of Labor. Program eligibility has been limited to the Coast Guard, Marine Corps, and Navy. Section 546 of the final bill expands program eligibility to all uniformed servicemembers at the Secretary of Defense's discretion. Not adopted was a Senate provision (§14003) that would seek to broaden job training opportunities through DOD's Skillbridge program by authorizing federal agencies to participate in the program as employers and trainers. However, the conferees "strongly urge the Secretary, in consultation with the Director, OPM, to take such actions as are necessary to encourage and enable other Federal agencies to participate in the SkillBridge program." Finally, not adopted was Section 549 of the Senate bill that would have required the Secretary of Defense to brief House Armed Services Committee and Senate Armed Services Committee on the feasibility and advisability of enacting into law authority to use tuition assistance program funds for "courses or programs of education in cybersecurity skills or related skills and computer coding skills or related skills." Currently tuition assistance funds can be used for a variety of undergraduate, graduate, vocational/technical, or certificate programs. References : CRS In Focus IF10347, Military Transition Assistance Program (TAP): An Overview , by [author name scrubbed], and CRS Report R42790, Employment for Veterans: Trends and Programs , coordinated by [author name scrubbed]. CRS Point of Contact : [author name scrubbed], x[phone number scrubbed]. *Military Sexual Assault and Sexual Harassment Background: Over the past decade, the issues of sexual assault and sexual harassment in the military have generated a good deal of congressional and media attention. In 2005, DOD issued its first department-wide sexual assault policies and procedures. These policy documents built on recommendations from the Joint Task Force for Sexual Assault Prevention and Response and on congressional requirements specified in the Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005 ( P.L. 108-375 ). In the same year, the Sexual Assault Prevention and Response Office (SAPRO) was established as a permanent office serving as DOD's primary oversight body for all service-level programs. Sexual harassment policy and oversight is handled by DOD's Office of Diversity and Military Equal Opportunity. Between 2012 and 2017, DOD took a number of steps to implement its own strategic initiatives as well as dozens of congressionally mandated actions related to sexual assault prevention and response, victim services, reporting and accountability, and military justice. In FY2016, estimated sexual assault prevalence rates across the DOD's active-duty population were 4.3% for women and 0.6% for men. These estimated prevalence rates were slightly lower than reported prevalence rates in 2014 (4.9% and 0.9%, respectively). Discussion : DOD is required to produce an annual report for Congress on sex-related offenses. The final version of the bill adds additional reporting requirements including incidents of nonconsensual distribution of private sexual images (§537) and family-member sexual assault (§538). A House provision that would have defined "sexual coercion" for the purpose of annual reporting was not adopted. Also not adopted was House Section 532 requiring additional reviews of SAPR programs for the Army National Guard and Reserve components, with a focus on monitoring timeliness of line-of-duty determinations and investigation processing. The conferees instead directed DOD to provide a briefing to the armed services committees on the implementation of the Government Accountability Office's recommendations in the February 2017 GAO report, Sexual Assault: Better Resource Management Needed to Improve Prevention and Response in the Army National Guard and Army Reserve . Congress has raised concerns about the character of discharge for certain veterans who experienced sexual trauma while serving in the military. Psychological trauma following a sexual assault incident has been associated with negative behavioral changes in the victim such as increased drug or alcohol use, poor work performance, or other disciplinary issues. These behaviors may affect the nature of a victim's discharge from the Armed Forces. Discharges that are not under "honorable" conditions may prevent servicemembers from being eligible for certain veterans' benefits. Under certain circumstances, servicemembers may appeal these decisions through Discharge Review Boards or Boards of Correction for Military Records. Section 521 of the final bill requires DOD to provide publicly available statistics on applications to these boards from those who have alleged a relationship between sex-related offenses and the nature of their discharge. In addition, Section 522 of the final bill codifies and expands existing requirements that the services establish processes through which alleged sexual assault survivors may challenge the terms of characterization of discharge or separation. Sexual assault prevention and response training is required by law for all new accessions within 14 duty days after initial entrance on active duty or into a duty status with a reserve component. Section 535 of the final bill requires service secretaries to provide this training to enlistees in a delayed entry program prior to beginning basic training or initial active duty for training. Concerns about male victims of sexual assault prompted the House in 2012 to call for a review of DOD's policies and protocols for the provision of medical and mental health care for male servicemembers. In a 2015 report, the GAO noted a number of areas where actions were needed to specifically address support for male victims of sexual assault. In response to this report, DOD has initiated gender-specific treatment: for example, male-only therapy groups and enhanced medical staff training on responding to and treating male victims. Section 536 of the final bill adopts a House provision which requires additional training for special victims' counsels on male-specific challenges for victims of sex-related offenses. In March 2017, the Senate Armed Services Committee held hearings in response to allegations of online sexual harassment and nonconsensual sharing of intimate images and sexually explicit photos by servicemembers on the Marines United website. In the hearing, senior Navy and Marine Corps officials noted that perpetrators could potentially be held accountable for these actions under Articles 92 (failure to obey an order or regulation), 120 (rape and sexual assault), and/or 134 (good order and discipline) of the Uniform Code of Military Justice (UCMJ). However, General Robert B. Neller, Commandant of the Marine Corps, noted that a more explicit UCMJ provision might assist commanders in holding perpetrators accountable. The conference report includes a provision (§533) that adds a punitive article to the UCMJ prohibiting the "wrongful broadcast or distribution of intimate visual images" (Article 117a, 10 U.S.C. §917a). A provision in the Senate bill (§521) that would also have amended the Manual for Courts-Martial for activities related to the nonconsensual dissemination of intimate images and sexually explicit conduct was not adopted. Other potential changes to judicial process that were not adopted included a House provision (§524) that would create an o pen discovery rule. The Administration has expressed concern about this provision, stating, The Administration shares Congress' goal of preventing sexual assault in the military and holding accountable those who commit the offense. Although the Administration is sympathetic to the motivation behind Section 524, affording victim's counsel with open file discovery may have the unintended consequence of impairing the successful prosecution of cases by creating additional opportunities for the defense to challenge the victim's testimony." Although the provision was not adopted, the conferees encouraged "the President to include a provision in the Rules for Courts-Martial establishing that Special Victims' Counsel and Victims' Legal Counsel are entitled to nonprivileged case information and documentation relevant to the crimes committed against their clients." References : See also CRS Report R44944, Military Sexual Assault: A Framework for Congressional Oversight , by [author name scrubbed] and [author name scrubbed], CRS Report R43168, Military Sexual Assault: Chronology of Activity in Congress and Related Resources , by [author name scrubbed]; CRS Report R43213, Sexual Assaults Under the Uniform Code of Military Justice (UCMJ): Selected Legislative Proposals , by [author name scrubbed]. CRS Report R43928, Veterans' Benefits: The Impact of Military Discharges on Basic Eligibility , by [author name scrubbed] and [author name scrubbed]. Previously discussed in CRS Report R44577, FY2017 National Defense Authorization Act: Selected Military Personnel Issues , by [author name scrubbed] et al., and similar reports from earlier years. CRS Point of Contact : [author name scrubbed], x[phone number scrubbed]. Military Childcare Programs DOD's child development program (CDP) is a military family-oriented initiative and part of a broader range of community and family support programs. The CDP delivers subsidized childcare services from birth to 12 years of age for eligible children of military personnel and certain civilian employees. About 160,000 military children receive some form of care through the CDP worldwide. The CDP includes Child Development Center (CDC) facilities that are operated on military installations and are funded by a combination of appropriated and nonappropriated funds, meaning that they are partially a fee-generating activity. By statute the amount of appropriated funds used to operate CDC cannot be less than the estimated amount of child care fee receipts. Section 558 of the final bill would require DOD to set and maintain the hours of operation of childcare development centers in a manner that considers the "demands and circumstances" of military service. In addition, this would require service secretaries to provide childcare coordinators at each military installation where significant numbers of servicemembers with accompanying dependent children are stationed. Section 575 adopts Section 558 of the Senate bill requiring the Secretary of Defense to report by September 1, 2018, on the feasibility and advisability of (1) expanding the operating hours of childcare facilities; (2) contracting with private-sector providers to expand the availability of childcare services; (3) contracting with private-sector childcare service providers to operate DOD facilities; and (4) expanding such services to members of the National Guard and Reserves if such expansion does not substantially increase costs of childcare services for the military departments or conflict with others who have higher priority for space in childcare services programs. Section 559 of the final bill would provide the Secretary of Defense with direct hire authority to recruit and appoint qualified childcare services providers to positions within DOD CDCs if the Secretary determines that (1) there is a critical hiring need, and (2) there is a shortage of providers. The Secretary would prescribe the regulations required and commence implementation of such direct hire authority no later than May 1, 2018. Section 576 of the final bill adopts Senate Section 559, which would require a review of the General Schedule pay grades for DOD childcare services provider positions to ensure that, in the words of the Senate committee report, "the department is offering a fair and competitive wage" for those positions. CRS Point of Contact : [author name scrubbed], x[phone number scrubbed]. Military Service Academies There are three military service academies within DOD: the U.S. Military Academy (USMA), West Point, NY; the U.S. Naval Academy (USNA), Annapolis, MD; and the U.S. Air Force Academy (USAFA), Colorado Springs, CO. These are four-year bachelor degree-granting institutions. Cadets (USAFA and USMA) and midshipmen (USNA) receive free tuition, room and board, and a monthly stipend while enrolled. In addition to degree requirements, they also are required to participate in professional development activities throughout the academic year and in summer training periods. Qualified graduates are offered an appointment as a commissioned officer in the Army, Air Force, Navy, or Marine Corps, and are generally required to complete at least a five-year active duty commitment. The law allows for part or all of the commitment to be completed in the Reserve component. DOD policy prior to 2016 allowed for certain cadets and midshipmen to have their active service commitment reduced, stating Officers appointed from cadet or midshipman status will not be voluntarily released from active duty principally to pursue a professional sports activity with the potential of public affairs or recruiting benefit to the DoD during the initial 2 years of active commissioned service. A waiver to release a cadet or midshipman prior to the completion of 2 years of active service must be approved by the ASD(M&RA). Exceptional personnel with unique talents and abilities may be authorized excess leave or be released from active duty and transferred to the Selective Reserve after completing 2 years of active commissioned service when there is a strong expectation their professional sports activity will provide the DoD with significant favorable media exposure likely to enhance national recruiting or public affairs. In May 2016, then-Secretary of Defense Ashton Carter announced at the Naval Academy Commencement that he had authorized a deferment of active duty commitment for certain cadets or midshipmen who were recruited directly into professional sports. On April 29, 2017, Secretary of Defense James Mattis released a memorandum to the Secretaries of the Military Departments canceling Carter's guidance and reinstating the pre-2016 policy (DODI 1322.22) that required at least two years of active service. House Section 541 would have codified a requirement that graduates fulfill their active service commitments without exception before release to participate in professional sports (i.e., five years of active duty without early release to the Selective Reserve). Section 543 of the Senate bill would have allowed graduates selected to participate in professional athletics to accept an appointment as an officer in the Selected Reserve for the entirety of the five-year service obligation. The Administration "strongly objects" to Section 543 of the Senate bill, stating, "following graduation from a military service academy, individuals should serve as full-fledged military officers, carrying out the normal work and career expectations of an officer who has received the extraordinary benefits of a taxpayer-funded military academy education." The final bill would codify a requirement that service academy graduates complete at least two consecutive years of commissioned service prior to pursuing a career as a professional athlete. References : CRS Report RL33213, Congressional Nominations to U.S. Service Academies: An Overview and Resources for Outreach and Management , by [author name scrubbed] and [author name scrubbed]. CRS Point of Contact : [author name scrubbed], x[phone number scrubbed].

Military personnel issues typically generate significant interest from many Members of Congress and their staffs. This report provides a brief synopsis of selected sections in the National Defense Authorization Act for FY2018 (H.R. 2810), as passed by the House on July 14, 2017, and the Senate on September 18, 2017. The FY2018 NDAA conference report was passed by the House on November 14, 2017, and the Senate on November 16, 2017. On December 12, President Donald J. Trump signed the bill into law (P.L. 115-91). Issues include military end-strengths, pay and benefits, and other personnel policy issues. This report focuses exclusively on the NDAA legislative process. It does not include language concerning appropriations, or tax implications of policy choices, topics that are addressed in other CRS products. Issues that have been discussed in the previous year's defense personnel reports are designated with an asterisk in the relevant section titles of this report.

CRS_RS22836

Background Nicaragua is a Central American nation bordering both the Caribbean sea and the Pacific ocean between Costa Rica and Honduras. Slightly smaller than the state of New York, Nicaragua has a population of roughly 5.4 million. With a per capita income level of $1,000 (2006), Nicaragua is classified by the World Bank as a lower middle income developing country. Nicaragua is still largely an agricultural country, but its non-traditional exports (textiles, tobacco products, vegetables, gold) have expanded rapidly in the last few years. Nicaragua's key development challenge is to boost growth rates to a level that can reduce poverty, which is especially severe in rural areas. Nicaragua has had a conflicted and anti-democratic past, dominated from 1936 until 1979 by the Somoza dictatorship. Anastasio Somoza and his two sons who succeeded him, though corrupt and authoritarian, were staunch anti-communists who maintained good relations with the United States. In 1979, the Somoza government was toppled by a revolution led by the Sandinista National Liberation Front (FSLN), a leftist guerrilla group that had opposed the regime since the early 1960s. That revolution resulted in the loss of some 50,000 lives. During the 1980s, Nicaragua was embroiled in a decade-long struggle between its leftist Sandinista government, which confiscated private property and maintained ties with rebel forces in neighboring El Salvador, and U.S.-backed counter-revolutionary forces. Since democratic elections were held in 1990, Nicaragua has adopted pro-market economic reforms, held free and fair elections, and worked toward building democratic institutions. Despite progress on those fronts, successive governments have made limited inroads in combating corruption and addressing the country's high levels of poverty and inequality. Political Situation On January 10, 2007, Sandinista leader and former President Daniel Ortega was inaugurated to a five-year presidential term. Ortega's previous presidency (1985-1991) was marked by a civil conflict pitting the government against U.S.-backed "contras." Ortega, who had lost the last three presidential elections, won only 37.9% of the vote in the November 2006 elections, but Nicaraguan law allowed him to avoid a run-off vote since he was more than 5% ahead of the next closest candidate, Eduardo Montealegre, then head of the Nicaraguan Liberal Alliance (ALN). Ongoing disputes between powerful leaders, endemic corruption, and weak institutions have undermined the consolidation of democracy in Nicaragua. The 2006 elections followed more than a year of political tensions among then-President Enrique Bolaños, Ortega and the leftist Sandinista party, and allies of rightist former President Arnoldo Alemán. Alemán and Ortega, once longtime political foes, negotiated a power-sharing pact ("El Pacto") in 1998 that has since influenced national politics. In addition to a tendency to have caudillos like Ortega and Alemán dominate national politics, Nicaragua is known to have high levels of corruption. According to Transparency International's 2007 Corruption Perception Index, Nicaragua is one of ten Latin American countries where corruption is perceived as rampant. Currently, some opposition leaders are urging the Ortega government to publicly disclose how it is using the aid Nicaragua receives from Venezuela, including funds earned through the re-sale of Venezuelan oil bought on preferential terms through PetroCaribe. They are concerned that the president of Nicaragua's state-owned oil company, which distributes the Venezuelan oil, is also the treasurer of the Sandinista party. Finally, the politicization of government entities, including party influence over the judiciary, is an obstacle to governance in Nicaragua. Since no single party won an outright majority in Nicaragua's 90-member National Assembly in the November 2006 legislative elections, President Ortega and the Sandinistas (FSLN) must form alliances in order to enact legislation The FSLN has generally relied on an informal alliance with the Constitutionalist Liberal Party (PLC), dominated by jailed former President Alemán, to pass legislation. In December 2007, however, the PLC broke with the Ortega government by voting against its plan to increase the power of the country's Citizen Power Councils (CPCs), which are funded by the executive branch, over the existing municipal authorities. The PLC has since aligned with Eduardo Montealegre, who, until recently was head of the ALN, to contest the ruling FSLN and its allies in the November 2008 municipal elections. Those elections will test the strength of the FSLN, which currently holds 87 of the country's 153 municipalities. Economic and Social Policy In 2008, the Ortega government faces the challenges of boosting the country's moderate growth rates (GDP growth was 2.9% in 2007) and reducing poverty. According to the World Bank, although overall poverty has declined in Nicaragua since the country's return to democracy (from 50.3% in 1993 to roughly 46% today), more than two-thirds of the rural population is impoverished. While Nicaragua made some progress towards development in the 1990s, much of those gains were reversed by the devastation wrought by Hurricane Mitch in 1998. As a result of sluggish growth rates, some social indicators for Nicaragua have shown little or no improvement since 1993. Nicaragua is highly dependent on foreign aid, which contributed 26% of its budget in 2006. It is also dependent on remittances sent from Nicaraguans living abroad, which totaled some $656 million in 2006 and accounted for 17% of the country's GDP. The official unemployment rate is about 5%, but underemployment is a major problem and some 60% of workers are employed in the informal sector, which doesn't provide social security and other benefits. The Ortega government has adopted a poverty reduction strategy and a 2008 budget in line with International Monetary Fund (IMF) recommendations. As a result, the IMF and the World Bank have cancelled roughly $200 million and $1.5 billion respectively in foreign debt owed by Nicaragua. President Ortega is expected to announce a development plan by mid-2008 that is likely to emphasize sustainable agro-industrial development. Obstacles to Nicaragua's growth prospects in 2008 will be the rising price of oil and the economic slowdown in the United States, which could affect trade and remittance flows. Some economists have also warned that if Ortega should engage in an increasingly radical or authoritarian manner, foreign investment in Nicaragua could decline. Foreign Relations President Ortega is working with the United States and the IMF to boost the country's long-term prospects for economic development, but is also seeking aid from Iran and Venezuela to meet more immediate needs. Iran has pledged to invest in Nicaragua's ports, agricultural sector, and energy network, with Venezuela co-financing many infrastructure projects. Venezuela has promised to build a $3.5 billion oil refinery and to provide up to 10 million barrels of oil at preferential prices annually through the PetroCaribe program. Ortega shares an ideological affinity with President Hugo Chávez of Venezuela and the other countries comprising the Bolivarian Alternative for the Americas (ALBA) trade block (Cuba and Bolivia). President Ortega generally maintains good relations with neighboring countries in Central America, but his government has been embroiled in a serious border dispute with Colombia. In December 2007, the International Court of Justice (ICJ) upheld Colombia's sovereignty over the islands of San Andrés and Providencia, but the ICJ is still determining the official maritime boundaries between the two countries. U.S.-Nicaraguan Relations Despite initial concerns about the impact of Ortega's November 2006 re-election on U.S.-Nicaraguan relations, the bilateral relationship, though tense at times, appears to be generally intact. One cause of tension has been President Ortega's tendency to vacillate between anti-U.S. rhetoric and reassurances that he will respect private property and pursue free-trade policies. In September 2007, Ortega denounced the United States in a speech before the United Nations as "the imperialist global empire." Rhetoric aside, Ortega's interest in cooperating with the United States has been reflected in his pledge to hand over 651 Soviet-made surface-to-air missiles in exchange for military and medical equipment. Ortega has continued cooperating with the IMF, which approved a new three-year poverty reduction package for Nicaragua in October 2007. His government is also implementing the CAFTA-DR. The United States provides significant foreign assistance to Nicaragua, and the two countries cooperate on counternarcotics, trade, and security matters. The United States responded to Hurricane Mitch in 1998 by granting Temporary Protected Status (TPS) to eligible Nicaraguan migrants living in the United States. In May 2007, the U.S. government extended the TPS of an estimated 4,000 eligible Nicaraguans through January 5, 2009. In response to Hurricane Felix, a category 5 hurricane that hit Nicaragua in September 2007, the United States provided hurricane assistance to Nicaragua to help with the recovery efforts. U.S. Aid The United States provided Nicaragua with $50.2 million in foreign aid in FY2006 and $36.9 million in FY2007, while an estimated $28.6 million is being provided in FY2008. The Administration has also requested, but Congress has not yet considered, some $2 million in FY2008 supplemental assistance for Nicaragua as part of the Administration's Mérida Initiative to boost the region's capabilities to interdict the smuggling of drugs, arms, and people, and to support a regional anti-gang strategy. For FY2009, the Administration has requested $38 million for Nicaragua, not including P.L. 480 food aid. Nicaragua could also receive roughly $6.7 million of the $100 million in Mérida Initiative funds for Central America included in the FY2009 budget request. The FY2009 request includes increases in funds for security reform and combating transnational crime, democracy and civil society programs, and trade capacity building programs to help Nicaragua benefit from CAFTA-DR. Millennium Challenge Account (MCA) In addition to traditional development assistance, Nicaragua benefits from its participation in the MCA, a presidential initiative that increases foreign assistance to countries below a certain income threshold that are pursuing policies to promote democracy, social development, and sustainable economic growth. In 2005, the Bush Administration signed a five-year, $175 million compact with Nicaragua to promote rural development. The compact, which entered into force in May 2006, includes three major projects in the northwestern regions of León and Chinandega. Those projects aim to promote investment by strengthening property rights, boost the competitiveness of farmers and other rural businesses by providing technical and market access assistance, and reduce transportation costs by improving road infrastructure. During a recent visit to Nicaragua, John Danilovich, director of the Millennium Challenge Corporation, asserted that, despite some political differences, he believes that the United States and Nicaragua can work together to combat poverty. Consolidating Democracy U.S. democracy programs aim to reform government institutions to make them more transparent, accountable and professional; combat corruption; and promote the rule of law. The United States provided some $13 million to support the November 2006 elections in Nicaragua. Some 18,000 observers monitored the elections. Following the November 2008 municipal elections, USAID is expected to help increase the capacity and transparency of local governments. Other ongoing programs seek to increase citizen advocacy and the role of the media. Human Rights U.S. officials have expressed some concerns regarding respect for human rights in Nicaragua. According to the State Department's March 2008 human rights report on Nicaragua, civilian authorities generally maintained effective control of security forces, but there were some reports of unlawful killings involving the police. Some of the most significant human rights abuses included harsh prison conditions, arbitrary arrests and detentions, and widespread corruption in and politicization of government entities, including the judiciary and the Supreme Electoral Council. Human rights problems related to labor issues include child labor and violation of worker rights in some free trade zones. In October 2007, Human Rights Watch asserted that Nicaragua's current ban on all abortions, which includes cases where the mother's life is at risk, has put pregnant women's health at risk. Counternarcotics Cooperation Nicaragua is a significant sea and land transshipment point for cocaine and heroin being shipped from South America to the United States, according to the State Department's February 2008 International Narcotics Control Strategy Report (INCSR). Trafficking occurs on both the country's Atlantic and Pacific coasts, with increasing trafficking occurring on the Pacific Coast since 2006. The INCSR report asserts that Nicaraguan law enforcement were "very successful" in their counternarcotics efforts in 2007. Seizures and arrests increased dramatically, with 153 kilograms of heroin and 13 metric tons of cocaine seized (compared to 23.4 kilograms of heroin and 9.72 metric tons of cocaine in 2006) and 192 traffickers arrested (up from 67). It also asserts that corruption, particularly within the judiciary, has been an obstacle to Nicaragua's counterdrug efforts. The Ortega Administration has asked the United States for more assistance to deal with drug gangs. The FY2009 budget request includes an increase in U.S. counternarcotics aid to Nicaragua. As noted above, other assistance could be provided through the proposed Mérida Initiative. Trade Nicaragua's National Assembly approved the CAFTA-DR in October 2005 and passed related intellectual property and other reforms in March 2006. The agreement went into effect in Nicaragua on April 1, 2006. Compared to other CAFTA-DR countries, Nicaragua has attracted textile and apparel investors because of its relatively low wage costs. In addition, Nicaragua is the only CAFTA-DR country allowed to export a certain amount of apparel products composed of third country fabric to the United States duty-free. Foreign Direct Investment (FDI) in Nicaragua totaled roughly $282 million in 2006, an 18.5% increase over 2005. In 2007, FDI rose again to some $335 million. CAFTA-DR has also helped to accelerate U.S.-Nicaraguan trade. In 2006, Nicaraguan exports to the United States totaled about $1.53 billion, up 29.2% from 2005. They rose again in 2007 to roughly $1.6 billion, with particularly strong growth in exports of apparel, sugar, coffee, cigars, cheese, and fruits and vegetables. For the same period, Nicaraguan imports from the United States rose 20.6% in 2006 to $752 million as compared to 2005, and by 18.5% in 2007 to $890 million. Key Nicaragua imports from the United States include machinery, grains, fuel oil, textile fabric, plastics, pharmaceuticals, and motor vehicles. Property Claims Resolution of property claims by U.S. citizens has been a contentious issue in U.S.-Nicaraguan relations since the Sandinista regime expropriated property in the 1980s. The Nicaraguan government has gradually settled many claims through compensation, including the claims of 4,500 U.S. citizens. Fewer than 700 claims registered with the U.S. Embassy remain unresolved. The Ortega government's willingness to continue processing those claims was rewarded in July 2007 by the Administration's renewal of a waiver that allows Nicaragua to continue receiving U.S. foreign assistance despite the past expropriation of property owned by U.S. citizens.

Nicaragua, the second poorest country in Latin America after Haiti, has had a difficult path to democracy, characterized by ongoing struggles between rival caudillos (strongmen), generations of dictatorial rule, and civil war. Since 1990, Nicaragua has been developing democratic institutions and a framework for economic development. Nonetheless, the country remains extremely poor and its institutions are weak. Former revolutionary Sandinista leader, Daniel Ortega, was inaugurated to a new five-year presidential term in January 2007 and appears to be governing generally democratically and implementing market-friendly economic policies. The United States, though concerned about Ortega's ties to Venezuela and Iran and his authoritarian tendencies, has remained actively engaged with the Ortega Administration. The two countries are working together to implement the U.S.-Dominican Republic-Central America Free Trade Agreement (CAFTA-DR), control narcotics and crime, and promote economic development through the Millennium Challenge Account (MCA). Nicaragua is receiving some $28.6 million in U.S. assistance in FY2008 and could benefit from the proposed Mérida Initiative for Mexico and Central America. This report may not be updated.

CRS_R40863

Recent Developments On January 21, 2011, the Department of Labor's (DOL's) Employment and Training Administration (ETA) published in the Federal Register a notice of solicitation for grant applications (SGA) for the TAA Community College and Career Training Grant (CCCT) Program. The notice of availability of funds and solicitation for grant applications set April 21, 2011, as the closing date for the receipt of applications. H.R. 1 , the Full-Year Continuing Appropriations Act, 2011 (sections 4106-4018), as passed by the House on February 19, 2011, would prohibit the DOL from using the annual appropriation to implement the mandatory FY2011 program funding appropriated in the Health Care and Education Reconciliation Act of 2010 ( P.L. 111-152 ) in FY2011. None of the funds that would be made available by H.R. 1 could be used to carry out the provisions of P.L. 111-152 or to pay an employee at the DOL to implement the relevant provisions of P.L. 111-152 . On August 18, 2009, the Department of Commerce's Economic Development Administration (EDA) published in the Federal Register final rules and regulations governing the implementation of the Trade Adjustment Assistance for Communities (CTAA) grant program. The regulations outline the responsibilities of EDA in administering the program including determining a community's eligibility for CTAA planning and implementation grants, providing technical assistance to impacted communities, and evaluating grant applications. On January 11, 2010, EDA published in the Federal Register a notice soliciting applications for CTAA grant assistance. The notice set April 20, 2010, as the deadline for the submission of applications for CTAA grants, established the criteria for awarding funds and directed potential applicants to the grants.gov website for the complete application. On September 20, 2010, DOC announced the awarding of $36.768 million in CTAA grant funds to 36 grant recipients. Overview of the Trade Adjustment Assistance for Communities (CTAA) Program The CTAA grant program was created with the passage of the American Recovery and Reinvestment Act (ARRA) of 2009, P.L. 111-5 , as part of a larger effort by the Obama Administration and the 111 th Congress to address an economic recession that began in December 2007. Included among the subtitles of Division B of ARRA was the Trade and Globalization Adjustment Assistance Act (TGAAA) of 2009. TGAAA amends the Trade Act of 1974, extending and revising trade adjustment assistance provisions affecting various constituencies including trade-impacted workers, farmers, firms, and communities. Included among the amendments to the Trade Act were provisions reestablishing a Trade Adjustment Assistance for Communities (CTAA) grant program. The CTAA program, as authorized by ARRA, comprises four subchapters: Subchapter A establishes the CTAA programs within the Department of Commerce; Subchapter B creates the Community College and Career Training Grant program (CCCT); Subchapter C establishes Industry or Sector Partnership Grants program for Communities Impacted by Trade (ISP); and Subchapter D includes general provisions related to program implementation. Subchapter A—Trade Adjustment Assistance for Communities (CTAA) The 2009 amendments to Chapter 4 of Title II of the Trade Act of 1974 directed the Department of Commerce (DOC) to establish a trade adjustment assistance program for communities by August 1, 2009. The act identified key components and processes of the CTAA program, including provisions governing the responsibilities of the DOC, eligible program activities, and cost sharing and reporting requirements. Within the DOC, the Economic Development Administration (EDA) was designated as the agency responsible for administering the new CTAA grant program. EDA was charged with: making affirmative determination of a community's eligibility for assistance; providing technical assistance to eligible communities; awarding strategic planning and project implementation grants to eligible communities; and establishing an Interagency Community Assistance Working Group responsible for coordinating federal assistance to trade-impacted communities. Notifying Communities of Eligibility for Assistance Regulations published in the Federal Register in August 2009 outlined the rules governing the definition of an affirmative determination of a community's eligibility for assistance. Specifically, a community could apply for CTAA if on or after August 1, 2009, it met one or more of the following certifications: 1. a Department of Labor certification that a group of workers in the community are eligible to apply for Trade Adjustment Assistance for Workers (TAAW); 2. a Department of Commerce certification that a firm or firms located within the community are eligible for Trade Adjustment Assistance for Firms (TAAF); or 3. a Department of Agriculture certification that a group of agricultural producers in the community are eligible for Trade Adjustment Assistance to Farmers (TAA-Fm.). In addition, EDA was required to determine if a community was or would be significantly affected by a threatened or expected or actual loss of jobs related to one of the certifications identified above. A community was allowed to submit an affirmative determination petition for designation as a community impacted by trade at least 180 days after the date of the most recent certification. The regulations also included a grandfather provision allowing communities that met one of the three affirmative certifications related to workers, firms, or farmers issued between January 1, 2007, and August 1, 2009, to submit a petition for CTAA designation. The deadline submission of the petition was February 1, 2010. Regulations governing the program required that the petition for an affirmative determination be submitted to the appropriate EDA regional office and include the following elements: sufficient information that would allow EDA to make a determination that the petitioning community was significantly affected by the threat or actual loss of jobs associated with certification as a trade-impacted community; and information about the adverse impacts on the community from the actual or threatened loss of jobs. The regulations directed EDA to use the petitioning community's most recent civilian labor force statistics when measuring such impacts. These data are available from the Department of Labor's Bureau of Labor Statistics. Upon making an affirmative determination that a community qualifies for CTAA assistance, program regulations require EDA to promptly notify the state's governor and officials of the trade-impacted community of the availability of CTAA funds and other appropriated economic development assistance. The notification also identified the appropriate EDA regional office responsible for providing CTAA technical assistance to the community. Provision of Technical Assistance Upon EDA's determination that a community had been impacted by trade, program regulations directed EDA to provide comprehensive technical assistance to aid the community in developing or updating a strategic plan aimed at diversifying and strengthening the community's economy. In doing so, the community's strategic plan was required to identify trade-related impediments to economic developments and address economic adjustment and worker dislocation. EDA is responsible for the coordination of federal assistance to trade impacted communities, including identifying all federal, state, and local resources available to address economic distress and assisting a trade-impacted community gain access to other federal programs. To facilitate this assistance EDA was charged with establishing the Interagency Community Assistance Working Group (ICAWG) comprised of representatives from at least eight other federal agencies. One of the principle roles of the ICAWG is to provide access to other federal programs when the trade-impacted community undertakes implementation grant activities. Contents of the Strategic Plan Program regulations require that a community must have an EDA-approved strategic plan before it can receive CTAA implementation grant funds. In developing its strategic plan each community was directed to seek the involvement of both public and private sector entities, including local educational institutions; federal, state, and local government entities serving the community; labor organizations representing workers in the impacted community; businesses; and local workforce investment boards. Program regulations outline elements that EDA must consider when evaluating a community's strategic plan. These elements can be grouped into three broad categories that are intended to assess a community's needs and assets, long-term economic adjustment prospects and commitments, and cost of implementation. Elements EDA will evaluate when reviewing a community's strategic plan are outlined in Table 1 . Implementation Grants Implementation grants are awarded by EDA to fund projects and programs included in a community's approved strategic plan. An implementation grant may not exceed $5 million and may not cover more than 95% of the cost of a project or program. EDA must give priority in awarding grants to small and medium size communities. Program regulations also require EDA to submit an annual report to Congress identifying grants awarded during the fiscal year and assessing the impact of the grant activity on the affected community. Program regulations identified six specific categories of eligible activities including infrastructure improvements, including site acquisition and preparation, construction, rehabilitation and equipping of a facility; market and industry research and analysis; technical assistance including feasibility studies, business networking and restructuring; public services; training; and other activities included in the strategic plan that satisfy statutory and regulatory requirements. Content of Implementation Grant Application Implementation grant applications must include a copy of the EDA-approved strategic plan and a description of the proposed project or program to be funded. In addition, EDA will consider additional evaluation criteria identified in the applicable Federal Funding Opportunity announcement (FFO) when selecting recipients of implementation grants. Applicants seeking assistance under Subchapter B (community college and career training grants) or Subchapter C (sector partnership grants) must include in its implementation grant application a discussion of how projects or programs funded with implementation grants will use these two programs and other federal grant assistance. Funding Authorizations and Appropriation Levels The act authorized funding totaling $337.5 million for implementation and strategic planning grants for the period that includes FY2009, FY2010, and a 90 day period from October 1, 2010, to December 31, 2010 (see Table 2 of this report). For FY2009, Congress appropriated $40 million and directed that it be split between CTAA activities and Trade Adjustment Assistance for Firms (TAAF), which is also administered by the EDA. This was far less than the amount authorized. In addition, Congress did not provide instructions covering the distribution of funds between the two programs. When it approved the Consolidated Appropriations Act of 2010, P.L. 111-117 , Congress appropriated $15.8 million to be allocated between Trade Adjustment Assistance for Firms and Subchapter A (CTAA) activities. Rescission of Funds The Obama Administration's FY2012 budget requests a decrease of $15.8 million in previously appropriated (FY2010) CTAA funds. The Administration cites high administrative costs and notes that program results are less effective or impressive than those of other EDA programs. Further, the Administration states that: EDA plans to utilize its other programs—particularly its Economic Adjustment Assistance and 21 st Century Innovation Infrastructure Program to fund investments that maximize opportunities for regions to engage in global markets, increase export potential of regional firms, mitigate threats posed by TAA, and foster greater regional competitiveness. CTAA Notice of Federal Funding Opportunity On January 11, 2010, EDA published in the Federal Register a notice announcing the solicitation of applications for $36.768 million in CTAA planning and implementation grants and directed potential applicants to the grants.gov website. The notice of Federal Funding Opportunity (FFO) established the criteria EDA will used in ranking and awarding grants grant applications. EDA will use six weighted criteria in evaluating grant applications. They are: The extent to which the proposed activities support small and medium sized communities which are defined as communities with populations less than 100,000 persons (20%). The extent the proposed investment is targeted to the most severely trade impacted communities as measured by the number of persons receiving Trade Adjustment Assistance for workers (20%). The extent that the proposed activities will result in a high return on investment as measured by jobs created or retained, private and public sector funds leveraged and the use of best practices in the management of the project (20%). The extent the proposed activities will support regionalism, innovation, and entrepreneurship through the implementation of regional cluster strategies and the adaptation of technology for commercial usage (20%). The extent that the project supports global trade and competitiveness by supporting companies that have significant export potential (15%). The extent that the funded activity will promote the green economy through the use of renewable energy, energy efficiency and green building technology(5%). The notice identified April 20, 2010, as the deadline for the submission of applications. Allocation and Distribution of Funds EDA allocated the $36.768 million among its six regional offices based on each region's share of total workers receiving assistance under the TAA for Workers program and workers who were employed by firms served by the TAA Firms program. The distribution among the six regions was as follows: Atlanta Regional Office – $8,861,419; Austin Regional Office—$3,263,046; Chicago Regional Office—$11,315,607; Denver Regional Office—$2,683,432; Philadelphia Regional Office—$6,588,807; Seattle Regional Office—$4,055,689. The FFO limited funds for strategic planning activities to no more than $25 million and limited grant awards to a single community to no more than $5 million. Based on historical experience in administering its Economic Adjustment Assistance Program, EDA estimated that grants for strategic planning activities would be between $75,000 and $200,000 while implementation awards would range between $700,000 and $3.5 million. Between August 3, 2010, and September 20, 2010, DOC announced the awarding of $36.768 million in CTAA grant funds to 36 entities. Of the total amount awarded, approximately $23 million was awarded for infrastructure improvements in support of industrial and business parks. activities. Funding to construct incubators and innovation centers was the second most funded activities. Grants supporting the development or enhancement of strategic plans accounted for $2.388 million of the amount allocated. Funded projects are expected to create 6,500 jobs and retain approximately 1,500 existing private sector jobs. grant recipients. Subchapter B—Community College and Career Training Grant19 (CCCT ) Subchapter B directs the Department of Labor (DOL) to award competitive grants to institutions of higher education (IHEs) for use in developing, offering, or improving educational or career training programs for persons eligible for Trade Adjustment Assistance for Workers (TAAW). The act limits the number and amount of grant funds an eligible institution may receive to not more than one grant of no more than $1 million. Grant Requirements and Award Criteria Accredited public and private IHEs, including private for-profit (proprietary) IHEs, that are located in the 50 states, the District of Columbia, and Puerto Rico and that offer two-year or less-than-two-year programs of education are eligible to apply for funds individually or in consortia. Potential applicants may seek technical assistance from DOL in preparing their application. The act requires that each CCCT grant application include: a description of the proposed project, including the manner in which the grant will be used to develop, offer, or improve an educational or career training program that is suited to persons eligible for TAAW; the extent to which the proposed project will meet the educational or career training needs of persons eligible for TAAW in the community served by the IHE; the extent to which the proposed project fits within the community's EDA-approved strategic plan; the extent to which the project for which the grant proposal is submitted relates to any project funded by a Sector Partnership Grant; a description of the IHE's previous experience in providing educational or career training programs to persons eligible for TAAW, although a lack of experience does not disqualify an IHE; a description of the extent and outcome of the applicant's compliance with the program's required outreach activities to local educational and training providers, government agencies, local workforce investment boards, labor organizations, and at least one employer to identify the required job skills of future employment opportunities within the community and the gaps in existing educational and training programs; the extent to which the proposed project will provide the required job skills or fill the identified gaps in existing educational and training programs; a description of the extent and the outcome of the applicant's compliance with the program's required outreach activities to similar IHEs to learn best practices for providing educational or training programs to persons eligible for TAAW; a description of the extent and outcome of the applicant's compliance with the program's required outreach activities to community partnerships that have sought or received a Sector Partnership Grant in an effort to enhance the project effectiveness and avoid duplication of efforts; and the extent to which employers have demonstrated a commitment to employing workers who have participated in the proposed project. Funds are awarded based on three factors. The first factor is the merits of the proposal to develop, offer, or improve educational or career training programs to persons eligible for TAAW. The second factor is an evaluation of the likely employment opportunities made available by the proposal. The final factor is an evaluation of prior demand for training programs by persons eligible for TAAW in the community and the availability and capacity of existing training programs to meet future demand. Priority is given to applicants that serve communities, which have been eligible for CTAA within the preceding five years. The act limits the number and amount of grant funds that an eligible institution may receive to not more than one grant of no more than $1 million; however, these limitations are not applicable for the mandatory appropriations for FY2011 through FY2014. In each state, the aggregate amount awarded to IHEs and consortia must equal or exceed 0.5% of the total mandatory appropriations each year from FY2011 through FY2014. Funding Authorization and Appropriation The TGAAA authorizes funding totaling $90 million in grant assistance for the period covering FY2009, FY2010, and October 1, 2010, to December 31, 2010 (see Table 1 ). Appropriated funds remain available until expended. The TGAAA prohibits grants from being used to meet the matching fund requirement of other federal grant programs. On March 30, 2010, the President signed the Health Care and Education Reconciliation Act of 2010 ( P.L. 111-152 ). P.L. 111-152 provides $500 million in mandatory funding for each of FY2011 through FY2014 (see Table 1 ). It appears that sections 4016-4018 of H.R. 1 , the Full-Year Continuing Appropriations Act, as passed by the House on February 19, 2011, would not allow the DOL to administer any appropriated grant funds in FY2011. However, DOL may be able to postpone awarding the FY2011 funds until FY2012, should funding for program administration be available for FY2012. Reporting DOL must report annually to the Senate Committee on Finance and the House Committee on Ways and Means about each grant awarded and the impact of each award on persons eligible for TAAW. Solicitation for Grant Applications The solicitation for grant applications (SGA) was issued January 20, 2011, with a closing date of April 21, 2011. DOL plans to provide 36-month awards. Applicants may apply under one of four priorities: Addressing workers with basic skills deficiencies; Improving retention and achievement rates to reduce time to education program completion; Building programs that meet industry needs, including developing career pathways; or Strengthening online and technology-enabled learning. Grant funds may be used for expenses such as salaries, training of instructors, classroom supplies and equipment, facility leases, data analysis, and information technology infrastructure. Facilities' alterations may be conducted with the DOL's approval. Grant funds may not be used for tuition, participant wages or stipends, certain participant support services, construction, the purchase of real property, or to supplant existing funds. Applicants must provide evidence that the project will be sustainable once grant funding ends. Two types of applicants are eligible to receive awards that exceed the DOL-expected amounts of $2.5 million-$5.0 million for individual applicants and $2.5 million-$20.0 million for a consortium. The first type includes applicants that propose to replicate strategies with strong or moderate evidence of effectiveness at multiple locations and/or for persons eligible for TAAW and other individuals. The second type includes applicants that propose to develop and implement online and technology-enabled courses that will be used within the local community and among diverse students over a large geographic area. In addition to the legislative requirements, the DOL uses the SGA in an effort to increase the rigor of the program's implementation and resulting evidence. For instance, all applicants must describe the proven research evidence on which their program strategies are based or the research basis for their proposed innovative strategies. Applicants must also describe how they will use process and outcome data to improve project implementation. The SGA emphasizes project and program evaluation. In addition to project-specific progress measures, each grantee must annually report on the following outcome measures: attainment of credits toward degree(s); attainment of less-than-one-year industry-recognized certificates in less than one year; attainment of industry-recognized certificates (more than one year); graduation number and rate within 150% of the program's normal completion time for degree programs; employment rate of prior participants in the first quarter after they exit from the project; employment retention rate of prior participants from the 1 st to 2 nd and 3 rd quarters after they exit from the project; average earnings of prior participants from the 2 nd and 3 rd quarters after they exit from the project if employed in the 1 st three quarters; and basic skills attainment of program participants, for those grantees addressing the application priority for workers with basic skills deficiencies. The measures must be reported for CCCT program participants and an appropriately comparable non-CCCT-funded cohort. The DOL will choose some grantees to participate in a rigorous program evaluation. The grantees so chosen "may be required to use a random-assignment lottery in enrolling project participants." In an effort to build on the research base and evidence related to educational and career training programs, grantees will be required to make all materials developed under the project available for public use under a Creative Commons Attribution 3.0 License. Materials to be made public include curricula, course materials, teacher guides, and other products developed with grant funds. The materials must be reviewed by third-party subject matter experts. Subchapter C—Industry or Sector Partnership Grants Subchapter C directs the Department of Labor to award Industry or Sector Partnership Grants (ISPG) to eligible public/private partnerships. Industry and sector partnerships are voluntary organizations located in communities eligible for trade adjustment assistance for workers, firms, or farmers. Such organizations must be comprised of representatives from industry associations; local, county, or state governments; businesses in the designated industry or sector, workforce investment boards; labor unions; and education institutions. The act limits the number of grants an eligible industry partnership may be awarded by the Department of Labor to no more than one grant, or not more than $2.5 million, except in the case where the partnership is located in a community that does not receive Community College and Career Training grants. In such cases the amount may not exceed $3 million. Grant Requirements and Award Criteria Approved Industry and Sector Partnership Grant activities must be completed within three years. In general, grant proposals must: identify the industry or sector that will be the focus of the partnership; identify member organizations or entities involved in the partnership, including the lead agency; describe the goals and specific projects to be undertaken with grant funds; demonstrate that the partnership has the organizational capacity to carry out proposed projects; and explain whether the community has or will seek funding under the CTAA or community college and career training grant programs, or other federal programs, and how such assistance will be coordinated with industry and sector partnership grants. Partnership Grants may be used to fund skill assessments and identify training and employment gaps. This includes using funds to: develop systems to better link skill workers with firms in the targeted industry; assist firms in obtaining access to qualified job applicants; and train new workers and retrain existing workers (including remedial skills training). Funds may also be used to improve productivity, information and outreach activities, including the dissemination of information on best practices, the development of learning consortia comprised of small and medium size firms in an effort to lower the cost of training, and the identification of other resources including community college and career training grants. DOL is directed to provide technical assistance to sector partnership entities to assist them in developing and administering sector partnership grants. In order to carry out this responsibility DOL may award technical assistance grants or contracts to one or more national or state organizations. It is also responsible for developing performance measures to be used by sector partnerships to measure progress in meeting goals outlined in their grant application. DOL is required to submit annual reports to Congress that include a listing of awards and an assessment of the program's impact. Funding Authorization and Appropriations The TGAAA authorizes funding totaling $90 million in grant assistance for the period covering FY2009, FY2010, and October 1, 2009 through December 31, 2010. Grantees are prohibited from using grants to meet the matching fund requirement of other federal grant programs. The TGAAA expressly states that grant funds may supplement but not supplant other federal, state, and local funds. Congress did not include an appropriation for the program for FY2009 or FY2010. In addition, the Obama Administration did not request funding for the program for FY2011. Subchapter D—General Provisions Subchapter D includes a provision stating that a worker receiving trade adjustment assistance for workers (TAAW) will not be disqualified from or ineligible for assistance under any of the provisions of trade adjustment assistance to communities. Issue Discussion Appropriations Congress appropriated significantly less funding than the $150 million it authorized for the CTAA program for FY2009. The Supplemental Appropriations Act of 2009, P.L. 111-32 , included a $40 million appropriation to be used to fund both CTAA and the Trade Adjustment Assistance for Firms programs for FY2009. In addition, the Consolidated appropriations Act for FY2010 included $15.8 million for CTAA and the Trade Adjustment Assistance for Firms programs. In appropriating funds for communities and firms Congress did not include language in the supplemental act or the accompanying conference reports outlining how it intended the funds to be split between the two programs. Given the $5 million maximum amount that can be awarded for a single CTAA implementation grant, the combined $55.8 million appropriation will only fund a modest number of CTAA grant awards. In addition, grant funds must be used to fund strategic planning grant activities and trade adjustment assistance for firms. Implementation Issues Timeliness EDA's implementation of the CTAA program may have been slowed by the process of filling vacant politically appointed positions. As a result, important agency decisions were delayed due to the absence of leadership. The agency's new Assistant Secretary for Economic Development, John R. Fernandez, was confirmed by the Senate on September 11, 2009. In addition, the appointment of a Director of Adjustment Assistance within EDA was also delayed. This absence of leadership may have also contributed to delay in the creation of the Interagency Community Assistance Working Group (ICAWG), charged with facilitating access to other federal programs in coordination with implementation grant activities under the CTAA program. EDA is the lead agency of the ICAWG.. Although EDA has published regulations governing Subchapter A, trade adjustment assistance to communities, the Department of Labor has not yet published regulations governing assistance to community colleges and sector partnership grants. The absence of such guidance may delay timely implementation of program activities and undermine the program's effectiveness. In addition, Congress did not immediately provide an initial appropriation for the Subchapter B (CCCT) and Subchapter C (ISPG ) grants for FY2009 or FY2010. Congress did appropriate $500 million for CCCT grants for each of the fiscal years FY2011 through FY2014 when it passed the Health Care and Education Reconciliation Act of 2010, P.L. 111-152 , which was signed by the President on March 30, 2010. This was well over a year after passing initial appropriations for Subchapter A activities. In addition, Congress has not yet appropriated funding for ISPG activities. Interagency Coordination The principal role of the ICAWG is to provide access to other federal programs when a CTAA designated community undertakes grant activities. The CTAA program's legislation and its rules encourage coordination with other economic development programs, directing EDA to identify possible grant assistance that might be available from other federal agencies, but does not guarantee trade adjustment assistance communities preference or priority in the awarding of such assistance. In addition, in an effort to enhance effectiveness and avoid duplication, the law anticipates a high degree of coordination between EDA and the Department of Labor's Employment and Training Administration (ETA), which is responsible for the administration of the community college-based training program grants and sector partnership grants authorized under subchapters B and C of the act. For instance, the statute requires an educational institution submitting a grant proposal to ETA for CCCT grant assistance to include a detailed description of the extent to which the proposed grant activity would fit within the strategic plan developed by a community eligible for CTAA assistance, and to explain how the CCCT grant proposal relates to any project funded by a sector partnership grant. In addition, the statute requires an entity seeking a sector or industry partnership grant to include in its grant application a discussion of whether the community impacted by trade has sought or received CTAA implementation grant funds, whether an eligible education institution had sought or received CCCT grant funds, and how the eligible sector partnership entity will use grant assistance in coordination with CTAA, CCCT, and funds from other grant sources. Targeting of Assistance Congress may elect to amend the statue to more precisely define terms. For example, the legislation directs EDA to give priority to small and medium size communities when awarding implementation grants, but fails to establish or define what constitutes a small or medium size community. The definition of what constitutes a small or medium size community was not established in program regulations published in the Federal Register. This omission could lead to controversy if EDA does not target funds to appropriate sized communities consistent with congressional intent. EDA has since addressed this issue with the January 11, 2010, Federal Register publication of a notice soliciting applications for CTAA grants. The notice defined small and medium size communities as those whose population do not exceed 100,000 persons. Duplication of Effort Critics of the legislation may argue that the CTAA program duplicates the activities of other federal programs. This includes EDA's Economic Adjustment Assistance (EAA) program, which awards federal grant assistance to economically distressed communities regardless of the cause. EAA program assistance may be used to fund both the development of strategic plans (Comprehensive Economic Development Strategies—CEDS) and implementation grants intended to fund one or more the activities identified in the CEDS. Proponents may argue that trade adjustment assistance to communities is warranted because it is targeted to communities whose economic dislocation and distress can be traced to unfair trade competition. Program Integration The statute attempts to address an issue raised in previous reports and studies concerning the need to promote an integrated approach to addressing the impact of economic dislocation. A 2001 report by the General Accounting Office (GAO) found that Local officials believe that dislocated worker training programs are more effective and job placement much higher when strong links exist between training and local business needs. . The CTAA grant program requires trade-impacted communities to seek the advice and involvement of a wide range of community partners when developing their strategic plans, including education institutions, labor organizations, firms, and workforce investment boards. These partners are not only essential in developing the strategic plan, but may also participate in its execution. For instance, the act also supports activities intended to identify and address deficiencies in existing education and career training opportunities available to eligible TAA workers through the use of community colleges. It also encourages the creation of public-private partnerships focusing on skills and employment assessments, and training activities by funding sector partnership grants. Both grant programs (CCCT and Sector Partnerships) require that the recipient of funds identify the link between the proposed grant and the community's strategic plan developed with CTAA funding.

The Trade Adjustment Assistance for Communities (CTAA) grant program was created with the passage of the American Recovery and Reinvestment Act (ARRA) of 2009, P.L. 111-5. Included among the subtitles of Division B of ARRA, was the Trade and Globalization Adjustment Assistance Act (TGAAA) of 2009. The CTAA program, as authorized by ARRA, comprises four subchapters: Subchapter A—Trade Adjustment Assistance to Communities (CTAA) directs the EDA to provide technical assistance and to award strategic planning and implementation grants to eligible trade-impacted communities. Subchapter B—Community Colleges and Career Training (CCCT) creates a competitive grant program administered by the Department of Labor which is intended to strengthen the role of community colleges in filling the education and skills gap of workers in trade impacted communities. Subchapter C—Industry or Sector Partnership Grants Program for Communities Impacted by Trade (ISG) creates a grant program intended to encourage the creation of public private partnerships that develop a skilled workforce. Subchapter D—General Provisions includes language prohibiting workers receiving trade adjustment assistance from being disqualified from receiving assistance under activities funded by the CTAA program. The Supplemental Appropriations Act of 2009, P.L. 111-32, included a $40 million appropriation that funded both Community Trade Adjustment Assistance and Trade Adjustment Assistance for Firms. For FY2010, the Consolidated Appropriations Act for FY2010, P.L. 111-117, included an appropriation of $15.8 million to be shared between the trade adjustment assistance programs for communities and firms. In addition, on March 30, 2010, the President signed the Health Care and Education Reconciliation Act of 2010, P.L. 111-152, which included $500 million in funding for each of the fiscal years FY2011 through FY2014 for Subchapter B, Community Colleges and Career Training Grants. On January 21, 2011, the Department of Labor's (DOL's) Employment and Training Administration (ETA) published in the Federal Register a notice of solicitation for grant applications (SGA) for the TAA Community College and Career Training Grant (CCCT) Program. The notice of availability of funds and solicitation for grant applications set April 21, 2011, as the closing date for the receipt of applications. On August 18, 2009, the Department of Commerce's (DOC) Economic Development Administration (EDA) published in the Federal Register final rules and regulations governing the CTAA program. The regulations outlined the responsibilities of EDA in administering the program, including determining a community's eligibility for CTAA grants, providing technical assistance to impacted communities, and evaluating grant applications. On January 11, 2010, EDA published in the Federal Register a notice soliciting applications for CTAA grants. Concurrently, it published the full announcement and application for assistance at http://www.grants.gov and established April 20, 2010, as the deadline for applications. Between August 3, 2010, and September 20, 2010, DOC announced the awarding of $36.768 million in CTAA grant funds to 36 grant recipients. This report will be updated as events warrant.

CRS_R40117

Introduction Worldwide there are millions of people that flee their homes and cross international borders due to threatening circumstances, including refugees and asylum-seekers. A refugee is a person fleeing his or her country because of persecution or a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion. Asylum-seekers are individuals that claim to be refugees and apply for sanctuary from within a potential host country, but whose claim for refugee status have not yet been evaluated and determined. The United Nations High Commissioner for Refugees (UNHCR)—an agency mandated to lead and coordinate international action to protect refugees and resolve refugee problems worldwide—attempts to register and assist as much of this population as possible. UNHCR contributes to a statistical database that allows for the tracking and analysis of what it describes as "populations of concern," that includes asylum-seekers and refugees. Specifically, this database allows for the comparison of refugee and asylum-seeker inflows and populations in the United States and other countries, such as Member States of the Organisation for Economic Co-operation and Development (OECD). UNHCR data generally show that the United States ranks among the highest recipients of refugees and asylum-seekers in the OECD. While the refugee and asylum-seeker situation has been of concern to policymakers for many years, the recent economic downturn may hold implications for the worldwide population of concern. International slowdowns in the availability of capital, as well as the accompanying unemployment, means that resources shortages are developing due to tightening government revenues. Some countries may develop shortages of vital food and agricultural imports, which could lead to food-based migration and displacement. Resource shortages have historically also served as the basis for conflict, which could mean an escalation in the worldwide supply of refugees and asylum-seekers. Yet, the United States is also being severely impacted by the economic downturn, and the demand for government assistance is growing. Thus, a potential issue for Congress is whether the United States should increase its admissions of asylum-seekers and refugees during a worldwide economic downturn, maintain current admission levels, or whether the economic circumstances warrant diverting refugee resources to other concerns. Providing a comparative and historical analysis of refugee and asylum-seeker inflows to the United States is of particular informational value, especially relative to other OECD countries. Such information informs Members of Congress as to how policies in the United States and the rest of the OECD are impacting refugee and asylum-seeker inflows and populations. Other CRS products provide extensive discussion of United States refugee and asylum policy. The aim of this report, however, is to provide Members of Congress with a comparative data context. Various patterns will be extracted from the data and the inflows to the United States will be analyzed in comparison to other OECD Member States. The policy analysis will provide some discussions regarding policy developments in OECD countries that may impact their respective inflows of refugees and asylum-seekers. The vast majority of these policies relate to the flows of asylum-seekers, since this group tends to foster less political support in the OECD. The data in this report shows that there is no uniform inflow trend across OECD countries relating to refugees or asylum-seekers. One of the main findings is that several OECD countries with historically greater numbers of asylum-seekers (such as the United States) have had the levels of their asylum-seeker inflows converge. Moreover, the level at which these asylum-seeker levels have converged is in most cases markedly lower than asylum-seeker inflows during the 1990s. Other OECD countries—mainly those on the periphery of the EU—have recently experienced an upward trend in the asylum-seeker inflows. This pattern is likely due to their geographic proximity to non-EU countries and the existence of safe third country provisions (a concept discussed later in this report). Additionally, refugee data demonstrates that the United States continues to be the main host country of resettled refugees, both in the OECD and worldwide. Despite lower numbers of refugee resettlements in the United States from a decade ago, the number of refugee resettlements in other OECD countries has also declined. Therefore, the resettlement burden of the United States as compared to other OECD countries has remained consistent. Concepts and Definitional/Contextual Background Refugee policy in the United States and other OECD countries is rooted in a post-World War II context. As state parties to the UN Convention Relating to the Status of Refugees of 1951 and the subsequent 1967 Protocol Relating to the Status of Refugees , all Member States of the OECD have committed themselves to admitting an unspecified number of individuals fleeing persecution. The intent of the Convention was to end an ad hoc approach to refugee admissions and resettlement that had previously characterized refugee policy. The United States has adopted the principles of the convention in statute. After a state officially grants sanctuary to an individual under the 1951 Convention and 1967 Protocol, the state is obligated to provide law-abiding admitted refugees with many of the same rights and privileges that citizens enjoy, such as access to courts, the right to pursue gainful employment, public education, medical access, artistic expression, and the like. These rights and privileges do not necessarily extend to individuals that have not been officially granted protective status. Yet, under the principal of nonrefoulment —which prohibits the expulsion or involuntary return of a refugee or a person seeking asylum to a territory where his/her life or freedom would be threatened—all parties to the 1951 Convention or 1967 Protocol must provide some evaluation of claims for sanctuary from persons within its jurisdiction. In OECD countries, sanctuary is normally offered on a permanent basis. U.S. Context For the United States, two historical elements were essential in shaping current U.S. law: (1) the conflicts in South and Central America in the 1970s and 1980s; and (2) the collapse of the former Soviet Union. Each of these factors compelled policymakers to examine the mechanisms for dealing with displaced populations seeking admission. These events caused policymakers to conclude that the previous ad hoc refugee efforts were inadequate for dealing with such populations, and in the late 1970s steps were taken by Congress towards codifying such measures into statute that eventually became part of current law. The admission of refugees to the United States and their resettlement are authorized by the Immigration and Nationality Act (INA), as amended by the Refugee Act of 1980. The 1980 Act had the dual purposes of providing a uniform procedure for refugee admissions and authorizing federal assistance to resettle refugees and promote their self-sufficiency. Under the INA, a refugee is a person who is outside his or her country and who is unable or unwilling to return because of persecution or a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion. Refugees are processed and admitted to the United States from abroad. In addition to refugees, the INA also employs the notion of "asylees." Aliens present in the United States may apply for asylum with the United States Citizenship and Immigration Services Bureau (USCIS) in the Department of Homeland Security (DHS) after arrival into the country, or they may seek asylum before the Department of Justice's Executive Office for Immigration Review (EOIR) during removal proceedings. Aliens arriving at a U.S. port who lack proper immigration documents or who engage in fraud or misrepresentation are placed in expedited removal; however, if they express a fear of persecution, they receive a "credible fear" review with an USCIS asylum officer and—if found credible—are referred to an EOIR immigration judge for a hearing. U.S. law also specifically addresses certain populations. When civil unrest, violence, or natural disasters erupt in spots around the world, concerns arise over the safety of nationals from these troubled places who are in the United States. Humanitarian provisions exist in the INA to offer temporary protected status (TPS) or relief from removal under specified circumstances. The INA also contains other ongoing provisions for certain country nationals. UNHCR's Global Context While the U.S. approach to refugee issues is anchored in the INA, the UNHCR approach for dealing with refugee issues is rooted in a global context. Refugees and asylum-seekers are a subset of a larger population that UNHCR refers to as "populations of concern." This larger population can also include such individuals as internally displaced persons (IDPs), stateless individuals, or other victims who have been displaced or are in need of protection. While both asylum-seekers and refugees claim to have been persecuted or fear they could become victims of persecution under UNHCR's definition, they are distinct populations for classification purposes. Before their request for asylum has been granted, however, these individuals are classified as "asylum-seekers." For classification purposes, UNHCR categorizes most people fleeing their home country as refugees if they have not specifically applied for sanctuary from the host country. Refugees and asylum-seekers that are registered as part of the UNHCR population of concern undergo a "status determination." These status determinations are a set of evaluation procedures used to determine their eligibility for sanctuary in a host country. While the 1951 Convention and 1967 Protocol establish a standard by which to evaluate claims for sanctuary, individual states receiving applications retain the right to determine their own procedures for recognizing and granting protective status. Evaluations of refugees and asylum-seekers are usually conducted by a national government-sponsored program, through a program administered by UNHCR, or through a jointly operated program shared by UNHCR and the respective national government. Yet, despite the existence of UNHCR evaluation programs, the potential host country has the final authority to grant sanctuary within its borders. Overview: UNHCR's Population of Concern As mentioned above, the UNHCR tracks official data worldwide on groups and individuals labeled as "UNHCR populations of concern"—a classification that includes several categories such as refugees, asylum-seekers, IDPs, and other populations of concern. In 2007, the worldwide population of concern was approximately 31.7 million. Of this population, approximately 36% were refugees, 2% were asylum-seekers (with pending cases), 43% were internally displaced persons, and the remaining 19% were other populations of concern (e.g., stateless persons). Note that these figures represent those registered with UNHCR, but do not represent the full total worldwide (as many are not registered). As shown in Figure 1 , the period between 1998 and 2007 witnessed a shift within the UNHCR's population of concern. For most of the time period there was a downward trend in the refugee population. Yet in 2007, the year-over-year growth number of refugees rose by 15% to approximately 11.4 million, due mainly to the conflicts in Iraq and Afghanistan. Asylum-seekers experienced declining numbers during the latter half of the 10-year period. Asylum-seekers dropped from a peak in 2001 of 1.1 million asylum-seekers to roughly 740,000 at the end of 2007, a decline of 32%. Persons categorized as "other populations of concern" increased notably in recent years before declining in 2007 to 5.7 million. Yet, the population that has undergone the largest absolute change in the previous few years has been the worldwide population of IDPs. At the end of 2007, UNHCR-registered population of IDPs had grown to nearly 13.7 million persons—an approximately twofold increase since 2005. The regions of origin for the populations of concern are predominantly Africa and Asia, as shown in Figure 2 . The people from Asia and Africa constituted 38% and 35% of this population in 2007, respectively. The third-largest contributing region during the same year was Latin America and the Caribbean, which was responsible for producing 12% of the population of concern. The persons of concern originating from Europe represented 4% of the estimated total population. North America's population (excluding Mexico and the Caribbean) represented less than 1% of the total population—similar to persons of concern from Oceania. The category of other populations such as stateless persons (labeled "various" in Figure 2 ) accounted for 11% of the worldwide population. Refugee Resettlement in OECD Member States As mentioned above, those refugees determined by the UNHCR to be most at risk are eligible to be screened and processed for permanent resettlement in a country with an existing resettlement agreement. Mandated by the UNHCR's charter, resettlements are used as a protection tool and durable solution for resettled individuals. Among OECD countries, the United States is somewhat unique in its continued participation in large-scale resettlement of refugees. The majority of OECD countries do not participate at all in refugee resettlement and fulfill 1951 Convention terms by processing asylum-seekers that arrive within their borders. In the past decade, only 12 other OECD Member States have participated in refugee resettlement, and one of those countries—Japan—has not resettled any refugees since 2001. By contrast, countries such as Australia, Canada, and the United States have consistently resettled thousands of refugees on an annual basis, thereby constituting the states most involved in refugee resettlement over the past 10 years. Resettlement Inflows The depiction of refugee resettlement in industrialized countries in Figure 3 below reveals the large refugee resettlement inflows into the United States relative to other OECD countries. For every year since 1994, the total inflows to the United States have exceeded the cumulative total for all other OECD Member States. Although the inflow level was multiple times higher than the remaining OECD countries during the mid-1990s, the two levels nearly converged in 2002 and 2003. This trend toward convergence was mostly due to declining inflows into the United States following the terrorist attacks of September 11, 2001. U.S. refugee inflow levels dropped by approximately 76% from 1994 to 2002. Since 2002, the United States has experienced a general upward trend, and in 2007 the United States resettled over 48,000 refugees. Comparatively, the cumulative total for other OECD countries has remained more consistent, fluctuating in a range between 22,000-32,000 resettlements annually from 1996 to 2007. Another notable aspect of Figure 3 is the depiction of refugee resettlement to the United States and other OECD countries in relation to UNHCR's worldwide refugee population total. While the OECD as a whole has annually resettled at least 50,000 refugees, since 1994 these inflows have not exceeded 1% of the worldwide refugee population for a given year. Because the process for refugee resettlement is challenging and resource-intensive, relatively few refugees are chosen (or even eligible) for resettlement. According to UNHCR, "the selectivity of resettlement ... must remain focused on protecting refugees who are at risk." In addition, refugee resettlement requires close coordination with national governments and non-governmental organizations (NGOs). These agencies frequently work with UNHCR in the identification and screening of resettlement candidates, and facilitating such interaction can be both time- and resource-intensive. Although some observers argue that the 1% proportion indicates that more refugees could be resettled in industrialized countries, the numbers in Figure 3 speak equally to the significant size of the refugee population in the world. What is more apparent from Figure 3 is that the fluctuations in the proportion of refugees resettled to the worldwide refugee total could be largely attributed to the changes in inflows to the United States. From 1994 through 2001, the contribution of the United States to refugee resettlement in all OECD countries hovered between 73% and 77%. Consequently, the ratio of the worldwide population being resettled in other OECD countries largely mirrored the resettlement pattern to the United States. This mirroring pattern continued when this same ratio experienced a large drop in 2002. Since 2003, the mirroring pattern has continued, although the relatively large change in the ratio is likely more attributable to worldwide decline in the refugee population during this period than due to changes in United States inflows. Also, the share of refugee inflows to the United States as a percentage of total OECD refugee resettlement inflows ranged between 58%-67% from 2003 to 2007. Consequently, while the United States still accounts for roughly two-thirds of refugee resettlements in OECD countries, its share has diminished somewhat since the mid-1990s. Migration Concerns and Political Values The policy approaches that countries have taken towards refugees and asylum-seekers has been largely intertwined with the political value countries have placed on immigration in general. While countries such as the United States, Canada, and Australia have traditionally had relatively proactive immigration policies, many European countries have not historically accepted many immigrants and have practiced highly restrictive legal immigration policies. These divergent immigrant experiences are partly reflected in the United States' willingness to accept hundreds of thousands of permanent immigrants annually. Consequently, refugees have constituted a smaller share of permanent inflows into the United States. By comparison, most European countries tend to prefer admitting foreign nationals on a temporary basis, and in many European countries asylum has become a main avenue for entry and a perceived "loophole" for immigration. The sizable inflows of asylum-seekers to many European countries has led to a perception in a number of states that their asylum systems are overburdened. In many countries, the expenditure of resources towards special accommodations, financial assistance, and providing temporary employment, has led to dissatisfaction with the asylum system. Additionally, the wave of migrants that arrived in Western Europe with the collapse of the Soviet Union and Communist control over Eastern Europe placed a burden on public resources that many European policymakers are not eager to see repeated. Thus, many of the restrictive policy trends that are noted in subsequent sections have emerged out of these political developments in Europe over the last two decades. Moreover, the lack of geographic barriers make travel to Europe less strenuous, and, as a result, make some countries on the European periphery especially susceptible to asylum-seeker inflows. An additional development affecting asylum-seeker and refugee policies in European OECD Member States has been the expanded number of Member States in the European Union (EU). For EU Member States, their nationals may freely travel, settle, and seek employment in other Member States. While such an arrangement should benefit the economic development of the entire EU area in the long term, political and cultural concerns have been raised about the impact this openness may have on various countries. Moreover, since countries cannot restrict flows from within the EU area, they have shown a greater eagerness to restrict unwanted flows from outside. Thus, asylum-seekers have become a prominent target for certain proponents of immigration restriction. EU countries are increasingly attempting to coordinate immigration and asylum-seeker policies, such as the recently passed European Pact on Immigration and Asylum. The inflow of large numbers of unauthorized immigrants has prompted security concerns amongst policymakers in Europe (as it has in the United States). The new European security-based provisions are likely to impact asylum-seekers since the proposed changes to EU policy will be based upon the concept of "country reception capacity"—thereby suggesting that inflows to each country beyond the level of "reception capacity" constitutes a security risk. For many OECD countries, however, the most confounding factor is illegal migration. The difficulty for many countries is separating illegal economic migrants from actual asylum-seekers that have migrated inside their borders. Moreover, asylum-seekers may have economic considerations when migrating to a destination country. Although less than 1% of UNHCR populations of concern are admitted into OECD countries, these countries are frequently desirable destinations for asylum-seekers because of the stronger performing economies and potential for social and economic upward mobility. Thus, the question for many OECD policymakers has been how to develop adequate inflow control measures without excluding genuine asylum-seekers. Asylum Policy Shifts, Cost Control, and Security Mechanisms Empirically, OECD countries with strongly performing economies are likely to be recipients of relatively higher rates of asylum applications. Strong economies serve as an incentive for economic migrants to travel to these states (in either an authorized or unauthorized manner), but not necessarily for asylum-seekers. More recent asylum-seeker policies throughout the OECD, however, have seemingly been based upon the assumption that asylum-seekers are economically rational actors, similar to many illegal immigrants. The response in the United States and throughout other OECD states has been to develop proactive measures to control the flows of asylum-seekers, by way of unilateral measures or via multilateral agreements. Efforts such as safe third-country agreements and various cost control programs have been the likely cause of the convergence of asylum-seeker inflow levels in certain OECD countries with historically higher inflow rates (a convergence that is depicted in Figure 4 ). Inflow Control A number of efforts to control the inflow of asylum-seekers embrace a concept that political scientists refer to as "beggar thy neighbor." Commonly used to refer to protectionist trade barriers, the term describes a policy whereby the objective or benefit sought by one country is achieved at the expense of others. In the case of asylum flows, a number of OECD countries have employed mechanisms and advocated policies that transfer the asylum-hosting obligations (and costs) to other countries. While some advocates view this shift as avoiding obligations, others contend that it constitutes an equitable distribution of cost in sheltering asylum-seekers and refugees. A few of these policy mechanisms—discussed in the sections below—are employed in the United States, while others are more unique to other OECD member states. Asylum-Seekers in the United States Controlling the mass inflow of asylum-seekers has been a concern of U.S. policymakers for decades. Prior to 1996, aliens arriving at a port of entry to the United States without proper immigration documents were eligible for a hearing before an immigration judge to determine whether the aliens were admissible. Aliens lacking proper documents could request asylum in the United States at that time. If the alien received an unfavorable decision from the immigration judge, he or she also could seek administrative and judicial review of the case. Critics of this policy argued that illegal aliens were arriving without proper documents, filing frivolous asylum claims, and obtaining work authorizations while their asylum cases stalled in lengthy backlogs. The Illegal Immigrant Reform and Immigrant Responsibility Act of 1996 (IIRIRA) made substantial changes to the asylum process, including establishing expedited removal proceedings; codifying many regulatory changes; adding time limits on filing claims; and limiting judicial review in certain circumstances, but it did not alter the numerical limits on asylee adjustments. Foreign nationals arriving without proper documents who express to the immigration officer a fear of being returned home must be kept in detention while their "credible fear" cases are pending. Moreover, the reforms established serious consequences for aliens who file frivolous asylum applications. IIRIRA also codified many regulatory revisions of the asylum process that the former George H.W. Bush and Clinton Administrations made. Most notably, aliens are statutorily prohibited from immediately receiving work authorization at the same time as the filing of their asylum application. Now the asylum applicant is required to wait 150 days after the USCIS receives his/her complete asylum application before applying for work authorization. The USCIS then has 30 days to grant or deny the request. IIRIRA also added a provision that enabled refugees or asylees to request asylum on the basis of persecution resulting from resistance to coercive population control policies, but the number of aliens eligible to receive asylum under this provision was limited to 1,000 each year. Safe Third Country One form of cost shift and inflow control in the OECD has been through "safe third country" provisions. A safe third country is a country the asylum-seeker has passed through en route to the receiving country and with which the receiving country has a reciprocal agreement. Under a safe third-country agreement, the receiving country can refuse to make an asylum determination, if the safe third country (the country an asylum-seeker passed through) is technically responsible for examining the application. These types of arrangements are most common among the OECD states that belong to the EU. Major recipients of refugee flows in the EU have generally advocated such agreements between the EU Member States, as it allows these countries to shift some asylum determination responsibilities to other countries without violating the direct terms of the 1951 Convention or 1967 Protocol. The UNHCR has stated that responsibility-sharing agreements between states can, when appropriate safeguards are in place, enhance the international protection of refugees by ensuring the orderly handling of asylum applications. The United States has only one similar arrangement in place: the U.S.-Canada Safe Third Country Agreement. Effective since December 29, 2004, the program is run through a cooperative agreement between Citizenship and Immigration Canada (CIC) and three U.S. Department of Homeland Security (DHS) agencies: Customs and Border Protection (CBP), U.S. Citizenship and Immigration Services (USCIS), and Immigration and Customs Enforcement (ICE). As part of the agreement, UNHCR independently monitors and reviews the implementation of the program and offers recommendations for improvement and compliance. The impact, however, has been small. In the United States, during the first year of implementation, there were 66 such claims at land border points of entry (POE). Of those 66 claimants, 62 were subject to the agreement. The other four claimants were Canadian citizens, who are not subject to the agreement. During the same time period, Canadian authorities returned 303 individuals to the United States as a result of the application of the agreement. The concept of a safe third-country mechanism first emerged in 1990 as part of the so-called Dublin Convention of EU Member States. The objective of this convention was to determine which Member State would be responsible for examining an application for asylum—a matter not explicitly declared in the 1951 Convention or 1967 Protocol. The parties agreed to abide by the order of responsibility laid out in the Dublin Convention, and subsequent agreements included conditions for accepting third country asylum-seekers. Critics, however, have contended that adequate safeguards are sometimes not in place. One of the main concerns about the concept of safe third countries for asylum-seekers has been its potential for unilateral application by a receiving country. Without a bilateral agreement, removing asylum-seekers from a receiving country to a third country could result in a refusal by the third country to accept the asylum-seeker. Critics have referred to such a phenomenon as "refugees-in-orbit," wherein the asylum-seeker is deported from country to country until a government chooses to accept the asylum-seeker. In the EU, third country responsibilities are required between Member States, but the same requirements are not applicable to non-Member States. EU countries have historically attempted to make arrangements with countries that are frequently stopovers before a final European destination. But the bilateral approach to safe third country agreements has resulted in numerous EU Member States having mismatched lists of safe third countries (presumably because of different interpretations of what constitutes compliance with the 1951 Convention). Since 1999, the EU has been working toward harmonizing minimum standards on procedures in Member States for granting and withdrawing refugee status, including creating an EU list of third countries as safe countries of origin. Several other OECD countries outside the European Union have set up their own bilateral safe third country provisions. Safe third-country provisions have likely caused some shift in the distribution of asylum-seekers among OECD countries with high inflow rates, such as the United Kingdom. As a country located in the northeastern region of Europe—and thus effectively containing a buffer zone from many asylum-seeker countries of origin—one would expect to see a notable number of asylum-seekers categorized as "not subject to asylum consideration" because of the availability of a safe third country. Cumulatively from 1996 through 2007, the United Kingdom refused consideration to roughly 20,200 principal applicants, but annually it never accounted for more than 8% of all asylum applications during that time period. Deterrence Mechanisms A notable cause of shifting burdens of asylum-seeker inflows in some OECD countries has been policy mechanisms designed to control flow rates and deter fraud and abuse. Working on the belief that asylum-seekers are economically rational, numerous governments and immigration critics across the OECD area have argued that some migrants engage in so-called "asylum shopping"—the practice of applying for asylum in several countries in order to maximize the likelihood of a positive asylum determination and/or receiving the most generous public benefits. The United States has implemented deterrence mechanisms, among other ways, through the previously discussed expedited removal mechanism, as well as the ongoing efforts to implement the provisions of the REAL ID Act. Several tactics have been attempted or implemented in various other OECD countries. Most widespread has been the development of shared databases on asylum-seekers. The inclusion of fingerprints and other biometric identifiers in systems like Eurodac, as well as the issuance in some cases of special identification cards, provides governments with improved tools for tracking asylum-seekers to ensure that they do not migrate from the first country of asylum to claim improved public benefits. The European Pact passed by the EU in October 2008 requires that Member States should start issuing biometric visas from January 1, 2012, establish an EU-wide electronic entry/exit system to record the movement of people, and only regularize the status of unauthorized individuals on a "case-by-case" basis. Voucher Program The United Kingdom, which has been a vocal advocate of asylum policy reforms in the European Union, introduced two programs in the past decade that some observers believe were designed specifically to prevent asylum shopping. Officially, these programs were aimed at preventing asylum fraud, illegal immigration, and human smuggling. The first of these efforts was a voucher program for asylum-seekers that was implemented in place of cash-based social security benefits. Although small cash allowances were also received, asylum-seekers were required to collect vouchers for most purchases at the post office and use the voucher in place of cash or credit at businesses. A review of the program by the UK Home Office found that the voucher scheme had encountered a number of operational problems such as business owners refusing to accept vouchers. Moreover, complaints from asylum-seekers and advocates claimed that the program was causing a further stigmatization of asylum-seekers and that many users suffered embarrassment. The UK government eventually did away with the voucher program in 2002, and instead instituted "smart card" identification requirements, including biometric identifiers such as fingerprints. In the United States, such a voucher program has not been attempted as the INA bans asylum-seekers from receiving any public benefits until they become legal permanent residents. Dispersal Actions The second program associated with preventing asylum shopping in the United Kingdom has been the government's effort to disperse asylum-seekers. Following the Immigration and Asylum Act of 1996 and its mandate that local authorities be responsible for the care of asylum-seekers, a few local governments began their own dispersal actions (through private contracts) and lobbied for greater burden sharing. Subsequently, the government implemented the Immigration and Asylum Act of 1999, which included a dispersal scheme to send asylum-seekers throughout the United Kingdom with the objective of controlling asylum-seeker inflows. The national government has maintained that dispersion has been necessary to more widely distribute service costs among municipalities, yet some observers believe the policy has been "unduly harsh." In addition, news reports have sometimes linked the dispersal policy with increased incidences of racism, harassment, and violence against refugees and asylum-seekers. Studies have suggested that improved communication efforts between local authorities, national government, and refugee groups could potentially improve the tensions between asylum-seekers and local populations. Whether or not these mechanisms effectively deterred asylum remains unclear. From 1996 to 2002, new asylum applications in the United Kingdom increased by 248% to 103,080 applications in 2002. Yet, in subsequent years, the levels dropped by 73%, to a level of 27,905 in 2007. Because of the cluster of asylum flow control measures being implemented in both the United Kingdom and European Union during this time period, multiple factors likely contributed to the downturn in applications. For advocacy groups, however, the introduction of programs partially aimed at controlling asylum flows raises numerous normative questions about asylum policy in the United Kingdom and elsewhere. Thus, despite the recent reduction in new asylum applications, tensions surrounding deterrence mechanisms and asylum-seekers remain a catalyst for political and social divisions. The Effects of New Asylum-Seeker Policies The "beggar thy neighbor" policy approach within the European Union has elevated concerns among numerous observers, causing some advocates and academics to label the EU as "Fortress Europe." While empirical data do not support the implication that the EU Member States (nor other OECD countries for that matter) are closing off asylum-seeker inflows entirely, statistics do indicate that there have been marked inflow level shifts downward in several traditionally larger receiving countries for asylum-seekers. Asylum-seekers represent the largest inflow population into OECD countries. Table A-1 in Appendix shows that the inflows of asylum-seekers into OECD countries has declined in recent years (the table also includes information for EU countries). In total, the OECD took in 638,539 asylum-seekers in 2001, while in 2005 this number had been reduced to 319,050, a drop of 50%. The corresponding drop in the worldwide asylum-seeker population was 29%. Although these trends are likely the results of inflow control policies implemented by the various countries, other factors such as regional stability cannot be ruled out as causal variables. Convergence and Increases Within the OECD, data shows that the larger states have begun converging in the number of asylum-seeker admissions. The convergence point sits at a lower inflow level than during the previous decade for most of the countries. In other countries, however, a pattern of increasing inflows has emerged. Overall, asylum-seeker inflows to the OECD still exceed historical lows from the past two decades. Convergence of Asylum-Seeker Inflows To illustrate the aforementioned convergence pattern, Figure 4 below maps out the asylum-seekers from 1996 to 2007 of five recipient countries in the OECD with historically large inflow levels: the United States, France, the United Kingdom, Germany, and Canada. From the illustration, the convergence trend of these five countries becomes evident. While these countries still vary in their respective annual refugee admissions, the range of these admissions in 1996 was 2.8 times greater than in 2007. This convergence has been driven by both decreases in some countries and increases in others. For example, the United States' inflow rate dropped by 35% from 1995 to 2007. By 2001, Germany and the United Kingdom were each experiencing higher asylum-seeker inflows than any other OECD Member States. Although the five major recipient countries included in Figure 4 witnessed fluctuations in their annual inflow levels over the entire interval, all the countries exhibited a downward trend beginning around 2002. Consequently, asylum-seeker inflows have been more evenly distributed among major OECD recipient states. The plotted lines in Figure 4 stem from data presented in Table A-1 of Appendix . These data indicate that since 1996, the United States has been one of the main recipients of asylum-seeker inflows among OECD countries. From 2002 to 2007, the U.S. share of OECD asylum-seeker inflows fluctuated between 13% and 19% annually. This proportion represents an increase from 1999, when the United States received 9% of the OECD asylum-seeker inflows. The proportion of asylum-seeker inflows in 2007 registered at 17% of the OECD cumulative total. Germany, France, Canada, and the United Kingdom each received approximately 6-9% of the asylum-seeker inflows in 2007. During this same time period, other OECD countries accounted for shares of asylum-seeker inflows that ranged from a low of 26% in 1996 to a high of 51% in 2007. Escalating Asylum-Seeker Inflows A development that may be partially attributed to the third-country policies in the European Union is the significant increase in asylum-seeker inflows in certain smaller Member States. These countries generally border non-EU states and serve as either land- or sea-based access points to the EU. Unlike certain OECD states that are geographically prohibitive for refugees to reach other than by expensive and restrictive air travel (such as Australia, New Zealand, or Japan), European states are easily accessible by land and sea, making certain countries especially subject to asylum-seeker inflows and third-country asylum application responsibilities. Figure 5 below depicts three of the states that have experienced increases in their asylum-seeker inflows: Greece, Poland, and Sweden. As the plots in Figure 5 show, all three countries experienced upward trends in asylum-seeker inflows from 1996 to 2007. The largest of these increases in absolute terms was the inflow to Sweden. Its annual inflows numbered less than 6,000 in 1996, but by 2007 this number had climbed to over 36,000—a more than sixfold increase. The same observation holds true for Poland and Greece. The inflow rate in Poland increased by over threefold over the same time period, from a level of 3,211 in 1996 to an inflow of 10,047 in 2007. Greece had the highest relative increase of the three countries, increasing over 15-fold, from 1,643 asylum-seekers in 1996 to 25,113 in 2007. Several other European "portal countries" have also witnessed increases over the same span, although most did not exhibit similar sized shifts in their relative inflow rates. Asylum Decisions In countries with relatively high inflow levels of asylum-seekers, anti-immigrant groups have criticized their respective governments for being "too permissive" in their admissions policies—a factor that is in some cases cited as attracting more asylum-seekers. In response, governments have focused their efforts on reducing incentives for asylum-seekers with respect to public benefits, as those discussed above. Yet, for some critics the question remains whether higher rates of positive asylum decisions could create higher asylum-seeker inflows (a causal relationship that could lend credence to the assumption of informed asylum-seekers conducting rationalized "asylum shopping"). If such a relationship did exist, one would reasonably expect that the countries with higher positive decision rates should demonstrate higher asylum-seeker inflow rates. The average annual rate of positive decisions for asylum applications where a decision was taken (shown in Figure 6 ) indicates a markedly large range between OECD countries from 2004 to 2007. On the one hand, Turkey had an annual positive decision rate of roughly 78%, the highest of all OECD countries. By contrast, Greece granted positive asylum decisions in 1% of cases where a decision was taken. This disparity in the decision rate occurred despite the inflows of thousands of asylum-seekers annually to each country. In the United States, the average positive decision rate for 2004-2007 was higher than the majority of OECD countries. The OECD average for this time period was 28%, 7% below that of the United States. Moreover, these figures do not account for the additional number of asylum-seekers that are granted asylum on appeal. The main analytical conclusion that may be drawn from Figure 6 is that the positive decision data demonstrate almost no relation to the inflow levels of asylum-seekers during the given time period. For example, in spite of different trends shown in Figure 4 from Figure 5 , Canada and Poland have similar average positive asylum decision rates. Greece has one of the highest rates of increase in asylum-seeker inflows in the OECD from 2004 to 2007, while simultaneously accounting for the lowest positive decision rate. Statistical analysis performed by CRS confirms these visual observations. Therefore, while so-called "asylum shopping" might occur based on the public benefits a country offers, the evidence suggests that the recent rates of positive asylum decisions have been of little consequence for such behavior on asylum-seeker inflow levels in general. More likely, the driving factors behind asylum-seekers are the accessibility of a country, cultural and linguistic ties, the existence of a diaspora or family members, and similar considerations. Sanctuary Capacity and Contributions of OECD Countries The preceding data analysis has largely been based on inflow levels. While such analysis is both informative and valid in an overview of capacity for and contributions towards these populations, it does not fully address the relative costs that countries experience from such inflows. Employing additional economic and demographic indicators would provide a fuller view of refugee inflows in OECD Member States. Therefore, this section attempts to place these inflows into a comparative context that emphasizes the relative burden of refugee populations in terms of economic costs and population size. One approach to contextualizing inflows in OECD countries is to analyze a country's existing refugee population relative to the size of the national income and productivity. The map shown in Figure 7 shows these data and uses gross domestic product (GDP) adjusted for purchasing power parity (PPP) to account for a given country's potential, relative financial burden. Specifically, Figure 7 maps out the average number of refugees per $1 GDP (PPP) per capita from 2002 to 2006, thereby adjusting national income to both exchange rates and the size of the population. This measure makes no assumption about the long-term net cost/benefit of refugee because such factors are entirely dependent on how economically integrated into the host country this population becomes. The map in Figure 7 demonstrates that when placed in the context of national income, the United States has taken on a larger refugee hosting burden than almost every other OECD country. Only Germany, with 26.3 refugees per $1 GDP (PPP) per capita, had a higher relative burden than the United States (10.9). On a worldwide basis, both the United States and Germany ranked in the top 35 for this same measure. Moreover, the map shows that the majority of OECD countries had an average population of one refugee per $1 GDP (PPP) per capita or less. Consequently, the United States had an average burden at least 11 times greater than most OECD countries for the 2002-2006 time period relative to national income. The lowest-ranked country in the OECD for this measure was Iceland, which had over 100 times fewer refugees than the United States relative to national income. Another way to contextualize burden sharing worldwide is to consider a given country's existing population. Such an approach removes economic conditions and considers refugees in terms of the number of residents in a country. This measure serves as one type of indicator for the demographic impact of refugee inflows. Depicted in Figure 8 is a world map showing the 2002-2006 average cumulative number of refugees to every 1,000 inhabitants in each country. Unlike the measure for national income, the United States—with 1.7 refugees per 1,000 inhabitants—figured more toward the median of OECD countries for this demographic measure. Overall, the ratio for the United States was lower than that of 14 other OECD countries and ranked 56 th worldwide. The highest ratios among OECD countries were for Sweden, Denmark, Germany, and Norway. Sweden's ratio ranked 11 th worldwide. Thus, the top 10 hosting countries for refugees per 1,000 inhabitants worldwide were all outside the OECD. A plurality of OECD countries averaged 1.0 or fewer refugees per 1,000 inhabitants from 2002 to 2006. Overall, refugees constitute the costliest recipients of public benefits on a per person basis in the United States. Yet, as advocates will note, the costs either presented or implied in the figures above do not convey the benefits of hosting refugee (or asylum-seeker) populations. Many benefits cannot be quantified in monetary terms, but nonetheless have affected host countries enormously. In the United States, for example, refugee populations frequently contribute to multicultural diversity and global awareness in the population. Moreover, some refugees that chose to remain have become successful entrepreneurs and strong contributors to economic development. Historically, recipient countries have benefitted from the human capital that refugee populations have represented by using that human capital for intellectual and technological advancement. In this regard, notable refugees to the United States include Nobel Prize winner and scientist Albert Einstein and former Secretary of State Madeleine Albright. While costs of refugee resettlement and asylum-seeker programs are necessary considerations for any government, these costs must also be weighed against the many contributions to the political, economic, cultural, and religious life that these populations make in OECD countries. Conclusion The findings of this report indicate that currently the United States resettles more refugees and has a higher inflow rate of asylum-seekers than any other OECD country, despite having numerous deterrence mechanisms in place. Additionally, the rate of positive asylum decisions (when a decision is taken) is above the OECD average. But the data also indicate that there are millions of refugees and other populations of concern worldwide, and in recent years these populations have grown. And with the worldwide economic downturn occurring, these populations are likely to increase. Yet, the United States is also being severely impacted by the economic downturn, and the demand for government assistance is growing. Thus, balancing the availability of resources against the demand for refugee assistance will likely continue. Appendix. Asylum-Seeker Flows

A refugee is a person fleeing his or her country because of persecution or a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion. Asylum-seekers are individuals that claim to be refugees and apply for sanctuary from within a potential host country, but whose claim for refugee status has not yet been evaluated and determined. The United Nations High Commissioner for Refugees (UNHCR) collects data on the millions of refugees and asylum-seekers worldwide and their inflows to the United States and other countries, including Member States of the Organisation for Economic Co-operation and Development (OECD). The recent economic downturn could lead to an escalation in the worldwide supply of refugees and asylum-seekers. Thus, a potential issue for Congress is whether the United States should increase admissions of asylum-seekers and refugees during a worldwide economic downturn, maintain current admission levels, or whether the economic circumstances warrant diverting refugee resources to other concerns. In terms of refugee populations, the United States is one of 13 OECD countries that participates in large-scale resettlement of refugees. Its leadership role in refugee resettlement is substantial. For every year since 1994, the total UNHCR-registered refugee resettlements to the United States have exceeded the cumulative total for all other OECD Member States. Resettlement levels relative to the rest of the OECD, however, have declined since the mid-1990s. Because of security concerns and political sensitivities over immigration, numerous OECD countries have moved to restrict the inflows of asylum-seekers through unilateral measures or multilateral agreements, particularly in countries that are members of the European Union (EU). In the United States, numerous measures for inflow control have been implemented, some of which other OECD countries have mirrored. Efforts such as the safe third-country agreements and various cost control programs—as well as forthcoming security-based efforts in the European Union—have lowered asylum-seeker inflow rates in the major receiving OECD countries in recent years. The United States' proportion of asylum-seeker inflows in 2007 registered at 17% of the OECD cumulative total. Germany, France, Canada, and the United Kingdom each received approximately 6%-9% of the asylum-seeker inflows. The data in this report show that there is no uniform inflow trend across OECD countries relating to refugees or asylum-seekers. One of the main observations is that several OECD countries with historically greater numbers of asylum-seekers (such as the United States) have had the levels of their asylum-seeker inflows converge with each other. Moreover, the level at which these asylum-seeker levels have converged is in most cases markedly lower than asylum-seeker inflows during the 1990s. Other OECD countries—mainly those on the periphery of the EU—have recently experienced an upward trend in asylum-seeker inflows. This pattern is likely due to safe third country provisions and their geographic proximity to non-European Union countries. One set of comparative measures frequently employed is the relative burdens for countries hosting refugees. When placed in the context of national income, the United States, on average, took on a larger refugee hosting burden than almost every other OECD country from 2002 to 2006. Only Germany had a higher relative burden than the United States. The United States' average relative burden was lower than that of 14 other OECD countries between 2002 and 2006. This report will be updated as necessary.

CRS_R43772

T he moratorium on Internet access taxes prohibits states, or their political subdivisions, from imposing new taxes on Internet access services. The moratorium was recently converted to a permanent provision as part of Trade Facilitation and Trade Enforcement Act of 2015 ( P.L. 114-125 ), after being previously extended eight times as a temporary provision. Under the Internet Tax Freedom Act (ITFA), states who taxed Internet access before 1998 can continue taxing Internet access through June 30, 2020. Legislative Status and Background The Internet Tax Freedom Act of 1998 (ITFA; P.L. 105-277 ) imposed on state and local governments a three-year moratorium, from October 1, 1998, to October 1, 2001, on (1) new taxes on Internet access, and (2) multiple or discriminatory taxes on electronic commerce. It also established the Advisory Commission on Electronic Commerce. The moratorium includes a grandfather clause allowing states that already had "imposed and enforced" a tax on Internet access to continue enforcing those taxes. The evolution of the Internet, its interaction with telecommunication services, and disputes over state autonomy have led to a number of changes in the law with its successive extensions. The Internet Tax Nondiscrimination Act ( P.L. 107-75 ), enacted in 2001, was the first extension of ITFA. It extended the Internet tax moratorium and the grandfather clause protections through November 1, 2003, but made no additional changes to the law. In 2004, the Internet Tax Nondiscrimination Act (ITNA; P.L. 108-435 ) extended the Internet tax moratorium through November 1, 2007. Before the passage of ITNA, some states had implemented taxes on digital subscriber line (DSL) Internet connections, claiming they were a telecommunication service and therefore exempt from the ITFA tax moratorium. ITNA changed the definition of Internet access to include DSL connections under the moratorium. Taxes on DSL service were given grandfather protection through November 1, 2005, and grandfather protection for other Internet access taxes in place before October 1, 1998, was extended through November 1, 2007. Changes in ITNA also excluded Voice over Internet Protocol (VoIP) services from the moratorium, allowing state and local governments to tax this service. Lastly, ITNA directed the Government Accountability Office (GAO) to investigate the impact of the Internet tax moratorium on state and local government revenues and the adoption of broadband technologies. The Internet Tax Freedom Act Amendments Act of 2007 ( P.L. 110-108 ) extended the Internet tax moratorium and the original grandfather clause through November 1, 2014. Additionally, the law revoked grandfather protections if states had voluntarily repealed their Internet access taxes since the passage of ITFA in 1998. In the 113 th Congress, ITFA was extended twice but no further changes were made to its provisions. As part of a continuing appropriations resolution ( P.L. 113-164 ) enacted in 2014, ITFA was extended through December 11, 2014. Later in the 113 th Congress, ITFA was extended through October 1, 2015, as part of the Consolidated and Further Continuing Appropriations Act ( P.L. 113-235 ), but no additional changes were made. In the 114 th Congress, ITFA was extended three times before the moratorium on taxing Internet access was made permanent by P.L. 114-125 . ITFA was first extended through December 11, 2015, as part of the 2016 Continuing Appropriations Act ( P.L. 114-53 ). An 11-day extension of ITFA was then passed as part of P.L. 114-100 through December 22, 2015. Shortly thereafter, ITFA was extended through October 1, 2016, as part of the 2016 Consolidated Appropriations Act ( P.L. 114-113 ). Lastly, P.L. 114-125 extended the moratorium on taxing Internet access permanently, and temporarily extended the grandfather clause provision through June 30, 2020. Moratorium on Taxing Internet Access The moratorium on Internet access taxes established by ITFA and its subsequent extensions prohibits states or their political subdivisions from imposing any new taxes on Internet access services. Internet access service is defined as "a service that enables users to access content, information, electronic mail, or other services offered over the Internet and may also include access to proprietary content, information, and other services as part of a package of services offered to consumers." The sale and purchase of Internet access services is exempt from taxation under ITFA; however, costs related to acquired services, such as an Internet service provider (ISP) leasing capacity over fiber, are not covered by the moratorium and thus potentially subject to taxation. Internet access is often bundled with other services such as voice or video service. In these situations, if the ISP can reasonably separate the charges related to Internet access from the other service charges, the Internet access charges remain exempt from taxation; otherwise the Internet access charges can be taxed. The moratorium on taxing Internet access affects consumers of the Internet, ISPs, and state and local governments. One of the most significant effects of ITFA is that state and local governments cannot impose their sales taxes on the monthly payments that consumers make to their ISP, such as Comcast or AT&T, in exchange for access to the Internet. The moratorium prohibits taxes on Internet access services regardless of whether the tax is imposed on the consumer or the provider. The moratorium affects state and local governments by limiting the activities that can be taxed, reducing their potential tax base, which may reduce state and local revenues. One estimate suggests that the moratorium on Internet access taxes could reduce potential state and local revenues by as much as $6.5 billion each year. It should be noted that this estimate assumes that all states and local governments would impose their sales tax on Internet access services. This revenue estimate is further discussed below in the " State Revenues and Autonomy " section. The Grandfather Clause ITFA contained a grandfather clause to allow state and local governments to continue taxing Internet access if they already had a tax on Internet access that was generally imposed and actually enforced before October 1, 1998. Initially 13 states were included under the grandfather clause, but a number of states have voluntarily eliminated their Internet access taxes since the passage of ITFA. Currently seven states claim to collect tax revenue from Internet access: Hawaii, New Mexico, North Dakota, Ohio, South Dakota, Texas, and Wisconsin. According to a recent survey, these seven states collect a combined $563 million per year from their taxes on Internet access. The grandfather clause protecting taxes on Internet access implemented before October 1, 1998, is set to expire on June 30, 2020 In addition to the original grandfather clause established in ITFA, an additional grandfather clause was established as part of the Internet Tax Nondiscrimination Act (ITNA) for certain taxes on Internet access imposed and enforced before November 1, 2003. The grandfather clause established under ITNA expired on November 1, 2005, which largely applied to state and local taxes on DSL Internet access services. Moratorium on Multiple or Discriminatory Taxes ITFA also prohibits state and local governments from imposing multiple or discriminatory taxes on electronic commerce. The ban on multiple taxes prohibits more than one state, or more than one local jurisdiction at the same level of government (i.e., more than one county or city), from imposing a tax on the same transaction, unless a credit is offered for taxes paid to the other jurisdiction. However, the state, county, and city in which an electronic commerce transaction takes place could all levy their own sales (or use) taxes on the transaction. The ban on discriminatory taxes prohibits additional taxes or an alternative tax rate on a good, service, or information delivered electronically that would differ from the tax or rate applied to the same, or similar, good, service, or information if it were purchased through traditional commerce (e.g., brick and mortar stores, catalog sales). In other words, under the moratorium the same tax rate must be applied to similar items regardless of how they were purchased. For example, purchasing a book through a local book store's website cannot be taxed at a higher rate than purchasing it at the local book store's physical location. ITFA also lists conditions under which a remote seller's use of a computer server, an Internet access service, or online services does not establish a minimal connection to a state for taxation purposes. These circumstances include the sole ability to access a site on a remote seller's out-of-state computer server; the display of a remote seller's information or content on the out-of-state computer server of a provider of Internet access service or online services; and processing of orders through the out-of-state computer server of a provider of Internet access service or online services. Some businesses have taken advantage of these nexus limits in ITFA's definition of discriminatory tax to establish what are referred to as Internet kiosks or dot-com subsidiaries. The businesses claim that these Internet-based operations are free from sales and use tax collection requirements. Critics object that these methods of business organization are an abuse of the definition of discriminatory tax. Use Taxes and Interstate E-Commerce The collection of use taxes has become a larger issue in public debates recently; however, this issue is largely unrelated to ITFA and its moratorium on Internet taxes. ITFA deals specifically with taxes on Internet access, and multiple or discriminatory taxes on electronic commerce, while the issues related to taxing interstate electronic commerce center largely on the Supreme Court's decision in Quill Corp. v. North Dakota and the Commerce and Due Process Clauses of the Constitution. Both clauses require that an entity have some type of connection, or nexus, with a state before the state can impose a tax on it. Quill established that, under the Commerce Clause, a retailer must have a "physical presence" in the state before the state can require the retailer to collect use taxes, while due process imposes a lesser standard. A great deal of electronic commerce involves firms that have a physical presence in a single state where they house their servers or warehouse their goods but sell goods to individuals in the other 49 states. Due to the definition of nexus established in Quill, firms cannot be compelled to collect use taxes from individuals at the point of sale when engaged in transactions in states where they have no physical presence. Instead, individuals making the purchase are supposed to remit a use tax to their own state governments; compliance with this requirement is low. For further discussion of interstate electronic commerce issues see CRS Report R41853, State Taxation of Internet Transactions , by [author name scrubbed], and CRS Report R42629, "Amazon Laws" and Taxation of Internet Sales: Constitutional Analysis , by [author name scrubbed] and [author name scrubbed]. Economic Considerations Tax policy is generally evaluated based on its equity, efficiency, and simplicity. The following sections will evaluate the ITFA, specifically the moratorium on taxing Internet access, with respect to these characteristics and other relevant factors, including its impact on state and local governments. Equity The equity, or fairness, of tax policy can be thought of along two different axes. One axis, referred to as horizontal equity, is concerned with how the tax policy will affect similar individuals. All else equal, a tax policy which places a similar tax burden on similarly situated tax payers is considered horizontally equitable. The alternative axis, referred to as vertical equity, is concerned with how tax policy will affect dissimilar individuals. All else equal, a tax policy is viewed as vertically equitable if taxpayers with a greater ability to pay will tend to pay more in taxes, than those with a lesser ability to pay. Horizontal Equity The Internet provides numerous services that are similar to services that are provided through more traditional means and are subject to taxation by state and local governments. The moratorium on taxing Internet access therefore provides a relative tax advantage to services offered through the Internet. For example, an individual who would like phone service can obtain similar service either by purchasing plain old telephone service, which is often subject to state and local sales taxes, or they can purchase Internet access and use a free service, like Skype, to make phone calls and avoid paying any sales or use taxes. The inequitable tax treatment under the moratorium violates the principle of horizontal equity. With the current Internet tax moratorium under ITFA, two firms that provide almost identical services can be subject to different tax rates based on how the service is provided, either over the Internet or by a brick-and-mortar business. Vertical Equity The Internet tax moratorium acts as a subsidy, lowering the effective price of purchasing Internet access by eliminating any state or local tax on the service. Higher-income individuals tend to have greater access to the Internet than low-income individuals. In 2013, 24% of adults making less than $30,000 per year did not use the Internet, while 4% of adults making more than $75,000 did not use the Internet. It is possible that this subsidy could help lower-income individuals gain access to Internet. However, only about 6% cited the cost of Internet access as the reason they do not use the Internet. The structure of the Internet access tax moratorium and resulting subsidy does not satisfy the principle of vertical equity. Upper-income individuals are likely more capable of paying state and local sales taxes on their Internet access charges than lower-income individuals, however both upper- and lower-income individuals have access to the subsidy. Because these dissimilar individuals face similar tax burdens with respect to Internet access, the moratorium does not exhibit the concept of vertical equity. Efficiency The ITFA, specifically the moratorium on taxing Internet access, likely improves economic efficiency by expanding access to the Internet among individuals who may not be able to afford the service otherwise. However, the blanket nature of the moratorium, where both low- and high-income individuals receive the benefits of a lower tax burden, likely reduces the economic efficiency gains produced by this policy. Due to the nature of the Internet, having additional businesses and individuals connecting to the Internet provides benefits both to the new Internet users but also to those who were already using the Internet. Or in economic terms, when an individual purchases Internet access they receive personal benefits, in the form of increased access to goods, services, and information, but they also generate external benefits for other individuals already using the Internet, in that they now have another Internet user to interact with or engage in commercial transactions. When an individual is making a decision about whether to purchase Internet access, they tend to only consider their personal benefits from accessing the Internet and are unlikely to consider the external benefits they will create by purchasing Internet access. This results in fewer individuals accessing the Internet than is socially optimal. The moratorium on taxing Internet access acts as a subsidy to individuals and businesses by lowering the cost of Internet access. Lowering the cost of Internet access should increase the number of individuals using the Internet. And increasing the number of individuals on the Internet could improve economic efficiency by bringing the number of people on the Internet closer to the socially optimal level. Some have argued that the subsidy provided by the Internet access tax moratorium is too large in comparison to the external benefits generated by an individual joining the Internet. Additionally, scholars argue that as the Internet has grown the external benefits associated with an additional user have decreased, and at a certain point negative external consequences may arise from congestion. The subsidy offered to businesses and individuals through the moratorium on taxing Internet access also likely generates a certain amount of waste due to the blanket design of the subsidy. A large number of individuals would likely choose to purchase Internet access even if the price was higher due to state and local governments applying taxes to the service. Offering the subsidy to individuals who would have purchased Internet access regardless of the subsidy is considered wasteful from an economic perspective because the forgone revenue associated with the subsidy could be used elsewhere in a more productive capacity. Better targeting of the subsidy to individuals who struggle to afford Internet access would likely be a more economically efficient use of resources. State Revenues and Autonomy As the Internet has grown in size and popularity, states have forgone a source of potential revenues because of the federal moratorium. As mentioned previously, one estimate suggests that states could collect as much as $6.5 billion in revenue each year from taxing Internet access. This estimate assumes that all states and local jurisdictions would impose their sales taxes on Internet access. This is unlikely to occur when considering that multiple grandfathered states eliminated their Internet access taxes voluntarily, and California even implemented a similar state-level moratorium on Internet taxes in 1999. Estimating the lost revenue from the Internet tax moratorium is difficult because it is necessary to speculate how states would have acted in the absence of the moratorium. The seven states that currently collect sales tax on Internet access raise an estimated $563 million per year. States have historically been allowed the freedom to determine how they want to raise their own revenues. ITFA is one example of a departure from this relationship in that the federal government restricted state and local governments from taxing certain activities. The National Governors Association has voiced concerns about the federal government encroaching on state autonomy, and hopes to revise parts of ITFA to shrink the definition of Internet access to allow taxation of more activities related to the provision of Internet access. Simplicity The moratorium on taxing Internet access likely simplifies complying with the tax code for ISPs. It is estimated that the number of different state and local tax jurisdictions ranges from 7,600 to 14,500. For any ISPs which span multiple tax jurisdictions, the moratorium on taxing Internet access likely reduces the administrative burden of complying with those multiple tax jurisdictions.

The Internet Tax Freedom Act (ITFA; P.L. 105-277), enacted in 1998, implemented a three-year moratorium preventing state and local governments from taxing Internet access, or imposing multiple or discriminatory taxes on electronic commerce. Under the moratorium, state and local governments cannot impose their sales tax on the monthly payments that consumers make to their Internet service provider in exchange for access to the Internet. In addition to the moratorium, a grandfather clause was included in ITFA that allowed states which had already imposed and collected a tax on Internet access before October 1, 1998, to continue implementing those taxes. Previously under ITFA, the moratorium on Internet access taxes and the grandfather clause were temporary provisions. With the passage of the Trade Facilitation and Trade Enforcement Act of 2015 (P.L. 114-125), the moratorium on taxing Internet access was extended permanently, while the grandfather clause was extended temporarily through June 30, 2020. The original three-year moratorium had been extended eight times before being converted to a permanent statute. As the original moratorium was extended, changes were made to the definition of Internet access to include and exclude different services and technology. Notable changes include the inclusion of digital subscriber lines under the moratorium and the exclusion of Voice over Internet Protocol services from the moratorium. Over time the grandfather clause has protected a decreasing number of states' abilities to tax Internet access. While 13 states previously taxed Internet access and were protected under the grandfather clause, 7 states now tax Internet access. In addition, changes made to ITFA in 2007 rendered the grandfather provision inapplicable for states that repealed or nullified their taxes on Internet access before the enactment of these changes. As a public policy, the moratorium on taxing Internet access has economic and fairness implications. The policy likely improves lower income individuals' ability to purchase Internet access, which has economic benefits, but the blanket nature of the moratorium likely results in some economic waste. Additionally, the moratorium results in unequal application of state and local taxes to the provision of services depending upon how the services are delivered. Under the moratorium, state and local governments are prevented from taxing Internet access. This may have implications for state and local government revenues and provision of services. The Internet Tax Freedom Act and its subsequent extensions are often conflated with issues related to the taxation of electronic commerce across state borders. ITFA is largely unrelated to these issues. For a discussion of interstate electronic commerce and taxation issues, refer to CRS Report R41853, State Taxation of Internet Transactions, by [author name scrubbed], and CRS Report R42629, "Amazon Laws" and Taxation of Internet Sales: Constitutional Analysis, by [author name scrubbed] and [author name scrubbed].

CRS_R42707

Introduction With the official end of the most recent recession in June 2009, congressional interest remains heightened with regard to job creation and the income security of the workers in this country. Traditionally, the path to high wage growth and secure employment for workers has been to pursue and complete education through vocational schools, post-secondary schools, or other institutions. However, employment prospects remain dim for the growing number of recent graduates. Many young workers who have lost their jobs or are still in school face challenges such as unemployment, or if they have a job, underemployment. In February 2013, among individuals aged 16 to 24 in the United States, the unemployment rate was 16.3%. Workers who have lost their job through no fault of their own often rely on Unemployment Compensation (UC) benefits for income support during periods of unemployment. Current graduating students, as well as recent graduates from years past, may have worked during previous periods, or worked while they were attending school. If they earned sufficient wages to qualify for UC benefits, they may be eligible to receive this form of income support if they became subsequently unemployed (depending on state considerations). However, students who worked previously, or are concurrently working and attending school, may face barriers and impediments to their UC claims once they are unemployed. This can occur in a number of ways. For example, a student could be attending school full-time, while also working full-time in covered employment, and then lose his or her job. In addition, a worker could have a job in covered employment, and also start school, and subsequently lose his or her job. In both cases, the individual may apply for UC benefits, but the eligibility for those benefits may differ according to the governing state. Many states disqualify workers from UC benefits for school attendance, although some states make exceptions for certain students, typically those receiving approved training or training under Trade Adjustment Assistance for Workers (TAA) program, which provides federal assistance to workers adversely affected by foreign trade. This report examines the treatment of students as a special group within the UC system, and how states define student eligibility for their respective state UC programs. General Eligibility Criteria UC is a joint federal-state program that provides unemployment benefits to eligible workers. The U.S. Department of Labor (DOL) administers the federal portion of the UC system, which operates in each state, the District of Columbia, Puerto Rico, and the Virgin Islands. The UC program is financed by federal taxes under the Federal Unemployment Tax Act (FUTA) and by state payroll taxes under the State Unemployment Tax Acts (SUTA). In addition to establishing how the UC program is financed, these laws also establish certain criteria for UC eligibility. Federal law excludes few positions or types of workers from coverage (with certain exceptions such as the self-employed or others as noted below). Because federal law provides broad guidelines for UC coverage, eligibility, and determination, specifics of each UC program are left to the determination of each state. Although general similarities exist between states, each state establishing its own criteria results in essentially 53 different UC programs. State laws and program regulations determine UC benefit eligibility, payments, and duration. Generally, UC benefits are available to eligible workers who have lost their jobs through no fault of their own and are willing, able, and available to work. In addition, UC eligibility is typically based on attaining qualified wages and employment covered in a 12-month period (called a base period) prior to unemployment. All states require a worker to earn a certain amount of wages or to work a certain period of time (or both) within the base period to be monetarily eligible to receive any UC benefits. Recently Unemployed Graduates Nothing in federal law precludes recent graduates from receiving UC benefits if unemployed. However, the likelihood of a recent unemployed graduate receiving UC benefits is low. Recent college graduates and younger individuals may not be receiving UC benefits for a number of reasons, but basic criteria noted above often dictate eligibility. Generally, to be eligible for UC benefits, a recent graduate would need to have worked in covered employment, earned sufficient wages in his or her base period, and left his or her work involuntarily. In February 2013, the unemployment rate for individuals 16 to 24 years of age was 16.3%, with about 3.5 million individuals in this age group unemployed in the United States. Moreover, during that month, individuals 24 years of age or under received 8.9% of total UC benefits yet made up 29.1% of the unemployed population. Although younger workers generally earn lower wages and would likely therefore receive less return in UC benefits, this difference is substantial. Approximately 1 in 10 unemployed workers aged 16 to 24 receives unemployment insurance. Moreover, recent testimony before the Joint Economic Committee of Congress suggested that individuals graduating from college during a large recession are likely to face reduced earnings that persist for up to 10 years compared with graduates during a boom economy. Federal Unemployment Tax Act Eligibility Restrictions UC benefits are financed through employer taxes that are established by federal and state law. Federal taxes on employers are provided under the authority of the Federal Unemployment Tax Act (FUTA), whereas state taxes are provided under the authority of the State Unemployment Tax Acts (SUTA). Federal law defines which jobs a state UC program must cover and provides broad guidelines concerning benefit eligibility, in order for the state's employers to avoid paying the maximum FUTA tax rate on each employee's annual pay. State laws govern student eligibility, but FUTA provides further guidelines concerning the eligibility of school personnel for UC benefits. Student Eligibility Most states disqualify workers from UC benefits if attending school and some states extend this disqualification to vacation periods. The typical presumption behind this policy is that students are unable or unavailable to accept full-time work while in school. Workers must have established wages prior to receiving UC benefits, and the sufficiency of earned wages often depends on the part-time or full-time status of their job. States vary in how they establish definitions of a student, as well as whether they distinguish between part-time and full-time students for the purposes of UC benefits eligibility. In addition, states differ in how they establish these policies, whether through statute, regulation, or case law. School Personnel FUTA requires states to disqualify school employees from UC benefits if they are unemployed between school terms or vacation periods. This denial applies if the individual has a contract or reasonable assurance of returning to work when the school reopens. This denial applies to instructional, research, or principal administrative employees. FUTA also requires states to deny benefits to these school personnel if they perform services in regular, but not successive, years or terms. For example, school personnel who only work during the academic year would not be eligible for UC benefits during the summer period. In this case, personnel are not eligible for compensation during the entire period between the regular but non-successive academic years or terms. This denial also applies to vacation or holiday periods within school years or terms. The report further discusses how states treat students in two circumstances: whether they qualify for UC benefits while attending school (e.g., a student loses his or her job while in school) or whether they qualify for UC benefits if leaving work to attend school. Eligibility While Attending School Most states disqualify students from UC benefits while they are attending school. States' policies tend to presume that students will be unavailable for full-time work because school hours often overlap with standard work hours. In addition, many students, if working part-time, would likely have insufficient prior earnings to qualify for UC benefits. However, if certain conditions are met, some states may allow students to remain eligible for UC benefits. Exceptions to disqualification for UC benefits vary considerably. Almost 45% of states allow students to remain eligible for UC benefits if school attendance does not interfere with the ability and availability to accept suitable work or the student can demonstrate that he or she is seeking and able to accept full-time work. In addition, almost one-third of states allow students to qualify while in school if they are attending an approved training program or can demonstrate that they are willing to quit school or adjust class hours if suitable work is offered. A few states have stricter UC eligibility requirements and do not provide exceptions for students to qualify for UC benefits. Conversely, a few states have little restriction on UC eligibility for students attending school. Table 1 shows the variation among the states. As Table 1 shows, just three states (Alabama, New York, and South Carolina) do not provide an exception to benefits disqualification if attending school. Many state UC programs will consider students eligible if certain conditions are met, namely through the combination of availability for work or seeking full-time work, or if the student is attending appropriate training. A few states specify that a student may be eligible if a major part of his or her base period wages was for services performed while in school. Disqualification for Leaving Work to Attend School State laws vary with respect to workers remaining eligible for UC benefits while leaving their jobs to attend school. Just over half the states, including the District of Columbia, disqualify individuals from UC benefits for leaving work to attend school. However, many states make exceptions for students leaving work to attend approved training sessions, union apprenticeships, or training under TAA. About one-third of states allow students to remain eligible for UC benefits if leaving work and pursuing one of these forms of training. Finally, a few states do not disqualify students from UC benefits for leaving work to attend school. Table 2 shows variation among the states. As Table 2 shows, most states disqualify students if they leave their jobs to attend school. The main exceptions to this policy are if the student is leaving work to attend approved training or training under TAA. Only eight states have no restrictions on students leaving work and remaining eligible for UC benefits. Approved Training Individual states approve the training programs they deem appropriate for students to attend and remain eligible for UC benefits. Typically, state workforce agencies determine the training providers that would be qualified to provide educational programs. These programs generally include those provided by a state under the Workforce Investment Act (WIA), the Trade Adjustment Assistance for Workers (TAA) program, and potentially other state-approved training programs. The Workforce Investment Act of 1998 (WIA; P.L. 105-220 ) is the primary federal program that supports workforce development. Title I of WIA authorizes state formula grants to provide job training and related services to unemployed or underemployed individuals. These programs are primarily administered through the Employment and Training Administration of DOL, but operated in partnership with each state. TAA, on the other hand, provides federal assistance to workers who have been adversely affected by foreign trade. The Trade Adjustment Assistance Extension Act of 2011 (TAAEA; Title II of P.L. 112-40 ) most recently authorized TAA. Because approved training is granted at the discretion of each state, the types of training offered vary widely, even under programs eligible through WIA and TAA. Approved training is constituted by both public and private options. These options can include employer-based training, remedial programs, prerequisite education or coursework required to enroll in an approved training program, technical skills classes, and various trade and vocational courses. Training providers may have an agreement or contract with state workforce agencies to provide these particular programs. They can be delivered in a number of ways, either through the classroom, via correspondence or web-based applications, or apprenticeships. Conclusion The treatment of students within the UC program varies by state. Only a few states allow students to attend school and qualify for UC benefits if unemployed. Generally, in approximately half the states, students must be able to show that they are available for and seeking full-time work to be eligible for UC benefits. This can be a high standard to meet, as many students are attending school full-time. In addition, some states require that students demonstrate that they would be willing to quit school to work if offered a job. In the instance of workers leaving their jobs to attend school, states are less flexible in allowing individuals to continue receiving UC benefits. Generally, about one-third of states allow individuals to remain benefits eligible only if they are taking training courses under TAA, WIA, or other state-approved program. The content of approved training classes varies from state to state. Typically, each state workforce agency is granted discretion as to what constitutes approved training for the purposes of attending school and remaining benefits eligible. States identify training providers that are eligible or qualified to receive funds under WIA or TAA.

The recent economic recession and subsequent recovery period has produced one of the most challenging labor markets in recent decades. Many workers lost their jobs during this time period, as others were just entering the market for the first time. As a strategy to cope with the difficult employment situation, many individuals entered school to acquire skills to become more competitive, while others never left, remaining in school to postpone the employment search. However, due to the prolonged nature of the recovery, many students and workers remain jobless and struggle to find work. According to Bureau of Labor Statistics (BLS) data, in February 2013, approximately 12.0 million workers remained jobless, of which almost 3.5 million individuals aged 16 to 24 were unemployed. Those that have gone back to school, and have now graduated, still face a competitive job market, and may need to search for work for a prolonged period of time. According to BLS data, in June 2012, there were approximately 3.4 unemployed workers for every available job, and almost 40% of the unemployed have been jobless for more than six months. Because of this economic climate, Congress has been interested in not only job creation and how students are coping with the competitive job market, but whether they are receiving income support during times of unemployment in order to cope. Unemployment Compensation (UC) is a joint federal-state program that provides income support payments to eligible workers who lose their jobs through no fault of their own. Federal law sets out broad guidelines with regard to how the UC program operates and how it should be administered. State laws establish eligibility criteria for who qualifies for the program. In the case of a student who becomes unemployed, eligibility would depend on how their respective state treats students within the UC system. Most states disqualify students from UC benefits while they are in school or disqualify individuals from UC benefits if they leave work to attend school. This is typically due to the presumption that students would be unavailable for work during the time that they are in school. However, exceptions and variations exist from state to state. Many workers who lost their jobs and remain in school may be eligible for UC benefits depending on their circumstances and how their respective states treat students. This report describes these state variations in further detail and how states consider students within the framework of their own unique UC programs.

CRS_R43435

Introduction Federal law classifies marijuana as a Schedule I Controlled Substance. As a result, it is a federal crime to grow, sell, or merely possess the drug. In addition to facing the prospect of a federal criminal prosecution, those who violate the federal Controlled Substances Act (CSA) may suffer a number of additional adverse consequences under federal law. For example, federal authorities may confiscate any property used to grow marijuana or facilitate its sale or use; marijuana users may lose their jobs, their homes, or their right to possess a firearm or ammunition; and sellers of marijuana may lose the tax benefits and banking services that other merchants enjoy, and ultimately their businesses. Nevertheless, without federal statutory sanction, more than 20 states have established medical marijuana regulatory regimes. Four have gone further and "legalized" marijuana under state recreational marijuana laws. State officials lack the constitutional authority necessary to trump conflicting federal law. Federal officials, however, lack the unlimited resources necessary to trump the impact of conflicting state law. The following is an analysis of some of the legal issues the situation has generated and some of the proposals to resolve them. Background Federal regulation of the drugs, chemicals, and plants now considered controlled substances began with the Harrison Narcotics Act of 1914. Relying upon its constitutional power to tax, regulate commerce, and implement the nation's treaty obligations, Congress used the legislation to establish a system under which it taxed lawful medicinal use and proscribed abuse. Little more than two decades later, Congress supplemented the Harrison Act with the Marihuana Tax Act of 1937, explicitly noting reliance on its tax, commerce, and territorial powers. The Marihuana Act replicated the Harrison Act's procedures in large measure and adopted by cross-reference the Harrison Act's penalty structure. It became apparent over time, however, that the Marihuana Act served no real revenue purpose and in fact had "become, in effect, solely a criminal law imposing sanctions upon persons who [sold], acquire[d], or possess[ed] marihuana." This proved problematic when, in the late 1960s, the Supreme Court pointed out the Fifth Amendment difficulties inherent in a tax-based enforcement structure like that of the Harrison and Marihuana Tax Acts. The Court in Marchetti observed that a gambler's "obligations to register and to pay the [federal] occupational tax created ... real and appreciable ... hazards of self-incrimination" under federal and state anti-gambling laws. The same day, in Haynes, it held that by the same token "the constitutional privilege against self-incrimination provides a full defense to prosecutions either for failure to register a firearm ... or for possession of an unregistered firearm" under the tax-based structure of the National Firearms Act. Finally, in Lea r y , it struck closer to home. There, it held that the Fifth Amendment privilege against self-incrimination provided a full defense to a charge of transporting marijuana acquired without paying the Marihuana Tax Act transfer tax. Within months, the Senate Judiciary Committee reported out a Commerce Clause/treaty-based controlled substances proposal that featured most of the components ultimately found in the Controlled Substances Act. It classified marijuana with the most tightly regulated substances in Schedule I, but punished its abuse less severely, explaining in its critique of an earlier proposal that [T]o impose the same high mandatory minimum penalties for marihuana-related offenses as for LSD and heroin offenses is inequitable in the face of a considerable amount of evidence that marihuana is significantly less harmful and dangerous than LSD or heroin. It had also become apparent that the severity of penalties including the length of sentences does not affect the extent of drug abuse and other drug-related violations. The basic consideration here was that the increasingly longer sentences that had been legislated in the past had not shown the expected overall reduction in drug law violations. The opposite had been true notably in the case of marihuana. Under Federal law and under many States laws marihuana violations carry the same strict penalties that are applicable to hard narcotics, yet marijuana violations have almost doubled in the last 2 years alone. In addition, the severe drug laws specifically as applied to marihuana have helped create a serious clash between segments of the youth generation and the Government. These youths consider the marihuana laws hypocritical and unjust. Because of these laws the marihuana issue has contributed to the broader problem of alienation of youth from the general society and to a general feeling of disrespect for the law and judicial process. Consistent with this view, it called for the establishment of a study commission to examine and make recommendations on the troubling marijuana-related issues. The Commission's final report recommended the legalization of possession of marijuana for private personal use, but that the Controlled Substance Act otherwise remain unchanged. Controlled Substances Act Today Congress enacted the Controlled Substances Act as Title II of the Comprehensive Drug Abuse Prevention and Control Act of 1970. The purpose of the CSA is to regulate and facilitate the manufacture, distribution, and use of controlled substances for legitimate medical, scientific, research, and industrial purposes, and to prevent these substances from being diverted for illegal purposes. The CSA places various plants, drugs, and chemicals (such as narcotics, stimulants, depressants, hallucinogens, and anabolic steroids) into one of five schedules based on the substance's medical use, potential for abuse, and safety or dependence liability. Schedule I substances are deemed to have no currently accepted medical use in treatment and can be used only in very limited circumstances, whereas substances classified in Schedules II, III, IV, and V have recognized medical uses and may be manufactured, distributed, and used in accordance with the CSA. The CSA requires persons who handle controlled substances (such as drug manufacturers, wholesale distributors, doctors, hospitals, pharmacies, and scientific researchers) to register with the Drug Enforcement Administration (DEA) in the U.S. Department of Justice (DOJ), the federal agency that administers and enforces the CSA. Such registrants are subject to strict requirements regarding drug security, recordkeeping, reporting, and maintaining production quotas, in order to minimize theft and diversion. Because controlled substances classified as Schedule I drugs have "a high potential for abuse" with "no currently accepted medical use in treatment in the United States" and lack "accepted safety for use of the drug [] under medical supervisions," they may not be dispensed under a prescription, and such substances may be used only for bona fide, federal government-approved research studies. Under the CSA, only doctors licensed by the Drug Enforcement Administration are allowed to prescribe controlled substances listed in Schedules II-V to patients. Federal regulations stipulate that a lawful prescription for a controlled substance may be issued only "for a legitimate medical purpose by an individual practitioner acting in the usual course of his professional practice." The CSA establishes an administrative mechanism for substances to be controlled (added to a schedule); decontrolled (removed from the scheduling framework altogether); and rescheduled or transferred from one schedule to another. Federal rulemaking proceedings to add, delete, or change the schedule of a drug or substance may be initiated by the DEA, the U.S. Department of Health and Human Services (HHS), or by petition by any interested person. Petitions for rescheduling marijuana have been largely unsuccessful. Congress may also change the scheduling status of a drug or substance through legislation. Penalties Federal civil and criminal penalties are available for anyone who manufactures, distributes, imports, or possesses controlled substances in violation of the CSA (both "regulatory" offenses as well as illicit drug trafficking and possession). When Congress enacted the CSA in 1970, marijuana was classified as a Schedule I drug. Today, marijuana is still categorized as a Schedule I controlled substance and is therefore subject to the most severe restrictions contained within the CSA. Pursuant to the CSA, the unauthorized cultivation, distribution, or possession of marijuana is a federal crime. Although various factors contribute to the ultimate sentence received, the mere possession of marijuana generally constitutes a misdemeanor subject to up to one year imprisonment and a minimum fine of $1,000. A violation of the federal "simple possession" statute that occurs after a single prior conviction under any federal or state drug law triggers a mandatory minimum fine of $2,500 and a minimum imprisonment term of 15 days (up to a maximum of two years); if the defendant has multiple prior drug offense convictions at the time of his or her federal simple possession offense, the sentencing court must impose a mandatory minimum fine of $5,000 and a mandatory minimum imprisonment term of 90 days (up to a maximum term of three years). On the other hand, the cultivation or distribution of marijuana, or the possession of marijuana with the intent to distribute, is subject to more severe penalties, ranging from imprisonment for five years to imprisonment for life. Moreover, property associated with the offense may be confiscated without or with any prior or accompanying criminal conviction. Forfeiture Either in addition to, or in lieu of, bringing criminal prosecutions, the Department of Justice may choose to rely more heavily on the civil forfeiture provisions of the CSA in order to disrupt the operation of marijuana dispensaries and production facilities. Forfeiture is a penalty associated with a particular crime in which property is confiscated or otherwise divested from the owner and forfeited to the government, in accordance with constitutionally required due process procedures. Property forfeiture is used both to enforce criminal laws and to deter crime. Forfeitures are classified as civil or criminal depending on the nature of the judicial procedure which ends in confiscation. Civil forfeiture is ordinarily the product of a civil, in rem (against the property) proceeding in which the property is treated as the offender. No criminal charges are necessary against the owner, landlord, or mortgage holder because the guilt or innocence of the property owner, landlord, mortgage holder, or anyone else with a secured interest in the property is irrelevant; it is enough that the property was involved in, or otherwise connected to, an illegal activity (in which forfeiture is authorized). Criminal forfeiture proceedings, on the other hand, are in personam (against the person) actions, and confiscation is possible only upon the conviction of the owner of the property and only to the extent of the defendant's interest in the property. Property that is subject to forfeiture includes both the direct and indirect proceeds of illegal activities as well as any property used, or intended to be used, to facilitate that crime. Section 511 of the CSA (21 U.S.C. §881) makes a wide array of property associated with violations of the CSA subject to seizure by the Attorney General and forfeiture to the United States. Property subject to the CSA's civil forfeiture provision includes any controlled substance that has been manufactured, distributed, dispensed, acquired, or possessed in violation of federal law, as well as any equipment, firearm, money, mode of transportation, or real property used or intended to be used to facilitate a violation of the CSA . In order to seize the covered property, the government need only show that the property is subject to forfeiture by a preponderance of the evidence. Once forfeited, the Attorney General may destroy the controlled substances seized, and sell the other property at public auction. After expenses of the forfeiture proceeding are recouped, excess funds are forwarded to the DOJ Asset Forfeiture Fund. Forfeiture proceedings are generally less resource intensive than a criminal prosecution and have been used in the past against medical marijuana dispensaries. In practice, DOJ would be able to seize and liquidate property, both real and personal, associated with marijuana production, distribution, or retail sale facilities, without bringing any criminal action. As explained above, a civil asset forfeiture proceeding is a civil proceeding against the property in question. Although an interested party may object to the seizure, given that such facilities are in clear violation of federal law, so long as the property is indeed being used for marijuana-related activities, it would appear unlikely that many successful challenges to these actions could be waged. Developments in the States Most of the states have legislation modeled after the federal Controlled Substances Act. Over the years, some have reduced possession of small amounts of marijuana to a civil offense under state law, while the District of Columbia went a step further and fully legalized possession of small amounts of marijuana and personal cultivation of a small number of marijuana plants. More than 20 states also have established a state law exception for medical marijuana. Colorado and Washington have enacted legislation authorizing the retail and personal growth, sale, and possession of marijuana under state law. Alaska and Oregon have enacted similar retail marijuana laws; however, they were not fully operational as of the publication date of this report. Medical Marijuana Laws State medical marijuana laws follow a general pattern, although most have some individual characteristics and the manner in which they are enforced can differ considerably. Some of their features are attributable to the CSA and a case from the United States Court of Appeals for the Ninth Circuit, Conant v. Walters. Conant, a California physician, sought to enjoin the federal government from revoking his authority to prescribe controlled substances at all in retaliation for his recommending marijuana to some of his patients. Then, as now, the CSA permits the Attorney General, acting through the Drug Enforcement Administration, to withdraw a physician's authority to prescribe controlled substances upon a failure to comply with the demands of the CSA. The Ninth Circuit acknowledged the prospect of criminal liability if the doctor were doing more than engaging in an abstract discussion with his patient: "A doctor would aid and abet by acting with the specific intent to provide a patient with the means to acquire marijuana. Similarly, a conspiracy would require that a doctor have knowledge that a patient intends to acquire marijuana, agree to help the patient acquire marijuana, and intend to help the patient acquire marijuana." Yet, "[h]olding doctors responsible for whatever conduct the doctor could anticipate a patient might engage in after leaving the doctor's office is simply beyond the scope of either conspiracy or aiding and abetting." On the other hand, such doctor-patient discussions do implicate First Amendment free speech principles. The Ninth Circuit therefore affirmed the district court's order which had enjoined any DEA enforcement action. As a consequence of the CSA and the Conant decision, the state medical marijuana laws are predicated upon a doctor's recommendation, rather than a prescription and the medicine is dispensed other than through a pharmacy. In addition, the laws afford registered patients, care givers, cultivators, and distributors immunity from the consequences of state criminal laws. Patients Physicians may recommend medical marijuana only for patients suffering from one or more statutorily defined "debilitating," or "qualifying" medical conditions. The typical list would include the following: "Debilitating medical condition" means one or more of the following: (a) Cancer, glaucoma, positive status for human immunodeficiency virus, acquired immune deficiency syndrome, hepatitis c, amyotrophic lateral sclerosis, crohn's disease, agitation of alzheimer's disease or the treatment of these conditions. (b) A chronic or debilitating disease or medical condition or its treatment that produces one or more of the following: cachexia or wasting syndrome; severe and chronic pain; severe nausea; seizures, including those characteristic of epilepsy; or severe and persistent muscle spasms, including those characteristic of multiple sclerosis. (c) Any other medical condition or its treatment added by the department pursuant to section 36-2801.01. The list usually includes a condition such as "severe pain," or "chronic pain," or "severe and chronic pain" that is easy to claim, difficult to diagnose, and grounds for potential abuse. Some states seek to limit the scope of the term by statute or by regulation. In many jurisdictions, a qualified patient must be a resident of the jurisdiction. Most states and the District of Columbia restrict the amount of marijuana a patient may possess for medical purposes. The limit is usually an amount less than three ounces. Medical marijuana statutes ordinarily do not allow patients to use marijuana in public. Caregivers Typically, caregivers must register and be designated by one or more registered medical marijuana patients. Many medical marijuana laws also afford caregivers the same immunity and impose the same limitations upon them as apply to patients. Dispensaries Some state medical marijuana laws contemplate cultivation exclusively by the patient or his or her caregiver. Most, however, establish a regulatory scheme for dispensaries. Retail Marijuana Four states, Washington, Colorado, Oregon, and Alaska, have established retail marijuana regimes. Each regulates the distribution of marijuana without a necessary medical nexus, but raises many of the same federal-state conflict issues found in the medical marijuana statutes. Much like the medical marijuana regimes, each recreational marijuana regime shares general patterns, but they also each have some unique characteristics. In some instances, for example Washington, the statutory authority establishing the retail regime is fairly specific. In others, such as Colorado, the statute provides only a broad framework while authorizing a state regulatory agency to fill in the details through regulations. Decriminalization of Personal Possession and Consumption Each of the retail marijuana laws decriminalizes the consumption and possession of varying amounts and forms of marijuana by individuals at least 21 years of age within the state. The laws, however, prohibit consumption of marijuana in public and maintain a prohibition on driving vehicles under the influence of marijuana, even if it was acquired and consumed in compliance with the state law. Washington Initiative 502, for example, legalizes marijuana possession by amending state law to provide that the possession of small amounts of marijuana "is not a violation of this section, this chapter, or any other provision of Washington law." Under the Initiative, individuals over the age of 21 may possess up to one ounce of dried marijuana, 16 ounces of marijuana-infused product in solid form, or 72 ounces of marijuana infused product in liquid form. However, marijuana must be used in private, as it is unlawful to "open a package containing marijuana ... or consume marijuana ... in view of the general public." Colorado voters approved an amendment to the Colorado Constitution (Amendment 64) to ensure that it "shall not be an offense under Colorado law or the law of any locality within Colorado" for an individual 21 years of age or older to possess, use, display, purchase, consume, or transport one ounce of marijuana; or possess, grow, process, or transport up to six marijuana plants. Unlike Initiative 502, which permits only state-licensed facilities to grow marijuana, Amendment 64 allows any individual over the age of 21 to grow small amounts of marijuana (up to six plants) for personal use. In similar fashion to Washington's Initiative 502, marijuana may not be consumed "openly and publicly or in a manner that endangers others" under Colorado law. Oregon Ballot Measure 91 decriminalizes personal possession, for individuals of at least 21 years old, of up to eight ounces of "homegrown marijuana," up to 16 ounces of "homegrown marijuana products in solid form," and up to 72 ounces of "homegrown marijuana in liquid form." It also decriminalizes cultivation of up to four marijuana plants. Ballot Measure 91 also explicitly prohibits "the use of marijuana items in a public place," as well as the production and storage of marijuana or marijuana products where they "can be readily seen by normal unaided vision from a public place." Alaska law allows individuals of at least 21 years old to possess up to one ounce of marijuana and six (but no more than three that are mature and flowering) marijuana plants. The public consumption and cultivation of marijuana is prohibited under Alaska law. Licensing Regime for Retail Production, Distribution, and Sale Another common feature of recreational marijuana laws is the establishment of licensing regimes for the retail production, distribution, and sale of marijuana. Although the specifics vary, each retail marijuana regime establishes license application processes, qualification standards, and license maintenance standards that are to be implemented and overseen by a state regulatory agency. Washington Initiative 502 provides that the "possession, delivery, distribution, and sale" by a validly licensed producer, processor, or retailer, in accordance with the newly established regulatory scheme administered by the state Liquor Control Board (LCB), "shall not be a criminal or civil offense under Washington state law." The Initiative establishes a three-tiered production, processing, and retail licensing system that permits the state to retain regulatory control over the commercial life cycle of marijuana. Qualified individuals must obtain a producer's license to grow or cultivate marijuana, a processor's license to process, package, and label the drug, or a retail license to sell marijuana to the general public. Initiative 502 also establishes various restrictions and requirements for obtaining the proper license and directs the state LCB to adopt procedures for the issuance of such licenses. On October 16, 2013, the LCB adopted detailed rules for implementing Initiative 502. These rules describe the marijuana license qualifications and application process, application fees, marijuana packaging and labeling restrictions, recordkeeping and security requirements for marijuana facilities, and reasonable time, place, and manner advertising restrictions. The licensing standards in Colorado were implemented through a combination of statutes and regulations enacted to supplement Amendment 64. The Colorado General Assembly passed three bills that were signed into law by Governor Hickenlooper on May 28, 2013. On September 9, 2013, the Colorado Department of Revenue and State Licensing Authority adopted regulations to implement licensing qualifications and procedures for retail marijuana facilities. The regulations establish procedures for the issuance, renewal, suspension, and revocation of licenses; provide a schedule of licensing and renewal fees; and specify requirements for licensees to follow regarding physical security, video surveillance, labeling, health and safety precautions, and product advertising. Alaska's recreational marijuana law establishes a licensing and registration regime for cultivation facilities, manufacturing facilities, and retail stores. A state Marijuana Control Board is authorized to issue regulations to implement the licensing and registration regime, including rules that establish license application and renewal processes, qualification standards, labeling requirements, and advertising limitations. Oregon Ballot Measure 91 empowers the Oregon Liquor Control Commission to issue regulations establishing similar licensing standards. Taxation Authority Each of the retail marijuana laws also imposes taxes on recreational marijuana. These taxing measures vary in size and applicability and establish different purposes for which the revenue generated through these taxes will be used. For example, in accordance with adopted regulations, Washington will impose an excise tax of 25% of the selling price on each marijuana sale within the established distribution system. The state excise tax will, therefore, be imposed on three separate transactions: the sale of marijuana from producer to processor, from processor to retailer, and from retailer to consumer. All collected taxes are deposited into the Dedicated Marijuana Fund and distributed, mostly to social and health services, as outlined in the Initiative. Similarly, Colorado voters approved a 25% tax on retail marijuana transactions (a 15% excise tax that would raise revenues generally to be used for public school capital construction, and an additional 10% sales tax that predominately would generate revenues to fund the enforcement of the retail marijuana regulations). Under Oregon Ballot Measure 91, marijuana producers will be taxed $5 for each immature marijuana plant, $10 for each ounce of marijuana leaves, and $35 for each ounce of flowers. The revenue generated will be used first to offset the costs of implementing the state's marijuana regime and remaining monies will be distributed to a variety of existing state funds, including the state's Common School Fund and the Mental Health Alcoholism and Drug Services Account. Alaska law imposes an excise tax of $50 per ounce marijuana for each transaction between a marijuana cultivation center and either a processor or retail store. Local Control Another issue relevant to each retail marijuana law is the question of whether local governments within the state are permitted to ban or otherwise regulate marijuana businesses within their local jurisdictions. Colorado Amendment 64 expressly permits local governments within Colorado to regulate or prohibit the operation of such facilities. The Alaska recreational marijuana law also expressly provides local governments with certain authority to ban recreational marijuana businesses from operating and otherwise restrict "the time, place, manner, and number of marijuana establishment operations" with their respective jurisdictions. Oregon Ballot Measure 91 also expressly authorizes localities to impose "reasonable time, place, and manner" restrictions on marijuana businesses. Washington's Initiative 502, on the other hand, does not expressly allow Washington cities to ban marijuana stores from opening within their borders, and there is uncertainty about the degree to which such local prohibitions or moratoriums on the operation of recreational marijuana businesses may be enforced. Justice Department Memoranda The Department of Justice is not required, and realistically lacks the resources, to prosecute every single violation of the CSA. Pursuant to the doctrine of "prosecutorial discretion," federal law enforcement officials have "broad discretion" as to when, whom, and whether to prosecute for violations of the CSA. Courts have recognized that the "decision to prosecute is particularly ill-suited to judicial review," as it involves the consideration of factors, such as the strength of evidence, deterrence value, and existing enforcement priorities, "not readily susceptible to the kind of analysis the courts are competent to undertake." Through the exercise of prosecutorial discretion, DOJ is able to develop a policy outlining what marijuana-related activities will receive the most attention from federal authorities. DOJ has issued four memoranda since 2009 that explain the Obama Administration's position regarding state-authorized marijuana activities, as described in the following sections. The 2009 Ogden Memorandum In 2009, Deputy Attorney General David W. Ogden provided guidance to federal prosecutors in states that have authorized the use of medical marijuana. Citing a desire to make "efficient and rational use of its limited investigative and prosecutorial resources," the memorandum stated that while the "prosecution of significant traffickers of illegal drugs, including marijuana … continues to be a core priority," federal prosecutors "should not focus federal resources [] on individuals whose actions are in clear and unambiguous compliance with existing state laws providing for the medical use of marijuana." The memorandum made clear, however, that "this guidance [does not] preclude investigation or prosecution, even where there is clear and unambiguous compliance with existing state law, in particular circumstances where investigation or prosecution otherwise serves important federal interests." Nevertheless, the Ogden Memorandum was widely considered an assurance that DOJ would not prosecute any marijuana cultivation, distribution, or possession, as long as those activities complied with state law. At about the same time, it became apparent the state medical marijuana programs had consequences that were perhaps unintended. In some states, the affliction most easily claimed and most difficult to diagnose—chronic pain—accounted for 90% of all physicians' recommendations. It was said that Los Angeles alone had somewhere between 500 and 1,000 medical marijuana dispensaries. No one knew how many for sure, but all agreed there were more dispensaries than there were Starbucks coffee shops. Rather than the old and infirm, "[r]emarkably the age distribution of medical marijuana users seem[ed] to mimic that of recreational users in its concentration of young persons." The 2011 Cole Memorandum DOJ reiterated and clarified its position in a subsequent memorandum in 2011 drawing a clear distinction between the potential prosecutions of individual patients who require marijuana in the course of medical treatment and "commercial" dispensaries. After noting that several jurisdictions had recently "enacted legislation to authorize multiple large-scale, privately operated industrial marijuana cultivation centers," DOJ stated that The Ogden memorandum was never intended to shield such activities from federal enforcement action and prosecution, even where those activities purport to comply with state law. Persons who are in the business of cultivating, selling or distributing marijuana, and those who knowingly facilitate such activities, are in violation of the [CSA] regardless of state law. Consistent with resource constraints and the discretion you may exercise in your district, such persons are subject to federal enforcement action, including potential prosecution. The surge in enforcement activity proximate to the release of the 2011 Cole Memorandum caught unawares many of those who considered the Ogden Memorandum a green light for marijuana entrepreneurship. The 2013 Cole Memorandum The Obama Administration's official response to the Colorado and Washington initiatives was provided on August 29, 2013, when Deputy Attorney General James M. Cole sent a memorandum to all U.S. Attorneys intended to guide the "exercise of investigative and prosecutorial discretion" when it comes to civil and criminal enforcement of the federal Controlled Substances Act within all states, including those that have legalized marijuana for medicinal or recreational use. The memorandum expresses DOJ's position that, although marijuana is a dangerous drug that remains illegal under federal law, the federal government will not pursue legal challenges against jurisdictions that authorize marijuana in some fashion, assuming those state and local governments maintain strict regulatory and enforcement controls on marijuana cultivation, distribution, sale, and possession that limit the risks to "public safety, public health, and other law enforcement interests." This DOJ decision has received both praise and criticism. The memorandum instructs federal prosecutors to prioritize their "limited investigative and prosecutorial resources to address the most significant [marijuana-related] threats" and identified the following eight activities as those that the federal government wants most to prevent: (1) distributing marijuana to children; (2) revenue from the sale of marijuana going to criminal enterprises, gangs, and cartels; (3) diverting marijuana from states that have legalized its possession to other states that prohibit it; (4) using state-authorized marijuana activity as a pretext for the trafficking of other illegal drugs; (5) using firearms or violent behavior in the cultivation and distribution of marijuana; (6) exacerbating adverse public health and safety consequences due to marijuana use, including driving while under the influence of marijuana; (7) growing marijuana on the nation's public lands; and (8) possessing or using marijuana on federal property. The memorandum advises U.S. Attorneys and federal law enforcement to devote their resources and efforts toward any individual or organization involved in any of these activities, regardless of state law. Furthermore, the memorandum recommends that jurisdictions that have legalized some form of marijuana activity "provide the necessary resources and demonstrate the willingness to enforce their laws and regulations in a manner that ensures they do not undermine federal enforcement priorities." However, the memorandum cautions that, to the extent that state enforcement efforts fail to sufficiently protect against the eight harms listed above, the federal government retains the right to challenge those states' marijuana laws. Two additional points made in the memorandum are worth highlighting. First, the memorandum acknowledges a change in Administration policy with respect to "large scale, for-profit commercial enterprises" that may ease the concerns of potential state-licensed marijuana distributors and retailers in Colorado and Washington. In previous guidance issued to U.S. Attorneys in states with medical marijuana laws, DOJ had suggested that large-scale marijuana enterprises were more likely to be involved in marijuana trafficking, and thus could be appropriate targets for federal enforcement actions. In the guidance, DOJ directs prosecutors "not to consider the size or commercial nature of a marijuana operation alone as a proxy for assessing whether marijuana trafficking implicates the Department's enforcement priorities ..." The memorandum suggests that a state with a robust regulatory system for the control of recreational marijuana "is less likely to threaten [] federal priorities ..." than a state that lacks such controls. This statement may inform the long-running debate over the extent to which state marijuana regulatory and licensing laws (as opposed to mere penalty exemptions) conflict with federal law. Some courts have suggested, for example, that whereas a state is generally free to remove state penalties for marijuana use, the more robust a state's licensing and regulatory program, the more likely the law is to be preempted by federal law. The Oregon Supreme Court, for instance, has suggested that states may not "affirmatively authorize" an individual to participate in conduct prohibited by federal law. The memorandum makes no statements with regard to the application of various federal money laundering and banking laws that have hampered the ability of commercial marijuana establishments to obtain the necessary financing and financial services to establish and grow their businesses. The 2014 Cole Memorandum The 2014 Cole memorandum, however, did address banking and money laundering laws. It recited eight priority points listed in the 2013 memorandum and explained that the same considerations should guide the allocation of investigation and prosecution resources to marijuana-related offenses involving financial transactions—money laundering, money transfers, and Bank Secrecy Act transgressions, discussed later in this report. Preemption To what extent does the CSA trump or preempt state medical and recreational marijuana laws? The preemption doctrine stands at the threshold of the federal-state marijuana debate. The preemption doctrine is grounded in the Supremacy Clause of Article VI, cl. 2, which states that "[t]he Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made ... under the Authority of the United States, shall be the supreme Law of the Land." The Supremacy Clause, therefore, "elevates" the U.S. Constitution, federal statutes, federal regulations, and treaties above the laws of the states. As a result, where federal and state law are in conflict, the state law is generally preempted, leaving it void and without effect. Preemption is a matter of Congress's choice when it operates within its constitutionally enumerated powers. In some instances, Congress has exercised its authority so pervasively as to preclude the possibility of state activity within the same legislative field. On the other hand, where Congress prefers the co-existence of state and federal law, state law must give way only when it conflicts with federal law in either of two ways: (1) if it is "physically impossible" to comply with both the state and federal law ("impossibility preemption"); or (2) if the state law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress" ("obstacle preemption"). What constitutes an obstacle for preemption purposes is a matter "to be informed by examining the federal statute as a whole and identifying its purpose and intended effects." When Congress acts within an area traditionally within the purview of the states, it will be assumed not to have intended to give its words preemptive force unless a contrary purpose is manifestly clear. The Controlled Substances Act contains an explicit statement of the extent of Congress's preemptive intent. Section 903 provides that No provision of this subchapter shall be construed as indicating an intent on the part of the Congress to occupy the field in which that provision operates, including criminal penalties, to the exclusion of any State law on the same subject matter which would otherwise be within the authority of the State, unless there is a positive conflict between that provision of this subchapter and that State law so that the two cannot consistently stand together. Several state courts have addressed the preemption challenges to state medical marijuana laws with mixed results. For example, appellate courts in Colorado, California, and Michigan have concluded that at least some aspects of the medical marijuana laws in those states survive both impossibility and obstacle preemption analysis. In two instances, they have held that the language in Section 903 evidences an intent to preempt state laws only under impossibility preemption and not under obstacle preemption. The Colorado case, People v. Crouse , arose when a defendant, acquitted of cultivation charges on the basis of immunity under the state medical marijuana law, petitioned the trial court to order police to return marijuana plants they had seized in connection with his prosecution. The state questioned whether the CSA precluded such an action. The Court of Appeals of Colorado determined that a state marijuana law is only in "positive conflict" with the CSA when it is "physically impossible" to simultaneously comply with the state and federal law. It held that in order to preempt the CSA Section 903 "demands more than that the state law 'stands as an obstacle to the accomplishment and execution' of the federal law.'" Thus, the language of the CSA "cannot be used to preempt a state law under the obstacle preemption doctrine." The decision in Crouse adopted the reasoning of County of San Diego v. San Diego NORML , a California state court decision that also determined that obstacle preemption should not be applied in determining whether a state marijuana law is preempted by the CSA. In both instances, however, the court supplied an alternative, obstacle preemption explanation. In Crouse , the court noted Section 885(d) of the CSA "carves out a specific exemption for distribution of controlled substances by law enforcement officers." Thus, if the officers returned ("distributed") the marijuana to Crouse they would not be obstructing the CSA but acting in a manner which it authorized. In San Diego NORML , the California law required local governments to issue medical marijuana cards to qualified applicants. In the eyes of the California appellate court, the medical marijuana statute posed no obstacle to the CSA, because "[t]he purpose of the CSA is to combat recreational drug use, not to regulate a state's medical practices." The Michigan case, Beek v. City of Wyoming , involved a Wyoming City property owner and medical marijuana registrant who sought a declarative judgment against a city ordinance which proscribed the use of his property in a manner contrary to federal law including the CSA. Beek argued that the Michigan Medical Marihuana Act (MMMA), which immunized an individual's cultivation of marijuana for medical purposes, invalidated the city ordinance. The City argued that the CSA preempted the MMMA. The Michigan Supreme Court held that the CSA did not preempt the MMMA, but also that the ordinance must yield to the MMMA. As understood by the court, the MMMA escaped impossibility preemption because it was permissive and therefore did not command the performance of an act prohibited by federal law: "impossibility results when state law requires what federal law forbids, or vice versa." The MMMA escaped obstacle preemption because it merely conveyed immunity from the consequences of state law: "the MMMA's limited state-law immunity for [medical marijuana] use does not frustrate the CSA's operation nor refuse its provisions their natural effect, such that its purpose cannot otherwise be accomplished.... [T]his immunity does not purport to alter the CSA's federal criminalization of marijuana, or to interfere with or undermine federal enforcement of that prohibition." The Oregon Supreme Court understood obstacle preemption a little differently in Emerald Steel . State regulators had charged Emerald Steel with disability discrimination for firing an employee for medical marijuana use. The Oregon court concluded, based on its interpretation of U.S. Supreme Court precedent, that "[a]ffirmatively authorizing a use that federal law prohibits stands as an obstacle to the implementation and execution of the full purposes and objectives of the Controlled Substances Act." Thus, "[t]o the extent that [the Oregon statute] affirmatively authorizes the use of medical marijuana, federal law preempts that subsection leaving it without effect." The continued viability of Emerald Steel may be open to question. While the Oregon Supreme Court has not overturned its earlier decision, it has observed in Willis that Emerald Steel 's "affirmative authorization" obstacle preemption test may have been an overgeneralization: " Emerald Steel should not be construed as announcing a stand-alone rule that any state law that can be viewed as 'affirmatively authorizing' what federal law prohibits is preempted. Rather it reflects this court's attempt to apply the federal rule and the logic of the most relevant federal cases to the particular preemption problem that was before it. And particularly where, as here, the issue of whether the statute contains an affirmative authorization is not straightforward, the analysis in Emerald Steel cannot operate as a simple stand-in for the more general federal rule." Finally, in what is one of the few reported statements by a federal court relating to preemption of state marijuana laws, in In re: Rent-Rite Super Kegs West LTD , a bankruptcy court noted (in what was clearly dicta) that "conflict preemption is not an issue here. Colorado constitutional amendments for both medical marijuana, and the more recent amendment legalizing marijuana possession and usage generally, both make it clear that their provisions apply to state law only. Absent from either enactment is any effort to impede the enforcement of federal law." Other Constitutional Considerations Other colorable constitutional issues involving the CSA and state medical or recreational marijuana statutes have arisen on a number of occasions. The Supreme Court resolved one of them when it found that Congress's constitutional authority to regulate interstate and foreign commerce enabled it to craft the CSA so as to categorically outlaw the cultivation and possession of marijuana. Congress's Commerce Clause authority, however, does not include the power to compel a state legislature to act at its bidding or a state official to enforce its will. From time to time, medical marijuana litigants have invoked this limitation in an effort to shield themselves from the CSA. Because the CSA makes no demands of state legislatures or officials, those efforts have been to no avail. The related Tenth Amendment argument that the CSA intrudes upon those police powers reserved to the states has enjoyed no greater success. Of course, the purported exercise of an explicit constitutional power such as the Commerce Clause will be defeated, if the exercise is beyond the scope of the asserted power or is contrary to some other explicit or implicit constitutional limitation. In the case of the fundamental rights of the people, the Tenth Amendment, the Ninth Amendment, and the substantive due process components of the Fifth and Fourteenth Amendments all impose limits on the federal or state legislative powers. Here too, litigants generally have been unable to convince the courts that the limitations entitle them to relief. Tenth Amendment reservations with respect to the rights of the people disappear once it is established that the Constitution has expressly delegated a power to the United States, as in the case of the Necessary and Proper Clause and the CSA. A limitation on intrusion upon the rights of the people, however, may flow from the Ninth Amendment and the Due Process Clauses' implicit prohibition on governmental encroachment on a fundamental right. Fundamental rights are those "deeply rooted in this Nation's history and tradition, and implicit in the concept of ordered liberty, such that neither liberty nor justice would exist if they were sacrificed." The courts have thus far declined to find such a fundamental right in the possession, use, or cultivation of marijuana, even for medicinal purposes. Due process and equal protection challenges have surfaced both in cases questioning the CSA and those contesting application of the various state marijuana laws. At the federal level, several courts have rejected the suggestion that the government is estopped from enforcing the CSA by virtue of misleading or inconsistent statements in the Ogden Memorandum and elsewhere. Some of these same cases have rejected the contention that placement of marijuana in Schedule I of the CSA is irrational and consequently constitutes a violation of equal protection. Municipal zoning or land use ordinances set the stage for most of the state marijuana-related due process cases. State laws vary as to whether municipalities may ban or restrict marijuana-related activities within their jurisdictions. Where they may do so, the regulatory scheme must comply with due process requirements. Banking The federal banking laws are designed to shield financial institutions from individuals and entities that deal in controlled substances. Congress has crafted several of them to enlist financial institutions in the investigation and prosecution of those who violate the CSA. As a consequence, medical marijuana providers have experienced difficulty securing banking services. On February 14, 2014, the Department of Justice and the Treasury Department's Financial Crimes Enforcement Network (FinCEN) issued guidance with respect to marijuana-related financial crimes. FinCEN's guidance specifically addresses the obligations to file suspicious activity reports (SARs). Banks must file SARs with FinCEN relating to any transaction involving $5,000 or more that they have reason to suspect are derived from illegal activity. Willful failure to do so is punishable by imprisonment for not more than five years (not more than 10 years in cases of a substantial pattern of violations or transactions involving other illegal activity). Breaking up a transaction into two or more transactions to avoid the reporting requirement subjects the offender to the same 5/10 year maximum terms of imprisonment. Banks must also establish and maintain anti-money laundering programs, designed to ensure that bank officers and employees will have sufficient knowledge of the banks' customers and of the business of those customers to identify the circumstances under which filing SARs is appropriate. Suspicion aside, banks must file currency transaction reports (CTRs) with FinCEN relating to transactions involving $10,000 or more in cash. Willful failure to do so is punishable by imprisonment for not more than five years (not more than 10 years in cases of a substantial pattern of violations or transactions involving other illegal activity). Again, structuring a transaction to avoid the reporting requirement exposes the offender to the same 5/10 year maximum terms of imprisonment. Banks, their officers, employees, and customers may also face criminal liability under the money laundering statutes for marijuana-related financial transactions. Section 1957 makes it a federal crime to deposit or withdraw $10,000 or more in proceeds derived from the distribution of marijuana and any other controlled substances. Section 1956 makes it a federal crime to engage in a financial transaction involving such proceeds conducted with an eye to promoting further offenses, for example, by withdrawing marijuana-generated funds in order to pay the salaries of medical marijuana dispensary employees. Section 1956 violations are punishable by imprisonment for not more than 20 years. Section 1957 violations are punishable by imprisonment for not more than 10 years. Conspiracy to violate either section carries the same maximum penalties, as does aiding and abetting the commission of either offense. Moreover, any real or personal property involved in, or traceable to, a transaction proscribed by either statute is subject to confiscation under either civil or criminal forfeiture. Federally insured state- and federally chartered depository institutions that engage in illegal or unsafe banking practices also run the risk of being assessed civil money penalties and even losing deposit insurance coverage, which would result in the termination of their status as an insured depository institution. In its recent guidance, FinCEN addressed banks' SAR reporting requirements. FinCEN began its guidance by emphasizing the point made in the accompanying 2014 Cole Memorandum, that the Justice Department's investigation and prosecution of financial crimes would be focused on activities that conflict with any of several federal priorities: preventing the distribution of marijuana to minors; preventing revenue from the sale of marijuana from going to criminal enterprises, gangs, and cartels; preventing the diversion of marijuana from states where it is legal under state law in some form to other states; preventing state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity; preventing violence and the use of firearms in cultivation and distribution of marijuana; preventing drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use; preventing the growing of marijuana on public lands and attendant public safety and environmental dangers posed by marijuana production on public lands; and preventing marijuana possession or use on federal property. FinCEN advised financial institutions that in providing services to a marijuana-related business they must file one of three forms of special SARs: a marijuana limited SAR, a marijuana priority SAR; or a marijuana termination SAR. The marijuana limited SAR is appropriate when the bank determines, after the exercise of due diligence, that its customer is not engaged in any of the activities that violate state law or that would implicate any of the Justice Department investigation and prosecution priorities listed in the 2014 Cole Memorandum. A marijuana priority SAR must be filed when the bank believes its customer is engaged in such activities. A bank files a marijuana termination SAR when it finds it necessary to sever its relationship with a customer in order to maintain an effective anti-money laundering program. FinCEN also provides examples of "red flags" that may indicate that a marijuana priority SAR is appropriate: The business is unable to produce satisfactory documentation or evidence to demonstrate that it is duly licensed and operating consistently with state law. The business is unable to demonstrate the legitimate source of significant outside investments. A customer seeks to conceal or disguise involvement in marijuana-related business activity. For example, the customer may be using a business with a non-descript name (e.g., a "consulting," "holding," or "management" company) that purports to engage in commercial activity unrelated to marijuana, but is depositing cash that smells like marijuana. Review of publicly available sources and databases about the business, its owner(s), manager(s), or other related parties, reveal negative information, such as a criminal record, involvement in the illegal purchase or sale of drugs, violence, or other potential connections to illicit activity. The business, its owner(s), manager(s), or other related parties are, or have been, subject to an enforcement action by the state or local authorities responsible for administering or enforcing marijuana-related laws or regulations. A marijuana-related business engages in international or interstate activity, including by receiving cash deposits from locations outside the state in which the business operates, making or receiving frequent or large interstate transfers, or otherwise transacting with persons or entities located in different states or countries. The owner(s) or manager(s) of a marijuana-related business reside outside the state in which the business is located. A marijuana-related business is located on federal property or the marijuana sold by the business was grown on federal property. A marijuana-related business's proximity to a school is not compliant with state law. A marijuana-related business purporting to be a "non-profit" is engaged in commercial activity inconsistent with that classification, or is making excessive payments to its manager(s) or employee(s). A customer appears to be using a state-licensed marijuana-related business as a front or pretext to launder money derived from other criminal activity (i.e., not related to marijuana) or derived from marijuana-related activity not permitted under state law. Relevant indicia could include the following: The business receives substantially more revenue than may reasonably be expected given the relevant limitations imposed by the state in which it operates. The business receives substantially more revenue than its local competitors or than might be expected given the population demographics. The business is depositing more cash than is commensurate with the amount of marijuana-related revenue it is reporting for federal and state tax purposes. The business is unable to demonstrate that its revenue is derived exclusively from the sale of marijuana in compliance with state law, as opposed to revenue derived from (i) the sale of other illicit drugs, (ii) the sale of marijuana not in compliance with state law, or (iii) other illegal activity. The business makes cash deposits or withdrawals over a short period of time that are excessive relative to local competitors or the expected activity of the business. Deposits apparently structured to avoid Currency Transaction Report ("CTR") requirements. Rapid movement of funds, such as cash deposits followed by immediate cash withdrawals. Deposits by third parties with no apparent connection to the account holder. Excessive commingling of funds with the personal account of the business's owner(s) or manager(s), or with accounts of seemingly unrelated businesses. Individuals conducting transactions for the business appear to be acting on behalf of other, undisclosed parties of interest. Financial statements provided by the business to the financial institution are inconsistent with actual account activity. A surge in activity by third parties offering goods or services to marijuana-related businesses, such as equipment suppliers or shipping servicers." The FinCEN guidance ends with the observation that a bank is not absolved of its obligation to file a currency transaction report for any financial transaction involving more than $10,000 in cash, regardless of how it resolves its marijuana SAR obligations. Other Federal Law Consequences Employment The use of marijuana, medicinal or otherwise, may have adverse employment consequences. Both state and federal courts have upheld firing an employee for medical marijuana use. Employee challenges have cited in vain state medical marijuana laws as well as federal and state anti-discrimination laws. The state medical marijuana laws ordinarily immunize medical marijuana users from the adverse consequences of the law, but do not give them a right that can be used affirmatively against a private entity. The Americans with Disabilities Act (ADA) and similar state anti-discrimination in employment statutes are predicated upon discrimination based on lawful activity and the CSA has consequently proven to be an insurmountable obstacle. They differ somewhat in the case of nongovernment employees, because, among other things, federal, state, and local government employees enjoy Fourth Amendment protections. The Fourth Amendment, binding on government employers, does not give employees the right to use marijuana, medical or otherwise, but it limits the likelihood that their employers will discover their use. The Fourth Amendment's proscription on unreasonable governmental searches means that federal, state, or local entities must have either reasonable suspicion or a constitutionally recognized special need in order to conduct employee drug testing. Government A significant number of government employees, however, must undergo random drug testing because the nature of their duties places them in a "special needs" category. For example, random drug testing is a fact of life and continued condition of employment for anyone with access to classified or similarly sensitive information. In the case of employees of state or local governmental entities, the "lower courts have allowed drug testing in other safety-sensitive occupation" such as "aviation personnel, railroad safety inspectors, highway and motor carrier safety specialists, lock and dam operators, forklift operators, tractor operators, engineering operators, and crane operators." More generally, federal contractors may face the loss of federal funding or could be subject to administrative fines if they do not maintain and enforce policies aimed at achieving a drug-free, safe workplace. The federal Drug-Free Workplace Act of 1988 (DFWA) imposes a drug-free workplace requirement on any entity that receives federal contracts with a value of more than $150,000 or that receives any federal grant. DFWA requires these entities to make ongoing, good faith efforts to comply with the drug-free workplace requirement in order to qualify, and remain eligible, for federal funds. Private Absent status as a federal contractor and grantee status or some other federal influence, employers are relatively free to establish their own drug-free workplaces and to fire employees who test positive for marijuana use, medical or otherwise. Although an occasional medical marijuana statute will shield employees, more often the statute is silent and thought not to cabin at-will employment status, as noted earlier. Depending upon the factual situation and the state unemployment statute in play, employees fired for marijuana use may also be ineligible for unemployment benefits. Taxation Income from any source is ordinarily subject to federal taxation. This is so even when the activity that generates the income is unlawful. Marijuana merchants, however, operate under a special federal tax disadvantage. Section 280E of the Internal Revenue Code provides: No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted. As a result of this provision, marijuana merchants, unlike most businesses, may not deduct their operating expenses (e.g., general labor, rent, and utilities) when computing their federal income tax liability. Section 280E does not, however, apply to the cost of goods sold (COGS), which means marijuana sellers may subtract COGS when determining gross income. Courts and the IRS have interpreted Section 280E to apply to marijuana so long as it is a controlled substance under the CSA, regardless of whether the purchase and use are allowed under state law. The customers of a medical marijuana merchant cannot deduct the amounts spent on marijuana as medical expenses. Possession of Firearms It is a federal crime punishable by imprisonment for not more than 10 years for an unlawful user of a controlled substance to possess a firearm or ammunition. Federal regulations define an "unlawful user" to include "any person who is a current user of a controlled substance in a manner other than as prescribed by a licensed physician." The Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) has made it clear that "any person who uses ... marijuana, regardless of whether his or her State has passed legislation authorizing marijuana use for medicinal purposes, is an unlawful user of ... a controlled substance, and is prohibited by Federal law from possessing firearms or ammunition." Those associated with a marijuana-cultivation or -sales operation may incur additional firearm-related criminal liability. In addition to the penalties for growing or selling, anyone who provides security for the operation and possesses a firearm in furtherance of that enterprise is subject to a series of mandatory terms of imprisonment. The offender and any accomplices face an additional five-year mandatory minimum term of imprisonment for possession of a firearm; a seven-year mandatory term if he brandishes the firearm; and a 10-year mandatory term if discharges it. Federally Assisted Housing "Illegal drug users" are ineligible for federally assisted housing. Public housing agencies and owners of federally assisted housing must establish standards that would allow the agency or owner to prohibit admission to, or terminate the tenancy or assistance of, any applicant or tenant who is an illegal drug user. An agency or an owner can take these actions if a determination is made, pursuant to the standards established, that an individual is "illegally using a controlled substance," or if there is reasonable cause to believe that an individual has a "pattern of illegal use" of a controlled substance that could "interfere with the health, safety, or right to a peaceful enjoyment of the premises by other residents." Thus, any individual whom the housing authority reasonably believes is using marijuana could be denied access to, or evicted from, federally assisted housing. With respect to medical marijuana, the Department of Housing and Urban Development previously concluded that public housing agencies or owners "must deny admission " to applicants who are using medical marijuana, but "have statutorily-authorized discretion with respect to evicting or refraining from evicting current residents on account of their use of medical marijuana." The question of whether marijuana users may be excluded from federally assisted housing is not the same as whether applicants for such housing may be required to undergo drug testing. The Eleventh Circuit's Lebron decision, decided in another context, would seem to preclude such preliminary testing in the absence of some individualized suspicion. Ethical Considerations Rule 1.2(d) of the American Bar Association's Model Rules of Professional Conduct, adopted in virtually every jurisdiction, states that "A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent, but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good-faith effort to determine the validity, scope, meaning or application of the law." Bar officials in several states—Arizona, Colorado, Connecticut, Maine, and Washington, among them—have issued ethics opinions addressing ethical constraints arising out of the conflict between state and federal marijuana laws. The Arizona State Bar concluded in Opinion 11-01that the Ogden Memorandum had created a "safe harbor" for those that operated within the confines of the state's medical marijuana statute. In its view, Arizona lawyers may counsel and assist their clients in any activity permitted under the Arizona medical marijuana law as long as their clients were made fully aware of the consequences under federal law. In contrast, Opinion 199 of the Maine Professional Ethics Commission advised attorneys that, absent an amendment to either the Rules of Professional Conduct or the CSA, a member of the Maine bar "may counsel or assist a client in making good faith efforts to determine the validity, scope, meaning or application of the law," but "the Rule forbids attorneys from counseling a client to engage in the [marijuana] business or to assist a client in doing so." The Commission declined to provide more specific advice, but warned that significant risks attended practice in the area. The Connecticut Bar Association offered much the same advice. Lawyers may advise their clients about the features of the state medical marijuana statute, but they may not assist clients in a violation of the CSA. While the Arizona, Maine, and Connecticut opinions are relatively general and relatively terse, the Colorado opinion provides far more examples of its view of the permissible and impermissible. It concluded that, consistent with Rule 1.2(d) and the CSA, a Colorado attorney might (1) represent and advise a client concerning the consequences of marijuana-related activities for purposes of criminal law, family law, or labor law; (2) as a government attorney advise a client in a matter involving the establishing, interpreting, enforcing, or amending zoning relations, local ordinances, or legislation; or (3) advise a client on the tax obligations incurred when cultivating or selling marijuana. It concluded, on the other hand, that a Colorado attorney may not (1) draft or negotiate contracts, leases, or other agreements to facilitate the cultivation, distribution, or consumption of marijuana; or (2) provide tax planning assistance with an eye to violating federal law. The Opinion points out that providing such assistance while aware of a client's intent is "likely to constitute aiding and abetting the violation of or conspiracy to violate federal law." Washington State attorneys have the advantage of not one, but two bar advisories. Both take a position similar to the Arizona opinion: attorneys transgress no ethical boundaries if their professional conduct is consistent with state law and perhaps with federal enforcement priorities. The Bar Association of King County (Seattle and environs) opined that an attorney who advises and assists a client to establish and maintain a marijuana dispensary is not subject to discipline, as long as his client's conduct is permitted under state marijuana law and as long as he makes his client aware of the provisions of the CSA including the Cole Memorandum. Moreover, in the opinion of the King County Bar Association, an attorney is likewise not subject to discipline merely because he owns an interest in a marijuana dispensary. Although such activity may constitute a crime under the CSA, it is not "a criminal act that reflects adversely on the lawyer's honesty, trustworthiness or fitness as a lawyer," in the eyes of the County Bar Association. The second Washington opinion is a proposed advisory opinion which the Washington State Bar Association submitted to the Washington Supreme Court along with a proposal to add a comment to Rule 1.2 of the Washington Rules of Professional Conduct. In its proposed opinion, a lawyer would be free to advise a client as to the nuances of state marijuana law as long as he did not do so in furtherance of an effort to violate or mask a violation of state marijuana law. A lawyer would also be free to advise and assist a client to establish and maintain a dispensary within the bounds of state law at least until such time as federal enforcement policies change. Finally, under the proposed opinion and accompanying proposed comment, a lawyer would be free to engage in a marijuana business without offending the Rule that condemns criminal conduct that reflects adversely on a lawyer's fitness to practice. Marijuana Research Under Federal Law The federal government retains strict controls over the use of marijuana for research purposes. Under the CSA, the Attorney General, as delegated to the Drug Enforcement Agency, is authorized to register "practitioners" to "dispense, or conduct research with" controlled substances. In instances where the practitioner seeks to conduct research on a schedule I drug, such as marijuana, that application is forwarded to the Secretary of Health and Human Services "who shall determine the qualifications and competency of each practitioner requesting registration, as well as the merits of the research protocol." The Secretary is also directed to "consult" with the Attorney General to ensure "effective procedures to adequately safeguard against diversion of such controlled substances from legitimate medical or scientific use." As of May 2014, the DEA has registered approximately 237 practitioners to conduct marijuana research, including 16 "approved to conduct research with smoked marijuana on human subjects." Practitioners obtain marijuana for approved research through the National Institute on Drug Abuse (NIDA) drug supply program. Under the CSA, the Attorney General is authorized to register applicants to manufacture or grow marijuana "if he determines that such registration is consistent with the public interest and with United States obligations under international treaties ..." Currently, the National Center for Natural Products Research (NCNPR) at the University of Mississippi is the only organization registered to manufacture marijuana. NIDA administers the federal contract with the NCNPR and therefore acts as the "single official source" through which researchers may obtain marijuana for research purposes. Congressional Response Several statutory provisions were enacted late in the 113 th Congress and a number of legislative proposals have been introduced in the 114 th concerning marijuana and state legalization initiatives. Enacted Marijuana-Related Measures P.L. 113-235 §809(b), 2015 Consolidated and Further Continuing Appropriations Act. This provision was enacted with the apparent attempt of preventing the implementation of Initiative 71, D.C.'s recreational marijuana law. However, there is some uncertainty regarding the legal effect of the provision. It states: "[n]one of the funds contained in this Act may be used to enact any law, rule, or regulation to legalize or otherwise reduce penalties associated with the possession, use, or distribution of any schedule I substance under the Controlled Substances Act (21 U.S.C. 801, et seq.) or any tetrahydrocannabinols derivative for recreational purposes." Some argue that this provision bars D.C. employees from using FY2015 appropriated funds to implement Initiative 71 and that any employee who takes official acts to implement the law could be subject to civil or criminal liability under the Antideficiency Act. Others, including D.C.'s attorney general, argue that the provision does "not prevent the District from using FY15 appropriated local funds to implement Initiative 71" because the marijuana law was enacted before the enactment of the 2015 Consolidated and Further Continuing Appropriations Act. P.L. 113-79 ( H.R. 2642 ), Agricultural Act of 2014. This public law has two marijuana-related sections. One relates to the Supplemental Nutrition Assistance Program (SNAP) (formerly, food stamps), and the other relates to industrial hemp. Eligibility for the receipt of SNAP benefits is governed in part by a means test. Only individuals below a certain income level are eligible. Section 4005 of P.L. 113-79 (7 U.S.C. §2014(e)(5)(C)) instructs the Secretary of Agriculture to promulgate rules to ensure that the costs of medical marijuana are not treated as a deduction in that calculation. Section 7606 of P.L. 113-79 authorizes institutions of higher education and state departments of agriculture to grow and cultivate industrial hemp for research purposes. Legislative Proposals in the 114th Congress P.L. 113-235 §538, 2015 Consolidated and Further Continuing Appropriations Act. This provision prohibits the Department of Justice from using FY2015 appropriated funds "to prevent [32 listed states and the District of Columbia] from implementing their own State laws that authorize the use, distribution, possession, or cultivation of medical marijuana." There appears to be disagreement regarding the breadth of this appropriations language. The Department of Justice reportedly argues that it only prevents the Department from using appropriations to restrict a named state's administrative implementation of state medical marijuana laws. Others maintain that it should be interpreted much more broadly to even bar the Department from enforcing the CSA against individuals who were acting in compliance with a named state's medical marijuana laws. S. 683 / H.R. 1538 , Compassionate Access, Research Expansion, and Respect of States Act of 2015. This bill, also referred to as the CARERS Act, would exempt from the CSA "any person acting in compliance with State law relating to the production, possession, distribution, dispensation, administration, laboratory testing, or delivery of medical marihuana." It also would reclassify marijuana as a Schedule II substance, meaning that marijuana would be recognized under federal law as having medical benefits and could be prescribed to patients for legitimate medical reasons in accordance with the CSA. The CARERS Act also would provide legal protections to depository institutions (i.e., banks, thrifts, and credit unions) that provide financial services to marijuana businesses, including by adding a provision stating that "[a] Federal banking regulator may not prohibit, penalize, or otherwise discourage a depository institution from providing financial services to a marijuana-related legitimate business" (i.e., one that is in compliance with a state or local marijuana regulatory regime). The bill also would attempt to further alleviate BSA reporting burdens beyond that which is provided by the February 2014 FinCEN guidance discussed above. The bill also would attempt to make it easier for individuals to be able to conduct research on marijuana and for entities to obtain approval from the Drug Enforcement Agency to cultivate marijuana for medical research use. Finally, Section 8 of the CARERS Act would authorize Department of Veterans Affairs health care providers to offer recommendations and opinions regarding veterans' use of marijuana in compliance with state medical and recreational marijuana regimes. S. 134 / H.R. 525 , Industrial Hemp Farming Act of 2015. This bill would remove industrial hemp from the definition of "marihuana" under the CSA. H.R. 262 , States' Medical Marijuana Property Rights Protection Act. This bill would amend the civil forfeiture provisions of the CSA to provide that no real property may be subject to civil forfeiture to the United States due to medical marijuana-related activities that are performed in compliance with state law. H.R. 667 , Veterans Equal Access Act. This bill would authorize Department of Veterans Affairs health care providers to offer recommendations and opinions regarding veterans' use of marijuana in compliance with state medical and recreational marijuana regimes. H.R. 1013 , Regulate Marijuana Like Alcohol Act. This bill, among other things, would require the Attorney General to remove marijuana from all schedules of the CSA and would amend other federal laws to regulate marijuana like alcohol. H.R. 1014 , Marijuana Tax Revenue Act of 2015. This bill would amend the Internal Revenue Code to impose an excise tax on the sale of marijuana by the producer or importer of the drug, at a rate of 10% for the first two years after the law goes into effect and increasing by 5% each year until maxing out at 25% from the fifth year on. The bill would provide certain exemptions to the taxation, including "on the distribution or sale of marijuana for medical use in accordance with State law." In addition, the bill would require anyone engaged in a "marijuana enterprise" to pay an occupational tax of $1,000 per year for marijuana producers, manufacturers and importers, and $500 per year for other marijuana enterprisers. The bill would require all marijuana enterprises to obtain a permit from the Secretary of the Treasury. Finally, the bill would impose civil and criminal penalties for violation of the duty to pay the new marijuana-related taxes, engaging in business as a marijuana enterprise without obtaining the requisite permit, and for otherwise violating the provisions of the bill. The bill does not amend the CSA, thus its provisions would remain in effect. H.R. 1635 , Charlotte's Web Medical Access Act of 2015. This bill would remove cannabidiol and cannabidiol-rich plants from coverage under the CSA and the Federal Food, Drug, and Cosmetic Act, subject to a three-year sunset date from the date of enactment. Taxation Income from any source is ordinarily subject to federal taxation. This is so even when the activity that generates the income is unlawful. Marijuana merchants, however, operate under a special federal tax disadvantage. Section 280E of the Internal Revenue Code provides: No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted. As a result of this provision, marijuana merchants, unlike most businesses, may not deduct their operating expenses (e.g., general labor, rent, and utilities) when computing their federal income tax liability. Section 280E does not, however, apply to the cost of goods sold (COGS), which means marijuana sellers may subtract COGS when determining gross income. Courts and the IRS have interpreted Section 280E to apply to marijuana so long as it is a controlled substance under the CSA, regardless of whether the purchase and use are allowed under state law. The customers of a medical marijuana merchant cannot deduct the amounts spent on marijuana as medical expenses.

The federal Controlled Substances Act (CSA) outlaws the possession, cultivation, and distribution of marijuana except for authorized research. More than 20 states have regulatory schemes that allow possession, cultivation, and distribution of marijuana for medicinal purposes. Four have revenue regimes that allow possession, cultivation, and sale generally. The U.S. Constitution's Supremacy Clause preempts any state law that conflicts with federal law. Although there is some division, the majority of state courts have concluded that the federal-state marijuana law conflict does not require preemption of state medical marijuana laws. The legal consequences of a CSA violation, however, remain in place. Nevertheless, current federal criminal enforcement guidelines counsel confining investigations and prosecutions to the most egregious affront to federal interests. Legal and ethical considerations limit the extent to which an attorney may advise and assist a client intent on participating in his or her state's medical or recreational marijuana system. Bar associations differ on the precise boundaries of those limitations. State medical marijuana laws grant registered patients, their doctors, and providers immunity from the consequences of state law. The Washington, Colorado, Oregon, and Alaska retail marijuana regimes authorize the commercial exploitation of the marijuana market in small taxable doses. The present and potential consequences of a CSA violation can be substantial. Cultivation or sale of marijuana on all but the smallest scale invites a five-year mandatory minimum prison term. Revenues and the property used to generate them may merely be awaiting federal collection under federal forfeiture laws. Federal tax laws deny marijuana entrepreneurs the benefits available to other businesses. Banks may afford marijuana merchants financial services only if the bank files a suspicious activity report (SAR) for every marijuana-related transaction that exceeds certain monetary thresholds, and only if it conducts a level of due diligence into its customers' activities sufficient to unearth any affront to federal interests. Marijuana users may not possess a firearm or ammunition. They may not hold federal security clearances. They may not operate commercial trucks, buses, trains, or planes. Federal contractors and private employers may be free to refuse to hire them and to fire them. If fired, they may be ineligible for unemployment compensation. They may be denied federally assisted housing. At the heart of the federal-state conflict lies a disagreement over dangers and benefits inherent in marijuana use. The CSA authorizes research on controlled substances, including those in Schedule I such as marijuana, that may address those questions. Members have introduced a number of bills in the 114th Congress that speak to the conflict. Additionally, a few marijuana-related provisions were enacted into law late in the 113th Congress. This report is available in an abridged form, without footnotes or citations to authority, as CRS Report R43437, Marijuana: Medical and Retail—An Abbreviated View of Selected Legal Issues, by [author name scrubbed] and [author name scrubbed]. Portions of this report have been borrowed from CRS Report R43034, State Legalization of Recreational Marijuana: Selected Legal Issues, by [author name scrubbed] and [author name scrubbed].

CRS_R41076

Introduction Domestic food assistance programs overseen by the Food and Nutrition Service of the U.S. Department of Agriculture (USDA) typically make up a large portion of federal spending aimed at helping with low-income households' day-to-day needs during economic downturns. The biggest, the Supplemental Nutrition Assistance Program (SNAP, formerly known as the Food Stamp program), spent $53.8 billion federal dollars in FY2009. Other key food assistance programs—costing a total of over $20 billion in FY2009—include The Emergency Food Assistance Program (TEFAP), child nutrition programs (like the school meal programs), and the Special Supplemental Nutrition Program for Women, Infants, and Children (the WIC program). By contrast, FY2009 federal outlays for other big programs helping lower-income households were $250 billion for Medicaid, $117 billion for Unemployment Insurance, $48 billion for the Supplemental Security Income (SSI) program, and $42 billion for Earned Income Tax Credit (EITC) payments. In 2009, the Administration and Congress took major steps to change food assistance program policies and increase federal funding available for domestic food aid in response to growing calls for assistance from those in need. These actions will continue to have significant effects over the next several years, and the Administration's FY2011 budget request envisions continued growth in federal spending on food assistance. Increased Program Participation2 Major increases in the demand for food assistance—most particularly the SNAP—were recorded in 2009, and participation is expected to continue to grow. The SNAP provides low-income households with monthly benefits that can be used to supplement their food spending and help free up cash for other household needs. SNAP participation jumped from 31.1 million persons in 14.0 million households in November 2008 to 38.2 million persons in 17.5 million households in November 2009 (the most recent available figures). Monthly spending on SNAP benefits (entirely funded with federal dollars) also rose dramatically from $3.6 billion in November 2008 to $5.1 billion in November 2009. For FY2010, the Administration and the Congressional Budget Office (CBO) estimate that total SNAP spending (including benefits and the federal share of administrative costs) will be at least $69 billion, with average monthly participation of almost 41 million persons—up from $53.8 billion and 33.7 million persons in FY2009. TEFAP supplies emergency feeding organizations (such as food banks and soup kitchens) with food commodities acquired by the USDA; these USDA donations typically make up 20%-25% of the food distributed by these organizations. It also provides cash payments to help states and feeding organizations with their distribution costs. Direct information as to recent increases in the number of persons served by recipient organizations supported by the TEFAP commodity donations is not available. However, Feeding America, an organization serving over 200 food banks, reported a 21% increase in the amount of food distributed between June 2008 and June 2009 and anticipates continued increases. In FY2009, TEFAP provided some $710 million worth of commodities and $89 million in distribution cost assistance, up from a total of $420 million in FY2008. In FY2010, TEFAP support may drop with the expiration of extra funding supplied by the American Recovery and Reinvestment Act of 2009 (discussed later in this report), unless "bonus" commodities donated from USDA stocks acquired for farm support purposes make up the difference. The two main child nutrition programs—the School Lunch program and the School Breakfast program—give schools cash subsidies and USDA-acquired commodities that help them cover the cost of providing school meals. Participating schools must provide free or reduced-price meals to children from low-income families. Between November 2008 and November 2009, the number of children receiving free lunches went up by 6.4% (to 17.2 million) and the number of children eating free breakfasts climbed by nearly 7% (to 8.7 million)—substantially outpacing the increase in total school enrollment. In FY2009, school meal programs and other child nutrition efforts cost some $15.4 billion, up from $14.7 billion in FY2008. For FY2010, the Administration estimates that overall child nutrition spending will rise to $17 billion, based on an estimate that the number of children receiving free school meals will rise by over 10%; the CBO projects $16.3 billion. The Special Supplemental Nutrition Program for Women, Infants, and Children (the WIC program) provides vouchers for nutrition supplemental foods to low-income pregnant women, new mothers, infants, and young children. It also provides nutrition education, medical referrals, and breastfeeding support. Between November 2008 and November 2009, WIC participation increased by 2.3% (to 9.1 million women, infants, and children). FY2009 WIC costs totaled to $6.5 billion, compared to $6.2 billion in FY2008, and the Administration's FY2011 budget estimates that FY2010 spending will be $7.2 billion—with average monthly participation growing from 9.1 million in FY2009 to 9.5 million in FY2010. Measures of Need In November 2009, the USDA's Economic Research Service released a report entitled Household Food Security in the United States, 2008 —available at http:// www.ers.usda.gov —which estimated that 14.6% of American households were "food insecure" at least some time during 2008, including 5.7% with "very low food security" (meaning that the food intake of one or more household members was reduced and their eating patterns were disrupted at times during the year because they lacked money or other resources for food). Prevalence rates of food insecurity and very low food security were up from 11.1% and 4.1%, respectively, in 2007, and were the highest recorded since 1995. In January 2010, the Food Research and Action Center (FRAC) released an analysis of survey data collected by Gallup for the Gallup-Healthways Well-Being Index project entitled Food Hardship: A Closer Look at Hunger — Data for the Nation, States, 100 MSAs, and Every Congressional District (available at http:// http://www.frac.org ). This report estimated that "food hardship" for the nation as a whole rose from 16.3% of respondent households in the first quarter of 2008 to 19.5% in the fourth quarter of 2008. In 2009, the rate dropped slightly, with food hardship in the four quarters of 2009 hovering between 17.9% and 18.8%. The Gallup survey measured food hardship by asking whether there had been times in the past 12 months when the surveyed household did not have enough money to buy food that it needed. The SNAP In response to the economic downturn, Congress and the Administration made substantial changes to SNAP funding, benefits, and eligibility policy in 2009. The ARRA The American Recovery and Reinvestment Act (ARRA) of 2009 ( P.L. 111-5 ) included a number of substantial provisions expanding benefits and eligibility for the SNAP. At the time the ARRA was enacted, the CBO estimated that the cost of these changes would be $10.8 billion in the first two years (FY2009 and FY2010). However, because SNAP participation is rising faster than the CBO projected, FY2009-FY2010 (and possibly future) costs will very likely be greater. SNAP benefits were increased significantly, time limits on eligibility for able-bodied adults without dependents were suspended, and states received extra federal funding for administrative costs. Monthly SNAP allotments are based on the estimated cost of a minimally adequate diet. This means that the benefit for any recipient household equals the inflation-indexed cost of USDA's "Thrifty Food Plan" (the maximum benefit), varied by household size and adjusted for household income. In recognition of the possibility of unanticipated food-price inflation and the other needs of recipient households, the ARRA provided an across-the-board increase in SNAP benefits (effective in April 2009). This add-on was accomplished through raising, by 13.6%, the base Thrifty Food Plan amounts normally used to calculate benefits. It effectively boosted each recipient household's monthly benefit by an amount equal to 13.6% of the maximum benefit for its size. For a one-person household, the added benefit was $24 a month; for two persons, $44 a month; for three persons (the typical household), $63 a month; for four persons $80 a month; and for larger households, higher amounts. As a result, monthly average household benefits were increased by nearly 20% (about $20 a person). In FY2009, ARRA-provided SNAP benefits accounted for $4.3 billion in spending (about 15% of all benefit costs). In November 2009, ARRA-provided benefits totaled over $800 million (16% of benefit costs). For FY2010 and FY2011, the Administration estimates that ARRA-provided benefits will total $10.5 billion and $11.7 billion, respectively—reflecting both the ARRA add-on and increased participation. SNAP law limits eligibility for most able-bodied adults without dependents (ABAWDs) who are not working at least half-time to 3 months out of every 36 months (without regard to their financial status). Reacting to high unemployment rates, the ARRA effectively suspends this requirement for those who cannot find a job through FY2010. While SNAP benefit costs are entirely a federal responsibility, states operating the SNAP share administrative costs with the federal government. Approximately half of administrative costs are picked up by states—some $3 billion a year. As noted above, participation in the SNAP is rising dramatically, leading to higher administrative costs, which states are having difficulty meeting. The ARRA provided $145 million (FY2009) and $150 million (FY2010) in additional federal money for administrative expenses, without requiring state matching funds. FY2010 Appropriations Under the terms of the regular FY2009 and FY2010 Agriculture Department appropriations laws ( P.L. 111-8 and P.L. 111-80 ), minimum FY2010 funding available for the SNAP is set at $53 billion, plus $6 billion in contingency funds. This is a $5 billion increase over FY2009 spending and does not include expected funding of over $10 billion provided under the provisions of the ARRA. In addition, the FY2010 Defense Department appropriations act ( P.L. 111-118 ) appropriates (1) unlimited funding ("such sums as may be necessary") above the base amounts noted above for any SNAP emergency requirements that may arise because estimates used for appropriations purposes prove too low and (2) an extra $400 million (above regular spending and ARRA-provided amounts) for state administrative expenses related to the SNAP, with no state match required. Administrative Policy Changes The Administration has taken two major steps that open up access to the SNAP. In both cases, they expand on policies in place prior to 2009. The USDA's Food and Nutrition Service has taken an official stance encouraging states to use so-called "categorical eligibility" authority to expand eligibility to significant numbers of households by (1) increasing or completely lifting limits on assets that eligible households may have and (2) raising dollar limits on households' gross monthly income. To date, 27 states and two territories have taken advantage of this option, to one degree or another. The Food and Nutrition Service has the authority to grant states waivers of the requirement that households have a face-to-face interview when their initial eligibility is determined and when they are up for recertification of eligibility. A growing number of states have been granted waivers for face-to-face interviews for some or all applicants, and most states now have waivers for interviews at recertification. TEFAP In FY2009, TEFAP was originally budgeted at $250 million in commodities and $50 million for distribution/storage costs, not including nearly $400 million in "bonus" commodities donated to TEFAP from USDA stocks acquired in support of the agricultural economy. The ARRA made an added $150 million available through FY2010: $100 million for commodity acquisitions and $50 million for distribution storage costs. In addition, the FY2010 Agriculture Department appropriations law ( P.L. 111-80 ) appropriated $6 million for increased support for infrastructure improvement expenses incurred by TEFAP recipient organizations. Child Nutrition The ARRA Child nutrition programs generally do not provide direct assistance to schools covering costs related to the equipment used to prepare meals. The ARRA made $100 million available to states for use in making competitive grants to schools (based on need) for school food service equipment. FY2010 Appropriations Law In addition to providing for some $17 billion in child nutrition spending, the FY2010 Agriculture Department appropriations law ( P.L. 111-80 ) included two significant provisions aimed at expanding participation in child nutrition programs. Three states and the District of Columbia were added to the 10 states eligible to receive federal subsidies for suppers served in after-school programs. A total of $25 million was appropriated for (1) grants to low-performing states to improve their rates of "direct certification" for free school meals and (2) federal technical assistance to help them improve their direct certification performance. The WIC Program State agencies operating the WIC program have consistently called for added support for implementing new or upgraded "management information systems" to improve their ability to deliver benefits more efficiently. Moreover, changing economic conditions and variable food-price inflation rates have made projections of the need for WIC funding increasingly uncertain. In response, the ARRA provides $400 million for a contingency reserve to support participation or food costs that exceed budget estimates. It also made $100 million available for WIC state agencies' management information system expansions/upgrades. The FY2011 Budget10 On February 1, 2010, the Administration submitted its FY2011 budget request. It envisions substantial increases in participation and spending for virtually every USDA food assistance program. Most prominently, SNAP costs are projected to jump by almost $4 billion (to $72.8 billion) because of increased participation (rising from an average of 40.5 million persons in FY2010 to 43.3 million FY2011). Spending for child nutrition and WIC programs also is estimated to increase substantially. The FY2011 budget estimates that child nutrition initiatives like school meal programs will cost $18.3 billion, as opposed to $17 billion in FY2010, and spending for the WIC program is expected to increase from $7.2 billion to $7.8 billion. On the other hand, mandatory funding for TEFAP is scheduled for a slight decrease ($2 million) under the terms of its underlying law tying TEFAP funding to food-price inflation/deflation, although USDA donations of bonus commodities will make up any difference. The Administration's FY2011 budget also includes several proposals to change the laws governing domestic food assistance programs. It effectively asks to extend the unlimited funding authority granted to the SNAP in the FY2010 Defense Department appropriations law. It proposes to extend the suspension of SNAP eligibility rules that apply to ABAWDs enacted in the ARRA for an additional year (through FY2011). As part of a government-wide initiative, it requests that SNAP law be changed to (1) exclude as countable assets all refundable tax credits in the month of receipt and for the following 12 months and (2) increase the limit on countable assets to $10,000. At present, tax credit payments generally are counted two to three months after receipt and countable assets are limited to $2,000, or $3,000 for elderly/disabled households (unless a state has used the "categorical eligibility" option noted earlier). Without laying out specific initiatives, it proposes to add $1 billion ($10 billion over 10 years) in new spending authority for child nutrition programs in an effort to end childhood hunger by 2015. According to the budget presentation, the additional money will be "aimed at ending childhood hunger, reducing childhood obesity, improving the diets of children, and raising program performance to better serve children."

Domestic food assistance programs typically make up a large portion of federal spending for needy households during economic downturns. The need for, participation in, and the costs of these programs—like the Supplemental Nutrition Assistance Program (SNAP, formerly the Food Stamp program)—have grown dramatically. In response to the recent downturn, the Administration and Congress have taken major steps to change food assistance program policies to open up program access and to increase federal funding. Most important, SNAP benefits have been increased across the board and eligibility rules have been substantially loosened. The Administration's FY2011 budget proposes to continue funding for most of these steps. This report will be updated to reflect action on the FY2011 budget and significant changes in participation and spending figures.

CRS_R44327

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

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

CRS_R44877

T his report describes actions taken by the Administration and Congress to provide FY2018 funding for Commerce, Justice, Science, and Related Agencies (CJS) accounts. It also provides an overview of enacted FY2017 appropriations for agencies and bureaus funded as part of annual CJS appropriations. The dollar amounts in this report reflect only new funding made available at the start of the fiscal year. Therefore, the amounts do not include any rescissions of unobligated or deobligated balances that may be counted as offsets to newly enacted appropriations, nor do they include any scorekeeping adjustments (e.g., the budgetary effects of provisions limiting the availability of the balance in the Crime Victims Fund). In the text of the report, appropriations are rounded to the nearest million. However, percentage changes are calculated using whole, and not rounded, numbers, meaning that in some instances there may be small differences between the actual percentage change and the percentage change that would be calculated by using the rounded amounts discussed in the report. The following reports contain a more in-depth review of appropriations for specific CJS departments and agencies CRS Report R43908, The National Institute of Standards and Technology: An Appropriations Overview . CRS Report R44938, FY2018 Appropriations for the Department of Justice . CRS Report R44893, FY2018 Appropriations for Department of Justice Grant Programs . CRS Report R42672, The Crime Victims Fund: Federal Support for Victims of Crime . CRS Report R43935, Office of Science and Technology Policy (OSTP): History and Overview . CRS Report R43419, NASA Appropriations and Authorizations: A Fact Sheet . CRS Report R44882, Commerce, Justice, Science and Related Agencies (CJS) FY2018 Appropriations: Trade-Related Agencies . CRS Report R45009, The National Science Foundation: FY2018 Appropriations and Funding History . Overview of CJS The annual CJS appropriations act provides funding for the Departments of Commerce and Justice, select science agencies, and several related agencies. Appropriations for the Department of Commerce include funding for agencies such as the Census Bureau, the U.S. Patent and Trademark Office, the National Oceanic and Atmospheric Administration, and the National Institute of Standards and Technology. Appropriations for the Department of Justice (DOJ) provide funding for agencies such as the Federal Bureau of Investigation; the Bureau of Prisons; the U.S. Marshals; the Drug Enforcement Administration; and the Bureau of Alcohol, Tobacco, Firearms, and Explosives, along with funding for a variety of grant programs for state, local, and tribal governments. The vast majority of funding for the science agencies goes to the National Aeronautics and Space Administration and the National Science Foundation. The annual appropriation for the related agencies includes funding for agencies such as the Legal Services Corporation and the Equal Employment Opportunity Commission. Department of Commerce The mission of the Department of Commerce is to "create the conditions for economic growth and opportunity." The department promotes "job creation and economic growth by ensuring fair and reciprocal trade, providing the data necessary to support commerce and constitutional democracy, and fostering innovation by setting standards and conducting foundational research and development." The department has wide-ranging responsibilities including trade, economic development, technology, entrepreneurship and business development, monitoring the environment, forecasting weather, managing marine resources, and statistical research and analysis. The Department of Commerce pursues and implements policies that affect trade and economic development by working to open new markets for U.S. goods and services and promoting pro-growth business policies. It also invests in research and development to foster innovation. The agencies within the Department of Commerce, and their responsibilities, include the following: International Trade Administration (ITA) seeks to strengthen the international competitiveness of U.S. industry, promote trade and investment, and ensure fair trade and compliance with trade laws and agreements; Bureau of Industry and Security (BIS) works to ensure an effective export control and treaty compliance system and promote continued U.S. leadership in strategic technologies by maintaining and strengthening adaptable, efficient, effective export controls and treaty compliance systems, along with active leadership and involvement in international export control regimes; Economic Development Administration (EDA) promotes innovation and competitiveness, preparing American regions for growth and success in the worldwide economy; Minority Business Development Agency (MBDA) promotes the growth of minority owned businesses through the mobilization and advancement of public and private sector programs, policy, and research; Economics and Statistics Administration (ESA) is a federal statistical agency that promotes a better understanding of the U.S. economy by providing timely, relevant, and accurate economic accounts data in an objective and cost-effective manner; Census Bureau , a component of ESA, measures and disseminates information about the U.S. economy, society, and institutions, which fosters economic growth, advances scientific understanding, and facilitates informed decisions; National Telecommunications and Information Administration (NTIA) advises the President on communications and information policy; United States Patent and Trademark Office (USPTO) fosters innovation, competitiveness and economic growth, domestically and abroad, by providing high quality and timely examination of patent and trademark applications, guiding domestic and international intellectual property (IP) policy, and delivering IP information and education worldwide; National Institute of Standards and Technology (NIST) promotes U.S. innovation and industrial competitiveness by advancing measurement science, standards, and technology enhancing economic security; and National Oceanic and Atmospheric Administration (NOAA) provides daily weather forecasts, severe storm warnings, climate monitoring to fisheries management, coastal restoration, and the supporting of marine commerce. Department of Justice DOJ's mission is to "enforce the law and defend the interests of the United States according to the law; to ensure public safety against threats foreign and domestic; to provide federal leadership in preventing and controlling crime; to seek just punishment for those guilty of unlawful behavior; and to ensure fair and impartial administration of justice for all Americans." DOJ also provides legal advice and opinions, upon request, to the President and executive branch department heads. The major functions of DOJ offices and agencies are described below Office of the United States Attorneys prosecutes violations of federal criminal laws, represents the federal government in civil actions, and initiates proceedings for the collection of fines, penalties, and forfeitures owed to the United States; United States Marshals Service (USMS) provides security for the federal judiciary, protects witnesses, executes warrants and court orders, manages seized assets, detains and transports offenders who have not been sentenced, and apprehends fugitives; Federal Bureau of Investigation (FBI) investigates violations of federal criminal law; helps protect the United States against terrorism and hostile intelligence efforts; provides assistance to other federal, state, and local law enforcement agencies; and shares jurisdiction with the Drug Enforcement Administration for the investigation of federal drug violations; Drug Enforcement Administration (DEA) investigates federal drug law violations; coordinates its efforts with other federal, state, and local law enforcement agencies; develops and maintains drug intelligence systems; regulates the manufacture, distribution, and dispensing of legitimate controlled substances; and conducts joint intelligence-gathering activities with foreign governments; Bureau of Alcohol, Tobacco, Firearms , and Explosives (ATF) enforces federal law related to the manufacture, importation, and distribution of alcohol, tobacco, firearms, and explosives; Federal Prison System ( Bureau of Prisons; BOP ) houses offenders sentenced to a term of incarceration for a federal crime and provides for the operation and maintenance of the federal prison system; Office on Violence Against Women (OVW) provides federal leadership in developing the nation's capacity to reduce violence against women and administer justice for and strengthen services to victims of domestic violence, dating violence, sexual assault, and stalking; Office of Justice Programs (OJP) manages and coordinates the activities of the Bureau of Justice Assistance; Bureau of Justice Statistics; National Institute of Justice; Office of Juvenile Justice and Delinquency Prevention; Office of Sex Offender Sentencing, Monitoring, Apprehending, Registering, and Tracking; and Office of Victims of Crime; and Community Oriented Policing Services (COPS) advances the practice of community policing by the nation's state, local, territorial, and tribal law enforcement agencies through information and grant resources. Science Offices and Agencies The science offices and agencies support research and development and related activities across a wide variety of federal missions, including national competitiveness, space exploration, and fundamental discovery. Office of Science and Technology Policy The primary function of the Office of Science and Technology Policy (OSTP) is to provide the President and others within the Executive Office of the President with advice on the scientific, engineering, and technological aspects of issues that require the attention of the federal government. The OSTP director also manages the National Science and Technology Council, which coordinates science and technology policy across the executive branch of the federal government, and cochairs the President's Council of Advisors on Science and Technology, a council of external advisors that provides advice to the President on matters related to science and technology policy. The National Space Council The National Space Council, in the Executive Office of the President, is a coordinating body for U.S. space policy. Chaired by the Vice President, it consists of the Secretaries of State, Defense, Commerce, Transportation, and Homeland Security, the Administrator of NASA, and other senior officials. The council previously existed from 1988 to 1993 and was reestablished by the Trump Administration in June 2017. National Aeronautics and Space Administration The National Aeronautics and Space Administration (NASA) was created to conduct civilian space and aeronautics activities. It has four mission directorates. The Human Exploration and Operations Mission Directorate is responsible for human spaceflight activities, including the International Space Station and development efforts for future crewed spacecraft. The Science Mission Directorate manages robotic science missions, such as the Hubble Space Telescope, the Mars rover Curiosity, and satellites for Earth science research. The Space Technology Mission Directorate develops new technologies for use in future space missions, such as advanced propulsion and laser communications. The Aeronautics Research Mission Directorate conducts research and development on aircraft and aviation systems. In addition, NASA's Office of Education manages education programs for schoolchildren, college and university students, and the general public. National Science Foundation The National Science Foundation (NSF) supports basic research and education in the nonmedical sciences and engineering. Congress established the foundation as an independent federal agency "to promote the progress of science; to advance the national health, prosperity, and welfare; to secure the national defense; and for other purposes." The NSF is a primary source of federal support for U.S. university research. It is also responsible for significant shares of the federal science, technology, engineering, and mathematics (STEM) education program portfolio and federal STEM student aid and support. Related Agencies The annual CJS appropriations act includes funding for several related agencies The U.S. Commission on Civil Rights informs the development of national civil rights policy and enhances enforcement of federal civil rights laws; The Equal Employment Opportunity Commission is responsible for enforcing federal laws that make it illegal to discriminate against a job applicant or an employee because of the person's race, color, religion, sex (including pregnancy, gender identity, and sexual orientation), national origin, age (40 or older), disability or genetic information; The International Trade Commission investigates the effects of dumped and subsidized imports on domestic industries and conducts global safeguard investigations, adjudicates cases involving imports that allegedly infringe intellectual property rights, and serves as a resource for trade data and other trade policy-related information; The Legal Services Corporation is a federally funded nonprofit corporation that provides financial support for civil legal aid to low-income Americans; The Mari ne Mammal Commission works for the conservation of marine mammals by providing science-based oversight of domestic and international policies and actions of federal agencies with a mandate to address human effects on marine mammals and their ecosystems; The Office of the U.S. Trade Representative is responsible for developing and coordinating U.S. international trade, commodity, and direct investment policy, and overseeing negotiations with other countries; and The State Justice Institute is a federally funded nonprofit corporation that awards grants to improve the quality of justice in state courts and foster innovative, efficient solutions to common issues faced by all courts. FY2017 Enacted Appropriations The Consolidated Appropriations Act, 2017 ( P.L. 115-31 ) provided a total of $66.360 billion for CJS. The total appropriation included $9.237 billion for the Department of Commerce, $28.962 billion for DOJ, $27.240 billion for the science agencies, and $921 million for the related agencies. The act also included $109 million in emergency-designated funding provided under the NASA Construction and Environmental Compliance and Restoration account for repairs at NASA-owned facilities that were damaged during recent natural disasters. The Administration's FY2018 Budget Request The Trump Administration requested a total of $62.331 billion for CJS for FY2018, a $4.029 billion (6.1%) reduction compared to the FY2017 enacted appropriation. The request included $7.817 billion for the Department of Commerce, $28.205 billion for the DOJ, $25.751 billion for the science agencies, and $559 million for the related agencies. The Administration's budget would have reduced FY2018 funding for the Department of Commerce by $1.420 billion (-15.4%) and DOJ by $757 million (-2.6%), the science agencies by $1.489 billion (-5.5%), and the related agencies by $362 million (-39.3%). The Administration's budget included funding reductions for many CJS agencies and bureaus. Within the Department of Commerce, the Administration proposed budget cuts for the International Trade Administration (-$41 million, -8.4%), NIST (-$227 million, -23.8%), and NOAA (-$902 million, -15.9%). The Administration's request also included a $232 million (-2.6%) reduction for the FBI, which was largely a result of a proposed $187 million (-78.3%) reduction for the Construction account, but also included a $44 million (-0.5%) reduction for the Salaries and Expenses account. NASA's budget would have decreased by $670 million (-3.4%), which included account-specific reductions of $53 million (-0.9%) for Science, $36 million (-5.5%) for Aeronautics, $8 million (-1.2%) for Space Technology, $390 million (-9.0%) for Exploration, $210 million (-4.2%) for Space Operations, and $63 million (-62.7%) for Education. NSF's budget would have decreased by $819 million (-11.0%), including a $642 million (-11.1%) reduction in the Research and Related Activities account, a $26 million (-12.5%) reduction in the Major Research Equipment and Facilities Construction account, and a $119 million (-13.6%) reduction in the Education and Human Resources account. In addition to proposed decreases for many CJS accounts, the Administration also proposed shuttering several CJS agencies and programs EDA, MDBA, NIST's Hollings Manufacturing Extension Partnership, NOAA's Pacific Coastal Salmon Recovery Fund, NASA's Office of Science Education, and Legal Services Corporation. In all instances except the Pacific Coastal Salmon Recovery Fund, the Administration requested some funding to assist with the closure of these agencies or programs. Even though nearly all CJS accounts would have faced a reduction under the Administration's budget, there were some proposed increases, most of which were in DOJ Office of the United States Attorneys (+$22 million, 1.1%), USMS's Federal Prisoner Detention account (+$82 million, 5.6%), National Security Division (+$5 million, 5.2%), Interagency Law Enforcement (+$9 million, 1.7%), BOP's Salaries and Expenses account (+$76 million, 1.1%), DEA (+$61 million, 2.9%), ATF (+$15 million, 1.2%), Census Bureau's Periodic Censuses and Programs account (+$51 million, 4.3%), NTIA (+$4 million, 12.5%), and NASA's Safety, Security, and Mission Services (+$62 million, 2.2%) and Construction and Environmental Compliance and Restoration (+$26 million, 5.6%) accounts. Finally, the Administration also proposed transferring $610 million from the Crime Victims Fund to three DOJ grant accounts ($445 million to the Office on Violence Against Women, $73 million to State and Local Law Enforcement Assistance, and $92 million to Juvenile Justice Programs) to supplement appropriations from the General Fund of the Treasury. The House-Passed Bill (H.R. 3354) On July 17, 2017, the House Committee on Appropriations reported its version of the FY2018 CJS appropriations bill ( H.R. 3267 ). Subsequently, the text of the committee-reported FY2018 CJS appropriations bill was included as Division C of an omnibus appropriations bill ( H.R. 3354 ) that was passed by the House on September 14, 2017. The House-passed bill would have provided $65.719 billion for CJS, which was 5.2% more than the Administration's request, but 1.0% less than the FY2017 enacted appropriation. The bill included $8.350 billion for the Department of Commerce (6.9% more than the Administration's request, but 9.6% less than the FY2017 enacted appropriation), $29.310 billion for DOJ (3.5% more than the Administration's request and 1.2% more than the FY2017 enacted appropriation), $27.217 billion for the science agencies (5.7% more than the Administration's request, but 0.1% less than the FY2017 enacted appropriation), and $842 million for the related agencies (50.7% more than the Administration's request, but 8.5% less than the FY2017 enacted appropriation). The House declined to shutter the agencies and programs identified by the Administration. However, while the House-passed bill included funding for these agencies and programs, funding levels were below the FY2017 enacted appropriation, except for the Minority Business Development Administration (+$33 million, +550.0%) and the Pacific Coast Salmon Recovery Fund (+$65 million, the Administration requested no funding for this program). Reductions included -$100 million (-36.2%) for EDA, -$25 million (-19.2%) for the Hollings Manufacturing Extension Partnership, -$10 million (-10.0%) for NASA's Office of Science Education, and -$85 million (-22.1%) for the Legal Services Corporation. The House-passed bill would have funded Department of Commerce accounts at an amount above the Administration's request. However, the House would have funded agencies such as ITA (-$16 million, -3.3%), ESA (-$11 million, -10.5%), NIST (-$82 million, -8.6%), and NOAA (-$702 million, -12.4%) at levels below the FY2017 enacted appropriation. The total funding for the Census Bureau would have received an increase under the House-passed bill relative to the FY2017 levels (+$37 million, +2.5%), which was due to an increase in the Periodic Censuses and Programs account but partially offset by a decrease in the Current Surveys and Programs account. Within DOJ, the House would have increased funding for many federal law enforcement agencies compared to the FY2017 enacted appropriation. The House-passed bill included an $88 million (+3.2%) increase for the USMS, a $54 million (+2.6%) increase for the DEA, and a $36 million (+2.8%) increase for the ATF. There were also increases for the Office of the U.S. Attorneys (+$22 million, +1.1%) and BOP (+$26 million, +0.4%). The House-passed bill reduced funding for the FBI by $140 million (-1.6%), but this was due to a $187 million (-78.3%) reduction in the FBI's Construction account. The House bill did not include the Administration's proposal to supplement direct appropriations for the Office on Violence Against Women, State and Local Law Enforcement Assistance, and Juvenile Justice Programs accounts with transfers from the Crime Victims Fund. The House-passed bill would have increased funding for NASA by $110 million, or 0.6% relative to FY2017 levels, for FY2018. The bill funded four of NASA's accounts at levels below the Administration's request: Space Operations (-$64 million, -1.4%); Safety, Security, and Mission Services (-$4 million, -0.1%); Construction and Environmental Compliance and Restoration (-$10 million, -2.0%); and the Office of the Inspector General (-$1 million, -3.6%). However, only the funding for the Space Operations account was less than the FY2017 enacted appropriation. The House-passed bill included a $133 million (-1.8%) decrease for NSF, which was largely the result of a $131 million reduction (-62.8%) for the Major Research Equipment and Facilities Construction account. The House declined to adopt the Administration's proposal to reduce funding for the Research and Related Activities and Education and Human Resources accounts. The House would have funded the Commission on Civil Rights, the Equal Employment Opportunity Commission, and the State Justice Institute at the Administration's requested level. The House would have funded the U.S. Trade Representative at a level below that requested by the Administration (-$5 million, -8.0%) the one requested by the Administration. However, the House included $15 million from the Trade Enforcement Trust Fund to support the trade enforcement activities of the Office of the U.S. Trade Representative. The Senate Committee-Reported Bill (S. 1662) On July 27, 2017, the Senate Committee on Appropriations reported its FY2018 CJS appropriations bill ( S. 1662 ). The bill would have provided $65.991 billion for CJS. This amount was 5.7% more than the Administration's request, but 0.6% less than the FY2017 enacted appropriation. The Senate committee-reported bill included $9.161 billion for the Department of Commerce (17.2% more than the Administration's request, but 0.8% less than the FY2017 enacted appropriation), $29.068 billion for DOJ (2.6% more than the Administration's request and 0.4% more than the FY2017 enacted appropriation), $26.846 billion for the science agencies (4.3% more than the Administration's request, but 1.4% less than the FY2017 enacted appropriation), and $916 million for the related agencies (64.0% more than the Administration's request, but 0.5% less than the FY2017 enacted appropriation). The Senate Committee on Appropriations also declined to follow the Administration's request to eliminate several CJS agencies and programs. In most instances, the committee recommended funding for these agencies and programs at the FY2017 enacted level. However, the committee-reported bill included a $22 million (-8.0%) reduction for the EDA. The Senate Committee on Appropriations recommended cuts relative to FY2017 levels for many Department of Commerce Bureaus and Offices, including ITA (-$1 million, -0.2%), ESA (-$8 million, -7.7%), NIST (-$8 million, -0.8%), and NOAA (-$85 million, -1.5%). However, in general, the committee declined to reduce funding to the levels proposed by the Trump Administration. The only agencies funded at a level below the Administration's request were BIS (-$1 million, -0.9%) and NTIA (-$4 million, -11.1%). S. 1662 included a $51 million (3.5%) increase for the Census Bureau, all of which would have been dedicated to the Periodic Censuses and Programs account. The Senate Committee on Appropriations would have funded most DOJ accounts at or above the FY2017 enacted level. The committee-reported bill included a $108 million (4.0%) increase for the USMS, a $13 million (0.6%) increase for the DEA, a $15 million (1.2%) increase for the ATF, and a $22 million (1.1%) increase for the Offices of the U.S. Attorneys relative to the FY2017 level. A few notable reductions relative to the FY2017 level were to the FBI's Construction account (-$84 million, -35.2%), and the State and Local Law Enforcement Assistance account (-$109 million, -8.6%). The Senate Committee on Appropriations largely declined to adopt the Administration's proposal to supplement funding for several grant accounts with transfers from the Crime Victims Fund. However, the committee-reported bill included a transfer of $379 million from the Crime Victims Fund to the Office on Violence Against Women. The amount the Senate Committee on Appropriations would have provided for NASA was $233 million (-1.2%) less than the FY2017 enacted appropriation, but $437 million (2.3%) more than the Administration's request. The committee-reported bill included reductions relative to the 2017 level for the Science (-$193 million, -3.3%), Aeronautics (-$10 million, -1.5%), and Space Operations (-$199 million, -4.0%) accounts. The committee recommended reductions for the Science (-$140 million, -2.5%); Safety, Security, and Mission Services (-$3 million, 0.1%); and the Office of the Inspector General (-$1 million, -3.3%) relative to the Administration's request. The committee-reported bill included a $161 million (-2.2%) reduction for NSF relative to the FY2017 level. Specifically, it recommended reductions for four NSF accounts: Research and Related Activities (-$116 million, -1.9%), Major Research Equipment and Facilities Construction (-$26 million, -12.5%), Education and Human Resources (-$18 million, -2.0%), and Agency Operations and Award Management (-$1 million, -0.5%). NSF's other two accounts, the National Science Board and the Office of the Inspector General, would have been funded at the FY2017 enacted level. However, the recommended funding for NSF was 9.9% greater than the Administration's request. The amount the Senate Committee on Appropriations recommended for the related agencies was 0.5% less than the FY2017 appropriation, and the reduction was the result of a $4 million (-7.1%) cut for the Office of the U.S. Trade Representative—all other agencies would have been funded at the FY2017 enacted level. The committee-reported amount for all related agencies, other than the Office of the U.S. Trade Representative, was greater than the Administration's request. FY2018 Enacted Appropriations For FY2018, Congress and the President appropriated a total of $72.119 billion for CJS. This includes $70.921 billion in regular appropriations provided in the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) and $1.198 billion in emergency-designated funding provided in the Further Additional Supplemental Appropriations for Disaster Relief Requirements Act, 2018 ( P.L. 115-123 ). The total, without emergency-designated funding, is 6.9% greater than the FY2017 enacted appropriation and 13.6% greater than the Administration's request. Including emergency-designated funding, the total is 8.7% greater than the FY2017 appropriation and 15.5% greater than the Administration's request. The FY2018 enacted appropriation for the Department of Commerce is $12.137 billion ($11.137 billion without emergency-designated funding), for the Department of Justice it is $30.384 billion ($30.299 billion without emergency-designated funding), for the science agencies it is $28.609 billion ($28.511 billion without emergency-designated funding), and for the related agencies it is $989 million ($974 million without emergency-designated funding). Total FY2018 funding for the Department of Commerce is 31.4% greater than the FY2017 appropriation (20.6% greater without emergency-designated funding) and 55.3% greater than the Administration's request (42.5% greater without emergency-designated funding). Total FY2018 funding for the Department of Justice is 4.9% greater than the FY2017 appropriation (4.6% greater without emergency-designated funding) and 7.3% greater than the Administration's request (7.0% greater without emergency-designated funding). Total FY2018 funding for the science agencies is 5.0% greater than the FY2017 appropriation (4.7% greater without emergency-designated funding) and 11.1% greater than the Administration's request (10.8% greater without emergency-designated funding). Total FY2018 funding for the related agencies is 7.4% greater than the FY2017 appropriation (5.8% greater without emergency-designated funding) and 77.0% greater than the Administration's request (74.3% greater without emergency-designated funding). The final funding agreement did not include the Administration's proposal to shutter several CJS agencies and programs. In fact, these agencies and programs were funded at or above the FY2017 enacted level (even if emergency-designated funding is excluded). Congress and the President increased regular appropriations for the EDA by $26 million, the MBDA by $5 million, NIST's Hollings Manufacturing Extension Partnership by $10 million, and the Legal Services Corporation by $25 million. In general, nearly all CJS accounts received an increase over both the FY2017 enacted appropriation and the Administration's request, even if emergency-designated funding is excluded. Some of the exceptions were the International Trade Administration (-$1 million, 0.2% less than the FY2017 enacted appropriation, but +$40 million, 8.9% more than the Administration's request), ESA (-$8 million, 7.7% less than the FY2017 enacted appropriation, but +$2 million, 2.1% more than the Administration's request), NIST's National Network for Manufacturing Innovation (-$10 million, 40.0% less than the FY2017 enacted appropriation, the same as the Administration's request), DOJ's General Legal Activities account (the same as the FY2017 enacted appropriation, -$2 million, 0.2% less than the Administration's request), DOJ's Research, Evaluation, and Statistics account (-$21 million, 18.9% less than the Administration's request), NASA's Space Operations account (-$199 million, 4.0% less than the FY2017 enacted appropriation, but +$12 million, 0.2% greater than the Administration's request), NASA's Safety, Security, and Mission Services account (+$58 million, 2.1% greater than the FY2017 enacted appropriation, -$3 million, 0.1% less than the Administration's request), and NSF's Major Research Equipment and Facilities Construction account (-$26 million, 12.5% less than the FY2017 enacted appropriation, the same as the Administration's request). Congress and the President also provided $492 million for the Office on Violence Against Women, but the entire amount is derived through a transfer from the Crime Victims Fund. Table 1 outlines the FY2017 enacted appropriations, the Administration's FY2018 request, the House-passed, the Senate committee-reported, and the FY2018 enacted amounts for the Departments of Commerce and Justice, the science agencies, and the related agencies. The FY2018 enacted amounts inc lude emergency-designated funding. Historical Funding for CJS Figure 1 shows the total appropriations, in both nominal and inflation-adjusted dollars, for CJS for FY2008-FY2017. (More detailed historical appropriations data can be found in Table 2 . ) The data show that nominal appropriations for CJS increased from FY2008 to FY2010. Appropriations for CJS peaked in FY2009 at $76.782 billion if emergency supplemental appropriations from the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ) are included. (If ARRA funding is not considered, appropriations peaked in FY2010 at $69.146 billion.) ARRA provided a substantial increase in appropriations for FY2009. The $15.992 billion Congress and the President appropriated for CJS under ARRA added approximately 25% to the amount that was provided for CJS through the annual appropriations process that year. Nominal appropriations for CJS decreased from FY2010 to FY2013, but they have increased in each subsequent fiscal year. If not for the effects of sequestration, which reduced FY2013 CJS appropriations by nearly $4 billion, funding levels for CJS would have held steady at approximately $61 billion between FY2011 and FY2015. CJS appropriations increased by approximately $4 billion in FY2016, largely made possible by the increase to the discretionary spending caps enacted in the Bipartisan Budget Act of 2015 ( P.L. 114-74 ). CJS appropriations increased marginally in FY2017 ($361 million, or 0.1%). Figure 2 shows total CJS appropriations for FY2008-FY2017 by major component (i.e., the Departments of Commerce and Justice, NASA, and the NSF). Increases in CJS appropriations in FY2009 (not including ARRA funding) and FY2010 largely resulted from Congress and the President appropriating more funding for the Department of Commerce in support of the 2010 decennial census, though there were small increases during that same time in funding for DOJ, NASA, and NSF. Although decreased appropriations for the Department of Commerce mostly explain the overall decrease in CJS appropriations from FY2010 to FY2013 (a 47.4% reduction), cuts in funding for DOJ (-8.7%) and NASA (-9.8%) also contributed. Appropriations for NSF held relatively steady from FY2010 to FY2013.

This report describes actions taken by the Administration and Congress to provide FY2018 appropriations for the Commerce, Justice, Science, and Related Agencies (CJS) accounts. It also provides an overview of FY2017 appropriations for agencies and bureaus funded as part of annual CJS appropriations. Division B of the Consolidated Appropriations Act, 2017 (P.L. 115-31) provided a total of $66.360 billion (which includes $109 million in emergency-designated funding) for CJS. Under the act, the Department of Commerce received $9.237 billion, the Department of Justice received $28.962 billion, the science agencies received $27.240 billion, and the related agencies received $921 million. The Trump Administration requested a total of $62.331 billion for CJS for FY2018, a $4.029 billion (6.1%) reduction compared to the FY2017 enacted appropriation. The request included $7.817 billion for the Department of Commerce, $28.205 billion for the Department of Justice, $25.751 billion for the science agencies, and $559 million for the related agencies. The Administration's budget included cuts for most CJS accounts. In addition to the funding reductions, the Administration proposed to eliminate several CJS agencies and programs, including the Economic Development Administration, the Minority Business Development Administration, the Legal Services Corporation, and the National Aeronautics and Space Administration's Office of Education. On July 17, 2017, the House Committee on Appropriations reported its FY2018 CJS appropriations bill (H.R. 3267). The text of the FY2018 CJS committee-reported appropriations bill was included as Division C of an omnibus appropriations bill that was passed by the House on September 14, 2017 (H.R. 3354). The House-passed bill, as amended, would have provided $65.719 billion for CJS, which is 1.0% less than the FY2017 enacted appropriation, but 5.2% greater than the Administration's request. The bill included $8.350 billion for the Department of Commerce, $29.310 billion for the Department of Justice, $27.217 billion for the science agencies, and $842 million for the related agencies. The House-passed bill would have provided funding for the agencies and programs the Administration proposed eliminating. The Senate Committee on Appropriations reported its FY2018 CJS appropriations bill (S. 1662) on July 27, 2017. The committee-reported bill recommended a total of $65.991 billion for CJS for FY2018, an amount that was 0.6% less than the FY2017 enacted appropriation, but 5.7% more than the Administration's request. The committee-reported bill included $9.161 billion for the Department of Commerce, $29.068 billion for the Department of Justice, $26.846 billion for the science agencies, and $916 million for the related agencies. The Senate committee-reported bill would have provided funding for the agencies and programs the Administration proposed eliminating. For FY2018, Congress and the President provided $72.119 billion for CJS in enacted appropriations. This includes $70.921 billion in regular appropriations provided in the Consolidated Appropriations Act, 2018 (Division B, P.L. 115-141) and $1.198 billion in emergency-designated funding provided in the Further Additional Supplemental Appropriations for Disaster Relief Requirements Act, 2018 (P.L. 115-123). The total FY2018 enacted appropriation is $12.137 billion for the Department of Commerce, $30.384 billion for the Department of Justice, $28.609 billion for the science agencies, and $989 million for the related agencies. Nearly all CJS accounts saw an increase in funding for FY2018. In addition, Congress declined to adopt the Administration's earlier proposal to eliminate funding for several CJS agencies and programs.

CRS_RL33628

Introduction Trade capacity building (TCB) can be broadly defined as development assistance aimed at helping countries build the physical, human, and institutional capacity to participate in global trade. It includes assistance to negotiate, implement, and benefit from trade agreements, such as agreements within the World Trade Organization (WTO), and regional and bilateral free trade agreements. Many experts consider TCB to be vital for developing countries to benefit from trade liberalization and to participate actively in the global economy. In turn, trade liberalization and participation in the global economy are considered important factors in promoting economic growth and poverty reduction. This report examines key issues in TCB, provides an overview of U.S. and international TCB programs, and explores Congressional involvement in TCB. TCB is provided by bilateral donors such as the United States, the European Commission, individual European countries, and Japan, Korea, and Canada. Multilateral institutions such as the World Bank, the Inter-American Development Bank (IDB), the World Trade Organization (WTO), and the United Nations also provide TCB. Direct recipients of TCB include government ministries, customs officials, business owners, local non-governmental organizations (NGOs), and farmers. TCB can take the form of workshops, on-the-job training, data collection, feasibility studies, infrastructure upgrades, and efficiency improvements in procedures. Ideally, developing countries incorporate TCB needs in their national development plans, and TCB programs are planned in partnership between recipient and donor countries. The U.S. government provides TCB assistance to developing countries worldwide on a bilateral basis, and through contributions to multilateral organizations and established global TCB trust funds. The U.S. Agency for International Development (USAID) has historically provided the bulk of U.S. TCB assistance, but other agencies such as the U.S. Department of Agriculture (USDA), U.S. Department of Commerce, and U.S. Trade and Development Agency (USTDA) also provide such assistance. The Millennium Challenge Corporation (MCC) first provided TCB assistance in FY2005, and in FY2006 and FY2007 its TCB funding obligations surpassed those of USAID. U.S. TCB is not currently a discrete line item with its own budget; it is funded through several different initiatives within USAID and other agencies. In FY2007, U.S. government agencies reported obligating nearly $1.4 billion to TCB, of which over $1 billion was obligated by the MCC and USAID. According to the Organization for Economic Cooperation and Development (OECD), the United States allocated about 25% of its total official development assistance (ODA) to TCB between 2002 and 2005. Interest in TCB has grown in the donor community, both in the United States and abroad. As developing countries become more involved in trade negotiations, trade capacity becomes a higher priority issue for them and for donors. Developing countries from every region have entered free trade agreement (FTA) negotiations with the United States or the European Union. They have also been heavily engaged in the Doha round of WTO negotiations. In order to conclude the Doha round and other trade negotiations, developing country needs may require consideration, and that may include additional resources for TCB. Congress has several policy interests in TCB. First, TCB may be included in some potential free trade agreements (FTAs). The United States has concluded FTA negotiations with some developing countries, and Congress may be asked to consider implementing legislation for these potential FTAs. Congress also appropriates funds for TCB through USAID and other budgets. Congress may play a role in oversight of TCB programs, to ensure effectiveness and adherence to U.S. interests. TCB is also considered a compliment to U.S. trade preference programs such as the African Growth and Opportunity Act (AGOA), which Congress oversees. Finally, TCB is provided to developing countries through their participation in the WTO, and has been a topic of discussion in the Doha Development Agenda (DDA) round of negotiations. Congress may consider implementing legislation for a WTO agreement, and TCB could be important in that discussion. Defining Trade Capacity Building There is no set definition of TCB in trade and development public policy discourse. A narrow definition of TCB might include only assistance directly related to trade agreements, such as assistance to negotiate and implement such agreements. However, TCB is usually defined more broadly to include all types of development assistance that directly affect a country's capacity to participate in trade. This broader definition of TCB is assumed for the purpose of this report (see the box on page 3 for elaboration on the various areas of TCB assistance). The assistance contained within the broad definition of TCB includes addressing the regulatory environment for business, trade, and investment, supply-side constraints such as low productive and entrepreneurial capacity, and inadequate physical infrastructure such as transport and storage facilities. The goals of TCB include overcoming adjustment costs from liberalized trade; offsetting high implementation costs of trade agreements; offsetting preference erosion from multilateral liberalization; offsetting lost tariff revenue; improving negotiating capacity; and addressing supply-side constraints that make it difficult for developing countries to compete in world markets. A risk of defining TCB too broadly is that almost any assistance activity can be loosely defined as TCB. There are many areas of assistance that focus on domestic policy and capacity issues in a developing country, for example, business regulatory regimes, but also have direct consequences for trade. However, there are other areas of assistance, such as providing training to local microenterprises that are not likely to engage in international trade, where the linkage to trade is often not clear. In some cases, two similar projects in different countries can be similarly described on paper, but may be implemented with different objectives in mind. One project may be strongly trade-related, while another may not qualify strongly as TCB. This poses a problem when examining the aggregate TCB data. It is useful to know the total amounts of TCB assistance provided to different countries for summary purposes, but this data should be viewed as an inexact estimate of TCB, rather than as a definitive tool for measuring TCB assistance. Trade capacity building has some synonyms. It is also referred to as aid for trade or trade-related technical assistance (TRTA), especially within the context of the WTO. Some distinctions can be made between these terms, but since there is no agreement on them they are treated as interchangeable within this report. Categories of TCB Most developing countries lack the physical, institutional, or human capacity to participate effectively in world trade. Physical capacity includes infrastructure essential to trade such as ports, roads, and storage facilities. Institutional capacity refers to the business and trade policy environment, in addition to the strength of the financial sector. Institutional capacity relates to the existence of effective administrative and regulatory regimes, including property rights and formal business registration procedures. Human capacity refers to the technical competence of individuals such as government officials, entrepreneurs, and producers to contribute to international trade. The box on the following page breaks down further the different categories of TCB. Why Trade Capacity Building? Trade capacity building is based on the premise that trade liberalization leads to economic growth for both developed and developing countries, but developing countries do not have the capacity to achieve trade-led economic growth without assistance. On a more basic level, TCB assumes that donors can have an impact on trade capacity in developing countries. TCB is often cited as an important complement to market access, which is believed to be necessary but insufficient for developing countries to increase participation in trade. Other reasons given for TCB are to offset preference erosion and the adjustment costs of trade liberalization. Market Access May Be Insufficient Increased market access through preferential treatment, trade agreements, and other programs may not be sufficient to increase developing countries' participation in international trade. Beginning with the Generalized System of Preferences (GSP) in the 1970s, the United States and other developed countries have provided increased market access to products from developing countries through trade preference programs. Trade preference programs provide duty-free and/or quota-free access to certain products from certain developing countries, with stated limitations such as rules of origin. Despite the GSP and other trade preference programs such as the African Growth and Opportunity Act (AGOA), most developing countries have not substantially increased their trade globally or with the United States. Perhaps more importantly, many developing countries have not diversified their exports out of primary commodities. Low income developing countries have faired the worst: between 1990 and 2003, low income developing countries only increased their share of the global market for non-oil trade by one half a percentage point and least developed countries (LDC) have only maintained their market share. During the same time period, middle income countries increased their market share by about 14 percentage points. A few exceptions have occurred in countries that have attracted investments in textile and apparel manufacturing. Some critics blame the lack of trade growth on the preference programs themselves, arguing that the rules of origin are too stringent or that the programs exclude products in which developing countries have a competitive advantage. Also, the temporary nature of preference programs may add greater uncertainty to an already risky business environment, discouraging both foreign and domestic investment. Other experts believe that trade capacity is a more important factor than any of the above. It is broadly accepted that many developing countries have not benefitted from market access opportunities because of inadequate knowledge of these opportunities, non-competitive production capacity, lack of the necessary exporting infrastructure, inability to meet prevailing standards in high value export markets, and being crowded out of some markets by domestic support and export subsidies of developed countries. This view is not new: a 1980 Congressional Budget Office (CBO) report found that "actual exports depend on the ability of the economy to produce competitively, and preferences of the sort granted by GSP may not be sufficient to compensate for the differences in competitiveness among countries, or between U.S. producers and those in developing countries." Trade Preference Erosion Trade preference erosion is a concern in the few countries where preference programs have had a significant impact, such as in Lesotho and Bangladesh, where booming apparel industries have increased incomes and employment. Trade preference erosion may cause a decline in the emerging apparel industries in these and other countries, because as trade liberalization occurs their margin of preference is reduced. The margin of preference is the difference between the cost of the duty and/or quota for most favored nation (MFN) exporters and the developing country exporters receiving preferential treatment. With a reduced margin of preference the developing countries may no longer be competitive with more developed, lower-cost producers (such as China). This prospect has prompted certain developing country WTO members to oppose tariff reductions in certain goods on the basis that it would diminish their preferences. TCB may mitigate the effects of trade preference erosion, by helping developing countries to increase their competitiveness in the industries in question and diversify into other areas. Some observers consider it to be more politically feasible than monetary compensation, which has been proposed by some developing countries as a possible solution. Adjustment Costs The United States and other donors may provide TCB to help developing country economies overcome adjustment costs and facilitate a smooth transition to liberalized trade. Adjustment costs occur when certain sectors of the economy are negatively affected by trade liberalization, even though the economy as a whole may benefit through increased growth. Trade may cause decreased production in the least efficient sectors of the economy and increased production in the more efficient sectors. During the transition period, land, labor, and capital resources that had been employed in the least productive sectors may become idle. This translates to land and capital investments losing value, and workers becoming unemployed. As production increases in the more efficient sectors of the economy throughout the transition, workers may find new jobs, and other resources are expected to regain value as they are put to use in growth sectors. In developing countries, this transition period can be especially slow and difficult, and may never really end. Certain regions, especially in rural areas, may not attract new industries to replace employment opportunities lost from the less efficient sectors. Therefore, TCB aims to help developing countries cope with this dislocation. The Historical Context for TCB The development community was skeptical about using trade as a vehicle for economic growth and development in the 1960s and 1970s. At the time, import substitution industrialization (ISI), where developing countries limited imports of manufactured products to foster a domestic manufacturing sector, was the prevailing theory in trade and development. Aid was used to support industrialization, and not to foster trade. In the 1980s, after the apparent failure of ISI policies, there was a shift in mainstream development thinking to the view that removing barriers to trade and other market distortions would foster growth. As the expected gains from trade and economic reforms did not materialize, another shift in development thought took place in the late 1990s. The development agenda changed its focus to strengthening institutions that support markets and trade-led growth. Development experts recognized that liberalized trade was necessary but not sufficient for increased growth and poverty reduction. At the same time, capacity development became a popular term during the 1990s, reflecting the need for demand-driven assistance as opposed to assistance imposed from outside and based primarily on what donors were willing and able to provide. TCB grew from these ideas about trade and development. Since the beginning of U.S. development assistance in the 1950s, U.S. development programs have had elements of what we now refer to as TCB assistance. The types of TCB assistance provided, from agricultural development to transportation infrastructure, have changed based on the evolving focus of overall U.S. development assistance. The composition and focus of such assistance over the last 60 years have been determined mainly by changes in U.S. foreign policy, prevailing theories of development, and domestic administrative realities. TCB emerged as a concept in U.S. development assistance parlance around 1999, even though many of the programs included in TCB had been ongoing for years. Before TCB, the terms used for similar assistance were generally technical assistance or technical cooperation. The development of TCB as a concept brought some changes to the planning and implementation of TCB programs. In the past, these programs were conceived as general economic development programs, and not necessarily formed with a wider trade agenda in mind. More importantly, capacity building relies on a partnership with beneficiaries, involving a variety of actors, including government, private sector, and non-governmental organizations (NGOs). TCB programs are also meant to be planned in coordination with trade policy. With TCB on the agenda, trade officials, both in the United States and in developing countries, may have a greater influence on development policy than they did previously. Overview of U.S. Bilateral Trade Capacity Building According to the USAID Trade Capacity Building Database, U.S. government agencies obligated $1.4 billion in TCB assistance worldwide in FY2007. TCB is funded through a variety of U.S. agencies and budgets, and includes a variety of programs, from agricultural development to WTO accession. The United States began tracking its TCB assistance in 1999, and according to the TCB database it climbed steadily every year until FY2006, from $370 million in 1999 to $1.4 billion in 2006 and 2007. It is possible that this apparent four-fold increase over seven years is partly due to greater reporting of TCB assistance by the responsible agencies, as well as an inclination to include more activities within the definition of TCB. However, there has also been increased interest in TCB which may have led to greater funding for more programs. From FY1999 to FY2005, USAID funded the majority of TCB assistance. In 2005, it funded 52% of total U.S. government TCB assistance, about 66% in 2004, and around 70% in previous years. In FY2006, the MCC became the largest U.S. government funder of TCB, with $610.3 million or 44% of total U.S. TCB (as compared to $473.1 million from USAID). In FY2007, the MCC funded even more TCB: $775.4 million, or 55% of total U.S. TCB. The MCC first obligated funds for TCB in 2005. The United States provides TCB to a range of developing countries around the world, including potential FTA partners. In developing countries where the United States is negotiating an FTA, the Office of the United States Trade Representative (USTR) coordinates TCB assistance through TCB working groups, consisting of U.S. government interagency representatives and partner country government representatives. The CAFTA-DR TCB working group was the first such working group, and it met concurrently with the FTA negotiations. The working group was institutionalized as a committee in the text of the negotiated agreement. Since the passage of the agreement, the CAFTA-DR TCB committee will reportedly focus its work on coordinating TCB programs for implementing the agreement and addressing concerns regarding the transition to free trade. As shown in Figure 2 , TCB funding trends since 2004 have varied by region. The Middle East and North Africa region received much less TCB assistance in 2006 and 2007 than in the previous two years because of a decline in TCB assistance in 2006 to Iraq (from $101 million in 2005 to $3 million in 2007), Egypt (from $69 million in 2005 to $18 million in 2007), and the West Bank/Gaza (from $35 million in 2005 to $0 in 2007). The regions of Sub-Saharan Africa and the former Soviet Republics both saw a surge in TCB assistance in 2006 because of MCC-funded TCB activities: $276 million to Cape Verde and Benin in Sub-Saharan Africa; and $280 million to Armenia and Georgia in the former Soviet Republics. In FY2007 the former Soviet Republics received more typical levels of TCB assistance because the region had no new MCC compacts, whereas Ghana and Mali in Sub Saharan Africa signed new compacts, inflating the region's TCB funding. The Latin America and Caribbean region had a similarly high level of TCB assistance in 2005 and 2007, as a result of MCC funded assistance. No MCC funds for TCB were obligated to the Latin America and Caribbean region in 2006. TCB assistance is often provided on a regional level to improve efficiency and encourage regional economic integration. Some projects are also provided on a global level, or they may be recorded as global projects in the database while focusing on individual countries in different regions. U.S. Agencies in Trade Capacity Building A variety of U.S. agencies have a role in providing TCB assistance. All U.S. government TCB assistance is coordinated by a TCB Interagency Group, which is co-chaired by USTR and USAID. The Interagency Group meets monthly to coordinate on general TCB issues including free trade negotiations, WTO issues, the Integrated Framework (IF), preference programs, and performance measures. Figure 4 below shows a breakdown of the different agencies' shares of TCB funding in 2005. Some agencies implement TCB funded by other agencies, so Figure 5 , which illustrates TCB assistance implementation rather than funding, shows a slightly wider distribution of TCB implementation across agencies. For example, the Department of Labor and the Department of Agriculture both fund their own programs and implement TCB activities funded by other agencies such as USAID and the State Department. This interagency cooperation is an example of agencies coordinating their activities through the Interagency Group. The "other" category represents a greater share of TCB program implementation, because many agencies with relatively small TCB programs are funded by other agencies. A low level of TCB funding by a particular agency may not be indicative of inconsequential involvement in TCB; some important TCB programs require less funding than others. Infrastructure development is inherently more expensive, and workshops are less expensive. One U.S. government office with a significant role in TCB is not included in the U.S. TCB database—that is USTR, which has an Office for Trade Capacity Building, but does not implement or fund any TCB programs. USTR exclusively plays a role in coordinating TCB. Negotiating offices within USTR occasionally advise TCB implementors when they are providing assistance related to a particular agreement or negotiation. The fact that TCB is provided by many different U.S. government agencies has been cited as both an advantage and a source of concern. On the advantage side, more agency involvement means greater support from a wider pool of expertise and funding options. In some cases expertise is at least as important as funding, and it can be helpful to have U.S. regulatory agencies understand TCB objectives. One example of this benefit is the U.S. Department of Agriculture's Animal and Plant Health Inspection Service (APHIS). APHIS is primarily a regulatory agency with the responsibility of protecting U.S. agriculture from foreign pests and diseases. Obtaining clearance from APHIS has been notoriously difficult for agricultural producers from developing countries. Some have argued that bringing APHIS into TCB has not only benefitted developing countries by providing additional expertise, but has raised awareness of this problem within APHIS. The issue of regulatory agencies providing TCB has raised some concerns. Some observers caution that the mission of regulatory trade agencies, generally to protect the United States from potentially harmful imports, conflicts with that of TCB, generally to encourage imports from developing countries. This conflict of interest may result in either ineffective TCB or protection, or both. The other major concern about the variety of U.S. government agencies in TCB is that it can be difficult to coordinate activities across the agencies. The U.S. Agency for International Development (USAID) TCB is one of the core strategies of USAID. The USAID strategy for TCB is laid out in its March 2003 document, "Building Trade Capacity in the Developing World." According to this strategy document, the agency's goal is to "increase the number of developing and transition countries that are harnessing global economic forces to accelerate growth and increase incomes." USAID aims to achieve this goal by supporting participation in trade negotiations, implementation of trade agreements, and economic responsiveness to trade liberalization. The majority of USAID TCB programs focus on improving economic responsiveness to trade liberalization. Projects in this area include strengthening commercial laws and trade-related services in the public sector, as well as working with businesses and industries in the private sector to overcome supply-side constraints, such as access to finance, meeting international market standards, and obtaining market information. As the United States enters into more FTA negotiations with developing countries, USAID will likely respond to greater demand for assistance with participation in trade negotiations and implementation of trade agreements. USAID plans, funds, and implements TCB activities at both the agency and country levels. At the agency level, USAID targets TCB assistance toward countries where governments are committed to reform and openness, or where such governments are emerging, especially LDCs. When targeted in this way, projects are expected to have the greatest impact on incomes. At the country level, individual country needs vary greatly, and USAID field missions reportedly have the flexibility to respond to these individual TCB needs. In planning their TCB assistance, USAID field missions aim to consider a wide range of local trade and investment factors and take advantage of opportunities presented by initiatives such as FTA negotiations and the Integrated Framework for Technical Assistance to LDCs (IF). Most USAID TCB programs are funded through the agency's Development Assistance (DA) account. Certain country missions may also fund TCB projects through the Economic Support Fund (ESF). The Millennium Challenge Corporation (MCC) In 2006 and 2007, the MCC committed the largest amount of TCB assistance of any U.S. government agency. The MCC first offered TCB in FY2005, when it signed its initial compacts with recipient countries. The MCC operates differently than USAID and other agencies, in that it only provides assistance to a select group of developing countries based on criteria involving governance and economic reform measures. MCC-eligible countries must define their own development priorities and submit a proposal for projects, which may include trade-related projects that are considered TCB. These proposals form the basis for compacts, which are five-year funding obligations negotiated between the MCC and the eligible country government. The MCC will only disburse funds once the compact is approved and signed. The compact development process occurs outside the U.S. TCB interagency process, but there is some level of coordination since USTR sits on the MCC Board of Directors. In FY2005, the MCC committed TCB assistance to Honduras, Nicaragua, and Madagascar totaling about $369 million (as reported on the USAID TCB database). MCC TCB commitments in FY2006 totaled about $610 million and were made to more countries, including Armenia, Benin, Cape Verde, Georgia, and Vanuatu. In FY2007, the MCC obligated about $775 million in TCB funding to El Salvador, Ghana, Guyana, Honduras, Mali, Moldova, and Ukraine. About 70% of these commitments were for physical infrastructure development. The MCC may continue to provide high levels of TCB assistance as more eligible countries sign compacts, but the actual levels will depend on whether eligible countries include TCB as a key component in their proposals. New compacts were recently signed with Lesotho, Mongolia, Morocco, and Mozambique. U.S. Department of Labor The Bureau of International Labor Affairs (ILAB) of the U.S. Department of Labor (DOL) funds and implements programs to help developing countries adhere to international labor standards, especially with regard to child labor. ILAB partners with the International Labor Organization's International Program on the Elimination of Child Labor (ILO/IPEC) to implement these programs in Africa, Asia, Europe, Latin America and the Caribbean. In FY2007, ILAB funded about $51 million in projects worldwide. In addition to ILAB-funded projects, in FY2007 ILAB implemented $12 million in projects funded by USAID and the State Department, providing labor technical assistance for the Dominican Republic-Central American Free Trade Agreement (DR-CAFTA). Meeting international labor standards is an important aspect of eligibility for trade preferences and FTAs with the United States and other developed countries. However, some observers argue that it does not directly help countries benefit from increased trade, and therefore they question the inclusion of labor activities in TCB. The U.S. Department of State The State Department has funded and implemented programs in a variety of TCB areas. In FY2007, the State Department funded $101 million and implemented $72 million in TCB projects globally. More than half ($47 million) of the funding for State Department-implemented projects went to two educational exchange programs, comprised of the $31 million Academic Exchange Program, and the $16 million International Visitors Leadership Program. Both of these exchange programs focused on trade-related topics such as international economics, trade law, financial markets, intellectual property rights, business development, and other trade topics. Another $19 million consisted of contributions to multilateral TCB programs, such as the WTO Global Trust Fund ($1 million); the United Nations Conference on Trade and Development (UNCTAD; $13 million); and the International Trade Center ($5 million). The remaining $6 million was distributed among global, regional, and bilateral TCB programs, of which about $4 million was committed to programs on customs operation and administration. The State Department funded about $29 million in TCB assistance implemented by other U.S. agencies. The Export-Import Bank The mission of the Export-Import Bank (Ex-Im Bank) is to assist in financing the export of U.S. goods and services to international markets. The Ex-Im Bank aims to accomplish its mission through providing pre-export financing, export credit insurance, loan guarantees, and direct loans. In 2007, the Ex-Im Bank reported providing about $4 million in funding for TCB programs, mainly in infrastructure and tourism development. In FY2005 the Ex-Im Bank committed nearly $50 million to TCB, of which $42 million went toward physical infrastructure development, primarily in the form of loans and other types of financing arrangements to help developing countries purchase infrastructure equipment from the United States. For example, the Ex-Im Bank provided about $15 million in financing to help Ethiopian Airlines purchase aircraft equipment from the United States. The Department of Transportation In FY2007, the Department of Transportation (DOT) did not fund or implement any TCB activities. In FY2006 it implemented about $26 million in TCB assistance, which was almost entirely in the form of assistance to Afghanistan funded by USAID. This assistance included a $25 million project to improve the Kabul International Airport, and a $1 million project to rebuild the Afghanistan Civil Aviation System. In previous years (FY2003 to FY2005), the DOT implemented projects totaling between $1 million and $14 million per year in different regions of the world, funded by itself and other agencies including USAID, State, and USTDA. The U.S. Trade and Development Agency The mission of the U.S. Trade and Development Agency (USTDA) is to advance economic development and U.S. commercial interests in developing and middle income countries. In pursuit of this mission, USTDA funds technical assistance, feasibility studies, orientation visits, and business workshops that support the development of a modern infrastructure and a fair and open trading environment. In 2007, USTDA reported funding and implementing about $23 million in TCB. About half of this TCB was in support of physical infrastructure development in the form of feasibility studies, training workshops, and technical assistance. The largest individual country recipients of TCB assistance from USTDA in 2007 were Burkina Faso ($1 million), Uganda ($1 million), and Vietnam ($1.1 million). The U.S. Department of Agriculture The U.S. Department of Agriculture (USDA) provides most of its TCB through the Foreign Agriculture Service (FAS). In 2007, the USDA funded around $5.1 million and implemented around $15.8 million in TCB assistance. USAID funded about $11 million in projects that were implemented by USDA, and the Department of State funded another $6 million. About $8 million of the USDA-implemented activities were in the area of "trade-related agriculture," which includes activities such as strengthening agricultural markets, support for agriculture technology development, improving environmental standards, biotechnology risk assessment, and technical assistance directly to producers. The next highest level of USDA-implemented activities was in technical assistance for developing countries to comply with WTO Sanitary and Phytosanitary (SPS) agreement, at nearly $3 million. Other U.S. Agencies Providing TCB Assistance Other U.S. government agencies provided smaller amounts of TCB Assistance, but were active in the TCB process. In FY2007, the U.S. Treasury Department provided advisors to various developing country governments in the areas of financial markets, budget management, debt management, tax administration, and financial law enforcement, implementing $18 million in TCB assistance. The Overseas Private Investment Corporation (OPIC) helps U.S. businesses invest in developing countries through financial instruments such as loans and political risk insurance. OPIC programs support profitable investments with development aims. In FY2007 OPIC implemented $27 million in TCB programs, mainly in the areas of physical infrastructure development and financial sector development. The Department of Commerce implemented about $17 million in TCB programs, including many by its Commercial Law Development Program (CLDP) in various areas of commercial legal development, as well as other programs by the Patent and Trademark Office and the National Institute of Standards and Technology. Most of Commerce's TCB programs are funded by other agencies. The Department of Homeland Security implemented $3 million in TCB, mainly in the area of border security training for customs officials, funded by the State Department. The Peace Corps funded and implemented about $2 million in TCB assistance in 2006, mainly in e-commerce, business development, and tourism development. The Department of Energy implemented about $2 million in TCB assistance in the former Soviet Union republics, which was funded by the State Department. Other agencies have implemented programs totaling $4.7 million, including the Environmental Protection Agency ($2.1 million), the Federal Trade Commission ($0.6 million), Health and Human Services ($0.1 million), the Department of the Interior ($0.1 million), and the Department of Justice ($1.8 million). Trade Capacity Building by Non-U.S. Donors Multilateral Trade Capacity Building TCB is provided by multilateral development banks such as the World Bank and the Inter-American Development Bank (IDB), and through multilateral funds managed by the WTO. TCB is also discussed in WTO negotiations. The WTO and the Organization for Economic Cooperation and Development (OECD) maintain a database of worldwide TCB activities, including multilateral and bilateral efforts. The World Trade Organization Trade Capacity Building is commonly referred to as 'Aid for Trade' and 'Trade-Related Technical Assistance' (TRTA) within the WTO. Technical assistance is an important aspect of the WTO, because many developing country members need assistance in understanding, negotiating, and implementing WTO agreements. Developed countries have an incentive to provide such assistance, because it helps ensure that developing country members understand the negotiated agreements, and that they are able and willing to implement them. It may also encourage developing countries to reach agreement in multilateral trade negotiations such as the Doha round. The WTO provides TCB funded through its member-supported Doha Development Agenda (DDA) Global Trust Fund and through the separate Integrated Framework (IF), which the WTO participates in along with five other multilateral institutions. From January 2005 to September 2007, total contributions to the trust fund were about $47 million. Since the launch of the Doha round, the United States has contributed nearly $6 million to this fund; its most recent contribution was $1 million in April 2006. The WTO also serves as a forum for donors to hold each other accountable on TCB, and for developing countries to participate in the discussions. At the Hong Kong ministerial in December 2005, the United States pledged to double its spending on TCB to $2.7 billion by 2010, and other donors made similar pledges. The WTO is working with the OECD to monitor TCB globally, in order to provide an incentive for donors and developing countries to improve its effectiveness. As part of this effort, the United States and other member donor countries submit reports of bilateral TCB assistance to the WTO, which are then compiled and presented in a joint WTO/OECD Doha Development Agenda Trade Capacity Building Database. Technical assistance is also discussed as part of the WTO negotiations. Technical assistance that is specifically related to the various negotiating areas, such as trade facilitation, is discussed in the individual negotiating groups. In some negotiating areas, developing countries are explicitly not held responsible for upholding agreements that they do not have the capacity to implement, unless they are provided with adequate technical assistance. Discussions of cross-cutting issues related to technical assistance (such as whether to create a new fund for TRTA) take place in the Committee on Trade and Development, and within the newly formed Aid for Trade Task Force. The key objectives of the WTO's Technical Cooperation and Training include enhancing beneficiary countries' capacity to (1) address trade policy issues; (2) incorporate trade into national development and poverty reduction plans; (3) participate more fully in the multilateral trade system; (4) adjust to WTO rules and disciplines and implement obligations; and (5) exercise the rights of WTO membership. The WTO delivers TRTA in the form of courses, seminars, workshops, and conferences. In the past, critics have contended that the WTO provides too much superficial training to too many individuals. Perhaps in response to this criticism, the WTO drastically reduced the number of its TRTA activities: from 462 for 12,000 participants in 2005, to 206 activities for 7,400 participants in 2006. In 2002 the WTO reached an estimated 16,000 individuals through TRTA. The WTO provided $15.9 million in TRTA/TCB assistance in 2005. Aid for Trade Initiative The WTO Aid for Trade Task Force was established at the December 2005 Hong Kong ministerial conference. It was tasked with making recommendations to the WTO General Council on how to "operationalize" aid for trade, and how it might contribute most effectively to the DDA. The Task Force released its recommendations at a meeting of the WTO General Council on July 27, 2006, the same meeting where the General Council agreed to suspend the Doha round of negotiations. Despite the suspension of WTO negotiations, the Task Force recommended that countries continue to provide aid for trade, and that its recommendations still be implemented. They made this recommendation with the caveat that aid for trade "cannot be a substitute for the development benefits that will result from a successful conclusion to the DDA, particularly on market access." At the October 2006 General Council meeting, WTO members reportedly agreed to endorse the recommendations of the Task Force. The recommendations of the Task Force include guidance on financing, defining, and overcoming some of the challenges associated with aid for trade. The Task Force recommends that aid for trade should be guided by the Paris Declaration on Aid Effectiveness, which focuses on key principles of country ownership, donor coordination, aligning aid to national development strategies, and monitoring and evaluation. The Task Force also recommends improving on the Integrated Framework (see next sub-section) and extending its needs-assessment process to developing countries that are not LDCs. The Integrated Framework The Integrated Framework (IF) is a process that assists Least Developed Countries (LDCs) to integrate trade issues into their national development strategies. Two key goals of the IF are to better coordinate aid for trade globally and within countries (donor coordination); and to integrate aid for trade with general development assistance objectives. Six international institutions collaborate on the IF, including the World Bank, the WTO, the International Monetary Fund (IMF), the International Trade Center (ITC), the United Nations Conference on Trade and Development (UNCTAD), and the United Nations Development Program (UNDP). The IF is funded by an IF Trust Fund, composed of voluntary contributions from multilateral and bilateral donors. Total contributions to this trust fund equaled $49.7 million as of March 2007, of which the United States contributed $800,000. The first stage of the IF process is the development of a Diagnostic for a Trade Integration Study (DTIS), which is a lengthy study on an individual country identifying constraints to trade, sectors with the greatest export potential, and an action plan for integrating the country into the global trading system. The DTIS is produced collaboratively by beneficiary country government officials, economists from international institutions, and experts from bilateral donor countries including the United States. The DTIS includes an action plan, which is supposed to be integrated into the country's national development strategy as part of the IF process. The national development strategy is usually the country's Poverty Reduction Strategy Paper (PRSP), which is developed in partnership with the World Bank and IMF. Bilateral donors are expected to provide TCB to implement each country's action plan, but small activities may be initially funded by the IF trust fund. According to the WTO, 47% of the IF's budget has been used toward diagnostic activities and 53% has gone toward implementing priority assistance activities. Critics of the IF have said that it could be more effective if it included funding to implement more of the action plan, rather than leave the bulk of implementation funding up to bilateral donors. The IF steering committee is reportedly in the process of implementing the "Enhanced Integrated Framework," which would raise extra money for more IF-implemented activities. Other concerns raised about the IF pertain to whether developing country officials and citizens are as involved in preparing the studies as they could be. Also, some observers believe that the IF should be extended to all developing country WTO members, and not just LDCs. As of November 2007, forty-five LDCs were at different stages of the IF process: 29 LDCs (23 from Sub-Saharan Africa) had completed their DTIS and national workshop to implement the action plan; eleven LDCs were in the process of developing a DTIS; and five had initial technical reviews under consideration. The World Bank The World Bank works on trade at both the global and country level. At the global level, the Bank conducts research and is involved in discussions on making the global trading system more supportive of development. At the country level, the Bank aims to build capacity in its member countries to (1) formulate and implement sound trade policy; (2) manage the adjustment costs of trade reform and external trade shocks; (3) participate effectively in international trade negotiations; and (4) develop appropriate regional trade policies. In 2005, the World Bank made global TCB commitments of about $121 million, including grants and loans (concessional and non-concessional). This amount is in addition to about $2.5 billion in infrastructure for transport, energy, and telecommunications. Most of the Bank's TCB projects address export development, trade facilitation, and standards such as Technical Barriers to Trade (TBT) and SPS. The World Bank has been criticized by members of the non-governmental agency (NGO) and academic community for not defining clear TCB goals and policies, and not integrating TCB throughout its operations. The Bank is one of the six international institutions involved in the Integrated Framework. Other Donor Bilateral Trade Capacity Building Many individual countries provide TCB through their own foreign assistance programs, and report such assistance to the OECD for inclusion in the joint OECD/WTO TCB database. Table 4 provides a summary of TCB assistance according to the OECD/WTO database. Data for the United States is included for the sake of comparison, as compiled by the OECD/WTO and not from the USAID database (therefore the numbers may not correspond exactly). Legislation on Trade Capacity Building Congress has passed appropriations legislation providing funds and guidance for trade capacity building. Other legislation passed by Congress may restrict the provision of TCB, either by limiting which countries can receive certain types of funding or by limiting the types of activities in which foreign assistance may be provided. TCB Appropriations Funds are appropriated for TCB within the State and Foreign Operations Appropriations Act. The 110 th Congress directed the administration to use at least $550 million of foreign aid appropriations for TCB in the Consolidated Appropriations Act of 2008 ( P.L. 110-161 ). This amount must come from the following foreign aid accounts: Development Assistance (DA); Economic Support Fund (ESF); Assistance for Eastern Europe and Baltic States; Andean Counterdrug Programs; and Assistance for the Independent States of the Former Soviet Union, but does not include TCB from the MCC. There has been a slow and steady increase in funds allocated by Congress to TCB this way. In 2006, Congress recommended that at least $522 million should be made available for TCB assistance, of which $40 million ($20 million from DA and $20 million from ESF) were to be used for labor and capacity building activities relating to DR-CAFTA. In previous years, Congress has designated somewhat lower amounts for TCB assistance. TCB was first included in Foreign Operations Appropriations in the FY2003 appropriations, with a total allocation of not less than $452 million, $159 million from DA, and $2.5 million from the U.S. Trade and Development Agency (TDA). In FY2004, the total allocation was not less than $503 million, of which $190 million from DA; and in FY2005 the total was $507 million, of which $194 million from DA. In FY2005 there was also an earmark of $20 million from ESF to support TCB activities regarding labor and environment in the CAFTA-DR countries. In the 109 th Congress, the House version of the FY2007 Foreign Operations, Export Financing, and Related Programs Appropriations Bill ( H.R. 5522 ) would have included the creation of a Trade Capacity Enhancement Fund in the amount of $522 million, and an Office of the Director of Trade Capacity Enhancement within USAID. This new office would have been responsible for USAID's TCB programs, as well as coordinating government-wide TCB programs of all U.S. agencies. These changes in the funding and management of TCB would have represented an initiative to make TCB a higher priority. They also prompted concerns about restricting the administration's flexibility to allocate foreign aid and draining resources from other foreign assistance priorities. The Senate version of the bill did not include this new fund or office, and neither did any of the 2007 Continuing Resolution bills. Legislative Limitations on TCB In the mid-1980s, Congress passed legislation restricting the use of foreign development assistance programs in response to problems in the U.S. farm economy. Some observers maintain that USAID developed policies that were more restrictive than necessary, as a result of the agency's sensitivity to congressional criticism. One widely cited legislative restriction on USAID's trade-related activities is known as the Bumpers Amendment, which was first introduced in the Urgent Supplemental Appropriations Act of 1986, (Section 209 of P.L. 99-349 ). The Bumpers Amendment states that no U.S. development assistance funds may be used for agricultural development activities for a commodity that would compete with a commodity grown or produced in the United States. There are two exceptions to the Bumpers Amendment: (1) where the activity is designed to increase food security in developing countries and it would not have a significant impact in the export of agricultural commodities to the United States; and (2) in the case of a research activity intended primarily to benefit American producers. USAID officials have cited the Bumpers Amendment as restricting TCB assistance in agriculture, for example in the provision of assistance to West African cotton farmers. In addition to restrictions on agricultural assistance, there are other restrictions on U.S. foreign assistance that affect TCB assistance. One such restriction, originating in the FY1993 Foreign Operations Appropriations (Section 599 of P.L. 102-391 ), prohibits funds to be used as a financial incentive for a U.S. firm to relocate outside of the United States, to establish or develop an export processing zone (EPZ) in a foreign country, or for any project that would contribute to the violation of internationally recognized workers' rights. Other restrictions affect aid to particular countries, such as in the Nethercutt Amendment ( P.L. 109-102 Section 574), which restricts ESF assistance to countries that are a party to the International Criminal Court (ICC) and have not signed an Article 98 agreement. These statutory restrictions are catalogued and summarized by USAID. Policy Issues Motivations for Trade Capacity Building Trade capacity building is generally regarded as an activity taken on by the United States and other donors for altruistic purposes: to help developing countries benefit from trade and achieve poverty reduction. There are other possible motivations for TCB that are not as altruistic. One possible motivation is to create markets for U.S. exports. TCB might achieve this objective indirectly by increasing developing countries' incomes, which would in turn would allow developing countries to import more goods from the United States. TCB can more directly create markets for U.S. exports by influencing developing countries' policies (such as technical standards) to be more open to U.S. goods, and by promoting development in sectors that would likely require imports of intermediate products and capital goods from the United States. The U.S. Export-Import Bank facilitates this process, by providing loans to businesses in developing countries to import American capital goods such as factory equipment. Another possible motivation for providing TCB is to gain the cooperation of developing countries in trade negotiations, both bilateral and multilateral. By helping trade officials in developing countries understand the technical aspects of an agreement, they are more likely to complete negotiations and implement the agreement. Developing countries are also more likely to be agreeable in negotiations if they expect to receive assistance in implementing the agreement. An example of this can be found in the trade facilitation negotiations of the WTO Doha Round. At first, developing countries did not want trade facilitation to be part of the round at all. However, once they started receiving technical assistance in trade facilitation and technical assistance became part of the trade facilitation negotiations, the negotiations moved along more easily than other negotiating areas. Also, technical assistance in trade facilitation caused some countries to make unilateral trade facilitation reforms without any obligation under a WTO agreement. Critics of U.S. trade policy contend that TCB may be used to deflect attention from a failure of the United States and other donor countries to adopt pro-poor trade reform. They point to high U.S. tariffs on imports produced by developing countries and trade-distorting agricultural subsidies. Other critics believe that U.S. TCB is influenced more by political objectives than development goals. They note that Iraq was the third-largest recipient of U.S. TCB funds in 2005, after Honduras and Nicaragua, which both received the majority of their TCB assistance from the Millennium Challenge Corporation. Some observers have also questioned whether the administration uses TCB as a way to influence developing country trade policies without going through the trade negotiations process. Conflicting Interests Trade capacity building may conflict with some perceived U.S. interests. Building the negotiating capacity of developing countries may make reaching agreement easier, but it might also help them to negotiate more aggressively against U.S. positions. Also, assisting developing countries to be more competitive in world markets may help them to compete against U.S. businesses. However, the same argument can be made for the benefits of increased competition through TCB as through trade liberalization. Increased competition tends to increase firm productivity and may benefit both consumers and workers through decreased consumer prices and increased wages. As in trade liberalization, however, the benefits and losses associated with increased competition can be unevenly distributed in the economy, causing some regions and industries to suffer losses of jobs and incomes disproportionately. Although, one major difference with general trade liberalization is that most TCB recipients are poor countries that are not likely to provide major competition to U.S. business. Exceptions to this difference may be found in a few major agricultural and textile producers who receive TCB assistance. Challenges for Trade Capacity Building One major challenge for TCB as an area of foreign assistance is to coordinate assistance with the trade policy agenda, and to effectively integrate TCB assistance and trade into developing countries' national development strategies. Changing trade policies, such as reducing trade barriers through a free trade agreement (FTA), may require new types of assistance to help developing countries benefit from trade. In this way, trade is not an end in itself but a tool for development. To fully utilize trade as a tool for development, it also needs to be considered in all aspects of development planning. Economic and social policies that have been considered separately from trade in the past may have an effect on a country's competitiveness and ability to benefit from trade, therefore policymakers should have an appreciation for possible trade implications when they are making development plans. One possible challenge in integrating trade with development planning is that national development strategies are typically planned on a relatively long time-frame through processes such as the Poverty Reduction Strategy Paper (PRSP), while trade needs can change more quickly. As a result, there may be tension between responding to changing trade needs and long term development planning. Another major challenge for TCB is international donor coordination. TCB assistance is provided by a wide range of donors in a multitude of sectors, and there has been some overlap and duplication among donors. This overlap and duplication of efforts is not only wasteful, but it can cause confusion and make programs less effective. Demand-driven TCB assistance, where donors provide assistance based on the strategies and requests of recipient governments, has inherent benefits and may help facilitate donor coordination. For TCB assistance to be demand-driven, recipients need to be proactive in assessing and communicating their needs, and donors need to orient their assistance around those stated needs. One example of this has been in the TCB provided alongside the CAFTA-DR negotiations, where there was close communication between USAID, USTR, and the recipient governments in the context of the negotiations. There is concern that some TCB recipient countries may lack the capacity to assess and prioritize their needs, which would hinder achieving demand-driven assistance. TCB recipients have complained that they lack the capacity to coordinate the assistance they receive from various donors. It is especially difficult when the assistance comes in the form of multiple short-term projects rather than a long term strategy that is coordinated with national development plans. Some steps toward international donor coordination have reportedly been taken, notably through the OECD and the WTO. Donor coordination has been hampered because donor countries and organizations generally prefer to take credit for their efforts, and they tend to have different strategies and mechanisms for planning and implementing foreign assistance. This leads to assistance being supply-driven, that is, driven by what donor countries are able and willing to provide. According to experts, assistance must be driven by the partner country's own needs, goals and strategies to be effective, rather than being driven by the donor country's administrative priorities. OECD members agreed to implement this principle of foreign aid in the Paris Declaration on Aid Effectiveness. Evaluating the effectiveness of TCB is another challenge. The U.S. Government Accountability Office (GAO) issued a report in February 2005 which determined that the United States government does not effectively monitor and evaluate the effectiveness of TCB programs. It recommended that USAID and USTR work together to develop a strategy, in consultation with other U.S. agencies that provide TCB, for evaluating TCB effectiveness. USTR and USAID have responded to this recommendation, and are reportedly in the process of developing evaluation mechanisms. Measuring the effectiveness of TCB can be difficult, because meaningful indicators are not readily available. Changes in trade volumes and other high level indicators are not necessarily attributable to TCB. Trade volumes respond to many factors, of which TCB is just one and not as significant in the short term as economic factors such as commodity price fluctuations. Lower level indicators, such as the number of people trained in WTO negotiations, may be entirely attributable to TCB, but they do not say much about the effects of such training. According to the OECD, the most measurable and positive outcome of TCB has been in the awareness of WTO issues, participation in the Doha round negotiations, and the development of a national policy dialogue on trade among the various stakeholders in business, government, and civil society. The OECD finds that where this dialogue has been most robust, TCB has been most effective. This finding may be key in developing a framework for evaluating TCB. An ongoing challenge for U.S. TCB is that it is just one area in which the United States provides development assistance, and it must compete with other priorities for limited resources. Some of these other development priorities involve responding to emergencies where lives are at stake, such as aid in response to natural disasters, conflict situations, and severe health concerns. It may be difficult to argue for funding for TCB when other areas of assistance are needed to help people survive. TCB may not directly save lives, but it could in the long term reduce countries' vulnerability in dire situations by helping to increase incomes and reduce poverty.

Trade capacity building (TCB) is a form of development assistance provided by the United States and other donors to help developing countries participate in and benefit from global trade. In addition to helping developing countries negotiate and implement trade agreements, TCB includes development assistance for agricultural development, customs administration, business training, physical infrastructure development, financial sector development, and labor and environmental standards. Some experts believe that TCB is necessary for developing countries to adjust to trade liberalization and achieve trade-led economic growth. In FY2007, the United States obligated about $1.4 billion in TCB worldwide. The U.S. Agency for International Development (USAID) funds and implements the majority of U.S. TCB programs. In FY2005, the Millennium Challenge Corporation (MCC) began to fund TCB activities, and in FY2006 and FY2007 it overtook USAID as the agency with the highest TCB obligations. Other agencies also provide TCB, including the U.S. Department of Agriculture, the Department of Commerce, the Treasury Department, the Department of Labor, and the U.S. Trade and Development Agency (USTDA). The United States also contributes to multilateral funds for TCB, and it contributes to multilateral development banks such as the World Bank, which also provide TCB programs. Congress has played a key role in TCB by providing funding through appropriations legislation. In the 109th Congress, the House passed a measure to create a Trade Capacity Enhancement Fund in the 2007 Foreign Operations Appropriations Bill (H.R. 5522), but this measure was not included in the Senate bill. The 110th Congress directed the administration to use at least $550 million of foreign aid appropriations for TCB in the Consolidated Appropriations Act of 2008 (P.L. 110-161). TCB may become a key part of the 110th Congress' discussions on potential free trade agreements (FTAs) with developing countries, renewal of trade promotion authority (TPA), and U.S. involvement in the Doha round of WTO negotiations. The 110th Congress may also be interested in using TCB to increase the effectiveness of trade preference programs initiated through legislation such as the African Growth and Opportunity Act (AGOA). In the past, Congress has passed legislation restricting the use of foreign assistance for certain activities promoting trade in developing countries. While TCB generally has trade-promoting motivations, any resulting increased import competition could also raise Congressional concern. This report describes trade capacity building and discusses the history of TCB in foreign assistance. It also provides an overview of U.S. bilateral TCB assistance, as well as multilateral and bilateral TCB assistance from other donors. There is also a discussion of legislation affecting TCB, including appropriations and legislative restrictions on foreign assistance. Finally, this report highlights some of the policy issues concerning TCB. This report will be updated as events warrant.

CRS_R40832

Introduction This report provides a summary of current developments in the U.S. Department of Agriculture's (USDA's) effort to establish a national animal traceability capacity with the intended goal of being able to rapidly identify and respond to an animal disease outbreak. National animal identification and traceability appear to have substantial economic value, yet federal proposals have proven controversial among certain segments of the U.S. cattle industry. This report provides background on animal ID and traceability in general, and the development of the current U.S. system of animal ID and traceability in particular. In addition, it reviews the claims and counter-claims of proponents and opponents of a national animal ID system, and describes many of the unresolved issues related to program development. Finally, two appendixes offer a brief chronology of the development of the U.S. National Animal Identification System (NAIS) and its successor program, and a brief description of the major international organizations involved in setting standards and rules for animal health and trade in animal products, along with summary descriptions of animal ID and traceability programs found in other major livestock producer and consumer countries. Most Recent Developments USDA Adopts New Approach to Animal Disease Traceability On February 5, 2010, Secretary of Agriculture Tom Vilsack announced that USDA was substantially revising its approach to achieving a national capability for animal disease traceability. The previous plan, called the National Animal Identification System (NAIS), first proposed in 2002, was being abandoned. In its place USDA proposed a new approach—Animal Disease Traceability—that will allow individual states and tribal nations to choose their own degree of within-state animal identification (ID) and traceability for livestock populations. The flexibility is intended to allow each state to respond to its own producer needs and interests. However, under the new Animal Disease Traceability framework, USDA will require that all animals moving in interstate commerce have a form of ID that allows traceability back to its originating state. The Secretary of Agriculture derives the authority to regulate interstate movement of farm-raised livestock from Section 10406 of the Animal Health Protection Act ( P.L. 107-171 , Subtitle E; 7 U.S.C. 8305). Initial Steps for Animal Disease Traceability In the six months after the February announcement, USDA began collaboratively building on its framework with animal health officials from states and tribal nations. USDA established a Traceability Regulation Working Group from state, tribal nation, and Animal and Plant Health Inspection Service (APHIS) officials. The working group is responsible for synthesizing feedback and making recommendations for the content of a proposed rule. APHIS held a forum on March 18-19, 2010, for animal health officials from state and tribal nations to discuss and provide feedback on the new framework for animal disease traceability. In May, June, and July APHIS held five public meetings around the country to present the framework and gather feedback from animal health officials and producers. Then, on August 13, 2010, USDA released two publications, Animal Disease Traceability Framework , Overview and Current Thinking and Animal Disease Traceability Framework, Update and Preliminary Content of the Proposed Rule , which outline USDA's current recommendations that could be incorporated in a proposed rule. APHIS then held three more follow-up public industry forums to provide further opportunities for animal health officials and producers to discuss and give feedback on the framework. Highlights of Current Thinking on Traceability USDA's traceability framework is still developing, but one of the key underlying principles of the framework is that managing a traceability program is the responsibility of states and tribal nations. Under this revised framework, states may choose to have no mandatory animal ID and traceability capability, or to rely on existing ID systems already in place to fight brucellosis, tuberculosis, and other contagious animal diseases, or to develop their own version of a more detailed birth-to-market ID system as originally proposed under NAIS. The within-state programs are intended to be implemented by the states and tribal nations, not the federal government. As such, any data collection and storage would done by state, not federal, authorities. The federal rules will apply only to livestock that move in interstate commerce. The rules will require livestock that move interstate have some type of official identification and an Interstate Certificate of Veterinary Inspection (ICVI). Exemptions for identification and ICVI requirements will be defined in the rules. For example, cattle moving directly to slaughter would be exempt. Types of acceptable official identification will be defined in federal regulations through the rulemaking process. The animal disease traceability capacity of each state and tribal nation will be evaluated according to performance standards that are defined through rulemaking. The Traceability Regulation Working Group, in conjunction with state and tribal animal health officials, will define performance standards that will describe a desired outcome but not the method for achieving the outcome. The method will be left up to the states and tribal nations. Each state and tribal nation will have detailed traceability cooperative agreements with APHIS that describe the cooperators' objectives. Whatever federal funding is available will be provided through annual cooperative agreements. Although the agriculture appropriations bill for FY2011 is not finalized, no funding is designated for animal traceability in the bill. However, the Senate Committee on Appropriations report indicates that funding could be considered after needs are identified under USDA's new initiative. The program governing animal disease traceability of interstate animal movements and coordination between different state "identification and traceability programs" will be implemented through federal regulations and the federal rulemaking process. USDA will define animal disease traceability with a new section in Title 9 of the Code of Federal Regulations . USDA has indicated that a proposed rule could be published in April 2011 with a 60- to 90-day comment period. According to USDA , once the proposed rule is published, it likely would be 12 to 15 months before the final rule is released. Overview of Animal Disease Costs Major outbreaks of harmful animal diseases—including avian influenza (AI), foot and mouth disease (FMD), and bovine spongiform encephalopathy (BSE, or mad cow disease)—have led to the slaughter of millions of commercial animals and caused billions of dollars in economic damages ( Table 1 ). The economic harm from these disease outbreaks first hits the farm enterprise that suffers direct loss of its animals and its livelihood. But it also extends well beyond the farm place to disrupt domestic and international markets, causing losses all along the marketing chain and ultimately hitting consumers. To date, the United States has been fairly fortunate in avoiding a catastrophic animal disease outbreak of the nature of the FMD events that occurred in Taiwan in 1997 or the United Kingdom in 2001. Were a similar FMD outbreak to hit the United States, the economic consequences could be staggering—possibly in the range of $30 billion to $100 billion in cost to the U.S. cattle industry alone, according to House Agriculture Committee Chairman Collin Peterson in remarks made at a March 11, 2009, hearing by the subcommittee on Livestock, Dairy, and Poultry to review animal identification systems. The economic consequences of major animal disease outbreaks that occurred during the 1990s and early 2000s provided the impetus for the development and implementation of animal identification (ID) and traceability systems in many countries. The motivation and nature of these programs varies across countries, ranging from voluntary programs focused on animal health as in the United States, to mandatory programs focused on both food safety and animal health as in the European Union (EU), Japan, and South Korea ( Figure 1 ). More recently, some major importers of animal products, Japan and South Korea in particular, have begun to discuss the possibility of requiring traceability on imported meat products, which, if undertaken, would add a further dimension—market access—to animal ID and traceability programs. Any developments that occur in domestic or international markets with respect to animal health, food safety, and import standards have potentially significant economic importance for U.S. livestock industries because the United States is a major producer and exporter of livestock and animal products ( Table 2 ). The United States is the world's leading producer of beef and poultry and ranks third in pork production behind China and the EU (see tables in Appendix B ). With respect to trade in animal products, the United States is the world's leading exporter of pork, the second-leading exporter of poultry (behind Brazil), and the third-leading exporter of beef, while ranking first as the world's leading importer of beef. In addition to these global rankings, U.S. exports of animal products account for substantial portions of total use of domestic production—17% for both pork and poultry, and 6% for beef, in 2007 and 2008. What Is Animal ID? Animal identification (ID) refers to keeping records on individual farm animals or groups (e.g., flocks or herds) of farm animals so that they can be more easily tracked from their birth through the marketing chain. Historically, animal ID was intended to indicate ownership and prevent thievery. Today, animal identification has been expanded to include information on the animal's origins (e.g., birthplace, parentage, sex, breed, genetics) as well as traceability—the ability to trace an animal product back through the marketing chain to its source, while identifying those other animals or animal products with which it has come into contact. In essence, a national database of animal ID combined with traceability, accessible via a high-speed computer network, is considered the ideal system to permit quick response to news of an animal disease outbreak or the discovery of tainted food so as to limit threats to human or animal health and to minimize commercial damage. Versions of animal ID systems currently exist in several countries, with differences based primarily on the amount and type of information collected and the extensiveness of the traceability system. Data Requirements At a minimum, information is collected and stored concerning the animal's place and date of birth, the name and address of the owner, the date and location of movements between the animal's origin and its place of slaughter, and the date and location of slaughter. More elaborate animal ID systems include information on the sex, breed, and parentage of an animal, the names of all feeds and pharmaceuticals used in raising the animal, and the movement of specific animal products from the processing plant to the retail consumer. Objectives The reasons for identifying and tracking animals and their products have evolved and include rapid response to animal health and/or food safety concerns, as well as verification of recognized premium commercial production processes as specified on qualifying product labels. In the United States, the current focus of animal ID is animal health. As such, traceability is limited specifically to movements from the animal's point of birth to its slaughter and processing location. In other countries such as the European Union (EU), Japan, and South Korea, the focus of animal ID is both animal health and food safety ( Figure 1 ). As a result, those countries have more comprehensive traceability systems that extend beyond the processing plant and follow animal products (marked with an animal-specific bar code) to the retail consumer. Increasingly, international buyers of U.S. animal products are demanding better information on those products' history—for example, where and how the animals were raised, how the products were prepared, and what is the nature of the marketing chain the products followed to reach their consumer markets. Traceability responds, in part, to these demands. Pros and Cons of an Animal ID System As a national animal ID and traceability system has evolved in the United States, so too have its proponents and critics. This section briefly highlights the potential benefits of a national animal ID and traceability system as cited by its proponents, and the criticisms that have been raised by program opponents. Proponents' Claimed Benefits10 Proponents argue that an animal ID and traceability system: 1. Enhance s animal health surveillance and disease eradication . According to USDA, animal ID would facilitate early detection of dangerous and costly animal disease outbreaks, while a traceability system would help to identify the source as well as those animal populations that were exposed to the disease, and to contain them via zoning or compartmentalization. Together, USDA claims that a national animal ID and traceability program would likely reduce animal producers' disease testing costs by controlling and/or eradicating animal diseases at both regional and national levels. 2. M inimize s economic impact of an animal disease outbreak . Regionalization or compartmentalization is a disease management tool that contains a disease outbreak to a specific zone, while leaving the remaining areas outside of that zone free of the particular disease and not at risk for international trade restrictions. Rapid identification and compartmentalization of a disease outbreak limits both the spread of commercially harmful diseases and, thereby, the number of animals that would otherwise have to be destroyed or removed from marketing channels. Compartmentalization also facilitates re-establishing international market access and the reopening of lost export markets. The more rapid the response to a disease outbreak, the more limited the economic damage. 3. Increase s d omestic m arketing o pportunities . Many farmers and ranchers already keep track of individual animals and how they are being raised, in order to identify and exploit desirable production characteristics—such as "organic" or "grass-fed" or "hormone-free"—that can command substantial price premiums in certain retail markets. Universal bar codes on processed food, including many meats, are widely used by processors and retailers to manage inventories, add value to products, and monitor consumer buying. When consumers seek meat, eggs, or milk from animals raised according to specified organic, humane treatment, or environmental standards, ID and traceability can help firms verify production methods. Government-coordinated programs also have been established for these purposes. For example, a process verification program operated by USDA's Agricultural Marketing Service (AMS) "provides livestock and meat producers an opportunity to assure customers of their ability to provide consistent quality products by having their written manufacturing processes confirmed through independent, third party audits," according to AMS. USDA "Process Verified" suppliers can have marketing claims such as breeds and feeding practices, and so label them, under this voluntary, fee-for-service program. Other programs employing varying levels and types of traceability include the domestic origin requirement for USDA-purchased commodities used in domestic feeding programs; the national organic certification program, which AMS also oversees; and the mandatory country-of-origin labeling (COOL) program. 4. Provide s a valuable management tool for producers . A traceability program that follows animal products to consumers would provide post-mortem information on cattle with respect to success of various production techniques (e.g., feed types, feed-pasture ratios, or genetics). Similarly, an ID system would be ideally suited for tracking the performance history, along with other relevant criteria, of racing or show animals. It would also increase transparency in the supply chain from producers to consumers; thereby reducing the risk of unfounded liability claims against livestock producers. Finally, an animal ID and traceability program would help producers maintain records on animal movements and health, breed registries, and other marketing activities. 5. Addresses f ood s afety and n ational s ecurity c oncerns . Federal and state food safety agencies collaborate with APHIS to protect the food supply from the introduction, through animals, of threats to human health, such as tuberculosis, and foodborne illnesses from bacteria like Salmonella and E. coli O157:H7. Generally, when local health officials can link an illness to a particular product, firms and their regulators have been able to trace that product back to the processor and/or slaughter facility. It has been more difficult to determine which particular animals, herds, or flocks were involved. Some believe that a more rigorous traceback and animal ID system would facilitate food recalls, possibly contain the spread of a foodborne illness, and help authorities stem future incidents. Others, particularly many within the food industry, strongly disagree, countering that such a system would not be based on sound science, and would be technically unworkable and costly. 6. Enhance s foreign marketing opportunities for animal products . In the global marketplace, animal disease programs, aided by traceability systems, are used both to reassure buyers about the health of U.S. animals and to satisfy foreign veterinary and/or food safety requirements. In addition, they assist in assuring credible attributes of animal products with consumers, thus improving opportunities for capturing value-added niche markets by certifying production processes—that is, for export programs that ensure certain aspects of the animal production process such as hormone- or antibiotic-free production. After BSE appeared in North America in 2003, USDA's AMS developed an export verification (EV) program for U.S. plants seeking to meet the differing beef import specifications of various countries like Japan, a key foreign market for U.S. beef. AMS establishes the standards that U.S. suppliers must follow if they want to ship beef to these countries, and certifies that the proper procedures are in place. While EV is "voluntary," it also has become a prerequisite for access to the Japanese, Korean, and other foreign markets. USDA contends that establishing an internationally recognized system of traceability is likely to enhance the competitiveness of U.S. exports of animals and animal products. In fact, the lack of a standardized, national animal identification system was one factor that prevented the United States from receiving "negligible risk" status (the best status possible under the rating system) for BSE from the World Organization for Animal Health (OIE). Receiving negligible risk status would likely enhance the United States' ability to compete internationally, but USDA contends that it would also support U.S. domestic price structures, so that all producers—regardless of their interest in international marketing—would benefit when the United States expands its export markets. 7. Enhance s animal welfare in response to natural disasters . In the event of a national disaster, such as a hurricane or major flood, an animal ID system could be used to locate and rescue at-risk animal populations. Opponents' Claimed Criticisms Opponents argue that an animal ID and traceability system: 1. Constitutes an i nvasion of privacy . One of the primary concerns cited by opponents or critics of a national animal ID program is that the collection of personal identification information and production methods represents a government invasion of privacy and could potentially result in the public disclosure of proprietary information. These critics claim that personal data held by government authorities is not secure and may ultimately be released to the broader public. 2. Increase s c osts and technical c omplexity . Other critics cite the likelihood of increased producer-level costs of implementation with no guarantee of any market benefit. This concern was at least partially born out by a USDA-funded benefit-cost analysis of animal ID implementation in the United States (discussed in detail in a later section of this report) which found that over 90% of the annual cost of such a program would fall upon the cattle sector. In addition, the as-yet-unknown technology requirements (e.g., computer hardware/software, record keeping, radio frequency recording, etc.) could potentially increase the complexity of operations and could easily exceed an operator's capability. 3. Rewards vertical integration at the expense of family farms . Studies have shown that the cattle industry is expected to bear the brunt of the costs of implementing a national ID program, in large part because each individual animal will have to be tagged, unlike in the large, vertically integrated pork and poultry industries, where animals are usually raised and moved in lots. Critics claim that this added cost factor would unfairly disadvantage cattle producers in domestic and international meat markets. For small operators who are unable to spread such new costs over large operations, ID costs would likely erode an already thin profit margin. 4. D isadvantages family farms with a l ack of market power in price structure . It has also been argued that, as more tracing requirements are imposed, large retailers and meat packers will exercise market power to shift compliance costs backward to farms and ranches, making it even more difficult for the smaller, independent ones to remain in business. 5. Is objectionable on r eligious grounds . Certain religious groups claim that a government program marking individual animals is an apocalyptic sign of the world's end and should therefore be avoided. 6. Other potential reasons for producer push-back . Although the issue is unstated, some producers are likely concerned that greater transparency at the farm level as a result of more thorough counting and reporting of livestock numbers and sales may increase both income and property tax liabilities, particularly for those producers who previously provided less than full disclosure of animal numbers and farm operations. Development of a National Animal ID System At the national level, an animal ID and traceability program emerged and evolved over the years from various state and national animal disease eradication and pest control programs. For example, USDA's Animal and Plant Health Inspection Service (APHIS)—the federal agency that oversees animal health in consultation with state veterinary authorities—directs several programs for animal disease eradication and control that include animal identification components effectively requiring ID and tracking. As part of a brucellosis eradication program, uniquely numbered brucellosis ID tags were routinely attached to animals, noting that they had been vaccinated or tested. The program was successful, and brucellosis has largely been eradicated from U.S. commercial herds; as a result, animal ID became less common as the program wound down. In addition to ID requirements under selected APHIS programs, certain classes of livestock have long had official identification requirements before entering interstate commerce. For example, the official disease programs for pseudorabies in swine and scrapie in sheep require that both of these species be officially identified before entering interstate commerce. Often state laws or breed association rules require animals of these and other species, like cattle and horses, to be identified to participate in shows or races. But these various programs are not national in scope and vary in their manner of animal identification, record keeping, and data management. U.S. animal ID limitations were noted after bovine spongiform encephalopathy (BSE, or mad cow disease) was discovered in the United States (in a Canadian-born dairy cow) in December 2003. A number of trading partners that had quickly closed their borders to U.S. beef reportedly were reluctant to reopen them, due in part to U.S. difficulties in tracing the whereabouts of other cattle that had entered the United States with the BSE-infected cow; similar difficulties arose in determining the whereabouts and/or herd mates of the two later U.S.-born BSE cases. The National Animal Identification System (NAIS) program, first proposed in 2002, attempted to build on and learn from these earlier programs, and, although administered by USDA's APHIS, was based on a state-federal-industry partnership that provided the opportunity for producers not part of a disease program to voluntarily participate in national animal health safeguarding efforts. Certain states have mandated some components of animal identification, such as premises registration; however, at the federal level, NAIS was a voluntary program. USDA's February 5, 2010, decision to replace NAIS with a more flexible, state-based program that mandates traceability only for livestock moving in interstate commerce responds to strong criticism of NAIS from the U.S. cattle sector, in large part because the burden of cost and implementation would fall most heavily on cattle producers. The following discussion refers primarily to the now-outdated NAIS system, but is useful in that many aspects of NAIS remain highly relevant to the potential implementation of the new, as-yet-unnamed system to take its place. Species Coverage NAIS was intended to cover all major commercial livestock and poultry species raised in the United States, including beef and dairy cattle, hogs, sheep, goats, chickens, and turkeys, as well as large animal species raised and kept for sports and/or recreation, most notably horses. This was a new development in the United States, as there has never been a nationwide animal ID system for all animals of any given species. Household pets were excluded from NAIS. Only animals that enter commerce or that commingle with animals at other premises (like sales barns, state or national fairs, or exhibits) were to be identified. Also, animals that typically are moved in groups—such as hogs and poultry—could be identified as part of their group rather than individually. USDA's Involvement Because NAIS was voluntary, and because much of its implementation was to occur at the local and state levels, USDA's involvement was focused on popularizing the program, ensuring that adequate information was available to all participants (both actual and potential), and addressing the following general issues: prioritizing implementation by species/sectors, taking into account where the greatest disease concerns and traceability opportunities exist; harmonizing animal ID programs; standardizing data elements of disease programs to ensure compatibility; integrating automated data capture technology with disease programs; partnering with states, tribes, and territories; collaborating with industry; and advancing ID technologies. To ensure that NAIS participants and other interested stakeholders had access to pertinent information about the program, USDA published a series of reports that provided participant guidance, technical standards, and implementation strategies. Three reports in particular (described below) provided detailed information about the status of NAIS, how to participate in the program, including the necessary technical details, and the future direction of program implementation. NAIS Business Plan21 A Business Plan to Advance Animal Disease Traceability detailed recommended strategies and actions to enable existing state and federal regulated and voluntary animal health programs, industry-administered animal health and marketing programs, and various animal identification techniques to work in harmony to enhance animal disease traceability. NAIS User Guide22 The NAIS User Guide , first published in November 2006, provided guidance to producers and owners of animals, as well as other sectors involved in the animal agricultural industry, on how to participate in NAIS and how participation would benefit them. NAIS Program Standards and Technical Reference23 As a supplement to the User Guide , the Program Standards and Technical Reference document established data standards for NAIS, including: the data element formats for premises identification numbers, animal identification numbers, and group/lot identification numbers, needed to ensure compatibility across information systems; standards for official identification devices that utilized the animal identification number; and information on technology standards published by the International Organization for Standardization (ISO) that were utilized in NAIS. Use of these standards by states, tribes, industry organizations, identification device manufacturers, and other entities involved in NAIS would help to ensure system effectiveness. NAIS Goals The primary goal of NAIS was to protect the commercial interests involved in U.S. agriculture from the potential harm associated with the outbreak of an animal disease. NAIS was not intended to serve as a food safety program per se, although there could be positive public safety effects from its successful implementation. USDA identified the following specific goals for NAIS: Increase the United States' disease response capabilities. Limit the spread of animal diseases. Minimize animal losses and economic impact. Protect the livelihoods of animal producers. Maintain market access. To accomplish these goals, USDA's long-term goal was to achieve the ability to identify and trace animals of interest within 48 hours of an animal disease problem. To meet this time frame, animal health officials would require rapid access to reliable and complete data on both animal ID and movement history. NAIS Program Implementation When a disease outbreak occurs, animal health officials need three key pieces of information in order to contain the outbreak and limit its commercial damage. Which animals are involved in a disease outbreak? Where are the infected animals currently located? What other animals might have been exposed to the disease? NAIS was designed to meet these three data needs so as to facilitate quick traceback from the point of discovery of an animal disease at any point in its commercial marketing chain back to its original premises, while noting all other animals that came into contact with the diseased animal. To collect the requisite information, NAIS was composed of three sequential components—premises registration, animal identification, and animal tracking. Step 1. Premises Registration25 The first phase of NAIS involved registering the geographic location (i.e., the farm or ranch) where the livestock or poultry were raised, housed, or boarded. To meet USDA's data standards for premises registration, states and tribes had to collect and maintain "at a minimum" the following pieces of information: premises identification number (PIN); name of entity; contact person for premises; mailing address or latitude/longitude coordinates of the premises; contact phone number; operation type; date activated, date retired, and the reason retired (to determine whether animals still exist at the location); and alternative phone numbers. The PIN, a unique seven-digit number permanently assigned to a location, would not change following a change of ownership. A producer or owner could have multiple PINs based on the nature and type of operations (e.g., if a single producer had distinctly different animal production activities taking place at different locations). Premises were to be registered at one of the state (or tribal) animal health authorities. Premises registration was free and did not require participation in the following two steps. USDA maintained the premises information in a National Premises Information Repository, but declared that it would protect individuals' private information and confidential business information from disclosure. According to USDA, premises information would ensure that producers are notified quickly when a disease outbreak or other animal health event might harm their operations. In an emergency, animal health officials would be able to quickly locate at-risk animals and take precise actions to address the situation, minimize hardships, and speed disease eradication efforts as much as possible. In late 2006, the goal was to have all premises registered by 2009. However, as of September 6, 2009, only about 37% of premises (excluding horses) were registered under the NAIS out of an estimated 1.4 million U.S. animal and poultry operations ( Table 3 ). USDA stated that much higher levels of participation would be needed to successfully implement NAIS. Step 2. Animal Identification28 The second phase of NAIS involved assigning each individual animal or each specific group of animals a unique number from a uniform numbering system. A group ID is best suited for animals, such as swine or poultry, that are raised in confined lots and move through the production chain as one group. Animal Identification Number (AIN) An animal identification number (AIN) is a unique, 15-digit number, where the first three numbers are the country code and the following 12 digits are the animal's unique identifying number. The first three numbers of an AIN issued in the United States would always be 840. As a result, tags, radio frequency identification devices, and other ID devices that comply with the 15-digit AIN numbering system are often referred to as 840 devices. Animal ID under NAIS was accomplished by obtaining USDA-recognized numbering tags or devices from representatives of authorized manufacturers. AIN devices include the traditional visual ear-tag or tattoos that are read by physical viewing, or the radio frequency identification (RFID) tags as well as injectable transponders, which may be read electronically from a moderate distance and without direct line of sight. USDA did not designate any specific identification technologies beyond the minimum requirements for official identification described in the Code of Federal Regulations . In recent years, the use of RFID devices and injectable transponders with information that is read by scanners and fed into computer databases is becoming more common, because these devices allow for faster, easier access to ID information. Because they can be read electronically, RFID and electronic transponder devices eliminate the need to approach or restrain animals, thereby reducing stress and increasing the quality of the data obtained. Some animals did not need to be identified under NAIS, specifically animals whose movement poses a low risk of disease spread or exposure. Such cases include animals that never leave their birth premises (e.g., that die and are buried at their birthplace) or are only moved directly to custom slaughter for personal consumption. However, USDA encouraged all animal owners to register their premises, regardless of the number of animals present, because many animal diseases (such as avian influenza, foot-and-mouth disease, and vesicular stomatitis) can be spread whether an animal leaves its home premises or not. The person responsible for the care of the animal would choose when to place the ID on the animal. Some producers might want to attach ID devices shortly after birth; others might choose to attach a device later. However, USDA contended that an animal should have an ID attached before it moved from its current premises to another producer's premises, a livestock market, or a feedlot, among other locations. If the animals could not be tagged at their current premises, producers might elect to have their animals tagged at an auction market providing tagging services when they were ready to market their animals. In such cases, when the animals were unloaded, they would be tagged before they were commingled with animals from other premises. In some areas, tagging services are available. Producers who purchase animals (whether from a domestic or foreign source) and bring them into their operation would be expected to maintain the official identification already on the animal—no additional identification or change of identification of those animals would be needed. Group Identification Number (GIN) Animals that typically move through the production chain as a group of animals of the same species could be identified by group/lot identification numbers (GINs), rather than individual numbers. This practice is most common in the poultry and pork industries. However, group/lot identification could be an option for other species moving through the production chain as a group. The GIN is a 15-character number consisting of the seven-character PIN; the six-digit date (MMDDYY) that the group or lot of animals was assembled; and a two-digit number (01 to 99) to reflect the count of groups assembled at the same premises on the same day. Since the GIN is "self-generated" by the producer (not assigned by USDA), the GIN of each group would be maintained at the premises by the producer in his or her management records. The ID would remain with the animal for its lifetime. The uniform numbering system would link each producer's livestock or poultry flock to the animal's birthplace or premises of origin. The actual identification protocol is sensitive to the unique qualities of different species groups, and the way they are raised, moved, commingled, and processed. Step 3. Animal Tracing31 The third phase of NAIS involved access to timely, accurate animal movement records in order to quickly locate at-risk animals in the event of a disease outbreak, and to limit the disease to a clearly defined region or compartment. Under this third step, a producer would select one of the NAIS-compliant animal tracking databases (ATDs) maintained by states and private industry (i.e., not the federal government) to which the producer could report the movement of animals shipped from or moved into their premises. Under NAIS, only the minimum, standardized tracing information was necessary for participation. The minimum traceback information included: the national premises identification number (PIN); the animal ID number (AIN) or group ID number (GIN); the date of the event; and the event itself (e.g., move-in to a new premises or move-out of the current premises). Other animal-specific data (e.g., age, species, sex) that supported NAIS in traceback situations were also standardized, but were not necessary for participation. The traceback information would be read and recorded each time that a notable movement between locations occurred. Movements within a production unit for management purposes (e.g., from pasture to pasture) were not considered to impact disease spread, and therefore were not necessary to report relative to NAIS. The voluntary animal tracing component of NAIS was a public/private partnership. Both industry—through private systems—and states would operate and maintain ATDs, which contain the animal location and movement records that producers report to help safeguard animal health. In other words, the federal government would not maintain the ATDs; states and privates entities would. Having states and industry maintain these ATDs was part of USDA's plan to assure confidentiality for participants. On the federal side, USDA would operate a portal system to enable animal health officials to submit requests for information to the administrators of the ATDs when investigating an animal disease event. This system was known as the Animal Trace Processing System (ATPS). When there was a disease outbreak or other animal health event, the ATDs were designed to provide timely, accurate reports that showed where potentially exposed animals had been and what other animals had come into contact with them. USDA defines retrieval of traceback data within a 48-hour window as optimal for efficient, effective disease containment. State and federal animal health officials would use the system only in the following situations: an indication (suspect, presumptive positive, etc.) or confirmed positive test for a foreign animal disease; an animal disease emergency as determined by the Secretary of Agriculture and/or state departments of agriculture; or a need to conduct a traceback/traceforward to determine the origin of infection for a program disease (brucellosis, tuberculosis, etc.). Issues Concerning NAIS Low Participation Rates; Slow Implementation Pace As of September 2008, about 40% of potential premises in the United States (including premises with horses) had been registered ( Table 4 ), although there was substantial variation in participation across species and states ( Table 3 ). Poultry and sheep registration was estimated at 95%, swine at 80%, goat at 60%, horse at 50%, and cattle at 18%. On September 6, 2009, APHIS reported that 531,284 animal premises (excluding horses) had been registered in one of the available databases ( Table 3 ). This represents 36.9% of the estimated 1.4 million livestock and poultry farms (with animal product sales of at least $1,000) in the United States, up slightly from a year earlier. To achieve an effective response to an animal disease outbreak, a certain level of participation is necessary. According to USDA, NAIS would have to achieve a "critical mass" level of participation to achieve its long-term goal of 48-hour traceback. USDA estimated that 70% of the animals in a specific species and/or sector would need to be identified and traceable to their premises of origin to achieve the necessary "critical mass." Dr. John Clifford, USDA's Chief Veterinary Officer for animal health, also cited a participation rate of 70% of the animals in a specific species—that could be both identified and traceable to their premises of origin—as necessary to provide an effective measure of traceability. However, Dr. Clifford suggested that a much higher participation rate, perhaps as high as 90%, would be necessary to ensure the full benefits of the system. Some animal ID program supporters have criticized USDA for moving too slowly and/or not setting a clearer path toward universal ID. A July 2007 report by the Government Accountability Office (GAO) concluded that a number of problems had hindered effective implementation of animal ID, such as no prioritization among the nine animal species to be covered to focus on those of greatest disease concern; no plan to integrate NAIS into existing USDA and state animal ID requirements; and no requirement that some types of critical data be provided to the databases, such as species or age. USDA's NAIS Business Plan (2008) was intended to respond to several of the GAO criticisms. Others believe that USDA's slow progress has simply reflected the wide differences among producers and other interests over many unresolved issues. Mandatory or Voluntary? NAIS was operated as a voluntary program. However, USDA officials expressed concern that participation rates were too low for NAIS to be effective at achieving its 48-hour traceback window. These officials publicly called for Congress to address the low participation rates either by increasing the incentives to participate or by making the program mandatory. Others, including many state animal health officials, had already made similar requests. The American Veterinary Medical Association (AVMA), which represents more than 78,000 veterinarians across the United States, addressed Congress on its support for mandatory participation in NAIS. At meetings in October 2006, the National Assembly of State Animal Health Officials and the U.S. Animal Health Association's livestock committee each approved a recommendation that, as a step toward a national system, USDA make animal ID mandatory for all U.S. breeding cattle. Consumer advocacy groups also have pressed for a mandatory national system. Among livestock industry groups, the National Pork Producers Council (NPPC), the National Milk Producers Federation (NMPF), and the American Meat Institute (AMI) announced their support for a mandatory animal identification system. Both the chairman of the House Committee on Agriculture, Collin Peterson, and the chairwoman of the House Committee on Appropriations' Subcommittee on Agriculture, Rosa DeLauro, expressed their interest in seeing NAIS implemented as a mandatory program as a way to avoid devastating losses from virulent diseases. In contrast, groups opposed to a mandatory NAIS have been associated primarily with the cattle industry, including the Rancher's-Cattlemen Action Legal Fund (R-CALF), the National Cattlemen's Beef Association (NCBA), and the Farm-to-Consumer Legal Defense Fund. Some opponents reportedly have worked to block mandatory and/or even voluntary programs in various states. The cattle groups fear that high costs for equipment to carry out the system will favor continued concentration in the industry to the disadvantage of small, independent producers, and they question whether USDA can keep the information confidential. Several members of Congress from districts and states with large cattle industries have echoed the cattle industry's concerns. There has been some uncertainty over the degree of authority that a U.S. Secretary of Agriculture has in determining by decree whether NAIS would be a voluntary or mandatory program. However, in August 2006, then-Secretary of Agriculture Mike Johanns responded to the growing concerns of the cattle industry by announcing that USDA would continue to implement NAIS as a voluntary program. Proponents of a mandatory NAIS program have argued that, with a change in administration, Secretary Vilsack should have the authority to reverse Secretary Johanns's earlier determination and announce that participation in NAIS would be mandatory for the U.S. livestock industry. Costs and Who Pays An animal ID system imposes a variety of costs, such as for tags or other identifying devices and their application, and data systems to track animals. As the extent of traceability increases, so do likely costs. Cost estimates of a national system have varied broadly, and are not directly comparable, a reflection of estimators' differing assumptions and of the varying designs of proposed programs. A related policy question is who should pay—the industry (and ultimately consumers), government, or both? USDA's ideas have called for expenses to be shared (e.g., database costs funded by government and the identifying devices by producers). It has been argued that, as more tracing requirements are imposed, large retailers and meat packers will exercise market power to shift compliance costs backward to farms and ranches, making it even more difficult for the smaller, independent ones to remain in business. Larger, more vertically integrated operations are more likely to have the resources and scale economies to survive, some have argued. On the other hand, if traceability costs forced big meat plants to reduce line speeds, "smaller plants with slower fabrication speeds may be better equipped to implement traceability to the retail level and may find niche market opportunities." On April 29, 2009, APHIS released a study, the KSU Benefit-Cost Study (2009) , of the economic benefits and costs of adopting USDA's NAIS. The research was conducted by economists at Kansas State University in collaboration with researchers from Colorado State University, Michigan State University, and Montana State University. The report represented the researchers' best estimate of what would result from the adoption of NAIS across multiple species and at varying participation rates. Key study assumptions concerning individual versus group ID tagging included the following: all cattle are individually ID tagged; all swine are group ID tagged, except for cull breeding animals, which require individual ID tagging; and all poultry are uniquely group ID tagged. The results for a 100%-participation scenario are summarized in Table 5 . Estimated Costs The KSU Benefit-Cost Study (2009) showed that annual estimated costs for implementing NAIS throughout the livestock (i.e., food animal) industries would be approximately $228 million (at 2009 prices) for full pre-harvest traceability with 100% participation ( Table 5 ). The cost expands to $304.2 million when horses are included. The cost estimates are less for lower levels of participation and for more limited traceability features. Over 90% of the food animal industry costs for such a system would be associated with the cattle sector, which equates to $5.97 per animal marketed. This is largely due to the individual animal ID required, whereas swine, sheep, goats, and poultry can often be sufficiently traced using premises and group lot information. Identification tags and tagging cattle accounted for 75% of the cattle sector's annual adoption costs. The estimated tag and tagging costs varied among cattle producers from $3.30 to $5.22 per animal, depending on current identification practices. In comparison to the cattle industry's $5.97 average cost per marketed animal, the average per animal cost for other livestock sectors was $0.059 per swine, $1.39 per sheep, $0.0007 per broiler, $0.002 per turkey, and $0.0195 per layer. Estimated Benefits The study also found that the economic benefits from NAIS with 100% participation easily exceeded the costs. Benefits included: substantial federal and state government savings in connection with administration of animal disease control and eradication programs due to the reduction in disease outbreaks; economic benefits from quickly re-establishing markets following a disease outbreak, plus possible expanded market access in the international marketplace; avoidance of significant losses—as great as $1.32 billion per year over a 10-year period—due mostly to lost export market access; and increased consumer demand resulting from higher confidence in food products. By evaluating the cost-benefit effects over a range of participation levels, the study found that implementation of NAIS would become more cost-effective as participation levels increase, and that NAIS might not be economically viable at lower participation levels. Liability and Confidentiality of Records Some producers have been concerned that they would be held liable for contamination or other problems over which they believe they have little control after the animal leaves the farm. On the other hand, documentation of management practices, including animal health programs, can help to protect against liability because it can prove where animals originated and how they were raised. Also at issue is whether producers can and should be protected from public scrutiny of their records. The federal Freedom of Information Act (FOIA) entitles members of the public to obtain records held by federal agencies. Some producers have been concerned, for example, that animal rights extremists might misuse information gained through FOIA, or that the data collection might reveal proprietary information. However, FOIA exempts access to certain types of business information, such as trade secrets, commercial or financial information, or other confidential material that might harm the provider. In the 110 th Congress, conferees deleted a provision (Sec. 10305) in the Senate-passed version of H.R. 2419 , the omnibus 2008 farm bill enacted as P.L. 110-246 , that would have required USDA regulations addressing "the protection of trade secrets and other proprietary and/or confidential business information" disclosed due to participation in an animal ID system. International Traceability Requirements for Meat Imports A South Korean agriculture official recently reported that his government intends to impose traceability requirements on imported beef as soon as December 2010. Currently the EU requires individual identification and traceability for all suppliers, domestic and foreign. Presently, Japan does not specifically require traceability for imported beef, although imported beef is subject to several other specifications including a 20-month age limitation. The opposition Democratic Party of Japan (DPJ) has declared that, if elected, it will work toward early passage of both an existing "BSE Measures Law" and a "Beef Traceability Law" in order to subject imported beef to the same traceability requirements as domestic beef. On August 30, 2009, the DPJ won 308 seats in the Japanese Diet. The DPJ hopes to forge a coalition with two minor parties that would give it a two-thirds majority, enabling it to force through legislation. However, as the DPJ is involved with setting up its new administration and prioritizing its agenda, it is unlikely that the issue of a traceability requirement on imported meat will be addressed as an early priority. The only top tier beef exporter in the world besides the United States without a traceability system is India, which exports very low-valued canned/cooked beef. According to CattleFax analyst Brett Stuart, "While few U.S. producers are willing, or expected, to implement a system voluntarily with little direct benefit, we may be rapidly approaching a future where beef traceability is the price of admission into the global beef world." The WTO's Agreement on the Application of Sanitary and Phytosanitary Measures applies rules to the use of non-tariff trade barriers (e.g., traceability and identification requirements) to restrict market access. The implementation of traceability measures applied to imports must meet two requirements. First, any traceability requirements must be scientifically justified based on an assessment of risk to human, animal, or plant health. Second, they may be equivalent to, but not more rigorous than, the standards applied to domestic industry. USDA Listening Sessions Since early 2004, USDA has committed nearly $142 million to the development of NAIS, providing many of the funds to states and tribal organizations for research, database systems, and startup of premises registration. Despite the large monetary investment, overall participation in NAIS remained low through 2009 at about 40% of livestock producers, and substantial criticism of the proposed national program resonated from the U.S. cattle sector. In response to slow growth in NAIS participation rates and to better assess the producer concerns surrounding NAIS implementation, Secretary of Agriculture Tom Vilsack undertook a series of public listening sessions around the country between April 15 and June 30, 2009, to hear from livestock producers and other interested parties concerning their views of the NAIS. Secretary Vilsack said that he hoped to use the listening sessions to gather feedback and input that would assist him in making decisions about the future direction of animal ID and traceability in the United States. It was the information obtained from these listening sessions, plus the thousands of written comments submitted to USDA, that motivated Secretary Vilsack to announce the abandonment of NAIS in favor of a more flexible, state-based system on February 5, 2010 (as described in this report's introduction). Congressional Actions Funding From FY2004 through FY2009, approximately $142 million was appropriated for NAIS ( Table 6 ). However, since 2008 Congress expressed growing frustration with the slow pace of NAIS implementation relative to the funding outlays. The explanatory language that accompanied the FY2009 USDA appropriation ( P.L. 110-161 , Division A), explicitly directed APHIS "to make demonstrable progress" to implement the program, and to meet a number of specific objectives (regarding 48-hour traceback ability) that were in the agency's 2008 traceability business plan. In 2009 the Administration proposed increasing the funding for the NAIS slightly to $14.6 million in FY2010. However, on June 11, 2009, the House Agriculture Appropriations Subcommittee voted to eliminate funding for USDA's NAIS from the FY2010 appropriations bill ( H.R. 2997 ). Subcommittee chairwoman Rosa DeLauro, along with Collin Peterson, chairman of the House Agriculture Committee, both of whom expressed interest in seeing a mandatory animal ID program passed into law, also expressed frustration with the slow pace of national sign-up for NAIS. The full committee's report ( H.Rept. 111-181 ) observed: After receiving $142 million in funding since FY2004, APHIS has yet to put into operation an effective system that would provide needed animal health and livestock market benefits. Until USDA finishes its listening sessions and provides details as to how it will implement an effective ID system, continued investments in the current NAIS are unwarranted. The Senate version of H.R. 2997 (originally S. 1406 ) originally provided for the entire $14.6 million proposed by the Administration. An amendment to zero out Senate funding for NAIS failed to pass in committee in July; however, another floor amendment ( S.Amdt. 2230 ; introduced by Senators Tester and Enzi) was passed on August 3, 2009, that reduced the FY2010 funding to $7.3 million. The successful amendment explicitly restricted use of FY2010 funds to ongoing NAIS activities and purposes related to rulemaking for the program. The Senate version of H.R. 2997 , as amended, was passed by the full Senate on August 4, 2009. House and Senate differences in NAIS funding for FY2010 were resolved in conference and the final FY2010 funding level for NAIS was set at $5.3 million. The FY2010 Agriculture appropriations bill was signed into law as P.L. 111-80 by President Obama on October 21, 2009. Legislative Proposals USDA has claimed it has existing authority, under the Animal Health Protection Act (7 U.S.C. 8301 et seq. ), to implement an animal ID program. In the 110 th Congress, several bills were proposed (but not adopted) aimed at clarifying USDA's authority or spelling out what type of program should be established. They included H.R. 1018 , prohibiting USDA from carrying out a mandatory program and also seeking to protect the privacy of producer information under a voluntary system; H.R. 2301 , establishing an industry-led Livestock Identification Board to manage a national ID system; and S. 1292 , requiring USDA to implement a more comprehensive farm-to-consumer animal ID and meat traceability program. H.R. 3485 would have required comprehensive new traceability systems both for USDA-regulated meat and poultry and for other foods regulated by the U.S. Food and Drug Administration (FDA). In the 111 th Congress, the broader food traceability provisions of H.R. 814 (DeGette) and S. 425 (Brown) both include the requirement that FSIS establish, within one year, a system that can trace each animal to any premises in which it was held at any time prior to slaughter, and each carcass, carcass part, or meat/poultry product from slaughter through processing and distribution to the ultimate consumer. The bills also would authorize the Secretary of Agriculture to require records to be maintained and to provide access to them for purposes of traceability. Traceability provisions have been incorporated into food safety legislation ( H.R. 2749 ) approved by the House and into a bill ( S. 510 ) expected to be the markup vehicle in the Senate, but these provisions would apply to FDA-regulated foods, not to FSIS-regulated meat and poultry products. Congressional Hearings The 111 th Congress held two hearings on the national animal ID system (NAIS), both in the House. On March 11, 2009, the House Committee on Agriculture's Subcommittee on Livestock, Dairy, and Poultry held a public hearing to review animal identification systems. Then on May 5, 2009, the House Committee on Agriculture's Subcommittee on Livestock, Dairy, and Poultry held a joint public hearing with the Committee on Homeland Security's Subcommittee on Emerging Threats, Cybersecurity, and Science and Technology to review the National Animal Identification System. Previous Congresses have held public hearings on issues related to animal ID, including animal health and disease matters, as well as bio-security and agro-terrorism. Appendix A. Chronology of NAIS's Development Early U.S. History Use of animal ID in the United States dates back at least to the 1800s, when hot iron brands were used throughout the U.S. West to identify ownership and prevent thievery. 1940s During the 1940s, the APHIS predecessor at USDA initiated an extensive program to identify cattle vaccinated for brucellosis. The official brucellosis vaccination tag and ear tattoo provided USDA with a highly successful animal ID program for cattle for decades. However, since brucellosis has neared eradication in the United States, the system of tagging and ID has been phased out. 1950s-1980s Individuals associated with animal industries recognized that finding potentially sick or exposed animals early in a disease outbreak was essential to containing the disease quickly. USDA slowly began piecing together plans for a national animal identification system. 1986-1988 Bovine spongiform encephalopathy (BSE) or "mad cow disease"—a fatal neurological disease—is first identified in the United Kingdom's cattle and dairy herds. BSE is believed to be transmitted mainly by feeding infected cattle parts back to cattle (a practice widespread in the UK at the time). Subsequent testing found BSE to be widespread in the UK's cattle population and resulted in the slaughter of 3.7 million cattle. 1997 An outbreak of foot and mouth disease (FMD) in swine in Taiwan cost $6.9 billion in losses and eradication costs, including the slaughter of 3.8 million pigs, and decimated its previously strong pork export market. Similarly, a major outbreak of Classical Swine Fever in the Netherlands resulted in the destruction of 12 million hogs and direct economic losses totaling $2.3 billion. 2001 An outbreak of FMD in cattle in the United Kingdom ultimately led to the forced slaughter of over 10 million sheep and cattle and cost an estimated $7.9 billion in losses and eradication costs. 2002 APHIS officials working with the National Institute for Animal Agriculture, the U.S. Animal Health Association, and other organizations helped to draft an early version of an animal ID plan. 2003 The preliminary work plan was expanded by a group of approximately 100 state, federal, and industry representatives—the National Identification Development Team—which produced an initial draft of the U.S. Animal Identification Plan (USAIP). December 2003 A draft "U.S. Animal Identification Plan (USAIP)" is published calling for recording the movement of individual animals or animal groups in a central database. APHIS's role was to design an ID numbering system, then allocate numbers to premises (e.g., farms, feedlots, auction barns, processing plants) and to animals or groups of animals. Finally, APHIS was to coordinate the data collection. The work plan envisioned by the USAIP had first called for all states to have an animal premises ID system by July 2004, with farm animals of all major species identified by July 2006. As the draft USAIP was being published in December 2003, the first case of bovine spongiform encephalopathy (BSE or mad cow disease) was detected in the United States. Among the initiatives USDA quickly announced to shore up confidence in the beef supply was accelerated implementation of a verifiable national animal ID system including action taken by then-Secretary of Agriculture Ann Veneman who used her emergency authority to transfer $18.8 million of Commodity Credit Corporation (CCC) funds to APHIS for this purpose. April 27, 2004 Secretary Ann Veneman announced the framework for implementing the National Animal Identification System (NAIS). The outlines of the program have been periodically revised since then in response to changing circumstances and input from industry participants. May 2005 USDA issued a "Draft Strategic Plan" that included timelines for a mandatory program by January 2009. August 2005 USDA announced the Draft Program Standards with a new set of "guiding principles." April 2006 USDA unveiled a new plan—"Implementation Strategies"—that set a timeline for full implementation by 2009. The plan stated that the program was voluntary with a contingency that USDA would consider regulations that would require participation if voluntary participation levels were not adequate to have an effective program. August 2006 NAIS program was initially designed with a vision of ultimately transitioning from a voluntary program to a mandatory program. However, in response to various concerns raised by some producers, small farmers, and religious groups, then-Secretary of Agriculture Mike Johanns announces that NAIS would be entirely voluntary at the federal level. November 2006 USDA distributed a draft "user guide" as "the most current plan for the NAIS [which] replaces all previously published program documents, including the 2005 Draft Strategic Plan and Draft Program Standards and the 2006 Implementation Strategies." This user guide first identifies the proposed three-step approach—premises registration, animal ID, and traceability—to implementing a national animal ID program. The user guide sought to assure livestock producers that the program would remain voluntary, and that it is bound by law to protect individuals' private and confidential business information. December 2007 USDA's APHIS released the National Animal Identification System (NAIS) — A User Guide and Additional Information Resource . April 2008 USDA's APHIS released A Business Plan to Advance Animal Disease Traceability in draft form. This same report is currently available with a September 2008 date. The Business Plan attempted to further clarify current implementation strategies. It provided benchmarks to guide the NAIS' progress towards the long-term goal of 48-hour traceback of affected or exposed animals in the event of an animal disease outbreak. One of seven key strategies would be to prioritize species, with the primary commercial food animals in "Tier 1," along with horses that need a health certificate or test when moved. All other livestock and poultry would be in a lower-priority Tier 2. Another key objective would be to bring 70% of the cattle breeding herd into NAIS by the end of 2009. January 13, 2009 APHIS published a proposed rule entitled, "Official Animal Identification Numbering System," (Docket No. APHIS-2007-0096) in the Federal Register for comment through March 16, 2009. The proposed rule would establish the seven-character PIN as the standard location identifier. April 15, 2009 to June 30, 2009 Secretary of Agriculture Tom Vilsack undertook a series of public listening sessions—with a variety of stakeholders representing the full spectrum of views on the NAIS—around the country to gather feedback and input to assist Secretary Vilsack and USDA in making decisions about the future direction of animal identification and traceability in the United States. April 29, 2009 USDA's APHIS released the results of a comprehensive benefit-cost analysis— KSU Cost-Benefit Study (2009) —of the NAIS. February 5, 2010 Secretary of Agriculture Vilsack announced that USDA was substantially revising its approach to achieving a national capability for animal disease traceability. NAIS was to be replaced with a new approach that will allow individual states (and tribal nations) to choose their own degree of within-state animal identification (ID) and traceability for livestock populations. However, under the proposed revision USDA will require that all animals moving in interstate commerce have a form of ID that allows traceability back to its originating state. March 2010 Through August 2010 USDA held a series of public meetings on the Animal Disease Traceability framework to provide opportunities for state and tribal nation animal health officials to discuss and provide feedback. APHIS released two documents on August 13 ( Animal Disease Traceability Framework, Overview and Current Thinking and Animal Disease Traceability Framework , Update and Preliminary Content of the Proposed Rule ) that described what a proposed rule on traceability might contain. Appendix B. International Animal ID and Traceability Organizations and Standards The United States participates with its trading partners in several important international organizations that are involved in animal health, food safety, and trade in livestock and animal products including the CODEX alimentarius, the World Organization for Animal Health (OIE), and the World Trade Organization (WTO). In addition to U.S. participation in these international organizations, U.S. livestock and animal products are often subject to "export certification" standards imposed by importing countries. As a member of the WTO, the United States agrees to abide by a set of international trade rules that seek to harmonize participation in international commerce and to provide for a framework for dispute settlement. In contrast, both the CODEX alimentarius and the OIE are designed to recommend scientifically-based standards for food safety and animal health, respectively, but such standards are not international laws; rather, they are intended as guidelines for countries when they are developing their own standards. World Trade Organization (WTO) In response to concerns that market access may be limited by use of non-tariff trade barriers, the WTO's Agreement on the Application of Sanitary and Phytosanitary Measures explicitly restricts the implementation of traceability measures applied to imports to two requirements. First, any traceability requirements must be scientifically justified based on an assessment of risk to human, animal or plant health. Second, they may be equivalent to, but not more rigorous than, the standards applied to domestic industry. CODEX The Codex Alimentarius Commission was created in 1963 by two United Nations' organizations—the Food and Agricultural Organization (FAO) and the World Health Organization (WHO)—to develop food standards, guidelines and related texts such as codes of practice under the Joint FAO/WHO Food Standards Program. The main purposes of this program are protecting health of the consumers and ensuring fair trade practices in the food trade, and promoting coordination of all food standards work undertaken by international governmental and nongovernmental organizations. World Organization for Animal Health (OIE) Founded in 1924 as the Office International des Epizooties (OIE) and renamed in 2003 as the World Organization for Animal Health, the OIE is an intergovernmental organization responsible for improving animal health worldwide. In its capacity as a leading international standard-setting organization for animal identification and traceability, the OIE helps its member countries and territories to implement animal identification and traceability systems in order to improve the effectiveness of their policies and activities relating to disease prevention and control, animal production food safety, and certification of exports. In March 2006, the OIE's Terrestrial Animal Health Standards Commission established a first series of guidelines on identification and traceability on behalf of OIE Members, which democratically adopted them in May 2007 as official OIE standards in the Terrestrial Animal Health Code . Chapter four of the OIE's Terrestrial Code includes two sections on animal identification and tracing: section 4.1 which defines general principles, and section 4.2 which provides general guidance on the design and implementation of systems. In April 2008, the Director General of the OIE (Bernard Vallet) called for progressive implementation of animal identification and product traceability systems from the "farm to the fork" be progressively implemented worldwide. Under internationally recognized OIE standards, robust animal identification and tracing systems would allow compartmentalization and regionalization of a disease outbreak so that trade could continue for animal products from other parts of the country. The OIE's Terrestrial Code includes two sections that deal with compartmentalization: section 4.3 which defines general principles of zoning and compartmentalization, and section 4.4 which discusses application of compartmentalization. Export Certification Certification is frequently part of export verification processes imposed by importing countries. In the United States, certification is handled by USDA's Food Safety and Inspection Service (FSIS). Although each specific country can have its own specific beef importing requirements, certification generally refers to the idea that animal production methods and processing plants comply with the importer's veterinary, animal health, and sanitary standards. This often involves sanitary sampling and plant inspection by the importing country. The OIE contributes to harmonization of international certification standards through its various programs and via the promotion of transparency and reliance on scientific information as a basis for evaluation. Chapter 5 of the OIE's Terrestrial Code presents the general obligations related to certification as well as certification procedures. Foreign Animal ID and Traceability Programs Many of our international trading partners and competitors, including Argentina, Australia, Brazil, Canada, the European Union, Japan, New Zealand, South Korea, and Uruguay, have adopted national animal identification systems with traceability capabilities ( Table B -1 ). Canada The Canadian Cattle Identification Agency (CCIA) is a federally incorporated, nonprofit, industry-led organization that manages, administers, and develops policy for Canada's national individual identification, tracking, and trace-back system for the Canadian cattle and bison industry. The CCIA is led by a board of directors made up of representatives from several sectors of the Canadian livestock industry. The government's Canadian Food Inspection Agency (CFIA) is a non-voting board member of the CCIA. Agri-Food and Agriculture Canada (AAFC)—Canada's USDA counterpart—works closely with the CCIA to ensure that funding requirements for development and enhancement initiatives are met. Animal identification for cattle in Canada was initially a voluntary program when first established in 2001, but was phased into a mandatory program on July 1, 2002. Initially, identification was based on traditional CCIA-approved ear tags. However, in 2003 the Canadian cattle industry committed to transitioning to Radio Frequency Identification (RFID). Since September 1, 2006, all cattle leaving their farm of origin must be tagged with a CCIA-approved RFID tag consisting of a transponder with encoded chip and antenna. According to the CCIA, RFID benefits include exceptional tag retention and readability, increased data integrity, ability to read at a distance without line of sight, and future capabilities of full animal movement tracking. CCIA executive director Kerry St. Cyr, estimated that, as of March 2009, the nationwide compliance rate for Canadian cattle ID was between 99-100%. With respect to privacy issues, St. Cyr stated that all personal information associated with ear tag number is securely maintained within the national database and is only accessed by authorized personnel in the event of an animal health issue. CCIA's repository—the Canadian Livestock Traceability System (CLTS)—houses the national ID and traceback systems for a variety of industry and species groups including dairy, beef, bison, sheep, pork, and poultry. The Canadian sheep and hog identification programs gained mandatory status in 2004 and 2008, respectively. Australia The National Livestock Identification System (NLIS) is Australia's system for identification and traceability of livestock. NLIS is a permanent whole-of-life system that allows individual animals to be identified electronically and tracked from property of birth to slaughter. A mandatory system for cattle has been in place since July 1, 2005, while a tracing system has been operational for sheep and goats since January 1, 2009. Similar tracing systems are under development for pigs and alpacas. Australia began its animal identification system in the early 1960s in coordination with a national program to eradicate bovine tuberculosis and brucellosis. A mandatory property identification system for cattle was started in 1967 that identified herds in relation to a parcel of land; these were referred to as Property Identification Codes (PICs)—an eight-digit number that identifies the state, region, and specific location of a property—and provided the ability to trace all cattle back to their last property of residence. In the mid-1990s, the established visual-read-only PIC system was converted to an electronic (using Radio Frequency Identification Devices (RFIDs)) whole-of-life individual cattle identification system on the grounds that it was only a matter of time before such a system would be needed to ensure biosecurity, food safety and market access. In 1998, in response to a trading partner, individual identification was made compulsory for producers supplying the European Union (EU) market to provide meat from Hormone Growth Promotant-free cattle. In 1999, the NLIS was introduced. In a 2004 audit of the NLIS—the National Livestock Tracing Audit—all of the animals identified using NLIS were traced to their property of origin within 24 hours. In contrast, only 41% of cattle without NLIS tags were located within 24 hours. In 2005, NLIS expanded to mandatory animal identification for all cattle leaving their property of birth, and all stock movements must be read at points of transfer including saleyards and slaughterhouses. In Australia, at slaughter each individual animal is assigned a unique ID number that is attached to a bar code. As a result, individual animal ID information is linked not only to live animals, but can also be linked to carcasses, hides, and byproducts of each animal. However, unless specific agreements are reached between producers and harvesting facilities, the animals are generally grouped into lots by harvest date and time, and the individual animal information (carcass data) is not available. Australia's NLIS is a joint commitment and working partnership between the Australian Government at federal and state levels and Australian industry. However, the Federal government has an overall policy coordination role and supplies funding to underpin the national system. State governments have legal jurisdiction over the movement and health of livestock. The state governments work with industry in joint management committees to develop and implement legislation that underpins the animal identification program. This committee in each state coordinates extension and producer education programs such as demonstration sites, an assistance hotline and industry seminars that assist producers with on-farm use of technology. The state governments have established a registry of PICs, are responsible for ordering of identification devices and have assisted with establishing the reading infrastructure and more recently auditing device performance and monitoring compliance with legislative requirements. A private industry company, Meat and Livestock Australia (MLA), currently administers the database for NLIS. As a result, data collected through the NLIS are protected from Australian Freedom of Information (FOI). Privacy and "commercial-in-confidence" provisions of the Australian FOI Act offer additional protection via exemptions for this type of data. European Union The European Union (EU) explicitly classifies animal identification as part of its "food safety" programs and has mandatory programs in place for the major commercial animal species. The basic objectives for EU rules on the identification of animals are the localization and tracing of animals for veterinary purposes for the control of infectious diseases. EU species-specific ID systems have evolved over time in response to particular disease events including the outbreaks of classical swine fever in 1997 and foot-and-mouth disease in 2001, as well as the 1997 BSE crisis. As the various animal ID systems evolved within the EU, they have each incorporated trace back and general traceability as a system goal along with animal identification. In April 1997, in response to the BSE crisis, the Council of the European Union implemented a mandatory system of permanent identification of individual bovine animals enabling reliable traceability from birth to death. All bovine animals were required, by January 1, 2000, to be identified with double ear tags that identify individual animals, a register must be maintained at each animal location (farm, market, etc.), cattle passports to record movements, and a computerized electronic national database includes both ID and tracking information. On July 17, 2000, an additional regulation was passed that fully implemented and made mandatory the bovine ID and traceability system that is currently in place in the EU. In addition to tracking animals from birth through harvest, the EU regulations stipulate the labeling of meat products in the following way: (1) a reference number that links the meat product to the animal or animals of origin; (2) identification of the member state where the meat was harvested and processed; and (3) the harvesting or fabrication facility's approval number(s). Mandatory food traceability has been a part of the general food law of the EU since January 1, 2005. Since July 1, 2000, it is compulsory for all equidae moving within the EU to be accompanied by a passport during their movements (on foot and during transport). A mandatory identification system for porcine animals went into effect on August 28, 2008. Initially adopted in December 2003, the EU's ID system for ovine and caprine animals was entered into in full force in July 2005. Japan Japan has a mandatory bovine ID and traceability system (in place since December 1, 2004) that identifies and tracks individual domestic animals from birth through the production chain until purchased by consumers. Imported beef is presently not subject to the same traceability requirements as domestically produced beef. However, political pressure for such a requirement appears to be building. In response to a series of food safety crises in the early 2000s, including the discovery of bovine spongiform encephalopathy (BSE) in Japan's domestic cattle herd and a series of labeling scandals, the Japanese government implemented a series of animal traceability regulations and food safety oversight. The first phase began in July 2002 when the Law Relating to Special BSE Countermeasures was enacted. As part of this new law, Japan implemented a set of bovine animal traceability and identification laws that required traceability of domestically produced beef from farms to slaughterhouses by December 1, 2003. In the second phase, Japan's Diet passed the Food Safety Basic Law on May 23, 2003, establishing the Food Safety Commission. Then, in June 2003 the Beef Traceability Law was enacted that required traceability be extended from slaughterhouses to processors, distributors, and retailers by December 1, 2004. As a result, Japanese retailers and restaurants now display animal identification numbers to allow consumers to reference information about the domestic beef that they buy and eat. In June 2003, Japan's Ministry of Agriculture, Forestry, and Fisheries (MAFF) also announced a new Japan Agricultural Standard (JAS) program to certify the traceability of imported beef. To gain certification, exporters must be able to provide all the same information required under the Law Relating to Special BSE Countermeasures—date of birth, sex, breed, name and address of owner, location of fattening, date fattening commenced, and slaughter date—plus the names of all feeds and pharmaceuticals used in producing the animal. South Korea South Korea has a mandatory domestic Beef Traceability System (BTS). Initiated in 2004 as a voluntary program, the BTS became mandatory for domestically produced beef in 2009. The BTS requires individual identification and registration in a central database system (known as the Beef Traceability database). The BTS operates as a whole-of-life traceability system, tracking each individual animal from birth to the consumer. For domestic beef produced under the BTS, Korean consumers can access a range of animal-specific information including the sex, breed, quality grade, location of birth and subsequent premises, owner's personal information, feed administered, medications given, location and date of slaughter, date of inspection, and location of processing. In July 2009, a South Korean agriculture official reported that the South Korean government intends to impose traceability requirements on imported beef as soon as December 2010. New Zealand New Zealand does not have a fully functioning national animal ID system. In August 2004, the Animal Identification and Traceability Working Group (AITWG) was established when industry approached the government to work together to improve animal traceability in New Zealand. In March 2006, an Animal Identification and Traceability Governance Group (AITGG) was established to oversee the development of a new animal ID system under the name NAIT (National Animal Identification and Tracing). As of early 2009, NAIT still exists more as a project under development than as a functioning system. Currently New Zealand has several partial systems that allow for traceability at herd levels but fail to provide effective traceability for individual animals. In addition, these partial systems leave substantial coverage gaps at the national level. The current focus is on developing traceability for cattle and deer populations. The Ministry of Agriculture and Forestry (MAF) has stated that the addition of other species—whether flock/group or individual identification—to the NAIT system should only be considered once the system is up and running for cattle and deer. New Zealand's existing animal ID systems began under the Bio-security Act of 1993 which provided for two systems of partial bovine animal ID: the Management Information System for Dairy Administration (MINDA) and the National Bovine Tuberculosis Identification Program (NBTIP). MINDA is a voluntary livestock and herd management system that has very high dairy herd participation (97%) in New Zealand. However, MINDA was not designed and does not function well for animal traceability. In contrast, the NTBIP is a mandatory, herd-based system that requires the identification of cattle and deer before movement from their property of origin. In addition to these two systems, several other private and governmental traceability databases are available for producers' use on a voluntary basis. A new mandatory animal identification system for cattle and possibly deer is proposed to be in place by June 2011. The inclusion of deer is dependent on confirmation of the in-field performance of radio frequency tags. Brazil In 2001, Brazil created the Brazilian Bovine and Buffalo Identification and Certification System (SISBOV, now renamed ERAS) as a farm-level identification system for cattle. In September 2006, SISBOV was extended to include the entire beef chain rather than just producers. Initially, SISBOV was intended as a mandatory program for identification of individual animals with a target date of 2008 for mandatory national participation; however, Brazil's domestic market had little demand for origination information and Brazilian cattle producers resisted adoption. As a result, SISBOV remains a voluntary program focused primarily on those premises engaged in providing animals to slaughterhouses that supply products destined for foreign markets that require origination information—most notably the EU which was Brazil's largest beef export market at that time and which requires substantial identification and traceability criteria for imported animal products. In addition, instead of identifying individual animals, animal classification has been by group lot under SISBOV. The EU has accepted individual tags for each group of cattle sold to export slaughterhouses. Since 2003, successive audits of SISBOV conducted by the EU's Food and Veterinary Office (EU/FVO) have found severe shortcomings in Brazil's animal identification and traceability system. In 2008, the EU imposed a near-total ban on beef imports from Brazil, unless they were sourced from farms that had been approved by Brussels. However, in a report released on August 4, 2009, the EU/FVO suggests that the situation in Brazil was getting worse. Europe has two major concerns: a lack of robust information, and the fear that foot-and-mouth disease could inadvertently enter the EU from Brazil. Argentina In 2003, Argentina established a limited mandatory system of animal identification and traceability—the Argentine Animal Health Information System (SGS) —directed at animal products destined for the EU. The Argentine system included farm-of-origin information and permits that document cattle movements including whether the animals have been in areas exposed to FMD. However, as in Brazil, Argentina operates its animal identification system primarily for identifying cattle (generally in group lots) destined for export markets. Starting in 2007, official ID tagging has been required for all calves born after September 2007. The compulsory cattle identification program will facilitate tracking cattle from birth to slaughter; however, the entire Argentine beef herd is not expected to be tagged until 2017. Because Argentina has traditionally been unable to control disease outbreaks—particularly foot and mouth disease (FMD)—its beef exports to the United States have been primarily restricted to thermo-processed beef (heated to a specific temperature for a specified amount of time). These export limitations provide ample incentive for Argentina to improve its animal identification and traceability system. Uruguay Uruguay is very dependent on external markets for selling a large portion of its annual domestic production. An estimate 68% of Uruguay's annual beef production was sold in foreign markets during the 2004-2008 period. As a result, Uruguay has a strong incentive to provide animal identification and traceability information as demanded by foreign buyers; however, it is only since late 2006 that Uruguay has been able to institute a comprehensive national program. On September 1, 2006, Uruguay's Ministry of Livestock, Agriculture, and Fisheries (MAGyP) implemented a mandatory animal identification system called the National Livestock Information System (SNIG). Under SNIG, all individual animals must be identified (i.e., tagged) before six months of age or before they are transported from their property of birth. Two tags are required for all cattle, one highly visible and one electronic, for example, an RFID device. In addition, the appropriate paperwork that tracks cattle from birth to slaughter must accompany each animal. The Uruguayan government plans to have all herds registered and all cattle tagged by 2010. At that point, the government will require traceability be extended, not just to the point of slaughter, but also to all cuts of beef back to specific animals at their farm of origin. SNIG builds on Uruguay's national premises identification system (DICOSE)—established in 1973—which, for participating producers, provided information on each individual animal in their herds. Private individuals or companies registered within SNIG must be used for movement notification. Termination records are recorded by MAGyP. The SNIG database then includes premises and animal identification, movements, and termination data. SNIG does not yet mandate further traceability to consumers, although this is under consideration. The Uruguayan government currently pays for the ID tags, although it plans to shift the cost to the producers at some point in the future. Countries Not Implementing Animal ID Programs Not all countries with large animal populations have ongoing animal ID programs—examples include Bangladesh, India, Indonesia, and Russia. Reasons for the non-existence of animal ID programs in these countries include the following. Many of these countries have large land masses consisting of mainly agrarian populations that are not technologically advanced. Also, several of these countries lack national distribution chains for animal products, instead relying on local production and marketing processes. Alternately, in many poorer countries of the world, consumers are simply unable financially to be overly discriminating in their choice of animal products. As a result, many lower-income consumers are not willing to pay a premium for food that is identified and traceable.

Animal identification (ID) refers to keeping records on individual farm animals or groups of farm animals so that they can be easily tracked from their birth through the marketing chain. Historically, animal ID was used to indicate ownership and prevent theft, but the reasons for identifying and tracking animals have evolved to include rapid response to animal health and/or food safety concerns. As such, traceability is limited specifically to movements from the animal's point of birth to its slaughter and processing location. On February 5, 2010, Secretary of Agriculture Tom Vilsack announced that USDA was revising its approach to achieving a national capability for animal disease traceability. The previous plan, called the National Animal Identification System (NAIS), first proposed in 2002, was being abandoned. In its place USDA proposed a new approach—Animal Disease Traceability—that will allow individual states and tribal nations to choose their own degree of within-state animal identification and traceability for livestock populations. The within-state programs are intended to be implemented by the states and tribal nations, not the federal government. As such, any data collection and storage would be done by state, not federal, authorities. The flexibility is intended to allow each state or tribal nation to respond to its own producer needs and interests. However, under the proposed revision USDA will require that all animals moving in interstate commerce have a form of ID that allows traceability back to their originating state or tribal nation. The Secretary of Agriculture derives the authority to regulate interstate movement of farm-raised livestock from Section 10406 of the Animal Health Protection Act (P.L. 107-171, Subtitle E; 7 U.S.C. 8305). The larger program governing traceability of interstate animal movements and coordination between different states and tribal nations will be implemented in federal regulations through the federal rulemaking process. Since the February announcement, USDA has held a series of public meetings for animal health officials and producers to provide opportunities for discussion and feedback. USDA expects to issue a proposed rule in April 2011, and a final rule could be released 12 to 15 months later. Since 2004, USDA had spent $150 million trying to get NAIS up and running. Since 2008, key committee leaders in Congress had expressed frustration with the slow pace of NAIS implementation and, as a result, had reduced annual funding appropriations for the program. USDA's decision to revise NAIS was made after a series of 15 listening sessions across the country in 2009, and after receiving thousands of comments concerning NAIS. While the poultry and pork industries have endorsed a mandatory national animal ID program in general, certain portions of the U.S. cattle industry have shown strong resistance to what they perceive as a costly government intrusion in their private affairs. Participation in the initial phase of NAIS, premises registration, reflected this same degree of interest, as very high percentages of eligible premises were registered for most major animal species—poultry (95%), sheep (95%), swine (80%), goats (60%), and horses (50%)—with the exception of cattle (18%). USDA stated that such a low participation rate for cattle rendered NAIS ineffective as a tool for controlling animal disease, and that a much higher participation rate would be necessary to respond effectively to an animal disease outbreak. Under the new proposal, USDA anticipates much higher participation rates. Lawmakers in the 112th Congress will continue to monitor USDA's work on animal ID and traceability, and could propose legislation aimed at shaping its scope, design, and pace of implementation, as well as possible federal financial support of state-level programs.

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Background CG(X) Cruiser Program The CG(X) cruiser is the Navy's planned replacement for its 22 existing Ticonderoga (CG-47) class Aegis-equipped cruisers, which are projected to reach retirement age between 2021 and 2029. The CG-47s are multimission ships with an emphasis on air defense. The Navy wants the CG(X) to be a multimission ship with an emphasis on air defense and ballistic missile defense (BMD). The Navy plans to equip the CG(X) with a large and powerful new radar capable of supporting BMD operations. The CG(X) may also have more missile-launch tubes than are on the DDG-1000, and one 155mm Advanced Gun System (AGS), or none, as opposed to two AGSs on the DDG-1000. The Navy's planned 313-ship fleet calls for a total of 19 CG(X)s. The FY2008-FY2013 Future Years Defense Plan (FYDP) calls for procuring the first CG(X) in FY2011 and the second in FY2013. The Navy's 30-year (FY2008-FY2037) shipbuilding plan calls for building 17 more CG(X)s between FY2014 and FY2023, including two CG(X)s per year for the seven-year period FY2015-FY2021. CG(X) Analysis of Alternatives (AOA) The Navy is currently assessing CG(X) design options in a study called the CG(X) Analysis of Alternatives (AOA), known more formally as the Maritime Air and Missile Defense of Joint Forces (MAMDJF) AOA. The Navy initiated this AOA in the second quarter of FY2006 and plans to complete it by mid-September 2007. Navy plans call for Milestone A review of the CG(X) program in the first quarter of FY2008, preliminary design review (PDR) in the third quarter of FY2010, critical design review (CDR) in the third quarter of FY2011, and Milestone B review in the fourth quarter of FY2011. Navy Preference for Design Based on DDG-1000 Hull Although the CG(X) AOA is examining a wide range of design options for the CG(X), the Navy has publicly stated on several occasions that would like to use the design of its new DDG-1000 destroyer as the basis for the CG(X). (The potential for using the DDG-1000 design for the CG(X) was one of the Navy's arguments for moving ahead with the DDG-1000 program.) At an April 5, 2006, hearing, for example, a Navy admiral then in charge of shipbuilding programs, when asked what percentage of the CG(X) design would be common to that of the DDG-1000 (previously called the DD(X)), stated the following: [W]e haven't defined CG(X) in a way to give you a crisp answer to that question, because there are variations in weapons systems and sensors to go with that. But we're operating under the belief that the hull will fundamentally be—the hull mechanical and electrical piece of CG(X) will be the same, identical as DD(X). So the infrastructure that supports radar and communications gear into the integrated deckhouse would be the same fundamental structure and layout. I believe to accommodate the kinds of technologies CG(X) is thinking about arraying, you'd probably get 60 to 70 percent of the DD(X) hull and integrated (inaudible) common between DD(X) and CG(X), with the variation being in that last 35 percent for weapons and that sort of [thing].... The big difference [between CG(X) and DDG-1000] will likely [be] the size of the arrays for the radars; the numbers of communication apertures in the integrated deckhouse; a little bit of variation in the CIC [Combat Information Center—in other words, the] command and control center; [and] likely some variation in how many launchers of missiles you have versus the guns. Prospective Affordability of CG(X) in Numbers Desired If the CG(X) is based on the DDG-1000 design, its unit procurement cost might be comparable to that of the DDG-1000. The FY2008-FY2013 FYDP includes notional "placeholder" figures of about $3.2 billion in FY2011 to procure the first CG(X) and about $3.1 billion in FY2013 to procure the second CG(X). This compares with about $3.2 billion to procure each of the first two DDG-1000s in FY2007-FY2008. Early Navy plans called for procuring two DDG-1000s per year, and a total of 16, 24, or 32 ships. In large part for affordability considerations, planned DDG-1000 procurement was reduced to one ship per year, and a total of 7 ships. If affordability considerations similarly limit CG(X) procurement to one ship per year, total CG(X) procurement might be reduced from 19 ships to perhaps no more than 12 ships, and possibly as few as eight. Some observers, including the Congressional Budget Office (CBO), have expressed concern about the prospective affordability and executibility of the Navy's long-range shipbuilding plan. Congressional Interest in Nuclear Propulsion Some Members of Congress, particularly Representatives Gene Taylor and Roscoe Bartlett, the chairman and ranking member, respectively, of the Seapower and Expeditionary Forces subcommittee of the House Armed Services Committee, strongly support expanding the use of nuclear propulsion to a wider array of Navy surface ships, beginning with the CG(X). Nuclear propulsion is an option being studied in the CG(X) AOA. Potential CG(X) Design Options If the CG(X) is to be a multimission ship for replacing the CG-47s, basic design options for the CG(X) include (but are not limited to) the following: a conventionally powered ship based on the hull design of the 9,200-ton Arleigh Burke (DDG-51) class Aegis destroyer, or on a variation of that hull design; a conventionally powered ship based on a new-design hull that is smaller than the DDG-1000 hull; a conventionally powered ship based on the DDG-1000 hull design or on a variation of that hull design (the Navy's stated preferred approach); a conventionally powered ship based on a new-design hull that is larger than the DDG-1000 hull; and nuclear-powered versions of each of these four ships. Ship Based on DDG-51 Hull or Variation of That Hull Basing the CG(X) on the current DDG-51 hull could produce a CG(X) design displacing roughly 9,000 tons. Lengthening the DDG-51 hull with a mid-hull plug might produce a CG(X) design displacing roughly 11,000 tons, which would be about 24% smaller than the 14,500-ton DDG-1000, and roughly as large as the six California (CGN-36) and Virginia (CGN-38) class nuclear-powered cruisers that were procured for the Navy in the 1960s and 1970s. The deck house and lower decks of the DDG-51 hull would need to be redesigned to accommodate a radar capable of supporting BMD operations, an integrated electric-drive propulsion system, other new technologies from the DDG-1000, and (if desired) missile-launch tubes large enough to accommodate a BMD interceptor now in development called the Kinetic Energy Interceptor (BMD). Since the DDG-51 hull design was originally developed in the 1980s, it may include hard-to-change features that prevent it from fully accommodating certain DDG-1000 new technologies, such as, perhaps, those permitting the ship to be operated by a substantially smaller crew. For ships of a similar type and level of complexity, relative size can be rough proxy for relative unit procurement cost. A 9,000- to 11,000-ton CG(X) would be 62% to 76% as large as a 14,500-ton DDG-1000-based CG(X). However, some shipbuilding costs, such as shipyard fixed overhead costs, do not go down proportionately with ship size. A DDG-51-based CG(X) consequently might cost more than 62% to 76% of what a 14,500-ton CG(X) would cost to procure—perhaps something more like 72% to 86%. Production of a DDG-51-based CG(X) might benefit from residual learning-curve effects of prior production of DDG-51s, the last of which was procured in FY2005. Any limitations in incorporating DDG-1000 technologies for reducing crew size could result in a ship with a larger crew than that of the DDG-1000, and thus higher crew-related life-cycle O&S costs than a DDG-1000-based CG(X). The DDG-51 hull is a conventional flared hull that slopes outward as it rises up from the waterline. A CG(X) based on the DDG-51 hull consequently would be more detectible by radar than a ship using a tumblehome (inwardly sloping) hull, like that of the DDG-1000. In addition, as ship size grows, so does the size of the ship's weapon and sensor payload. Consequently, larger ships generally have more capability than smaller ones. Indeed, due to certain economies of scale that occur in naval architecture, larger ships can have proportionately larger payloads than smaller ones. Thus, a DDG-51-based CG(X) might be less than 62% to 76% as capable as a 14,500-ton CG(X). Due to the space, weight, and energy requirements of the large and powerful BMD-capable radar to be carried by the CG(X), accommodating such a radar in a DDG-51-based CG(X) design might require steep reductions in other ship capabilities. Ship Based on New-Design Hull Smaller Than DDG-1000 Hull A ship using a new-design hull smaller than the DDG-1000 hull might similarly displace roughly 9,000 to 11,000 tons. (A new-design hull larger than about 11,000 tons might be too close in size to the DDG-1000 hull to produce savings that are worthwhile compared to the option of simply reusing the DDG-1000 hull.) The unit procurement cost of such a ship might be about equal to that of a DDG-51-based design, or perhaps somewhat less, if the new-design hull incorporates producibility features (i.e., features for ease of manufacturing, such as straighter-running pipeline arrangements) that are more advanced than those of the DDG-51 hull. A new-design hull might be able to take more complete advantage of DDG-1000 technologies than a DDG-51-based design, possibly giving the ship a smaller crew and thus lower personnel-related O&S costs. The new-design hull could be a conventional flared hull, like that of the DDG-51, or a reduced-size version of the DDG-1000's tumblehome hull. The latter option could produce a ship as stealthy as (or perhaps slightly stealthier than) the DDG-1000. Due to the potential greater ability to take advantage of DDG-1000 technologies or other new technologies, a 9,000- to 11,000-ton ship based on a new-design hull might be somewhat more capable than a DDG-51-based design. A 9,000- to 11,000-ton design would still, however, be substantially less capable than a DDG-1000-based design, and perhaps proportionately less capable. As with the previous option, due to the space, weight, and energy requirements of the large and powerful BMD-capable radar to be carried by the CG(X), accommodating such a radar in a 9,000- to 11,000-ton CG(X) based on a new-design hull design might require steep reductions in other ship capabilities. Ship Based on DDG-1000 Hull or Variation of That Hull This option, which is the Navy's stated preferred approach, could produce a ship about as large as the 14,500-ton DDG-1000, or (if the DDG-1000's hull is expanded) somewhat larger than the DDG-1000 (i.e., upwards of 20,000 tons). The unit procurement cost of this option would be substantially greater than those of the previous two options, but perhaps less so than a simple size comparison would suggest, due to shipbuilding costs that are fixed or relatively insensitive to ship size. Production of the ship would benefit from learning-curve effects of producing DDG-1000s. Hull-design and system-integration costs would be minimized through reuse of the DDG-1000 hull and elements of the DDG-1000 combat system, and could be substantially lower than those of the previous two options. The ship would be substantially more capable than the previous two options, and perhaps proportionately more capable, due to economies of scale in naval architecture. Thus, although this ship would be substantially more expensive to procure, it would likely offer more capability per dollar than the previous two designs. Ship Based on New-Design Hull Larger Than DDG-1000 Hull This option could produce a ship of more than 20,000 tons. In at least some respects, this option would be more capable than the previous option, and perhaps proportionately more capable. The unit procurement cost of this option would be greater than that of the previous option, but perhaps less so than a simple size comparison would suggest. Production might benefit less than would the previous option from the DDG-1000 learning curve, and hull-design and system-integration costs might be higher than those of the previous option due to less reuse of DDG-1000 hull design features and the DDG-1000 combat system. Nuclear-Powered Versions of These Four Ships A Navy report submitted to Congress in January 2007 suggests that adding a nuclear propulsion plant to a to any of the above four options would likely increase its unit procurement cost by $600 million to $700 million in constant FY2007 dollars. If oil prices in coming years are high, much or all of the increase in unit procurement cost could be offset over the ship's service life by avoided fossil-fuel costs. Due to its larger size, the fourth option above would most easily accommodate a modified version of one-half of the new nuclear propulsion plant that has been developed and designed for the Navy's new Gerald R. Ford (CVN-78) class aircraft carriers. The third option above might also accommodate a modified version of one-half of a Ford-class propulsion plant, but perhaps less easily and with more modifications. The first two options above would likely require the design of a new nuclear propulsion plant. Designing a new nuclear propulsion plant would likely cost hundreds of millions of dollars; modifying the Ford-class plant would cost substantially less. A nuclear-powered ship would be more capable than a corresponding conventionally powered version because of the mobility advantages of nuclear propulsion, which include, for example, the ability to make long-distance transits at high speeds in response to distant contingencies without need for refueling. Building the CG(X) as a nuclear-powered ship might mean that at least part of the ship would not be built at two shipyards that have built the Navy's cruisers and destroyers in recent years, because neither of these yards are certified to build nuclear-powered ships. Assessing These Options The basic CG(X) design options presented above can be assessed in terms of development cost and risk, unit procurement cost, annual O&S cost, and unit capability, all in the context of operational requirements or desires, the potential operational risks of not fulfilling those requirements or desires due to insufficient unit capability or insufficient ship quantities, and potential implications for the shipbuilding industrial base. The question of whether to procure a potentially smaller number of individually more expensive and more capable ships, or a potentially larger number of individually less expensive and less capable ships, is a classic ship-design and force-planning issue that the Navy, the Department of Defense, and Congress have faced many times in the past. The advantage that larger ships have in terms of unit capability and capability per dollar is one reason why the Navy has often preferred larger and more capable designs in recent decades. This advantage has been counterbalanced by the issue of unit procurement affordability, because procuring an insufficient quantity raises the risk of not having a ship in service in the right location when it is needed. Potential Oversight Issues for Congress Potential oversight questions for Congress include the following: How much consideration is the Navy giving in the CG(X) AOA to design options other than those based on the DDG-1000? Are other basic options being treated in the AOA simply as straw men? What are the relative costs and capabilities of the options discussed above? What is the potential tradeoff between unit capability (and unit procurement cost) on the one hand, and potential numbers procured on the other? In assessing basic CG(X) design options, is the Navy assigning too much value, not enough value, or about the right amount of value to the sunk costs of designing the DDG-1000 hull and to CG(X) production economies that can result from the DDG-1000 learning curve? Legislative Activity for FY2008 Section 1012 of the House-reported version of the FY2008 defense authorization bill ( H.R. 1585 ) would make it U.S. policy to build cruisers and certain other large Navy ships with nuclear power unless the Secretary of Defense notifies Congress that nuclear power for a given class of ship would not be in the national interest. The provision is discussed on page 387 of the House Armed Services Committee's report on H.R. 1585 ( H.Rept. 110-146 of May 11, 2007).

The Navy has stated that it would like to use the design of its new DDG-1000 destroyer as the basis for its planned CG(X) cruiser. Ships based on other hull designs are possible. Nuclear propulsion is an option being studied for the CG(X). For a more general discussion of both the CG(X) and DDG-1000, see CRS Report RL32109, Navy DDG-1000 and DDG-51 Destroyer Programs: Background, Oversight Issues, and Options for Congress, by [author name scrubbed]. This report on basic CG(X) design options will be updated as events warrant.

CRS_RL33817

Introduction Human-driven climate change, once considered a topic only for scientific research, has evolved into a policy debate. Congressional proposals have identified numerous actions aimed at closer observation and analysis, mandatory pollution control, financial assistance for technological change, adaptation to cope with changes, and a host of additional policy options. Despite calls to expand federal funding to address climate change, federal budgeting overall faces increasingly stark choices among competing fiscal demands. Federal funding for climate change activities was enacted at $6.37 billion for FY2008; adding in the effects of tax incentives, the budgetary impact of climate change-related activities totaled $7.73 billion for FY2008. For FY2009, funding continues at or below those levels through March 6, 2009 under a Continuing Resolution ( P.L. 110 - 329 ). In some cases, the Continuing Resolution may have sustained funding to many climate change programs at a higher level than President Bush's FY2009 request, since many had been proposed to bear cuts. Tax incentives for renewable energy and other similar incentives were passed late in 2008 and the uncertainty may have affected the budgetary impacts of those incentives in FY2009. As the 111 th Congress evaluates the value of past funding and future priorities to address climate change, this report provides an overview of federal funding and tax incentives in the context of Presidential goals from 2001 through 2008, as well as legislative requirements for these programs. With a new Administration, the context for climate change funding will change: President Barack Obama has outlined a new set of policies, including a goal to return U.S. greenhouse gas (GHG) emissions to their 1990 levels by the year 2020, to reduce GHG emissions by 80% below 1990 by 2050, and to achieve these goals through a system of emission caps and trading. As President-elect, Obama stated, on December 15, 2008, that "the effort before us will demand coordination across the government, and my personal engagement as President." To assist with these, he has designated former EPA Administrator Carol Browner to be Assistant to the President for Energy and Climate Change. It remains to be seen how his goals and new leadership in the White House will translate into funding proposals and program alignment. Recent Federal Policy Goals for Climate Change Programs In 2002, President George W. Bush announced a goal to cut the U.S. greenhouse gas (GHG) intensity—the quantity of greenhouse gases emitted per unit of economic activity (GDP)—by 18% through 2012. In parallel, he directed U.S. programs addressing climate change to aim at: reducing scientific uncertainties; advancing development and introduction of energy efficient, renewable, and other low- or non-emitting technologies; and improving standards for measuring and registering GHG emission reductions. On April 16, 2008, President Bush announced a new national goal for climate policy—to halt increases in U.S. emissions of GHG by 2025. Emissions would begin to decline thereafter "so long as technology continues to advance." According to President Bush, the United States would achieve this goal by regulatory measures and market incentives to encourage use of clean technologies. Presidential requests for funding have been linked only in a general way to achieving stated climate change policy goals. Specific outcome-oriented performance targets have been set for some programs, such as for greenhouse gas reductions achieved by the Environmental Protection Agency's and the Department of Energy's Energy Star programs, and several other voluntary partnerships. However, quantitative greenhouse gas, science, or technology performance targets are not identified for most of the requested climate-related funding. Clearer relationships among programs, their funding, and their contributions to meeting measurable climate change goals may be considered by the Obama Administration and the 111 th Congress, especially if GHG targets are legislated as proposed in a number of bills. The Congressional Role The appropriation of funds by the Congress alters the total amount and distribution of funding requested by the President to address climate change across agencies and activities. Because most Congressional scrutiny of specific funding, and primary choices, occurs in appropriations subcommittees—further altered by Congressionally directed funding—the appropriations process has not facilitated a broad view of over-arching climate change policy goals and priorities, or consistency with goals across agencies and diverse activities. Enhancing an over-arching vision and prioritization would require greater coordination across subcommittees or at the committee level than typically occurs. Evolution of Federal Climate Change Programs Evidence of human influence on the Earth's climate and its potentially catastrophic impacts gained the attention of some Members of Congress by the 1980s. Congress enacted a scientific research program in 1990, and U.S. federal funding subsequently expanded to better understand and address the phenomenon. Both the amounts and purposes of funding for climate change efforts have evolved since 1990. This report describes federal funding of climate change activities across 14 agencies. Most emphasis is on changes from the enacted FY2007 and FY2008 levels to President Bush's FY2009 request. A Continuing Resolution ( P.L. 110 - 329 ) extended the FY2008 enacted levels through March 6, 2009, which is in some cases higher than the levels requested. Some longer historical perspective is provided where data are available. As this report discusses, the availability and clarity of funding information continues to impede full understanding of the federal effort and its effectiveness, and so the estimates provided in this report are best viewed with caution. In addition, the limited political agreement that has evolved around climate change in the United States has resulted in packaging of all activities as research on science or technologies, or international assistance. This emphasis on research may not adequately characterize the actual work and evolving priorities—especially if calls for greater action on GHG abatement, impacts assessment, and adaptation are answered by federal programs and incentives. There has been an historic emphasis on climate change science within the overall U.S. effort to address climate change. Concerns about climate change first issued from the research community. Even as public concern rose, some decision-makers emphasized improving the science in order to make wise policy decisions. Some observers expressed concern that such emphasis on uncertainties and the need for additional scientific research were a rationale not to undertake more concrete mitigative or adaptive actions to address climate change. Nonetheless, there has been a long-standing consensus that continued scientific research on climate change, its impacts and possible adaptation strategies is desirable. Funding levels for climate change increased rapidly from 1989 to 1995, but have generally declined for climate change science since then (when amounts are adjusted for inflation). By the mid-1990s, scenario analyses had made clear that effectively avoiding human-induced climate change would require major changes in energy and other technologies in use. Not surprisingly, another consensus emerged surrounding federal support to advance technologies that allow a transition to a lower greenhouse (GHG)-emitting society without compromising economic well-being. The growing set of activities and funds to support "clean" technologies were packaged as a second major component of the climate change effort by President William J. Clinton for FY1997 as the Climate Change Technology Initiative, and then by President George W. Bush for FY2003 as the Climate Change Technology Program (CCTP). The technology programs have grown to be about two-thirds of all climate change funding. (Budget data are insufficient at this time to analyze the historical funding prior to FY1998.) A third point of broad agreement—and associated funding—has been that the developing countries would need assistance—financial and technical—to adopt less emitting economic paths than those followed by the United States and other industrialized countries. In 1992, the United States and other developed countries committed to providing such assistance under the United Nations Framework Convention on Climate Change. In association with that treaty, in 1992, President George H.W. Bush established a two-year, $25 million Country Studies Program to build the capacities of developing and transition countries to assess and implement climate change policies. Most funding for international assistance has been through the Agency for International Development (US AID), and has generally declined since the late 1990s, due variously to Executive Branch decisions and Congressional opposition. This report provides an overview of climate change funding in three major climate change program areas (science, technology, and international assistance) as well as tax provisions that may encourage reductions in greenhouse gases. Increasingly, there are overlaps and gaps among these program areas. Alternative ways to categorize the funding might better serve Congressional decision-making. Though limited by data, this report provides preliminary analysis of the federal effort—for example, by type of activity or by types of technologies supported. The report also identifies several legislative issues related to federal funding for climate change programs and activities. Historical Climate Change Funding: FY2001 to Present New Budget Authority by Year and Program Table 1 shows new federal budget authority enacted for FY2001 through FY2008 and the FY2009 request, in nominal dollars as reported by the Office of Management and Budget (OMB), and in constant 2007 dollars only for the annual totals, adjusted for inflation by CRS. While information has not been reported yet for FY2009, a Continuing Resolution (CR) ( P.L. 110 - 329 ) extended the FY2008 enacted levels through March 6, 2009 for almost all climate-related programs. The CR continues funding in some cases at levels higher than requested, and in some cases, lower that the request. The Bush Administration has grouped all funding into three major program areas: the Climate Change Science Program (CCSP), the Climate Change Technology Program (CCTP), and International Assistance. Funding has wavered through the years, in total and in each of the program areas. Notable increases occurred in the FY2008 enacted and FY2009 proposed funding, largely for new satellites, nuclear energy, and international technology financing. Understanding the level of effort over time is obscured by changes in the levels of aggregation, scope of programs reported, and methods of budget accounting. (See discussion in the Box 3 , Clarity and Consistency of Reporting of Climate Change Funding.) Tax Expenditures In addition to budget authority for CCSP, CCTP, and International Assistance, the federal government offers a variety of tax incentives to encourage reductions in greenhouse gas (GHG) emissions. Table 1 shows an OMB- estimated total of $1.52 billion in climate change-related "tax expenditures" in FY2008 and FY2007, and has projected these tax expenditures to decrease in FY2009 to $1.44 billion. Although tax incentives are not federal spending per se , they reduce revenues to the federal government that would otherwise accrue. In that sense, the loss of revenues resulting from tax incentives are often presented by OMB as "tax expenditures" of the federal government. (Hereafter, this report refers to these as "tax expenditures.") Examples of tax expenditures related to climate change include credits for purchases of cleaner automobiles, and investment in renewable electricity generation technologies. Table 1 does not include estimates of other tax expenditures that may aggravate climate change, such as provisions that promote fossil fuel production and use. Budgetary Impact of Climate Change Programs Based on OMB's data, Table 1 presents the total impact to the federal budget, from FY2001 through FY2008 and the FY2009 request, resulting from budget authority for the three major climate change program areas and tax expenditures. Though federal spending and losses of revenues are not alike, this total budgetary impact illustrates the overall level of federal effort, or cost to the federal government, of identified climate change programs and incentives. Table 1 suggests that the budgetary impact of reported climate change activities has increased nearly 85% from FY2001 to the enacted FY2008 level (in constant 2007 dollars). Of the actual $4.3 billion increase, $2.6 billion—more than 60%—is attributable to expansion of technology research and development; another $1.5 billion of the budgetary impact is due to tax incentives to stimulate greenhouse gas reductions (which the Office of Management and Budget projected to decline in FY2009). For scientific research funding in actual dollars increased by $0.1 billion from FY2001 to FY2008 enacted, though this represents a decline in funding for climate change science when accounting for inflation. President Bush's request for FY2009 would have brought the funding back up to the FY2001 level in real terms. As discussed in Box 3 , however, conclusions regarding the levels of funding over time can be considered only approximate because of reporting issues. President Bush's FY2009 Request for Climate Change Funding Budget authority in FY2008 for activities related to climate change totaled $5.44 billion, according to the Office of Management and Budget (OMB). President Bush's budget request for FY2009 would have increased this funding by 12.3%, to $7.15 billion. A Continuing Resolution (CR) ( P.L. 110 - 329 ) extended the FY2008 enacted levels through March 6, 2009 for almost all climate-related programs. The CR continues funding in some cases at levels higher than requested, and in some cases, lower that the request. Information has not been reported yet on any changes to climate change funding for FY2009. In addition, extension of tax incentives that may help to stimulate greenhouse gas reductions (i.e., for renewable energy investments) were passed late in 2008; the uncertainty through 2008 may have altered the estimated impacts of these tax incentives for FY2009. Major Changes in the FY2009 Request The major changes requested for climate change purposes, compared to the FY2008 enacted levels, were to: nuclear energy : increase funding for nuclear energy research by at least $302 million and demonstrations by $129 million; fossil energy : increase fossil energy research and development (R&D) by $133 million, mostly for carbon capture and storage (CCS) technologies; energy efficiency and renewable energy : eliminate Weatherization Assistance Grants (-$227 million) to low-income households; satellites : increase funding for satellite sensors for radiation and other climate-related measurements by $177 million in the NASA and NOAA budgets; and international technology deployment : provide an initial installment through Treasury of $400 million (and a proposed $2 billion over five years) to a new Clean Technology Fund hosted by the World Bank. Although the Analytical Perspectives for the FY2009 request stated that the FY2009 proposal for the CCSP would add emphasis to researching the impacts of climate change and for the science of adaptation , such added emphasis is not apparent in the documentation available in the multi-agency cross-cut nor in individual agencies' budget submissions. Almost all the proposed increases would support observational capacities and technological basic research and demonstration, not applied policy or management research, assessment, planning or actions. Several programs that now are devoted to impacts and adaptation are proposed to receive less funding, such as programs on abrupt climate change and drought research in NOAA. Several programs for which Congress specifically appropriated funds were not proposed by the Bush Administration to continue in FY2009, such as $3.4 million enacted for the Environmental Protection Agency (EPA) in FY2008 to develop a rule for a mandatory greenhouse gas emission registry. The Administration's requested changes are discussed in more detail in later sections by major program area and agency in Appendix D and Appendix E . FY2009 Request by Major Program Areas Funding related to climate change is grouped by OMB into three program areas ( Figure 1 ), each of which consolidates many individual programs and activities across 14 federal agencies. The three program areas and their FY2009 budget requests are: Climate Change Science Program (CCSP): $2.08 billion; Climate Change Technology Program (CCTP): $4.42 billion; and International Climate Change Assistance: $0.66 billion. New budget authority for these three program areas since FY2007 appear in Figure 1 , as provided by OMB. The categories of science, technology and international assistance may be useful for understanding the purposes of federal climate change programs in broad terms. Arguably, alternative ways of categorizing federal funding for climate change programs may also be useful to Congress. As Table 1 and Figure 1 illustrate, most recent growth of funding to address climate change supports technology research, demonstration and deployment (RD&D)—proposed to expand by almost $1 billion for FY2009 compared with FY2007. Within the Climate Change Technology Program, most of the requested funding growth was to support nuclear energy research. If the Congress had approved the requested $400 million for the Clean Technology Fund, the international assistance category would have experienced the greatest percentage growth—a 325% increase over the FY2008 enacted budget authority (albeit over a much smaller amount for international assistance than for the science and technology program areas). FY2009 Requests by Applications of Funding Because of the aggregation of funding information that is publicly available, understanding the specific uses of climate change funds can be challenging. The levels of funding for specific activities are often unreported or unclear. CRS has conducted preliminary analysis of the amounts of the FY2009 request that would fund different kinds of applications, from satellite-based observing systems, to technology R&D, to inventories and registries of greenhouse gas emissions and sinks. A large portion of the funding request could not be determined for the current analysis. Most discussion of the uses of funding follow in the sections on the CCSP and the CCTP. Looking across all applications, though, two categories appear to have the greatest shares of requested funding for FY2009, exceeding other categories by hundreds of millions of dollars: Nuclear energy research and demonstrations would receive the largest share of climate-related funding—an estimated $1.40 billion (19.6%) in the FY2009 request. Funding for nuclear energy technology research would be about 30% of the funding requested for climate change technologies. Satellite-based observations would constitute about 11.8% of all federal climate change funding for climate change, at the level of $843 million proposed for FY2009. This would be about 11.8% of all climate change funding and 40.5% of the Climate Change Science Program (CCSP) funding. These funds do not cover most data quality assurance, management, accessibility to researchers or analysis needed to create value from the observations. FY2009 Request by Agency Figure 2 illustrates the FY2009 request for new budget authority for 14 participating federal agencies and for the three climate change program areas. Climate change funding is dominated by budget authority to two agencies: the Department of Energy (DOE) and to the National Space and Aeronautics Administration (NASA); together they amount to 74% of the climate change request. Table 2 indicates by agency the amount of new budget authority reported by OMB for the FY2003 through the FY2009 request for the 14 federal departments and agencies that administer the three major climate change program areas. (The totals in Table 1 and Table 2 are not consistent for FY2003, FY2004, and FY2005 because of OMB accounting adjustments to the science and technology programs in Table 1 ; Table 2 is derived from earlier years' reports which do not have these adjustments). The remainder of this report briefly describes each of the three major climate change program areas, including science, technology, and international assistance, as well as tax provisions that may encourage reductions in greenhouse gases. Highlights of the FY2009 request, and particular issues for Congressional consideration are identified in the following sections. Discussions of funding by agency for the CCSP and the CCTP appear in Appendix D and Appendix E , respectively. Climate Change Science Program (CCSP) FY2009 Request for the CCSP—Overview The Climate Change Science Program (CCSP) has been the umbrella organization for informal management of scientific research on climate change since 2003. It was the extension of a U.S. research effort that has been underway for several decades. For FY2009, President Bush requested $2.08 billion to support climate change science under the CCSP. The FY2009 request was $216 million (12%) above the FY2008 enacted budget authority of $1.82 billion, and $255 million (14%) above the FY2007 level. The CCSP research was intended to help reduce uncertainties in the science, as highlighted by a National Academies report requested by President Bush in 2001. A revised research strategy for the CCSP was issued in May 2008 (discussed in a later section) and may be reflected in President Obama's request for FY2010. The proposed CCSP funding for FY2009 would be provided to 11 federal agencies, with NASA continuing to receive the largest share—about 58%—with about 64% of NASA's funding proposed for space-based observations. Of the total request for FY2009, 16% was proposed for NOAA; 11% for NSF; and 7% for DOE. The history of U.S. funding for climate change science since FY1989 is presented in Figure 3 and Appendix C . The amounts are as reported by the CCSP, which do not appear to reflect OMB's adjustments to the amounts for FY2003, FY2004, and FY2005, as presented in Table 1 of this CRS report. In constant dollars (i.e., adjusted for inflation), the CCSP budget declined by 11% from FY2001 ($2.0 billion) through FY2008 enacted ($1.8 billion), down 25% from the funding peak in FY1995. The FY2009 request would have brought the total back to the FY2001 funding in constant dollars, although the composition of the research would be altered. The tightening fiscal environment of federal discretionary budgets has resulted in shifting of funds within almost all agencies from climate change to other priorities. For example, NASA's climate-related budget declined by 24% from FY2000 through FY2008 enacted, after adjusting for inflation (but not for scope and methodological changes), though an addition of $126 million (12%) was proposed for space-based observations in the FY2009 request. The decline in climate change-related funding at NASA reflects the agency's priority for space exploration, as well as budget constraints imposed by cost over-runs in space programs. In the FY2001 to FY2008 time period, only the budget of the National Oceanic and Atmospheric Administration (NOAA) increased—by 217%—while all other agencies saw their climate science budgets decline in dollars adjusted for inflation. The pressure on agencies' budgets has likely aggravated on-going tension within and among agencies over funding for this cross-agency objective (climate change science), when agencies are stretching to meet what they perceive as their core missions. Background and Historical Funding for Climate Change Science Federally-supported research has been conducted for many decades on the potential for rising greenhouse gases in the atmosphere to induce global climate change. In 1971, a panel of the National Academy of Sciences recommended that the United States increase its research into understanding the dynamics of climate and climate change to $111 million for the 10-year period of 1970-1979. (All amounts in this paragraph have been adjusted for inflation to 2007 dollars). After several compelling scientific conferences in the 1980s, federal support for climate change research rose from these levels up to a peak of funding in FY1995 of $2.28 billion. Following the FY1995 peak, funds reported for climate change science generally declined through the $1.83 billion enacted for FY2008. ( Figure 3 illustrates the historical funding reported by the Administration in nominal dollars and adjusted for inflation in constant 2007 dollars. Supporting data are in Appendix C , Table C -1 .) The rapid growth of funding from 1989 paralleled the enactment by Congress of the Global Change Research Act (GCRA)( P.L. 101 - 606 ), which established the U.S. Global Change Research Program (US GCRP). The US GCRP in many ways constituted an extension and expansion of existing science programs and had been conceived by some to exist in parallel with other research that would more directly support policy and management decision-making. The latter program was never established, and its absence is reflected in some of the tension today over the goals and balance of federally supported climate change science. The CCSP states its mandate under the GCRA as "to improve understanding of uncertainties in climate science, expand global observing systems, develop science-based resources to support policymaking and resource management, and communicate findings broadly among scientific and stakeholder communities." Arguably, however, little has changed since a 1993 review of the program by the Office of Technology Assessment concluded that: Although the program is scientifically well-grounded, it has become overwhelmingly a physical science program focused on basic Earth system processes that largely ignores the behavioral, economic, and ecological aspects of environmental problems. For example, understanding the role clouds play in climate change and the role of the ocean-land-atmosphere interface is now its highest priority.... Although the results of the program, as currently structured, will provide valuable information for predicting climate change, they will not necessarily contribute to the information needed by public and private decisionmakers to respond to global change. Three areas are particularly lacking: ecosystem-scale research, adaptation research (ecological, human, and economic), and integrated assessments (evaluation of all focused and contributing research results and their implications for public policy). Although there has been some adjustment to address the problems above, a number of critics argue that there remain important gaps in the federal program; some have concluded that structural—potentially legislative—fixes would be necessary, as 15 years of efforts have been largely unsuccessful. As a result, there are several proposals within and outside of the U.S. Congress to restructure and expand climate change research. Since the FY2004 budget, the Climate Change Science Program (CCSP) has been composed of the US GCRP and the Climate Change Research Initiative (CCRI), the latter having been established by President Bush in 2003. There appears to be little practical distinction between these two efforts within the CCSP. Appendix B describes the organization of agencies under the federal climate strategy of President Bush, while Appendix D identifies the major climate science activities of the major agencies. The CCSP has not been formalized through legislation; the GCRA remains the principal legal authorization and framework for U.S. federal climate change science. However, there were several hearings and bills introduced in the 110 th Congress concerning the content and organization of the CCSP, and it is likely that bills to amend or replace the GCRA will be introduced in the 111 th Congress. CCSP Goals, Strategies, Products and Evaluations The CCSP is described in an overall strategy, the Climate Change Science Program Strategic Plan . This plan was published in 2003, with ongoing reviews by the National Academy of Sciences. The strategic plan was updated in May 2008 under court order. As the revised plan was released in May 2008, its priorities were not necessarily reflected in the FY2009 request to Congress. The 2008 Strategic Plan did not substantially change the organization of the existing CCSP, as described below. The 2003 and 2008 CCSP Strategic Plans grouped research into seven elements: atmospheric composition, climate variability and change, global water cycle, land use/land cover change, global carbon cycle, ecosystems, and human contributions and responses. Both plans further lay out five goals, which do not correspond closely with these seven research elements. The proposed FY2009 funding for each goal, as self-identified by agencies and excluding satellite-based observation funding, is provided below: Goal 1 ($410.6 million): Improve knowledge of the Earth's past and present climate and environment, including its natural variability, and improve understanding of the causes of observed variability and changes, Goal 2 (314.8 million): Improve quantification of the forces bringing about changes in the Earth's climate and related systems, Goal 3 ($279.8 million): Reduce uncertainty in projections of how the Earth's climate and related systems may change in the future, Goal 4 ($160.0 million): Understand the sensitivity and adaptability of different natural and managed ecosystems and human systems to climate and related global changes, and Goal 5 ($143.8 million): Explore the uses and identify the limits of evolving knowledge to manage risks and opportunities related to climate variability and change. The identified funding levels do not include all funding for federal climate-related science (e.g., research on health risks by the Centers for Disease Control and Prevention), and some activities reported within CCSP arguably are only tangentially related to climate change (e.g., the $46.8 million in Health and Human Services for human health effects of ultra-violet radiation). Some reporting issues may have evolved from the absorption by the CCSP of the pre-established Global Change Research Program, the mandate for which is broader than climate change. Such issues, however, increase the challenge of identifying what work, and how much funding, in the federal agencies is directed primarily at climate change science. FY2009 CCSP Proposals by Activities The main applications of proposed funding, according to CRS analysis of available data (again, with limitations), would be satellite-based observations, basic science research, and climate models. Figure 4 provides preliminary CRS analysis of how federal funding for climate change science is used in different applications, as requested in the FY2009 budget. Products of the CCSP The Global Change Research Act of 1990 (GCRA) ( P.L. 101-606 ) requires a scientific assessment report to Congress at least every four years, as well as annual reports on climate change activities and budget. The first national assessment complying with the Global Change Research Act was published in December 2000. The Bush Administration intended a set of synthesis and assessment products (SAPs), taken together, to meet the four-year reporting requirement of the GCRA. Synthesis and Assessment Products . The CCSP Strategic Plan aimed to produce 21 SAPs, originally intended to be completed in 2007. Both Members of Congress and environmental groups disagreed that the series of reports would meet the statutory requirement or meet the needs of policy-makers. Several environmental groups filed suit against officials in the Bush Administration to force production of a revised research plan and an integrated, national scientific assessment. A Court Order of August 21, 2007 required the following products to be released by the Administration: Revised Research Plan . On May 29, 2008, under court order, the Administration released the CCSP Revised Research Plan (RRP), in compliance with Section 104(a) of the Global Change Research Act of 1990. This report focused on the 2008 to 2010 period, and noted that it was a first step toward a new strategy by 2010 covering 2013 to 2023. Public outreach towards that new strategy reportedly has begun. The RRP retains the same five goals and overall structure as the 2003 Strategy. The RRP distills the main emerging priorities, and similarities and differences from the 2003 Strategy, in the following four points: CCSP will continue to provide the basic physical science required to understand Earth's past and present climate, including its natural variability, and to improve understanding of the causes of and uncertainties in observed variability and change at global, continental, regional, and local scales. CCSP remains committed to basic, ongoing research to understand climate processes and the forcing factors that cause changes in climate and related systems. CCSP will increasingly address emerging needs for research to more fully understand the impacts of climate change on unmanaged and managed ecosystems, human health and infrastructure, economic, and other human systems. CCSP will continue to generate science [to] support decision-making related to the management of risks and opportunities of climate variability and change, including adaptive management and mitigation efforts, with an increased emphasis on generating scientific results at regional and local scales. CCSP will place greater emphasis on communicating with users and stakeholders (e.g., state and local governments, academia, industry, public utilities, and non-governmental organizations), both to gain the benefit of their experience, perspectives, and input and to ensure that the results of CCSP research, monitoring data, and assessments are widely and easily available and accessible to potential users of this information. As the CCSP moves towards revision in 2010 of its strategic plan for 2013 to 2023, the Congress may consider legislative options to clarify the goals, measures of progress, organization and processes of federal climate change scientific research. New Integrative Scientific Assessments . On May 28, 2008, the Bush Administration released Scientific Assessment of the Effects of Global Change on the United States . In addition, the CCSP will produce an integrative 'capstone' product, called the CCSP Unified Synthesis Product (USP) required in 2009 by the court order. The USP will synthesize information from the 21 SAPs, the 2007 Assessment Reports of the Intergovernmental Panel on Climate Change, and other recent research. The USP is intended to analyze current understanding of climate change science, summarize the contributions of the CCSP, and identify important gaps in the science. Evaluations of the CCSP The CCSP has employed many panels of the National Academy of Sciences to review aspects of the climate science program and to provide recommendations for improvements. Multiple agencies similarly seek reviews from the NAS or other external bodies (e.g. science advisory boards) and advice. Some common concerns about the CCSP are identified below. Weaknesses in Leadership and Budget Coherence . While the existing decentralized structure of the climate change science program brings some advantages, most reviews of the program conclude that the CCSP lacks sufficient over-arching authority to overcome agencies' individual interests and to make budget consistent with cross-cutting priorities. A 2007 National Academies panel concluded, for example, that "[t]he separation of leadership and budget authority presents a serious obstacle to progress in the CCSP." Although a number of Members of Congress and interest groups might be interested in strengthening central leadership of the CCSP through legislative actions, there is no general consensus—and some active dispute—about which federal entity would be the best site in which to invest such authority. Options raised have included the Office of Science and Technology Policy (or a new entity within the Executive Office of the President), the Office of Management and Budget, the National Science Foundation, or the National Oceanic and Atmospheric Administration. Some experts have proposed a "climate czar" in the White House, a "troika" of leaders from existing White House councils, or a new free-standing entity like the U.S. Trade Representative. One question also raised is whether such leadership should cover only the science programs, or be extended to all climate change programs (possibly including the Climate Change Technology Program, new initiatives that might more fully address adaptation or greenhouse gas mitigation, policy analysis, and international strategies). Some would include energy security coordination as well, while at least one proposal would subsume climate change leadership under an "energy czar." President Obama's appointment of Carol Browner to be his Assistant for Energy and Climate Change may fill this role, though the functions and authority of the new position have not been defined. Lack of Metrics of Progress . One challenge facing the CCSP is, arguably, lack of clearly articulated and measurable goals (notwithstanding the qualitative goals cited above). The goals as articulated define directional change with no definable end-points at which one could declare "mission accomplished," or milestones along the way. Such measurable objectives exist for many of the individual projects funded under the CCSP, but not for the program as a whole. This potentially presents a challenge in determining priorities and changes in them over time, when existing or proposed programs cannot be evaluated against their contributions to the overall product. It also exacerbates some continuing tension between funding for fundamental knowledge and—under budgetary constraints—calls for greater resources for applied research and actions to accomplish climate change policy objectives. A National Academies panel, convened at the request of the former director of the CCSP to consider how to measure progress for the program, noted that the CCSP Strategic Plan "does not contain measures of success, and program objectives are written too broadly for them to be inferred." The panel concluded that metrics could be developed and used for the CCSP, but highlighted the considerable challenge and cost in identifying, producing, and using a set of metrics to measure progress for all elements of the CCSP. It also noted that "while some metrics can measure short-term impacts (e.g., CCSP payoffs scheduled to occur within two to four years), it may take decades to fully assess the substantial contributions to the global debate on climate change being made by the CCSP and its predecessor US GCRP." With only qualitative, directional goals and an absence of detailed management metrics, a 2008 review of the CCSP by a National Academies panel was forced to rely on a high-level "assessment of strengths and weaknesses of the entire program, based mainly on the reviewers' knowledge of program results." Unclear and Inconsistent Reporting of Programs and Funding . In 2005, the Government Accountability Office (GAO) concluded that "[d]ata and reporting limitations make determining agencies' actual levels of climate change funding difficult." GAO made a number of recommendations and reported in late 2006 that most had been implemented. However, the difficulty of the present CRS analysis leads to the conclusion that, while many GAO-recommended improvements have been helpful, the fundamental problems with lack of clarity and consistency persist and confound understanding of how climate change funds have been applied and evaluation of the efficiency, results, and value of their use. A recent National Academies panel charged with evaluating the progress of the CCSP concluded in 2007 that "the detailed budget and management information necessary to score the process and input metrics [as laid out in a 2005 report on metrics for the program] is not readily available, even to CCSP agencies." This CRS analysis confirms the 2007 NAS conclusion. Imbalance between Space - Based Observations and Other Research Elements . The National Research Council published another report in 2008 evaluating priorities for flight missions and supporting activities for space-based observations over the coming decade. Many of the satellite-based programs reviewed by the NRC are reported under the CCSP. The assessment concluded that the value of the observations could be improved by addessing the balance between space-based and other research components. It concluded that to provide benefits to both science and society—"of equal priority"—the programs needed a foundation of observations collected from the land, sea, air—as well as space—and that observations needed to be integrated into forecast models and other tools for decision-making. The current observation systems were noted to have major weaknesses; the top priority for improvement was obtaining the needed range of continuous observations, rather than implementing individual space missions. The panel further concluded that strong observation systems: will prove useful only if they can be effectively analyzed, interpreted, and applied.... To realize the potential offered by these missions, resources must be focused in the following four areas: ensuring sustained observations for operations, research, and monitoring; obtaining complementary non-space-based observations; turning observations into knowledge and information; and sustaining the knowledge and information system. In sum, the NRC panel found that greater benefits could be gained by redressing existing imbalances in funding for satellite-based observations with other observation systems and greater analysis of the information gathered. Science for Expanding Knowledge versus Practical Applications . An on-going frustration from some quarters with the climate change science enterprise has been the tension between science for "the quest to acquire new knowledge" or for "practical benefits for humankind." These observers conclude that the emphasis of the USGCRP has, since inception, been far more strongly to observe, understand, and predict global change than to provide useful information to policy makers. A recent critique also concluded that "from execution of the program it is clear that the agencies consider their mandate to be primarily the support of basic research according to the specifics of each agency mission." The CRS analysis of the CCSP budget, in the following section, reinforces this author's conclusion. The author continued, Almost all oversight or advisory committees providing input on priorities for carbon cycle science, whether at the agency or national level, consist exclusively of practicing scientists.... Even Congress members charged with reviewing budgets for science have been reluctant to challenge the paradigm that 'unfettered' basic research will eventually result in societal benefit, with some notable exceptions.... The processes that govern the prioritization, selection, advocacy and accountability for research stem from the internal operating norms of the scientific community and are extremely appropriate for basic, curiosity-driven research. Should the community wish to shift their research agency to one more focused on the needs of society, however, changes in the operating norms would be appropriate. Similarly, a 2007 study by the National Research Council concluded that "the full potential of societal benefits from NASA products will not be realized unless users are involved directly in determining priorities, designing products, and evaluating benefits." Looking at the CCSP overall, a National Academies panel concluded in Evaluating Progress of the U.S. Climate Change Science Program—Methods and Preliminary Results (2007) that "if the program is to achieve its vision of producing information that can be used to formulate strategies for preventing, mitigating, and adapting to effects of climate change, adjustments will have to be made in the balance between science and applications." Myriad interest groups have put forward proposals for how the CCSP might be restructured; it is beyond the scope of the current report to review and evaluate these. In sum, alternative proposals would vest more central authority in one agency or in the White House, give that authority greater budgetary control, augment input from potential users of the science, and improve the overall budget decision-making. Some proposals would expand the science program to include more applied research and analysis to serve private and government needs, and increase public communications and outreach, while other proposals would expand such activities in a separate institutional structure. Several bills introduced in the 110 th Congress would accomplish some of these proposals. Climate Change Technology Program (CCTP) By the 1990s, on-going federal research on various energy technologies and on carbon storage in soils and vegetation were recognized as potentially contributing to the technological change that would be required for a major reduction of GHG in the atmosphere. President Clinton packaged some research into the Climate Change Technology Initiative in 1998. President Bush in 2002 repackaged many of the same activities into the U.S. Climate Change Technology Program (CCTP). The composition of the broad climate technology programs have changed over time. The CCTP was authorized by the Energy Policy Act of 2005 (EPAct 2005)( P.L. 109 - 58 ). EPAct directed the President to establish a Committee on Climate Change Technology to "integrate current Federal climate reports" and carry out climate change technology activities and programs to implement a required strategy (§1610(b)(1)). The Secretary of Energy was designated to chair this Committee. The Committee was required to produce a strategy within 18 months from enactment (which was August 8, 2005) to "promote the deployment and commercialization of greenhouse gas intensity reducing technologies and practices developed through research and development programs conducted by the National Laboratories, other Federal research facilities, institutions of higher education, and the private sector" (§1610(c)(1)). A CCTP Strategic Plan was published in September 2006, envisioning a $3 billion program. (By comparison, the FY2008 enacted level was $3.49 billion; the FY2009 request was for $4.41 billion; and, a Continuing Resolution continues funding at the FY2008 enacted level through March 6, 2009.) EPAct requires the strategy to be updated every five years or more frequently. EPAct 2005 also established the Climate Change Technology Program "within the Department of Energy" (§1610(d)), to "carry out the programs authorized under this section." Besides preparation of the national strategy, the programs authorized under §1610 are: to prepare inventories and evaluation of GHG intensity-reducing technologies, including a report to Congress; to identify the need for technology demonstration projects, including a report to Congress on barriers to, and commercial risks of, technologies and a plan for demonstrations; to develop standards and best practices for calculating, monitoring and analyzing GHG intensity; to support demonstration projects; and to enter into cooperative research and development agreements. These activities are arguably much narrower than the scope of activities identified under President Bush's CCTP, as described in the FY2009 budget request (and others). The CCTP, as defined by President Bush, is composed of programs administered by 11 agencies, plus the Executive Office of the President. It is coordinated by the Department of Energy and overseen by the interagency Committee on Climate Change Science and Technology Integration (see Appendix B ). The CCTP objective is to accelerate the technological advances needed to facilitate the reduction and avoidance, as well as capture and storage, of man-made emissions of greenhouse gases (GHG). While the 2006 Strategic Plan sets many milestones for demonstrations of specific technologies, there are no specific targets or measures for greenhouse gas emissions or capture in the CCTP Strategic Plan. The six strategic goals outlined by the CCTP are to advance development of technologies that: reduce emissions from energy end-use and infrastructure, reduce emissions from energy supply, capture and sequester carbon dioxide, reduce emissions of non-CO 2 greenhouse gases, improve capabilities to measure and monitor GHG emissions, and bolster basic scientific contributions to technology development. As reported by OMB, federal funding for climate change technology has increased from $845 million in FY1993 to $4.53 billion enacted for FY2008, a $3.70 billion (536%) increase. President Bush's FY2009 budget requested $4.41 billion for FY2009, a $114 million increase (3%) above FY2008. As requested, the CCTP would constitute 62% of federal funding on climate change (as reported by OMB). However, the actual increase in funding for these efforts may be lower than the reported dollar amounts suggest, as the agencies and OMB have redefined the initiatives included within the CCTP over time. For example, an increasing number of existing nuclear energy programs, as well as some clean coal programs, have been added to the count in later years though they existed but were not included in OMB's earlier reporting of climate change technology funding. Such changes make it difficult to track the content and evolution of specific climate change technology efforts, and funding for them, across the years. GAO has made similar observations, and has identified several ways that technology funding presented in OMB's more recent reports may not be comparable to previously reported technology funding, introducing uncertainty in the funding trend. As quantified results expected from programs are set and monitored (as required under the Government Performance and Results Act of 1993), redefinitions of program areas also may complicate performance tracking and accountability, in addition to making funding comparisons difficult from year to year. CCTP Funding by Technology Generally, funding for the CCTP is presented by agency and program. CRS analyzed data for the FY2009 funding request by technology across programs and agencies. The preliminary results are in Figure 5 . The reported CCTP funds do not constitute all the funding and other financial incentives for research, development and deployment of technologies; they are a subset selected according to OMB guidelines for the CCTP. According to the data available, 29% of the funds requested for the CCTP for FY2009 would support nuclear energy (equivalent to 20% of all funding for climate change activities). Funding for nuclear energy research would be more than twice the amount requested for any other technology category. The next largest categories in the CRS analysis are mixes of technologies: 13% of the FY2009 request is for programs that either support multiple technologies or the specific technologies have not been identified. Another 12% of the funding would support renewable energy technologies other than biomass and biofuels, such as wind, solar, and others. Appendix F provides a table of funding highlighting the Administration's stated priorities for specific technologies planned for development by DOE and EPA under the CCTP. These are not necessarily the technologies receiving the largest funding reported under the CCTP, or among all climate-related R&D. There is broad support for federal interventions to stimulate technological advance, and multiple studies have shown that effectively stabilizing greenhouse gas emissions over the coming century would require radical technological change compared to current patterns globally. Such rapid change has some precedent, but on narrower geographical and economic scales, for example, the transformation of France's electricity sector to nuclear energy, or the adoption of private motor vehicles. The former example was driven by governmental fiat and the latter by the large private benefits associated with vehicle ownership and use. The U.S. technology strategy has been, thus far, one of federal sponsorship of research on specified technologies. But, there is no clear relationship between federal investment in particular technologies and success in commercialization, and there may be substantial inefficiencies or opposition to governmental "picking and choosing" of technologies. Moreover, there is a much wider array of public incentives that affect private technology choice than those identified under the CCTP; these other incentives may support the climate-related investments or may counteract them. There are likely opportunities to improve efficiencies of federal stimulation of technological advance by reviewing them all as a package and considering their cumulative effects. The CCTP supports technological advance at all stages of research, development, demonstrations, and deployment (RDD&D). Figure 6 shows the shares of the CCTP proposed for FY2009 for these different stages, according to data provided by the CCTP. More than two-thirds of CCTP funding supports basic research as well as development of specific technologies. As technologies prove promising for commercial use, programs support activities such as demonstrations at the pilot and bench scales. When technologies are ready for commercialization, or are already commercialized but adopted in markets more slowly than is advantageous, federal programs encourage deployment through targeted information, technical assistance and other measures. A very small portion of CCTP funding—perhaps 5%—supports technology deployment in the United States. Congress appropriates funds to DOE, the Environmental Protection Agency (EPA), and the Department of Agriculture (USDA) to administer more than 60 programs to promote voluntary adoption of technologies that are more efficient or reduce greenhouses gases, relative to the average of each technology available commercially. Programs include Energy Star, Climate Leaders, the Methane Partnership Initiatives, Value Added Producer Grants, and many others. CCTP Funding by Agency Figure 7 compares CCTP funding levels by agency as enacted for FY2008 and requested for FY2009. It does not display the agencies with less than 1% of the CCTP funding. Neither does this figure provide all related federal R&D funding, nor does it display other forms of support for technologies, such as tax exemptions or government procurement. In the FY2009 request, DOE would have represented 87% ($3.8 billion) of the new budget authority for the CCTP—two percentage points and $183 million more than in the FY2008 enacted level, which continues in FY2009 under a continuing resolution. USDA would have received about 4%, while DOD and NASA would have each received about 3%, of the $4.42 billion request for CCTP for FY2009. The EPA and NSF would have received 2% and 1%, respectively. Descriptions of CCTP-identified activities by agency are in Appendix E . International Climate Change Assistance The third major program in President Bush's climate change strategy was International Climate Change Assistance, to encourage other countries to slow and then reduce their emissions of greenhouse gas emissions. A major policy challenge is negotiating international commitments to address climate change after 2012, and especially gaining global engagement in GHG mitigation. Developing countries have stated that their degree of participation will depend on the degree to which the industrialized countries have fulfilled their commitments under the United Nations Framework Convention on Climate Change (UNFCCC). These commitments include financial and technological assistance to the lower income countries and to countries that may be harmed by policies to abate greenhouse gas (GHG) emissions. The United States, as one of the wealthiest nations and the leading emitter historically of GHG, is considered worldwide to have extraordinary responsibility to address climate change. Most people consider that, while addressing climate change must be a common, global effort, the United States must play a leading role among nations. President Bush's request would have more than tripled federal funding of climate change-related international programs, from $202 million enacted for FY2008 to $657 million for FY2009. The principal increase would provide a proposed $400 million "first installment" to a new Clean Technology Fund (CTF) established in 2008 and managed by the World Bank. The Clean Technology Fund (CTF) On Sept. 30, 2008, the U.S. Treasury committed $2 billion for the Clean Technology Fund (CTF), with a first installment of $400 million in grant money to be provided once appropriated by Congress. At the same meeting, up to $6.14 billion in total were pledged by Australia, France, Germany, Japan, the Netherlands, Norway, Sweden, Switzerland, the United Kingdom and the United States for the Climate Investment Funds (CIF) of the World Bank: CTF and the Strategic Climate Fund (SCF). These funds would provide grants and concessional loans to developing countries in order to facilitate greenhouse gas emission reductions and preparations for adaptation to climate change. According to the CIF website, Two trust funds are being created under the Climate Investment Funds. The Clean Technology Fund, will invest in projects and programs in developing countries that contribute to the demonstration, deployment, and transfer of low-carbon technologies. The projects or programs must have a significant potential for long-term greenhouse gas savings. The second fund, the Strategic Climate Fund, will be broader and more flexible in scope. It will serve as an overarching fund for various programs to test innovative approaches to climate change. The first program under this fund is a pilot aimed at increasing climate resilience in developing countries. A Forest Investment Program and a Scaling-Up Renewable Energy Program are also expected to be created in the coming months. The financing is intended to help meet existing commitments of the United States and other developed countries for financial assistance to developing countries. This commitment would supplement other obligations under the United Nations Framework Convention on Climate Change, for which some multilateral mechanism exist. (See, for example, the discussion on the Global Environmental Facility, below.) Accompanying the funds is the hope that the commitment will increase trust and garner developing countries' engagement in new GHG mitigation commitments in the current round of negotiations on climate change actions. There is general acknowledgment that more, and more effective, assistance to developing countries would be necessary to reduce their GHG trajectories. Several debates, however, have emerged over the CTF: which technologies should be financed? which countries should receive CTF assistance? should funds aim at transforming recipients' energy economies, or at making marginal changes in large countries? might the CTF substitute for reform of World Bank policy to make all its investments less emitting? and—perhaps most strategic—how does the CTF fit into the confusing set of existing and emerging funds to promote GHG mitigation and adaptation to climate change? United States Agency for International Development (USAID) President Bush's request also would have increased international climate change assistance through USAID by $50 million, from $115 million enacted for FY2008 to a proposed $165 million in FY2009. A Continuing Resolution extends the FY2008 funding level through March 6, 2009. Although the FY2009 requested amount would still be lower than the level of $190 million enacted for FY2006, a large part of the decrease from the FY2006 funding was $28 million eliminated for "modern energy services" in Afghanistan. USAID does not distinguish funding for measuring, monitoring, reporting, verification and reduction of greenhouse gas emissions from other activities in the relevant sectors. Asia-Pacific Partnership on Clean Development and Climate (APP) In the FY2009 request, the international assistance category included $52 million for the Department of State, $37 million of which would support the APP (compared to $32 million enacted for FY2008, extended through March 6, 2009 by a Continuing Resolution). Reported in other agencies under the Climate Change Technology Program (CCTP) and intended for the APP were another $15 million requested for the Department of Energy ($7.5 million enacted for FY2008), and $2 million for the Department of Commerce's International Trade Administration (zero in FY2008), and $5 million for the Environmental Protection Agency (with no appropriation for APP for FY2008). Both the House and Senate passed bills for FY2009 appropriations for many DOE programs (though none was enacted into law) and, in them, both committees rejected the request to fund the Asia Pacific Partnership. This is consistent with past appropriations, and funds for the APP have never been appropriated to the Environmental Protection Agency either. The APP is a voluntary partnership that aims to advance technologies that may help reduce the greenhouse gas intensity of partner nations: the United States, Canada, China, India, South Korea, Australia and Japan. The initial set of projects under the APP's workplan emphasizes sectoral assessments, capacity building, identifying best practices, and technology research and demonstration. Some critics argue that the APP is a diversion from cooperation under the United Nations and the UN FCCC, but few would deny that technological advance in the major developing countries will be essential to reducing their projected greenhouse gas emissions. The Global Environment Facility (GEF) and Additional Commitments Under the United Nations Framework Convention on Climate Change (UNFCCC)—to which the United States became a Party in 1992—the wealthier "Annex I" Parties committed to "provide new and additional financial resources to meet the agreed full costs incurred by developing country Parties" to comply with certain obligations, such as producing GHG inventories, and the "agreed full incremental costs of implementing measures" (UNFCCC Article 3). In federal climate change funding, under international assistance, is $26 million reported for FY2009 as the United States' climate-related contribution to the Global Environment Facility (GEF). The FY2009 requested level was the same as in FY2007 to FY2008. The GEF is the principal financial mechanism of the UNFCCC related to Article 3, and it is managed by the World Bank. The GEF supports projects to demonstrate innovative clean energy production and efficient energy use. To complement the GEF and bilateral arrangements, the Conference of the Parties to the UNFCCC set up the Least Developed Countries Fund (LDC Fund) to assist the poorest countries to adapt to climate change; it restricts eligibility to Least Developed Countries; projects must be short-term, urgent and meet high priority needs; and projects must be derived from completed National Adaptation Programmes of Action (NAPAs) (the development of which may be supported by the LDC Fund). For FY2009, the Senate-passed bill for foreign operations ( S.Rept. 110-425 ) would have enacted $20 million for the LDC Fund. It was not enacted into law, however. The Continuing Resolution continues funding through March 6, 2009 at FY2008 levels, which did not include an explicit contribution to the LDC Fund. The UNFCCC Parties also set up the Special Climate Change Fund (SCCF) to leverage additional resources from bilateral and multilateral sources in four areas of action: adaptation to climate change; transfer of technologies; energy, transport, agriculture, forestry and waste management; and activities to assist diversification of the economies of those developing countries that depend greatly on fossil fuel production. The United States has not contributed to the SCCF. Parties to the Kyoto Protocol—the United States is not a Party—also set up an Adaptation Fund (AF). The AF is to be financed, at least in part, by a 2% surcharge on emission reduction credits exchanged through the Kyoto Protocol's Clean Development Mechanism (CDM). It may also be financed by voluntary contributions of countries or private entities. The United States is not obligated to contribute to the AF, but may face pressure to make voluntary contributions. The degree to which Congress appropriates assistance to developing countries will likely influence the degree to which the Department of State can enhance U.S. credibility and garner developing countries' engagement in new GHG mitigation commitments for the post-2012 period. On the other hand, providing assistance alone cannot guarantee that developing countries will consider it measurable, reportable and verifiable finance, technology and capacity-building, as called for under the Bali Action Plan of 2007. Another issue, in some countries' views, is whether financial assistance provided outside of the financial mechanisms of the UNFCCC should be regarded as fulfilling financial commitments under the Convention. Controversy is likely as well over how multilateral funds might be managed. Further issues concern whether financing will be considered "new and additional," any conditions placed on the financing, and whether the funds are "adequate" and "predictable." Debt Restructuring to Preserve Tropical Forests The United States also encourages countries to conserve tropical rain forests, thereby avoiding greenhouse gas emissions and protecting the removal by trees of carbon dioxide from the atmosphere. It does this by a "swap" of a country's debt for payment into conservation funds, authorized by the Tropical Forest Conservation Act (TFCA)( P.L. 108 - 323 ). The FY2009 request included $20 million for the Treasury Department for debt restructuring for tropical forestry conservation—the same as in recent years—in the Treasury Department's budget for climate-related debt restructuring programs. Tax Provisions The fourth major type of financial support to climate change activities reported by the Administration is tax provisions or "tax expenditures." Tax provisions, often not for the explicit purpose of addressing climate change, may contribute to reducing greenhouse gas emissions by establishing incentives for incremental investments in technologies (e.g., wind energy) that emit less than the technologies they are thought to replace (e.g., fossil fuel combustion). In its federal expenditures reports, OMB enumerates certain tax expenditures , which are the estimated loss of federal revenues that result from taxpayers taking advantage of these preferential tax treatments. OMB's estimates of tax expenditures rose sharply overall from $580 million in FY2003 to $1.52 billion in FY2007 ( Table 1 ). The rise in the estimates from FY2006 to FY2007 was primarily due to expected loss of revenues resulting from tax incentives included in the Energy Policy Act of 2005 ( P.L. 109 - 58 ). These provisions were due to expire at the end of 2008. OMB projected the estimated tax expenditures to remain at $1.52 billion for FY2008 and then fall to $1.4 billion in FY2009, and continue to decline through 2013. These projections are likely altered by the extension in late 2008 of various incentives for renewable energy included in the Emergency Economic Stabilization Act of 2008 ( P.L. 110 - 343 ). One policy issue related to the tax provisions is their continuity over periods of time that are consistent with planning and construction of large capital projects, including commercial wind and other renewable energy installations. Because these take a number of years to execute, tax provisions may not predictably be available for a sufficiently long period for investors to take advantage of them for entirely new facilities (as opposed to facilities that may already have been planned). This could reduce the effectiveness of tax incentives to help to reduce greenhouse gas emissions. On the other hand, the tax incentives are intended to stimulate deployment of new technologies, rather than to support a market that may not become commercially viable. The full effects of tax incentives could be understood only in the context of other tax provisions that support activities that may aggravate climate change, such as support for fossil fuel production and use; data on these are not provided by OMB. Existence of tax incentives for both low-GHG-emitting technologies and high-GHG-emitting technologies likely counteract each other, and together would mask the full cost of energy to consumers. While tax provisions support a variety of policy objectives, such as energy security and employment, overall efficiencies may be gained by revising the counter-acting provisions in the context of meeting several objectives together (and supporting "win-win"measures). Such analysis, however, is beyond the scope of this report. Principal Observations and Legislative Issues Over the past two decades, federal funding related to climate change has expanded from scientific research, almost exclusively, to a wide variety of programs to: develop and disseminate technologies; build a foundation for future policy actions; plan for adaptation; assist lower income countries; and address additional needs. As the debate continues over appropriate strategies to address climate change, the needs and priorities for funding are likely to evolve further. No Single Goal Aligns the Federal Effort There has not been an overarching policy goal for climate change that guides the programs funded or the priorities among programs. U.S. federal policy on climate change has been a coalescence of separate goals—evolved distinctly for science, technology, energy production, foreign assistance, and trade—not a single, integrated strategy. The current federal effort largely has been built "bottom up" from a variety of existing programs, Presidential initiatives, and Congressionally-directed activities. Choices tend to be based on departmental missions and the degree of support for the input activities. There is no synthesis that establishes quantitatively, or even qualitatively, how federal funding will lead to accomplishment of a national climate change goal. As President-elect, Barack Obama stated, on December 15, 2008, that "the effort before us will demand coordination across the government, and my personal engagement as President." To assist with these, he has designated former EPA Administrator Carol Browner to be Assistant to the President for Energy and Climate Change. While President Obama has announced the intention of establishing a cap-and-trade system to reduce U.S. greenhouse gas (GHG) emissions to 1990 levels by 2020, and by 80% from 2005 levels by 2050, it remains to be seen how his goals will translate into funding proposals and program alignment. Reporting Might Better Serve Congressional Needs For FY2008, no legislative language required the Executive Branch to report a cross-cut budget for climate change activities, as had been the case for more than a decade. The Executive Branch consequently did not produce a consolidated annual report on climate change funding in 2008. The Global Change Research Program, however produced its annual report, Our Changing Planet, for the science programs, although the detail of budget information is limited. (Spreadsheets were available upon request to the Office of Management and Budget.) The absence of a requirement for a cross-program, cross-cut budget continues into FY2009. Agencies vary in the degree to which they identify and explain climate-related activities in their separate budget justifications. In some cases, OMB's cross-cut spreadsheets include activities that are not noted in agency budget justifications as related to climate change; in other cases, agencies identify activities as climate change-related that are not included in OMB's tallies. It would be extremely difficult to construct an accurate overview of climate change funding without such an OMB-assisted cross-cut. The Congress may elect to continue with the status quo, in terms of separate agency budget reports, which may or may not identify climate change-related programs, or wish to re-instate a reporting requirement for climate change funding and tax incentives. If the Congress were to require annual reports, as it did for more than a decade, it may wish also to consider specifying the criteria for including funding (since many programs may exist primarily for other purposes), as well as detailed supporting information that could improve the clarity, consistency, and usefulness of such reports to Congress. It may also be helpful for budget justifications to be more clear about both increases and decreases to activities, the stakeholders affected and their priorities, and to facilitate transparency for decision-making and bargaining about the trade-offs. Presidents historically have categorized agencies' climate change-related efforts and funding into three broad programs: science, technology, and international assistance. In recent years, the Office of Management and Budget has also provided estimates of annual tax incentives. These broad groupings, given the limited information typically available from each agency, may not clearly express the objectives of many activities. For example, agencies may consider some programs to be directed, say, at impact assessment and management of adaptation, or at policy analysis, neither of which fits neatly into those three program categories. Hence, the traditional OMB reporting by three broad programs may not meet the needs of Congress in its oversight and appropriations functions. If the Congress were to require annual funding or expenditure reports, it may also wish to specify how to organize the information to increase its usefulness. A different organization of budgetary information might, for example, be aligned with elements of climate change legislation likely to be considered in the 111 th Congress. In addition, it could be organized by its expected contributions to measurable objectives of a climate policy. The priorities and achievements of funded climate change efforts have frequently been evaluated at the level of component activities, but not at a more integrated level—except for the Climate Change Science Program. The Climate Change Science Program (CCSP) and component elements have arranged numerous prospective and retrospective evaluations by the National Research Council, particularly the Committee on Strategic Advice on the U.S. Climate Change Science Program, and other independent bodies. A similar degree of evaluation has not been performed on the Climate Change Technology Program (CCTP), although it now constitutes more than two-thirds of all federal funding for climate change. Nor has evaluation been conducted of the international assistance effort and broader foreign policy on climate change. No entity has been charged with, or provided, an evaluation of the federal effort in its entirety. Such evaluations may be useful, however, if calls for additional resources to address climate change are to be persuasive, given many competing national priorities within a constrained federal budget. Recent Changes: Technology and Tax Incentives Up, Science Down Federal funding and tax incentives for climate change activities totaled an estimated $7.73 billion for FY2008. After accounting for inflation, this suggests an increase of about 85% since FY2001. However, due to reporting issues, any comparisons over time must be viewed with caution. Of the $4.3 billion increase (in actual dollars), $2.6 billion—more than 60%—is attributable to expansion of technology research and development; another $1.5 billion of the budgetary impact is due to enactment of new tax incentives that may stimulate greenhouse gas reductions. For scientific research, federal funding in actual dollars increased by $0.1 billion from FY2001 to the FY2008 enacted level, though this represents a decline of 23% in funding for climate change science after accounting for inflation. The Federal Climate Science Effort Has Declined The Climate Change Science Program (CCSP) is the Administration's research program established under the umbrella of the Global Change Research Act (GCRA) of 1990. Funding enacted for the CCSP was $1.86 million in FY2008. CCSP constitutes about 29% of federal funding for climate change, and about 24% of the total budgetary impact. Satellite-based observing systems represent almost two-fifths of all climate science funding. The decline of funding for climate change science by 23% (adjusted for inflation) from FY2001 to the FY2008 enacted level led to less buying power to support satellite-based observations, and a proportionately greater decline for other types of observations and for research, analysis and applications. External evaluations of the CCSP suggest that improvements would be beneficial in: overall leadership and budget coherence; metrics to measure progress; clearer reporting of programs and funding; balance among space-based observations and other research elements; and practical applications of gained knowledge. As the Climate Change Science Program (CCSP) moves towards revision by 2010 of its strategic plan for 2013 to 2023, in compliance with a court order, the Congress may move to consider legislative options that could clarify the goals, measures of progress, organization and processes of federal climate change scientific research. Performance objectives for technology, regulatory, and assistive programs may also be set through new legislation to control greenhouse gas emissions in the 111 th Congress, or through Executive Branch decisions. Balancing the Technology Effort The federal investment in the Climate Change Technology Program (CCTP) has more than doubled since FY2001, from $1.68 billion to $4.30 billion enacted for FY2008. It enjoys broad support, partly due to the widespread recognition that meeting aggressive long-term targets to slow climate change would require radical technological advance in the United States and globally. Funding to support nuclear energy research and development is the largest single component among all climate change-related programs. While some stakeholders may disagree with the federal balance of funding across technology types, almost all agree on the importance of advancing low-emitting technologies. Some have pointed out the need for greater continuity of programs and incentives to be more consistent with the planning and investment cycles of businesses, while others have emphasized the importance of stimulating demand for less-emitting technologies and practices. No rigorous and systematic evaluations of the CCTP have been performed, although at least one assessment occurred in 2006, managed by a DOE national laboratory. It advised that there may be fruitful opportunities to support exploratory and revolutionary technologies, in addition to those that would provide incremental change to existing ones. There also are likely benefits to supporting more "enabling" and "integrative" technologies. The CCTP is largely an aggregation of existing, climate-related technology programs. There are likely opportunities to improve efficiencies of federal stimulation of technological advance by reviewing them together, strategically. Moreover, because federal funds and tax incentives also support technologies that may aggravate greenhouse gas emissions (or other national goals), there also are likely efficiencies that could be gained by evaluating those identified to stimulate greenhouse gas reductions with the others—as a package—considering their cumulative effects, and considering the likely effectiveness of alternative policy instruments that could stimulate technological advance to mitigate GHG emissions. Solving a Global Problem Requires a Strategy for International Programs Climate change funding includes international programs; the FY2008 enacted amount was $202 million and President Bush proposed to increase this by $2 billion over five years. These funds may help to achieve global participation in abatement of greenhouse gas emissions, and to adapt to the impacts of climate change. A major policy challenge is negotiating international commitments to address climate change after 2012, and especially gaining global engagement in GHG mitigation. Developing countries have stated that their degree of participation will depend on the degree to which the industrialized countries have fulfilled their commitments under the United Nations Framework Convention on Climate Change. These commitments include financial and technological assistance to the lower income countries and to countries that may be harmed by policies to abate GHG emissions. The United States, as one of the wealthiest nations and the leading emitter cumulatively of GHG is considered worldwide to have extraordinary responsibility in addressing climate change. Many people consider that, though addressing climate change must be a common global effort, the United States must play a leading role among nations. From this perspective, the United States and other industrialized countries have already attained a high standard of living, and have greater financial and technological resources to address climate change than developing countries. In view of these facts, the United States committed in 1992, along with other wealthy countries under the United Nations Framework Convention on Climate Change (UNFCCC), to provide financial and technological assistance to emerging economies to mitigate greenhouse gas emissions and to adapt to climate change. The United States has contributed about one-fifth of total funding to the Global Environmental Facility, the main financial mechanism of the treaty. However, it has made no contribution to two special funds set up to assist the least developed countries. On Sept. 30, 2008, the U.S. Treasury committed $2 billion for the Clean Technology Fund (CTF), with a first installment of $400 in grant money to be provided once appropriated by Congress. At the same meeting, up to $6.14 billion in total were pledged by Australia, France, Germany, Japan, the Netherlands, Norway, Sweden, Switzerland, the United Kingdom and the United States for the Climate Investment Funds (CIF) of the World Bank. The U.S. commitment has not been appropriated by Congress, however, due in part to concerns about whether the CTF might promote coal use and forestall GHG abatement. There are additional funds and bilateral channels, as well, for providing assistance under the UNFCCC. Moreover, many countries seek technological cooperation with the United States, not strictly financing. Federal programs and private partnership will establish the United States' role as leader, collaborator, or follower, depending on their future character. The degree to which Congress appropriates funds for cooperation with, and assistance to, developing countries will arguably influence the degree to which the Department of State can enhance U.S. credibility and garner developing countries' engagement in new GHG mitigation commitments for the post-2012 period. On the other hand, providing assistance alone cannot guarantee that developing countries will consider it measurable, reportable and verifiable finance, technology and capacity-building, as called for under the Bali Action Plan of 2007. Another issue, in some countries' views, is whether financial assistance provided outside of the financial mechanisms of the UNFCCC should be regarded as fulfilling financial commitments under the Convention. Controversy is likely as well over how multilateral funds might be managed. Further issues concern whether financing will be considered "new and additional," any conditions placed on the financing, and whether the funds are "adequate" and "predictable." Possible Efficiencies Among Tax Provisions Many tax provisions have been enacted that may stimulate technologies that emit less GHG than those currently common. One policy issue related to tax provisions is their continuity over periods of time that are consistent with planning and construction of large capital projects, including commercial wind and other renewable energy installations. Because these take a number of years to execute, tax provisions may not predictably be available for a sufficiently long period for investors to take advantage of them for entirely new facilities (as opposed to facilities that may already have been planned). The delay through most of 2008 in renewing expiring incentives for certain renewable energy investments, for example, may have reduced their effectiveness to help to reduce GHG emissions because of uncertainties and reduced investor confidence. In addition, tax credits may not be as effective in the current economic situation in which both profit potential is down and financing is difficult to obtain, and may have little effect on individuals or entities that do not pay enough taxes to take advantage of the tax credits. Few evaluations have been conducted of the effectiveness and efficiency of tax incentives, although controversies exist regarding whether tax incentives or other mechanisms are most efficient in achieving a policy goal (e.g., in debates over tax credits or grants for weatherization). Existence of tax incentives for both low GHG-emitting technologies and high GHG-emitting technologies likely counteract each other, and together would mask the full cost of energy to consumers. Executive Branch reporting on climate change "expenditures" only reports tax incentives that may stimulate GHG reductions. While tax provisions support a variety of policy objectives, such as energy security and employment, data on these are not provided by OMB potentially counter-acting incentives to assist consideration of the overall effects on greenhouse gas emissions. Overall efficiencies may be gained by revising counter-acting tax provisions in the context of meeting several objectives together (and supporting "win-win"measures). Opportunities to Improve the Federal Climate Change Effort The packaging of mostly existing programs into a climate change strategy has resulted in an apparent lack of a unifying mission across agencies to address climate change. Funding for climate change activities has largely reflected departmental missions and support for each activity, rather than each activity's expected contribution to an over-arching strategy. This is not surprising, given the variety of stakeholders and their priorities. The new Obama Administration is expected to provide more action-oriented leadership, but will face a challenge of understanding climate-related programs and funding, and aligning those into an effective cross-agency, inter-governmental mission. As policy needs have evolved, there increasingly have emerged overlaps and gaps among climate-related program areas. For example, there are gaps in U.S. governance infrastructure, such as data management and accessibility, and public communications. Federal resources for economic evaluations of options and other policy analyses, are well under 1% of total funding. Many stakeholders have argued that programs to assess potential impacts of climate change and plan for adaptation are under-funded. (Although the Analytical Perspectives for the FY2009 request stated that the FY2009 proposal for the CCSP would add emphasis to researching the impacts of climate change and for the science of adaptation, such added emphasis was not apparent in the documentation available in the multi-agency cross-cut nor in individual agencies' budget submissions.) At the same time, in some instances, several agencies all manage programs to address a given issue, such as sequestration of carbon by soils and vegetation, or development of greenhouse gas emissions estimates, and there may be opportunities to improve efficiencies across programs. Finally, there may be numerous mundane but important constraints on funding that may weaken efficiency or effectiveness of climate change-related programs. Such administrative requirements or constraints can include: authorities to use contracts versus grants; whether agencies may finance entities in foreign countries; sufficiency of travel money to collaborate or oversee international activities; authorization of personal services contracts; etc. One potentially important element in the success of programs is the expertise of federal officials in these programs, and whether federal policies enhance or hinder the recruitment, development and effective use of personnel. Barriers to job mobility of federal personnel across programs and departments also likely discourage development, interaction and collaboration across agencies and disciplines. A number of sources have reported that finding funds can be problematic for interagency teams to accomplish specific "common good" tasks. Although there have been some adjustments to address some of the issues above, a number of critics argue that there remain important weaknesses in the federal program; some have concluded that structural—potentially legislative—fixes are necessary. As a result, many proposals within and outside of the U.S. Congress to restructure and expand climate change programs may be debated in the 111 th Congress. The Congress may seek ways to encourage integrated strategies across climate change programs and to minimize fragmentation of legislative measures across committee jurisdictions, given the high profile and growing accord that addressing climate change appears to have in the legislative agenda. In sum, some Members of Congress and others have expressed interest in how federal funding may reflect and enable an overall strategy to address climate change. With deepening budget pressures, calls to expand funding to address climate change may face challenges in demonstrating program benefits that can compete effectively with other demands. In addition, with direction-changing pledges by the new President and an evolving Congressional debate over appropriate policies to address climate change, priorities among climate change activities will likely change. Such discussion could be served by improved reporting of funding. In addition, this review of federal funding of climate change activities suggests that there will be opportunities to better align funding with strategic policy goals, and to assure that programs are organized to accomplish those goals efficiently. Related CRS Reports CRS Report RL31931, Climate Change: Federal Laws and Policies Related to Greenhouse Gas Reductions , by [author name scrubbed] and [author name scrubbed]. CRS Report RL33588, Renewable Energy Policy: Tax Credit, Budget, and Regulatory Issues , by [author name scrubbed]. CRS Report RL33599, Energy Efficiency Policy: Budget, Electricity Conservation, and Fuel Conservation Issues , by [author name scrubbed]. CRS Report RL33826, Climate Change: The Kyoto Protocol, Bali " Action Plan, " and International Actions , by [author name scrubbed] and [author name scrubbed]. CRS Report RL33578, Energy Tax Policy: History and Current Issues , by [author name scrubbed]. CRS Report RL34417, Energy and Water Development: FY2009 Appropriations , by [author name scrubbed] et al. Appendix A. Statutory Language Requiring Reports to Congress on Federal Climate Change Expenditures Unlike in previous years, the Congress did not include statutory language in the FY2008 appropriations law or in the FY2009 Continuing Resolution requiring the Administration to reports to Congress on federal expenditures for climate change activities. In previous years, for about a decade, Congress had included specific language in the annual appropriations bill for foreign operations, requiring the President to report to Congress on all federal agency obligations and expenditures for climate change programs and activities. Language was not included in the Revised Continuing Appropriations Resolution for FY2007 ( P.L. 110 - 5 ), which funded foreign operations and many other federal agencies and activities. However, that law did require agencies to adhere to the same authorities and conditions that were enacted for FY2006, in effect continuing the requirement for the President to report on climate change obligations and expenditures in FY2007. Congress most recently included a reporting requirement in the Foreign Operations, Export Financing, and Related Programs Appropriations Act for FY2006 (Section 585(b) of P.L. 109 - 102 ). Previous requirements were stated in: Section 555(b), Division E of P.L. 108-7 , the Consolidated Appropriations Resolution, FY2003; Division D, Title V, Section 555(b) of P.L. 108-199 , the Consolidated Appropriations Act, FY2004; Division D, Title V, Section 576(b) of P.L. 108-447 , the Consolidated Appropriations Act, 2005; Title V, Section 585(b) of P.L. 109-102 , the Foreign Operations, Export Financing, and Related Programs Appropriations Act, 2006, as carried forward under P.L. 110-5 , requires the President to transmit a report to Congress on climate change expenditures within 60 days after transmittal of the President's Budget. The statutory language from Section 585(b) of P.L. 109 - 102 is provided below: CLIMATE CHANGE REPORT- Not later than 60 days after the date on which the President's fiscal year 2007 budget request is submitted to Congress, the President shall submit a report to the Committees on Appropriations describing in detail the following— (1) all Federal agency obligations and expenditures, domestic and international, for climate change programs and activities in fiscal year 2006, including an accounting of expenditures by agency with each agency identifying climate change activities and associated costs by line item as presented in the President's Budget Appendix; and (2) all fiscal year 2005 obligations and estimated expenditures, fiscal year 2006 estimated expenditures and estimated obligations, and fiscal year 2007 requested funds by the United States Agency for International Development, by country and central program, for each of the following: (i) to promote the transfer and deployment of a wide range of United States clean energy and energy efficiency technologies; (ii) to assist in the measurement, monitoring, reporting, verification, and reduction of greenhouse gas emissions; (iii) to promote carbon capture and sequestration measures; (iv) to help meet such countries' responsibilities under the Framework Convention on Climate Change; and (v) to develop assessments of the vulnerability to impacts of climate change and mitigation and adaptation response strategies. Appendix B. Interagency Coordination of Climate Change Under President George W. Bush In 2002, President George W. Bush announced a goal to cut the U.S. greenhouse gas intensity—the quantity of greenhouse gases emitted per unit of economic activity (GDP)—by 18% through 2012. In parallel, U.S. programs to address climate change have aimed at: reducing scientific uncertainties; advancing development and introduction of energy efficient, renewable, and other low- or non-emitting technologies; and improving standards for measuring and registering emissions reductions. Specific outcome-oriented performance targets were set for selected programs, such as for greenhouse gas reductions achieved by EPA's appliance efficiency Energy Star program, and several other voluntary partnerships. Quantitative greenhouse gas, science, or technology performance targets have not been identified for most of the climate-related funding requests. On April 16, 2008, President George W. Bush announced a new national goal for climate policy—to halt increases in U.S. emissions of GHG by 2025. Emissions would begin to decline thereafter "so long as technology continues to advance." According to President Bush, the United States would achieve this goal by regulatory measures and market incentives to encourage use of clean technologies. President Bush said that the United States would be willing to include this plan in a future international agreement as long as all other major emitting economies also include their plans in the agreement. Some stakeholders have criticized the new Bush policy for proposing any cap on future emissions, while others have criticized it as too little, too late. President Bush's 2002 strategy established a new Cabinet-level Committee on Climate Change Science and Technology Integration ( Figure B -1 ) to oversee the implementation of the science and technology research programs across agencies. This committee meets approximately quarterly, typically at the deputies level. The principal program design and management occurs within each agency. According to the Bush Administration, the strategy, thus, puts accountability and leadership for the science and technology programs in each of the relevant agencies. Others argue that this leads to less effective collaboration and accountability for the cross-cutting climate change goals than if there were greater central authority for the programs. Communication and coordination are facilitated through a series of inter-agency working groups that meet with varying frequencies. Budget levels are established primarily through dialogue between each agency and OMB. This contrasts with the practice in the early 1990s of reaching agreement among the science agencies about any increments to the global change research budgets. Under the Climate Change Science Program (CCSP) announced in 2002, President Bush set up a Climate Change Research Initiative (CCRI) that supplements the U.S. Global Change Research Program (US GCRP), established by Congress in 1990, which emphasizes long-term scientific research. The 2002 strategy also established a Climate Change Technology Program (CCTP), parallel to the science research program. It includes a National Climate Change Technology Initiative (NCCTI) in addition to pre-existing clean energy research. The Department of State takes the lead on most aspects of international cooperation. Appendix C. Historical Funding of the CCSP Appendix D. CCSP-Identified Programs by Agency This appendix describes the identified climate change science activities of the agencies with almost all of the Climate Change Science Program (CCSP) funding. It provides the FY2008 enacted funding by agency, which has been extended into FY2009 by a Continuing Resolution ( P.L. 110 - 329 ). This section also provides President Bush's requests for FY2009 and discussion of the proposed changes, some of which address issues which are likely to be raised again in the 111 th Congress. Additional information summarizes the roles and activities of the covered agencies within the CCSP. National Aeronautics and Space Administration (NASA) Funding for NASA's contributions to the CCSP were enacted for FY2008 at $1.20 billion—a 12% increase over FY2007 levels. Amid vociferous appeals to increase NASA's budget to boost satellite operations and other efforts, President Bush's FY2009 proposal would have increased NASA's CCSP funding by $125.6 million—12% more than the enacted FY2008 levels. Under the Continuing Resolution for FY2009, NASA's share of all CCSP funding remains approximately 58%. Space - Based Observations . Of NASA's FY2008 funding, $666 million (62%) was for acquiring observations by satellites. Of the total $125.6 million increase proposed by President Bush over FY2008, $102.3 million would have boosted satellite-based observations, based on recommendations from the NRC Decadal Survey and in light of the decline of funding for these observations in recent years. If enacted President Bush's proposal for FY2009 would have increased the satellite share to $769 million (64% of NASA's total). In order to ensure continuity of key climate-related data, the Total Solar Irradiance Sensor (TSIS) would be restored to the first satellite scheduled to fly in the National Polar-Orbiting Operational Environmental Satellite System (NPOESS). In addition, the Clouds and Earth Radiant Energy System (CERES) would be placed on the NPOESS Preparatory Project, the precursor mission for NPOESS. The data acquired by these two sensors would help to determine how much solar variability may be contributing to observed climate variability, and how clouds and other atmospheric changes may influence the Earth's energy balance and the climate. These and other technologies had been cut from NASA's budget in 2006 in response to cost-overruns and other problems. Simultaneously, Earth Sciences have been low among NASA's priorities. Funds were shifted from FY2005 from programs that support climate change to other priorities, such as the Vision for Space Exploration. An NRC report in 2006, charged with examining the balance concluded: The program proposed for space and Earth science is not robust; it is not properly balanced to support a healthy mix of small, medium, and large missions and an underlying foundation of scientific research and advanced technology projects; and it is neither sustainable nor capable of making adequate progress toward the goals that were recommended in the National Research Council's decadal surveys. Under the FY2009 proposal, the Earth System Science Pathfinder, which includes the Orbiting Carbon Observatory (OCO) and Aquarius, would have seen its funding decrease 22%. NASA's FY2009 five-year budget projection would provide $910 million to develop two priorities: the SMAP mission for soil moisture mapping; and a second generation ICESat mission, the latter intended to accurately measure ice topography and allow estimation of ice sheet volume changes and sea ice thickness. Formulation and early development work is proposed to proceed also for at least two additional missions by 2013, in response to the NRC Decadal Survey released in 2007. An NRC report published in 2008 provides a set of priorities for future observation systems. NASA has changed some of its accounting methods since 2005, and has revised the set of programs and projects it counts within the CCSP. These revisions make comparison of budget authority difficult to track across multiple years. Elements of several satellite systems, including the Landsat Data Continuity Mission, the Gravity Recovery and Climate Experiment (GRACE) and portions of the High-End Computing and Scientific Computing projects were newly included in the FY2006 request and 2007 White House report. NASA is one of several agencies that support satellite-based climate-related observations, but is the only one that presents this funding distinctly in its CCSP budget submissions. For example, most of the proposed increase for NOAA for FY2009 is also to support the same satellite-sensor systems. The Department of Defense also contributes through its Defense Meteorological Satellite Program. USGS has additional efforts. Data Management, Analysis and Applied Sciences . Within NASA's Earth Science account, Applied Sciences and Education and Outreach are supposed to provide a bridge between NASA's missions and potential users—particularly in the federal agencies—in order to ensure that societal benefits accrue from NASA investments. NASA reports that its FY2009 budget would support evaluation and assessment of potential policy-, market-, and technology-based approaches to adapting to or mitigating the impacts of climate change, as well as the impact of climate change on infectious diseases. While funds for the satellite-based observations have declined in recent years, the funding for other observations, and for research and analysis have declined faster. The NRC study that assessed balance among NASA science programs recommended, in particular, that "NASA should move immediately to correct the problems caused by reductions in the base of research and analysis programs.... " Despite that 2006 recommendation, the NRC Decadal Survey that recommended enhanced space missions also noted that cutting research and analysis of observations from missions already launched reduces the "return on investment" from the high front-end expenditures to acquire satellite-based data. A recent NRC study also commented that users of NASA require better access to the data, rather than new modeling or data analysis tools. In the FY2009 budget justifications, however, it is neither clear whether the level of effort is proposed to change, nor how such applied research in NASA would be coordinated with program agencies' needs for their missions related to adapting to or mitigating climate change. National Oceanic and Atmospheric Administration (NOAA) NOAA funding constitutes about 14% of total CCSP funding. NOAA is the second largest of agencies participating in the CCSP. NOAA's Assistant Secretary of Commerce for Oceans and Atmosphere directs the interagency Climate Change Science Program. NOAA has the lead among agencies on the court-ordered Capstone Synthesis and Assessment Product of the CCSP, due in 2009. The FY2009 proposal would have increased NOAA's budget for climate change science by $20 million (8.3%) over the FY2008 enacted level of $240 million, and $76 million (41.3%) over the FY2007 budget authority of $184 million. Although the Analytical Perspectives for the FY2009 request states that the FY2009 proposal for the CCSP overall adds emphasis to impacts of climate change and the science of adaptation, such added emphasis is not apparent in the FY2009 proposal for NOAA. Almost all the increases proposed are for observational capacities, not applied research, assessment or planning. The proposal would have redistributed funding within NOAA: several decreases would have partially offset an increase of $74 million to develop key satellite climate sensors. The Continuing Resolution until March 6, 2009, puts such redistributions on hold. The FY2009 request for an increase of $74 million would have supported the Clouds and the Earth's Radiant Energy System (CERES) sensor, intended to measure the Earth's incoming and outgoing radiation, as well as the Total Solar Irradiance Sensor (TSIS) sensor, to help determine solar variations as one driver of climate variability and change. The two sensors could help distinguish the solar influence from other factors (such as greenhouse gases) driving climate variability and change. These climate sensors had been de-manifested in 2006 from the National Polar-orbiting Operational Environmental Satellite System (NPOESS) under the Nunn-McCurdy certification process (but had not been included in CCSP accounting previously). Reinstatement of the sensors is seen as key to assuring overlapping data series for calibration of measurements. The requested increase responds to the Decadal Survey recommendations of the NRC in January 2007 and relates to increases also in the FY2009 request for the NASA. This is the first budget request for the CCSP in which the Administration is counting funding for these items, "to provide the most accurate picture of its climate funding to date." Adding this item to what is identified as CCSP would raise NOAA's CCSP FY2007 actual budget authority and FY2008 enacted authority by $7 million each, and the FY2009 request by $81 million, compared to previous Administration accounting of the CCSP. Offsetting the satellite increase, one proposed reduction would have cut Congressionally directed funding of $5.4 million, eliminating the Regional Climate Centers. A second proposed reduction would have cut $19.1 million from the enacted FY2008 level for "Archive, Access, and Assessment." NOAA's FY2009 budget justification stated the following objectives: development of an integrated earth system analysis capability; creating a high quality record of the state of the atmosphere and ocean since 1979 (+$74 million to develop the CERES and TSIS radiation sensors); development of an end-to-end hydrologic projection and application capability; enhanced carbon cycle research on high latitude systems; quantification of climate forcing and feedbacks by aerosols, non-carbon dioxide greenhouse gases, water vapor, and clouds; assessment of abrupt change in a warming climate (+$1.0 million, for a total of $5 million, for research on "Atlantic Meridional Overturning Circulation" A-MOC, and -$0.4 million for other abrupt climate change research); examination of the feasibility of development an abrupt change early warning system; and ecological forecasting (+$0.6 million to$2.1 million in the FY2009 request). Associating most of these objectives with specific funding proposals was not possible with the information available. The FY2009 proposal would increase funding in the Climate Data and Information line item by $8.3 million, restoring the request for FY2008 that was not enacted. It would also provide an increase of $2 million for the National Integrated Drought Information System (NIDIS), to develop and bring into operation the next-generation Climate Forecast System. The FY2009 proposal would increase funding for Water Vapor Process Research by $880 thousand, to improve currently weak but critical understanding of the amount of water vapor in the atmosphere and its distribution. Of this, about two-thirds would be used to initiate work on LIDAR, sondes, satellite and other sensors. The remainder would use the observations to improve computer models by 2013 for analyses of greenhouse gas, aerosol and cloud effects on climate. In addition, creation of a National Climate Service within NOAA, parallel to but distinguished from the National Weather Service, has been advocated by some people for a number of years. (Currently, there exists a Climate Services Division within the National Weather Service.) The proposed Climate Information Services would aim at improving provision of routine seasonal to multi-annual forecasts and data products, as well as expanded drought information. The proponents would expect benefits for prediction of and responses to drought, hurricanes, fires, floods, and weather extremes. The definition of "climate" in the context of the proposed National Climate Service seems to be seasonal to multi-annual, encompassing such phenomena as El Nino; it does not appear to aim at the multi-annual to inter-decadal or longer horizon generally embodied in the debate over human-induced climate change. ("Climate" is often defined by long-term averages, such as the "normals" that constitute 30-year averages; the proposed National Climate Service seems aimed at variability on much shorter time frames.) National Institute of Standards and Technology (NIST) The FY2009 proposal for the Department of Commerce's contribution to the CCSP included NIST activities for the first time as a distinct line item. The request would have increased the NIST contribution to the CCSP from $0.2 million enacted in FY2007 and FY2008 by $5.0 million to $5.2 million in FY2009. According to Our Changing Planet , these funds would be used for: Resolving discrepancies in satellite measurements of radiation, including solar irradiance, reflected solar radiation, outgoing longwave radiation, and surface radiation; and Providing critical information about aerosols and atmospheric components believed to play a major role in global climate change. National Science Foundation (NSF) With enacted budget authority for FY2008 of just over $205 million, National Science Foundation funding constitutes about 11% of the U.S. Climate Change Science Program (CCSP), and the third largest of agencies participating in the CCSP. Still, NSF funding was only 3% of total federal funding for climate change in FY2008. President Bush's budget proposed to increase NSF's funding by $16 million to $220.6 million (8%) in FY2009. While funding for most components of NSF's climate change program was proposed for FY2009 to remain flat or decline slightly, two components had been slated for significant increases: Geosciences : proposed increase of $7.0 million (4.4%—or a little more than inflation); and Office of Polar Programs : proposed increase of $7.8 million (74.3%). NSF's climate change science programs invest in "fundamental discovery," research infrastructure, and educational activities. High priorities are stated as including data acquisition, information management, model enhancement, development of new Earth observing instruments and platforms, and new research methods. NSF also has a program for research on "the general processes used by organizations to identify and evaluate policies for mitigation, adaptation, and other responses to varying environmental conditions," according to its FY2009 budget justification. In addition, NSF proposed to initiate a program related to climate change impacts on water, "Dynamics of Water Processes in the Environment." Department of Energy (DOE) DOE's funding for the CCSP was enacted at $128.3 million for FY2008, and was proposed to increase by $17.6 million in FY2009 to $145.9 million. The largest component of DOE's contribution to the CCSP supports research on "climate forcing," which was proposed in FY2009 to increase by $3.2 million to $81.2 million. Of this, $52.6 (same as FY2008) would support continued Atmospheric Radiation Measurement (ARM), to reduce the largest scientific uncertainty in climate change prediction—the roles of clouds and aerosols and their interactions with solar radiation. Some $14.8 would have funded research while another $37.8 million would have supported the ARM infrastructure—the Climate Research Facility (ACRF): three stationary facilities, a mobile facility and aerial vehicles. The proposed $2.6 million increase over FY2008 levels would have supported an additional mobile facility for deployment in 2010. $13.0 million (+0.4 million) in FY2009 would have funded research on atmospheric aerosols and their effects on the Earth's energy balance. Another $13.6 million would have continued support for Ameriflux, to measure exchanges of carbon dioxide, energy and water between the atmosphere and major terrestrial ecosystems in North America. AmeriFlux is funded also by NASA, NOAA, USGS, the Forest Service and the Agricultural Research Service. About $1.9 million supports the Carbon Dioxide Information and Analysis Center (CDIAC), one of several repositories of data on greenhouse gas emissions, atmospheric concentrations, and related data. In DOE's Office of Science, $45.4 million was proposed for climate change modeling in FY2009, an increase of $14.1 million of FY2008 enacted levels, and $20.0 million over FY2007 levels. About $7.8 million would have supported work towards a first-generation Earth System model (to include natural, but not human, components). Some $2.6 million would have explored past and potential future abrupt climate change. The Climate Change Response program would have received $19.4 million under President Bush's request, with $13.2 million for experimental studies of the possible effects of warming, precipitation changes and CO 2 increases on terrestrial ecosystems. In FY2009, research on carbon capture and sequestration (CCS) was proposed to increase to a total in the Office of Biological Research of $17.4 million, up $0.5 million from the FY2008 enacted level. Of the total, $12.3 million (73%) would have supported biological sequestration (e.g., absorption of carbon dioxide from the atmosphere by trees and other vegetation), while the remaining $4.7 million would have supported soil sequestration of carbon associated with switchgrass systems, for ethanol production from cellulose. United States Geological Survey (USGS) The USGS restructured its climate change science research in 2007, and the FY2009 budget was the first under the new organization. The FY2009 request would have provided $31.4 million for CCSP-related work in FY2009, with $26.6 million consolidated across disciplines into one Global Change activity account. Additionally, in the Geographic and Biologic Divisions, $3.7 million would have supported the National Satellite Land Remote Sensing Data Archive (NSLRSDA), and $1.1 million in the Biological Research and Monitoring activity, would also have contributed to the CCSP. USGS is embarking on a new climate change science strategy, the National Climate Effects Research and Monitoring Network. The network would include long-term monitoring in "focus areas" of key processes controlling resource or ecosystem responses to climate change; a network of field study sites to assess the sensitivity to climate change of specific resources and ecosystems; regional and national surveys to link the "focus areas" to the broader landscapes; and expanded use of space-based remote sensing to track environmental changes. Eventually, and pending future appropriations, information in an envisioned Global Change Information Management System would be accessible to users through the internet. USGS also proposed to expand initial adaptation-oriented projects to develop decision tools to help resource managers and policy makers to cope with future climate change. The FY2009 request would have eliminated $2.5 million of Congressionally directed funding to develop methods to assess capacities for geologic carbon sequestration, as well as to research hazards, carbon management and water availability. Bureau of Reclamation Although the Bureau of Reclamation is not listed explicitly in the CCSP, it reports climate change-related activities. However, other budget information suggests that its funding level (for impact assessment and adaptation) would be greater than many other agencies' identified in the CCSP. In FY2009, the Bureau's budget justification said, "[a]s a part of the Water for America initiative, Reclamation is examining how climate change information can be considered in our water and power operations and planning through several project-specific studies. Additionally, through collaborative research with other Federal agencies and non-Federal entities that have complementary expertise and a common stake in Western water, Reclamation is well positioned to obtain the most relevant climate information and manage our water resources under changing conditions." According to the Bureau's budget justification, the funding requested for its climate change activities was $31.9 million, of which $19.0 million appeared in the Water for America Initiative line item. Another $12.9 million would fund specific projects for endangered species recovery activities ($8.9 million) and investigation programs ($4.0 million). Reclamation's efforts focus on two of the Initiative's three strategies: Plan for Our Nation's Water Future; and Expand, Protect, and Conserve Our Nation's Water Resources. The third strategy, to Enhance Our Nation's Water Knowledge, will be undertaken by USGS. As part of the Plan for Our Nation's Water Future component of the Initiative, Reclamation will merge the existing investigation programs with a new basin-wide studies program, thus initiating comprehensive water supply and demand studies to assess the impact of increased water demands on finite water sources. U.S. Department of Health and Human Services (HHS) All of the $46.8 million enacted for HHS for climate change science is associated with health effects of ultra-violet radiation due to stratospheric ozone depletion. This is not, strictly speaking, climate change, although the two environmental issues are related. Although no climate-related budget is identified for the Centers for Disease Control (CDC), the CDC is engaged in work on climate change impacts on emerging and re-emerging infectious diseases, allergens, and preparedness. With the FY2008 appropriations, H.Rept. 110-231 contained the following language pertaining to climate change: Additional scientific research is needed to further understand the potential health effects of global climate change and to identify tools to educate health professionals about adaptation strategies. The Committee encourages CDC to begin to develop public health research, technical assistance, and surveillance programs to understand the impacts of climate change on health. (p. 116) In responding to this language, the CDC identified 11 priority health actions and developed a policy statement. The agency reports that five workshops were planned to explore these issues further. In October 2008, the World Health Organization (WHO) released an agenda of research priorities to address the health effects of climate change globally. The main research priorities were: Interactions with other health determinants and trends, such as economic development, globalization, urbanization, and inequities both in exposure to health risks and access to care. Better characterization of long-term climate change effects through drought, freshwater resources, and population displacement, including risks to mental health, with a focus on children and other vulnerable groups. Comparing effectiveness of short-term interventions dealing with such health threats as heatwaves and floods. Assessing health impact of policies of non-health sectors including effects of biofuels incentives on food security and malnutrition. Strengthening public health systems to address health effects of climate change. Environmental Protection Agency (EPA) EPA's contribution to the CCSP is research on air and water quality effects of climate change, and related risks to human health and ecosystems. The FY2009 proposal would have reduced funding for this research by $2.8 million from the FY2008 appropriations of $19.6 million. The FY2008 level was below the FY2007 funding of $17.0 million. The agency's Science Advisory Board, in a May 12, 2008 memorandum to Administrator Johnson, reported that the EPA's research on impacts of climate change "performs well considering its declining funding and relatively small, though focused and important role, in the overall Federal program." It also described the "dramatic reductions" since FY2004 of EPA's budget for research on climate change impacts as "eating the seed corn": As a consequence we run a considerable risk that we will not be able to address these problems adequately in the future. We also run the risk of incurring much larger future costs because we do not understand the subtle intricacies of these risks and hence could blunder into difficulties, such as inappropriate regulatory responses, from which it may be much more expensive to recover than if we understood what we were facing ahead of time. Although the EPA does not currently conduct research under the CCSP on GHG mitigation (though the Office of Air and Radiation conducts policy analysis with funds reported under the CCTP), the SAB recommended that EPA adopt some long-term GHG reduction objectives "to inform and to better define their research portfolio" (p. 8). The recommendation reflects the tension in and among many agencies regarding what climate-related research and analysis should be conducted, and by whom (i.e., the research office versus the program office). U.S. Department of Agriculture (USDA) For FY2008, funding was enacted at a level of $64.4 million for climate change science. The FY2009 request forUSDA would have reduced this amount to $60.3 million—a decrease of $4.1 million. Of that overall decrease from FY2008 enacted to FY2009, most—$3.7 million—would have come from the across-the-board cuts to various climate change programs in the Agricultural Research Service (ARS), resulting in a FY2009 request of $35.7 million. Most ARS research is conducted intramurally. ARS carbon cycle activities ($3.1 million requested for FY2009) include the Greenhouse gas Reduction through Agricultural Carbon Enhancement NETwork (GRACEnet) and Agriflux network to understand soil carbon sequestration, minimize greenhouse gas emissions, on range, pasture and crop land sites. Almost $18 million of the ARS funding request under the CCSP concerns emissions, particularly of methyl bromide, which is a substance that depletes stratospheric ozone but is not a greenhouse gas. Another $10.7 million of the FY2009 request would study the impacts of climate change on rangelands and other agricultural ecosystems through drought, warming, snowpack disappearance, and altered fire regimes. The Forest Services research related to climate change would be reduced by $2.2 million to $18.9 million in FY2009. The Economic Research Service's climate change-related research would remain the same, at $50 thousand. In contrast, funding for the Cooperative State Research, Education, and Extension Service (CSREES) would have increased by $1.7 million to $5.7 million in FY2009. CSREES provided grants for research on land use, land cover, and managed ecosystems in terms of responses, feedbacks, and drivers of carbon and greenhouse gas fluxes. Its stated long-term goal was to better understand land change through predictive modeling. The research to understand how ultraviolet radiation affects plant and animal physiology and ecosystems would have increased by $0.8 million and on carbon cycle would have increased by $1.1 million. The FY2009 request proposed $0.5 million for the National Research Initiative (NRI), though the program was not reauthorized in the 2008 farm bill (the Food, Conservation, and Energy Act of 2008, P.L. 110 - 246 ). Appendix E. CCTP-Identified Programs by Agency This appendix provides additional information about the climate change technology programs in several of the most important participating agencies. FY2008 funding levels are reported, and are extended through March 6, 2009 for FY2009 levels by a Continuing Resolution ( P.L. 110-329 ). This appendix also provides President Bush's FY2009 request for the Climate Change Technology Program (CCTP), as the FY2009 budget justifications provided the most recent descriptions of on-going programs and priorities, approved by OMB. It remains to be seen how President Obama may re-propose similar modifications. Department of Energy (DOE) The DOE is, by far, the largest component of President Bush's CCTP, at 85% of the FY2008 enacted total. The FY2009 request included numerous changes to funding that Congress enacted for FY2008 to support DOE's climate change technology programs. Some of these proposed changes include: a $155 million (11%) reduction for energy efficiency and renewable energy, largely because of proposed elimination of low-income weatherization grants, small business innovation research support, and state energy activities, as well as reductions for hydrogen fuel cell research; increases are proposed for geothermal systems, biofuels, and vehicle, building and industrial technologies; a $5 million (5%) reduction for energy supply and conservation for electricity transmission and distribution; a $251 million (51%) increase for Fossil Energy Research and Development/Efficiency and Sequestration, including a 52% increase carbon sequestration (+$52 million) and almost a tripling of the funding for FutureGen (to $156 million); a $365 million (71%) increase for nuclear energy supply and conservation to support the Global Nuclear Energy Partnership; and a $208 million (42%) increase for nuclear fusion research, sequestration and hydrogen research, including support to the international ITER nuclear fusion partnership and three bioenergy research centers. Both the House and Senate passed bills in 2008 covering most of the CCTP appropriations, and agreed on a conference bill. The amounts in these bills, which never were enacted into law, frequently deviated substantially from the FY2008 levels and the FY2009 request. In particular, both chambers rejected elimination of the DOE weatherization grants. The Continuing Resolution that holds funding for almost all other programs to the FY2008 levels includes special provisions to add $250 million for weatherization (Division A of P.L. 110 - 329 ). From FY2003 to FY2004, the total budget authority for DOE for the CCTP rose, largely due to inclusion of a greater share of funding for DOE's Clean Coal Power Initiative than in prior years. While the clean coal program previously had focused on reduction of major pollutants, its focus was reported by OMB to have shifted to improving efficiency, which would reduce greenhouse gas emissions per unit of electricity produced. Funding for nuclear energy has increased by hundreds of millions of dollars in several different programs, and it has become a large share of CCTP funding. However, less was enacted for nuclear than requested for FY2008; the FY2009 request would increase that funding almost to the level requested for FY2008, and would make nuclear energy more than half of the NCCTI funding, if enacted. According to DOE's FY2009 budget justification, the nuclear energy R&D program is intended "to develop new nuclear energy generation technologies to meet energy and climate goals." However, opponents have criticized DOE's nuclear research program as providing wasteful subsidies to an industry that they believe should be phased out as unacceptably hazardous and economically uncompetitive. The Bush Administration's Global Nuclear Energy Partnership (GNEP) has been intended to develop technologies for recycling uranium and plutonium from spent nuclear fuel without creating pure plutonium that could be readily used for nuclear weapons. According to DOE's budget justification, such technologies could allow greater expansion of nuclear power throughout the world "with reduced risk of nuclear weapons proliferation. "But nuclear opponents have disputed DOE's contention that nuclear recycling technology can be made sufficiently proliferation-resistant for widespread use. In 2008, the House Appropriations Committee sharply criticized GNEP as "rushed, poorly-defined, expansive, and expensive," and eliminated all funding for the program. On the other hand, the House panel would have dramatically boosted funding for advanced nuclear reactors. However, FY2008 funding levels continue under the Continuing Resolution until March 6, 2009. President Obama has indicated that he would support "safely harness nuclear energy" as a component of a strategy to address climate change. It is likely that further scrutiny and modifications of nuclear energy initiatives will continue in the 111 th Congress and under the Obama Administration. US Department of Agriculture (USDA) USDA's contributions to the CCTP are a mix of both mandatory and discretionary funding, with shares of 74% and 26%, respectively, estimated for FY2008 prior to passage of the 2008 Farm Bill. The enacted FY2008 funding levels were estimated at about $205 million, up from $48 million in FY2007. The mandatory share was estimated to rise from $14 million in FY2007 to $151 million in FY2008 under President Bush's proposals for the FY2008 Farm Bill. Although discretionary funding would extend into early FY2009 at FY2008 levels under the Continuing Resolution, the mandatory levels will have been altered by the new Farm Bill. President Bush's FY2009 budget foresaw a $22 million decrease in CCTP funding of the USDA, primarily from the renewable energy program under the Cooperative State Research, Education and Extension Service (CSREES). However, compared to the 424% increase from FY2007 to FY2008 for USDA's CCTP programs, from $48.4 million to $20.4 million, the proposed decrease would have been small. The increases from FY2007 to FY2008 were primarily due to increases in mandatory funding of farm programs of: $50.0 million for bioenergy and biobased products research; $15.0 million for forest wood to energy; $50.0 million for renewable energy system and energy efficiency grants; and $21.0 million for renewable energy system and energy efficiency loans. These grants and loans had been included in the Administration's formal recommendations for the 2007-2008 farm bill debate. Another one-third would be for increases in discretionary spending on formula funds for bioenergy research (+$5.0 million), renewable energy (+$13.0 million), and value-added producer grants (+$2.0 million). The 2008 farm bill (the Food, Conservation, and Energy Act of 2008, P.L. 110 - 246 ) reauthorized, modified and/or expanded several existing programs, and created several new programs, in the enacted bill's Conservation, Energy, and Rural Development titles. While few of these programs directly are geared toward climate change mitigation, these USDA programs likely will indirectly affect various U.S. climate change initiatives. Whether and the extent to which these programs will affect overall funding levels for programs related to climate change is uncertain; also, no accounting of these CCTP changes is yet available for FY2008 or FY2009. Department of Defense (DOD) Funding for DOD reported for the CCTP rose from $100.9 million in FY2007 to $109.6 million enacted for FY2008. President Bush's budget proposal would have increased that funding by an additional $21.4 million in FY2008, to $131.0 million, though with increases and decreases across the different services. DOD appropriations for FY2009 were passed into law and signed on September 30, 2008 ( P.L. 110 - 329 ). Because the climate change-related activities are below the appropriations account detail, it is unclear at this time what changes may have been made to the FY2008 enacted or FY2009 requested levels. The Administration requested to raise Air Force funding for the CCTP by $81.7 million from FY2008 to a total of $103 million FY2009. It would decrease CCTP-related funding to the Army by $41.9 million from the FY2008 enacted level to $16.4 million in FY2009, and to the Navy by $16.2 million to $11.1 million in FY2009. No further information was obtainable regarding the uses of these proposed funds. However, the DOD would have many incentives and opportunities to engage in advanced, low-greenhouse gas technologies: in 2005, the DOD accounted for 97% of all U.S. Government fuel consumption, at a federal expense of more than $8 billion (at 2005 energy prices). More than half of this consumption was by the Air Force. More broadly, the Defense Science Board (DSB) issued a report in February 2008 that concluded that the DOD's current energy consumption patterns put military operations at risk both in the battlefield, due to high and expensive fuel demand, and at installations, due to dependence on an increasingly fragile electricity grid. It noted that, even in battlespace, one half or more of demand may come from equipment such as air conditioners and field kitchens, not combat equipment. It also noted that DOD had not implemented two key recommendations from a 2001 task force on energy. Institutionally: The Task Force concluded that solving DoD's energy problem would take more than producing documents establishing the new policies, procedures and analytical products recommended by this report. It depends on leadership's willingness to provide the oversight to ensure they are effective. Currently, decisions that affect DoD's energy demand are scattered throughout the organization with little accountability or oversight. While there is a senior official with responsibility for energy use at installations, this function oversees only about a quarter of DoD's energy usage. The Task Force recommends senior leadership establish oversight and accountability for implementing the recommendations in this report, and ongoing measurement of their progress across the whole of DoD. This 2008 report recommended, among other measures, that DOD "establish a Department-wide strategic plan that establishes measurable goals, achieves the business process changes recommended by the 2001 DSB report and establishes clear responsibility and accountability" (Executive Summary, p. 6). Decisions and technologies to enhance DOD's energy security could have profound implications for its related greenhouse gas decisions. One vision, of relying on alternative fuels produced from oil shale and other unconventional fossil fuels has been controversial, however, because of its potential for dramatically increasing net greenhouse gas emissions associated with aviation fuels. This dispute culminated in a constraint in the Energy Independence and Security Act of 2007 ( P.L. 110 - 140 ) barring all agencies from procuring alternative fuels that resulted in higher greenhouse gas emissions than conventional fossil fuels—most critical for the DoD, which accounts for almost all federal oil consumption. Similar language was debated in the FY2009 appropriations for DOD but was not enacted. The DSB, after considering the climate change implications for DOD, concluded: The global movement toward constraints on future carbon emissions is gaining support. DoD cannot be oblivious to this trend. Thus, the Task Force recommends that if DoD decides to provide financial backing to synthetic fuel production plants, it should avoid investing in processes that exceed the carbon footprint of petroleum. The Task Force recommends DoD continue to invest in low carbon synthetic fuel technologies that address unique, pressing DoD needs. For example, equipment capable of producing fuel at forward deployed locations using locally available renewable or waste feedstock reduces gallon for gallon the amount needed to be moved and protected in theater. DoD should continue to invest in research into alternative, non-petroleum, renewable and low-carbon footprint fuels for the long term. (p. 22) The DOD's Defense Advanced Research Projects Agency (DARPA) has been acclaimed by some experts for its contributions to technological advance broadly. Some technology experts have advocated for an expansion of this program to take on a mission of advancing energy technologies to enable deep cuts from current greenhouse gas emission levels, like a new "Apollo" project. The Congress appropriated funds of $6.3 million to initiate such an expansion, DARPA-E, in FY2007. The Administration proposed to eliminate this funding in DOD for FY2009, saying that such research could be accomplished through similar programs in DOE. In 2008, the 110 th Congress amended Section 118 of title 10, United States Code, the Department of Defense (DOD) authorization to require DOD to consider the effects of climate change on Department facilities, capabilities, and missions ( P.L. 110 - 181 ). The law requires that the next national security strategy and national defense strategy include guidance for military planners to assess the risks of climate change to current and future defense missions; to update defense plans accordingly, and to engage with allies and partners on climate mitigation strategies, capacity building, and relevant research and development; and to develop the capabilities to reduce future impacts. The new authorization also requires that the next quadrennial defense review assess DOD's capacities to respond to the consequences of climate change, including extreme weather events, both domestically and abroad. It directs such assessment to use mid-range scenarios of future climate change (which may have roughly a 50-50 likelihood of occurring). The subsequent section of the law requires the Secretary of Defense to submit a plan to Congress to improve DOD's participation in interagency coordination on a national security strategy. Presumably, such interagency coordination would extend also to the work on responding to, and mitigating, future impacts of climate change. Environmental Protection Agency (EPA) EPA's share of the CCTP funding was proposed to continue to decline from 3.0% in FY2007, 2.5% in FY2008 to 2.2% in FY2009. The FY2007 new budget authority was $105 million, rising by $3 million in the FY2008 enacted level of $108 million, then requested to drop to $98 million in FY2009. Under the Continuing Resolution, funding will continue at FY2008 levels through March 6, 2009. EPA's role has been primarily in inventorying and evaluating greenhouse gas emissions from alternative sectors and technologies, and operating voluntary programs that provide information, technical assistance and marketing incentives to private and public entities to quantify and reduce their greenhouse gas emissions. EPA also provides key scenarios of future greenhouse gas emissions and analyses of the economic impacts of mitigation strategies—including proposed legislation—that are widely used by Congress and the public. President Bush's proposal would have reduced EPA's funding for the Energy Star building-related programs by $4.0 million from the FY2008 omnibus appropriations; Energy Star is one of the principal voluntary GHG reduction initiatives and garners a large portion of the GHG reductions expected by President Bush's climate change strategy. The budget would cut $1.3 million by eliminating the congressionally-directed Industrial Carbon outreach program. The agency evaluates options to reduce greenhouse gas emissions from vehicles, including effects of biofuel mandates that have been legislated or proposed. The FY2009 request would have reduced these transportation activities by $6.9 million to $11.9 million. President Bush's proposal would also have eliminated congressionally-directed funding for a greenhouse gas reporting registry, enacted at $3.4 million in the FY2008 omnibus appropriations. The joint explanatory statement for the FY2008 omnibus appropriations directed EPA to use $3.5 million (before an across-the-board 1.6% recision) appropriated within the Federal Support Air Quality Management program "to develop and publish a rule requiring mandatory reporting of emissions above appropriate thresholds in all sectors of the economy." The draft and final rules are due no later than nine and 18 months, respectively, after enactment. President Bush's FY2009 proposal would not have continued the $3.4 million appropriated for FY2008 to develop this national Greenhouse Gas Registry, causing angry responses from some Senators. Consistent GHG reporting is essential to the efficient and equitable functioning of any program to limit emissions, and provisions for early reporting may facilitate rewarding those sources that show leadership in GHG reductions ahead of possible mandatory controls. A number of initiatives are underway besides the current EPA effort that would develop guidance for how sources would report their greenhouse gas emissions and emission reductions in the event of mandatory reporting requirements. No initiative prior to EPA's effort, including DOE's "402(a)" program has gained widespread agreement as sufficient for a mandatory requirement. EPA's FY2009 budget justification likely refers to the existence of these other initiatives when it states that "EPA is reviewing available data to maximize efficiency and reduce potential overlaps while exploring options for integration." The FY2009 request proposed to add $5.0 million to support the Asia-Pacific Partnership (see section on International Assistance)—a request that has been repeatedly denied in previous years' appropriations. Without FY2008 enacted funding, none is available under the Continue Resolution through March 9, 2009. As in other agencies, the appropriations line items for the EPA no longer reflect current organization and activity levels of the climate-technology related initiatives. While this may occur to assist continuity of reporting, the next Administration's proposals may include significant changes in activity levels and descriptions. National Aeronautics and Space Administration (NASA) NASA's share of CCTP funding was proposed to decline from 3.2% to 2.6%, or from $139.0 million as enacted for FY2008 to the proposed $116.1 million for FY2009. The largest portion of NASA's CCTP funding is for the Fundamental Aeronautics Program, aimed at developing high performance aircraft and rotorcraft that would significantly reduce emissions of GHG, water vapor, volatile organic compounds, unburned hydrocarbons, and particulate matter. The FY2009 request would have eliminated a congressionally directed increase in FY2008, reducing the level by $19.5 million to $100.5 million. The 2009 defense reauthorization law ( P.L. 110 - 422 ) was enacted with a provision, Sec. 302, requiring NASA to support research and development of environmentally friendly aircraft. This provision is intended to "enable", specifically, "[s]ignificant reductions in greenhouse gas emissions compared to aircraft in commercial services as of the date of enactment." President Bush's request would have reduced Exploration Technology Development Program projects to advance lithium-ion batteries, regenerative fuel cells, and nuclear fission from the FY2008 enacted level of $17.4 to $14.0 in FY2009. Proposed to remain constant would be $1.6 million for measuring surface radiation to support solar heating, as well as other assessment of renewable energy production and efficiency. Appendix F. Climate Change Technology Priorities, as Identified by the Bush Administration Early in President George W. Bush Administration, a set of general technologies were designated as "high priority" within the CCTP. These have continued to be tracked as such by the CCTP, and the evolution of funding in recent years for these is provided in the table below. It is unclear what status these have in funding or other decisions.

Federal funding to address global climate change was enacted at $6.37 billion for FY2008, extended by a Continuing Resolution for FY2009 at or below FY2008 levels to March 6, 2009. Members of Congress have expressed interest in how federal funding may reflect and enable an overall strategy, and priorities within it, to address climate change. This report summarizes federal funding and tax incentives identified as climate change-related under the Bush Administration. It identifies the organization of programs, how funding may reflect priorities, and external evaluations or recommendations for the broad programs, to the degree they are available. Barack Obama has made direction-changing pledges to abate U.S. greenhouse gas emissions and to engage more aggressively internationally on climate change. The change in Executive leadership and the evolving Congressional debate over appropriate policies to address climate change may shift priorities among climate change activities. Calls to expand climate change funding, despite deepening budget pressures, may require that programs do a better job of demonstrating benefits to compete effectively with other budgetary demands. This review of federal funding of climate change activities suggests that there may be opportunities to better align funding with strategic policy goals, and to assure that programs are organized to accomplish those goals more efficiently. Fourteen federal agencies administer climate change-related activities. The packaging of mostly existing programs into a climate change strategy has resulted in a lack of a unifying mission jointly shared across agencies to address climate change. Funding has largely reflected departmental missions and support for each activity, rather than each activity's expected contribution to an over-arching strategy. The new Obama Administration is expected to provide more action-oriented leadership, but will face the challenge of aligning programs, resources, and tax incentives into a cross-agency, inter-governmental strategy. Associated legislative issues include how legislation to control greenhouse gases may affect funding and tax incentive priorities; the sufficiency and alignment of federal resources to support a strategy to achieve long-term climate change policy goals; demands for additional and predictable resources to support actions by low income countries to mitigate greenhouse gases or adapt to climate change; possible legislative proposals to restructure or improve collaboration among climate change activities; addressing recommendations from evaluations, to the degree they exist, to improve climate change programs; exploring options for financing climate change programs, especially if greenhouse gas emission allowances or fees are enacted by the 111th Congress; and possible requirements for reporting to Congress of funding, budget justifications and programmatic progress that are adequate to support Congressional decision-making and oversight.

CRS_RL32427

Most Recent Developments On April 9, 2018, the Senate approved H.R. 3445 , the African Growth and Opportunity Act and Millennium Challenge Act Modernization Act, which authorizes the MCC to conduct regional compacts. The legislation was approved by the House on January 17, 2018. On April 3, 2018, the MCC Board approved a $35 million threshold program for Togo that will focus on reform in information and communication technology and land tenure. In approving the program, the Board directed the MCC to closely monitor citizen rights to freedom of expression and association in light of recent political unrest related to opposition to the president's possible bid for a third term in office and other matters. On March 23, 2018, the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), was signed into law, providing $905 million for the MCC, the same level as in FY2017. On February 12, 2018, the Trump Administration issued its FY2019 budget request, including $800 million for the MCC, a cut of $105 million (-11.6%) from FY2017-enacted levels. On December 19, 2017, the MCC Board selected Timor-Leste to develop a compact and The Gambia for a threshold program. It also reselected Burkina Faso, Lesotho, Mongolia, Senegal, Sri Lanka, and Tunisia to continue developing their compacts. Introduction The Millennium Challenge Corporation (MCC), established in 2004, arose out of a widespread frustration with then-existing foreign aid programs and represented a significant change in the way the United States delivered economic assistance. The MCC is based on the premise that economic development succeeds best where it is linked to free market economic and democratic principles and policies, and where governments are committed to implementing reform measures in order to achieve such goals. The MCC concept differs in several fundamental respects from past and current U.S. aid practices a competitive selection process that rewards countries for their commitment to free market economic and democratic policies as measured by objective performance indicators; the pledge to segregate the funds from U.S. strategic foreign policy objectives that often strongly influence where U.S. aid is spent; a mandate to seek poverty reduction through economic growth, not encumbered with multiple sector objectives or congressional directives; the requirement to solicit program proposals developed solely by qualifying countries with broad-based civil society involvement; the responsibility of recipient countries to implement their own MCC-funded programs, known as compacts; a compact duration limited to five years, with funding committed up front; the expectation that compact projects will have measurable impact; and an emphasis on public transparency in every aspect of agency operations. The original proposal, made by President George W. Bush in a speech on March 14, 2002, also differed from previous aid efforts in the size of its commitment to reach an annual level of $5 billion within a few years, an aim never even approximately met. Congress approved the new initiative in January 2004 in the Millennium Challenge Act of 2003 (Division D of P.L. 108-199 ). It established the MCC as an independent government entity separate from the Departments of State and the Treasury and from the U.S. Agency for International Development (USAID). The MCC headquarters staff level is currently about 286, with a total of 26 additional U.S. direct hire employees in compact countries. The agency is headed by a Chief Executive Officer (CEO), a post currently awaiting a Trump Administration nomination. A Board of Directors oversees the MCC and makes the country selections. It is chaired by the Secretary of State and composed of the Secretary of the Treasury, the USAID Administrator, the U.S. Trade Representative, the Corporation's CEO, and four individuals from the private sector appointed by the President drawn from lists submitted by congressional leaders. Since its inception, Congress has closely followed MCC implementation. The 115 th Congress may consider MCC funding, a possible reauthorization, and operational issues. MCC Country Selection Process One of the distinctive features of the MCC is the manner in which it selects the countries that receive its assistance. No other aid agency, U.S. or foreign, has adopted a similar methodology. Country selection moves chronologically through a number of steps: candidate countries are identified, eligibility criteria are formulated and applied, compact and threshold program-eligible countries are selected. Elements in this process are discussed below. Identification of Candidate Countries for Funding Purposes The pool of possible candidate countries is limited by the authorizing statute to those falling under the threshold for the World Bank's classification for upper-middle income countries. For FY2017, this limit is a Gross National Income (GNI) per capita of $3,955. As a result, the pool of possible candidates is 83 countries for FY2018. Apart from the necessity to be under the income ceiling to be broadly considered for candidacy, income level status—in particular, the division of candidate countries between lower income and lower-middle income—is important in both the financing and competitive selection processes and, since FY2012, has been treated differently in each case. See " Weighing Country Performance " below for competitive performance selection discussion. For funding purposes, a country's income level is important because, under the MCC legislative authority, no more than 25% of compact assistance in a fiscal year is available for lower-middle-income country compacts, severely limiting the possibility that such countries can be funded and therefore discouraging the MCC Board from selecting them. The high annual volatility of a country's income level data—resulting in shifting from one income level to another—has also added some uncertainty. Countries moving from one income level to another had no predictable path to compact eligibility. Both the Philippines (FY2009) and Indonesia (FY2009) were first selected when they were low-income countries; a year later they transitioned to lower-middle income and were subject to the lower-middle-income funding cap. This abrupt shift was viewed by the MCC as extremely disruptive to a smoothly functioning compact development process. A further concern is the diminishing pool of well-governed candidates eligible for the larger amount of lower-income funding as more countries have been transitioning into the lower-middle level. To address this recurring issue of income category change, appropriators, beginning with the FY2012 State, Foreign Operations appropriations legislation, and, most recently, Division J of the Consolidated Appropriations Act, 2017 ( P.L. 115-131 ), extended by the Continuing Appropriations FY2018 ( P.L. 115-56 ) to December 8, 2017, adopted language that, for purposes of funding eligibility, redefines the category of low-income countries from the previous definition of those with Gross National Income (GNI) per capita below the World Bank's International Development Association (IDA) eligibility ceiling of $1,905 (in FY2018) to one that encompasses the bottom 75 countries in the low- and lower-middle-income level rankings. The remaining countries below the World Bank's cut-off ceiling for lower-middle-income countries ($3,955 GNI per capita in FY2017) are defined as lower-middle in MCC terms. Applied in FY2018, 74 countries are considered for MCC funding purposes as low income and 9 countries are considered lower-middle income (versus 52 and 31, respectively, under the old definition). Seeking to further ensure stability and predictability for candidate countries that might be transitioning in and out of different income levels, the FY2017 appropriations language requires that countries that move from low income to lower-middle income or vice versa be treated as though they are in their former classification for that fiscal year and two succeeding years. MCC believes this legislation provides for a graduated transition for countries rather than the abrupt change in status that characterized the previous process. In addition to the income ceiling, under the MCC authorization, countries may be candidates only if they are not statutorily prohibited from receiving U.S. economic assistance. For FY2018, eight countries are excluded for this reason. Many had been barred in prior years as well. In August 2017, the MCC transmitted to Congress its annual notification of candidate countries for FY2018. For funding purposes, the revised version listed 66 low-income countries (from the original pool of 74, after excluding prohibited countries) and 9 lower-middle-income countries. Identification of Countries for Compact Selection Purposes With regard to the selection process that determines compact eligibility, it is MCC practice that low-income countries "compete" with other low-income countries and lower-middle-income countries with other lower-middle-income countries. The original income level definitions in the MCC authorization still apply, not those introduced in FY2012 for funding purposes. The eight countries excluded from candidacy due to legislative prohibitions on assistance are included in the pool of competing countries strictly for comparative performance purposes. In the FY2018 selection process, there are 46 low-income candidate countries, (excluding the 6 low-income aid-prohibited countries) competing with each other, and 29 lower-middle-income countries (excluding 2 aid-prohibited countries) competing with each other, a total of 75 candidate countries from which compact-eligible countries may be chosen. Determining Selection Criteria and Methodology The MCC provides assistance to developing nations through a competitive selection process, judged by country performance in three areas Ruling justly—promoting good governance, fighting corruption, respecting human rights, and adhering to the rule of law. Investing in people—providing adequate health care, education, and other opportunities promoting an educated and healthy population. Economic freedom—fostering enterprise and entrepreneurship and promoting open markets and sustainable budgets. Country selection is based largely, but not exclusively , on a nation's record, measured by performance indicators related to these three categories, or "baskets" (see Appendix D ). Indicators may be a straightforward single measure of a country's rate of inflation—one reflection of good economic policies—or may be a combination of data points forming an index of surveys and expert opinions on the quality of public service, civil servant competency, a government's ability to plan and implement sound policies, which together "measure" government effectiveness. MCC is constrained somewhat in measuring performance by the public availability of appropriate, comparable, and consistent data on every country. Pursuant to reporting requirements set in the MCC legislation, each year the Corporation sends to Congress an overview of the criteria and methodology that would be used to determine the eligibility of the candidate countries in that fiscal year. The choice of criteria on which to base the eligibility of countries for MCC programs is one of the most important elements in MCC operations. They are a key statement of MCC development priorities, as they ultimately determine which countries will receive U.S. assistance. Perhaps of equal significance, raising indicator scores has become a prominent objective of some developing countries in what former CEO Danilovich called the "MCC effect." Countries seeking eligibility are said to be moving on their own to enact reforms and take measures to improve performance scores that would enable them to meet MCC criteria. (See the " Compact Outcomes and Impact " section for further discussion of the MCC effect.) Periodically, the MCC introduces new indicators and modifies or replaces old ones in an effort to improve their quality and identify indicators better reflecting congressional intent. Beginning with the FY2005 selection process, for example, the MCC lowered the inflation rate threshold from 20% to 15%, making it somewhat more difficult to pass this test (only 6 of the 63 candidate countries failed this test for FY2004). For FY2006, the MCC replaced a "country credit rating" with a new indicator on the "cost of starting a business" that it believed had a stronger correlation with economic growth and was a measurement that might encourage governments to take action in order to improve their scores. Since the initial use of the indicator "days to start a business," MCC candidate countries had introduced many business start-up reforms, the results of which were reflected in a lowered median for this category. MCC officials hoped that adding an indicator for the "cost of starting a business" would stimulate additional policy improvements. In FY2008, the MCC collapsed the "days to start a business" and "cost of starting a business" indicators into one "business start-up" indicator. In addition to criteria originally proposed by the Bush Administration, lawmakers in the 2004 MCC authorizing legislation included four other matters on which to evaluate a country's performance. These relate to the degree to which a country recognizes the rights of people with disabilities; respects worker rights; supports a sustainable management of natural resources; and makes social investments, especially in women and girls. For each of these, the MCC sought to use supplemental data and qualitative information to inform its decisions on compact eligibility. The latter two factors led to the development of new indicators. In FY2005, an indicator measuring girls' primary education completion rates replaced a broader measure used in FY2004 that did not disaggregate primary education graduation by gender. In FY2008, two indicators assessing a country's commitment to policies that promote sustainable management of natural resources were adopted. In September 2011, the MCC Board adopted for the FY2012 process perhaps the most significant changes to its selection methods since the agency was established. These continue to be applied in FY2018. The MCC modified or added new indicators under all three baskets. Under the Ruling Justly basket, a "freedom of information" indicator, including a measure of efforts to restrict internet content, replaced the "voice and accountability" indicator. Under Investing in People, a measure of "natural resource management" was split into two indicators, one focusing on "natural resource protection" that assesses whether countries are protecting up to 10% of their biomes, and the other on "child health," which captures the earlier indicator's data on access to improved water, sanitation, and child mortality. The indicator on girls' education was amended solely for lower-middle-income countries to weigh the number of female students enrolled in secondary school, rather than those completing primary school, which remains the indicator for low-income countries. Two new indicators were added to the Economic Freedom category of performance measures. An "access to credit" indicator reflects the importance of credit in stimulating private sector growth. A "gender in the economy" indicator measures a government's commitment to promote equal economic legal rights for both men and women. Weighing Country Performance Shortly after release of the performance criteria, the MCC publishes a scorecard of candidate country performance. Sometime later, the MCC Board meets to select countries eligible to apply for compact assistance. For most performance indicators, each country is judged against its peers in its income group, requiring a score just above the median to pass that indicator. For several of the indicators, there is an absolute threshold that must be met in order to pass that indicator. The absolute threshold indicators include an "inflation rate" under 15%, "political rights" requiring a score above 17, "civil liberties" requiring a score above 25, and, for lower-middle-income countries only, an "immunization coverage" of above 90%. Countries are required to pass at least half of the total number of indicators—10 of the 20 indicators (see Appendix D for a complete list of the performance indicators). Of the 10, two "hard hurdles" must be passed to qualify: the "control of corruption" indicator and either one of two democratic rights indicators—the "civil liberties" indicator or the "political rights" indicator. Requiring passage of a democratic rights indicator may weed out countries that achieved eligibility only to have their compact programs suspended or terminated when their governments failed to meet governance performance standards, the most common cause of suspension or termination. Finally, to avoid concerns that a country could achieve compact eligibility with a passing performance in only two of the three baskets, the MCC Board set the requirement that countries must pass at least one indicator in each basket. The MCC Board is guided by, but not entirely bound to, the outcome of the performance indicator review process; Board members can apply discretion in their selection. Performance trends, missing or old data, and recent policy actions might come into play during selection deliberations. For countries being considered for second compacts, the history and success of implementation of the first compact is a significant factor. Because it is MCC practice to judge the performance of countries within their income status cohort, countries that move from one year to the next from low-income to lower-middle-income status may be affected negatively by being compared to countries longer established at a higher level of development . Seeking to mitigate the negative consequences of income change on the selection process, in September 2009, the MCC Board announced that henceforth, for countries that move from low to lower-middle-income status, it would consider their performance relative to both their old income group and the newer one for a period of three years. But it only does this as supplemental information and, to date, has only considered the previous status of those countries it is considering for reselection. Just because a country passes the requisite number of qualifying indicators does not mean that it will be selected for compact eligibility. This can be due to a variety of reasons, not least of which is the limited funding available to support compacts. The MCC Board is not required to give a reason for its selections and only occasionally offers one. Most often it appears that a country has passed the requisite number of qualifying indicators but is not selected because it scores very poorly—perhaps in the lowest 25 th percentile—in one or more of the remaining indicators. For example, in FY2005, the Philippines passed 13 of the then-16 indicators, but was not made eligible, because it scored "substantially below" the median on tests for health expenditures and fiscal policy, and more recent trends indicated the fiscal policy situation was deteriorating further. In FY2006, Bhutan and Vietnam passed enough hurdles but were not chosen based on very low scores on political rights and civil liberties; Uganda passed 12 of the 16 indicators and did not fall significantly below the median on the other four, but was not selected for unexplained reasons. At times, countries have been deemed compact eligible without meeting a sufficient number of qualifying factors or with weak scores in some qualifying areas. In most such cases, the MCC Board takes into consideration recent policy changes or positive trend lines. For example, in FY2004, the program's first year, several countries (Georgia, Mozambique, and Bolivia) were selected despite having failed the so-called "pass-fail" corruption indicator. Mozambique, which failed on corruption and each of the four "investing in people" indicators, was chosen based on supplemental data that were more current than information available from the primary data sources. This evidence, the Board felt, demonstrated Mozambique's commitment to fighting corruption and improving its performance on health and education. In FY2004, Cape Verde scored poorly on the "trade policy" indicator, but the Board took into account the country's progress towards joining the World Trade Organization and implementing a value added tax to reduce reliance on import tariffs. Lesotho did not score well on the measurement for "days to start a business." The MCC Board, however, took note of Lesotho's creation of a central office to facilitate new business formation and saw positive performance on other factors related to business start-ups. In FY2011, Georgia was invited to submit a proposal for a second compact despite failure in the "investing in people" basket; supplemental information attributing an insufficient score in immunization rates to a temporary shortage of one vaccine helped the Board toward a positive decision. Even prior to its selection in FY2007, the possible choice of Jordan had come in for severe criticism from some quarters. Freedom House, the organization whose annual Index of Freedom is drawn upon for two of the "ruling justly" indicators, had urged the MCC Board to bypass countries that had low scores on political rights and civil liberties. It argued that countries like Jordan that fell below 4 out of a possible 7 on its index should be automatically disqualified. Jordan, however, did well on three of the other indicators in this category. Several development analysts further argued that Jordan should not be selected, because it is one of the largest recipients of U.S. aid, has access to private sector capital, and is not a democracy. In selecting Jordan, the MCC Board appears not to have been swayed by these arguments. The Board has, at times, selected a country and then, in future years, and prior to approval of a compact, de-selected it if its qualifying scores worsened or other factors interceded. Although the Gambia was selected in FY2006, its eligibility for MCC assistance was suspended by the MCC Board in June 2006 because of "a disturbing pattern of deteriorating conditions" in half of the 16 qualifying factors. Among the problems cited in this case were human rights abuses, restrictions on civil liberties and press freedom, and worsened anticorruption efforts. For the 2008 selection process, the MCC Board eliminated Sri Lanka because of the resurgent civil strife that would make a compact problematic. In the FY2009 selection round, the Board decided not to reselect several countries that had been eligible in previous years—Bolivia, Timor-Leste, and Ukraine. In FY2008 and FY2009, both Ukraine and Timor-Leste failed the corruption indicator. Timor-Leste, in addition, failed the "investing in people" basket in those years. Bolivia, however, had passed its indicator test in every year. A hold put on MCC consideration of Bolivia's compact proposal in FY2008 and its exclusion from eligibility in FY2009 appeared likely due to the political tensions existing between it and the United States rather than its performance in development-related matters. In the FY2014 selection round, both Benin and Sierra Leone were not reselected for compact eligibility, because they failed the "control of corruption" indicator. In the FY2016 round, Tanzania, selected in FY2013, 2014, and 2015, was suspended from further consideration of a second compact due to a pattern of behavior that put in question its adherence to democratic principles. Some countries have remained eligible despite failing performances in years following their selection. For example, Indonesia, selected in FY2009, failed the corruption indicator, half the indicators, and the investing in people basket in FY2010 and FY2011 when it had moved up to the lower-middle-income level. It remained compact eligible and signed a compact in 2011, because Congress allowed it to be judged and funded as a lower-income country, in which case it passed the selection requirements. In FY2014, the Board continued the eligibility of Liberia and Morocco, although both failed slightly more than half the 20 indicators (11). While compact development could go forward, the Board indicated that it expected both to pass the scorecard before a compact would be approved. And both did pass in FY2015 and FY2016. Except in certain extreme circumstances, described in the " Compact Suspension and Termination " section below, countries that are already implementing compacts are generally unaffected by a decline in performance indicators. Nine of the 19 countries implementing compacts as of December 2010 would not have qualified in the FY2011 selection round. Up to that point, Georgia and Vanuatu had failed three years in a row; Armenia, El Salvador, Mali, and Mozambique had failed four years in a row. Morocco had failed for five years straight. Since then, this picture has changed; only 2 of 16 active compacts would have failed in December 2011, 5 of 15 in 2012, 3 of 10 in 2013, and 2 of 11 in 2014. In 2016, only Indonesia of 11 compact countries failed the FY2017 indicators, and, in 2017, only El Salvador of 12 signed compact countries failed the FY2018 indicators. In not strictly following the rule of the performance indicators, the MCC has argued that the indicators themselves are imperfect measures of a country's policies and performance. The indicators often suffer from lag time, reflecting when the raw data were derived as much as a year or more previously. A country's position vis-à-vis its peers may also fluctuate considerably from year to year without reflecting any significant change in the country's policies. Countries following reasonable policies may fall behind the performance criteria when other countries are improving faster—thereby raising the bar. A shift in position from the low income to lower-middle-income group can similarly alter a country's scores as it competes with countries more likely to achieve better indicators than ones in the lower income group. They may also fail when new criteria are introduced which countries have not had an opportunity to address and when institutions measuring performance refine or revise their indicators. Country Selection—FY2018 In its FY2018 selection round on December 19, 2017, the MCC Board chose Timor-Leste and reselected Sri Lanka and Tunisia as eligible to develop their first compacts. It also reselected Burkina Faso, Lesotho, Mongolia, and Senegal as eligible to develop second compacts. The Board selected The Gambia for a threshold program. Timor-Leste had been selected in FY2017 for a threshold program. Its positive scorecard performance since then led the Board to elevate it to compact status. In FY2017 Mongolia, first reselected for a second compact in FY2015, had failed its "control of corruption" indicator, and the Board had consequently noted that it expected Mongolia to improve its performance in this aspect prior to compact agreement. Mongolia passed this hurdle in FY2018. Lesotho had been made eligible in FY2015, but a decision on its FY2016 status was deferred at the December 2015 Board meeting pending the addressing of governance concerns, a situation continued in FY2017. In the meantime, Lesotho had been allowed to develop a compact, although no new financial resources were being provided to help them in this regard. Its improved performance on the FY2018 scorecard led the Board to restore its eligibility. At its December meeting, the Board noted that the government of the Philippines had decided not to move forward with a second compact. The Philippines was made eligible in FY2016, but the Board deferred reselection in FY2017 pending a review of concerns regarding the rule of law and civil liberties. It failed the "control of corruption" indicator in FY2018. MCC Programs The MCC operates two types of assistance programs: a long-term, large-scale investment in a country-developed and country-implemented set of projects, known as a compact, and a short-term, more narrowly defined, donor-managed effort to help prepare possible candidates for compact eligibility, termed a threshold program. These programs are discussed below. MCC Compacts MCC compacts are grant agreements, five years in length (the MCC authorization limit), proposed and implemented by countries selected by the MCC Board. To date, the MCC Board has approved 33 compacts in 27 countries worth more than $11.7 billion. Details of each active compact and major developments in their implementation are provided in Appendix B . Currently, compacts are fully operating in 9 countries—Benin II, El Salvador II, Georgia II, Ghana II, Liberia, Malawi, Morocco II, Niger, and Zambia—and will enter into force in two more within the next two years—Cote d'Ivoire and Nepal. Projects to date have emphasized infrastructure. As of September 2017, 26% of MCC cumulative compact funding was in the transport sector, mostly roads; 17% was targeted on agriculture; 16% on energy; 14% on health, education, and community services; 9% on water supply and sanitation; 6% on governance; and 1% on financial services, and 11% was used for the administration and monitoring of programs. The sub-Saharan Africa region has always represented the bulk of MCC spending. Counting just the 12 active compacts as of March 2018, 59% of compact funding is going to sub-Saharan African countries, 9% to North Africa and the Middle East, 3% to the countries of the former Soviet Union, 6% to Latin America, and 23% to Asia and the Pacific. Since its inception, the MCC has designed guidelines and procedures for project development and implementation that are followed by all MCC compact countries. These are described below. Compact Development Once declared as eligible, countries may prepare and negotiate program proposals with the MCC. The process to develop a compact, from eligibility to signing, is expected to take about 27 months. Only those compact proposals that demonstrate a strong relationship between the proposal and economic growth and poverty reduction will receive funding. With limited funding available and multiple countries eligible, compact development, like the selection process, is competitive. While acknowledging that compact proposal contents likely will vary, the MCC expects each to discuss certain matters, including a country's strategy for economic growth and poverty reduction, impediments to the strategy, how MCC aid will overcome the impediments, and the goals expected to be achieved during implementation of the compact; why the proposed program is a high priority for economic development and poverty reduction and why it will succeed; the process through which a public/private dialogue took place in developing the proposal; how the program will be managed and monitored during implementation and sustained after the compact expires; the relationship of other donor activities in the priority area; examples of projects, where appropriate; a multiyear financial plan; and a country's commitment to future progress on MCC performance indicators. Countries designate an entity, usually composed of government and nongovernment personnel, to coordinate the formulation of the proposal and act as a point of contact with the MCC. In many cases, a high level of political commitment to the program—country leadership identifying themselves closely with the success of the compact—helps propel compact development forward and continues into implementation. One of the first steps in the compact development process is the undertaking by the compact-eligible country, possibly in conjunction with MCC economists or consultants, of an analysis of the principal constraints to economic growth and poverty reduction. This report seeks to identify the binding constraints that "are the most severe root causes that deter households and firms from making investments of their financial resources, time, and effort that would significantly increase incomes." Underscoring the MCC concept of "country-ownership" and the requirement of broad public participation in the development of MCC programs embodied in MCC authorization language, the compact development entity typically launches nationwide discussions regarding the scope and purpose of the MCC grant, with meetings held at the regional and national level that include representation of civil society and the business community. In Namibia, the National Planning Commission charged with developing the compact identified 500 issues as a result of public discussions held throughout the country on the question "What will unlock economic development in your region?", narrowing them down to 77, and then just to several. Burkina Faso's consultations reportedly included 3,100 people in all 13 regions. Public consultation combined with analysis of constraints to growth helps focus a country on the range of sectors and possible activities that might go into a compact proposal. Concept papers are developed around many of these ideas. During each step in the development process, the MCC provides feedback to keep the country within MCC parameters. The eventual results of these public deliberations and concept papers are compact proposals. These proposals often exceed MCC's budget capacity, forcing a process of further prioritization and elimination. Tanzania reportedly suggested a package worth $2 billion; with the elimination of irrigation and education options, they were able to bring it down to $700 million. Namibia's first proposal, at $415 million, was whittled down to $305 million by eliminating irrigated agriculture and roads projects. Proposals are developed by a country with the guidance of and in consultation with the MCC. To assist in compact development, the MCC may, under Section 609(g) of its authorizing statute, provide so-called precompact development grants to assist the country's preparatory activities. Among other things, these grants may be used for design studies, baseline surveys, technical and feasibility studies, environmental and social assessments, ongoing consultations, fees for fiscal and/or procurement agents, and the like. For example, in June 2009, the MCC provided Jordan with a precompact development grant of $13.34 million, not counted as part of the final compact. It was used for feasibility studies and other assessments for water and wastewater projects. One feature of compact proposals is the requirement that sustainability issues be addressed. In the case of road construction, this might mean provisions committing the government to seek to establish transport road funds, a fuel levy, or some other tax to pay for road maintenance in future. For example, as a condition of its compact, Honduras increased its annual road maintenance budget from $37 million to $64 million. Once a proposal is submitted, the MCC conducts an initial assessment, then, on the basis of that assessment, launches a due diligence review that closely examines all aspects of the proposal, including costs and impacts, to see if it is worthy of MCC support. Included in the review is an economic analysis assessing anticipated economic rates of return for the proposed projects and estimating the impact on poverty reduction. At the same time, MCC staff work with the country to refine program elements. Finally, the MCC negotiates a final compact agreement prior to its approval by the MCC Board. The compact is signed but does not enter into force until supplemental agreements on disbursements and procurement are reached. When the compact enters into force the clock begins to tick on compact implementation and the total amount of funds proposed for the compact is formally obligated (held by the U.S. Treasury until disbursed). Because of the difficulties encountered in trying to undertake a complex set of projects within a set five-year time span, MCC has increasingly sought to front-load many planning activities prior to compact signing or entry-into-force, including feasibility studies and project design, which in the case of infrastructure can be a lengthy process. Usually, the first year of operations is consumed by contract design and solicitation for services. In the case of Burkina Faso, however, one analyst noted that the passage of a full year between signing and entry-into-force combined with early action on staff and planning allowed an estimated 60% of procurement to be initiated before entry-into-force. Compact Implementation Typically, by the time of compact signing, the local entity that was established as point of contact during program development segues into the compact management and oversight body, the "accountable entity" usually known as the MCA. Its board is usually composed of government and nongovernment officials, including representatives of civil society. The government representatives are usually ministers most closely associated with compact project sectors. The MCA itself may take a variety of forms. In Tanzania, it was a government parastatal established by presidential decree under the Ministry of Finance. In Namibia, it was a separate unit within the ministry-level government National Planning Commission. MCA staff will include fiscal and procurement agents, in many cases duties contracted out and in some cases, where the capacity is available, undertaken in-house. In the case of Namibia, for example, procurement started as a contracted function, and, when capacity improved, the contractor was replaced by an MCA-staffed procurement office. The MCA is also responsible for ensuring that accountability requirements concerning audits, monitoring, and evaluation take place. Environmental, gender, and other social requirements embedded in the compact agreement are its responsibility as well. Held to a strict five-year timetable and limited budget, the MCA faces a daunting challenge for most developing countries. For many countries, the process of getting the MCA set up, staffed, and operating was very time-consuming and difficult, in some cases causing delays in implementation. As, perhaps, the most important aspect of compact implementation, MCC procurement processes are a good example of how the MCC is building government capacity at the same time that it provides development project assistance and maintains accountability oversight for the use of U.S. funds. In the course of implementing compacts, the MCA signs hundreds of contracts each year to procure equipment, construct infrastructure, or obtain technical expertise. Under MCC rules, compact procurement processes are based on World Bank procedures, not U.S. federal acquisition requirements or the compact country's own rules. To counter corruption, build capacity, and achieve the maximum value for the cost of goods and services, MCC-approved rules feature transparent, competitive bidding from all firms, regardless of national origin. According to the MCC, between October 2010 and December 2016, companies from 90 countries have won MCC-funded procurement contracts, with U.S. firms winning the most, roughly 12% of the total value of contracts. MCC-supported procurements are fixed-price contracts, putting the burden on the contractor to get the work done to meet the agreed price. The MCC has a set of standards and guidelines for all its project contracting. The MCC requires that procurements are preceded by a price reasonableness analysis to ensure that bids are realistic. An independent evaluation panel is selected for each discrete procurement, with all members requiring MCC approval to ensure that appropriate technical expertise is represented. The panel's report is also vetted by the MCC. Reportedly, several countries have adopted this methodology for their procurements. Cape Verde is applying it to all public procurements. Honduras said it would maintain the program management unit to deal with projects funded by other donors and would apply MCC guidelines for procurement. The MCC itself has only a very small staff located in-country, composed chiefly of a Resident Country Director and a deputy. To assist in oversight of infrastructure projects, which account for more than half of MCC activities, MCC will often hire an independent engineering consultant. Close cooperation and guidance is also provided by MCC Washington headquarters expert staff at all points of implementation, on procedure as well as on sector technical support. MCC has to sign off on all major steps during implementation, including each disbursement. To reduce the risk of corruption, funding is transferred periodically and directly to contractors following a determination that project performance has continued satisfactorily. An appealing feature of MCC contracts to international contractor firms is that payment is made by the U.S. Treasury, not the compact country. Following completion of a compact, the MCC conducts impact or performance evaluations using independent evaluators. Evaluations are conducted on each project component within a compact. Results of the evaluations are made public. For closed compacts, as of December 22, 2017, 61 evaluations (39 performance and 22 impact) had been completed and 58 (34 performance, 23 impact, and one to be determined) were planned or ongoing. As projects are implemented, events may require that changes be made to compact plans. In 2007 and 2008, for example, the convergence of a depreciating U.S. dollar and rising costs for the machines and material necessary for the many infrastructure projects conducted by MCC meant that MCC projects were faced with having less funding than envisioned to meet the agreed-on objectives. At the time, at least six projects were scaled back from original plans or supplemented by financing from other sources. In 2010, increased costs due to design changes and higher construction costs led to the reallocation of nearly $40 million for a Ghana transportation project. A reallocation of project resources was made unnecessary when bids on Tanzania's rural roads came in higher than budgeted, because the Tanzanian government committed funds to make up for the shortfall. The number of boreholes to be drilled under a rural water supply project in Mozambique was reduced from 600 to 300-400 because the amount allocated for construction was insufficient. Although the MCC is trying to address potential changes by requiring more frequent portfolio reviews and early identification of high-risk projects, projects planned for a five-year life span are likely to undergo revision at some point. Changes in country policy performance, however, are less foreseeable and may carry more serious consequences. These are discussed below. Compact Suspension and Termination Throughout the entire process from candidacy to eligibility through development and implementation of a threshold program or compact, countries are expected to maintain a level of performance on the criteria reasonably close to that which brought them to their MCC threshold or compact-eligible status. On more than one occasion and for a variety of reasons, MCC programs have been suspended or terminated. Section 611(a) of the Millennium Challenge Act of 2003 provides that, after consultation with MCC's Board of Directors (Board), the CEO may suspend or terminate assistance in whole or in part if the CEO determines that (1) the country or other entity receiving MCC aid is engaged in activities which are contrary to the national security interests of the United States; (2) the country or entity has engaged in a pattern of actions inconsistent with the criteria used to determine the eligibility of the country or entity; or (3) the country or entity has failed to adhere to its responsibilities under its compact. This policy applies to MCC assistance provided through a compact, for compact development and implementation, and assistance through a threshold agreement. All compacts contain language providing that MCC may terminate the compact if the government engages in a pattern of action inconsistent with the criteria used to determine the eligibility of the country for assistance. This is the standard compact language that has been cited in most, if not all, prior MCC compact terminations. In addition, all countries at all points of the process are affected by certain strictly applied foreign assistance restrictions in the Foreign Assistance Act of 1961 and in annual appropriations legislation. For example, restrictions on aid to countries whose governments are deposed by a military coup prevent countries from being considered for MCC candidacy, eligibility, or continued threshold or compact implementation. Application of legislative restrictions varies according to circumstances. The MCC has four steps available to it as responses to any perceived violations of its performance rules. It may warn a country of its concerns and potential consequences. It may place a program or part of a program on hold. These actions are both preliminary steps that can be taken by management without immediate concurrence of the Board. The two further steps, suspension and termination, must be made by the Board of Directors. In all cases when some possible violation of MCC standards has been brought to the attention of the agency, the MCC Department of Policy and Evaluation conducts a review of the evidence and presents it with a recommendation to the Board. The Board does not uniformly follow the recommendation made. If a determination is made to hold, suspend, or terminate, it may be further determined to affect a whole or only part of the compact. The MCC has suspended or terminated programs in the following cases: Threshold programs have been suspended in Niger (December 2009, reinstated in June 2011), due to undemocratic actions taken by its leadership contrary to the MCC's governance criteria; suspended in Yemen (November 2005, reinstated February 2007, but never implemented) due to a pattern of deterioration in its performance criteria; and terminated in Mauritania (2008) due to aid prohibitions on governments deposed by a coup. Compact eligibility was suspended in the Gambia (June 2006) because of "a disturbing pattern of deteriorating conditions" in half of the 16 qualifying factors. Eligibility for a second compact for Tanzania, expected to have been worth $473 million, was suspended (March 2016) due to governance concerns. Portions of compacts have been terminated in Nicaragua (June 2009), because of the actions of the government inconsistent with the MCC eligibility criteria in the area of good governance; and in Honduras (September 2009), because of an undemocratic transfer of power contrary to the Ruling Justly criteria. The compact in Madagascar was terminated due to a military coup (May 2009). In Armenia (2008), MCC put a hold on a portion of the compact due to poor performance in a range of governance indicators, but the Board did not formally vote to suspend. The Mali compact, put on operational hold in March 2012 after a military coup, was terminated in August 2012. In March 2012, the MCC Board suspended the Malawi compact. This followed the placing of an operational hold on the Malawi compact in July 2011, only a few months after the compact was signed, both steps taken as a result of a pattern of actions by the Malawi government "inconsistent with the democratic governance criteria" of the MCC. The Malawi suspension was lifted in June 2012 when democratic behavior significantly improved. The number of holds, suspensions, or terminations suggests that the MCC takes seriously its legislative mandate by moving to address violations of its performance standards. These prior instances of MCC program suspension and termination indicate that the MCC is most likely to apply Section 611(a) in response to an undemocratic transfer/retention of power, a violation of the Ruling Justly eligibility criteria. Despite these efforts by MCC, observers have noted instances in the past in which MCC has not taken action to restrict eligibility to countries with questionable records on political rights and civil liberties, for instance Jordan. And, as noted above, a number of compact countries have failed one or more of their qualifying indicators for one or more years in a row during the period of compact implementation without serious consequences. Anticipated Compacts in FY2018-2019 The MCC expects that as yet unobligated funds combined with FY2018 and FY2019 appropriations will support compacts in several of the existing pool of compact-eligible countries. According to the MCC, Board consideration is likely to occur in FY2018 for the following compacts: Mongolia II . Mongolia's expected $350 million compact is expected to focus on a range of water-related issues: increasing water supply and delivery, industrial water reuse, and associated regulatory reform. It is likely to be considered by the Board by early summer 2018. Senegal II . Senegal's compact, estimated at $480 million, will focus on energy infrastructure, including power transmission and distribution and access in rural areas. It will likely be taken up by the Board in September 2018. Sri Lanka . Sri Lanka's anticipated $450 million compact is targeting transportation and land access issues. It will improve the traffic management system, modernize the bus sector, provide logistics facilities, establish a national land information system, and improve mapping, surveying, and titling of land. The compact is expected to be considered in early FY2019. Burkina Faso II . MCC anticipates that a $304 million compact will be approved with Burkina Faso before June 2019 that will focus on the high cost and poor quality of energy and the country's low-skilled workforce. Tunisia . A constraints analysis found three issues that will be the focus of an estimated $292 million compact expected to be considered before June 2019: excessive market controls of goods and services, excessive labor market regulations, and water scarcity. Threshold Programs In addition to compacts, the MCC has supported "threshold" programs—smaller, more short-term (two to three years) programs designed to assist promising candidate countries to become compact eligible. Up to 2010, threshold programs addressed shortcomings in a country's qualifying indicators—most focusing on corruption concerns, as this pass/fail indicator prevented numerous candidates from compact eligibility. In 2010, the threshold program underwent an extensive review in part because some Members of Congress and others had raised questions regarding its efficacy; an explanatory statement accompanying the FY2009 Omnibus appropriations suggested that an assessment of the programs be undertaken before more were approved. Accordingly, the MCC did not select any new countries for threshold eligibility for FY2010 and did not request funding for the program in its FY2011 budget. The MCC announced a new approach to these programs in September 2010. Now threshold programs focus less on specific qualifying indicator scores and more on resolving policy constraints to economic growth that are preventing countries from becoming compact eligible. According to the agency, these allow MCC to begin work on reforms in problem sectors that would likely be among those addressed in compact projects, and they initiate a relationship in which the MCC can better judge a country's capacity to implement a possible compact in the future. Congress provided in the MCC authorizing legislation that not more than 10% of 2004 MCC appropriations could be used for such purposes (§616 of P.L. 108-199 ). Subsequent foreign operations appropriations made 10% of new MCC appropriations available for threshold assistance, but, since the FY2012 appropriations, including FY2016 (and carried forward under the FY2017 continuing appropriations), 5% has been made available for this purpose each year. In its FY2017 budget presentation, the MCC argued for restoration of the 10% cap to allow for more flexibility and a stronger threshold effort. The FY2014 appropriations ( P.L. 113-76 ) contained two new provisions, both repeated in FY2016 ( P.L. 114-113 ), specifically affecting threshold program eligibility. One prohibits a threshold program for countries that have already had a compact program. This provision is viewed by some as an after-the-fact response to the threshold eligibility granted Honduras for FY2012. Its program was signed in August 2013. In its FY2017 budget presentation, the MCC opposed this language, noting that, where a second compact may not be appropriate, such programs may be preferable to no engagement. Some observers note that Madagascar, a former compact country (terminated due to a coup in 2009) would be a good candidate for a threshold program, having passed the FY2017 scorecard but not yet considered ready for a full compact. The appropriations provision, however, prohibits a threshold program for Madagascar at this time. Recent appropriations acts also prohibit a new threshold program for any country not currently a candidate country. Tunisia, which had been granted threshold eligibility in September 2011, graduated to upper-middle-income status by FY2014 and, therefore, did not qualify as a candidate country then. If it were not for this appropriations language, Tunisia might have received a threshold program funded with FY2011 appropriations, the year of its selection. In its FY2017 budget presentation, the MCC argued for elimination of this provision, as it restricts the agency's authority. (In FY2017, Tunisia has returned to lower-middle-income status and has been granted compact eligibility.) As of April 2018, 29 threshold programs worth a total of over $600 million have been or were being conducted in 27 countries, two of which received second programs. Of those countries that have completed programs, Indonesia, Liberia, Moldova, Burkina Faso, Jordan, Malawi, the Philippines, Tanzania, and Zambia have received compacts. Funding levels for threshold programs differ, ranging from $6.7 million for Guyana to $55 million for Indonesia. Currently, only Honduras, Guatemala, Sierra Leone, Togo, and Kosovo are actively receiving threshold assistance (see Appendix C ). Currently, The Gambia is the only threshold-eligible country. Threshold countries are subject to the same performance rules as compact countries. Two countries—Mauritania and Yemen—have had their threshold eligibility terminated prior to program implementation, the former because of a coup and the latter due to deterioration in qualifying indicators. One country—Niger—had its active threshold program suspended as its governance performance deteriorated. MCC Strategy On February 24, 2016, the MCC released a document entitled NEXT: A Strategy for MCC's Future . The strategy reviews and reaffirms the MCC model and the principles on which that model is based. It also establishes several priority goals, including in the words of the MCC "Help countries choose evidence-based priorities in growth and poverty reduction strategies that reflect new learning and new opportunities." Among other action items, the MCC is promising to improve its analysis during compact development, including a constraints analysis that better assesses impacts on women and marginalized groups and incorporates public and private donors as partners in addressing constraints, and an economic analysis that considers regional integration opportunities. The MCC will also seek better integration of environmental and social factors in selection of poverty reduction strategies. "Strengthen reform incentives and accountability." The MCC plans to push for partner government reforms that will have greater systemic impact, including prioritizing those that support sustainability and address corruption. It will use the threshold program more as a tool for promoting reform. "Broaden and deepen public and private partnerships for more impact and leverage." The MCC is intent on exploring multicountry investments; working more with local governments, including subnational partnerships; and collaborating more with other U.S. government agencies. It also will seek to foster public-private partnerships, leverage more private sector involvement, engage more partnerships with foundations and corporations, and encourage U.S. companies to participate in compact procurements. "Lead on data and results measurement, learning, transparency, and development effectiveness." The MCC will work to improve its ability to measure systemic impacts and track gender and social inclusion goals. It will seek data to accurately identify countries with high poverty rates. It will take steps to share its data-driven approach with other development organizations. "Maximize internal efficiency and productivity and maintain and motivate a world class, high functioning staff." The MCC promises to improve its efficiency and effectiveness, designing better compacts faster with stronger outcomes, by strengthening its staff and management capabilities. Select Issues Concerns regarding the MCC have been expressed at various points in time on its level of funding, its operations, and its ability to ensure project sustainability; aspects of procurement; and the risk of corruption. These and other issues are discussed below. Funding When the MCC was proposed, it was expected that, within a few years, the level of funding would ramp up to about $5 billion per year. For a variety of reasons, not least of which is the limitation on available funding for foreign aid more broadly, the MCC never achieved anywhere near that level of funding. In fact, in most years since the MCC was established, its enacted appropriation has been below the President's request. MCC Appropriations Request and Congressional Action for FY2018 On May 23, 2017, the Trump Administration issued its FY2018 budget request, including $800 million for the MCC, a cut of $105 million (-11.6%) from FY2017-enacted levels. On July 24, 2017, the House Appropriations Committee reported its version of the FY2018 State, Foreign Operations, and Related Programs appropriations ( H.R. 3362 ), providing $800 million for the MCC in FY2018, matching the Trump Administration request and $105 million less than it received in FY2017. On September 14, the House approved H.R. 3354 , an omnibus appropriations act, including the State, Foreign Operations, and Related Programs appropriations (Division G), providing $800 million for the MCC in FY2018. On September 7, 2017, the Senate Appropriations Committee reported its version of the FY2018 State, Foreign Operations, and Related Programs appropriations ( S. 1780 ), providing $905 million for the MCC, equal to the FY2017 level and $105 more than the Administration request. On March 23, 2018, the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) was signed into law, providing $905 million for the MCC, the same level as in FY2017. MCC Appropriations Request and Congressional Action for FY2019 On February 12, 2018, the Trump Administration issued its FY2019 budget request, including $800 million for the MCC, a cut of $105 million (-11.6%) from FY2018-enacted levels. Expanding MCC Partner Options In recent years, several proposals have been made to expand the MCC's range of possible partners and activities, all so that it may better meet its mandate of poverty reduction through economic growth. These options are discussed below. Regional Integration and Concurrent Compacts At its December 2014 meeting, the MCC Board stated its support for possible efforts by the agency to consider developing regionally oriented partnerships, especially in South Asia. Compacts addressing regional issues, MCC argues, could provide higher rates of return on MCC investments, benefitting from economies of scale and supporting trade between nations. To enable the possibility of working on a regional basis, the MCC proposed legislation in its FY2016, FY2017, and FY2018 budget presentations that would allow it to undertake concurrent compacts—more than one in an individual country at the same time. The agency argues that being able only to do one compact at a time, as the existing MCC authorization requires, is a major barrier to pursuing regionally oriented programs. Bills supporting the concept of regional-purpose compacts and containing the concurrent compact authorization language were introduced in the 114 th Congress in both House and Senate—approved by the former, but not taken up by the latter. In the 115 th Congress, H.R. 3445 , the African Growth and Opportunity Act and Millennium Challenge Act Modernization Act, was approved by the House on January 17, 2018, and by the Senate on April 9, 2018. The argument for concurrent compacts as a condition for regional programs is that, as compacts are bilaterally based and awarded to countries only rarely, the opportunity to initiate compacts at the same time in two contiguous countries is unlikely to arise. The most probable scenario for a compact that would address regional barriers to economic growth would be one in which country #1 already has a compact and another, contiguous country (country #2) is subsequently made compact eligible. At that point, it might be possible to then add another compact to country #1 while simultaneously developing a compact with a regional element in country #2. To add another compact to an existing compact country, concurrent compacts must be permitted. Nepal, currently developing its first compact, is a possible candidate for a regional concurrent compact. Its close relationship with India—which passes the performance indicators, but has not been offered compact eligibility—opens the door to exploring power or transport sector themed compacts whose economic impact might be strengthened by having a regional element. Similarly, there are regional possibilities that might be explored with Cote d'Ivoire, Ghana, Benin, Niger, Senegal, and Burkina Faso in West Africa and with Malawi and Zambia, which are all currently compact eligible and at different stages of compact implementation or development. A few further challenges remain. Development of regional compacts would still depend on the right timing and coincidence of contiguous countries. MCC's budget for multiple compact activities is limited. The existence of a regional compact might raise the possibility that a misbehaving country's suspension or termination would also force suspension or termination of a compact benefitting the partner country with an unblemished policy performance record. In making regional compacts operational, the MCC reports that it would still have to find potential investments to be cost beneficial, countries would still have to want such investments to be made (and not just because MCC wanted to do them), and the investments would still have to address economic constraints to growth as do all other compacts. Upper-Middle-Income Countries Currently, upper-middle-income countries are excluded from participation in MCC programs by the MCC authorization. Yet, it is argued by observers in the development community that the relative wealth of upper-middle countries is not broadly shared and that the line between lower-middle-income and upper-middle is arbitrary. The recent moves of both Mongolia and Tunisia back and forth across the line between lower- and upper-middle income highlight this problem. In the case of Mongolia, the MCC chose to continue working with Mongolia on its second compact despite its move to upper-middle status one year after selection for eligibility. Mongolia moved to upper-middle-income status due to the growth of its mining economy, a change that has hardly made a dent on its poverty. That Mongolia has, one year later, moved back to lower-middle status seems, in the view of some observers, to justify the MCC position. Some suggest that the income exclusion be redefined or removed and some other measure be used that will take into account the existence of significant poverty within relatively wealthier countries. On the other hand, when establishment of the MCC was debated in 2003, the development community argued that aid should be channeled to those countries in greatest need; the prohibition on upper-middle income and the funding preference given to low-income countries in the authorization legislation reflect that view. Within-Country Regional or Sub-regional Partnerships MCC currently works on a bilateral basis with individual country national governments. Some, including former MCC CEO Dana J. Hyde, have suggested that, in certain cases, poverty reduction could be better addressed at more local levels of government—the regional or sub-regional level. Such a move would require new authorization legislation. The MCC would also have to work out how to establish such partnerships in a way that would be acceptable to national governments. Compact Outcomes and Impact The MCC places considerable weight on demonstrating measurable results. During project development, it predicts a set of outcomes—using cost-benefit analyses and calculated economic rates of return—that helps determine which projects will be funded. During implementation, it gathers data to establish baselines and monitor performance. And, at project completion, it supports independent evaluations of achievements. It promises to release these findings to the public, regardless of the results, with the intention of improving the agency's performance in meeting its purpose of reducing poverty through economic growth. Project Outputs . Foreign assistance programs have multiple levels of results, some more measurable than others. On the most elementary level, assistance program inputs—financing, technical expertise, construction, etc.—produce outputs. The MCC tracks these throughout program implementation and reports quarterly on progress made in achieving performance indicators. Cumulatively from 2004 to September 2017, the agency claims that its programs have trained 330,814 farmers, built 772 educational facilities, completed 2,500 miles of roads, formalized 321,508 land rights, and constructed 2,683 miles of electricity lines, among other achievements. Project Outcomes . Some of these outputs have led to medium-term outcomes, such as an increase by 20,000 in the number of new registered businesses in Albania as a result of administrative reforms made in business licensing under its threshold program. An independent analysis of the Burkina Faso threshold program found that construction of 132 primary schools led to increased enrollment for both boys and girls by about 20% and for girls over boys by 5%. Among the outcomes of its Port of Cotonou modernization project under the Benin compact, according to MCC, are annual savings of $2.1 million in dredging and maintenance costs and a decrease in average customs clearance time. Project Impact . The most important measure of MCC activity is the long-term impact compacts can have on poverty reduction through increased incomes among poor people—the legislative mandate of the agency. Independent postcompact impact evaluations are meant to explore the relationship between an MCC investment and such an outcome, if any, so as to provide lessons for future compacts. Twenty-two independent impact evaluations of compact projects (and another four of threshold programs) have been completed as of December 2017, and another 23 of closed compact projects are planned or ongoing. In addition, 39 performance evaluations of closed compact projects (and 7 of threshold programs) have been completed and another 34 are planned or ongoing. While impact evaluations focus on changes that are directly attributable to project interventions, performance evaluations review how the program was implemented and other questions related to program design, achievements, management, and operational decisionmaking. The decision to choose one type or the other may depend on whether expected accountability and learning is worth the extra cost of impact evaluations. The first impact evaluations were published in October 2012. Examining farmer training programs conducted in five compact countries, the evaluations affirmed that the average of individual outputs anticipated for a country, such as the number of farmers trained and hectares under production with MCC support, met or exceeded their targets in all five cases (although for two countries a number of indicators had no targets). While the evaluations found increases in farm income in three countries—no measurements could be undertaken in a fourth country—in no case were they able to identify increases in household incomes. This finding may be due to a household reallocating other income sources to farming or because household income is too difficult to measure. In any case, MCC is looking for alternative methods for measuring household income for application to future compacts. A 2013 impact evaluation of road construction in Georgia found a significant increase in industrial investment in communities near the improved road, but no evidence of impact on household-level income, consumption, or utilization of health and education services. The varied reasons for the lack of impact suggest the difficulties of impact evaluation in general—these include a possible poor choice of comparison road; a too-short time frame for measuring change as the data were derived in some cases less than a year after construction; and a focus on beneficiaries living adjacent to the project road, whereas beneficiaries may live far from the roads where they transport their goods. The MCC has indicated that these early impact evaluations have taught it to better design projects as well as future impact evaluations. The "MCC Effect." Above and beyond the standard measures of results, the MCC claims for itself an impact made by the MCC process itself. Under the so-called "MCC effect," countries are said to be establishing reforms in an effort to qualify under the 20 performance indicators. Yemen has been cited in this regard because, following its suspension from the threshold program in 2005, it approved a number of reforms to address indicators where its performance had lapsed (and subsequently was reinstated and then later suspended for different reasons). Niger passed the Natural Resources Protection indicator in FY2013 as a consequence of establishing a large new protected area. House- and Senate-approved resolutions in 2007 ( H.Res. 294 and S.Res. 103 ) noted the role the MCC played in encouraging Lesotho to adopt legislation improving the rights of married women. It can also be argued that the establishment of local compact implementation mechanisms—the MCAs—has served a capacity-building function and influenced some governments' procurement policies. These extraordinary results are reported only anecdotally, but if documented and measured appropriately, might prove to be of significant development value. Capacity Building . As discussed in the " Compact Implementation " section earlier in this report, one possible development effect of the MCC program that goes unmeasured arises from its operational model which promotes "country ownership" and country implementation of compacts. Some countries, Cape Verde and Honduras among them, have reportedly adopted the MCC transparent procurement methodology for general use. Honduras has made its local MCA compact implementing institution permanent (as INVEST-Honduras) and made it responsible for managing infrastructure, rural development, and food security donor funds. GAO Observations . On occasion, GAO has reviewed and commented on the MCC record in predicting and achieving compact outcomes. A 2007 GAO report highlighted a concern that, in the case of Vanuatu, projected impacts had been overstated. The GAO noted that the MCC estimated a rise from 2005 per capita income in Vanuatu of about 15% ($200) by 2015 when the data suggest it would rise by 4.6%. Although the MCC stated that the compact would benefit 65,000 poor, rural inhabitants, the data, according to the GAO, did not establish the extent of benefit to the rural poor. Further, the MCC projections assumed continued maintenance of projects following completion, whereas the experience of previous donors is that such maintenance has been poor. The MCC response was that, although there may be varying views on the degree of benefit, both agencies agree that the underlying data show that the compact would help Vanuatu address poverty reduction. A September 2012 GAO report called into question the quality of data used to determine beneficiary numbers in seven transportation projects in seven countries, pointing to mistakes made in formulas used, a failure to apply a methodology to all compacts, and a failure to update numbers in public documents. A June 2012 GAO report questioned the quality of work done on a road construction project in Georgia and noted an array of problems that have kept part of a port constructed by MCC in Benin from full operability. Sustainability concerns were raised for both projects (see below for discussion). Ensuring Sustainability An important factor in assessing the success of development assistance programs, one strongly emphasized by the MCC, is the extent to which assistance efforts are sustainable after donor support ends. This question is of particular significance in the case of the MCC as most of its assistance is in the form of infrastructure, which developing countries, historically, have had difficulty maintaining due to lack of funds for physical upkeep or lack of trained technical personnel for regular maintenance. The MCC often conditions compact aid on country adoption of policy reforms that enhance sustainability. In Tanzania, for example, the government electric power services were required to reform their tariff schedules in order to fully recover their costs, and, in those countries with road projects, provisions have been included to ensure establishment or improvement of a road fund to pay for upkeep. GAO reports in the period 2007 to 2012 on completed compacts, however, questioned the effectiveness of MCC sustainability efforts in the cases it examined. In Cape Verde, the road fund reportedly met only half of maintenance requirements, and water fees, established to fund infrastructure maintenance for the watershed and agricultural support project, were not being collected in one of the three watersheds. In Honduras, a required increase in the national road maintenance budget was believed to be insufficient to meet needs. Further, farm-to-market roads provided under the Honduras compact were the responsibility of municipalities that, reportedly, lacked equipment, expertise, and funds for road maintenance. GAO noted that, while the MCC included conditions precedent in its compact with Georgia requiring the government to maintain a level of funding for road maintenance, the government "shows limited ability to keep the road operational and well maintained." It has also questioned the ability of Benin's port authority to operate key components. The USAID Office of Inspector General (OIG), which also acts in that capacity for the MCC, has repeatedly pointed to sustainability concerns as among the top MCC management challenges in its annual letter to the agency. In FY2017, it made this case by suggesting that the MCC had not provided timely training for Moldovan water user associations to ensure sufficient experience operating and maintaining compact-funded irrigation systems. The MCC responded by noting that the OIG's views, about sustainability and other identified challenges, were reiterations of "old findings ... based on dated fieldwork." With regard to Moldova, the MCC listed a number of actions it had taken to build sustainability, including sustainability training provided to 11 water user associations the compact had established, postcompact technical support to the associations offered by USAID, and a commitment of $8 million by the government of Moldova to continue operation of the local compact implementing agency for an additional two years. Corruption The extent to which government efforts to combat corruption is a factor in MCC judgment of compact eligibility and in the implementation of compacts has long been an interest of Congress. Most recently, the statement of conferees of the FY2016 State, Foreign Operations appropriations required the MCC to submit a report on progress made to strengthen the application of the "control of corruption" indicator, and, in July 2017, the House Appropriations Committee called on the MCC to keep it informed of efforts to seek better data on governance and other measures of corruption. With developing countries themselves implementing MCC-funded programs, corruption is a major concern of the MCC, in the selection process, in threshold programs, and in compact implementation. Aiming to safeguard U.S. aid dollars, MCC programs are designed to prevent corrupt contracting. Among other things, MCC requires a transparent and competitive process and mandates separation of technical and financial elements of a bid. The MCC reviews each decision made by the procurement entity and must register approval for many of them, and it provides funds directly to contractors rather than through the government implementing entity. MCC argues that, in following this process, recipient governments learn how to do procurement in a corruption-free way. The degree to which a country controls corruption is one of the performance indicators that help determine whether a country should be eligible for compact funding. In fact, it is a "pass-fail" indicator. Passing the indicator, however, does not mean there is little or no corruption—an unrealistic expectation for most developing countries. It only demonstrates that a country's performance is above the median relative to other countries at the same economic level. As suggested in the discussion of country selection, the MCC Board does not depend on indicator scores alone to determine the selection process. These scores change from year to year, depending on fresh data and the relative scores of competing countries. Taking this into account, the MCC Board uses discretion by looking at a number of factors, including the many underlying data sources that make up indicators, as well as recent steps taken by the government in question to address corruption (or, in some cases, recent increased allegations of corruption). Accordingly, a country can be selected that technically falls near or below the median if mitigating factors occur. Alternatively, countries that pass the corruption indicator may be the subject of intense debate over incidences of alleged corruption. Because of data lags, countries passing the indicator may fail a year or two later, once a compact is in place. This can be true of all the indicators, particularly when a country "graduates" into a higher income category, thereby changing the medians. The MCC attempts to address this concern by looking for a pattern of behavior on the part of the government in order to judge the severity of any proposed corrective action. In the FY2014 compact eligibility selection process, two countries that had been selected in FY2013—Benin and Sierra Leone—were dropped from compact consideration due to their failing grades on the "control of corruption" indicator. In its December 2014 meeting, the MCC Board issued a warning to Tanzania that, although reselected for a second compact, such a compact would not be approved unless its declining corruption score was reversed with "firm concrete steps." At the September 2015 meeting, the Board noted that, unless Tanzania passed the corruption indicator, its compact would not be voted on. Tanzania passed the FY2016 scorecard; its reselection, however, has been suspended due to unresolved governance concerns, apart from those of corruption. In the FY2017 selection, a failing grade in corruption caused the Board to move Kosovo from its compact-eligible status to threshold eligible. Because Mongolia had demonstrated more consistent improvement over a number of years, its failure to pass the corruption indicator in FY2017 did not eliminate it from compact eligibility, but the Board still required an improvement in the score prior to actual compact approval. Mongolia passed the indicator in FY2018. Appendix A. Past and Active MCC Compacts at a Glance Appendix B. Active Compact Descriptions Descriptions and key developments in the 11 active Board-approved or signed compacts undertaken by the MCC are provided below in alphabetical order. Not all have entered into force at this time. Compact funding totals include administrative and monitoring costs. Benin II The five-year, $375 million compact will focus entirely on electric power infrastructure and related policy reforms. Assistance will go to the new regulatory authority ($41 million); to solar, thermal, and hydro generation facilities ($136 million); to distribution facilities ($110 million); and to off-grid access ($46 million). In addition, the government of Benin is contributing $28 million to the compact effort. Cote d'Ivoire The five-year, $525 million compact targets constraints to growth in education and transport. A Skills for Employability and Productivity Project will seek to improve secondary education in two regions through school and teacher training facility construction and policy reform at the national level. It will also develop a new model of private sector management of new technical and vocational education training. The Abidjan Transport Project will seek to improve mobility of goods and people by rehabilitating and maintaining four primary roads in the capital and improving infrastructure management skills and technical capacities for road planning and maintenance. El Salvador II The $277 million, five-year second compact with El Salvador consists of three projects. One will address constraints in the investment climate by developing an independent institution seeking regulatory improvement and will build the capacity of government to partner with the private sector in public service delivery ($42.4 million). A second project will focus on development of human capital, reforming education policy to increase school hours and strengthen the curriculum, and would also address skills needed by the labor market ($100.7 million). The third project will meet identified infrastructure needs—expansion of an important roadway and border crossing improvements related to commerce ($109.6 million). El Salvador will contribute $88 million to project implementation. Georgia II The five-year, $140 million second compact would address education concerns in three ways. One project seeks to improve the quality of education through infrastructure improvements and training of educators ($76.5 million). A second project will focus on meeting labor market needs through skills development ($16 million). A third project will modernize the teaching of science, technology, and math ($30 million). Ghana II The five-year, $498 million compact addresses electric power problems through investments in power generation and distribution and reforms in power sector policy. Of the total, $190 million is conditional on the government making agreed-upon reforms. The introduction of private-sector participation is a significant requirement of the project. The Government of Ghana is expected to contribute at least 7.5% of total MCC funding toward compact implementation. Liberia The five-year, $257 million compact targets two constraints to economic growth—a lack of access to reliable and affordable electricity and inadequate road infrastructure. The energy project ($201.6 million) will provide a new hydropower turbine to an existing facility, provide training to Liberia Electric Corporation employees, and help establish an independent regulator. The roads projects ($21.1 million) will assist in the creation of five regional maintenance centers and a road fund administration to build sustainability and will provide technical assistance to build capacities in multiple aspects of road planning, maintenance, and policy development. Malawi The five-year, $350.7 million Malawi compact, signed in April 2011, focuses on just one sector—electric power. The program aims to reduce power outages, reduce costs to business and homes, and improve the economic environment. One element will upgrade and modernize generation and distribution capacity ($283 million); another will reform electric power supply institutions in the country ($25.7 million). In July 2011, the compact, which had not yet entered into force, was put on operational hold in response to concerns raised by several antidemocratic actions taken by the government, including suppression of the media and prevention of peaceful protests. In March 2012, the compact was suspended in view of the continuing pattern of actions "inconsistent" with good governance. On June 26, 2012, the MCC reinstated its compact with Malawi. A change in the country's leadership and subsequent steps to restore democratic society led the Board to change its position. Morocco II The five-year, $450 million second compact focuses on secondary education and workforce development and on land policy and implementation. The Education and Training for Employability project ($220 million) will pilot a new model for educating a modern workforce in 90-100 secondary schools and support private-sector training centers for technical and vocational education. The Land Productivity project ($170.5 million) addresses industrial and rural land use issues and seeks to strengthen the enabling environment for investment. The Government of Morocco will contribute $67.5 million, 15% of the U.S. contribution, to compact implementation. Nepal The five-year, $500 million compact focuses on electric power and transport. An Electric Transmissions Projects seeks to address the lack of adequate power by constructing 300 kilometers of high voltage transmission lines and three substations. It will also seek to strengthen the Electricity Regulatory Commission and increase skills and capacity of power management and technical personnel. The Road Maintenance Project will seek to prevent further deterioration of roads and improve administration of road maintenance through technical assistance to the Department of Roads and attempting to increase government spending on road maintenance by matching spending annually for three years. Niger The five-year, $437 million compact targets two economic constraints: the lack of water for productive uses and institutional and physical barriers to trade. An Irrigation and Market Access project ($254.6 million) will focus on increasing agricultural productivity in two regions in the country. It seeks to rehabilitate and construct irrigation systems, establish a framework for land allocation, establish water user associations, build roads to improve market access, and promote policy reforms to facilitate these projects' success. A Climate-Resilient Communities project ($96.5 million) intends to improve livestock value and sales through health and vaccination improvements and modernizing local market infrastructure, among other efforts. It will similarly target agriculture through improved utilization of fertilizer and seeds, protection of watersheds from erosion, increased access to irrigation, and other activities. Zambia The $354.8 million, five-year compact focuses entirely on the water and sanitation sector in the Lusaka area. Most of the funds ($284 million) will be used to rehabilitate and improve infrastructure; other funds will go for strengthening management and policy controlling the water sector. Appendix C. Active Threshold Programs Descriptions and key developments in the four active Board-approved or signed threshold programs undertaken by the MCC are provided below in alphabetical order. Currently, one other country—The Gambia—is eligible to develop a threshold program. Funding totals include administrative and monitoring costs. Guatemala The $28 million Guatemala threshold program, signed on April 8, 2015, has two elements. One $5.8 million effort seeks to increase government revenue by targeting corruption in tax and customs administration. A $19.7 million education project focuses on the quality of secondary education, addressing teacher skills and the effectiveness of technical and vocational education and training. Honduras The three-year, $15.6 million Honduras threshold program, signed on August 28, 2013, aims to improve government financial management; help government provide services more efficiently and inexpensively by improving budget formulation and execution, procurement capacity, and management; and increase civil society oversight, among other efforts. Kosovo The $49 million Kosovo threshold program, signed on September 12, 2017, addresses two constraints to growth—an unreliable energy supply and weak rule of law. The energy project will encourage use of nonelectric sources of heating and the development of finance mechanisms for independent power producers. The rule of law project seeks to make the judicial system more transparent. It will also support the innovative use of data to help civil society adopt a problem-solving role in partnership with government. Sierra Leone The $44.4 million Sierra Leone threshold program, signed on November 17, 2015, targets improved government delivery of water and electricity services, focusing on the Freetown area. The project is assisting the new independent Electricity and Water Regulatory Commission (EWRC) and is attempting to increase transparency and accountability in delivery of public services. Togo The $35 million Togo threshold program, approved by the MCC Board on April 3, 2018, will focus on reform in information and communication technology (ICT) and land tenure. The ICT project is aimed at expanding public access to high-quality and affordable services by increasing competition, establishing independent regulation, and supporting a Universal Service Fund to help get internet and mobile services to remote parts of the country. The land project will help formalize and legitimize land rights through implementation of a new Land Code and testing of methodologies at five sites for eventual rollout nationwide. In approving the program, the Board directed the MCC to closely monitor citizen rights to freedom of expression and association in light of recent political unrest related to opposition to the president's possible bid for a third term in office and other matters. Appendix D. MCC Performance Indicators FY2018

The Millennium Challenge Corporation (MCC) provides economic assistance through a competitive selection process to developing nations that demonstrate positive performance in three areas: ruling justly, investing in people, and fostering economic freedom. Established in 2004, the MCC differs in several respects from past and current U.S. aid practices the competitive process that rewards countries for past actions measured by objective performance indicators; its mandate to seek poverty reduction through economic growth, not encumbered with multiple sector objectives; the requirement to solicit program proposals developed solely by qualifying countries with broad-based civil society involvement; the responsibility of recipient countries to implement their own MCC-funded programs, known as compacts; a compact duration limited to five years, with funding committed up front; the expectation that compact projects will have measurable impact; and an emphasis on public transparency in every aspect of agency operations. On February 12, 2018, the Trump Administration issued its FY2019 budget request, including $800 million for the MCC, a cut of $105 million (-11.6%) from FY2018-enacted levels. On March 23, 2018, the Consolidated Appropriations, 2018 (P.L. 115-141) was signed into law, providing $905 million for the MCC, the same level as in FY2017. Congress authorized the MCC in P.L. 108-199 (January 23, 2004). Since that time, the MCC has signed 33 grant agreements, known as compacts, with 29 countries, including with Madagascar (calendar year 2005), Honduras (2005), Cape Verde (2005), Nicaragua (2005), Georgia (2005), Benin (2006), Vanuatu (2006), Armenia (2006), Ghana (2006), Mali (2006), El Salvador (2006), Mozambique (2007), Lesotho (2007), Morocco (2007), Mongolia (2007), Tanzania (2008), Burkina Faso (2008), Namibia (2008), Senegal (2009), Moldova (2010), Philippines (2010), Jordan (2010), Malawi (2011), Indonesia (2011), Cape Verde II (2012), Zambia (2012), Georgia II (2013), El Salvador II (2014), Ghana II (2014), Benin II (2015), Liberia (2015), Morocco II (2015), Niger (2016), Cote D'Ivoire (2017), and Nepal (2017). MCC issues include the level of funding to support MCC programs, the results of MCC compacts, sustainability, and corruption concerns.

CRS_R44504

Introduction Under the Outer Continental Shelf Lands Act (OCSLA), as amended, the Department of the Interior (DOI) must prepare and maintain forward-looking five-year plans—referred to by DOI as "five-year programs"—that indicate proposed public oil and gas lease sales in U.S. waters over a five-year period. In preparing each program, DOI must balance national interests in energy supply and environmental protection. The lead agency within DOI responsible for the program is the Bureau of Ocean Energy Management (BOEM). BOEM's development of a five-year program typically takes place over two or three years, during which successive drafts of the program are published for review and comment. All available leasing areas are initially examined, and the selection may then be narrowed based on economic and environmental analysis to arrive at a final leasing schedule. At the end of the process, the Secretary of the Interior must submit each program to the President and to Congress for a period of at least 60 days, after which the proposal may be approved by the Secretary and may take effect with no further regulatory or legislative action. As required by the National Environmental Policy Act (NEPA), the planning process includes a programmatic environmental impact statement (PEIS). The PEIS examines the potential environmental impacts from oil and gas exploration and development and considers a reasonable range of alternatives to the proposed plan. Public comments from stakeholders, including state governors, companies, individuals, and public interest organizations, are addressed in both the PEIS and the five-year program itself. Because of the stages of review and comment required under both the OCSLA and NEPA, the Administration could not revise a finalized program—for example, to add new sales—without restarting the program development process. However, scheduled sales could potentially be canceled (but could not be added) during implementation of the program, based on requirements for environmental review that are associated with each individual sale. On November 18, 2016, BOEM released the third and final version of its oil and gas leasing program for 2017-2022. Former Secretary of the Interior Sally Jewell issued a record of decision approving the final program on January 17, 2017. The final program was revised from a March 2016 proposed program (PP) and a January 2015 draft proposed program (DPP). The final program schedules 11 lease sales on the OCS: 10 in the Gulf of Mexico region, 1 in the Alaska region, and none in the Atlantic or Pacific regions (see Table 3 ). Three sales proposed in earlier versions of the program—one in the Atlantic and two off of Alaska—were not ultimately included in the program. The leasing decisions in BOEM's five-year programs may affect the economy and environment of individual coastal states and of the nation as a whole. Accordingly, Congress has typically been actively involved in the planning process for the five-year programs. Under the OCSLA, Congress's review of BOEM's final program does not include approval or disapproval of the program. However, Members of Congress may influence the program in other ways. Members may convey their views on the Administration's proposals by submitting public comments on draft versions of the program during formal comment periods, and they may evaluate the program in committee oversight hearings. More directly, Members may introduce legislation to set or alter a program's terms. The 114 th Congress pursued all these types of influence with respect to the proposed program for 2017-2022. The first two sections of this report discuss the history and legal framework for BOEM's five-year offshore oil and gas leasing programs. Subsequent sections outline BOEM's development process, briefly summarize previous programs, and analyze the program for 2017-2022. The final section of the report discusses the role of Congress, with a focus on congressional oversight and legislation related to the 2017-2022 program. For a status report on the 2017-2022 program and discussion of issues for Congress, see CRS Report R44692, Five-Year Program for Federal Offshore Oil and Gas Leasing: Status and Issues in Brief . Historical Background13 In 1953, Congress enacted two laws that addressed jurisdiction and rights off the coasts of the United States, including rights to regulation of subsurface oil and natural gas exploration and production. The first of these acts, the Submerged Lands Act, provides that coastal states are generally entitled to an area extending 3 geographical miles from their officially recognized coasts (or baselines). The second, the OCSLA, defined the OCS as "all submerged lands lying seaward of" state coastal waters that are subject to the jurisdiction and control of the United States. The OCSLA has as its primary purpose "expeditious and orderly development [of OCS resources], subject to environmental safeguards, in a manner which is consistent with the maintenance of competition and other national needs." As offshore activities expanded in the years following adoption of the OCSLA, Congress sought a means by which to allow for expedited exploration and production in order to achieve national energy goals while also providing for environmental protection, opportunities for state and local governments affected by offshore activity to have their voices heard, and a competitive bidding and leasing process. The product was the Outer Continental Shelf Lands Act Amendments of 1978. This legislation added a number of new provisions to the OCSLA, including Section 18, which mandates the creation and maintenance of an OCS leasing program to "best meet national energy needs for the five-year period following its approval or reapproval." These five-year programs, which include schedules for lease auctions, have provided the framework for OCS oil and gas exploration and production ever since the first one was adopted by DOI in 1980. Although the 1978 amendments were the last major overhaul to the OCSLA, Congress has taken other actions since that time that have altered the scope of offshore oil and gas exploration and production. The Deep Water Royalty Relief Act of 1995 attempted to encourage exploration and production in deep water by providing relief from otherwise applicable royalty payment requirements for some deepwater oil and natural gas production. The Gulf of Mexico Energy Security Act of 2006 directed the leasing of certain regions of the Gulf of Mexico for oil and gas exploration and production and placed a moratorium on leasing in other regions. It also created a mechanism for sharing revenues from leasing in the region with Gulf states and the Land and Water Conservation Fund. Also, starting in 2008, Congress removed language from annual Interior appropriations legislation that had been in place to bar leasing and related activities in certain OCS regions. These legislative actions helped to shape subsequent five-year programs. Legal Framework25 The statutory framework governing BOEM's development of a five-year offshore oil and gas leasing program includes the OCSLA as well as other federal statutes, particularly NEPA and the Coastal Zone Management Act (CZMA). Outer Continental Shelf Lands Act Section 18 of the OCSLA provides The Secretary [of the Interior] ... shall prepare and periodically revise, and maintain an oil and gas leasing program to implement the policies of this subchapter. The leasing program shall consist of a schedule of proposed lease sales indicating, as precisely as possible, the size, timing, and location of leasing activity which he determines will best meet national energy needs for the five-year period following its approval or reapproval. Section 18 further provides that the OCS is to be managed in a manner "which considers economic, social, and environmental values" of the resources of the OCS as well as the potential impact of oil and gas exploration on the marine, coastal, and human environments. Specifically, Section 18 directs the Secretary to schedule the timing and location of oil and gas exploration and production among the regions of the OCS based on consideration of a variety of factors, including existing geographical, geological, and ecological characteristics of the regions; relative environmental and other natural resource considerations of the regions; the relative interest of oil and natural gas producers in the regions; and the laws, goals, and policies of the states that would be affected by offshore exploration and production in the region. In addition to striking this balance, leasing under the five-year program must also "be conducted to assure receipt of fair market value for the lands leased and the rights conveyed by the Federal Government." The OCSLA also requires that the five-year program include estimates on appropriations and staffing needs. The OCSLA also imposes a number of consultation requirements. During preparation of the five-year program, the Secretary of the Interior must "invite and consider suggestions for such program from any interested Federal agency, including the Attorney General, in consultation with the Federal Trade Commission, and from the Governor of any State which may become an affected State under such proposed program." In addition to these mandatory consultation requirements, the Secretary may choose to consult with local government officials in affected states. Once the Secretary has satisfied these consultation and other requirements and prepared a proposed program, that program must be submitted to the governor of each affected state for further comments at least 60 days prior to publication of the proposed program in the Federal Register . The OCSLA also authorizes the Attorney General, in coordination with the Federal Trade Commission, to submit comments regarding potential effects of the proposed program on competition. Subsequently, at least 60 days prior to its approval, the Secretary must submit the proposed program to Congress and the President, along with an explanation as to why any specific recommendation of the Attorney General or a state or local government was not accepted. Once these steps have been completed, the Secretary is free to approve a final five-year program. The OCSLA also authorizes the Secretary to revise the five-year program at any time pursuant to a mandated review, although any revision that is "significant" must go through the process for the initial five-year program described above. The responsibilities of the Secretary of the Interior with respect to the five-year program under the OCSLA are carried out by BOEM. The regulations applicable to BOEM's preparation of the five-year program include details regarding these consultation requirements. For example, BOEM is required to send letters to governors of affected states requesting that they identify specific laws, goals, and policies that they would like BOEM to consider during preparation of the five-year program. The regulations also outline requirements for publication of the proposed program in the Federal Register . Other Federal Statutes While the OCSLA and the applicable regulations guide the five-year planning process, other federal statutes also play a role in the program's formation. Two federal statutes that play a prominent role in the preparation of the five-year program are NEPA and the CZMA. National Environmental Policy Act Section 102(2)(C) of NEPA requires all federal agencies to prepare a detailed statement of the environmental impact of and alternatives to major federal actions significantly affecting the environment. In many cases the process for compliance with this requirement includes an environmental assessment (EA) that determines whether an action is a major federal action significantly affecting the environment. However, if the agency has determined that the proposed action is a major federal action without conducting an EA, then the agency moves directly to preparing the statement of the environmental impact of and alternatives to the proposed federal action, known as an environmental impact statement (EIS). This is the case with BOEM's five-year programs; the significance of the program's impact on the environment is assumed. Therefore, BOEM prepares a programmatic EIS (PEIS) concurrently with preparation of the five-year program. This process is explained in further detail throughout this report. Coastal Zone Management Act42 Under the CZMA, states are encouraged to enact coastal zone management plans to coordinate protection of habitats and resources in coastal waters. The CZMA establishes a policy of preservation alongside sustainable use and development compatible with resource protection. State coastal zone management programs that are approved by the Secretary of Commerce are eligible to receive federal monetary and technical assistance. State programs must designate conservation measures and permissible uses for land and water resources and must address various sources of water pollution. The CZMA also requires that the federal government and federally permitted activities comply with these state programs. To that end, the BOEM regulations governing the five-year program provide that "[i]n development of the leasing program, consideration shall be given to the coastal zone management program being developed or administered by an affected coastal State." The regulations require BOEM to request information concerning the relationship between a state's coastal zone management program and OCS oil and gas activity from both the governors of affected coastal states and the Secretary of Commerce prior to development of the leasing program. Five-Year Program Development Process51 BOEM's development of a five-year program typically takes place over two or three years, during which successive drafts of the program are published for review and comment. The drafts are also submitted to state governors and federal agencies and, in later stages, to Congress and the President (see discussion of consultation requirements in the " Legal Framework " section, above). Each step of the process involves additional public comment and environmental review. After the program takes effect, individual lease sales also undergo environmental review and public comment, as do companies' exploration and development plans on leased tracts. Figure 1 outlines the steps from development of the five-year program to actual oil and gas production in an individual well. Because of the analysis and review undertaken at each stage of drafting the five-year program, the successive drafts represent a winnowing process. The initial draft proposed program (DPP) examines all of the agency's available planning areas for oil and gas leasing, analyzing them according to factors in Section 18 of the OCSLA and considering public input, in order to develop an initial schedule of proposed lease sales. In the next version of the plan, the proposed program (PP), only those areas listed in the initial schedule undergo further analysis and environmental review. On the basis of this more targeted analysis, BOEM might remove proposed sales but would not add new sales. The same is true for the final version of the plan—the agency may remove proposed sales at the final stage but may not add new sales without reverting to an earlier stage of the process and undertaking new environmental reviews. The steps of the process are discussed in greater detail below. Step 1. Request for Information . BOEM initiates development of a new five-year program by publishing in the Federal Register a request for information (RFI) from interested parties concerning regional and national energy needs for the next five-year period; leasing interests of possible oil and gas producers; environmental concerns; and concerns of state and local governments, tribes, and the public, among other issues. The RFI for the 2017-2022 leasing program was published on June 16, 2014, and was followed by a comment period during which the agency received more than half a million comments. Step 2. Draft Proposed Program/Notice of Intent for PEIS . On the basis of its analysis and the public comments received in the RFI, BOEM publishes a draft proposed program (DPP) that represents the initial proposal for lease sales in the upcoming five-year period. The DPP is the first of three decision documents leading up to BOEM's eventual final program. The DPP analyzes all OCS planning areas available for leasing and identifies a preliminary list of areas proposed for lease sales over the next five years. It also contains a preliminary schedule for the proposed sales. BOEM published its DPP for 2017-2022 on January 29, 2015, with a comment period that closed on March 30, 2015. BOEM received more than 1 million comments on the DPP. When the DPP is published, BOEM also issues a notice of intent (NOI) to publish a programmatic environmental impact statement (PEIS) for the proposed lease areas and seeks public input (through a scoping process) on the issues that should be analyzed in the PEIS. The NOI for the 2017-2022 program was published on January 29, 2015, along with the DPP. Step 3. Proposed Program/Draft PEIS . After further analyzing the lease sale areas proposed in the DPP according to the required factors in Section 18 of the OCSLA, and taking into account the public comments received on the DPP, BOEM publishes a proposed program (PP) for the five-year period. This second version of the program refines the proposed locations and timing for OCS oil and gas lease sales. BOEM submits the PP to Congress, state governors, and relevant federal agencies and also solicits public comment on the program. BOEM published the PP for 2017-2022 on March 15, 2016, with a comment period that closed on June 16, 2016. The PP is accompanied by a draft PEIS analyzing the OCS areas that were identified for leasing at the DPP stage. The comment period for the 2017-2022 draft PEIS closed on May 2, 2016. Step 4. Proposed Final Program/Final PEIS . The final document published by BOEM is the PFP, which is based on additional analysis of the factors in Section 18 of the OCSLA, along with analysis of the public comments received on the PP. The PFP is announced in the Federal Register and submitted to the President and Congress for a period of at least 60 days. Although Congress does not have an approval role for the PFP, the 60-day review period could allow for legislation to be introduced that would influence the outcome of the program. BOEM published the PFP for 2017-2022 on November 18, 2016. Along with the PFP, BOEM publishes a final PEIS that concludes the analysis of the areas proposed for leasing. The final PEIS is submitted to the President and Congress along with the PFP. BOEM released the final PEIS for the 2017-2022 program on November 18, 2016. Step 5. Approval of PFP by Secretary of the Interior . At least 60 days after BOEM submits the PFP to the President and Congress, the Secretary of the Interior may approve the PFP, which then becomes final. The Secretary publishes a record of decision for the final program. Former Secretary of the Interior Sally Jewell issued a record of decision approving the final program for 2017-2022 on January 17, 2017. Five-Year Programs Submitted in Earlier Years62 Since 1980, eight distinct five-year programs and a revised version of one program have been submitted to Congress. Following the 60-day review period required by the OCSLA, each of these five-year programs has taken effect as an approved program. This section briefly discusses the previous submissions, dating back to 1980, as shown in Table 1 . The five-year programs have reflected the offshore oil and gas leasing policies of different presidential administrations, along with input from states, Members of Congress, and other stakeholders. 2012-2017 Program. The Obama Administration submitted the 2012-2017 five-year program to Congress under the direction of former Secretary of the Interior Ken Salazar. The program reflected Obama Administration policies on offshore energy development in the aftermath of the Deepwater Horizon oil spill and subsequent management reforms. The submission consisted of 15 proposed lease sales from August 2012 through August 2017, including 12 sales in the Gulf of Mexico and 3 sales in the Alaska region. Two of the three Alaska sales were later canceled. As of late November 2016, 11 lease sales had been held. 2007 - 2012 Program. The George W. Bush Administration prepared and submitted the 2007-2012 five-year program to Congress under the direction of former Secretary of the Interior Dirk Kempthorne. This submission reflected the Bush Administration's policies on domestic energy production and environmental protection. The program went into effect in July 2007 with a schedule of 21 sales. DOI subsequently revised the schedule in accordance with a 2009 court order. The Obama Administration resubmitted the program to Congress in 2010, replacing the original lease sale schedule with a schedule consisting of 16 sales, and approved the leasing program after the 60-day review period. Eleven of the 16 sales were held. This five-year program expired in June 2012. 2002 - 2007 Program. The 2002-2007 OCS oil and gas leasing plan was submitted to Congress in 2002 under former Secretary of the Interior Gale Norton. This submission was consistent with the George W. Bush Administration's policies on energy production. The proposal consisted of a schedule of 20 lease sales, 15 of which were held before the program expired in June 2007. 1997 - 2002 Program. The five-year program for the 1997-2002 period was submitted to Congress in 1996 under former Secretary of the Interior Bruce Babbitt. The submission was consistent with national energy policies established during the Clinton Administration. The submission listed 16 sales, 12 of which were held before the program expired in June 2002. 1992 - 1997 Program. The five-year program for the 1992-1997 period was presented to Congress in 1992 under former Secretary of the Interior Manuel Lujan. Planning was consistent with George H. W. Bush Administration policies on energy production. A schedule of 18 sales was submitted. Twelve sales were held before the program expired in June 1997. 1987 - 1992 Program. This five-year program was presented to Congress in 1987 under former Secretary of the Interior Donald Hodel. The program reflected Reagan Administration policies. The approved lease sale schedule contained 42 sales, 17 of which were held before the program expired in June 1992. 1982 - 1987 Program. This submission was presented to Congress in 1982 under former Secretary of the Interior James Watt. It was consistent with the Reagan Administration's national energy policies. The plan consisted of 41 sales, 23 of which were held before the program expired in June 1987. 1980 - 1982 Program. The original Section 18 submission for domestic oil and gas leasing was envisioned during the passage of the 1978 Amendments to the OCSLA and was prepared starting in October 1978. Consistent with President Carter's "Energy Message" of April 5, 1979, the program was presented to Congress in April 1980 under the direction of former Secretary of the Interior Cecil D. Andrus. The proposal took effect as an approved plan in June 1980. Under this plan, DOI proposed 36 sales, 12 of which were held. This program was succeeded by the 1982-1987 program. Lease Sales Held Prior to 1980. The domestic program for oil and gas leasing prior to 1980 encompassed almost 30 years of federal government lease sales conveying more than 3,000 tracts from October 1954 through September 1980. Five-Year Program for 2017-2022 In November 2016, BOEM released the third and final version of its offshore oil and gas leasing program for 2017-2022. The final program schedules 11 lease sales in particular regions and planning areas of the OCS. BOEM identifies four OCS regions, comprising a total of 26 planning areas (see Figure 2 and Figure 3 ). The four regions are the Gulf of Mexico region, the Alaska region, the Atlantic region, and the Pacific region. The 2017-2022 final program schedules lease sales in two of these regions (Gulf of Mexico and Alaska). The sections below discuss BOEM's decisions for each region—and the market conditions, resource estimates, and other factors affecting the proposals—in greater detail. Market Conditions Affecting the 2017-2022 Program78 U.S. offshore crude oil production accounted for 16% of U.S. total production in FY2015, a decline from FY2010, when offshore production represented 31% of U.S. total crude oil production. Offshore production volumes declined by about 12% during this period, whereas U.S. total crude production soared to near-record levels of 9.4 million barrels per day (mbd), an increase of about 73% over FY2010 levels. Offshore natural gas accounted for 4% of U.S. total production in FY2015, also a decline from FY2010, when it represented 9.5% of the total. Offshore natural gas production volumes fell by nearly 50% between FY2010 and FY2015. During the same period, U.S. total annual natural gas production rose by more than 30%, from 21.3 trillion cubic feet (Tcf) to 28.7 Tcf. The surge in total U.S. crude oil and natural gas production is the result of increased production of shale gas and shale oil in several unconventional onshore formations throughout the United States (e.g., Marcellus, Bakken, Permian Basin, and Eagle Ford). The increased U.S. oil production has helped to reduce imports, primarily from members of the Organization of Petroleum Exporting Countries (OPEC). The onshore shale oil plays have lower production costs than the deepwater plays that are currently being explored and developed offshore. As of November 1, 2016, there were 917 producing offshore oil and natural gas leases on 4.5 million acres of the OCS, out of a total of 3,431 active leases on 18.3 million offshore acres. Approximately 86% of the producing leases and 79% of the active leases were located in the Central Gulf of Mexico. In a low oil and natural gas price environment, the demand for the acquisition of new offshore leases is likely to be soft, which could impact future production levels. Overall, the Energy Information Administration (EIA) anticipates lower domestic investment in oil and gas projects over the 2015-2020 period. Estimates by the Office of Natural Resources Revenue (ONRR) of bonus bid revenues from offshore leasing in the next five fiscal years are much lower than for previous five-year periods. For example, in ONRR's FY2015 budget request, offshore bonus bid revenues were estimated at around $1 billion annually for FY2015-FY2019. In the most recent FY2017 budget request, estimated bonus bid revenues were closer to $500 million annually for FY2017-FY2021. The Office of Management and Budget's crude oil price estimates fell from $80-$90 per barrel in the FY2015 budget request to $50-$60 per barrel in the FY2017 budget request. The longer low oil prices persist, the more impact the decline will have on new investment. Nonetheless, crude oil production on federal lands, particularly offshore, likely will continue to make a significant contribution to the U.S energy supply picture. The EIA anticipates that offshore crude oil production in the Gulf of Mexico will reach record levels of 1.91 mbd in 2017, because of the potential for new deepwater oil projects to come online. BOEM stated in the 2017-2022 PP that "energy diversification, including continued oil and natural gas production in the GOM [Gulf of Mexico], the primary OCS region currently available for energy production and development activities, remains vital ... and new production from other OCS regions can also contribute to meeting the country's energy needs." Offshore Resource Estimates for the 2017-2022 Program92 Oil and gas exploration and production proceed in stages, during which increased data provide growing certainty about the volume of resources present. Prior to discovery by drilling wells, estimated volumes of oil and gas are termed undiscovered resources . When oil or gas is discovered, the volumes of that oil and gas are measured within pools or fields via well penetration or other technology, and are called reserves . Measured reserves are reported to the Securities and Exchange Commission by the owners of the wells. Reserves have been reported for U.S. OCS areas that have been developed, such as the Central and Western Gulf of Mexico and some parts of the California coast, but no reserves of oil or gas have been reported along the Atlantic OCS, because there have been no discoveries. Only modest oil reserves have been reported on the Alaska OCS. Altogether, BOEM estimates that the U.S. OCS has 4.3 billion barrels of proven oil reserves and 16 Tcf of dry gas, nearly all of which are located in the Central and Western Gulf of Mexico. According to BOEM, the U.S. OCS contains estimated undiscovered technically recoverable resources (UTRR) of 89.9 billion barrels of oil (Bbo) and 327.5 Tcf of natural gas (see Table 2 ). The Gulf of Mexico contains about 54% of the UTRR for oil and an estimated 43% of the natural gas, with the vast majority of the resources in the Central Gulf of Mexico. About 90% of Alaska's UTRR estimates for oil and 80% for natural gas are contained in the Chukchi and Beaufort Seas. In preparing its five-year programs under the OCSLA, BOEM must consider the resource potential of individual OCS regions and planning areas along with other factors, such as potential environmental and socioeconomic impacts of oil and gas leasing. Moratoria and Withdrawals Affecting the 2017-2022 Program96 Some portions of the U.S. OCS were not available for leasing consideration in the 2017-2022 five-year program because U.S. Presidents had withdrawn those areas from consideration, Congress had placed a moratorium on leasing in the areas, or the areas had a protected status that does not allow for oil and gas leasing. These unavailable areas, which BOEM did not consider for the 2017-2022 program, included the following. Areas in the Eastern and Central Gulf of Mexico. The Gulf of Mexico Energy Security Act of 2006 (GOMESA) placed a moratorium on oil and gas leasing in almost all of the Gulf's Eastern planning area and a small portion of its Central planning area through 2022. Alaska Withdrawal Areas . President Obama withdrew from disposition for leasing certain ocean areas in the Alaska region. Withdrawals that affected the 2017-2022 program for the Alaska region included those for the North Aleutian Basin planning area, the Hanna Shoal portion of the Chukchi Sea planning area, and the Barrow and Kaktovik whaling areas in the Beaufort Sea (also see below). National Marine Sanctuaries and Marine Monuments . National marine sanctuaries designated by the Secretary of Commerce, as well as national marine monuments established by U.S. Presidents, are withdrawn from future oil and gas leasing activities. Such protected areas have been designated in parts of the Atlantic Ocean, the Pacific Ocean, and the Gulf of Mexico. In December 2016, after BOEM's publication of the final program, President Obama made additional withdrawals under the OCSLA. The President withdrew much of the U.S. Arctic from leasing disposition for an indefinite time period, including the entire Chukchi Sea planning area, almost all of the Beaufort Sea planning area, and planning areas in the North Bering Sea. The President also withdrew from leasing consideration certain areas of the Atlantic Ocean associated with major canyons and canyon complexes. The President's December 2016 withdrawals did not directly affect the 2017-2022 program, because none of the withdrawn areas overlapped with areas that BOEM had scheduled for leasing in the final program. However, the withdrawals would affect the areas that can be considered for leasing for future five-year programs. Proposed Leasing Schedule by Region BOEM's "tailored leasing strategy" separately considers each of the four U.S. ocean regions with respect to the criteria for leasing set out in Section 18 of the OCSLA (see " Legal Framework ," above). For each region, BOEM weighs factors including the oil and gas resource potential of the region, existing infrastructure, other ocean uses, environmental issues, and state and local interests and concerns about offshore oil and gas development, among others. On the basis of its regional analyses, BOEM included in the final program a total of 11 lease sales, all of which take place in either the Gulf of Mexico region or the Alaska region. No lease sales are scheduled for the other two regions of the U.S. OCS, the Atlantic region and the Pacific region. An Atlantic lease sale and two Alaska lease sales proposed in earlier versions of the program were not ultimately included. Table 3 shows the oil and gas lease sales scheduled in the program. BOEM stated that, altogether, the program makes available for leasing almost half of the undiscovered technically recoverable oil and gas resources on the U.S. OCS. Gulf of Mexico Region: Ten Lease Sales The Gulf of Mexico is the most mature of the four BOEM regions, in that it contains "the most abundant proven and estimated oil and gas resources, broad industry interest, and well-developed infrastructure." The region accounts for about 97% of all U.S. offshore and gas production. Also, the Gulf states—including Louisiana, Texas, Mississippi, and Alabama—are supportive of offshore oil and gas activities. For all these reasons, the majority of the lease sales in the 2017-2022 program, as in previous programs, are scheduled in the Gulf region (10 of the 11 proposed sales). The region includes three BOEM planning areas: the Western Gulf, the Central Gulf, and the Eastern Gulf (see Figure 4 ). Almost all of the Eastern Gulf and a small portion of the Central Gulf are closed to oil and gas leasing by the congressional moratorium imposed under GOMESA (see " Moratoria and Withdrawals Affecting the 2017-2022 Program ," above). In earlier five-year programs, BOEM and its predecessor agencies scheduled separate sales in each of the three Gulf planning areas. For the 2017-2022 program, BOEM has replaced these area-specific sales with region-wide sales that offer all available lease blocks in the Gulf in each sale. BOEM stated that the change is intended "to provide greater flexibility to industry, including more frequent opportunities to bid on rejected, relinquished, or expired OCS lease blocks, as well as facilitating better planning to explore resources that may straddle the U.S.-Mexico boundary." The final program schedules fewer lease sales in the Gulf—and fewer lease sales generally—than were contained in previous five-year programs (see Table 1 ). For example, the five-year program for 2012-2017 included 12 sales in the Gulf, and the revised program for 2007-2012 also contained 12 Gulf sales. Some Members of Congress expressed concerns about the lower number of lease sales during congressional hearings on the 2017-2022 program. BOEM attributed the decrease to the consolidation of area-specific sales in the Gulf. With all available Gulf blocks offered at each sale, BOEM stated, each individual planning area is made available more times, even though the overall number of lease sales has decreased. Alaska Region: One Lease Sale Interest in exploring for offshore oil and gas in the Alaska region of the U.S. OCS has grown as the region sees decreases in the areal extent of summer polar ice, allowing for a longer drilling season. Recent estimates of substantial undiscovered oil and gas resources in Arctic waters have also contributed to the increased interest. However, the region's severe weather and perennial sea ice, and its lack of infrastructure to extract and transport offshore oil and gas, continue to pose challenges to new exploration. Among 15 BOEM planning areas in the region, the Beaufort and Chukchi Seas are the only two areas with existing federal leases, and only the Beaufort Sea has any producing wells in federal waters (from a joint federal-state unit). Stakeholders including the State of Alaska, as well as some Members of Congress, seek to expand offshore oil and gas activities in the region. Other Members of Congress as well as some environmental groups oppose offshore oil and gas drilling in the Arctic, due to concerns about potential oil spills and about the possible contributions of these activities to climate change. The Obama Administration at times expressed support for expanding offshore oil and gas exploration in the Arctic, while also pursuing safety regulations that aim to minimize the potential for oil spills. In the five-year program for the period 2012-2017, BOEM included lease sales in three planning areas of the Alaska region: the Beaufort Sea, the Chukchi Sea, and Cook Inlet. However, in October 2015 BOEM canceled its scheduled Chukchi and Beaufort Sea lease sales for 2016 and 2017, citing difficult market conditions and low industry interest. BOEM's earlier program drafts for 2017-2022 also included three Alaska lease sales—again, one each in the Beaufort Sea, Chukchi Sea, and Cook Inlet planning areas. However, for the final program, BOEM removed the sales for the Beaufort and Chukchi Seas and retained only the sale for Cook Inlet (see Figure 5 ). BOEM stated that it weighed factors that favored sales in the Beaufort and Chukchi planning areas, including the significant hydrocarbon resources in those waters and the support of the State of Alaska for the sales. Nonetheless, BOEM ultimately decided against the sales based on other factors, including "opportunities for exploration and development on [already] existing leases, the unique nature of the Arctic ecosystem, recent demonstration of constrained industry interest in undertaking the financial risks that Arctic exploration and development present, current market conditions, and sufficient existing domestic energy sources already online or newly accessible." BOEM noted in particular evidence of a declining industry interest in the Arctic OCS, in the face of low oil prices and Shell Oil Company's disappointing exploratory drilling effort in the Chukchi Sea in 2015. The agency stated that the number of active leases on the Arctic OCS declined by more than 90% between February 2016 and November 2016, as companies relinquished leases they had acquired in previous years rather than incurring the costs of continued investment. BOEM observed that, based on the U.S. energy outlook for future years, industry interest in the Beaufort and Chukchi Seas may likely to be stronger in years following the 2017-2022 period. Additionally, BOEM concluded that, because of the current overall strength of the domestic energy supply, the two Arctic lease sales were not immediately needed to satisfy U.S. energy needs. Subsequent to BOEM's publication of the final program, President Obama withdrew large portions of the Arctic OCS from future leasing consideration for an indefinite time period (see section on " Moratoria and Withdrawals Affecting the 2017-2022 Program "). The withdrawn areas do not overlap with BOEM's scheduled Alaska lease sale. Atlantic Region: No Lease Sales The final program for 2017-2022 excludes a lease sale in the Atlantic region that was proposed in the DPP version of the program. If conducted, it would have been the first offshore oil and gas lease sale in the Atlantic since 1983. The lack of oil and gas activity in the Atlantic region in the past 30 years was due in part to congressional bans on Atlantic leasing imposed in annual Interior appropriations acts from FY1983 to FY2008, along with presidential moratoria on offshore leasing in the region during those years. Starting with FY2009, Congress no longer included an Atlantic leasing moratorium in annual appropriations acts. In 2008, President George W. Bush also removed the long-standing administrative withdrawal for the region. These changes meant that lease sales could now potentially be conducted for the Atlantic. However, no Atlantic lease sale has taken place in the intervening years. As of December 2016, certain parts of the Atlantic are again under presidential moratorium (see section on " Moratoria and Withdrawals Affecting the 2017-2022 Program "), although other areas in the region would be available for leasing. For both the DPP and PP versions of the 2017-2022 program, BOEM analyzed of a variety of factors for the Atlantic region under Section 18 of the OCSLA. These factors included the region's resource potential and infrastructure needs, ecological and safety concerns, competing uses of the areas—especially by the Department of Defense and the National Aeronautics and Space Administration (NASA)—and state and local attitudes toward drilling, among others. The initial analysis for the DPP resulted in a planned lease sale in a combined portion of the Mid- and South Atlantic planning areas in 2021 (see Figure 6 ). However, after the comment period and further analysis, BOEM removed the Atlantic sale in the PP. BOEM gave several reasons for the removal, including "strong local opposition, conflicts with other ocean uses, ... current market dynamics, ... [and] careful consideration of the comments received from Governors of affected states." In particular, BOEM cited conflicts with existing uses, including ocean-dependent tourism, commercial and recreational fishing, commercial shipping and transportation, and Department of Defense and NASA uses. BOEM observed that some of these activities coexist with oil and gas activities in the Gulf of Mexico, which has a long history of offshore mineral production. By contrast, BOEM stated, because the Atlantic has little such history, the prospect of drilling has raised many concerns among those who use the ocean for competing purposes. BOEM further cited the broader U.S. energy situation as a factor in its decision not to hold an Atlantic lease sale in the 2017-2022 period. The agency observed that the increases over the past decade in onshore oil and gas production have made national energy needs less pressing. BOEM stated that "domestic oil and gas production will remain strong without the additional production from a potential lease sale in the Atlantic." Pacific Region: No Lease Sales Like other recent five-year programs, the 2017-2022 program schedules no lease sales for the Pacific region. No federal oil and gas lease sales have been held for the region since 1984, although some active leases with production remain in the Southern California planning area. Like the Atlantic region, the Pacific region was subject to congressional and presidential leasing moratoria for most of the past 30 years. Although these restrictions were lifted in FY2009, the governors of California, Oregon, and Washington continue to oppose offshore oil and gas leasing in the region. Role of Congress Congress can influence the Administration's development of a five-year program in a number of ways. Members of Congress may convey their views on the Administration's proposal by submitting public comments on a draft program during the formal comment periods, or they may evaluate the program in committee oversight hearings. More directly, Members may introduce legislation to set or alter a program's terms. Congress also has a role under the OCSLA of reviewing each five-year program once it is finalized, but the OCSLA does not require that Congress directly approve the final program in order for it to be implemented. The 114 th Congress pursued all these types of influence with respect to the proposed program for 2017-2022. The 115 th Congress could also address the 2017-2022 program—for example, through legislation to alter its terms—or could choose not to do so. Public Comment Members of Congress, along with other stakeholders such as state governors, interested agencies and organizations, and members of the public, may submit comments on draft versions of five-year programs. For the 2017-2022 program, BOEM received 15 comments from Members of Congress on its initial request for information (RFI), 12 comments from Members on the DPP, and 5 comments from Members on the PP. Some of these comments came from one or a few Members, and others had many signers (in some cases, 150 Members or more). Some comments opposed the inclusion of certain regions in the program, whereas others supported the proposed lease sales or sought an expansion of lease areas and a higher number of sales. The comments also addressed related issues such as seismic testing in the Atlantic. BOEM takes the public comments into account when developing successive drafts of a five-year program. Each draft contains an appendix summarizing the substantive comments that BOEM received on the previous version, including those from Members of Congress, and explaining BOEM's response to each. BOEM may revise the program to partially or fully adopt a suggestion, or may explain why it declined to do so. Oversight Hearings The House or Senate may hold oversight hearings to evaluate a proposed five-year oil and gas leasing program. Such hearings help to inform Members in their legislative decisionmaking concerning the program and provide an opportunity for BOEM to hear Members' views. After BOEM released the DPP for 2017-2022, the House held a hearing on the program on April 15, 2015. Members and witnesses addressed issues such as the overall number of lease sales proposed for the program, whether leasing should occur in the Atlantic and Arctic, and whether seismic surveying should occur in the Atlantic, among others. On May 19, 2016, the Senate Energy and Natural Resources Committee held a hearing on the PP version of the program. Members and witnesses discussed, among other issues, the PP's proposal for targeted rather than area-wide lease sales in Alaska and the factors that contributed to BOEM's decision to remove its earlier-proposed Atlantic lease sale from the 2017-2022 program. Legislation Through legislation, Congress may direct specific terms for an upcoming program or modify a program that is currently in effect. Legislation could, for example, remove a scheduled lease sale, add a new lease sale, or make broader changes to the program. The 114 th Congress considered legislation that would have affected the 2017-2022 program, including the following bills, none of which was enacted. H.R. 1487 and S. 791 would have required the Secretary of the Interior to use an earlier-proposed Bush Administration draft program for 2010-2015 (which was not adopted) as the final oil and gas leasing program for the years FY2015-FY2020. This earlier-proposed program would have held 31 lease sales, although H.R. 1487 and S. 791 direct that 3 of them would not be part of the FY2015-FY2020 program. The bills also would have required BOEM to conduct, within a year of enactment, a previously proposed sale in the Atlantic region that was removed from the final 2012-2017 program. The bills would have further required that BOEM conduct a lease sale at least every 270 days for any OCS planning area for which there is a commercial interest in purchasing leases. Additionally, the bills would have declared the FY2015-FY2020 program to be approved under NEPA, with no further environmental review needed. H.R. 1663 would have deemed BOEM's DPP for 2017-2022 (the initial draft released in January 2015) to be approved by the Secretary as the final program and would have added lease sales to the program. Lease sales would have been added for the Chukchi Sea, Beaufort Sea, and Bristol Bay in the Alaska region; for all previously leased areas off the coast of Virginia; and for any other OCS area estimated to contain more than 5 billion barrels of oil or 50 trillion cubic feet of natural gas. The bill also would have declared the final program to be approved under NEPA. In addition, the bill contained other offshore provisions, such as state revenue-sharing provisions. H.R. 3682 would have amended the OCSLA to provide, among other things, that BOEM five-year programs must make available for leasing at least 50% of the available unleased acreage in each OCS planning area considered to have the largest undiscovered technically recoverable oil and gas resources. It also would have provided that the programs must include any OCS planning area estimated to contain more than 2.5 billion barrels of oil or 7.5 trillion cubic feet of natural gas. In addition, the bill would have required BOEM to develop its five-year programs with the specific goal of increasing production by at least 3 million barrels of oil per day and 10 billion cubic feet of natural gas per day by 2032. The bill also would have amended the OCSLA to allow the Secretary to add additional areas to an approved leasing program under certain conditions. BOEM would have been required to finalize a leasing program for 2016-2021 that complied with these provisions. BOEM also would have been required to conduct a specific previously proposed lease sale in the Atlantic region that was removed from the final 2012-2017 program, as well as lease sales off of South Carolina and Southern California. The bill contained other offshore energy provisions as well, such as those concerning revenue sharing with the states and the organization of the DOI ocean energy agencies. H.R. 4749 would have directed the Secretary to conduct a lease sale off of North Carolina no later than two years after the bill's enactment, with subsequent lease sales in this area each year in the ensuing five-year period. The bill provided for military protections and revenue sharing with coastal states. S. 1276 and S. 2011 would have amended the OCSLA with the same requirements as in H.R. 3682 for BOEM to lease areas with the largest undiscovered technically recoverable resources, including areas with certain amounts of oil and gas, as described above. Additionally, the bills would have reduced the portion of the Eastern Gulf of Mexico that is under a congressional leasing moratorium and would have added Eastern Gulf lease sales to the 2017-2022 program. The bills also contained state revenue-sharing and other offshore energy provisions. The Senate Committee on Energy and Natural Resources held a hearing on S. 1276 on May 19, 2015, and reported S. 2011 on September 9, 2015. S. 1278 would have required BOEM to conduct lease sales in Alaska's Cook Inlet planning area and a portion of the Beaufort Sea planning area in FY2016 and each fiscal year thereafter. In addition, the bill would have required that each five-year leasing program include at least three lease sales in each of the Beaufort and Chukchi Sea planning areas. The bill also would have required BOEM to extend existing leases in the Beaufort and Chukchi Seas to cover 20 years if the holder desires, and it would have required revenue sharing with the state of Alaska. The Senate Committee on Energy and Natural Resources held a hearing on S. 1278 on May 19, 2015. S. 1279 would have required the Secretary to include the South Atlantic planning area in the 2017-2022 program and to conduct one lease sale in that area during FY2021 and two during FY2022. The bill contained provisions addressing potential conflicts with military operations in the area, consultations with state governors, and geological and geophysical surveys of resources, among other matters. The Senate Committee on Energy and Natural Resources held a hearing on S. 1279 on May 19, 2015. S. 3203 would have required the Secretary to include, in a leasing program prepared for FY2017 through FY2023, two lease sales in the Beaufort planning area, two in the Chukchi planning area, and two in the Cook Inlet planning area. The bill also would have provided for increased revenue sharing with the state of Alaska and would have made certain changes to lease terms for the Alaska region. The Senate Committee on Energy and Natural Resources held a hearing on S. 3203 on September 22, 2016. Review of Final Program Under the OCSLA, the final version of each five-year program must be submitted to Congress for a period of 60 days before the Secretary of the Interior can approve and implement the program. However, Congress does not directly approve or disapprove the program during this period. Instead, either during or outside the 60-day period, Congress could introduce legislation to alter the program. For example, in the 112 th Congress, during the 60-day review period for the current five-year leasing program (for 2012-2017), Representative Doc Hastings introduced H.R. 6082 , which would have replaced the submitted program with a congressionally developed plan containing additional lease sales, including 13 sales in the Gulf of Mexico, 7 sales in the Alaska region, 6 sales in the Atlantic, and 3 sales in the Pacific. The bill passed the House but did not become law. As discussed above, bills under consideration in the 114 th Congress would have made changes to the lease sale schedule for the 2017-2022 program. Legislation to alter the program could potentially be considered in the 115 th Congress.

The Bureau of Ocean Energy Management (BOEM), within the Department of the Interior (DOI), has prepared a five-year plan—referred to by BOEM as a "five-year program"—for offshore oil and gas leasing on the U.S. outer continental shelf (OCS) from mid-2017 through mid-2022. Currently, BOEM is implementing a previous five-year program for the 2012-2017 period. BOEM develops the leasing programs under Section 18 of the Outer Continental Shelf Lands Act, as amended (OCSLA; 43 U.S.C. §§1331-1356b). The law requires the Secretary of the Interior to prepare and maintain forward-looking plans that indicate proposed public oil and gas lease sales in U.S. waters. In doing so, the Secretary must balance national interests in energy supply and environmental protection. BOEM's development of a five-year program typically takes place over two or three years, during which successive drafts of the program are published for review and comment. All available leasing areas are initially examined, and the selection may then be narrowed based on economic and environmental analysis to arrive at a final leasing schedule. At the end of the process, the Secretary of the Interior must submit each program to the President and to Congress for a period of at least 60 days, after which the proposal may be approved by the Secretary and may take effect with no further regulatory or legislative action. BOEM also develops a programmatic environmental impact statement (PEIS) for the leasing program, as required by the National Environmental Policy Act (NEPA; 42 U.S.C. §4321). The PEIS examines the potential environmental impacts from oil and gas exploration and development and considers a reasonable range of alternatives to the proposed plan. On January 17, 2017, former Secretary of the Interior Sally Jewell issued a record of decision approving BOEM's final offshore oil and gas leasing program for 2017-2022. The final program schedules 11 OCS lease sales, including 10 in the Gulf of Mexico and 1 in the Alaska region. No sales are scheduled for the Atlantic or Pacific regions. Three sales proposed in earlier drafts of the program—one in the Atlantic and two off of Alaska—were not ultimately included in the program. An incoming Administration could not revise a finalized program—for example, to restore excluded sales or to add new sales—without restarting the program development process. Congress has typically been actively involved during the planning phases of BOEM's five-year leasing programs. For example, Members of Congress have conveyed their views on the Administration's proposals by submitting public comments on draft versions of programs during formal comment periods and have evaluated programs in committee oversight hearings. The 114th Congress exercised both of these types of influence with respect to the program for 2017-2022. Further, although Congress's role under the OCSLA does not include approval or disapproval of the program, Members may directly influence the terms of a program through legislation. Some legislation in the 114th Congress, including H.R. 1487/S. 791, H.R. 1663, H.R. 3682, H.R. 4749, S. 1276, S. 1278, S. 1279, S. 2011, and S. 3203, would have altered the 2017-2022 program by adding certain lease sales or making other programmatic changes. Other bills, including H.R. 1895, H.R. 2630, H.R. 3927, H.R. 4535, S. 1430, S. 2155, and S. 2238, would have influenced the program by prohibiting leasing in various parts of the OCS. None of these bills was enacted. The 115th Congress could introduce legislation to alter the terms of the Administration's final program for 2017-2022, or it could choose not to do so.

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Farm Bill Expiration: Timing and Effects Vary1 The farm bill is an omnibus, multi-year law that governs an array of agricultural and food programs. It provides an opportunity for policymakers to periodically address a broad range of agricultural and food issue s. The farm bill has typically undergone reauthorization about every five years. In the past, farm bills have focused primarily on farm commodity program support for a handful of staple commodities—corn, soybeans, wheat, cotton, rice, dairy, and sugar. Farm bills have become increasingly expansive in their topical scope since 1973, when a nutrition title was included. Other prominent additions include conservation, horticulture, and bioenergy programs. Recent farm bills have been subject to various developments, such as insufficient votes to pass the House floor, presidential vetoes, or—as in the case of 2008 and 2014 farm bills—short-term extensions. The 2002 farm bill was the most recent to be enacted before the fiscal year expiration date for some programs. The current farm bill (the Agricultural Act of 2014, P.L. 113-79 ) has many provisions that expire in 2018. The 115 th Congress has begun but not finished a new farm bill. An initial House vote on H.R. 2 failed by vote of 198-213, but floor procedures allowed that vote to be reconsidered, and it passed by a second vote of 213-211. The Senate passed its bill as an amendment to H.R. 2 by a vote of 86-11. Conference proceedings officially began on September 5, 2018, but have not reached agreement. Timing of Expiration The timing and consequences of expiration vary by program across the breadth of the farm bill. There are two principal expiration dates: September 30 and December 31. The 2014 farm bill generally expires either at the end of FY2018 (September 30, 2018), or at the end of the 2018 crop year. Crop years vary by commodity, but the first to be affected by a new crop year is dairy, which has a 2018 crop year that ends on December 31, 2018. Expiration by Fiscal Year Expiration of a farm bill on September 30 matters for programs with fiscal year authorizations. These programs include certain nutrition, conservation, trade, and agricultural support programs (excluding the Title I commodity programs), along with many authorizations for discretionary appropriations. Although the Supplemental Nutrition Assistance Program (SNAP) has an authorization of appropriations ending on September 30, it (and other related programs in the SNAP account) can continue to operate with an appropriation. Expiration by Crop Year Farm commodity programs expire on a crop year. A crop year is the year in which crops are harvested and may extend into a new calendar year. In the case of dairy, the crop year is the calendar year. Following the expiration of the current farm law without replacement legislation or an extension, the first farm commodity program to be affected would be dairy, whose new crop year begins on January 1, 2019. Consequences of Expiration The possible consequences of expiration include minimal disruption (if the program is able to be continued via appropriations), ceasing new activity (if its authorization to use mandatory funding expires), or reverting to permanent laws enacted decades ago (for the farm commodity programs). For example An appropriations act or a continuing resolution can continue some farm bill programs even though a n authority has expired. Programs using discretionary funding—and programs using appropriated mandatory funding such as those in the SNAP account—can continue to operate via appropriations action. Most farm bill programs with mandatory funding generally cease new operations when they expire (e.g., the Conservation Reserve Program (CRP), and Market Assistance Program (MAP)). However, existing contracts under prior-year authority could generally continue to be paid. Exceptions include SNAP and programs in the SNAP account (as discussed above), the farm commodity programs, and crop insurance (as discussed below). The mandatory farm commodity programs would begin reverting to permanent law beginning with the 2019 crop year , for which dairy is the first to be affected, beginning on January 1, 2019. However, payments for the 2018 crop year would continue to be authorized from the 2014 farm bill, including final payments for corn and soybeans that would be made as late as October 2019 after the 2018 crop's marketing year. Crop insurance is an example of a program with mandatory funding that is permanently authorized outside of the farm bill and does not expire. 9 Funding Sources Affect Consequences of Expiration The funding source that is authorized matters, since some programs use discretionary appropriations and some are mandatory spending. These differences affect how the farm bill is constructed under normal circumstances. They also affect what happens when the farm bill expires or if there is an extension. Farm bill programs are generally funded in two ways: 1. Discretionary authorizations. A farm bill sets the parameters for programs and authorizes them to receive funding in subsequent appropriations, but does not provide or assure actual funding. Budget enforcement is through future appropriations acts and budget resolutions. 2. Mandatory spending. A farm bill authorizes outlays and pays for them with multiyear budget estimates when the farm bill is enacted. Budget enforcement is through "PayGo" budget rules, baseline projections, and scores of the effect of proposed bills. The baseline is a projection of future federal spending on mandatory programs under current law. It is a benchmark against which proposed changes in law are measured (i.e., the score of a bill). Discretionary Funding Discretionary spending is authorized throughout the farm bill. Discretionary programs include most rural development, credit, and research programs, and some conservation and nutrition programs. Some smaller research, bioenergy, and rural development programs are authorized to receive both mandatory and discretionary funding. Most agency operations are financed with discretionary funds. SNAP—a mandatory program—also requires an appropriation and can be continued in expiration situation via appropriations action. Without a new farm bill or extension, many programs may not appear to have statutory authority to receive appropriations (an "authorization of appropriations"). However, appropriations law allows the continued operation of a program where only appropriations action has occurred. The Government Accountability Office (GAO) says there is no constitutional or statutory requirement for an appropriation to have a prior authorization. Congress distinguishes between authorizations and appropriations, but this is a congressional construct. GAO says that "the existence of a statute imposing substantive functions upon an agency that require funding for their performance is itself sufficient legal authorization for the necessary appropriations." For expired authorizations, GAO says that "appropriation of funds for a program whose funding authorization has expired ... provides sufficient legal basis to continue the program." Mandatory Funding Programs that rely on mandatory funding are perhaps the most at risk for interruption if the farm bill expires. Most farm bill programs with mandatory funding have an expiration date either on their program authority or their funding authority. These include farm commodity programs, some conservation programs, agricultural trade programs, and international food aid programs. For the most part, without reauthorization or an extension, these programs would cease to operate or undertake new activities in an expiration. Exceptions are noted above. Among the mandatory-funded programs that are usually the focus of the farm bill, there are two subcategories that may affect congressional action—some have baseline beyond FY2018 and some do not have baseline after FY2018. In an expiration, both categories of mandatory programs face similar disruption when their authorizations expire. But the difference in having or not having a baseline is important as Congress writes a farm bill or if Congress considers an extension to deal with an expiration. For example, when Congress enacted a one-year extension of the 2008 farm bill for 2013, the extension act was budget-neutral. The major programs that had baseline were extended at no additional budgetary cost. However, the subset of programs without baseline did not continue in the 2013 extension because they would have needed budgetary offsets to provide continuing funding and not increase the deficit. Providing funding for those programs without baseline would have made the extension more difficult. Historical Examples of Expiration The current, partial expiration of the 2014 farm bill has precedent in the two most recent farm bills—the 2002 and 2008 farm bills. As the 2014 farm bill was being developed, there were two periods of expiration of the 2008 farm bill. The first was from October 1, 2012, through January 1, 2013, and the second dated from October 1, 2013, through February 6, 2014. Some programs ceased new operations, while others were able to continue. However, neither expiration lasted long enough for the farm commodity programs to revert to a "permanent law" that would have raised support prices and increased federal outlays. On the first occasion, the 2008 farm bill was extended for one year; all provisions that were in effect on September 30, 2012, were extended through FY2013 or for the 2013 crop year as applicable. Programs without baseline did not continue in FY2013 because no additional mandatory funding was provided in the extension. On the second occasion, no extension was enacted since a conference agreement was expected. The Agricultural Act of 2014 (2014 farm bill; P.L. 113-79 ) was enacted on February 7, 2014, to cover the 2014-2018 crop years and other programs through September 30, 2018. As the 2008 farm bill was being developed, the 2002 farm bill expired and portions of it were extended six times for less than a year in total. The first of those extensions continued authority for many expiring programs for about three months. Because final agreement was pending, five more extensions each covered a week to a month. With a few exceptions, these extensions continued the 2002 farm bill provisions—including the dairy and sugar programs, but not the direct, counter-cyclical, and marketing loan programs for the other supported commodities. Programs without baseline did not continue during the first part of the fiscal year because no additional mandatory funding was provided in the short term extensions. Farm Commodity Support Programs The last year for the 2014 farm bill's commodity programs is the 2018 crop year—that is, crops harvested during 2018 and marketed during the twelve months following harvest. The dairy margin protection program is the first such program that would expire, on December 31, 2018. The farm commodity income support programs raise farm income by making payments and reducing financial risks from uncertain weather and market conditions. Government-set reference prices offer payments when market prices fall below support levels. These programs collectively are known as "Title I" programs, based on where they have been placed in recent farm bills. Possible Reversion to Permanent Law Farm commodity support policy has evolved since the first farm bill in 1933 via successive farm bills that update and supersede prior policies. However, a set of nonexpiring provisions remain in statute and are known as "permanent law." These provisions were enacted primarily in the Agriculture Adjustment Act of 1938 and the Agricultural Act of 1949, as amended by subsequent farm bills. As more modern farm bills moved away from using the permanent law provisions, they have suspended permanent law, but only for the duration of each farm bill. If the suspension of permanent law were to expire, the commodity programs authorized by permanent law could be reactivated. The first commodity to be affected by the expiration of the 2014 farm bill would be dairy, which has a 2018 crop year that ends on December 31, 2018. Some see the existence of permanent law—and the policy and budget consequences that could result—as an assurance that the farm commodity programs will be revisited every time a farm bill expires. In general, recent farm bills have retained permanent law and continued to suspend it, though some bills over the past three decades have proposed to repeal it (see Table 1 ). Description of Permanent Law The commodity support provisions of the 1938 and 1949 permanent laws are commonly viewed as being so fundamentally different from current policy and potentially costly to the federal government—and inconsistent with today's farming practices, marketing system, and international trade agreements—that Congress is unlikely to let permanent law take effect. Permanent law provides mandatory support for basic crops through nonrecourse loans. It does not authorize more modern support approaches such as loan deficiency payments, payments based on prices or revenue but not to actual production (decoupled), or dairy margin protection. Government Costs under Permanent Law Official budget estimates of reverting to permanent law have been rare. In 1979, the Congressional Budget Office studied the effect on dairy policy. In 1985, USDA analyzed more comprehensively the possible economic consequences of permanent law. It found that significant market intervention and increased government expenditures could occur. In 2013, the White House indicated that permanent law for dairy could cost $12 billion per year and result in milk prices doubling. This was consistent with an extrapolation of the 1985 USDA report by substituting modern prices and production levels, which estimated outlays between $10 billion and $12.5 billion per year for dairy. At that time, projected outlays for dairy in the 2008 farm bill were about $100 million per year. Implementing Permanent Law If the suspension of permanent law expires, USDA would be required to implement the permanent law statutes. When the farm bill faced expiration in 2012, USDA outlined how it would implement permanent law. To achieve implementation, however, USDA might need to write new regulations, which could take additional time. In 2013, USDA indicated that it could take at least a month to implement permanent law. The market effects of implementing permanent law may be more gradual and the effect could take weeks or months. Implementation of permanent law is based on crop years and tied to the harvest and marketing of a crop (effectively, the marketing year for the corresponding crop year), and thus would be separated from a single, fixed expiration date. For example, the 2014 farm bill covers farm production through the 2018 crop year—including 2014 farm bill payments that might occur after the 2018 crop's marketing year ends in October 2019 for corn and soybeans. The 2019 crop year would be the first year potentially covered by permanent law, and the first commodity to be affected would be dairy (on January 1, 2019), followed by wheat, barley, and oats, whose marketing year starts in June 2019. Parity Price Support Levels and Production Controls Price support under permanent law uses the concept of "parity prices." Parity refers to the relationship between prices that farmers receive for their products and prices they pay for inputs. Permanent law determines parity using the period of 1910-1914 as a benchmark. Support prices would be set to guarantee producers between 50% to 90% of the parity price, based on the commodity. Under permanent law, nonrecourse loan rates for wheat, rice, cotton, corn, and other feed grains function as farm price supports. A nonrecourse loan allows the producer to forfeit the crop to the government and keep the principal amount if market prices are below the loan rate. Unless commercial markets pay more than the nonrecourse loan prices, farmers could put their crops under loan and forfeit the commodities to USDA when the nine-month loans mature. However, to avoid forfeiture problems, USDA has permanent authority allowing farmers to repay nonrecourse loans for less than the principal (loan rate) plus interest, similar to marketing loans in the modern commodity program. Productivity gains and technological advances over the past 100 years have made ratios of parity prices out of touch with—and possibly irrelevant to—modern farming practices. Additional production controls exist for wheat and cotton. Permanent law would require USDA to announce acreage allotments and marketing quotas during the prior crop year, and to hold producer referenda on implementing marketing quotas. A two-thirds affirmative vote for marketing quotas results in the highest levels of support, with mandatory restrictions on acreage (and the quantity eligible for support). Even if support levels were set at the lower end of the range in permanent law (e.g., 50%-75% of parity prices), permanent law supports would be above 2018 market prices for all supported commodities and result in greater federal outlays than under the 2008 farm bill ( Figure 1 , Table 1 ). For example, in July 2018, the national average "all milk" farm price received was $15.40 per hundredweight (cwt.). This is less than half the permanent law support price ($39.08/cwt. at a minimum support level of 75% of parity; Table 1 ). USDA would be compelled to purchase manufactured dairy products in sufficient quantities to raise demand in order to raise the farm price of milk. By contrast, the 2014 farm bill's dairy margin protection program has generally not been making many payments at current prices and margins. Moreover, as implied by the list of commodities in Table 1 , not all commodities that are part of the 2014 farm bill would receive federal support under permanent law. The commodities that would lose mandatory support include soybeans and other oilseeds, peanuts, wool, mohair, sugar beets and sugar cane, dry peas, lentils, and small and large chickpeas. Parity-based supports once existed for wool, mohair, and peanuts, but were repealed. Parity support is not allowed for oilseeds or sugar. A different set of commodities could receive support under discretionary authority given to the Secretary of Agriculture in the Agricultural Act of 1949 and the Commodity Credit Corporation Charter Act. But for budgetary and other reasons, such discretionary authority has rarely been used. Crop Insurance The federal crop insurance program protects producers against losses in crop revenue or yield through federally subsidized policies that are purchased by producers. The program is permanently authorized by the Federal Crop Insurance Act, as amended (7 U.S.C. 1501 et seq.). A reauthorization of the program is not needed in the farm bill. Producers who grow a crop that is ineligible for crop insurance may be eligible for a direct payment under USDA's Noninsured Crop Disaster Assistance Program (NAP). Like crop insurance, NAP has permanent authority under Section 196 of the Federal Agriculture Improvement and Reform Act of 1996 (7 U.S.C. 7333). Conservation Programs USDA administers close to 20 agricultural conservation programs that are directly or indirectly available to assist producers and landowners who wish to practice conservation on agricultural lands. These programs address natural resource concerns on private agricultural and forested lands through technical and financial assistance. Many conservation programs have different expiration dates for program and funding authority. Therefore, they may be affected differently by expiration or extension of the 2014 farm bill. Table 2 separates the conservation programs by type of funding authority—mandatory and discretionary. For many conservation programs, program authority is permanent under the Food Security Act of 1985, as amended, but the authority to receive mandatory funding expires. An extension of the 2014 farm bill would allow programs with expired mandatory funding authority to continue, if the program has baseline beyond FY2018. For example, the Conservation Reserve Program's (CRP's) funding and program authority expired at the end of FY2018. Because CRP has baseline beyond FY2018, an extension would allow the program to continue for a period of time at the authorized rate of enrollment—up to 24 million acres at any one time. Without reauthorization or a further extension of mandatory funding and program authority, CRP is unable to sign new contracts or enroll additional acres after September 30, 2018. All existing contracts and agreements stay in force for the contract period, and payments continue to be made. Some mandatory conservation programs have no baseline beyond FY2018 and therefore would require offsets from other funding in order to continue (e.g., Voluntary Public Access and Habitat Incentives Program and Wetlands Mitigation Banking). In some cases, provisions within a program do not have baseline, while the parent program does (e.g., Transition Incentives Program within CRP). In these cases, the individual provisions would require offset funding in order to continue. One mandatory conservation program—the Environmental Quality Incentives Program (EQIP)—was extended in the Bipartisan Budget Act of 2018 ( P.L. 115-123 ) to September 30, 2019. While EQIP has funding authority through the end of FY2019, select program provisions expired September 30, 2018 (see text box below). Several conservation programs also have permanent program authority, but are authorized to receive discretionary appropriations only through FY2018. Funding for these programs varies and is based on appropriated levels. Similar to other discretionary programs with expired authority, the program can continue as long as it receives appropriated funding. SNAP and the Other Nutrition Programs As discussed earlier, expiration and extension of SNAP (and most of the related nutrition programs in the farm bill) particularly hinge on whether funding is provided in an explicit extension or in an appropriations act, including a continuing appropriations act (commonly referred to as a continuing resolution or CR). In the case of the 2014 farm bill, certain provisions of law include a September 30, 2018, expiration date; these are primarily authorizations of appropriations but some are program authorizations. The impact on operations is based on factors related to programs' authorizing statutes, appropriations actions, and the terms of a farm bill extension (if applicable). The 2014 farm bill reauthorized a number of domestic food assistance programs, including SNAP (formerly food stamps), the Emergency Food Assistance Program (TEFAP), the Commodity Supplemental Food Program (CSFP), the Food Distribution Program on Indian Reservations (FDPIR), the Senior Farmers' Market Nutrition Program, the Bill Emerson Hunger Fellowship Program, Community Food Projects, and nutrition assistance block grants for American Samoa and Puerto Rico. The law also created a new program, the Food Insecurity Nutrition Incentive (FINI) grants. With regard to expiration or extension, these programs fall into one of three categories: 1. Programs that are permanently authorized and funded, 2. Programs that can be continued by the enactment of further funding, or 3. Programs or authorities which would expire unless extended by statute or explicit appropriations for such purposes. These categories are elaborated upon below. The majority of farm bill nutrition programs (and the majority of nutrition spending) falls into the second category. Permanently Authorized and Funded Programs The 2008 farm bill included an expansion of the Fresh Fruit and Vegetable Program (FFVP, "snack" program), and provided permanent funding through Section 32. FFVP's operations were not impacted by periods of expiration after the 2008 farm bill and would not be affected by expiration after September 30, 2018. Programs Continued by the Enactment of Further Funding46 Appropriations can allow a program to continue even if the underlying authorization or authorization of appropriations has not been extended. Because many of the nutrition programs are funded by the SNAP account, appropriated funds for this account would allow continued operations for most of the programs in the Food and Nutrition Act of 2008 (most recently amended by the 2014 farm bill). After September 30, 2018, the farm bill programs listed below could continue to operate if funding for the SNAP account is provided in appropriations acts, including continuing appropriations SNAP and related grant programs; Purchase and distribution of TEFAP commodities (administrative funds could continue with appropriations in the Commodity Assistance Program account); FDPIR; Nutrition assistance funding for Puerto Rico, American Samoa, and Commonwealth of Northern Mariana Islands; and Community Food Projects (administered by the National Institute of Food and Agriculture). For CSFP, in the Commodity Assistance Program account, the authority to make commodity purchases and fund administrative costs can continue with funding. During the periods of expiration before enactment of the 2014 farm bill, for example, when funding was provided, these programs continued to operate. In addition, during a partial government shutdown in October 2013, there was a period where some Commodity Assistance Program account operations were affected, but SNAP continued (discussed in text box below). Programs that Would Require Extension or Specific Appropriations Language Two farm bill provisions contain both the authorization of the program and the mandatory funding for the operation of the program. These programs, to continue operations, would require either (a) an extension of the authority and mandatory funding or (b) specific (or explicit) reference in appropriations acts. The Senior Farmers' Market Nutrition Program 's (SFMNP's) authorizing law (most recently amended by the 2014 farm bill) contains both the program's authority and mandatory funding (a transfer from the Commodity Credit Corporation). Therefore, operations may be affected after September 30, 2018, without an extension or specific additional funding provided. In parts of FY2013 and parts of 2014, expiration temporarily affected program operations. The 2014 farm bill created the Food Insecurity Nutrition Incentive (FINI) grant program. The 2014 farm bill provided mandatory funding (a transfer from the Commodity Credit Corporation) for FINI to operate from FY2014 through FY2018. Without enactment of an extension of such provisions or specific reference in appropriations acts, a sixth year of FINI grants (FY2019) would not be available. A third 2014 farm bill authority, SNAP Employment & Training (E&T) Pilot Projects , expired after September 30, 2018. USDA obligated the mandatory funding by the law's September 30, 2018, deadline, so even in a period of farm bill expiration, pilot project operations continue through the states' grant project periods. However, after September 30, 2018, without extension or specific appropriation, USDA does not have authority to award additional SNAP E&T pilot grants. Trade and Foreign Food Aid Programs Agricultural trade programs with mandatory funding that are affected by fiscal year expiration include export credit guarantees, facilities credit guarantees, export market promotion (the Market Access Program and the Foreign Market Development Program), and technical assistance for specialty crops. Without new mandatory program authority, the Commodity Credit Corporation would not be able to undertake new activities in these programs. Several international emergency and nonemergency food assistance programs are authorized in the farm bill to receive annual appropriations and have 2018 fiscal year expiration dates. The Food for Peace Title II, Farmer-to-Farmer, and McGovern Dole International Food for Education and Child Nutrition programs rely on discretionary funding. Therefore, these programs can continue to operate after a farm bill expires as long as the programs receive funding in annual appropriations bills. In contrast, the Bill Emerson Humanitarian Trust and the Food for Progress program rely on mandatory funding; therefore they cannot be reauthorized and continued through an annual appropriation. Their authorization to operate expires without a new or extended farm bill. Appendix. Legislative Options Under Permanent Law Some see the existence of permanent law as an assurance for farm bill supporters that the farm commodity programs will be revisited every time a farm bill expires. Given the problematic consequences of permanent law, Congress is not likely to let a farm bill remain expired without taking some action eventually. Permanent law, however badly it may be widely perceived, has remained in statute, and each recent farm bill has suspended it for the duration of the farm bill. Several legislative options relative to permanent law exist as a farm bill approaches expiration: 1. Retain permanent law, and then do one of the following: Do nothing (revert to permanent law) Pass an extension (with its suspension of permanent law) Pass a new farm bill (and reinstate the suspension of permanent law) Suspend permanent law (without a new farm bill or extension) 2. Repeal permanent law, and then do one of the following: Do nothing (no new farm bill) Pass an extension of the current farm bill Pass a new farm bill (with or without a new permanent law provision). The existence of an outdated permanent law likely encourages Congress to take action, because, to most people, inaction is perceived to have unacceptable consequences. If Congress cannot reach agreement on a new farm bill, then a path of least resistance may be extending the current farm bill with its suspension of permanent law—but this, too, requires legislative action, which may pose political and budgetary challenges. For those who oppose the farm commodity programs, repealing permanent law would allow Congress to debate farm supports without the looming consequences of reverting to permanent law. But repealing permanent law also requires legislative action. Some believe that it is easier to negotiate and pass a new farm bill, with compromises and reforms, than to deal with the question of repealing permanent law. Suspension of Permanent Law Throughout the 1950s and 1960s, farm bills generally used and amended the 1938 and/or 1949 acts. Amendments were sometimes made permanent and sometimes applied only to specific years. As farm commodity policy continued to evolve, farm bills in the 1970s gradually began to move away from using the permanent law provisions with their parity-based price supports and quotas. As recently as the 1970 and 1973 farm bills, the farm commodity programs were generally written into the 1938 and/or 1949 farm bills, as a form of suspension, with provisions that were applicable only for the new period of the farm bill. Thus, while those farm bills might not have directly suspended permanent law in the same way as more modern farm bills, they nonetheless supplanted some portion of the permanent law parity-based support system for the life of the farm bill, albeit from within the body of the permanent law itself. Beginning with the 1977 farm bill and continuing through the 2014 farm bill, direct suspension or nonapplicability language began to be used regarding the permanent laws. The current statute that suspends permanent law is the following: Suspension of Permanent Price Support Authority (7 USC 9092; P.L. 113-79 , Sec. 1602) (a) Agricultural Adjustment Act of 1938. The following provisions of the Agricultural Adjustment Act of 1938 shall not be applicable to the 2014 through 2018 crops of covered commodities (as defined in section 1111), cotton, and sugar and shall not be applicable to milk during the period beginning on the date of enactment of this Act through December 31, 2018: (1) Parts II through V of subtitle B of title III (7 U.S.C. 1326 et seq.). (2) In the case of upland cotton, section 377 (7 U.S.C. 1377). 3) Subtitle D of title III (7 U.S.C. 1379a et seq.). (4) Title IV (7 U.S.C. 1401 et seq.). (b) Agricultural Act of 1949. The following provisions of the Agricultural Act of 1949 shall not be applicable to the 2014 through 2018 crops of covered commodities (as defined in section 1111), cotton, and sugar and shall not be applicable to milk during the period beginning on the date of enactment of this Act and through December 31, 2018: (1) Section 101 (7 U.S.C. 1441); (2) Section 103(a) (7 U.S.C. 1444(a)); (3) Section 105 (7 U.S.C. 1444b); (4) Section 107 (7 U.S.C. 1445a); (5) Section 110 (7 U.S.C. 1445e); (6) Section 112 (7 U.S.C. 1445g); (7) Section 115 (7 U.S.C. 1445k); (8) Section 201 (7 U.S.C. 1446); (9) Title III (7 U.S.C. 1447 et seq.); (10) Title IV (7 U.S.C. 1421 et seq.), other than sections 404, 412, and 416 (7 U.S.C. 1424, 1429, and 1431); (11) Title V (7 U.S.C. 1461 et seq.); and (12) Title VI (7 U.S.C. 1471 et seq.). (c) Suspension of Certain Quota Provisions. The joint resolution, "A joint resolution relating to corn and wheat marketing quotas under the Agricultural Adjustment Act of 1938, as amended," approved May 26, 1941 (7 U.S.C. 1330 and 1340), shall not be applicable to the crops of wheat planted for harvest in the calendar years 2014-2018. Proposals to Repeal Permanent Law Proposals to repeal permanent law have been somewhat rare, though some have advanced as far as passing either chamber. For example, a proposal to repeal permanent law advanced perhaps the farthest during the development of the 1996 farm bill. Repeal provisions may have had more saliency then because of a perceived intent that the "Freedom to Farm" plan was to end in 2002 at the end of the farm bill. The existence of permanent law could have been an obstacle. Whether or not repeal was a condition of the plan during its development, repeal was dropped in favor of continued suspension during conference negotiations in 1996. More specifically regarding the 1995-1996 developments, the initial bill considered by the House Agriculture Committee in 1995 would have continued to suspend permanent law ( H.R. 2195 , Title IV). After not passing in committee, the text of that bill, including the suspension provision, was incorporated into a broader House-passed budget reconciliation package ( H.R. 2491 , §1105). However, the Senate-passed version of the 1995 reconciliation package included a provision to repeal permanent law ( S. 1357 , §1101). The conference agreement for the reconciliation package adopted the Senate approach for repeal ( H.R. 2491 , §1109). The conference agreement passed both the House and Senate, but was vetoed, albeit not because of the farm bill provisions. The next year, a stand-alone 1996 farm bill was introduced and passed in the House with the provision to repeal permanent law ( H.R. 2854 , §109). The repeal provision was also in the Senate-reported bill ( S. 1541 , §19). However, the Senate-passed version ( S. 1541 , §109) did not repeal permanent law but continued to suspend permanent law. The conference agreement for the 1996 farm bill ( H.R. 2854 , §171) followed the Senate-passed version and continued the suspension of permanent law. Other bills besides the farm bill from 1995 to 2001 proposed repealing permanent law, but were not formally considered. In 1995, several bills were introduced to restructure government agencies. A bill was introduced to abolish USDA, eliminate all price support authorities including those of permanent law, and transfer certain powers to the Department of Commerce ( H.R. 1354 , S. 586 ). A broader government-wide restructuring bill would have repealed permanent law ( H.R. 1923 ). A separate agricultural reform bill would have phased down agricultural supports and eventually repealed permanent law ( H.R. 2010 ). Two other bills to repeal permanent law were introduced in 1995 ( H.R. 2523 and H.R. 2787 ). In 1997-1998, H.R. 502 and S. 2573 would have repealed permanent law. Other bills to repeal permanent law were H.R. 328 in 1999 and S. 1571 in 2001. None of these bills advanced beyond being introduced and referred to committee. Other bills in various Congresses have been introduced with targeted repeal provisions for certain commodities, but not comprehensive repeal. These bills are not discussed here. In the 112 th Congress during consideration of the 2012 farm bill, a Senate amendment was submitted, but not actually introduced on the floor, to replace the suspension of permanent law with the repeal of those provisions (S.Amdt. 2379 to S. 3420 ). In 2013, the House-passed farm bill ( H.R. 2642 ) would have repealed the 1938 and 1949 permanent laws (§1602). In their place, the House-proposed farm commodity program would have become the permanent law since it would have applied to "the 2014 crop year and each succeeding crop year" (§§1107, 1202, 1204, 1205, 1206, 1301). The Senate bill ( S. 954 ) continued the long-standing suspension of permanent law, as did the initial House-rejected bill ( H.R. 1947 ). The enacted 2014 farm bill continues to suspend permanent law.

The farm bill is an omnibus, multi-year law that governs an array of agricultural and food programs. It provides an opportunity for policymakers to periodically address a broad range of agricultural and food issues. The farm bill is typically reauthorized about every five years. Recent farm bills have been subject to various developments, such as insufficient votes to pass the House floor, presidential vetoes, or—as in the case of 2008 and 2014 farm bills—short-term extensions. The current farm bill (the Agricultural Act of 2014, P.L. 113-79) has many provisions that expire in 2018. The 115th Congress has begun but not finished a new farm bill. An initial House vote on H.R. 2 failed by vote of 198-213, but floor procedures allowed that vote to be reconsidered, and it passed by a second vote of 213-211. The Senate passed its bill as an amendment to H.R. 2 by a vote of 86-11. Conference proceedings officially began on September 5, 2018, but have not yet reached agreement. The timing and consequences of expiration vary by program across the breadth of the farm bill. There are two principal expiration dates: September 30 and December 31. The 2014 farm bill generally expires either at the end of FY2018 (September 30, 2018), or with the 2018 crop year. Crop years vary by commodity, but the first to be affected by a new crop year is dairy, whose 2018 crop year ends on December 31, 2018. The possible consequences of expiration include minimal disruption (if the program is able to be continued via appropriations), ceasing new activity (if its authorization to use mandatory funding expires), or reverting to permanent laws enacted decades ago (for the farm commodity programs). For example An appropriations act or a continuing resolution can continue some farm bill programs even though an authority has expired. Programs using discretionary funding—and programs using appropriated mandatory funding like those in the SNAP account—can continue to operate via appropriations action. Most farm bill programs with mandatory funding (except the Supplemental Nutrition Assistance Program (SNAP), the farm commodity programs, and crop insurance) generally cease new operations when they expire (e.g., the Conservation Reserve Program (CRP), and Market Assistance Program (MAP)). The mandatory farm commodity programs would begin reverting to permanent law beginning with the 2019 crop year, for which dairy is the first to be affected, beginning on January 1, 2019. Crop insurance is an example of a program with mandatory funding that is permanently authorized outside of the farm bill and does not expire. "Permanent law" refers to nonexpiring farm commodity programs that are generally from the 1938 and 1949 farm bills. A temporary suspension of permanent law has been included in all recent farm bills, but reverting to permanent law would occur if the suspension expires. The commodity support provisions of permanent law are commonly viewed as being fundamentally different from current policy—and inconsistent with today's farming practices, marketing system, and international trade agreements—as well as potentially costly to the federal government. Among the mandatory-funded programs that are usually the focus of the farm bill, there are two subcategories that may affect congressional action—some have baseline beyond FY2018 and some do not have baseline after FY2018. In an expiration, both categories of mandatory programs can face similar disruption when their authorizations expire. But the difference in having or not having a baseline is important if Congress considers an extension to deal with an expiration. Providing funding for those programs without baseline could make extension more difficult if budget offsets are needed to keep an extension budget-neutral.

CRS_R42529

Background The North Atlantic Treaty Organization (NATO) has been the cornerstone for transatlantic security and defense cooperation since its founding in 1949. As NATO continues to evolve to confront emerging regional and global security challenges, the 112 th Congress could play an important role in determining the future direction of the alliance and U.S. policy toward it. This includes addressing key issues that are expected to be discussed at NATO's upcoming summit in Chicago. Issues of importance to Congress could include ongoing NATO operations in Afghanistan, off the Horn of Africa, and in the Balkans; the development of allied military capabilities and a NATO territorial missile defense system; NATO's nuclear force posture; NATO's relations with non-NATO members; and implementation of NATO's 2010 Strategic Concept. Since the last NATO summit in Lisbon, Portugal, in November 2010, the alliance has recorded some important achievements and faced considerable challenges in pursuit of its agreed strategic goals. In Lisbon, the allies adopted a new Strategic Concept in an effort to clarify NATO's role in the 21 st century security environment. The new NATO blueprint outlined three core tasks: collective defense; crisis management; and cooperative security. On the issue of collective defense, the allies have committed to maintaining an appropriate mix of nuclear and conventional forces to defend alliance territory and to developing a ballistic missile defense capability based largely on the U.S. European Phased Adaptive Approach (EPAA, discussed in more detail below). Some issues remain divisive, however. For example, some allies continue to question the utility of U.S. non-strategic nuclear weapons deployed in Europe, while others have argued that a continued focus on large-scale "out-of-area" operations and unconventional security threats could compromise the alliance's ability to defend the territory of NATO member states. With respect to crisis management, ongoing operations in Afghanistan and the Balkans as well as the alliance's 2011 operation in Libya demonstrated NATO's capacity to respond simultaneously to multiple security crises. At the same time, each of the missions also exposed significant shortfalls in allied military capabilities. Calls from some allies for an accelerated transition away from combat operations in Afghanistan and the fact that no more than 14 of 28 allies participated in the Libya operation have also prompted many observers to question alliance solidarity and to express doubts about the appetite for future "out-of-area" operations, particularly on the scale of the Afghan mission. On the issue of cooperative security, NATO has sought to enhance its relations with non-NATO member states and other multilateral institutions to allow for stronger regional political and military cooperation and increased partner participation in alliance operations. However, NATO's relations with some key partners, including Russia, continue to be marked by disagreement and deadlock. The global economic downturn and ongoing European debt crisis and the budgetary constraints facing many allied governments on both sides of the Atlantic may pose one of the biggest challenges to alliance capabilities and solidarity. Most European allies have enacted far-reaching budget cuts, including to what had already been declining national defense budgets in most cases. Some observers worry that alliance members will be unable or unwilling to contribute and develop the military capabilities necessary to meet allied security objectives and that this, in turn, could lead to a diminished ability to meet NATO's collective security goals. Others argue that current fiscal constraints only heighten the importance of pooling scarcer resources at the alliance level and cooperating to realize common defense and security objectives. In any case, most observers agree that the current transatlantic burden-sharing situation, with the United States accounting for over two-thirds of alliance defense spending, could be unsustainable. Far-reaching defense budget cuts in the United States and the planned withdrawal of two of the U.S. Army's four Brigade Combat Teams based in Europe have also raised questions within the alliance about future U.S. commitments to European security. Key Agenda Items for the Chicago Summit NATO's 2012 summit of alliance heads of state and government is scheduled to take place in Chicago on May 20-21. U.S. and NATO officials have outlined what they expect to be the Summit's three main agenda items: Defining the next phase of formal transition in Afghanistan and shaping a longer term NATO commitment to the country after the planned end of combat operations by the end of 2014; Securing commitments to maintain and develop the military capabilities necessary to meet NATO's defense and security goals, including through a new "Smart Defense" initiative; and Enhancing NATO's partnerships with non-NATO member states. The allies also plan to consider the results of an ongoing Deterrence and Defense Posture Review (DDPR), for which they called at the Lisbon Summit. Although NATO is not expected to issue membership invitations to any of the four countries currently seeking NATO membership, they could reaffirm their commitment to do so in the future. Transition in Afghanistan In Chicago, alliance leaders are expected to further develop plans for the transition of full responsibility for security to Afghans by the end of 2014 and to define NATO's role in the country after the changeover. The transition would mark the end of what has been the largest and longest combat operation in NATO's history. According to NATO Secretary General Anders Fogh Rasmussen, 22 non-NATO partners that have an interest in stabilizing Afghanistan will attend the Summit. Some analysts point out, however, that the possible absence of Pakistan—one of the region's most influential actors—from the Summit could be emblematic of the significant challenges NATO faces as it seeks to secure the cooperation of Afghanistan's neighbors in its evolving strategy. U.S. and NATO officials outline the following three Afghanistan-related priorities for Chicago: Identifying milestones in 2013 for NATO's transition from a primary emphasis on combat to a primary emphasis on support—in particular, training, advising, and assisting Afghan forces and authorities; Defining the appropriate size of the Afghan National Security Forces (ANSF) after 2014 and securing commitments from NATO member states to help fund and sustain the ANSF after the withdrawal of allied combat forces; and Refining the terms of a NATO-Afghanistan relationship after 2014. Statements by several alliance leaders earlier this year, including newly elected French President François Hollande and U.S. Secretary of Defense Leon Panetta, had led some observers to speculate that some allies could call for an accelerated withdrawal out of Afghanistan at the Chicago Summit. NATO officials say that a further withdrawal of forces in 2013 is in line with existing transition plans. At the same time, they highlight the importance of maintaining some level of combat forces in Afghanistan throughout 2014, even after Afghan forces have taken lead responsibility for security across the country. On May 13, 2012, Afghan President Hamid Karzai announced the beginning of the third "Tranche" of the formal transition process in Afghanistan. According to U.S. officials, Afghan forces now have lead security responsibility over half of the Afghan population. Upon completion of "Tranche 3" of the transition—which reportedly could come within six months—Afghan authorities will have lead security responsibility for 75% of the population. Between now and the end of 2014, NATO forces increasingly are to increasingly take a supporting role, focusing on training and assisting Afghan forces. The Obama Administration reportedly has been leading efforts to raise funds to sustain the ANSF beyond 2014. According to press reports, NATO and the United States estimate that maintaining the ANSF at adequate levels beyond 2014 would cost approximately $4.1 billion annually. In testimony to the Senate Foreign Relations Committee on May 10, 2012, Assistant Secretary of State Philip Gordon said that the United States is seeking a collective annual commitment of about $1.3 billion from its allies and expects the Afghan government to contribute about $500 million annually. U.S. officials reportedly have said the United States could cover the additional cost. Other allies reportedly have been reluctant thus far to make specific commitments ahead of the Summit. Observers expect such support would be necessary for at least 10 years after 2014, reflecting President Karzai's request for international support during a 10-year "transformation" period. Plans for NATO's involvement in Afghanistan after 2014 remain unclear, though some NATO member states—including the United States, United Kingdom (UK), France, and Italy—have signed bilateral agreements with the Afghan government that outline broad commitments after the NATO draw-down. Most member state governments face considerable public opposition to a significant continued combat role in Afghanistan. As of April 18, 2012 there were 128,961 troops from 50 countries serving in NATO's International Security Assistance Force (ISAF) in Afghanistan, with the 28 NATO members providing the core of the force. The largest ISAF troop deployments come from the United States (90,000), the UK (9,500), Germany (4,900), Italy (3,816), France (3,308), and Poland (2,457). Capabilities, "Smart Defense," and Fiscal Constraints Europe's current financial problems have led to heightened concern about European allies' willingness and ability to project power as a global security actor in the years ahead. The European debt crisis comes amid already long-standing U.S. concerns about a downward trend in European defense spending and shortfalls in European defense capabilities. Not counting the United States, NATO militaries have about two million personnel in uniform, but some 70% of European military forces reportedly cannot be deployed abroad, and throughout the Afghanistan mission the European members of the alliance have struggled to maintain 25,000 to 40,000 troops in the field. In 2011, only three NATO allies exceeded NATO's informal goal of 2% of GDP for defense spending (Greece, the United Kingdom, and the United States). European militaries continue to be limited by shortfalls in key capabilities such as strategic air- and sealift, aerial refueling, and Intelligence, Surveillance, and Reconnaissance (ISR). Some analysts have long asserted that defense spending in many European countries is inefficient, with disproportionately high personnel costs coming at the expense of much-needed research, development, and procurement. Analysts also argue that the European defense industry remains fractured and compartmentalized along national lines; many believe that European defense efforts would benefit from a cooperative rationalization of defense-industrial production and procurement. In Chicago, the allies are expected to commit to a "Smart Defense" initiative that will call for cooperation, prioritization, and specialization in pursuit of needed defense capabilities. NATO officials are expected to announce up to 20 multinational defense projects in which assets are pooled or shared, including acquisition, training, force protection, ISR, and logistics cooperation initiatives. This effort to enhance defense capabilities is the latest in a number of post-Cold War NATO capabilities initiatives, each of which has had mixed success. In February 2012, Secretary General Rasmussen announced agreement on a key ISR project, the Alliance Ground Surveillance (AGS) system, through which a group of 13 allies will jointly acquire five high-altitude Global Hawk strategic reconnaissance drones that will be maintained by and made available to the entire alliance beginning in 2015. Acquisition of AGS, long a priority of successive U.S. Administrations, will give European alliance members a capability that only the United States currently possesses and that played a key role in the Libya operation. Additional projects expected to be highlighted in Chicago include interim capability for a NATO-wide territorial missile defense system (see "Missile Defense" below), and NATO's long-standing Baltic Air Policing Mission. In February 2012, NATO agreed to extend the air policing mission indefinitely, subject to periodic review. Allies may also be asked to take bolder spending decisions in terms of phasing out what some perceive as unnecessary national "legacy" capabilities in order to fund collective alliance priorities. For example, U.S. officials have commended a Dutch decision to disband its army tank battalions and invest the savings in ballistic missile defense radars to be placed on Dutch frigates as part of a NATO-wide missile defense capability. Secretary General Rasmussen has announced plans for a parallel initiative to "Smart Defense," dubbed the "Connected Forces Initiative" (CFI). The goal is to enhance the capacity of military personnel from NATO member states to work together, through a focus on education and training, increased joint exercises, and better use of technology. A key element of the initiative is to increase joint exercises through the NATO Response Force (NRF), a multinational rapid reaction force of about 13,000, comprised of land, air, maritime, and special forces components. U.S. officials have said that combat units from an American-based brigade will rotate through Europe to train with the NRF after the planned withdrawal of two Brigade Combat Teams from Europe. The Obama Administration and other allied governments have pointed to NATO's 2011 mission in Libya as a positive example of transatlantic defense cooperation in which European allies and partners were not only centrally relevant, but in which they took the leading role—the mission was the first in NATO's history in which the United States did not lead military operations. At the same time, the Libya mission also exposed significant shortfalls in allied capabilities. According to U.S. officials, in Libya, the United States had to make up for a shortage of well-trained targeting specialists and shortages of key supplies and munitions in order to keep the operation going. Perhaps more importantly, European allies lacked critical enabling capabilities such as the aforementioned aerial refueling tankers and ISR. The United States reportedly supplied nearly half of the ISR aircraft in the mission and the vast majority of analytical capability. Recent reports indicate that even with U.S. help, NATO had only about 40% of the aircraft needed to intercept electronic communications in Libya. Some allied officials and observers argue that despite the criticism and shortcomings, the forces of key European allies still rank among the most capable militaries in the world; this assessment remains particularly true for France and the UK, which rank third and fourth, respectively, in global defense expenditure. Many European allies have undertaken significant defense transformation initiatives in recent years, and the EU has been exploring possibilities for greater defense integration and pooling of assets as a possible solution to the resource-capability crunch. NATO Secretary General Rasmussen and others have argued that the economic constraints facing allied governments could present an opportunity for European defense because it could help overcome long-standing political obstacles to cooperation initiatives and reforms that many have long argued are necessary in any case. Non-Strategic Nuclear Weapons and the Deterrence and Defense Posture Review (DDPR)21 In Lisbon, allies agreed to launch a Deterrence and Defense Posture Review (DDPR) that would further examine NATO's readiness and ability to address potential threats against the alliance. The results of the DDPR are expected to be presented to alliance leaders at the Chicago Summit. By most accounts, consultations in the DDPR have been "dynamic and extremely delicate," characterized by disagreements within the alliance about the future role of nuclear weapons in NATO. In testimony to Congress in November 2011, the State Department's Undersecretary for Arms Control and International Security, Ellen Tauscher, reaffirmed the Administration's position that "NATO will remain a nuclear alliance as long as nuclear weapons exist," a position that was also articulated in the 2010 Strategic Concept. Nevertheless, given persistent debates within the alliance on the issue, observers do not expect the allies to make any significant changes regarding longer-term force posture at the Chicago Summit, but rather to task NATO headquarters to study the issue further. The current debate on the role of nuclear weapons in the alliance has focused on U.S. non-strategic nuclear weapons (sometimes called tactical nuclear weapons, or NSNW) in Europe. Since the end of the Cold War, the United States is reported to have drastically reduced the number of NSNW based in Europe, but an estimated 150-200 reportedly remain deployed in five allied countries (Belgium, Germany, Italy, the Netherlands, and Turkey). The congressionally mandated Strategic Posture Commission has estimated that Russia, on the other hand. currently has around 3,800 operational non-strategic nuclear weapons. NATO's Strategic Concept states that "deterrence, based on an appropriate mix of nuclear and conventional capabilities, remains a core element of our overall strategy," and reflects the Administration's position that NATO will remain a nuclear alliance as long as nuclear weapons continue to exist. Proponents of NATO's current nuclear force posture support this view, highlighting both the need for a nuclear deterrent in a world where nuclear weapons continue to pose a security threat and the need to reassure member states for whom NATO's nuclear umbrella remains a vital component of national security. Some European leaders, however, have called for the removal of U.S. non-strategic nuclear weapons from European soil. Some members of the German government have been particularly vocal on the issue. Among other things, they argue that "the rationale for [U.S. nuclear] deployment expired with the collapse of the Warsaw Pact…and nuclear weapons based in Europe have little or no role to play in countering terrorism, the most likely external security threat to the alliance." In what could be a reflection of these views, NATO's Strategic Concept also alludes to the possibility of further reductions in nuclear weapons, both within the alliance and globally, in the future. In the document, the allies pledge to "seek to create the conditions for further reductions [of nuclear weapons] in the future," indicating that the goal in these reductions should be to "seek Russian agreement to increase transparency on its nuclear weapons in Europe and relocate these weapons away from the territory of NATO members." NATO Partnerships NATO's partnerships with non-NATO member states and other multilateral institutions are the third main agenda item at the Chicago Summit. U.S. and NATO officials increasingly emphasize the importance of working with regional and international partners to realize shared security objectives. They range from regional partners in the Mediterranean and the broader Middle East—including key contributors to the 2011 Libya operation—to partners on the other side of the globe, such as Australia, Japan, and South Korea. U.S. officials underscore that 22 non-NATO members are participating in NATO's Afghanistan mission, both in military operations and through significant financial contributions. Some analysts note that as NATO continues to face security challenges outside the Euro-Atlantic region, it could increasingly rely on the assistance of regional partners. In addition, the allies may want to enhance coordination with European partners, such as Sweden and Finland, which have been significant contributors to NATO operations, but are not members of NATO due primarily to political and historical reasons. NATO's 2010 Strategic Concept identifies the development of partnerships as a key security task for the alliance. In Lisbon, the allies launched a reform of NATO's partnership policy, intended to make "dialogue and cooperation more inclusive, flexible, meaningful and strategically oriented." A key aim of the ongoing reform of NATO's partnership programs is to streamline several distinct partnership initiatives and develop more flexible formats for the alliance to engage with partners. Currently, the alliance engages in relations with non-NATO members through at least four different programs: the 50-nation Euro-Atlantic Partnership Council and the related Partnership for Peace Program of bilateral cooperation with individual Euro-Atlantic countries; the Mediterranean Dialogue with countries in the southern Mediterranean; the Istanbul Cooperation Initiative with countries from the Gulf region; and relations with so-called "global partners" outside the Euro-Atlantic region, such as Australia, Japan, and New Zealand. Under reforms endorsed by NATO foreign ministers in April 2011, all NATO partners will have access to approximately 1,600 partnership activities laid out in a streamlined "Partnership and Cooperation Menu" (PCM), with an emphasis on training and support for security sector reform. NATO is also developing more flexible formats for cooperation among groups of partners working together to confront security issues beyond the existing partnership frameworks. This includes, for example, counter-piracy operations and cybersecurity. Relations with Russia Relations with Russia are a central component of debates over NATO's future. That said, NATO-Russia relations are not expected to figure prominently on the Chicago Summit's agenda, especially since Russian President Vladimir is not attending the meeting. Russian representatives reportedly have been invited to attend discussions on Afghanistan, but their participation has not been confirmed. Some observers view the diminished level of Russian participation in Chicago as a telling sign of ongoing disagreements between the two sides on issues such as NATO's planned territorial missile defense system for Europe and Georgia's territorial integrity. Over the past several months, and particularly during Russia's recent election campaign, Russian leaders have engaged in what some consider hostile rhetoric toward NATO. Some NATO member states have criticized the Russian government's treatment of political protesters, resulting in angry responses from Moscow. During a meeting in Moscow on missile defense in early May 2012, Russian Chief of General Staff Nikolai Makarov reportedly suggested that Russia could use preemptive force against NATO missile defense installations if NATO moves forward with its missile defense plans without an agreement of cooperation with Russia. Secretary General Rasmussen and other allied leaders acknowledge these disagreements, but emphasize that the two sides are cooperating successfully in a range of areas, including in Afghanistan, joint counter-terrorism exercises, countering piracy, and counter-narcotics. NATO and U.S. officials highlight Afghanistan as a key example of the benefits of heightened NATO-Russia cooperation. Russia has allowed the use of air and land supply routes on its territory for the NATO mission and has agreed to bolster training for Afghan and regional counter-narcotics officers. According to U.S. officials, over 42,000 containers of cargo have transited Russia as a result of the agreement. The two sides are currently negotiating an expansion of the transit arrangement to allow for increased transit of NATO supplies out of Afghanistan during the ongoing transition. Russian helicopters, operated by civilian crews, have also begun providing transport in Afghanistan and the NATO-Russia Council established a Helicopter Maintenance Trust Fund in 2011. NATO and U.S. officials stress that they will continue to oppose Russian policies that they perceive as conflicting with the core values of the alliance. They say, for example, that NATO will not recognize a Russian sphere of influence outside its borders and will continue to reject Russia's recognition of Georgia's breakaway regions, Abkhazia and South Ossetia. There continues to be concern among some NATO allies that Russia has not changed its fundamental view of NATO as a security threat and that unresolved issues will continue to plague NATO-Russia relations. Observers and officials in some allied nations—notably the Baltic states and Poland—have at times expressed concern that NATO's reengagement with Russia could signal that the alliance is not serious about standing up to Russian behavior it has deemed unacceptable. In this vein, they have urged the United States to consider the interests and views of all NATO allies as it seeks to improve relations with Russia. Enlargement and NATO's Open Door Policy As noted above, NATO enlargement is not expected to feature prominently on the Chicago Summit's agenda. Nevertheless, NATO maintains an "open door" policy on membership based on Article 10 of the alliance's founding treaty, which states that membership is open to "any European state in a position to further the principles of this Treaty and to contribute to the security of the North Atlantic Area." NATO's post-Cold War enlargement to Central and Eastern Europe was seen as a key factor in these countries' peaceful transition to democratic governance. However, in recent years, several allied governments have argued that NATO has enlarged too quickly, and that the alliance should agree on how to resolve a complex range of issues before taking in another group of new members. In April 2009, Albania and Croatia became the latest countries to join NATO. In 2008, the allies agreed that Macedonia meets the qualifications for NATO membership. In December 2009, Montenegro was offered a Membership Action Plan (MAP). In April 2010, Bosnia and Herzegovina was formally invited to join the MAP, but was told that its Annual National Program under the MAP would not be accepted until the country resolved an issue about the control of immovable defense property (mainly former military bases and barracks) on its territory. Little if any progress has been made in advancing Macedonia's stalled candidacy for NATO membership. As noted, in NATO summit communiqués since 2008, the allies have agreed that Macedonia meets the qualifications for membership. However, Greece has blocked a membership invitation due to a protracted dispute over Macedonia's name. The two sides have been unable to resolve the issue during talks sponsored by the U.N. In 2008, debate over whether to place Georgia and Ukraine in the MAP process caused controversy in the alliance. Although the allies have pledged that Georgia and Ukraine will eventually become NATO members, they have not specified when that might happen. The Russia-Georgia conflict and the renunciation of NATO membership aspirations by the current government in Ukraine appear to have diminished the short- and even medium-term membership prospects for the two countries. Most observers believe that the unresolved situation in South Ossetia and Abkhazia could continue to pose a major obstacle to possible Georgian membership for the foreseeable future. They contend that as long as the territorial dispute persists, some allies could oppose defining a specific timeline for membership. Selected Issues for Congress Congress has played an important role in guiding U.S. policy toward NATO and in shaping NATO's post-Cold War evolution. Members of the 112 th Congress have expressed interest in each of the key agenda items to be discussed in Chicago and, to varying degrees, have called on the Administration to advance specific policy proposals at the Summit. Proposed companion legislation in the House and the Senate— The NATO Enhancement Act of 2012 ( S. 2177 and H.R. 4243 )—endorses NATO enlargement to the Balkans and Georgia, reaffirms NATO's role as a nuclear alliance, and calls on the U.S. Administration to seek further allied contributions to a NATO territorial missile defense capability, and to urge NATO allies to develop critical military capabilities. In recent months, other Members of Congress have also called on the U.S. Administration and NATO to enhance efforts to bring Bosnia and Herzegovina, Georgia, Macedonia, and Montenegro into the alliance. In March 2012, a bipartisan group of 54 Members of the House signed a letter to President Obama urging him to ensure that Macedonia receives a formal invitation at the Chicago Summit to join NATO. In April 2012, Representative Carolyn Maloney introduced legislation apparently aimed at cautioning against formally inviting Macedonia before it resolves an ongoing dispute with Greece over Macedonia's name ( H.Res. 627 ). In the run-up to and aftermath of the Chicago Summit, Congress may want to consider a range of questions relating to NATO's current operations and activities and its longer term mission. These include the following. NATO's commitment to Afghanistan, both during the ongoing transition away from a primary emphasis on combat and after the transition. Some allied leaders—notably new French President François Hollande—have indicated a desire to accelerate the withdrawal of forces from Afghanistan. Congress may want to consider the implications of such decisions for NATO and U.S. security interests in Afghanistan. The allied commitment to sustaining the Afghan National Security Forces after 2014 could have particularly significant security implications for the United States, as could the extent of NATO's presence in the country after 2014. Allied military capabilities and burden-sharing within the alliance. In June 2011, then-U.S. Secretary of Defense Robert Gates lamented that many European allies are "unwilling to devote the necessary resources or make the necessary changes to be serious and capable partners in their own defense." Congress may want to consider the immediate and longer-term effects on alliance security of the continuing downward trend in European defense spending. Of particular concern could be the extent of the allied commitment to pooling and sharing resources in the framework of NATO's "Smart Defense" initiative and the extent to which European governments are consulting and coordinating with other allies when pursuing cuts to national defense budgets. In addition, if current trends in European defense spending and capabilities development continue over the medium term, how would this affect U.S. perceptions of NATO and the transatlantic security partnership? How would this affect U.S. pursuit of its security interests around the globe? Future NATO operations and allied military readiness. Some analysts assert that NATO member states would not support another "out of area" operation on the scale of the Afghanistan mission. Congress may want to consider the types of future military operations in which the alliance should be preparing to engage. What steps are being taken to ensure alliance readiness and interoperability? What effect will the planned withdrawal of two U.S. Army Brigade Combat Teams from Europe have on allied interoperability and alliance solidarity more generally? NATO's conventional and nuclear force posture. NATO allies continue to express divergent views on the appropriate force posture for the alliance. Congress may want to consider the implications for U.S. security interests of this ongoing debate within NATO. In particular, what role should U.S. non-strategic nuclear weapons play in alliance force posture? Do these weapons currently play an important deterrent role or is their presence primarily a symbol of U.S. commitment to NATO? What are the benefits of NATO's evolving territorial missile defense capability? What is the European allied commitment to that capability? NATO's relations with non-NATO member states and international organizations. Allied leaders and U.S. officials emphasize the importance of enhancing and expanding NATO's partnerships both within and outside the Euro-Atlantic region. The evolution of NATO's partnership policy could have significant political and operational implications for the alliance, including on its decision-making procedures and its force projection capabilities. Congress may want to consider the appropriate role of non-NATO members in the alliance's political structures and in allied operations. How would the increased participation of partners affect broader U.S. strategic interests? Should NATO seek to develop and/or enhance defense and security cooperation with the governments of Libya, Tunisia, Egypt, and other countries in the Mediterranean and broader Middle East region? Prospects and conditions for future NATO enlargement. Successive U.S. Administrations and some Members of Congress have emphasized the importance of NATO's "open door" membership policy. Congress may want to consider the possible implications of further NATO enlargement for U.S. and NATO security interests. What have been the costs and benefits of NATO's post-Cold War enlargement and what are the potential costs and benefits of possible future enlargement? Should there be a limit to NATO's "open door" policy? Should the alliance consider offering Russia the possibility of NATO membership? The U.S. Administration and some Members of Congress continue to view NATO as the world's preeminent military alliance and the cornerstone for transatlantic security cooperation. As NATO has evolved to confront a range of new and emerging security challenges, it has recorded some important achievements and faced considerable challenges. On the one hand, ongoing military operations in Afghanistan, the Balkans, and off the Horn of Africa demonstrate NATO's capacity to respond simultaneously to multiple security crises. On the other hand, severe budgetary constraints currently facing allied governments on both sides of the Atlantic have caused some to question NATO's ability to continue to sustain such an operational tempo. These budget constraints and public opposition in many European countries to military operations in Afghanistan could play a key role in shaping the scope of future NATO operations. As the alliance moves forward after the Chicago Summit, allied responses to these and the other challenges outlined above could be important factors in determining NATO's ability to meet and refine its strategic objectives.

NATO's 2012 summit of alliance heads of state and government is scheduled to take place in Chicago on May 20-21. U.S. and NATO officials have outlined what they expect to be the Summit's three main agenda items: Defining the next phase of formal transition in Afghanistan and shaping a longer term NATO commitment to the country after the planned end of combat operations by the end of 2014; Securing commitments to maintain and develop the military capabilities necessary to meet NATO's defense and security goals, including through a new "Smart Defense" initiative; and Enhancing NATO's partnerships with non-NATO member states. Although NATO is not expected to issue membership invitations to any of the four countries currently seeking NATO membership, it could reaffirm their commitment to do so in the future. Congress has played an important role in guiding U.S. policy toward NATO and shaping NATO's post-Cold War evolution. Members of the 112th Congress have expressed interest in each of the key agenda items to be discussed in Chicago. For example, proposed companion legislation in the House and Senate—The NATO Enhancement Act of 2012 (S. 2177 and H.R. 4243)—endorses NATO enlargement to the Balkans and Georgia, reaffirms NATO's role as a nuclear alliance, and calls on the U.S. Administration to seek further allied contributions to a NATO territorial missile defense system, and to urge NATO allies to develop critical military capabilities. In the run-up to and aftermath of the Chicago Summit, Congress may consider a range of issues relating to NATO's current operations and activities and its longer term mission. These include questions pertaining to: NATO's commitment to Afghanistan, both during the ongoing transition away from a primary emphasis on combat and after the transition; Allied conventional military capabilities and burden-sharing within the alliance; Future NATO operations and allied military readiness; NATO's future as a nuclear alliance; NATO's relations with non-NATO member states and multilateral organizations; and Prospects and conditions for future NATO enlargement.

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Introduction This report (1) summarizes provisions of several laws and regulations, including the PatentLaw, the Atomic Energy Act, International Traffic in Arms Control regulations, the USA PATRIOTAct ( P.L. 107-56 ), the Public Health Security and Bioterrorism Preparedness and Response Act of2002 ( P.L. 107-188 ), and the Homeland Security Act ( P.L. 107-296 ), that permit the federalgovernment to restrict disclosure of scientific and technical information that could harm nationalsecurity; (2) describes the development of federal controls on "sensitive but unclassified" (SBU)scientific and technical information; (3) summarizes current controversies about White House policyon "Sensitive But Unclassified Information," and "Sensitive Homeland Security Information" (SHSI)issued in March 2002; and (4) identifies controversial issues which might affect the development ofOffice of Management and Budget (OMB) and agency guidelines for sensitive unclassifiedinformation, which were expected to be released during 2003. Federal Controls on Privately Generated Scientific and Technical Information Several laws permit the federal government to classify privately-generated scientific andtechnical information that could harm national security, even when it is not held by federal agencies. These laws deal with patent law secrecy and atomic energy restricted data. Patent Law Secrecy Pursuant to 35 U.S.C. 181-188, the U.S. Patent Commissioner has the right to issue patent secrecy orders to prevent disclosure of information about an invention if disclosure by granting ofa patent would be detrimental to the national security. This provision is applicable to a patent forwhich the "government has a property interest" and those privately developed inventions which thegovernment does not own. Thus, if a federal government agency has a "property interest" in theinvention, the agency head will notify the Patent Commissioner, who is to withhold the publicationof the application or the granting of a patent. If the government does not have a property interestin the patent and the Commissioner decides that the granting of a patent or publication of anapplication would be detrimental to the national security, the Patent Commissioner is required toprovide the patent application in question for inspection to the Atomic Energy Commission [nowthe Secretary of Energy], the Secretary of Defense, or the heads of other relevant agencies. If theagency head determines that publication or disclosure by the grant of patent is detrimental to thenational security, the Patent Commissioner shall order that the invention be kept secret, and "shallwithhold the grant of a patent ... for such period as the national interest requires...." The owner ofthe application may appeal the decision to the Secretary of Commerce. The invention may be keptsecret for one year, but the Commerce Secretary may renew the secrecy order for additional periodsas instructed by the agency head who initially determined the need for secrecy. (1) If a secrecy order is issued during time of war, it shall remain in effect for the duration of hostilities and for one year following cessation of hostilities. If a secrecy order is issued during anational emergency, it shall remain in effect for the duration of the emergency and six monthsthereafter. The order may be rescinded by the Patent Commissioner upon written notification of theagency head who requested the order. In addition, to prevent circumventing the law, a license must be obtained from the Patent Commissioner before a U.S. inventor files for a foreign patent application or registers a design ormodel with a foreign patent office. Penalties for violation of the law include a fine of not more than$10,000 or imprisonment for not more than two years, or both. During FY2002, 4,792 secrecyorders were in effect on patents applications; most of these were recommended by and issued tofederal agencies for their own government-owned technical information; 37 were issued to individualprivate inventors. (2) The Atomic Energy Act and "Restricted Data" Because of potential national security implications, nongovernmental scientists who conducted atomic energy research and development at the beginning of World War II took actions to keep suchresearch secret, except for those with a need to know it. Strict governmental security during the warkept this knowledge limited, and after the war's end, the U.S. Congress passed the Atomic EnergyAct of 1946 , (3) which created the AtomicEnergy Commission and established policies for securingatomic energy-related information. Atomic energy laws, as administered first by the Atomic EnergyCommission and now the Department of Energy, allow the federal government to limit access to allatomic energy-related information, which is automatically "born classified" and is categorized uponcreation as "restricted data," (RD), even if it is developed by private researchers outside ofgovernment. At first, access to this information was allowed only for defense purposes. Subsequentmodifications in law, principally the Atomic Energy Act of 1954 , permitted certain non-governmentalpersons, such as industrialists and foreign governments, to obtain permits to access such "restricteddata," for the purposes of peaceful commercial development of atomic energy or internationalcooperative programs if they could obtain the necessary security clearances. "Restricted data," or RD, is defined as "all data concerning (1) design, manufacture, or utilization of atomic weapons; (2) the production of special nuclear material; or (3) the use of specialnuclear material in the production of energy, but shall not include data declassified or removed fromthe Restricted data category pursuant to section 142 [42 USC 2162]." (4) Current penalties forviolating the law include imprisonment for "any term of years," a fine of $100,000, or both. (5) Thedevelopment and history of these controls were explained in a document prepared in 1989 by ArvinS. Quist, a classification officer at the Oak Ridge Gaseous Diffusion Plant, Oak Ridge NationalLaboratory, which is operated on contract for the Department of Energy. Excerpts from thisdocument are included in Appendix 1 . Export Control Regulations for Scientific and Technical Information Both the Export Administration Act (50 U.S.C. App. 2401-2420) (6) and the Arms Export ControlAct (22 U.S.C. 2751-2794) provide authority to control the dissemination to foreign nationals, bothin the United States and abroad, of scientific and technical data related to items requiring exportlicenses according to the Export Administration Regulations (EAR) or the International Traffic inArms Regulations (ITAR). Both laws regulate export of technical data. (7) ITAR control the releaseof defense articles specified on the U.S. Munitions List (22 CFR 121) and technical data directlyrelated to them. EAR, among other things, control the export of dual-use items (items that have bothcivilian and military uses) on the [Department of] Commerce Control List (15 CFR Part 774) andtechnical data related to them. Licenses are needed to export controlled items. The implementingregulations are administered by the Department of Commerce, which licenses items subject to EAR,and by the Department of State, which licenses items subject to ITAR and the Munitions List ofitems. (8) They apply to "exporters" of both privateand federally funded scientific and technicalinformation. Fundamental research is excluded from ITAR and EAR. ITAR generally treats the disclosure or transfer of technical data to a foreign national, whether in the United States or abroad as an export. (9) Someacademic researchers believe they need to beregistered with the State Department to hold conversations or meetings with foreigners in the UnitedStates about scientific developments. (10) Accordingto ITAR regulations, publicly available scientificand technical information and academic exchanges and information presented at scientific meetingsare not treated as controlled technical data. (11) Nevertheless, there has been considerable ambiguityand confusion regarding these provisions at some academic institutions because of uncertaintiesabout which research projects might not be excluded because they use space or defense articles,technologies, and defense services on the Munitions List which is used to identify technologiesrequiring export licensing. (12) The ExportAdministration regulations also categorize as "deemed"exports communications to foreign nationals about technologies characterized as "sensitive" orcountries identified as "sensitive" under EAR rules. (13) This is declaimed by some as a hindrance tointernational science and supported by others who view it as a needed national security protection. (14) Since 1999, export of information about satellites and spacecraft instruments, including technical discussions about them, has been under the jurisdiction of the State Department and ITAR. Some academic researchers have complained that these rules curtailed their presentations atmeetings, their on-campus research, and international collaborations because "research activity thatonce was subject to the fundamental research exclusion under National Security Directive 189, [Seethe next section for details] was, for the first time, formally regulated ...." (15) Reportedly, some foreignresearchers at U.S. universities had not been able to access this information and U.S. researchersbelieved they needed a license to discuss defense-related basic research information with foreigncolleagues. Universities sought clarifying rules. Under a new rule issued in March 2002, the State Department clarified language exemptingU.S. universities from obtaining ITAR licenses for export of certain (16) space-based fundamentalresearch information or articles in the public domain to certain universities and research centers incountries that are members of the North Atlantic Treaty Organization (NATO), the European Union,or the European Space Agency, or to major non-NATO allies, such as Japan and Israel. Also to bepermitted are exports of certain services and unclassified technical data for assembly of products intoscientific, research, or experimental satellites. The exemption does not permit export of technicaldata for the integration of a satellite or spacecraft to a launch vehicle or Missile Technology ControlRegime controlled defense services or technical data. A license will be needed for export ofexempted information (including discussions) and hardware to researchers from all other countries. In addition, collaborators in approved countries would have to guarantee that researchers fromnon-approved countries were not receiving restricted information. (17) Some university researchersmaintain that these rules do not go far enough in clarifying the situation and that academicresearchers will find it difficult to design and implement campus controls and to bloc access to suchinformation by students and scientists from disallowed countries. (18) Summary of Policies Regarding Classification of Scientific and Technical Research Results and Information Several laws and directives govern classification of federally owned or federally fundedscientific and technical research results or information. These are Executive Order (E.O.) 12958,National Security Decision Directive (NSDD) 189, and rules related to pre-publication review. Executive Order 12958, on "Classified National Security Information," as Amended by Executive Order 13292 Federal policy allows classification of federal information at three levels, "top secret," "secret," and "confidential." Until March 25, 2003, the most recent version of this policy was in ExecutiveOrder 12958, released on April 17, 1995. (19) Itpermitted classification of "scientific, technological,or economic matters relating to the national security" (Sec. 1.5). But Section 1.8 (b) prohibitedclassification of "basic scientific research information not related to the national security." OnMarch 25, 2003, the President issued a new Executive Order 13292 on classification, which amendedExecutive Order 12958. It changed section 1.5 by adding a new clause, permitting classification of "scientific, technological, or economic matters relating to the national security, which includesdefense against transnational terrorism" (Sec. 1.4 (e) of Executive Order 13292). (20) The amendmentalso added a new category of information which may be classified, that is information that concerns"weapons of mass destruction" (Sec. 1.4 (h)). The exemption for basic scientific research not clearlyrelated to national security remains (renumbered section 1.7). National Security Decision Directive 189 (NSDD 189) The policy embodied in Executive Order 12958 reflected prior policy expressed in National Security Decision Directive 189, NSDD 189, issued on September 21, 1985, (21) during the ReaganAdministration. It says if federally funded basic scientific and technical information produced atcolleges, universities and laboratories is to be controlled for national security reasons, it should beclassified. But fundamental research findings generally are not to be restricted. Specifically, NSDD189 states: ... to the maximum extent possible, the products of fundamental research (22) remain unrestricted. Itis also the policy of this Administration that, wherethe national security requires control, the mechanism for control of information generated duringFederally funded fundamental research in science, technology, and engineering at colleges,universities, and laboratories is classification. NSDD 189 made agencies sponsoring research responsible for determining, before the award of a research contract or grant, whether classification is appropriate and for periodically reviewinggrants and contracts for potential classification. (23) It also said that "No restriction may be placed onthe conduct or reporting of Federally funded fundamental research that has not received nationalsecurity classification, except as provided in applicable U.S. statutes." NSDD 189 is still in effect,as stated in a letter issued by National Security Advisor Condoleeza Rice on November 1, 2001. (24) Pre-Publication Review The federal government exercises "pre-publication review" of some privately published scientific and technical information by current and former employees and contractors who workedfor federal agencies and who had access to classified information. For instance, the US Departmentof Agriculture issued the following guidance to employees regarding pre-publication review: In order to protect against the unauthorized disclosure of classified information, you are required to submit for security review any material intended forpublic release that might be based in any way on information you learned through your access toclassified information. This requirement covers all written materials, including technical papers,books, articles, and manuscripts. It also includes lectures, speeches, films, videotapes. It includesworks of fiction as well as non-fiction. (25) Pre-publication review controls for research and development information may be written into federal government contracts. Typically the Defense Department (DoD) includes "pre-publicationreview" clauses in government contracts for extramural research that allow DoD to review researchgenerated extramurally with federal support before it is published. (26) These controls are used ifclassified information was used in research or when the government seeks to prohibit release ofinformation deemed sensitive because of the way it is aggregated. An agreement was initiated in 1980 with the American Council on Education for all academic cryptography research to be submitted on a voluntary basis for pre-publication review to the federalgovernment's National Security Agency. (27) Relatedto this, the U.S. Government may enter intocontracts to purchase exclusive rights to commercial satellite imagery and has the ability to stop thecollection and dissemination of commercial satellite imagery for national security reasons. (28) In February 2002, DoD released a draft report, Mandatory Procedures for Research and Technology Protection Within the DOD, which would have required researchers to obtain DoDapproval to discuss or publish findings of all military-sponsored unclassified research, a departurefrom existing policy guidelines. After academic objections, the draft was withdrawn; a revised andclearer set of new regulations was planned. (29) Controls on Information in the USA PATRIOT Act and in the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 Before the 2001 terrorist attacks, U.S. laboratories that transported "select agents," that is, about 40 dangerous biological agents and toxins, had to register with the federal government (42 CFR72.6). Pursuant to the USA PATRIOT Act, P.L. 107-56 and the Public Health Security andBioterrorism Preparedness and Response Act of 2002, P.L. 107-188 , and the AgriculturalBioterrorism Protection Act of 2002, (which is part of P.L. 107-56 ), limits were placed on publicaccess was extended to an additional 60 select agents, defined as "certain biological agents andtoxins," (30) whose misuse could pose security risks. Registration requirements were extended toinclude registration of persons who used these agents. To prohibit potential terrorists from accessto these agents, controls were placed on access by selected persons, including those who could bepotential terrorists, including criminals, illegal aliens, persons with mental defects, and or drugabusers; aliens not admitted for permanent residence from certain countries "which the Secretary ofState has made a determination (that remains in effect) that such country has repeatedly providedsupport for acts of international terrorism," (31) orpersons who have been dishonorably dischargedfrom the Armed Services. These controls will be administered by the Justice Department. (32) Pursuant to these laws, the Departments of Health and Human Services and of Agriculture, identified the new list of "select agents," which was released in the Federal Register on December13, 2002. (33) Under the interim final rule, whichwas amended on November 3, 2003, (34) thelaboratories that use such agents will need to register and control access to such agents; scientistswill have to register, submit to background checks, and obtain prior approval to use, send, or receiveselect agents used in experiments. Some say this process, while denying access to possible terrorists,might prove costly and burdensome to some researchers (estimated in an article by Malakoff at$700,000 per laboratory) (35) and has the potentialof limiting the conduct of some scientific researchthat would otherwise be performed by such persons, including some foreign researchers. In addition,privately funded scientists will be subject to the same requirements as government-fundedresearchers who need "prior approval from the DHHS ... for genetic engineering experiments thatmight make a select agent more toxic or more resistant to known drugs." (36) Civilian and criminalpenalties for noncompliance apply to universities, private companies and government laboratories. Laboratories that handle select agents were to be in compliance with the new rules by fall 2003. "Sensitive But Unclassified" Information Restrictions Over time some agencies have established procedures to identify and safeguard "sensitive butunclassified information" (SBU), also called "sensitive unclassified information." Generally, thisunclassified information is withheld from the public for a variety of reasons, but needs to beaccessible to federal agency personnel. As will be discussed next in this report, the term SBU hasbeen defined in various presidential-level directives and agency guidances, but, some critics say, onlyindirectly in statute. Agencies have given the term various meanings in their implementing rules andregulations. Some agency guidance documents have started to use interchangeably the terms "forofficial use only," "limited use," "sensitive," "sensitive but unclassified," and related terms, and havedefined SBU by referring to such statutes as Privacy Act of 1974 (5 USC 552a), (37) the Freedom ofInformation Act (FOIA) of 1966 (5 USC 552 ), the Computer Security Act of 1987 (relevantportionscodified at 15 USC 278 g-3), and other language. Agencies have discretion to define SBU in waysthat serve their particular needs to safeguard information. There is no uniformity in implementingrules throughout the government on the use of SBU. Agencies also may assign various criminal andcivilian penalties to improper release of "sensitive but unclassified" information. Summary of the Evolution of Policies Relating to "Sensitive But Unclassified" Information Official definitions of SBU were issued as early as 1977 and over the years thereafter. Telecommunications Protection Policy (PD/NSC-24) . In 1977, in one of the earliest references to SBU, a PresidentialDirective on Telecommunications Protection Policy (PD/NSC-24) mandated protectionofunclassified, but sensitive communications "that could be useful to an adversary." It did not definethe term further. (38) National Security Decision Directive 145 (NSDD-145) . In 1984, National Security Decision Directive 145 (NSDD-145) directed that "sensitive, but unclassified, government or government-derived information, the lossof which could adversely affect the national security interest ..." should be "protected in proportionto the threat of exploitation and the associated potential damage to the national security." NSDD-145 did not define the term, "sensitive, but unclassified," but explained that even unclassifiedinformation in the aggregate can "reveal highly classified and other sensitive information ..." harmfulto the national security interest. (39) The absence of a precise definition was widely criticized, especially by the General Accounting Office (GAO) (40) because of concern that the 1984definition of SBU could include nationalsecurity-related as well as possibly innocuous information needed to make policy. For instance, aGAO witness testified, "... unclassified sensitive civil agency information affecting national securityinterests could include hazardous materials information held by the Department of Transportation,flight safety information held by the Federal Aviation Administration, and monetary policyinformation held by the Federal Reserve." He recommended that the Administration "needs toclearly define the types of information that fall under the coverage of NSDD-145." (41) National Policy on Protection of Sensitive, but Unclassified Information in Federal Government Telecommunications and Automated Information Systems, NTISSP No. 2 OnOctober29, 1986, President Reagan's National Security Advisor, John Poindexter, (42) issued a document,entitled National Policy on Protection of Sensitive, but Unclassified Information in FederalGovernment Telecommunications and Automated Information Systems, NTISSP No. 2 , thatwidenedthe rationale for safeguarding "sensitive, but unclassified" information for reasons of nationalsecurity, as in NSDD-145, to include also "other government interests." Specifically, it said, Sensitive, but unclassified information is information the disclosure, loss, misuse, alteration or destruction of which could adversely affect nationalsecurity or other Federal Government interests. National security interests are those unclassifiedmatters that relate to the national defense or the foreign relations of the U.S. Government. Othergovernment interests are those related, but not limited to the wide range of government orgovernment-derived economic, human, financial, industrial, agricultural, technological, and lawenforcement information, as well as the privacy or confidentiality of personal or commercialproprietary information provided to the U.S. Government by itscitizens. This policy was to be applicable to all federal executive departments and agencies, including their contractors, which electronically transferred, stored, processed, or communicated sensitive, butunclassified information. (43) During 1986-1987, criticisms about NTISSP No. 2 focused on both the scope of information to be restricted and the responsibility given to the intelligence community over civilian informationactivities. These led to the withdrawal of both NTISSP No. 2 in 1987 (attendant to passage of theComputer Security Act of 1987) and to official use of this definition of "sensitive, butunclassified." (44) (However, as will be noted below,some agencies, notably the Department ofEnergy, still use this broad conceptualization of SBU.) The Computer Security Act of 1987 (P.L. 100-235). In the Computer Security Act of 1987 ( P.L. 100-235 , 101 Stat.1724-1730), 40 USC 1441, Congress declared: "... improving the security and privacy of sensitiveinformation in Federal computer systems is in the public interest, and hereby creates a means forestablishing minimum acceptable security practices for such systems, without limiting the scope ofsecurity measures already planned or in use" (Section 2, Purpose). The law authorized creation ofa computer standards program within the National Bureau of Standards, now called the NationalInstitute of Standards and Technology (NIST)), actions to enhance Government-wide computersecurity, and training in security matters for persons who are involved in the management, operation,and use of Federal computer systems. P.L. 100-235 also addressed some of the criticisms raised about NTISSP No. 2. It defined the term "sensitive" as any information, the loss, misuse, or unauthorized access to or modification of which could adversely affect the national interest or the conduct ofFederal programs, or the privacy to which individuals are entitled under section 552a of title 5,United States Code (the Privacy Act) , but which has not been specifically authorized under criteriaestablished by an Executive order or an Act of Congress to be kept secret in the interest of nationaldefense or foreign policy" (Section 3). (Emphasis added.) The last clause of this definition specifically limited the definition of "sensitive" to information that was not classified. Agencies were given discretion to identify information that was sensitiveand risks accompanying release of it. The report accompanying the bill said that each individualfederal agency should make a determination of which unclassified information in its systems wassensitive in accord with the definition of sensitive in the law and the purposes of the law. (45) Federalagencies were given responsibility for developing plans "commensurate with the risk and magnitudeof the harm resulting from the loss, misuse, or unauthorized access to or modification of theinformation being protected," and are responsible for protecting such "sensitive" information. (46) In 1992 the National Institute of Standards and Technology (NIST) issued guidance about agency implementation of systems to protect sensitive information pursuant to P.L. 100-235 . Itreiterated that, Interpretation of the Computer Security Act's definition of sensitive is, ultimately, an agency responsibility. Typically, protecting sensitive informationmeans providing for one or more of the following: Confidentiality : disclosure of the informationmust be restricted to designated parties; Integrity : The information must be protected from errors orunauthorized modification; Availability : The information must be available within some given timeframe (i.e., protected against destruction)." (47) The NIST document urged agency information owners to "use a risk-based approach to determine" harm of inadequate protection of information. In defining this discretionary process, it emphasized, Information 'owners,' not system operators, should determine what protection their information requires. The type and amount of protection neededdepends on the nature of the information and the environment in which it is processed. The controlsto be used will depend on the risk and magnitude of the harm resulting from the loss, misuse, orunauthorized access to or modification of the information contained in the system. (48) Because P.L. 100-235 applied to "sensitive" information that is not classified, some say, in effect, it defined "sensitive but unclassified." Computer Security in Relation to the Freedom of InformationAct. The Freedom of Information Act of 1966 (FOIA) was enacted to ensure publicaccess to certain types of information held by federal agencies. However, it permits agencies toexempt from public disclosure nine types of information: As noted above, the definition of "sensitive" in the Computer Security Act cited three reasons to categorize non-classified information as sensitive: adverse effects on the national interest, adverseeffects on the conduct of federal programs, and privacy. It included explicit provisions saying it wasnot authority to withhold information sought pursuant to "section 552 of title 5, United States Code[the Freedom of Information Act]...." (50) This wasreiterated in 1992 when the National Institute ofStandards and Technology issued guidance about agency implementation of systems to protectsensitive information pursuant to P.L. 100-235 . (51) Neither the Computer Security Act nor theaccompanying report indicated that information exempt from FOIA was to be designated as"sensitive." Also, the report accompanying the legislation said specifically, "The designation ofinformation as sensitive [or as subject to protection] under the Computer Security Act is not adetermination that the information is not subject to public disclosure." (52) However, major federal agencies started to apply the label SBU to information defined as "sensitive" in the Computer Security Act and to information exempt from disclosure under theFreedom of Information Act (especially as governed by provisions 2 and 4). In fact, some agencieshave declared that these acts define SBU, a statement which is open to debate. Federal Agencies' Various Definitions of "Sensitive But Unclassified" Introduction. Even before the terrorist attacksof September 2001 and actions taken by the White House during 2001 and 2002 to safeguard"sensitive but unclassified" information, federal agencies had implemented a variety of proceduresto safeguard information. While they have used classification categories to withhold informationclassified pursuant to Executive Order 12958, they also use a variety of administrative controlmarkings and procedures to control access to unclassified information to which public access isrestricted, such as privacy data, law enforcement information, health information, and informationexempt from disclosure under the Freedom of Information Act (FOIA), and "sensitive" information. According to a report of the Commission on Protecting and Reducing Government Secrecy, 1997 ,"... at least 52 different protective markings [are] being used on unclassified information,approximately 40 of which are used by departments and agencies that also classify information. Included among these are widely-used markings such as 'Sensitive But Unclassified,' 'LimitedOfficial Use,' 'Official Use Only,' and 'For Official Use Only.' " (53) Other notable categories areDrug Enforcement Administration (DEA) sensitive information, and DoD Unclassified ControlledNuclear Information. (54) There is no uniformity in Federal agency definitions, or rules to implement safeguards for "sensitive but unclassified" information. Over time the term "sensitive but unclassified" has cometo be used to encompass information subject to control pursuant to the Computer Security Act, aswell as information determined to be exempt from disclosure under the Freedom of Information Act,5 USC 552. This is further complicated by the fact that, as noted above, agencies were givendiscretion under the Computer Security Act of 1987 to do risk analysis to identify information to besafeguarded as sensitive. In addition , as will be described below, since the terrorist attacks of 2001, the Bush Administration has given agencies discretion to make nondisclosure decisions under FOIAin relation to homeland security and the thwarting of terrorist attacks. SBU in the State Department and U.S. Agency for InternationalDevelopment. In its Foreign Affairs Manual, issued on October 1, 1995, theDepartment of State said it would stop using the designation "limited official use," (LOU), whichit had applied to information exempt from FOIA disclosure, and in its place would use the term"sensitive but unclassified" (SBU). (55) This appearsto have been one of the earliest instances of anagency declaring that SBU applies to information exempt from disclosure under the Privacy Act aswell as under the Freedom of Information Act: a. SBU describes information which warrants a degree of protection and administrative control that meets the criteria for exemption from public disclosureset forth under Sections 552 and 552a of Title 5, United States Code: the Freedom of InformationAct and the Privacy Act. (12 FAM 540, Sensitive but Unclassified Information (SBU), (TL: DS-61;10-01-1999) 12 FAM 541 SCOPE, (TL: DS-46; 05-26-1995). The State Department declared that, b. SBU information includes, but is not limited to: (1) Medical, personnel, financial, investigatory, visa, law enforcement, or other information which, if released, could result in harm or unfair treatmentto any individual or group, or could have a negative impact upon foreign policy or relations; and (2)Information offered under conditions of confidentiality which arises in the course of a deliberativeprocess (or a civil discovery process), including attorney-client privilege or work product, andinformation arising from the advice and counsel of subordinates to policy makers. (12 FAM 540,Sensitive but Unclassified Information (SBU), (TL: DS-61; 10-01-1999) 12 FAM 541 SCOPE, (TL:DS-46; 05-26-1995). In an explanatory telegram sent to U.S. embassies, the department explained why it would use the SBU category instead of the LOU category and it declared that SBU covered information exemptfrom FOIA. It said, "Sensitive but unclassified is not a classification level for national securityinformation, but is used when it's necessary to provide a degree of protection from unauthorizeddisclosure for unclassified information as set forth in 12 FAM 540." (56) It explained that it would usethe category of SBU for two reasons: "... to keep classified material to a minimum and to be able topass-on relevant, but sensitive information to individuals (including FSNS [Foreign Service Nationalstaff]) on a need to know bases (sic)." (57) Publicaccess to "sensitive but unclassified" informationwould be limited to those with a need to know and would be subject to provisions which governdisclosure and exemptions in the Freedom of Information Act and Privacy Act; unauthorizeddisclosure would be subject to criminal penalties, including "criminal and/or civil penalties. Supervisors may take disciplinary action, as appropriate." (58) In 1995, the U.S. Agency for International Development equated "sensitive" with "sensitive but unclassified" and linked procedures needed to protect "sensitive but unclassified" to protectionsrequired by FOIA and the Computer Security Act. (59) Defense Agencies' Use of SBU. DoD's guidancefor "controlled unclassified information," issued in 1997, stated that "For Official Use Only(FOUO)" designations should be used for unclassified information that should be protected, that thisincludes "information that may be exempt from mandatory release to the public under the Freedomof Information Act (FOIA)" and "sensitive but unclassified" information that the Department of Stateformerly designated as Limited Official Use (which meets the criteria for exemption from mandatorypublic disclosure under FOIA), and "there must be a legitimate Government purpose served bywithholding it." (60) This same DoD directivelimited dissemination of information labeled "for officialuse only" including "sensitive but unclassified" information to: ... within the DoD Components and between officials of the DoD Components and DoD contractors, consultants, and grantees as necessary in the conductof official business. FOUO information may also be released to officials in other Departments andAgencies of the Executive and Judicial Branches in performance of a valid Government function. (Special restrictions may apply to information covered by the Privacy Act.) Release of FOUOinformation to Members of Congress is covered by DoD Directive 5400.4, and to the GeneralAccounting Office by DoD Directive 7650.1." (61) According to the U.S. Army, citing DoD Regulation 5200.1 and Army Regulation 25-55, SBU information is information exempted from disclosure under FOIA. Also, Army Regulation 380-19,Section 1-5, "gives some examples of SBU as information that: (a) involves intelligence activities,(b) involves cryptological activities related to national security, (c) involves command and controlof forces, (d) is contained in systems that are an integral part of weapon or a weapon system; (e) iscontained in systems that are critical to the direct fulfillment of military or intelligence missions, (f)involves processing of research, development, and engineering data." (62) The U.S. Army Materiel Command encrypts certain categories of SBU data, including "logistics, medical care, personnel management, Privacy Act data, contractual data, and "For OfficialUse Only Information." (63) Since there is no onesource for a definition of SBU, according to thissource, "Other factors such as risk management, consideration of the effects of unauthorizeddisclosure, and an examination of the timeliness of information, should be taken into account as well. Ultimately level of sensitivity of the information should be determined by owner/creator of thedata." (64) A matrix presented that guides thedefinition of SBU follows. Note that certain researchand development data are included: SBU MATRIX (65) The matrix below provides a general guide on the data categories and description of the types of data that should be considered Sensitive But Unclassified. This matrix should notbe considered authoritative or all-inclusive. Department of Energy. The Department of Energy (DOE) uses a definition of "sensitive but unclassified" which is identical to the 1986Poindexter definition that Congress had the Administration withdraw. It is: Sensitive Unclassified Information: (66) Guidance used by the DOE laboratories refers to this concept and cites, as authority, Executive Order 12958 and DOE regulations. (67) Other Agencies' Definitions of SBU, Including the General Services Administration, the Federal Aviation Administration, and the National Aeronautics andSpace Administration. Other agencies have issued directives to define andprescribe safeguards that should be taken and penalties used for releasing SBU information. Forinstance, in 2002 the General Services Administration (GSA) defined SBU to include informationthat could possibly benefit terrorists, such as equipment plans, building designs, operating plans, the locations of secure facilities or functions within GSA buildings, utility locations, and informationabout security systems or guards. (68) The FederalAviation Administration (FAA) issued regulationsto safeguard unclassified but "sensitive security information," which may be developed from securityor research and development activities and whose release, the Administration determines, could bean invasion of personal privacy, reveal private or financial information, or could "be detrimental tothe safety of passengers in transportation." (69) The National Aeronautics and Space Administration (NASA) labels nonclassified sensitive information as "administratively controlled information (ACI)," and describes procedures forcontrolling it under the same heading that it uses to describe procedures to control classified nationalsecurity information (CNSI): Such information and material, which may be exempt from disclosure by statute or is determined by a designated NASA official to be especially sensitive,shall be afforded physical protection sufficient to safeguard it from unauthorized disclosure. WithinNASA, such information has previously been designated "For Official Use Only." (70) The statutes cited as justification are the Export Administration Act of 1979, the Arms Export Control Act, and section 303 (b) of the Space Act. NASA also cited as justification the exemptioncriteria of the Freedom of Information Act, and information designated by NASA officials, such aspredecisional and not-yet-released materials relating to national space policy, pending reorganizationplans, or sensitive travel itineraries. In some agencies, the official responsible for guiding and developing agency policy and procedure for classified information also has responsibility for control and decontrol of sensitive butunclassified information. (71) Equivalence Between "Sensitive" and "Sensitive But Unclassified" Information By 1997, the Department of the Navy had issued guidance that said explicitly that the Computer Security Act of 1987 defined the requirements for "sensitive but unclassified" informationand further that "all business conducted within the federal government is sensitive butunclassified." (72) In 1998, the equivalence between "sensitive" and "sensitive but unclassified" was codified by DoD in administrative law in 32 CFR 149.3, relating to technical surveillance countermeasures usedby all federal agencies that process SBU. DoD defined "sensitive but unclassified" by using thedefinition of "sensitive" that appeared in the Computer Security Act of 1987. (73) In 2002, the Department of the Interior issued guidance that "... all unclassified DOI systems are considered SBU." (74) White House Policy for "Sensitive but Unclassified" Information Related to Homeland Security, March 2002 On March 19, 2002, the White House released a memo, signed by Chief of Staff Andrew Card, entitled "Action to Safeguard Information Regarding Weapons of Mass Destruction and otherSensitive Documents Related to Homeland Security." It called for agencies to reconsider currentmeasures for safeguarding information regarding weapons of mass destruction and other sensitivedocuments related to homeland security and "information that could be misused to harm the securityof our Nation and the safety of our people." Agencies were required to examine their policies andholdings in accord with an accompanying memos issued by the National Archives and RecordsAdministration's (NARA) Information Security Oversight Office (ISOO) and the Department ofJustice's Office of Information and Privacy (OIP) to determine if information should be classified,including previously unclassified or declassified information, or handled as sensitive but unclassifiedinformation and report the status of their review to the White House, via the Office of HomelandSecurity, within ninety days. (75) Agencies Instructed to Use FOIA Exemptions to Control Disclosure of Information. The accompanying ISOO and OIP memo included asection titled "sensitive but unclassified information," (SBU), which instructed agencies to safeguard"sensitive information related to America's homeland security"(SHSI), and told them to considerall applicable FOIA exemptions if FOIA requests are received for such information. (76) The memourged agencies to consider using specifically FOIA exemptions 2 and 4 when determining whetherto categorize information as "sensitive but unclassified." Exemption 2 refers to "(2) internalpersonnel rules and practices of an agency," while Exemption 4 deals with "trade secrets andcommercial or financial information obtained from a person and privileged or confidential." TheISOO/OIP memo cautioned that "The need to protect such sensitive information from inappropriatedisclosure should be carefully considered, on a case-by-case basis, together with the benefits thatresult from the open and efficient exchange of scientific, technical, and like information." See Appendix 3 for excerpts of the memo. As further justification, the memo referred agencies to guidance on FOIA that had been issued by Attorney General Ashcroft in October 2001. This memorandum expressed the Administration'sintent to comply with FOIA while, at the same time, instructing agencies, when undertakingdiscretionary disclosure determinations under FOIA, to consider protecting values and interests towhich the Bush Administration is committed, including "safeguarding our national security,enhancing the effectiveness of our law enforcement agencies, protecting sensitive businessinformation, and, not least, preserving personal privacy." (77) In explaining the intent of the memo, theDepartment of Justice said In replacing the predecessor FOIA memorandum, the Ashcroft FOIA Memorandum establishes a new "sound legal basis" standard governing theDepartment of Justice's decisions on whether to defend agency actions under the FOIA when theyare challenged in court. This differs from the "foreseeable harm" standard that was employed underthe predecessor memorandum. Under the new standard, agencies should reach the judgment thattheir use of a FOIA exemption is on sound footing, both factually and legally, whenever theywithhold requested information. In the predecessor memorandum issued by Attorney General Janet Reno in 1993, agencies wereencouraged to release documents even if the law provided a way to withhold information, if therewas no "foreseeable harm" from doing do. The October 2001 memo underscored the need to ensurethat information about agency deliberations not be made public and encouraged agencies to makedisclosure determinations under FOIA "only after full and deliberate consideration of theinstitutional, commercial, and personal privacy interests that could be implicated by disclosure ofthe information." (78) Also, referring to the need for heightened sensitivity after the September 2001 terrorist attacks, the October 2001 memo instructed agencies to utilize FOIA exemptions when making an agency"assessment of, or statement regarding, the vulnerability of ... a critical asset ..." (79) or the need toprotect critical infrastructure information, referenced in the memo as "critical systems, facilities,stockpiles, and other assets from security breaches and harm -- and in some instances from theirpotential uses weapons of mass destruction in and of themselves. Such protection efforts, of course,must at the same time include the protection of any agency information that could enable someoneto succeed in causing the feared harm." (80) The Attorney General's October 2001 memorandum instructed agencies to interpret FOIA exemption 2 broadly to permit withholding of a document, which if released would allowcircumvention of an agency rule, policy or statute, thereby impeding the agency in the conduct of itsmission. (This is generally referred to as the high profile interpretation of exemption 2.) (81) It saidthat agencies should "avail themselves of the full measure of exemption 2's protection for theircritical infrastructure information as they continued to gather more of it, and assess its heightenedsensitivity, in the wake of the September 11 terrorist attacks." (82) The memo referred to guidance thatwas issued in 1989 describing the sensitivity of vulnerability assessments and the need to exemptsuch information from disclosure under FOIA. (83) Pursuant to the Card memo, and attachments, the information to be covered by theAdministration's "sensitive but unclassified" homeland security information seems to includerecords that deal with the agency, public infrastructure the agency might regulate or monitor, someinternal databases (reports, data the agency has collected, maps, etc.), vulnerability assessments,some internal deliberations, and information provided to the government by private firms, such aschemical companies. (84) Although most of this information is not classified, it appears as if security clearances may be required for access to some SHSI and certain types of SBU information. The National Archives andRecords Administration (NARA) included in its Annual Performance Plan, FY2003, (85) a goal oftraining state and local officials in the proper handling of classified and sensitive homeland securityinformation. The document stated that this included the objectives of obtaining Top Secret securityclearances for state and local officials who need such clearances to handle classified or sensitivehomeland security information, and also of developing "a training program at the state and locallevel for the proper use and handling of classified and sensitive but unclassified homeland securityinformation for all officials with Top Secret security clearances and other officials who have accessto sensitive information. Finally ISOO will ensure that Federal agencies have the necessaryclassification authority for homeland security information." It should be noted that, on March 12, 2002, and again on June 23, 2003, the House oversight committee on FOIA, the Committee on Government Reform, called the Attorney General's October2001 memorandum into question and specifically rejected its standard to allow the withholding ofinformation sought under FOIA whenever there is merely a "sound legal basis" for doing so. (86) Thecommittee directed agencies to withhold documents only in those cases when the agency reasonablyforesees that disclosure would be harmful to an interest protected by an exemption. (87) Policies for Control of Unclassified Information in P.L. 107-296 Introduction The dilemma about balancing security and science is reflected in the Homeland Security Act, P.L. 107-296 , signed November 2, 2002. Among other things, it required that research conductedby the Department of Homeland Security (DHS) created by the law "shall be unclassified to thegreatest extent possible" (Sec. 306 (a)). Nevertheless, in a signing statement, the President reiteratedthat the executive branch had the right to implement this provision (and others) in a manner whichwould protect information "...the disclosure of which could otherwise harm the foreign relations ornational security of the United States." (88) Protection of Critical Infrastructure Information P.L. 107-296 , also included prohibitions against disclosure under FOIA of "critical infrastructure information" regarding to the security of critical infrastructure and protected systemssubmitted voluntarily by private companies. Criminal penalties for disclosure by affected employeesinclude fines, dismissal, or imprisonment for up to a year (Section 214). (89) The statute also providedfor the preemption of state freedom of information laws regarding the public disclosure of suchinformation if it is shared with a state or local government official in the course of DHS's activities. (90) Subsequently, the Department of Defense issued a memo on March 25, 2003 which appliedprohibitions like those in P.L. 107-296 to critical infrastructure information voluntarily submittedto DoD. (91) On April 15, 2003, the Departmentof Homeland Security published interim rules in the Federal Register which implement the critical information infrastructure protection provisions of P.L. 107-296 , and which would extend the rules to other agencies by requiring them to pass similarinformation that they receive to DHS. (92) DHSpublished a final rule and to established the "ProtectedInfrastructure Information (PCII) Program on February 18, 2004. (93) The submitted information willbe withheld from public disclosure under FOIA and "Initially, the PCII Program Office will limit thesharing of PCII to IIAP [DHS's Information Analysis and Infrastructure Protection Directorate]analysts," (94) and then, if accepted as appropriateto be safeguarded pursuant to the law andregulations, to other federal agencies. Submitters are to certify, under penalty of fine orimprisonment, that the submitted information is not subject to disclosure under the rules of anotherdepartment, such as to meet health, safety, or environmental regulations. This later provision isintended to allay some of the fears of groups that suspect companies will submit to DHS informationthey do not want to be disclosed in order to hide from the public information about pollution, newfacilities, or security gaps. "Sensitive But Unclassified" Homeland Security Information P.L. 107-296 also required the President to "prescribe and implement procedures" for federal agencies to, among other things, identify, safeguard, and share with appropriate federal, state, andlocal agencies "homeland security information that is sensitive but unclassified" (Sec. 892). Thisis often abbreviated SHSI. "Homeland security information" was defined as any information possessed by a Federal, State, or local agency that -- (A) relates to the threat of terrorist activity; (B) relates to the ability or prevent,interdict, or disrupt terrorist activity; (C)would improve the identification or investigation of asuspected terrorist or terrorist organization; and (D) would improve the response to a terrorist act(Sec. 892(f)(1)). The law did not define sensitive or "sensitive but unclassified." It stated that, in sharing sensitive but unclassified information with state and local persons, it is the sense of Congress thatthe procedures developed to share information that is sensitive but unclassified may includerequirements for "entering into nondisclosure agreements with appropriate State and local personnel"(Sec. 892(c)(2)(B)). On July 29, 2003, the President assigned his responsibility to provide such procedural guidance to federal agencies and most other responsibilities of sections 892 and 893 of P.L. 107-296 to theSecretary of the Department of Homeland Security (pursuant to Executive Order 13311). (95) DHS wastasked with developing such guidance; no guidance for identifying and sharing sensitive unclassifiedhomeland security information has been issued yet.. Also, DHS is drafting the report onimplementation of section 892 of P.L. 107-296 , as required by Section 893 of the law. Federal Agency Implementation Actions. After the release of the Ashcroft and Card memos some agencies started to respond to this issue in itsbroadest sense. Some issued policy statements or rules relating to SBU even before passage of P.L.107-296 or the issuance of the guidance Congress mandated in the law. Reportedly, some agencies are increasingly inserting restrictions based on the category"sensitive but unclassified" into contracts for unclassified research negotiated with some universities. This has not only raised questions about whether the term should be better defined before it is morewidely used but has caused some universities to object to such clauses and have refused to acceptfederal contract funds for unclassified research that contain them. (96) Some agencies have defined "sensitive" information that will be protected from public disclosure or might be exempt from disclosure under FOIA, and have developed procedures to sharethis information with appropriate officials in federal state and local agencies. Several federalagencies have developed guidance or regulations to define SHSI or SBU and protect it from publicrelease. The Nuclear Regulatory Commission's guidance, which it described as interim pending afinal Administration definition for SHSI, was released on April 4, 2002. It includes such things as"plan specific information, generated by NRC, our licensees, or our contractors, that would clearlyaid in planning an assault on a facility.... Physical vulnerabilities or weaknesses of nuclearfacilities.... Construction details of specific facilities.... Information which clearly would be usefulto defeat or breach key barriers at nuclear facilities," and "Information in any type of comment (e.g.plant status report, press release) that provides the current status or configuration of systems andequipment that could be used to determine facility vulnerabilities if used by an adversary." (97) The U.S. Department of Agriculture issued Regulation 3440-002 on "Control and Protection of 'Sensitive Security Information,' " on January 30, 2003. It said it applied to "...the identificationof unclassified but sensitive information as 'Sensitive Security Information,' ".... (98) The definitionapplies generally to facilities, critical infrastructure and cyber-based systems (Sec. 6). Thisinformation is to be made available only to individual who have a "need-to-know," and theregulation provided procedures to protect it (Secs. 11 and 12 of the regulation). Pursuant to the Transportation Security Regulations, (99) DHS's Transportation SecurityAdministration (TSA) has defined the types of information that are categorized as "sensitive securityinformation," (SSI) and to be protected from disclosure and be exempted from FOIA. There are alsoreports that the TSA has sought to remove unclassified congressional testimony tht was alreadypublished, "in which a government contractor described security problems at the Rochester, N.Y.airport" on the grounds that it included "sensitive security information." (100) Reportedly, the testimonywas removed from some, but not all, sources. The TSA has defined the types of of information thatare SSI and to be protected from disclosure and exempted from FOIA. Some federal agencies have withdrawn from their websites information they have categorized as SBU and that might prove to be useful to terrorists, but which would appear to be accessible tothe public under existing laws such as the Emergency Planning and Community Right-To-Know Actof 1986 (42 U.S.C. 11049), which environmental advocates often cite to obtain information. Forinstance, reportedly, the Department of Energy "removed environmental impact statements whichalerted local communities to potential dangers from nearby nuclear energy plants, as well asinformation on the transportation of hazardous materials." (101) Reportedly, some agencies may bewithholding some information that normally would be made available under FOIA requests. (102) According to one report, the Environmental Protection Agency (EPA) has removed documents fromits website and the Defense Department has removed more than 6,000 documents in response to thememo. (103) The Nuclear Regulatory Commissionis reported to have removed documents from itswebsite. (104) State governments have removeddata from public websites, including "hospital securityplans and information on energy stockpiles of pharmaceuticals" in Florida. (105) The Secretary ofDefense was reported to have said a review of information accessible on DOD websites indicatedover 1,500 instances where posted data were insufficiently reviewed for sensitivity or not adequatelyprotected. He said the trend should be reversed and he advised that " 'Thinking about what may behelpful to an adversary prior to posting any information to the web could eliminate manyvulnerabilities....' " (106) One critic said inresponse, "However, such guidance, taken by itself, woulddictate the elimination of nearly all accurate information from DoD web sites since practicallyanything could be of use to an adversary in some conceivable scenario." (107) It has been reported thatsome information which researchers have sought and that agencies removed from their websites isbeing advertised to researchers through commercial vendors on CD and hard copy. Someresearchers now fear that the deleted information, including USGS topographic map information will"become unavailable due to tighter security .... " (108) This might deny public access to suchinformation of could possibly resulting in a "commercialization of information similar to whathappened with Landsat data in the 1980s, when the satellite imagery became privatized, dramaticallyraising the cost of research." (109) Some assessments made so far of the changes to agency FOIA procedures based on the Ashcroft October 2001 guidance, which restricted discretionary disclosures under FOIA, indicate that the newpolicies appear not to have had a major impact on agency activities. Preliminary analysis issued bythe National Security Archive regarding implementation of this guidance in 35 agencies indicatedthat while a few agencies, such as NASA, EPA, and the Departments of the Interior and Navy, hadto undertook significant activities to comply, most did not. Some agencies reported that the Cardmemo, rather than the Ashcroft memo, would appear to have had more significant effects ondisclosures requested via FOIA. (110) Accordingto a GAO assessment, released in September 2003, the Ashcroft memo appears to have had only limited impact on the processing of FOIA requests. GAO reported that 48% of the FOIA officers surveyed "... did not notice a change with regard tothe likelihood of their agencies' making discretionary disclosures. About one third of the FOIAofficers reported a decreased likelihood; of these officers, 75 percent cite the new policy as a topfactor influencing the change." (111) In contrast, others have concluded that the effects are serious. For instance, the Lawyers Committee for Human Rights, in a 2003 report, described as an example, DOD refusal to releasean unclassified conference report on lessons learned from the 2001 anthrax attacks and concluded"The 'homeland security information' provision represents a sweeping new delegation of authorityto expand secrecy well beyond formal classification procedures in a manner that is likely to furtherimpair Congress' oversight responsibilities. Whether Congress will step in to try to mitigate thispotential remains uncertain." (112) Some speculate that less unclassified information will be made available since passage of Section 214 of P.L. 107-296 , relating to critical infrastructure information. This has been viewedas a controversial provision. Critics say while it would protect sensitive information submitted tothe government about dams, buildings, electric power lines, pipelines, rail transit and so forth. Others say that it "... could make government officials fearful of disclosing information aboutcorporate activities that pose risks to the public." (113) Reportedly, the American Civil Liberties Union(ACLU) was concerned "... that companies could ensure secrecy for a wide range of informationprovided to the government simply by declaring that it involves critical infrastructure and thendemanding confidentiality." (114) It also"contended that the ... law could prevent the disclosure ofpotential health risks from uranium stored at private sites or of defects in railroad tracks ... [or] ...thatthe law might discourage whistle-blowers from coming forward with revelations about corporatewrongdoing." (115) Supporters of withholdingthis kind of information cite the potential threats tohomeland security that may be incurred if such information is allowed to remain widely accessible. They say that potential terrorists could use information about critical U.S. public and privateinfrastructure to design and implement attacks that could destroy U.S. power, communications,transportation and public works networks and facilities. Access to this kind of information, they say,should be given only to those with a need to know. Concerns About Sensitive Information in Non-governmental Research and Scientific Publications Acknowledging the serious potential threats from release of certain kinds of "sensitive"privately developed research information, professional scientific societies and groups haveconsidered developing ways to regulate, review, identify and deal with publication of "sensitive"journal articles. (116) Some believe that privatescientific publishers and editors will feel compelled tomodel their publications policy for sensitive papers on guidelines that the federal governmentdevelops for release of agency documents. There is considerable controversy about this issue. National Academies' Policy. The NationalAcademy of Sciences says it voluntarily deleted from a public version of a report, and put into aseparate appendix, certain information on vulnerabilities of U.S. croplands after review by the U.S.Department of Agriculture, the sponsoring agency. (117) The rationale was that terrorists might be ableto exploit information on vulnerabilities. The information is being made available "on aneed-to-know basis" to a select list of persons including "federal, state, and local governmentworkers, officials involved in homeland security, and animal and plant health scientists, but notmembers of the media or the general public. Anyone interested in the appendix has to file a writtenrequest.... Academy staff members then call applicants, ascertain their identify, and ask why theyneed the report...." (118) Reportedly, the Academycited FOIA exemption 2, "which protects matters'related solely to the internal personnel rules and practices of an agency' " in justifying thisprocedure. (119) Regarding another Academyreport, DoD's Joint Non-Lethal Weapons Directoratereportedly took several months to review a study on non-lethal weapons, finally released inNovember 2002. But there are "conflicting opinions of that review, including whether it was usedimproperly to suppress NAS' criticism of DoD's non-lethal weapons program." (120) On October 18, 2002, the three presidents of the National Academies issued a statement (121) which sought to balance security and openness in disseminating scientific information. Itsummarized the policy dilemma by saying that "Restrictions are clearly needed to safeguard strategicsecrets; but openness also is needed to accelerate the progress of technical knowledge and enhancethe nation's understanding of potential threats." The statement encouraged the government toreiterate that basic scientific research should not be classified, that nonclassified research reportingshould not be restricted, and that vague and poorly defined categories of research information, suchas sensitive but unclassified, should not be used. "Experience shows that vague criteria of this kindgenerate deep uncertainties among both scientists and officials responsible for enforcing regulations. The inevitable effect is to stifle scientific creativity and to weaken national security." The statementoutlined "action points" for both government and professional societies to consider when developinga dialogue about procedures to safeguard scientific and technical information which could possiblybe of use to potential terrorists. The National Academies held a workshop on this subject early in 2003 (122) in cooperation withthe Center for Strategic and International Studies. (123) Reportedly, during this meeting, Administrationofficials, stated the view that scientists should voluntarily craft a policy that protects sensitiveinformation and that they should assist the government "... to help it identify and censor trulysensitive findings," especially in the biological sciences. (124) One result is that the CSIS and theAcademies established a "Roundtable on Scientific Communication and National Security," aworking group composed of scientific and security leaders which will hold continuing discussionsto try to develop a workable publications policy. (125) Other Groups. Some scientists, including Dr. Ronald Atlas, President of the American Society for Microbiology, (126) have suggested that thescientific community should come together to discuss the issue of balancing secrecy in science andscientific publication in a move similar to the 1975 Asilomar conference, which helped to developguidelines for information communication and institutional review boards to monitor and controlthe development of genetically modified organisms. Some suggest that perhaps the NationalAcademy of Sciences or a committee of a relevant professional society be established to evaluatewhether parts of methodology of especially sensitive research should be published. (127) Reportedly,Dr. Anthony Fauci, Director of the NIH National Institute of Allergy and Infectious Diseases(NIAID), which is receiving the bulk of funds allocated to NIH for counterterrorism R&D, said onOctober 3, 2002, that while transparency in publication should be the norm, consideration shouldbe given to developing a "specially appointed committee to determine whether publication isappropriate." He suggested the formation of a panel to determine whether it is appropriate to pursuecertain types of biomedical research," similar to the Asilomar Conference. (128) Others have suggestedthat only certain kinds of sensitive research be restricted or classified, such as research relating tothe "weaponization of biological and toxin agents...." (129) The International Council for Science (ICSU), an international non-governmental scientific association, (130) announced that it will reviewthreats to scientific freedom, including limitations orrestrictions being placed on the conduct and communication of scientific information and thefreedom of movement of scientific materials. (131) The Council of the American Library Associationadopted a resolution at its June 2002 meeting that urged that the provisions relating to "Sensitive butUnclassified" information be dropped from the Card memorandum and that urged "governmentagencies ... ensure that public access to government information is maintained absent specificcompelling and documented national security or public safety concerns." (132) The AmericanAssociation of University Professors (AAUP) announced on September 11, 2002, that it was creatinga committee to review and analyze "post-September 11 developments which impinge on academicfreedom." (133) In January 2004, the American Physical Society (APS) Council released a statement which concluded, "Restricting exchange of scientific information based on non-statutory administrativepolicies is detrimental to scientific progress and the future health and security of our nation. TheAPS opposes any such restrictions, such as those based on the label 'sensitive but unclassified'...." (134) Professional Groups Views That Scientists Should Voluntarily"Self-Regulate" Research and Publications. Some professional scientific groups,such as the American Society for Microbiology, have called upon their members to be cautious aboutreleasing or publishing information which might be useful to potential terrorists, includingspecifically the "methodology" sections of some scientific papers, and have established publicationreview committees to evaluate the sensitivity of articles presented for publication in their journals. (135) The society has established procedures to have an editorial panel review for sensitivity manuscriptswhich deal with "select agents." So far, reportedly only one paper has been asked to be revised. (136) In February 2003, shortly after the Academies/CSIS 2003 meeting, 32 journal editors and scientists, including officials with the American Association for the Advancement of Science andthe American Society of Microbiology, issued a statement on "Statement on Scientific Publicationsand Security," published in Science , Nature and the Proceedings of the NationalAcademy ofSciences , saying that they would take security issues into account when reviewing research papersfor publication. Each scientific publication will develop its own process to review papers submittedfor publication. (137) A National Academy of Sciences report, entitled Biotechnology Research in an Age of Terrorism: Confronting the "Dual Use" Dilemma , published in 2003 and dubbed the "Fink" reportfor its chairman, called for greater self-regulation by scientists, using institutional biosafetycommittees at academic and research institutions, for research that could possibly aid terrorists. Italso urged creation of a new federal National Science Advisory Board for Biodefense to provideguidance to nongovernmental researchers. But it did not propose government control of suchresearch. (138) Partly in reaction, the American Association of University Professors (AAUP) Special Committee on Academic Freedom and National Security in a Time of Crisis, in a report issued in2003, urged a note of caution regarding self-restraint by the scientific community: "the academiccommunity must be careful not to impose on itself a regulatory burden that differs from thegovernment's only in the locus of administration." (139) Although there has been no evidence ofnegative effects on scientific research so far, " a realistic appraisal of what the scientific communityis doing to monitor its own members requires us to be aware of the possibility that researchers andjournal editors might exercise their responsibilities with too much rigor and thus inadvertently givetoo little attention to freedom's needs." (140) Policy Options. Congress has also expressed interest in this topic. Shortly after publication on July 1, 2002, in Science magazine online, of acontroversial scientific paper that described the synthesis of an infectious polio virus from mail ordercomponents, Congressman Weldon introduced H.Res. 514 (107th Congress). Itexpressed "serious concern" about the paper, which was funded by the Defense Advanced ResearchProjects Agency (DARPA), and called for tighter controls on the publication of certain scientificresearch. It also sought to have the scientific community and the executive branch ensure thatinformation that may be used by terrorists is not made widely available, or is properly classified. (141) The resolution was not reported from the committee. For additional information see CRS Report RL31695 , Balancing Scientific Publication andNational Security Concerns: Issues for Congress . Policy Issues About "Sensitive But Unclassified" Information Introduction As explained above, some federal agencies use the definition of "sensitive" in the Computer Security Act of 1987 as the basis for identifying information to label SBU. Other agencies haveexpanded the definition of sensitive in various ways, with some agencies including informationexempt from release under FOIA and others including other kinds of information determined to besensitive to a particular agency's activities. Following the terrorist attacks of September 11, 2001,the Administration instructed agencies to withhold more information when undertaking discretionarydisclosure deliberations under FOIA. Agencies were instructed to balance access to informationwith the needs to protect critical infrastructure information, national security, law enforcementeffectiveness, agency deliberations and decision-making, and related values and interests, and to usespecifically FOIA exemptions 2 and 4. When making such deliberations, they were also told toconsider, on a case by case basis, "benefits that result from the open and efficient exchange ofscientific, technical, and like information." These actions have raised significant policy issues, such as allegations that the terms sensitive and SBU are ambiguous because they are subject to agency interpretation. This, some say, makesit difficult to identify and safeguard such information, while raising questions about the need foruniformity in standards. Some say expanded interpretation of FOIA exemptions 2 and 4 to identifySBU divides those who want increased security of information from those who want public accessto the information now exempted in order to protect public and community oversight, civil liberties,and accountability, to promote the conduct of science, or to monitor private sector activities. Theprocedures mandated in P.L. 107-296 are intended to guide agencies toward the use of similar procedures to identify, share, and safeguard sensitive but unclassifed homeland security information. As will be discussed below, there has been considerable debate about this content of these proposedguidelines. Historical Controversy About "Sensitive But Unclassified" Even before the terrorist attacks of 2001, there had been considerable controversy about the meaning and use of the term SBU. One position is that agencies should interpret the term morebroadly to categorize and safeguard more information as SBU; alternatively, others say that thiscategory is often imprecise and leads to indiscriminate withholding of information from the public. For instance, a February 28, 1994 report, Redefining Security , by the Joint Security Commission prepared for the Director of the CIA and the Secretary of Defense, which according to the Federationof American Scientists (FAS) "was the first significant post-cold war examination of governmentsecurity policies and practices," (142) estimatedthat as much as 75% of all government-held informationmay be sensitive and unclassified. It recommended that more attention should be paid to protectingsuch information and labeling it as SBU within the defense, intelligence and other sectors ofgovernment as well as "... information that, while neither classified nor government-held, is crucialto U.S. security in its broadest sense." Continuing, it said, We have in mind information about, and contained in, our air traffic control system, the social security system, the banking, credit, and stock marketsystems, the telephone and communications networks, and the power grids and pipeline networks. All of these are highly automated systems that require appropriate security measures to protectconfidentiality, integrity and availability." (143) In a contrasting position, the aforementioned Moynihan commission report, entitled Report of the Commission on Protecting and Reducing Government Secrecy, 1997 , noted that agencies oftenuse different types of mandates to justify protecting unclassified information and these range fromthe very broad to specific. This causes problems because "... [V]irtually any agency employee can decide which information is to be so regulated;" there is no oversight of this categorization and agencies controlaccess "though a need-to know process," and "... the very lack of consistency from one agency toanother contributes to confusion about why this information is to be protected and how it is to behandled. These designations sometimes are mistaken for a fourth classification levels, causingunclassified information with these markings to be treated like classifiedinformation." (144) As a result, the Commission concluded that more information is protected than is warranted. An attempt had been made in December 1994, the report said, to develop a policy to address sensitive but unclassified information, but it "met with great resistance by both the civilian side ofthe Government and industry" because the process was controlled by the Security Policy Board,which dealt largely with classified information and was controlled by the defense and intelligencecommunity. (145) The report also found thatoverzealous labeling of information as SBU could beavoided if more attention were devoted to improving the security of governmentcomputer-information systems (146) to preventunauthorized access. Critiquing the wide scope of the current DOE definition of SBU (see above under the section, "Department of Energy"), a Center for Strategic and International Studies (CSIS) commissiondealing with DOE laboratories reported in 2002: The Department's official definition is so broad as to be unusable. ...There is no ... common understanding of how to control ... [SBU] ..., no meaningfulway to control it that is consistent with its level of sensitivity, and no agreement on what significanceit has for U.S. national security. Sensitive unclassified information is causing acute problems atDOE. ... Security professionals find it difficult to design clear standards for protection. Scientistsfeel vulnerable to violating rules on categories that are ill defined. Without clear definition orstandards for protection, those who oversee implementation for the Department find it extremelydifficult to measure laboratory performance. ... Yet the Department tends to treat this information as if subject to security measures not unlike those for classified information. It is considered whendeveloping background checks for foreign visitors and when reviewing presentations that mayinvolve sensitive unclassified information. ... The lack of management discipline around sensitive unclassified information both hinders the scientific enterprise and reduces the ability of security andcounterintelligence professionals to control information wherenecessary. (147) The CSIS commission recommended that DOE avoid using the definition and label "SBU." "By avoiding these labels," it said, "the Department can depart from treating unclassified informationas if subject to national security controls. The Department should have just three classes ofinformation: (1) classified; (2) unclassified but subject to administrative controls; and (3)unclassified, publicly releasable." (148) DOEshould also avoid use of a sensitive subjects list or changeits name, since the list deals primarily with items and technology potentially subject to exportcontrol. (149) "If information is not classified butrequires administrative control," DOE shouldconsider using "the category of information designated official use only (OUO)...." "A single officewithin DOE administers OUO, which has guidelines established in law and unclassified informationcould be reviewed for applicability under the OUO statutes. Existing statutes governing certain typesof sensitive unclassified information could remain unchanged and distinct from OUO (i.e.unclassified but controlled nuclear information [UCNI]), as long as they provide sufficiently clearguidelines for control." (150) During the 107th Congress, congressional interest in this topic was reflected in a recommendation made by the congressional Joint Inquiry Into September 11, which among otherthings recommended a review encompassing the concepts of sensitive or classified information: Congress should also review the statutes, policies and procedures that govern the national security classification of intelligence information and itsprotection from unauthorized disclosure. Among other matters, Congress should consider the degreeto which excessive classification has been used in the past and the extent to which the emergingthreat environment has greatly increased the need for real-time sharing of sensitive information. TheDirector of National Intelligence, in consultation with the Secretary of Defense, the Secretary ofState, the Secretary of Homeland Security, and the Attorney General, should review and report tothe House and Senate Intelligence Committees on proposals for a new and more realistic approachto the processes and structures that have governed the designation of sensitive and classifiedinformation. The report should include proposals to protect against the use of the classificationprocess as a shield to protect agency self-interest. (151) Critiques of the White House (Card) Memorandum While many observers agree with the objectives and implementation of the March 2002 Card memorandum in order to lessen potential terrorist attacks, some critics have urged caution ininterpreting it and the accompanying guidance which appears to allow agencies to widen types ofinformation to be exempt from disclosure under FOIA. It has been argued that "Several of the newrestrictions on information are not congruent with the existing legal framework defined by theFreedom of Information Act (FOIA) or with the executive order [Executive Order 12598] thatgoverns National Security classification and declassification." (152) Some have questioned the authorityof national security directives pertaining to "sensitive, but unclassified" information or say thatwhere Congress has statutorily prescribed policy contrary to information management policyprescribed in presidential directives or agency regulations, the supremacy of statutory law wouldseemingly prevail. One critic of the March 2002 White House memo cautioned that the term"sensitive but unclassified" may be "the most dangerous level of secrecy, because it was not defined[in the past] and there were no channels of appeal." (153) Similarly, others say that "... no administrativemechanisms have been developed to allow those who disagree with the decision to withholdinformation to challenge the decision or to seek some remedy to the decision. To make this policywork, the federal government needs to develop procedures that will allow citizens the ability todisagree with the conclusions of the agency denying or withholding the information." (154) Policy Options for "Sensitive But Unclassified" Information Some who seek to clarify policies for controlling public or private scientific information thatis not classified believe that scientific progress and innovation, and even the fight against terrorism,will be harmed by limiting information flow. Yet these critics share the goal of trying to keeppotential terrorists from obtaining information that could be used to threaten the United States. Some have called for closer cooperation between the scientific and intelligence community to draftguidelines relating to safeguarding scientific information that might be useful to potentialterrorists. (155) These conflicting objectives raiseperplexing dilemmas for policymakers and scientistsalike. Policy options discussed below focus on several parts of this debate, including establishinguniformity in definitions and implementing guidelines; establishing an appeals process for SBUinformation; and the potential to classify or label as SBU more research information. Considerations Related to a Uniform Definition of SBU. Since agencies define the term SBU differently, various interpretations couldlead to the possibility that information that should not be released to the public because of itspotential value to terrorists might be released; that agencies might not release SBU information toother agencies, or to state or local officials; or that the public may be denied access to informationwhose release might be permitted. Questions about ambiguities in the definition of the term SBUmay raise interest about legislating, or overseeing the process of developing, uniform criteria forSBU, especially since, in P.L. 107-296 , Congress encouraged nonfederal first responders tosafeguard such information via nondisclosure agreements. (156) In order help set standards for SBU and SHSI, and to resolve policy dilemmas surrounding definitions and procedural controls, after release of the Card memorandum in March 2002, the WhiteHouse Office of Homeland Security was reported to have drafted a definition for SHSI, (157) and that"originally, there was an initiative to issue a Presidential Directive on unclassified but HomelandSecurity-sensitive information." (158) This wasnever publically released, but several agencies,including the Nuclear Regulatory Commission, utilized it when developing criteria to define SHSIas discussed in the Card and Ashcroft memos. (159) Subsequently the Office of Homeland Securityasked the White House Office of Science and Technology Policy (OSTP) and the Office ofManagement and Budget to develop guidance, which had been expected to be released in 2002 or2003. An objective of the proposed guidance was to withhold information from persons who shouldnot have access to it, but to allow such information to be shared with those who might have a needfor it, such as law enforcement and emergency response personnel. (160) OMB and OSTP met with stakeholder groups, including academics and scientists, to obtain their views about how to develop guidance. (161) During a meeting held in late August 2002, withacademic and scientific officials and others discussing the March 2002 memos, their implementation,and definitions, "[a]cademic and scientific representatives ... argued [that] basic and appliedresearch, even research performed by the government, should not be subject to [sensitive butunclassified homeland security information] SHSI guidelines and advocated following existing rulesfor the handling of sensitive information, such as the Centers for Disease Control and Prevention(CDC) guidance for the handling of select agents." (162) Academic officials reportedly left the meetingconvinced that the March memo applied only to "information that was generated and owned by thegovernment, and not university research," nor to university research funded by federal governmentgrants. (163) During hearings on ConductingResearch During the War on Terrorism: BalancingOpenness and Security, held by the House Science Committee on October 10, 2002, White HouseOffice of Science and Technology (OSTP) Director John Marburger testified that the Administrationwants "to ensure an open scientific environment" while maintaining homeland security. He saidSHSI would apply to federal intelligence, law enforcement and public health information thatgenerally is not made public, but would not necessarily include research results. (164) Several otherwitnesses endorsed this position. According to OSTP Director Marburger, SBU information related to homeland security "... may be withheld from public disclosure only when it warrants protection under one of the nineexceptions of the Freedom of Information Act." (165) The relationship between FOIA and theAdministration's homeland security information policies was the theme of a conference held by theDepartment of Justice's Office of Information and Privacy for FOIA officers during June 25, 2004. (166) The topics of the meeting were summarized in a FOIA Post article, but the discussion summarieswere not released to the public. Despite many meetings in 2002 and 2003 with various stakeholders and apparent attempts to draft policy, no SBU or SHSI policy guidance was issued. Before July 2003, the OMB/OSTP guidance had been expected to constitute the President's instructions to federal agencies to "prescribe and implement procedures" to "identify and safeguardsensitive homeland security information that is sensitive but unclassified," and to share thisinformation with other federal agencies and appropriate State and local personnel, as required bysection 892 (a) (1) (A)(B) of P.L. 107-296 . The Secretary of DHS was assigned these functionspursuant to Executive Order 13311, July 29, 2003 and the DHS Office of General Counsel was,reportedly, developing the guidelines mandated by P.L. 107-296 . It is not known which perspectiveswill be used in guidance to federal agencies -- the limited definition of sensitive as in the ComputerSecurity Act of 1987, the more expansive, but somewhat limited, conceptualization of SBU in theCard memorandum and attachments, or the broader conceptualization of SBU used by theDepartment of Energy. It is expected that the definition will extend beyond SHSI per se , that is,beyond information not routinely released to the public, such as law enforcement data, personnelinformation, and information on computer vulnerabilities, to include also a conceptualization of SBUinformation that could extend to some kinds of scientific and technical data. Some have speculated that the delay in issuing guidance is due to disagreement about whether there should be public comment -- which might involve discussions raised by critics relating toensuring allowing public access to information that could be used to continue to permit public andcommunity oversight of governmental and industrial activities. Another concern that might be raisedby the public in commenting on proposed regulations could focus on penalties for violatingnondisclosure agreements that might affect unsuspecting recipients of SBU information. (167) Otherssay the delay "... may be ... a recognition of the voluntary restraints the academic community hasimposed on itself," referring specifically to professional groups' activities in support of voluntaryself-restraint (168) for sensitive scientificinformation. Although the law does not require publiccomment, an OMB official (169) and a Departmentof Justice release had said that SHSI guidance wouldbe subject to public notice comment before the regulation was implemented. (170) It is not clearwhether the Department of Homeland Security will seek public comment now that it has been givenresponsibility to draft the regulations. (171) Over75 public groups, "representing journalists, scientists,librarians, environmental groups, privacy advocates, and others" wrote to DHS Secretary in August2003, urging that he allow public input on procedures to be prescribed and implemented foridentifying, safeguarding, and sharing the sensitive but unclassified homeland security informationreferenced in section 892. (172) Factors Agencies Might Use in Developing Nondisclosure Policyfor SBU Information. The Card and Ashcroft memos, together with section 892of P.L. 107-296 , have given agencies a basis to make decisions about restricting access to certainelectronic and hard copy information that previously may have been accessible to the public, butwhose continued distribution might be detrimental to homeland security. But it is unclear whatconceptualizations agencies and the DHS guidance will use. As noted above, agencies havediscretion to identify and withhold from the public, as sensitive or as sensitive but unclassified,information which they determine is subject to nondisclosure (pursuant to both the ComputerSecurity Act of 1987 and the Administration's interpretation of FOIA). Since the basis of thesedeterminations is subject to interpretation, both agency program managers and the public who mightseek access to such information may confront ambiguity in definitions and different kinds ofbalancing tests. There are questions about the uniformity of definitions used by different agenciesand which values or objectives should be encompassed in a risk analysis on which suchnondisclosure determinations might be based. The definition of what information is SBU, at a minimum, is likely to encompass concepts that are defined as sensitive in the Computer Security Act 1987, that is to protect information whosedisclosure "could adversely affect the national interest or the conduct of Federal programs, or theprivacy to which individuals are entitled under ... the Privacy Act." Also, it may encompass theNIST criteria for sensitive information protection: confidentiality, integrity, and availability. (173) Additionally, among the topics the Administration instructed agencies to consider when making"discretionary disclosures" of SBU homeland security-related information that could be exempt fromFOIA is the "need to protect critical systems, facilities, stockpiles, and other assets from securitybreaches and harm -- and in some instances from their potential use as weapons of massdestruction in and of themselves." (174) TheAdministration also stressed that agencies, when applyingexemption 2, should consider the needs for an informed citizenry to ensure accountability,"safeguarding our national security, enhancing the effectiveness of our law enforcement agencies,protecting sensitive business information, and not least preserving personal privacy." (175) Also to beconsidered were " ... benefits that result from the open and efficient exchange of scientific, technical,and like information." Criteria for sensitive but unclassified SHSI also are likely to reference thetypes of information P.L. 107-296 identifies as "homeland security information" -- "any informationpossessed by a Federal, state, or local agency that -- relates to the threat of terrorist activity; relatesto the ability to prevent, interdict, or disrupt terrorist activity; would improve the identification orinvestigation of a suspected terrorist or terrorist organization, or would improve the response to aterrorist act" (Sec. 892 (f)). Because of the difficulty of balancing the needs for information with security, some critics of the White House March 2002 memo have focused on the need for developing guiding principles. According to Steven Aftergood and Henry Kelly, "In deciding how to treat such information, theadministration should enunciate a clear set of principles, as well as an equitable procedure forimplementing them and appealing adverse decisions," with the appeals procedure "outside theoriginating agency." (176) They said that "Theguiding principles could be formulated as a set ofquestions, such as: Is the information otherwise available in public domain? (Or can it be readily deduced from first principles?) If the answer is yes, then there is no valid reasonto withhold it, and doing so would undercut the credibility of official information policy. Is there specific reason to believe the information could be used by terrorists? Are there countervailing considerations that would militate in favor ofdisclosure, i.e., could it be used for beneficial purposes? Documents that describe in detail howanthrax spores could be milled and coated so as to maximize their dissemination presumptively posea threat to national security and should be withdrawn from the public domain. But not everydocument that has the word "anthrax" in the title is sensitive. And even documents that are in someways sensitive might nevertheless serve to inform medical research and emergency planning andmight therefore be properly disclosed. Is there specific reason to believe the information should be public knowledge? It is in the nature of our political system that it functions in response to publicconcern and controversy. Environmental hazards, defective products, and risky corporate practicesonly tend to find their solution, if at all, following a thorough public airing. Withholdingcontroversial information from the public means short-circuiting the political process, and riskinga net loss in security. Given the contending values and factors that affect a workable definition and implementing rules, Congress may monitor the guidance that DHS develops to assist agencies in identifyingsensitive homeland security information and SBU. Because of the potential implications of theforthcoming DHS concepts for private scientific publications policy, various constituencies andscientific groups will undoubtedly seek to examine the balance between security and access toinformation in these guidelines. The Potential to Classify More Research Information. Several activities have occurred that might increase the amount ofscientific research information that is classified. As noted above, NSDD 189 and Executive Order12958 both prohibit classification of certain kinds of federal scientific research information exceptfor reasons of national security. NSDD 189 deals with basic research and Executive Order 12958applies the prohibition to fundamental, or what it defines as basic and applied, research. During2001 and 2002, the heads of several federal agencies with substantial research responsibilities, whodid not have classification authority under Executive Order 12958, the prevailing executive orderon classifying information, (177) were givenoriginal classification authority. These include theSecretaries of Health and Human Services (178) and of Agriculture, (179) and also theAdministrator of theEnvironmental Protection Agency. (180) Someof the agencies with new classification authority,especially Health and Human Services and Agriculture, support substantial amounts ofcounterterrorism research, as well as of fundamental research in a variety of scientific and technicalareas, often performed on an extramural basis by researchers in colleges and universities. (181) New Executive Order 13292, issued on March 25, 2003, amends Executive Order 12958 on classified national security information. The amendment permits classification of "scientific,technological, or economic matters relating to the national security, which includes defense againsttransnational terrorism " (new clause in italics, sec. 1.4 (e)). The amendment appears to highlightthat national security-related scientific, technological, and economic information dealing withdefense against international terrorism may be classified. Given that the definition of "nationalsecurity," in the two executive orders is not changed and that definition could have encompassedmatters related to transnational terrorism, it is unclear if the amended order widens the scope ofscientific, technological, and economic information to be classified. (182) In addition, the Department of Defense reportedly plans to reissue its guidelines relating to pre-publication review of extramural research that it funds outside of its own laboratories. Recentlyseveral university groups wrote a letter to the Director of the Office of Science and TechnologyPolicy complaining that more agency program officials are inserting pre-publication review clausesinto contracts, including for fundamental research, without explanation as to their justification. Thishas a "pernicious effects," they said, "not only with regard to the freedom to publish but also withregard to employment of foreign-born students and researchers on federally funded research projects. If the contract clauses require blanket screening of any and all foreign-born scientists, universitieswill object." (183) Agencies which were given original classification authority in the last few years are now developing implementing guidelines and appointing security officers in operating units. Given thelong-standing federal policy embodied in Executive Order 12598 and in NSDD 189 of notclassifying basic scientific research, except if release would threaten national security, the balancebetween science and security in agency guidelines will remain a topic of interest and concern. Interest in this topic may be heightened because of the recent changes made in Executive Order13292 to the definition of the kinds of scientific, technological, and economic information that maybe classified. The scientific and academic communities are expected to pay close attention to these issues. Among the questions that may be raised are: Will new controls be placed on federally funded research, including both intramural research conducted in an agency's laboratories, and on extramural research, that mightbe federally funded but conducted in nonfederal academic and industrial research laboratories? Will controls encompass both classification levels and use of designations such as sensitive and sensitive but unclassified? Will designation of a controlled research project be made before the award offunds and the start of a project, or after a project is completed and during a pre-publication reviewphase? What kinds of requirements will be placed upon nonfederal researchers tosafeguard research information? How will such controls affect the conduct of academic research for the federalgovernment? How will such controls differ from the controls on proprietary researchinformation that are deemed acceptable by most academic institutions eager to receive financialsupport from industry? Will research agencies with original classification authority modify theirlong-standing policies of encouraging publication and dissemination of federally funded researchresults? Under the expanded definition of scientific and technological informationsubject to classification in Executive Order 13292, will agencies classify information that might haveotherwise been categorized as SBU? Appeals Process for SBU Information. Anothercontinuing issue is expected to be an appeals process for designating information as SBU. StephenAftergood, with the Federation of American Scientists (FAS), suggested that " ... An appeals panelthat is outside of the originating agency and that therefore does not have [the] same bureaucraticinterests at stake would significantly enhance the credibility of the deliberative process. The efficacyof such an appeals process has been repeatedly demonstrated by an executive branch body called theInteragency Security Classification Appeals Panel (ISCAP)." (184) Another suggested approach is that"To solve disputes that develop out of the new category of 'sensitive but unclassified' information,one could allow the Information Security Oversight Office (a part of the Executive Branch) toreceive appeals to review disputes and challenges to executive agency decisions regarding the releaseof documents and reports The Office would oversee the appeals, it would have another set of eyesthat would examine the requested information and review it in a different context that the executiveagency. The ISOO might be able to work with both the agency involved and those requesting theinformation to reach a compromise that everyone could accept. It would also have the effect ofkeeping the oversight of the information in the hands of the executive branch." (185) Determination of "Tiered" Access to SBU Information. Some agencies have discussed developing procedures to permit"tiered," or selective, access to qualified and pre-screened individuals for some scientific andtechnical information, that could be categorized as SBU or SHSI. Reportedly, EPA requiresresearchers to obtain sponsorship from a senior EPA official, have their requests approved inadvance and register before using the Envirofacts database. (186) EPA also has issued instructions toutilities to submit threat or vulnerability assessments to the agency. Using a protocol issued inDecember 2002, reportedly, EPA "... will keep sensitive information in the assessments secure. Thedocuments will be kept in one location under lock and only individuals designated by EPA will haveaccess to them." (187) EPA also will release otheragency information to selected individuals only inhard copy at EPA offices and libraries throughout the nation. (188) The Federal Energy RegulatoryCommission (FERC) issued a final rule, effective April 2, 2003, which limits release of its criticalenergy infrastructure information on a selective or "tiered" basis to members of the public based ontheir need to know and the legitimacy of their need as determined by the Commission. (189) FERC saidit would not alter its responsibilities under FOIA, but appears to be broadening, or at a minimum,reinterpreting implementation of exemptions to disclosure under FOIA. (190) The U.S. GeologicalSurvey has announced that it will implement four levels of control for its information products: a. No sensitivity is determined. No restriction is required. b. Product is determined to be sensitive. Do not distribute. c. Sensitivity has beendetermined for a previously distributed product that is widely available. Withdrawal would beineffective. Continue distribution of current version. Restrict distribution of new features to updatesfor l year. d. Product is restricted according to directive from another agency with specific authorityfor public safety or national security. (191) The equity of procedures for "tiered" or selective access; the need to create public and or private panels to examine controls on the release of some information; and the need to clarify relationshipsbetween the private sector and the government with respect to safeguarding information in scientificpublications to protect the public interest are issues which may be raised in the legislative context. Appendices Appendix 1. History of Atomic Energy "Restricted Data" Controls The development and history of atomic energy restricted data controls were explained in a document prepared in 1989 by Arvin S. Quist, a classification officer at the Oak Ridge GaseousDiffusion Plant, Oak Ridge National Laboratory, which is operated on contract for the Departmentof Energy. (192) Excerpts below from the Quistdocument explain the relevant provisions of these laws. In the ... Atomic Energy Act of 1946, Congress established a special category of information called "Restricted Data." Restricted Data was definedto encompass "all data concerning the manufacture or utilization of atomic weapons, the productionof fissionable material, or the use of fissionable material in the production of power." (193) Thus, byoperation of law, nearly all atomic (nuclear) energy information fell within the definition of RD. TheAtomic Energy Act authorized the AEC to control the dissemination of RD, specifying as aprerequisite to access to this information that an individual must have a security clearance.... ... Two particularly unique and significant aspects ofRD warrant emphasis. First, a positive action is not required to put information into the RD category.If information falls within the Act's definition of RD, it is in this category from the moment of itsorigination; that is, it is "born classified." The government has no power to determine thatinformation is RD ... only the power to declassify RD. [In practice, the Government (Departmentof Energy) determines whether information falls within the definition of Restricted Data.] ... The"born classified" concept is unique with RD. This concept assumes that newly discovered atomicenergy information might be so significant with respect to the nation's security that it requiresimmediate and absolute control. ...National Security Information is not so designated until anoriginal classifier makes a positive determination that the information falls within the definition ofNSI .... Although RD is said to be born classified, the AtomicEnergy Act does not specifically designate it as "classified" information. The Act defines RD andprescribes very strict methods for its control without stating that it is "classified" information. However, the Act does describe declassification of RD; therefore, by implication, RD is "classified." A second unique aspect of RD is that information does not have to be owned or controlled by thegovernment to be classified as RD. ... The circumstance could even arise in which an individualcould originate RD and then not be allowed to possess it because of lack of security clearance or"need to know." The Atomic Energy Act does not forbid an individual to generate RD, but, onceRD is generated, the Act prohibits its communication to persons not authorized to receive it. In 1951, Congress amended the Atomic Energy Act of 1946 to make certain atomic energy information available to other countries for purposes of weapons development, but the NationalSecurity Council had to approve these information flows. The Atomic Energy Act of 1954 amendedthe 1946 act to include "an increased emphasis on wider dissemination of atomic energy information,to make more of it accessible to U.S. industry and to the world in order to permit the developmentof nuclear reactors for commercial production of electric power ... as a consequence of PresidentEisenhower's [1953] Atoms For Peace initiative ...." The Quist document says: With respect to the control of information, the 1954 Act stated: "It shall be the policy of the Commission to control thedissemination and declassification of Restricted Data in such a manner as to assure the commondefense and security. Consistent with such policy the Commission shall be guided by the followingprinciples: (a) Until effective and enforceable international safeguards against the use of atomicenergy for destructive purposes have been established by an international arrangement, there shallbe no exchange of Restricted Data with other nations except as authorized by section 2164 of thistitle; and (b) The dissemination of scientific and technical information relating to atomic energyshould be permitted and encouraged so as to provide that free interchange of ideas and criticismwhich is essential to scientific and industrial progress and public understanding and to enlarge thefund of technical information. ...[42 U.S.C. sec. 2161.]" ... The 1954 Actadded "industrial progress," "public understanding," and "enlarge the fund of technical information"as reasons to disseminate atomic energy information. Those additions provided the basis for thesubsequent declassification or downgrading of much atomic energyinformation. ... The 1946 Act had permitted declassification of RDonly when the AEC determined that it could be published without "adversely affecting the commondefense and security .... The 1954 Act changed "adversely affecting" to "undue risk," therebyshifting the balancing test towards declassification of more information .... The increased emphasisof the 1954 Act in disseminating atomic energy information is further exemplified by a continuousreview requirement...: ... Prior to the Atomic Energy Act of 1954, privatepersons could not have access to RD for commercial purposes (e.g., development of commercialnuclear power reactors). The only reason for allowing private persons to have access to such datawas on a need-to- know basis, in connection with national defense work. Although the 1954 Actenvisioned the commercial development of nuclear energy, the Act contained no express provisionspermitting access to RD for commercial purposes. This hurdle was overcome in 1956 when the AECused its administrative powers to establish an Access Permit Program ... Under this program, apermitted is able to have access to RD "applicable to civil uses of atomic energy for use in hisbusiness, trade or profession." Appendix 2. Foreign Affairs Manual on SBU Information (194) 12 FAM 540, SENSITIVE BUT UNCLASSIFIED INFORMATION (SBU) (TL:DS-61; 10-01-1999) 12 FAM 541 SCOPE (TL:DS-46; 05-26-1995) a. SBU describes information which warrants a degree of protection and administrativecontrol that meets the criteria for exemption from public disclosure set forth underSections 552 and 552a of Title 5, United States Code: the Freedom of Information Act andthe Privacy Act. b. SBU information includes, but is not limited to: (1) Medical, personnel, financial, investigatory, visa, law enforcement, or otherinformation which, if released, could result in harm or unfair treatment to any individualor group, or could have a negative impact upon foreign policy or relations; and (2) Information offered under conditions of confidentiality which arises in the course ofa deliberative process (or a civil discovery process), including attorney-client privilege orwork product, and information arising from the advice and counsel of subordinates topolicy makers. 12 FAM 542 IMPLEMENTATION (TL:DS-46; 05-26-1995) Previous regulations regarding LOU material are superseded and LOU becomes SBU asof the date of this publication. 12 FAM 543 ACCESS, DISSEMINATION, AND RELEASE (TL:DS-61; 10-01-1999) a. U.S. citizen direct-hire supervisory employees are responsible for access, dissemination,and release of SBU material. Employees will limit access to protect SBU information fromunintended public disclosure. b. Employees may circulate SBU material to others, including Foreign Service nationals,to carry out an official U.S. Government function if not otherwise prohibited by law,regulation, or interagency agreement. c. SBU information is not required to be marked, but should carry a distribution restrictionto make the recipient aware of specific controls. To protect SBU information stored orprocessed on automated information systems, the requirements found in 12 FAM 600(Information Security Technology) must be met. 12 FAM 544 SBU HANDLING PROCEDURES: TRANSMISSION, MAILING, SAFEGUARDING/STORAGE, AND DESTRUCTION (TL:DS-47; 06-08-1995) a. Regardless of method, transmission of SBU information should be effected throughmeans that limit the potential for unauthorized public disclosure. Since informationtransmitted over unencrypted electronic links such as telephones may be intercepted byunintended recipients, custodians of SBU information should decide whether specificinformation warrants a higher level of protection accorded by a secure fax, phone, or otherencrypted means of communication. b. SBU information may be sent via the U.S. Postal Service, APO, commercial messenger,or unclassified registered pouch, provided it is packaged in a way that does not discloseits contents or the fact that it is SBU. c. During nonduty hours, SBU information must be secured within a locked office or suite,or secured in a locked container. d. Destroy SBU documents by shredding or burning, or by other methods consistent withlaw or regulation. 12 FAM 545 RESPONSIBILITIES (TL:DS-46; 05-26-1995) Unauthorized disclosure of SBU information may result in criminal and/or civil penalties.Supervisors may take disciplinary action, as appropriate. State offices responsible for theprotection of records are outlined in 5 FAM. See 3 FAM for regulations and process ondisciplinary actions. (12 FAM 550 provisions regarding incidents/violations do not pertainto SBU.) Appendix 3. Excerpts From ISOO/OIP Guidance, March 18, 2002 (195) III. Sensitive But Unclassified Information In addition to information that could reasonably be expected to assist in the development or use of weapons of mass destruction, which should beclassified or reclassified as described in Parts I and II above, departments and agencies maintain andcontrol sensitive information related to America's homeland security that might not meet one ormore of the standards for classification set forth in Part 1 of Executive Order 12958. The need toprotect such sensitive information from inappropriate disclosure should be carefully considered, ona case-by-case basis, together with the benefits that result from the open and efficient exchange ofscientific, technical, and like information. All departments and agencies should ensure that in taking necessary and appropriate actions to safeguard sensitive but unclassified information relatedto America's homeland security, they process any Freedom of Information Act request for recordscontaining such information in accordance with the Attorney General's FOIA Memorandum ofOctober 12, 2001, by giving full and careful consideration to all applicable FOIA exemptions. See FOIA Post , "New Attorney General FOIA Memorandum Issued" (posted 10/15/01) (found atwww.usdoj.gov/oip/foiapost/2001foiapost19.htm), which discusses and provides electronic links tofurther guidance on the authority available under Exemption 2 of the FOIA, 5 U.S.C. � 552 (b)(2),for the protection of sensitive critical infrastructure information. In the case of information that isvoluntarily submitted to the Government from the private sector, such information may readily fallwithin the protection of Exemption 4 of the FOIA, 5 U.S.C. � 552 (b)(4). As the accompanying memorandum from the Assistant to the President and Chief of Staff indicates, federal departments and agencies should not hesitateto consult with the Office of Information and Privacy, either with general anticipatory questions oron a case-by-case basis as particular matters arise, regarding any FOIA-related homeland securityissue. Likewise, they should consult with the Information Security Oversight Office on any matterpertaining to the classification, declassification, or reclassification of information regarding thedevelopment or use of weapons of mass destruction, or with the Department of Energy's Office ofSecurity if the information concerns nuclear or radiologicalweapons.

The U.S. Government has always protected scientific and technical information that might compromise national security. Since the 2001 terrorist attacks, controls have been widened onaccess to information and scientific components that could threaten national security. The policychallenge is to balance science and security without compromising national security, scientificprogress, and constitutional and statutory protections. This report summarizes (1) provisions of thePatent Law; Atomic Energy Act; International Traffic in Arms Control regulations; the USAPATRIOT Act, P.L. 107-56 ; the Public Health Security and Bioterrorism Preparedness and ResponseAct of 2002, P.L. 107-188 ; and the Homeland Security Act, P.L. 107-296 , that permit governmentalrestrictions on either privately generated or federally owned scientific and technical information thatcould harm national security; (2) the evolution of federal concepts of "sensitive but unclassified"(SBU) information; (3) controversies about pending Department of Homeland Security guidance onfederal SBU and "Sensitive Homeland Security Information" (SHSI); and (4) policy options. Even before the terrorist attacks of 2001, federal agencies used the label SBU to safeguard from public disclosure information that does not meet standards for classification in Executive Order12958 or National Security Decision Directive 189. New Executive Order 13292 might widen thescope of scientific and technological information to be classified to deter terrorism. SBU has notbeen defined in statutory law. When using the term, some agencies refer to definitions for controlledinformation, such as "sensitive," in the Computer Security Act, and to information exempt fromdisclosure in the Freedom of Information Act (FOIA) and the Privacy Act. The identification ofinformation to be released pursuant to these laws may be discretionary, subject to agencyinterpretation and risk analysis. The White House and the Department of Justice recently widenedthe applicability of SBU. Critics say the lack of a clear SBU definition complicates designing policies to safeguard such information and that, if information needs to be safeguarded, it should be classified. Others say thatwider controls will deny access to information needed for oversight and scientific communication. P.L. 107-296 required the President to issue guidance on safeguarding SBU homeland securityinformation, a function assigned to the Department of Homeland Security Secretary in ExecutiveOrder 13311; action is pending. Issues of possible interest to Congress include designing uniformconcepts and procedures to share and safeguard SBU information; standardizing penalties forunauthorized disclosure; designing an appeals process; assessing the pros and cons of wider SBUcontrols; and evaluating the implications of giving some research agency heads originalclassification authority. On February 20, 2004, DHS published a rule to protect voluntarilysubmitted critical infrastructure information. Some professional groups are starting to limitpublication of some "sensitive" privately controlled scientific and technical information. Theiractions may be guided by federal policy. This report will not be updated.

CRS_RS20531

Introduction According to the National Institute on Deafness and Other Communication Disorders, exposure to loud sounds is responsible for hearing impairment in 10 million of the nearly 30 million people with hearing loss in the United States, and another 30 million people are daily exposed to dangerous noise levels. Many individuals are also regularly exposed to sound levels that may not lead to hearing loss, but can be intrusive and impair one's quality of life. Several federal laws require the federal government to maintain standards for various sources of noise. However, the standards do vary in stringency among individual sources. Although there is some variance among the standards, all of them limit sound levels at least to a degree that would prevent human hearing loss. The responsibility for setting and enforcing noise control standards is divided among multiple federal agencies. In the past, the Environmental Protection Agency (EPA) coordinated all federal noise control activities through its Office of Noise Abatement and Control. However, Congress phased out the office's funding in FY1983 as part of a shift in federal noise control policy to transfer the primary responsibility for regulating noise to state and local governments. Although EPA no longer plays a prominent role in regulating noise, its past standards and regulations remain in effect, and other federal agencies continue to set and enforce noise standards for sources within their regulatory jurisdiction. Public interest in the federal regulation of noise and the adequacy of existing standards continues to be strong, especially among communities where sources of noise have proliferated, and as residential development has resulted in people living closer to sources of noise. Considering that existing standards generally are protective against hearing loss, the primary concern among the public has been whether the standards should be tightened to protect the quality of life in communities where sound levels may be perceived as annoying or intrusive, but not necessarily harmful to human hearing. Potential effects of various sound levels, and the roles of federal, state, and local governments in regulating individual sources of noise, are discussed below. How Loud Is Too Loud? Sound is measured in units of decibels (dbA), and an increase of 10 dbA represents sounds that are perceived to be twice as loud. There is broad consensus among regulators in the United States that constant or repeated exposure to sound levels in the vicinity of 90 dbA and higher can lead to hearing loss. Exposure to sounds significantly below these levels are generally not considered harmful to human hearing. However, most individuals perceive unwanted sound above 65 dbA to be intrusive, which can impair one's quality of life, depending on the sensitivity of the individual and the frequency and duration of exposure. Some also argue that persistent exposure to intrusive sound may have certain physiological effects, such as headaches or nausea, even though one's hearing ability may not be impaired. There also have been some questions about the vibration-induced effects of low frequency sound, which can be felt but not heard. What Sources of Noise Are Subject to Federal Regulation? The Noise Control Act of 1972 (P.L. 92-574) and several other federal laws require the federal government to set and enforce noise standards for aircraft and airports, interstate motor carriers and railroads, workplace activities, engines and certain types of equipment, federally funded highway projects, and federally funded housing projects. The Noise Control Act also requires federal agencies to comply with all federal, state, and local noise requirements. Various federal laws and regulations governing the administration of park and recreational lands owned by the federal government also provide authorities for agencies to regulate noise that would be generated from human activities on, and in the vicinity of, these lands. Most federal noise standards focus on preventing hearing loss by limiting exposure to sounds of 90 dbA and higher. Some federal standards are stricter and focus on limiting exposure to lower levels of around 65 dbA to protect quality of life. Whether "quality-of-life" standards should be tightened has been an ongoing issue, particularly among communities located near transportation sources such as airports and highways, where exposure to noise is a daily or routine occurrence. As noted above, there also have been some questions about the effects of low frequency sound, but so far, noise standards in the United States have not regulated low frequency sound below the threshold of human hearing. Major existing federal standards that regulate human exposure to noise, and the agencies responsible for setting and enforcing them, are discussed below. Aircraft and Airports The Aircraft Noise Abatement Act of 1968 (P.L. 90-411) requires the Federal Aviation Administration (FAA) to develop and enforce standards for aircraft noise. In developing these standards, the FAA generally follows noise limits recommended by the International Civil Aviation Organization (ICAO). Federal noise regulations define aircraft according to four noise classes: Stage 1, Stage 2, Stage 3, and Stage 4. Stage 1 aircraft are the loudest, and Stage 4 are the quietest. All Stage 1 aircraft have been phased out of commercial operation, and all unmodified Stage 2 aircraft over 75,000 pounds were phased out by December 31, 1999, as required by the Airport Noise and Capacity Act of 1990 ( P.L. 101-508 , Title IX, Subtitle D). Stage 3 aircraft must meet separate standards for runway takeoffs, landings, and sidelines, ranging from 89 to 106 dbA depending on the aircraft's weight and its number of engines. Stage 4 standards are stricter and require a further reduction of 10 dbA overall relative to Stage 3 standards. The Stage 4 standards are relatively new and are based on standards that the ICAO adopted in June 2001 (referred to as "Chapter 4" in ICAO parlance). The FAA finalized these standards in July 2005, adopting the ICAO standards by reference. The Stage 4 standards apply to newly manufactured subsonic jet airplanes, and subsonic transport category large airplanes, for which a new design is submitted for airworthiness certification on or after January 1, 2006. As the majority of jet aircraft designed in recent years are already quiet enough to attain the Stage 4 standards, some have commented that the impact of the stricter standards on most aircraft manufacturers may be less significant than otherwise. The ICAO also had recommended separate standards for propeller-driven, small airplanes. The FAA finalized these standards in January 2006. They apply to newly manufactured, propeller-driven, small aircraft for which a new design is submitted for airworthiness certification on or after February 3, 2006. In addition to aircraft certification standards, airports receiving federal funds are required to meet noise control standards for their operation. The standards range from 65 dbA for airports adjacent to residential areas to over 85 dbA for those adjacent to lands used for agricultural and transportation purposes. The Airport and Airway Improvement Act of 1982 ( P.L. 97-248 ) established the Airport Improvement Program (AIP) to provide federal assistance for airport construction projects and to award grants for mitigating noise resulting from the expansion of airport capacity. Airport operators applying for such grants must design noise exposure maps and develop mitigation programs to ensure that noise levels are compatible with adjacent land uses. Interstate Motor Carriers The Noise Control Act required EPA to develop noise standards for motor carriers engaged in interstate commerce, and it authorized the Federal Highway Administration to enforce them. All commercial vehicles over 10,000 pounds are subject to standards for highway travel and stationary operation, but the standards do not apply to sounds from horns or sirens when operated as warning devices for safety purposes. For highway travel, the standards range from 81 to 93 dbA, depending on the speed of the vehicle and the distance from which the sound is measured. The standards for stationary operation are similar and range from 83 to 91 dbA, depending on the distance from the vehicle. The standards apply at any time or condition of highway grade, vehicle load, acceleration, or deceleration. Interstate Railroads The Noise Control Act required EPA to establish noise standards for trains and railway stations engaged in interstate commerce, and the law authorized the Federal Railroad Administration (FRA) to enforce those standards. There are separate standards for locomotives, railway cars, and railway station activities such as car coupling. For locomotives built before 1980, noise is limited to 73 dbA in stationary operation and at idle speeds, and is limited to 96 dbA at cruising speeds. The standards for locomotives built after 1979 are stricter, and limit noise in stationary operation and at idle speeds to 70 dbA and at cruising speeds to 90 dbA. Noise from railway cars must not exceed 88 dbA at speeds of 45 miles per hour (mph) or less, and must not surpass 93 dbA at speeds greater than 45 mph. Noise from car coupling activities at railway stations is limited to 92 dbA. There are no uniform noise standards that control sounds from locomotive horns, whistles, or bells when they are operated as warning devices for safety purposes. However, in response to concerns about noise from horns in communities located near railways, the FRA finalized regulations in 2005, and modified them in 2006, allowing such communities to designate "quiet zones." Within these zones, communities could prohibit the routine sounding of locomotive horns. Designation of these zones is subject to certain conditions, including that there would be no significant risk of loss of life or risk of serious personal injury resulting from the lack of a horn sounding. Workplace Activities The Occupational Safety and Health Act of 1970 (P.L. 91-596) required the Occupational Safety and Health Administration (OSHA) to develop and enforce safety and health standards for workplace activities. To protect workers, OSHA established standards which specify the duration of time that employees can safely be exposed to specific sound levels. At a minimum, constant noise exposure must not exceed 90 dbA over 8 hours. The highest sound level to which workers can constantly be exposed is 115 dbA, and exposure to this level must not exceed 15 minutes within an 8-hour period. The standards limit instantaneous exposure, such as impact noise, to 140 dbA. If noise levels exceed these standards, employers are required to provide hearing protection equipment to workers in order to reduce sound exposure to acceptable limits. In April 2007, the Department of Labor proposed regulations that would require minors to wear hearing protection devices when working with wood processing machinery. Engines and Certain Types of Equipment The Noise Control Act directed EPA to set and enforce noise standards for motors and engines, and transportation, construction, and electrical equipment. With this authority, EPA established standards for motorcycles and mopeds, medium and heavy-duty trucks over 10,000 pounds, and portable air compressors. The standards for motorcycles only apply to those manufactured after 1982 and range from 80 to 86 dbA, depending on the model year and whether the motorcycle is designed for street or off-road use. Noise from mopeds is limited to 70 dbA. The standards for trucks over 10,000 pounds only apply to those manufactured after 1978 and range from 80 to 83 dbA depending on the model year. These standards are separate from those for interstate motor carriers. Noise from portable air compressors is limited to 76 dbA. Federally Funded Highway Projects The Federal-Aid Highway Act of 1970 (P.L. 91-605) required the Federal Highway Administration (FHWA) to develop standards for highway noise levels that are compatible with adjacent land uses. The law prohibits the approval of federal funding for highway projects that do not incorporate measures to attain these standards, which range from 52 to 75 dbA depending on adjacent land use. Among the most common method to attain these standards is to erect a physical barrier (i.e., a noise wall) between the highway and the adjacent land. Federally Funded Housing Projects Under general authorities provided by the Housing and Urban Development Act of 1968 (P.L. 90-448), the Department of Housing and Urban Development (HUD) has established standards for federally funded housing projects located in noise-exposed areas. The standards limit interior noise to a daily average of 65 dbA. Possible methods to mitigate noise in housing include the installation of doors and windows designed to diminish the transmission of sound, the insertion of noise-blocking insulation within walls, and the use of thicker walls and floors in new construction. Federal Park and Recreational Lands Various federal laws and regulations governing the administration of park and recreational lands owned by the federal government also provide authorities for agencies to regulate noise that would be generated from human activities on, and in the vicinity of, these lands. For example, the National Park Service has included noise standards in its regulations governing the operation of vessels on waters within all National Parks. Certain regulations also govern noise from specific sources in particular parks and recreational areas. For example, the FAA has promulgated regulations limiting noise from aircraft operations in the vicinity of Grand Canyon National Park. These and other restrictions have been motivated by rising interest among recreational users in maintaining the serene qualities of public lands for their enjoyment. However, there have been conflicting desires between recreational users who seek a quieter environment and those users whose preferred recreational activities would be restricted because of the noise those activities would generate. Noise Reduction Devices The federal government also is responsible for rating consumer devices designed to be worn by individuals to reduce exposure to potentially harmful or intrusive sound levels. The Noise Control Act authorized EPA to require labels for products that reduce noise. Under this authority, EPA established Noise Reduction Ratings for noise reduction devices, such as head gear and ear plugs. Manufacturers are required to use these ratings to identify the reduction of sound in decibels that the user would experience when wearing these devices. What Is the State and Local Role in Controlling Noise? The federal role in regulating noise is primarily limited to transportation, workplace activities, certain types of equipment, and human activities on public lands owned by the federal government. State and local governments determine the extent to which other sources of noise are controlled, and regulations for such sources can vary widely among localities. Further, some states do not directly regulate noise, but allow local governments to play the primary role. Sources of noise commonly regulated at the state and local level include commercial, industrial, and residential activities. Regulations for such sources typically control the public's exposure to noise by limiting certain activities to specific times, such as construction noise only during business hours. Public concern about differing state and local control of noise has led some to suggest that the federal role should be expanded to regulate a greater variety of sources uniformly across the country.

Community perceptions of increasing exposure to noise from a wide array of sources have raised questions about the role of the federal government in regulating noise, and the adequacy of existing standards. The role of the federal government in regulating noise has remained fairly constant overall since the enactment of the Noise Control Act in 1972 (P.L. 92-574). With authorities under this and other related statutes, the federal government has established, and enforces, standards for maximum sound levels generated from aircraft and airports, federally funded highways, interstate motor carriers and railroads, medium- and heavy-duty trucks, motorcycles and mopeds, workplace activities, and portable air compressors. The federal government also regulates human exposure to noise in federally funded housing. In more recent years, the federal role has expanded to include regulation of noise generated by human activities on public lands, including National Parks. State and local governments determine the extent to which other sources of noise are regulated, including commercial, industrial, and residential activities. Although noise standards generally provide a level of protection sufficient to prevent human hearing loss, they vary among individual sources in terms of what level of sound is permissible. This report explains potential effects of various sound levels, describes the role of the federal government in regulating noise, characterizes existing federal standards, discusses the role of state and local governments, and examines relevant issues.

CRS_RL34751

Overview The military retirement system is a government-funded benefit system that has been viewed historically as a significant incentive in retaining a career military force. The system includes a defined benefit (i.e., pension) element for all retirees and a defined contribution element for certain eligible retirees. The defined benefit includes a monthly annuity for qualified active and reserve retirees paid out of the Military Retirement Fund. The defined contribution benefit includes government-matching payments into an individual retirement Thrift Savings Plan (TSP) account. The amount of the retirement annuity depends on time served and basic pay at retirement. It is adjusted annually by a Cost-of-Living Adjustment (COLA) to ensure that the annuity is protected from the adverse consequences of inflation. Military retirees are also entitled to nonmonetary benefits, which include exchange and commissary privileges, medical care through TRICARE, and access to Morale, Welfare and Recreation facilities and programs. The non-disability military retirement system has evolved since the late 1800s to meet four main goals. To keep the military forces of the United States young and vigorous and ensure promotion opportunities for younger members. To enable the armed forces to remain competitive with private-sector employers and the federal Civil Service. To provide a reserve pool of experienced military manpower that can be called upon in time of war or national emergency to augment active forces. To provide economic security for former members of the armed forces during their old age. Among active duty personnel, eligibility for a monthly pension is generally based on a service requirement of at least 20 years of (active) service. For reserve component personnel, the system is based on points , and reservists do not generally begin to receive retired pay until the age of 60. Both the active duty and reserve component retirement systems vest at 20 years of qualifying service. However, some members who are retired with a physical disability may receive a pension regardless of the amount of time they have spent on active duty. Disability retirement offers a choice between two retirement compensation options: one based on years of service (longevity) and one on the severity of the disability. In FY2017, approximately $53.5 billion was paid to approximately 2 million military retirees, and an additional $3.9 billion was paid to 319,431 survivors. As shown in Table 1 , the number of military retirees and the cost of their retirement benefits have increased over the past decade. Congress grapples with constituent concerns as well as budgetary constraints in considering military retirement issues. In the past, some have viewed military retirement as a place where substantial savings could be made, arguing that the military retirement compensation is overly generous relative to pension systems in the civilian sector. In particular, they note that active duty military personnel become eligible for retirement at a relatively young age. In FY2017, the average active duty non-disability enlisted retiree is 42 years old and has 21 years of service at retirement; the average officer is 46 years old and has about 23 years of service at retirement. Others argue that the military retirement system is fair given the unique demands of military service, pointing out the high operational tempo and repetitive tours of duty in overseas combat areas that servicemembers have endured over the past 15 years. In addition, some have argued that past modifications to the system intended to save money have had a deleterious effect on military recruiting and retention, particularly in times of strong economic performance. While congressionally mandated changes to the military retirement system have been infrequent, any potential changes are closely monitored by current servicemembers, retirees, survivors and the veterans' service organizations that support them. Retirement System Eligibility and Pay Calculations There are currently three separate but related retirement systems within the DOD: one for active duty members, one for reservists, and one for those who become medically disabled and are unable to complete a 20-year military career due to their disability. Each of these systems has distinct eligibility requirements and formulas for calculating the retirement annuity. Retirement pay calculations are based on the date when the servicemember first entered active duty and their pay base at the time of retirement. The defined benefit portion of the active and reserve component retirement systems cliff-vest s after 20 years of service. This means servicemembers who leave the service prior to completing 20 years of eligible service typically will not receive any non-disability retirement benefit. This contrasts with eligibility for disabled veterans, who are vested on their disability retirement date regardless of years of service. Active Component Retirement7 For active duty military personnel, there are four methods of calculating retired pay based on longevity: the Final Basic Pay System, "High Three," Redux, and the Blended Retirement System (BRS) (see Table 4 for a comparison of the benefits under each method). The applicable retirement calculation is based on the date when the servicemember first entered active duty, their pay base at the time of retirement, their years of service, and whether they chose the Redux system or the BRS (if eligible). Figure 1 shows how eligibility for retirement calculations is determined. Final Basic Pay (prior to September 8, 1980) For persons who entered military service before September 8, 1980, the pay base is the final monthly basic pay received by the servicemember at the time of retirement multiplied by 2.5% for each year of service. The minimum amount of retired pay to which a member is entitled under this formula is therefore 50% of the retired pay computation base (20 years of service times 2.5%). For example, a servicemember who retires at 25 years receives 62.5% of the computation base (25 years of service times 2.5%). The Final Basic Pay cohort that entered the military before September 8, 1980, had 30 years of service in 2010. It was expected that all members of this group would be retired by 2016. High Three Those who entered service on or after September 8, 1980, and before January 1, 2018, are eligible to elect the High Three system. For this system the computation base is the average of the highest 3 years (36 months) of basic pay rather than the final basic pay. Otherwise, calculations are the same as under the Final Basic Pay method. Redux The Redux military retirement system was initiated with the Military Retirement Reform Act of 1986 ( P.L. 99-348 ). The Redux formula reduced the amount of retired pay for which military servicemembers who entered the armed forces on or after August 1, 1986, were eligible. This system was broadly unpopular and by 1997 Congress began to take note of potential recruiting and retention problems associated with the change. In 1998, the Clinton Administration announced that it supported Redux repeal. The National Defense Authorization Act for Fiscal Year 2000 ( P.L. 106-65 §§641 and 642) repealed compulsory Redux. It allowed post-August 1, 1986, entrants to retire under the High Three system or opt for Redux plus an immediate $30,000 cash payment. The FY2016 NDAA, enacted on November 25, 2015, terminated the Redux option. Those who entered the service during the time when Redux was an option were required to select one of the following two options for calculating their retired pay within 180 days of reaching 15 years of service. Option 1: Pre-Redux Eligible servicemembers can opt to have their retired pay computed in accordance with the pre-Redux formula, described above as High Three. Option 2: Redux Eligible servicemembers can opt to have their retired pay computed in accordance with the Redux formula and receive an immediate $30,000 cash bonus called a Career Status Bonus. Those who select the Career Status Bonus (CSB) must remain on active duty until they complete 20 years of service or forfeit a portion of the bonus. Blended Retirement System (BRS) In the FY2016 NDAA, based on recommendations from the Military Compensation and Retirement Modernization Commission (MCRMC), Congress adopted a new retirement system, shifting from a purely defined benefit system to a blended defined benefit plus defined contribution system. Servicemembers with 12 or fewer years of service as of December 31, 2017, were afforded an opportunity to choose the BRS. The BRS is mandatory for individuals who entered the service on or after January 1, 2018. For these servicemembers, the computation base for the defined benefit will be the average of the highest three years (36 months) of basic pay, as in the High Three System; however, the multiplier is reduced to 2.0 from 2.5. This means that the pay base is the high three average at the time of retirement multiplied by 2.0% for each year of service. Therefore a servicemember retiring at 20 years would receive 40% of his or her pay base under the new formula and a 30-year retiree would receive 60% of his or her pay base. The Lump Sum Payment The Blended Retirement System also allows servicemembers to receive a portion of their retired pay in a lump sum. An individual entitled to retired pay may, no later than 90 days before the date of retirement, elect to receive A lump sum payment of the discounted present value at the time of the election of an amount of the covered retired pay that the eligible person is otherwise entitled to receive for the period beginning on the date of retirement and the date the eligible person attains the eligible person's retirement age. For those who elect to receive a lump sum payment, after reaching the eligibility age for social security (usually 67), they will again receive 100% of their regular monthly annuity, which will be adjusted for annual cost of living increases. The law also allows retirees to take their lump sum payment as a single payment or up to four annual installments. The lump sum is discounted to the present value based on the annual rate published by DOD in June of each year and which goes into effect on January 1 of the following year. Lump sum payments are considered earned income and are taxed accordingly. Members under the BRS with a disability retirement do not have the option of receiving a portion of retired pay as a discounted lump sum. Reserve component members may elect the discounted lump sum option from the date the member first becomes eligible for retired pay (typically 60 years old) until the normal social security retirement age (typically 67). Based on an external study, the DOD Board of Actuaries assumes that approximately 5.2% of officers and 22.8% of enlisted members under the BRS will elect the lump sum option. BRS Defined Contributions Congress's decision to include a defined contribution element in the BRS was driven by the finding that under the legacy retirement systems, 83% of enlisted and 51% of officers did not complete the 20 years of service and thus received no retirement compensation for their service. This was at odds with retirement benefits in the private sector where firms increasingly offer a variety of defined contribution packages and are required by law to vest employees within a much shorter time period. Under the BRS, individuals entering service after January 1, 2018, are automatically enrolled in the Thrift Savings Plan (TSP) at an individual contribution level of 3% from his or her monthly basic pay or inactive duty pay beginning the first pay period after the member's 60 th day of service. At that time, the services will also begin automatic monthly contributions of 1% of basic pay to the servicemember's TSP account. In addition, DOD will match servicemembers' contributions up to 4% of the servicemember's basic pay starting at two years and one day after the member first enters service and ending at 26 years of service. The servicemember is required to make individual total contributions of 5% in order to receive government matching of 4% (see Table 2 for government matching percentages). The servicemember is fully vested after two complete years of service and able to take ownership of the 1% contributions as well as any subsequent matching contributions. Any earnings on government contributions are immediately vested when they accrue. Servicemembers are immediately fully vested in any personal TSP contributions. The services will also automatically enroll new servicemembers in the TSP program for individual contributions at a default amount of their basic pay unless the servicemember opts out. If the servicemember declines to make individual contributions, he or she will automatically be reenrolled every year at the default amount of 3% individual contribution. This requires the individual to make an active decision every year to not contribute to the TSP. Continuation Pay In order to provide a mid-career retention incentive under the BRS, Congress authorized continuation pay for members who are between 8 to 12 years of service, in return for a three-year service obligation. The pay may be distributed in a lump sum, or in a series of not more than four payments. The law allows an active duty (regular component) member or reserve component member who is performing Active Guard or Reserve duty to receive a minimum amount of continuation pay equal to 2.5 times their monthly basic pay. For reserve component members not on active duty, the minimum continuation pay is equal to at least 0.5 times the monthly basic pay of an active component member of similar rank and longevity. The law also authorizes an additional amount of continuation pay, at the discretion of the Secretary concerned (see Table 3 ). For active component members that would be the amount of monthly basic pay multiplied by no more than 13. This flexibility awarded to military department Secretaries on the amount of additional continuation pay is intended to aid force-shaping by allowing the Secretaries to offer higher continuation payments to those in occupational specialties that are undermanned. Under the blended system, reserve component members within the window of eligibility would receive the minimum continuation pay as discussed above (2.5 or 0.5 times the monthly basic pay of an active component member), plus an additional amount at the discretion of the Service Secretary that would be the amount of monthly basic pay multiplied by no more than six. Reserve Component Retirement27 There are many similarities between the active and reserve retirement systems. First, reserve component (RC) members must also complete 20 qualifying years of service to become eligible for a defined retirement benefit. Second, the reserve retirement system also accrues at the rate of 2.5% per equivalent year of qualifying service (explained below) at retirement eligibility for those who entered service prior to January 1, 2018, and 2.0% for those who enter on or after January 1, 2018. The primary difference between the reserve and the active system is the points system used to calculate qualifying years and equivalent years of service, as well as the age at which the retirement annuity begins. Also, Redux is not an option for reservists. For retirement purposes, a qualifying year of service is a year in which a member of the RC earns at least 50 retirement points . Points are awarded for a variety of reserve activities one point for each day of active service, which includes annual training; fifteen points a year for membership in the Ready Reserve; one point for each inactive duty training (IDT) period; one point for each period of funeral honors duty; and one point for every three satisfactorily completed credit hours of certain military correspondence courses. With multiple opportunities to earn points, a participating member of the selected reserve normally can accrue the requisite 50 points per year and thus earn a qualifying year for retirement. The maximum number of points per year, exclusive of active duty, has varied over time but is currently capped at 130 points. When active duty points are added to this total, the reservist cannot earn more than 365 points a year. The number of points is critical in determining both the number of years of qualifying service and the number of equivalent years of service for retired pay calculation purposes. A reservist may retire after completing 20 years of qualifying service; there is no minimum age. However, the reservist will usually not become eligible for retired pay until age 60, at which time he or she also becomes eligible for military medical care. Upon retirement, the individual is normally transferred to the Retired Reserve and is entitled to a number of military benefits to include commissary and exchange privileges; access to Morale, Welfare and Recreation programs and facilities; and limited space available travel on military aircraft. Reservists in the Retired Reserve, but not yet retired pay eligible, are referred to as Gray Area retirees. Time spent in the Retired Reserve counts for longevity purposes and ultimately results in higher retired pay. For example, a lieutenant colonel who transitions to the Retired Reserve at age 45 will have their retired pay at age 60 calculated on the basic pay of a lieutenant colonel with an additional 15 years of longevity. The date the reservist became a member of the armed forces determines whether their retired pay is calculated based on the Final Basic Pay, High Three, or Blended Retirement System. Those entering before September 8, 1980, will retire under the Final Basic Pay system while those entering after September 8, 1980 but before January 1, 2018, will retire under the High Three system. Those who first perform Reserve Component service (with no prior regular or reserve service) on or after January 1, 2018, will retire under the Blended Retirement System. Those reservists with prior service who have accumulated less than 12 equivalent years of service (< 4,320 points) may elect the BRS. Calculation of Reserve Retired Pay The actual calculation parallels the active duty system but requires adjustment to reflect the part-time nature of reserve duty. For example, consider a reserve component lieutenant colonel with 5,000 points who joined the military in January 1980 and transferred to the Retired Reserve in 2000 after completing 20 qualifying years of service. In 2015, after reaching 60 years of age, and becoming eligible to receive retired pay, the process for calculating her retired pay would be Step 1: Divide the total points by 360 to convert the points to equivalent years of service (5,000 / 360 = 13.89). Step 2: Multiply the equivalent years of service by the 2.5% multiplier (13.89 times 0.025 = 0.3472). Using the Final Basic Pay option, the 2015 pay base for a lieutenant colonel with 35 years of service (20 years of qualifying service plus 15 years in the Retired Reserve) is $8,762.40 per month. Step 3: Multiply the pay base by the retired pay multiplier ($8,762.40 times 0.3472) to produce a monthly retirement annuity of $3,042 per month. Disability Retirement34 Servicemembers who, due to a disqualifying medical condition, are no longer able to perform their military duties, may qualify for disability retirement, commonly referred to as a Chapter 61 retirement . Eligibility is based on having a permanent and stable disability rated at 30% or more under the standard schedule of rating disabilities in use by the Department of Veterans Affairs at the time of determination. Some disability retirees are retired before becoming eligible for longevity retirement, while others have completed 20 or more years of service. The maximum retired pay calculation under the disability formula cannot exceed 75% of basic pay. Disability retirees are not authorized to receive a lump sum payment under the Blended Retirement System. Retired pay computed under the disability formula is subject to federal income tax, unless one or more of the following conditions applies: (1) the member's disability is the result of a combat-related injury, or (2) the individual was eligible to receive disability retirement payments prior to September 25, 1975, or (3) the individual was in the Armed Services prior to September 25, 1975, and later became eligible for disability retired pay. Retired pay under the longevity formula (for those entering after September 24, 1975) is taxable only to the extent that it exceeds what the individual would receive for a combat related injury under the disability formula. Extraordinary Heroism Pay Retired enlisted members of military services with less than 30 years of service may be eligible for a 10% increase in retired pay when credited with extraordinary heroism in the line of duty as determined by the Secretary of his or her service. This increase is subject to a maximum of 75% of the member's retired or retainer pay base. In 2002, Congress extended this benefit to enlisted members of the reserve component who are eligible for reserve retired pay. Military Retired Pay, Social Security, and Federal Income Tax Military retirees receive full Social Security benefits in addition to their military retired pay. Current military personnel do not contribute a portion of their salary as part of the military retirement pay accrual. However, they have paid taxes into the Social Security trust fund since January 1, 1957 and are entitled to full Social Security benefits based on their military service. Military retired pay and Social Security are not offset against each other. Military retired pay is not subject to withholding for Social Security tax. However, all non-disability retired pay is subject to withholding of federal income tax. A portion of the Social Security benefit may also be subject to federal income tax for individuals who have other income. Retired Pay and the Cost-of-Living Adjustment (COLA) Military retired pay is adjusted for inflation by statute (10 U.S.C. §1401a). The Military Retirement Reform Act of 1986, in conjunction with changes contained in the FY2000 National Defense Authorization Act ( P.L. 106-65 ), provides for COLAs as indicated below. Congress has not modified the COLA formula since 1995. However, policymakers regularly discuss COLA modifications, typically with the aim of reducing costs and, hence, the payments to retirees. COLAs for 2007 to 2017 are shown in Table 5 . COLAs for Pre-August 1, 1986, Entrants For military personnel who first entered military service before August 1, 1986, each December a COLA equal to the percentage increase in the Consumer Price Index between the third quarters of successive years will be applied to military retired pay for the annuities paid beginning each January 1. This number is rounded to the nearest one-tenth of 1%. The COLA is applied to the monthly benefit amount and the final payment is rounded down to the nearest $1.00. COLAs for Personnel Who Entered Service On or After August 1, 1986 For those personnel who first entered military service on or after August 1, 1986, their COLAs will be calculated in accordance with either of two methods, as noted below. Non-Redux Recipients Those personnel who opted to have their retired pay computed in accordance with the pre-Redux (High Three) formula will have their COLAs computed as described above for pre-August 1, 1986, entrants. Redux/$30,000 Cash Bonus Recipients Those personnel who opt to have their retired pay computed in accordance with the Redux formula, have their COLAs computed using a different formula. Annual COLAs are held one percentage point below the actual inflation rate. So for example, the December 2017 COLA increase was 2.0% and Redux retirees saw a COLA increase of 1.0%. When a retiree reaches the age of 62, there is a one-time recomputation of his or her annuity to make up for the lost purchasing power caused by holding of annual COLA adjustments to the inflation rate minus one percentage point. This recomputation of COLA, in combination with the recomputation of the retired pay multiplier (discussed earlier), is a one-time increase in the member's monthly retired pay to parity with that of a similarly retired member who did not take the Redux option. After the recomputation at age 62, however, future COLA increases continue to be computed annually on the basis of the inflation rate minus one percentage point. Concerns about the Future of Military Retirement Some advocacy groups and servicemembers have expressed concerns about the implementation of the Blended Retirement System, in particular in relation to the reduced multiplier for the defined benefit (monthly annuity) and the lump sum payment option. These include the potential impacts of the BRS on recruitment and retention, as well as on the financial well-being of military personnel. For example, there is some uncertainty as to whether the reduced multiplier for the defined benefit remains a strong enough retention incentive for mid-career personnel. A recent study for the Marine Corps that modeled potential retention outcomes found relatively small effects on force profiles, with officer retention being somewhat more sensitive than enlisted retention. The study also noted that retention may vary by occupational specialty—supporting the notion that flexibility may be needed for the services to vary the continuation pay, to offer other retention bonuses, or to lengthen minimum service requirements for high-demand fields. In terms of financial well-being, the study found that, in general, those who retire after a 20-year career and contribute to the TSP throughout their career, will have lower take-home pay from retirement to age 60 than those in the legacy retirement system, but will be better off after the age of 60 when eligible to start drawing from the TSP without penalty. The total lifetime benefit was estimated to be slightly higher under the legacy retirement system than under the BRS. Since the average military retiree upon retirement is in his or her 40s, many choose to pursue a second civilian career and may also accrue retirement savings and benefits from his or her new employer. Estimates of retirement savings are sensitive to the amount a member contributes to the TSP and the return on investment for TSP accounts. One of the ways that Congress addressed these concerns was to require financial literacy training for servicemembers in the FY2016 NDAA with the authorization for the new retirement system. Military Retirement Budgeting and Costs Military retirement costs, which include all payments to current retirees and survivors, have been rising modestly each year, due to a predictable, slow rise in the number of retirees and survivors coupled with cost of living increases. All DOD budgets through FY1984 reflected the costs of retired pay actually being paid out to personnel who had already retired. That is, Congress appropriated the amount of money required to pay current retirees each year as part of each annual defense appropriations bill. Since FY1985, the accrual accounting concept has been used to budget for the costs of military retired pay. The unfunded liability resulting from the change in accounting practices is discussed in the next section. Under the accrual accounting system, the DOD budget for each fiscal year includes a contribution to a Military Retirement Fund (MRF) sufficient to finance future retirement payouts to current uniformed personnel when they retire, not the amount of retired pay actually paid to current retirees. These annual accrual contributions accumulate in the MRF, along with interest earned on them. Therefore, changes to military end-strength, increases or decreases in basic pay tables, or changes to retirement pay formulas, in any given year will result in same-year DOD budget obligations for military retired pay. Once military personnel retire, payments to them are made from the accumulated amounts in the MRF, not from the annual DOD budget. The amount that DOD must contribute to the MRF each year to cover future retirement costs is determined by an independent, presidentially appointed, Department of Defense Retirement Board of Actuaries, which decides how much is needed to cover future retirement costs as a percentage of military basic pay. Estimated future retirement costs are modeled based on the past rates at which active duty military personnel stayed in the service until retirement and on assumptions regarding the overall U.S. economy, including interest rates, inflation rates, and military pay levels. The model helps determine the level percentage of basic pay for each active servicemember that must be contributed from the DOD budget every year to cover future retirement costs—approximately 30 cents on every dollar of basic pay for full-time members. This is called the normal cost percentage (NCP) and is shown in Table 6 . The Military Retirement Fund also receives intergovernmental transfers from the General Fund of the Treasury to fund the initial unfunded liability of the military retirement system. This is the total future cost of military retired pay that will result from military service performed prior to the implementation of accrual accounting in FY1985. Unfunded Liability Current debates over both federal civilian and military retirement have included some discussion of unfunded liability , which consists of future retired pay costs incurred before the creation of the Military Retirement Fund in FY1985. The initial unfunded liability as of September 30, 1984 was $528.7 billion. The unfunded liability at the end of FY2016 was $742.6 billion. These obligations are being liquidated by the payment to the fund each year of an amount from the General Fund of the Treasury and are currently expected to be fully amortized by FY2025. Congressional action to change basic pay, retired pay, or associated benefits (e.g., concurrent retirement disability pay , or survivor benefit program) may affect the unfunded liability. For example, the implementation of the Blended Retirement System reduced the unfunded liability by $800 million, while the FY2017 NDAA provision authorizing an extension of the Special Survivor Indemnity Allowance (SSIA) for certain survivors of military members raised the unfunded liability by $200 million. The FY2017 NDAA extended the SSIA as a permanent benefit which annual COLA increases. The DOD Actuary estimates that this change will raise NCPs by approximately 0.1 percentage point and lead to an actuarial loss of approximately $8 billion to the Military Retirement Fund. Appendix. Retirement Reform Recommendations in Prior Reviews Every four years, the President is required by law to direct a comprehensive review of the military compensation system and to forward the review, along with his recommendations, to Congress. This review is known as the Quadrennial Review of Military Compensation (QRMC). The Military Compensation and Retirement Modernization Commission (MCRMC) served as the 12 th QRMC. The sections below summarize the recommendations of these commissions. 10 th QRMC Recommendations In the 10 th Quadrennial Review of Military Compensation (QRMC), one of the directed areas of assessment was "the implications of changing expectations of present and potential members of the uniformed services relating to retirement." To accomplish this, the QRMC suggested a major revision of both the active and reserve retirement systems. Selected options were: 1. A defined benefit plan similar to the current High Three system that would vest personnel at 10 years of service, with benefits to begin either at age 60 (for personnel who have served less than 20 years of service) or age 57 (for those that served more than 20 years of service). Retirees could opt to receive the retirement annuity immediately upon retirement but the annuity would be reduced by 5% for each year under age 57. 2. Combined with the above defined benefit plan would be a defined contribution plan that would require the services to contribute up to 5% of annual base pay into a retirement account for each servicemember. The contribution would start at 2% for those with two years of service and increase incrementally until it reached 5% for those with five or more years of service. This plan would also vest at 10 years of service but withdrawals could not begin until age 60. 3. A system of gate pays would be established at specified career points to retain selected personnel in specified skill areas. 4. Separation pay would be used to encourage personnel in over-manned skills to separate prior to vesting at the 10-year point or becoming eligible for an immediate annuity at 20 years. 11 th QRMC Recommendations DOD submitted the 11 th QRMC final report in 2012. While this QRMC did not have the same focus on the entire retirement system as the previous QRMC, DOD recommended more closely aligning active and reserve retirement systems with the goal of eventually transitioning to a total force single-system approach for both the active and reserve components. The report recommended the following modification to the reserve retirement system: Reserve component members who have attained 20 qualifying years for retirement benefits could begin receiving retired pay on the 30 th anniversary of their service start date or at age 60, whichever comes first. Reserve members would receive one retirement point for each day of service, and the points needed for a qualifying year would be reduced from the current 50-point requirement to 35. Military Compensation and Retirement Modernization Commission (MCRMC) The National Defense Authorization Act (NDAA) for FY2013 ( P.L. 112-239 ) established a Military Compensation and Retirement Modernization Commission (MCRMC) to provide the President and Congress with specific recommendations to modernize pay and benefits for the armed services. In terms of retirement, the commission was mandated to provide recommendations to "Modernize and achieve fiscal sustainability for the compensation and retirement systems for the Armed Forces and the other Uniformed Services for the 21 st century." Notably, Section 674 of P.L. 112-239 mandated that the commission comply with conditions that would grandfather existing servicemembers and retirees into the existing retirement system, stating: (i) For members of the uniformed services as of such date, who became members before the enactment of such an Act, the monthly amount of their retired pay may not be less than they would have received under the current military compensation and retirement system, nor may the date at which they are eligible to receive their military retired pay be adjusted to the financial detriment of the member. (ii) For members of the uniformed services retired as of such date, the eligibility for and receipt of their retired pay may not be adjusted pursuant to any change made by the enactment of such an Act. The commission delivered its final report and recommendations to Congress on January 29, 2015. Congress adopted many of the MCRMC's recommendations in the FY2016 NDAA. Several of the most prominent changes include, reduction of the retired pay multiplier, government matching contributions, and the lump sum option. The MCRMC did not make any recommendations changing the 20-year eligibility for retirement; however, it recommended that the Secretary of Defense be given authority to modify the years-of-service requirement to shape the force profile as long as it does not impose involuntary changes on existing servicemembers. DOD expressed opposition to this proposal and Congress did not adopt a provision based on this MCRMC recommendation. The 20-year eligibility remains in current law.

The military retirement system is a government-funded, noncontributory, defined benefit system that has historically been viewed as a significant incentive in retaining a career military force. The system currently includes monthly compensation for qualified active and reserve retirees, disability benefits for those deemed medically unfit to serve, and a survivor annuity program for the eligible survivors of deceased retirees. The amount of compensation is dependent on time served, basic pay at retirement, and annual Cost-of-Living-Adjustments (COLAs). Military retirees are also entitled to nonmonetary benefits including exchange and commissary privileges, medical care through TRICARE, and access to Morale, Welfare and Recreation (MWR) facilities and programs. Currently, there are three general categories of military retiree, active component, reserve component, and disability retiree. Active component personnel are eligible for retirement (i.e., vested) after completing 20 years of service (YOS). Reserve personnel are eligible after 20 years of creditable service based on a points system, but do not typically begin to draw retirement pay until age 60. Finally, those with a disability retirement do not need to have served 20 years to be eligible for retired pay; however, they must have been found unqualified for further service due to a permanent, stable disability. In FY2017, approximately $57 billion was paid to 2.3 million military retirees and survivors. Given the size of the program, some have viewed military retirement as a place where substantial budgetary savings could be made. Others have argued that past modifications intended to save money have had a deleterious effect on military recruiting and retention. Military retirees, families, and veterans' service organizations closely monitor potential changes to the retirement system. When considering alternatives to the current system, Congress may choose to consider the balance among the benefits of the military retirement system as a retention incentive, budget constraints, and the needs and concerns of their constituents.

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Introduction Federal funding provided by Congress for major disasters has grown considerably in the past decade, driven principally by the hurricane seasons of 2005, 2008, and Hurricane Sandy. As concern over the size of federal budget deficits and the national debt has grown, so has congressional attention to both the amount of funding the federal government provides to states and localities for disaster assistance, and the processes the federal government uses to provide that assistance. Although funds have been reallocated at times from one account to another to provide for disaster-related assistance, disaster relief funding has historically not been fully offset. In addition, assistance for large-scale disasters has usually been funded outside traditional budget constraints. As a result of the concern over the size of the deficit and rising level of national debt, Congress has implemented measures to limit federal spending. These include the Budget Control Act of 2011 ( P.L. 112-25 , hereinafter the BCA), which established a range of budget-controlling mechanisms. Caps were placed on discretionary spending from FY2012 through FY2021. If these caps are exceeded, an automatic cancellation of budget resources—known as sequestration—would take place across most discretionary budget accounts to reduce spending down to the cap. However, the BCA includes a mechanism that recognizes the unexpected nature of disasters and the periodic need for disaster relief funding beyond what the budget might envision. This mechanism has changed the way Congress approaches spending on major disasters allowing for a less crisis-driven debate on providing relief funding in the immediate wake of an incident and providing somewhat more transparency into federal disaster relief spending. The first section of this report addresses the pre-BCA funding mechanism for major disaster declarations, including the role of the President's Disaster Relief Fund (DRF). Next, this report provides a basic overview of how that funding mechanism has evolved under the BCA, and how Hurricane Sandy was addressed under that mechanism. Finally, the report explores a number of other issues pertinent to disaster relief funding in the BCA-regulated environment, including time frames for congressional action after a large-scale disaster strikes; the implications of the rising number of Stafford Act declarations; funding disaster relief efforts in severe disaster years; offsetting the cost of disaster relief; calculating the allowable adjustment for disaster relief; the degree to which different types of disaster relief are included in the methodology for calculating the 10-year average on disaster relief spending; and the possible implications of excluding Stafford Act assistance for emergencies and fires from the allowable adjustment calculation. Disaster Relief Funding: A Brief Overview The DRF is a no-year account that is used to fund response activities and pay for ongoing recovery programs resulting from declared major disasters, emergencies, and Fire Management Assistance Grants (FMAGs). The majority of its funding goes to pay for response to and recovery from major disasters. The Robert T. Stafford Disaster Relief and Emergency Assistance Act ( P.L. 93-288 , hereinafter the Stafford Act) authorizes the President to declare a major disaster in response to a governor or tribal nation leader's request for federal assistance. The declaration enables federal agencies to provide assistance to state and local governments overwhelmed by the incident. While the majority of federal assistance for major disasters to states and localities is provided through the Federal Emergency Management Agency (FEMA), other federal agencies and offices also may provide assistance once a major disaster has been declared. These agencies include the U.S. Army Corps of Engineers, the Department of Transportation, and the Department of Education among others. The assistance provided by these agencies may be funded through their own budgets, but in many cases is requested and paid for by FEMA. In some circumstances, however, federal agencies have the authority to provide assistance regardless of whether a disaster is declared under the Stafford Act. For example, under the Small Business Act, the Administrator of the Small Business Administration (SBA) is authorized to issue declarations that make loans available to homeowners and businesses through the SBA Disaster Loan Program. This report focuses primarily on the DRF, as it has been the most commonly used tool to fund disaster relief efforts. Budgeting the Disaster Relief Fund The DRF is generally funded through the annual appropriations process, which begins with the Administration's formulation of the budget request for the account. Prior to the BCA, the data points used to determine budget requests were: (1) funding levels currently available in the DRF; (2) the five-year rolling average of "normal" disaster costs; (3) pending recovery costs; and (4) the estimated monthly "recoveries" of unobligated funds. The current budgetary practice is the same; however, a ten-year rolling average of normal disaster costs is being used rather than a five-year rolling average. Based on these data points, the Administration's request for the DRF from FY2002 to FY2011 was roughly $1.9 billion per year. Yet the average spend-out rate for the DRF during that period was $350 million per month, or $4.2 billion per year. Without resources beyond the annual appropriation, the DRF would have faced a shortfall in its budget in an average operating year. When funds neared depletion, Congress usually provided additional funding through supplemental appropriations. In some fiscal years, Congress passed two or three supplemental appropriations to fund the DRF. Two factors that may have contributed to these chronic shortfalls in the DRF are the decision not to budget for high-cost disasters in the annual appropriations process, and the unpredictability of the distribution of disaster events over time. According to data provided by FEMA, since 1996 there have been 16 declared major disasters that have cost $500 million or more (see Figure 1 ). However, disasters costing more than $500 million were considered atypical events—outliers—when FEMA made its annual appropriations request for each new fiscal year. This guideline had been used for over a decade without being adjusted for inflation. It could be argued incidents costing $500 million or more occur too frequently to be omitted and that their omission from the budget calculation led to lower budget requests, which in turn may have encouraged lower appropriations for the DRF. Supplemental Appropriations Congress generally provides additional budget authority to the DRF when its balance is deemed insufficient to provide for assistance and recovery projects. This is done through supplemental appropriations legislation. The use of supplemental appropriations as a vehicle to pay for disaster assistance has been of concern to some because traditionally they have been designated as emergency appropriations—allowing amounts to be provided in excess of discretionary spending limits. In addition, they often move through Congress on an expedited basis, not undergoing traditional markup processes, and sometimes under terms that limit floor debate and the amendment process. Some critics of past policies have asserted that it is a common tactic for Administrations to request lower funding levels than needed for the DRF in order to mask potential disaster costs and project smaller deficits in their initial budget documents, allowing supplemental appropriations to fill the gap later. The combined effect of these factors is reflected in Figure 2 . The wider bars show the Administration's initial budget request level for the DRF, while the overlying narrow bars show enacted annual and supplemental appropriations for those fiscal years. As shown in Figure 2 , from FY1996 to FY2015, the DRF needed supplemental funding in 12 years. The data also demonstrate higher appropriations for the DRF after the passage of the BCA. It may be too early, however, to determine whether the larger appropriations have reduced the reliance on supplemental appropriations to help the federal government meet disaster needs. Disaster Spending Under the Budget Control Act The BCA allows for adjustments to the cap in a handful of situations, essentially raising it to allow for certain categories of spending. One of those adjustments is for emergencies, which is familiar to many observers of the budget process, but a new category of spending was defined in law for "disaster relief," allowing it to be treated separately from other emergencies. Under the BCA, the discretionary spending limit can be adjusted upward to make room for an uncapped amount of emergency spending and adds the following definitions to existing budget law: (20) The term "emergency" means a situation that— (A) requires new budget authority and outlays (or new budget authority and the outlays flowing there from) for the prevention or mitigation of, or response to, loss of life or property, or a threat to national security; and (B) is unanticipated. (21) The term "unanticipated" means that the underlying situation is— (A) sudden, which means quickly coming into being or not building up over time; (B) urgent, which means a pressing and compelling need requiring immediate action; (C) unforeseen, which means not predicted or anticipated as an emerging need; and (D) temporary, which means not of a permanent duration. Prior to the BCA's enactment, supplemental appropriations for disaster relief were often designated as emergency spending, and for a limited period even some of the annual appropriations requests included an emergency designation. However, the enactment of the BCA distinguishes disaster relief spending, though often unanticipated, as separate from emergency spending. A separate allowable adjustment is created for disaster relief spending that some have interpreted as a limit on certain types of disaster relief funding. "Disaster relief" is specifically defined under the BCA as follows: (iii) For the purposes of this subparagraph, the term 'disaster relief' means activities carried out pursuant to a determination under section 102(2) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5122(2)). [Determination of a major disaster ] (iv) Appropriations considered disaster relief under this subparagraph in a fiscal year shall not be eligible for adjustments under subparagraph (A) [the unlimited adjustment for emergency spending] for the fiscal year. The limit established by the BCA on adjustments to the caps for disaster relief is based on the average funding provided for disaster relief over the last ten years, excluding the highest and lowest annual amounts, calculated by the Office of Management and Budget (OMB). If Congress spends less than that average on disaster relief in a given fiscal year, the caps can be further adjusted upward by the unspent amount in the following year. It is important to note that this adjustment limitation is not a restriction on disaster assistance per se—rather it is a restriction on how much the caps can be adjusted upward in a given fiscal year to accommodate the assistance. Also, spending within the cap or within the adjustment does not require offsets. Because of the way "disaster relief" is defined in the BCA, not all of the DRF's activities are eligible for funding under the allowable adjustments. FEMA operating expenses, funding for Fire Management Assistance Grants, and emergencies under the Stafford Act are not eligible for funding under the adjustment, and are therefore funded through ordinary discretionary appropriations to the DRF that fall within the discretionary budget caps. In response to the BCA, FEMA and the appropriations committees developed a new, two-part approach to accounting for disaster-related activity, with one approach for major disasters and another for all other DRF activity. As FEMA's first post-BCA budget justification described it: Essentially, requests for DRF funding for FEMA's Stafford Act programs and disaster support activities fall into two categories: disaster relief cap adjustment and base/non-major disasters. Funding requested under the disaster relief cap adjustment is for major disasters declared pursuant to the Stafford Act and designated by the Congress as being for disaster relief pursuant to section 251(b)(2)(D) of the BBEDCA, as amended by the BCA. Funding requested under the base/non-major disasters category includes Emergencies, Pre-disaster Surge Support, Fire Management Assistance Grants and activities that are non-disaster specific, such as Disaster Readiness Support (DRS) activities (e.g., distribution centers, reservist training, etc.). According to FEMA, the funding request for major disasters is based on FEMA's spending plans for all past declared major disasters. The non-catastrophic funding request is based on a revised approach that uses a 10-year average for non-catastrophic events. FEMA argued that using a 10-year average of costs as opposed to the previous use of a 5-year average of costs "provides a more accurate projection of non-catastrophic needs since it normalizes the effects of outlier years." As demonstrated earlier in Figure 2 , FEMA's two-part approach to accounting for disaster-related activity has coincided with higher Administration budget requests for DRF funding, which, in turn, may have led to higher annual appropriation amounts, as opposed to reliance on supplemental appropriations to fund disaster relief and recovery efforts. As mentioned earlier, not all disaster relief flows through FEMA's DRF, and the allowable adjustment can be used to compensate for that non-DRF relief. For example, in FY2012, the allowable adjustment was used to pay for disaster relief programs under the Army Corps of Engineers, Department of Agriculture, Department of Housing and Urban Development, and Department of Transportation, as well as the DRF. Hurricane Sandy provided the first case where demand for disaster relief exceeded the allowable adjustment. For discussion of how this was resolved, see the BCA and Disaster Relief in Practice: Hurricane Sandy later in this report. OMB Reporting and Calculations OMB manages the sequestration process and the limits on adjustments available to raise the discretionary spending limit. The BCA requires OMB to annually calculate the adjusted 10-year rolling average of disaster relief spending that sets the allowable adjustment for disaster relief. These calculations are included in the final sequestration report and sequestration update report issued under Section 254 of the Balanced Budget and Emergency Deficit Control Act of 1985 as amended (BBEDCA). OMB has not made any other estimates of "disaster relief" spending other than those called for by the BCA. OMB's methodology for calculating the initial allowable adjustment was tied to the language of the BCA's definition of "disaster relief," which included only amounts that were appropriated or authorized through legislation that specifically referenced Section 102(2) of the Stafford Act. In its initial sequestration report under the BCA structure, OMB illustrated this by comparing two similar education programs targeting students in hurricane-affected areas. One program had appropriations language specifically referencing the major disaster declaration (which was counted as disaster relief), and one program that had language only mentioning the hurricanes rather than the disaster declaration (which was not counted as disaster relief). In making its calculation, OMB included funding provided through both annual and supplemental appropriations bills for 29 individual accounts managed by 11 agencies and departments. OMB makes a similar calculation each year, taking into account the latest information available on disaster funding for the 10 previous fiscal years, and excludes the highest and lowest years. If Congress does not designate appropriations equal to the 10-year rolling average, the unused portion of that average can be carried forward to the allowable adjustment for the next year. The BCA and Disaster Relief in Practice: Hurricane Sandy As a result of the process outlined above, OMB calculated the initial allowable adjustment for disaster relief for FY2012 as $11.3 billion. $10.5 billion of that adjustment was used, leaving $799 million in carryover. When this carryover was added to the recalculated rolling average of $11 billion for FY2013, the allowable adjustment for disaster relief under the BCA for FY2013 rose to $11.8 billion. In FY2012, $6.4 billion of the allowable adjustment went to the DRF, and that in turn was calculated into the rate of spending provided for in P.L. 112-175 , the continuing resolution for FY2013. No other disaster relief designations were carried forward in P.L. 112-175 . It was this adjustment that provided a relatively significant balance for the DRF (roughly $5.4 billion) at the beginning of FY2013, which in turn may have reduced the urgency of the debate on Hurricane Sandy supplemental funding. P.L. 113-2 , the Disaster Relief Appropriations Act, 2013 (that provided $50.5 billion in supplemental funding for Hurricane Sandy), used the remaining $5.4 billion of the allowable adjustment to provide additional resources for the DRF. As a result, FY2013 was the first year the entire allowable adjustment for disaster relief was used for a single account. Analysis and Potential Policy Implications A number of policy questions are before Congress as the country recovers from its first large-scale disasters with the BCA in effect. These include: time frames for congressional action after a large-scale disaster strikes; the implications of the rising number of Stafford Act declarations; funding disaster relief efforts in severe disaster years; offsetting the cost of disaster relief; calculating the allowable adjustment for disaster relief; the inclusiveness of all types of disaster assistance in OMB's methodology for calculating the 10-year average on disaster relief spending; and the possible implications of excluding Stafford Act assistance for emergencies and fires from the allowable adjustment calculation. Timeframes for Congressional Action As demonstrated in Table 1 , prior to the enactment of the BCA, Congress generally responded to the needs of disaster victims by appropriating additional funds for disaster relief in a matter of days as with the September 11 th terrorist attacks and Hurricane Katrina, with some exceptions. The timeline for Hurricane Sandy, the first catastrophic disaster under the BCA structure, was markedly different than in years past. In the case of Hurricane Sandy, the DRF had a relatively high balance when the disaster occurred compared to previous years. The high balance can be attributed to the combination of the BCA mechanism, which had been used to replenish a nearly-depleted DRF in FY2012, and a CR that based interim funding for the DRF on that replenishment. This decreased the urgency to enact legislation to provide additional resources to the DRF. With the DRF able to fund the immediate needs in the wake of the storm, the Administration and Congress took additional time to assess how other relief funds should be targeted through the supplemental appropriations bill. This is in contrast to Hurricane Katrina, where a large supplemental appropriation was initially provided to FEMA and was rescinded and redistributed to other programs as needs became clearer. Potential Implications of the Rising Number of Stafford Act Declarations Since FEMA's first full year of operations (1979) there has been a steady increase in the number of emergency and major disaster declarations. It is unclear what is causing the increase. On the one hand, it could be the result of more incidents. On the other hand, it could be the result of an increase in incidents for which a request for assistance is made (in other words, there is no increase in the number of incidents; rather, there is an increase in requests for federal assistance). The result could also be caused by a combination of the two, as well as by some other undetermined cause. However, while the number of declarations is often a focus for criticism, it is the costs within the declared events (determinations on eligible disaster spending) that can drive the higher disaster spending amounts. The BCA does not provide a means for limiting or reducing federal expenditures on disaster assistance. If declarations continue to increase unabated, Congress may be asked to approve increasingly larger amounts for disaster assistance. Some might argue that in addition to the structure used by the BCA, other policies designed to reduce federal expenditures for assistance should also be pursued. These policy options might include strengthening declaration criteria, reducing the federal cost-share for incidents, and creating incentives that would encourage states to pursue more robust preparedness and mitigation measures. Funding Relief Efforts in Severe Disaster Years Going Forward Congress provided additional budget authority for disaster assistance in 10 appropriation laws since the hurricanes of 2005. While OMB removed the $37 billion spent on disaster relief in 2005 as an outlier when calculating the allowable adjustment for disaster relief to the cap, response and recovery to these storms went well beyond that first year. Appropriations for recovery from these storms between FY2006 and FY2010 were still substantial—$32 billion was spent in FY2006, in great part because of those ongoing recovery efforts. The sizeable initial disaster relief expenditures for Hurricane Katrina and the other 2005 storms will begin to lose relevance in calculating the allowable adjustment for disaster assistance for FY2016, and will no longer impact calculations for the allowable adjustment in FY2017. Once FY2005 and FY2006 rotate out, there will be a corresponding drop in the allowable disaster assistance adjustments. The reduction in the allowable adjustment will be more significant if disaster spending is below the 10-year average in the intervening years. In a scenario where disaster spending stays at the 10-year average level, the allowable adjustment will fall by $2.2 billion from FY2015 to FY2016, and then by another $2.9 billion from FY2016 to FY2017—a reduction of 41% in two years. Moreover, as the Administration and Congress work to spend under the adjustment, the allowable adjustment could continue to decrease, increasing the likelihood that it would be inadequate to accommodate future catastrophic disaster needs. Prior to Hurricane Sandy, there were at least four possible outcomes to meeting disaster assistance demands beyond the allowable adjustment for disaster relief: 1. Designation of disaster assistance as emergency funding, 2. Congress appropriating additional disaster relief budget authority. 3. Renegotiation of the underlying budget control laws, or 4. Making discretionary spending cuts, either specific program cuts or through across-the-board means, to offset the cost of additional assistance. In the wake of Hurricane Sandy, the Administration submitted a request to Congress for more than $60 billion in relief, well in excess of the available allowable adjustment. At the time Congress was confronted with a significant fiscal challenge, with a sequestration under the BCA already looming, as well as expiration of multiple tax cuts—a combination colloquially known as "the fiscal cliff." The Administration (and ultimately Congress) chose to pursue the first option, designating the additional assistance as emergency funding without offsets, citing legislative authority and historical precedent. There was no public legislative initiative to provide additional revenue to pay for disaster assistance. Renegotiation of the underlying budget laws was limited to measures delaying sequestration, rather than altering the allowable adjustment for disaster assistance. Offsetting the Cost of Disaster Relief Over the years Congress has debated the use of "offsets" to "pay for" all or part of legislation. In the context of appropriations debate, to offset means using policy changes, additional revenue, spending cuts, or rescissions of previous appropriations to pay for all or part of legislation. Congress uses the Congressional Budget Office, which provides budgetary "scoring," to evaluate the costs of legislation and the value of any offsets. Some examples include amendments that were offered in both the House and the Senate to offset the cost of the Disaster Relief Appropriations Act—including the funding for the DRF. H.Amdt. 4 (which would have offset $17 billion in the immediate disaster assistance with an across-the-board cut in discretionary spending) was not agreed to by a vote of 162-258. S.Amdt. 4 (which would have offset the entire $51 billion in disaster assistance) was not agreed to by a vote of 35-62. In the fall of 2011, there was also extensive public debate over the possible requirement of offsets for disaster assistance. Those opposed to the use of offsets argue that their use could politicize disaster assistance by allowing policymakers to target certain programs for the needed spending reduction. Opponents have also argued that assistance to disaster victims could be delayed while Congress debates the issue; and that emergency funding for other endeavors, such as war funding, has not faced the same requirement. Those in favor of offsetting disaster assistance argue that offsets do not deny disaster victims aid; they merely provide a way of doing so without increasing the deficit. Proponents also argue that the concern over delayed disaster assistance is without merit. Efforts were made to reduce the size of the FY2013 disaster supplemental, as well as to remove emergency funding designations for mitigation programs, to ensure that such funding would count against the BCA's discretionary spending limits. Supporters argued that additional funds could be provided later in the process. Opponents of that approach argued that the supplemental funds were important for morale and the confidence of states and local communities that they would receive help in initiating their recovery. Across-the-board cuts may seem more appealing to some Members rather than finding specific offsets for disaster assistance. Although the net accounting effect is the same over the medium term, across-the-board cuts do not require a specific congressional action that may provoke allies of (and stakeholders in) a given program. The potential risks incurred by an across-the-board rescission regardless of the possible effect on national priorities should not be discounted, however, especially when one considers that a full offset for the Disaster Relief Appropriations Act would have been over $50 billion—almost 140% of the size of the sequestration applied under the BCA to the non-defense budget in March 2013. Calculating the Disaster Relief Allowable Adjustment Expenditures Omitted from the 10-Year Average As previously mentioned, under the BCA, future spending caps on disaster relief and OMB's methodology for calculating the allowable adjustment are based on Section 102(2) of the Stafford Act. As a result of OMB's interpretation of the definition, when OMB reviewed appropriations for inclusion in the "disaster relief" calculation, if the Stafford Act was not explicitly cited those amounts were omitted—even when the funding was clearly for response to incidents declared as major disasters (see OMB quotations below). In some cases the legislative text included "pursuant to the Stafford Act." In other cases this specific language was omitted. It is not likely that precision in the language contemplated that the wording would one day be the basis of a calculation of disaster spending. OMB's review resulted in this construction: when the legislative text stated the funding was pursuant to the Stafford Act, OMB included that amount in the 10-year average. On the other hand, when the legislative text made no reference to the Stafford Act—whether it referred to the declared incident or not—OMB did not include that amount in the 10-year average. OMB illustrated such omissions in the Report's methodological description. According to OMB: ... in determining the amount that was "provided for disaster relief" in fiscal year 2005, OMB included in the calculation the funding that the Congress appropriated ... to the Department of Education "Hurricane Education Recovery" account for "assisting in meeting the educational needs of individuals affected by hurricanes in the Gulf of Mexico" because the appropriations language specified that it was "for students attending institutions … located in an area in which a major disaster has been declared in accordance with section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act." The OMB Report further states: OMB did not include in its calculations those amounts ... Congress appropriated in response to a presidentially-declared major disaster when such amounts were not specifically designated in statute to carry out activities pursuant to the Stafford Act and the Act itself was not specifically referenced. For example, OMB did not include in its calculations for fiscal year 2009 the appropriations ... Congress provided in December 2009 to the Department of Education "Innovation and Improvement" account "for competitive awards to local educational agencies located in counties in Louisiana, Mississippi, and Texas that were designated by ... [FEMA] as counties eligible for individual assistance due to damage caused by Hurricanes Katrina, Ike, or Gustav" because the amounts were not specified as being for activities undertaken pursuant to a major disaster declaration under the Stafford Act and the [Stafford] Act was not specifically referenced. OMB took this position despite the fact that it has not always been the practice to include a specific reference to the Stafford Act in supplemental appropriations for assistance in response to major disasters. An example of past practice is presented below. Pre-BCA Disaster Assistance Spending In the Disaster Relief and Recovery Supplemental Appropriations Act, 2008, Title I, Chapter 1 outlines relief funds provided through the Department of Agriculture, including the following provisions (emphasis added): NATURAL RESOURCES CONSERVATION SERVICE EMERGENCY WATERSHED PROGRAM For an additional amount for the "Emergency Watershed Protection Program", $100,000,000, to remain available until expended, for disaster recovery operations. FARM SERVICE AGENCY EMERGENCY CONSERVATION PROGRAM For an additional amount for "Emergency Conservation Program", $115,000,000, to remain available until expended. RURAL DEVELOPMENT PROGRAMS RURAL DEVELOPMENT DISASTER ASSISTANCE FUND For grants, and for the cost of direct and guaranteed loans, for authorized activities of agencies of the Rural Development Mission Area, $150,000,000, to remain available until expended, which shall be allocated as follows: $59,000,000 for single and multi-family housing activities; $40,000,000 for community facilities activities; $26,000,000 for utilities activities; and $25,000,000 for business activities: Provided, That such funds shall be for areas affected by hurricanes, floods, and other natural disasters occurring during 2008 for which the President declared a major disaster under title IV of the Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1974 : Provided further, That the cost of such direct and guaranteed loans, including the cost of modifying loans, shall be as defined in section 502 of the Congressional Budget Act of 1974: Provided further, That the Secretary of Agriculture may reallocate funds made available in this paragraph among the 4 specified activities, if the Secretary notifies the Committees on Appropriations of the House of Representatives and the Senate not less than 15 days prior to such reallocation. In addition, for an additional amount for grants, and for the cost of direct and guaranteed loans, for authorized activities of the Rural Housing Service, $38,000,000, to remain available until expended, for single and multi-family housing activities: Provided, That such funds shall be for areas affected by Hurricanes Katrina and Rita: Provided further, That the cost of such direct and guaranteed loans, including the cost of modifying loans, shall be as defined in section 502 of the Congressional Budget Act of 1974. Of all the appropriations listed, only the provisions in bold would be counted by OMB for purposes of calculating the cap on the adjustment for disaster relief as defined under the Budget Control Act. Only the Rural Development Disaster Assistance Fund appropriation specifically noting the declaration of a major disaster under the Stafford Act meets the standard described in OMB's report. The other provisions, mentioning the storms that were the root cause of the declaration, or the intent that the funds be for "disaster recovery" would likely not be adequate to meet the OMB methodology for accounting for disaster relief spending. Disaster Relief Spending Under the BCA In the "minibus" legislation, P.L. 112-55 , provisions providing disaster relief under some of these same accounts were written as follows (emphasis added): Section 735. There is hereby appropriated for the 'Emergency Conservation Program', for necessary expenses resulting from a major disaster declared pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5121 et seq.), $122,700,000, to remain available until expended: Provided, That the preceding amount is designated by the Congress as being for disaster relief pursuant to section 251(b)(2)(D) of the Balanced Budget and Emergency Deficit Control Act of 1985: Provided further, That there is hereby appropriated for the 'Emergency Forest Restoration Program', for necessary expenses resulting from a major disaster declared pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5121 et seq.), $28,400,000, to remain available until expended: Provided further, That the preceding amount is designated by the Congress as being for disaster relief pursuant to section 251(b)(2)(D) of the Balanced Budget and Emergency Deficit Control Act of 1985: Provided further, That there is hereby appropriated for the 'Emergency Watershed Protection Program', for necessary expenses resulting from a major disaster declared pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5121 et seq.), $215,900,000, to remain available until expended: Provided further, That the preceding amount is designated by the Congress as being for disaster relief pursuant to section 251(b)(2)(D) of the Balanced Budget and Emergency Deficit Control Act of 1985. All of this funding would be considered by OMB as disaster relief due to the citations of major disasters under the Stafford Act, as well as the specific proviso in bold declaring congressional intent that it be categorized as such. It could be argued that a more precise 10-year average of disaster assistance would include all spending for major disasters regardless of whether the legislative text referred to the Stafford Act. As we saw above, not all immediate assistance for Hurricane Katrina—which was declared a major disaster on August 29, 2005—was captured in making calculations for the disaster relief allowable adjustment. Furthermore, large incidents like Katrina often receive assistance from the federal government years after the incident—the appropriations impact the budget for disaster assistance as large infrastructure and mitigation projects are completed and reimbursed, yet because this funding was appropriated without direct reference to a Stafford Act declaration, it is not factored into the calculation for disaster relief. There are at least two changes that could be made that would help ensure a more accurate calculation of the 10-year average spent on disaster relief for use as a cap adjustment under the BCA. First, Congress could opt to provide the Stafford Act designation in all future appropriations legislation. That appears to be the new practice. However, it is useful to note that at the time of appropriation to some accounts, it is not clear if funding will pay for costs associated to a major disaster. For example, Department A has a mission-critical facility destroyed by a tornado, and uses current-year funding to restore operations. The appropriation does not signal that disaster cost, and therefore it may not be captured in future calculations. Second, Congress could amend the BCA to require that OMB recalculate "disaster relief" amounts based on a broader methodology. In the example above, an appropriation to pay for the cost of restoring operations might not be eligible to be called disaster relief if the tornado was not designated as a major disaster. Both of these changes would likely result in a higher, and arguably more accurate yearly total of disaster relief, and a larger allowable adjustment for disaster relief under the BCA than under current practices, if the underlying calculation of the allowable adjustment was not changed. Other Types of Excluded Stafford Assistance The BCA excludes other types of assistance provided under the Stafford Act. These are emergency declarations provided under Section 102(1) and FMAGs provided under Section 420(a). Emergency declarations authorize activities that can help states and communities carry out essential services during emergency situations. Emergencies can also be declared prior to an incident, at the request of the governor, to save lives and prevent loss. For example, emergency declarations have been declared prior to a hurricane making landfall to help state and local governments take necessary measures (evacuation assistance, placement of response resources, etc.). Unlike major disasters, the President does have the authority to declare an emergency without a governor's request when the incident involves a subject area where the "Federal government exercises exclusive or primary responsibility and authority." Compared to major disaster declarations, emergency declarations are generally considered a minor expense (congressional notification is required when spending for an emergency exceeds $5 million); however, numerous declarations can be declared in a year and, like major disasters, they are funded through the DRF. In 2005, 68 emergency declarations were declared, 50 of which were for each individual state to help relocate Hurricane Katrina victims who were displaced by the storm. In addition, since Hurricane Katrina, the federal government has increased its efforts to pre-position resources before a hurricane makes landfall. If this trend continues, the cost associated with emergency declarations may increase due to the more comprehensive preparations. This means that the spending levels on disaster relief from the DRF used in OMB's accounting are less than the total amount expended from the DRF in the years reported. This difference may include the omission of expenditures for emergency declarations and FMAG declarations. FMAG declarations include equipment, personnel, and supplies to states and localities for the mitigation, management, and control of fires that threaten to become a major disaster. As with emergency declarations, FMAGs are relatively modest in cost when compared to major disaster declarations. A review of FEMA obligations data indicate that the highest amount provided in FMAG declarations was in 2007, when roughly $112 million was obligated for fire assistance. Because emergency declarations and FMAGs derive funding from the DRF, it could be argued that excluding them from the ten-year average calculation for disaster relief generates an artificially low result. It could be further argued that including emergency and fire declarations would more accurately forecast federal disaster expenses. Although it is likely that including all federal assistance for emergency and disaster relief would increase the ten-year average, the size of the increase would depend on the new methodology used to calculate the amount of assistance provided. Concluding Observations Enactment of the BCA resulted in several key changes in the way disaster assistance is funded. The structure of the appropriation for the DRF has change d to reflect the availability of resources that do not count against the allocation for annual appropriations, allowing for prefunding of disaster needs. This in turn has led to a more deliberate development of a supplemental appropriation in the face of a major disaster with abnormally high cost and broad scope. The bulk of the debate over the impact of disaster relief on the federal budget tends to occur in moments of crisis, such as in the past when the DRF was on the brink of depletion, or when a major incident like Hurricane Katrina or Sandy seems ready to overwhelm the budgetary structures in place. It is difficult to assemble a clear picture of the issue on such a short time frame in the wake of a major disaster. In FY2013, the federal response to Hurricane Sandy led to a certain legislative response in the shape of supplemental appropriations and reforms to the Stafford Act. To some, the legislative intent of the BCA was to eliminate or reduce the use of the emergency designations to pay for disaster assistance by creating the disaster relief designation. They argue that in the case of assistance for Hurricane Sandy, Congress circumvented the use of offsets by designating the incident as an emergency. Opponents of the use of emergency designations for disaster assistance may conclude that while the BCA may have helped budget the DRF at more sustainable levels, disaster assistance for larger incidents should be offset to lessen their budgetary impact. Proponents, on the other hand, might argue that emergency designations are still needed for larger, arguably catastrophic incidents. Now that some time has passed since the BCA, Congress may choose to consider whether its mechanisms have produced the intended result more broadly, or in the specific area of disaster relief. Exploring the actual costs of governmental assistance in the wake of floods, fires, explosions, and storms, and understanding how the local, state, and federal governments fund those relief efforts is a valuable first step. A more accurate accounting for the size of that burden and how it is shared across the levels of government would appear to be essential. The funding and budget control functions do not operate in a vacuum, however. Controlling disaster costs cannot be done without addressing the laws that establish the role of the federal government in disaster response and recovery, and the expectations of state and local governments and the American people.

On August 2, 2011, the President signed into law the Budget Control Act of 2011 (BCA, P.L. 112-25), which included a number of budget-controlling mechanisms. As part of the legislation, caps were placed on discretionary spending for the next ten years, beginning with FY2012. If these caps are exceeded, the BCA provides for an automatic rescission—known as sequestration—to take place across most discretionary budget accounts to reduce the effective level of spending to the level of the cap. Additionally, special accommodations were made in the BCA to address the unpredictable nature of disaster assistance while attempting to impose discipline on the amount spent by the federal government on disasters. The BCA created an allowable adjustment specifically to cover disaster relief (defined as the costs of major disasters under the Stafford Act), separate from emergency appropriations. The limit established by the BCA on adjustments to the caps for disaster relief is based on the average funding provided for disaster relief over the previous ten years, excluding the highest and lowest annual amounts, calculated by the Office of Management and Budget. If Congress spends less than that average on disaster relief in a given fiscal year, the caps can be further adjusted upward by the unspent amount in the following year. The existence of this "allowable adjustment" for disaster relief has influenced the way that the Disaster Relief Fund (DRF) is structured, allowing a larger overall funding stream to be provided in annual appropriations without it counting against the bill's allocation of discretionary spending. On October 29, 2013, Hurricane Sandy came ashore, causing loss of life and billions of dollars in damage. The Administration proposed a relief package that exceeded the allowable adjustment for disaster relief under the BCA. The Administration requested, and Congress for the most part agreed, to designate the supplemental funding provided in the wake of Hurricane Sandy as emergency spending outside of the limited disaster relief adjustment made available under the BCA. The history of the legislative response to this disaster demonstrated that while the BCA included an accommodation to provide dedicated additional funding for many disasters, catastrophic events such as Sandy remain a challenge to those developing long-term budgeting strategies. This challenge could be compounded by the fact that by design, the methodology used by the Office of Management and Budget (OMB) to calculate the allowable adjustment could not capture the full range of disaster relief spending, and that the structure of the formula for calculating the average provides smaller allowable adjustments in future years. The sizeable initial disaster relief expenditures for Hurricane Katrina and the other 2005 storms will begin to lose relevance in calculating the allowable adjustment for disaster assistance for FY2016, and will no longer impact calculations for the allowable adjustment in FY2017. Once FY2005 and FY2006 rotate out, there will be a corresponding drop in the allowable disaster assistance adjustment. In the face of these challenges, Congress could choose to continue to use emergency funding to meet unbudgeted disaster relief needs, or change the allowable adjustment mechanism. Congress may also consider changing the formula used for calculating the allowable adjustment. Another potential option would be to take other steps to mitigate the impact of federal disaster relief spending on the budget, including altering the underlying laws, if Congress believes further legislative controls for federal disaster relief expenditures are a priority. This report will be updated as needed.

CRS_RL31365

Background Recent estimates that the unauthorized (illegally present) alien population in the United States exceeds 11 million has focused renewed attention on this population. The 107 th and 108 th Congresses considered legislation to address one segment of the unauthorized population—aliens who, as children, were brought to live in the United States by their parents or other adults. In a 1982 case, the Supreme Court struck down a state law that prohibited unauthorized alien children from receiving a free public education, making it difficult, if not impossible, for states to deny an elementary or secondary education to such students." Unauthorized aliens who graduate from high school and want to attend college, however, face various obstacles. Among them, a provision enacted in 1996 as part of the Illegal Immigration Reform and Immigrant Responsibility Act (IIRIRA) discourages states and localities from granting unauthorized aliens certain "postsecondary education benefits." This provision (IIRIRA §505) directs that an unauthorized alien— shall not be eligible on the basis of residence within a State (or a political subdivision) for any postsecondary education benefit unless a citizen or national of the United States is eligible for such a benefit (in no less an amount, duration, and scope) without regard to whether the citizen or national is such a resident. Although IIRIRA §505 does not refer explicitly to the granting of "in-state" residency status for tuition purposes and some question whether it even covers in-state tuition, the debate surrounding §505 has focused on the provision of in-state tuition rates to unauthorized aliens. The Higher Education Act of 1965, as amended, also makes unauthorized alien students ineligible for federal student financial aid. In most instances, they are likewise ineligible for state financial aid. Moreover, as unauthorized aliens, they are unable to work legally and are subject to removal from the country regardless of the number of years they have lived in the United States. Legislation in the 107th and 108th Congresses In the 107 th and 108 th Congresses, legislation was introduced—but not enacted—to provide relief to unauthorized alien students. These bills sought to repeal IIRIRA §505 and, thereby, provide unauthorized students greater access to postsecondary education. These bills also would have enabled certain unauthorized students to adjust to legal permanent resident (LPR) status. Legal permanent residents, sometimes referred to as "green card holders," are able to live and work indefinitely in the United States. In most cases, they are able to apply for U.S. citizenship after five years. The unauthorized student bills introduced in the 107 th and 108 th Congresses were H.R. 1563 , Preserving Educational Opportunities for Immigrant Children Act, introduced in the 107 th Congress and reintroduced as H.R. 84 in the 108 th Congress by Representative Sheila Jackson-Lee; H.R. 1582 , Immigrant Children's Educational Advancement and Dropout Prevention Act, introduced in the 107 th Congress by Representative Luis Gutierrez; H.R. 1918 , Student Adjustment Act, introduced in the 107 th Congress and reintroduced as H.R. 1684 in the 108 th Congress by Representative Chris Cannon; S. 1291 , Development, Relief, and Education for Alien Minors Act (DREAM Act), introduced in the 107 th Congress and reintroduced (in modified form) as S. 1545 in the 108 th Congress by Senator Orrin Hatch; S. 1265 , Children's Adjustment, Relief, and Education Act (CARE Act), introduced in the 107 th Congress by Senator Richard Durbin; and Title III, Subtitle D of S. 8 , Educational Excellence for All Learners Act of 2003, introduced in the 108 th Congress by then-Senate Minority Leader Thomas Daschle. Activity in the 107th Congress In the 107 th Congress, the Senate Judiciary Committee reported an amended version of S. 1291 , known as the DREAM Act. This amended measure represented a compromise between S. 1291 , as introduced, and S. 1265 . None of the other pending bills saw any action beyond committee referral. ( Appendix A contains a table comparing four unauthorized alien student bills introduced in the 107 th Congress.) Activity in the 108th Congress In the 108 th Congress, S. 1291 , as reported by the Senate Judiciary Committee in the 107 th Congress, was included as part of S. 8 , an education measure introduced by then-Senate Minority Leader Daschle. In addition, a new version of the DREAM Act ( S. 1545 ) was introduced by Senator Hatch. On November 25, 2003, the Senate Judiciary Committee reported S. 1545 with an amendment. The other unauthorized alien student bills did not see any action beyond committee referrals. Overview of Bills Four bills ( H.R. 84 , H.R. 1684 , S. 8 , and S. 1545 , as reported) would have enabled eligible unauthorized students to obtain LPR status through an immigration procedure known as cancellation of removal . (The major features of the bills are compared in Appendix B .) Cancellation of removal is a discretionary form of relief authorized by the Immigration and Nationality Act (INA), as amended, that an alien can apply for while in removal proceedings before an immigration judge. If cancellation of removal is granted, the alien's status is adjusted to that of an LPR. H.R. 84 and H.R. 1684 would have permanently amended the INA to make unauthorized alien students who meet certain requirements eligible for cancellation of removal/adjustment of status, whereas S. 8 and S. 1545 would have established temporary cancellation of removal/adjustment of status authorities separate from the INA. H.R. 1684 , S. 8 , and S. 1545 would have allowed aliens to affirmatively apply for relief without being placed in removal proceedings. Other bills, H.R. 3271 and H.R. 1830 , also would have enabled eligible unauthorized alien students to obtain LPR status, but they would not have done so through a cancellation of removal mechanism. Instead, they would have established a temporary adjustment of status authority. The INA limits the number of aliens who can be granted cancellation of removal/adjustment of status in a fiscal year to 4,000. It, however, contains exceptions for certain groups of aliens. H.R. 1684 would have amended the INA to add an exception to the numerical limitation for aliens granted cancellation of removal/adjustment of status under its terms. No numerical limit would have applied under H.R. 3271 , S. 8 , or S. 1545 . S. 1545 differed from the other bills in that it would have established a two-stage process by which aliens could obtain LPR status. Aliens granted cancellation of removal under the bill would have been adjusted initially to conditional permanent resident status. Such conditional status would have been valid for six years and would have been subject to termination. To have the condition removed and become full-fledged LPRs, the aliens would have had to submit an application during a specified period and meet additional requirements. The other bills would have adjusted all eligible aliens directly to full-fledged LPR status. As detailed in Appendix B , H.R. 84 , H.R. 1684 , H.R. 3271 , S. 8 , and S. 1545 varied in their eligibility criteria. Among these criteria, all five would have required continuous physical presence in the United States for a specified number of years. In the case of S. 8 and S. 1545 , the continuous presence requirement would have had to be satisfied prior to the date of enactment. Under H.R. 84 , H.R. 1684 , and H.R. 3271 , the continuous presence requirement would have needed to be met prior to the date of application for relief. All of the bills except H.R. 84 would have limited relief to aliens meeting specified age requirements. All five bills would have required a showing of good moral character. With respect to educational status, H.R. 1684 and H.R. 3271 would have required prospective beneficiaries to be enrolled at or above the 7 th grade level, or enrolled in, or actively pursuing admission to, an institution of higher education in the United States. S. 8 would have granted LPR status only to individuals with a high school diploma or equivalent credential. Under S. 1545 , in order to obtain conditional LPR status, aliens would have needed to gain admission to an institution of higher education or possess a high school diploma or equivalent credential. H.R. 84 contained no educational requirements. Markup of S. 1545 On October 16 and October 23, 2003, the Senate Judiciary Committee marked up S. 1545 . At the October 16 session, the Committee voted in favor of an amendment in the nature of a substitute proposed by Senator Hatch for himself and Senator Durbin. The substitute amended various provisions of S. 1545 , as introduced. Among the substantive amendments were changes to the confidentiality of information section. For example, the bill, as introduced, stated that information furnished by applicants could not be used for any purpose other than to make a determination on the application. The substitute amended this provision to state that information furnished by applicants could not be used to initiate removal proceedings against individuals identified in the application. At the October 23 meeting, the Judiciary Committee considered a set of amendments to S. 1545 offered by Senator Charles Grassley. Two of these amendments were the subject of debate at the markup. The first proposed to amend a provision in the bill allowing aliens who, prior to the date of enactment, met the requirements for both conditional resident status and removal of the condition, to petition for LPR status without first becoming conditional residents. The amendment would have made these aliens subject to the same period of conditional residence as other aliens eligible for relief under the bill. The second amendment proposed to place restrictions on the availability of federal student financial aid to aliens eligible for adjustment to LPR status under the bill. Under the amendment, these aliens would have been eligible only for specified student loan and work-study programs. Among the other amendments in the Grassley package was one that would have required beneficiaries of the bill to be registered in the Student and Exchange Visitor Information System (SEVIS), the monitoring system for foreign students. The Committee voted, 18-1, to approve the Grassley amendments, and voted, 16-3, to report the bill, as amended. The Committee acted, however, with the understanding that the bill would be subject to further discussion and modification prior to being reported. In S. 1545 , as reported, the Grassley amendment language on federal financial assistance was modified, as described in the next section. The rest of the Grassley amendments were unchanged. Federal Postsecondary Educational Benefits Under Title IV of the Higher Education Act of 1965, as amended, LPRs and certain other eligible noncitizens may receive federal student financial aid. Pell Grants and Stafford loans authorized under Title IV comprise 85% of postsecondary student aid. S. 1545 , as reported, would have placed restrictions on eligibility for higher education assistance for beneficiaries of the bill's adjustment provisions. With respect to assistance provided under Title IV, it would have made aliens who adjust to LPR status under the bill eligible only for student loans, federal work-study programs, and services (such as counseling, tutorial services, and mentoring), subject to the applicable requirements. Thus, aliens adjusting status under S. 1545 would not have been eligible for Pell Grants. H.R. 84 , H.R. 1684 , H.R. 3271 , and S. 8 , as introduced, did not contain restrictions on eligibility for federal student financial aid. An alien who adjusted to LPR status under any of these bills would have been eligible, as an LPR, for federal financial aid under Title IV. H.R. 84 and H.R. 1684 additionally would have extended this eligibility to unauthorized students who had applied for, but not yet been granted, cancellation of removal/adjustment of status. Appendix A. Comparison of Major Provisions of Bills in the 107 th Congress on Unauthorized Alien Students Appendix B. Comparison of Major Provisions of Bills in the 108 th Congress on Unauthorized Alien Students

Unauthorized alien students constitute a subpopulation of the total U.S. unauthorized alien population that is of particular congressional interest. These students receive free public primary and secondary education, but often find it difficult to attend college for financial reasons. A provision enacted as part of a 1996 immigration law prohibits states from granting unauthorized aliens certain postsecondary educational benefits on the basis of state residence, unless equal benefits are made available to all U.S. citizens. This prohibition is commonly understood to apply to the granting of "in-state" residency status for tuition purposes. In addition, unauthorized aliens are not eligible for federal student financial aid. More generally, as unauthorized aliens, they are not legally allowed to work in the United States and are subject to being removed from the country at any time. Bills were introduced in the 107th and 108th Congresses to address the educational and immigration circumstances of unauthorized alien students. Most of these bills had two key components. They would have repealed the 1996 provision. They also would have provided immigration relief to certain unauthorized alien students by enabling them to become legal permanent residents of the United States. In both Congresses, bills known as the DREAM Act (S. 1291 in the 107th Congress; S. 1545 in the 108th Congress) containing both types of provisions were reported by the Senate Judiciary Committee. This report will not be updated.

CRS_RS21771

RS21771 -- Animal Rendering: Economics and Policy Updated March 17, 2004 Introduction Renderers convert dead animals and animal parts that otherwise would require disposal into a variety of materials, including edibleand inedible tallow and lard and proteins such as meat and bone meal (MBM). (2) These materials in turn are exported or sold todomestic manufacturers of a wide range of industrial and consumer goods such as livestock feed and pet food, soaps,pharmaceuticals, lubricants, plastics, personal care products, and even crayons (also see Table 1 on page 6). Although rendering provides an essential service to the increasingly intensive and cost-competitive U.S. animal and meat industries(and is subject to certain government food safety and environmental regulations), the industry has largely operatedoutside of publicview. However, rendering has attracted greater public attention since the discovery of bovine spongiformencephalopathy (BSE ormad cow disease) in two North American cows in 2003. U.S. officials have announced or are considering newregulatory actionsintended to reassure foreign and domestic customers that BSE will not threaten food safety or U.S. cattle herds. These actions arelikely to cause changes in renderers' business practices, costs, and product values. Any changes in the economicsof rendering likelywill affect the economics of animal and meat producers too. Industry Overview Renderers annually convert 47 billion pounds or more of raw animal materials into approximately 18 billion pounds of products. Sources for these materials include meat slaughtering and processing plants (the primary one); dead animals fromfarms, ranches,feedlots, marketing barns, animal shelters, and other facilities; and fats, grease, and other food waste fromrestaurants and stores. In meat animal slaughtering and processing plants, the amount of usable material from each animal depends largely upon the species. For example, at slaughter, a 1,200-pound steer can yield anywhere from 55% to 60% of human edible product,including meat forretail sale, edible fat, and variety meats (organs, tongue, tail, etc.), according to various estimates. Subtractinganother 5%-8% for theweight of the hide, which goes into leather, leaves 32%-40% of material for rendering. If this range were appliedconsistently to all35.5 million U.S. cattle slaughtered in 2003, the equivalent would represent the weight of approximately 11 millionto 14 million livecattle. (3) Elsewhere, independent renderers collect and process about half of all livestock and poultry that die from diseases or accidents beforereaching slaughter plants (Sparks 2002). U.S. farm animal mortalities in 2000 included approximately 4.1 millioncattle and calves(totaling 1.9 billion pounds); 18 million hogs (1 billion pounds); 833,000 sheep, lambs, and goats (64 millionpounds); and 82 millionchickens and turkeys (347 million pounds), according to Sparks, which examined USDA data. "Disposing of these mortalities is complicated because of the need to minimize adverse environmental consequences, such as thespread of human and animal disease or the pollution of ground or surface water," Sparks (2002) observed. "Formany producers,paying a modest fee to have a renderer remove dead carcasses is likely preferred to finding alternative on-farmdisposal methods"(i.e., burial, incineration, or composting). Number and Types of Rendering Plants. One study estimated that 137 firmsoperated 240 plants in 1997, with a total payroll of nearly 10,000 employees. (4) More recently, the National Renderers Association(NRA) estimated that Canada and the United States have a combined 250-260 rendering plants. Rendering facilitiesmay be eitherintegrated or independent operations. Integrated plants operate in conjunction with animal slaughter and meat processing plants and handle 65%-70% of all renderedmaterial. The estimated 95 U.S. and Canadian facilities (NRA) render most edible animal byproducts (i.e., fattyanimal tissue),mainly into edible fats (tallow and lard) for human consumption. Edible rendering is subject to the inspection andsafety standards ofUSDA's Food Safety and Inspection Service (FSIS) or its state counterparts, which by law already are present in themeat slaughterand processing plants. These plants also render inedible byproducts (including slaughter floor waste) into fats andproteins for animalfeeds and for other ingredients. Because a meat plant typically processes only one animal species (such as cattle,hogs, or poultry), itsassociated rendering operations likewise handle only the byproducts of that species. The inedible and ediblerendering processes aresegregated. Independent operations handle the other 30%-35% of rendered material. These plants (estimated by NRA at 165 in the United Statesand Canada) usually collect material from other sites using specially designed trucks. They pick up and process fatand bonetrimmings, inedible meat scraps, blood, feathers, and dead animals from meat and poultry slaughterhouses andprocessors (usuallysmaller ones without their own rendering operations), farms, ranches, feedlots, animal shelters, restaurants, butchers,and markets. Asa result, the majority of independents are likely to be handling "mixed species." Almost all of the resultingingredients are destinedfor nonhuman consumption (e.g., animal feeds, industrial products). The U.S. Food and Drug Administration (FDA)regulates animalfeed ingredients, but its continuous presence in rendering plants, or in feed mills that buy rendered ingredients, isnot a legalrequirement. The Rendering Process. In most systems, raw materials are ground to a uniformsize and placed in continuous cookers or in batch cookers, which evaporate moisture and free fat from protein andbone. A series ofconveyers, presses, and a centrifuge continue the process of separating fat from solids. The finished fat (e.g., tallow,lard, yellowgrease) goes into separate tanks, and the solid protein (e.g., MBM, bone meal, poultry meal) is pressed into cakefor processing intofeed. (5) Other rendering systems are used, includingthose that recover protein solids from slaughterhouse blood or that process usedrestaurant grease. This restaurant grease generally is recovered (often in 55-gallon drums) for use as yellow greasein non-humanfood products like animal feeds. Value and Use of Rendered Products. The 18 billion pounds of ingredients thatrenderers produce each year have been valued at more than $3 billion, of which $870 million is exported. Of the18 billion poundtotal, 10 billion pounds were feed ingredients with a value of approximately $1 billion (Sparks 2001). MBMaccounted for 6.6 billionpounds of this, poultry byproducts 4 billion pounds, and blood meal 226 million pounds (Sparks). (6) Such ingredients are valued fortheir nutrients -- high protein content, digestible amino acids, and minerals -- and their relatively low cost. Poultryoperations andpet food manufacturers accounted for 66% of the domestic MBM market of nearly 5.7 billion pounds in 2000, whilehog and cattleoperations took most of the rest. Policy Discussion So long as animals are raised and processed for food, vast amounts of inedible materials will be generated, the result of prematuredeaths, herd culls, and slaughter byproducts. "Regardless of quantity, byproducts and rendered products from theslaughter processmust be sold at whatever price will clear the market or the industry (and the environment) incurs a cost fordisposal." (7) Asgovernment rules and industry practices evolve to address food safety and animal disease concerns like BSE, optionsfor using thesebyproducts may become more limited. If animal byproducts have fewer market outlets, new questions may ariseabout how todispose of them safely and who should pay. "Feed Ban" Impacts. Scientists currently maintain that infected animal feed is theprimary source of BSE transmission (although research continues into other potential sources). Therefore, U.S.officials believe thatregulation of feed ingredients is the single most effective method for controlling BSE. Following the widespreadoutbreaks of BSE inGreat Britain and Europe, the FDA in August 1997 imposed a ban on feeding most mammalian proteins to cattleand other ruminants. Prohibited proteins still can be fed to other animals such as pigs, poultry and pets. (FDA in late January 2004announced plans toexpand the list of prohibited proteins.) Estimates vary on the economic impact of the feed ban. According to a 1997 report prepared for the FDA on compliance costs andmarket impacts, the FDA feed ban could reduce MBM values by between $63 million and $252 million, or $25 to$100 per ton. (8) Sparks (June 2001) estimated that the average MBM value loss since the 1997 rule was $18 per ton, for a total of$288 million duringthe period 1996 to 2000. Sparks added that these losses likely were highly concentrated among renderers thatproduce MBMexclusively, and among those handling mixed species. The FDA-commissioned report predicted that rendererswould pass much ofthe lost value to packers by paying less for raw materials; packers in turn were expected to reduce their paymentsfor cattle. The 2001 Sparks study examined potential cost impacts of several options for more extensive feed restrictions. It estimated that atotal animal protein feed ban to ruminants would cost $100 million yearly; a total ban on all ruminant proteins toall farm animals,$636 million yearly; and a total animal protein ban to all farm animals, $1.5 billion yearly. Downers and Dead Animals. Another recent regulatory action with an impact onthe rendering industry was USDA's December 30, 2003, ban on all "downer" (nonambulatory) cattle from the humanfood supply. U.S. officials consider downers, or animals unable to rise or walk, to be one of the higher-risk cattle groups for BSE(althoughindustry officials note that most animals become nonambulatory from injuries or non-BSE diseases). Before theban, USDAestimated that 150,000-200,000 downers were entering slaughter plants. One issue is whether the downer ban hasremoved aneconomic incentive to market downers and thus made it more difficult for USDA to obtain such animals for BSE(and other disease)surveillance. On March 15, 2004, USDA announced a major expansion of its BSE surveillance program that will samplemany more downers anddead animals, adding that it is looking to renderers (among other sites) to make these animals available. Numerouspracticalproblems -- such as how to recover and store carcasses, who will sample, the costs, etc. -- now confront bothgovernment andindustry officials. (9) Disposal Questions. If renderers earn less money from rendered byproducts anddead animals, they will pay less for such materials. In the past, renderers paid for dead animals. Now most chargea fee to pick themup. (10) In its 2002 study on the cost of livestockmortalities, Sparks assumed that so long as MBM could be sold for feed, the averageper-head cost of disposing of dead cattle and calves might be $8.25 per head; if MBM is banned from animal feed,the cost could riseto $24.11 per head. Sparks estimated the per-head costs for other disposal methods at $9.33 for incineration, $10.63for burial, and$30.34 for composting. The 2002 World Health Organization (WHO) report observed that rendering, because it "sanitizes" animal wastes, "performs anessential public service: the environmental clean-up of wastes too hazardous for disposal in conventional ways. Forexample, animalwastes provide ideal conditions for the growth of pathogens that infect humans as well as animals. Incinerationwould cause major airpollution. Landfill could lead to disease transmission." (11) A USDA advisory committee in February 2004 said that along with an enhanced BSE surveillance program, "a comprehensive systemmust be implemented to facilitate adequate pathways for dead and non-ambulatory cattle to allow for collection ofsamples, and forproper, safe disposal of carcasses; this must be done to ensure protection of public health, animal health, and theenvironment; such asystem will require expending federal resources to assist with costs for sampling, transport and safe disposal." (12) Others temper this view of rendering by observing that the nation's clean air and water laws are in place to address possible adverseenvironmental impacts. These responsibilities are enforced under the purview of the U.S. Environmental ProtectionAgency (EPA)and generally through states and localities, which often impose their own environmental and health standards aswell. Whilerendering (which also must abide by such standards) certainly is one option for handling dead stock and animalbyproducts, it hasbeen argued, this option does not relieve the animal and meat industries of their environmental responsibilities. Because theseindustries created this material, they should bear the costs, not the public, particularly at a time when budget deficitsare forcingdifficult spending choices, the argument goes. Table 1. U.S. Production, Consumption, and Export of Rendered Products,1999-2003(p) Source : NRA; 2003 data preliminary (p). a. Includes poultry fat and by-product meal and raw products for pet food. b. Withheld to avoid disclosing individual firm data.

Renderers convert dead animals and animal byproducts into ingredients for a widerangeof industrial and consumer goods, such as animal feed, soaps, candles, pharmaceuticals, and personal care products. U.S. regulatoryactions to bolster safeguards against bovine spongiform encephalopathy (BSE or mad cow disease) could portendsignificant changesin renderers' business practices, the value of their products, and, consequently, the balance sheets of animalproducers and processors. Also, if animal byproducts have fewer market outlets, questions arise about how to dispose of them safely. Thisreport, which willnot be updated, describes the industry and discusses several industry-related issues that have arisen in the108th Congress. (1)

CRS_RL33010

U.S.–Australia Relations Australia has become a more active global actor in recent years, and its strategic position has become more important as the globe's geopolitical center of gravity shifts to Asia and the Indo-Pacific region. While developments in the Middle East and Europe will continue to demand the attention of the United States and others, the potential for conflict in the Indo-Pacific region positions Australia in an increasingly strategic corner of the globe. Australia, a traditionally staunch U.S. ally, strengthened its long-standing alliance with the United States under the Obama Administration. This was demonstrated by former-Australian Prime Minister Tony Abbott's October 2014 decision to send eight Super Hornet fighter/bomber aircraft, 200 special forces and 400 support troops to the United Arab Emirates to join the coalition forming to try to halt the advance of Islamic State (IS) militants in Iraq. Former Secretary of State Hillary Clinton stated the "ties between our two nations are as close as any in the world," while then-Foreign Minister Rudd stated, "No one can overestimate the importance of the sharing of common values" when discussing the alliance. The United States and Australia share strategic interests in the Indo-Pacific region and globally and have worked closely together to promote their goals and objectives. Australia's worldview has traditionally viewed the United States as a force for good in the world and in Australia's Indo-Pacific region. There has traditionally been strong bipartisan elite and popular support in Australia for bilateral defense cooperation with the United States. The Trump Administration and Australia The U.S.-Australia relationship began on a difficult note under President Trump, who described his first call with Prime Minister Malcolm Turnbull, one of his first as President, as "the worst call by far," according to media reports. Ties were strained by disagreements over a refugee-settlement agreement concluded under the Obama Administration, President Trump's statements that U.S. allies needed to pay more for U.S. support, and the President's move to withdraw from the proposed Trans-Pacific Partnership (TPP) trade agreement, an important part of Australia's trade policy. The April 2017 visit to Australia by Vice President Mike Pence, and what was generally viewed as a positive meeting between President Trump and Prime Minister Turnbull aboard the retired aircraft carrier USS Intrepid for the 75 th anniversary of the Battle of the Coral Sea on May 4, 2017, helped to put the relationship back on track after the rocky start according to media reports. During his April 2017 visit to Australia, Vice President Pence affirmed the alliance and stated that the United States would honor the refugee deal made by Turnbull and former President Obama. The first group of approximately 50 refugees from Australian offshore detention centers in Papua New Guinea and Nauru were sent to the United States in September 2017. Trump described this arrangement as "the worst deal ever." At their meeting aboard the Intrepid , Trump and Turnbull were able to move past the previous reportedly acrimonious phone call with Trump stating that "We get along great, we have a fantastic relationship, I love Australia." President Trump stated in May 2017, "Few peoples in the world share ties in history, affection and culture like the Americans and Australians." In January 2017, Australian Foreign Minister Julie Bishop stated We are allies, partners, collaborators, and most importantly friends—we like each other—a lot. We share fundamental values that underpin a corresponding world view and a similar brand of pragmatic optimism. There's a natural affinity. We benefit from a high level of mutual trust, built up over decades of close cooperation. Ours is a formal alliance, and the ANZUS Treaty of 1951 is the cornerstone of our longstanding relationship. Following the inauguration of President Trump, Australia commits anew to our essential and enduring partnership. In July 2016, candidate Trump stated, "If we cannot be properly reimbursed for the tremendous cost of our military protecting other countries … then yes, I would be absolutely prepared to tell those countries, 'congratulations, you will be defending yourself.'" This position that departed from past U.S. policy is a cause for concern for many in Australia. The President reportedly was displeased over the previously negotiated Obama-Turnbull deal under which the United States would receive 1,250 refugees from Australian offshore detention sites. President Trump's actions were viewed by some in the press as "injecting new uncertainty in the U.S.-Australia relationship" and reflecting the "transactional view he takes of relationships, even when it comes to diplomatic ties with long-standing allies." The call, when taken in context with earlier statements, Trump's withdrawal from the TPP, and other factors, led some observers in Australia to question America's commitment and Australia's extremely close relationship with the United States. AUSMIN At the core of the ANZUS alliance is the Australia-United States Ministerial (AUSMIN) process. This meeting of the U.S Defense Secretary and Secretary of State and their Australian counterparts, the Minister of Defence and the Minister of Foreign Affairs, guides and shapes the alliance relationship. AUSMIN usually meets once a year. In June 2017, Secretary of State Tillerson and Secretary of Defense Mattis traveled to Sydney, to attend the Trump Administration's first AUSMIN meeting with their Australian counterparts Minister for Foreign Affairs Julie Bishop and Minister for Defence Marise Payne. In their Joint Statement the group reaffirmed their commitment to the alliance and ... decided to further expand defence and security cooperation, including: a commitment to further strengthen the interoperability of our armed forces; and continued close collaboration on capability development and defence technology. We confirmed our commitment to full implementation of the U.S.-Australia Force Posture Initiatives. The two nations also pledged to "increase bilateral collaboration in relation to the Indo-Pacific" and to "continue to strengthen their trilateral cooperation with Japan, and to enhance their engagement with our regional allies and partners." There was no AUSMIN meeting in 2016. In October 2015, Secretary of State John Kerry and Secretary of Defense Ashton Carter met with Australian Minister for Foreign Affairs Julie Bishop and Defence Minister Marise Payne in Boston for the 2015 AUSMIN consultations. The Joint Statement at that time included a number of principles, initiatives, and accomplishments in the areas of military cooperation, regional stability, counterterrorism, economic integration, and climate change. The two sides reaffirmed the "strong state of bilateral defense and security cooperation ... bolstered by more than a decade of operations together" in Afghanistan and Iraq and more recently through the Global Coalition to Counter the Islamic State. They reiterated their commitment to the implementation of the U.S. Force Posture Initiatives. The two defense leaders signed a Joint Statement on Defense Cooperation, which articulates the principles underpinning defense cooperation. At the 2015 ministerial, the two governments expressed "strong concerns" over Chinese land reclamation and construction activities in the South China Sea and called on all claimant states to "halt land reclamation, construction, and militarization." They emphasized the importance of the "rights, freedoms, and lawful uses of the sea enjoyed by all states to fly, sail, and operate in accordance with international law." The two countries called on the Association of Southeast Asian Nations (ASEAN) and China to reach agreement on a "substantive" Code of Conduct in the South China Sea. They also reaffirmed the importance of a constructive relationship with China through "dialogue, cooperation, and economic engagement." Former Prime Minister Tony Abbott met with former President Barack Obama in Washington, DC, in 2014. In joint remarks with Abbott, Obama stated the following. There are a handful of countries in the world that we always know we can count on, not just because they share our values, but we know we can count on them because they have real capacity. Australia is one of those countries. We share foundational values about liberal democracies and human rights, and a world that's governed by international law and norms. And Aussies know how to fight, and I like having them in a foxhole if we're in trouble. The Quad There appears to be increasing interest in re-exploring a quadrilateral group of Indo-Pacific liberal democracies comprised of the United States, Australia, Japan, and India, to promote shared interests in the region. The idea of forming such a "Quad" was relatively prominent under the George W. Bush Administration, but efforts to move forward with such a group lost momentum following changes of government in the late 2000s. Interest in such a grouping appears to be renewed in 2017. Australia's Department of Foreign Affairs and Trade issued a statement following the Quad Senior officials meeting in November 2017 that spoke of a ... shared vision for increased prosperity and security in the Indo-Pacific region and to work together to ensure it remains free and open. The officials examined ways to achieve common goals and address shared challenges in the region. This includes upholding the rules-based order in the Indo-Pacific and respect for international law, freedom of navigation and overflight; increase connectivity; coordinate on efforts to address the challenges of countering terrorism and upholding maritime security in the Indo-Pacific. The Quad was first promoted by Japanese Prime Minister Shinzo Abe when representatives from the four countries met on the sidelines of the ASEAN Regional Forum in May 2007. In placing new emphasis on the Indo-Pacific—a strategic conception of the region that places heightened importance on India and securing maritime routes linking East and South Asia, including routes near Australia—President Trump and Secretary of State Rex Tillerson have rearticulated the United States' strategic conceptualization of Asia in a way that is similar to Australia's strategic worldview. President Trump's November 2017 trip to Asia promoted among other things a Free and Open Indo-Pacific. During the trip, President Trump hosted a trilateral meeting with Prime Minister Turnbull and Japanese Prime Minister Abe of Japan which was followed by a bilateral meeting between Trump and Prime Mister Modi of India. In his October 2017 policy speech on U.S.-India relations, Secretary Tillerson emphasized the need to increase engagement and cooperation with the Indo-Pacific democracies: We are already capturing the benefits of our important trilateral engagement between the U.S., India, and Japan. As we look ahead, there is room to invite others, including Australia, to build on shared objectives and initiatives. Tillerson went on to describe Australia as an important southern "pinpoint" on the Indo-Pacific map that includes the United States to the east, Japan to the north, and India to the west. In response to a question related to the Japanese foreign minister's proposal for a new strategic dialogue between India, the United States, Japan, and Australia, U.S. Acting Assistant Secretary for South and Central Asian Affairs Alice Wells stated, The quadrilateral that the Japanese foreign minister discussed would be building on what has been a very productive trilateral that we have with India and Japan, and if you look at the largest military exercise that we do, Malabar, Japan is a part of that exercise. As we explore ways to deepen and try to inculcate some of the values—freedom of navigation, maritime security, humanitarian assistance, disaster response, transparency—obviously, Australia would be a natural partner in that effort as well. We're looking at a working-level quadrilateral meeting in the near term, but again, I think the idea is how do we bring together countries that share these same values to reinforce these values in the global architecture. Wells went on to describe the Quad as "providing an alternative to countries in the region who are seeking needed investment in their infrastructure" so that they have "alternatives that don't include predatory financing or unsustainable debt." Australia-India-Japan-United States senior official consultations on the Indo-Pacific were held on November 12, 2017, in Manila. Multilateral approaches to security, including the Quad concept, have gained currency in Australia in recent years. This is a recognition that India and the Indian Ocean are vital parts of our region, partly in response to the fact that China is expanding its interests, power, and naval presence so far afield. Japan and India too are now active proponents of this wider regional approach. Indeed, Tokyo, New Delhi, and Washington see a "free and open Indo-Pacific" as a direct answer to the geo-economic and strategic leverage Beijing is seeking through the maritime part of its One Belt One Road Initiative, an Indo-Pacific with Chinese characteristics. All this means there is sense in reserving the right to pursue novel strategic dialogues that would involve the United States alongside emerging Asian partners such as India and Japan. The Malabar naval exercises, which began as bilateral exercises between the United States and India and subsequently included Japan, are a tangible expression of multilateral naval cooperation between liberal democracies in the Indo-Pacific. Canberra is reportedly interested in participating in the exercises but India reportedly declined Australia's request to join the 2017 exercises. Congressional Action Many Members of Congress have sought to signal their support of the alliance with Australia. H.Con.Res. 21 , "Reaffirming a Strong Commitment to the United States-Australia Alliance Relationship," sponsored by Representative Eliot Engel with 32 cosponsors, was introduced on February 6, 2017, and referred to the Subcommittee on Asia and the Pacific on February 16, 2017. S.Res. 50 , "Reaffirming a Strong Commitment to the United States-Australia Alliance Relationship," was sponsored by Senator Benjamin Cardin with 13 cosponsors and was introduced on February 6, 2017, and referred to the Committee on Foreign Relations. Senator John McCain expressed his "unwavering support" for the alliance by meeting with Australian Ambassador to the United States Joe Hockey on February 2, 2017, and stating, Today, Australia is hosting increased deployments of U.S. aircraft, more regular port visits by U.S. warships, and critical training for U.S. marines at Robertson Barracks in Darwin. This deepening cooperation is a reminder that from maintaining security and prosperity in the Asia-Pacific region to combatting radical Islamist terrorism, the U.S-Australia relationship is more important than ever. In short, Australia is one of America's oldest friends and staunchest allies. We are united by ties of family and friendship, mutual interests and common values, and shared sacrifice in wartime. Both the House and Senate have also established bipartisan Friends of Australia Caucuses. Representatives Joe Courtney and Mike Gallagher and Senators Roy Blunt and Dick Durbin announced the launch of both the House and the Senate bipartisan Friends of Australia Caucuses in May 2017. The U.S.-Australia Force Posture Agreement The United States and Australia signed the U.S.-Australia Force Posture Agreement in August 2014. Statements issued at the time also pointed to bilateral cooperation in the areas of cyber defense and cybersecurity incident response and expanded cooperation on ballistic missile defense (BMD) in the Asia-Pacific region. Such a system could network U.S., Australian, and allied assets to increase shared capabilities. The HMAS Hobart is the first of three Australian air warfare destroyers with the Aegis missile defense system. The reported expansion of a base near Geraldton, West Australia, would upgrade access to a next generation military satellite communications system for U.S. and Australian troops to communicate worldwide. Under the Force Posture Agreement, U.S. forces in Australia have been set to increase from 1,150 to 2,500. The agreement provides a legal basis for the presence of U.S. marines and prepares the way for a rotational presence of U.S. Navy vessels and military aircraft in Western Australia in the years ahead. In October 2016, the United States and Australia reached an "in principle conclusion of cost-sharing negotiations" for the force posture initiatives. The Force Posture Initiatives in northern Australia are being implemented under the Force Posture Agreement signed at the 2014 Australia-United States Ministerial Meeting. The initiatives seek to expand cooperation, increase opportunities for combined training and exercises and deepen the interoperability of our armed forces. The initiatives also provide opportunities for broader collaboration between Australia, the United States and our partners in the Indo-Pacific. In discussing the Force Posture Agreement, which has a 25-year time frame, the 2014 AUSMIN Joint Communiqué stated that it "demonstrates the United States' strong commitment to the Asia Pacific and the Indian Ocean regions." The communiqué also stated that AUSMIN "welcomed the larger U.S. Marine Corps presence" in Northern Australia and "discussed the way forward for enhanced aircraft cooperation" and "the potential for additional bilateral naval cooperation." The communiqué discussed how the two nations were committed to working together on BMD and developing common approaches to regional security challenges. It also discussed the need to "harness opportunities for greater defense cooperation across the Asia-Pacific and Indian Ocean regions" and called for "upholding freedom of navigation and overflight in the East China and South China Seas" and "opposed unilateral attempts to change facts on the ground or water through the threat or use of force or coercion." Historical Background Australia (see Figure 1) was first inhabited from 40,000 to 60,000 years ago. The Aboriginal people of Australia are the world's oldest continuous culture. Today, Aboriginal and Torres Strait Islanders people account for up to 2.5% of Australia's total population. While the Aboriginal population were hunter-gatherers, they developed a complex spiritual "Dreamtime" culture focusing on creation myths, rituals, laws, and connections to ancestors and the Australian landscape. Captain James Cook claimed Australia for Britain in 1770, and in 1788 the first European settlement, largely made up of convicts, was established at Sydney, New South Wales. Australia evolved into a pastoral settler society based on sheep and wool, with the increasing importance of minerals following the gold rush of 1851. Although the majority of Australians have British or Irish ancestry, Australia's immigrants also came from elsewhere in Europe, particularly after World War II. Today, Australian immigration is increasingly from Asia, with Asians accounting for approximately 7% of the population. Despite the centrality of the "bush" or the "outback" to the national myth, Australia has evolved into an urbanized society, with 11% living in rural areas. Australia is slightly smaller than the contiguous lower 48 United States and has a population of approximately 23 million. Australia has for some time been undergoing a national identity debate related to its relationships with Asia, in which it is geographically situated, and with Britain, the United States, and Europe, with which it has deep cultural and historical linkages. Politics Government Structure Australia is an independent nation within the British Commonwealth. The Head of State is the ruling monarch of the United Kingdom, who is represented by the Governor General in Australia. Queen Elizabeth II is represented by the Governor General Sir Peter Cosgrove. In practice, power is held by the Prime Minister and Cabinet, who are elected members of Parliament. Parliamentary elections are called by the government, but must be held at least once every three years. The Liberal-National Party Coalition and the Labor Party are the two main political forces in Australia. There is a growing republican movement in Australia that supports breaking with the British Crown. Australia is divided into several administrative divisions. There are six states and two territories. The states are: New South Wales, Queensland, Victoria, South Australia, West Australia, and Tasmania. The territories are the Australian Capital Territory and the Northern Territory. There also are a number of dependent islands including Christmas Island, Norfolk Island, and the Cocos Islands. All citizens 18 years of age and older are legally required to vote. Australia has a bicameral parliament consisting of the House of Representatives and the Senate. The House has 150 Representatives, who are elected through a preferential ballot. The Senate has 76 seats, with 12 senators from each of the six states and two senators from each of the two territories. One half of the state senators are elected every three years and territory senators are elected every three years. Although the government must call elections every three years, it may call early elections. A double dissolution, where all members of both legislative bodies must stand for election, may be called if government legislation is blocked twice in three months. Political Developments The Liberal-National Party Coalition returned to power in 2013 under the leadership of Tony Abbott, following six years of Labor Party rule. Abbott advocated eliminating the Labor government's tax on carbon emissions, reducing government spending, and stopping refugee boats from coming to Australian shores. In September 2015, the Liberal Party ousted Tony Abbott as its leader and elected longtime rival Malcolm Turnbull, making him the fifth Australian prime minister in eight years. While Abbott had succeeded in repealing the unpopular carbon tax, other policy initiatives, such as cuts in health care and education aimed at balancing the budget, encountered popular and political opposition. Turnbull's more progressive outlook, relative to Abbott and the Liberal Party's right wing, on such issues as climate change, same-sex marriage, and Australia's status within the British Commonwealth reportedly were popular with many Australians, if not with some members of his own party. In November 2015, Turnbull formally abolished the awarding of knighthoods and damehoods to prominent Australians. Abbott had reintroduced the practice in 2014 after a hiatus of 30 years. Australia went to the polls in July 2016 and returned the Turnbull government's Liberal/National Coalition with a narrow margin in parliament. (See Table 1 .) The lack of a majority in the Senate necessitates cooperation by the government with small parties and independents or with the opposition to get legislation passed. The next general election is due to be held in 2019 or earlier. Turnbull continues to face opposition from conservatives within his own right-of-center Liberal Party. Since the 2016 election, Labor Party Leader Bill Shorten has strengthened his political position. Bill Shorten's Labor Party held a 53% to 47% lead over Prime Minister Turnbull's Coalition in a two-party preferred poll held in May 2017. Dual-Citizenship Controversy On October 27, 2017, the High Court of Australia ruled that no one can sit in Australia's Federal Parliament while being eligible for citizenship in a foreign land. A number of members of parliament as a result had to step down, causing Prime Minister Turnbull to lose his parliamentary majority. The Prime Minister responded by saying that there was no need for an election even though he is now leading with a lack of a majority. As of November 11, 2017, the Coalition held 74 seats in the reduced chamber of 148 seats with Labor holding 69 seats with five crossbench MPs. Upcoming by-elections are to fill the vacated seats in parliament. Same-Sex Marriage In November 2017, Australia undertook a non-binding postal survey to determine the electorate's opinion on same-sex marriage. More than 12.7 million people, or 79.5% of those surveyed, responded. The overall result was 61.6% in favor. Following the survey's result, Prime Minister Turnbull, a moderate within the right-of-center Liberal Party, stated that he hopes marriage equality will become law in Australia by Christmas 2017. The result marks a setback for the right wing of the Liberal Party that is opposed to same-sex marriage. Former Prime Minister Tony Abbott had been a leader opposing same-sex marriage. His electorate voted "Yes" in favor of same-sex marriage. The Alliance The ANZUS Alliance and Changing Strategic Contexts The United States–Australia bilateral defense and alliance relationship has traditionally remained strong even as it has evolved through several different strategic contexts over the past 100 years. The United States and Australia both committed troops to suppress the Boxer Rebellion in China (1900-1901). In 1908, President Theodore Roosevelt's Great White Fleet was welcomed in Australia, which was concerned with the expansion of Japanese naval power at that time. The defense relationship was forged when the two nations fought together on the Western Front in World War I. There U.S. troops fought under Australian General Monash at the Battle of Hamel. They also fought together in World War II in the South Pacific theatre of operations, in the Battle of the Coral Sea, for example, and beyond, and again in the Korean War in battles such as Kapyong. Former Australian Minister of Defence and former Ambassador to Washington Kim Beazley pointed out that the Battle of the Coral Sea "looms large in our strategic consciousness" and that it was a "nation saving" event. The joint action by U.S. and Australian naval forces checked the Japanese naval advance on Papua and New Guinea just north of Australia and helped turn the tide of war in the Pacific. At the outbreak of World War II, the Territory of New Guinea was a League of Nations Mandate of Australia while the Territory of Papua was under the direct authority of the Commonwealth of Australia. The 1951 ANZUS Treaty was signed at a time when Australia was concerned about a resurgent Japan and the United States was increasingly concerned with the growing power of the Soviet Union. The two nations came to share common concern during the Cold War, which saw Australian troops fighting alongside U.S. forces in Vietnam, and the two nations worked together to promote stability in the post-Cold War era in places like Somalia. The advent of the "War Against Terror" also drew the two nations together. Former Prime Minister John Howard invoked the ANZUS alliance to come to the assistance of the United States by sending Australian troops to serve in Iraq and Afghanistan. Australia and the United States also share a deep and broad-based intelligence relationship. The U.S.-Australia joint defense facilities aid in intelligence collection, ballistic missile early warning, submarine communications, and satellite-based communications. Formal consultations include policy planning, political-military, and military-to-military talks. Australia continues to have close defense ties with New Zealand as the United States has reestablished close defense relations with New Zealand. The U.S.–New Zealand leg of the ANZUS alliance had been suspended as a result of differences over nuclear policy in the mid-1980s. The Wellington Declaration of 2010 and the Washington Declaration of 2012 signaled that the United States and New Zealand have overcome past differences over nuclear policy. These declarations established a renewed strategic partnership between the United States and New Zealand and provide for enhanced cooperation on a range of areas including enhanced military cooperation. U.S. Arms Sales to Australia Australia, the world's sixth largest arms importer, has traditionally bought most of its major weapons systems from the United States with approximately 68% of arms imports in 2015 being sourced from the United States. Australia was the fifth-largest purchaser of U.S. weapons in 2016. The State Department approved a possible sale of a $1.3 billion Gulfstream G550 Aircraft with Airborne Intelligence, Surveillance, Reconnaissance, and Electronic Warfare (AISREW) Mission Systems in June 2017. The State Department approved a $815 million sale of GBU-53/B Small Diameter Bomb Increment II for Australia's future F-35A Joint Strike Fighter purchase in October 2017. Australia announced in April 2014 that it would buy 58 F-35A Joint Strike Fighter aircraft at a cost of $11.5 billion. This purchase is in addition to a previously announced decision by Australia to buy 14 F-35As. It is expected that the F-35A planes will be delivered in 2018 and will enter service in 2020. Over the past decade Australia has also agreed to purchase the EA-18G Growler, the P-8A Poseidon maritime surveillance aircraft and the E-7A Wedgetail early warning aircraft. These purchases help American defense firms and improve bilateral interoperability with U.S. armed forces. In 2015, Australia received two additional Boeing C-17 strategic transport aircraft as part of a $713 million purchase. Australia's Strategic Outlook The shift in the geostrategic dynamics of Asia and relative decline of U.S. power brought on by the rise of China is leading Australia to explore multilateral as well as other bilateral security relationships. A Lowy Institute paper by Rory Medcalf and Raja Mohan observed that middle powers in Asia—including Australia, India, Japan, and others—are looking beyond traditional approaches to security and expanding security cooperation with each other. Some observers view this as a reaction to the rise of China and Indo-Pacific regional states' uncertainty over America's future role in the region. The two authors argue that such middle power ties could "build regional resilience against the vagaries of U.S.-China relations" and "reinforce the multipolar quality of the emerging Indo-Pacific order" while "encouraging continued U.S. engagement without unduly provoking China." Such developments also mark change in the regional security architecture which has been grounded in the post-war San Francisco "hub-and-spoke" system of U.S. alliances. This shift towards increasing reliance by middle powers in Asia on each other could build on and complement these states' ties with the United States. The search for new security mechanisms in Asia appears, in the view of some analysts, to mark a declining faith that economic interdependence and existing regional institutions will succeed in preventing regional conflict in the future. This sentiment is also reflected in a regional arms race. Strategic Geography Despite Australia's close ties with Anglosphere countries, many in Australia firmly believe that the 21 st Century is an Asian Century and that this presents Australia with opportunity. Australia sees the global center of gravity shifting to its Indo-Pacific region, thus eliminating a "tyranny of distance" that for much of Australia's history left it isolated from global centers of commerce and power. The new perspective for Australia in this Asian Century is the "prospect of proximity" and the opportunity that this presents. The Indo-Pacific Linkages of trade and energy, as well as changes in the correlates of power, are reshaping perceptions of the strategic geography of the Indo-Pacific region. This thinking is also bringing together American and Australian conceptions of their evolving strategic environment. The 2013 Australian Defence White Paper departed from previous articulations of Australia's strategic geography and included a "categorical shift towards identifying Australia's region of strategic interest as something called the Indo-Pacific." The United States' rebalance to Asia strategy similarly brought the Indian Ocean into strategic discussions that earlier would have been more exclusively focused on strategic dynamics in Northeast Asia and to a lesser extent Southeast Asia. The importance of mineral and hydrocarbon reserves in West Australia and off Australia's Northwest coast are in part refocusing Australia's strategic gaze towards the Indian Ocean region. The United States' appreciation of the strategic importance of India, as well as the trade and energy routes that transit the Indian Ocean, are increasingly focusing the United States on this same strategic geography. Evidence of this can be seen in the various documents that articulated the rebalance-to-Asia strategy as well as in the 2014 AUSMIN Joint Communiqué. The document declared an intention to "work with India to expand trilateral cooperation, including on shared challenges such as maritime security, energy security, and ensuring economic growth." The document also recognized the importance of the Indian Ocean Rim Association (IORA) and the Regional Cooperation Agreement on Combating Piracy and Armed Robbery Against Ships in Asia. Shifts in Asian power dynamics and shared interests in ensuring freedom of the seas are bringing Australia and India closer together at the same time that the United States has focused more attention on India and the Indian Ocean region. Defense Policy and Strategy The Australian Strategy Framework 2017 reiterates the 2016 Defence White Paper's "goals that the Defence strategy must achieve" through three strategic defense interests: A secure and resilient Australia, with secure northern approaches and proximate sea lines of communication. A secure nearer region, encompassing maritime Southeast Asia and the South Pacific. A stable Indo-Pacific region and a rules-based global order. While the United States remains Australia's key strategic partner, Australia maintains other traditional security relationships, such as with New Zealand and the nations of the Five Power Defence Arrangements (FPDA). A core identity of the Australian military and broader Australian culture is the ANZAC legend. ANZAC refers to the Australia New Zealand Army Corps that fought together in World War I in places such as Gallipoli. The ANZAC experience at Gallipoli was central in helping Australia define its national identity independent of its status as part of the British Empire. Australia-New Zealand defense relations were formalized through the 1944 Canberra Pact and the 1951 ANZUS Treaty. The 1991 Closer Defence Relations (CDR) Agreement, which was revised in 2003, serves as a framework for bilateral defense ties between Australia and New Zealand. Australian and New Zealand military forces have worked together to promote regional stability in places such as Bougainville, Timor-Leste, and the Solomon Islands. Australia and New Zealand are also linked through the 1971 Five Power Defence Arrangements, which also includes Great Britain and two other former British colonies, Malaysia and Singapore. The FPDA, which was established in the context of Britain's plans to withdraw forces from east of the Suez, has, in the view of some, proven to be surprisingly durable. Large-scale exercises were held by member states to mark the 40 th anniversary of the Arrangements. Two key themes which have informed debates over Australian defense policy in the past are forward defense and continental or mainland defense, which has placed relative emphasis on defending the Australian continent within an alliance context. The 2014 Defence Issues Paper observed that while "the ability to prevent and deter attacks on Australia ... remains a cornerstone," more recently "a more globalised and inter-connected world has emerged in which Australia has broad and far-reaching interests." Foreign Affairs Australia's Identity and Asia Australia's identity as a nation is intertwined with its ongoing debate over how it should engage Asia. Former Prime Minister Howard approached the debate by making the point that Australia need not choose between its history, which is grounded in the West, and its geography, which locates Australia at one end of the Asia-Pacific region. Former Labor Prime Minister Paul Keating (1991-1996) moved enthusiastically to engage Asia, building on his predecessor Bob Hawke's (1983-1991) efforts that included the formation of the APEC forum in 1989. Many in Australia viewed Keating's initiatives as going too far, reflecting the fact that many Australians' sense of identity was not grounded in an "Asian" identity. Former Prime Minister Abbott's emphasis on reinforcing ties with Anglosphere nations—as well as reactions against this—demonstrates how this debate continues. These debates over identity are real to many Australians. Although Australia is a large continent, its population of 23 million people is located relatively close to key population centers of Asia, including Indonesia (240 million), China (1.3 billion), and India (1.2 billion). Australia's isolation from its key cultural partners and strategic allies in the West has traditionally led to an existential fear by some of being overwhelmed by Asia. This has given way in recent years to increasing interest in Asia as it is viewed as a source of prosperity and no longer only as a potential threat. The Rudd government's 2008 apology to the Aboriginal population of Australia demonstrates to some that the dominant Anglo-Celtic identity is increasingly prepared to accommodate non-European Australian identities. Increasing Asian immigration is also changing the face of Australia. Australia's shifting trade patterns continue to draw it closer to Asia, even as it has not fully reconciled what this means for its identity. Indonesia Australia and Indonesia's bilateral relationship has historically been subject to various tensions. These date back to Australia's military deployment in support of Malaysia during Indonesia's period of Konfrontasi in the mid-1960s. In November 2015, Prime Minister Turnbull briefly visited Indonesia in an effort to help mend relations following a troubled year in bilateral relations. Strains included the Indonesian executions of two Australian drug smugglers and the Abbott government's rejection of asylum seekers mostly from the Middle East, South Asia, and Myanmar who had traveled by boat from Indonesia headed towards Australia. During a half day of what President Widodo referred to as "warm and productive" meetings, Turnbull and the Indonesian President discussed trade, tourism, Australian investment in Indonesia, and other topics. Indonesian concerns over Australia's role in the independence of the former Indonesian Province of East Timor (now Timor-Leste) following a referendum of 1999 have moderated over time. Australia, under the United Nations, played a key role in assisting Timor-Leste to become an independent nation. The Timor-Leste military peacekeeping intervention by Australia and other countries was viewed negatively by many in Indonesia. Australia's post-2004 tsunami assistance to Indonesia helped improve relations between Australia and Indonesia. Tensions rose in the wake of revelations that Australian intelligence listened to the cell phone conversations of President Susilo Bambang Yudhoyono and his inner circle in 2009. Related tensions abated somewhat following a June 2014 meeting between Abbott and Yudhoyono. Australia and Indonesia's cooperation on security matters is underpinned by the Lombok Treaty of 2006. The two nations also signed a Defence Cooperation Arrangement in 2012. President Yudhoyono stated in August 2014 that "in my view there is plenty of room for increased defense cooperation." Some observers have called for increased bilateral maritime cooperation between Australia and Indonesia as growing naval forces in the Asia-Pacific region may place increased emphasis on the strategic Malacca, Sunda, and Lombok Straits. President Joko Widodo has emphasized the importance of developing Indonesia's identity as a maritime nation. This may present Australia with positive opportunities to engage Indonesia. Australia's policy to turn back boats of illegal immigrants, however, could once again become an area of tension in this bilateral relationship. Australia and Indonesia have worked together closely to investigate terrorist attacks in Indonesia. It has been reported that as many as 200 Indonesians are believed to have joined IS forces in Syria and Iraq. Other estimates vary from 50 to 500 Indonesians who have gone to fight with IS. Australia has particular concern with terrorism in Indonesia due to past attacks against the Australian Embassy in Jakarta in 2004 as well as attacks which killed Australians in Bali, Indonesia, in 2002 and 2005. China Australia's political leadership does not see Australia's economic relationship with China, which has been its largest trading partner since 2009, and its strategic relationship with the United States as incompatible. Australia has demurred from formally signing onto the One Belt, One Road project promoted by China. A number of issues have caused tensions in Australia's relationship with China. Among these are Chinese political donations in Australia, the sale or lease of farmland and energy and transportation infrastructure to Chinese business interests, and differences over the South China Sea maritime territorial disputes. Chinese corporate donations to Australian political parties have become a focus of attention with respect to concerns over China's influence in Australia. Senator Sam Dastyari of the Labor Party resigned from the opposition frontbench after media scrutiny of his acceptance of Chinese funds. Policy experts have criticized the Northern Territory's 99-year lease to the Chinese company Landbridge Group for port facilities in Darwin. The port, which was attacked by the Japanese in 1942, is strategically located in the north of Australia and former President Obama reportedly registered his displeasure over the lease to Prime Minister Malcolm Turnbull. Critics of the lease have argued that this gives China an excellent position to observe U.S. and Australian military operations. China became the largest investor in Australia's agricultural sector in 2014. The Australian government blocked the sale of Kidman and Company agricultural enterprises on national security grounds in 2015. National security concerns were referenced when Australia prevented the A$10 billion sale of Ausgrid to China. Ausgrid supplies power to New South Wales. Australians are also concerned that Chinese buyers are putting upward pressure on real estate prices. Foreign Minister Julie Bishop urged China to abide by the ruling by an arbitral tribunal under the United Nations Convention on the Law of the Sea (UNCLOS), which ruled largely in favor of the Philippines and against China's behavior and claims in the South China Sea in July 2016. When a sample of the population was asked in a 2016 Lowy poll which relationship is more important to Australia, respondents were split evenly with 43% answering China and 43% answering the United States. In 2014, 48% answered the United States and 37% answered China. In the June 2016, 59% of Australians polled indicated they would be "less likely to support Australia taking future military action in coalition with the U.S. under Donald Trump." On a separate "feeling thermometer" scale (0-100), Australians felt more warmly towards the United States ("temperature" of 68) than they did towards China (58). While 75% of Australians polled felt China's economic growth was a positive influence, 79% felt China's military activities in the region were negative. Following President Trump's electoral victory, Keating called on Australia to "cut the tag" and pursue an independent foreign policy. Former Liberal Prime Minister Malcolm Fraser previously called on Australia to end its strategic dependence on the United States. Other former government officials, such as Australia's former Ambassador to China Stephen FitzGerald have also come out in opposition to Australia's very close relationship with the United States and more supportive of close relations with China. These key political voices are added to the views of leading Australian strategist Hugh White who recently stated that Australians can no longer trust America and that as a result they will move closer to China. White has observed that while balancing between China and the United States was going to be "an immense challenge" for Australia in any event, President Trump, who White sees as viewing allies as "dispensable," has made the choice starker and faster than had been expected. Bilateral relations between Australia and China are based on a strong trade relationship that has benefitted both countries. Trade with China has contributed much to Australia's economic success in recent years. There is broad support in Australia for a strong economic relationship with China. There is also unease in some policy circles in Australia with China's increasingly assertive posture in the region. In June 2015, Australia and China formally signed a free trade agreement (FTA). Australian backers argued that the arrangement would promote exports of Australian agricultural goods, wine, and services to China. Some trade unions and others criticized the FTA, saying that it would bring more Chinese manufactured products and investment into Australia, thereby threatening local jobs and economic interests in some sectors. Some observers expressed concern that Australia's growing economic dependence upon China may bolster China's strategic influence. In March 2015, Australia joined China's Asian Infrastructure Investment Bank (AIIB) as a founding member with a contribution of $718 million, despite concerns, particularly in the United States and Japan, about the bank's governance and transparency standards and China's growing regional influence. The bank, which has 57 member countries, including many developed economies in Asia and Europe, rivals multilateral financial institutions such as the World Bank and the Asian Development Bank. While China has figured prominently in Australia's outreach to Asia, Australian values have at times been challenged as ties have developed. Ties between the two nations were strained over the 2010 imprisonment of Australian national and Rio Tinto executive Stern Hu on espionage charges. Hu was involved in iron ore price negotiations. China's Xinhua news service reported that Hu and three other Rio Tinto group employees improperly obtained commercial secrets related to China's iron and steel industry and violated Chinese law. China was also reportedly displeased with the visit to Australia of Rebiya Kadeer, an activist from China's Uighur minority. Chinese diplomats reportedly pressured organizers at the time to prevent her from appearing at a film festival in Melbourne and at the National Press Club. Japan Australia has become an increasingly close security partner with Japan. This developing strategic relationship was promoted by former Prime Minister Abbott and elevated during Prime Minister Shinzo Abe's visit to Canberra in 2014. During his speech to a special joint sitting of the Australian Parliament, Prime Minister Abe stated, "There are many things Japan and Australia can do together by each of us joining hands with the United States, an ally for both our nations." At the time of the Abe visit to Canberra, then-Australian Defence Minister David Johnston indicated that Australia wanted to strengthen three-way defense cooperation with Japan and the United States. The Abe speech was significant in that it marked both Japan's effort to change the legal basis for its defense policies (to enable collective self-defense) and its desire to develop its network of strategic relationships. "Japan is now working to change the legal basis for its security ... so we can act jointly with other countries in as many ways as possible.... Let us join together all the more in order to make vast seas from the Pacific Ocean to the Indian, and those skies, open and free." In the view of one Australian observer, Abe's address was a strategic landmark "which illuminates how Japan and Australia are leading the creation of a regional coalition to hedge against China, with—but also without—the United States." In an effort to put World War II history to rest, Prime Minister Abe offered "sincere condolences" to Australian troops who suffered at Kakoda and Sandakan during the war. Reportedly 2,345 Australian prisoners of war were killed at Sandakan. During WWII, Japan attacked the Australian mainland including air attacks on Darwin and a submarine attack on Sydney Harbor. Australia and Japan have been developing bilateral security relations under the Australia-Japan Joint Declaration on Security Cooperation (JDSC) signed in 2007 under the Howard Government. The JDSC offers the potential for security cooperation in the areas of border security; counter-terrorism; disarmament and counter proliferation of weapons of mass destruction; maritime and aviation security; and peace operations and humanitarian relief operations. The United States, Japan, and Australia have conducted a trilateral security dialogue since 2002. Submarine Replacement Project There was speculation that declarations of Australian-Japanese strategic partnership made in Canberra in 2014 would be followed up with a substantive increase in defense trade, including the Australian purchase of 8 to 12 Japanese Soryu c lass diesel engine submarines to replace the Collins-class fleet. According to some experts, purchasing "off the shelf" submarines from Japan would be far less costly than building submarines in Australia, which by some estimates would cost significantly more. In 2015, the Coalition government opened the bidding process to Japanese, French, and German companies. In 2016, an agreement was reached to build 12 diesel-electric French Barracuda Block 1A submarines in Adelaide, Australia. An independent report by Insight Economics issued in October 2017 called on the government to revisit its submarine purchase decision. India Australia-India relations have historically not been extensive despite periodic Australian studies discussing the importance of bilateral relations with India. Cold War, post-colonial attitudes, and India's preferences for the Non Aligned Movement (NAM) played a part in this. Bilateral relations were also damaged in 2009-2010 by apparently racist attacks against Indian students in Australia. Such past obstacles to developing closer relations have begun to change in recent years. The signing of a deal to export uranium from Australia to India during a visit to India by former Prime Minister Abbott in 2014 created an opening for an expansion of bilateral relations between the two nations. Australia is thought to have approximately one-third of the world's uranium reserves. Relations between Australia and India appear to now be expanding. Australia and India have held a number of high level visits in recent years. During the talks between Turnbull and Modi in New Delhi in April 2017, The two Prime Ministers reaffirmed their commitment to a peaceful and prosperous Indo-Pacific, based on mutual respect and cooperation. Australia and India share a commitment to democratic values, rule of law, international peace and security, and shared prosperity. The strategic and economic interests of both countries are converging which opens up opportunities for working together in a rapidly changing region ... Both leaders recognized that India and Australia share common interests in ensuring maritime security and the safety of sea lines of communication. Prime Minister Modi made an official visit to Australia in November 2014, when he addressed a joint sitting of both houses of parliament and met with Turnbull's predecessor, Prime Minister Tony Abbott. This was the first state visit of an Indian Prime minister to Australia in almost three decades. Abbott visited India in September 2014. Australia and India also hold an annual Foreign Ministers Framework Dialogue to further their bilateral agenda. During her 2015 visit to New Delhi, Australian Foreign Minister Julie Bishop gave the inaugural Indo-Pacific Oration at the Observer Research Foundation where she made a number of observations about India and the bilateral relationship: We are ready to seize the opportunity to forge an even closer relationship with India, there is new excitement and new energy about India's future. That is clearly evident in the momentum that is driving our bilateral relationship. It is more dynamic, more diverse, broader and deeper than ever before. Indeed, unprecedentedly so. But it is also evident in our increasingly close cooperation in the Indo-Pacific region, the region in which both Australia's and India's core economic and strategic interests converge.... The increasingly dynamic Indian Ocean region is vital to Australia's future economic and strategic security. In fact, around half of Australia's naval fleet is located along our Indian Ocean coastline. Australia and India also work together through the Indian Ocean Rim Association (IORA) which is a Ministerial forum focused on the Indian Ocean. The IORA Secretariat is based in Mauritius. India is Australia's fifth-largest export market, tenth-largest trading partner, and increasingly a destination for Australian investment. Bilateral trade between Australia and India grew dramatically from AD$6.8 billion in FY2003/04 to AD$14.8 billion in FY2013/14. Australia is seeking an Australia-India Comprehensive Economic Cooperation Agreement with India to facilitate the growth of bilateral trade between the two nations. The two countries also are involved in Regional Comprehensive Economic Partnership (RCEP) trade negotiations, which involve 16 nations in the Indo-Pacific region. Prime Minister Turnbull, during his April 2017 visit to India, announced that Australia would commission an independent India Economic Strategy. The strategy is to be led by former Secretary of the Australian Department of Foreign Affairs Peter Varghese AO, the Chancellor of the University of Queensland. The strategy is intended to strengthen existing economic collaboration and look for new ways for Australia and India to do business together. There is an Australia-India Joint Ministerial Commission to provide a forum for Trade Ministers to develop the economic relationship. Australia and India have established several mechanisms to further their strategic and defense cooperation. A Framework for Security Cooperation was established in 2014, and is based on "converging political, economic and strategic interests." Prime Minister Modi and Prime Minister Turnbull have committed themselves to "deepening the bilateral defense and security partnership," and welcomed progress achieved through this Framework. They also share a desire "to ensure that Indian Ocean architecture keeps pace with regional issues and addresses emerging threats and challenges in the region." Today, this framework is viewed by many analysts in Australia as an important step forward in developing relations between Australia and India. Bilateral defense relations are based on a 2006 memorandum on Defense Cooperation and a 2009 Joint Declaration on Security Cooperation. Strategic dialogues include annual Defense Policy Talks and an annual Track 1.5 Defense Strategic Dialogue. The first-ever official visit to Australia by an Indian defense minister came in 2013 and, during Prime Minister Modi's 2014 visit to Canberra, the two countries agreed to extend defense cooperation to cover research, development, and industry engagement. They also formalized annual defense minister summits and made plans to conduct regular maritime exercises. The two nations initiated their bilateral naval exercise AUSINDEX in the Bay of Bengal in 2015 and held another off Australia's west coast in June 2017. Army-to-army exercises are also scheduled for 2018. Australia and India are members of the India Ocean Naval Symposium, "a forum to increase maritime cooperation among the littoral states of the Indian Ocean Region ... to preserve peaceful relations, and thus is critical to building an effective maritime security architecture in the Indian Ocean Region." The Pacific The Southwest Pacific is viewed by many in Australia as its "Near Abroad" and, as such, part of Australia's natural sphere of influence. The South Pacific is an area of key strategic importance to Australia. The region has been subject to a number of shocks including food and fuel price increases, natural disasters, ethnic conflict, challenges to democratic government, rising influence of new external actors, difficulties in maintaining infrastructure, and the negative effects of climate change. Australia has led peace-keeping efforts in the region, including in Timor-Leste and the Solomon Islands, indicating Australia's resolve to promote stability in the South Pacific. The former Portuguese colony of Timor-Leste was occupied by Indonesia from 1975 to 1999. In 1998, diplomatic intervention by Prime Minister Howard prompted dialogue between Indonesian officials and East Timorese nationalists that resulted in an agreement to hold U.N.-supervised elections in 1999. On August 30, 1999, nearly 80% of Timor's electorate voted to separate from Indonesia. Following the announcement of the result, anti-independence militias launched a campaign of violence. On September 15, 1999, the U.N. Security Council authorized the International Force East Timor (INTERFET) to restore peace and security and protect and support the U.N. mission personnel in East Timor. INTERFET operated under a unified command structure headed initially by Australia. Timor-Leste became independent in 2002. Australia and Timor-Leste have worked together to establish arrangements for the exploitation of energy resources beneath the Timor Sea. Australia's Regional Assistance Mission to the Solomon Islands (RAMSI) also demonstrated Australia's resolve to promote stability in the South Pacific. Australia headed a multinational force to restore order in the Solomons in 2003. This was augmented in 2006 when Australia sent more troops to the Solomons to quell rioting and violence following the election of Prime Minister Snyder Rini. RAMSI was established under the Biketawa Declaration and is supported by the members of the Pacific Islands Forum and led by Australia and New Zealand. The government of Papua New Guinea (PNG) requested that Australia and New Zealand send troops to assist PNG with its elections in 2012. The troops provided support for the elections by transporting personnel, ballot boxes, and election materials to many of PNG's remote locations. Some analysts have observed a relative lessening of Australian influence in the South Pacific as China has sought to play a more active role in the region. Australia, along with other Western nations and the Pacific Islands Forum (PIF), sought to impose sanctions on Fiji in the wake of the 2006 coup which installed Frank Bainimarama to power. Fiji was subsequently suspended from the Forum in 2009. In response, Fiji developed a "Look North" policy and developed closer relations with China as well as with the Melanesian Spearhead Group and the Small Islands Developing States group. The September 17, 2014, election, which elected Prime Minister Bainimarama to office, may offer an opportunity to revisit Western approaches to Fiji. The Commonwealth reinstated Fiji as a member following this "credible" election in September 2014. Australia, Islamist Militancy, and Counterterrorism Australia contributed to the International Coalition Against Terrorism (ICAT) and sent rotations of special forces troops plus regular troops to Iraq and Afghanistan. This support stems from Australia's desire to support the United States and from a shared perspective on Islamist extremist violence. Terrorist attacks against Australians in Indonesia did much to shape Australia's perceptions of Islamist threats in the post-9/11 environment. In 2002, bombs decimated two crowded nightclubs full of foreign tourists in Bali, Indonesia, killing more than 200 foreigners and Indonesians, and injuring over 300. There were 88 Australians among the dead and 7 Americans. Indonesian officials attributed the bombing to the militant Islamic network Jemaah Islamiya (JI), which had links to Al Qaeda. JI also carried out an attack against the Australian Embassy in Jakarta in 2004 and a second attack in Bali in 2005. Some within JI at that time reportedly set as their goal the establishment of an Islamic state that would encompass Indonesia, Malaysia, the southern Philippines, and Northern Australia. Australian and Indonesian counterterror cooperation improved as a result of cooperation on the investigation into the Bali blasts. JI leader Abu Bakar Bashir (now imprisoned) has announced his allegiance to the Islamic State. It is not clear just how much influence this pledge will have on Islamist militants in Indonesia. There is concern that dozens of Australians, and others from Southeast Asia, who have gone to fight with the Islamic State (IS) in Syria and Iraq may lead to future threats to Australia and Australians abroad. Australia has approximately half a million Muslims out of a total population of approximately 23 million. Australia has enacted new security laws including enhanced data retention capabilities and has increased funding for intelligence agencies and police to help prevent terrorist attacks. Australian intelligence officials reportedly know of 30 Australians who were suspected of going to Afghanistan to fight or train during the conflict there. Approximately two-thirds of the 25 who returned to Australia are known or thought to have become involved in terrorist activities in Australia. It is also estimated that there are "about 150 Australia based individuals who are directly related in some way" and an additional 60 Australians operating with either Al-Qaeda or the Islamic State in Syria or Iraq. There is also concern that IS fighters from Indonesia and elsewhere in Southeast Asia may follow the pattern of previous militants who were radicalized through fighting in Afghanistan before returning to the region and resuming militant Jihadist activities. A 2014 estimate had about 150 Southeast Asians fighting with or supporting the Islamic State in Syria and Iraq out of IS's estimated 10,000 foreign fighters. The Environment and Climate Change Australia, the sixth largest country in the world, has a diverse and often fragile environment that includes rainforests, farming and pastoral land, expansive deserts, and the Great Barrier Reef. About 6% of the land is arable. Australia is the driest inhabited continent. Environmental challenges include introduced species, water quality, drought, wildfire, flooding, poor soil conservation, coral bleaching, and overfishing. Australia is an urban society, and 80% of Australians live within 100 kilometers of the coast. Sixty-eight percent of the 2,700 introduced plants are considered a problem for natural ecosystems as are many of the introduced animals. Much of Australia's flora and fauna are unique to Australia. One environmental priority for the government is the Land Care Program. Over the period 2014-2018 the Australian government is to invest A$1 billion to deliver biodiversity and sustainable agriculture outcomes that benefit Australia's community and environment. The Landcare Program seeks to address problems such as loss of vegetation, soil degradation, the introduction of pest weeds and animals, changes in water quality and flows, and changes in fire regimes. A study by the Australian CSIRO and the Bureau of Meteorology projected that Australia will warm faster than the rest of the world and be subject to temperature rises of up to 5.1 degrees C by 2090. The study also found that: There will be more extreme droughts, with the length of droughts increasing by between 5% and 20%.... Rising temperatures will result in a "greater number of days with severe fire danger" ... soil moisture will fall by up to 15% in southern Australia in the winter months by 2090. Australia pledged to reduce emissions by 26%-28% below 2005 levels by 2030 as part of its Intended Nationally Determined Contribution (INDC) commitment to the United Nations Framework Convention on Climate Change (UNFCCC) at the 21st Conference of the Parties (COP21) in Paris in 2015. Australia also has a target of reducing CO 2 emissions 5% below 2000 levels by 2020. Australia's CO 2 emissions declined 12% from 2005 to 2015. Australia's greenhouse gas emissions have been increasing since March 2015. Emissions increased 1.1% in the year preceding March 2017. Some reports point to "a clear trend of increasing greenhouse gas emissions since the carbon tax was repealed in 2014—a trend that runs counter to Australia's international commitments." Over the period 2015 to 2020 Australia's emissions are projected to grow further. Australia has identified likely increasing electricity demand, increasing transport activity, population growth, growth in the liquefied natural gas (LNG) industry, and increasing numbers of livestock as key drivers of emissions. In 2016 estimates for the period 2014-2015, 63% of Australia's electricity generation was from coal and 14% was from renewables while energy productivity and energy consumption both rose by 1%. Australia's energy exports also increased by approximately 5% over the same period. Australian net energy exports equaled around two-thirds of domestic energy production during the period. In one 2017 report, close to 50% of Australia's great barrier reef's coral was killed over the past two summers. It has been asserted that global average temperatures would have to be kept to no more than a 1.2-degree rise in order to protect current reef biodiversity. Under the Australian Labor Party's Climate Change Action Plan, a Labor Government, should it take office, would seek to build an emissions trading scheme and set a pollution reduction target of net zero emissions by 2050. Labor has also pledged to achieve 45% emissions reductions on 2005 levels by 2030. Labor's Climate Change Action plan has six key components: Make Australia a Leading Renewable Energy Economy by ensuring that at least 50% of the nation's electricity is sourced from renewable energy by 2030. Cleaner Power Generation : transition from coal to renewable based electricity generation. Bui ld Jobs and Industry through creation of a Strategic Industries Reserve Fund. Cut Pollution through an Emissions Trading Scheme with caps and offsets. C apture Carbon on the L and through a Carbon Farming Initiative, carbon storage on the land and deal with broad scale land clearing. Increased Energy Efficiency by doubling Australia's energy productivity and implement new emissions standards for motor vehicles. Labor has criticized the Liberal Abbott and Turnbull Governments' policies toward renewable energy. According to the Labor Party, The Liberal Government has done everything in its power to try and destroy Australia's share in one of the world's fastest growing industries with devastating consequences for our country. In the last two years more than two million renewable energy jobs were added to the global economy, but over the same period 2,900 jobs were lost in Australia. The Labor Party stresses the need for Australia to position itself to leverage jobs and economic opportunities related to expanding renewable investment in the Asia-Pacific region. Economic Issues Australia has gone 26 years without a recession. Despite this record, Australia's economy is slowing with year-on-year growth of 1.7%, the slowest since 2009, estimated for 2017. Australia's economy is "undergoing structural change as the mining investment boom, which peaked in 2012, unwinds." Mining, construction and finance have contributed much to Australia's economic growth in recent years while manufacturing has been in decline. Much of Australia's wealth is derived from the fact that Australia has 19% of the world's total known mineral wealth with 0.3% of the world's population. The housing market is another key sector of Australia's economy. Efforts have been made to diversify the economy in the areas of education, tourism and health services. Australia's economy has to a large extent been dependent on world prices for natural resources, such as iron ore, coal and liquefied natural gas. Some view the Australian dollar as a "liquid proxy" for China. Over the past decade Australia-China trade has increased dramatically. China became Australia's largest trade partner in 2009, taking over 30% of Australian exports. In November 2017, Australia, along with the other members of the Trans Pacific Partnership TPP-11 group, agreed to "core elements" as they continue to work towards a new free trade agreement. President Trump withdrew from the TPP agreement in January 2017.

The Commonwealth of Australia and the United States enjoy a close alliance relationship. Australia shares many cultural traditions and values with the United States and has been a treaty ally since the signing of the Australia-New Zealand-United States (ANZUS) Treaty in 1951. Australia made major contributions to the allied cause in the First and Second World Wars, and the conflicts in Korea, Vietnam, Iraq, and Afghanistan. Australia is also a close intelligence partner through the "Five Eyes" group of nations. U.S. Marines are conducting rotational deployments in northern Australia. This initiative and others demonstrate the closeness of the relationship. A traditional cornerstone of Australia's strategic outlook is the view that the United States is Australia's most important strategic partner and is a key source of stability in the Asia-Pacific region. Australian decision-makers have also believed that Australia does not have to choose between the United States and China. Some former Australian political leaders and former government officials, as well as media reports, have expressed concern about where Australia's relationship with the United States may be headed under the Trump Administration. While Australia has a complex array of international relations, its geopolitical context is to a large extent defined by its economic relationship with China and its strategic relationship with the United States. Australia's political leadership generally believes it can have constructive trade relations with China while maintaining its close strategic alliance relationship with the United States. However, shifts in the geostrategic dynamics of Asia are leading regional states such as Australia to hedge, increasingly with other Asian states, against the relative decline of U.S. engagement in the region. This is one interpretation of what is behind the recent strengthening of ties between Australia and Japan, India, and other states in Asia. Australia also plays a key role in promoting regional stability in Southeast Asia and the Southwest Pacific, and has led peacekeeping efforts in the Asia-Pacific, including in Timor-Leste and the Solomon Islands. Under the former Liberal Party government of John Howard, Australia invoked the ANZUS treaty to offer assistance to the United States after the attacks of September 11, 2001, in which 22 Australians were among those killed. Australia was one of the first countries to commit troops to U.S. military operations in Afghanistan and Iraq. Terrorist attacks on Australians in Indonesia in the 2000s also led Australia to share many of the United States' concerns in the struggle against Islamist militancy in Southeast Asia and beyond. Australia is part of the global coalition to defeat the Islamic State (IS). There are continuing concerns in Australia about domestic Islamist terrorist threats, including from "lone wolf" attacks. Dozens of Australian citizens are believed to have gone to the Middle East to fight for the Islamic State. Australia's trade relationship with China has been a key source of economic growth. However, there is an ongoing debate in Australia on where the Australian economy is headed, as China's economic growth slows. Australia, which has free trade agreements with the United States, South Korea, Japan, and China, was part of the Trans Pacific Partnership (TPP) agreement, from which President Trump withdrew the United States in January 2017. Australia currently has a coalition government led by Prime Minister Malcolm Turnbull of the Liberal Party. The domestic political scene in Australia has been dominated by controversy surrounding the dual-citizenship of Members of Parliament (MPs) and the gay marriage plebescite. Two Liberal-National Coalition Members, former Deputy Prime Minister and National Party Leader Barnaby Joyce and Liberal MP John Alexander, have had to resign due to the dual-citizenship controversy. They seek reelection in by-elections in December 2017. In November 2017, approximately 62% of Australians responding to a mail-in survey voted "Yes" in support of same-sex marriage, which opens the way for implementing legislation in parliament.

CRS_R44915

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

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

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Background1 Peru has had a turbulent political history, alternating between periods of democratic and authoritarian rule. Political turmoil dates back to Peru's traumatic experience during the Spanish conquest, which gave rise to the economic, ethnic and geographic divisions that characterize Peruvian society today. Since its independence in 1821, Peru has had 13 constitutions, with only nine of 19 elected governments completing their terms. Peru's most recent transition to democracy occurred in 1980 after 12 years of military rule. The decade that followed was characterized by a prolonged economic crisis and the government's unsuccessful struggle to quell a radical Maoist guerrilla insurgency known as the Shining Path (Sendero Luminoso). In 1985, leftist Alan García of the American Popular Revolutionary Alliance (APRA) was elected President. García's first term (1985-1990) was characterized by many observers as disastrous. His antagonistic relationship with the international financial community and excessive spending on social programs led to hyperinflation (an annual rate above 7,600%) and a debt crisis. His security policies were unable to defeat the Shining Path, which drove Peru to the brink of collapse during his Administration. His Administration was also dogged by charges of corruption and human rights violations. By 1990, the Peruvian population was looking for a change and found it in the independent candidate Alberto Fujimori. Once in office, Fujimori implemented an aggressive economic reform program and stepped up counterinsurgency efforts. When tensions between the legislature and Fujimori increased in 1992, he initiated a "self coup," dissolving the legislature and calling a constituent assembly to write a new constitution. This allowed him to fill the legislature and the judiciary with his supporters. President Fujimori was re-elected in 1995, but his popularity began to falter as the economy slowed and civic opposition to his policies increased. He was increasingly regarded as an authoritarian leader, due in part to the strong-handed military tactics his government used to wipe out the Shining Path that resulted in serious human rights violations. President Fujimori won a third term in May 2000, deemed by international and Peruvian observers to have been neither free nor fair. That controversy, combined with the revelation of high-level corruption and allegations of human rights violations committed by his top aides, forced Fujimori first to agree to call new elections in which he would not run, and then to flee to Japan and resign in November 2000. A capable interim government, headed by President Valentin Paniagua, served from November 22, 2000 to July 28, 2001, and was credited with beginning to root out widespread political corruption, preventing the economy from sliding into recession, and conducting free and fair elections. The new President, Alejandro Toledo (2001-2006), of indigenous descent, defeated Alan García, who had returned to Peru after nine years in self-imposed exile following allegations of corruption in his administration. Toledo's government was characterized by extremely low approval ratings but one of the highest economic growth rates in Latin America: 5.9% in 2005 and 8% in 2006. Toledo was able to push through several significant reforms that increased tax collection, and reduced expenditures and the budget deficit. He negotiated a free trade agreement with the United States. Toledo's presidency was marred by allegations of corruption—although they were limited in comparison to the widespread corruption of the earlier Fujimori administration—and recurrent popular protests. García ran for President again in 2006. After his comeback in 2001, García softened his populist rhetoric, and pledged to maintain orthodox macro-economic policies. Many observers cast him as "the lesser of two evils" compared to his opponent, Ollanta Humala, who espoused nationalist, anti-globalization policies and raised fears among middle- and upper-class Peruvians of the expropriations and authoritarianism of an earlier era. Humala is also an ally of Venezuelan President Hugo Chavez. Garcia narrowly defeated populist Humala. Current Political Issues On June 4, 2006, Alan García was elected to a second, non-consecutive term as President. President García has maintained economic orthodoxy and governed as a moderate, rather than as the leftist he considered himself to be earlier in his career. Much of the political opposition has supported García's economic policies to date. García's party, the Peruvian Aprista Party (Partido Aprista Peruano, better known as APRA), controls only 36 of the 120 legislative seats and depends on loose alliances with other parties such as the Alliance for the Future (Alianza por el Futuro), headed by former President Alberto Fujimori's daughter, Keiko Fujimori, to pass legislation. The García Administration has been shaken, first by a corruption scandal, then by deadly protests in the Amazon. In October 2008, García dismissed 7 of the 17 members of his cabinet in the wake of a bribery scandal. The corruption scandal involved alleged kickbacks in the awarding of contracts for oil exploration. Wiretapped conversations implicated APRA party officials in accepting bribes. García's prime minister and energy minister were among those who resigned. García appointed Yehude Simon as his new prime minister on October 14. Simon was imprisoned in the 1990s for alleged ties to the Tupac Amaru insurgency, but cleared of the charges eight years later. He was elected twice as governor of the province of Lambayeque, where he established a reputation for governing effectively and fighting corruption. García hoped that Simon would defuse social tensions and advance programs to reduce poverty. Instead, widespread social unrest has increased as growing inflation combines with anger that social conditions for Peru's poorest people have not improved with Peru's remarkable economic growth over the past eight years. Now, in the third year of his five-year term, President García is facing the worst crisis of his presidency to date. On June 5, 2009, the unrest exploded into a deadly conflict when the government sent police to break up blockades set up by thousands of indigenous protesters in the Amazon. Estimates range from 30 to over 100 deaths of police officers and protesters. Simon resigned on July 11, and García reorganized his Cabinet in response to the mishandling of the protests. The Cabinet reorganization, including the appointment of Javier Velasquez, the former head of the Congress, and a member of the now generally pro-business APRA, as Prime Minister, has raised concerns about the government's ability to negotiate with indigenous protesters. Protests and Exploitation of Natural Resources The deadly clash between indigenous protesters and police, and the reaction to it, is indicative of the polarization both within Peru and within the Andean region. The protest stems from disputes over who has the right to exploit natural resources in the Amazon and elsewhere in the country. García has promoted such exploitation by foreign investors as key to development and poverty reduction. Of Peru's 173 million acres of rainforest in the Amazon basin, about 70% has been granted or offered as concessions for oil and gas exploration. Much of those concessions were made under García, who argues that indigenous peoples should not be able to block investment that will benefit the country as a whole. Indigenous peoples of the Amazon rainforest counter that the government is ignoring and/or violating their property rights. Much of the area is considered ancestral communal land of the 60 tribes who live there, or private property, and under the United Nations (UN) Declaration on Indigenous Peoples—of which Peru was a proponent—indigenous peoples have the right to exercise control over traditional lands and their resources. Instead, local indigenous people say they get little or no benefits from foreign investments, and their land suffers environmental damage from the resource exploration. More than 50% of the northern Amazonian population is poor, compared to 36% nationwide. An umbrella group of indigenous peoples of the rainforest, the Interethnic Association for the Development of the Peruvian Jungle (AIDESEP), complains that the government is quick to grant concessions to oil and logging companies, but very slow to settle indigenous property claims and titles. In May, AIDESEP's leader, Alberto Pizango, called for an "insurgency," resurrecting the spectre of the violent Shining Path insurgency of the 1980s and 1990s. The call was short-lived, however, and Pizango sought asylum in Nicaragua. Despite the protesters' sometimes violent tactics, many Peruvians blame the García administration for the violent outcome of the protests. In 2008, García obtained special legislative powers from the Congress, and issued more than 99 decrees as he was rushing through implementation of the free trade agreement with the United States before the expiration of former President George W. Bush's term. There was widespread criticism that García failed to consult adequately either the Congress or the public before issuing the decrees, not all of which were seen as necessary to the trade agreement. Following protests in August 2008, the Peruvian Congress repealed two decrees that would have made it easier to sell communal lands. Congress did not fulfill a promise to review eight other decrees that allowed the development of "unproductive" rainforest land, sparking more protests in April 2009. When some Members of the Congress moved to repeal another of the eight decrees, a forestry and wildlife law, they were blocked by García's APRA party, and the conflict in the Amazon ensued. Ninety percent of Peruvians believe García should have sought the support of the indigenous tribes before issuing decrees to open up their lands to mining and oil companies. Congress repealed two more of the decrees after the June violence. Some observers believe President García deepened polarization in the country by using what was widely viewed as a heavy-handed response to the protests, and by referring to protesters in terms regarded as extremely derogatory to the indigenous population. Although García now calls for reconciliation, some view him as responsive only to extreme pressure, and protests have spread beyond the Amazon to other sectors of society. If García's dramatic loss of support and social unrest are sustained, the President may find it difficult to implement his policies. The fallout from the protests has also heightened regional tensions over how to reduce poverty and the nature of the region's foreign relations. García has implied that Presidents Chavez of Venezuela and Evo Morales of Bolivia are supporting the protests in an effort to promote more leftist, populist policies like theirs in Peru. After President Morales, an Aymaran Indian, accused the Peruvian government of "genocide" in the protests, Peru withdrew its ambassador from that country. Unlike Venezuela, Bolivia, and Ecuador, who have aligned themselves together in a confrontational relationship with Washington, Peru, along with Colombia, has pursued free trade economic policies and nurtured positive relations with Washington. García's ability to govern effectively may continue to be challenged by ongoing political unrest. All of these factors may favor the opposition in Peru's next congressional and presidential elections, scheduled for April 9, 2011. President García is constitutionally prohibited from seeking a consecutive term, although he indicated in late 2008 that he wishes to run for a third term in 2016. Opposition leader Ollanta Humala, who placed a very close second to García in the 2006 elections, says he plans to run again. Humala is a retired army officer who led a failed coup attempt against then-President Fujimori in 2000, and espouses nationalist, anti-globalization policies. His position was greatly weakened when his former party, the Union for Peru (Union por el Peru) split from an alliance with the Nationalist Peruvian Party (Partido Nacionalista Peruano, PNP) in 2006. Humala now heads the PNP, but his political inexperience is seen by some observers as limiting his influence. Furthermore, in September 2008, a Peruvian Court began investigating whether there was enough evidence to charge Humala with participating in disappearances, torture, and murders in 1992 at the Madre Mia military base. Former Prime Minister Simon had been considered a likely candidate, but that seems unlikely following his resignation, and his reputation has been severely damaged by his handling of the Amazon protests. Another presumed but undeclared candidate is Keiko Fujimori. Conviction of Former President Alberto Fujimori In a landmark legal case, on April 7, 2009, former President Fujimori was convicted and sentenced to 25 years in prison for "crimes against humanity," on charges of corruption and human rights abuses, including authorizing killings by an army death squad and the abduction of a journalist and a businessman. The conviction is the first of an elected President to be found guilty of human rights abuses by a court in his own country. Analysts also regard it as a considerable accomplishment for Peru's judicial system, which has been considered weak and subject to political influence. But others still support Fujimori as the one who defeated the violent guerrilla movement Sendero Luminoso, or Shining Path. The conviction may deepen political divisions within the country and strain García's tenuous congressional alliances. The trial proved difficult for García in another way as well, as Fujimori's defense suggested that García should be charged for alleged human rights violations during his first term in office as well. Keiko Fujimori has vowed to pardon her father if elected President. Fujimori's second trial began in mid-July 2009. Economic Issues Peru's economy has been stronger than virtually all other Latin American economies since 2001. Its Gross Domestic Product (GDP) growth rate has increased steadily over the past five years. Its GDP grew almost 9% in 2007 and almost 10% in 2008. According to the Economic Intelligence Unit, rising inflation and reduced demand for Peruvian products will temper economic growth to 1.3% in 2009. In April 2009, Peru's economy shrank for the first time since 2001. While Peru's sound public finances and cushion of foreign reserves can help offset damage from the global financial crisis, its institutional weaknesses could limit the effectiveness of economic stimulus measures. President García has largely continued the orthodox economic policies of his predecessor, Alejandro Toledo, concentrating on reducing the fiscal deficit. The U.S. State Department describes Peru's economy as "well managed," and maintains that better tax collection and growth are increasing revenues. According to the Economist Intelligence Unit, "several years' worth of large surpluses will provide ample finance for [the García] administration's social policies," although implementation of those policies will be hampered by the limited capacity of Peru's institutions. Peru's poverty rates have been dropping since 2000. The percentage of Peruvians living in poverty fell from 54.3% in 2001 to 39.3% in 2007. Peruvians living in extreme poverty, unable to purchase the most basic basket of necessities, fell from 24.1% to 13.7% during the same period. According to the World Bank, "poverty rates are still high for a country with income levels like Peru's." Social unrest has continued to rise as inflation increases and Peru's poor feel that the country's economic prosperity has not reached them. Indeed, the percentage of the population living in poverty in cities in 2007 was about 26%, while the percentage living in poverty in rural areas was about 65%. These latter statistics reflect Peru's dual economy. The relatively modern sector of the economy is concentrated along the coastal plains, where Lima is located. Economic power has been traditionally, and remains, concentrated in the hands of a small economic elite of European descent. The subsistence sector, on the other hand, is concentrated in the mountainous interior, and among the mostly indigenous population there. This is evident in Peru's enormous income distribution gap. The poorest 20% of the population receives less than 4% of national income, while the wealthiest 20% receive almost 57% of national income. Employment has risen since 2004, but underemployment remains high. More than 60% of the workforce is engaged in the informal sector, such as small-scale vendors not captured in the formal tax system. Mining and fisheries are Peru's top export earners. High international metal prices have meant that mining constituted 62% of the country's export earnings in 2007. Dependence on primary products leaves Peru vulnerable to economic shocks caused by the volatility of commodity prices—which are currently falling—and weather conditions. Manufacturing has grown in recent years, benefitting from the preferential access to the U.S. market for Peruvian exports granted by the Andean Trade Promotion and Drug-Eradication Act (ATPDEA) since 2002. The ATPDEA renewed and modified the Andean Trade Preference Act (ATPA), which has been in effect since 1991. The Peruvian government's ability to carry out poverty reduction programs is somewhat limited by its institutional capacity. The country is still recovering from the erosion of democratic institutions under Fujimori. As President, Fujimori effectively controlled both the legislature and the judiciary, inhibiting their development as independent democratic institutions. Freedom of expression and other avenues of civic discourse were also restricted, leaving the public to channel much of its frustration into protests that contributed to the fall of one government, and left another paralyzed. Post-Fujimori governments have tried to restore the independence of democratic institutions. Nonetheless, as the world economic downturn leads to a dramatic slowing of Peru's economic growth, this weak institutional capacity may also hinder the government's ability to implement responsive economic policies effectively. In February 2009, Peru began work on a $3 billion stimulus package to mitigate the effect of the global economic crisis. The package aims to ensure at least 5% economic growth in 2009 and the creation of over 400,000 new jobs. Relations with the United States Peru and the United States have a strong and cooperative relationship. The United States supports the strengthening of Peru's democratic institutions and respect for human rights. In the economic realm, the United States supports bilateral trade relations and Peru's further integration into the world economy. The United States is Peru's top trading partner. The United States and Peru signed the U.S.-Peru Trade Promotion Agreement (PTPA) in April 2006. Both legislatures ratified the agreement, Peru's in 2006 and the U.S. Congress in 2007. In October 2008, Congress again extended the Andean Trade Promotion and Drug Eradication Act ( P.L. 109-432 ), continuing Peru's trade preferences until December 31, 2009, while Peru worked on intellectual property and environmental legislation needed before the superseding PTPA could go into effect. On January 16, 2009, then-President George W. Bush issued a proclamation to implement the PTPA as of February 1, 2009. The chairmen of the House Ways and Means Committee and Trade Subcommittee expressed disappointment, saying that Peru's legislation included "provisions inconsistent with their commitments," and that the U.S. Trade Representative should have resolved those issues prior to certification. Peru had a trade surplus in relation to the United States in 2007, according to the State Department. Peru's second largest trade partner is China, with whom it recently signed a trade agreement. U.S. Foreign Assistance to Peru The United States provided $91 million to Peru in FY2008. Just under $114 million was requested for FY2009, and the Obama Administration requested almost $119 million for FY2010. The U.S. Agency for International Development (USAID) programs focus on strengthening democratic institutions, including the fledgling regional governments; fostering continued economic growth and the integration of Peru into the world economy; promoting environmentally sound practices, including compliance with the environmental provisions of the Peru trade promotion agreement; and increasing social investments in health and education. Assistance for FY2009 includes $37 million for the Andean Counterdrug program (now part of the International Narcotics Control and Law Enforcement Assistance account); $63 million in Development Assistance; $750,000 for Foreign Military Financing; and $400,000 for International Military Education and Training. For Global Health and Child Survival funds, $20,000 will be managed by the State Department, and $12 million by USAID. The increase of funding in FY2009 over FY2008 is mainly for increased alternative development programs, and support for the Peru trade promotion agreement. It also includes a $454,000 increase in counter-narcotics programs. Increased military assistance is to improve the security forces' ability to participate in international peacekeeping operations (Peru has 210 troops in the UN's Stabilization Mission in Haiti). In June 2008, Peru and the United States signed a two-year, $35.6 million Millennium Challenge Threshold program that supports Peru's efforts to reduce corruption in public administration and improve immunization coverage. USAID is implementing the program. In October 2008, Peru and the United States signed a debt-for-nature swap that reduces Peru's debt to the United States by more than $25 million over the next seven years. In exchange, Peru promises to use those funds to support grants to protect its tropical forests. Counter-narcotics Cooperation A dominant theme of relations between the two countries is the effort to stem the flow of illegal drugs, mostly cocaine, from Peru to the United States. Peru is a major cocaine producing country, although it is a distant second behind Colombia, which produces about 90% of the cocaine headed for the United States. Peru is also a major importer of precursor chemicals for cocaine production. According to the State Department's February 2009 International Narcotics Control Strategy Report (INCSR), in 2008 the García Administration consolidated gains in the eradication of illicit coca cultivation, disrupted cocaine production and transshipment in land, sea, and air operations, and pressed forward on interdicting precursor chemicals. The government issued decrees against corruption, money laundering, and other organized crime. It also implemented measures to protect eradication and interdiction personnel from violent attacks. U.S. counter-narcotics assistance in Peru has supported a combination of interdiction, eradication, and alternative development. Peru is implementing its National Drug Plan for 2007-2011, which continues that strategy, but places greater emphasis on development assistance and precursor chemical interdiction. Special police training programs have improved Peru's ability to sustain interdiction and eradication in areas that have previously resisted eradication. The Peruvian Congress passed a set of laws proposed by the García administration to combat drug-trafficking, money laundering, terrorism, extortion, trafficking in persons, and other organized crimes. The Justice Ministry has strengthened its capacity to carry out drug-related prosecutions, although corruption fueled by narcotics money in the judicial system remains a problem. Peru has also worked with law enforcement agencies of neighboring Bolivia, Brazil, Colombia, and Ecuador to coordinate and improve regional counter-narcotics efforts. Although about four million Peruvians use coca leaf for legal purposes, such as coca tea and leaf-chewing, more than 90% of the country's coca production is directed toward illegal drug trafficking. The U.S. and Peruvian governments have been conducting a campaign to increase public awareness of the role coca farmers play in drug trafficking, and of negative impacts of drug trafficking on Peru. This awareness has contributed to weakened support for political organizations of coca growers, or "cocaleros," who have carried out violent resistance to eradication. Such public awareness campaigns are part of U.S.-supported alternative development programs in Peru. The main part of the program provides technical assistance to help farmers grow legal crops such as cacao, coffee, and African oil palm. According to the 2008 INCSR, the alternative development program in Peru "has achieved sustainable reductions in coca cultivation through an integrated approach that increases the economic competitiveness of coca-growing areas while improving local governance." The 2009 INCSR reports that the García government "consolidated gains in the eradication of illicit coca cultivation in the Upper Huallaga Valley," where most coca is grown. An independent analysis of data from the UN Office on Drugs and Crime, however, shows a net 16.4 percent increase of coca cultivation from 2005 to 2008. Various Peruvian counter-narcotics officials say that narcotics trafficking is on the rise in Peru, and that recent violence, arrests, and seizures demonstrate that Mexican drug cartels are fighting to take over drug trafficking in Peru from Colombian cartels. Drug trafficking is also linked to the Shining Path and gangs, including a Korean-Chinese gang known as Red Dragon. Terrorism17 Peru's main concern regarding terrorism is containing the violent guerrilla movement Sendero Luminoso, or Shining Path. The Shining Path, which in the 1980s and 1990s had between 5,000 and 10,000 members, and was one of the most violent terrorist groups in the world, was practically eliminated under former President Fujimori. It has reemerged in recent years, now linked to drug-trafficking. Thwarted bomb attacks in Lima in 2007 indicated that the Shining Path maintains a limited presence and guerrilla capacity in urban areas. But the government and other analysts believe that the guerrilla movement has shifted its primary bases to remote drug-producing areas, and funds its activities through drug production and providing protection to drug traffickers. It is not currently considered a threat to national security, but appears to be growing in size and influence. Some experts estimate that Sendero Luminoso has between 200 and 800 members. The military estimates Sendero strength at about 600 guerrillas. Sendero has two factions, which appear to be cooperating currently. Escalating drug trafficking could increase the size of the Shining Path groups, according to Peruvian officials. On October 9, 2008, the group launched its most violent attack in a decade, killing 13 soldiers and two civilians. Further attacks have followed, resulting in 33 deaths and 43 injured soldiers. These attacks have led to a reevaluation by the military of its tactics and of Sendero's strength. Military leaders claimed that reduced funding for intelligence collection and military equipment had hampered their abilities. Opposition political parties have criticized the military for sending conscripts into counter-terrorism offensives, and military officials have acknowledged that doing so has contributed to the high number of army casualties in such operations. The military also says the guerrilla group is better armed than previously thought, and now has rocket launchers, grenade launchers, and heavy machine guns. Sources for their weapons include the black market; arms stolen from the military, police, and self-defense groups; explosives stolen from industrial and mining centers; and arms acquired from Colombian drug cartels, and possibly from the Colombian guerrilla group known as the Revolutionary Armed Forces of Colombia (Fuerzas Armadas Revolucionarias de Colombia, FARC). In response to renewed Sendero Luminoso activity, the government reopened several military bases and deployed counter-insurgency units in several departments over the last few years. Army commander-in-chief General Edwin Donayre proposed in late 2007 to increase police presence in areas where Sendero is active, to improve coordination between the army and the police. He also proposed combining community-based counter-insurgency patrols with increased spending on health, education and special social programs. In the past, community-based patrols, known as civil defense committees, were accused of gross violations of human rights. The government has had modest success in the Huallaga Valley, where they captured 28 suspected guerrillas in 2007. A program to open 19 counter-terrorism bases with 2,000 troops in the Apurimac-Ene River Valleys (known by its Spanish acronym, VRAE) has been less successful. According to Jane's World Insurgency and Terrorism report, the "Plan VRAE" "has failed to make headway owing to a lack of security plan, poor intelligence, a weak judiciary and resistance from the rural poor who are yet to see promised improvements in infrastructure, health, and education." The other terrorist group operating in Peru in the 1990s was the Túpac Amaru Revolutionary Movement (MRTA). It has not conducted terrorist activities since 1996, when it took hostages at the Japanese Ambassador's residence in Lima. Although there appears to be no effort to reconstitute the MRTA as a guerrilla organization, former MRTA members are working to establish a political party called the Free Fatherland Movement ("Movimiento Patria Libre") to participate in future elections. Maritime Concerns: Port Security and Maritime Border Dispute Drug trafficking has had an adverse impact on port security in Peru. According to the State Department's International Narcotics Control Strategy Report, cocaine is exported from Peru to other South American countries, Europe, the Far East, Mexico, and the United States by maritime conveyances and commercial air flights. The increased presence of Mexican drug cartels have led to increased violence in Peruvian ports. Peruvian officials consider the northern port city of Paita, near Piura, to be especially corrupt. There was a rise in maritime criminal incidents off the Latin American Pacific coast in February 2009, with most of the incidents occurring in or near the Peruvian port of Callao. Though categorized as piracy, the acts do not occur in the number or manner of piracy acts in areas such as Somalia or Indonesia. Piracy acts in this region constituted only 2% of piracy attacks committed world-wide in 2008. Criminals do not generally seize or hijack vessels. Rather, they board anchored vessels and steal goods, equipment, and personal belongings. Another maritime concern is the long-standing maritime dispute between Peru and Chile. Populist politician Ollanta Humala, President García's rival in the last elections, and possible candidate in the next elections, has stirred up anti-Chile sentiment over the maritime dispute. Peru has filed a petition against Chile with the International Court of Justice in the Hague. The government of Bolivia is concerned that the decision may affect its ongoing efforts to secure the landlocked country access to the Pacific Ocean. Human Rights Issues According to the State Department's 2008 Country Reports on Human Rights Practices, the Peruvian government generally respected the human rights of its citizens. Some of Peru's human rights problems were significant, however, including the alleged unlawful killings by government forces and the disappearance of people in an area under military control. In October 2008, the Human Rights Ombudsman's office requested that a congressional commission investigate military actions in the Apurimac and Ene Valley region that resulted in the killing of four citizens and the disappearance of two others. The First Penal Prosecutor of Ayacucho was also carrying out an investigation. Other human rights problems reported by the State Department include abuse of detainees and inmates by police and prison security forces; harsh prison conditions; lengthy pretrial detention and inordinate trial delays; attacks on the media by local authorities; corruption; harassment of some civil society groups; violence and discrimination against women; violence against children, including sexual abuse; discrimination against indigenous communities, ethnic minorities, and gay and lesbian persons; failure to apply or enforce labor laws; child labor in the informal sector; and trafficking in persons, discussed in more detail below. During the trial of former President Alberto Fujimori, his defense called for President Garcia also to be investigated for alleged human rights violations during his first term. Human rights groups reported widespread human rights abuses during the guerrilla war, attributing most government abuses under the first Garcia Administration to security forces over which the Garcia Administration exerted little control. In April 2006 a Peruvian newspaper published a declassified U.S. government document stating that during Garcia's tenure as President, his party ran at least one, and perhaps several, secret paramilitary organizations, and that his Deputy Interior Minister supervised a secret police force. The document said the minister believed that APRA needed to be able to "eliminate" terrorists, but did not say whether the APRA-run forces carried out executions. Human Trafficking The U.S. Department of State rates Peru as a Tier 2 country for human trafficking, meaning that it is a country whose government does not fully comply with the Trafficking Victims Protection Act's minimum standards, but is making significant efforts to bring itself into compliance with those standards. According to the State Department's June 2009 Trafficking in Persons Report, "Peru is a source, transit, and destination country for men, women, and children trafficked for the purposes of forced labor and commercial sexual exploitation." Most of the trafficking occurs within the country, with over 20,000 people estimated to be forced into labor in the mining and logging sectors, agriculture, the brick-making sector, domestic servitude, and for the purpose of commercial sexual exploitation. Peruvians are also trafficked abroad for sexual exploitation, to Ecuador, Spain, Italy, Japan, and the United States. Child sex tourism is also a problem. Many sex-related trafficking victims are girls and young women from Peru's poorest regions, lured with false offers of employment. According to the Trafficking report, Peru passed a comprehensive anti-trafficking law in January 2007, and approved implementing regulations in November 2008. In 2008, the Peruvian government improved its efforts to fight human trafficking over the previous year. It set up a dedicated anti-trafficking police unit. It increased law enforcement efforts against sex trafficking crimes, initiating the prosecution in 54 sex trafficking cases, and convicting five offenders. In 2007 only 15 prosecutions were initiated, and no traffickers were convicted. The government continued existing anti-trafficking activities, such as involving the private sector in its educational campaigns, but did not take additional steps to reduce demand for child or other commercial sex acts or forced labor. The State Department considers the Peruvian government's efforts to combat forced labor crimes, and to protect and assist trafficking victims to be inadequate. Earthquake Preparedness24 Peru participates in Disaster Preparedness, Response, and Management programs with the U.S. Agency for International Development's Office of Foreign Disaster Assistance (OFDA). During the last major earthquake in 2007, OFDA coordinated its response with Peruvian national and local officials, noting that local authorities were playing a large leadership role in the response to the disaster. OFDA also distributed aid through Peruvian non-governmental organizations such as the Peruvian Red Cross. Peru also participates in Health Disaster Preparedness and Response programs with the Pan American Health Organization (PAHO), to promote improved disaster preparedness and response in the health sector. Meeting many of the goals established by PAHO, Peru has a disaster management unit in the Ministry of Health, with a full-time professional staff and a defined budget. The disaster management unit coordinates with the national institutions in charge of overall disaster management and reduction. Peru not only participates in training programs with OFDA and PAHO, but offers training programs of its own. Peru has formal training programs in disaster management in its universities at the undergraduate level. PAHO notes that Peru has "made many decisions and developed activities to improve [its disaster] preparedness and risk reduction," but that there "are still many areas that require sustained attention." For example, CARE International is working at improved accountability of disaster assistance providers to communities affected by disasters in Peru, through means such as information sharing, transparency, and meaningful participation in decision making. CARE suggests that Peru form a permanent inter-agency team to develop accountability practices and to address the loss of skill and knowledge in between emergencies.

Peru shows promising signs of economic and political stability and the inclination to work with the United States on mutual concerns. President Alan García is, however facing challenging times during this, the third year of his five-year term. Widespread social unrest has increased as growing inflation combines with unmet expectations that social conditions for Peru's poorest citizens would improve with Peru's economic growth. Peru's economy has been stronger than virtually all other Latin American economies since 2001. Peru's poverty rates have been dropping since 2000, but still remain high considering Peru's income levels. Economic power is, and has been traditionally, concentrated in the hands of a small economic elite of European descent. The subsistence sector, on the other hand, is concentrated in the mountainous interior, and among the mostly indigenous population there. Indeed, the percentage of the population living in poverty in cities in 2007 was about 26%, while the percentage living in poverty in rural areas was about 65%. On June 5, 2009, unrest exploded into a deadly conflict when the government sent police to break up blockades set up by thousands of indigenous protesters in the Amazon. The deadly clash between the indigenous protesters and police, and the reaction to it, is indicative of the polarization both within Peru and within the Andean region. The protest stemmed from disputes over who has the right to exploit natural resources in the Amazon and elsewhere in the country. The fallout from the protests has also heightened regional tensions over how to reduce poverty and the nature of foreign relations. While Peru's sound public finances can help offset damage from the global financial crisis, its institutional weaknesses may limit the effectiveness of economic stimulus measures and the Peruvian government's ability to carry out poverty reduction programs. As the world economic downturn leads to a dramatic slowing of Peru's economic growth, this weak institutional capacity may also hinder the government's ability to implement responsive economic policies effectively. The García Administration's ability to govern may continue to be challenged by ongoing political unrest. The violent guerrilla movement Sendero Luminoso, or Shining Path, which helped drive Peru to the brink of collapse during García's first presidency (1985-1990), has reemerged in recent years, now linked to drug-trafficking. On a more positive note, in a landmark legal case, on April 7, 2009, former President Fujimori was convicted and sentenced to 25 years in prison for "crimes against humanity," on charges of corruption and human rights abuses. Analysts regard the court's decision as a considerable accomplishment for Peru's judicial system, which has been considered weak and subject to political influence. Peru and the United States have a strong and cooperative relationship. The United States supports the strengthening of Peru's democratic institutions and respect for human rights. A U.S.-Peru Trade Promotion Agreement (PTPA) went into effect on February 1, 2009. The two countries also cooperate on counter-narcotics efforts, maritime concerns, combating human trafficking, and improving disaster preparedness.

CRS_RL32608

FISA Provisions which are Part of Intelligence Reform or Reorganization Proposals While not all of the intelligence reform or reorganization proposals introduced in the 108thCongress addressed FISA, a number had FISA provisions, including: P.L. 108-458 ( S. 2845 ) . Intelligence Reform and Terrorism Prevention Act of 2004,enacted into law December 17, 2004. Originally introduced on September 23, 2004, as the NationalIntelligence Reform Act of 2004, by Senator Susan Collins, for herself and Senator JosephLieberman, reporting an original bill from the Committee on Governmental Affairs. It passed theSenate with amendments on October 6, 2004 by Yea-Nay Vote, 96-2 (Record Vote Number 199). After H.R. 10 was passed by the House of Representatives, Section 2 of H.Res. 827 provided that, when S. 2845 was received from the Senate bythe House, the latter bill was to be considered to have been taken from the Speaker's table, all butits enacting clause was to be deemed stricken and the text of H.R. 10 as passed by theHouse inserted in lieu thereof, and as so amended, S. 2845 was to be considered passedby the House. H. Res. 827 provided further that the House was to be deemed to have insisted on itsamendment and to have requested a conference with the Senate thereon. S. 2845 passedthe House as amended on October 16, 2004. The conference report, H.Rept. 108-796 , was filed onDecember 7, 2004. It was agreed to in the House by recorded vote, 336-75 (Roll no. 544) the sameday, and passed the Senate by Yea-Nay Vote, 89-2 (Record Vote Number 216) the following day. The President signed the measure into law on December 17, 2004, P.L. 108-458 , entitled theIntelligence Reform and Terrorism Prevention Act of 2004. As enacted, Section 1011 of the measure amended Title I of the National Security Act of1947, 50 U.S.C. § 402 et seq. , to strike the previous Sections 102 through 104 of the act 50 U.S.C.§§ 403, 403-1, 403-3, and 403-4, and insert new Sections 102 through 104A. The new Section 102created the position of Director of National Intelligence (DNI). Section 102A outlined authoritiesand responsibilities of the position. Under the new Section 102A(f)(6) of the National Security Act,the DNI was given responsibility "to establish requirements and priorities for foreign intelligenceinformation to be collected under [FISA], and provide assistance to the Attorney General to ensurethat information derived from electronic surveillance or physical searches under that act isdisseminated so that it may be used efficiently and effectively for foreign intelligence purposes,except that the Director shall have no authority to direct, manage, or undertake electronicsurveillance or physical search operations pursuant to that act unless otherwise authorized by statuteor Executive order." New Section 102A(f)(8) of the National Security Act, as enacted by P.L.108-458 , Section 1011, provided that, "Nothing in this act shall be construed as affecting the roleof the Department of Justice or the Attorney General with respect to applications under the ForeignIntelligence Surveillance Act." Section 1071(e) of P.L. 108-458 , amended FISA to insert "Director of National Intelligence"in lieu of "Director of Central Intelligence" in each place in which it appeared. Section 6001 of P.L. 108-458 amended Sec. 101(b)(1) of FISA, 50 U.S.C. § 1801(b)(1), toadd to the list of categories of persons, other than U.S. persons, who are considered "agents of aforeign power" for purposes of FISA. Under Sec. 6001, any person, other than a U.S. person, who"engages in international terrorism or activities in preparation therefore" (2) is considered an agent of aforeign power. This language does not require the government to establish that the person wasconnected with an international terrorist organization, foreign government or group. The newlanguage is subject to the sunset provision in Sec. 224 of the USA PATRIOT Act, P.L.107-56 ,including the exception provided in subsection (b) of Sec. 224. Therefore, Sec. 6001 as amendedwill sunset on December 31, 2005, except with respect to any foreign intelligence investigationbegun before that date or any criminal offense or potential offense that began or occurred before thatdate. (3) Section 6002 created additional semiannual reporting requirements under FISA. Under thenew language, the Attorney General, on a semiannual basis, must submit to the House PermanentSelect Committee on Intelligence, the Senate Select Committee on Intelligence, the House JudiciaryCommittee and the Senate Judiciary Committee, in a manner consistent with protection of nationalsecurity, reports setting forth with respect to the preceding six month period: "(1) the aggregatenumber of persons targeted for orders issued under this act, including a breakdown of those targetedfor--(A) electronic surveillance under section 105 [50 U.S.C. § 1805]; (B) physical searches undersection 304 [50 U.S.C. § 1824]; (C) pen registers under section 402 [50 U.S.C. § 1842]; and (D)access to records under section 501 [50 U.S.C. § 1861]; (2) the number of individuals covered byan order issued pursuant to section 101(b)(1)(C) [50 U.S.C. § 1801(b)(1)(C)]; (3) the number oftimes that the Attorney General has authorized that information obtained under this act may be usedin a criminal proceeding or any information derived therefrom may be used in a criminal proceeding;(4) a summary of significant legal interpretations of this act involving matters before the ForeignIntelligence Surveillance Court or the Foreign Intelligence Surveillance Court of Review, includinginterpretations presented in applications or pleadings filed with the Foreign Intelligence SurveillanceCourt or the Foreign Intelligence Court of Review by the Department of Justice; and (5) copies ofall decisions (not including orders) or opinions of the Foreign Intelligence Surveillance Court orForeign Intelligence Surveillance Court of Review that include significant construction orinterpretation of the provisions of this act." H.R. 10 . 9/11 Recommendations Implementation Act. Introduced by RepresentativeJ. Dennis Hastert on September 24, 2004, and referred to House Permanent Select Committee onIntelligence, and in addition to the House Committees on Armed Services, Education and theWorkforce, Energy and Commerce, Financial Services, Government Reform, International Relations,the Judiciary, Rules, Science, Transportation and Infrastructure, Ways and Means, and SelectCommittee on Homeland Security, for a period to be subsequently determined by the Speaker, ineach case for consideration of such provisions as fall within the jurisdiction of the committeeconcerned. On October 4, 2004, reported out of: House Permanent Select Committee onIntelligence, amended, H.Rept. 108-724 , Part I; House Committee on Armed Services, amended, H.Rept.108-724 , Part II; and House Committee on Financial Services, amended, H.Rept. 108-724 ,Part III. On October 5, 2004, reported out of House Committee on Government Reform, amended, H.Rept. 108-724 , Part IV; and House Judiciary Committee, amended, H.Rept. 108-724 , Part V. Alsoon October 5, 2004, the House Committees on Education and the Workforce, Energy and Commerce,International Relations, Rules, Science, Transportation, and Ways and Means, and the House SelectCommittee on Homeland Security were discharged. The measure passed the House on October 8,2004, by recorded vote, 282-134 (Roll no. 523). A supplemental report was filed by the HouseJudiciary Committee on November 16, 2004, H.Rept. 108-724 , Part VI. As per H.Res. 827 , Section 2, the House was considered to have stricken all but the enacting clause of S. 2845 as received from the Senate and inserted the text of H.R. 10 aspassed by the House in lieu thereof, to have insisted on its amendment, and to have requested aconference. For further action, see discussion of P.L.108-458 ( S. 2845 ). Sec. 1011 of the H.R. 10 , among other things, created a new Sec. 102A of theNational Security Act of 1947, dealing with the responsibilities and authorities of the newly createdNational Intelligence Director. Sec. 102A(f) stated, in pertinent part, that "Nothing in this act shallbe construed as affecting the role of the Department of Justice or the Attorney General with respectto applications under the Foreign Intelligence Surveillance Act." Under Sec. 1071(e) of the measure,"Director of Central Intelligence" was replaced with "National Intelligence Director" in each placein which it appears in FISA. Sec. 2001 of the bill as introduced would have amended Sec. 101(b)(1)of FISA, 50 U.S.C. § 1801(b)(1), to add to the list of categories of persons, other than U.S. persons,who are considered "agents of a foreign power" for purposes of FISA. Under Sec. 2001 asintroduced, any person, other than a U.S. person, who "engages in international terrorism or activitiesin preparation therefor" would be considered an agent of a foreign power. This language would nothave required the government to establish that the person was connected with an internationalterrorist organization, foreign government or group. During mark-up of H.R. 10 by theHouse Judiciary Committee, an amendment offered by Representative Howard Berman was agreedto by voice vote which would replace Sec. 2001 as introduced with a new Sec. 2001. The newlanguage would have created a new Sec. 101A of FISA, 50 U.S.C. § 1801A, which would haveprovided, "Upon application by the Federal official applying for an order under this act, the courtmay presume that a non-United States person who is knowingly engaged in sabotage or internationalterrorism, or activities that are in preparation therefor, is an agent of a foreign power under section101(b)(2)(C)." The amendment would also have made the new language subject to the sunsetprovision in Sec. 224 of the USA PATRIOT Act, P.L.107-56 , including the exception provided insubsection (b) of Sec. 224. Therefore, Sec. 2001 as amended would have been subject to sunset onDecember 31, 2005, except with respect to any foreign intelligence investigation begun before thatdate or any criminal offense or potential offense that began or occurred before that date. H.R. 4104 . Intelligence Transformation Act of 2004. Introduced April 1, 2004, byRepresentative Jane Harman, and referred to House Permanent Select Committee on Intelligence. Sec. 101 of the bill would, in pertinent part, have amended the National Security Act of 1947 tostrike the existing Section 103 of the act and replace it with new language. Under new Section103(b)(6), a newly created Director of National Intelligence would have had responsibility to"establish requirements and priorities for foreign intelligence information to be collected under[FISA] and provide assistance to the Attorney General to ensure that information derived fromelectronic surveillance or physical searches under that act is disseminated so it may be usedefficiently and effectively for foreign intelligence purposes, except that the Director shall have noauthority to direct, manage, or undertake electronic surveillance or physical search operationspursuant to that act unless otherwise authorized by statute or Executive order." Under Sec. 502 ofH.R. 4104, "Director of Central Intelligence" was to be replaced with "Director of NationalIntelligence" in each place in FISA in which it appeared. H.R. 5040 . 9/11 Commission Report Implementation Act of 2004. IntroducedSeptember 9, 2004, by Representative Christopher Shays, and referred to House Permanent SelectCommittee on Intelligence, and in addition to the House Committees on Armed Services,International Relations, Government Reform, Judiciary, Rules, Transportation and Infrastructure,Energy and Commerce, Ways and Means, and House Select Committee on Homeland Security, fora period to be subsequently determined by the Speaker, in each case for consideration of suchprovisions as fall within the jurisdiction of the committee concerned. Referred to HouseSubcommittee on Aviation; House Subcommittee on Coast Guard and Maritime Transportation;House Subcommittee on Economic Development, Public Buildings and Emergency Management;House Subcommittee on Railroads; House Subcommittee on Highways, Transit and Pipelines; andHouse Subcommittee on Water Resources and Environment of House Transportation andInfrastructure Committee on September 10, 2004. Referred to the House Energy and CommerceCommittee's Subcommittee on Telecommunications and the Internet for a period subsequentlydetermined by the Chairman on October 8, 2004. Under Sec. 132(a)(6), the National IntelligenceDirector established by the bill would have had responsibility to "establish requirements andpriorities for foreign intelligence information to be collected under [FISA], and provide assistanceto the Attorney General to ensure that information derived from electronic surveillance or physicalsearches under that act is disseminated so that it may be used efficiently and effectively for foreignintelligence purposes, except that the Director shall have no authority to direct, manage, or undertakeelectronic surveillance or physical search operations pursuant to that act unless otherwise authorizedby statute or Executive order." Under Sec. 172(e) of the bill, "National Intelligence Director" was to replace "Director of Central Intelligence" in every place where it appeared in FISA. H.R. 5150 . National Intelligence Reform Act of 2004. Introduced September 24,2004, by Representative Christopher Shays, for himself and Representative Carolyn Maloney, andreferred to the House Permanent Select Committee on Intelligence. In Sec. 112(a)(7) of the bill, anewly established National Intelligence Director would have had responsibility "to establishrequirements and priorities for foreign intelligence information to be collected under [FISA], andprovide assistance to the Attorney General to ensure that information derived from electronicsurveillance or physical searches under that act is disseminated so that it may be used efficiently andeffectively for foreign intelligence purposes, except that the Director shall have no authority to direct,manage, or undertake electronic surveillance or physical search operations pursuant to that act unlessotherwise authorized by statute or Executive order." Under Sec. 302(e) of the bill, "NationalIntelligence Director" would have replaced "Director of Central Intelligence" in each place in whichit appeared in FISA. S. 6 . Comprehensive Homeland Security Act of 2003. Introduced January 7, 2003,by Senator Thomas Daschle, and referred to Senate Committee on the Judiciary. Sec. 10002 of thebill created a new Sec.103(b)(6) of the National Security Act of 1947, pursuant to which a newlyestablished Director of National Intelligence would have had responsibility "to establishrequirements and priorities for foreign intelligence information to be collected under [FISA], andprovide assistance to the Attorney General to ensure that information derived from electronicsurveillance or physical searches under that act is disseminated so that it may be used efficiently andeffectively for foreign intelligence purposes, except that the Director shall have no authority to direct,manage, or undertake electronic surveillance or physical search operations pursuant to that act unlessotherwise authorized by statute or Executive order." Under to Sec. 10005(f) of the bill, "Directorof Central Intelligence" would have been replaced with "Director of National Intelligence" in everyplace it appeared in FISA. S. 190 . Intelligence Community Leadership Act of 2003. Introduced January 16,2003, by Senator Dianne Feinstein, and referred to the Senate Select Committee on Intelligence. Section 2 of the bill would have replaced the existing Sec. 103 of the National Security Act of 1947with a new Sec. 103, subsection 103(b)(6) of which would have given the new Director of NationalIntelligence responsibility "to establish requirements and priorities for foreign intelligenceinformation to be collected under [FISA], and provide assistance to the Attorney General to ensurethat information derived from electronic surveillance or physical searches under that act isdisseminated so that it may be used efficiently and effectively for foreign intelligence purposes,except that the Director shall have no authority to direct, manage, or undertake electronicsurveillance or physical search operations pursuant to that act unless otherwise authorized by statuteor Executive order." Under Sec. 4(f) of the bill, "Director of Central Intelligence" would have beenreplaced with "Director of National Intelligence" in each place in FISA in which it appeared. S. 1520 . 9-11 Memorial Intelligence Reform Act. Introduced July 31, 2003, bySenator Bob Graham, and referred to the Senate Select Committee on Intelligence. Sec. 2 of the billwould create a new Sec. 103 of the National Security Act of 1947. Under the new Sec. 103(b)(6),the newly established Director of National Intelligence would have had responsibility to "establishrequirements and priorities for foreign intelligence information to be collected under [FISA], andprovide assistance to the Attorney General to ensure that information derived from electronicsurveillance or physical searches under that act is disseminated so that it may be used efficiently andeffectively for foreign intelligence purposes, except that the Director shall have no authority to direct,manage, or undertake electronic surveillance or physical search operations pursuant to that act unlessotherwise authorized by statute or Executive order." Section 8(a)(1) of the bill would have directedthe Attorney General, in consultation with the Director of the FBI, to "provide detailed training toappropriate personnel of the FBI, and to appropriate personnel of other elements of the intelligencecommunity, on the availability and utilization of the authorities provided by [FISA] to addressterrorist threats to the United States." Section 8(b) required the Attorney General and the Directorof the FBI to "jointly take appropriate actions to ensure that the information acquired throughelectronic surveillance, searches, and other activities under [FISA] is disseminated on a timely basisto appropriate personnel within the [FBI], and appropriate personnel in other elements of theintelligence community, in order to facilitate the use of such information for analysis and operationsto address terrorists threats to the United States." Under Section 8(c), the Attorney General and theDirector of the FBI were required to "jointly develop a plan to utilize the authorities under [FISA]to provide for the full assessment of the threats posed to the United States by international terroristgroups operating within the United States, including the determination of the extent to which suchgroups are funded or otherwise supported by foreign governments." In the context of enhancedcounterterrorism training for intelligence community personnel, Subsections 10(1)(A) and (C) of thebill directed the Director of National Intelligence to expand such training to improve and enhance(A) "intelligence sharing between and among intelligence personnel and law enforcement personnel;. . . [and] (C) the utilization of the authorities under [FISA]." S. 2811 . Intelligence Reformation Act of 2004 or 9/11 Act. Introduced September15, 2004, by Senator Arlen Specter, and referred to Senate Committee on Governmental Affairs. Under Sec. 132(a)(5), the newly established Director of Intelligence would have had responsibility"to establish requirements and priorities for foreign intelligence information to be collected under[FISA], and provide assistance to the Attorney General to ensure that information derived fromelectronic surveillance or physical searches under that act is disseminated so that it may be usedefficiently and effectively for foreign intelligence purposes, except that the Director shall have noauthority to direct, manage, or undertake electronic surveillance or physical search operationspursuant to that act unless otherwise authorized by statute or Executive order." Under Sec. 402(e),"Director of Intelligence" was to replace "Director of Central Intelligence" in each place it appearedin FISA. S. 2840 . National Intelligence Reform Act of 2004. Introduced September 23, 2004,by Senator Susan Collins, reporting an original bill from the Senate Committee on GovernmentalAffairs. On September 27, 2004, the Senate Committee on Governmental Affairs filed a writtenreport, S.Rept. 108-359 , with additional views. In Sec. 112, the bill outlined the responsibilities ofthe new National Intelligence Director. In Sec. 112(a)(7), the Director was given responsibility "toestablish requirements and priorities for foreign intelligence information to be collected under[FISA], and provide assistance to the Attorney General to ensure that information derived fromelectronic surveillance or physical searches under that act is disseminated so that it may be usedefficiently and effectively for foreign intelligence purposes, except that the Director shall have noauthority to direct, manage, or undertake electronic surveillance or physical search operationspursuant to that act unless otherwise authorized by statute or Executive order." Under Sec. 302(e)of the bill, "National Intelligence Director" replaced "Director of Central Intelligence" in each placein which it appeared in FISA. Senator Pat Roberts' Draft Bill , dated August 23, 2004. 9-11 National Security Protection Act. Sec. 102 of the bill would create a new Sec. 102A of the National Security Act of 1947. Under Sec.102A(b)(8), the newly established National Intelligence Director would have had responsibility "toestablish requirements and priorities for foreign intelligence information to be collected under[FISA], and provide assistance to the Attorney General to ensure that information derived fromelectronic surveillance or physical searches under that act is disseminated so that it may be usedefficiently and effectively for foreign intelligence purposes, except that the Director shall have noauthority to direct, manage, or undertake electronic surveillance or physical search operationspursuant to that act unless otherwise authorized by statute or Executive order." Under Sec. 221(e)of the bill, "National Intelligence Director" would have replaced "Director of Central Intelligence"in each place where it appeared in FISA. Other FISA-Related Bills in the 108th Congress The FISA-related measures in the 108th Congress which did not involve intelligence reformor reorganization appear to have been more varied in their focus and approach. These included thefollowing bills: H.R. 1157 . Freedom to Read Protection Act. A bill to amend the Foreign IntelligenceSurveillance Act to exempt bookstores and libraries from orders requiring the production of anytangible things for certain foreign intelligence investigations, and for other purposes. Introduced onMarch 6, 2003, by Representative Bernard Sanders. Referred to House Judiciary Committee and theHouse Permanent Select Committee on Intelligence for a period to be subsequently determined bythe Speaker, in each case for consideration of such provisions as fall within the jurisdiction of thecommittee concerned, on March 6, 2003. Referred to the Subcommittee on Crime, Terrorism, andHomeland Security of the House Judiciary Committee on May 5, 2003. Among other things, Sec.2 of the bill amended Section 501 of FISA, 50 U.S.C. § 1861, to preclude an application for an orderseeking or having the effect of searching for or seizing records of a bookseller or library documentarymaterials concerning personally identifiable information regarding a patron of the library orbookstore. It did not preclude a physical search for such documentary materials under anotherprovision of law. Sec. 3 of the bill amended 50 U.S.C. § 1862, with respect to reportingrequirements for the Attorney General to make to the House Judiciary Committee, Senate JudiciaryCommittee, House Permanent Select Committee on Intelligence and Senate Committee onIntelligence. It also required the Attorney General, consistent with protection of U.S. nationalsecurity, to make public the information reported to these committees. H.R. 2242 . Tribal Government Amendments to the Homeland Security Act. A billto amend the Homeland Security Act of 2002 to include Indian tribes among the entities consultedwith respect to activities carried out by the Secretary of Homeland Security and for other purposes. Introduced on May 22, 2003, by Representative Patrick J. Kennedy. On May 22, 2003, referred tothe House Committee on Resources and, in addition, to the House Committee on the Judiciary, theHouse Committee on the Budget, the House Permanent Select Committee on Intelligence, and theHouse Select Committee on Homeland Security, for a period to be subsequently determined by theSpeaker, in each case for consideration of such provisions as fall within the jurisdiction of thecommittee concerned. Referred to the Subcommittee on Crime, Terrorism, and Homeland Securityof the House Judiciary Committee on June 25, 2003. Sec. 12(g)(1) would have amended Section106(k)(1) of FISA, 50 U.S.C. § 1806(k)(1), to permit federal officers who conduct electronicsurveillance to acquire foreign intelligence information under FISA to consult, among others, withlaw enforcement personnel of an Indian tribe. Sec. 12(g)(2) would also have amended Section305(k)(1) of FISA, 50 U.S.C. § 1825(k)(1), to permit federal officers who conduct a physical searchunder FISA to consult, among others, with law enforcement personnel of an Indian Tribe. H.R. 2429 . Surveillance Oversight and Disclosure Act of 2003. A bill to amend theForeign Intelligence Surveillance Act of 1978 to improve the administration and oversight of foreignintelligence surveillance, and for other purposes. Introduced on June 11, 2003, by RepresentativeJoseph M. Hoeffel. On June 11, 2003, referred to the House Judiciary Committee, the HousePermanent Select Committee on Intelligence, and the House Financial Services Committee, for aperiod to be subsequently determined by the Speaker, in each case for consideration of suchprovisions as fall within the jurisdiction of the committee concerned. Referred to the Subcommitteeon Financial Institutions and Consumer Credit of House Committee on Financial Services for aperiod to be subsequently determined by the Chairman, on June 23, 2003. Referred to Subcommitteeon Commercial and Administrative Law of House Judiciary Committee on June 25, 2003. Amongother things, this measure would have authorized the Foreign Intelligence Surveillance Court (FISC)and the Foreign Intelligence Court of Review (Court of Review) to establish rules and proceduresand to take actions necessary to administer FISA. It would have required reporting of such rules andprocedures and any modifications thereof to all of the judges of the FISC and the Court of Review,the Chief Justice of the United States, the House Judiciary Committee, the Senate JudiciaryCommittee, the House Permanent Select Committee on Intelligence and the Senate Committee onIntelligence. In addition, it would have established certain public reporting requirements withrespect to electronic surveillance, physical searches, pen registers, and business records productionunder FISA. H.R. 2800 . Foreign Operations, Export Financing, and Related ProgramsAppropriations Act, 2004. A bill making appropriations for foreign operations, export financing,and related programs for the fiscal year ending September 30, 2004, and for other purposes. Introduced/originated in the House on July 21, 2003. On that day, the House Committee onAppropriations reported an original measure, H.Rept. 108-222 , by Representative Jim Kolbe. Passedthe House, amended, on July 24, 2003, by Yeas and Nays, 370-50 (Roll no. 429). Received in theSenate July 24, 2003, read twice, and placed on Senate Legislative Calendar under General Orders,Calendar No. 227. Sec. 582 barred the use of funds by the State Department to support anapplication under FISA for an order requiring the production of library circulation records, librarypatron lists, library Internet records, bookseller sales records, or bookseller customer lists. Note that H.R. 2673 , the Consolidated Appropriations bill for 2004, which became P.L. 108-199 ,included appropriations for Foreign Operations, but does not appear to have included FISA language. H.R. 3179 . Anti-Terrorism Intelligence Tools Improvement Act of 2003. IntroducedSeptember 25, 2003, by Representative James Sensenbrenner, Jr., and referred to House Committeeon Judiciary an House Permanent Select Committee on Intelligence. Referred to Subcommittee onCrime, Terrorism, and Homeland Security of House Judiciary Committee on October 22, 2003. Subcommittee hearings held May 18, 2004. Sec. 4 of the bill would have amended Sec. 101(b)(1)of FISA, 50 U.S.C. § 1801(b)(1) to include in the definition of an "agent of a foreign power" anyperson other than a U.S. person who "engages in international terrorism or activities in preparationtherefor." Sec. 6 of the bill would have created an exception to the FISA provisions regardingnotification by the United States of intended use or disclosure of information acquired through aFISA electronic surveillance, FISA physical search, or FISA pen register or trap and trace device;motion to suppress; and in camera and ex parte review by the district court, for civil proceedings orother civil matters under the immigration laws. H.R. 3352 . Security and Freedom Ensured Act of 2003 or SAFE Act. Introduced onOctober 21, 2003, by Representative C.L. (Butch) Otter, and referred to the House Committee onthe Judiciary and House Permanent Select Committee on Intelligence. Referred to the Subcommitteeon Crime, Terrorism, and Homeland Security of the House Judiciary Committee on December 10,2003. Sec. 2 of the bill would have amended the roving wiretap provisions of FISA to require thatan order approving such electronic surveillance must specify either the identity of the target or theplaces and facilities to which the electronic surveillance is to be directed. In cases where the facilityor place is not known at the time of the issuance of the order, Sec. 2 of the bill would have requiredthat the electronic surveillance only be conducted when the person conducting the surveillance hasascertained that the target is present at a particular facility or place. Sec. 4 of the bill would haverequired that applications for FISA orders for production of books, records, papers, documents, orother tangible things under 50 U.S.C. § 1861, must specify that there are specific and articulablefacts giving reason to believe that the person to whom the records pertain is a foreign power or agentof a foreign power, and that the court, in issuing its order must find that there are specific andarticulable facts giving reason to believe that the person to whom the records pertain is a foreignpower or an agent of a foreign power and that the application meets the other requirements of 50U.S.C. § 1861. Sec. 4 of the bill also would have amended 50 U.S.C. § 1862 to require the AttorneyGeneral, on a semi-annual basis, to fully inform the House Permanent Select Committee onIntelligence, the House Judiciary Committee, the Senate Select Committee on Intelligence and theSenate Judiciary Committee concerning all requests for production of tangible things under 50U.S.C. 1861. The Attorney General's report to the House and Senate Judiciary Committees wouldalso have been required to include the total number of applications made under 50 U.S.C. § 1861,and the total number of such orders granted, modified or denied. H.R. 3552 . A bill to amend the Foreign Intelligence Surveillance Act of 1978 to coverindividuals, other than United States persons, who engage in international terrorism withoutaffiliation with an international terrorist group. Introduced November 20, 2003, by RepresentativePeter King, and referred to the House Committee on the Judiciary and the House Permanent SelectCommittee on Intelligence. Referred to the Subcommittee on Crime, Terrorism, and HomelandSecurity of the House Judiciary Committee on December 10, 2003. Sec. 1 of the bill would haveamended the definition of "agent of a foreign power" under FISA to cover any person other than aU.S. person who engages in international terrorism or activities in preparation therefor. It wouldhave made this definitional change subject to sunset December 31, 2005, except for any particularforeign intelligence investigations that began before December 31, 2005, or any particular criminaloffenses or potential offenses which began or occurred before December 31, 2005. As to thoseparticular investigations or offenses, applicable provisions would continue in effect. Sec. 2 addedadditional reporting requirements: the Attorney General would have been required to report annuallyin April to the House Judiciary Committee, House Permanent Select Committee on Intelligence,Senate Judiciary Committee and Senate Select Committee on Intelligence on (1) the aggregatenumber of non-U.S. persons targeted for FISA orders during the previous year, broken down byelectronic surveillance, physical searches, pen registers, or access to records under 50 U.S.C. § 1861;(2) the number of individual covered by an order issued under FISA who were determined pursuantto activities authorized by FISA to have acted wholly alone in activities covered by the order; (3) thenumber of times the Attorney General authorized that information obtained under FISA or derivativeinformation may be used in a criminal proceeding; and, (4) in a manner consistent with protectionof U.S. national security, redacting the facts of any particular matter, the portions of the documentsand applications filed with the Foreign Intelligence Surveillance Court (FISC) or the ForeignIntelligence Court of Review (Court of Review) that include significant construction or interpretationof the provisions of FISA and the portions of opinions or court orders from the FISC or Court ofReview which include significant construction or interpretation of FISA provisions. H.R. 4591 . Civil Liberties Restoration Act of 2004. Introduced June 16, 2004, byRepresentative Howard Berman, and referred to the House Committee on the Judiciary and theHouse Permanent Select Committee on Intelligence. Referred June 28, 2004, to the Subcommitteeon Immigration, Border Security, and Claims and the Subcommittee on Crime, Terrorism, andHomeland Security of the House Judiciary Committee. In the context of electronic surveillance orphysical searches under FISA, Sec. 401 of the bill would have amended FISA to permit, rather thanrequire, relevant U.S. district courts, upon filing by the Attorney General of an affidavit under oaththat disclosure or an adversary hearing would harm U.S. national security, to review in camera andex parte the application, order, and other pertinent materials necessary to determine whether thesurveillance or physical search was lawfully authorized and conducted. In making this determinationwith respect to an electronic surveillance, the court would have been required to disclose, ifotherwise discoverable, to the aggrieved person, his or her counsel, or both, under ClassifiedInformation Procedures Act (CIPA) procedures and standards, portions of the application, order, orother materials relating to the surveillance unless the court finds the disclosure would not assist indetermining any legal or factual issue pertinent to the case. It would have applied a similar standardin the context of physical searches, but would have given the court the option of requiring theAttorney General to provide the aggrieved person, his or her counsel, or both, a summary of suchmaterials relating to the physical search. In the context of pen registers or trap and trace devices, thebill would have required disclosure to the aggrieved person, his or her attorney, or both, under CIPAprocedures and standards, if otherwise discoverable, of portions of the application, order, or othermaterials relating to the use of the pen register or trap and trace device, or evidence or informationobtained or derived from the pen register or trap and trace device, unless such disclosure would notassist in determining any legal or factual issue pertinent to the case. In the context of 50 U.S.C. §1861, any disclosure of applications, information, or items submitted or acquired pursuant to a FISAorder for production of tangible things, if otherwise discoverable, would have had to be conductedunder CIPA procedures and standards. Sec. 403 of the bill would have required that applications forFISA orders for production of books, records, papers, documents, or other tangible things under 50U.S.C. § 1861, specify that there are specific and articulable facts giving reason to believe that theperson to whom the records pertain is a foreign power or agent of a foreign power, and that the court,in issuing its order find that there are specific and articulable facts giving reason to believe that theperson to whom the records pertain is a foreign power or an agent of a foreign power ant that theapplication meets the other requirements of 50 U.S.C. § 1861. Sec. 403 of the bill also would haveamended 50 U.S.C. § 1862 to require the Attorney General, on a semi-annual basis, to fully informthe House Permanent Select Committee on Intelligence, the House Judiciary Committee, the SenateSelect Committee on Intelligence and the Senate Judiciary Committee concerning all requests forproduction of tangible things under 50 U.S.C. 1861. The Attorney General's report to the House andSenate Judiciary Committees would also have had to include the total number of applications madeunder 50 U.S.C. § 1861, and the total number of such orders granted, modified or denied. H.Amdt. 652 to H.R. 4754 . An amendment to add a new section to theCommerce-Justice-State appropriations bill prohibiting funds from being made available to makean application under Sec. 501 of FISA, 50 U.S.C. § 1861, for an order requiring production of librarycirculation records, library patron lists, library internet records, book sales records, or book customerlists. Introduced by Representative Sanders on July 8, 2003. Amendment not agreed to by recordedvote 210-210, 1 present (Roll no. 339). S. 113 . Official title as amended by the Senate: A bill to amend the ForeignIntelligence Surveillance Act of 1978 to cover individuals, other than United States persons, whoengage in international terrorism without affiliation with an international terrorist group. Introduced/originated in Senate on January 9, 2003, by Senator Jon Kyl. Referred to SenateJudiciary Committee. On March 11, 2003, reported out of the Senate Judiciary Committee bySenator Orrin Hatch with an amendment in the nature of a substitute and an amendment to the title,without written report Placed on Senate Legislative Calendar under General Orders, Calendar No.32. On April 29, 2003, Senate Judiciary Committee filed a written report, S.Rept. 108-40 ; additionalviews filed. On May 8, 2003, Referred to Senate Committee on Intelligence, pursuant to order ofMay 7, 2003; Senate Committee on Intelligence discharged same day. On May 8, 2003, passed theSenate with an amendment and an amendment to the title by Yea-Nay vote, 90-4 (Record VoteNumber 146). Received in House on May 9, 2003. Referred to the House Judiciary Committee, andin addition to the House Permanent Select Committee on Intelligence, for a period to be subsequentlydetermined by the Speaker, in each case for consideration of such provisions as fall within thejurisdiction of the committee concerned. On June 25, 2003, referred to Subcommittee on Crime,Terrorism, and Homeland Security. As passed the Senate and referred to the House, Sec. 1 of thebill amended Section 101(b)(1) of FISA, 50 U.S.C. § 1801(b)(1) to include in the definition of agentof a foreign power non-U.S. persons who engage in international terrorism or activities inpreparation for international terrorism. The new subsection did not require that such persons beaffiliated with an international terrorist group, or foreign nation or group. It made the sunsetprovision in Sec. 224 of the USA PATRIOT Act, P.L. 107-56 applicable to this amendment. Sec.2 of the bill created new annual reporting requirements under FISA to be made by the AttorneyGeneral to the House Judiciary Committee, Senate Judiciary Committee, House Permanent SelectCommittee on Intelligence and Senate Committee on Intelligence. S. 123 . A bill to exclude United States persons from the definition of "foreign power"under the Foreign Intelligence Surveillance Act of 1978 relating to international terrorism. Introduced by Senator Jon Kyl on January 9, 2003. Referred to Senate Judiciary Committee. Related bill, S. 113 . Sec. 1 of the bill would have amended the definition of a "foreignpower" under Section 101(a)(4), 50 U.S.C. § 1801(a)(4), to include a person, other than a U.S.person, or a group that engages in international terrorism or activities in preparation therefor. Previously, this subsection had only covered groups engaged in international terrorism or activitiesin preparation for international terrorism. S. 410 . Foreign Intelligence Collection Improvement Act of 2003, includingHomeland Intelligence Agency Act of 2003 and Foreign Intelligence Surveillance Public ReportingAct. A bill to establish the Homeland Intelligence Agency, and for other purposes. Introduced bySenator John Edwards on February 13, 2003. Referred to Senate Committee on Intelligence. TitleIII, Subtitle A, amended FISA reporting requirements with respect to electronic surveillance andphysical searches. It also would have required reporting, within discretion of Attorney General orDirector of Homeland Intelligence and in a manner consistent with protection of U.S. nationalsecurity, of significant interpretations of FISA, including, as appropriate, redacted portions ofopinions or orders of FISA court. Title III, Subtitle B, of the bill would have amended Title VI ofFISA to address participation by an official or agent of a proposed Homeland Intelligence Agencyin religious and political groups for foreign intelligence and international terrorism purposes. Subtitle III, Subtitle A, of S. 410 also provided reporting requirements with respect to suchundisclosed participation. S. 436 . Domestic Surveillance Oversight Act of 2003. A bill to amend the ForeignIntelligence Surveillance Act of 1978 to improve the administration and oversight of foreignintelligence surveillance, and for other purposes. Introduced by Senator Patrick Leahy on February25, 2003. Referred to Senate Judiciary Committee. Among other things, the bill authorized ForeignIntelligence Surveillance Court (FISC) and Foreign Intelligence Court of Review (Court of Review)to establish rules and procedures and to take actions necessary to administer FISA. It requiredreporting of such rules and procedures and any modifications thereof to all of the judges of the FISCand the Court of Review, the Chief Justice of the United States, the House Judiciary Committee, theSenate Judiciary Committee, the House Permanent Select Committee on Intelligence and the SenateCommittee on Intelligence. It also established certain public reporting requirements with respect toelectronic surveillance, physical searches, pen registers, and business records production under FISA. S. 578 . Tribal Government Amendments to the Homeland Security Act of 2002. Abill to amend the Homeland Security Act of 2002 to include Indian tribes among the entitiesconsulted with respect to activities carried out by the Secretary of Homeland Security, and for otherpurposes. Introduced by Senator Daniel K. Inouye on March 7, 2003. Referred to SenateGovernmental Affairs Committee. Hearings held before the Senate Select Committee on IndianAffairs on July 30, 2003, S. Hrg. 108-312. Sec. 12(g)(1) would have amended Section 106(k)(1) ofFISA, 50 U.S.C. § 1806(k)(1), to permit federal officers who conduct electronic surveillance toacquire foreign intelligence information under FISA to consult, among others, with law enforcementpersonnel of an Indian tribe. Sec. 12(g)(2) would also have amended Section 305(k)(1) of FISA, 50U.S.C. § 1825(k)(1), to permit federal officers who conduct a physical search under FISA to consult,among others, with law enforcement personnel of an Indian Tribe. S. 1158 . Library and Bookseller Protection Act. A bill to exempt bookstores andlibraries from orders requiring the production of tangible things for foreign intelligenceinvestigations, and to exempt libraries from counterintelligence access to certain records, ensuringthat libraries and bookstores are subjected to the regular system of court ordered warrants. Introduced by Senator Barbara Boxer on May 23, 2003. Referred to Senate Judiciary Committee. Sec. 2 of the bill would have amended Section 501 of FISA, 50 U.S.C. § 1861, to preclude anapplication for an order seeking or having the effect of searching for or seizing records of abookseller or library documentary materials concerning personally identifiable information regardinga patron of the library or bookstore. It did not preclude a physical search for such documentarymaterials under another provision of law. S. 1507 . Library, Bookseller, and Personal Records Privacy Act. Introduced July 31,2003, by Senator Russell Feingold, and referred to the Senate Judiciary Committee. Sec. 2 of thebill would have required that applications for FISA orders for production of books, records, papers,documents, or other tangible things under 50 U.S.C. § 1861, specify that there are specific andarticulable facts giving reason to believe that the person to whom the records pertain is a foreignpower or agent of a foreign power, and that the court, in issuing its order, find that there are specificand articulable facts giving reason to believe that the person to whom the records pertain is a foreignpower or an agent of a foreign power ant that the application meets the other requirements of 50U.S.C. § 1861. Sec. 2 of the bill also amended 50 U.S.C. § 1862 to require the Attorney General,on a semi-annual basis, to fully inform the House Permanent Select Committee on Intelligence, theHouse Judiciary Committee, the Senate Select Committee on Intelligence and the Senate JudiciaryCommittee concerning all requests for production of tangible things under 50 U.S.C. 1861. TheAttorney General's report to the House and Senate Judiciary Committees would also have includedthe total number of applications made under 50 U.S.C. § 1861, and the total number of such ordersgranted, modified or denied. S. 1552 . Protecting the Rights of Individuals Act. A bill to amend title 18, UnitedStates Code, and the Foreign Intelligence Surveillance Act of 1978 to strengthen protections of civilliberties in the exercise of the foreign intelligence surveillance authorities under Federal law, and forother purposes. Introduced by Senator Lisa Murkowski on July 31, 2003. Referred to SenateJudiciary Committee. Among other things, Sec. 4 of the bill amended Section 501 of FISA, 50U.S.C. § 1861, the business records provision, to add as an additional requirement for an applicationfor a court order that it "include a statement of the facts and circumstances relied upon by theapplicant to justify the applicant's belief that the person to whom the records pertain is a foreignpower or an agent of a foreign power." It also provided that a judge enter an ex parte order asrequested or modified approving the release of records if the judge finds reason to believe that theperson to whom the records pertain is a foreign power or an agent of a foreign power; or, in the caseof medical records, library records, other records involving purchase or rental of books, video, ormusic, or accessing of legal and publicly available information through the internet, if the judge findsthat there is probable cause that the person to whom the records pertain is a foreign power or anagent of a foreign power. The application would also have had to meet other requirements of thesection. Sec. 5 of the bill amended Section 105(c) of FISA, 50 U.S.C. § 1805(c), to eliminate JohnDoe roving wiretaps under FISA. Sec. 8 of the bill established certain public reporting requirementsunder FISA. S. 1709 . Security and Freedom Ensured Act of 2003 or the SAFE Act. IntroducedOctober 2, 2003, by Senator Larry Craig, and referred to Senate Judiciary Committee. Sec. 2 of thebill would have amended the roving wiretap provisions of FISA to require that an order approvingsuch electronic surveillance specify either the identity of the target or the places and facilities towhich the electronic surveillance is to be directed. In cases where the facility or place is not knownat the time of the issuance of the order, Sec. 2 of the bill would have required that the electronicsurveillance only be conducted when the person conducting the surveillance has ascertained that thetarget is present at a particular facility or place. Sec. 4 of the bill would have required thatapplications for FISA orders for production of books, records, papers, documents, or other tangiblethings under 50 U.S.C. § 1861, specify that there are specific and articulable facts giving reason tobelieve that the person to whom the records pertain is a foreign power or agent of a foreign power,and that the court, in issuing its order, find that there are specific and articulable facts giving reasonto believe that the person to whom the records pertain is a foreign power or an agent of a foreignpower ant that the application meets the other requirements of 50 U.S.C. § 1861. Sec. 4 of the billalso amended 50 U.S.C. § 1862 to require the Attorney General, on a semiannual basis, to fullyinform the House Permanent Select Committee on Intelligence, the House Judiciary Committee, theSenate Select Committee on Intelligence and the Senate Judiciary Committee concerning all requestsfor production of tangible things under 50 U.S.C. 1861. S. 2528 . Civil Liberties Restoration Act of 2004. Introduced June 16, 2004, bySenator Edward Kennedy, and referred to the Senate Judiciary Committee. In the context ofelectronic surveillance or physical searches under FISA, Sec. 401 of the bill would have amendedFISA to permit, rather than require, relevant U.S. district courts, upon filing by the Attorney Generalof an affidavit under oath that disclosure or an adversary hearing would harm U.S. national security,to review in camera and ex parte the application, order, and other pertinent materials necessary todetermine whether the surveillance or physical search was lawfully authorized and conducted. Inmaking this determination with respect to an electronic surveillance, the court would have beenrequired to disclose, if otherwise discoverable, to the aggrieved person, his or her counsel, or both,under Classified Information Procedures Act (CIPA) procedures and standards, portions of theapplication, order, or other materials relating to the surveillance unless the court finds the disclosurewould not assist in determining any legal or factual issue pertinent to the case. The bill applied asimilar standard in the context of physical searches, but gave the court the option of requiring theAttorney General to provide the aggrieved person, his or her counsel, or both, a summary of suchmaterials relating to the physical search. In the context of pen registers or trap and trace devices, thebill would have required disclosure to the aggrieved person, his or her attorney, or both, under CIPAprocedures and standards, if otherwise discoverable, of portions of the application, order, or othermaterials relating to the use of the pen register or trap and trace device, or evidence or informationobtained or derived from the pen register or trap and trace device, unless such disclosure would notassist in determining any legal or factual issue pertinent to the case. In the context of 50 U.S.C. §1861, any disclosure of applications, information, or items submitted or acquired pursuant to a FISAorder for production of tangible things, if otherwise discoverable, would have had to be conductedunder CIPA procedures and standards. S.Amdt. 536 to S. 113 . To establish additional annual reportingrequirements on activities under FISA. Introduced May 8, 2003, by Senator Feingold. Agreed tothe same day by Unanimous Consent. Under the amendment, the Attorney General was to reportannually in April to the House Judiciary Committee, House Permanent Select Committee onIntelligence, Senate Judiciary Committee and Senate Select Committee on Intelligence on (1) theaggregate number of non-U.S. persons targeted for FISA orders during the previous year, brokendown by electronic surveillance, physical searches, pen registers, or access to records under 50U.S.C. § 1861; (2) the number of individual covered by an order issued under FISA who weredetermined pursuant to activities authorized by FISA to have acted wholly alone n activities coveredby the order; (3) the number of times the Attorney General authorized that information obtainedunder FISA or derivative information may be used in a criminal proceeding; and, (4) in a mannerconsistent with protection of U.S. national security, redacting the facts of any particular matter, theportions of the documents and applications filed with the Foreign Intelligence Surveillance Court(FISC) or the Foreign Intelligence Court of Review (Court of Review) that include significantconstruction or interpretation of the provisions of FISA and the portions of opinions or court ordersfrom the FISC or Court of Review which include significant construction or interpretation of FISAprovisions.

The Foreign Intelligence Surveillance Act, 50 U.S.C. § 1801 et seq. , (FISA) as passed in1978, provided a statutory framework for the use of electronic surveillance in the context of foreignintelligence gathering. In so doing, Congress sought to strike a delicate balance between nationalsecurity interests and personal privacy rights. Subsequent legislation expanded federal laws dealingwith foreign intelligence gathering to address physical searches, pen registers and trap and tracedevices, and access to certain business records. The Uniting and Strengthening America byProviding Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Actof 2001, P.L. 107-56 , made significant changes to some of these provisions. Further amendmentsto FISA were included in the Intelligence Authorization Act for Fiscal Year 2002, P.L. 107-108 , andthe Homeland Security Act of 2002, P.L. 107-296 . In addressing international terrorism orespionage, the same factual situation may be the focus of both criminal investigations and foreignintelligence collection efforts. The changes in FISA under these public laws facilitate informationsharing between law enforcement and intelligence elements. In The 9/11 Commission Report, FinalReport of the National Commission on Terrorist Attacks upon the United States (W. W. Norton2004) ( Final Report ), the 9/11 Commission noted that the removal of the pre-9/11 "wall" betweenintelligence and law enforcement "has opened up new opportunities for cooperative action withinthe FBI." In the 108th Congress, a number of intelligence reform bills were introduced, including somewhich pre-dated the release of the Final Report of the 9/11 Commission, while others emerged afterits release. On December 17, 2004, the Intelligence Reform and Terrorism Prevention Act of 2004, P.L. 108-458 ( S. 2845 ), was signed into law. It included several provisions related toFISA. In addition to P.L. 108-458 , a variety of other bills were introduced with FISA-relatedprovisions. The FISA provisions of some of these measures were part of larger intelligence reform proposals. Still others were more narrowly focused measures that would also have impacted FISAinvestigations in the post-9/11 environment. This report briefly discusses the FISA-related aspectsof these proposals. For purposes of this report, the bills addressed are divided generally into twocategories: intelligence reform or reorganization proposals that have FISA provisions, including P.L.108-458 ( S. 2845 ), H.R. 10 , H.R. 4104 , H.R. 5040 , H.R. 5150 , S. 6 , S. 190 , S. 1520 , S. 2811 , S. 2840 , and Senator Pat Roberts' draft bill; and otherFISA-related bills, including H.R. 1157 , H.R. 2242 , H.R. 2429 , H.R. 2800 , H.R. 3179 , H.R. 3352 , H.R. 3552 , H.R. 4591 , H.Amdt. 652 to H.R. 4574 , S. 113 , S. 123 , S. 410 , S. 436 , S. 578 , S. 1158 , S. 1507 , S. 1552 , S. 1709 , S. 2528 , and S.Amdt. 536 to S. 113 . For a more detaileddiscussion of FISA, see CRS Report RL30465 , The Foreign Intelligence Surveillance Act: AnOverview of the Statutory Framework and Recent Judicial Decisions , while a discussion of theamendment in P.L. 108-458 to the FISA definition of "agent of a foreign power may be found in CRS Report RS22011 , Intelligence Reform and Terrorism Prevention Act of 2004: "Lone Wolf"Amendment to the Foreign Intelligence Surveillance Act .

CRS_RS21961

Background Ammonium perchlorate is the key ingredient in solid fuel for rockets and missiles; other perchlorate salts are used to manufacture products such as fireworks, air bags, and road flares. Uncertainty about the health effects of perchlorate exposure has slowed efforts to establish drinking water and environmental cleanup standards. However, because of perchlorate's persistence in water and ability to affect thyroid function, concern has escalated with the detection of perchlorate in water in at least 33 states. In the absence of a federal standard, states have begun to adopt their own measures. Massachusetts set a drinking water standard of 2 parts per billion (ppb, or micrograms per liter [μg/L]) in 2006, and California adopted a 6 ppb standard in 2007. Several states have issued health goals or advisory levels ranging from 1 ppb in Maryland (advisory level) and New Mexico (drinking water screening level) to 17 ppb in Texas (residential protective cleanup level) and, also in Texas, 51 ppb (industrial cleanup level). Occurrence Perchlorate has been used heavily by DOD and its contractors, and perchlorate contamination has been found near weapons and rocket fuel manufacturing facilities and disposal sites, research facilities, and military bases. Fireworks, road flares, construction sites, and other manufacturing activities and facilities also have been sources of contamination. Moreover, perchlorate occurs naturally (in West Texas, for example), is present in organic fertilizer imported from Chile, and can occur as a breakdown product of other products. It has been detected in drinking water sources, primarily in the Southwest and in scattered locations across the country. Contamination has been found most often in ground water, including some large aquifers in California. In 1999, EPA required public water systems to monitor for perchlorate under the Unregulated Contaminant Monitoring Rule (UCMR) to determine the frequency and levels at which it is present in public water supplies nationwide. The UCMR required monitoring by all systems serving more than 10,000 persons and by a sample of smaller systems. Of 3,865 public water systems tested, perchlorate was detected at levels greater than or equal to 4 µg/L (the minimum detection level of the test) in 160 (4.1%) systems in 26 states and two commonwealths, including 58 systems in California. In 14 systems, perchlorate levels exceeded EPA's preliminary remediation goal of 24.5 ppb. Approximately 1.9% (637) of a total of 34,331 samples collected by the systems had detections of perchlorate at levels of 4 µg/L or greater. The average concentration of perchlorate for the samples with positive detections was 9.85 µg/L. California has required more comprehensive monitoring, and perchlorate has been detected at least twice in 241 active or standby sources of drinking water in that state since 2002. In 2005, EPA reported perchlorate contamination had been found at 65 DOD facilities, 7 other federal facilities, and 37 private sites. All sampling results combined (i.e., soil, public and private drinking water wells, ground water monitoring wells, and surface water), the Government Accountability Office reported that perchlorate had been detected at 395 sites. Monitoring also has been conducted to assess the presence of perchlorate in foods. In 2004, the Food and Drug Administration (FDA) tested 500 samples of foods, including vegetables, milk, and bottled water for perchlorate. Samples were taken in areas where water was thought to be contaminated. The FDA found perchlorate in roughly 90% of lettuce samples (average levels ranged from 11.9 ppb to 7.7 ppb for lettuces), and in 101 of 104 bottled milk samples (with an average level of 5.7 ppb). To assess the presence of perchlorate in a wider range of foods, the FDA began testing all samples in its Total Diet Study in 2005. Perchlorate was detected in 625 of 1065 (50%) of samples, and in 211 of the 285 (74%) foods tested. In most cases, perchlorate levels were in the low single digits; however, levels were higher in some foods (e.g., shrimp, tomatoes, spinach, and bacon). The study found that 2-year-olds have the highest total perchlorate intake per kilogram body weight per day, followed by infants (6 to 12 months of age) and children 6 to 10 years of age. The widespread detection of perchlorate in food is relevant to EPA's standard-setting efforts, because EPA considers non-water exposures when determining whether to establish a standard for a contaminant, and at what level to set a standard. Health Concerns Perchlorate is not known to cause cancer. It is known to disrupt the uptake of iodine in the thyroid, and health effects associated with perchlorate exposure are expected to parallel those caused by iodine deficiency. Iodine deficiency decreases the production of thyroid hormones, which help regulate the body's metabolism and growth. A key concern is that impairment of thyroid function in pregnant women can affect fetuses and nursing infants and can result in delayed development and decreased learning capacity. Several human studies have indicated that thyroid changes occur in humans at significantly higher levels of perchlorate than the amounts typically observed in water supplies. However, a 2006 study by the Centers for Disease Control and Prevention (CDC) of a representative sample of the U.S. population found that environmental exposures to perchlorate have an effect on thyroid hormone levels in women with iodine deficiency. (No effect was found in men.) Fully 36% of the 1,111 women in this study were found to be iodine deficient, and the median level of urinary perchlorate measured in the women was 2.9 ppb. EPA Assessment of Perchlorate for Regulation Over the past decade, EPA has evaluated perchlorate to determine whether a federal drinking water standard is needed. Under the Safe Drinking Water Act (SDWA, §1412(b)(1)), EPA must regulate a contaminant if the Administrator determines that the contaminant (1) may have an adverse health effect, (2) occurs in public water systems at a frequency and level of public health concern, and (3), in the sole judgment of the Administrator, regulation of the contaminant presents a meaningful opportunity for reducing health risks. In 1997, when a sensitive detection method became available for perchlorate and detections increased, scientific information was limited. In 1998, EPA placed perchlorate on the list of contaminants that were candidates for regulation, but concluded that information was insufficient to determine whether perchlorate should be regulated under the SDWA. EPA listed perchlorate as a priority for further research on health effects and treatment technologies and for collecting occurrence data. In 1999, EPA required water systems to monitor for perchlorate under the Unregulated Contaminant Monitoring Rule to determine the frequency and levels at which it is present in public water supplies nationwide. In January 2007, EPA reported that it had collected sufficient occurrence data, and that further monitoring was not needed for the agency to make a regulatory determination (72 Fed. Reg. 367, January 4, 2007). Perchlorate Risk Assessment In 1992, and again in 1995, EPA issued draft reference doses (RfDs) for perchlorate exposure. An RfD is an estimate (with uncertainty spanning perhaps an order of magnitude) of a daily oral exposure that is not expected to cause any adverse, non-cancer health effects during a lifetime. In developing an RfD, EPA incorporates factors to account for sensitive subpopulations, study duration, inter- and intraspecies variability, and data gaps. The draft RfDs range of 0.0001 to 0.0005 milligrams per kilogram (mg/kg) body weight per day translated to a drinking water equivalent level of 4 ppb-18 ppb. EPA takes the RfD into account when setting a drinking water standard; it also considers costs, the capabilities of monitoring and treatment technologies, and other sources of perchlorate exposure, such as food. EPA's 1999 draft risk characterization resulted in a human risk benchmark of 0.0009 mg/kg per day (with a 100-fold uncertainty factor), which converted to a drinking water equivalent level of 32 ppb. However, EPA determined that the available health effects and toxicity database was inadequate for risk assessment. In 1999, EPA issued an Interim Assessment Guidance for Perchlorate , which recommended that EPA risk managers use the earlier reference dose range and drinking water equivalent level (DWEL) of 4-18 ppb for perchlorate-related assessment activities at hazardous waste sites. In 2002, EPA prepared a draft risk assessment that concluded that the potential human health risks of perchlorate exposures include effects on the developing nervous system and thyroid tumors, based on rat studies that observed benign tumors and adverse effects in fetal brain development. The document included a draft RfD of 0.00003 mg/kg per day, which translated to a drinking water equivalent level of 1 ppb. This document was controversial, both for its implications for cleanup costs and for science policy reasons. (For example, some peer reviewers expressed concern over EPA's risk assessment methodology and reliance on rat studies.) DOD, water suppliers, and other commentors expressed concern that the draft RfD could lead to unnecessarily stringent and costly cleanups of perchlorate releases at federal facilities and in water supplies. In 2002, a federal interagency perchlorate working group convened to discuss perchlorate risk assessment, research and regulatory issues, and related agency concerns. Working group members included DOD, EPA, the Department of Energy, the National Aeronautics and Space Administration, the Office of Science and Technology Policy, the Council on Environmental Quality, and the Office of Management and Budget. NRC Perchlorate Study To resolve some of the uncertainty and debate over perchlorate's health effects and the 2002 draft risk assessment, the interagency working group asked the National Research Council (NRC) to review the available science for perchlorate and EPA's draft assessment. The NRC was asked to comment and make recommendations. The NRC Committee to Assess the Health Implications of Perchlorate Ingestion issued its review in January 2005 and suggested several changes to EPA's draft risk assessment. The committee concluded that because of key differences between rats and humans, studies in rats were of limited use for quantitatively assessing human health risk associated with perchlorate exposure. Although the committee agreed that thyroid tumors found in a few rats were likely perchlorate treatment-related, it concluded that perchlorate exposure is unlikely to lead to thyroid tumors in humans. The committee noted that, unlike rats, humans have multiple mechanisms to compensate for iodide deficiency and thyroid disorders. Also, the NRC found flaws in the design and methods used in the rat studies. The committee concluded that the animal data selected by EPA should not be used as the basis of the risk assessment. The committee also reviewed EPA's risk assessment model. It agreed that EPA's model for perchlorate toxicity represented a possible early sequence of events after exposure, but it did not think that the model accurately represented possible outcomes after changes in thyroid hormone production. Further, the committee disagreed with EPA's definition of a change in thyroid hormone level as an adverse effect. Rather, the NRC defined transient changes in serum thyroid hormone as biochemical events that might precede adverse effects, and identified hypothyroidism as the first adverse effect. Because of research gaps regarding perchlorate's potential effects following changes in thyroid hormone production, the committee made the recommendation that EPA use a nonadverse effect (i.e., the inhibition of iodide uptake by the thyroid in humans) rather than an adverse effect as the basis for the risk assessment. The committee explained that "[i]nhibition of iodide uptake is a more reliable and valid measure, it has been unequivocally demonstrated in humans exposed to perchlorate, and it is the key event that precedes all thyroid-mediated effects of perchlorate exposure." Based on the use of this point of departure, the reliance on human studies, and the use of an uncertainty factor of 10 (for intraspecies differences), the NRC's recommendations led to an RfD of 0.0007 mg/kg per day. The committee concluded that this RfD should protect the most sensitive population (i.e., the fetuses of pregnant women who might have hypothyroidism or iodide deficiency) and noted that the RfD was supported by clinical studies, occupational and environmental epidemiologic studies, and studies of long-term perchlorate administration to patients with hyperthyroidism. In addition, the NRC identified data gaps and research needs. The committee has received some criticism for the extent to which it relied on a small, short-term human study, and debate over perchlorate's health risks has continued. EPA's Response and Subsequent Actions In 2005, EPA adopted the NRC recommended reference dose of 0.0007 mg/kg per day, which translates to a drinking water equivalent level of 24.5 ppb. The DWEL is the concentration of a contaminant in water that is expected to have no adverse effects; it is intended to include a margin of safety to protect the fetuses of pregnant women who might have a preexisting thyroid condition or insufficient iodide intake. Notably, EPA based the DWEL on the assumption that all exposure would come from drinking water. If EPA were to develop a drinking water standard for perchlorate, it would lower the DWEL to account for other sources of exposure, particularly food. In January 2006, EPA's Superfund office issued guidance adopting the NRC reference dose and the DWEL of 24.5 ppb as the recommended value to be considered as the preliminary remediation goal (PRG) to guide perchlorate assessment and cleanup at Superfund sites. In March, EPA's Children's Health Protection Advisory Committee (CHPAC) wrote to the EPA Administrator that the PRG did not protect infants, who are highly susceptible to neurodevelopmental toxicity and may be more exposed than fetuses to perchlorate. The CHPAC noted that perchlorate is concentrated in breast milk and that nursing infants could receive daily doses greater than the RfD if the mother is exposed to 24.5 ppb perchlorate in tap water. The committee recommended that the Superfund office lower the PRG and that the Office of Water develop a standard for perchlorate and, in the interim, issue a drinking water health advisory that takes into account early life exposures. In October 2008, EPA announced a preliminary determination not to regulate perchlorate, noting that less than 1% of water systems have perchlorate levels above the health reference level. EPA concluded that perchlorate failed to meet two of SDWA's regulatory criteria (i.e., that a contaminant occur frequently at levels of health concern, and that establishing a national drinking water standard would provide a "meaningful opportunity for health risk reduction"). In response, EPA's Science Advisory Board's (SAB's) Drinking Water Committee argued that, given perchlorate's occurrence and well-documented toxicity, EPA must have a compelling basis to support a determination not to regulate. The SAB requested more time to review the new model EPA relied on, and to comment on the preliminary determination. On January 8, 2009, EPA announced that it would seek further advice from the NRC before making a final determination on whether or not to set a drinking water standard for perchlorate. EPA also announced that it was replacing the perchlorate preliminary remediation goal of 24.5 ppb with an interim health advisory, which contains a value of 15 ppb. Health advisories are nonregulatory, but can be useful to state and local officials in addressing drinking water contamination and making cleanup decisions for Superfund sites. EPA based the 15 ppb level on the reference dose recommended by the NRC. The agency explained that it calculated the advisory level to protect the most sensitive population that was identified by the NRC perchlorate committee (the fetuses of pregnant women), and took into account exposures from food as well as water. This approach does not appear to address a key concern of EPA's Children's Health Protection Advisory Committee which identified nursing infants as potentially more exposed than fetuses. The evaluation of impacts to infants and young children is one of the scientific issues that EPA wanted the NRC to evaluate. EPA also was considering asking the NRC to evaluate recent studies, EPA's use of models, and its derivation of the 15 ppb health reference level. In August 2009, the EPA Administrator announced that the agency would reevaluate the science regarding perchlorate's potential health effects, with particular emphasis on evaluating the effects of perchlorate exposure on infants and young children. The agency determined not to ask the NRC to conduct further review of issues related to perchlorate, having concluded that additional NRC review would unnecessarily delay the regulatory decision-making process. Instead, EPA published a Supplemental Request for Comments notice in the Federal Register, seeking public comment on additional ways to analyze data related to the regulatory determination for perchlorate. EPA noted its intent to consider a broader range of alternatives for interpreting the available data on the level of health concern, the frequency of occurrence of perchlorate in drinking water, and the opportunity for health risk reduction through a national drinking water standard. EPA is reevaluating perchlorate exposure to sensitive life stages including infants and developing children, expanding the previous emphasis on pregnant women and their developing fetuses as the most sensitive subpopulations. EPA intends to take public comments into account before making a final regulatory determination. The agency's announcement noted that the final decision may be a determination to regulate. DOD Perchlorate Actions DOD is responsible for some large releases of perchlorate into the environment and has allotted significant resources to address this problem. DOD has spent more than $114 million on research activities regarding perchlorate treatment technologies, detection methods, toxicity studies, and substitutes. Additional funds have been spent on cleanup. Although remediation has proceeded at some sites, cleanups typically are driven by drinking water standards or other established cleanup standards. With no federal standard, cleanup goals and responsibilities have been ambiguous outside of California and Massachusetts where standards have been set. In 2006, after EPA established a DWEL for perchlorate and issued cleanup guidance based on the DWEL, DOD adopted a policy setting 24 ppb as the level of concern to be used in managing perchlorate releases (unless a more stringent federal or state standard exists. The policy applies broadly to DOD installations and former military lands, and directs the services to test for perchlorate when it is reasonably expected that a release has occurred. Under the policy, if perchlorate levels exceed 24 ppb, a site-specific risk assessment must be conducted; if the assessment indicates that the perchlorate could result in adverse health effects, then the site must be prioritized for risk management. DOD uses a relative risk site evaluation framework to help prioritize environmental restoration work and to allocate resources among sites. EPA has withdrawn the 2006 perchlorate remediation guidance and recommends that its Regional offices now consider using the interim health advisory level of 15 ppb for cleanup. DOD may follow suit and adopt the new level for managing perchlorate releases. Legislative Actions In the 111 th Congress, as in the past several Congresses, legislation has been introduced concerning the regulation of perchlorate under the Safe Drinking Water Act (SDWA). H.R. 3206 would require EPA to propose a drinking water regulation for perchlorate within 12 months of enactment of the legislation, and to promulgate a final regulation no later than 18 months after EPA published a proposed rule. Additionally, Congress has provided some funding for the remediation of perchlorate contamination of ground water and public drinking water supplies. The explanatory statement for the Department of Defense Appropriations Act, 2010 ( P.L. 111-118 , H.R. 3326 ), specifies that $1.6 million is intended for the cleanup of perchlorate contaminated drinking water wells, and another $3.5 million is intended for Inland Empire (CA) perchlorate remediation. Two similar bills, H.R. 2316 and H.R. 4252 , each entitled the Inland Empire Perchlorate Ground Water Plume Assessment Act of 2009, would direct the Secretary of the Interior, acting through the Director of the United States Geological Survey, to (1) complete a study of water resources in California, including the Rialto-Colton Basin ( H.R. 2316 ), or (2) complete a study of water resources, specifically the Rialto-Colton Basin ( H.R. 4252 ). Under both bills, the required studies would include a survey of ground water resources (including the identification of a recent surge in perchlorate concentrations in ground water). ( H.R. 4252 , H.Rept. 111-433 ) was passed by the House in March 2010, and ordered reported, without amendment, by the Senate Committee on Energy and Natural Resources in July. Relatedly, H.R. 102 would authorize additional appropriations for the San Gabriel Basin Restoration Fund, and would establish a 35% non-federal matching requirement for the recipient water districts after a specified amount of federal funds had been appropriated During the 110 th Congress, several perchlorate bills were considered, but none were enacted. Responding to EPA's 2007 decision not to require further monitoring for perchlorate as an unregulated contaminant, S. 24 was introduced to require community water systems to test for perchlorate and disclose its presence in annual consumer reports. S. 150 and H.R. 1747 would have required EPA to set a standard for perchlorate. The Senate Environment and Public Works Committee reported S. 24 ( S.Rept. 110-483 ) and S. 150 ( S.Rept. 110-484 ). Additionally, H.Con.Res. 347 expressed the sense of Congress that the CDC and FDA should take action to educate the public on the importance of adequate iodine intake, as iodine is protective against perchlorate exposure.

Perchlorate is the explosive component of solid rocket fuel, fireworks, road flares, and other products. Used heavily by the Department of Defense (DOD) and related industries, perchlorate also occurs naturally and is present in some organic fertilizer. This soluble, persistent compound has been detected in drinking water supplies, especially in California. It also has been found in milk and many foods. Because of this widespread occurrence, concern over the potential health risks of perchlorate exposure has increased, and some states, water utilities, and Members of Congress have urged the Environmental Protection Agency (EPA) to set a federal drinking water standard for this chemical. Regulatory issues have involved the health risk reduction benefits and the costs of federal regulation, including environmental cleanup and water treatment costs, both of which are driven by federal and state standards. EPA has spent years assessing perchlorate's health effects and occurrence to determine whether a national standard is warranted. The Food and Drug Administration (FDA) has supported this effort by testing produce and other foods for the presence of perchlorate. Interagency disagreements over the risks of perchlorate exposure led several federal agencies to ask the National Research Council (NRC) to evaluate perchlorate's health effects and EPA's risk analyses. In 2005, the NRC issued its report, and EPA adopted the NRC's recommended reference dose (i.e., the expected safe dose) for perchlorate exposure. Subsequent studies raised more concerns about the potential effects of low-level exposures, particularly for infants in certain cases. In October 2008, EPA made a preliminary determination not to regulate perchlorate in drinking water. Then, in early January 2009, the agency announced that it again would seek advice from the NRC before making a final determination. EPA also announced that it was replacing the preliminary remediation goal for perchlorate of 24.5 parts per billion (ppb) with an interim health advisory, which contains a value of 15 ppb. In August 2009, the EPA Administrator announced that the agency would reevaluate the science regarding perchlorate's potential health effects, with particular emphasis on evaluating the effects of perchlorate exposure on infants and young children. The agency determined not to ask the NRC to conduct further review of issues related to perchlorate, having concluded that additional NRC review would unnecessarily delay the regulatory decision-making process. EPA intends to consider public comments before making a final regulatory determination. Perchlorate legislation in this Congress includes H.R. 3206, which would require EPA to set a drinking water standard for perchlorate. No action has been taken on this bill. Among perchlorate contamination cleanup bills, the House passed H.R. 4252 to direct the U.S. Geological Survey to complete a study of water resources (including a study of perchlorate contamination of ground water) in the Rialto-Colton Basin, California. In July 2010, the Senate Committee on Energy and Natural Resources ordered H.R. 4252 to be reported, without amendment. This report reviews perchlorate contamination issues and related developments.

CRS_95-406

Constitutional Principles The First Amendment provides: "Congress shall make no law ... abridging the freedom of speech, or of the press." In general, the First Amendment protects pornography, with this term being used to mean any erotic material. The Supreme Court, however, has held that the First Amendment does not protect two types of pornography: obscenity and child pornography. Consequently, they may be banned on the basis of their content, and federal law prohibits the mailing of child pornography as well as its transport or receipt in interstate or foreign commerce by any means, including by computer. A. Obscenity2 Most pornography is not legally obscene; to be obscene, pornography must, at a minimum, "depict or describe patently offensive 'hard core' sexual conduct." Miller v. California , 413 U.S. 15, 27 (1973). The Supreme Court has created a three-part test, known as the Miller test, to determine whether a work is obscene. The Miller test asks: (a) whether the "average person applying contemporary community standards" would find that the work, taken as a whole, appeals to the prurient interest; (b) whether the work depicts or describes, in a patently offensive way, sexual conduct specifically defined by the applicable state law; and (c) whether the work, taken as a whole, lacks serious literary, artistic, political, or scientific value. The Supreme Court has allowed one exception to the rule that obscenity, as defined by Miller , is not protected under the First Amendment. In Stanley v. Georgia , 394 U.S. 557, 568 (1969), the Court held that "mere private possession of obscene material" is protected. The Court wrote: Whatever may be the justifications for other statutes regulating obscenity, we do not think they reach into the privacy of one's own home. If the First Amendment means anything, it means that a State has no business telling a man, sitting alone in his house, what books he may read or what films he may watch. Id . at 565. B. Child Pornography Child pornography is material that " visually depicts sexual conduct by children below a specified age." New York v. Ferber , 458 U.S. 747, 764 (1982) (emphasis in original). It is unprotected by the First Amendment even when it is not legally obscene; i.e., child pornography need not meet the Miller test to be banned. However, the Court held in Ferber that, as with obscenity, the conduct to be prohibited must be defined by the applicable state law, as written or authoritatively construed.... The category of "sexual conduct" proscribed must also be suitably limited and described. Id . at 764. In Massachusetts v. Oakes , 491 U.S. 576, 579 (1989), the Supreme Court considered a Massachusetts statute that made it a crime knowingly to permit a child under 18 "to pose or to be exhibited in a state of nudity ... for purpose of visual representation or reproduction in any book, magazine, pamphlet, motion picture film, photograph, or picture." The defendant in the case had been convicted for taking topless photographs of his 14-year-old stepdaughter, but the Massachusetts Supreme Judicial Court reversed on the ground that the statute was overbroad because it would make "a criminal of a parent who takes a frontal view picture of his or her naked one-year-old running on a beach or romping in a wading pool." Id . at 581. While the case was pending before the Supreme Court, the statute was amended to allow convictions only where nude pictures are taken "with lascivious intent." This amendment made moot the question of whether the statute under which the defendant was convicted was overbroad. However, it left open the question whether the statute under which the defendant was convicted could constitutionally be applied to him; i.e., whether his conduct was protected by the First Amendment. The Supreme Court remanded the case for this to be decided. In Osborne v. Ohio , 495 U.S. 103 (1990), the Supreme Court held that the Stanley v. Georgia right to possess obscene material in one's home does not extend to child pornography. The difference is that: In Stanley , Georgia primarily sought to proscribe the private possession of obscenity because it was concerned that obscenity would poison the minds of its viewers. We responded that "[w]hatever the power of the state to control public dissemination of ideas inimical to the public morality, it cannot constitutionally premise legislation on the desirability of controlling a person's private thoughts." Id . at 109 (citations omitted). In Osborne , by contrast, the State does not rely on a paternalistic interest in regulating Osborne's mind. Rather, Ohio has enacted [its statute prohibiting possession of child pornography] in order to protect the victims of child pornography; it hopes to destroy a market for the exploitative use of children.... It is ... surely reasonable for the State to conclude that it will decrease the production of child pornography if it penalizes those who possess and view the product, thereby decreasing demand.... Other interests also support the Ohio law. First, as Ferber recognized, the materials produced by child pornography permanently record the victim's abuse. The pornography's continued existence causes the child victims continuing harm by haunting the children in years to come. The State's ban on possession and viewing encourages possessors of these materials to destroy them. Second, encouraging the destruction of these materials is also desirable because evidence suggests that pedophiles use child pornography to seduce other children into sexual activity. Id . at 109-111 (citations omitted). In Ashcroft v. Free Speech Coalition , 535 U.S. 234 (2002), the Supreme Court held that child pornography that is produced without using an actual minor is protected by the First Amendment. We discuss this case in the section below titled " Section 2256 ." Federal Child Pornography Statutes Federal child pornography statutes are codified at 18 U.S.C. §§ 2251-2260. These sections, including selected court cases that have ruled on their constitutionality or interpreted them, are summarized in numerical order. After that, the Children's Internet Protection Act and the Federal Racketeer Influenced and Corrupt Organizations Act (RICO) are considered, to the extent that they incorporate child pornography crimes. A. 18 U.S.C. §§ 2251-22608 Section 2251 Sexual exploitation of children. Subsection (a) of this section makes it a crime to use a minor in child pornography if the pornography has one of three specified connections to commerce. The phrase "use a minor in child pornography" in the preceding sentence is a synopsis of the following statutory language: employs, uses, persuades, induces, entices, or coerces any minor to engage in, or ... transports any minor in or affecting interstate or foreign commerce, or in any Territory or Possession of the United States, with the intent that such minor engage in, any sexually explicit conduct for the purpose of producing any visual depiction of such conduct .... Subsection (b) makes it a crime for "[a]ny parent, legal guardian, or person having custody or control of a minor" knowingly to permit such minor to engage in child pornography that has one of three specified connections to commerce. Subsection (d) makes it a crime for any person knowingly to publish notices or advertisements for child pornography or for "participation in any act of sexually explicit conduct by or with any minor for the purpose of producing a visual depiction of such conduct," if "such person knows or has reason to know that such notice or advertisement will be transported using any means or facility of interstate or foreign commerce or in or affecting interstate or foreign commerce by any means including by computer or mailed," or if "such notice or advertisement is transported using any means or facility of interstate or foreign commerce or in or affecting interstate or foreign commerce by any means including by computer or mailed." Section 2251A Selling or buying of children. This section imposes a minimum 30-year sentence on "[a]ny parent, legal guardian, or other person having custody or control of a minor who sells or otherwise transfers custody or control of such minor, or offers to sell or otherwise transfer custody or control of such minor" (1) with knowledge that, as a consequence of the sale or transfer, the minor will be portrayed in child pornography, or (2) with intent to promote the participation of the minor in child pornography. It imposes the same sentence on the person who purchases or otherwise obtains custody or control of the child for one of these purposes. "Custody or control" is defined to include "temporary supervision or responsibility for a minor whether legally or illegally obtained." 18 U.S.C. § 2256(7). In order for a person to be guilty under § 2251A, there must be a nexus with interstate or foreign commerce, namely that, in the course of the offense, either the minor or the defendant have traveled or be transported in or affecting interstate or foreign commerce, the offer for transfer of custody or control have been "communicated or transported using any means or facility of interstate or foreign commerce or in or affecting interstate or foreign commerce by any means including by computer or mail," or the offense have been committed in a territory or possession of the United States. Section 2252 Certain activities relating to material involving the sexual exploitation of minors. This section, unlike § 2252A, applies only to child pornography that depicts actual children. It makes it a crime (1) knowingly to transport or ship child pornography by any means, including by computer or mail, (2) knowingly to receive or distribute child pornography that has been transported or shipped in or affecting interstate or foreign commerce by any means including by computer or mail, and (3) knowingly to reproduce child pornography for distribution in or affecting interstate or foreign commerce by any means including by computer or mail. Section 2252 also makes it a crime, in two situations, knowingly to possess or to access with intent to view "1 or more books, magazines, periodicals, films, video tapes, or other matter which contain any visual depiction ... of a minor engaging in sexually explicit conduct." It shall be an affirmative defense, however, that the defendant "possessed less than three matters containing [such] visual depiction" and "promptly and in good faith, and without retaining or allowing any person other than a law enforcement agency, to access any [such] visual depiction ... (A) took reasonable steps to destroy each such visual depiction; or (B) reported the matter to a law enforcement agency and afforded that agency access to each such visual depiction." 18 U.S.C. § 2252(c). The two situations in which the crime of knowing possession and the affirmative defense apply are: (1) "in the special maritime and territorial jurisdiction of the United States, or on any land or building owned by, leased to, or otherwise used by or under the control of the Government of the United States, or in the Indian country as defined in section 1151 of this title," and (2) if the material "has been mailed, or has been shipped or transported in interstate or foreign commerce, or ... was produced using materials which have been mailed or so shipped or transported, by any means including by computer." 18 U.S.C. § 2252(a)(4). In the most natural grammatical reading of § 2252, the word "knowingly" applies to transporting, shipping, receiving, or distributing child pornography, but does not require that the person doing these things know that the material is child pornography. Nevertheless, in United States v. X-Citement Video, Inc. , 513 U.S. 64 (1994), the Supreme Court held that the statute must be read to require that the defendant knew that the material depicted sexually explicit conduct and that at least one of the performers was a minor. The Court read the statute this way "because of anomalies that would result from [the most natural grammatical reading of the statute], and because of the respective presumptions that some form of scienter [knowledge] is to be implied in a criminal statute even if not expressed, and that a statute is to be construed where fairly possible so as to avoid substantial constitutional questions." Id . at 68-69. As for anomalies that would result from limiting the application of "knowingly" to the acts of transporting, shipping, receiving, and distributing, the Court observed that doing so would make the statute apply to a retail druggist who returns an uninspected roll of developed film to a customer, and would make it apply to a new resident of an apartment who receives the mail for the prior resident and stores it unopened. As for constitutional questions to be avoided, in Smith v. California , 361 U.S. 147, 153 (1959), the Supreme Court held that the First Amendment prohibits prosecution of a book distributor for possession of an obscene book unless the distributor has "knowledge of the contents of the book." In United States v. Knox , the defendant was convicted of violating § 2252 for possessing videotapes that focused on the genitalia and pubic area of minor females, even though those body parts were covered by opaque clothing. The Court of Appeals for the Third Circuit affirmed, and the Supreme Court agreed to hear the case, but the Solicitor General filed a brief for the United States agreeing with the defendant that the statute did not apply to depictions of clothed children. In November 1993, the Supreme Court sent the case back to the Third Circuit for reconsideration in light of the Solicitor General's opinion. The Third Circuit, nevertheless, in June 1994, reaffirmed Knox's conviction. Knox again asked the Supreme Court to hear the case, and this time the Solicitor General agreed with the Third Circuit that the statute applied to depictions of clothed children. The Supreme Court, however, declined to review the case, and Knox's conviction stands. Between the Supreme Court's two actions, Congress apparently amended the statute to apply explicitly to depictions of clothed children. P.L. 103-322 , § 160003(a) (1994), states: The Congress declares that in enacting sections 2252 and 2256 of title 18, United States Code, it was and is the intent of Congress that— (1) the scope of "exhibition of the genitals or pubic area" in section 2256(2)(E), in the definition of "sexually explicit conduct," is not limited to nude exhibitions or exhibitions in which the outlines of those areas were discernible through clothing; and (2) the requirements in section 2252(a) (1)(A), (2)(A), (3)(B)(i), and (4)(B)(i) that the production of a visual depiction involve the use of a minor engaging in "sexually explicit conduct" of the kind described in section 2256(2)(E) are satisfied if a person photographs a minor in such way as to exhibit the child in a lascivious manner. Section 2252A This section was created by the Child Pornography Prevention Act of 1996 (CPPA), P.L. 104-208 , 110 Stat. 3009-26, and amended several times, including by the PROTECT Act, P.L. 108-21 (2003). The CPPA added a definition of "child pornography" to 18 U.S.C. § 2256, and this definition was also amended by the PROTECT Act. As so amended, it prohibits any "digital image, computer image, or computer-generated image that is, or is indistinguishable from, that of a minor engaging in sexually explicit conduct," even if no actual minor was used to produce the image. This definition, before and after its amendment by the PROTECT Act, is discussed below under " Section 2256 ." With respect to child pornography as so defined, § 2252A, as amended by the PROTECT Act, imposes essentially the same prohibitions as § 2252, which were described above. Specifically, § 2252A(a) makes it a crime knowingly to (1) mail, transport, or ship child pornography in or affecting interstate or foreign commerce, by any means, including by computer; (2) receive or distribute child pornography that has been mailed, shipped, or transported in violation of (1); (3)(A) reproduce any child pornography for distribution in violation of (1); (3)(B) advertise, promote, present, distribute, or solicit any material in a manner that reflects the belief, or that is intended to cause another to believe, that the material is child pornography that is obscene or that depicts an actual minor; (4) sell or possess with the intent to sell child pornography that has been mailed, or shipped or transported in or affecting interstate commerce (and in specified other circumstances); (5) knowingly possess or knowingly access with intent to view, in specified circumstances, "any book, magazine, periodical, film, videotape, computer disk, or any other material that contains an image of child pornography" ; or (6) distribute, offer, send, or provide to a minor any visual depiction that is or appears to be of a minor engaging in sexually explicit conduct, "for purposes of inducing or persuading a minor to participate in any activity that is illegal." Section 2252A(d) allows the same affirmative defense as § 2252(c) to charges of knowing possession (i.e., to charges of violating § 2252A(a)(5)). In addition, the PROTECT Act amended § 2252A(c) to allow an affirmative defense to a charge of violating § 2252A(a)(1), (2), (3)(A), (4), or (5), that the material was produced using actual persons, each of whom was an adult; or the material was produced without using an actual minor. The affirmative defense is not available to a charge of violating § 2252A(a)(3)(B), or to prosecutions that involve child pornography under § 2256(8)(C), which is the portion of the definition of "child pornography" that covers images that were modified to make it appear that an identifiable minor is engaging in sexually explicit conduct. This portion was not struck down by Ashcroft and was not amended by the PROTECT Act. Section 2252A(f), as added by § 510 of the PROTECT Act, authorizes civil actions by persons aggrieved by a violation of 18 U.S.C. § 2252A(a) or (b), or § 1466A. Section 2252B Misleading domain names on the Internet. Although this section, which was created by § 521 of the PROTECT Act, was placed in the child pornography statute, it concerns obscenity and "harmful to minors" material, and not child pornography, except to the extent that obscenity or "harmful to minors" material may also be child pornography. It makes it a crime knowingly to use a misleading domain name on the Internet with the intent to deceive a person into viewing material that is obscene, or with the intent to deceive a minor into viewing material that is "harmful to minors." It defines "harmful to minors" so as to parallel the Miller test for obscenity, as applied to minors. Section 2252C Misleading words or digital images on the Internet. This provision, which was enacted as P.L. 109-248 (2006), § 703, does not concern child pornography, except to the extent that it falls within the categories that the provision does cover, namely obscenity and material that is "harmful to minors." We note it here because it is codified among the child pornography statutes. It makes it a crime to knowingly embed words or digital images into the source code of a website with the intent to deceive a person into viewing material that constitutes obscenity, or with the intent to deceive a minor into viewing material that is "harmful to minors." It defines "harmful to minors as defines in section 2252B. Section 2253 Criminal forfeiture. This section provides for criminal forfeiture in child pornography cases. Specifically, it provides that a person convicted of violating 18 U.S.C. §§ 2251, 2251A, 2252, 2252A, or 2260, shall forfeit to the United States (1) the child pornography involved in the violation, (2) property, real or personal, constituting or traceable to gross profits or other proceeds obtained from the offense, and (3) property, real or personal, used or intended to be used to commit or to promote the commission of the offense. P.L. 109-248 (2006), § 505(c), repealed subsections (b) through (o) of section 2253 and made "[s]ection 413 of the Controlled Substances Act (21 U.S.C. 853), with the exception of subsections (a) and (d)," applicable to the criminal forfeiture of property pursuant to section 2253. Section 2254 Civil forfeiture. This section was amended by P.L. 109-248 (2006), § 505(d), to provide, in full: "Any property subject to forfeiture pursuant to section 2253 may be forfeited to the United States in a civil case in accordance with the procedures set forth in chapter 46 [18 U.S.C. §§ 981-986]." Section 2255 Civil remedy for personal injuries. This section provides that a minor who suffers personal injury as the result of a violation of various laws, including §§ 2251, 2251A, 2252, 2252A, and 2260, may bring a civil action for actual damages (which shall be deemed to be at least $50,000) plus the cost of the suit, including a reasonable attorney's fee. Section 2256 Definitions for chapter. This section defines terms used in 18 U.S.C. §§ 2251-2260. As amended by § 502 of the PROTECT Act, P.L. 108-21 (2003), it defines "sexually explicit conduct" (conduct in which one may not depict minors engaging) as "actual or simulated"— (i) sexual intercourse, including genital-genital, oral-genital, anal-genital, or oral-anal, whether between persons of the same or opposite sex; (ii) bestiality; (iii) masturbation; (iv) sadistic or masochistic abuse; or (v) lascivious exhibition of the genitals or pubic area of any person. The PROTECT Act provided a separate definition of "sexually explicit conduct" for purposes of its use in part of the definition of "child pornography"; we discuss this under " PROTECT Act ," below. Paragraph (v) (formerly paragraph (E)) was supplemented by § 2252 note, set forth in the discussion of the Knox case, above, which indicates that "lascivious exhibition" is not limited to nudity. The Child Pornography Protection Act of 1996 (CPPA), P.L. 104-208 , 110 Stat. 3009-26, added a definition of "child pornography" to § 2256. The term, which is used in 18 U.S.C. § 2252A, includes visual depictions that do not portray an actual child. The definition was struck down in part by the Supreme Court in Ashcroft v. Free Speech Coalition , 535 U.S. 234 (2002), and then amended by the PROTECT Act, P.L. 108-21 (2003). In order to explain Ashcroft , we will first discuss the CPPA definition of "child pornography," before it was amended by the PROTECT Act. This definition provided: "child pornography" means any visual depiction, including any photograph, film, video, picture, or computer or computer-generated image or picture, whether made or produced by electronic, mechanical, or other means, of sexually explicit conduct, where— (A) the production of such visual depiction involves the use of a minor engaging in sexually explicit conduct; (B) such visual depiction is, or appears to be, of a minor engaging in sexually explicit conduct; (C) such visual depiction has been created, adapted, or modified to appear that an identifiable minor is engaging in sexually explicit conduct; or (D) such visual depiction is advertised, promoted, presented, described, or distributed in such a manner that conveys the impression that the material is or contains a visual depiction of a minor engaging in sexually explicit conduct. The CPPA provided an affirmative defense (not applicable to charges of violating the knowing possession provision, § 2252A(a)(5)) that the alleged child pornography was produced using only adults, and that "the defendant did not advertise, promote, present, describe, or distribute the material in such a manner as to convey the impression that it is or contains a visual depiction of a minor engaging in sexually explicit conduct." 18 U.S.C. § 2252A(c). For a defendant charged only with knowing possession of child pornography, there is, as noted above under " Section 2252A ," and unchanged by the PROTECT Act, an affirmative defense that the defendant (1) possessed fewer than three images of child pornography, and (2) promptly and in good faith destroyed or reported the images to a law enforcement agency. 18 U.S.C. § 2252A(d). Ashcroft v. Free Speech Coalition In Ashcroft v. Free Speech Coalition , 535 U.S. 234 (2002), the Supreme Court struck down paragraphs (B) and (D) of the definition of "child pornography" quoted above. Paragraphs (A), which covers images of actual children engaged in sexually explicit conduct, and paragraph (C), which covers images of actual children "morphed" to make it appear as if the children are engaged in sexually explicit conduct, were not in issue. Paragraphs (B) and (D), by contrast, cover pornography that was produced without the use of actual children. In Ashcroft , the Supreme Court observed that statutes that prohibit child pornography that use real children are constitutional because they target "[t]he production of the work, not its content." 535 U.S. at 249; see also id . at 242. The CPPA, by contrast, targeted the content, not the means of production. "Virtual child pornography is not 'intrinsically related' to the sexual abuse of children, as were the materials in Ferber. " Id . at 250; see also id . at 249. The government's rationales for the CPPA included that "[p]edophiles might use the materials to encourage children to participate in sexual activity" and might "whet their own sexual appetites" with it, "thereby increasing ... the sexual abuse and exploitation of actual children." Id . at 241. The Court found these rationales inadequate because "[t]he evil in question depends upon the actor's unlawful conduct, conduct defined as criminal quite apart from any link to the speech in question.... The government 'cannot constitutionally premise legislation on the desirability of controlling a person's private thoughts.... The government may not prohibit speech because it increases the chance an unlawful act will be committed 'at some indefinite future time.' ... Without a significantly stronger, more direct connection, the Government may not prohibit speech on the ground that it may encourage pedophiles to engage in illegal conduct." Id . at 253-254. The government also argued that the existence of "virtual" child pornography "can make it harder to prosecute pornographers who do use real minors," because, "[a]s imaging technology improves..., it becomes more difficult to prove that a particular picture was produced using actual children." Id . at 242. "This analysis," the Court found, "turns the First Amendment upside down. The Government may not suppress lawful speech as a means to suppress unlawful speech.... '[T]he possible harm to society in permitting some unprotected speech to go unpunished is outweighed by the possibility that protected speech of others may be muted....'" Id . at 255. The Court also noted that, because child pornography, unlike obscenity, may include material with serious literary, artistic, political, or scientific value, it includes "[a]ny depiction of sexually explicit activity, no matter how it is presented.... The CPPA [therefore] applies to a picture in a psychology manual, as well as a movie depicting the horrors of sexual abuse.... [T]eenage sexual activity and the sexual abuse of children ... have inspired countless literary works." Id . at 247. The Court then noted that the CPPA would make it a crime to film Shakespeare's Romeo and Juliet in a manner that made it appear that the teenage lovers were engaging in sexually explicit conduct. The majority opinion in Ashcroft was written by Justice Kennedy and joined by Justices Stevens, Souter, Ginsberg, and Breyer, with Justice Thomas concurring. Justice O'Connor concurred insofar as the decision struck down the prohibition of child pornography created with adults that look like children, but dissented insofar as it struck down the ban on virtual child pornography. Justices Rehnquist wrote a dissenting opinion joined by Justice Scalia, arguing that the CPPA should be construed to apply only to "computer-generated images that are virtually indistinguishable from real children engaged in sexually explicit conduct," and upheld as such. Id . at 268. PROTECT Act The PROTECT Act, P.L. 108-21 (2003), amended the definition of "child pornography" to provide: "child pornography" means any visual depiction, including any photograph, film, video, picture, or computer or computer-generated image or picture, whether made or produced by electronic, mechanical, or other means, of sexually explicit conduct, where— (A) the production of such visual depiction involves the use of a minor engaging in sexually explicit conduct; (B) such visual depiction is a digital image, computer image, or computer-generated image that is, or is indistinguishable from, that of a minor engaging in sexually explicit conduct; or (C) such visual depiction has been created, adapted, or modified to appear that an identifiable minor is engaging in sexually explicit conduct. The PROTECT Act defines "sexually explicit conduct," for purposes of (B), as: (i) graphic sexual intercourse, including genital-genital, oral-genital, anal-genital, or oral-anal, whether between persons of the same or opposite sex, or lascivious simulated sexual intercourse where the genitals, breast or pubic area of any person is exhibited; (ii) graphic or lascivious simulated; (I) bestiality; (II) masturbation; or (III) sadistic or masochistic abuse; or (iii) graphic or simulated lascivious exhibition of the genitals or pubic area of any person. The most significant change in the definition of "child pornography," from the CPPA to the PROTECT Act, as the term applies to material produced without the use of an actual minor, is that, instead of including any visual depiction that "is, or appears to be, of a minor engaging in sexually explicit conduct," it now includes only "a digital image, computer image, or computer-generated image that is, or is indistinguishable from, that of a minor engaging in sexually explicit conduct." The PROTECT Act defines "indistinguishable" to mean "virtually indistinguishable," and not to apply to "drawings, cartoons, sculptures, or paintings." Nevertheless, the inclusion of "a digital image, computer image, or computer-generated image that is, or is indistinguishable from, that of a minor engaging in sexually explicit conduct" is apparently unconstitutional under Ashcroft , unless the PROTECT Act's expanded affirmative defense can save it. But whether it can seems questionable, because a defendant who "is not the producer of the work ... may have no way of establishing the identity, or even the existence, of the actors.... The statute, moreover, applies to work created before 1996, and the producers themselves may not have preserved the records necessary to meet the burden of proof." These aspects of the CPPA, which the Court in Ashcroft called "serious constitutional difficulties," were not changed by the PROTECT Act. The Court in Ashcroft did "not decide, however, whether the Government could impose this burden [of proving that his speech is not unlawful] on a speaker." Section 504 of the PROTECT Act created 18 U.S.C. § 1466A, which makes it a crime knowingly to produce, distribute, receive, or possess, with or without intent to distribute, "a visual depiction of any kind, including a drawing, cartoon, sculpture, or painting," that depicts a minor engaging in sexually explicit conduct and is obscene or lacks serious literary, artistic, political, or scientific value. This provision applies whether an actual minor is used or not, but covers only depictions of minors engaged in specified sexual activities, and not in lascivious exhibition of the genitals or pubic area. Section 1466A allows the same affirmative defense to charges of knowing possession (without intent to distribute) that appears in 18 U.S.C. §§ 2252(c) and 2252A(d). It does not, however, allow the same affirmative defense that appears in § 2252A(c), that the material was produced using actual persons, each of whom was an adult; or the material was produced without using an actual minor. To the extent that § 1466A applies to non-obscene material produced without the use of an actual minor, it would apparently be unconstitutional under Ashcroft . Section 2257 Recordkeeping requirements. This section was enacted in 1988, declared unconstitutional in 1989, amended in 1990 in order to restore it, amended again in 1994, 2003, and 2006 (by P.L. 109-248 , § 502). It currently provides: Whoever produces any book, magazine, periodical, film, videotape, digital image, digitally- or computer-manipulated image of an actual human being, picture, or other matter which— (1) contains any visual depiction made after November 1, 1990 [prior to the 1990 amendment this date was February 6, 1978] of actual sexually explicit conduct; and (2) is produced in whole or in part with materials which have been mailed or shipped in interstate or foreign commerce, or is shipped or transported or is intended for shipment or transportation in interstate or foreign commerce; shall create and maintain individually identifiable records pertaining to every performer portrayed in such visual depiction. Section 2257 also provides that these records must include the performer's name and date of birth, and must be made available to the Attorney General for inspection at all reasonable times. They may not be used directly or indirectly as evidence against any person with respect to any violation of law. Section 2257A Record keeping requirements for simulated sexual conduct. This section, added in 2006 by P.L. 109-248 , § 503, is essentially the same as § 2257 except that it applies only to "visual depictions of simulated sexual conduct." Section 2258 Failure to report child abuse. This section, added in 1990 by P.L. 101-647 , § 226(g)(1), provides that a person who, while engaged in a specified professional capacity or activity on federal land or in a federally operated or contracted facility, learns of facts that give him or her reason to suspect child abuse, and fails to make a timely report of it, shall be guilty of a Class B misdemeanor. The specified professionals are those described in 42 U.S.C. § 13031(b), and include, among others, medical personnel, social workers, teachers, law enforcement personnel, foster parents, and commercial film and photo processors. Section 2259 Mandatory restitution. This section requires courts to order a defendant convicted of a federal child pornography crime to pay to the victim the full amount of the victim's losses. Section 2260 Production of sexually explicit depictions of a minor for importation into the United States . This section, added in 1994 by P.L. 103-322 , § 160001, makes it a crime for a person, outside the United States, to employ, use, persuade, induce, entice, or coerce any minor to engage in, or transport a minor with the intent that the minor engage in, any sexually explicit conduct, for the purpose of producing a visual depiction of such conduct for importation into the United States or into waters within twelve miles of the coast of the United States. It also makes it a crime for a person, outside the United States, knowingly to receive, transport, ship, distribute, sell, or possess with the intent to transport, ship, sell, or distribute any visual depiction of a minor engaging in sexually explicit conduct (if the product involved the use of a minor engaging in sexually explicit conduct), intending that the visual depiction be imported into the United States or into waters within twelve miles of the coast of the United States. B. Children's Internet Protection Act (CIPA)34 The Children's Internet Protection Act (CIPA), P.L. 106-554 (2000), 114 Stat. 2763A-335, amended three federal statutes to provide that a school or library may not use funds it receives under these statutes to purchase computers used to access the Internet, or to pay the direct costs of accessing the Internet, and may not receive universal service discounts (other than for telecommunications services), unless the school or library enforces a policy "that includes the operation of a technology protection measure" that blocks or filters minors' Internet access to visual depictions that are obscene, child pornography, or harmful to minors; and that blocks or filters adults' Internet access to visual depictions that are obscene or child pornography. The sections of CIPA (1711 and 1712) that require schools and libraries to block or filter if they use federal funds for computers or for Internet access, provide that the blocking or filtering technology may be disabled "to enable access for bona fide research or other lawful purpose." The section of CIPA (1721) that requires schools and libraries to block or filter if they receive universal service discounts, provides that the blocking or filtering technology may be disabled "during use by an adult, to enable access for bona fide research or other lawful purpose." Sections 1711, 1712, and 1721 all contain identical definitions of "child pornography," which they define to have the meaning given such term in 18 U.S.C. § 2256, which is discussed above. In United States v. American Library Association , a three-judge federal district court unanimously declared CIPA unconstitutional and enjoined its enforcement insofar as it applies to libraries. The government to appealed directly to the Supreme Court, which, on June 23, 2003, reversed the district court, finding CIPA constitutional. The plurality opinion acknowledged "the tendency of filtering software to 'overblock'—that is, to erroneously block access to constitutionally protected speech that falls outside the categories that software users intend to block." It found, however, that, "[a]ssuming that such erroneous blocking presents constitutional difficulties, any such concerns are dispelled by the ease with which patrons may have the filtering software disabled." The plurality also found that CIPA does not deny a benefit to libraries that do not agree to use filters; rather, the statute "simply insist[s] that public funds be spent for the purposes for which they were authorized." C. Federal Racketeer Influenced and Corrupt Organizations Act (RICO) In 1988, the Federal Racketeer Influenced and Corrupt Organizations Act (RICO), was amended by P.L. 100-690 , § 7514, to add the child pornography crimes specified in 18 U.S.C. §§ 2251, 2251A, 2252 to the definition of "racketeering activity" in 18 U.S.C. § 1961(1)(B). In 1994, RICO was amended by P.L. 103-322 , § 160001, to add the crimes specified in 18 U.S.C. § 2260 to the definition. RICO makes it a crime for any person employed by or associated with any "enterprise" engaged in or affecting interstate or foreign commerce to participate in the affairs of the enterprise "through a pattern of racketeering activity." 18 U.S.C. § 1962(c). A "pattern of racketeering activity" means at least two acts of racketeering activity within ten years (excluding any period of imprisonment). 18 U.S.C. § 1961(5). Thus, if a person engages in two such activities, which may include the child pornography offenses specified, he is subject to prosecution under RICO in addition to, or instead of, prosecution for the particular activities. RICO also provides for criminal forfeiture (18 U.S.C. § 1963). In Fort Wayne Books, Inc. v. Indiana , 489 U.S. 46 (1989), the Supreme Court held that pretrial seizure, under the Indiana RICO statute, of books or other expressive materials, was unconstitutional. Although probable cause to believe that a person has committed a crime is sufficient to arrest him, "probable cause to believe that there are valid grounds for seizure is insufficient to interrupt the sale of presumptively protected books and films." Id . at 66. This presumption of First Amendment protection "is not rebutted until the claimed justification for seizing books or other publications is properly established in an adversary proceeding." Id . at 67. The federal RICO statute, in any event, does not provide for pretrial seizure. In Fort Wayne Books , the Court did, however, uphold the constitutionality of including obscenity violations among the predicate offenses under a RICO statute. The Court rejected the argument "that the potential punishments available under the RICO law are so severe that the statute lacks a 'necessary sensitivity to first amendment rights.'" Id . at 57. Further, the Court held that such obscenity violations need not be "affirmed convictions on successive dates ... in the same jurisdiction as that where the RICO charge is brought." Id . at 61. The fact that the violations need not be affirmed convictions means that the obscenity violations may be proved as part of the RICO prosecution; no "warning shot" in the form of a prior conviction for obscenity is required. "As long as the standard of proof is the proper one with respect to all the elements of the RICO allegation—including proof, beyond a reasonable doubt, of the requisite number of constitutionally proscribable predicate acts—all of the relevant constitutional requirements have been met." Id . There appears to be no reason why the principles the Court stated in Fort Wayne Books with respect to obscenity violations under RICO would not apply equally to child pornography violations. In Alexander v. United States , 509 U.S. 544 (1993), the Supreme Court addressed a question it had left open in Fort Wayne Books : whether there are First Amendment limitations to RICO forfeitures of assets that consist of expressive materials that are otherwise protected by the First Amendment. The defendant in the case had been found guilty of selling four magazines and three videotapes that were obscene, and, on that basis, had been convicted under RICO. He was sentenced to six years in prison, fined $100,000, and ordered to pay the cost of prosecution, incarceration, and supervised release. He was also ordered to forfeit all his wholesale and retail businesses, including more than a dozen stores and theaters dealing in sexually explicit material, all the assets of these businesses (i.e., expressive materials, whether or not obscene), and almost $9 million. The government chose to destroy, rather than sell, the expressive material. The Supreme Court rejected the argument that the forfeiture of expressive materials constitutes prior restraint, as the forfeiture order "does not forbid petitioner from engaging in any expressive activities in the future, nor does it require him to obtain prior approval for any expressive activities." Id . at 550-551 (emphasis in original). Consequently, the Court analyzed the forfeiture "under normal First Amendment standards," and could see no reason why, "if incarceration for six years and a fine of $100,000 are permissible forms of punishment under the RICO statute, the challenged forfeiture of certain assets directly related to petitioner's racketeering activity is not.... [T]he First Amendment does not prohibit either stringent criminal sanctions for obscenity offenses or forfeiture of expressive materials as punishment for criminal conduct." Id . at 554. The Court did, however, remand the case to the court of appeals to decide whether the forfeiture constituted an "excessive fine" under the Eighth Amendment. The same day, in Austin v. United States , 509 U.S. 602 (1993), the Court held that the Excessive Fines Clause of the Eighth Amendment applies to forfeitures of property imposed by criminal statutes. D. Money Laundering The federal money laundering statute makes it a crime to, among other things, knowingly engage or attempt to engage in a monetary transaction in criminally derived property of a value greater than $10,000, if such property is derived from "specified unlawful activity." The Enhancing the Effective Prosecution of Child Pornography Act of 2007 (Title II of P.L. 110-358 ) amended the money laundering statute's definition of "specified unlawful activity" to include an offense under "section 2252A (relating to child pornography) where the child pornography contains a visual depiction of an actual minor engaging in sexually explicit conduct, [or] section 2260 (production of certain child pornography for importation into the United States)." Recently Enacted Federal Legislation The Sex Crimes Against Children Prevention Act of 1995, P.L. 104-71 , became law on December 23, 1995. It requires the United States Sentencing Commission to amend the sentencing guidelines to increase the penalties for offenses under 18 U.S.C. §§ 2251 and 2252 (which are discussed in this report), to increase the penalties under particular subdivisions of those sections if a computer was used to commit the crime, and to increase the penalty under 18 U.S.C. § 2423 (which prohibits transporting a minor in interstate or foreign commerce for the purpose of prostitution, and which is not discussed in this report). It would also require the Sentencing Commission, within 180 days after enactment of the bill, to submit a report to Congress concerning offenses involving child pornography and other sex offenses against children. Section 508 of the Communications Decency Act of 1996 (CDA), which is Title V of the Telecommunications Act of 1996, P.L. 104-104 , amended 18 U.S.C. § 2422, which imposes up to five years' imprisonment on anyone who "knowingly persuades, induces, entices, or coerces any individual to travel in interstate or foreign commerce ... to engage in prostitution or in any sexual activity for which any person can be charged with a criminal offense" (and which is not discussed in this report). The 1996 amendment added a subsection imposing up to ten years' imprisonment on anyone who, "using any facility or means of interstate or foreign commerce ... knowingly persuades, induces, entices, or coerces any individual who has not attained the age of 18 years to engage in prostitution or any sexual act for which any person may be criminally prosecuted...." The Child Pornography Prevention Act of 1996 (CPPA), P.L. 104-208 , 110 Stat. 3009-26, added 18 U.S.C. § 2252A and added a definition of "child pornography" to 18 U.S.C. § 2256. These provisions banned child pornography even when no actual minor was used to produce it. In Ashcroft v. Free Speech Coalition , 535 U.S. 234 (2002), the Supreme Court declared this provision unconstitutional to the extent that it prohibited pictures that were not produced with actual minors. The Protection of Children From Sexual Predators Act of 1998, P.L. 105-314 , included some sections relating to child pornography. These amended 18 U.S.C. §§ 2252, 2252A, 2253, 2254, and 2255; these amendments are noted in this report in the summaries of these sections. In addition, P.L. 105-314 , § 604, added § 227 to the Victims of Child Abuse Act of 1990, 42 U.S.C. §§ 13001 et seq . Section 227(b)(1), 42 U.S.C. § 13032(b)(1), provides: Whoever, while engaged in providing an electronic communication service [as defined at 18 U.S.C. § 2510] or a remote computing service [as defined at 18 U.S.C. § 2711] to the public, through a facility or means of interstate or foreign commerce, obtains knowledge of facts or circumstances from which a violation of section 2251, 2251A, 2252, 2252A, or 2260 of title 18, United States Code, involving child pornography (as defined in section 2256 of that title), or a violation of section 1466A of that title, is apparent, shall, as soon as reasonably possible, make a report of such facts or circumstances to the Cyber Tip Line at the National Center for Missing and Exploited Children, which shall forward that report to a law enforcement agency or agencies designated by the Attorney General. The Attorney General's designations are published at 28 C.F.R. Part 81. The Adam Walsh Child Protection and Safety Act of 2006, P.L. 109-248 , § 130 (2006) added 42 U.S.C. § 13032(g), which grants the National Center for Missing and Exploited Children, as well as its directors, officers, employees, or agents, immunity from civil or criminal liability arising from the performance of Cyber Tip Line responsibilities, except when the Center or any of the above individuals engages in intentional misconduct or reckless disregard to a substantial risk of causing injury without legal justification. Another provision of the Adam Walsh Act is noted below. The Children's Internet Protection Act (CIPA), P.L. 106-554 (2000), amended three federal statutes to provide that a school or library may not use funds it receives under these statutes to purchase computers used to access the Internet, or to pay the direct costs of accessing the Internet, and may not receive universal service discounts, unless the school or library enforces a policy to block or filter minors' Internet access to visual depictions that are obscene, child pornography, or harmful to minors; and enforces a policy to block or filter adults' Internet access to visual depictions that are obscene or child pornography. Filters may be disabled, however, "for bona fide research or other lawful purpose." In 2003, the Supreme Court held CIPA constitutional. The Prosecutorial Remedies and Other Tools to end the Exploitation of Children Today Act of 2003, or the PROTECT Act, P.L. 108-21 , amended 18 U.S.C. § 2252A to make prohibit any "digital image, computer image, or computer-generated image that is, or is indistinguishable from, that of a minor engaging in sexually explicit conduct," even if no actual minor was used to produce the image. It also amended the affirmative defense in 18 U.S.C. § 2252A to prosecutions for child pornography crimes, and amended the definitions in 18 U.S.C. § 2256 of "sexually explicit conduct" and "child pornography." The PROTECT Act also created 18 U.S.C. § 1466A, which makes it a crime knowingly to produce, distribute, receive, or possess, with or without intent to distribute, "a visual depiction of any kind, including a drawing, cartoon, sculpture, or painting," that depicts a minor engaging in sexually explicit conduct and is obscene or lacks serious literary, artistic, political, or scientific value. The Adam Walsh Child Protection and Safety Act of 2006, P.L. 109-248 , included several child pornography provisions, including section 502, which amended 18 U.S.C. § 2257, which requires by producers of material that depicts actual sexually explicit conduct to keep records of every performers' name and date of birth; and section 503, which enacted 18 U.S.C. § 2257A, which requires essentially the same thing with respect to simulated sexual conduct. The Effective Child Pornography Prosecution Act of 2007 (Title I of P.L. 110-358 ) and the Enhancing the Effective Prosecution of Child Pornography Act of 2007 (Title II of P.L. 110-358 ) amended 18 U.S.C. §§ 2251, 2251A, 2252, and 2252A to apply to violations "affecting interstate or foreign commerce" even if they are not in interstate commerce, to apply to mailing, transporting, or shipping child pornography "using any means or facility of interstate or foreign commerce," and to apply not only to knowingly possessing child pornography but to knowingly accessing it with intent to view it. Title II also amended the money laundering provision, discussed above.

The First Amendment provides: "Congress shall make no law ... abridging the freedom of speech, or of the press." Although the First Amendment, in general, protects pornography, the Supreme Court has held that it does not protect two types of pornography: obscenity and child pornography. Consequently, the government may, and has, banned them. Child pornography is material that visually depicts sexual conduct by children, and is unprotected by the First Amendment even when it is not legally obscene. Federal statutes, in addition to making it a crime to transport or receive child pornography in interstate or foreign commerce, prohibit, among other things, the use of a minor in producing pornography, and provide for criminal and civil forfeiture of real and personal property used in making child pornography, and of the profits of child pornography. In addition, child pornography crimes are included among the predicate offenses that may give rise to a violation of the Federal Racketeer Influenced and Corrupt Organizations Act. The Child Pornography Prevention Act of 1996, P.L. 104-208, 110 Stat. 3009-26, added a definition of "child pornography" that include visual depictions of what appears to be a minor engaging in explicit sexual conduct, even if no actual minor was used in producing the depiction. In Ashcroft v. Free Speech Coalition (2002), the Supreme Court held this provision unconstitutional to the extent that it prohibited pictures that were not produced with actual minors. In response to Ashcroft, Congress enacted the Prosecutorial Remedies and Other Tools to end the Exploitation of Children Today Act of 2003, or the PROTECT Act, P.L. 108-21, which would again ban some non-obscene child pornography that was produced without an actual minor. The Children's Internet Protection Act (CIPA), P.L. 106-554 (2000), amended three federal statutes to provide that a school or library may not use funds it receives under these statutes to purchase computers used to access the Internet, or to pay the direct costs of accessing the Internet, and may not receive universal service discounts, unless the school or library enforces a policy to block or filter minors' Internet access to visual depictions that are obscene, child pornography, or harmful to minors; and enforces a policy to block or filter adults' Internet access to visual depictions that are obscene or child pornography. Filters may be disabled, however, "for bona fide research or other lawful purpose." In United States v. American Library Association (2003), the Supreme Court held CIPA constitutional. This report ends with a chronological list and description of recently enacted child pornography statutes, through P.L. 110-358, which was signed into law on October 8, 2008.

CRS_RS21067

The fundamental policy assumption that has changed between the U.S. ratification of the 1992 Framework Convention on Climate Change (FCCC) and the current Bush Administration's decision to abandon the Kyoto Protocol process concerns costs. The ratification of the FCCC was based at least partially on the premise that significant reductions could be achieved at little or no cost. This assumption helped to reduce concern some had (including those of the former Bush Administration) that the treaty could have deleterious effects on U.S. competitiveness—a significant consideration because developing countries are treated differently from developed countries under the FCCC. Further ameliorating this concern, compliance with the treaty was voluntary. While the United States could "aim" to reduce its emissions in line with the FCCC's goal, if the effort indeed involved substantial costs, the United States could fail to reach the goal (as has happened) without incurring any penalty under the treaty. This flexibility would have been eliminated under the Kyoto Protocol with its mandatory reduction requirements. The possibility of failure to comply with a binding commitment intensifies one's perspective on potential costs: How confident can one be in the claim that carbon reductions can be achieved at little or no cost? Compliance cost estimates ranging from $5.5 billion to $200 billion annually cause some to pause. The current Bush Administration was sufficiently concerned about potential CO 2 control costs to reverse a campaign pledge to seek CO 2 emissions reductions from power plants, in addition to its decision to abandon the Kyoto Protocol process. Proposed CO 2 reduction schemes present large uncertainties in terms of the perceived reduction needs and the potential costs of achieving those reductions. In an attempt to prevent any CO 2 control program from incurring unacceptable costs, several cost-limiting "safety valves" have been proposed to bound costs. These safety valves are designed to work with market-based CO 2 reduction schemes, similar to the tradeable permit strategy used by the acid rain program, and would effectively limit the unit (per ton of emissions) control costs sources would pay. This report examines four such safety valves: (1) a straight carbon tax, (2) a contingent reduction scheme, (3) unlimited permit purchases, (4) cost-based excess emissions penalties. The Dilemma: Price versus Quantity In general, market-based mechanisms to reduce CO 2 emissions focus on specifying either the acceptable emissions level (quantity), or compliance costs (price), and allowing the marketplace to determine the economically efficient solution for the other variable. For example, a tradeable permit program sets the amount of emissions allowable under the program (i.e., the number of permits available caps allowable emissions), while permitting the marketplace to determine what each permit will be worth. Likewise, a carbon tax sets the maximum unit (per ton of CO 2 ) cost that one should pay for reducing emissions, while the marketplace determines how much actually gets reduced. In one sense, preference for a carbon tax or a tradeable permit system depends on how one views the uncertainty of costs involved and benefits to be received. For those confident that achieving a specific level of CO 2 reduction will yield significant benefits—enough so that even the potentially very high end of the marginal cost curve does not bother them—a tradeable permit program may be most appropriate. CO 2 emissions would be reduced to a specific level, and in the case of a tradeable permit program, the cost involved would be handled efficiently, though not controlled at a specific cost level. This efficiency occurs because through the trading of permits, emission reduction efforts concentrate at sources at which controls can be achieved at least cost. However, if one feels more certain of the potential downside risk of substantial control costs to the economy than of the benefits of a specific level of reduction, then a carbon tax may be most appropriate. In this approach, the level of the tax effectively caps the marginal cost of control that affected activities would pay under the reductions scheme, but the precise level of CO 2 achieved is less certain. Emitters of CO 2 would spend money controlling CO 2 emissions up to the level of the tax. However, since the marginal cost of control among millions of emitters is not well known, the overall emissions reductions for a given tax level on CO 2 emissions cannot be accurately forecast. Hence, a major policy question is whether one is more concerned about the possible economic cost of the program and therefore willing to accept some uncertainty about the amount of reduction received (i.e., carbon taxes); or one is more concerned about achieving a specific emission reduction level with costs handled efficiently, but not capped (i.e., tradeable permits). A model for a tradeable permit approach is the sulfur dioxide (SO 2 ) allowance program contained in Title IV of the 1990 Clean Air Act Amendments. Also called the acid rain control program, the tradeable permit system is based on two premises. First, a set amount of SO 2 emitted by human activities can be assimilated by the ecological system without undue harm. Thus the goal of the program is to put a ceiling, or cap, on the total emissions of SO 2 rather than limit ambient concentrations. Second, a market in pollution licenses between polluters is the most cost-effective means of achieving a given reduction. This market in pollution licenses (or allowances, each of which is equal to one ton of SO 2 ) is designed so that owners of allowances can trade those allowances with other emitters who need them or retain (bank) them for future use or sale. Initially, most allowances were allocated by the federal government to utilities according to statutory formulas related to a given facility's historic fuel use and emissions; other allowances have been reserved by the government for periodic auctions to ensure market liquidity. There are no existing U.S. models of an emissions tax, although five European countries have carbon-based taxes. Safety Valves As a stalemate has continued on strategies to control CO 2 emissions, particularly because of costs fears, attention increasingly focuses on the cost-limiting benefit of a carbon tax, either as the primary strategy or as a component blending a carbon tax with the reduction certainty of the tradeable permit system. The object is to create a safety valve to avert unacceptable control costs, particularly in the short term. These safety valves limit unit (per ton) costs of reducing emissions. Four ideas are identified below: Carbon taxes: generally conceived as a levy on natural gas, petroleum, and coal according to their carbon content, in the approximate ratio of 0.6 to 0.8 to 1, respectively. However, proposals have been made to impose the tax downstream of the production process. Several European countries have carbon taxes in varying degrees and forms. Unlimited permits at set price: generally conceived as part of an auction system where permits are allocated to affected sectors by auction with an unlimited number available at a specific price. The most recent proposal is by the National Commission on Energy Policy, which recommends an initial limiting price of $7/ton that would increase by 5% annually. Other variations include the Resources for the Future/Skytrust proposal, which would increase the limiting price ($25/ton) by 7% above inflation annually, and the Brookings proposal, which would set up a short-term market based on a $10/ton price, and a long-term market based on market rates. Contingent reduction: generally conceived as a declining emission cap system where the rate of decline over time is determined by the market price of permits. If permit prices remain under set threshold prices, the next reduction in the emission cap is implemented. If not, the cap is held at the current level until prices decline. Discussions have centered on a 2% annual declining cap subject to a $5 a permit CO 2 cost cap. Excess emissions penalty: generally involves a fee on emissions exceeding available permits based on control costs or other economic criteria, rather than criminal or civil considerations. For example, Oregon's CO 2 standard for new energy facilities includes a fee of 57 cents per short ton on CO 2 emissions in excess of the standard (increase to 85 cents proposed). Discussion Table 1 summarizes the key considerations of each of the proposals identified above. As indicated, each safety valve effectively controls cost, but at the price of some uncertainty about the amount of emissions reduced. If one uses the existing Title IV acid rain control program as a baseline, the excess emissions penalty option is the most similar, while the carbon tax option is the most different. The excess emissions penalty option would work in essentially the same fashion as the acid rain program, with the primary difference being the penalty for having insufficient permits at the end of the year. Under Title IV, the penalty is intended to be punitive—to punish the offender for breaking the law. Thus, the offender pays a fine three times the estimated cost of control in addition to forfeiting a future permit. The overriding assumption is that the offender could have reduced his emissions sufficiently, but refused to do so. Under the excess emissions penalty option, there is uncertainty as to whether an offender could have reduced his emissions sufficiently at the estimated price, and that reductions at a cost greater than that price are either socially unacceptable or economically unjustifiable. Hence, the penalty is assessed on the basis of a socially acceptable or economically justifiable price so that the offender pays a cost for his unlawful activity and is encouraged to comply with the law, but is not punished beyond what society has deemed reasonable. Arriving at such an acceptable penalty could be contentious. The carbon tax is the most radical compared with the Title IV program because it dispenses with the permit system approach to emissions control. All the pressure under a carbon tax scheme is on the timing, pace, and level of the tax, as there is no stigma for not controlling pollution. The strength of this approach is that it is self-enforcing, and considerable revenues will be generated that could be recycled to polluters or used for other priorities. However, U.S. environmental policy has generally opposed any approach suggesting a polluter's right to pollute, which the carbon tax approach does grant. Depending on how the unlimited permit approach is implemented, it can look and act a lot like a carbon tax. If the initial allocation of permits is by auction and unlimited permits are available at a low price, the auction price will equal the unlimited permit price, resulting in a carbon tax equal to the excess emissions permit price. Thus, without limits on the quantity of permits allowed, the unlimited permits approach is merely a carbon tax by another name, at least in the short term. In addition, the unlimited permits system requires the tracking mechanisms of a tradeable permit system if it is ever to evolve into a permit system. As with a carbon tax, setting the unlimited permit price could be contentious. The contingent reduction approach attempts to turn both the price and the quantity of reductions into variables solved by the trading market. This requires agreements on both the profiles of emissions reductions and threshold price triggers. It also puts enormous pressure on the trading permit market to produce an accurate price to make the whole system work. Although in some ways the most innovative, the contingent approach also could be the most difficult in terms of arriving at acceptable parameters for the reductions and triggers. In short, employing a safety valve shifts much of the emission reduction debate from compliance targets to the specifications of the safety valve. The safety valve becomes the controlling mechanism of the permit tradeable system, or the sole mechanism in the case of a carbon tax. Whether this shift would contribute to an acceptable result is not clear.

Proposed CO2 reduction schemes present large uncertainties in terms of the perceived reduction needs and the potential costs of achieving those reductions. Several cost-limiting "safety valves" have been proposed to bound costs of any CO2 control program, including (1) a straight carbon tax, (2) a contingent reduction scheme, (3) unlimited permit purchases, and (4) cost-based excess emissions penalties. Employing a safety valve shifts much of the emission reduction debate from compliance targets to the specifications of the safety valve, in particular, the level of the tax or fee involved. This report will be updated if events warrant.

CRS_RL33710

In 1993, Congress passed the Family and Medical Leave Act ("FMLA") to "balance the demands of the workplace with the needs of families." Recognizing that many employees had to choose between parenting or caregiving and job security, Congress sought to enable employees to take "reasonable leave" for medical reasons, for the birth or adoption of a child, and for the care of a child, spouse, or parent with a serious health condition. When the FMLA was enacted, it supplemented approximately 30 state statutes that provided some form of family and medical leave to employees who worked in those states. Congress did not intend to preempt these laws. Rather, Congress wanted to establish minimum standards for the availability of family and medical leave, particularly in states that did not have statutes extending such leave to their employees. Congress understood that more favorable leave benefits could be available under some state laws. Thus, section 401(b) of the FMLA indicates that nothing in the federal law "shall be construed to supersede any provision of any State or local law that provides greater family or medical leave rights than the rights established under [the FMLA]." Although the FMLA and state family and medical leave laws are generally similar with regard to the availability of leave, they differ both in terms of coverage and scope. For example, under the FMLA and many of the state family and medical leave statutes and regulations, only certain employers are required to provide leave to their employees. The FMLA applies only to employers engaged in commerce or in an industry affecting commerce that have at least 50 employees who are employed for each working day during each of 20 or more calendar workweeks in the current or preceding calendar year. In contrast, the state family and medical leave laws vary with regard to the number of employees who must be employed by an employer before it becomes subject to a law. The FMLA and state family and medical leave laws also differ with regard to scope. Section 102(a)(1) of the FMLA provides for a total of 12 workweeks of leave during any 12-month period for one or more of the following reasons: (1) Because of the birth of a son or daughter of the employee and in order to care for such son or daughter; (2) Because of the placement of a son or daughter with the employee for adoption or foster care; (3) In order to care for the spouse, or a son, daughter, or parent, of the employee, if such spouse, son, daughter, or parent has a serious health condition; (4) Because of a serious health condition that makes the employee unable to perform the functions of the position of such employee. In contrast, some state laws permit leave for reasons other than pregnancy, adoption, or a serious health condition. Forty-five states and the District of Columbia now appear to have family and medical leave laws. The following section provides citations and brief descriptions of the relevant laws. Many of the laws identified in this section govern state government employers. Title II of the FMLA amended the U. S. Code to add family and medical leave provisions to title 5 of the Code, the title that governs employees in the federal government. Under the Federal Employees Family Friendly Leave Act, federal employees are also entitled to use sick leave to care for a family member with an illness or injury, to make funeral arrangements for a family member, and to attend the funeral of a family member. State Family and Medical Leave Laws Alabama Ala. Code § 36-27-58 (2007): An Employees' Retirement System member may purchase up to one year's service credit in the system for any period of time while he or she is on maternity leave without pay. Ala. Code § 16-1-18.1 (2007) and Ala. Admin. Code r. 670-X-14-.01 (2007): State employees may take sick leave for personal illness, to care for a sick family member, for incapacitating personal injury, for the death of a family member, or for the death or serious illness of a non-family member with strong personal ties to the employee. Employees may accumulate an unlimited amount of sick leave at the rate of one day of leave per month of employment, and sick leave days may be transferred between employees. In case of serious illness, a permanent employee may be advanced an additional 24 days of sick leave. Alaska Alaska Stat. § 39.20.305 (2007): An officer or employee of the state who is otherwise qualified to take leave of absence may take family leave because of a serious health condition for a total of 18 workweeks during any 24-month period. An otherwise qualified officer or employee may take family leave because of pregnancy and childbirth or adoption for a total of 18 workweeks within a 12-month period. An eligible employee may take family leave for the birth or adoption of a child, to care for a child, spouse or parent with a serious health condition, or because of the employee's own health condition. Arizona Ariz. Rev. Stat. § 41-783 (2007): Personnel rules shall provide for the transfer of accumulated annual leave (1) between state employees in the same agency, or (2) between state employees in different agencies if the employees are members of the same family. Such transfers may occur if the employee to whom the leave is transferred has a seriously incapacitating and extended illness or a seriously incapacitating and extended disability that is caused by pregnancy or childbirth or a member of the employee's immediate family has a seriously incapacitating and extended illness or injury or a seriously incapacitating and extended disability that is caused by pregnancy or childbirth and the employee has exhausted all available leave balances. Ariz. Admin. Code § 2-5-404 (2007): A state employee may take sick leave for personal illness or for the illness of the employee's spouse, child, or parent. Sick leave may also be taken for a disability caused by pregnancy, childbirth, miscarriage, or abortion. Ariz. Admin. Code § 2-5-411 (2007): With regard to state employees, "parental leave" means any combination of annual leave, sick leave, compensatory leave, or leave without pay taken by an employee due to pregnancy, childbirth, miscarriage, abortion, or adoption of children. Parental leave shall not exceed 12 weeks. An agency shall not require an employee to exhaust all annual leave, sick leave, or compensatory leave before taking leave without pay. Arkansas Ark. Code Ann. § 21-4-209 (2007): For public employees, maternity leave shall be treated as any other leave for sickness or disability. Accumulated sick leave and annual leave, if requested by the employee, shall be granted for maternity use, after which leave without pay may be used. Ark. Code Ann. § 21-4-210 (2007): Public employees may be granted up to 6 months leave without pay for maternity and sick leave. Ark. Code Ann. § 21-4-215 (2007): Public employees are entitled to up to 7 days leave to serve as a bone marrow donor and up to 30 days leave to serve as an organ donor. California Cal. Gov ' t Code § 12945 (2007): Public employers and private employers with 5 or more employees must provide reasonable accommodations for conditions related to pregnancy and must allow an employee disabled by pregnancy, childbirth or related medical conditions to take up to 4 months of leave and return to work. Cal. Gov ' t Code § 12945.2 (2007): Public employees and private employees in organizations with 5 or more workers who have more than 12 months of service and with at least 1,250 hours of service during the previous 12-month period must be allowed up to a total of 12 workweeks in any 12-month period for family care and medical leave. "Family care and medical leave" means any of the following: (1) leave for the birth of a child, the placement of a child with an employee for adoption or foster care, or the serious health condition of a child of the employee; (2) leave to care for a parent or a spouse who has a serious health condition; or (3) leave because of an employee's own serious health condition that makes the employee unable to perform the functions of the position of that employee, except for leave taken for disability on account of pregnancy, childbirth, or related medical conditions. Cal. Gov ' t Code §§ 19991.6 and 19991.11 (2007): State employees are entitled to a year of leave without pay for pregnancy, 30 days leave with pay to be an organ donor, and 5 days leave without pay to be a bone marrow donor. Cal. Lab. Code §§ 230.7 and 230.8 (2007): No employer who employs 25 or more employees working at the same location shall discharge or in any way discriminate against an employee who is a parent, guardian, or grandparent having custody of one or more children in kindergarten or grades 1 to 12, inclusive, or in a licensed child day care facility, for taking off up to 40 hours each year, not exceeding 8 hours in any calendar month, to participate in activities of the school or licensed child day care facility of any of his or her children or grandchildren. Cal. Lab. Code § 233 (2007): Any employer who provides sick leave must allow sick leave to be used to attend to the illness of a child, spouse, parent, or domestic partner of the employee. Colorado Colo. Rev. Stat. § 19-5-211 (2007): An employer who permits paternity or maternity time off for the birth of a child must allow equal time off for the adoption of a child. If the employer has established a policy providing time off for biological parents, that period of time shall be the minimum period of leave available for adoptive parents. Any other benefits provided by the employer, such as job guarantees or pay or time off to care for a sick child, shall be available to both adoptive and biological parents on an equal basis. Connecticut Conn. Gen. Stat. § 5-248a (2007): Each permanent state employee shall be entitled to the following: (1) a maximum of 24 weeks of family leave of absence within any 2-year period upon the birth or adoption of a child of such employee, or upon the serious illness of a child, spouse or parent of such employee; and (2) a maximum of 24 weeks of medical leave of absence within any 2-year period upon the serious illness of such employee or in order for such employee to serve as an organ or bone marrow donor. Any such leave of absence shall be without pay. Conn. Gen. Stat. §§ 31-51kk and 31-51ll (2007): A public and private employer of 75 or more employees shall grant a total of 16 workweeks of leave during any 24-month period. Leave may be taken for the birth or adoption of a child; to care for a spouse, child or parent with a serious health condition; to serve as an organ or bone marrow donor; because of a serious health condition of the employee; or upon the placement of a child with the employee for foster care. Conn. Gen. Stat. §§ 46a-60 and 46a-51 (2007): It shall be a discriminatory practice for any state employer and any employer of 3 or more employees to refuse to grant to an employee a reasonable leave of absence for disability resulting from her pregnancy or to deny that employee any compensation to which she is entitled as a result of the accumulation of disability or leave benefits accrued pursuant to plans maintained by the employer. Delaware Del. Code Ann. tit. 29, § 5120 (2007): For child care purposes, a full-time or part-time employee of the state shall be allowed to use accumulated sick leave upon the birth of a child of the employee or the employee's spouse, or upon the adoption by the employee of a pre-kindergarten age child. Del. Code. Ann. tit. 29, § 5116 (2007): An employee of the state is entitled to 6 weeks unpaid leave upon the adoption of a minor child. District of Columbia D.C. Code § 1-612.32 (2007): A voluntary transfer of leave is authorized when a potential recipient state employee will suffer a prolonged absence due to the employee's serious health condition or the employee's responsibility to provide personal care to an immediate relative. D.C. Code §§ 32-501 and 32-502 (2007): A public or private employee is allowed 16 workweeks of family leave during any 24-month period for: (1) the birth of a child; (2) the placement of a child with the employee for adoption or foster care; (3) the placement of a child with the employee for whom the employee permanently assumes and discharges parental responsibility; or (4) the care of a family member of the employee who has a serious health condition. D.C. Code § 32-503 (2007): A public or private employee who becomes unable to perform the functions of the employee's position because of a serious health condition shall be entitled to medical leave for as long as the employee is unable to perform the functions, except that the medical leave shall not exceed 16 workweeks during any 24-month period. D.C. Code §§ 32-1201 and 32-1202 (2007): Any public or private employee who is a parent shall be entitled to a total of 24 hours leave during any 12 month period to attend or participate in a school-related event for his or her child. Florida Fla. Stat. § 110.221 (2007): The state shall not: (1) terminate the employment of any employee in the career service because of pregnancy or the adoption of a child; (2) refuse to grant to a career service employee parental or family medical leave without pay for a period not to exceed six months; (3) deny a career service employee the use of and payment for annual leave credits for parental or family medical leave; (4) deny a career service employee the use of and payment for accrued sick leave or family sick leave for any reason deemed necessary by a physician or as established by policy. The statute also provides that upon returning at the end of a parental or family medical leave of absence, the employee shall be reinstated to the same job or to an equivalent position with equivalent pay and with seniority, retirement, fringe benefits, and other service credits accumulated prior to the leave period. Hawaii Haw. Rev. Stat. § 398-3 (2007): Any public or private employee shall be entitled to a total of four weeks of family leave during any calendar year upon the birth or adoption of a child, or to care for the employee's child, spouse or reciprocal beneficiary, or parent with a serious health condition. Idaho Idaho Admin. Code § 15.04.01.242 (2007): The provisions of the federal Family and Medical Leave Act shall apply without regard to the exclusion for worksites employing less than 50 employees in a 75 mile area, and without the limitation on reinstatement of the highest-paid employees. Idaho Admin. Code § 15.04.01.243 (2007): Pregnancy, childbirth, and related medical conditions are considered disabilities for sick leave purposes. Maternity and paternity leave for reasons other than disability shall be leave without pay unless the employee elects to use vacation time. Illinois 5 Ill. Comp. Stat. Ann. 400/10 (2007): Public employees may participate in a sick leave bank to be used by any participating employee who has exhausted his or her accrued vacation time, personal days, sick leave, and compensatory time. An employee may only use leave from the sick leave bank for the employee's personal catastrophic illness or injury. 5 Ill. Comp. Stat. Ann. 327/20 (2007): Public employees may use (i) up to 30 days of organ donation leave in any 12-month period to serve as a bone marrow donor, (ii) up to 30 days of organ donation leave in any 12-month period to serve as an organ donor, (iii) up to one hour or more to donate blood every 56 days, and (iv) up to 2 hours or more to donate blood platelets. Leave to donate blood platelets may not be granted more than 24 times in a 12-month period. An employee may not be required to use accumulated sick or vacation leave time before being eligible for organ donor leave. 820 Ill. Comp. Stat. Ann. 147/15 and 147/40 (2007): Public employers and private employers of 50 or more people must grant leave of up to a total of 8 hours during any school year, no more than 4 hours of which may be taken on any given day, to attend school conferences or classroom activities related to the employee's child if the conference or classroom activities cannot be scheduled during nonwork hours; however, no leave may be taken by an employee unless the employee has exhausted all accrued vacation leave, personal leave, compensatory leave and any other leave that may be granted to the employee except sick leave and disability leave. Indiana Ind. Admin. Code tit. 31, r. 2-11-4, 2-11-4.5, and 2-11-8 (2007): State employees accumulate paid sick and personal leave. Iowa Iowa Code § 216.6 (2007): Disabilities caused or contributed to by the public employee's pregnancy, miscarriage, childbirth, legal abortion and recovery therefrom are temporary disabilities and shall be treated as such under any health or temporary disability insurance or sick leave plan available in connection with employment. Where sufficient leave is not available, the employer of a pregnant employee shall not refuse to grant to the employee a leave of absence for the period that the employee is disabled because of the employee's pregnancy, childbirth, or related medical conditions, or for 8 weeks, whichever is less. Kansas Kan. Stat. Ann. § 75-5549 (2007): State employees may donate annual and sick leave to other state employees who are suffering from, or who have a family member suffering from, an extraordinary or severe illness, injury, impairment or physical or mental condition which has caused, or is likely to cause, the employee to take leave without pay or terminate employment. "Extraordinary or severe" means serious, extreme or life threatening. Kan. Admin. Regs. §§ 1-9-5 and 1-9-6 (2007): State employees may use sick leave with pay for illness or disability of the employee, including pregnancy, childbirth, miscarriage, abortion, and recovery therefrom; the illness or disability, including pregnancy, childbirth, miscarriage, and abortion, and recovery therefrom of a family member; or for the adoption of a child or placement of a foster child. Employees may also receive up to one year of leave without pay for the same purposes. Kentucky Ky. Rev. Stat. Ann. § 18A.197 (2007): State employees with more than 75 hours sick leave may donate sick leave to other state employees who are suffering from, or have an immediate family member suffering from, a medically certified illness, injury, impairment, or physical or mental condition which has caused, or is likely to cause, the employee to go on leave for at least 10 consecutive working days. To qualify for a donation, an employee must have exhausted his or her accumulated sick leave, annual leave, and compensatory leave balances. Ky. Rev. Stat. Ann § 337.015 (2007): Public and private employees may take up to 6 weeks leave for the adoption of a child under age 7. Louisiana La. Rev. Stat. Ann. §§ 23:341 and 23:342 (2007): Employers of 25 or more people are required to treat problems arising from pregnancy childbirth like any other temporary disability and to provide up to 6 weeks disability leave. Total pregnancy leave, including accrued vacation time, can be up to 4 months. La. Rev. Stat. Ann. § 40:1299.124 (2007): Employers of 20 or more people shall grant up to 40 hours leave for bone marrow donation. Maine Me. Rev. Stat. Ann. tit. 26, § 636 (2007): Employees of public and private employers with 25 or more employees must be allowed to use at least 40 hours of paid leave in a 12-month period to care for a sick child, spouse, or parent, if such leave is provided. "Paid leave" includes sick time, vacation time, and compensatory time, but does not include paid short-term or long-term disability, catastrophic leave or similar types of benefits. Me. Rev. Stat. Ann. tit. 26, §§ 843 and 844 (2007): Public employees and private employees of organizations that employ 15 or more people are entitled to up to 10 work weeks of family medical leave in any 2 years. "Family medical leave" means leave requested by an employee for: a serious health condition of the employee; the birth of a child or a domestic partner's child; the adoption placement of a child 16 years of age or younger with the employee or a domestic partner; the serious health condition of a child, parent, spouse, domestic partner, or child of a domestic partner; the donation of an organ for a human organ transplant; or the death or serious health condition of a spouse, domestic partner, parent or child in the state military who dies or incurs a serious health condition while on active duty. Family medical leave may consist of unpaid leave. If an employer provides paid family medical leave for fewer than 10 weeks, the additional weeks of leave added to attain the total of 10 weeks required may be unpaid. Maryland Md. Code Ann., State Pers. & Pens.§ 9-501 (2008): A state employee may use sick leave for personal illness or disability; the death, illness, or disability of an immediate family member; the birth or adoption of a child; or a medical appointment of the employee or a member of immediate family. Md. Code Ann., State Pers. & Pens.§ 9-505 (2008): An employee who is responsible for the care and nurturing of a child may use, without certification of illness or disability, up to 30 days of accrued sick leave to care for the child during the period immediately following the birth or adoption placement of the child. If two employees are responsible for the care and nurturing of a child, both employees in aggregate may use, without certification of illness or disability, up to 40 days, not to exceed 30 days for one employee, of accrued sick leave to care for the child during the period immediately following the birth or adoption placement of the child. Md. Code Ann., State Pers. & Pens.§ 9-604 (2008): An employee who receives leave through the Leave Donation Program may only use the leave for an illness or disability of the employee due to the medical condition that existed at the time of the donation; or a catastrophic illness or injury of a member of the employee's immediate family. Md. Code Ann., State Pers. & Pens. § 9-1001 (2008): A state employee may use other available accrued leave concurrently with family and medical leave. Md. Code Ann., State Pers. & Pens. § 9-1106 (2008): State employees are entitled to 30 days of leave to serve as an organ donor and 7 days of leave to serve as a bone marrow donor. Md. Code Ann., Lab. & Empl. § 3-802 (2008): An employer who provides paid leave following the birth of a child shall provide the same leave following the adoption of a child. Massachusetts Mass Ann. Laws ch. 149, § 33D (2007): Public employees shall be allowed a leave of absence without loss of pay of not more than 8 hours in each calendar year for the purpose of donating platelets, plasma white cells or whole blood to any cancer research center. Mass Ann. Laws ch. 149, § 33E (2007): Public employees may take a leave of absence of not more than 30 days in a calendar year to serve as an organ donor, without loss of or reduction in pay, without loss of leave to which he is otherwise entitled and without loss of credit for time or service. Mass Ann. Laws ch. 149, § 52D (2007): Employers must offer 24 hours of leave during any 12-month period, in addition to leave available under the federal Family and Medical Leave Act, to participate in a child's school activities, or to accompany a child or elderly relative to routine medical or dental appointments. Mass. Ann. Laws ch. 149, § 105D (2007): State employers and private employers of 6 or more employees must allow 8 weeks maternity leave for the birth of child, adoption of a child under the age of 18, or adoption of a child under the age of 23 if the child is mentally or physically disabled. Michigan Mich. Comp. Laws § 38.1375 (2007): Public school employees may purchase service credits for maternity, paternity, or child rearing. The total service credited under this section shall not exceed 5 years. Minnesota Minn. Stat. §§ 18.940 and 181.941 (2007): A public and private employer of 21 or more employees must provide up to 6 weeks maternity leave in conjunction with the birth or adoption of a child. Minn. Stat. § 181.9412 (2007): An employer must allow employees 16 hours during any 12-month period to attend school conferences or school-related activities provided the conferences or school-related activities cannot be scheduled during nonwork hours. This provision also applies to the school activities of foster children. Minn. Stat. § 181.9413 (2007): An employer must allow employees to use personal sick leave benefits for absences due to an illness of or injury to the employee's child for such reasonable periods as the employee's attendance with the child may be necessary. Minn. Stat. § 181.945 (2007): A public or private employer of 20 or more employees must grant paid leaves of absence to an employee who seeks to undergo a medical procedure to donate bone marrow. The combined length of the leaves may not exceed 40 work hours, unless agreed to by the employer. Minn. Stat. § 181.9456 (2007): A public employer of 20 or more employees must grant paid leaves of absence to an employee who seeks to undergo a medical procedure to donate an organ or partial organ to another person. The combined length of the leaves may not exceed 40 work hours for each donation, unless agreed to by the employer. Mississippi Miss. Code Ann. § 25-3-95 (2007): Public employees may use major medical leave for the injury or illness of an immediate family member. Any employee may donate a portion of his or her earned personal leave or major medical leave to another employee who is suffering from a catastrophic injury or illness, or to another employee who has a member of his or her immediate family who is suffering from a catastrophic injury or illness. Miss. Code Ann. § 25-3-103 (2007): State employers shall provide time off with pay for state employees who donate an organ, bone marrow, blood or blood platelets. Employees may use 30 days in any 12-month period to serve as a bone marrow or an organ donor, up to 1 hour to donate blood every 56 days, and up to 2 hours to donate blood platelets in accordance with appropriate medical standards. Leave for donating blood platelets may not be granted more than 24 times in a 12-month period. Missouri Mo. Rev. Stat. § 105.266 (2007): A state employee must be granted a leave of absence of 5 workdays to serve as a bone marrow donor and 30 workdays to serve as a human organ donor. Mo. Rev. Stat. § 105.271 (2007): Public employees may use the same leave granted to biological parents upon the birth of a child to adopt a child and may use the same leave granted to biological parents to care for a sick child to care for a sick adopted child or stepchild. Montana Mont. Code Ann. § 2-18-606 (2007): State employees are entitled to up to 15 days of leave for the birth or adoption of a child. Mont. Code Ann. §§ 49-2-101(11) (2007): Employer means an employer of one or more persons or an agent of the employer but does not include a fraternal, charitable, or religious association or corporation if the association or corporation is not organized either for private profit or to provide accommodations or services that are available on a nonmembership basis. Mont. Code Ann. § 49-2-310 (2007): An employer must grant to the employee a reasonable leave of absence for pregnancy; and must allow an employee disabled as a result of pregnancy to use accrued disability or leave benefits. Nebraska Neb. Rev. Stat. § 48-234 (2007): An employee who offers maternity leave for the birth of a child must also provide leave for the adoption of a child. Nevada Nev. Rev. Stat. § 392-920 (2007): It is unlawful for an employer or his agent to terminate the employment of a person who, as a parent, guardian or custodian of a child appears at a conference requested by an administrator of the school attended by the child, or is notified during his work by a school employee of an emergency regarding the child. Nev. Rev. Stat. § 613.335 (2007): An employer who offers sick leave must offer leave for pregnancy, miscarriage and childbirth. New Hampshire N.H. Rev. Stat. Ann. § 100-A:9-a (2007): Any member of the New Hampshire retirement system who is on leave under the provisions of the federal Family and Medical Leave Act shall be considered in service for purposes of eligibility for death or disability benefits. New Jersey N.J. Stat. Ann. § 34:11B-3 (2007): A private or public employer of 50 or more employees shall provide family leave to employees who been employed for 1,000 base hours during the immediately preceding 12-month period. N.J. Stat. Ann. § 34:11B-4 (2007): An employee shall be entitled to 12 weeks of leave in any 24-month period. Family leave means the birth of a child; the placement of a child in connection with adoption; the serious health condition of a family member. Leave may be paid, unpaid or a combination of paid and unpaid. New York N.Y. Lab. Law. § 201-c (2007): Whenever an employer or governmental agency permits leave for the birth of a child, an adoptive parent shall be entitled to the same leave. N.Y. Lab. Law. § 202-a (2007): A public or private employer who employs 20 or more employees must grant leaves of absence for the donation of bone marrow who works for an average of 20 or more hours per week. The combined length of the leaves may not exceed 24 work hours. N.Y. Lab. Law. § 202-b (2007): Any state employee shall be allowed up to 7 days paid leave to donate bone marrow and up to 30 days paid leave to serve as an organ donor. Such leave shall be in addition to any other sick or annual leave allowed. N.Y. Workers ' Comp. Law § 201(9) (2007): A private employers' disability benefits shall also include pregnancy. North Carolina N.C. Gen. Stat. § 95-28.3 (2007): An employer shall grant 4 hours of leave so that an employee may attend or otherwise be involved at a child's school. An employer is not required to pay for leave. North Dakota N.D. Cent. Code § 54-06-14.1 (2007): State employees who suffer from or have a relative or household member suffering from an extraordinary or severe illness may use shared leave, including both annual and sick leave, that shall not exceed 4 months in any 12-month period. N.D. Cent. Code §54-06-14.2 (2007): State employees who suffer from an extraordinary or severe illness may use shared leave, including both annual and sick leave, that shall not exceed 4 months in any 12-month period. N.D. Cent. Code § 54-06-14.4 (2007): The state may grant leave of absence, not to exceed 20 workdays for the donation of an organ or bone marrow. An employee may use donated annual leave or sick leave. The state may grant a paid leave for up to 20-workdays. N.D. Cent. Code § 54-52.4-01 (2007): A state employee shall be entitled to family leave if employed for at least 12-months, and has worked at least 1,250 hours over the previous 12-months. N.D. Cent. Code § 54-52.4-02 (2007): A state employer shall grant family leave for the care of a child (includes adopted or foster) within 12-months of the child's birth or placement; the care of a child, spouse, or parent with a serious health condition; or because of the employee's serious health condition. An employee may take leave in any 12-month period for not more than 12-workweeks. Leave is not required to be granted with pay. N.D. Cent. Code § 54-52.4-03 (2007): A state employer that provides leave for its employees for illnesses or other medical or health reasons shall grant an employee's request to use that leave to care for the employee's child, spouse, or parent with a serious health condition. An employee may take not more than 40 hours of leave in any 12 month period. The employer shall compensate the employee for leave. Ohio Ohio Rev. Code Ann. § 124.136 (2007): State permanent full-time and part-time employees who work 30 or more hours per week may be eligible for parental leave and benefits upon the birth or adoption of a child. Employees may elect to receive $2,000 for adoption expenses in lieu of receiving the paid leave benefit. Parental leave shall not exceed 6 continuous weeks. Use of parental leave does not prohibit taking leave under the federal Family and Medical Leave Act. Ohio Rev. Code Ann. § 124.139 (2007): A full-time state employee shall receive up to 240 hours of leave with pay during each calendar year for the donation of a liver or kidney. A full-time state employee shall receive up to 56 hours of leave with pay during each calendar year for the donation of bone marrow. Oklahoma Okla. Stat. tit. 74, § 840-2.20B (2007): Any state employee shall be granted a leave of absence of 5 workdays to serve as a bone marrow donor and 30 workdays to serve as a human organ donor. Okla. Stat. tit. 74, § 840-2.23 (2007): An eligible state employee who is suffering from or has a relative or household member suffering from an extraordinary or severe illness, injury, impairment, or physical or mental condition which has caused or is likely to cause the employee to take leave without pay or terminate employment may participate in the state leave sharing program. An employee may use up to 261 days of donated leave during total state employment. An employee suffering from a terminal illness may receive up to 365 days of donated leave during total state employment. Okla. Admin. Code § 530:10-15-45 (2007): An eligible employee is entitled to family and medical leave for up to a total of 12 weeks during any 12-month period for the birth and care of a newborn child; placement of an adopted or foster child; care for a spouse, son, daughter, or parent with a serious health condition; and a serious health condition that makes the employee unable to perform the functions of the job. Oregon Or. Rev. Stat. § 659A.153 (2007): A public or private employer of 25 or more persons during each of 20 or more calendar workweeks is required to grant family leave to eligible employees. Or. Rev. Stat. § 659A.156 (2007): An employee shall have worked 180 days or 25 hours per week during the 180 days immediately before the date on which the family leave would commence. Or. Rev. Stat. § 659A.159 (2007): Family leave may be taken to care for an infant or newly adopted child under 18 years of age, or for a newly placed foster child under 18 years of age, or for an adopted or foster child older than 18 years of age if the child is incapable of self-care because of a mental or physical disability; to care for a family member with a serious health condition; to recover from or to seek treatment for a serious health condition of the employee; or to care for a child who is suffering from an illness, injury or condition that is not a serious health condition but that requires home care. Leave must be completed within 12 months after birth or placement of the child. Or. Rev. Stat. § 659A.162 (2007): An eligible employee is entitled to up to 12 weeks of family leave within any one-year period. In addition, a female employee may take a total of 12 weeks within any one-year period for an illness, injury or condition related to pregnancy or childbirth. An employee may take an additional 12 weeks of leave within one year to care for a sick child. Or. Rev. Stat. § 659A.312 (2007): An employer shall grant already accrued paid leave to an employee for the donation of bone marrow. The leave shall not exceed accrued paid leave or 40 work hours, whichever is less. An employee shall have worked an average of 20 or more hours per week. Rhode Island R.I. Gen. Laws § 28-48-1 (2007): A private employer of 50 or more employees, a state employer, and a public employer of 30 or more employees are required to grant parental and family leave. R.I. Gen. Laws § 28-48-2 (2007): An employee shall be entitled to 13 weeks of parental or family leave in any 2 calendar years. Leave may consist of paid and unpaid leave. R.I. Gen. Laws § 28-48-11 (2007): An employer who allows sick time or sick leave to be utilized after the birth of a child shall allow the same time for the adoption placement of a child 16 years of age or less. R.I. Gen. Laws § 28-48-13 (2007): An employee shall be entitled to 10 hours during 12 months to attend school conferences or other school-related activities for a child. The employee is not entitled to paid leave; except accrued paid leave. South Carolina S.C. Code Ann. § 8-11-40 (2006): Eligible full-time state employees are entitled to 15 days' sick leave a year with pay. Eligible part-time state employees are entitled to sick leave prorated on the basis of 15 days a year. Employees may use no more than 10 days of sick leave annually to care for ill members of their immediate families. S.C. Code Ann. § 8-11-65 (2006): A public employee who wishes to be an organ donor and who accrues annual or sick leave is entitled to leave of up to 30 days in a fiscal year. S.C. Code Ann. § 8-11-155 (2006): A state adoptive parent may use up to 6 weeks of accrued sick leave to care for a child after placement. S.C. Code Ann. §§ 8-11-700 and 8-11-710 (2006): State employees may request leave from the pool leave account for a personal emergency. S.C. Code Ann. § 44-43-80 (2006): A public or private employer of 20 or more employees may grant paid leave for the donation of bone marrow. An employee who works an average of 20 or more hours a week may request paid leave not to exceed 40 work hours. South Dakota S.D. Codified Laws § 3-6-7 (2007): An eligible state employee may use up to 5 days for sick leave for personal emergency. Adoption of a child is treated as natural childbirth for leave purposes. S.D. Codified Laws § 3-6-8 (2007): Sick leave, not exceeding 28 days, may be advanced to an employee who has used up all of his accumulated and earned leave. S.D. Codified Laws § 3-6-10 (2007): Employees may take leave without pay. Tennessee Tenn. Code Ann. § 4-21-408 (2007): Full-time employees of private and public employers with 100 full-time employees may be absent for up to 4 months for adoption, pregnancy, childbirth and nursing an infant. Leave may be with or without pay. Tenn. Code Ann. § 8-50-802 (2007): Sick leave for maternity or paternity for state employees shall not exceed the accumulated sick leave balance or 30 working days, whichever is less. Tenn. Code Ann. § 8-50-806 (2007): State adoptive parents are granted a special 30-day leave. An employee may use sick leave for all or a portion of that 30 days, not to exceed the employee's leave balance if the child is one year old or less. Tenn. Code Ann. §§ 8-50-905 and 8-50-907 (2007): An eligible state employee may participate in the sick leave bank. Participants may be granted up to 90 days of leave. Texas Texas Gov ' t Code Ann. § § 661.004 and 661.006 (2007): An eligible state employee may withdraw time contributed to an agency-sponsored sick leave pool for the catastrophic illness or injury of the employee or an immediate family member. Time withdrawn shall not exceed the lesser of 1/3 of the total time in the pool or 90 days. Texas Gov ' t Code Ann. § 661.206 (2007): A state employee may use up to 8 hours of sick leave to attend parent-teacher conferences. Texas Gov ' t Code Ann. § 661.902 (2007): A state employee is entitled to emergency leave without a deduction in salary because of death in the family. Texas Gov ' t Code Ann. § 661.906 (2007): A state employee is entitled to leave without a deduction in salary for attending meetings regarding a foster child. Texas Gov ' t Code Ann. § 661.909 (2007): A state employer may grant leave without pay. Leave may not exceed 12-months. Texas Gov ' t Code Ann. § 661.913 (2007): A state employee who has been employed for fewer than 12 months or who worked fewer than 1,250 hours during the 12-month period preceding the beginning of leave is eligible to take parental leave of absence not to exceed 12 weeks for the birth of a natural child or adoption or foster care placement of a child younger than 3 years of age. The employee must first use all available and applicable vacation and sick leave while taking the leave, and the remainder of the leave is unpaid. Vermont Vt. Stat. Ann. tit. 21, § 471 (2007): Parental leave requirements apply to a private or public employer of 10 or more individuals who are employed for an average of 30 hours per week during a year. Family leave requirements apply to private and public employers of 15 or more individuals who are employed for an average of 30 hours per week during a year. "Family leave" means leave for the serious illness of the employee or the employee's child, stepchild or ward who lives with the employee, a foster child, parent, spouse, or parent of the employee's spouse. "Parental leave" means leave for the birth of a child or the initial placement of a child 16 years of age or younger for adoption. Vt. Stat. Ann. tit. 21, § 472 (2007): An employee, during any 12-month period, shall be entitled to take unpaid leave not to exceed 12 weeks for parental or family leave. The employee may use accrued sick, vacation, or other accrued paid leave, not to exceed 6 weeks. Vt. Stat. Ann. tit. 21, § 472a (2007): In addition, an employee shall be entitled to take unpaid leave not to exceed 4 hours in any 30-day period and not to exceed 24 hours in any 12-month period to attend a child's school activities; family member's medical/dental or professional services appointments; and to respond to a child's medical emergency. Virginia Va. Code Ann. § 51.1-1107 (2007): Eligible state employees shall receive a calculated amount of family and personal leave based on the number of months of state service. Va. Code Ann. § 51.1-1108 (2007): Eligible state employees can take family and personal leave for short-term incident, illness or death of a family member, or other personal need. Employers shall compensate employees 100% for each hour taken, not to exceed the employee's family and personal leave balance. Va. Code Ann. § 51.1-1110 (2007): Short-term disability benefits shall be payable only during periods of total disability, partial disability, maternity leave, or periodic absences due to a major chronic condition. Washington Wash. Rev. Code § 41.04.665 (2007): A state employer may permit an employee to receive leave if the employee suffers from, or has a relative or household member suffering from, an illness, injury, impairment, or physical or mental condition which is of an extraordinary or severe nature. The employee shall not receive more than 260 days leave from the leave sharing program. Wash. Rev. Code § 49.78.020 (2007): A private or public employer of 50 or more employees is required to provide medical and family leave. Wash. Rev. Code § 49.78.220 (2007) : An employee is entitled to a total of 12 workweeks of leave during any 12-month period for the birth and care of a child; the placement of a child for adoption or foster care; to care for a family member who has a serious health condition; or because of a serious health condition of the employee. Wash. Rev. Code § 49.78.240 (2007) : Leave granted may consist of unpaid leave. Wash. Rev. Code § 49.78.380 (2007) : Nothing in the state's family leave provisions shall be construed to discourage employers from adopting or retaining leave policies more generous than any policies that comply with the requirements under this chapter. Wash. Rev. Code § 49.78.390 (2007) : Family leave provided under state law and leave under the federal Family and Medical Leave Act is in addition to any leave for sickness or temporary disability because of pregnancy or childbirth. West Virginia W. Va. Code § 21-5D-3 (2007): A public employer is not prohibited from providing employees with rights to family leave which are more generous. W. Va. Code § 21-5D-4 (2007): An employee shall be entitled to 12 weeks of unpaid family leave, following the exhaustion of all annual and personal leave, during any 12-month period. Leave may be taken because of the birth of a child, the placement of an adopted child, or to care for a child, spouse, parent or dependent who has a serious health condition. W. Va. Code § 29-6-28 (2007): A full-time state employee shall receive up to 120 hours of paid leave for donation of a liver or kidney. A full-time state employee shall receive up to 56 hours of paid leave for the donation of bone marrow. W. Va. Code R. § 143-2-3 (2007): An eligible employee may receive donations of annual leave for the medical condition of the employee or a member of the employee's immediate family. Wisconsin Wis. Stat. § 103.10 (2006): Family leave applies to state employers and private employers of 50 or more individuals on a permanent basis. Eligible employees must have been employed for at least 1,000 hours during the preceding 52-week period. In a 12-month period, an employee may take 6 weeks for the birth or adoption placement of a child; 2 weeks to care for a child, spouse, or parent who has a serious health condition; or 8 weeks for any combination of reasons. No employee may take more than 2 weeks of medical leave during a 12-month period. An employee may use paid or unpaid leave. Wis. Stat. § 230.35 (2006): A state employer shall grant 5 workdays of leave to a bone marrow donor. A state employer shall grant 30 workdays of leave to a human organ donor. An employee shall receive his or her base state pay without interruption during the leave of absence.

In 1993, Congress passed the Family and Medical Leave Act ("FMLA") to "balance the demands of the workplace with the needs of families." When the FMLA was enacted, it supplemented approximately 30 state statutes that provided some form of family and medical leave to employees who worked in those states. Although the FMLA and state family and medical leave laws are generally similar with regard to the availability of leave, they differ both in terms of coverage and scope. This report includes summaries of the family and medical leave laws of forty-five states and the District of Columbia. Laws pertaining to family and medical leave and maternity leave were not found in the codes of all 50 states. Summaries of the relevant leave statutes and regulations are organized in alphabetical order.

CRS_R44730

Introduction The 21 st Century Cures Act ( P.L. 114-255 ) was signed into law on December 13, 2016, by President Barack Obama. On November 30, 2016, the House passed an amendment to the Senate amendment to H.R. 34 , the 21 st Century Cures Act, on a vote of 392 to 26. The bill was then sent to the Senate, where it was considered and passed, with only minor technical modification, on December 7, 2016, on a vote of 94 to 5. The law consists of three divisions: Division A—21 st Century Cures; Division B—Helping Families in Mental Health Crisis; and Division C—Increasing Choice, Access, and Quality in Health Care for Americans. CRS has published a series of reports on this law, one on each division. This report provides information on Division C of the law. The Increasing Choice, Access, and Quality in Health Care for Americans Act (Division C of P.L. 114-255 ) primarily focuses on Medicare. A single provision of the act focuses on the small-group market within the private health insurance market. Division C comprises Title XV through Title XVIII. The first three titles in Division C include provisions primarily relating to Medicare. Title XV focuses on provisions relating to Medicare Part A (Hospital Insurance, or HI), which provides coverage for inpatient hospital services, posthospital skilled nursing facility services, hospice care, and some home health services, subject to certain conditions and limitations. Title XVI focuses on provisions relating to Medicare Part B (Supplementary Medical Insurance, or SMI), which covers physicians' services, outpatient hospital services, durable medical equipment, and other medical services. Title XVII focuses on provisions relating to other aspects of Medicare, such as Medicare Part C (Medicare Advantage, or MA, the private plan option for beneficiaries that covers all Parts A and B services, except hospice); Medicare Part D (Prescription Drug Plan, or PDP, which covers outpatient prescription drug benefits); MA quality ratings; enrollment data; the Welcome to Medicare package; the Medicare Shared Savings Program (MSSP); and payments to Medicare, Medicaid, or Children's Health Insurance Program (CHIP) providers and suppliers. The fourth title in Division C includes a single provision relating to the small-group health insurance market. This report briefly summarizes each provision of the Increasing Choice, Access, and Quality in Health Care for Americans Act by title and section. For each section, the report provides relevant background information and a discussion of the act's provision. See below for a list of which CRS analyst authored which provision of this report. The Appendix provides a list of abbreviations used throughout this report. Summary of Provisions Division C begins before Title XV with the short title (Section 15000), "Increasing Choice, Access, and Quality in Health Care for Americans Act." Title XV—Provisions Relating to Medicare Part A Section 15001. Development of Medicare HCPCS Version of MS-DRG Codes for Similar Hospital Services Currently, billing and reimbursement for hospital inpatient services under Medicare differ from billing and reimbursement for hospital outpatient services. For hospital inpatient billing, Medicare uses International Classification of Diseases (ICD) diagnosis and procedure codes to assign a case to a Medicare Severity Diagnosis Related Group (MS-DRG) to determine the reimbursement amount for that case. Hospital outpatient and other outpatient settings use Healthcare Common Procedure Code System (HCPCS) codes as the basis for determining Medicare reimbursement. According to analysis published in the Medicare Payment Advisory Commission's (MedPAC's) June 2015 Report to the Congress: Medicare and the Health Care Delivery System that crosswalked hospital inpatient and outpatient billing codes, Medicare generally reimbursed more for clinically similar short-stay patients served in a hospital inpatient setting compared to an outpatient setting. Provision Section 15001 amends Social Security Act Section 1886 to require the Secretary of the Department of Health and Human Services (HHS) to develop a crosswalk that links outpatient HCPCS codes to inpatient MS-DRGs for a minimum of 10 surgical procedures that are commonly performed in both an inpatient and outpatient setting by no later than January 1, 2018. In developing the crosswalk, the HHS Secretary is required to consult with MedPAC and consider the analysis contained in Chapter 7 of MedPAC's June 2015 Report to the Congress: Medicare and the Health Care Delivery System . Section 15001 also requires the HHS Secretary to make the crosswalk, including a definitions manual and software, available in the public domain without charge. Section 15002. Establishing Beneficiary Equity in the Medicare Hospital Readmission Program The Hospital Readmission Reduction Program (HRRP) reduces Medicare's inpatient prospective payment system (IPPS) reimbursement to hospitals with Medicare risk-adjusted readmission rates for certain conditions that exceed the national average. Under the HRRP, a hospital's readmission penalty is based on a complex formula that determines a hospital's excess readmissions (defined generally as actual readmissions divided by expected readmissions) across all HRRP conditions. Currently, the HRRP formula does not adjust for the effect of socioeconomic status on readmissions. MedPAC has found that hospitals with a higher share of low-income patients have higher readmission rates and thus higher penalties under the HRRP. MedPAC has suggested that one option to address this issue is to refine the HRRP to allow hospitals to be evaluated against their peers relative to the share of low-income patients served. However, the Centers for Medicare & Medicaid Services (CMS) has argued that adjusting for low-income patients would hold hospitals that serve low-income communities to a lower standard of quality and mask disparities in care. Provision Section 15002 amends Social Security Act Section 1886(q)(3) to require the HHS Secretary to implement a transitional methodology, effective for discharges beginning in fiscal year (FY) 2019, that accounts for the proportion of low-income Medicare beneficiaries—specifically, those who are full-benefit dually eligible for Medicare and Medicaid—that a hospital serves in determining the HRRP penalty. The transitional methodology must be budget neutral, and in implementing such methodology, the HHS Secretary must not impose additional reporting burden on hospitals. Section 15002 also permits the HHS Secretary to (1) refine the HRRP methodology based on information learned from implementation of the Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act; P.L. 113-185 ); (2) consider certain diagnosis codes for exclusion from HRRP; and (3) remove certain conditions related to transplants, end-stage renal disease (ESRD), burns, trauma, psychosis, or substance abuse from HRRP. In addition, Section 15002 requires MedPAC to conduct a study of the effect of outpatient and emergency services on readmissions and submit a report to Congress by June 2018. Section 15003. Five-Year Extension of the Rural Community Hospital Demonstration Program The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA; P.L. 108-173 ), Section 410A, as amended by the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended), Sections 3123(a) and 10313(a), established and extended the Rural Community Hospital (RCH) demonstration, which tests the feasibility and advisability of establishing RCHs in 20 states with low population densities for Medicare hospital inpatient payment purposes. An RCH must (1) be in a rural area; (2) have fewer than 51 acute-care inpatient beds; (3) have 24-hour emergency care services; and (4) not currently be (or not be eligible to be) designated as a critical access hospital (CAH). Under the demonstration, participating hospitals are paid the reasonable costs of providing Medicare-covered inpatient services (excluding psychiatric or rehabilitation care) and extended care services, rather than reimbursement under Medicare's IPPS. According to CMS, the second five-year period of the RCH demonstration program was to expire after December 2016. Provision Section 15003 extends the RCH demonstration program for an additional five years and expands the program to rural areas nationwide. It also requires the HHS Secretary to issue a solicitation for application within 120 days of enactment to select RCHs to participate in the demonstration during this period, up to the maximum of 30 hospitals permitted under the demonstration. Priority for selecting additional participant hospitals is to be given to hospitals located in the 20 states with the lowest population densities. Section 15004. Regulatory Relief for LTCHs Long-term care hospitals (LTCHs) generally treat patients who have been discharged from acute-care hospitals but require prolonged inpatient hospital care due to the patients' medical conditions. Medicare reimburses LTCHs under the LTCH Prospective Payment System (LTCH PPS), which provides a per-discharge reimbursement based on the average costs and patient mix of LTCHs. The LTCH PPS typically provides higher Medicare reimbursement rates for inpatient hospital care than the IPPS. With some exceptions, LTCHs have faced a moratorium on (1) new LTCH facilities and (2) new LTCH beds since the enactment of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA; P.L. 110-173 ). MMSEA provided a temporary exception to the moratorium on new LTCH facilities for LTCHs that (1) had a binding written agreement before the enactment of MMSEA for the actual construction, renovation, lease, or demolition of an LTCH and had expended at least 10% of the estimated cost of the project (or $2.5 million, if less) and (2) had obtained an approved certificate of need in a state where one is required on or before the date of enactment of MMSEA. MMSEA also provided an exception for new LTCH beds for LTCHs (1) located in a state where there is only one other LTCH and (2) that requested an increase in beds following the closure or decrease in the number of beds of another LTCH in the state. The moratorium lapsed at the end of 2012 but was reinstated without the exceptions by the Pathway for SGR Reform Act of 2013 (Pathway for SGR Reform; P.L. 113-67 ) for the period January 1, 2015, through September 30, 2017. The Protecting Access to Medicare Act of 2014 (PAMA; P.L. 113-93 ) reinstated the exception for new LTCH facilities but not for new LTCH beds. Provision Section 15004 amends MMSEA Section 114(d)(7), as amended by ACA Sections 3106(b) and 10312(b), the Pathway for SGR Reform Section 1206(b)(2), and PAMA Section 112, to reinstate the exception to the moratorium on the expansion of LTCH beds, effective as if it had been enacted by PAMA, April 1, 2014, to coincide with the previously reinstated exception for new LTCH facilities. Section 15004 includes an offset that reduces LTCH PPS outlier payments in perpetuity beginning October 1, 2017. The reduction does not apply to site neutral case outlier payments. (For an explanation of the LTCH site neutral policy, refer to " Sections 15009 and 15010. Temporary Exceptions to the Application of the Medicare LTCH Site Neutral Provisions for Certain Spinal Cord Specialty Hospitals and for Certain Discharges with Severe Wounds ".) Section 15005. Savings from IPPS MACRA Pay-For Through Not Applying Documentation and Coding Adjustments The TMA, Abstinence Education, and QI Programs Extension Act of 2007 ( P.L. 110-90 ), as amended by the American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240 ) and the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA; P.L. 114-10 ), adjusted hospital IPPS rates for discharges occurring during FY2018 through FY2023. Specifically, MACRA replaced the ATRA one-time 2018 payment increase of 3.2% with a phased-in payment rate increase of 0.5% per year for FY2018 through FY2023. Provision Section 15005 amends the TMA, Abstinence Education, and QI Programs Extension Act of 2007, as amended by ATRA and MACRA, to reduce the MACRA annual update from 0.5% to 0.4588% for FY2018. Section 15006. Extension of Certain LTCH Medicare Payment Rules LTCHs can be (1) freestanding—a hospital that in general is not integrated with any other hospital; (2) colocated with another hospital, either in the same building or in a separate building on that hospital's campus; or (3) a satellite facility of an LTCH—a facility that operates as part of the LTCH but in a separate location (which may be colocated with another hospital). Beginning in FY2005, CMS implemented a new payment regulation for colocated LTCHs and LTCH satellites to limit inappropriate patient shifting driven by financial rather than clinical considerations. Under this policy, if such an LTCH received more than 25% of its Medicare patients from any single referring hospital, the LTCH would be reimbursed the lower of the LTCH PPS or the IPPS reimbursement for discharges that exceeded the threshold. Beginning in FY2008, CMS, by regulation, expanded the 25% patient threshold adjustment policy to include all LTCHs. Congress enacted a number of delays of CMS's implementation of the 25% patient threshold adjustment for LTCHs. The most recent delay expired after June 30, 2016 (or after September 30, 2016, for certain LTCHs colocated with another hospital). Provision Section 15006 amends MMSEA Section 114(c), as amended by the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ), the ACA, and the Pathway for SGR Reform, to reinstate the delay of CMS's implementation of the 25% threshold adjustment for discharges from freestanding LTCHs and certain colocated LTCHs occurring October 1, 2016, through September 30, 2017. Section 15007. Application of Rules on the Calculation of Hospital Length of Stay to All LTCHs To receive Medicare reimbursement under the LTCH PPS, with some exceptions, LTCHs are required to maintain a Medicare inpatient average length of stay (ALOS) of greater than 25 days. The PAMA amended the Pathway for SGR Reform to allow only LTCHs classified as such as of December 10, 2013, to exclude cases that are reimbursed under MA and those subject to the LTCH site neutral policy from the calculation of ALOS. (For an explanation of the LTCH site neutral policy, refer to Section 15009.) Provision Section 15007 amends the Pathway for SGR Reform, Section 1206(a)(3), as amended by the PAMA, Section 112(c)(2), to permit all LTCHs, regardless of the date on which they were classified as such, to exclude cases reimbursed under MA and those subject to the LTCH site neutral policy from the LTCH ALOS calculation. This provision is effective as if enacted by the Pathway for SGR Reform, December 26, 2013. Section 15008. Change in Medicare Classification for Certain Hospitals As noted above in the discussion of Section 15007, the vast majority of LTCHs qualify as such because they have an ALOS, as determined by the HHS Secretary, of greater than 25 days. However, the Balanced Budget Act of 1997 (BBA 1997; P.L. 105-33 ), Section 4417(b), recognized a second LTCH category comprised of hospitals that (1) first received payment under Part A in 1986; (2) had an ALOS, as determined by the HHS Secretary, of greater than 20 days; and (3) had 80% or more of their annual Medicare inpatient discharges with a principle diagnosis of neoplastic disease (including cancer) in FY1997. This category is referred to as a subclause (II) LTCH because it was so designated under Social Security Act Section 1886(d)(1)(B)(iv)(II). According to CMS, there is only one subclause (II) hospital in the country, which since 1986 has focused on the provision of palliative care to patients with end-stage cancer. In the Pathway for SGR Reform, Section 1206(d), Congress required the HHS Secretary to evaluate the payment levels for subclause (II) LTCHs. The law authorized the HHS Secretary to adjust payment rates to subclause (II) LTCHs and to amend the payment regulations accordingly. CMS concluded that payments were inadequate, so CMS promulgated a regulation, effective for cost-reporting periods beginning on or after October 1, 2014, that created a unique payment methodology for subclause (II) LTCHs. The regulation (42 C.F.R. §412.526) applied an "adjustment" to the LTCH PPS such that the subclause (II) LTCH effectively would be paid on a reasonable-cost basis with a hospital-specific ceiling. Provision Section 15008 removes the LTCH designation for the former subclause (II) hospital category by redesignating Social Security Act Section 1886(d)(1)(B)(iv)(II) as Section 1886(d)(1)(B)(vi) (clause (vi)). Section 15008 provides that a clause (vi) hospital is not an LTCH and is not subject to the LTCH PPS. Section 15008 does not substantively change the way this hospital type is paid; the new clause (vi) hospital type will be paid under the same methodology that has governed subclause (II) LTCH reimbursement since FY2014. Instead, the provision merely changes the statutory treatment of this hospital type so that it is no longer nominally subject to the LTCH PPS methodology. For beneficiaries discharged from a clause (vi) hospital on or after January 1, 2017, the associated claims will be treated simply as claims reimbursed on a reasonable-cost basis rather than as claims paid under the LTCH PPS with a reasonable-cost "adjustment." Sections 15009 and 15010. Temporary Exceptions to the Application of the Medicare LTCH Site Neutral Provisions for Certain Spinal Cord Specialty Hospitals and for Certain Discharges with Severe Wounds The Pathway for SGR Reform, Section 1206(a), amended the law so that LTCH PPS payment was no longer available for all LTCH discharges but instead was available only for those that meet specific clinical criteria. Effective for cost-reporting periods beginning in FY2016, LTCHs are eligible to receive full payment under the LTCH PPS for a discharge if the beneficiary (1) had a prior three-day intensive-care-unit stay at a hospital paid under the IPPS immediately preceding the LTCH stay or (2) was assigned to an LTCH PPS case-mix group based on the receipt of ventilator services for at least 96 hours and had a prior hospital stay at a hospital paid under the IPPS immediately preceding the LTCH stay. LTCH discharges involving beneficiaries with a principal diagnosis relating to a psychiatric issue or rehabilitation do not qualify for the LTCH PPS rate even if they otherwise meet one of the two criteria. For LTCH discharges that do not qualify for the LTCH PPS under either clinical criterion above, the Pathway for SGR Reform provided for the phasing in of a "site neutral payment rate" similar to hospital reimbursement. The site neutral rate is defined as the lower of an "IPPS-comparable" per diem amount, as defined in regulations, or the estimated cost of the services involved. For discharges in cost-reporting periods beginning in FY2016 and FY2017, LTCHs receive a blended payment amount based on 50% of what the LTCH would have been reimbursed under the LTCH PPS rate and 50% of the site neutral payment rate. For cost-reporting periods beginning in FY2018 and subsequent years, the LTCH will receive the site neutral payment rate. The Consolidated Appropriations Act of 2016 (CAA 2016; P.L. 114-113 ), Section 231, amended the law to provide for a temporary third set of clinical criteria for an LTCH to receive payment under the LTCH PPS rather than the site neutral payment rate. For discharges occurring before January 1, 2017, an LTCH is entitled to the full LTCH PPS if all of the following apply: (1) the LTCH participated in Medicare as an LTCH and was colocated with another hospital as of September 30, 1995, and meets the current regulatory requirements for "grandfathered" hospital-within-hospital status; (2) the LTCH is located in a rural area or is treated as being so located; and (3) the individual discharged has a "severe wound," as defined in the statute. Provisions Sections 15009 and 15010 create or reinstate two sets of temporary clinical criteria for an LTCH to receive payment under the LTCH PPS rather than the site neutral payment. Section 15009 creates a temporary fourth set of clinical criteria for payment under the LTCH PPS. For discharges occurring in cost-reporting periods beginning during FY2018 and FY2019, an LTCH will be paid under the LTCH PPS if all of the following apply: (1) the LTCH was a not-for-profit LTCH on June 1, 2014; (2) of the LTCH's discharges in calendar year (CY) 2013 for which payment was made under the LTCH PPS, at least 50% were classified under LTCH diagnosis related groups (DRGs) associated with catastrophic spinal cord injuries, acquired brain injury, or other paralyzing neuromuscular conditions; and (3) the LTCH during FY2014 discharged patients (including Medicare beneficiaries and others) who had been admitted from at least 20 of the 50 states, as determined by the patient's state of residency. Section 15009 gives the HHS Secretary the authority to implement the state-of-residency requirement by program instruction. Section 15009 requires the U.S. Comptroller General to conduct a study of the LTCHs that meet these criteria and report to Congress on the study by October 1, 2018. The study must include an analysis of the Medicare payment rates for the hospitals; the number and health care needs of Medicare beneficiaries with spinal cord, acquired brain injuries, or other paralyzing neuromuscular conditions who are receiving services from the hospitals; and how the hospitals are impacted by state facility licensure rules. Section 15010 temporarily reinstates, with some modifications, the set of clinical criteria under CAA 2016 for payment of the LTCH PPS for discharges of patients with severe wounds. The CAA 2016 provision expired after December 31, 2016. Under Section 15010, for discharges occurring in cost-reporting periods that begin in FY2018, an LTCH will be eligible to receive the LTCH PPS where all of the following apply: (1) the hospital was designated as an LTCH on or before September 30, 1995, and is colocated with another hospital; (2) the discharge is associated with a DRG relating to cellulitis or osteomyelitis; and (3) the individual was treated in the LTCH for a severe wound, as defined in the statute. The severe wound criteria for LTCH PPS payment under Section 15010 do not align precisely with those under CAA 2016. Both provisions designate a narrow set of hospitals by requiring that the LTCH at issue be a grandfathered hospital-within-hospital. However, Section 15010 is broader than the prior severe-wound exception in that it does not require that the LTCH be located in a rural area. Conversely, Section 15010 is narrower in that it requires the patient to have a diagnosis associated with cellulitis or osteomyelitis and in that the statutory definition of severe wound in Section 15010 is narrower than the one used in CAA 2016. Section 15010 requires the Comptroller General to conduct a study on the treatment needs of Medicare beneficiaries who require specialized wound care and the costs of wound care in rural and urban areas and to report to Congress on the study by October 1, 2020. The study is required to address beneficiaries' access to care; how the Medicare LTCH site neutral payment provisions will affect the access, quality, and cost of specialized wound care; and how to pay for such care appropriately under Medicare. Title XVI—Provisions Relating to Medicare Part B Section 16001. Continuing Medicare Payment Under HOPD Prospective Payment System for Services Furnished by Mid-build Off-Campus Outpatient Departments of Providers Some Medicare-covered items and services can be provided in multiple settings, for instance, in a physician's office, in a hospital outpatient department, or in freestanding or hospital-operated ambulatory surgical centers (ASCs). The applicable payment is determined by the site of service: the Medicare physician fee schedule (MPFS), the Medicare hospital outpatient prospective payment system (OPPS) fee schedule, or the Medicare ASC payment system, respectively, in the prior examples. MedPAC has recommended that Medicare implement site neutral policies, for instance, those that would equalize outpatient payment rates at hospitals to rates at freestanding physician offices. The Bipartisan Budget Act of 2015 (BBA 2015; P.L. 114-74 ), Section 603, among other things, codified the CMS definition of provider-based (PBD) off-campus hospital outpatient departments (HOPDs) as "a department of a provider ... that is not located on the campus ... or within [250 yards from] a remote location of a hospital facility," and defined a "new" PBD HOPD as an entity that was not billing as a hospital department prior to November 2, 2015 (the date of enactment of BBA 2015). Although existing PBD HOPDs are grandfathered to continue to receive payments according to the OPPS, new PBD HOPDs are paid under the ASC payment system or the MPFS rather than the OPPS, effective January 1, 2017. Provision Section 16001 makes modifications for certain new PBD HOPDs to be paid under the OPPS in 2017 and beyond. For purposes of applying the criteria described above, PBD HOPDs are deemed to be billing prior to November 2, 2015, if the HHS Secretary received an attestation from the provider prior to December 2, 2015, that the off-campus HOPD was and is part of a hospital . These PBD HOPDs are to be paid under the OPPS beginning January 1, 2017. For 2018 and in subsequent years, "mid-build" PBD HOPDs, defined as those PBD HOPDs for which the provider had a binding written agreement with an outside, unrelated party for the actual construction of such a department prior to November 2, 2015, also will be exempted from the BBA 2015 modification and will receive payments according to the OPPS. The HHS Secretary must receive such attestations by December 31, 2016, or, if later, by 60 days after enactment. The HHS Secretary must audit the accuracy of the statements no later than December 31, 2018. To implement this modification, $10 million will be made available from the Federal SMI Trust Fund, to remain available until December 31, 2018. The modifications in this section will be effective as if included in the enactment of BBA 2015 Section 603. Section 16002. Treatment of Cancer Hospitals in Off-Campus Outpatient Department of a Provider Policy Eleven cancer hospitals meet certain statutory criteria that exempt them from the Medicare inpatient PPS. These PPS-exempt cancer hospitals (PCHs) receive Medicare payments for inpatient services based on their reported costs, subject to an upper limit, as well as potential add-on payments. After the implementation of the OPPS in 1989, BBA 1997 established that PCH HOPDs would be paid no less than what they would have been paid prior to the implementation of the OPPS, applying an upward payment adjustment based on reported costs and a payment-to-cost ratio (PCR). BBA 2015 Section 603 did not make any exceptions for cancer hospitals. (See background to Section 16001.) Provision Section 16002 excludes PCH OPDs from the modifications made in BBA 2015 for applicable items and services furnished in 2017 and in subsequent years. PCHs are required to notify the HHS Secretary that their outpatient departments meet the requirements for being an HOPD, and such attestations are subject to audit by the HHS Secretary. Section 16002 also makes modifications to the PCR that result in offsetting savings. Beginning on January 1, 2018, for the payment adjustment for outpatient services provided at a PCH, the HHS Secretary is to use a target PCR that is 1.0 percentage point less than the target PCR that otherwise would apply. The HHS Secretary also may consider "an additional percentage point reduction" to the PCR, taking into account payments for applicable items and services furnished by off-campus outpatient departments made under Medicare payment systems other than the OPPS. To implement the modification made by Section 16002, $2 million will be made available from the Federal SMI Trust Fund, to remain available until expended. The changes made by this section will be effective as if included in the enactment of BBA 2015 Section 603. Section 16003. Treatment of Eligible Professionals in Ambulatory Surgical Centers for Meaningful Use and MIPS The Health Information Technology for Economic and Clinical Health (HITECH) Act, which was incorporated in ARRA, authorized Medicare and Medicaid incentive payments to promote the adoption and use of certified electronic health record technology (CEHRT). Eligible hospitals and nonhospital-based physicians qualify for incentive payments under the HITECH Act if they become meaningful users of CEHRT. Meaningful use is defined as using CEHRT to capture and exchange clinical information to improve the coordination and quality of care, and using such technology to report clinical quality measures. Under the HITECH Act, Medicare electronic health record (EHR) incentive payments for eligible physicians demonstrating meaningful use of CEHRT ended in 2016. Beginning in 2015, physicians who do not successfully demonstrate meaningful use are subject to a penalty in the form of a payment adjustment that reduces their Part B reimbursement for covered services. ASCs were not mentioned in the law; however, physicians who operate in ASCs are still eligible professionals and are subject to the meaningful use requirements. For eligible physicians who see patients in multiple practices or multiple locations, such as surgeons who use ASCs and physicians who treat patients in nursing homes, at least 50% of their patient encounters must occur at practices or locations equipped with CEHRT for them to be considered meaningful EHR users. Physicians who practice at multiple locations, including ASCs, have expressed concern that they lack control over the availability of CEHRT and may be unable to meet the 50% patient threshold. Currently, those physicians who cannot meet this threshold because they lack control over the availability of CEHRT can apply annually through 2018 for a hardship exception to avoid the annual payment adjustment. MACRA sunset the Medicare EHR payment adjustment for physicians at the end of 2018 and, among other things, established a new merit-based incentive payment system (MIPS). MIPS will incorporate many EHR-related meaningful use measures in a new measurement category (advancing care information, or ACI), which will be used to adjust payments to physicians and other practitioners beginning in 2019. Data on ACI measures will be collected beginning in 2017, and physicians' performance scores in the ACI category (as well as in the other MIPS categories) and how these scores would affect payments will be reported back to physicians beginning in 2018. However, MIPS adjustments to actual Medicare payments based on MIPS will not apply until 2019. In the November 4, 2016, final rule implementing MIPS, CMS noted that some commenters "urged the addition of an exclusion for MIPS eligible clinicians practicing in multiple locations because they may encounter specific hardships due to CEHRT availability." CMS responded that it is "finalizing fewer required measures for the base score of the advancing care information performance category than [it] had proposed. As there are now fewer required measures, [CMS does] not believe that it is necessary to create additional exclusions for measures which are now optional for reporting." Provision Section 16003 excludes physicians from the Medicare meaningful use payment adjustment in 2017 and 2018 in cases where "substantially all of the covered professional services" by the professional are furnished in an ASC. The determination of whether an ASC-based professional is to be excluded will be made on the basis of the site of service, as defined by the HHS Secretary, or an attestation submitted by the professional. The exclusion will sunset three years after the HHS Secretary, through notice and comment rulemaking, determines that certified EHR technology applicable to the ASC setting is available. Section 16004. Continuing Access to Hospitals Act of 2016 In the 2009 OPPS final rule, CMS established that outpatient therapeutic services furnished in hospital outpatient departments are required to have direct physician supervision, defined as having a physician "present and on the premises of the location and immediately available to furnish assistance and direction throughout the performance of the procedure." On March 15, 2010, CMS instructed its Medicare contractors not to enforce these supervision requirements with respect to CAHs in CY2010. As CMS continued to refine its direct supervision policy, the agency extended the moratorium on enforcement through CY2011 and expanded the scope of the moratorium to include both CAHs and small rural hospitals (which CMS defined as having 100 or fewer beds, being geographically located in a rural area, or being paid under the OPPS using a rural wage index). On November 1, 2012, CMS issued a notice that extended the moratorium through the end of CY2013. Two subsequent acts of Congress ( P.L. 113-198 , Section 1, and P.L. 114-112 , Section 1) further extended the moratorium through the end of CY2015. Provision Section 16004 extends the moratorium on enforcement of the requirement of direct supervision of outpatient therapeutic services furnished in CAHs and small rural hospitals through the end of CY2016. The section also requires MedPAC to report to Congress no later than one year after enactment on an analysis of the effect of the extension of the moratorium "on the access to health care by Medicare beneficiaries, on the economic impact and the impact upon hospital staffing needs, and on the quality of health care furnished to such beneficiaries." Section 16005. Delay of Implementation of Medicare Fee Schedule Adjustments for Wheelchair Accessories and Seating Systems When Used in Conjunction with Complex Rehabilitation Technology (CRT) Wheelchairs Medicare covers a variety of durable medical equipment (DME) when it is medically necessary and prescribed by a physician. The amount that Medicare will pay for the equipment is determined in one of two ways. First, in competitive bidding geographic areas, the Medicare payments are determined for selected items based on the bids (or estimates of the cost of providing the item) submitted by winning DME suppliers. Second, outside of competitive bidding areas, payments are determined through statutorily specified formulas (fee schedules) adjusted based on information from the competitive bidding process, when information is available. Not all items of DME are competitively bid. Therefore, not all items outside of competitive bidding areas have their fee schedule payments adjusted based on competitive bidding information. Competitive bidding tends to result in lower payment amounts for DME, so adjusting the fee schedules based on competitive bidding can result in lower payments. Certain items of DME were statutorily excluded from the competitive bidding program, including Group 3 complex rehabilitative power wheelchairs and their accessories. Group 2 complex rehabilitative power wheelchairs and their accessories were not excluded and were competitively bid in the first round of the program. In general, the difference between Group 2 and Group 3 complex rehabilitative power wheelchairs is related to the number of different power accessories that can be plugged into the chair and to the power, durability, and performance of the chair. Certain accessories can be used with either Group 2 or Group 3 chairs and were part of the competitive bidding process. The HHS Secretary published final regulations on November 6, 2014, that would have adjusted the fee schedule payments for wheelchair accessories based on information from the competitive bidding program regardless of the type of wheelchair the accessory was used with, effective starting January 1, 2016, for areas outside of competitive bidding areas. However, the Patient Access and Medicare Protection Act ( P.L. 114-115 ), prohibited the HHS Secretary from using information from the competitive bidding program to adjust the fee schedule payments for accessories furnished in conjunction with Group 3 complex rehabilitative power wheelchairs prior to January 1, 2017. Provision Section 16005 delays the date when the HHS Secretary can begin using information from competitive bidding to adjust the fee schedule rates for accessories used with Group 3 complex rehabilitative power wheelchairs by six months (to July 1, 2017). Section 16006. Allowing Physical Therapists to Utilize Locum Tenens Arrangements Under Medicare Physicians who are absent from their practices (for reasons such as illness, pregnancy, vacation, or continuing medical education) may retain substitute physicians to take over their practices temporarily. The regular physician may bill and receive payment for the substitute physician's services as though he or she performed them; the regular physician generally pays the substitute physician a fixed amount per diem or on a similar fee-for-time basis, with the substitute physician having the status of an independent contractor rather than of an employee. These substitute physicians are generally called locum tenens physicians. The Social Security Act Amendments of 1994, Section 125(b), authorized regular physicians to bill Medicare for the services of locum tenens physicians beginning January 1, 1995. Medicare statute (Section 1861(r)) defines a physician as a doctor of medicine or osteopathy, licensed in the state where he or she practices. In addition, for certain purposes and within limitations, a doctor of dental surgery or of dental medicine, a doctor of podiatric medicine, a doctor of optometry, or a chiropractor is also considered a physician. Prior to passage of P.L. 114-255 , health care professionals not included in that list were nonphysicians under the Medicare program and therefore were unable to serve locum tenens. Provision Section 16006 allows physical therapists who furnish outpatient physical therapy services in a health professional shortage area (as defined in Public Health Service Act (PHSA) Section 332(a)(1)(A)), a medically underserved area (as designated pursuant to PHSA Section 330(b)(3)(A)), or a rural area (as defined in Social Security Act Section 1886(d)(2)(D)), to use locum tenens arrangements for payment purposes for these services in the same manner as such arrangements are used for physicians. This modification is to be effective no later than six months after enactment. Section 16007. Extension of the Transition to New Payment Rates for Durable Medical Equipment Under the Medicare Program Medicare pays for most durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) on the basis of fee schedules. However, in competitive bidding areas, the prices paid by Medicare for selected items of DMEPOS are based on the bids of winning suppliers rather than on fee schedules. Starting in 2016, the ACA required the HHS Secretary to either expand competitive bidding to more areas or use information from competitive bidding to adjust the fee schedule amounts that apply outside of competitive bidding areas. The final rule establishing the methodology was published November 6, 2014, and phased in the methodology as follows: (1) for items and services furnished January 1, 2016, through June 30, 2016, 50% of the payment was based on the new adjusted fee schedule methodology and 50% was based on the unadjusted fee schedule amount and (2) for items and services furnished starting July 1, 2016, the Medicare payment was based entirely on the adjusted fee schedule amount. Provision Section 16007 requires the HHS Secretary to extend the transition to the adjusted fee schedule amounts by six months so that (1) for items and services furnished January 1, 2016, through December 31, 2016, 50% of the payment is based on the new adjusted fee schedule methodology and 50% is based on the unadjusted fee schedule amount and (2) for items and services furnished starting January 1, 2017, the Medicare payment is based entirely on the adjusted fee schedule amount. Section 16007 also requires the HHS Secretary to examine the impact of the payment adjustments on the number of suppliers that ceased to conduct business as suppliers during CY2016 and the availability of equipment to beneficiaries during the same period. The HHS Secretary is to submit a report on the findings to Congress by January 12, 2017. Section 16008. Requirements in Determining Adjustments Using Information from Competitive Bidding Programs As described in " Section 16007. Extension of the Transition to New Payment Rates for Durable Medical Equipment Under the Medicare Program ," the ACA required the HHS Secretary to either expand competitive bidding to more geographic areas or use information from competitive bidding to adjust fee schedule amounts that apply outside of competitive bidding areas. In doing so, the HHS Secretary was required to specify the methodology for adjusting fee schedule amounts through regulation and to consider the costs of items and services in areas in which the methodology would be applied relative to costs in competitive bidding areas. On February 26, 2014, the HHS Secretary published an advance notice of proposed rulemaking (ANPR) and requested comments on factors to consider when developing the methodology; the HHS Secretary specifically asked for comments about whether costs of providing items and services varied by geography, size of the market, or delivery distance. The HHS Secretary also asked what alternative information could be relied upon to determine relative costs. The HHS Secretary published a proposed rule on July 11, 2014, which summarized the comments received in the ANPR. Commenters generally agreed that costs vary by geography and among rural and non-rural areas but offered few suggestions about how to measure the differences. For example, "one commenter representing many suppliers said that there exists no reliable cost data." The final rule, published November 6, 2014, indicated "Although we do not have direct evidence that cost[s] in rural areas are higher than costs in urban areas or vice versa or that the SPAs [Competitive Bidding Single Payment Amounts] do not cover costs in rural areas, we believe it is prudent for the sake of ensuring access to items and services in these areas to proceed cautiously in adjusting fee schedule amounts in these areas." In general, the regulation set the adjustments to the fee schedule amounts based on regional averages with a ceiling and floor based on a national average of the regional averages. Rural areas are prohibited from having their payment adjusted below 110% of the national average for an item. Provision Section 16008 requires the HHS Secretary to solicit and take into account stakeholder input when adjusting fee schedule rates outside of competitive bidding areas for items and services furnished on or after January 1, 2019. It also requires the HHS Secretary to take into account the highest bid amount by a winning supplier in a competitive bidding area and a comparison of each of the following with respect to competitive bidding areas and non-competitive bidding areas: (1) the average travel distance and cost associated with furnishing items and services in the area, (2) the average volume of items and services furnished by suppliers in the area, and (3) the number of suppliers in the area. Title XVII—Other Medicare Provisions Section 17001. Delay in Authority to Terminate Contracts for Medicare Advantage Plans Failing to Achieve Minimum Quality Ratings Under MA, CMS pays private health plans a per-enrollee amount to provide all Medicare-covered benefits (except hospice) to beneficiaries who enroll in their plans. Social Security Act Section 1853(o)(4) requires the HHS Secretary to use a five-star quality rating system to administer bonus payments to high-performing MA organizations. High star ratings also result in an increase in an MA organization's rebate if its contract bid is less than the maximum amount Medicare will pay. In addition, the five-star quality rating system is used to rate PDPs. The Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act; P.L. 113-185 ) required the HHS Secretary to conduct a study examining the effect of Medicare beneficiaries' socioeconomic status on quality measures and resource use. This provision reflected Congress's concern that Medicare providers and MA organizations that serve high-needs populations (and, in particular, Medicare-Medicaid dual-eligible beneficiaries) may be disadvantaged under quality rating systems that focus to some extent on health outcomes. The Social Security Act authorizes the HHS Secretary to terminate a contract with an MA organization or a PDP if the HHS Secretary determines that the MA organization or PDP has failed substantially to carry out the contract, is carrying out the contract in a manner inconsistent with the efficient and effective administration of the Medicare program, or no longer meets the applicable Medicare program conditions. CMS amended its regulations in 2012 to include a ground for contract termination relating to an MA organization's or a PDP's rating under the five-star system. Specifically, under the regulation, CMS may terminate a contract with an MA organization or a PDP if the plan receives a "summary plan rating of less than 3 stars for 3 consecutive contract years." The regulation applies to plan ratings issued by CMS after September 1, 2012. In recent years, CMS has terminated some MA organizations' contracts on this basis. Provision Section 17001 expresses the intent of Congress, consistent with the IMPACT Act, to continue to study and request input on the effects of socioeconomic status and dual-eligible populations on the MA five-star rating system before reforming the system with the input of stakeholders. The provision also expresses Congress's intent to delay CMS's authority to terminate MA organizations' contracts solely on the basis of low quality ratings, pending the results of these studies. Accordingly, Section 17001 provides that from the date of enactment of P.L. 114-255 until the end of plan year 2018, the HHS Secretary may not terminate an MA organization's contract solely because the MA plan has failed to achieve a minimum quality rating under the five-star rating system. Because the contract termination procedures for MA organizations statutorily apply to PDPs, as well, the provision also bars the Secretary from terminating a PDP's contract on the basis of failure to achieve a minimum quality rating. Section 17002. Requirement for Enrollment Data Reporting for Medicare CMS provides data on Medicare beneficiary enrollment for fee-for-service (FFS) Medicare (Parts A and/or B), MA, and Part D on the "CMS Program Statistics" website. There is no statutory requirement for CMS to provide this data. Provision Section 17002 requires the HHS Secretary to submit Medicare enrollment data to the congressional committees of jurisdiction on an annual basis, beginning in 2016. These data are to include enrollment figures for FFS Medicare, MA (for both stand-alone plans and plans that include Part D), and Part D at the state and congressional district levels. Section 17003. Updating the Welcome to Medicare Package Individuals who are receiving Social Security benefits at least four months prior to the month in which they turn 65 years of age (or in the case of the disabled, for at least four months prior to their 25 th month of disability benefit) are automatically enrolled in Medicare Parts A and B. These individuals are sent a "Welcome to Medicare" package three months prior to their month of eligibility. This package includes the following: (1) Welcome to Medicare cover letter; (2) Welcome to Medicare booklet; (3) Medicare card; and (4) Form CMS-1966 (Part B refusal card), together with a postage-paid envelope. The booklet provides a basic overview of the various parts of Medicare and lists key decisions that new Medicare beneficiaries need to make. Such decisions include whether to keep Part B coverage, stay in original Medicare (Parts A and B) or select an MA plan, enroll in a PDP, and/or purchase private supplemental coverage (Medigap). Provision Section 17003 requires the HHS Secretary to update the Welcome to Medicare package, taking into consideration information and recommendations provided by stakeholders on how to improve the enrollment and coverage information provided in this package. The HHS Secretary is to request the information from stakeholders (including patient advocates, issuers, and employers) within 6 months of the date of enactment and to update the information in the Welcome to Medicare package not later than 12 months after the last day of the period for the request of this information. The HHS Secretary is to make subsequent updates to the information in this package as appropriate. Section 17004. No Payment for Items and Services Furnished by Newly Enrolled Providers or Suppliers Within a Temporary Moratorium Area The ACA Section 6401(a) authorizes the HHS Secretary to impose a temporary moratorium on enrollment of new Medicare, Medicaid, or CHIP FFS providers and suppliers if the HHS Secretary determines a moratorium is necessary to address Medicare, Medicaid, or CHIP fraud, waste, or abuse. Under this temporary enrollment moratorium authority, the HHS Secretary can impose numerical caps or otherwise limit provider or supplier enrollment. Subject to CMS approval, state Medicaid programs also are authorized to impose temporary moratoriums on new provider or supplier enrollment. Under the temporary moratorium authority, the HHS Secretary is required to specify the particular type of providers or suppliers that are temporarily prohibited from enrolling or the geographic area subject to the new provider enrollment moratorium. Before initiating a temporary moratorium on new provider enrollment, the HHS Secretary is required to consult with state Medicaid programs affected by the moratorium. After consultation with states affected by the moratorium, the HHS Secretary is required to impose the moratorium unless an affected state determines that a moratorium on new provider or supplier enrollment would reduce Medicaid or CHIP beneficiaries' access to care. States that determine a temporary moratorium on new provider enrollment would reduce beneficiaries' access to care are required to notify the HHS Secretary in writing. All temporary provider or supplier enrollment moratoriums, state or federal, may be imposed for six months initially and extended in six-month increments. ACA Sections 6401(b) and (c) require state Medicaid and CHIP programs to comply with any moratorium imposed by the HHS Secretary unless the state determines that a moratorium would reduce Medicaid beneficiaries' access to care. Provision Under Section 17004, beginning October 1, 2017, the HHS Secretary is authorized to prohibit payment for services or items furnished by Medicare, Medicaid, or CHIP providers and suppliers who are subject to temporary new provider or supplier enrollment moratoria. To be subject to the payment prohibition, providers and suppliers must be enrolled in Medicare, Medicaid, or CHIP as of the effective date of the new provider moratorium and must be in the same geographic area and provider or supplier category as those in the temporary new provider enrollment moratorium. Section 17004 prohibits the HHS Secretary from making federal matching payments to states for items and services provided by Medicaid (and CHIP) providers or suppliers that are subject to a temporary new provider moratorium and a payment prohibition. Providers and suppliers subject to a temporary new provider enrollment moratorium and a Section 17004 payment prohibition are prohibited from charging individuals eligible for Medicare Part A or enrolled in Part B, Medicaid, or CHIP for items or services subject to the payment prohibition. In addition, the HHS Secretary is authorized to exempt state Medicaid programs from a temporary new provider and supplier enrollment moratorium and to make federal matching payments for services and supplies provided by exempt providers if the state determines that the moratorium will restrict beneficiaries' access to Medicaid or CHIP services or supplies. States are required under Section 17004 to amend their state plans to specify that providers and suppliers affected by a temporary new provider enrollment moratorium and payment prohibition are prohibited from charging Medicaid beneficiaries covered under a state plan or waiver for items and services provided by the provider or supplier during the moratorium period. Section 17005. Preservation of Medicare Beneficiary Choice Under Medicare Advantage Medicare beneficiaries may enroll in or change their enrollment in MA from October 15 through December 7 each year (the annual, coordinated election period). Changes go into effect on January 1 of the next year. Starting in 2011, at any time during the first 45 days of the year, MA enrollees may disenroll from their MA plans and return to Parts A and B and may elect to enroll in a stand-alone PDP (the annual 45-day period for disenrollment). In addition, MA enrollees may discontinue or change their MA enrollment during specified special election periods. One such special election period pertains to individuals who (1) first become eligible for Part A at the age of 65, (2) enroll in Part B, and (3) immediately enroll in an MA plan; such individuals may discontinue election of their MA plans and elect coverage in Parts A and B at any time during their first 12 months of enrollment. Provision Section 17005 discontinues the annual 45-day period of disenrollment at the end of the 2018 period. Starting in 2019, this provision creates a continuous open enrollment and disenrollment period during the first three months of each year, during which an MA enrollee may switch to a different MA plan or disenroll from MA to return to Parts A and B (with or without a PDP). Also starting in 2019, a comparable three-month window will be provided to individuals who enroll in an MA plan upon first becoming eligible for Medicare during the year. MA enrollees may make only one change during the continuous open enrollment and disenrollment period for a year. Section 17005 prohibits marketing materials from being sent to individuals during the continuous open enrollment and disenrollment period. Section 17006. Allowing End-Stage Renal Disease Beneficiaries to Choose a Medicare Advantage Plan An individual is eligible to enroll in an MA plan if he or she is eligible for Part A, enrolled in Part B, and does not have ESRD. An MA enrollee who develops ESRD is allowed to remain enrolled. MA plans are paid a capitated, monthly payment to provide all required benefits to enrollees (except hospice, which is covered for MA enrollees through a Part A payment). The maximum possible amount of that payment is called the benchmark and is determined through a statutory formula for each county. As of payment year 2017, the benchmarks are based on a percentage of per capita spending in Parts A and B, with certain costs excluded and certain other adjustments made. Benchmarks also are increased based on plan quality, as measured by a five-star rating system. Payments to MA plans are risk adjusted to take into account the demographics and health histories of the beneficiaries who actually enroll in the plan. The risk-adjustment model used to adjust MA payments takes into account age, disability status, gender, institutional status, and other factors the HHS Secretary determines appropriate. One factor, in particular, is whether a beneficiary is enrolled in both the Medicare and Medicaid programs (dual-eligible beneficiaries). Programmatically, there are two categories of dual-eligible beneficiaries—full-benefit and partial dual-eligible beneficiaries. Full-benefit dual-eligible beneficiaries receive full benefits from Medicare and Medicaid. Partial dual-eligible beneficiaries receive full benefits from Medicare and financial assistance from Medicaid for Medicare premiums and/or cost sharing. Prior to payment year 2017, the risk-adjustment model did not distinguish between full-benefit and partial dual-eligible beneficiaries (i.e., both simply counted as dual eligibles) and research showed that the model overestimated the cost of partial dual-eligible beneficiaries and underestimated the cost of full-benefit dual-eligible beneficiaries. In October 2015, the HHS Secretary proposed to update the risk-adjustment model for payment year 2017. One aspect of the update was to replace the model with six separate models that took into account full-benefit dual eligibility, partial dual eligibility, and non-dual eligibility for both aged and disabled beneficiaries. CMS analysis showed that creating separate models more accurately estimated costs for these groups but would result in lower payments for MA plans that enrolled a larger proportion of partial dual-eligible beneficiaries. Provision Section 17006 allows beneficiaries with ESRD to enroll in MA for plan years beginning on or after January 1, 2021. For the same year, the HHS Secretary is required to adjust benchmarks to exclude the HHS Secretary's estimate of the cost of organ acquisition for kidney transplants covered under Medicare, including the expenses covered for individuals donating a kidney for transplant. Similar to the way hospice is paid for MA enrollees, the costs associated with kidney acquisition for MA enrollees are to be payable under Parts A and B. Section 17006 requires the HHS Secretary to evaluate whether the MA five-star quality rating system should include a quality measure specifically related to the care of MA enrollees with ESRD; the HHS Secretary is to publish the results on the CMS website no later than April 1, 2020. Section 17006 also requires the HHS Secretary to submit to Congress a report on the impact of these provisions on the following: (1) spending under Parts A and B and under MA and (2) the number of beneficiaries determined to have ESRD in Parts A and B and in MA. The report is required to include information on whether the amount of data under Parts A and B on ESRD beneficiaries is sufficient for determining payments for MA enrollees with ESRD. The report is required to be submitted not later than December 31, 2023. Section 17006 requires the HHS Secretary to change certain aspects of risk adjustment starting in 2019. The HHS Secretary is required to take into account the total number of diseases or conditions of an MA enrollee and make additional adjustments as the number of diseases or conditions of an individual increases. The HHS Secretary is required to make separate risk adjustments for beneficiaries who are full-benefit dual-eligible beneficiaries and those who are not full-benefit dual-eligible beneficiaries. The HHS Secretary is required to evaluate the impact of additional diagnosis codes related to mental health and substance-use disorders in the risk-adjustment model. The HHS Secretary also is required to evaluate the impact of including the severity of chronic kidney disease in the model and to evaluate whether other ESRD factors should be taken into consideration. In addition, the HHS Secretary may use at least two years of diagnosis data for risk adjustment. Any changes to risk adjustment are required to be phased in over a three-year period, beginning in 2019 with such changes being fully implemented for 2022 and subsequent years. The HHS Secretary is required to provide an opportunity for review and comment for a period of not less than 60 days before implementing such changes. Section 17006 requires MedPAC to evaluate the impact of provisions in this section on risk scores for enrollees in MA and payments to plans, including the impact on overall accuracy of risk scores. MedPAC is required to submit the report, along with recommendations, by no later than July 1, 2020. Section 17006 requires the HHS Secretary to submit a report to Congress no later than December 31, 2018, and at least every three years thereafter, on the risk-adjustment model and the ESRD risk-adjustment model under MA. The report is to include any revisions to the model since the last report and how changes impact predictive ratios under MA, including for the very high and very low cost enrollees and for groups defined by chronic conditions. Section 17006 requires the comptroller general to conduct a study on how to most accurately measure functional status of enrollees in MA plans and whether the use of such status would improve the accuracy of risk adjustment. This report, along with recommendations, is required to be submitted to Congress by no later than June 30, 2018. Section 17007. Improvements to the Assignment of Beneficiaries Under the Medicare Shared Savings Program The Medicare Shared Savings Program (MSSP) was established by the ACA as a type of accountable care organization (ACO) that "promotes accountability for a patient population and coordinates items and services under Parts A and B, and encourages investment in infrastructure and redesigned care processes for high quality and efficient service delivery." By statute, Medicare FFS beneficiaries would be assigned to MSSP ACOs "based on their utilization of [Medicare] primary care services provided ... by an ACO professional," defined as a physician or practitioner under current law. Provision Section 17007 modifies the requirements for the assignment of Medicare beneficiaries to MSSP ACOs beginning January 1, 2019. In addition to considering the care furnished by a primary care physician or practitioner, primary care services furnished by a federally qualified health center or a rural health clinic to a Medicare FFS beneficiary also will be used in determining assignment to MSSP ACOs. Title XVIII—Other Provisions Section 18001. Exception from Group Health Plan Requirements for Qualified Small Employer Health Reimbursement Arrangements Health reimbursement arrangements (HRAs) are employer-established arrangements that pay or reimburse employees for substantiated medical care expenses up to a maximum dollar amount. HRAs are funded solely by employers; employees cannot contribute to HRAs directly or through salary reduction agreements. Employers choose how much to contribute to employees' HRAs. Payments and reimbursements for medical care expenses generally are excluded from the employee's income (i.e., are not subject to taxes), provided the HRA meets specified requirements. Current, former, and retired employees and their spouses and dependents are eligible to participate in HRAs. An HRA can only be used to pay or reimburse individuals for substantiated medical care expenses. Medical care is defined in the Internal Revenue Code (IRC) Section 213(d); medical care expenses include amounts paid for the "diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body." They also include certain transportation and lodging expenditures, amounts paid for health insurance premiums and qualified long-term care costs, and long-term care insurance premiums that do not exceed certain amounts. If a distribution is, or can be, made from the HRA for payment or reimbursement of anything other than medical care expenses, all distributions from the HRA in that tax year are included in the employee's income (i.e., are subject to taxes). In September 2013, the Department of the Treasury, HHS, and Department of Labor issued guidance in which the agencies determined that, in general, an HRA must be integrated with another group health plan (that is not an HRA) to comply with two requirements that apply to group health plans. The two requirements are described below. Prohibition on annual limits: Group health plans are prohibited from having dollar limits on the amount the plan will spend for covered health benefits during a plan year. Preventive services requirement: Group health plans must provide coverage for certain preventive health services without imposing cost sharing. Employers that offer group health plans that do not comply with one or both of these requirements—including an HRA that is not integrated with a non-HRA group health plan—could be subject to an excise tax of $100 per day per employee covered under the noncompliant arrangement. A salient aspect of the guidance (and subsequent follow-up guidance) is that it specifically addresses HRAs that pay or reimburse employees for health insurance coverage purchased in the non-group, or individual, market. In general, the guidance provides that an HRA that can be used for such purposes may not be integrated with a non-HRA group health plan and therefore is not in compliance with the prohibition on annual limits and the preventive service requirement. The guidance issued in September 2013 was effective for plan years beginning January 1, 2014; however, transition relief was provided for small employers in guidance issued by the Internal Revenue Service (IRS) in April 2015. Under the transition relief, a small employer is one with fewer than 50 full-time-equivalent employees. Employers eligible for the transition relief did not have to comply with the requirements of the September 2013 guidance until after June 30, 2015. Provision Section 18001(a)(1) creates qualified small employer health reimbursement arrangements (SEHRAs). A SEHRA is an arrangement offered by an eligible employer that pays or reimburses employees for substantiated medical expenses. A SEHRA can only be funded by an employer. Employees cannot contribute to a SEHRA directly or via salary reduction agreement. Payments and reimbursements from the SEHRA cannot exceed $4,950 per year for self-only coverage or $10,000 per year for coverage that includes family members. (These dollar amounts are prorated for part-year employees and are indexed for inflation in future years.) The maximum dollar amount of payments or reimbursements an employee can receive under a SEHRA in a year is referred to as the permitted benefit . An employer must provide a SEHRA "on the same terms" to all "eligible employees." A SEHRA does not fail the test of "on the same terms" simply because employees' permitted benefits vary in accordance with permitted variations for age and family size in the price of insurance policies available in the non-group market. An eligible employee is any employee of the employer, except that the terms of the SEHRA may exclude certain types of employees as described in IRC Section 105(h)(3)(B). An eligible employee's family members' expenses are eligible for reimbursement from the SEHRA. Eligible family members are determined "under the terms of the arrangement." SEHRAs generally are exempted from the definition of group health plan; therefore, they do not have to comply with requirements that apply to group health plans. As a result, SEHRAs are not subject to the requirement, as interpreted by the agencies in the 2013 guidance, that applies to HRAs to be integrated with a (non-HRA) group health plan or the restriction on the use of payments or reimbursements for coverage purchased in the non-group market. Employers eligible to offer SEHRAs are those with fewer than 50 full-time-equivalent employees that do not offer group health plans to any of their employees. No later than 90 days prior to the beginning of a year in which an employer provides SEHRAs to its employees, the employer must provide written notification to its employees. The notification must include the following content: the amount of the permitted benefit the employee is eligible to receive under the SEHRA; a statement telling the employee that he or she should provide information about the permitted benefit when applying to a health insurance exchange for premium tax credits (as provided under IRC Section 36B); and a statement explaining that if the employee is not covered by minimum essential coverage for any month in which the individual is eligible to receive reimbursements from a SEHRA, the individual could be subject to the penalty for not complying with the requirement to maintain health insurance coverage (IRC Section 5000A) and reimbursements from the SEHRA could be included in gross income. Section 18001(a)(5) imposes a fine on employers that fail to provide this notification as required. The fine is equal to $50 per employee per failure, limited to a maximum fine of $2,500 per calendar year for all such failures. Under Section 18001(a)(2), payments and reimbursements from a SEHRA are excludable from an employee's income as long as the payments and reimbursements are for medical care expenses (as defined in IRC Section 213(d)) and the medical care is received in a month when the individual is covered by minimum essential coverage (as defined in IRC Section 5000(f)). Section 18001(a)(3) provides that if an employee's SEHRA constitutes affordable coverage (as discussed below), the employee is not eligible to receive a premium tax credit for non-group coverage purchased through an exchange. If an employee's SEHRA does not constitute affordable coverage, the employee may be eligible to receive a premium tax credit; however, the credit amount the employee is eligible to receive in a month would be reduced (but not below zero) by an amount equal to one-twelfth of the permitted benefit amount for the SEHRA. A SEHRA constitutes affordable coverage in a month if the monthly premium for self-only coverage for the second-lowest-cost silver plan available to the employee through an exchange that is over one-twelfth of the employee's permitted benefit amount does not exceed one-twelfth of 9.5% of the employee's household income. (The formula is prorated for part-year employees, and the 9.5% is indexed for inflation in future years.) Section 18001(a)(4) provides that with respect to IRC Section 4980I (the excise tax on high-cost employer-sponsored health insurance), the definition of group health plan includes SEHRAs. As a result, when an employer calculates the cost of the health coverage it provides to each of its employees for purposes of determining whether the employer is subject to the excise tax, the employer must include the amounts contributed to employees' SEHRAs. Section 18001(a)(6) provides that employers must report information about permitted benefits under a SEHRA on employees' W-2 forms. Section 18001(a)(7) provides that, in general, all amendments made by Section 18001 are effective for years beginning after December 31, 2016. Additionally, the subsection extends the transition relief provided under IRS Notice 2015-17 for small employers through December 31, 2016. Section 18001(b) and (c) amend the Employee Retirement Income Security Act (ERISA) and the PHSA, respectively, to generally exempt SEHRAs from the definition of group health plan. The amendments apply to plan years beginning after December 31, 2016. Appendix. List of Abbreviations ACA: Patient Protection and Affordable Care Act ( P.L. 111-148 , as amended) ACI: Advancing Care Information ACO: Accountable Care Organization ALE: Applicable Large Employer ALOS: Average Length of Stay ANPR: Advance Notice of Proposed Rulemaking ARRA: American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) ASC: Ambulatory Surgical Center ATRA: American Taxpayer Relief Act of 2012 ( P.L. 112-240 ) BBA 1997 : Balance Budget Act of 1997 ( P.L. 105-33 ) BBA 2015: Bipartisan Budget Act of 2015 ( P.L. 114-74 ) CY: Calendar Year CAA 2016: Consolidated Appropriations Act of 2016 ( P.L. 114-113 ) CAH: Critical Access Hospital CBO: Congressional Budget Office CEHRT: Certified Electronic Health Records Technology CHIP: Children's Health Insurance Program CMS: Centers for Medicare & Medicaid Services DRG: Diagnosis Related Group DME: Durable Medical Equipment DMEPOS: Durable Medical Equipment, Prosthetics, Orthotics, and Supplies EHR : Electronic Health Record ERISA: Employee Retirement Income Security Act ESRD: End-Stage Renal Disease FFS: Fee-For-Service FY: Fiscal Year HCPCS: Healthcare Common Procedure Code System HHS: Department of Health and Human Services HI: Hospital Insurance HITECH: Health Information Technology for Economic and Clinical Health Act HOPD: Hospital Outpatient Department HRA: Health Reimbursement Arrangement HRRP: Hospital Readmission Reduction Program ICD: International Classification of Diseases IMPACT: Improving Medicare Post-Acute Care Transformation Act of 2014 ( P.L. 113-185 ) IPPS: Inpatient Prospective Payment System IRC: Internal Revenue Code IRS: Internal Revenue Service LTCH: Long-Term Care Hospital MA: Medicare Advantage MACRA: Medicare Access and CHIP Reauthorization Act of 2015 ( P.L. 114-10 ) MedPAC: Medicare Payment Advisory Commission MIPS: Merit-Based Incentive Payment System MMA: Medicare Prescription Drug, Improvement, and Modernization Act of 2003 ( P.L. 108-173 ) MMSEA: Medicare, Medicaid, and SCHIP Extension Act of 2007 ( P.L. 110-173 ) MPFS: Medicare Physician Fee Schedule MS-DRG: Medicare Severity Diagnosis Related Group MSSP: Medicare Shared Savings Program OPD: Outpatient Department OPPS: Outpatient Prospective Payment System PAMA: Protecting Access to Medicare Act of 2014 ( P.L. 113-93 ) PBD: Provider-Based PCH: Prospective Payment System-Exempt Cancer Hospitals PCR: Payment-to-Cost Ratio PDP: Prescription Drug Plan PHSA: Public Health Service Act PPS: Prospective Payment System RCH: Rural Community Hospital SEHRA: Small Employer Health Reimbursement Arrangement SMI: Supplementary Medical Insurance SPA: Competitive Bidding Single Payment Amount

This report summarizes the Increasing Choice, Access, and Quality in Health Care for Americans Act, enacted December 13, 2016, as Division C of the 21st Century Cures Act (P.L. 114-255). Division C comprises Title XV through Title XVII, which include provisions primarily relating to Medicare and Title XVIII, which includes a provision relating to the small-group health insurance market. Title XV Medicare Part A provisions: extend the Rural Community Hospital demonstration five years; require the Secretary of the Department of Health and Human Services (HHS) to account for socioeconomic factors in administering the Hospital Readmission Reduction Program; reduce a specific inpatient hospital payment update for FY2018; require the HHS Secretary to create a crosswalk between codes used for reimbursing procedures performed in inpatient and outpatient settings; and make adjustments to long-term care hospital (LTCH) reimbursement including creating or reinstating temporary clinical criteria for payment under the LTCH prospective payment system (PPS) rather than site neutral payment; modifying the average length of stay formula that determines whether a hospital qualifies as an LTCH; reinstating an exemption from a temporary moratorium on additional LTCH beds; delaying implementation of a rule that lowers reimbursement for certain LTCHs that rely disproportionately on referrals from a single acute-care hospital; and creating a new, non-LTCH hospital category in statute for a specific type of long-stay hospital. Title XVI Medicare Part B provisions: make modifications for PPS-exempt cancer hospital and certain new provider-based hospital outpatient departments to be paid under the outpatient PPS; exclude certain ambulatory surgical center-based eligible professionals from the electronic health records meaningful use payment adjustment; allow physical therapists who furnish outpatient physical therapy in certain areas to use locum tenens arrangements for payment purposes; extend the delay in enforcement of direct physician supervision requirements for outpatient therapeutic services in critical access hospitals and small rural hospitals; and make changes to durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) payment including delaying when competitive bidding information can be used to adjust fee schedule rates for Group 3 complex rehabilitative power wheelchairs accessories; extending the transition to the adjusted fee schedule for DMEPOS; and requiring the HHS Secretary to consider stakeholder input when adjusting fee schedule rates outside of competitive bidding areas. Title XVII's other Medicare provisions: express Congress's intent to continue to study the effects of socioeconomic status and dual-eligible populations on the Medicare Advantage (MA) five-star rating system before reforming the system with stakeholder input; instruct that the HHS Secretary may not terminate MA or Prescription Drug Plan (PDP) contracts solely because of failure to achieve a minimum quality rating; create a three-month period at the beginning of the year during which an MA enrollee may switch to a different MA plan or return to Medicare Parts A and B (with or without a PDP); allow beneficiaries with end-stage renal disease (ESRD) to enroll in MA beginning January 1, 2021; modify the requirements for assigning beneficiaries to Medicare Shared Savings Program (MSSP) accountable care organizations; require the HHS Secretary to submit Medicare enrollment data to Congress annually; require the HHS Secretary to update the new beneficiary Welcome to Medicare package; and authorize the HHS Secretary to prohibit payment for services or items furnished by Medicare, Medicaid, or State Children's Health Insurance Program providers and suppliers who are subject to temporary new provider or supplier enrollment moratoria. Title XVIII: creates qualified small employer health reimbursement arrangements, which are arrangements offered by eligible employers that pay or reimburse employees for substantiated medical expenses. Under certain conditions, employers may make contributions up to a specified limit and employees do not owe income tax on the payments and reimbursements.

CRS_R44203

Introduction The Fair Housing Act (FHA) was enacted "to provide, within constitutional limitations, for fair housing throughout the United States." It prohibits discrimination on the basis of race, color, religion, national origin, sex, physical and mental handicap, and familial status. Subject to certain exemptions, the FHA applies to all sorts of housing, public and private, including single family homes, apartments, condominiums, and mobile homes. It also applies to "residential real estate-related transactions," which include both the "making [and] purchasing of loans ... secured by residential real estate [and] the selling, brokering, or appraising of residential real property." In June 2015, the Supreme Court, in Texas Department of Housing Community Affairs v. Inclusive Communities Project , confirmed the long-held interpretation that, in addition to outlawing intentional discrimination, the FHA also prohibits certain housing-related decisions that have a discriminatory effect on a protected class. Historically, courts have generally recognized two types of disparate impacts resulting from "facially neutral decision[s]" that can result in liability under the FHA. The first occurs when that decision has a greater adverse impact on one [protected] group than on another. The second is the effect which the decision has on the community involved; if it perpetuates segregation and thereby prevents interracial association it will be considered invidious under the Fair Housing Act independently of the extent to which it produces a disparate effect on different racial groups. The Supreme Court's holding in Inclusive Communities that "disparate-impact claims are cognizable under the [FHA]" mirrors previous interpretations of the Department of Housing and Urban Development (HUD) and all 11 federal courts of appeals that had ruled on the issue. However, as discussed further below, HUD and the 11 courts of appeals have not all applied the same criteria for determining when a neutral policy that causes a disparate impact violates the FHA. In a stated attempt to harmonize disparate impact analysis across the country, HUD finalized regulations in 2013 that established uniform standards for determining when such practices violate the act. The Inclusive Communities Court did not expressly adopt the standards established in HUD's disparate impact regulations. Rather, the Court adopted a three-step burden-shifting test that has some similarities with these standards. In addition, the Court outlined a number of limiting factors that lower courts and HUD should apply when assessing disparate impact claims. It likely will take years to gain a strong understanding of how the Inclusive Communities decision will affect future disparate impact litigation under the FHA (and other laws such as Title VII of the Civil Rights Act of 1964). While plaintiffs historically have faced fairly steep odds of getting their disparate impact claims past the preliminary stages of litigation, much less succeeding on the merits of those claims, it is possible that the "cautionary standards" stressed by the Inclusive Communities majority might result in even fewer successful disparate impact claims and swifter disposal of claims that are raised. This report provides an overview of how the lower courts and HUD evaluated allegations of discriminatory effects before the Supreme Court's Inclusive Communities decision. This discussion is followed by an assessment of Inclusive Communities and an analysis of the potential implications of the Court's ruling. Disparate Impact Analysis Before Inclusive Communities As noted, all of the circuit courts of appeals that had previously addressed the issue held that disparate impact claims are cognizable under the FHA. The U.S. Court of Appeals for the Seventh Circuit, for example, reasoned that "a requirement that the plaintiff prove discriminatory intent before relief can be granted under the statute is often a burden that is impossible to satisfy.... A strict focus on intent permits racial discrimination to go unpunished in the absence of evidence of overt bigotry ... [which] has become harder to find." The Seventh Circuit went on to explain that interpreting the FHA so narrowly as to allow systematic discrimination in housing simply because it is done "discreetly" would be counter to congressional intent, and "[w]e therefore hold that at least under some circumstances a violation of section 3604(a) can be established by a showing of discriminatory effect without a showing of discriminatory intent." Beyond agreement that disparate impact claims are cognizable, a number of other commonalities existed among the circuits before the Inclusive Communities ruling. For example, courts typically looked to Title VII disparate impact cases in the employment context for guidance in FHA-based claims (and vice versa ). Additionally, there was general agreement among the circuits that plaintiffs must rely on more than a mere statistical anomaly to make a prima facie showing of a discriminatory effect. The Seventh Circuit, for instance, explained that "we refuse to conclude that every action which produces discriminatory effects is illegal. Such a per se rule would go beyond the intent of Congress and would lead courts into untenable results in specific cases." The circuits generally agreed that plaintiffs must provide causal evidence—that is, evidence showing that a particular practice caused the disparity on a protected class. Another important common feature prior to Inclusive Communities is that plaintiffs were rarely successful with disparate impact claims, at least at the appellate level. Rather, it appears that most of the plaintiffs' disparate impact claims that were reviewed by federal courts of appeals were dismissed in preliminary stages of litigation before trials. One scholar, who conducted a qualitative analysis of the 92 cases in which a federal court of appeals made a substantive ruling on an FHA disparate impact claim from 1971 (when the Supreme Court, in Griggs v. Duke Power , first held that disparate impact claims were cognizable under Title VII) through June 2013, found that plaintiffs obtained "positive outcomes" in only 18 cases (i.e., 19.5% of the cases); most of the cases (64 of 92 or 69.6%) were decided by the appellate courts before trials at the preliminary stages (i.e., pleading, summary judgment, or preliminary injunction) of litigation; district court rulings in favor of plaintiffs were reversed by the appellate courts two-thirds of the time (12 of 18 decisions), in spite of the fact that it is estimated that lower courts are generally affirmed approximately 80% of the time; and lower court rulings in favor of defendants were only reversed by the appellate courts 12 times out of 74 cases (i.e., 16.2% of the cases). As a result, the scholar concluded that, [w]hatever has prompted the Court's sudden interest in examining the question of disparate impact liability under the FHA [ i.e. , by granting certiorari in disparate impact cases in two successive terms], this interest cannot be attributable to plaintiffs' high rate of success or the appellate courts' general unwillingness to impose a rigorous and exacting review of the claims at every stage of the proceedings. While commonalities did exist, the courts did not agree on every aspect of disparate impact analysis. Importantly, the courts were not in agreement as to how to determine if a discriminatory effect violates the act. The First, Second, Third, Fifth, Eighth, and Ninth Circuit Courts of Appeals generally applied burden-shifting tests to assess the validity of a disparate impact claim pursuant to the FHA. Yet there were some differences in the tests applied, even among the courts that applied burden-shifting schemes. For example, all courts that used burden-shifting tests agreed that the burden is initially on the plaintiff to make a prima facie showing, generally with the use of statistics, that a specific policy results in a disparate impact upon a protected class, and that, upon such a showing, the burden shifts to the defendant to show that the policy was initiated for some nondiscriminatory, legitimate purpose. From there, most of these courts shifted the burden to the plaintiff to submit proof of a viable, less discriminatory alternative. The Second Circuit, on the other hand, upon a defendant's showing of a nondiscriminatory, legitimate purpose, kept the onus on the defendant to show there is not a less discriminatory alternative that would allow the defendant to meet the same legitimate purpose. Rather than the three-step burden-shifting test, the Seventh Circuit historically applied a four-factor balancing test originally set out in the Village of Arlington Heights decision. These factors are (1) [the] strength of the plaintiff's statistical showing; (2) the legitimacy of the defendant's interest in taking the action complained of; (3) some indication—which might be suggestive rather than conclusive—of discriminatory intent; and (4) the extent to which relief could be obtained by limiting interference by, rather than requiring positive remedial measures of, the defendant. The Sixth and Tenth Circuit Courts of Appeals applied hybrid approaches using elements from both the Seventh Circuit's balancing test and a burden-shifting framework. The Fourth Circuit applied a burden-shifting test when the defendant was a private party, but applied the four-factor balancing test with public defendants. Finally, the Eleventh Circuit has explained that "[a] showing of a significant discriminatory effect suffices to demonstrate a prima facie violation of the Fair Housing Act" but the plaintiff must also establish evidence of causality—"A plaintiff can demonstrate a discriminatory effect in two ways: it can demonstrate that the decision has a segregative effect or that it makes housing options significantly more restrictive for members of a protected group than for persons outside that group." HUD's Disparate Impact Rule For approximately two decades, through internal adjudicatory proceedings, appeals of those proceedings to federal courts, policy guidance, and other means, HUD has interpreted the FHA as supporting disparate impact claims. The agency did not formally adopt the policy through regulations until February 2013. HUD explained in the preamble of the Implementation of the Fair Housing Act's Discriminatory Effects Standard Final Rule (the Rule or the Disparate Impact Rule) that "[t]his regulation is needed to formalize HUD's long-held interpretation of the availability of 'discriminatory effects' liability under the Fair Housing Act and to provide nationwide consistency in the application of that form of liability." The Rule defines "discriminatory effect" as a practice that actually or predictably results in a disparate impact on a group of persons or creates, increases, reinforces, or perpetuates segregated housing patterns because of race, color, religion, sex, handicap, familial status, or national origin. HUD adopted the "three-part burden-shifting test currently used by HUD and most federal courts," as described in the previous section, to assess whether a discriminatory effect violates the FHA. Specifically, under the Rule, the plaintiff "has the burden of proving that a challenged practice caused or predictably will cause a discriminatory effect." If a plaintiff is able to successfully prove a prima facie discriminatory effect, then the burden shifts to the defendant to "prov[e] that the challenged practice is necessary to achieve one or more [of its] substantial, legitimate, nondiscriminatory interests.... " Such an interest "must be supported by evidence and may not be not hypothetical or speculative." If this burden is met, then the burden is shifted back to the plaintiff to "prov[e] that the substantial, legitimate, nondiscriminatory interest[] ... could be served by another practice that has a less discriminatory effect." The Supreme Court in Inclusive Communities On June 25, 2015, in a 5-4 decision, the Supreme Court held that "disparate-impact claims are cognizable under the Fair Housing Act (or FHA).... " However, the Court cautioned that disparate impact claims must rely on more than just "a statistical disparity" and remedies for disparate impact violations "that impose racial targets or quotas might raise [] difficult constitutional questions." The holding was surprising to some given that the Court chose to grant certiorari in the case in spite of the fact that there was no circuit split, leading to speculation that the Court was poised to overturn the lower court consensus that disparate impact claims generally are permissible. The Inclusive Communities Project, Inc. (ICP), "a Texas-based nonprofit corporation that assists low-income families in obtaining housing," sued the Texas Department of Housing and Community Affairs (DHCA) alleging that, by disproportionately distributing federal low-income housing tax credits in black-concentrated metropolitan areas as compared to white-concentrated suburban communities, DHCA perpetuated racial segregation in violation of the FHA. The federal district court held that the plaintiffs had met their initial burden of establishing that DHCA's policy had a discriminatory effect on African-Americans, but concluded that the defendants had failed to prove that there was no viable, less discriminatory alternative. Consistent with precedent in the circuit, the Fifth Circuit agreed with the district court that the FHA authorizes disparate impact claims. However, the Fifth Circuit reversed the district court's ruling because it had placed the burden of proving there were no less discriminating alternative policies on the defendant, in contravention of HUD's disparate impact regulations. A concurring opinion, which was cited favorably by the Supreme Court's majority opinion, also questioned whether the plaintiff sufficiently established a causal connection between the challenged policy and the relevant statistical disparity. The Supreme Court affirmed the Fifth Circuit's judgment that discriminatory effect claims are viable under the FHA, and remanded the case "for further proceedings consistent with this opinion," including, notably, its limiting principles regarding causality and remedies. To support its interpretation of the FHA, the Court began its analysis with two prior cases: Griggs v. Duke Power Co . and Smith v. City of Jackson , which the Court described as "provid[ing] essential background and instruction in the case now before the Court." In Griggs and Smith , the Court interpreted Title VII of the Civil Rights Act of 1964 and the Age Discrimination in Employment Act of 1967 (ADEA), respectively, as supporting disparate impact claims because both statutes contain language that focuses, not just on the intent or motivation of employers, but also on the discriminatory consequences or effects of their actions. Similarly, FHA Section 804(a) makes it unlawful "[t]o refuse to sell or rent ... or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin." The Court stated that "the logic of Griggs and Smith provides strong support for the conclusion that the FHA encompasses disparate impact claims ... [because] Congress' use of the phrase 'otherwise make unavailable' refers to the consequences of an action rather than the actor's intent." The Court added that this conclusion is bolstered by the fact that Congress amended the FHA in 1988 to establish three exemptions to disparate impact liability without making any changes to the statutory language that previous courts had relied upon to conclude that disparate impact claims were cognizable under the act. "In short, the 1988 amendments signal that Congress ratified disparate-impact liability." After concluding that the FHA supports disparate impact claims, the Court provided guidance as to how disparate impact claims should be assessed. The Court made clear that, before a plaintiff can establish a prima facie case of discriminatory effect based on a statistical disparity, courts should apply a "robust causality requirement" that requires the plaintiff to prove that a policy or decision led to the disparity. The Court stressed that a careful examination of the plaintiff's causality evidence should be made at preliminary stages of litigation to avoid "the inject[ion of] racial considerations into every housing decision"; the erection of "numerical quotas" and similar constitutionally dubious outcomes; the imposition of liability on defendants for disparities that they did not cause; and unnecessarily protracted litigation that might dissuade the development of housing for the poor, which would "undermine [the FHA's] purpose as well as the free-market system." The Court emphasized that disparate impact claims should be further limited by ensuring that defendants, whether private developers or governmental actors, have the ability to counter a prima facie case with evidence that the policy or decision in question is "necessary to achieve a valid interest." Further, the Court seemed to indicate that such business decisions—or in cases where the defendant is a governmental entity, decisions made in the public interest—should stand unless the "plaintiff has shown that there is an available alternative practice that has less disparate impact and serves the entity's legitimate needs." The Court also cautioned that court-ordered remedies for discriminatory effects generally should be race-neutral and focused on eradicating the policy that caused the disparate impact, rather than erecting constitutionally dubious "racial targets or quotas." The opinion concludes: Much progress remains to be made in our Nation's continuing struggle against racial isolation. In striving to achieve our "historic commitment to creating an integrated society," we must remain wary of policies that reduce homeowners to nothing more than their race. But since the passage of the Fair Housing Act in 1968 and against the backdrop of disparate-impact liability in nearly every jurisdiction, many cities have become more diverse. The FHA must play an important part in avoiding the Kerner Commission's grim prophecy that "[o]ur Nation is moving toward two societies, one black, one white—separate and unequal." Kerner Commission Report 1. The Court acknowledges the Fair Housing Act's continuing role in moving the Nation toward a more integrated society. The primary dissenting opinion, written by Justice Alito and joined by Chief Justice Roberts and Justices Thomas and Scalia, argued that the statutory text and the circumstances surrounding the original enactment of the FHA indicated that the act was only intended to bar overt discrimination—not disparate impact discrimination. The dissent also disputed the majority's "conten[tion] that the 1988 amendments provide convincing confirmation of Congress' understanding that disparate-impact liability exists under the FHA.... " Instead, the dissenting Justices viewed the 1988 amendments as a compromise between Members of Congress—some of whom agreed that disparate impact claims were cognizable under the FHA and some who did not. To support this argument, the dissent cited several opinions in which the Court rejected similar "implicit ratification" arguments. Additionally, the dissent took issue with the majority's reliance on Griggs . Justice Thomas wrote a separate dissent, to which no other Justice joined. It argued that Griggs was wrongly decided, but even if it should be afforded some precedential value, that value should be limited to Title VII cases, rather than expanded to other contexts like the FHA and ADEA. Significance of the Inclusive Communities Decision It is unclear exactly how the Inclusive Communities decision will change the way in which the lower courts and HUD will evaluate disparate impact claims going forward, and any effect likely will vary from circuit to circuit. However, a review of several of the decision's most notable holdings elucidates some potential implications. First, the Court appears to have adopted a three-step burden-shifting test for assessing disparate impact liability under the FHA. At step one, the plaintiff has the burden of establishing evidence that a housing decision or policy caused a disparate impact on a protected class. At step two, defendants can counter the plaintiff's prima facie showing by establishing that the challenged policy or decision is "necessary to achieve a valid interest." The defendant will not be liable for the disparate impact resulting from a "valid interest" unless, at step three, the plaintiff proves "that there is an available alternative practice that has less disparate impact and serves the entity's legitimate needs." As a result, circuits, such as the Fourth (in cases with public defendants) and Seventh, that historically have used a balancing test likely will begin using a burden-shifting test. Additionally, although the opinion offers scant guidance regarding step three, it seems to conclude that the burden should be on the plaintiff to establish a less discriminatory alternative. Thus, the Second Circuit likely will place the burden on the plaintiff rather than the defendant to establish a less discriminatory alternative in future decisions in light of Inclusive Communities. These changes might have taken place even in the absence of the Supreme Court ruling as a result of HUD's disparate impact rule. In addition, the specific standards that the Inclusive Communities Court detailed for each step of the burden-shifting test, though considerably similar, may not be identical to those historically applied by the lower courts and HUD. For example, the standards for steps one and two that are detailed in Inclusive Communities seem to be largely consistent with those in HUD's disparate impact rule. However, the Court used somewhat different language that could be interpreted as being more exacting on plaintiffs at step one and more deferential to defendants at step two, as compared to the Rule. Both the Court and HUD's Rule require plaintiffs to establish a prima facie case, which must include causal evidence. The Rule states that the plaintiff must "prov[e] that a challenged practice caused or predictably will cause a discriminatory effect." The Inclusive Communities Court neither expressly endorses nor disapproves of the "predictably will cause" language. The Court and the Rule agree that the burden at the second step is on the defendant. The Court states that defendants can counter a prima facie case by proving that the challenged practice is "necessary to achieve a valid interest." The Rule, in contrast, states that the defendant must "prov[e] that the challenged practice is necessary to achieve one or more substantial , legitimate, nondiscriminatory interests.... " Two other major takeaways involve how disparate impact claims should be evaluated. The Supreme Court stressed that lower courts and HUD should rigorously evaluate plaintiffs' claims to ensure that evidence has been provided to support not only a statistical disparity, but also causality. Additionally, the Court emphasized that claims should be disposed of swiftly in the preliminary stages of litigation if plaintiffs have failed to establish a prima facie case of disparate impact. As previously mentioned, over the last several decades, plaintiffs have faced fairly steep odds of getting their disparate impact claims past the preliminary stages of litigation, much less succeeding on the merits of those claims. Additionally, all of the federal courts of appeals and HUD, when assessing disparate impact claims, have stated that they were applying tests that required plaintiffs to show that a challenged policy actually caused the disparate impact in order to support a prima facie case. Nevertheless, the Inclusive Communities decision might result in some lower courts applying the causality standards more stringently than they had previously, thus making it more difficult for plaintiffs to establish prima facie cases of discriminatory effects. The Inclusive Communities majority opinion explicitly criticized one specific case—the Eighth Circuit's decision in Magner v. Gallagher , a case which the Court had previously granted certiorari , but ultimately dismissed because the parties settled out of court. The Court stated that Magner "was decided without the cautionary standards announced in this opinion." The primary point of contention likely was not with the three-step burden-shifting test that the Eighth Circuit applied, but rather with how the court applied the test. It is possible that, by its criticism, the Inclusive Communities Court might have been signaling its disapproval of the Eighth Circuit's failure to require the plaintiffs to provide evidence that directly tied the city's housing code enforcement to a reduction in the affordable housing of African-Americans. Instead, the Eighth Circuit relied on indirect evidence and "reasonable ... infer[ences]." In other words, it is possible that the Inclusive Communities Court expects lower courts to ensure that plaintiffs have provided evidence at the preliminary stages of litigation that fully "connects the dots" between the neutral policy and the disparate impact, before concluding that plaintiffs have established a prima facie case. In sum, it is possible that the "cautionary standards" stressed by the Inclusive Communities majority might result in even fewer successful disparate impact claims being raised, and swifter disposal of claims that are raised. This could, in turn, discourage claims from being raised at all.

The Fair Housing Act (FHA) was enacted "to provide, within constitutional limitations, for fair housing throughout the United States." It prohibits discrimination on the basis of race, color, religion, national origin, sex, physical and mental handicap, and familial status. Subject to certain exemptions, the FHA applies to all sorts of housing, public and private, including single family homes, apartments, condominiums, and mobile homes. It also applies to "residential real estate-related transactions," which include both the "making [and] purchasing of loans ... secured by residential real estate [and] the selling, brokering, or appraising of residential real property." There has been controversy over whether, in addition to outlawing intentional discrimination, the FHA also prohibits certain housing-related decisions that have a discriminatory effect on a protected class. That controversy was settled when, in June 2015, a divided U.S. Supreme Court ruled that disparate impact claims are cognizable under the FHA. Key Takeaways of This Report In February 2013, Department of Housing and Urban Development (HUD) for the first time issued regulations "formaliz[ing] HUD's long-held interpretation of the availability of 'discriminatory effects' liability under the Fair Housing Act and to provide nationwide consistency in the application of that form of liability." In June 2015, the Supreme Court held in Texas Department of Housing and Community Affairs v. Inclusive Communities Project that disparate impact claims are cognizable under the FHA—a view previously espoused by HUD and the 11 U.S. Courts of Appeals to render opinions on the issue. The Court also outlined certain limiting factors that should apply when assessing disparate impact claims. The Supreme Court appears to have adopted a three-step burden-shifting test for assessing disparate impact liability under the FHA. The test outlined by the Court, which is similar though not identical to the one adopted by HUD, places the initial burden on the plaintiffs to establish evidence that a housing decision or policy caused a disparate impact on a protected class. Defendants can counter the plaintiff's prima facie showing by establishing that the challenged policy or decision is "necessary to achieve a valid interest." The defendant's "valid interest" will stand unless the "plaintiff has shown that there is an available alternative practice that has less disparate impact and serves the entity's legitimate needs." Going forward, the minority of federal circuits that historically have used a different type of test likely will begin using a burden-shifting scheme consistent with the test outlined in Inclusive Communities. The Supreme Court stressed that lower courts and HUD should rigorously evaluate plaintiffs' disparate impact claims to ensure that evidence has been provided to support, not only a statistical disparity, but also causality (i.e., that a particular policy implemented by the defendant caused the disparate impact). The Court also emphasized that claims should be disposed of swiftly in the preliminary stages of litigation when plaintiffs have failed to provide sufficient evidence of causality. Although plaintiffs historically have faced fairly steep odds of getting their disparate impact claims past the preliminary stages of litigation, much less succeeding on the merits, the "cautionary standards" stressed by the Supreme Court might result in even fewer successful disparate impact claims being raised in the courts and/or swifter disposal of claims that are raised.

CRS_R40826

Introduction Congress has various legislative authorities under which it can regulate the behavior of persons and businesses, and it has significant discretion as regards the breadth and scope of such regulation. On occasion, however, Congress exercises its authority regarding a specified individual, entity, or identifiable group in such a way as to give rise to constitutional concerns. In particular, the United States Constitution expressly prohibits the federal government from enacting bills of attainder, defined by the Supreme Court as a "law that legislatively determines guilt and inflicts punishment upon an identifiable individual without provision of the protections of a judicial trial." The basis for the prohibition arises from the separation of powers concern that the enforcement of a bill of attainder would allow Congress to usurp the power of the judicial branch. For instance, there was, for a time, significant controversy about bonuses paid to employees of entities that had received Troubled Asset Relief Program (TARP) funds from the federal government under the Emergency Economic Stabilization Act of 2008. In response to this concern, various proposals were made to impose taxes on such bonuses. One such bill, which passed the House, would have taxed bonuses as income to the employee at a rate of 90%, while another, introduced in the Senate, would have imposed an excise tax equal to 35% of the bonus on both the employee and entity. Significantly, both bills would have applied retroactively to tax bonuses awarded before the legislation was passed. Concerns were expressed that, because these bills targeted the bonuses of employees of specific companies that had received funds, they could be seen as bills of attainder. A similar situation arose in response to allegations of election law and other legal violations by the Association of Community Organizations for Reform Now (ACORN), a public interest group. Here, Congress passed several appropriations bills that limited the provision of federal funds to ACORN and its affiliates. For instance, § 163 of the 2010 Continuing Appropriation Resolution provided that: [n]one of the funds made available by this joint resolution or any prior Act may be provided to the Association of Community Organization[s] for Reform Now (ACORN) or any of its affiliates, subsidiaries, or allied organizations. Further, the 2010 Consolidated Appropriations Act provided in various places that none of the funds made available under various divisions of the act or any prior act could be provided to ACORN or any of its affiliates, subsidiaries, or allied organizations. This legislation was challenged in federal court as a bill of attainder, but was ultimately upheld by the United States Court of Appeals for the Second Circuit. Generally, a court will have reservations in declaring a provision of law unconstitutional because "legislative decisions enjoy a high presumption of legitimacy." Further, the Supreme Court has suggested that each bill of attainder case "turn[s] on its own highly particularized context." Notably, since the signing of the Constitution, the Bill of Attainder Clause has been successfully invoked only five times in the Supreme Court. Nevertheless, constitutional concerns may arise in this context when Congress proposes or passes legislation that burdens specified individuals or a defined class of persons or entities. Bills of Attainder Background As noted, the prohibition on bills of attainder is based on separation of powers concerns. By passing a bill of attainder, the legislature assumes judicial magistracy, pronouncing upon the guilt of the party without any of the common forms and guards of trial, and satisfying itself with proofs, when such proofs are within its reach, whether they are conformable to the rules of evidence, or not. In short, in all such cases, the legislature exercises the highest power of sovereignty, and what may be properly deemed an irresponsible despotic discretion, being governed solely by what it deems political necessity or expediency, and too often under the influence of unreasonable fears, or unfounded suspicions. At common law, a bill of attainder was a parliamentary act that sentenced a named individual or identifiable member of a group to death. It was most often used to punish political activities that Parliament or the sovereign found threatening or treasonous. A bill of pains and penalties was identical to a bill of attainder, except that it prescribed a punishment short of death such as banishment, deprivation of the right to vote, exclusion of the designated individual's sons from Parliament, or the punitive confiscation of property. The prohibition on bills of pains and penalties has been subsumed into the prohibitions of the Bill of Attainder Clause, so that a variety of penalties less severe than death may trigger its provisions. The two main criteria that the courts look to in order to determine whether legislation is a bill of attainder are (1) whether specific or identifiable individuals are affected by the statute (specificity prong), and (2) whether the legislation inflicts a punishment on those individuals (punishment prong). Specificity The Supreme Court has held that legislation meets the criteria of specificity if it either specifically identifies a person, a group of people, or readily ascertainable members of a group, or if it applies to a person or group based on past conduct. For example, where a court determines that a statute referencing a specific group of persons is based on past conduct, this legislation may in some cases be treated as a per se violation of the specificity prong. In United States v. Lovett , Congress passed Section 304 of the Urgent Deficiency Appropriation Act of 1943, which named three government employees, labeled them as subversive, and then provided that no salary should be paid to them. The employees brought suit, and the Supreme Court ruled in their favor, holding that Section 304 was a punishment of named individuals without a judicial trial. As will be discussed later, it is a defense to a bill of attainder challenge to establish that a statute is not intended to punish, but rather to implement a legitimate regulatory scheme. Although this analysis is generally considered under the second prong of the test (whether the law is punitive), it may have implications for the specificity prong. For instance, in the case of Nixon v. Administrator of General Service s , the Court evaluated the Presidential Recordings and Materials Preservation Act, which required that former President Richard Nixon, whose papers and tape recordings were specifically named in the act, turn those papers and tape recordings over to an official of the executive branch. The former President challenged the constitutionality of the act as a bill of attainder, arguing that it was based on a congressional determination of the former President's blameworthiness and represented a desire to punish him. It would appear that the identification of papers and recordings under the control of a named person (the former President) would meet the per se requirement. The Court in Nixon , however, found that the statute was constitutional despite this specificity. In Nixon , the Court found that the bill failed the second prong (punishment) of the test for a bill of attainder, since the act fulfilled the valid regulatory purpose of preserving information which was needed to prosecute Watergate-related crimes and was of historical interest. As part of this analysis, however, the Court even questioned whether the statute in question met the specificity prong of the two-part test, finding that naming an individual could be "fairly and rationally understood" as designating a "legitimate class of one." Thus, it has been suggested that Nixon stands for the proposition that any level of specificity is acceptable, even the naming of individuals, as long as a rational, non-punitive basis for the legislation can be established. A different question arises as to whether legislation that applies both retroactively and prospectively, and thus includes persons not yet identified, can violate the prohibition on bills of attainder. It does not appear to be fatal to a bill of attainder challenge that the statute in question applies to both past and future behavior. In one of the relatively few cases in which a successful bill of attainder challenge was made, the Court in United States v. Brown invalidated Section 504 of the Labor-Management Reporting and Disclosure Act, which made it a crime for anyone "who is or has been a member of the Communist Party to serve as an officer or employee of a labor union ... during or for five years after the termination of his membership in the Communist Party." In Brown, the Court did not find it significant that future members of the Communist Party would be included in the group affected. Rather, the Court focused on the fact that once a person had entered the Communist Party, his or her withdrawal did not relieve the disability for five years. So, the requirement of specificity is not defeated by the potential of future persons being added to the identified group, as long as the persons or entities identified cannot withdraw from such specified group. However, a per se finding of specificity can still fail to meet the first prong if the group specified by the statute can be justified by a regulatory purpose. This question would require an analysis of the nexus between the specificity and the regulatory purpose that is arguably served by the proposed law. In this regard, the specificity analysis would be similar to the "Functional Test" discussed below. Punishment The mere fact that focused legislation imposes burdensome consequences does not require that a court find such legislation to be an unconstitutional bill of attainder. Rather, the Court has identified three tests to determine whether legislation is "punitive": (1) whether the burden is such as has traditionally been found to be punitive (historical test); (2) whether the type and severity of burdens imposed cannot reasonably be said to further non-punitive legislative purposes (functional test); and (3) whether the legislative record evinces a congressional intent to punish (motivational test). Historical Test of Punishment The Supreme Court has identified various types of punishments that have historically been associated with bills of attainder. These traditionally have included capital punishment, imprisonment, fines, banishment, confiscation of property, and more recently, the barring of individuals or groups from participation in specified employment or vocations. The courts have been reluctant, however, to further expand the scope of the historical test. For instance, the United States Court of Appeals for the Second Circuit has rejected the argument that denial of federal benefits to specified individuals or organizations was the type of "punishment" traditionally engaged in by legislatures as a means of punishing individuals for wrongdoing. Functional Test of Punishment The Supreme Court has also indicated that some legislative burdens not traditionally associated with bills of attainder might nevertheless "functionally" serve as punishment. The Court has indicated, however, that in those cases, the type and severity of the legislatively imposed burden would need to be examined to see whether it could reasonably be said to further a non-punitive legislative purpose. The Court has specified that "legislative acts, no matter what their form, that apply either to named individuals or to easily ascertainable members of a group in such a way as to inflict punishment on them without a judicial trial are bills of attainder prohibited by the Constitution." For example, it seems clear that, in some instances, a denial of the ability to engage financially with the United States can fulfill the punishment prong of the test. As touched upon earlier in United States v. Lovett , the Court struck down a statute prohibiting specified individuals from being employed by the United States as a bill of attainder. In Lovett , the respondents, Robert Lovett, Goodwin Watson, and William Dodd, Jr., were federal government employees in good standing. Congress, however, passed a statute naming those individuals and providing that, after a certain date, no federal salary or compensation could be paid to them. The statute was passed as a result of concerns in the House Committee on Un-American Activities that "subversives" were occupying influential positions in the government and elsewhere, and that Congress had the responsibility to identify and remove those individuals. The Court noted that the character of the legislation was informed by both the particulars of the legislation and the context in which it arose. In this case, the Court found that the statute operated to bar the named individuals not only from their current jobs, but also from employment by any branch of the federal government for perpetuity. The Court also noted that the congressional proceedings relevant to the legislation had the elements of judicial process. For instance, the chairman of the House Committee on Un-American Activities, Representative Dies, told the House that the three named individuals, among others, were unfit to "hold a Government position," and other statements made during the debate included discussion of "charges" against the individuals and of having sufficient proof of "guilt." A special counsel for the House noted that the legislation in question was within the discretion of Congress's power under the Spending Clause. However, the Court in Lovett remarked that other Supreme Court decisions have invalidated legislation barring specified persons or groups from pursuing various professions where the employment bans were imposed as a brand of disloyalty. For instance, the Court has found that a ban on lawyers practicing before the Supreme Court was punishment for purposes of bill of attainder analysis, as was a ban on persons holding positions of trust related to legal proceedings. Consequently, the Court in Lovett held that the denial of the contractual right to federal employment fell squarely into the type of punishment susceptible to bill of attainder analysis. The situation can arise, however, where the burdens imposed by legislation on specified or identifiable persons or entities may be justified by a valid regulatory (non-punitive) purpose. In such a case, a court would be likely to find that such legislation is not intended to be punitive. For instance, in Flemming v. Nestor , the Court upheld termination of Social Security benefits to persons deported for events occurring before the passage of the legislation terminating benefits, reasoning that Congress was within its authority to find that the purposes of Social Security were not served by providing benefits to persons living overseas. In reaching this conclusion, the Court noted that: [O]nly the clearest proof could suffice to establish the unconstitutionality of a statute on [bill of attainder grounds]. Judicial inquiries into Congressional motives are at best a hazardous matter, and when that inquiry seeks to go behind objective manifestations it becomes a dubious affair indeed. Moreover, the presumption of constitutionality with which this enactment, like any other, comes to us forbids us lightly to choose that reading of the statute's setting which will invalidate it over that which will save it. 'It is not on slight implication and vague conjecture that the legislature is to be pronounced to have transcended its powers, and its acts to be considered as void.' Fletcher v. Peck, 6 Cranch 87, 128. However, it should be noted that the legislation in question in Flemming was but a small part of a larger regulatory scheme—the Social Security program—making any punitive intent less apparent. Another factor that may be relevant to a bill of attainder analysis is the duration of the burden imposed by legislation. For instance, if the burden imposed by legislation is of short duration, one might argue that Congress had to act quickly to address a particular situation, with an understanding that more general legislation would be forthcoming in the future. For instance, in the case of SeaRiver Maritime Financial Holdings, Inc. v. Mineta , the United States Court of Appeals for the Ninth Circuit (Ninth Circuit) suggested that the need for quick resolution of a particular regulatory concern might require a degree of specificity that would not otherwise be acceptable. The SeaRiver case is closely related to an oil spill that occurred in 1989, when the Exxon Valdez ran aground onto Bligh Reef in Alaska, spilling nearly 11 million gallons of oil into the Prince William Sound. The following year, Congress passed the Oil Pollution Act of 1990, which, among other things, excluded from the waters of Prince William Sound any vessel that had spilled more than 1 million gallons of oil into the marine environment after March 22, 1989. The act effectively barred the Exxon Valdez from operating in Prince William Sound. The owner of the Exxon Valdez brought suit, arguing that the exclusion of the Exxon Valdez under the Oil Pollution Act constituted an unconstitutional bill of attainder. While the Ninth Circuit held that the legislation in question did meet the specificity prong of the bill of attainder analysis, it found that the legislation was not intended to punish the owners of the Exxon Valdez , and thus did not violate the punishment prong of the bill of attainder test. Rather, the Ninth Circuit found that the legislation furthered a rational, non-punitive regulatory purpose. In the Oil Pollution Act, Congress recognized Prince William Sound as an "environmentally sensitive area," and included various provisions designed to protect the Sound's environment and reduce the likelihood of future oil spills. The act established the Prince William Sound Oil Spill Recovery Institute and an Oil Terminal and Oil Tanker Environmental Oversight and Monitoring Demonstration Program for Prince William Sound; provided for a Bligh Reef navigation light and a vessel tracking and alarm system; and increased equipment and requirements for oil spill response. The Ninth Circuit found that the exclusion of the Exxon Valdez from the Prince William Sound was consistent with this legislative purpose, and Congress could legitimately conclude that a vessel that spilled over 1 million gallons of oil posed a greater risk to Prince William Sound than other tank vessels, because of a pre-existing defect, damage incurred as a result of the spill, or because the spill calls into question the practices of its operators. The court found this case similar to the Supreme Court case of Nixon , which held that the Presidential Recordings and Materials Preservation Act, which only applied to the preservation of documentary materials relating to the presidency of Richard Nixon, was not a bill of attainder. In both of these cases, the reasoning was that there was a specific need for quick legislative action regarding specific situations. Regarding the Exxon Valdez , legislative action was needed to avoid another oil spill, while legislation specifically affecting President Nixon was deemed necessary to avoid the possible loss of important historical documents. In both cases, the need for Congress to "proceed with dispatch" allowed Congress to pass legislation that established "a legitimate class of one." The holdings in both of these cases appeared to assume that further regulation which applied to persons or entities outside of these "legitimate class[es] of one" would be forthcoming. Motivational Test for Punishment A court will also consider the legislative history of a provision in evaluating whether or not legislation is intended to be punitive. The Court, however, has been reluctant to ascribe too much significance to legislative history alone, and will generally require more than just a few statements by individual Members to find such motivation. Further, it seems to be unsettled what information aside from that directly found within the legislative history of a law should be considered by a court. In some cases, extensive legislative history may suggest punitive intent. For instance, when the proposal to tax employee bonuses of TARP recipients was considered and passed by the House, a variety of remarks were made on the floor concerning the bill. While a small number of remarks addressed the issue of the regulatory purpose of prospective applications of the bill, many remarks were made that seemed to indicate that the application of these bills retrospectively was based on concern with the morality of having paid the bonuses in question, and a desire that the person receiving the bonuses not be able to enjoy their benefit. Some of these comments might have been interpreted as indicating a punitive intent on the passage of the legislation. In other situations, however, there may be less direct evidence of the motivational basis for such legislation. For instance, in the bills to limit the provision of federal monies to ACORN, there was some discussion of alleged misdeeds of ACORN during consideration of the bills. The United States Court of Appeals for the Second Circuit, however, found that a "smattering" of Members' remarks suggesting a punitive intent was not sufficient to show that the legislation was motivated by punitive intent. Consequently, it may be difficult to predict in particular cases when evidence of punitive intent in legislative history would be sufficient to establish that a bill was an unconstitutional bill of attainder.

On occasion, Congress exercises its legislative authority regarding a specified individual, entity, or identifiable group in such a way as to raise constitutional concerns. In particular, the United States Constitution expressly prohibits the federal government from enacting bills of attainder, defined by the Supreme Court as a "law that legislatively determines guilt and inflicts punishment upon an identifiable individual without provision of the protections of a judicial trial." The basis for the prohibition arises from the separation of powers concern that the enforcement of a bill of attainder would allow Congress to usurp the power of the judicial branch. For instance, in recent years, Congress proposed retroactive taxation of up to 90% of the value of bonuses paid to employees when an employer had received funds from Troubled Asset Relief Program (TARP). Additionally, in response to allegations of election law and other legal violations by the Association of Community Organizations for Reform Now (ACORN), Congress passed several appropriations bills that limited the provision of federal funds to ACORN and its affiliates. In both of these instances, suggestions were made that the legislation might be found by the courts to be prohibited bills of attainder. As regards the limitations imposed on the provision of funds to ACORN, such limitations were upheld by the United States Court of Appeals for the Second Circuit. The two main criteria that the courts use to determine whether legislation is a bill of attainder are (1) whether "specific" individuals, groups, or entities are affected by the statute, and (2) whether the legislation inflicts a "punishment" on those individuals. The U.S. Supreme Court has also identified three types of legislation that would fulfill the "punishment" prong of the test: (1) where the burden is such as has "traditionally" been found to be punitive (historical test); (2) where the type and severity of burdens imposed are the "functional equivalent" of punishment because they cannot reasonably be said to further "non-punitive legislative purposes" (functional test); and (3) where the legislative record evinces a "congressional intent to punish (motivational test)." The Court has suggested that each bill of attainder case turns on its own highly particularized facts, and notably, since the signing of the Constitution, the Bill of Attainder Clause has been successfully invoked only five times in the Supreme Court. Nevertheless, there remain potential constitutional concerns when Congress proposes or passes legislation that imposes a burden on a specified individual, entity, or identifiable group.

CRS_RL31176

With military conflict in Iraq and Afghanistan, Congress has expressed an interest in how wars have been financed historically, and what effects the wars had on the economy. This report examines financing and economic issues in World War II, the Korean Conflict, the Vietnam Conflict, the Reagan Military Buildup, and the 1991 and 2003 wars in Iraq. It examines tax policy, non-military outlays, the budget balance, economic growth, inflation, and interest rates during these periods. The Economics of War Financing People often assume that wars will lead to recessions, reasoning that the spending on war will lead to less spending in the rest of the economy. While this reasoning is correct, the conclusion is wrong. Recessions are characterized by a reduction in spending in the entire economy, including the military sector. Although it is true, in times of war, resources must be shifted to the military sector, because the military sector is a part of gross domestic product (GDP), the shift does not lower GDP. Wars may lead to less spending on non-military goods and services, but there is no reason to assume that they will lead to less spending on total goods and services. In fact, under certain financing methods, it is likely to lead to greater spending on total goods and services, which would increase the growth rate of aggregate demand in the short run. The increased government outlays associated with wars can be financed in four ways: through higher taxes, reductions in other government spending, government borrowing from the public (the issuance and sale of U.S. Treasury securities to the public), or money creation. Major wars have relied upon all four measures. The first two methods are unlikely to have an effect on economic growth (aggregate demand) in the short run. The expansion in aggregate demand caused by greater military outlays is largely offset by the contraction in aggregate demand caused by higher taxes or lower non-military government spending. The latter two financing methods increase aggregate demand. Thus, a by-product of wars has typically been a short-term economic boom and an increase in employment in excess of the economy's sustainable rate of growth. The sectors of the economy that are recipients of the military spending, such as the transportation sector and military equipment producers, would receive the biggest boost. Just as a military buildup in wartime typically boosts aggregate demand, the reduction in defense expenditures after a war typically causes a brief economic contraction as the economy adjusts to the return to peacetime activities. Borrowing from the Public If the economy's resources are fully employed when the government boosts aggregate demand, the increase in government spending must be offset by a reduction in spending elsewhere in the economy. In the case of borrowing from the public, prices and interest rates would be expected to rise, the latter causing investment and other interest-sensitive spending to be lower than it otherwise would be. Economists refer to this phenomenon as government purchases "crowding out" private investment and interest-sensitive spending. Because private investment is crucial to long-run growth, the long-run effect of these policies would be to reduce the private capital stock and future size of the economy. Once government controls on the international flow of private capital were largely removed by the early 1970s, it became possible for government budget deficits to be financed by foreigners as well as domestic citizens. If a budget deficit is financed by foreigners, exports and import-competing goods rather than private investment would be "crowded out" by government expenditures through an appreciation of the dollar and a larger trade deficit. The appreciation occurs because demand for the dollar increases as foreigners purchase U.S. financial instruments. In the case of expenditures on a military campaign abroad, there may be less of an expansion in aggregate demand than from other forms of government spending since some of the expenditures would be used for foreign goods and services. This suggests that there would be less upward pressure on the exchange rate and less crowding out of U.S. exports and import-competing goods. Money Creation How does money creation help the government raise revenues? When the government (through the Federal Reserve) prints money, it can use that money to purchase real resources. But at full employment, the government cannot increase the amount of real resources in the economy simply by printing money. In this case, if the increase in the money supply increases the resources available to the government, it must be offset by a decrease in the resources available to other individuals in the economy. This occurs through inflation, which makes money less valuable in terms of the amount of real resources for which it can be exchanged. The individuals whose wealth is reduced are those who held a portion of their wealth in the existing money at the time when the government increased the money supply. That is because the existing money they hold can now be exchanged for fewer real resources than before the new money was printed. For this reason, using money creation as a form of government finance has often been characterized by economists as an "inflation tax." Unlike borrowing from the public, money creation would not be expected to disproportionately crowd out private investment because expansionary monetary policy is likely to have the effect of reducing interest rates in the short run. Instead, the transfer of resources is likely to come about through higher inflation, affecting individuals who are unable to protect their wealth and income from inflation. Although some price inflation may be associated with borrowing from the public, money creation is typically a more inflationary method of finance. In World War II, the means by which the increase in the money supply came about was through the Federal Reserve's purchase of government bonds. In effect, the Federal Reserve made a loan to the government of newly printed money. The increase in the money supply transferred resources to the government by reducing the public's real wealth. World War II was the only conflict examined in this report in which the government relied on money creation as a significant source of revenue. In the 1950s, the Treasury- and Federal Reserve reached an "accord," and the government could no longer "borrow" directly from the Federal Reserve. In other conflicts in which inflation rose in the United States, such as the Vietnam Conflict, it would be unfair to characterize the excessive money creation that occurred as being motivated primarily by a desire to increase government revenue. It is fairer to say that excessive money creation was influenced by a desire or belief by the government that the economy could or should grow faster than was actually possible. Use of Price Controls Under normal circumstances, money creation as a means of government finance would be expected to lead to price inflation. In major wars, the government has attempted to suppress inflation through the use of widespread price controls rather than forgo the benefits of inflationary monetary policy. Economic theory suggests, and historical evidence supports, that the use of price controls may be successful at suppressing inflation for a time, but prices will eventually rise when those controls are removed, or even sooner if the administration of controls break down. The suppression of inflation increases the government's purchasing power for a given change in the money supply, making monetary finance more powerful. Strict price controls create significant market distortions and may result in shortages for some goods because they do not allow relative prices to adjust as supply and demand for individual goods change. When price controls are in effect, black market activity typically expands as citizens attempt to avoid the distortions that the controls create. Equity Issues All four methods of war financing raise equity questions because each method places the financing burden on different groups of individuals. The burden of financing wars through higher taxes is borne by the individuals that have their taxes raised. The burden of financing wars through a reduction in other government spending is borne by the individuals to whom the spending was previously directed. This is the essence of the famous "guns vs. butter" analogy: when military spending is financed through higher taxes or lower government spending, society consumes more "guns" (military spending) and less "butter" (non-military spending). The burden of financing wars through money creation is borne by those whose real wealth and real income fall when prices rise. Uniquely, the burden of financing wars through borrowing from the public is thought to be borne in part by future generations rather than present generations. The result of borrowing from the public is lower private investment, and lower private investment leads to a smaller future economy, and hence lower standards of living in the future. In this case, today's "guns" are financed through less "butter" in the future. Philosophically, the debt financing of wars has often been justified on the grounds that the peace or security that wars make possible is enjoyed by present and future generations. Thus, the cost should be borne by present and future generations. Interpreting Results Unlike science experiments, economic experiments are not controlled and cannot be repeated. It is difficult to separate out the effects of a war from the countless other economic events happening simultaneously to get accurate estimates of how any given war affected the economy. The presentation of data in the tables below is not meant to imply causation. This is especially true in the case of interest rates. The economic theory that interest rates are higher than they otherwise would be when the budget is in deficit is not equivalent to the empirical observation that interest rates are high or low in any given year. For example, interest rates can rise in any given year because private investment demand rises, monetary policy is tightened, private individuals change their savings patterns, foreigners find U.S. assets less attractive, the perceived riskiness of investment increases, or because the federal budget deficit increases. Furthermore, real (or inflation-adjusted) interest rates are measured in this report based on actual inflation rates. But they are determined in part by expected inflation rates. If actual inflation turns out to be much higher than expected inflation, then real interest rates will be temporarily low. Thus, it is not unusual to see ex-post negative real interest rates in years of unexpectedly high inflation, of which there are several examples in the periods discussed below. In drawing lessons from past conflicts, it should also be stressed that larger wars require wider ranging government involvement and produce larger economic effects, as illustrated in Figure 1 . The Vietnam Conflict, the Reagan Military Buildup, and the Desert Storm Operation were not large enough events that they could be thought to dominate cause and effect in the economy at the time. And to equal the military outlays (as a percentage of GDP) undertaken at the peak of the Reagan military buildup, military outlays today would need to more than double from their level in 2001. World War II World War II was unique among events considered in this report in that it was accompanied by fundamental (albeit temporary) changes in the structure of our market economy. Because of these measures, any economic comparison between World War II and other economic events in the post-war period is questionable, and the predicted economic outcomes could be significantly different. In World War II, the prices of consumer goods were fixed and controlled on a widespread basis from 1942 to 1945, consumer goods were rationed through the use of purchase coupons and goods and services available to individuals were purposely kept below salaries to force a higher private saving rate. Also, private factories were instructed and encouraged to change their output to war production, resources and credit were directed by the government toward companies producing war materials, the female participation rate in the labor force was temporarily raised, and nearly half of GDP was used by the federal government. Because of the size of World War II associated expenditures, the government relied on all four methods of financing. Despite the record size of government as a percentage of GDP, non-military government expenditures had fallen to less than half their pre-war level by the end of the war. As can be seen in Table 1 below, which illustrates economic conditions before, during, and after the war, budget deficits exceeded 30% of GDP at their peak. The publicly held debt reached 108.6% of GDP in 1946. This would have been impossible without government controls over private spending and investment decisions and the patriotism generated by a major war. Central to this policy was the decision by the Treasury and Federal Reserve to keep the yield on U.S. Treasuries artificially low to ease the debt financing burden. (With the desire to keep inflation low, this policy decision necessitated the use of price controls since it required rapid money creation.) About one-quarter of the debt financing of World War II occurred through the war bond program, which sold small-denomination, non-marketable bonds to private citizens. The war effort was large enough to keep the economy operating far above its sustainable rate for the entirety of the war. Furthermore, there was a high rate of unemployment before the war began, at 14.6% in 1940. Thus, the economy probably had idle resources to enlist toward the war effort, allowing growth to exceed its sustainable rate while those resources became employed. Since economic growth was so great during the war, the standard contraction following the war was also large, as the economy adjusted to a decline in government spending from about 40% of GDP to about 15% of GDP. The contraction ended in 1948, and left no lasting impact on growth in the 1950s. To finance the increase in government outlays from 9.8% of GDP in 1940 to 43.6% of GDP in 1943 through higher taxes exclusively would have involved impossibly large tax increases, with corresponding disincentive effects on work and saving. Nevertheless, the government did finance a portion of the war effort by raising taxes. Tax measures during the War included the Revenue Act of 1942, the Current Tax Payment Act of 1943, the Revenue Act of 1943, and the Individual Income Tax Act of 1944. The Revenue Act of 1942 included provisions that made the individual income tax a "mass tax" for the first time, increased the corporate tax, increased excise taxes, increased the excess profits tax to 90%, and created a 5% Victory tax that was to be repaid through a post-war tax credit. The Current Tax Payment Act of 1943 introduced tax withholding that eased the Treasury's ability to finance day-to-day expenditures. The Revenue Act of 1943 was meant to alter the distribution of taxation. It was the first tax bill to be vetoed, and Congress overrode the veto. The Individual Income Tax Act of 1944 was meant to simplify the income tax system and it also abolished the Victory Tax. The act lowered tax revenues by an estimated 0.2% of GDP. Tax rates were greatly reduced after the war ended. Korean Conflict In contrast to World War II, President Truman relied largely on taxation and a reduction of non-military outlays, rather than borrowing from the public or money creation, to finance the Korean Conflict. Of course, this turned out to be feasible only because the Korean Conflict was so much smaller than World War II. Nevertheless, it is striking how much lower budget deficits and inflation were during this era than during the Vietnam Conflict and President Reagan's military buildup, both of which involved much smaller military expenditures as a percentage of GDP. Inflation remained low even though economic growth was kept above its sustainable rate throughout the war. When high inflation emerged in 1951, the government again resorted to widespread wage and price controls. It did not reimplement a rationing system for private consumption of goods and services, however. A change in Federal Reserve policy in 1951 assured that inflation would be kept under control. After World War II, the Treasury had adopted the position that Federal Reserve monetary policy should be directed toward keeping the yield on Treasury securities stable and artificially low to keep debt financing costs manageable while limiting the reserves available to banks. In 1951, it became clear that maintaining this policy would be inflationary, and because inflation remained the Truman administration's primary concern, the Treasury and Federal Reserve reached an "accord" to allow the Fed to focus on maintaining price stability and gradually allowing the yields on Treasury securities to become market determined. True to pattern, the economy experienced a short recession after the Korean Conflict ended. Shortly after the outbreak of the Korean Conflict, the Revenue Act of 1950 was enacted. It resurrected the income tax rates of World War II and raised taxes by an estimated 1.3% of GDP. Later in the year, the Excess Profits Tax of 1950 was enacted. The Revenue Act of 1951 raised individual income and corporate taxes, for an estimated revenue increase of 1.9% of GDP. The increase in individual and corporate taxes would have raised more revenue, but the 1951 act also contained several narrow-based tax reductions. Vietnam Conflict There are no official dates to frame the period of the Vietnam Conflict. This report considers the conflict to cover the period from 1964, when American soldiers in Vietnam were increased to 20,000, to 1973, when President Nixon declared an end to the conflict. In budgetary terms, a buildup did not begin until 1966 and the war was in decline from 1970 onwards. The military buildup was not as marked as in other wars because military outlays were already high from the Cold War arms race. Arguably, fiscal policy in the 1960s and 1970s was not framed in terms of events in Vietnam; this was done in part purposely due to the domestic controversy surrounding the Conflict. Unlike World War II and the Korean Conflict, non-military expenditures were increased throughout the Vietnam era, beginning with the Great Society programs. Throughout the Conflict, the government attempted to avoid tax increases, although it did raise taxes between 1968 and 1970. Thus, borrowing from the public played a greater part in war financing than it had in the Korean Conflict. There was no explicit policy during the Vietnam Conflict instructing the Federal Reserve to keep federal interest costs low, as there was in World War II and at the beginning of the Korean Conflict. Nevertheless, inflation rose significantly as the Conflict progressed, although this was probably the result of a belief that the economy could grow at a faster rate than was actually possible, rather than a desire to use money creation as a significant source of revenue. The first tax act of the Vietnam era was a tax reduction, the Revenue Act of 1964, which was implemented to counter a perceived economic slowdown. This act embodied many of the proposals made by President Kennedy in 1961 to "get America moving again." Its major provisions included a reduction in individual income and corporate tax rates, and an expansion of the standard deduction. Nevertheless, the Vietnam Conflict put strains on the budget that ultimately influenced budgetary decisions. In 1968 and 1969, temporary 10% surcharges were applied to individual income and corporate taxes, ostensibly to curb inflation. The measure led to the last budget surplus (in 1969) until 1998. Later that year, the Tax Reform Act of 1969 was passed. It was advertised as a measure to reform the tax code and close certain loopholes, but also had the effect of raising revenue by 0.2% of GDP in 1970. Its major provisions were the repeal of the investment tax credit (revenue raising), the restriction of the tax exempt status of foundations (revenue raising), a broadening of the individual income tax base (revenue raising), and an increase in the income tax's standard deduction and personal exemption (revenue reducing). In addition, it extended the temporary surcharges for the first six months of 1970 at a rate of 5% (reduced from the previous 10%), raising an additional 0.4% of GDP. The 1971 Revenue Act reduced taxes with the aim of increasing aggregate demand. It restored the investment tax credit, accelerated planned tax reductions, and increased the standard deduction. The tax reductions contributed to larger budget deficits in the following years. The combination of rising budget deficits and expansionary monetary policy led to rapidly rising inflation in the late 1960s and early 1970s. Rather than further tighten monetary policy or fiscal policy to weaken aggregate demand, President Nixon responded with the imposition of price controls in four phases from 1971 to 1974. Under the Nixon program, prices, wages, and profits were controlled for all large firms. The prices of some commodities, imports and exports, unprocessed agricultural products, and the wages of low-wage workers were exempted. Later, in phase III, rents were exempted as well. Small firms did not have to comply with price, profit, or wage controls for some phases. During the four phases, controls were meant to be gradually reduced. In phase I, prices and wages were "frozen;" in phase II, they were "self-administered" which meant that price increases were allowed if approved by the government; in phase III, "decontrol" began. (The subsequent failure of inflation to slow in phase III led to tighter controls for some industries in phase IV, while other industries were decontrolled.) The controls proved to be very unpopular with the public, as shortages and distortions appeared in different markets. From 1973, the oil shock and ensuing "stagflation" dominated economic events. The combination of higher oil prices and the end of price controls, which released pent up inflationary pressures, led to a high inflation rate throughout the 1970s. By this point, military expenditures as a percentage of GDP had been significantly reduced. Reagan Military Buildup Military outlays during the Reagan military buildup were significantly lower as a percentage of GDP than they were during any of the preceding military conflicts. Neither tax increases nor money creation were used to finance the buildup. On the contrary, both taxes and inflation were lowered during this time for reasons unrelated to the military buildup. Tax cuts and their claimed supply-side effects on economic growth were one of the major themes of the Reagan era, and the main goal of the Federal Reserve under Chairman Paul Volcker was to reduce inflation from the double-digit rates prevalent in the late 1970s. (The Fed accomplished this goal by 1983, but the side effect of the Fed disinflation was the deepest recession since the Great Depression.) As a result, increased military outlays and tax cuts led to budget deficits and a reduction in non-military outlays as a percentage of GDP. The Economic Recovery Tax Act of 1981 was the major tax reduction bill of the Reagan years. The major provisions were reductions in marginal income tax rates, individual saving incentives, and more favorable capital depreciation rates. In the years following the act, the budget deficit increased from to 2.6% of GDP in 1981 to 4.0% of GDP in 1982 to 6.0% of GDP in 1983. These budget deficits were the largest budget deficits as a percentage of GDP since World War II. As theory suggests, the combination of loose fiscal policy and tight monetary policy in the 1980s led to the highest ex-post real interest rates of any period covered in this report. Since the United States operated a floating exchange rate in the 1980s, as it does at present, economists believe that one result of the large budget deficits were the large trade deficits of the mid-1980s, which were the result of foreign capital being attracted to the United States by the high interest rates that budget deficits had caused. Efforts were undertaken from 1982 onwards to reduce the budget deficit. In 1982, parts of the Economic Recovery Tax Act of 1981 that had not yet been phased in were repealed. In 1983, Social Security taxes were increased and benefits reduced. In 1984, Congress passed the Deficit Reduction Act. In 1985, Congress enacted the Gramm-Rudman-Hollings Act, which attempted (unsuccessfully) to balance the budget in five years through automatic reductions in expenditures. In 1986, the Tax Reform Act was passed; it was intended to be revenue neutral. It sought to broaden the tax base by eliminating deductions and exemptions and lowered marginal tax rates. It also eliminated the special capital gains tax rate and the investment tax credit, altered depreciation rules, expanded the Alternative Minimum Tax (AMT) on individuals and introduced an AMT on corporations. As a percentage of GDP, non-military outlays were not cut until 1984. Although President Reagan favored lower government spending in general, the size of the budget deficits was thought to be a central reason for Congress to enact these reductions in outlays. The deficit was not eliminated until 1998, however. The deficits caused interest payments on the national debt to rise from 1.9% of GDP in 1980 to 3.1% of GDP in 1985. Military outlays were not reduced until the end of the Reagan presidency, and the reductions were later accelerated by the fall of the Soviet Bloc. Desert Storm Operation The economic and financing issues surrounding the Desert Storm Operation are unique in this survey in several ways. First, it was the only military operation considered that did not require any increase in military expenditures as a percentage of GDP. In fact, it took place during the long reduction in military spending as a percentage of GDP that accompanied the end of the Cold War. In this broad sense, there is no reason to consider the economic effects of financing the buildup. In fact, an economic contraction occurred during Desert Storm, unlike the typical wartime economic boom. The 1990-1991 recession is not typically attributed to the war, except for its possible negative effects on confidence. Instead, it is typically attributed to contractionary monetary policy (undertaken through 1989 to quell the rising inflation rate), problems in the banking sector, and the spike in oil prices associated with the Iraqi invasion of Kuwait. Timing supports this argument: the monetary tightening took place in 1988 and 1989, the recession began in July 1990, the oil price spike began in August 1990, and military operations began in January 1991. After the conflict ended, the economy began to expand again (in March 1991)—it did not experience post-war contraction. Unlike previous military conflicts, in which the Federal Reserve had tolerated excessive money creation, during Desert Storm the Federal Reserve sought to stamp out inflationary pressures that originated before the conflict, even at the risk of recession. After the conflict ended, the economy began to expand again. The budget deficit rose during the conflict, but it would be difficult to claim that military spending contributed to the rise in the deficit when overall military spending was declining during this time. Instead, the rising budget deficit was characterized by falling tax revenues and rising non-military outlays, both of which can be largely accounted for by automatic changes in revenues and outlays caused by the economic slowdown. To reduce the widening deficit, the Omnibus Budget Reconciliation Act of 1990 cut spending and increased taxes. It was estimated that over the following five years, 57% of the deficit reduction would come from spending cuts and 29% from tax increases (14% would come from lower interest payments). Changes to excise taxes, payroll taxes, and individual income taxes accounted for the bulk of the tax increases. The revenue raising provisions of the act were estimated to raise tax revenues by 0.3% of GDP in 1991. Most of the spending reductions were to come from reductions in military outlays and Medicare spending. Another unique aspect of the financing of the Gulf War was the financial contributions that the United States received from its allies. In effect, foreign governments financed a large part of the war effort for the United States—contributions from foreign governments equaled $48 billion, while the overall cost of the war was $61 billion in current dollars. In the balance of payments, these contributions represented a unilateral transfer to the United States, which is recorded as a reduction in the current account deficit. The exchange value of the dollar was unlikely to have been significantly affected, however, since a substantial portion of the contributions came from Saudi Arabia and Kuwait, both of whom had a de facto fixed exchange rate with the dollar. Ongoing War in Iraq and Afghanistan This section discusses spending and economic trends through 2008 surrounding the war in Iraq that began in 2003. Like the 1991 conflict, the 2003 war began during a period of economic weakness. Because the recession had already ended about a year and a half before the war, the war was clearly not responsible for the economic weakness. At most, it prolonged the initially sluggish nature of the recovery through the upward blip in oil prices, which mostly occurred in the months leading up to the war. Some observers had predicted the war would depress economic activity through another channel, weakened consumer and investor confidence, but this did not come to pass. Economic growth picked up in 2004, and the economy was operating around full employment in 2006. In the latter part of 2007 through the first half of 2008, rising unemployment, increasing oil and gas prices, and historically large numbers of housing foreclosures have put a strain on the economy. Initially, the war in Iraq made a substantial contribution to the widening of the budget deficit. During a period of economic sluggishness, this would be expected to stimulate aggregate demand. However, any stimulative effect was minor since military outlays increased by only 0.3 percentage points of GDP in 2003 and an additional 0.2 percentage points in 2004 (if measured by the supplemental appropriations, the increased outlays equaled about 0.6 percentage points of GDP in 2003 and 0.7 percentage points in 2004). As can be seen in Table 6 , the increase in military outlays occurring during the early years of the war was not financed through higher tax revenues or lower non-military outlays. Therefore, the war can be thought to be entirely deficit financed. As opposed to past conflicts where taxes were raised, taxes were cut in 2003. The tax cut's major provisions were an acceleration of the 2001 income tax rate reductions and a reduction in the tax rate on dividends. Because of general economic weakness, the increased military spending and resultant deficits did not initially lead to higher interest rates or inflation. Inflation began rising in 2005 though it slowed slightly in 2007. Even after the recent increase, military spending as a percentage of GDP is still lower than it was in any year before 1994. After the first couple of war years, a shift to a higher level of deficit-financed spending would not be expected to have any further stimulative effect on the economy. The increase in revenues that occurred between 2005 and 2007 was caused by rising taxable income generated as a result of strong GDP growth, contributing to lower deficits and allowing the war to be financed through this increase in revenues. Revenues are projected to fall again in 2008 due to the cost of the economic stimulus measures passed by Congress in February, as well as the slowing economy. This indicates a return to funding the war solely through deficit-financed spending. Conclusion There is little reason to believe that the increase in military outlays associated with a war would cause a recession; in fact, theory predicts that it will cause an increase in aggregate demand. Even if a conflict shifted spending away from non-military goods and services, there is no reason to think overall GDP would fall because military spending is included in GDP. The increased government outlays associated with wars can be financed in four ways: through higher taxes, reductions in other government spending, government borrowing from the public (the issuance and sale of U.S. Treasury securities to the public), or money creation. The Desert Storm Operation illustrates that a military campaign of moderate size can be financed with very little impact on the budget or the economy. That campaign involved no increase in overall military outlays as a percentage of GDP. When wars get larger, tax increases almost inevitably become necessary. Big conflicts typically bring economic booms because borrowing from the public and money creation expand aggregate demand. "Total wars," such as World War II, typically draw on all four financing methods and may even lead to fundamental shifts away from a market economy. The choice of how to finance a war is mainly a question of equity, which by its nature is a political question. (The exceptions are total wars, which involve such large expenses that virtually any financing choices will lead to considerable efficiency losses.) Financing through borrowing has been justified by some on the grounds that future generations benefit from the sacrifice that present generations make by fighting the war, and should therefore bear some of the cost of the war. Borrowing has also been justified on "consumption smoothing" grounds—it is better to defray a temporary expense over time than all at once. Of the four financing methods, economists tend to reject the money creation method if it can be avoided. They argue that the "inflation tax" is the most arbitrary of all taxes because the government cannot democratically specify its incidence. It is also a financing method that leads to large efficiency losses quickly because it reduces the useful functions money serves in a market economy. It also undermines the effectiveness of monetary policy as a macroeconomic stabilization tool. Economists also tend to believe that the benefits of widespread price controls are largely illusory. Even if price controls successfully reduce recorded inflation, they create serious efficiency and welfare losses, typically lead to shortages, limit individual choice, and encourage participation in black markets. When removed, price controls have consistently led to a release of pent up inflation historically. Total wars by their nature require financing methods that lead to large efficiency losses. Money creation, increasing taxes, or borrowing from the public on a large scale could all be opposed on efficiency grounds—it would be difficult to claim that any one financing method is most efficient. In addition, governments often feel that the equity rationale makes policies such as rationing necessary, compounding the overall efficiency loss. Thus, attempting to draw general policy conclusions from the experience with total war risks comparing apples with oranges.

The increased government outlays associated with wars can be financed in four ways: through higher taxes, reductions in other government spending, government borrowing from the public, or money creation. The first two methods are unlikely to have an effect on economic growth (aggregate demand) in the short run: the expansion in aggregate demand caused by greater military outlays is offset by the contraction in aggregate demand caused by higher taxes or lower non-military government spending. The latter two methods increase aggregate demand. Thus, a by-product of American wars has typically been a wartime economic boom in excess of the economy's sustainable rate of growth. Wars may shift resources from non-military spending to military spending, but because military spending is included in GDP, it is unlikely to lead to a recession. Just as wars typically boost aggregate demand, the reduction in defense expenditures after a war removes some economic stimulus as the economy adjusts to the return to peacetime activities. The economic effect of World War II stands in a class of its own. More than one-third of GDP was dedicated to military outlays. Budget deficits were almost as large; these large deficits were made possible through policies that forced individuals to maintain a very high personal saving rate. Money creation was a significant form of financing, but the inflation that would typically accompany it was suppressed through widespread rationing and price controls. Private credit was directed toward companies producing war materials. There was a significant decrease in non-military outlays and a significant increase in taxes, including the extension of the income tax system into a mass tax system and an excess profits tax. President Truman attempted to avoid financing the Korean Conflict through borrowing from the public or money creation—budget deficits were much lower than during any other period considered—but the economy boomed anyway. Tax increases and a reduction in non-military spending largely offset the increases in military outlays. President Truman relied on price controls to prevent the money creation that did occur from being inflationary. Vietnam, the Reagan military buildup, and the two wars in Iraq were not large enough to dominate economic events of their time. The beginning of the Vietnam Conflict coincided with a large tax cut. Non-military government spending rose throughout the Vietnam era. Most of the conflict was deficit financed, although tax increases occurred at the peak of the conflict. Inflation rose throughout the period, and President Nixon turned to price controls to suppress it. The beginning of the Reagan military buildup also coincided with a large tax cut, as well as an effort by the Federal Reserve to disinflate the U.S. economy. Thus, borrowing from the public, and later a reduction in non-military outlays, offset most of the rise in military spending. Unlike earlier conflicts, liberalized international capital markets allowed the United States to borrow significantly abroad for the first time, which many economists believe caused the large trade deficits of the mid-1980s. Desert Storm took place among rising budget deficits and rising taxes. It was the only military operation considered to largely occur in a recession. The ongoing wars in Iraq and Afghanistan took place at a time of sluggish economic recovery, tax cuts, and rising budget deficits. This report will be updated as needed.

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The U.S. strategy in pursuing the war on international terrorism involves a variety of missions conducted by military and civilian intelligence personnel characterized as "special operations" or paramilitary operations. The separate roles of the Department of Defense (DOD) and the Central Intelligence Agency (CIA) are not always clearly reflected in media accounts and at times there has been considerable operational overlap. Proposals such as those made by the 9/11 Commission to change organizational relationships will, however, be evaluated on the basis of separate roles and missions, operating practices, and relevant statutory authorities. What Are Special Operations and Paramilitary Operations? DOD defines special operations as "operations conducted in hostile, denied, or politically sensitive environments to achieve military, diplomatic, informational, and/or economic objectives employing military capabilities for which there is no broad conventional force requirement." DOD defines paramilitary forces as "forces or groups distinct from the regular armed forces of any country, but resembling them in organization, equipment, training or mission." In this report, the term "paramilitary operations" will be used for operations conducted by the CIA whose officers and employees are not part of the armed forces of the United States. (In practice, military personnel may be temporarily assigned to the CIA and CIA personnel may temporarily serve directly under a military commander.) In general, special operations are distinguishable from regular military operations by degree of physical and political risk, operational techniques, and mode of employment among other factors. DOD special operations are frequently clandestine—designed in such a way as to ensure concealment; they are not necessarily covert, that is, concealing the identity of the sponsor is not a priority. The CIA, however, conducts covert and clandestine operations to avoid directly implicating the U.S. Government. Roles and Mission of CIA and SOF USSOCOM was established by Congress in 1987 ( P.L. 99-661 , 10 U.S.C. §167). USSOCOM's stated mission is to plan, direct and execute special operations in the conduct of the War on Terrorism in order to disrupt, defeat, and destroy terrorist networks that threaten the United States. The CIA was established by the National Security Act of 1947 (P.L. 80-253) to collect intelligence through human sources and to analyze and disseminate intelligence from all sources. It was also to "perform such other functions and duties related to intelligence affecting the national security as the President or the National Security Council may direct." This opaque phrase was, within a few months, interpreted to include a range of covert activities such as those that had been carried out by the Office of Strategic Services (OSS) during World War II. Although some observers long maintained that covert actions had no statutory basis, in 1991 the National Security Act was amended (by P.L. 102-88 ) to establish specific procedures for approving covert actions and for notifying key Members of Congress. The statutory definition of covert action ("activity or activities of the United States Government to influence political, economic, or military conditions abroad, where it is intended that the role of the United States Government will not be apparent or acknowledged publicly....") is broad and can include a wide range of clandestine efforts—from subsidizing foreign journals and political parties to participation in what are essentially military operations. In the case of paramilitary operations, there is a clear potential for overlap with activities that can be carried out by DOD. In general, the CIA would be designated to conduct operations that are to be wholly covert or disavowable. In practice, responsibilities for paramilitary operations have been assigned by the National Security Council on a case-by-case basis. Brief History of CIA and SOF Paramilitary Operations CIA In addition to acquiring intelligence to support US military operations from the Korean War era to Iraq today, the CIA has also worked closely alongside DOD personnel in military operations. On occasion it has also conducted clandestine military operations apart from the military. One example was the failed Bay of Pigs landing in Cuba in 1961. Especially important was a substantial CIA-managed effort in Laos in the 1960s and 1970s to interdict North Vietnamese resupply efforts. The CIA was directed to undertake this effort in large measure to avoid the onus of official U.S. military intervention in neutral Laos. The CIA's paramilitary operations in Afghanistan in 2001 have been widely described; CIA officers began infiltrating Afghanistan before the end of September 2001 and played an active role alongside SOF in bringing down the Taliban regime by the end of the year. According to media reports, the CIA has also been extensively involved in operations in Iraq in support of military operations. SOF SOF have reportedly been involved in clandestine and covert paramilitary operations on numerous occasions since the Vietnam War. Operations such as the response to the TWA 847 and Achille Lauro highjackings in 1985, Panama in 1989, Mogadishu in 1993, and the Balkans in the late 1990s have become public knowledge over time but other operations reportedly remain classified to this day. Some speculate that covert paramilitary operations would probably become the responsibility of a number of unacknowledged special operations units believed to exist within USSOCOM. 9/11 Report Recommendations6 Recommendation 32 of the 9/11 Commission report states: "Lead responsibility for directing and executing paramilitary operations, whether clandestine or covert, should shift to the Defense Department. There it should be consolidated with the capabilities for training, direction, and execution of such operations already being developed in the Special Operations Command." The 9/11 Commission's basis for this recommendation appears to be both performance and cost-based. The report states that the CIA did not sufficiently invest in developing a robust capability to conduct paramilitary operations with U.S. personnel prior to 9/11, and instead relied on improperly trained proxies (foreign personnel under contract) resulting in an unsatisfactory outcome. The report also states that the United States does not have the money or people to build "two separate capabilities for carrying out secret military operations," and suggests that we should "concentrate responsibility and necessary legal authorities in one entity." Some observers question whether procedures are in place to insure overall coordination of effort. Press reports concerning an alleged lack of coordination during Afghan operations undoubtedly contributed to the 9/11 Commission's recommendation regarding paramilitary operations. Although such accounts have been discounted by some observers, the Intelligence Reform and Terrorism Prevention Act ( P.L. 108-458 ) included a provision (Section 1013) that requires DOD and CIA to develop joint procedures "to improve the coordination and deconfliction of operations that involve elements" of the CIA and DOD. When separate missions are underway in the same geographical area, the CIA and DOD are required to establish procedures to reach "mutual agreement on the tactical and strategic objectives for the region and a clear delineation of operational responsibilities to prevent conflict and duplication of effort." Potential Impacts Diminished CIA Intelligence Capabilities Some observers suggest that a capability to plan and undertake paramilitary operations is directly related to the Agency's responsibility to obtain intelligence from human sources. Some individuals and groups that supply information may also be of assistance in undertaking or supporting a paramilitary operation. If CIA were to have no responsibilities in this area, however, certain types of foreign contacts might not be exploited and capabilities that have proven important (in Afghanistan and elsewhere) might erode or disappear. Additional Strain on SOF Some question if this proposed shift in responsibility would place additional strains on SOF who are extensively committed worldwide. Others argue that SOF lack the experience and requisite training to conduct covert operations. They suggest that if SOF do undertake covert operations training, that it could diminish their ability to perform their more traditional missions. A Reduction in Flexibility The 9/11 Report notes the CIA's "reputation for agility in operations," as well as the military's reputation for being "methodical and cumbersome." Some experts question if DOD and SOF are capable of operating in a more agile and flexible manner. They contend that the CIA was able to beat SOF into Afghanistan because they had less bureaucracy to deal with than did SOF, which permitted them to "do things faster, cheaper, and with more flexibility than the military." Some are concerned that if SOF takes over responsibility for clandestine and covert operations that they will become less agile and perhaps more vulnerable to bureaucratic interference from defense officials. SOF Funding Authority Section 1208 of P.L. 108-375 permits SOF to directly pay and equip foreign forces or groups supporting the U.S. in combating terrorism. Although not a recommendation in the 9/11 Commission's report, many feel that this authority will not only help SOF in the conduct of unconventional warfare, but could also be a crucial tool should they become involved in covert or clandestine operations. In Afghanistan, SOF did not have the authority to pay and equip local forces and instead relied on the CIA to "write checks" for needed arms, ammunition, and supplies. Issues for Congress Oversight Issues Congress may choose to review past or current paramilitary operations undertaken by the CIA and might also choose to assess the extent of coordination between the CIA and DOD. P.L. 108-458 required that a report be submitted to defense and intelligence committees by June 2005 describing procedures established in regard to coordination and deconfliction of CIA and DOD operations. That report provided an opportunity to indicate how initiatives by the executive branch have addressed relevant issues. CIA has not maintained a sizable paramilitary force "on the shelf." When directed, it has built paramilitary capabilities by using its individuals, either U.S. or foreign, with paramilitary experience under the management of its permanent operations personnel in an entity known as the Special Activities Division. The permanent staff would be responsible for planning and for maintaining ties to former CIA officials and military personnel and individuals (including those with special language qualifications) who could be employed should the need arise. Few observers doubt that there is a continuing need for coordination between the CIA and DOD regarding paramilitary capabilities and plans for future operations. Furthermore, many observers believe that the CIA should concentrate on "filling the gaps," focusing on those types of operations that DOD is likely to avoid. Nevertheless, they view this comparatively limited set of potential operations to be a vitally important one that should not be neglected or assigned to DOD. There may be occasions when having to acknowledge an official U.S. role would preclude operations that were otherwise considered vital to the national security; the CIA can provide the deniability that would be difficult, if not impossible, for military personnel. Potential Legal Considerations Some experts believe that there may be legal difficulties if SOF are required to conduct covert operations. One issue is the legality of ordering SOF personnel to conduct covert activities that would require them to forfeit their Geneva Convention status to retain deniability. To operate with deniability, SOF could be required to operate without the protection of a military uniform and identification card which affords them combatant status under the Geneva Convention if captured. Also, covert operations can often be contrary to international laws or the laws of war and U.S. military personnel are generally expected to follow these laws. Traditionally, the public text of intelligence legislation has included few provisions regarding paramilitary operations; levels of funding and other details are included in classified annexes which are understood to have the force of law. The House and Senate Intelligence Committees do have considerable influence in supporting or discouraging particular covert actions. In a few cases Congress has formally voted to deny funding to ongoing covert operations. Special Forces, however, fall under the House and Senate Armed Services Committees, and it is unclear how Congress would handle oversight if covert operations are shifted to SOF as well as how disputes between the intelligence and armed services committees would be dealt with. Congressional Activity 109th Congress The 109 th Congress did not address this issue legislatively. On November 23, 2004, President Bush issued a letter requiring the Secretary of Defense and the Director of Central Intelligence to review matters relating to Recommendation 32 and submit their advice to him by February 23, 2005. In unclassified testimony to the Senate Select Committee on Intelligence in February 2005, the Director of the CIA testified that the CIA and DOD disagreed with the 9/11 Commission's recommendation. In June of 2005 it was reported that the Secretary of Defense and the Director of the Central Intelligence Agency responded to the President, stating that "neither the CIA nor DOD endorses the commission's recommendation on shifting the paramilitary mission or operations." The Administration reportedly rejected the 9-11 Commission's recommendation to shift the responsibility for paramilitary operations to DOD. 110th Congress The 110 th Congress saw the enactment of P.L. 110-53 , Implementing Recommendations of the 9/11 Commission Act of 2007 which did not address either paramilitary operations by CIA or special operations by DOD. Opposition by the Pentagon, the Intelligence Community, and the Bush Administration undoubtedly affected the congressional response to the 9/11 Commission's recommendation to vest responsibilities for paramilitary operations in DOD. CIA's reputation may have also been assisted by the generally favorable assessments given to the Agency's post-9/11 performance, especially in the initial phases of the Afghan campaign that led to the collapse of the Taliban regime in December 2001. 111th Congress Although most observers believe that there remains little inclination among Members to transfer responsibilities for all paramilitary operations out of CIA, some Members have expressed concerns about apparent blurring of lines between DOD clandestine operations and CIA intelligence-gathering operations.

The 9/11 Commission Report recommended that responsibility for directing and executing paramilitary operations should be shifted from the CIA to the U.S. Special Operations Command (USSOCOM). The President directed the Secretary of Defense and Director of Central Intelligence to review this recommendation and present their advice by mid-February 2005, but ultimately, they did not recommend a transfer of paramilitary responsibilities. This Report will briefly describe special operations conducted by DOD and paramilitary operations conducted by the CIA and discuss the background of the 9/11 Commission's recommendations. For additional information see CRS Report RS21048, U.S. Special Operations Forces (SOF): Background and Issues for Congress , by [author name scrubbed].

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Outcomes of the Leaders' Meeting APEC's annual Leaders' Meeting is the association's paramount event, culminating a year of meetings designed to foster trade and investment liberalization among the 21 APEC members. Because APEC operates under a system of voluntary action and "open regionalism," in which changes in trade policy are extended not just to APEC members, but to all trading partners, these meetings rarely result in concrete, binding "deliverables." The Leaders' Meeting, in particular, usually results in a joint Leaders' Declaration that enumerates a series of commitments and pledges on steps to be taken to liberalize the trade and investment regimes of the APEC members. In addition, the United States usually has taken advantage of the gathering of the 21 APEC leaders to hold bilateral meetings with selected leaders. Although President Obama did not attend this year's meeting, Secretary of State Hillary Clinton did meet with the representatives from Japan, Malaysia, Russia, Singapore, South Korea, and Taiwan while in Vladivostok. Plans for a meeting with Hong Kong's new Chief Executive Leung Chun-ying were cancelled because he was unable to attend due to important domestic duties. Prior to her arrival at the APEC Leaders' Meeting, Secretary Clinton met with Indonesia's President Susilo Bambang Yudhoyono and China's President Hu Jintao. This year's Joint Leaders' Declaration focused on the four themes selected by host member Russia: (1) Advancing trade and investment liberalization and regional economic integration; (2) strengthening food security; (3) establishing reliable supply chains; and (4) promoting cooperation to foster innovative growth. On the issue of regional economic integration, the declaration reaffirmed APEC's commitment to the Bogor Goals, as well as "APEC's role as an incubator of a FTAAP [Free Trade Area of the Asia-Pacific]." The declaration also noted the completion of a model chapter on transparency, adding to the list of model chapters developed by APEC for use by its members when negotiating bilateral or multilateral trade agreements. On trade and investment liberalization, the document highlighted the agreement of tariff reduction for environmental goods (see " Agreement on Environmental Goods Tariff Reductions " below). Regarding food security, the Leaders' Declaration called for the implementation of the Niigata Declaration of 2010 and the Kazan Declaration on Food Security (see " Food Security and Sustainable Agriculture " below) and a commitment to strengthen efforts to combat illegal trade in wildlife. The leaders also agreed to promote more reliable supply chains by various means, including reducing the "time, cost, and uncertainty of moving goods and services through the Asia-Pacific region," in order to achieve the goal of a 10% improvement in supply-chain performance by 2015. In addition, the declaration committed the APEC members to develop non-discriminatory, market-driven innovation policies that promote greater involvement of small, medium, and micro-sized enterprises (SMMEs) and women in the field of technological innovation. Key Issues for U.S. Policy Although as the host for this year's meetings, Russia set the overall agenda for the Leaders' Meeting and the resulting Leaders' Declaration, the United States delegation had its own priorities to pursue in Vladivostok. Below is a summary (in alphabetical order) of the five key issues addressed at the APEC meetings in Vladivostok, according to officials with the U.S. State Department and U.S. Trade Representative's (USTR's) office. Agreement on Environmental Goods Tariff Reductions The leading outcome for the United States, according to U.S. officials, was the agreement to lower tariffs on 54 categories of "environmental goods" to 5% or less by 2015. At the 19 th Leaders' Meeting held in Honolulu in November 2011, the APEC members agreed to lower tariffs to 5% by 2015 on a then-undesignated list of environmental goods. During the ensuing 10 months, representatives of each APEC member suggested goods to be included on the list. The U.S. representatives reportedly focused on goods that were clearly related to environmental issues and would be commercially credible. According to interviews with State Department and USTR officials, the United States is generally pleased with the final list of environmental goods. Energy Security Noting the "negative influence on the world's economy from carbon emissions," the leaders pledged to "strengthen APEC energy security" by promoting greater energy efficiency and the development of cleaner sources of sustainable energy. The APEC leaders also reiterated the commitment made at the 19 th Leaders' Meeting to reduce aggregate energy intensity by 45% by 2035, based on 2005 data. In Annex B to the 2012 Leaders' Declaration, the APEC members agreed to increase the use of natural gas; promote investment in energy infrastructure (including natural gas liquefaction facilities); and strengthen cooperation in the peaceful use of nuclear energy. Food Security and Sustainable Agriculture In their declaration, the leaders recognized the global and regional challenge of providing secure access to a safe and sufficient food supply to a growing population. To that end, they made a commitment to increasing sustainable agricultural production by investing in improved agricultural technology; developing a "more open, stable, predictable, rule-based, and transparent agricultural trading system"; and combatting illegal and/or excessive fishing and harvesting of flora and fauna. Secretary Clinton, partially as the result of her August trip to Africa, reportedly pressed for stronger measures by APEC members to combat the trade in illegal wildlife. The leaders' efforts on food security and sustainable agriculture built on two previous APEC declarations. In October 2012, APEC held its first ministerial meeting on food security in Niigata, Japan, resulting in the issuance of the Niigata Declaration. The Niigata Declaration established two shared goals for APEC members: (1) The sustainable development of the agricultural sector; and (2) The facilitation of investment, trade and markets. In May 2012, APEC released the Kazan Declaration following its third ministerial meeting on food security, held in Kazan, Russia. The Kazan Declaration confirmed APEC's commitment to increasing sustainable agricultural production by promoting foreign direct investment, sharing agricultural technology and research, harmonizing domestic regulations with international standards, and improving food access for "socially vulnerable groups." The ministers made particular note of the damage caused by overfishing in the region, and called for sustainable management of marine ecosystems. Innovative Growth The 18 th Leaders' Meeting, held in Yokohama, Japan, called for APEC to create a path for a "robust community" based in part on innovative growth. The theme of innovative growth has been further explored in subsequent Leaders' Meetings, including this year's event in Vladivostok. The 2012 Leaders' Declaration highlighted the importance of including small, medium, and micro-sized enterprises (SMMEs) and women into the development of innovation in the Asia-Pacific region. Annex A of the declaration maps other aspects of promoting innovative growth that the APEC members agreed to pursue. Supply Chains APEC has sought ways of improving the reliability and efficiency of supply chains in the region for several years. The 2010 Leaders' Declaration set a goal of achieving a 10% improvement in supply-chain performance by 2015, by reducing the time, cost, and uncertainty of moving goods and services through the Asia-Pacific region. This year, one of the foci of discussion was on the identification of "chokepoints" in the supply chains, and improving infrastructure and policies to ameliorate the identified "chokepoints." In addition, the Leaders' Declaration called for APEC members to promote "greener, smarter, more efficient, and intelligent supply chains." Another issue identified as critical to improving supply chain efficiency was improving export consolidation. According to U.S. officials, the APEC leaders agreed that in preparation for next year's Leaders' Meetings, the members would conduct comprehensive supply chain performance assessments. In addition, APEC would examine ways of networking smaller ports in the region into existing supply chains. Technical Barriers to Trade and Trade Facilitation During this year's meeting, the APEC leaders also discussed efforts to reduce barriers to trade and to enhance trade facilitation. The Leaders' Declaration reaffirmed their commitment to "rollback protectionist measures," such as export and investment restrictions. To reduce technical barriers to trade, the APEC members agreed to increase the transparency of their trade regulations, and continue their efforts to advance regulatory convergence based on international standards. In addition, APEC will continue its capacity building initiatives, including the exchange of best practices related to key issues, such as secure trade. According to some observers, past APEC efforts designed to lower technical barriers to trade and facilitate trade have had a significant impact on intra-regional trade and investment. A study released by APEC's Economic Committee a month after the 2012 Leaders' Meeting appears to support this assertion. The study reports that the ease of doing business in APEC economies, as measured by several commercial factors, had improved by an average of 8.2% between 2009 and 2011. The results exceeded APEC's target of a 5% improvement during the same time period, and were nearly a third of APEC's goal of a 25% improvement by 2015. APEC and the Trans-Pacific Partnership During President Obama's first term, there seemed to be a subtle shift in the role of APEC in U.S. trade policy and its interaction with the ongoing TPP negotiations. The TPP was initially presented by the United States as a model for establishing a Free Trade Area of the Asia-Pacific (FTAAP) as part of APEC's efforts to promote trade and investment liberalization in the region. Other APEC members have similarly portrayed alternative regional integration models, such as the ASEAN+3 and the ASEAN+6, as possible paths towards the creation of a FTAAP. More recently, senior U.S. trade officials describe APEC as an incubator of new ideas or concepts that can eventually be incorporated into a binding and more formal TPP. In addition, the annual APEC Leaders' Meeting is often portrayed by U.S. officials as a forum at which the current TPP negotiating nations can present to the other APEC members the status of the trade talks. The 2012 Leaders' Declaration does not mention the TPP, but does direct APEC ministers to take note of "various regional undertakings that could be developed and built upon as a way towards an eventual FTAAP," which presumably includes the TPP. By various accounts, the TPP negotiations have been a source of some tension among the 21 APEC members, with some viewing the negotiations as a divisive initiative introduced by the United States. Recent Leaders' Declarations provide different portrayals of the importance of the FTAAP, as well as the TPP. The 2009 Leaders' Declaration—the first following the U.S. announcement of its intention to negotiate the TPP—refers in general terms to APEC's exploration of "a range of possible pathways" to the creation of an FTAAP without explicitly mentioning the TPP. Following the 2010 Leaders' Meeting held in Yokohama, Japan, the Leaders' Declaration was more explicit about the role of the FTAAP and its relationship to APEC: We will take concrete steps toward realization of a Free Trade Area of the Asia-Pacific (FTAAP), which is a major instrument to further APEC's regional economic integration agenda. An FTAAP should be pursued as a comprehensive free trade agreement by developing and building on ongoing regional undertakings, such as ASEAN+3, ASEAN+6, and the Trans-Pacific Partnership, among others. To this end, APEC will make an important and meaningful contribution as an incubator of an FTAAP by providing leadership and intellectual input into the process of its development, and by playing a critical role in defining, shaping, and addressing the "next generation" trade and investment issues that FTAAP should contain. APEC should contribute to the pursuit of an FTAAP by continuing and further developing its work on sectoral initiatives in such areas as investment; services; e-commerce; rules of origin; standards and conformance; trade facilitation; and environmental goods and services. While APEC official statements focus on FTAAP—not TPP—and present FTAAP as an instrument to achieve APEC's agenda, U.S. officials appear to place a greater priority on the TPP. For example, Secretary Clinton highlighted the TPP in her comments to the press in Vladivostok, saying, "[A]s leaders meet here in Russia, our negotiating partners are engaged in intense diplomacy to advance the Trans-Pacific Partnership, known as the TPP. Th is free trade agreement is central to America's economic vision in Asia [emphasis added]." For several years, critics in the United States and in Asia have questioned the value of APEC and its annual Leaders' Meeting. Despite having helped organize the first APEC Leaders' Meeting in 1993, former Australia Prime Minister Paul Keating subsequently referred to APEC as a "talk shop of debatable output." Confidential sources have suggested to CRS that given the growth in high-level events in Asia at which the President of the United States is expected to attend, the United States could be represented at future APEC Leaders' Meetings by the Secretary of State or the Vice President. Although President Obama did not attend this year due to the conflict with the Democratic Party's National Convention, the Obama Administration is consulting with Indonesia, next year's APEC host, to set dates for the Leaders' Meeting so that the President can attend. Implications for Congress To the extent that APEC remains one of the leading economic and trade fora in Asia for U.S. foreign policy, Congress will continue to have an active interest in APEC's major meetings and any resulting commitments. In addition, Congress must appropriate funds to pay the U.S. share to support APEC's secretariat and operations. Finally, Congress may be asked to approve funding for various APEC studies and initiatives agreed to at events such as the annual Leaders' Meeting. At this year's Leaders' Meeting, the 21 APEC members pledged to reduce the tariff rates on 54 categories of environmental goods to below 5% by 2015. Under current U.S. law, 4 of those 54 categories have peak rates above 5%. As a result, the 113 th Congress may consider legislation to bring U.S. tariff rates in compliance with the APEC commitment. As an APEC member, the United States contributes to the support of the APEC secretariat in Singapore, as well as various APEC programs. The 112 th Congress provided an estimated $1.023 million to APEC-related activities in FY2012 as part of the State Department's contributions to international organizations. President Obama has requested $1.028 million for FY2013. Of that amount, $144,000 is for the 18% share of the APEC member assessments provided by the United States. The rest of the funding is for APEC-related activities. According to the Department of State Operations Congressional Budget Justification for Fiscal Year 2013, APEC-related activities involve 17 different federal departments, agencies, and supported organizations in such areas as advancing regulatory reform, enhancing Customs procedures, promoting anti-corruption efforts, and improving transportation security. The 113 th Congress will also be asked to provide funding for APEC activities, including some related to the key issues discussed in Vladivostok. Appendix. List of Environmental Goods The following table lists the 54 categories of goods included in the APEC agreement to lower tariff rates to 5% or less by 2015 by harmonized system code. Categories with peak tariff rates above 5% according to U.S. law are highlighted in italics.

Russia hosted the Asia-Pacific Economic Cooperation's (APEC) week-long series of senior-level meetings in Vladivostok on September 2-9, 2012. The 20 th APEC Economic Leaders' Meeting, the main event for the week, was held September 8-9, 2012. It was the first time that Russia had hosted the APEC meetings, as well as the first APEC Economic Leaders' Meeting at which all the members were also members of the World Trade Organization (WTO). U.S. expectations for the 20 th APEC Economic Leaders' Meeting were relatively low for a number of reasons. First, several of the members' leaders either did not attend (e.g., President Obama), were effectively lame ducks (e.g., President Hu Jintao of China), or were facing political uncertainty at home (e.g., Prime Minister Yoshihiko Noda of Japan), making it difficult for the members to consider major commitments. Second, in the eyes of U.S. officials involved in the preparations for the meetings, Russia's lack of experience and past lack of commitment to APEC weakened the pre-meeting preparations for the Leaders' Meeting. Third, by holding the Leaders' Meeting in September (rather than in November, as in previous years), Russia foreshortened the time to work on various initiatives. Fourth, recent events and initiatives, including the ongoing Trans-Pacific Partnership trade agreement negotiations, have raised questions within the Obama Administration about APEC's role on the promotion of greater economic integration in the Asia-Pacific region. Despite the low U.S. expectations, U.S. officials indicate that they think the week-long event in Vladivostok was relatively productive. Below is a summary of the main results of these meetings, according to senior officials in the Obama Administration: The 21 APEC members agreed to lower their tariffs on 54 categories of environmental goods to no more than 5% by 2015. The APEC members endorsed a model chapter on transparency for reference when negotiating multilateral or bilateral trade agreements. The APEC members agreed to cooperate in developing policies and technology to promote sustainable agriculture, including encouraging the harmonizing of domestic regulations on food safety. An APEC report concluded that its members had improved the ease of doing business by an average of 8.2% between 2009 and 2011, fulfilling nearly a third of APEC's goal to obtain a 25% improvement by 2015. The APEC members agreed to continue to promote technological innovation by developing non-discriminatory, market-driven innovation policies and fostering greater communication between academia, businesses, and governments. U.S. officials are apprehensive, however, about APEC's prospects for the next two years when first Indonesia and then China will be the host members. This report also examines the role of Congress with respect to APEC, including appropriations necessary to finance APEC's secretariat and U.S. support of APEC activities.

CRS_RL33592

Introduction On July 19, 2006, Illinois Special State's Attorney Edward J. Egan and Chief Deputy Special State's Attorney Robert Boyle, named to investigate long standing charges of police brutality by a segment of the Chicago Police Department, released their report, Report of the Special State ' s Attorney: Appointed and Ordered by the Presiding Judge of the Criminal Division of the Circuit Court of Cook County in No. 2001 Misc. 4 (Report) . The Report , the culmination of a 4-year investigation, concluded that criminal charges might have been brought in three cases of police misconduct, but in each instance were barred by the Illinois statute of limitations. Press accounts indicate, however, the Chief Deputy Special State's Attorney Boyle, the Report 's co-author, suggested that a prosecution under federal RICO and Hobbs Act statutes might encounter less severe statute of limitations obstacles. This is a brief examination of the federal criminal statutes implicated by the Report . The Report concluded: – In the case of Andrew Wilson, there exists proof beyond a reasonable doubt that the commanding officer of Area 2 and two other officers who interrogated Wilson committed aggravated battery, perjury and obstruction of justice in violation of Illinois law, but two of the officers are deceased and the Illinois 3 year statute of limitations bars prosecution the former commander of the Area 2 Violent Crime unit, Report at 63, 16. – In the case of Phillip Adkins, there exists proof beyond a reasonable doubt that two other officers who interrogated Adkins committed aggravated battery in violation of Illinois law, but the Illinois statute of limitations bars prosecution, Report at 274, 16. – In the case of Alfonzo Pinex, there exists proof beyond a reasonable doubt that a second pair of officers who interrogated Pinex, committed aggravated battery, perjury and obstruction of justice in violation of Illinois law, but the Illinois statute of limitations bar prosecution, Report at 290, 16. Andrew Wilson Wilson was arrested at 5:15 on the morning of February 14, 1982, in connection with the investigation of the murder of two police officers, Report at 45. The arresting officers allegedly brutalized Wilson, beating him, burning him, subjecting him to electric shocks, and threatening him with a gun until he confessed, Report at 46-7. The commanding officer of the Area 2 Violent Crime Unit was purportedly present during much of the time and was said to have administered some of the mistreatment, id. At 10:00 in the evening, Wilson was taken to hospital after officers at the lock-up refused to take custody of him because of his condition. After the escorting officers remarked that he would refuse treatment if he knew what was good for him, he "was examined at about 11:15 p.m. by Dr. Geoffrey Korn. Dr. Korn [later] testified that he made note of some 15 separate injuries that were apparent on the defendant's head, chest, and right leg. Two cuts on the defendant's forehead and one on the back of his head required stitches; the defendant's right eye had been blackened, and there was bleeding on the surface of that eye. Dr. Korn also observed bruises on the defendant's chest and several linear abrasions or burns on the defendant's chest, shoulder, and chin area. Finally, Dr. Korn saw on the defendant's right thigh an abrasion from a second-degree burn; it was six inches long and 1 ½ to 2 inches wide." Wilson was subsequently convicted for the murder of the two officers and sentenced to death, but the Illinois Supreme Court overturned the conviction on appeal because the state had failed to demonstrate that Wilson's confession was not coerced. He was retried, convicted a second time and sentenced to life imprisonment; his conviction and sentence were affirmed and his federal habeas corpus petition denied. Wilson sued the three officers, the Superintendent of Police and the City under 42 U.S.C. 1983, based on allegations of his mistreatment, and ultimately settled with the City after being awarded damages and attorney's fees at trial against the commanding officer. The Office of Professional Standards investigation of the allegations of brutality led to the commanding officer's suspension in November 1991 and, following a Police Board hearing, his dismissal in 1992, Report at 153. The commanding officer denied mistreating Wilson at the suppression hearing (November 9, 1982), in depositions relating to the civil litigation (1988, 1989), and at the hearing before the Police Board (which nevertheless found the three had tortured Wilson, fired the commander, and suspended the other two officers in 1992), Report at 28-29, 44, 49. He seems likely to have denied them to investigators during various Office of Professional Standards investigations, the last of which apparently occurred in November 1991, Report at 153, and during interviews with the Special State's Attorney's office sometime between 2001 and 2006, Report at 15. Phillip Adkins Adkins was arrested on June 7, 1984, in connection with an armed robbery during which a police officer was assaulted, Report at 266. Adkins asserts that on the way to the station police officers from Area 2 beat him to unconsciousness, Report at 267-69. He was hospitalized in the Intensive Care/Trauma Ward on June 8 and June 9 and discharged on June 10, Report at 271. Adkins successfully sued the officers and the City in federal court and the City settled for $25,000, Report at 267. Thereafter, the Chicago Office of Professional Standards conducted an investigation (May 4, 1993 to December 16, 1993) that concluded that officers had in fact beaten Adkins, Report at 266. Alfonzo Pinex Pinex was arrested on June 28, 1985, in connection with a murder charge, Report at 276. His statement while in custody was suppressed for failure to honor his Miranda rule rights, Report at 276-77. The court declined to address the question of whether the statement was the product of a beating, Report at 277. Charges against Pinex were dismissed and he sued alleging that two officers in Detective Area 2 had beaten him to secure his confession while he was in custody, id . The City settled for $5,000 on November 1, 1991, id . Related Matters The Report addresses several other instances where detainees complained that they were beaten by officers of Detective Area 2. In each instance, the Report concludes that there is a lack of creditable evidence sufficient to convict the officers in question, Report at 178, 182, 202, 240-41, 264. The Report also considers the possibility of charges against those purported to have "covered up" the misconduct of others at Detective Area 2. It observes that, "We have found no evidence that would support a charge beyond a reasonable doubt of obstruction of justice (or 'cover-up') by any police personnel. There is insufficient evidence of wrongdoing by any member of the State's Attorneys Office, except for one person," Report at 17; see also, Report at 32-6; 112-29. The exception is apparently reserved for the prosecutor who ultimately took Wilson's recorded confession: If he was telling the truth when he testified about the sequence of events leading up to the court-reported confession of Andrew Wilson, . . . then the claim of Andrew Wilson that he had been abused before he gave that confession would be seriously undercut. If, on the other hand, [he] was not telling the truth, his false testimony would stand as strong corroboration of Andrew Wilson . . . He has testified on the motion to suppress and before the jury that convicted Wilson and sentenced him to death. He was named in the Federal civil rights action brought by Andrew Wilson. . . His deposition was taken, and he testified in both civil trials. He also testified as a witness on behalf of [the police commander] in the Police Board hearing in 1992. . . . In our judgment [he] did not tell the truth when he denied that he had been told by Andrew Wilson that he had been tortured by detectives, Report at 53-4. The Report does not indicate that its authors would seek to indict and convict the prosecutor but for impediment of the statute of limitations, nor does it speak to the weight of any evidence that might support charges of perjury or obstruction of justice against the prosecutor. Finally, the Report comments that, "the evidence supports the conclusion that [the] Superintendent [of Police] was guilty of a dereliction of duty and did not act in good faith in the investigation of the claim of Andrew Wilson," Report at 17. It makes no comment on the existence or weight of any evidence to support criminal charges. Federal Laws Implicated Although the purpose of the Special State's Attorney's inquiry was to determine whether prosecution under Illinois law might be had, statements contained in the Report suggest the possibility that several federal criminal laws may have been violated. The Fourth Amendment prohibits unreasonable searches and seizures; the Fifth Amendment prohibits compelling an individual to incriminate himself; the Eighth Amendment prohibits cruel and unusual punishment; each is binding upon the state and local officials by virtue of the due process clause Fourteenth Amendment. In combination, they prohibit police from torturing and otherwise brutalizing those in custody either to elicit confessions or otherwise; to do so under color of law constitutes a federal crime, 18 U.S.C. 242. It is likewise a federal crime to use force, corruption, or deceit to prevent another from providing authorities with information concerning other federal offenses, 18 U.S.C. 1512; or to directly provide a material false statement in a matter within the jurisdiction of a federal agency or department, 18 U.S.C. 1001; or to lie under oath in federal proceedings, 18 U.S.C. 1621. A fifth federal crime, the Hobbs Act, outlaws extortion under color of official right to the extent that the misconduct obstructs, delays or affects commerce, 18 U.S.C. 1951. Federal racketeering laws (RICO) proscribe operating a formal or informal enterprise, whose activities affect interstate commerce, through the patterned commission of other state or federal crimes (referred to interchangeably as racketeering activities or predicate offenses), 18 U.S.C. 1961-1963. Anyone who aids or abets the commission of a federal offense by another is liable himself for its commission and is equally punishable, 18 U.S.C. 2. The same can be said of anyone who conspires with another to commit a federal offense or to obstruct federal governmental activities—conspirators are liable and punishable for any underlying offenses committed in furtherance of the conspiracy. Conspiracy is a little different, however, in that it is also a separate crime, complete upon the criminal agreement and under the general conspiracy statute upon the commission of some overt act in furtherance of the scheme, 18 U.S.C. 371; liability attaches regardless of whether the crime which is the object of scheme is ever committed, 18 U.S.C. 371. Absent some specific exception, federal crimes are subject to a general 5-year statute of limitations; an indictment or information initiating prosecution must be filed within 5 years of the commission of the offense, 18 U.S.C. 3282. In the case of crimes like conspiracy or RICO offenses that can extend over long periods of time, the statute of limitations begins to run with the last act committed in the name of the criminal enterprise and may be considered to continue to exist until abandoned or the object of the conspiracy has been achieved. Evidence that establishes that police officers committed aggravated battery upon Wilson, Adkins, and Pinex in violation of Illinois law would presumably be sufficient to support a civil rights conviction for violation of 18 U.S.C. 242. Federal perjury charges cannot be predicated upon false statements made during Illinois judicial and administrative proceedings, but the same false statements may have been made under oath in connection with the federal civil rights suits brought by Wilson and Adkins. Statements that denied Wilson and Adkins were beaten while in police custody, if perjurious in Illinois proceedings, were likely perjurious in federal proceedings. Moreover, evidence of such false statements made to internal police and other state investigators concerning conduct that might constitute a federal civil rights violation could form the basis for a federal prosecution under either 18 U.S.C. 1001 (false statements on a matter within the jurisdiction of a federal department or agency) or 18 U.S.C. 1512 (obstructing disclosure of a federal crime to federal authorities by deception of a potential witness). Until recently, it might have been possible to argue that the use of violence or the threat of violence by law enforcement authorities to coerce prisoners to relinquish their constitutional rights constituted prohibited extortion under the Hobbs Act and as a RICO predicate. The Supreme Court's decision in Scheidler v. NOW , seems to preclude such a construction. Scheidler held that Hobbs Act extortion does not include the use of violence or the threat of violence to "restrict another's freedom of action." Moreover, Scheidler holds that the same definition of extortion applies the generic reference to state extortion laws in the RICO predicate list. The Ninth Circuit appears to have recognized the general possibility of a RICO prosecution in cases involving charges of police misconduct. The cases there, however, involved allegations of a wider range of predicate offenses, principally involved an issue critical in civil RICO cases but not relevant for purposes of a criminal RICO prosecution, and have yet to resolve the question of whether the requisite elements of a RICO have been satisfied. The cases, which grew out of the so-called "Ramparts Scandal," alleged that various officers had committed kidnaping, extortion, witness tampering, drug dealing, and attempted murder. They focused primarily on the type of injuries for which a civil RICO plaintiff has standing to recover damages. As for the possibility of a RICO prosecution based on crimes implicated here, civil rights violations of 18 U.S.C. 242 are not RICO predicate offenses, 18 U.S.C. 1961(1); neither are violations of 18 U.S.C. 1001 (false statements), of 18 U.S.C. 1621 (perjury), nor of 18 U.S.C. 371 (conspiracy), 18 U.S.C. 1961(1). Violations of 18 U.S.C. 1512, however, are RICO predicate offenses, 18 U.S.C. 1961(1)(B). In order to establish a RICO violation in this context, the government would have to prove that the commander and/or various officers of Area 2 conducted the activities of an enterprising affecting interstate commerce (either the Area 2 violent crime section or the informal association of the officers dedicated to the use of brutality to punish and obtain coerced confessions from some of those in their custody) through the patterned commission of violations of 18 U.S.C. 1512(b)(3) (i.e., denials and fabrication to investigators pursuing allegations of such brutality). But at least in part, the problem may be one of time. The Constitution's ex post facto clauses, U.S.Const. Art.I, §9, cl.3 and Art.I, §10, cl.1, prohibit the retroactive application of either federal or state criminal laws. Section 1512 was enacted and became effective on October 12, 1982; it cannot be applied to misconduct occurring prior to that date. Section 1512 became a RICO predicate offense on November 10, 1986; a RICO prosecution cannot be grounded on section 1512 predicate offenses occurring prior to that date. The three cases the Report found prosecutable (but for the statute of limitations) at best involve conduct straddling November 10, 1986. The denials of mistreatment to state investigators, at state proceedings, or during depositions, which provide the gravamen under section 1512 (preventing disclosure to federal authorities by deceiving those who would otherwise report the commission of a federal offense), begin with Wilson's suppression hearing on November 9, 1982, and end possibly with denials at interviews conducted by the Report 's authors, Report at 26, 7, 14. The date section 1512 was added as a RICO predicate, November 10, 1986, provides a beginning line; no prior violation of section 1512 may be used as a RICO predicate offense. There may also be a question as to the end line. It is not at all clear that section 1512(b)(3) covers situations where deceit is used to prevent disclosure of information to federal authorities concerning federal crimes for which the statute of limitations has expired. Thus, it may be that no violations of section 1512(b)(3) occurred with respect to denials made more than five years after the alleged civil rights violations on February 14, 1982 (Wilson), June 7, 1984 (Adkins), or June 28, 1985 (Pinex). On the other hand, here we have alleged civil rights violations followed by a series of denials themselves purportedly constituting violations of federal perjury and false statement statutes. A court might conclude that the end line should be marked at five years after the penultimate instance of perjury or a false statement, concealed within a more recent denial upon which a section 1512 charge may be based. In the context of the Wilson case, for example, section 1512 may permit the prosecution of any denial occurring within five years of false statements made concerning the 1982 civil rights violation during testimony at the 1992 Police Board hearing. Then there is the question of pattern. A RICO prosecution requires the government to establish not only qualified predicate offenses but to prove that they were committed as part of a pattern. The Supreme Court has explained that a "person cannot be subjected to [RICO] sanctions simply for committing two widely separate and isolated criminal offenses. Instead, the term 'pattern' itself requires the showing of a relationship between the predicates and of the threat of continuing activity. It is this factor of continuity plus relationship which combines to produce a pattern." "[P]redicate acts are related if they have 'the same or similar purposes, results, participants, victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events.'" RICO continuity comes in two forms, a series of predicate offenses that has ended (closed ended) and a series of predicate offenses that is continuing or bears the threat of continuation (open ended). The government "can satisfy the continuity prong either by (1) demonstrating a close-ended series of conduct that existed for such an extended period time that a threat of future harm is implicit, or (2) an open-ended series of conduct that, while short-lived, shows clear signs of threatening to continue into the future." The Report highlights three cases, each arising at least a year apart from the others, and involving three different sets of officers. Nevertheless, each is an instance where officers of Area 2 under the same commanding officer are alleged to have brutalized detainees in police custody, regularly denied wrongdoing, and offered explanations that the Report does not find creditable. Of course, the civil rights violations are not the alleged RICO predicates. The RICO predicates are instead the alleged violations of section 1512 in the form of denials and fabrications to investigators, and in state proceedings and federal depositions. More numerous than the underlying civil rights violations, they benefit and suffer from the same relationship analysis. They are relatively isolated instances involving different officers, but arising out of the same environment, reflecting common means and purpose. Even if a court should find the cases sufficiently related for RICO purposes, the question of continuity may still prove troubling. The actionable obstructions appear to run from the depositions taken in Adkins' civil case in 1987 to the depositions in Wilson's civil litigation in 1988 and 1989, and include statements in Pinex's civil litigation in 1991, testimony in the Wilson Police Board hearing in 1992, and possibly statements to investigators in the Office of Professional Standards' Adkins investigation that ended in December 16, 1993. The duration of the activity would seem sufficient, but the comparatively few instances, relatively isolated in time and circumstance, may bring into question whether the events can accurate be seen as the evidence of the continuous existence of a single enterprise. Statute of Limitations As noted earlier, federal crimes are generally subject to a 5-year statute of limitations, 18 U.S.C. 3282. The civil rights violations of which the Report speaks occurred in 1982, 1984 and 1985. The Report indicates that with the exception of its own interviews (for which it provides no dates) the denials and alleged fabrications upon which any other criminal charges would have been grounded occurred not later December 16, 1993, the date upon which the last mentioned Office of Professional Standards investigation ended, Report at 266. The Report argues that the Illinois statute of limitations precludes state prosecution, Report at 16. While citing the earlier conclusions of federal authorities, media accounts at the time the Report was released quoted one of its authors as suggesting that RICO and the longer federal statute of limitation might hold the prospect of future federal prosecution. This would seem to build upon a theory that the officers alleged to have committed the three civil rights violations in the 1980s were part of a conspiracy or RICO enterprise that encompassed not only the beating of detainees but an agreement to perpetually conceal the activity. As a general rule, the statute of limitations begins to run with the commission of the most recent overt act for conspiracies in violation of a statute which requires the government to prove both criminal agreement and some overt act in furtherance of scheme. In the case of statutes like RICO whose conspiracy proscription carries no overt act requirement, the scheme is said to continue until all its objectives have been realized or it is abandoned. In Grunewald v. United States , 353 U.S. 391 (1957), the question arose in whether in the case of an overt act conspiracy, the statute of limitations may be extended when the conspirators or one of their number acts to conceal the past workings of the scheme. The defendants in Grunewald had conspired to fix tax prosecutions and had doctored government records to conceal their misconduct, 353 U.S. at 395. When a grand jury was convened after the statute of limitations on the "tax fix" had run, the conspirators denied wrongdoing and urged other witnesses not to cooperate, 353 U.S. at 396. The prosecution argued that the conspiracy included a concealment component that meant the plot continued in place even after its principal objective, the tax fix, had been accomplished. The Court was unpersuaded, "[w]e find in all this noting more than what was involved [in our earlier cases], that is: (1) a criminal conspiracy which is carried out in secrecy; (2) a continuation of the secrecy after the accomplishment of the crime; and (3) desperate attempts to cover up after the crime begins to come to light; and so we cannot agree that this case does not fall within the ban of those prior opinions," 353 U.S. at 403. But then the Court went on the explain that "[b]y no means does this mean that acts of concealment can never have significance in furthering a criminal conspiracy. But a vital distinction must be made between acts of concealment done in furtherance of the main criminal objectives of the conspiracy, and acts of concealment done after these central objectives have been attained, for the purpose only of covering up after the crime." 353 U.S. at 405 (emphasis in the original). Subsequent lower court decisions reflect the view that an overt act of concealment will toll the statute of limitations or evidence its continued existence if the indictment charges that concealment was of the main object of the conspiracy. The Report cites two reported federal appellate court cases as examples, United States v. Masters , 924 F.2d 1362 (7 th Cir. 1991), and United States v. Maloney , 71 F.3d 645 (7 th Cir. 1995). Masters involved an attorney, a chief of police who until he lost his job took kickbacks for referring clients to the attorney, and a sheriff's department lieutenant who accepted bribes from the attorney to protect bookies from police interference, 924 F.2d at 1365. The three also participated in a plot to murder the attorney's wayward wife, 924 F.2d at 1365-366. The three were convicted under federal RICO charges predicated on the corruption offenses, 924 F.2d at 1365. The chief of police was charged and convicted only with conspiracy because the statute of limitations on the substantive corruption charges had run between the time he lost his job and the time the indictment was returned, id . The appellate court rejected the chief's statute of limitations challenge with the observation that "[t]he conspirators in this case, signally including [the chief], intended from the first to exert strenuous efforts to prevent discovery of the crime and of their involvement in it; the fact that two of the three conspirators were policemen supports the inference that concealment was part of the original conspiracy and not a spontaneous reaction to fear of arrest and prosecution. It was also a fair inference that the defendants agreed to keep trying to conceal the conspiracy for as long as they could, using their official positions where possible," 924 F.2d at 1368. Maloney involved a judge who accepted bribes to "fix" four criminal cases and then sought to make sure that the middle man through whom the bribes were funneled continued to "stand tall" in the face of criminal investigations into allegations of corruption, United States v. Maloney , 71 F.3d 645, 650-52 (7 th Cir. 1995). The statute of limitations had run on each of the bribery cases by the time indictments were returned, but the judge was charged with and convicted of a RICO conspiracy based upon the obstruction of justice predicates, 71 F.3d at 649. The judge objected that the statute of limitations barred prosecution for a conspiracy to conceal the commission of time-barred offenses, but the appellate court responded that, "[u]nlike Grunewald , however, the conspiracy's main criminal objective was never 'finally attained' in this case. . . . In the instance case, the main criminal objective, to fix cases whenever feasible, was neither accomplished nor abandoned as long as Judge Maloney remained on the bench . . . Concealment, therefore, was an overt act in furtherance of the conspiracy's main objectives. . . Maloney's statements . . . helped to preserve his position on the bench—the essential ingredient in the conspiracy's ability to fix cases. . . Thus, Grunewald does not exclude the obstruction of justice acts from the RICO conspiracy for statute of limitations purposes" 71 F.3d at 659-60. Cases from other circuits reflect the same view: Grunewald does not bar extension of the statute of limitations to include acts of concealment where concealment falls within the scope of the conspiracy; Grunewald only applies where the conspiracy's objectives have been attained and concealment follows. If federal prosecutors could establish either a conspiracy in which concealment was an initial object of the plot or a RICO violation or conspiracy, the specter of a statute of limitations bar would disappear. Otherwise the statute of limitations would appear to preclude federal prosecution on the basis of any misconduct identified in the Report . Other than its own interviews, the last of the events in question took place no later than December 16, 1993, Report at 266. The Special State's Attorney's investigation described in the Report began in 2001 and ended July 19, 2006. The commanding officers and each of the individual officers whom the Report describes as indictable were interviewed, Report at 16, 274, 290, 15. The interview statements were apparently consistent with the officers' earlier statements, for the Report would certainly have noted any incriminating statements. If the interview statements were false and material, they would constitute violations of 18 U.S.C. 1001 and 1512(b) (3); but if the statute of limitations bars the prosecution of the offenses to which the statements relate, they are not material consequently no violation. The Report suggests that dispelling statute of limitation difficulties, however, may be challenging, for on several occasions federal authorities have concluded that the passage of time bars federal prosecution: On October 3, 1990 . . . the Task Force to Confront Police Violence wrote to . . . the United States Attorney, pointing out that [it] had previously submitted information regarding incidents of torture committed by the detectives at Detective Area 2 . . . the response form the United States Attorney's Office was that the incidents had occurred more than five years before. . . On March 15, 1991, Assistant Public Defender Joseph M. Grump wrote to [the Attorney General], also referring to . . . the case of Andrew Wilson. Mr. Gump identified over 25 cases involving persons who claimed to have been abused. . . it was determined that prosecution would be declined because of the statute of limitations. The matter was reopened by the Department of Justice, and on May 18, 1993, prosecution was again declined because of the statute of limitations. Shortly after we were appointed, we were informed that persons . . . seeking prosecution of police officers met with [the] Attorney General. . . .We have received a report that the investigation . . . by the Civil Rights Section of the Justice Department was closed as of December 2001 because of the statute of limitations. Report at 30-1, 30.

The report of an Illinois Special State's Attorney, appointed to investigate allegations of police brutality committed against certain detainees during the early 1980s, concluded that in three instances indictable aggravated battery, perjury, and obstruction of justice had occurred, but that the 3-year Illinois statute of limitations barred prosecution. Media accounts, however, have suggested the possibility of federal prosecution. Statements found in the report implicate, at a minimum, federal statutes outlawing civil rights violations, perjury, false statements, obstructions of justice, conspiracy, and racketeering. In most instances, the 5-year federal statute of limitations is not likely to prove any more forgiving that the Illinois law. Federal law, however, does recognize a longer period of limitation for certain conspiracies and racketeering offenses. Yet it is unclear whether either of the exceptions is available. Federal authorities have apparently examined the question on several occasions in the past and declined to proceed at least in part on the basis of the statute of limitations. At this time, we anticipate no subsequent revisions of this report.

CRS_RS22005

Background Congress and state legislatures have authorized the use of forfeiture for over two hundred years. Forfeiture law has always been somewhat unique. Its increased use has highlighted its eccentricities and attendant policy concerns. Present forfeiture law has its roots in early English law. It is reminiscent of three early English procedures: deodands, forfeiture of estate or common law forfeiture, and statutory or commercial forfeiture. At early common law, the object that caused the death of a human being—the ox that gored, the knife that stabbed, or the cart that crushed—was confiscated as a deodand. Coroners' inquests and grand juries, bound with the duty to determine the cause of death, were obligated to identify the offending object and determine its value. The Crown distributed the proceeds realized from the confiscation of the animal or deadly object for religious and charitable purposes in the name of the deceased. Although deodands were not unknown in the American colonies, they appear to have fallen into disuse or been abolished by the time of the American Revolution or shortly thereafter. In spite of their limited use in this country, deodands and the practice of treating the offending animal or object as the defendant have frequently been cited to illustrate the characteristics of modern civil forfeiture. Forfeiture of estate or common law forfeiture, unlike deodands, focused solely on a human offender. At common law, anyone, convicted and attained for treason or a felony, forfeited all his lands and personal property. Attainder, the judicial declaration of civil death, occurred as a consequence of the pronouncement of final sentence for treason or felony. In colonial America, common law forfeitures were rare. After the Revolution, the Constitution restricted the use of common law forfeiture in cases of treason, and Congress restricted its use, by statute, in the case of other crimes. The third antecedent of modern forfeiture, statutory or commercial forfeiture, figured prominently in cases in admiralty and on the revenue side of the Exchequer in precolonial England. It was used fairly extensively against smuggling and other revenue evasion schemes in the American colonies and has been used ever since. In most instances, the statutes called for in rem confiscation proceedings in which, as with deodands, the offending object was the defendant; occasionally, they established in personam procedures where confiscation occurred as the result of the conviction of the owner of the property. Although contemporary American forfeiture law owes much to the law of deodands and the law of forfeiture of estate, it is clearly a descendant of English statutory or commercial forfeiture. Property and Trigger Crimes Modern forfeiture is a creature of statute. While there are some common themes and general patterns concerning the crimes that trigger forfeiture, the property subject to confiscation, and the procedures associated with forfeiture, federal forfeiture statutes are matters of legislative choice and can vary greatly. Virtually every kind of property, real or personal, tangible or intangible, may be subject to confiscation under the appropriate circumstances. The laws that call for the confiscation of contraband per se, property whose very possession has been outlawed, were at one time the most prevalent, and can still be found. Property—particularly vehicles—used to facilitate the commission of a crime and without which violation would be less likely, has long been the target of confiscatory statutes as well. In some instances, Congress has focused upon the profits of crime and authorized the confiscation of the direct and indirect proceeds of illegal activities. And under some circumstances, it has authorized the forfeiture of substitute assets, when the tainted property subject to confiscation under a particular statute has become unavailable. Traditionally, the crimes which triggered forfeiture were (1) those that threatened the government's revenue interest, for example, smuggling, tax evasion, hunting or fishing without a license, or (2) those crimes that because of their perceived threat to public health or morals might have been considered public nuisances subject to abatement, for example, gambling, or dealing in obscene material, or illicit drug use. Beginning with the racketeering statutes, a number of jurisdictions have created another category of forfeiture warranting offenses—crimes that involve substantial economic gain for the defendant even if not at the expense of government revenues, but which may greatly enhance government revenues, for example, racketeering and money laundering. A prime example of this approach is the Civil Asset Forfeiture Reform Act (CAFRA), which makes forfeitable, among other things, the proceeds from any of the crimes upon which a money laundering or RICO prosecution might be based. Following the terrorist attacks on September 11, 2001, Congress authorized the confiscation of another type of crime-related property—property owned by certain terrorists regardless of whether the property is traceable, used to facilitate, or connected in any other way to any practical crime. Civil Forfeiture Forfeiture follows one of two procedural routes: criminal or civil. Although crime triggers all forfeitures, they are classified as civil forfeitures or criminal forfeitures according to the nature of the judicial procedure which ends in confiscation. Criminal forfeitures are part of the criminal proceedings against the property owner, and confiscation is only possible upon the conviction of the owner of the property and only to the extent of defendant's interest in the property. Civil forfeitures are accomplished using civil procedure. Civil forfeiture is ordinarily the product of a civil, in rem proceeding in which the property is treated as the offender. Within the confines of due process and the language of the applicable statutes, the guilt or innocence of the property owner is irrelevant; it is enough that the property was involved in a crime to which forfeiture attaches in the manner in which statute demands. Some civil forfeitures are accomplished administratively; some are not. Administrative forfeitures are, in oversimplified terms, uncontested civil forfeitures. As a general rule, since the proceedings are in rem, actual or constructive possession of the property by the court is a necessary first step in any confiscation proceeding. The arrest of the property may be accomplished either by warrant under the Federal Rules of Criminal Procedure; or, if judicial proceedings have been filed, by a warrant under the Supplemental Rules of Certain Admiralty and Maritime Claims; or without warrant, if there is probable cause and other grounds under which the Fourth Amendment permits a warrantless arrest; or pursuant to equivalent authority under state law. Because realty cannot ordinarily be seized until after the property owner has been given an opportunity for a hearing, the procedure differs slightly in the case of real property. Administrative Forfeitures In the interests of expediency and judicial economy, Congress has sometimes authorized the use of administrative forfeiture as the first step after seizure in "uncontested" cases. It may be somewhat misleading to characterize administrative forfeitures as uncontested forfeitures, given the procedural obstacles that the government and claimants must overcome before the government is put to its burden in a judicial proceeding. For the government the procedure begins with seizure of the property. It must notify anyone with an interest in the property and provide an opportunity to request judicial forfeiture proceedings. Anyone with an interest in the property may contest confiscation with a verified claim under the Supplemental Rules. The period within which a claimant must register his or her intent to contest can be a fairly narrow window. Moreover, the government may petition the court to dismiss a claim for want of statutory standing, which in turn may require the claimant to establish that he lawfully obtained the targeted property. If there are no viable claims, the property is summarily declared forfeited. When administrative forfeiture is unavailable, when a claimant has successfully sought judicial proceedings, or when the government has elected not to proceed administratively, the government may begin civil judicial proceedings by filing either a complaint or a libel against the property. In money laundering and other civil forfeitures governed by CAFRA, the government must establish that the property is subject to confiscation by a preponderance of the evidence. In cases such as those arising under the customs laws and cases filed before the effective date of CAFRA amendments, the government must establish probable cause to believe that the property is subject to forfeiture. If the government overcomes the initial obstacle, a claimant may successfully challenge confiscation on several grounds. He or she may be able to show that the predicate criminal offense did not occur or that his or her property lacks the statutorily required nexus to the crime. For example, when the government claims that property is forfeitable because it was used to commit or to facilitate the commission of a crime, it must "establish that there was a substantial connection between the property and the offense." A claimant's innocence or even acquittal only bars civil forfeiture to the extent that a statute permits or due process requires. For most civil forfeitures, other than those arising under the tax or customs laws, CAFRA establishes two "innocent owner" defenses. The first is available to claimants either who were unaware that their property was being criminally used or who did all that could be reasonably expected of them to prevent criminal use of their property. The second is for good-faith purchasers who did not know of the taint on the property at the time they acquired their interest. Even when the government establishes that property is subject to civil forfeiture, CAFRA affords a claimant the right to a judicial reduction of the amount of the confiscation, if the court determines the extent of the forfeiture is excessive in view of the gravity of the offense and claimant's culpability. Criminal Forfeiture Once less frequently invoked than civil forfeiture, criminal forfeiture appears to have become the procedure of choice when judicial proceedings are required. CAFRA added to the federal crimes punishable by criminal forfeiture various offenses involving unlawful money transmission, counterfeiting, identify fraud, credit card fraud, computer fraud, theft related to motor vehicles, health care fraud, telemarketing fraud, bank fraud, and immigration-related offenses. Like civil forfeiture, criminal forfeiture is a creature of statute. Unlike civil forfeiture, criminal forfeiture follows as a consequence of conviction. It is punishment, even though it may also serve remedial purposes very effectively. While civil forfeiture treats the property as the defendant, confiscating the interests of the innocent and guilty alike, criminal forfeiture traditionally consumes only the property interests of the convicted defendant, and only with respect to the crime for which he is convicted. When the property subject to confiscation is unavailable following the defendant's conviction, however, the court may order the confiscation of other property belonging to the defendant in its stead (substitute assets). The indictment or information upon which the conviction is based must list the property that the government asserts is subject to confiscation. When the trial is conducted before a jury, either party may insist upon a jury determination of the forfeiture issue. Since the court's jurisdiction does not depend upon initial control of the res, it need not be seized before forfeiture is declared. Although the courts are authorized to issue pretrial restraining orders to prevent depletion or transfer of property that the government contends is subject to confiscation, many are hesitant to issue pretrial restraining orders covering substitute property. In any event, the defense to criminal forfeiture differs somewhat from the defense to civil forfeiture. For example, since conviction is a prerequisite to confiscation, an overturned conviction or an acquittal will ordinarily preclude criminal forfeiture. Third-party interests are less likely to be cut off by virtue of the property's proximity to criminal conduct simply because only the defendant's interest in the property is subject to confiscation and because bona fide purchaser exceptions are more common. After conviction of the defendant and after it has met its burden of establishing forfeitability by a preponderance of the evidence, the government may elect to seek either confiscation of forfeitable property or a money judgment in the amount of its value. If the government seeks confiscation, the court must determine whether the statutory nexus between the property and the crime of conviction exists. If the government instead seeks a money judgment, the court must determine the amount the defendant must pay. At that point, the court issues a preliminary forfeiture order or order for a money judgment against the defendant in favor of the government. Upon the issuance of a preliminary forfeiture order, the government must proclaim its intent to dispose of the property and notify any third parties known to have an interest in the property. Third parties with a legal interest in the forfeited property, other than the defendant, are then entitled to a judicial hearing, provided they file a timely petition asserting their claims. Third-party claims may be grounded either in an assertion that they possessed a superior interest in the property at the time confiscation-trigger misconduct occurred, or that they are good-faith purchasers. When the government is awarded a money judgment, it is not limited to the forfeitable assets the defendant has on hand at the time, but may enforce the judgment against future assets as well. Disposition of Forfeited Assets Disposal of forfeited property is ordinarily a matter of statute. The pertinent statute may require that the proceeds of a confiscation be devoted to a single purpose such as the support of education or deposit in the general fund. The statute may call for the destruction of property that cannot be lawfully possessed; or authorize rewards, the settlement of claims against the property; or remission or mitigation. It may permit distribution of the proceeds or a portion thereof as victim restitution. Intergovernmental transfers and the use of special funds, however, are the hallmarks of the more prominent federal forfeiture statutes. The Attorney General and the Secretary of the Treasury enjoy wide latitude to equitably share, that is, to transfer confiscated property to federal, state, local, and foreign law enforcement agencies to the extent of their participation in the case. Nevertheless, both must be assured that the transfers will encourage law enforcement cooperation. This "equitable sharing" transfer authority includes adoptive forfeitures. Adoptive forfeiture occurs when property is forfeitable under federal law because of its relation to conduct, such as drug trafficking, which violates both federal and state law. The Department of Justice "adopts," for processing under federal law, a forfeiture case brought to it by state or local law enforcement officials and in which the United States is not otherwise involved. Federal adoption is sometimes attractive because of the speed afforded by federal administrative forfeiture. It may also be attractive because forfeiture would be impossible or more difficult under state law or because law enforcement agencies would not share as extensively in the bounty of a successful forfeiture under state law. The Treasury and Justice Departments insist that state and local law enforcement agencies indicate the law enforcement purposes to which the transferred property is to be devoted and that the transfer will increase and not supplant law enforcement resources. Moreover, the Attorney General has prohibited adoption subject to narrow exceptions. The lion's share of confiscated cash, or the proceeds from the sale of confiscated property, however, is now deposited in either the Department of Justice Asset Forfeiture Fund, or the Department of the Treasury Forfeiture Fund. The Treasury and Justice Department Funds, together, receive over $2 billion per year. Constitutional Considerations The Eighth Amendment states in its entirety that "[e]xcessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted." A "punitive forfeiture violates the Excessive Fines Clause if it is grossly disproportionate to the gravity of a defendant's offense." Forfeitures that Congress has designated as remedial civil sanctions do not implicate double jeopardy concerns unless "the statutory scheme [is] so punitive either in purpose or effect as to negate Congress' intention to establish a civil remedial mechanism." The Sixth Amendment assures the accused in criminal proceedings the right to a jury trial, to the assistance of counsel, and to the confrontation of accusers. The Supreme Court long ago held that the right to confrontation does not apply in civil forfeiture cases, and has not revisited the issue. The right to the assistance of counsel in criminal cases does not prevent the government from confiscating tainted fees paid to counsel; or, upon a probable cause showing, from obtaining a restraining order to freeze assets preventing the payment of attorneys' fees; or entitle an otherwise indigent property owner to the appointment of counsel for substitute asset forfeiture proceedings. The Amendment is by its terms only applicable "in all criminal prosecutions," and consequently there is no constitutionally required right to assistance of counsel in civil forfeiture cases. The Court's opinion to the effect that there is no right to a jury trial on disputed factual issues in criminal forfeiture, rests on a somewhat battered foundation. The fact that criminal forfeiture is a penalty within "the prescribed statutory maximum" and that Rule 32.2 of the Federal Rules of Criminal Procedure affords an expanded jury determination right would seem to shield federal criminal forfeiture procedures from Sixth Amendment challenges. Due process objections can come in such a multitude of variations that general statements are hazardous. Due process demands that those with an interest in the property which the government seeks to confiscate be given notice and opportunity for a hearing to contest. Actual notice is not required, but the government's efforts must be "reasonably calculated, under all the circumstances, to apprise" of the opportunity to contest. In some instances, due process permits the initiation of forfeiture proceedings by seizing the personal property in question without first giving the property owner either notice or the prior opportunity of a hearing to contest the seizure and confiscation. But absent exigent circumstances, the owner is entitled to the opportunity for a preseizure hearing in the case of real property where there is no real danger that the property will be spirited away in order to frustrate efforts to secure in rem jurisdiction over it. Due process also requires a probable cause determination of the forfeitability of property made subject to a post-seizure, pretrial restraining order designed to prevent dissipation. Due process does not require an adversarial determination of the existence of probable cause; a grand jury indictment will do. While due process clearly limits at some point the circumstances under which the property of an innocent owner may be confiscated, the Court has declined the opportunity to broadly assert that due process uniformly precludes confiscation of the property of an innocent owner. Any delay between seizure and hearing offends due process only when it fails to meet the test applied in speedy trial cases: Is the delay unreasonable given the length of delay, the reasons for the delay, the claimant's assertion of his or her rights, and prejudice to the claimant? In other challenges, the lower federal courts have found that due process permits: the procedure of shifting the burden of proof to a forfeiture claimant after the government has shown probable cause and allows use of a probable cause standard in civil forfeitures; postponement of the determination of third-party interests in criminal forfeiture cases until after trial in the main; an 11-year delay between issuance of a criminal forfeiture order and amendment of the original order to reach overseas assets; and fugitive disentitlement under 28 U.S.C. 2466. Section 3 of Article III of the United States Constitution does not appear to threaten most contemporary forfeiture statutes. It provides in part that "no attainder of treason shall work corruption of blood, or forfeiture except during the life of the person attainted." The section on its face seems to restrict forfeiture only in treason cases, but at least one court has suggested a broader scope. Even if Article III when read in conjunction with the due process clause reaches not only treason but all crimes, its prohibitions run only to forfeiture of estate. They do not address statutory forfeitures of the type currently found in state and federal law. The critical distinction between forfeiture of estate and statutory forfeiture is that in the first all of the defendant's property, related or unrelated to the offense and acquired before, during, or after the crime, is confiscated. In the second, confiscation is only possible if the property is related to the criminal conduct in the manner defined by the statute. Article III also declares that the judicial power of the United States extends to certain cases and controversies. If a litigant has no judicially recognized interest in the outcome of such a case or controversy, he is said to lack standing and the court lacks jurisdiction to proceed. In some instances, a statute or rule imposes additional, more demanding standing requirements. So it is with civil forfeiture. As a threshold matter, however, a claimant must satisfy Article III standing requirements. In order to meet the case-or-controversy requirement of Article III, a plaintiff (including a civil forfeiture claimant) must establish the three elements of standing, namely, that the plaintiff suffered an injury in fact, that there is a causal connection between the injury and conduct complained of, and that it is likely the injury will be redressed by a favorable decision. Claimants in civil forfeiture actions can satisfy this test by showing that they have a colorable interest in the property, which includes an ownership interest or a possessory interest. Article III's standing requirement is thereby satisfied because the owner or possessor of property that has been seized necessarily suffers an injury that can be redressed at least in part by the return of the seized property.

Forfeiture has long been an effective law enforcement tool. Congress and state legislatures have authorized its use for over 200 years. Every year, it redirects property worth billions of dollars from criminal to lawful uses. Forfeiture law has always been somewhat unique. Legislative bodies, commentators, and the courts, however, had begun to examine its eccentricities in greater detail because under some circumstances it could be not only harsh but unfair. The Civil Asset Forfeiture Reform Act (CAFRA), P.L. 106-185, 114 Stat. 202 (2000), was a product of that reexamination. Modern forfeiture follows one of two procedural routes. Although crime triggers all forfeitures, they are classified as civil forfeitures or criminal forfeitures according to the nature of the procedure that ends in confiscation. Civil forfeiture is an in rem proceeding. The property is the defendant in the case. Unless the statute provides otherwise, the innocence of the owner is irrelevant—it is enough that the property was involved in a violation to which forfeiture attaches. As a matter of expedience and judicial economy, Congress often allows administrative forfeiture in uncontested civil confiscation cases. Criminal forfeiture is an in personam proceeding, and confiscation is only possible upon the conviction of the owner of the property. The Supreme Court has held that authorities may seize moveable property without prior notice or an opportunity for a hearing but that real property owners are entitled as a matter of due process to preseizure notice and a hearing. As a matter of due process, innocence may be irrelevant in the case of an individual who entrusts his or her property to someone who uses the property for criminal purposes. Although some civil forfeitures may be considered punitive for purposes of the Eighth Amendment's excessive fines clause, civil forfeitures do not implicate the Fifth Amendment's double jeopardy clause unless they are so utterly punitive as to belie remedial classification. The statutes governing the disposal of forfeited property may authorize its destruction, its transfer for governmental purposes, or deposit of the property or of the proceeds from its sale in a special fund. Intergovernmental transfers and the use of special funds are hallmarks of federal forfeiture. Every year federal agencies transfer hundreds of millions of dollars and property to state, local, and foreign law enforcement officials as compensation for their contribution to joint enforcement efforts. This is an abridged version of CRS Report 97-139, Crime and Forfeiture, by [author name scrubbed], a longer report from which citations, footnotes, and attachments have been stripped.

CRS_R43746

Introduction The U.S. Constitution established only one federal court—the U. S. Supreme Court. In lieu of creating other adjudicative bodies through the nation's founding document, Article I of the Constitution instead authorizes Congress to, in its discretion, "constitute Tribunals inferior to the [S]upreme Court." In the years following the ratification of the Constitution, Congress has regularly exercised its power to create a host of different federal tribunals that adjudicate a variety of legal disputes. For example, staffed by judges with lifetime tenures and salary protections, 13 federal circuit courts of appeals and over 90 federal district courts have been established by Congress under Article III of the Constitution. In addition to the judges who staff those courts, there are thousands of other judges, including administrative law judges, military judges, and federal magistrates who serve on non-Article III tribunals created by Congress. Notwithstanding the seemingly broad authority vested in Congress to establish federal courts, the Constitution does provide often sharp limits on when Congress can choose to create a federal tribunal to adjudicate a particular legal dispute. And the scope of these constitutional limits has been the focus of much debate, as evidenced by a long line of divided Supreme Court decisions on the subject. Indeed, as one legal scholar remarked, the law respecting federal courts and in particular the law distinguishing the powers of the various federal courts is "notoriously unfathomable." This report provides an overview of this often difficult and misunderstood area of law, beginning with a discussion of the various types of federal tribunals. The report continues by noting the rationales for why Congress established the breadth of different courts that exist today and concludes with a discussion of the various factors and relevant issues that limit Congress's discretion in establishing federal courts. Types of Federal Courts Article III, Section 1 of the Constitution provides that the "judicial power" of the United States shall be "vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish.... " Article III or "constitutional" courts are not, however, the only body that Congress can assign the task of adjudication to under federal law. Instead, the Supreme Court has long recognized that "the Constitution [gives] Congress wide discretion to assign the task of adjudication in cases arising under federal law to legislative tribunals." The two central types of federal "courts"—courts established under Article III and those tribunals that are not—differ in many respects, including with regard to their personnel, purposes, and powers. In order to understand these differences, this section describes the two types of federal courts, beginning with Article III Courts. Article III or Constitutional Courts Courts established pursuant to Article III are mainly defined by the three central constitutional provisions to which they are subject. First, a constitutional court can exercise the "judicial power of the United States" to resolve "cases" and "controversies" of nine designated categories. The Supreme Court has interpreted the "case-or-controversy" requirement of Article III to impose certain rules of justiciability, such as the prohibition on advisory opinions, the requirements of standing and ripeness, and the limitation on the ability of federal courts to decide "political questions." Second, a judge who serves on a constitutional court holds his position during "good behavior." While the Constitution does not explain what "good behavior" entails or how a federal judge's term can expire, the Supreme Court has adopted the view that the Good Behavior Clause guarantees life tenure to Article III judges, "subject only to removal by impeachment." Third, an Article III judge's compensation cannot be "diminished during their Continuance in Office." The Supreme Court has interpreted the Compensation Clause to prohibit both direct and indirect methods of lowering of an Article III judge's pay, barring laws that either "order[] a lower salary" for a federal judge or laws that enact a discriminatory tax that uniquely affects federal judges. Constitutional Basis for Article III Courts The three central provisions respecting Article III courts are fundamental to the basic purposes of such courts in the American constitutional scheme. The Framers of the Constitution, while proponents of democracy, were wary of any form of unchecked power, even when that power was lodged in a democratic majority. As a consequence, the Framers envisioned a written Constitution, which protected specific values, principles, and rights, as a limit of what could be changed through ordinary political processes. Because the political branches naturally cannot be expected to fairly adhere to the near-permanent constitutional limitations placed on each body, as these branches are most directly responsive to the often temporary whims of the people, the federal judiciary established under Article III was deliberately designed by the Framers of the Constitution to be a "counter-majoritarian branch" that interpreted the written Constitution and protected its principles. The Constitution did this by "insulating the federal judiciary" from potential pressures, from either the political branches or the public, which could potentially "skew the decision making process or compromise the integrity or legitimacy of federal court decisions." The key sources of the judiciary "insulation" from the political processes are the Good Behavior Clause and the Compensation Clause of Article III. The Good Behavior Clause, by creating a "permanent tenure of judicial offices," ensures an "independent spirit in judges," and the Compensation Clause, by creating a "fixed provision for [the judiciary's] support," prevents the political branches from having power over a judge's subsistence and, with that, "power over his will." However, just as the Framers worried about the concentration of unchecked power in either of the political branches, so too did the founding generation have concerns regarding the reach of the judiciary. Indeed, the power that "belongs" to the judiciary, as articulated by Alexander Hamilton in Federalist No. 78, to "ascertain [the Constitution's] meaning as well as the meaning of any particular act proceeding from the legislative body" and, when faced with a conflict, "be governed by [the Constitution] rather than [a legislative act]," is an immense power. The power of judicial review, at bottom, entails the power of unelected officials to "apply and construe the Constitution, in matters of the greatest moment, against the wishes of a legislative majority, which is, in turn powerless to affect the judicial decision." Notwithstanding the scope of this power, the Framers of the Constitution were untroubled by the potential reach of the judiciary because Article III judges were limited to ruling in certain circumstances and could only exercise that power "when other actors—public officials and private citizens—created justiciable cases and controversies for them." As a consequence, as famously described by Alexander Hamilton, the Framers envisioned the judiciary as being the "least dangerous" branch of the government. When Is a Court Designated an Article III Court? Given the host of different types of constitutional courts, a fundamental question is when must a court be considered one that has been established under Article III and subject to Article III's restrictions. The answer to that question has produced, in the words of Justice John Marshall Harlan II, "much confusion and controversy." Perhaps the best answer to the question of when a court can be deemed an Article III court comes from the 1962 Supreme Court case of Glidden v. Zdanok . Glidden involved a challenge to a judgment issued in part by a judge of the Court of Claims while that judge was sitting by designation on the Second Circuit Court of Appeals. In an earlier case, Williams v. United States , the Supreme Court had held that the Court of Claims was not an Article III court because the matters being brought before the court were not of the type that an Article III court generally adjudicates: primarily monetary claims against the government. The Williams Court held as such, notwithstanding that the law creating the Court of Claims did not limit the tenure of judges on the court or provide the authority of the salaries of the judges on that court. In the intervening years since Williams, Congress had declared the Court of Claims was "created under Article III." Notwithstanding that declaration, the petitioner in Glidden argued, relying on Williams , that his constitutional right to have an Article III court adjudicate the breach of contract claim was violated because a judge from a non-Article III court was designated to the case on appeal. The Supreme Court issued a splintered decision in Glidden ultimately holding that the Court of Claims was an Article III court making the designation of the Court of Claims judge to the Second Circuit panel constitutionally valid. Justice Harlan, writing for a plurality of three, argued that Williams should be overturned because the question of whether a court is an Article III court does not turn on the nature of the court's subject matter, but instead on whether the court's "establishing legislation complies with the limitations" of Article III. In concluding that the Court of Claims was an Article III court, Justice Harlan noted that the establishing legislation complied with the three central constitutional provisions pertaining to constitutional courts—namely the Good Behavior Clause, the Compensation Clause, and the case-or-controversy requirement. Specifically, Justice Harlan noted that (1) Court of Claims judges had been given life tenure to ensure their independence; (2) Congress had not provided that the salary of a Court of Claims judge be subject to diminution; and (3) Congress had provided the Court of Claims with the authority to rule on "cases and controversies" by, for example, respecting the finality of the rulings of the court and by providing the court jurisdiction over justiciable matters. In other words, for Justice Harlan, what mattered in determining the status of the Court of Claims as an Article III court was not the nature of the court's subject-matter jurisdiction, nor an after-the-fact declaration by Congress that the Court was considered an Article III Court, but the nature of the enabling legislation for the court. Justice Clark and Chief Justice Warren concurred in the judgment of the Court, but found it unnecessary to overrule Williams because of the intervening declaration by Congress that the Court of Claims was an Article III court and because of changes in the jurisdiction of the Court of Claims to make the court more like an Article III court. The specific holding of Glidden —that the Court of Claims is an Article III Court—is of little importance today, as the Court of Claims ceased to exist in 1982 and was replaced by the Court of Federal Claims, which is staffed by term-limited judges. Nonetheless, while the Glidden decision was fractured, the case marks a clear shift from earlier jurisprudence that evaluated a court's Article III status based on the nature of the subject matter of cases before the court. Instead, the Court, when determining whether a court is a constitutional court, appears to look at how Congress structures a court, looking to see if the structure of the court adheres to basic requirements of Article III. Moreover, a majority of justices on the Glidden court appear to reject the notion that Congress can by solely attaching a label to a court change the constitutional nature of that court. Ultimately, the touchstone of when a court is a constitutional court appears to be whether the court was established pursuant to the power and constraints provided for under Article III of the Constitution. In the wake of Glidden , lower courts have largely followed the plurality's functional approach to determine whether a court is one established under Article III. For example, in United States v. Cavanagh, a criminal defendant challenged whether the Foreign Intelligence Surveillance Court (FISA Court) was established in violation of the Constitution. In an opinion written by then-Judge Anthony Kennedy, the Ninth Circuit rejected the defendant's argument, noting that Congress, in creating the Foreign Intelligence Surveillance Court, (1) staffed the court with judges that had lifetime tenure and salary protections and (2) had the court adjudicate matters that sounded in a "case-or-controversy." In other words, in line with the Glidden plurality, the Cavanagh court concluded that a court is an Article III court so long as it is established pursuant to the contours of Article III. Article III Courts Today Today the system of courts established under Article III consists of three layers of review. Cases are generally brought in one of 91 federal district courts, and litigants typically are allowed to appeal a district court's final decision to one of the 12 regional courts of appeal. Federal district and circuit judges are primarily generalists, with "limited knowledge of [any] specialized field." As one prominent scholar described the typical work of an Article III judge: Judges have heavy caseloads ... Judges have to research, analyze, and address an extraordinarily wide range of issues ... Each judge must be able to resolve a major civil rights dispute on Monday, a major environmental law dispute on Tuesday, and a major commercial law dispute on Wednesday. Judges have little time or opportunity for reflection, detailed analysis of an area of law, or development of special expertise in any field of law. Nonetheless, there do exist a limited number of Article III courts that have a jurisdiction limited by subject matter, as opposed to geographic area, making these courts somewhat specialized. The most prominent example of such a specialized Article III court is the Court of Appeals for the Federal Circuit. The Federal Circuit takes appeals from federal district courts and certain administrative bodies and Article I courts with respect to a host of subject areas, including international trade, government contracts, patents, trademarks, certain money claims against the U.S. government, federal personnel issues, veterans' benefits, and public safety officers' benefits claims. In addition to the Federal Circuit, Congress has, throughout history, established other specialized Article III courts. Today, in addition to the Federal Circuit, there are five specialized Article III courts, four of which are staffed temporarily by Article III judges from other courts. First, the FISA Court, which is responsible for issuing warrants authorizing the government to conduct certain espionage activities, is staffed by federal district judges who serve nonrenewable, staggered terms of up to seven years. The Foreign Intelligence Surveillance Act of 1978 also established an appellate court called the Foreign Intelligence Surveillance Court of Review, consisting of three judges from the federal district and courts of appeals whose role it is review certain orders issues by the FISA Court. Third, the Judicial Panel on Multidistrict Litigation, which is empowered to transfer to a single district multiple civil cases whose pretrial proceedings may benefit from consolidation and coordination, consists of a mix of district judges and circuit judges designated by the Chief Justice. Fourth, the Alien Terrorist Removal Court, which reviews ex parte applications from the Department of Justice to order removal of certain aliens from the United States based on classified information, consists of five district court judges designated by the Chief Justice for staggered terms of five years. Fifth, the Court of International Trade, whose jurisdiction focuses on a host of trade-related matters, is an Article III tribunal composed of nine judges appointed by the President. Table 1 lists the current Article III courts in federal judicial system. Why Create Inferior Article III Courts? Article III of the Constitution neither establishes nor requires the establishment of lower federal courts. Instead, the Constitution envisions Congress "from time to time" establishing federal courts that are "inferior" to the Supreme Court, and it is generally accepted that Congress could have left state courts as the primary courts for matters respecting federal law. Given the strict limits that are imposed on how Congress may deploy Article III courts—lifetime appointments, inability to reduce salaries of federal judges for poor performance, and the host of restrictions that are implied by the "case-or-controversy" requirement—one might question why Congress has chosen to create the number of Article III courts that it has. Two central arguments underlie why Congress has opted to create inferior Article III courts. First, Congress's interest in creating lower federal courts aligns with the Framers' intentions for Article III courts: Article III courts, which are insulated from political pressures through salary and tenure protections, provide a legal forum to help ensure compliance with federal legal interests, including those enshrined in the Constitution. Not only does the existence of an independent federal judiciary provide a bulwark against encroachments by federal political branches on civil and structural rights, without an independent federal judiciary, original litigation on federal claims would arise in state courts. The Framers, who had just witnessed the resulting chaos of decentralization during the Articles of Confederation, considered that having such power in the exclusive province of state courts "presented a real threat to the enforcement of federal law against the states," and consequently, the first Congress, in the Judiciary Act of 1789, established the system of lower federal courts. The quintessential example of the value of lower federal courts in protecting federal interests came in the wake of the Supreme Court's ruling in Brown v. Board of Education prohibiting de jure school segregation where, in stark contrast to the behavior of state courts, the aggressive enforcement of Brown's mandate by lower federal courts was, in the words of one prominent legal scholar, "essential in desegregating many southern school systems." The second primary reason Congress has chosen to employ Article III courts as a forum for adjudication is that the constitutional protections afforded to Article III judges tend to attract high quality judges that embed any judicial process with a status unrivaled by other federal and state courts. As the Supreme Court has noted, life tenure and salary protections "helps to promote public confidence in judicial determinations" and "to attract well-qualified persons to the federal bench." The Court's assessment is supported by a recent study by the Congressional Research Service indicating that of the active U.S. Circuit Court judges, 54.6% of those judges had prior judicial experience and those that did not were primarily long-established private practitioners or law professors. The status of Article III judges, in turn, allows such courts to attract high level candidates for their staff, including law clerks "who most often have strong academic credentials from top law schools, to work for one year prior to entering private practice or some other legal career." And the perceived quality of the federal judiciary established under Article III has not been lost in congressional debates over whether to establish a new Article III court. For example, long-time efforts by the bankruptcy bar to transform the bankruptcy court into an Article III court have contended that "life-tenured judges would be more autonomous, more powerful, and enjoy more prestige, and that the bankruptcy court consequently would attract better judges." Non-Article III or Legislative Courts As noted above, Article III of the Constitution commands that "the judicial Power of the United States, shall be vested in one Supreme Court, and in such inferior courts as the Congress may from time to time ordain and establish." A literal interpretation of Article III would seem to require that every case that falls within the "judicial Power of the United States" must be adjudicated in forums before judges cloaked with Article III protections. Again, this is to ensure that judges will not be swayed by political pressure and can hand down decisions without fear of reprisal from the democratically elected branches. Notwithstanding this command, Congress has assigned to non-Article III bodies—that is, forums with judicial officers who do not enjoy Article III guarantees—the authority to adjudicate a large swath of cases that would seemingly fall within the "judicial power" traditionally allocated to Article III courts. These entities, which extend back to the earliest days of the Republic, include specialized stand-alone courts, administrative agencies, and magistrate judges who serve under Article III judges. This section will survey the various types of non-Article III courts; explore the various historical, legal, and practical justifications for their uses; and provide an analytical framework for determining when non-Article III courts can be employed. Non-Article III or Legislative Courts Today Before exploring the justification and scope of non-Article III courts, it is necessary to establish a working definition of what a non-Article III court is and provide some examples. First, these adjudicatory entities have been called by various names: "non-Article III courts," "Article I courts," "Article I tribunals," "legislative courts," or "administrative courts." Although there are many variations in name, structure, and duties, these bodies have a few core commonalities. First, non-Article III judges do not enjoy life tenure, but are term-limited. Second, these officials do not have the luxury of constitutional salary protection. Third, these judicial officials need not be appointed by the President with Senate confirmation (although they sometimes are). There are two main categories of non-Article III courts. The first is commonly referred to as "legislative courts" or "Article I courts." These are standalone courts, created under Congress's Article I power, which have similar authority as Article III courts, such as entering their own judgments and issuing contempt orders. Examples of legislative courts include the U.S. Tax Court; the Court of Federal Claims; the Court of Appeals for Veterans Claims; the Court of Appeals for the Armed Forces; and federal district courts in Guam, the Virgin Islands, and the Northern Mariana Islands. The second category of non-Article III tribunals has commonly been referred to as "adjuncts" to Article III courts. This category is mainly comprised of federal administrative agencies and magistrate judges. Each of these will be described in detail below, but first it is important to understand what prompts Congress to create these judicial fora. Why Create Legislative Courts? Congress has opted to establish legislative courts for a number of reasons. First, some have suggested that Congress establishes Article I courts to ensure the unique status of Article III courts is preserved. For example, in support of establishing Article I bankruptcy courts under the Bankruptcy Reform Act of 1978, several Members of Congress argued that establishing new specialized Article III courts would "set[] a bad precedent," as the expansion of Article III Courts "unnecessarily" and "inevitably ... dilute[s] its prestige and influence." For others, legislative courts provide an alternative to having Article III courts "deal with the countless matters handled in administrative agencies and in specialized tribunals like bankruptcy courts." Second, given that most Article III courts are generalist in nature, Congress has established specialized non-Article III tribunals that focus on a particular area of law, with the understanding that an expert is needed to adjudicate disputes with respect to certain complex and technical areas of law. For example, in establishing the predecessor to the Tax Court, Congress in 1924 created the Board of Tax Appeals, recognizing the need for an adjudicative body consisting "of 'Members' who possessed the specialized knowledge to handle increasingly complex tax issues." In this same vein, Congress has established legislative courts within executive branch agencies for reasons of efficiency or cost savings. As noted by Chief Justice Hughes in Crowell v. Benson, a non-Article III tribunal residing in an administrative agency can "furnish a prompt, continuous, expert and inexpensive method for dealing with a class of questions of fact which are peculiarly suited to examination and determination by an administrative agency specially assigned to that task." And, indeed, one of the central reasons Congress allowed the Commodity Future Trading Commission (CFTC) to adjudicate state law counterclaims arising in a proceeding regarding a violation of the Commodity Exchange Act was because "Congress intended to create an inexpensive and expeditious alternative forum" to resolve all such disputes. Finally, Congress has established non-Article III tribunals to avoid the constitutional restrictions imposed upon Article III courts. For example, in 1982, Congress reconstituted the Court of Claims as an Article I tribunal in part so that the court could hear "congressional reference" cases. A "congressional reference" case is one in which a bill for monetary relief is referred by a resolution of either house of Congress to the Court of Claims. After conducting proceedings to determine the factual merits, the Court of Claims, in turn, issues a report to Congress, which is free to ignore the court's recommendations. Because the Court of Claims' report in a congressional reference case cannot bind the parties presenting the case, the report is advisory in nature and could not be issued by a constitutional court, which lacks the authority under Article III to "give opinions upon ... abstract propositions, or to declare principles or rules of law which cannot affect the matter in issue in the case before it." As a consequence, the only means by which Congress could have the Court of Claims adjudicate congressional references cases was to reconstitute the court as a legislative tribunal. Likewise, Congress may wish to exert control over or influence the work of a court, and by establishing an Article I tribunal, Congress can establish a court housed with judges that lack life tenure and salary protections. Constitutional Basis for Legislative Courts Again, while Article III would seem to require that every "case" or "controversy" must be litigated in an Article III court, there appears to be historical, legal, and practical support for Congress's authority to create non-Article III tribunals and vest in them the authority to hear matters that would otherwise fall within one of the heads of Article III jurisdiction (for instance, cases "arising under" federal law). Non-Article III tribunals have been entrenched in federal adjudications for over 200 years and are likely to remain. From very early on, Congress placed adjudicating authority in various non-Article III forums that might have instead been vested in Article III courts. For instance, the first Congress left it to the executive branch to resolve disputes concerning military pensions and federal customs laws, disputes that clearly arose under federal law and could have been placed in constitutional courts. Likewise, in the early 18 th century, the Supreme Court, led by Chief Justice John Marshall, approved of the use of legislative courts in the territories notwithstanding that the subject matter of the case—admiralty law—fell within Article III's "judicial power." The leading legal rationale for the legitimacy of legislative courts is to treat them as an "exception" to Article III's requirement of tenure and salary protection. That is to say, in certain instances when Congress is exercising its Article I authority, the need for life-tenured judges with salary protection "must give way to accommodate plenary grants of power to Congress to legislate with respect to specialized areas having particularized needs and warrant distinctive treatment." This theory finds strong support in Justice Brennan's plurality opinion in Northern Pipeline Construction Co. v. Marathon Pipe L ine Co . In assessing whether creation of the bankruptcy courts as legislative courts was consistent with Article III strictures, Justice Brennan noted that there were three instances in which Congress has created legislative courts: territorial courts, military courts, and courts that adjudicate public rights. Each of these recognized "a circumstance in which the grant of power to the Legislative or Executive Branch was historically and constitutionally so exceptional that the congressional assertion of a power to create legislative courts was consistent with, rather than threatening to, the constitutional mandate of separation of powers." Adjuncts to federal courts, such as administrative agencies and magistrate judges, do not necessarily rely on this "exceptions" rationale (although administrative agencies do adjudicate many public rights cases). Rather, adjuncts are primarily justified by the direct oversight by Article III courts. In addition to the historical and legal foundations for non-Article III courts, there are practical reasons why all federal adjudications need not take place in Article III courts. One commentator has noted, "Every time an official of the executive branch, in determining how faithfully to execute the laws, goes through the process of finding facts and determining the meaning and application of the relevant law, he is doing something which functionally is akin to the exercise of judicial power." In other words, in a certain light, every application of law to facts by a federal executive branch official could be deemed a "judicial" act that should be litigated in an Article III court. However, if every application of law to facts by an executive branch official—for instance, each application of the tax code—required an Article III determination, the federal court system would be rendered completely unworkable. Constitutional Limitations on Non-Article III Courts Distilling the somewhat Byzantine case law in this area, there appear to be four instances in which non-Article III courts may be employed: (1) territorial courts, (2) military courts, (3) cases involving "public rights," and (4) adjuncts to federal courts. Additionally, in some instances, litigant consent will permit a non-Article III court to hear certain matters. Territorial Courts Article IV, §3, cl. 2 provides Congress the power to "make all needful Rules and Regulations respecting the territory or other Property belonging to the United States." Under this authority, Congress has set up a host of different courts in the territories. The Supreme Court's first opportunity to address the use of territorial courts came in the 1828 case Florida in American Insurance Co. v. Canter . In Canter , the Court assessed the constitutionality of a court established in the territory of Florida. Judges of these courts did not enjoy life tenure, but instead sat for four-year terms. Challengers to the court's jurisdiction argued that it could not properly hear cases arising under admiralty law, which instead must be heard in Article III courts overseen by life-tenured judges. Chief Justice John Marshall, writing for the Court, disagreed and explained that such courts were "created in virtue of the general right of sovereignty which exists in the government, or in virtue of that clause which enables Congress to make all needful rules and regulations, respecting the territory belonging to the United States. The jurisdiction which they are invested ... is conferred by Congress, in the execution of those general powers which that body possesses over the territories of the United States." In other words, when Congress exercised its plenary authority over the territories under Article IV, it could place matters normally left to Article III courts in an alternative judicial forum. Looking to more modern examples, the district courts in the federal territories, including Guam, the Virgin Islands, and the Northern Mariana Islands, are all considered legislative courts. A similar rationale of congressional authority has also applied in the context of courts in the District of Columbia. Under Article I, §8, cl. 17 of the Constitution, Congress has the authority to "exercise exclusive Legislation in all Cases whatsoever" over the District of Columbia. In an early twentieth century ruling, the Supreme Court concluded that a federal law seeking to reduce judicial salaries could not apply to the judges sitting on the Supreme Court of the District of Columbia and the District of Columbia Court of Appeals as they were considered Article III courts. At the time, these courts not only had jurisdiction over local matters in the District, but also had jurisdiction over federal questions equivalent to that of other inferior federal courts. In 1970, Congress created a new Superior Court and Court of Appeals for the District "pursuant to Article I of the Constitution." These courts were limited to hearing purely local matters. In Palmore v. United States , the defendant challenged the constitutionality of these courts, arguing that he was entitled to a life-tenured judge since he was being prosecuted under federal law (the District of Columbia criminal code). The Court rejected this argument, and observed that "requirements of Art. III, which are applicable where law of national applicability and affairs of national concern are at stake, must in proper circumstances give way to accommodate plenary grants of power to Congress to legislate with respect to specialized areas having particularized needs and warranting distinctive treatment." Military Courts The second major category of Article I courts are those employed in the military context. Under Article I, §8, cl. 14, Congress has the authority "[t]o make Rules for the Government and Regulation of the land and naval forces." In the 1858 case Dynes v. Hoover , the Supreme Court upheld the use of this authority to create military courts. In that case, the Court observed that "Congress has the power to provide for the trial and punishment of the military and naval offences ... and that the power to do so is given without any connection between it and the 3d article of the Constitution defining the judicial power of the United States; indeed, that the two powers are entirely independent of each other." Although Congress has broad authority to create and implement military courts, the Supreme Court has set some substantive limits on their jurisdiction. For instance, military courts cannot be used to try civilians nor the spouses of military members. Additionally, military courts have jurisdiction over members of the military only when they are still in service. However, military courts are able to hear non-service related crimes while the defendant is still in the service. Currently, the U.S. Court of Appeals for the Armed Forces (CAAF), an Article I court, sits at the apex of the military justice system. Judges of the CAAF sit for 15-year terms and can be removed by the President for neglect of duty, misconduct, or mental or physical disability. Public Rights The third category of cases that can be resolved in an Article I court are "public rights" cases—those that arise between a private actor and the government. This public rights theory can be traced back to the Court's ruling in Murray's Lessee v. Hoboken Land & Improvement Co. in which Justice Story explained that although Congress cannot withdraw from federal courts the jurisdiction to hear suits at common law, equity, or admiralty, "there are matters, involving public rights, which may be presented in such form that the judicial power is capable of acting on them, and which are susceptible of judicial determination, but which Congress may or may not bring within the cognizance of the courts of the United States, as it may deem proper." At the core of the public rights doctrine are cases involving claims or benefits against the government. The U.S. Tax Court, for example, is an Article I court that resolves disputes between taxpayers and the government. Although judges of the Tax Court exercise the "judicial power" of the United States, its judges do not enjoy life tenure, but rather sit for 15-year terms. And unlike Article III judges who are subject to removal only through impeachment, Tax Court judges can be removed by the President for "inefficiency, neglect of duty, or malfeasance in office[.]" The Court has offered several rationales for why public rights cases can be handled in Article I courts. The first is based on the doctrine of sovereign immunity and the right of Congress to attach conditions to the federal government being sued, including what type of forum the claim can be brought in. The second major rationale is that historically these cases were conclusively determined by the executive and legislative branches, "and that as a result there can be no constitutional objection to Congress' employing the less drastic expedient of committing their determination to a legislative court or an administrative agency." As a general matter, the Court has broadly defined public rights cases as those that arise "between the Government and persons subject to its authority in connection with the performance of the constitutional functions of the executive or legislative departments." Private rights cases, on the other hand, pertain to the "liability of one individual to another under the law as defined." Beyond these general definitions, the Supreme Court has struggled to articulate the exact parameters of the public rights doctrine. As Chief Justice Roberts has noted, "our discussion of the public rights exception ... has not been entirely consistent, and the exception has been the subject of some debate." In a series of cases, the Court has endeavored to draw this line. In the 1982 case Northern Pipeline Const. Co. v. Marathon Pipeline Co. , the Court addressed whether Article I bankruptcy courts could adjudicate common law contract and tort claims. Under Bankruptcy Act of 1978, bankruptcy judges were appointed to office for 14-year terms by the President, with the advice and consent of the Senate, and subject to removal by the judicial council in the circuit in which they presided. Acknowledging that the "distinction between public and private rights has not been definitely explained" in the Court's precedents, Justice Brennan, writing for a plurality of the Court, traced the three historical exceptions to the literal command of Article III: territorial courts, military courts, and courts and agencies that adjudicate public rightsDisposing of the first two categories as clearly inapplicable, the plurality also rejected the public rights argument as the underlying case did not arise between government and a private party, but involved a state-created claim between two private parties. Several years later in Thomas v. Union Carbide Agricultural Products Co. the Court shifted from the formalist approach of Northern Pipeline to a more functional approach for determining when Congress may utilize non-Article III forums. The statute in question created a system of binding arbitration for determining the amount of compensation due to pesticide manufacturers whose data had been used by other manufacturers to register their products. The arbitrator's decision was subject to judicial review for "fraud, misrepresentation, or other misconduct." Justice O'Connor, writing for the majority, rejected the strict public/private rights dichotomy established in Justice Brennan's Northern Pipeline opinion, instead asserting that "substance rather than doctrinaire reliance on formal categories should inform application of Article III." Instead of formal reliance on these strict categories, the Court instructed that the nature of the right at issue and the concerns that drove Congress to create this alternative judicial forum should guide the inquiry. Because the arbitration scheme was created by federal statute, was a "pragmatic solution to the difficult problem of spreading [] costs," and did not "preclude review of the arbitration proceeding by an Article III court," the Court found that it "did not threaten the independent role the Judiciary in our constitutional scheme." This decision is notable as it broke away from the strict public rights category from Northern Pipeline and permitted a private right to be adjudicated in a non-Article III forum so long as the private right is "so closely integrated into a public regulatory scheme as to be a matter appropriate for agency resolution with limited involvement by Article III judiciary." Two years later in Commodity Futures Trading Commission v. Schor , the Court reaffirmed Thomas ' functional approach and held that the Commodity Futures Trading Commission (CFTC) was empowered to hear common law counterclaims related to a violation of the Commodities Exchange Act (CEA) or CFTC regulations. In the most recent foray into Article I courts, Stern v. Marshall , the Court shifted away from the functionalism of Thomas and Schor and back towards the formalism of Northern Pipeline . In Stern , the issue was whether a bankruptcy court could adjudicate a common law claim for fraudulent interference with a gift. In a 5-4 decision authored by Chief Justice Roberts, the Court held that Article III prohibited the bankruptcy court's exercise of jurisdiction because it did not fall under the public rights exception. The Court acknowledged that Thomas and Schor had rejected the limitation of the public rights exception to actions involving the government as a party, but that the Court has continued to limit the exception to claims deriving from a "federal regulatory scheme" or in which "an expert government agency is deemed essential to a limited regulatory objective." In rejecting the application of the public rights exception to the fraudulent interference counterclaim, the Court observed that her claim was not one that could be "pursued only by grace of the other branches" or could have been "determined exclusively" by the executive or legislative branches. Additionally, the underlying claim did not "flow from a federal regulatory scheme" and was not limited to a "particularized area of law." Because the counterclaim involved the "most prototypical exercise of judicial power," adjudication of a common law cause of action not created by federal law, the Court rejected the bankruptcy courts' exercise of jurisdiction over the counterclaim as a breach of Article III. Adjunct Theory In addition to the three categories of legislative courts—territorial, military, and public rights—the use of "adjuncts" is another prominent theory that supports the use of non-Article III courts to adjudicate federal questions. An "adjunct" is an adjudicator—most often an administrative agency or a magistrate judge—that does not function as an independent court, but instead acts as a subordinate to the federal courts. Adjuncts have become highly important in the modern era, as they not only handle many cases involving public benefits, but also assist Article III judges with their heavy caseload. Support for the adjunct theory can be traced back to the 1932 case Crowell v. Benson . In Crowell , the plaintiff brought a claim against his employer under the Longshoreman's and Harbor Workers' Compensation Act for injuries allegedly sustained while working on the navigable waters of the United States. The act required that all such claims be filed with the U.S. Employees' Compensation Commission. The agency was to determine "questions of fact as to the circumstances, nature, extent, and consequences of the injuries sustained by the employee." After the commission awarded the plaintiff damages, the employer appealed this decision, claiming that grant of jurisdiction to the commission violated Article III. In upholding the act, the Supreme Court delineated the proper role of the use of adjuncts in relation to Article III courts. The Court observed that "there is no requirement that, in order to maintain the essential attributes of the judicial power, all determinations of fact in constitutional courts shall be made by judges." Instead, an adjunct may make findings of fact and initial legal determinations, but questions of law must be subject to de novo review in an Article III court. Questions of jurisdictional fact—that is, facts that pertain to the jurisdiction of the agency itself—and constitutional fact are also subject to a more searching review by a constitutional court. In sum, assuming one of the three historical exceptions is not applicable, Crowell instructs that for Article III courts to retain the "essential attributes of the judicial power," adjuncts must act as subordinates to the Article III courts and not as independent adjudicators. Administrative Agencies The framework established in Crowell provided the blueprint for the modern administrative state, starting with the New Deal and expanding throughout the 20 th and 21 st centuries. These agencies perform a host of various functions including making policy, promulgating rules, and adjudicating questions arising under federal law. Many of the disputes coming before federal agencies concern public rights cases, with a large share of cases concerning the right to various government entitlements. For instance, the Social Security Administration, a federal agency who administers various government benefits including old-age and disability benefits, has a complex adjudication process for determining who is entitled to these benefits, including several tiers of administrative review and review by both a federal district court and a circuit court of appeal. The form of judicial review of SSA decisions closely follows the Crowell model. For example, while factual findings made by an administrative law judge are subject to the highly deferential "substantial evidence" standard, legal determinations "receive no deference" from either the district court or court of appeals. And while administrative law judges do not receive constitutionally protected life tenure or salary protection, there are statutory protections regarding their appointment, tenure, and compensation. Magistrate Judges The second major subcategory of adjuncts is the federal magistrate judge. In 1968, Congress abolished the U.S. commissioner system as part of the Federal Magistrates Act, and sought to "reform the first echelon of the Federal judiciary into an effective component of a modern scheme of justice by establishing a system of U.S. magistrates." Initially the magistrate judges were assigned a somewhat circumscribed role, but over the last several decades, Congress has expanded the role of magistrate judges to include the power to decide various motions, hear evidence, and try both criminal and civil cases. With the ever burgeoning federal docket, magistrate judges have been deemed "nothing less than indispensable" in the federal judicial process. However useful they may be, there appears to be some conflict in vesting authority to resolve federal questions in judicial officials not cloaked with life tenure and salary protections. Instead, magistrate judges are selected by district court judges and can be removed for good cause or if the Judicial Conference "determines that the services performed by his office are no longer needed." The Supreme Court's first encounter with the first Magistrates Act came about in Wingo v. Wedding . In that case, the Court addressed whether the act permitted magistrate judges to hold evidentiary hearings in habeas corpus proceedings without the defendant's consent or whether district court judges were required to do so personally. The Court, speaking through Justice Brennan, parsed the statute in a way to avoid potential Article III problems. The High Court did this by construing the term "additional duties" in the act to not include the authority of a magistrate to hold evidentiary hearings, but instead allowing the magistrate simply to propose to the district court judge whether such a hearing should be held. Two years later in Mathews v. Weber , the Court was tasked with interpreting whether "additional duties" could be read to permit referral of Social Security benefit cases to a magistrate judges for preliminary review of the administrative record and preparation of a recommended ruling. While the Court again avoided the potential Article III issues, it echoed the adjunct theory by observing that a district judge is free to follow or wholly reject a magistrate's recommendation and that the "authority—and the responsibility—to make informed, final determination ... remains with the judge." As a statutory matter, because the district judge was still free to follow or wholly ignore the magistrate's recommendation, the Court upheld the magistrate's "preliminary-review function" as one of the "additional duties" permitted under the act. In the 1980 case United States v. Raddatz , the Court finally addressed head-on the constitutional issues surrounding that Magistrates Act that were left unresolved in previous cases. In Raddatz , the defendant challenged both the magistrates' statutory and constitutional authority to hear motions to suppress evidence in a criminal proceeding. Under the act, magistrate judges could "hear and determine" any pretrial matter before it, except for any certain dispositive motions, including motions to suppress evidence in criminal cases. For these dispositive motions, the district court judge could "designate a magistrate to conduct hearings, including evidentiary hearings, and to submit to a judge of the court proposed findings of fact and recommendations for the disposition.... " If the proposed findings or recommendations were objected to by either party, the district court judge was then required to make a "de novo determination" of the raised issues and could "accept, reject, or modify, in whole or in part, the findings or recommendations of the magistrate." The defendant in Raddatz contended that these provisions required the district court judge to rehear the testimony on which the magistrate based his findings. In an opinion by Chief Justice Burger, the Court rejected this argument, holding that the district court need only make a de novo determination of the disputed findings and recommendations and not hold a de novo hearing on the issues raised. In the face of the Article III challenge, the Court upheld the act observing that the "ultimate decision" is reserved for the district court judge and that magistrates "are constantly subject to the court's control." Congress amended the act in 1979, further enlarging and clarifying the magistrates' authority. Under the new statute, upon designation by the district court judge and with consent of the parties, magistrate judges were authorized to preside over and enter final judgments in civil trials, including jury trials and misdemeanor criminal prosecutions. In Gomez v. United States , the Court addressed whether overseeing the selection of jurors in a felony criminal prosecution was among the "additional duties" envisioned in the act. The defendant in that case objected to the assignment both the before and after the magistrate judge selected the jury. In a unanimous decision, the Court agreed, and held that the Magistrates Act did not permit such an assignment. Adhering to the rule of avoiding "an interpretation of a federal statute that engenders constitutional issues if a reasonable alternative interpretation poses no constitutional question," the Court focused on the statutory question of whether Congress would have intended magistrates to oversee this "critical stage of the criminal proceeding." By focusing on the importance of the selection of a jury, "the primary means by which a court may enforce a defendant's right to be tried by a jury free from ethnic, racial, and political prejudice," the Court was able to avoid the lingering Article III question whether judicial officials without life tenure and salary protection can preside over an essential part of a federal criminal prosecution. Speaking for a unanimous Court, Justice Stevens noted that while a literal reading of the additional duties provision would allow magistrates to oversee felony trials, the "carefully defined grant of authority to conduct trials of civil matters and of minor criminal cases should be construed as an implicit withholding of the authority to preside at a felony trial." Ultimately, the Court held that the "absence of a specific reference to jury selection in the statute, or, indeed, in the legislative history, persuades us that Congress did not intend the additional duties clause to embrace this function." Importantly, in Gomez , the defendant had not given consent to the magistrate to select the jury, illustrating the limits of the adjunct theory when consent is withheld. Role of Consent Even if a particular proceeding before a legislative court involves a claim traditionally tried by an Article III court, such a proceeding may be able to occur within the bounds of the Constitution if the parties to the proceeding consent to such an adjudication. Before discussing the role of consent and the constitutionality of non-Article III tribunals, it is important to note, as a statutory matter, Congress has from time to time allowed non-Article III courts to adjudicate based on consent. For example, under the Federal Magistrates Act, upon the consent of the parties, a magistrate judge "may conduct any or all proceedings in a jury or nonjury civil matter and order the entry of judgment in the case.... " Moreover, pursuant to the Bankruptcy Amendments and Federal Judgeship Act of 1984, a district court, with the "consent of all parties to the proceeding," is permitted to refer a "proceeding related to a case under title 11 to a bankruptcy judge to hear and determine and to enter appropriate orders and judgments.... " Other federal laws may provide for arbitration over discrete legal issues to occur based on the consent of the parties involved. In short, some federal statutes have allowed parties to consent to have discrete matters adjudicated before a non-Article III tribunal. While a non-Article III tribunal may be statutorily authorized to adjudicate a matter based on the consent of the parties, a question still remains as to whether the Constitution provides for such an arrangement. To understand the constitutional limits with respect to consent and non-Article III tribunals, it is important to understand the nature of the interests protected by Article III, §1, the constitutional provision that restricts Congress's ability to constitute legislative courts. The Supreme Court has identified two separate rationales for the constitutional limitations on the creation of non-Article III tribunals. First, the Court has noted that Article III, §1, provides a right that is personal in nature to individual litigants, preserving "their interest in an impartial and independent federal adjudication of claims with the judicial power of the United States." Second, in addition to the "individual rights" component of Article III, §1, the Court has held that that provision also safeguards certain structural principles, as well. Specifically, Article III preserves the "role of the Judicial Branch" in our system of government by preventing Congress from transferring jurisdiction to non-Article III tribunals en-masse, which could risk "'emasculating' constitutional courts." Put another way, Article III, §1 prohibits Congress from undermining Article III courts by enacting legislation that reassigns traditional federal judicial business to legislative judges that do not have life tenure and guaranteed compensation and, therefore, are presumably less independent. Having individuals consent to the jurisdiction of a non-Article III tribunal effectively undermines only one of the two rationales for why Article III can bar litigation of certain claims before legislative courts—the individual rights rationale. Generally, individual rights that are protected by the Constitution can be waived through a voluntary, knowing, and intelligent act "done with sufficient awareness of the relevant circumstances and likely consequences." For example, while the Fifth Amendment protects a criminal defendant's right against self-incrimination during custodial interrogation, the defendant can waive that right by voluntarily answering questions without claiming a right to keep silent or by executing a written waiver of his rights. Likewise, with respect to individual rights protected under Article III, §1, a party can agree to adjudication before a legislative court and effectively waive his individual interest in having an Article III court adjudicate his claim. Nonetheless, while individual rights can be waived, "notions of consent and waiver cannot be dispositive" with respect to the structural protections provided by Article III, §1 "because [those] limitations serve institutional interests that the parties cannot be expected to protect" —namely, separation of powers principles protecting the judicial branch from encroachment by the political branches. Indeed, the Supreme Court has likened the structural protections provided by Article III, §1 to the limits on the subject-matter jurisdiction of a federal court imposed by Section 2 of Article III, which cannot be waived through consent. Instead, the Supreme Court, when examining the structural component of Article III protections in consent cases, has assessed the constitutionality of a given judicial scheme using ad hoc balancing tests that rely on seemingly disparate principles, leaving an open question as to when Congress can provide an alternative forum to an Article III court in which consenting parties can assert their grievances. For example, in Commodities Futures Trading Commission v. Schor, the Supreme Court, in assessing the structural component of the constitutional protections provided by Article III, §1, rested its decision primarily based on the breadth of matters adjudicated by the non-Article III tribunal at issue in that case. Specifically, the Court upheld a law that allowed the Commodities Futures Trading Commission to adjudicate common law claims that were (1) "incidental to" and "completely dependent upon adjudication by the Commission of [public rights] claims created by federal law" and (2) arose "out of the same transaction or occurrence" as the federal law claim. For the Court, allowing an administrative agency to adjudicate such a "narrow class of common law claims," amounted to an intrusion on the judicial branch that could "only be termed de minimis ." Nonetheless, the Schor Court, in noting the narrow nature of its holding, emphasized that Congress could not "create[] a phalanx of non-Article III tribunals equipped to handle the entire business of the Article III courts without any Article III supervision or control and without evidence of valid and specific legislative necessities," even if parties consented to adjudicate before such a forum. Five years later, the Court approached the issue regarding Article III's structural protections in a slightly different manner in another consent case, Peretz v. United States. In Peretz, a criminal defendant who had failed to demand the presence of an Article III judge during the selection of his jury challenged, relying on the constitutional underpinnings of Gomez, argued that having a magistrate judge oversee voir dire proceedings implicated the structural protections provided by Article III. As in Schor, the Court in Peretz rejected that a judicial scheme affording to a legislative court certain responsibilities traditionally exercised by a constitutional court ran counter to the institutional interests preserved by Article III. Nonetheless, unlike in Schor, where the Court focused on the narrow nature of the claims adjudicated by administrative agency in that case, the Court's reasoning in Peretz centered on the degree of control exercised by a constitutional court over the non-Article III court's work. In Peretz , the Court observed that (1) magistrate judges are "appointed and subject to removal" by Article III judges; and (2) the "'ultimate decision' whether to invoke the magistrate's assistance," including assistance with voir dire , is made by the district court. Based on these observations, the Court concluded that "[b]ecause 'the entire process takes place under the district court's total control and jurisdiction,' there is no danger that use of the magistrate involves a 'congressional attempt'" to undermine the power of constitutional courts. Given the different approaches of Schor and Peretz with respect to how to evaluate the threat posed by consent cases to the structural protections afforded by Article III, lower court judges have—perhaps predictably—struggled to ascertain the constitutional limits of allowing consenting parties to seek traditional judicial relief from non-Article III tribunals. For example, in 1984 a divided panel of the Seventh Circuit Court of Appeals upheld the constitutionality of a provision of the Federal Magistrates Act of 1979 that allowed magistrates with the consent of the parties to try any civil case and to enter judgment with respect to them. In so holding, the appellate court reasoned that the "magistrates continue to function as adjuncts of the district courts" in such cases because magistrates are appointed and removed by district judges and the magistrate's conclusions of law are subject to de novo review by an Article III Court. Judge Richard Posner dissented from the decision, arguing that the power to enter final judgments is vested in Article III courts and cannot be delegated to judges who lack the protections afforded by Article III. The remaining circuit courts have agreed with the Seventh Circuit's assessment on the constitutionality of allowing consenting parties to proceed before a magistrate, including the Ninth Circuit in a decision written by then-Judge Anthony Kennedy. In the wake of Stern and the Court's condemnation of the "broad substantive jurisdiction" afforded to the bankruptcy court to enter final and binding judgments, questions about the constitutionality of allowing consenting parties to proceed before a non-Article III court have been renewed. Specifically, the federal appellate courts divided on the question of whether consenting parties could have claims similar to those adjudicated in Stern ( Stern claims) proceed before a bankruptcy court. To resolve the split amongst the lower courts, the Supreme Court, in July of 2014, granted certiorari in Wellness International v. Sharif . In May of 2015, the Court, in a 6-3 ruling, held that Article III permits bankruptcy courts to adjudicate with finality Stern claims if the parties have provided knowing and voluntary consent. In so holding, the Court in Wellness International relied heavily upon a functionalist approach to the underlying constitutional question similar to Schor and Peretz . Specifically, the Court utilized the ad hoc balancing test from Schor and Peretz to conclude that allowing bankruptcy courts to decide Stern claims by consent would not "impermissibly threaten the institutional integrity of the Judicial Branch." Just as in Schor, in Wellness International the Court relied on the fact that the underlying class of claims that was being adjudicated by the non-Article III court was "narrow" in nature, resulting in a " de minimis " intrusion on the federal judiciary. Moreover, much like in Peretz , the Wellness International Court found instructive the fact that the legislative court in question was ultimately supervised and overseen by a constitutional court and not Congress. Finally, the Court, relying on language in both Schor and Peretz , found "no indication" that Congress, in allowing bankruptcy courts to decide with finality Stern claims, was acting in "an effort to aggrandize itself or humble the Judiciary." Weighing all of these factors together, the Wellness International Court concluded that allowing bankruptcy courts to adjudicate Stern claims with the express or implied consent of the parties "pose[d] no threat to the separation of powers." Following Wellness International , it appears that legislation that affords a relatively narrow class of claims to be adjudicated before a non-Article III tribunal with the parties' consent and provides Article III courts with some oversight of the legislative court's activities would arguably pass constitutional muster . However, many issues remain open to dispute following the Court's most recent Article III consent case. For example, the Court's opinion in Wellness International declined to outline any precise limits to adjudication by litigant consent, including the breadth of claims that Congress may allow a non-Article III court to adjudicate with the consent of the parties and the scope of the needed oversight a constitutional court must possess over a legislative court that is ruling on claims traditionally heard by an Article III court. Nonetheless, the Wellness International Court signals that after a brief retreat in Stern from more pragmatic and flexible opinions like Thomas, Schor, and Peretz, the Court's separation of powers jurisprudence with regard to Article I courts has returned to a more functionalist approach.

The U.S. Constitution established only one federal court—the U.S. Supreme Court. Beyond this, Article III of the Constitution left it to the discretion of Congress to "ordain and establish" lower federal courts to conduct the judicial business of the federal government. From the very first, Congress established a host of different federal tribunals to adjudicate a variety of legal disputes. The two central types of federal "courts"—courts established under Article III and those tribunals that are not—differ in many respects, including with regard to their personnel, purposes, and powers. Courts established pursuant to Article III are mainly defined by the three central constitutional provisions to which they are subject: resolution of cases that only present live "cases or controversies," lifetime tenure, and salary protection. The primary purpose for these safeguards was to insulate the federal judiciary from potential pressures, from either the political branches or the public, which might improperly influence the judicial decision-making process. Notwithstanding Article III's seemingly literal command that the "judicial power" shall extend to all cases "arising under" the Constitution or federal law, Congress has assigned a host of cases arising under federal law to non-Article III bodies. Unlike Article III judges, these bodies, generally referred to as "non-Article III courts," "legislative courts," or "Article I courts," enjoy neither lifetime tenure nor salary protection. There are two main categories of non-Article III courts. The first are standalone courts, created under Congress's Article I power, which have similar authority as Article III courts, such as entering their own judgments and issuing contempt orders. Examples of legislative courts include the U.S. Tax Court; the Court of Federal Claims; the Court of Appeals for Veterans Claims; the Court of Appeals for the Armed Forces; and federal district courts in Guam, the Virgin Islands, and the Northern Mariana Islands. The second category of non-Article III tribunals is commonly referred to as "adjuncts" to Article III courts. This category is mainly comprised of federal administrative agencies and magistrate judges. These non-Article III bodies have been justified on several grounds. First, the Court has held that in certain limited instances, Article III's absolute command must give way to Congress's exercise of its Article I powers. This theory has been used to justify the creation of territorial courts, military courts, and the adjudication of cases involving rights created by Congress (commonly referred to as "public rights" cases). The second rationale is the use of "adjuncts," judicial officers who do not function as independent courts but instead act as a subordinate to the federal courts with direct review of their decisions. Examples of adjuncts include the thousands of administrative law judges who adjudicate cases coming before federal agencies and federal magistrate judges who assist district court judges with everything from deciding motions, hearing evidence, and trying both criminal and civil cases. Lastly, certain questions arising under federal law may be resolved by non-Article III tribunals if the parties to the proceeding consent to such an adjudication.

CRS_RS20376

A Closer Look at the Elements RICO outlaws the collection of an unlawful debt, or the patterned commission of two or more crimes from a series of designated state and federal crimes ("racketeering activities" often referred to as predicate offenses), in order to acquire, invest in, or conduct the activities of an enterprise whose activities occur in, or affect, interstate or foreign commerce. Any Person Any person may violate RICO. The "person" need not be a mobster or even a human being; "any individual or entity capable of holding a legal or beneficial interest in property" will do. Although the "person" and the "enterprise" must be distinct in the case of a subsection 1962(c) violation (conducting an enterprise's activities through racketeering activity), a corporate entity and its sole shareholder are sufficiently distinct to satisfy the enterprise and person elements of a subsection (c) violation. The "person" and "enterprise" need not be distinct for purposes of subsection 1962(a) (investing the racketeering activity proceeds in an enterprise) or subsection 1962(b) (acquiring or maintaining an enterprise through racketeering activity) violations. On the other hand, even though governmental entities may constitute or participate in a RICO enterprise and may bring a RICO cause of action, they are not considered capable of a RICO violation. Misconduct RICO addresses four forms of illicit activity reflected in the four subsections of Section 1962: (a) acquiring or operating an enterprise using racketeering proceeds; (b) controlling an enterprise using racketeering activities; (c) conducting the affairs of an enterprise using racketeering activities; and (d) conspiring to so acquire, control, or conduct. The first, 18 U.S.C. 1962(a), was designed as something of a money laundering provision. It introduces several features of its own and has been described as the most difficult to prove. Under its provisions, it is unlawful for (1) any person (2) who is liable as a principal (a) in the collection of an unlawful debt or (b) in a pattern of predicate offenses (3) to use or invest (4) the income from such misconduct (5) to acquire, establish or operate (6) a commercial enterprise. The "person," the pattern of predicate offense, and the enterprise elements are common to all of the subsections. For purposes of 1962(a), however, a legal entity that benefits from the offense may be both the "person" and the "enterprise." The person must have committed usury or a pattern of predicate offenses or aided and abetted in their commission, and have received income that would not otherwise have been received as a result. The second proscription, 18 U.S.C. 1962(b), is much the same except that it forbids acquisition or control of an enterprise through the predicate offenses themselves rather than through the income derived from the predicate offenses. It makes it unlawful for (1) any person (2) to acquire or maintain an interest in or control of (3) a commercial enterprise (4) through (a) the collection of an unlawful debt or (b) a pattern of predicate offenses. As in the case of subsection 1962(a), the "person" and the "enterprise" may be one and the same. There must be a nexus between the predicate offenses and the acquisition of control. Exactly what constitutes "interest" or "control" is a case by case determination. The defendant must be shown to have played some significant role in the management of the enterprise but a showing of complete control is not necessary. Subsection 1962(c) makes it unlawful for (1) any person, (2) employed by or associated with, (3) a commercial enterprise (4) to conduct or participate in the conduct of the enterprise's affairs (5) through (a) the collection of an unlawful debt or (b) a pattern of predicate offenses. Although on its face subsection 1962(c) might appear to be less demanding than subsections 1962(a) and (b), the courts have not always read it broadly. Thus, in any charge of a breach of its provisions, the "person" and the "enterprise" must ordinarily be distinct. The requirement cannot be avoided by charging a corporate entity as the "person" and the officers and employees through whom it must act as an "association in fact" enterprise. A corporate entity and its sole shareholder, however, are sufficiently distinct for purposes of subsection 1962(c). Moreover, the Supreme Court has identified an entrepreneurial stripe in the "conduct or participate in the conduct" element of 1962(c) under which only those who participate in the operation or management of the enterprise itself meet the definition. Nevertheless, conviction requires neither an economic predicate offense nor a predicate offense committed with an economic motive. Racketeering Activity The heart of most RICO violations is a pattern of racketeering activities, that is, the patterned commission of two or more designated state or federal crimes. The list of state and federal crimes upon which a RICO violation may be predicated includes murder, kidnaping, gambling, robbery, arson, bribery, extortion, dealing in drugs or obscene material, mail fraud, wire fraud, and federal crimes of terrorism, to name a few. To constitute "racketeering activity," the predicate offense need only be committed ; there is no requirement that the defendant or anyone else have been convicted of a predicate offense before a RICO prosecution or action may be brought. Conviction of a predicate offense, on the other hand, does not preclude a subsequent RICO prosecution, nor is either conviction or acquittal a bar to a subsequent RICO civil action. Pattern As noted the Supreme Court's decision in H.J., Inc. v. Northwestern Bell Telephone Co. , 492 U.S. 229 (1989), quoted below, the pattern of racketeering activities element of RICO requires (1) the commission of two or more predicate offenses, (2) that the predicate offenses be related and not simply isolated events, and (3) that they are committed under such circumstances that suggest either a continuity of criminal activity or the threat of such continuity. Predicates : The first element is explicit in Section 1961(5): "'Pattern of racketeering activity' requires at least two acts of racketeering activity." The two remaining elements, relationship and continuity, flow from the legislative history of RICO. That history "shows that Congress indeed had a fairly flexible concept of a pattern in mind. A pattern is not formed by sporadic activity.... [A] person cannot be subjected to the sanctions [of RICO] simply for committing two widely separate and isolated criminal offenses. Instead, the term 'pattern' itself requires the showing of a relationship between the predicates and of the threat of continuing activity. It is this factor of continuity plus relationship which combines to produce a pattern." Related predicates : The commission of predicate offenses forms the requisite related pattern if the "criminal acts ... have the same or similar purposes, results, participants, victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events." Continuity : "Continuity" is a question of time. "A party alleging a RICO violation may demonstrate continuity ... by proving a series of related predicates, extending over a substantial period of time. Predicate acts extending over a few weeks or months and threatening no future criminal conduct do not satisfy this requirement." But this does not mean that no RICO violation has occurred in the absence of continuity. "Often a RICO action will be brought before continuity can be established.... In such cases, liability depends on whether the threat of continuity is demonstrated." The Court characterized a pattern, extending over a period of time but which posed no threat of reoccurrence, as a pattern with "closed-end" continuity; and a pattern marked by a threat of reoccurrence as a pattern with "open-ended continuity." In the case of a "closed-ended" pattern, the lower courts have been reluctant to find predicate activity extending over less than a year sufficient for the "substantial period[s] of time" required to demonstrate continuity. Whether the threat of future predicate activity is sufficient to recognize an "open-end" pattern of continuity depends upon the nature of the predicate offenses and the nature of the enterprise. "Though the number of related predicates involved may be small and they may occur close together in time, the racketeering acts themselves include a specific threat of repetition extending indefinitely into the future, and thus supply the requisite continuity. In other cases, the threat of continuity may be established by showing that the predicate acts or offenses are part of an ongoing entity's regular way of doing business." Collection of an Unlawful Debt Collection of an unlawful debt appears to be the only instance in which the commission of a single predicate offense will support a RICO prosecution or cause of action. No proof of pattern seems to be necessary. The predicate covers only usury and the collection of unlawful gambling debts. The prohibition seems to apply to both lawful and unlawful means of collection as long as the underlying debt is unlawful. Enterprise The statute defines "enterprise" to include "any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity." The enterprise may be devoted to entirely legitimate ends or totally corrupt objectives, and RICO reaches efforts involving both governmental and nongovernmental enterprises. Finally as noted earlier, a corporation or other legal entity may be both the defendant and the required "enterprise" under some circumstances. As for "associated in fact" enterprises, the Supreme Court in Boyle rejected the suggestion that such enterprises must be "business-like" creatures, having discernable hierarchical structures, unique modus operandi, chains of command, internal rules and regulations, regular meetings regarding enterprise activities, or even a separate enterprise name or title, Boyle v. United States , 129 S.Ct. 2337, 2347 (2009). The statute demands only "that an association-in-fact enterprise must have at least three structural features: a purpose, relationships among those associated with the enterprise, and longevity sufficient to permit these associates to pursue the enterprise's purpose," Id. , at 2346. To satisfy RICO's jurisdictional element, the corrupt or corrupted enterprise must either engage in interstate or foreign commerce or engage in activities that affect interstate or foreign commerce. An enterprise that orders supplies and transports its employees and products in interstate commerce is "engaged in interstate commerce" for purposes of RICO. As a general rule, the impact of the enterprise on interstate or foreign commerce need only be minimal to satisfy RICO requirements. Where the predicate offenses associated with an enterprise have an effect on interstate commerce, the enterprise is likely to have an effect on interstate commerce. However, more is required where the enterprise is not engaged in economic activity. Conspiracy Conspiracy under subsection 1962(d) is (1) the agreement of (2) two or more (3) to invest in, acquire, or conduct the affairs of (4) a commercial enterprise (5) in a manner which violates 18 U.S.C. 1962(a), (b), or (c). The heart of the crime lies in the agreement rather than any completed, concerted violation of the other three RICO subsections. In fact, unlike the general conspiracy statute, RICO conspiracy is complete upon the agreement even if none of the conspirators ever commit an overt act towards the accomplishment of its criminal purpose. Moreover, contrary to the view once held by some of the lower courts, there is no requirement that a defendant commit or agree to commit two or more predicate offenses himself. It is enough that the defendant, in agreement with another, intended to further an endeavor which, if completed, would satisfy all of the elements of a RICO violation. A conspirator is liable not only for the conspiracy but for any foreseeable substantive offenses committed by any of the conspirators in furtherance of the common scheme, until the objectives of the plot are achieved, abandoned, or the conspirator withdraws. "To withdraw from a conspiracy, an individual must take some affirmative action either by reporting to authorities or communicating his intentions to his coconspirators." The individual bears the burden of showing he has done so. Consequences The commission of a RICO violation exposes offenders to a wide range of criminal and civil consequences: imprisonment, fines, restitution, forfeiture, treble damages, attorneys' fees, and a wide range of equitable restrictions. Criminal Liability . RICO violations are punishable by fine or by imprisonment for life in cases where the predicate offense carries a life sentence, or by imprisonment for not more than 20 years in all other cases. Although an offender may be sentenced to either a fine or a term of imprisonment under the strict terms of the statute, the operation of the applicable sentencing guidelines makes it highly likely that offenders will face both fine and imprisonment. The maximum amount of the fine for a RICO violation is the greater of twice the amount of the gain or loss associated with the crime, or $250,000 for an individual, $500,000 for an organization. Offenders sentenced to prison are also sentenced to a term of supervised release of not more than three years to be served following their release from incarceration. Most RICO violations also trigger mandatory federal restitution provisions, because the RICO offense involves a crime of violence, drug trafficking, or a crime with respect to which a victim suffers physical injury or pecuniary loss. Moreover, property related to a RICO violation is subject to confiscation. Even without a completed RICO violation, committing any crime designated a RICO predicate offense opens the door to additional criminal liability. It is a 20-year felony to launder the proceeds from any predicate offense (including any RICO predicate offense) or to use them to finance further criminal activity. Moreover, the proceeds of any RICO predicate offense are subject to civil forfeiture (confiscation without the necessity of a criminal conviction) by virtue of the RICO predicate's status as a money laundering predicate. Civil Liability . RICO violations may result in civil as well as criminal liability. "Any person injured in his business or property by reason" of a RICO violation has a cause of action for treble damages and attorneys' fees. No prior criminal conviction is required, except in the case of liability based on certain securities fraud predicates. Although the United States is apparently not a "person" that may sue for damages under RICO, the term does include local governments, state agencies, and foreign governments. On the other hand, private parties may not bring a RICO suit for damages against the United States or other governmental entities. In order to recover, the plaintiff must establish an injury to his or her business or property directly or proximately caused by the defendant's RICO violation. The injury must involve a "concrete financial loss," a "mere injury to a valuable intangible property interest" such as a right to pursue employment will not do. The courts agreed generally that Section 1964(c) does not permit recovery for personal injuries since they are not injuries to "business or property," but sometimes disagree on what constitutes a qualified injury. If the underlying violation involves subsection 1962(a), it is the use or investment of the income rather than the predicate offenses that must have caused the injury. If the underlying violation involves subsection 1962(b), it is the access or control of the RICO enterprise rather than the predicate offenses that must have caused the injury. While a criminal prosecution requires no overt act, the courts demand that RICO plaintiffs whose claim is based on a conspiracy under subsection 1962(d) prove an overt act since a mere agreement cannot be the direct or proximate cause of an injury. Moreover, the overt act itself must constitute a predicate offense. Notwithstanding the apparent inability of the United States to sue for damages under RICO, the Attorney General may seek to prevent and restrain RICO violations under the broad equitable powers vested in the courts to order disgorgement, divestiture, restitution, or the creation of receiverships or trusteeships. This authority has been invoked relatively infrequently, primarily to rid various unions of organized crime and other forms of corruption. There is some question whether private plaintiffs, in addition to the Attorney General, may seek injunctive and other forms of equitable relief. On the procedural side, the Supreme Court has held that (1) state trial courts of general jurisdiction have concurrent jurisdiction over federal civil RICO claims; (2) under the appropriate circumstances parties may agree to make potential civil RICO claims subject to arbitration; (3) the Clayton Act's four-year period of limitation applies to civil RICO claims as well, and the period begins when the victim discovers or should have discovered the injury; and (4) in the absence of an impediment to state regulation, the McCarran-Ferguson Act does not bar civil RICO claims based on insurance fraud allegations.

Congress enacted the federal Racketeer Influenced and Corrupt Organization (RICO) provisions as part of the Organized Crime Control Act of 1970, 18 U.S.C. 1961-1968. In spite of its name and origin, RICO is not limited to "mobsters" or members of "organized crime" as those terms are popularly understood. Rather, it covers those activities which Congress felt characterized the conduct of organized crime, no matter who actually engages in them. RICO proscribes no conduct that is not otherwise prohibited. Instead it enlarges the civil and criminal consequences, under some circumstances, of a list of state and federal crimes. RICO condemns: (1) any person, (2) who (a) invests in, or (b) acquires or maintains an interest in, or (c) conducts or participates in the affairs of, or (d) conspires to invest in, acquire, or conduct the affairs of (3) an enterprise (4) which (a) engages in, or (b) whose activities affect, interstate or foreign commerce (5) through (a) the collection of an unlawful debt, or (b) the patterned commission of various state and federal crimes ("racketeering activities" sometimes referred to as "predicate offenses"). Violations are punishable by fines, forfeiture, and imprisonment for not more than 20 years or life if one of the predicate offenses carries such a penalty. Civil RICO permits anyone injured in their business or property by a RICO violation to recover treble damages, costs and attorneys' fees. In exceptional cases, at least at the behest of the government, the courts will enjoin further RICO violations, order divestiture, dissolution or reorganization, or restrict an offender's future professional or investment activities. RICO comes with tailored provisions for venue and service of process, expedited judicial action in civil cases brought by the United States, in camera proceedings, and for the use of civil investigative demands. This is an abridgement of a report, which with full citations, footnotes, and various appendixes, appears as CRS Report 96-950, RICO: A Brief Sketch, by [author name scrubbed].

CRS_RL34645

Some policymakers have concluded that the energy challenges facing the United States are so critical that a concentrated investment in energy research and development (R&D) should be undertaken. The Manhattan project, which produced the atomic bomb, and the Apollo program, which landed American men on the moon, have been cited as examples of the success such R&D investments can yield. Investment in federal energy technology R&D programs of the 1970s, in response to two energy crises, have generally been viewed as less successful than the earlier two efforts. This report compares and contrasts the goals of, and the investments in, the three initiatives, which may provide useful insights for Congress as it assesses and debates the nation's energy policy. The Manhattan Project The Manhattan project took place from 1942 to 1946. Beginning in 1939, some key scientists expressed concern that Germany might be building an atomic weapon and proposed that the United States accelerate atomic research in response. Following the Pearl Harbor attack in December 1941, the United States entered World War II. In January 1942, President Franklin D. Roosevelt gave secret, tentative approval for the development of an atomic bomb. The Army Corps of Engineers was assigned the task and set up the Manhattan Engineer District to manage the project. A bomb research and design laboratory was built at Los Alamos, New Mexico. Due to uncertainties regarding production effectiveness, two possible fuels for the reactors were produced with uranium enrichment facilities at Oak Ridge, Tennessee, and plutonium production facilities at Hanford, Washington. In December 1942, Roosevelt gave final approval to construct a nuclear bomb. A bomb using plutonium as fuel was successfully tested south of Los Alamos in July 1945. In August 1945, President Truman decided to use the bomb against Japan at two locations. Japan surrendered a few days after the second bomb attack. At that point, the Manhattan project was deemed to have fulfilled its mission, although some additional nuclear weapons were still assembled. In 1946, the civilian Atomic Energy Commission was established to manage the nation's future atomic activities, and the Manhattan project officially ended. According to one estimate, the Manhattan project cost $2.2 billion from 1942 to 1946 ($22 billion in 2008 dollars), which is much greater than the original cost and time estimate of approximately $148 million for 1942 to 1944. General Leslie Groves, who managed the Manhattan project, has written that Members of Congress who inquired about the project were discouraged by the Secretary of War from asking questions or visiting sites. After the project was under way for over a year, in February 1944, War Department officials received essentially a "blank check" for the project from Congressional leadership who "remained completely in the dark" about the Manhattan project, according to Groves and other experts. The Apollo Program The Apollo program, FY1960 to FY1973, encompassed 17 missions, including six lunar landings. NASA was created in response to the Soviet launch of Sputnik in 1958 and began operation in 1959. Although preliminary discussions regarding the Apollo program began in 1960, Congress did not decide to fund it until 1961 after the Soviet Union became the first nation to launch a human into space. The goals of the Apollo program were To land Americans on the Moon and return them safely to Earth; To establish the technology to meet other national interests in space; To achieve preeminence in space for the United States; To carry out a program of scientific exploration of the Moon; and To develop man's capability to work in the lunar environment. The program included a three-part spacecraft to take two astronauts to the Moon surface, support them while on the Moon, and return them to Earth. Saturn rockets were used to launch this equipment. In July 1969, Apollo 11 achieved the goal of landing Americans on the Moon and returning them safely to Earth. The last lunar landing took place in December 1972. The Apollo program was only one part of NASA's activities during this period. NASA's peak funding during the Apollo program occurred in FY1966 when its total funding was $4.5 billion (in current dollars), of which $3.0 billion went to the Apollo program. According to NASA, the total cost of the Apollo program for FY1960-FY1973 was $19.4 billion ($97.9 billion in 2008 dollars). The activities with the greatest cost were the Saturn V rockets ($6.4 billion in current dollars) followed by the Command and Service Modules ($3.7 billion), the Lunar Modules ($2.2 billion), and Manned Space Flight Operations ($1.6 billion). Energy Technology Research and Development The Arab oil embargo of 1973 (the "first" energy crisis) put energy policy on the national "agenda." At that time, Americans began to experience rapidly rising prices for fuel and related goods and services. Until then, energy R&D had been focused on the development of nuclear power under the Atomic Energy Commission (AEC). After the Manhattan project ended, Congress had established the AEC to manage both civilian and military projects in the Atomic Energy Act of 1946 (P.L. 79-585). In response to the energy crisis, Congress subsumed the AEC, including the Manhattan project facilities, and other energy programs, into the Energy Research and Development Administration (ERDA), which became the focus for federal energy technology R&D, and the Nuclear Regulatory Commission (NRC) as part of the Energy Reorganization Act of 1974 ( P.L. 93 - 438 ). In the Department of Energy Organization Act of 1977 ( P.L. 95 - 91 ), Congress decided to combine the activities of ERDA with approximately 50 other energy offices and programs in a new Department of Energy (DOE), which began operations on October 1, 1977. In 1979, the Iranian Revolution precipitated the "second" energy crisis that took place from 1978-1981. High oil prices and inflation lasted for several years. An ensuing recession curbed demand and oil prices fell markedly by 1986. The scale of funding for most of DOE's energy R&D programs dropped steadily during the 1980s (see Figure 1 ). The large energy technology demonstration projects funded during the late 1970s and early 1980s were viewed by some as too elaborate and insufficiently linked to either existing energy research or the marketplace. A well known example is the Synthetic Fuels Corporation (SFC). The goal of SFC was to support large-scale projects that industry was unwilling to support due to the technical, environmental, or financial uncertainties. The program ended in 1986 due to a combination of lower energy prices, environmental issues, lack of support by the Reagan Administration, and administrative challenges. Oil prices rose substantially from 2004 to 2008, but funding for energy technology R&D has not so far increased as it did during the energy crisis of the late 1970s to early 1980s. However, the appropriations process for FY2009 and FY2010 has not yet been completed. Comparative Analysis of the Manhattan Project, the Apollo Program, and Federal Energy Technology R&D A general understanding of driving forces of and funding histories for the Manhattan project and Apollo program, and a comparison of these two initiatives to Department of Energy (DOE) energy technology R&D programs, may provide useful insights for Congress as it assesses and determines the nation's energy R&D policy. Four criteria that might be used to compare these programs are funding, perception of threat, goal clarity, and technology customer. Each is discussed in more depth below. Funding Table 1 provides a comparison of the total and annual average program costs for the Manhattan project, Apollo program, and federal energy technology R&D program since the first energy crisis. Annual average long-term (1974-2008) DOE energy technology R&D funding was approximately $3 billion (in 2008 constant dollars) as is the FY2008 budget and the FY2009 budget request. In comparison, the annual average funding (in 2008 constant dollars) for the Manhattan project was $4 billion and for the Apollo program and the DOE energy technology program at its peak (1975-1980) was $7 billion. At the time of peak funding, the percentage of federal spending devoted to DOE energy technology R&D was half that of the Manhattan project, and one-fifth that of the Apollo program. From an overall economy standpoint, the percentage of the gross domestic product (GDP) spent on DOE energy technology R&D in the peak funding year was one-fourth that spent on either the Manhattan project or the Apollo program. As shown in Figure 2 , although cumulative funding for the DOE energy technology R&D program is greater than for the Manhattan project or the Apollo program, the annual funding for each of the historical programs was higher than that for energy technology R&D which occurred over a greater number of years. This is an important distinction: the Manhattan project and the Apollo program were specific and distinct funding efforts whereas the national energy R&D effort has been ongoing over a longer period of time. In all three cases, a rapid increase in funding was followed by a rapid decline. Threat Perception The Manhattan project and Apollo project were both responses to perceived threats, which compelled policymaker support for these initiatives. The Manhattan project took place during World War II. Although the public might have been unaware of the potential threat of Germany's use of nuclear weapons and the Manhattan project, the President and Members of Congress could feel confident about public support for the war effort of which the Manhattan project was a part. Similarly, the Apollo program took place during the Cold War with the Union of Soviet Socialist Republics (USSR). When the USSR launched the Sputnik satellite and first man into space, the U.S. public felt threatened by the potential that the USSR might take leadership in the development of space flight technology, and potentially greater control of outer space. President Jimmy Carter said that With the exception of preventing war, this [energy crisis] is the greatest challenge that our country will face during our lifetime ... our decision about energy will test the character of the American people and the ability of the President and the Congress to govern this Nation. This difficult effort will be the 'moral equivalent of war,' except that we will be uniting our efforts to build and not to destroy." The threat to which investment in energy technology R&D responds, however, is largely economic rather than military. In addition, the threat posed by climate change, which is related to energy consumption, will likely be gradual and long-term. Goal Clarity Another issue is the degree to which there is clarity and consensus on the program goal. The Manhattan project had a clear and singular goal—the creation of a nuclear bomb. For the Apollo program, the goal was also clear and singular—land American astronauts on the moon and return them safely to Earth. In the case of energy technology R&D, however, the overall goal of clean, affordable, and reliable energy is multi-faceted. While "energy independence" has from time to time been a rallying cry, energy technology R&D has in fact, been driven by at least three not always commensurate goals: resource and technological diversity, commercial viability, and environmental protection. To help reduce the risk of dependence on a single energy source, diversity of resources and energy technologies have always been seen as a goal of the energy R&D program. Second, unlike the Manhattan project or the Apollo program, the DOE energy technology R&D program seeks ultimately to be commercially viable. Third, the energy R&D program must meet environmental goals, including reducing the impact of energy-related activities on land, water, air, and climate change. Technology Customer Another comparison criterion is the customer for technologies that may result from the R&D. The government was the customer for both the Manhattan project and Apollo program. The private sector is the ultimate customer for any energy technology developed as a result of federal energy R&D programs. Therefore, the marketability of any technologies developed will be a key determinant of the degree to which the program is successful. Moreover, the inherent involvement of the private sector raises a number of issues related to the appropriateness of different government roles. Some believe that focusing R&D on one particular technology versus another may result in government, instead of the marketplace, picking "winners and losers." Some experts believe that the most important driver for private sector deployment or commercialization is not the need for new technologies, but regulation or economic incentives. Others, however, believe that without government support and intervention, the private sector is unlikely to conduct the R&D necessary to achieve the public goal of clean, affordable, and reliable energy, and that current technologies are insufficient to achieve this goal. Implications for Congress When the Manhattan project and the Apollo program are used as analogies for future DOE energy technology R&D, the following points may be important to consider: To be equivalent in annual average funding, DOE energy technology R&D funding would need to increase from approximately $3 billion in FY2008 to at least $4 billion per program year to match the Manhattan project funding, or $7 billion per program year to match Apollo program funding levels or DOE energy technology R&D funding at its peak. To be equivalent of peak year funding would require even greater increases. In terms of federal outlays, energy technology R&D funding would need to increase from 0.5% to 1% (Manhattan project) or 2.2 % (Apollo program) of federal outlays. As a percentage of GDP, this funding would need to increase from 0.1% to 0.4% of GDP (for both the Manhattan project and the Apollo program). Both the Manhattan project and the Apollo program had a singular and specific goal. For the Manhattan project, the response to the threat of enemy development of a nuclear bomb was the goal to construct a bomb; for the Apollo program, the threat of Soviet space dominance was translated into a specific goal of landing on the moon. For energy, however, the response to the problems of insecure oil sources and high prices has resulted in multiple, sometimes conflicting goals. Both the Manhattan project and the Apollo program goals pointed to technologies primarily for governmental use with little concern about their environmental impact; for energy, in contrast, the hoped for outcome depends on commercial viability and mitigation of the environmental impacts of the energy technologies developed. Although the Manhattan project and the Apollo program may provide some useful analogies for funding, these differences may limit their utility regarding energy policy. Rather, energy technology R&D has been driven by at least three not always commensurate goals—resource and technological diversity, commercial viability, and environmental protection—which were not goals of the historical programs. Congressional Activities The New Manhattan Project for Energy Independence ( H.R. 513 ), a bill introduced in the House on January 14, 2009, would require the President to convene a summit to review the progress and promise of, the interrelationship of, and the additional funding needed to accelerate the progress of: (1) developing alternative technology vehicles that are not more than 10% more expensive than comparable model year vehicles; (2) developing and building energy efficient buildings that use no more than 50% of the energy of buildings of similar size and type; (3) constructing a large scale solar thermal power plant or solar photovoltaic power plant capable of generating 300 megawatts or more at a cost of 10 cents or less per kilowatt-hour; (4) developing and producing biofuel that does not exceed 105% of the cost for the energy equivalent of unleaded gasoline; (5) developing and implementing a carbon capture and storage system for a large scale coal-burning power plant that does not increase operating costs more than 15% compared to a baseline design without carbon capture and storage while providing an estimated chance of carbon dioxide escape of no greater than 1% over 5,000 years; (6) developing both a process to remediate radioactive waste so that it is not harmful for at least 5,000 years and a model that accounts for the effects of nuclear waste in that process; and (7) developing a sustainable nuclear fusion reaction capable of providing a large-scale sustainable source of electricity for residential, commercial, or government entities. The bill would also require the Secretary of Energy to implement a program to support such technologies; and competitively award cash prizes to advance the research, development, demonstration, and commercial application necessary to advance such technologies. In addition, the bill would establish a New Manhattan Project Commission on Energy Independence that would make recommendations to Congress as to the steps necessary to achieve 50% energy independence within 10 years and 100% energy independence within 20 years, as well as assessing the impact of foreign energy dependence on national security. On June 26, 2009, a proposed amendment to replace the text of H.R. 2454 with this bill failed in the House 172-256.

Some policymakers have concluded that the energy challenges facing the United States are so critical that a concentrated investment in energy research and development (R&D) should be undertaken. The Manhattan project, which produced the atomic bomb, and the Apollo program, which landed American men on the moon, have been cited as examples of the success such R&D investments can yield. Investment in federal energy technology R&D programs of the 1970s, in response to two energy crises, have generally been viewed as less successful than the earlier two efforts. This report compares and contrasts the three initiatives. In 2008 dollars, the cumulative cost of the Manhattan project over 5 fiscal years was approximately $22 billion; of the Apollo program over 14 fiscal years, approximately $98 billion; of post-oil shock energy R&D efforts over 35 fiscal years, $118 billion. A measure of the nation's commitments to the programs is their relative shares of the federal outlays during the years of peak funding: for the Manhattan program, the peak year funding was 1% of federal outlays; for the Apollo program, 2.2%; and for energy technology R&D programs, 0.5%. Another measure of the commitment is their relative shares of the nation's gross domestic product (GDP) during the peak years of funding: for the Manhattan project and the Apollo program, the peak year funding reached 0.4% of GDP, and for the energy technology R&D programs, 0.1%. Besides funding, several criteria might be used to compare these three initiatives including perception of the program or threat, goal clarity, and the customer of the technology being developed. By these criteria, while the Manhattan project and the Apollo program may provide some useful analogies for thinking about an energy technology R&D initiative, there are fundamental differences between the forces that drove these historical R&D success stories and the forces driving energy technology R&D today. Critical differences include (1) the ability to transform the program or threat into a concrete goal, and (2) the use to which the technology would be put. On the issue of goal setting, for the Manhattan project, the response to the threat of enemy development of a nuclear bomb was the goal to construct a bomb; for the Apollo program, the threat of Soviet space dominance was translated into a specific goal of landing on the moon. For energy, the response to the problems of insecure oil sources and high prices has resulted in multiple, sometimes conflicting, goals. Regarding use, both the Manhattan project and the Apollo program goals pointed to technologies primarily for governmental use with little concern about their environmental impact; for energy, in contrast, the hoped-for outcome depends on commercial viability and mitigation of environmental impacts from energy use. Although the Manhattan project and the Apollo program may provide some useful analogies for funding, these differences may limit their utility regarding energy policy. Rather, energy technology R&D has been driven by at least three not always commensurate goals—resource and technological diversity, commercial viability, and environmental protection—which were not goals of the historical programs.

CRS_R42627

Introduction The Department of Health and Human Services (HHS) announced a new initiative in July 2012, under which it would be willing to waive certain federal work participation standards under the Temporary Assistance for Needy Families (TANF) block grant to permit states to experiment with "alternative and innovative strategies, policies, and procedures that are designed to improve employment outcomes for needy families." HHS announced this policy through the release of an Information Memorandum on July 12, 2012. The work participation standards are numerical performance standards that each state must meet or risk being penalized through a reduction in its block grant. These are standards that apply to the states, not directly to individuals, though they influence how states design their welfare-to-work programs and apply requirements to individual recipients. Such waivers will be the first "new" waivers to test welfare-to-work strategies in more than 15 years, since the enactment of the 1996 welfare reform law that created TANF. Some in Congress have opposed the Administration's waiver initiative. The House has twice (once in the 113 th Congress; once in the 112 th Congress) passed measures to bar HHS from moving forward with granting waivers of the TANF work participation standards. In the 113 th Congress, the House passed H.R. 890 on March 13, 2013. The bill would prevent the Administration's waiver initiative from being implemented, while also barring any future waivers of the TANF work participation standards. Thus, TANF work standards could only be changed by Congress. Senator Hatch (the ranking Republican member of the Committee on Finance) has also introduced measures in both the 113 th ( S.J.Res. 9 ) and 112 th Congress ( S.J.Res. 50 ) to block the waiver initiative. Opponents of the waiver initiative question both its legality and the process used in forwarding the initiative, and claim that granting waivers of the participation standards would weaken the work requirements. In some respects, the discussion about "waivers" is a continuation of a decades-old controversy about whether welfare-to-work efforts should emphasize quick attachment to work and working off welfare grants or whether they should focus on education and training. This report is not a legal analysis of the Secretary's authority to waive TANF work participation standards. Rather, it describes and provides context for this HHS initiative through discussing the current TANF work participation standards; the HHS initiative to waive TANF work participation standards; the history of welfare waivers; and factors that might be considered in assessing the initiative to waive the TANF work participation standards. This is not a comprehensive review of TANF or even welfare-to-work issues. For an overview of TANF, see CRS Report R40946, The Temporary Assistance for Needy Families Block Grant: An Introduction , by [author name scrubbed]. For a more comprehensive discussion of welfare-to-work issues, see CRS Report R42767, Temporary Assistance for Needy Families (TANF): Welfare-to-Work Revisited , by Shannon Bopp and [author name scrubbed]. TANF and Its Work Participation Standards TANF is a broad-based block grant that provides funds to states, the territories, and Indian tribes to help them finance cash welfare programs for needy families with children as well as provide a wide range of other benefits and services to either ameliorate the effects of, or address the root causes of, child poverty. The basic federal block grant for the 50 states and the District of Columbia is funded at a total of $16.5 billion per year. States are required, under a provision known as the maintenance of effort (MOE) requirement, to expend from their own funds a minimum total of $10.4 billion per year in addition to federal funds on TANF or TANF-related programs. The statutory purpose of TANF is increasing state flexibility to achieve goals to 1. provide assistance to needy families so that children may be cared for in their own homes or in the homes of relatives; 2. end the dependence of needy parents on government benefits by promoting job preparation, work, and marriage; 3. prevent and reduce the incidence of out-of-wedlock pregnancies and establish annual numerical goals for preventing and reducing the incidence of these pregnancies; and 4. encourage the formation and maintenance of two-parent families. States may use TANF funds to finance any activity "reasonably calculated" to achieve these four TANF goals. This gives states broad leeway in spending TANF funds. In general, state MOE funds can be used for these same activities (there are some technical differences in the use of federal and state funds). Cash welfare accounted for less than 30% of all TANF and MOE funds in FY2011. TANF provides states with a great deal of flexibility in designing their cash assistance programs. However, there are federal standards and requirements that apply to states with respect to providing cash assistance, including time limits and work participation standards. The TANF Work Participation Standards TANF sets minimum work participation standards that a state must meet. The standards are performance measures computed in the aggregate for each state, which require that a specified percentage of families be considered engaged in specified activities for a minimum number of hours. A state that fails to meet its work standard is at risk of being penalized through a reduction in its block grant. The TANF statute provides that 50% of all families and 90% of two-parent families included in the participation rate are required to be engaged in work. However, few states have ever faced this standard because the percentage is reduced for caseload reduction or state spending in excess of what is required under the TANF MOE. Additionally, not all families receiving cash assistance are included in the participation rate calculation, as some families do not have a "work-eligible" individual or are otherwise disregarded from the rate. Rules for Being "Engaged in Work" Work-eligible individuals must participate in specific activities during a month for a state to count them as "engaged in work" and have the activities count toward the work participation standard. Work-eligible individuals must also participate in activities for a minimum number of hours per week in a month to be considered "engaged in work." In general, single parents with a pre-school aged child (under the age of six) must participate for at least 20 hours per week in a month; other single parents must participate at least 30 hours per week in a month. Two-parent families must participate for more hours to be counted as engaged in work. Most welfare-to-work activities are on the list of 12 activities that count toward the participation standards, including educational and rehabilitative activities. (For a listing of the twelve activities, and their definition, see Table A-1 .) However, there are limits on the ability of states to count participation in pre-employment activities such as education, rehabilitative activities, and job search toward the work standards: For work-eligible individuals age 20 and older, participation in a GED program counts only if the recipient also participates in activities more closely related to work for at least 20 hours per week. Since single mothers with pre-school children—the largest group of adult cash assistance recipients—are required to participate only 20 hours per week, states do not receive credit for engaging them in GED programs. Vocational educational training may be counted only for 12 months in a recipient's lifetime. The combination of job search and rehabilitative activities (e.g., rehabilitation from a disability, substance abuse treatment) is limited to a maximum of 12 weeks in a fiscal year. Rules that Apply to Individual Recipients The work participation standards described above apply to states, not individual recipients. Work requirements applicable to individuals, and the financial sanctions on families with individuals who fail to comply with them, are determined by the states. States may engage recipients in activities that do not count toward the federal participation standards, require fewer hours than the federal standard, and exempt categories of recipients from work or participation in activities altogether. If granted discretion under state rules, a caseworker might determine that a federally-countable activity is unsuited to a recipient given their circumstance. For example, a state might determine that, given economic conditions, extended job search beyond the maximum 12 weeks might better serve a work-ready individual than alternative, countable activities. A caseworker might also determine that an individual would be best served by obtaining a GED or be in a rehabilitative activity (e.g., substance abuse treatment) before entering the labor market. States that allow participation in activities that cannot be counted (e.g., job search or education in excess of their time limits) do not receive credit for that participation. Depending on the circumstances in the state, lack of credit for certain types of participation or exemptions from requirements might put the state at risk of failing the work standard. Thus, though the work participation standard's counting rules do not apply directly to individual recipients they may influence how a state designs its welfare-to-work program. Work Verification Though the 1996 welfare reform law created the TANF work participation standards, it was silent on whether and how states would be required to verify hours of participation that are counted to that standard. A 2005 Government Accountability Office (GAO) report found that some states lacked methods and systems for accurately reporting actual hours of participation. The Deficit Reduction Act of 2005 ( P.L. 109-171 ) required states to establish procedures to count and verify hours of reported work or engagement in activities. HHS regulations implementing this requirement required that participation in all activities be supervised, many on a daily basis. Additionally, states are required to file "work verification plans" with HHS outlining procedures to verify participation in activities. States that fail to comply with these work verification requirements are subject to a penalty of between 1% and 5% of the state's block grant. The Caseload Reduction and "Excess MOE" Credits As mentioned, few jurisdictions have faced the full TANF 50% or 90% work participation standards. This is because of a provision in TANF law known as the caseload reduction credit. The caseload reduction credit reduces a state's 50% and 90% standards by one percentage point for each percent reduction in its caseload since FY2005. Additionally, under HHS regulations promulgated in 1999, states also may receive credits for spending in excess of what they are required to spend under the MOE requirement. The amount of credit varies by state and year, depending on caseload reduction and how much a state spends from its own funds. Most states have received some credit, and some states have received substantial credits. From FY2002 through FY2009 in all years but one (FY2007), caseload reduction and/or excess MOE permitted a majority of jurisdictions to face an effective (after-credit) work participation standard of less than 25%. (FY2009 is the latest work participation data available as of June 4, 2013.) That is, the majority of states could meet the TANF work participation standard with a participation rate of less than 25% in all but FY2007. See Table A-2 for TANF effective work participation standards by state. Trends in Work Participation Rates Figure 1 shows the national average work participation rate based on the federal rules for FY2002 through FY2009. This participation rate is the percent of TANF families receiving assistance who have at least one member "engaged in work." The figure shows that the participation rate has fluctuated around 30% since FY2002, remaining well below 50% for the entire period. However, most states met their participation standards with rates below 50% because of caseload reduction and excess MOE credits. Engagement by Activity The most common work activity for TANF work-eligible individuals is unsubsidized employment: work in a regular job while remaining on the cash assistance rolls. This reflects work at a wage low enough to still qualify a family for assistance. Under TANF, most states changed their eligibility rules to permit more families with members who go to work to continue to receive assistance. Such families, if they meet the minimum hours requirement, count toward the TANF participation standards. Additionally, some states have eligibility rules that permit families with a member who goes to work to continue to receive assistance for a limited period of time. For TANF recipients who are not employed, the most common activities are job search and readiness and vocational educational training. As discussed, participation in these pre-employment activities are time-limited. Figure 2 shows the percentage of families included in the participation rate with a work-eligible individual who was engaged in work, by activity, for FY2009. As evidenced in the figure, unsubsidized employment—work in a regular job while receiving cash assistance—was by far the most common work activity in FY2009. In FY2009, 19.1% of families included in the participation rate had a member engaged in work and employed in an unsubsidized job. The time-limited pre-employment activities of job search and readiness and vocational educational training were the next most common activities . In FY2009, 5.0% of families included in the participation rate had a member engaged in work and participating in job search and readiness. That year, 4.5% of families had a member engaged in work and participating in vocational educational training. In terms of activities that are counted without limit (aside from unsubsidized employment), the most common activity was unpaid work experience. In FY2009, 2.6% of families included in the TANF participation rate had a member engaged in work and participating in work experience. Assessing Penalties for Failure to Meet Work Standards The TANF statute gives the Secretary of HHS flexibility in assessing the financial penalty (reduction in the block grant) for failure to meet work participation standards. The Secretary may reduce the penalty based on the degree of noncompliance, waive the penalty if a state demonstrates "good cause," and enter into corrective compliance plans with states and subsequently forgive them if they come into compliance with the work standards. To date, most penalties imposed on states for failure to meet the TANF work standards have been for failure to meet the higher two-parent standard. These penalties have generally been small, as they are pro-rated for the share of the caseload that represents two-parent families. However, after the changes in work standards made by the Deficit Reduction Act of 2005, a handful of states failed the all-family work standard for each year FY2007-FY2009. Most of the states that failed the standards entered into corrective compliance plans, with the outcomes of those plans yet to be determined. The Obama Administration's Waiver Initiative The Obama Administration announced an initiative on July 12, 2012, under which it would be willing to grant certain waivers of the federal TANF work participation standards. It says these waivers would be granted under Section 1115 of the Social Security Act. HHS said in its announcement that this initiative is a response to President Obama's February 28, 2011, Presidential memorandum that asked agencies to work with state, local, and tribal grantees of federal funds to identify barriers "that currently prevent states, localities, and tribes from efficiently using tax dollars to achieve the best results for their constituents." The waiver programs would allow states that undertake alternative welfare-to-work strategies to substitute other performance measures (e.g., outcome measures) for the TANF statutory work participation standards. Waiver programs would also have to be formally evaluated. Waivers could be granted for state-wide initiatives, or demonstrations and pilots conducted in a portion of the state. These initiatives could also be either for a state's entire caseload, or a specific population within its caseload (e.g., individuals with disabilities). HHS envisions the typical waiver as having a five-year duration. The HHS announcement also says states may receive waivers of the existing procedures to verify participation put into place through the Deficit Reduction Act of 2005. Goals of the Waiver HHS says a goal of its waiver initiative is to allow states to operate experimental, pilot, or demonstration projects to test "alternative and innovative strategies, policies, and procedures that are designed to improve employment outcomes for needy families." The department says it is "encouraging states to consider new, more effective ways to meet the goals of TANF, particularly helping parents successfully prepare for, find, and retain employment." In its announcement, HHS noted that waivers of TANF work participation standards could address the following goals: testing multiyear career pathways models that combine work and learning; strengthening strategies for individuals with disabilities; testing the effectiveness of subsidized employment programs; and testing the effectiveness of extending the period of time allowed for participation in pre-employment activities such as vocational educational training and job search and readiness. The department says that another goal of the waiver initiative is to develop a new body of research evidence that could improve state programs' abilities to achieve TANF's goals. Application and Approval Process In order for TANF work standards to be waived, states would have to apply for a waiver and have that waiver approved by HHS and OMB. HHS has specified some elements that will be required of waiver requests: they must include a set of performance measures; an evaluation plan; the proposed duration of the waiver; and a budget that includes the cost of evaluation. As of June 3, 2013, no state had requested a waiver. Ongoing Performance Monitoring and Evaluation HHS has said that states will be required to track ongoing performance and outcomes during the period of the demonstration projects. States applying for waivers must set interim performance targets. States that fail to meet interim targets would be required to develop improvement plans. HHS asserts that repeated failure to meet performance targets will lead to an end of the waiver demonstration. In a correspondence to Members of Congress, HHS Secretary Kathleen Sebelius stated that states would be required to increase the number of people moving from welfare-to-work by at least 20%. HHS says that its "preferred" approach to evaluating programs is a random assignment experiment. However, HHS notes it will consider alternative methods for evaluating the waiver demonstration program. What Would Not be Waived HHS has said that it will not waive requirements that would reduce access to assistance or employment. Moreover, a number of TANF provisions are outside the scope of the requirements to be waived (e.g., TANF time limits and child support enforcement requirements). Brief History of Welfare Waivers The legal authority to waive requirements in public assistance programs dates back to 1962, and the Public Welfare Amendments of 1962 (P.L. 87-543). That law established Section 1115 of the Social Security Act, and allowed the waiver of the requirements of federal-state public assistance programs, including the Aid to Families with Dependent Children (AFDC) program that preceded TANF in helping fund cash assistance for needy families with children. In establishing waiver authority for public assistance programs, the House Ways and Means Committee report said: The public assistance titles of the Social Security Act contain a number of requirements on states for approval of a State plan. These are necessary and desirable in the administration of a broad program to reach the numbers of people such programs must serve. These plan requirements, however, often stand in the way of experimental projects designed to test new ideas and ways of dealing with the problems of public assistance recipients. Though waivers under Section 1115 were allowed as early as 1962, they were not sought with much frequency until the late 1980s. Until that point, waivers were primarily related to program administration and service delivery. However, the late 1980s and the early 1990s were a period of large-scale experimentation in welfare-to-work strategies—much of which occurred at state initiative under "waivers" of pre-1996 federal requirements. Waivers of the Late 1980s and Early 2000s Waivers ranged in scope from small demonstrations that were carried out in a select number of counties to—increasingly over time—greater statewide changes in the state's AFDC program. Until the enactment of the 1996 welfare law, the Clinton Administration continued to approve waivers of AFDC law. Between January 1993 and August 1996, a total of 83 waiver applications from 43 states and the District of Columbia were approved. State waiver programs tested program features such as Enhancing the financial incentives for single mothers to work. This was done by disregarding a greater share of earnings when determining welfare eligibility and benefits than allowed under federal law. Additionally, some waivers permitted families to have more savings and retain eligibility for assistance than what was allowed under federal law. Expanding work requirements to more mothers receiving assistance than required by federal law, particularly to mothers with very young children. Increasing sanctions for failure to comply with work requirements beyond what was required and allowed by federal law. Establishing time limits on aid to families receiving assistance. Tightening child support enforcement requirements. Allowing longer transitional medical coverage under Medicaid and child care than was permitted at the time under federal law. In many cases, a state's AFDC waiver program became the basis for its TANF program following the enactment of federal welfare reform in 1996. The 1996 welfare reform law permitted states to "grandfather in" their waiver rules with respect to TANF work requirements (see " Grandfathering of Pre-1996 Welfare Waivers Under TANF ") and time limits. However, in addition to providing states flexibility to implement new program models, the waivers of AFDC requirements, together with a national evaluation known as the National Evaluation of Welfare to Work Strategies (NEWWS), produced a body of research and program evaluations that greatly enhanced policymakers' understanding of the effects of welfare-to-work programs. (NEWWS is discussed in " The National Evaluation of Welfare-to-Work Strategies (NEWWS) ".) In order to receive and implement a waiver, a state was required to conduct a structured evaluation of its proposed program, which featured an "impact analysis" that assessed the success of the program in meeting its goals. "Impacts" included employment and earnings as well as indicators of child well-being, like school attendance and health. Evaluations often combined both qualitative and quantitative methods, utilizing sources such as surveys, program data, and in-depth interviews. The waiver process sometimes also required approval by the state legislature of proposed program changes, usually before the proposal was submitted to HHS. The findings of the waiver programs, NEWWS, and related research produced evidence that mandatory welfare-to-work programs could increase employment and reduce welfare receipt. Mandatory programs are those programs backed by financial sanctions for failure to comply. The research also found that programs that combined financial incentives with mandatory work requirements also had the effect of increasing employment, though they did not always reduce welfare receipt. However, such programs often raised the income of recipient families, and some research showed that such programs could also improve the well-being of the children of such recipient families. These reflect the effects of many of the key changes to low-income assistance programs that culminated in the mid-1990s: requiring work and providing earnings supplements and work supports to "make work pay." The National Evaluation of Welfare-to-Work Strategies (NEWWS) The Family Support Act of 1988 ( P.L. 100-485 ) mandated a national evaluation of different welfare-to-work strategies. That national evaluation is known as the National Evaluation of Welfare-to-Work Strategies (NEWWS). NEWWS compared mandatory "work-first" programs that emphasized job search as a primary activity with "education-focused" programs that emphasized either adult basic education or post-secondary education. The evaluation's main findings were the following: Both the labor force attachment and the education-focused programs produced positive impacts. Both types of programs raised employment and reduced welfare receipt. When impacts are compared over a relatively long period (five years), the labor force attachment programs produced some larger impacts than the education-focused programs. This was particularly true for those without a high school diploma, as the labor force attachment programs increased employment rates more than the education-focused program in this subgroup over five years. The program with the largest impacts in the NEWWS evaluation was the one operated in Portland, OR. That program was referred to as a "mixed" program model. It emphasized employment as a goal, but also permitted caseworkers the discretion to assign participants to education if warranted. Further, Portland's program emphasized finding a "good job," not just any job, and permitted extended job search. Though some preliminary findings were available from NEWWS before the enactment of the 1996 welfare law, its final report was not issued until 2001. The research findings from the NEWWS evaluation have been used to support the "work-first" approach taken in the TANF participation standards and many TANF programs. Grandfathering of Pre-1996 Welfare Waivers Under TANF The 1996 welfare reform law allowed states to delay implementation of certain TANF provisions to the extent that they were inconsistent with requirements of the state's approved waiver demonstration project (if the state chose to continue its waiver). States that continued their work-related waivers were permitted to have their programs assessed based on the rules of their waivers, rather than those of the federal work participation standard. In general, states that operated under waivers still had to achieve the numerical participation standards required under the new law. However, they were able to count certain participation that otherwise would not meet the federal definition of "engaged in work." This included activities not countable toward the participation standard, such as extended job search and education. It also included families participating for fewer hours than required under that federal definition. Further, states were also permitted to exclude from the participation rate calculation families that were exempted from the welfare-to-work program under their waiver. TANF regulations required states to certify by October 1, 1999, whether or not they intended to continue their waiver policies until the scheduled expiration of the waiver. A total of 20 states continued their waiver policies with respect to work requirements. Figure 3 shows the number of states operating under these "grandfathered" waivers in FY2000 through FY2007. The number gradually declined from FY2000 through FY2007 as these waivers expired. Table A-5 describes the specific waiver inconsistencies claimed by each state under the grandfathered waiver. As described above, states with waivers had their welfare-to-work programs assessed using the rules of the waiver rather than the rules of the federal work participation standard. For FY2000 through FY2006, HHS calculated two sets of work participation rates: the official rate (using the waiver rules for those states with grandfathered waivers) and a rate based on the federal rules for the work standard (shown on Figure 1 ). In FY2001 and FY2002, waivers added 4.5 percentage points to the national average participation rate. In other words, a greater proportion of TANF families were counted as engaged in work under the waivers than under the statutory TANF work participation standards. This declined in subsequent years, as the number of states operating their programs under these waivers declined. In its 2002 TANF reauthorization proposal, the Administration of George W. Bush proposed to immediately end the "grandfathered waivers." According to the Administration's proposal: Flexibility under current law allows states to accomplish all the purposes of TANF without waivers. Furthermore, the requirements of TANF no longer represent an experiment. Abolishing the remaining waivers will put all states on an equal footing. The Administration's proposal was not adopted. The last grandfathered waiver (Tennessee's) expired in 2007. The "Superwaiver" Proposal Though the Bush Administration's 2002 TANF reauthorization proposal sought to end the "grandfathered waivers," it concurrently proposed new waiver authority that would have applied to TANF. The "superwaiver" proposal would have allowed states to seek "new waivers for integrating funding and program rules across a broad range of public assistance and workforce development programs" (for example, programs operated under the Workforce Investment Act, WIA). States that received waivers would have been required to develop integrated performance objectives and outcomes, which could have altered reporting and performance requirements in affected programs. An evaluation of the demonstration would have been required. The superwaiver proposal passed the House three times: in 2002, 2003, and 2005. The legislation would have had the effect of allowing TANF work participation standards to be waived. A scaled back version of the superwaiver was also included in bills reported by the Senate Finance Committee in 2003 and 2005. Goals and Considerations The Obama Administration's initiative to allow waivers of the TANF work participation standards raises a number of legal, procedural, and substantive issues. The legal and procedural issues will not be discussed in this report. In terms of substantive issues, questions can be raised about the likelihood of the waiver initiative in achieving its goals, what other policy goals might be compromised in pursuing the initiative, and whether there are alternatives to achieve similar goals. This section addresses these questions. First, it discusses some of the goals set forth by the Administration in its announcement of the waiver initiative, focusing on three goals: testing alternative strategies, measuring employment outcomes, and program integration. It then discusses what goals others (states, policymakers) might also wish to achieve in altering TANF's welfare-to-work rules. Testing Alternative Welfare-to-Work Strategies TANF was enacted during a period of experimentation of welfare-to-work strategies. The waivers of pre-1996 welfare law together with NEWWS provided tests of a wide range of strategies—as well as the testing of certain strategies in different states and different settings. TANF provides states with the flexibility to design their own welfare-to-work programs. However, with the enactment of TANF came the end of the era of large-scale experimentation in welfare-to-work strategies. While states have the flexibility to incorporate new and innovative strategies in their programs, they are under no requirements to formally assess the effectiveness of these strategies. The over-arching purpose of the Obama Administration's waiver initiative is to encourage states to consider "new, more effective ways" to help parents prepare for, find, and retain employment. As discussed, TANF's current work participation standards generally reflect a "work-first" philosophy, emphasizing rapid attachment to a job and limiting the time in pre-employment activities that can be counted toward the standards. The NEWWS research and the evaluations of pre-1996 waivers examined programs that were in place now 15-20 years ago. Since then there have been a number of innovations in policies in the realm of education and training. These policies have not been tested within the context of welfare-to-work programs. Examples of such policies include the following: Career Pathway models, which combine education and work in a series of "steps," to provide advancement in jobs often within a specific economic sector (e.g., the health sector). Programs that integrate basic adult education with college-level career and technical skills. NEWWS found some evidence of positive employment impacts for those who participate in adult basic education, obtain a GED, and then go on to post-secondary education. New program models have been developed that integrate adult basic and post-secondary education. An example of such a model is the I-Best program, operating in Washington state. "Drop-out recovery" programs, which seek to re-engage those who left high school without a diploma in regular high school courses though in a separate setting devoted to meeting their needs. Some of these programs engage young adults (ages 20 and older). Programs in community colleges that target low-income students (some of whom are parents) and provide financial incentives to students to complete semesters and persist in pursuing their educational goals. Other community college programs include "learning communities," where groups of disadvantaged students are grouped together in classes and support sessions. The TANF work participation standards do not preclude placing recipients of cash assistance in these types of programs. In some circumstances, participation in such programs might be countable toward the TANF participation standards. Given the flexibility of TANF, a question can be raised about whether a waiver is needed for states to use any of these strategies. However, states may be deterred from using such strategies for cash assistance recipients if participation in them might exceed the durational limit (i.e., vocational educational training's one-year limit) or runs into other restrictions (i.e., high school, adult basic education or ESL programs not being able to be counted). Education and training programs might not be the only activities that could be tested under a waiver. For example, states might consider testing different job search strategies. Since the enactment of TANF, the nature of job search has changed. The rise of social networks, social media, and Internet searches made print newspaper "help wanted" listing outmoded. In the labor market generally, there has been increased use of employment and temporary help agencies. Additionally, the Deficit Reduction Act of 2005 required states to supervise all TANF job searches, and states have now had several years of experience with their current methods of verifying and supervising job search. Enforcing job search requirements has historically been difficult. Under a waiver, states might opt for alternative methods of enforcing job search requirements. States might also consider experimenting with other activities such as subsidized employment, on-the-job training, work experience, and community service as part of a waiver. The waiver is only one potential option to encourage states to consider new welfare-to-work strategies. Congress could also re-open the debate on TANF work participation standards. The degree and type of flexibility of welfare-to-work programs was one of the key issues during the 2002-2005 TANF reauthorization debates. The statutory standards could be modified to allow states the flexibility to incorporate new strategies. However, it, like current TANF law, would lack the need to formally assess the effectiveness of any new strategy. Additionally, changing the current work standards would occur without a large body of up-to-date research to inform policymakers on the likely effects of the policy changes. Focusing on Employment Outcomes The Administration's announcement said it would consider projects that "demonstrate superior employment outcomes if a state is held accountable for negotiated employment outcomes in lieu of participation rate requirements." Thus, it would test whether changes in the performance measure itself can effect changes in states' behavior. As discussed, TANF imposes its work requirements indirectly, primarily through the numerical work participation performance standard imposed on states. It does this indirectly in part because of the program's place in the federal-state system. TANF is a broad-based block grant to the states, with federal goals but a great deal of flexibility in meeting those goals. The TANF work participation numerical standards—and the potential financial penalties for not meeting them—are to ensure that the states use their flexibility in ways consistent with the federal goals. "Technical" Considerations Performance measures, including the current TANF work participation standard, can have intended and unintended consequences. Performance measures in general have been criticized as creating incentives so that those assessed can behave such that they are "hitting the target but missing the point." For example, there has been concern that the TANF work standard's "excess MOE" component of the caseload reduction credit has led states to attempt to "find" expenditures in state budgets that can be counted as MOE and reduce the effective TANF work participation standard. Alternative outcome measures can also have unintended consequences. President Obama's waiver initiative essentially would permit states to negotiate an alternative to the work participation rate as the way to measure the performance of their welfare-to-work program. This includes measures of "outcomes," such as leaving the welfare rolls for work, the earnings of those who go to work, and the degree of job attachment for those who find jobs. Presumably, states would focus on achieving a better score on the outcome being measured: increasing the number of recipients who move from welfare to work. If performance is tracked using an outcome measure (e.g., rate of entry into employment of TANF recipients), states would no longer risk failing a standard solely by having recipients engaged in activities that do not count toward a participation rate. However, if that participation is ineffective in helping the state achieve a good score on the new outcome measure, the state would risk failing the new performance standards. A change in performance measures can also lead to unanticipated and unwanted behaviors. The most commonly cited unintended behavior resulting from assessing based on outcomes is called "cream skimming," improving performance outcomes through serving only those most likely to succeed and leaving behind the hardest-to-serve. Philosophical Considerations The choice of what measure is used to assess welfare-to-work efforts is not merely a technical exercise. The current TANF performance measure—the work participation rate—is a measure of engagement in work or activities in exchange for receipt of assistance. During the period leading up to the 1996 law, there was increasing concern that providing cash assistance to needy families, usually headed by a single mother, was creating welfare dependency—enabling behaviors that prevented functioning within the norms of society and thus perpetuated long-term receipt of assistance. Welfare work requirements were seen as a means to obligate recipients to do something in return for their assistance. This obligation requires recipients to engage in activities so that they would be required to function in ways similar to that of others either in the workforce or in education and training, with the goal that they would move off the welfare rolls and into work. A measure of engagement, like the work participation rate, reinforces the notion that recipients are obligated to work or be in job preparation activities if they are to receive assistance. An outcome measure does not necessarily convey the same message. Outcomes Versus Program Impacts Outcome measures are not direct measures of the effectiveness of a welfare-to-work program. Some families would leave the cash assistance rolls even without the intervention of a program. Additionally, external factors (e.g., the health of the economy) can affect measured outcomes. For example, job entry rates can be expected to rise during an economic recovery and fall during a recession. The effectiveness of a welfare-to-work program can also be measured by whether the program made a difference. This is a measure of the impact of the program: comparing outcomes that can be attributed to the program with those measured in the absence of the program. For example, not just measuring job entries, but the increase in job entries attributed to the program. Neither a measure of engagement such as the TANF work participation rate nor an outcome measure can alone fully assess the effectiveness of state welfare-to-work efforts. The work participation rate measures only one dimension of what welfare-to-work programs typically attempt to achieve. Different measures offer different perspectives, and often complement each other. Program Integration One of the ongoing criticisms of federally-assisted workforce programs has been that there are multiple, fragmented programs that overlap and raise questions about efficient and effective uses of resources as well as frustrate people seeking assistance and employers. The Administration's waiver announcement said that states may want to consider projects that improve coordination with other components of the workforce system, particularly the Workforce Investment Act (WIA). Some states use the WIA system to deliver workforce services to TANF cash assistance recipients, others do not. There has historically been congressional interest to promote further coordination between TANF and WIA. The "Super Waiver" provision considered by Congress during the 2002-2005 TANF reauthorization debate was offered in part to address this issue. Coordination between TANF and WIA has also been discussed in the context of WIA legislation. One potential obstacle to integrating TANF and WIA programs is the different assessments that would be required of TANF recipients (the participation rate) compared with the performance measures used in WIA. The WIA's performance measures for its disadvantaged adult programs include three employment outcome measures: the entered employment rate, employment retention rate, and average earnings. Allowing states to assess TANF welfare-to-work efforts on the same basis as how WIA services are assessed could ease one of the barriers to creating a more integrated workforce system. However, there are differences between TANF and WIA. TANF's work standards are in the context of requiring work of recipients of cash assistance. These requirements are mandatory for recipients. WIA, on the other hand, generally provides services on a voluntary basis. Thus, though there are arguments for program integration, the different nature of TANF's work requirements and WIA's workforce services also provide arguments for assessing them, at least in part, using different measures. States and the Waivers The Obama Administration said that its waiver initiative is in response to its initiative to have federal agencies work with state, local, and tribal grantees of federal funds to identify barriers to efficiently using tax dollars to achieve the best results for their constituents. Organizations representing states have traditionally requested that TANF work participation standards be modified to allow for greater flexibility in what counts as work. Thus, some states might have the same goals in mind as does the Obama Administration in terms of what they wish to achieve through the waiver initiative. A waiver could be particularly valuable for a state that is at-risk of failing the work participation standard. As shown on Table A-3 , TANF work participation rates have historically varied considerably, ranging in the 50 states and District of Columbia from 9.5% in Oregon to 67.5% in Mississippi in FY2009. The waiver would provide the opportunity for low-participation-rate states to reconsider their programs. Additionally, since the waiver would require that a state substitute an alternative performance measure for the work participation rate, it would give a low- participation-rate state the opportunity to demonstrate that its program performs well on measures other than the TANF work participation rate. A waiver would be less valuable for a state with a high participation rate with little risk of failing the work standard. The waiver does impose additional costs on states, in terms of tracking alternative performance measures and evaluation of the initiative. Even absent the work participation rate, TANF gives states the incentive to operate programs to minimize their assistance rolls. The fixed nature of the block grant provides that incentive. States that are successful in minimizing their assistance rolls – and one way of doing that is moving families as quickly as possible from welfare to work – have the ability to reduce their expenditures on cash assistance and reallocate those funds to other purposes. Broader Considerations In assessing whether TANF welfare-to-work policies should be changed—by allowing waivers of participation standards or otherwise—policymakers might look to the record of how the cash assistance rolls have responded, and how families with children have fared, since the changes in low-income assistance programs were made in the 1990s. However, TANF is only a part of that story. The 1996 welfare law was one of a series of changes made to low-income assistance programs in the mid-1990s. A number of changes were made to "make work pay," through expansions of the Earned Income Tax Credit (EITC) in 1986, 1990, and 1993. Child care funding, to offset one of the main costs of going to work for parents, was increased in 1988, 1990, and in the 1996 welfare law. Expansions of health care coverage through Medicaid and, in 1997, the creation of the State Children's Health Insurance Program (CHIP) lessened the possibility that children would lose health care coverage when a mother moved from the welfare rolls (that guaranteed Medicaid coverage) to work. The cash assistance rolls for needy families with children reached its historical peak in March 1994 at 5.1 million families. The welfare rolls began to decline thereafter, and declined especially rapidly following the enactment of the 1996 welfare reform law. By 2001, the cash assistance rolls had declined to 2.1 million families. The number of families receiving cash assistance who were headed by an unemployed recipient adult declined by 74%, from a monthly average of 3.8 million families in FY1994 to 992,000 in FY2001. Additionally, child poverty declined in the late 1990s. The overall child poverty rate declined from 21.8% in 1994 to 16.2% in 2000. The poverty rate for children living in female-headed families declined from 52.9% in 1994 to 40.1% in 2000. However, even in 2000, children remained the age group most likely to be poor (more likely than the aged or nonaged adults), and 2 in 5 children living in female-headed families were poor. Then in the 2000s, the rate of decline in the cash assistance rolls slowed, and the declines in child poverty were reversed. This occurred even before the 2007-2009 recession. The cash assistance rolls that stood at 2.2 million families in FY2001, declined to 1.7 million in FY2008, before rising to 1.9 million in FY2010 in response to the recession. The child poverty rate increased to 18.0%, a rise of 1.8 percentage points (and 1.6 million children) even before the onset of the recession. Poverty among children living in female-headed families rose to 43.0% in 2007. Poverty rates spiked higher during the recession, reaching 22.0% for all children in 2009 (peak level during the recession) and 47.7% for children in single-parent families in 2010. As discussed, policymakers might consider this broader context for considering whether welfare-to-work policies should be changed, and whether waivers of current TANF work participation standards are a means for making those changes. Conclusion The TANF work participation standards are one of the central features of the welfare reforms that culminated in the mid-1990s. Since the 1996 law, states have historically sought additional flexibility in terms of the activities that count toward the standards. Some in Congress have seen proposals to grant that flexibility as weakening the work requirements that result from the standards, or at least weakening the tie to work activities as opposed to educational activities. In that regard, the current debate over the Obama Administration's waiver initiative can be seen as a continuation of a long-running debate on the degree that participation standards should emphasize work as compared with education and training. The waiver initiative's emphasis on measuring outcomes raises both philosophical and technical questions. The emphasis on work in welfare programs grew in part out of an argument that if society had an obligation to help low-income persons, recipients also had obligations and a basic societal obligation to work or to prepare for work. A focus that is solely on outcomes—whether a welfare-to-work strategy succeeds in moving families off the rolls and into jobs—removes some of the focus on engaging recipients in activities to meet their obligations. However, the performance of TANF work programs has also been criticized on other grounds. The official TANF work participation rate has hovered around 30%—well below the statutory target of 50%, as "credits" have permitted states to meet the standards with lower levels of engagement. Participation in activities that represent supported work—subsidized employment and on-the-job training—has been relatively low for those on the assistance rolls. Participation in activities that closely resemble work – work experience and community service—has likewise been relatively low. Despite the fact that states can count vocational educational training for only one year in a lifetime of a recipient, it is the third most common activity behind working in a regular unsubsidized job while on the rolls and job search and readiness. It could be argued that the old dichotomy between "work-first" and education-focused strategies is outdated, given new types of programs such as career pathways that combine work-focused education and training with work. These programs are available to low-income persons generally, but have yet to be tested and evaluated in a welfare-to-work setting. The waiver initiative presents an opportunity to re-examine welfare-to-work. Congress has a number of options. It can choose not to act, allowing the waiver initiative to move forward. It can bar the waiver initiative and retain the current rules. It can re-open the debates over welfare-to-work and craft new TANF work performance standards. Congress can also craft its own program of welfare-to-work experimentation. That is, it can address any legal, procedural, and substantive objections to the Obama Administration's waiver initiative through legislation that would allow for new welfare-to-work experiments with congressionally prescribed goals and within congressionally prescribed boundaries. Appendix.

The Department of Health and Human Services (HHS) announced a new initiative in July 2012, under which it would be willing to waive certain federal work participation standards under the Temporary Assistance for Needy Families (TANF) block grant to permit states to experiment with "alternative and innovative strategies, policies, and procedures that are designed to improve employment outcomes for needy families." Some in Congress have opposed the Administration's waiver initiative. The House has twice (once in the 113th Congress; once in the 112th Congress) passed measures to bar HHS from moving forward with granting waivers of the TANF work participation standards. Opponents of the waiver initiative question its legality and the process used in forwarding the initiative, and they claim that granting waivers of the participation standards would weaken the work requirements. The major provision that HHS would waive is the numerical performance standards that states must meet or risk being penalized through a reduction in their TANF block grant. The TANF statute provides that 50% of all families and 90% of two-parent families included in a participation rate are required to be engaged in work, though few states have ever faced the full standard because this percentage is reduced for certain credits. To be considered engaged in work under the TANF standard, a family must either be working or in specified welfare-to-work activities for a minimum number of hours per week. Pre-employment activities such as job search, rehabilitative activities, and education count for a limited period of time or under limited circumstances. Though these counting rules apply to states, and not directly to individual recipients, they may influence the requirements that states place on recipients. The new waivers would permit states to have welfare-to-work initiatives assessed using different measures than the TANF work participation rate. Thus, states could test alternative welfare-to-work approaches by engaging recipients in activities currently not countable without risk of losing block grant funds. States would have to apply for waivers, which must be approved by HHS and the Office of Management and Budget (OMB). States would also be required to monitor performance measures and evaluate the alternative welfare-to-work program. HHS also indicated it might waive some requirements that apply to states for verifying work activities. As of June 3, 2013, no state had requested a waiver. The new initiative would allow the first new waivers to test welfare-to-work strategies in more than 15 years, although waivers were used extensively in the years immediately preceding the 1996 welfare reform legislation. The pre-welfare reform research found that "work-first," education-focused, and certain "mixed strategy" programs all moved recipients from welfare to work. However, the education-focused programs did not outperform the "work-first" programs even over a five-year timeframe. This lent support to TANF's focus on rapid job attachment and limits on counting education and training toward the participation standards. This research is now 15 to 20 years old, and certain newer workforce strategies (e.g., "career pathways") have yet to be tested in a welfare-to-work setting. The waiver initiative would also allow states to evaluate their welfare-to-work programs by focusing on outcomes, such as the rate at which recipients leave welfare for work, rather than participation. This might focus state behavior on increasing such outcomes. However, it could also alter state behavior in ways not anticipated or desired by policymakers.

CRS_R40170

Introduction The offices of the resident commissioner from Puerto Rico and the delegates to the House of Representatives from American Samoa, the District of Columbia, Guam, the U.S. Virgin Islands, and the Commonwealth of the Northern Mariana Islands are created by statute, not by the Constitution. Because they represent territories and associated jurisdictions, not states, they do not possess the same parliamentary rights afforded Members. This report examines the parliamentary rights of the delegates and the resident commissioner in legislative committee, in the House, and in the Committee of the Whole House on the State of the Union. In Legislative Committee Under clause 3 of Rule III, the delegates and the resident commissioner are elected to serve on standing committees in the same manner as Representatives and have the same parliamentary powers and privileges as Representatives there: the right to question witnesses, debate, offer amendments, vote, offer motions, raise points of order, include additional views in committee reports, accrue seniority, and chair committees and subcommittees. The same rule authorizes the Speaker of the House to appoint delegates and the resident commissioner to conference committees as well as to select and joint committees. In the House The delegates and the resident commissioner may not vote in or preside over the House. Although they take an oath to uphold the Constitution, they are not included on the Clerk's roll of Members-elect and may not vote for Speaker. They may not file or sign discharge petitions. They may, however, sponsor and cosponsor legislation, participate in debate—including managing time—and offer any motion that a Representative may make, except the motion to reconsider. A delegate or resident commissioner may raise points of order and questions of personal privilege, call a Member to order, appeal rulings of the chair, file reports for committees, object to the consideration of a bill, and move impeachment proceedings. In Committee of the Whole House on the State of the Union Under the rules of the 115 th Congress (2017-2018), the delegates and the resident commissioner may not vote in the Committee of the Whole House on the State of the Union. In a change from the rules of the prior Congress, however, they may preside over the Committee of the Whole. Under Rules III and XVIII, as adopted in both the 110 th and 111 th Congresses (2007-2010), when the House was sitting as the Committee of the Whole, the delegates and resident commissioner had the same ability to vote as Representatives, subject to immediate reconsideration in the House when their recorded votes had been "decisive" in the committee. These prior House rules also authorized the Speaker to appoint a delegate or the resident commissioner to preside as chairman of the Committee of the Whole. These rules of the 110 th and 111 th Congresses were identical in effect to those in force in the 103 rd Congress (1993-1994), which permitted the delegates and the resident commissioner to vote in, and to preside over, the Committee of the Whole. These provisions were stricken from the rules as adopted in the 104 th Congress (1995-1996) and remained out of effect until readopted in the 110 th Congress. They were again removed from House rules at the beginning of the 112 th Congress (2011-2012). At the time of the adoption of the 1993 rule, then-Minority Leader Robert H. Michel and 12 other Representatives filed suit against the Clerk of the House and the territorial delegates seeking a declaration that the rule was unconstitutional. The constitutionality of the rule was ultimately upheld on appeal based on its inclusion of the mechanism for automatic reconsideration of votes in the House. The votes of the delegates and the resident commissioner were decisive, and thus subject to automatic revote by the House, on three occasions in the 103 rd Congress. There were no instances identified in the 110 th Congress in which the votes of the delegates and the resident commissioner were decisive. In the 111 th Congress, the votes of the delegates were decisive, and subject to an automatic revote, on one occasion. The prior rule governing voting in the Committee of the Whole by delegates and the resident commissioner was not interpreted to mean that any recorded vote with a difference of six votes or fewer was subject to automatic reconsideration. In determining whether the votes of the delegates and the resident commissi oner were decisive, the chair followed a "but for" test—namely, would the result of a vote have been different if the delegates and the commissioner had not voted? If the votes of the delegates and resident commissioner on a question were determined to be decisive by this standard, the committee automatically rose and the Speaker put the question to a vote. The vote was first put by voice, and any Representative could, with a sufficient second, obtain a record vote. Once the final result of the vote was announced, the Committee of the Whole automatically resumed its sitting.

As officers who represent territories and properties possessed or administered by the United States but not admitted to statehood, the five House delegates and the resident commissioner from Puerto Rico do not enjoy all the same parliamentary rights as Members of the House. They may vote and otherwise act similarly to Members in legislative committee. They may not vote on the House floor but may participate in debate and make most motions there. Under the rules of the 115th Congress (2017-2018), the delegates and resident commissioner may not vote in, but are permitted to preside over, the Committee of the Whole. This report will be updated as circumstances warrant.

CRS_RS22545

Introduction The No Child Left Behind Act of 2001 (NCLB), signed into law on January 8, 2002 ( P.L. 107-110 ), required that all paraprofessionals assigned instructional duties and employed in Title I, Part A-funded schools meet minimum qualifications by January 8, 2006. The NCLB states that paraprofessionals (also known as instructional aides) must have completed two years of college, obtained an associate's degree, or demonstrated content knowledge and an ability to assist in classroom instruction. On June 17, 2005, the Education Department (ED) announced that the paraprofessional deadline would be extended to the end of the 2005-2006 school year to coincide with the related NCLB deadline for highly qualified teachers (HQT). The use of instructional aides in U.S. classrooms has been increasing every year since data on paraprofessionals were first collected by ED's National Center for Education Statistics. Instructional aides accounted for 2.5% of total full-time equivalent instructional staff in 1970, 11.9% in 1980, 16.5% in 2000, and 17.2% in 2009. ED's interim report on NCLB teacher quality implementation revealed that paraprofessionals accounted for about one-third of instructional staff in Title I-A funded schools and districts. Instructional aides are also increasingly handling classroom responsibilities without supervision. ED's final report on NCLB teacher quality implementation indicated that 19% of paraprofessionals spent "at least half of their time working with students in the classroom without a teacher present." Recognition that the quality of instruction in U.S. schools is increasingly affected by the quality of paraprofessional staff has bolstered support for federal instructional aide standards. Prior to the NCLB, the Elementary and Secondary Education Act of 1965 (ESEA) required only that paraprofessionals possess a high school diploma. This requirement was established in previous ESEA amendments passed under the Improving America's Schools Act of 1994 ( P.L. 103-382 ). Legislative proposals establishing higher standards for paraprofessionals were supported by ED under both the Clinton and Bush Administrations, and were eventually enacted under the NCLB. Requirements for Paraprofessionals Under NCLB As of the enactment of the NCLB on January 8, 2002, all newly hired Title I paraprofessionals whose duties include instructional support must possess the minimum qualifications prior to employment. That is, they must have completed two years of study at an institution of higher education, obtained an associate's (or higher) degree, or passed a formal state or local academic assessment, demonstrating knowledge of and the ability to assist in instructing reading, writing, and mathematics. Paraprofessionals hired on or before January 8, 2002, who were performing instructional duties in a program supported with Title I funds, were required to meet these requirements by the end of the 2005-2006 school year. The NCLB paraprofessional qualification requirements apply only to Title I paraprofessionals with instructional duties; that is, those who provide one-on-one tutoring if the tutoring is scheduled at a time when a student would not otherwise receive instruction from a teacher; assist with classroom management, such as organizing instructional and other materials; provide assistance in a computer laboratory; conduct parental involvement activities; provide support in a library or media center; act as a translator; or provide instructional services to students under the direct supervision of a teacher. Individuals who work in food services, cafeteria or playground supervision, personal care services, non-instructional computer assistance, and similar positions are not considered paraprofessionals, and do not have to meet these requirements. Also, ESEA Section 1119(e) indicates that paraprofessionals who only serve as translators or who only conduct parental involvement activities must have a secondary school diploma or its equivalent, but do not have to meet additional requirements. Under NCLB, local education agencies (LEAs) must make progress toward meeting their state's annual objectives for teacher quality and student achievement. If a state determines that an LEA has failed to make progress toward meeting those annual objectives for three consecutive years, the LEA is prohibited from using Title I-A funds on any paraprofessional hired after the date of the determination. Guidance from the U.S. Department of Education Who Must Meet the NCLB Rules? The most recent non-regulatory guidance on paraprofessionals, issued by ED on March 1, 2004, clarifies a number of questions that have been raised during implementation of the NCLB. The guidance describes various school settings under which paraprofessionals may or may not be required to meet the NCLB rules. The requirements apply to all paraprofessionals employed in a Schoolwide Title I program without regard to whether the position is funded with federal, state, or local funds. In Targeted Assistance Title I programs, only those paraprofessionals paid with Title I funds must meet the requirements (not those paid with state or local funds); however, special education paraprofessionals in targeted assistance programs must meet the requirements even if only part of their pay comes from Title I funds. A paraprofessional who provides services to private school students and is employed by an LEA with Title I funds must meet the NCLB requirements; however, these requirements do not apply to those in the Americorps program, volunteers, or those working in either 21 st Century Community Learning Centers or Head Start programs. Qualified Status LEAs have discretion when it comes to considering who is an "existing" paraprofessional and whether qualified status is "portable." If an LEA laid off a paraprofessional who was initially hired on or before January 8, 2002, the LEA may consider that person an "existing" employee when the individual is subsequently recalled to duty. Also, an LEA may determine that a paraprofessional meets the qualification requirements if the individual was previously determined to meet these requirements by another LEA. Education Credits The ED guidance clarifies that "two years of study" means the equivalent of two years of full-time study as determined by an "institution of higher education" (IHE)—the definition of an IHE is specified in Section 101(a) of the Higher Education Act of 1965. Continuing education credits may count toward the two-year requirement if they are part of an overall training and development program plan and an IHE accepts or translates them to course credits. Assessment of Paraprofessionals Section C of the guidance discusses issues related to the assessment of paraprofessionals. The guidance indicates that a state or LEA may develop a paraprofessional knowledge and ability assessment using either a paper and pencil form, a performance evaluation, or some combination of the two. These assessments should gauge content knowledge (e.g., in reading, writing, and math) as well as competence in instruction (which may be assessed through observations). The content knowledge should reflect state academic standards and the skills expected of a child at a given school level. The results of the assessment should establish a candidate's content knowledge and competence in instruction, and target the areas where additional training may be needed. Most states are employing more than one type of written assessment along with performance evaluation. Two of the most common tests are ParaPro (developed by the Educational Testing Service). Thirty-four states and the District of Columbia allow LEAs to use ParaPro for paraprofessional assessment. In addition, 21 states allow LEAs to develop their own assessments. ECS considers 12 states to have established paraprofessional qualifications that exceed federal standards, and identifies 10 states that require paraprofessionals to obtain professional certification. The ECS also identifies 11 states that have professional development programs for paraprofessionals. Supervision of Paraprofessionals Section D of the guidance discusses programmatic requirements that pertain to the supervision of paraprofessionals. The guidance points out that ESEA Section 1119(g)(3)(A) stipulates that paraprofessionals who provide instructional support must work under the "direct supervision" of a highly qualified teacher. Further, the guidance states the following: A paraprofessional works under the direct supervision of a teacher if (1) the teacher prepares the lessons and plans the instruction support activities the paraprofessional carries out, and evaluates the achievement of the students with whom the paraprofessional is working, and (2) the paraprofessional works in close and frequent proximity with the teacher. [§200.59(c)(2) of the Title I regulations] As a result, a program staffed entirely by paraprofessionals is not permitted. In addition, the guidance states that the rules regarding direct supervision also apply to paraprofessionals who provide services under contract. That is, paraprofessionals hired by a third-party contractor to work in a Title I program must work under the direct supervision of a teacher (even though teachers employed by the contractor need not meet NCLB highly qualified teacher requirements). Professional Development Funding The ED guidance discusses funding sources for the professional development and assessment of paraprofessionals. An LEA must use not less than 5% of its Title I, Part A allocation for the professional development of teachers and paraprofessionals. LEAs may also use their general Title I funds for this purpose. Funds for professional development of paraprofessionals may also be drawn from Title II, Part A (for core subject-matter personnel); from Title III, Part A (for those serving English language learners); from Title V, Part A (for "Innovative" programs); and from Title VII, Part A, subpart 7 (for those serving Indian children). Schools and LEAs identified as needing improvement must reserve additional funds for professional development. Section B-2 of the guidance describes conditions under which LEAs are prohibited from using Title I funds to hire new paraprofessionals. Such a prohibition may be imposed by a state on an LEA that has failed to make progress toward meeting the annual measurable objectives established by the state for increasing the percentage of highly qualified teachers , and has failed to make adequate yearly progress for three cumulative years. Two exceptions to this rule are (1) if the hiring is to fill a vacancy created by the departure of another paraprofessional, and (2) if the hiring is necessitated by a significant increase in student enrollment or an increased need for translators or parental involvement personnel. Forty-two states and the District of Columbia reported data to ED on the qualifications of their paraprofessionals for the 2003-2004 school year. Among them, 10 states reported that fewer than half of their paraprofessionals met the NCLB requirements; four states reported that at least 9 of every 10 of their paraprofessionals met these standards. However, ED officials indicated that most paraprofessionals acquired the minimum qualifications by the June 30, 2006, deadline. Reauthorization NCLB authorized most ESEA programs through FY2007. The General Education Provisions Act (GEPA) provided an automatic one-year extension of these programs through FY2008. While most ESEA programs no longer have an explicit authorization, the programs continue to receive annual appropriations and paraprofessional quality requirements continue to be in place. LEAs in states that have received an ESEA flexibility waiver are not restricted in the use of Title I-A funds for failing to meet NCLB teacher quality and student achievement accountability requirements; however, all LEAs still must comply with the law's paraprofessional quality requirements. The 114 th Congress has acted on legislation to reauthorize the ESEA. Possible reauthorization issues concerning the paraprofessional provisions in Title I include the following: Are the assessments used to evaluate paraprofessional quality rigorous enough, and are they adequately tied to academic standards for students? Some consider the ParaPro and WorkKeys tests to be the "easy route," and claim they do not measure a instructional aide's ability to improve classroom instruction. Might a reauthorized ESEA be more explicit about the nature of these tests by linking them to other accountability provisions? Should ED be given greater authority to enforce higher standards for paraprofessional assessments? Should the paraprofessional qualification requirements be applied to a broader group of instructional aide s? For example, should these requirements be applied to all paraprofessionals with instructional responsibilities, not just to those paid with Title I-A funds? Should the exceptions currently made for computer lab assistants, translators, and those assisting with parental involvement be curtailed? Is the language regarding "direct supervision" too vague or too difficult to enforce? Do current provisions for the professional development of instructional aide s adequately encourage states to improve the paraprofessional workforce? Should states be given incentives to adopt paraprofessional certification requirements, as have been adopted in some states? Are there other ways to encourage paraprofessional development beyond the minimum qualifications that would positively affect the overall level of instructional quality? Have the paraprofessional qualification requirements significantly affected the extent to which Title I-A funds are used to hire these staff? In particular, have a significant number of paraprofessionals lost their jobs, or been assigned to non-Title I-A positions, after the end of the 2005-2006 school year because they were unable to meet the paraprofessional qualification requirements? Has this resulted in an overall decline or improvement in the quality of instruction? Should the roles of states versus LEAs in setting policies and implementing these requirements be clarified? Particularly in comparison to the teacher quality requirements of the NCLB, there has been relatively little guidance from ED, or clarity in the statute, on state-versus-LEA roles in the area of paraprofessional qualification requirements. Has the result been a constructive form of flexibility or dysfunctional ambiguity?

The No Child Left Behind Act of 2001 (NCLB) established minimum qualifications for paraprofessionals (also known as instructional aides) employed in Title I, Part A-funded schools. NCLB required that paraprofessionals must complete two years of college, obtain an associate's degree, or demonstrate content knowledge and an ability to assist in classroom instruction. Prior to the NCLB, the Elementary and Secondary Education Act of 1965 (ESEA) required only that paraprofessionals possess a high school diploma. These requirements, as enacted through NCLB, apply to all paraprofessionals employed in a Title I-A Schoolwide (§1114) program without regard to whether the position is funded with federal, state, or local funds. In Title I-A programs known as Targeted Assistance (§1115), only those paraprofessionals paid with Title I-A funds must meet the requirements (not those paid with state or local funds). A report by the Education Department (ED) reveals that paraprofessionals accounted for about one-third of instructional staff in Title I-A funded schools and districts. NCLB authorized most ESEA programs through FY2007. The General Education Provisions Act (GEPA) provided an automatic one-year extension of these programs through FY2008. While most ESEA programs no longer have an explicit authorization, the programs continue to receive annual appropriations and paraprofessional quality requirements continue to be in place. LEAs in states that have received an ESEA flexibility waiver are not restricted in the use of Title I-A funds for failing to meet NCLB teacher quality and student achievement accountability requirements; however, all LEAs still must comply with the law's paraprofessional quality requirements. This report describes the paraprofessional quality provisions and guidance provided by ED regarding implementation. The report concludes with discussion of issues that may arise as Congress considers reauthorization of the ESEA.

CRS_RL33904

Overview The LIHTC was created by the Tax Reform Act of 1986 (TRA; P.L. 99-514 ) to provide an incentive for the acquisition and development or rehabilitation of affordable rental housing. In the two decades since its enactment, the LIHTC has become the leading source of financing for affordable rental housing. As the 110 th Congress begins, and legislative conversations turn toward affordable housing, the LIHTC may receive attention. Proponents of the LIHTC view the credit as highly efficient and effective. As evidence of effectiveness, advocates state that the LIHTC is responsible for producing 50% of all multifamily housing starts annually, and virtually all affordable rental housing in the United States since the credit was introduced. Proponents also suggest that the very high price of tax credits in equity markets is a sign of the credit's popularity. Opponents claim that the LIHTC has crowded out other forms of rental housing finance, and that result, not the credit's value, is the leading source of financing for rental housing. Additionally, the credit is perceived as more costly and less efficient than demand-side subsidies like the Section 8 Housing Voucher Program. Opponents also claim that the price of tax credit dollars is high, not because of its efficiency, but because the credit offers a deep subsidy to investors as well as other tax benefits. As policymakers begin to address affordable housing issues, modifications to the LIHTC will likely be considered. This report discusses some fundamental public-policy questions that have not received much attention. Is the lack of affordable housing a result of a housing-market failure? Does the LIHTC address the affordable housing problem? And is the LIHTC efficient, or can it be improved? Despite the significance of the tax credit in housing finance markets, these questions are not definitively answered in economics literature. This report, where possible, attempts to answer these questions. Where it is not possible to answer the policy questions, this report draws attention to the information, actions, or both, necessary to obtain the answers. The principal conclusions of this report are as follows: The perceived lack of affordable housing, while of concern to policymakers, the press, and to some degree, the general public, is not necessarily caused by a housing-market failure. There is insufficient empirical evidence to determine what is causing the affordable housing "crisis." The evidence is unclear that the LIHTC actually helps to solve the affordable housing problem, and there is some evidence that it may actually crowd out (replace) other affordable housing development rather than increase the number of housing units. The LIHTC has a complicated system of delivery that may increase costs relative to the benefits it provides. Moreover, it may be less efficient than other affordable housing programs. After discussing how affordable housing is defined, this report examines whether a housing-market failure exists, whether the LIHTC program is efficient, and whether the LIHTC is cost effective relative to other programs; and concludes with a discussion of several policy options. What is Affordable Housing? There is a growing consensus among policymakers and the general public that the nation faces a shortage of affordable housing, particularly rental housing. The 2002 bipartisan, congressionally mandated Millennial Housing Commission's final report confirmed and defined the shortage as a "crisis." The Harvard Joint Center for Housing Studies' 2006 State of the Nation's Housing Report identified housing affordability as one of the key challenges facing the nation. But is the "affordability crisis" the result of a housing market failure, warranting government intervention in housing markets? To answer that question, we start by defining the concept of affordable housing. The term "affordable housing" is widely used and generally refers to housing of standard, decent quality, and that a family can afford without compromising their ability to meet other needs. While higher-income families generally have a range of housing that, under this definition, is available to them, families with lower incomes have fewer options. Housing affordability for middle- and lower-income groups is generally measured in terms of cost burden. Generally, cost burden measures the actual percentage of household income spent on housing by renters. Households are considered cost-burdened if more than 30% of annual income is spent on housing. When families are considered housing-cost burdened, they may have difficulty affording necessities such as food, clothing, transportation, and medical care. In 2004, 7.6 million renter households were considered cost burdened, with an additional 8.4 million renter households considered severely cost burdened—paying more than 50% of their income toward housing. While some moderate-income renters experience severe rent burdens, low-income renters face the greatest burdens; more than 86% of severely cost-burdened renters were in the bottom quintile of the income distribution. Economists report that the problem of severe rent burdens may be growing while the supply of low-cost rental units may be declining, creating an affordable housing shortage. It is estimated that the inventory of affordable units—with inflation-adjusted rents of $400 or less, including utilities—declined by 1.2 million from 1993 to 2003. With losses of units due to repair, abandonment, or demolition, the shortage of affordable rentals available to low-income households is estimated at 5.4 million. Is There a Housing Market Failure? According to standard economic theory, an economy best satisfies the wants and needs of its participants if markets operate free from distortions such as taxes. Government intervention in housing markets, as in any market, may be justified on economic grounds if market failures exist. Market failures can occur when a market, left on its own, fails to allocate resources efficiently. If a market failure exists and a subsidy remedies that failure, then there is economic justification for the subsidy based on efficiency. If a market failure does not exist, then there is no economic justification for the subsidy based on efficiency. There may, however, be justifications for government intervention based on other public-policy goals, such as ensuring a minimum level of housing consumption for all households or equalizing opportunities for housing consumption. Certain socially undesirable phenomena may be valid targets of public policy, such as pay inequality, poverty, lack of affordable housing, and inflation, but there is no consensus as to whether these problems meet the definition of economic inefficiency. Some economists argue that the lack of affordable housing is not a market failure to be corrected, but rather a result of increased demand being met with a slow supply response, which causes prices to rise. If the lack of affordable housing is a supply-response problem, state and local land-use regulations may be contributing factors. Land-use restrictions and zoning laws are examples of government regulatory areas that can hinder the timeliness of supply responses to changes in demand. Another key factor potentially contributing to a lack of affordable housing, but one not categorized as a market failure, is the unwillingness of lenders to make loans to investors because of class or race bias, a form of discrimination often referred to as redlining. Where discrimination in lending occurs, capital subsidies for affordable housing might improve the allocation of capital. If a market failure exists, the presence of externalities may be the culprit. An externality, itself a type of market failure, exists when the activity of an individual directly affects, positively or negatively, the welfare of another, and that result, or consequence, is not incorporated in market prices. Economic theory suggests that there are externalities in housing-services markets because there are both private costs and benefits for individuals as well as social costs and benefits for the public at large. High prices for housing in certain areas can increase housing prices in adjacent areas. Also, to the extent that housing structures, perhaps older ones, induce blight, there is an imposition of external costs on society. These externalities of housing sometime serve as grounds for government intervention in such areas as neighborhood redevelopment and housing production. Yet, the few studies that have examined the LIHTC's contribution to neighborhood quality have found only small effects, both negative and positive. In some cases, the new construction of LIHTC projects positively influenced the price of single-family homes in the immediate surrounding area. In other cases, the LIHTC projects negatively influenced the price of single-family homes. The lack of affordable housing raises a host of important economic issues. For example, to the extent that households spend disproportionate amounts of income on housing, other basic necessities might be neglected. One recent report found that households devoting more than 50% of their income to housing paid an average of $175 for food and $35 for healthcare per month in 2003. In comparison, households spending less than 30% of their income on housing paid an average of $248 for food and $109 for healthcare monthly. If health care spending, for instance, is insufficient for households, it could lead to poor health and well-being. This outcome could create both private costs for the household and social costs for the community (negative externalities), either through increased public subsidies for health care or increased disease and poor health for others. Yet, it can be argued that the negative externality experienced by households in the example above is not confined solely to the housing market. In that case, the externality might be more appropriately viewed as a matter for the health care marketplace. Correcting market failures may not be the only reason for government intervention. Other reasons could include the desire to increase equality of outcomes (to provide a minimum level of housing consumption by all members of society) or to create equity of opportunity (ensuring viable participation in housing markets by providing some minimum endowment of assets). If housing subsidies, like the LIHTC, contribute toward these outcomes, then the subsidies may be justified. Most economists, however, would argue that a demand-side subsidy, like housing vouchers, would be more appropriate than the LIHTC (a supply-side subsidy) in satisfying this type of policy objective. Other economists argue that the supply of rental housing is insufficient to meet demand and thus supply-side subsidies are necessary policy tools to complement demand-side subsidies. Once the question justifying the LIHTC is addressed, the next policy question that arises is does the LIHTC address the affordable housing problem? The next section of this report addresses this question. Does the LIHTC Address the Affordable Housing Problem? The fact that the LIHTC is a source of financing for a large number of rental housing units is undisputed. Industry experts often cite these data as evidence of the credit's success. Left unaddressed is the issue of whether (or to what extent) the units financed with the LIHTC would have been built without the LIHTC? And, for tax credit units built, to what extent, if any, do they crowd out existing units? The following section attempts to address this issue, but to date, the relevant data to make these determinations are not readily available. A number of studies assert the positive impact of the LIHTC is large. In 2000, for example, McClure cited several studies of the credit's impact, and stated that the LIHTC has been a success in that it generated many rental housing units that are now occupied by low- and moderate-income households. Although estimates vary, the program has contributed to the rehabilitation or construction of somewhere between 500,000 and 900,000 units. More recent estimates from the U.S. Department of Housing and Urban Development (HUD) indicate that 1.3 million units were placed in service between 1997 and 2003. These estimates, however, do not indicate whether or not the LIHTC units constitute net additions to the housing stock. The LIHTC data do not reflect all additions to the housing stock and the portion of those additions that the LIHTC represents. Thus, assessing the LIHTC's impact on the housing stock involves two related issues for investigation: marginality (housing production choices made at the margin) and "crowding out" (whether subsidized affordable housing replaces other affordable housing). Are the Projects at the Margin Being Selected? One issue that arises in assessing the impact of the LIHTC on the stock of housing is whether the projects receiving the tax-credit awards are at the margin of being developed. In other words, are tax credits awarded to projects that would not proceed if not for the tax credit financing? Alternatively, are tax credits awarded to projects that could proceed, and be successfully developed, without the aid of tax credit financing? To the extent that tax credits are awarded to projects not at the margin (i.e., inframarginal projects that could proceed without tax credit financing), it could be argued that the LIHTC does not add to the housing stock. Thus, the effectiveness of the LIHTC relies heavily on the ability of state housing authorities to select and fund marginal projects. Project financing, along with sponsorship and costs, are criteria used by states in the selection process that could be used in identifying marginal projects. Other factors include the geographic location of the project, local housing needs, resident characteristics, project activities and types, building characteristics, and affordability. These other factors may lead state housing authority officials to select non-marginal projects. If the goal were to focus resources on financing marginal projects, an alternative selection method could be to select the marginal projects first and then, from within that pool, select the projects that meet housing-agency priorities. This alternative would, however, add complexity, time, and cost to the selection process. Some observers have suggested that state housing authority officials may be more likely to select inframarginal projects, rather than those at the margin, because the former are generally perceived as more likely to succeed. Under such circumstances, rather than selecting "do or die" projects, housing officials may wish to be perceived as successful in supporting housing production; and they may not wish to take risks in selecting projects that may or may not succeed. The marginality problem is illustrated in Figure 1 , which shows the market for low-income housing capital. The demand for housing capital slopes downward from left to right, and the supply curve is perfectly horizontal. In Case 1, if the tax credits were widely available to all investors, the tax credit would simply cause a downward shift in the supply curve (as denoted by S). Given the downward-sloping nature of the demand curve, housing stock would increase from H 0 to H t (the stock from H 0 to H t would be the LIHTC units) and the LIHTC could be said to have increased the stock of housing. But the tax credit is not widely available. Instead, the tax credit is awarded to a few projects by state housing authorities. In Case 2, only a few projects receive tax credits and thus, only a portion of the supply curve for the market shifts downward. In this example, the first few projects (the inframarginal ones) receive tax credits (those up to H t ), and yet the total stock of housing is unchanged at H 0 (the units from H t to H 0 are unsubsidized). Thus, the tax credit has financed projects that would have been built even without the subsidy. (The applicability of the credit to these "inframarginal" projects can also be viewed as one variety of the "crowding out" process described in the next section.) Where projects receiving the credit are not on the margin of production, those investors claiming the credit do not have to offer reduced rents (as in the first case at S 1 ) and can, instead, lease the project at the prevailing market rental rates. As long as the LIHTC gross rent restriction is near the market rate, investors have no incentive to discount rents and pass the benefits of the LIHTC onto tenants. If tax credits are awarded to projects that are marginal, as in Case 3, when the associated portion of the supply curve shifts, there is an addition to the housing stock (from H 0 to H t ). While the stock of housing up to H 0 is unsubsidized, the additional stock of housing beyond H 0 is subsidized. In this case, the federal tax revenue loss from the LIHTC is associated with a net gain in the housing stock, and the subsidy may be passed on to tenants as reduced rent. Do LIHTC Units Crowd Out Other Housing? A number of economic studies have examined the question of whether government-subsidized housing actually increases the supply of housing, or simply crowds out unsubsidized production, leaving no net gain in units in the economy. What some studies term crowding out can be viewed as an aspect of the marginality problem described previously. The evidence suggests that some crowding out occurs, but the extent and degree is unclear. A Congressional Budget Office (CBO) study of the LIHTC concluded that the credit was "unlikely to increase substantially the supply of affordable housing." Subsidized housing, CBO asserted, displaces other affordable housing that would have been available through the private, unsubsidized housing market. CBO surmised that the increased demand for LIHTC units would cause a decreased demand for non-LIHTC (or unsubsidized) units, resulting in a decrease in the prices of those units. The subsequent price decline would cause suppliers to remove unsubsidized units from the housing stock. If crowding out occurs in this manner, the residents of affordable housing units crowded out by LIHTC units would lose out if those residents were not able to become LIHTC unit tenants. In such a case, developers of LIHTC units would benefit at the expense of owners of other low-cost housing. Malpezzi and Vandell found a high rate of substitution between current housing stock and LIHTC units, consistent with the CBO findings. Malpezzi and Vandell asserted that if the supply of housing were perfectly elastic (responsive to price changes), then the demand for LIHTC units would cause price declines in the rest of the market as demand for such housing declined. This decline would cause a reduction in the supply of housing until the market price of housing prior to the change was restored. The total stock of housing would ultimately remain the same, but the new LIHTC units would have crowded out "an equivalent quantity of unsubsidized housing." Alternatively, Malpezzi and Vandell asserted that if housing supply prices were inelastic (unresponsive) to the presence of the LIHTC, then LIHTC units would still cause price declines in the rest of the market as demand for housing in the rest of the market were to fall. The authors theorized that price declines would make renters in the rest of the market better off while also providing new affordable housing to residents of the LIHTC units. However, price declines could also cause housing suppliers to remove units from the housing stock. Sinai and Waldfogel concluded that if subsidized housing raised the quantity of occupied housing per capita, either more people would be finding housing or people would be housed less densely. Alternatively, if subsidized housing merely crowded out equivalent-quality, low-income housing that otherwise would have been provided by the private sector, housing policy may have little real effect on housing consumption. Sinai and Waldfogel found that government-financed units raised the total number of units in an area, although on average three government-subsidized units displaced two units that would otherwise have been provided by the private market. The authors found there was less crowding out in more populous markets, and more crowding out in places where there was less excess demand for public housing. Burman and McFarlane determined that, if the supply of low-income housing is very elastic in the long run, then production of limited amounts of subsidized housing replaces other housing that would have been provided by the private sector. The authors concluded that housing subsidized by the government could increase the average quality of housing available to poor people, but would not have a lasting effect on the quantity or price of housing available to poor people. The impact of crowding out on tenants and developers depends on a variety of factors. If LIHTC units crowd out other affordable housing units, developers of LIHTC units benefit at the expense of other developers. Additionally, market forces may allow developers to charge the highest allowable rents under the LIHTC program, which could approximate market rates. As illustrated in Figure 2 , with the LIHTC contributing to a reduction in costs, the developer could afford to charge rents at P 1 , but demand is high enough such that the developer can continue to charge at P 0 and not risk vacancies. Thus, developers may retain more of the subsidy from the LIHTC, rather than pass it onto tenants. If tax credits are awarded to marginal projects and these projects do not crowd out other affordable housing, then LIHTC succeeds in solving the affordable housing problem. The evidence is unclear as to whether marginal projects are being selected. The evidence is also unclear as to whether there are net gains in the affordable housing stock as a result of the LIHTC program; in other words, is the level of new housing stock created by LIHTC units large enough to offset crowding out effects. Aside from the impact of the LIHTC on the stock of housing, the determination of whether the LIHTC addresses the affordable housing problem also requires an assessment of the "affordability" of the tax credit units. Do LIHTC Units Assist Those Most in Need of Affordable Housing? To be eligible for the LIHTC, developers MUST meet certain tests that restrict both the amount of rent assessed to tenants and the income of eligible tenants. The two tests are termed "income test" and the "gross rents test." The "income test" for a qualified low-income housing project requires that the project owner irrevocably elect one of two income levels and comply with that income level by the end of the first year the project is placed in service. There is either a 20-50 test or a 40-60 test. In order to satisfy the first test, at least 20% of the units must be occupied by individuals with income 50% or less of the area's median gross income, adjusted for family size. To satisfy the second test, at least 40% of the units must be occupied by individuals with income 60% or less of the area's median gross income, adjusted for family size. Area median gross income is published by the U.S. Department of Housing and Urban Development. A qualified low-income housing project must meet the "gross rents test" by ensuring rents do not exceed 30% of area median gross income of the elected 50% or 60%, depending on which income test the project elected. Gross rents are the total rent for the unit, including any utility allowances for electricity and/or heat. A criticism of the LIHTC program has been that the program, by its design, does not serve very-low-income households—those most in need of affordable housing. LIHTC developments usually charge rents that are at or close to the maximum permitted by the program. Though rents are restricted, they are not tied to the individual household income of the tenant. Rather, units are leased only to eligible households with enough income to afford the rent. A recent study published by the National Low Income Housing Coalition reports that the shortage of affordable housing units is greatest for extremely low-income (ELI) households. The report estimates that the number of units needed by ELI households is 2.8 million, up from 1.6 million in 2000. With a total deficit for both ELI and very-low-income households (VLI) of over 10 million affordable and available units, the study also reported a surplus of more than 6 million rental units for higher-income households. Given the program rules governing rents for LIHTC units, the affordable housing deficit for ELI and VLI households is unlikely to be remedied by the tax credit program. Is the LIHTC Efficient? Even if the LIHTC does add to the affordable housing stock, there are questions as to whether it is the most efficient system. The LIHTC involves a complicated subsidy mechanism that adds to the cost of the program relative to its benefits. This section examines three areas in which the program can be examined for inefficiencies: (1) the complicated system of distributing tax credits, (2) the value of the credits themselves, and (3) the cost effectiveness of the LIHTC relative to other housing programs. Distribution of Credits The process of allocating, awarding, and then claiming the LIHTC is complex and lengthy. The LIHTC is allocated annually to states according to federal law. State housing agencies are required to allocate credits to developers of rental housing according to federally required, but state-created, allocation plans. Many states have two allocation periods per year. Developers apply for the credits by proposing plans to state agencies. On average, one project out of five may receive an allocation of tax credits. Upon receipt of a LIHTC allocation, developers typically must exchange the tax credits for equity. Taxpayers claiming the tax credits are usually real estate investors, not developers. The tax credits cannot be claimed until the real estate development is complete and operable. For example, a project may be allocated credits in June of 2005 but not completed until June of 2006. The tax credits may not begin to be claimed until the tax return filing period of April 2007. Thus, more than a year or two could pass between the time of tax credit allocation and the time the credit is claimed. Housing Finance Agencies LIHTCs are allocated to each state according to its population and are typically administered by the state's Housing Finance Agency (HFA). In 2007, HFAs receive annual tax credit allocation authority in the amount of $1.95 multiplied times the population of the state. The minimum tax credit ceiling for states with small populations is $2,275,000 in 2007. Tax credits that are not awarded by states are added to a national pool and then distributed to those states that apply for the excess credits. To be eligible for those credits, a state must have allocated all of its previously allotted tax credits. HFAs award tax credits to developers according to a Qualified Allocation Plan (QAP) that outlines the states' affordable housing priorities and how to apply for tax credits. Federal law requires that the QAP give priority to projects that serve the lowest-income households and that remain affordable for the longest period of time. The types of projects eligible for the LIHTC are apartment buildings, single-family dwellings, duplexes, or townhouses. Projects may include more than one building. Tax credit project types also vary by the type of tenants served. Housing can be for families and/or special needs populations including the elderly. Developers and Investors Developers of housing projects compete for tax credits by submitting proposals to the HFA. Types of developers include nonprofit organizations, for-profit organizations, joint ventures, partnerships, limited partnerships, trusts, corporations, and limited liability corporations. For-profit developers can either retain tax credits to reduce their own tax bills or sell them; nonprofit developers sell tax credits. Trading tax credits, or selling them, refers to the process of exchanging tax credits for equity investment in real estate projects. Developers recruit investors to provide equity to fund development projects and offer the tax credits to those investors in exchange for their commitment. When credits are sold, the sale is usually structured with a limited partnership between the developer and the investor, and sometimes administered by syndicators who must adhere to the complex provisions of the tax code. As the general partner, the developer has a very small ownership percentage, but maintains the authority to build and run the project on a day-to-day basis. The investor, as a limited partner, has a large ownership percentage, with an otherwise passive role. Typically, the investor does not expect the project to produce income. Instead, investors look to the credits, which will be used to offset their income tax liabilities, as their return on investment. The investor can also receive tax benefits related to any tax losses generated through the project's operating costs, interest on its debt, and deductions such as depreciation and amortization. For the investors providing equity to real estate projects in exchange for the credits, there is a primary investment in real estate and a secondary set of tax benefits (the tax credits and any depreciation and/or interest expense). Investors can be either individuals or corporations. Currently, most LIHTC investors are corporations. In the initial years after the enactment of the LIHTC, public partnerships were the primary source of equity investment in tax credit projects. In recent years, the vast majority of investment has come from corporations, either investing directly or through private partnerships. Different types of investors have different motivations for investing in tax credits. According to one study, investors have reported that the rate of return on investment is their primary purpose for investing in tax credits. Tax sheltering is the second-most highly ranked purpose for investing. An estimated 43% of investors are financial institutions subject to the Community Reinvestment Act (CRA), and investment in LIHTC projects is favorably considered under the investment test component of the CRA. Other investors include real estate, insurance, utility, and manufacturing firms. Figure 3 , below, outlines the flow of the tax credits. The Value of the Credit The rate of the credit and its actual value to investors varies, contributing to the credit's complicated nature. The variability in value received by investors depends upon factors specific to the investor and, as such, the lack of consistency both adds complexity and reduces equity. The Rate of the Credit For any particular qualifying project, the credit is claimed in annual installments over a 10-year period. The rate of the credit is approximately 9% for new construction, or 4% for either rehabilitation projects or federally subsidized buildings. The credit rate is multiplied by the amount of the eligible basis (project cost) to determine the annual amount of tax credit the taxpayer can claim. The annual amount of the tax credit is then multiplied by 10 to determine the total value of the tax credits to the taxpayer. An example of this calculation is provided below in Table 1 . One of the complexities of the tax credit is that the actual tax credit rates employed are not exactly 9% and 4%, and vary on a monthly basis. The tax credit rate is determined so that the total expected present value of the subsidy over the 10-year period is equal to 70% of the project's eligible basis (or cost) in the case of the 9% credit, and 30% in the case of the 4% credit. The tax credit rates are calculated and released monthly by the U.S. Treasury Department. The rates' values are derived by the Treasury from the mid- and long-term applicable federal rates used by the Treasury for a variety of tax-related purposes. Over the years, the actual 9% rate has ranged from 7.90% to 8.65%, and the current rate is 8.11%. The 4% credit has ranged from 3.33% to 3.68%, and the current rate is 3.48%. When an LIHTC property is placed in service (ready for occupancy), the rate published for that particular month is the rate used to calculate the credit amount for the project. This aspect of the design of the credit can create a disparity between what developers expect to receive when they win the credit award, and what they may actually receive when the project is placed in service. For instance, if a project won a credit award in June 2005, the credit rate at that time was 8.00%. By the time the project is placed in service, say June 2006, the rate rose to 8.21%. In this example, the rate change is advantageous to the developer, and the final credit amount allocated to the project is higher than the amount projected at the time of the award. However, it is quite possible that the reverse outcome can occur, and when it does, the amount of tax credits the project receives is less than was budgeted at the time of award, creating a disadvantage to the developer. Tax Credit Boost Enhanced LIHTCs are available for both difficult development areas (DDAs) and qualified census tracts (QCTs) as an incentive to developers to invest in more distressed areas—areas where the need is greatest for affordable housing, but areas that are among the most difficult to develop. DDAs are locations designated by the Secretary of HUD as places that have high construction, land, and utility costs relative to the areas' median gross income. QCTs are areas designated by the Secretary of HUD as having high poverty relative to the overall population. In particular, QCTs have 50% or more of households in the tract with incomes of 60% of the area median income or less, or a poverty rate of at least 25%. In these distressed areas, the LIHTC can be claimed for 130% (instead of the normal 100%) of the project's total cost, excluding land costs. This also means that available credits can be increased by up to 30%. For instance, if the sample project in Table 1 were located in a DDA, the tax credits per year would grow from $40,356 to $52,455. At the Treasury's discounted rate, the present value of the 10-year stream of payments at $52,455 yields a 91% effective present value; at the investor's discount rate, the payment stream yields an 84% effective value. Some policymakers have suggested fixing the annual LIHTC rate amounts at 4% and 9% to simplify administration of the program and investment document preparation, as well as to eliminate the uncertainty and financial risk the current floating rate system creates for developers and investors. Effective Value of the LIHTC The effective value of the credit differs from the statutory value of the credit, further showcasing the complexity of the credit. As described earlier, for a qualified project, the LIHTC provides an investor with a stream of tax credits over a 10-year period whose present value is equal to 70% of the project's cost, assuming a particular discount rate prescribed by law. Based on the author's calculations, the discount rate associated with a credit rate of 8.07% (as used in the example from Table 1 ) is around 3.30%. At this rate the 10-year stream of credits has a present value of 70% of the project's cost. But an investor may have a discount rate that differs from the applicable federal rates used by the U.S. Treasury, and that discount rate may be higher than the U.S. Treasury rate. This difference is attributable, among other things, to the greater riskiness of private-sector investments. Thus, the investor's actual present value of the credit stream will usually differ from 70% of the eligible project cost. To illustrate, given prevailing bond yields, equity returns, and inflation rates, 4.21% is a reasonable approximation of a typical investor's discount rate. Given this rate, a 10-year stream of payments would be valued differently by the firm than as calculated using the Department of the Treasury's method. The numerical example provided in Table 1 is continued in Table 2 and indicates that the effective value of the LIHTC to investors can be different when the discount rate of the investor differs from the discount rate used in calculating the monthly value of the LIHTC. The effective credit value will vary from investor to investor and from period to period, depending on the investor's real discount rate and how widely it diverges from the applicable federal rates used by the Treasury Department to calculate the statutory credit rate each month. Generally, the higher the investor's discount rate compared to the federal rate, the lower the effective value of the credit. This variance in value adds to the complexity of the credit. Further compounding the complexity of the credit is the equity price that is paid for tax credits. When developers trade tax credits for equity to finance their projects, the tax credit is sold at a discounted rate to investors. Typically tax credits trade for around $0.95 per one tax credit dollar. So, in the example shown in Table 1 , equity investors would be willing to provide $383,382 ($403,560 x $0.95) in cash to the developer to become owners of the project. Is the Value to Investors too High? The economic analysis of the LIHTC in this section focuses on one question. What is the size of the tax benefit—and thus the tax incentive—the credit delivers to eligible investors? A discussion follows; the conclusion is that the LIHTC delivers a tax benefit that is quite large on a per-project basis. Specifically, the LIHTC reduces the cost of capital of investors by nearly 80%. The Cost of Capital Economic theory provides an analytical tool—the user cost of capital—that is a standard method of using economic analysis to measure the impact of particular tax benefits on the attractiveness of new investment. In general, the user cost of capital is the rate of return a new investment must earn that is high enough to attract funds from savers, given the possible alternative uses of those funds. The user cost of capital is the standard yardstick against which every potential corporate investment is measured in order to ascertain its worthiness. The investment is considered worthy when the rate of return it will generate exceeds the user cost of the investment. Since savers could purchase stocks or bonds from other sectors of the economy, the investment under analysis must earn at least as much as the alternatives. The LIHTC has the effect of reducing the cost of capital for the eligible investment. As a result, the tax benefit enables eligible projects to attract more investment funds from alternative uses than would otherwise be possible: the lower the cost of capital, the more investment is undertaken in the tax-favored sector. The user cost of capital can be used to calculate the value of the LIHTC to investors and to gauge its ability to attract more capital. Specifically, the LIHTC acts to significantly reduce the cost of capital. The mathematical details of the procedure are in Appendix C . Given a set of reasonable assumptions, the user cost of capital is estimated at 7.50%, before the LIHTC is applied. When the 9% LIHTC is added, the user cost of capital declines to 1.57%, a reduction of 79.10%. When the investor's discount rate rises, the effective value of the tax credit falls, and the user cost of capital rises. The decline in user cost of capital due to the LIHTC is smaller relative to lower investor discount rates. Similar results, though not as dramatic in terms of declines in user cost of capital, occur with the 4% LIHTC. To gauge the degree of benefit to investors from the LIHTC, a comparison can be made to other tax credit programs, such as the investment tax credit (ITC) for rehabilitation of structures and the historic rehabilitation tax credit (HRTC). The ITC is equal to 10% of the amount of qualified rehabilitation expenses, and is available for certain structures. The HRTC is equal to 20% of the amount of qualified rehabilitation expenditures, and is only available in connection with certified historic structures. Generally, the full amount of these rehabilitation tax credits is claimed in the year in which the qualified rehabilitation expenditures are placed in service. While the user cost of capital is reduced 79.1% with the LIHTC, the reduction caused by the ITC is 11.7% and the reduction caused by the HRTC is 24%. The policy questions that remain unanswered are: Is the size of the subsidy justified? If so, how is it justified? If not, what size, if any, is justifiable? Is it possible that the value offered to LIHTC investors includes excessive profits? And, if so, should the program be modified? Further, if the program were to be modified, how should that occur? Is the LIHTC Cost Effective Relative to Other Programs? The cost effectiveness of the LIHTC program is typically examined in the context of housing-production programs as compared to housing-consumption programs. Subsidies that support the production of rental housing, like the LIHTC, are project-based assistance programs, while subsidies that subsidize tenants' ability to pay rent (consume housing) are tenant-based assistance programs. Project-based programs are also referred to as supply programs, while tenant-based assistance programs are referred to as demand programs. Tenant-based assistance is most commonly available in the form of housing vouchers, particularly, the Housing Choice Voucher (HCV) program, also referred to as the Section 8 voucher program. The economics literature provides mixed views about the relative merits of project-based and tenant-based housing assistance. Tenant-based assistance is promoted on the grounds that it allows residents freedom of choice for both housing and the neighborhood. Yet, some landlords do not accept vouchers and, where vacancy rates are low, voucher holders may face competition for units. The value of vouchers rises and falls with market rents. Studies on the relative costs of housing programs have generally found that vouchers are less expensive and more cost-effective than production programs. DiPasquale, Fricke, and Garcia-Diaz estimated that, in both metropolitan and nonmetropolitan areas, the average total per-unit cost of each housing-production program exceeded the cost of providing a voucher for a unit of similar size. Their estimates range from 8% to as much as 44% difference in cost for units, depending on the number of bedrooms and the location. For instance, LIHTC costs were 19% more than costs of voucher units. Those costs were for metropolitan areas. When the authors examined nonmetropolitan areas, the differentials rose. Compared to vouchers, LIHTC production costs were 44% higher. Other studies have confirmed that the cost of production programs outweighs the cost of voucher programs. One economist examined studies of housing assistance programs and found larger excess costs to be associated with housing production programs relative to voucher programs. In particular, the author stated that, In the absence of distortions that lead to too little housing construction, subsidies that result in the construction of additional housing will inevitably produce dwellings whose construction costs exceed their market values. As the LIHTC program was examined, the author found that since the tax credit subsidizes initial development of projects but not operating inputs, profit-maximizing firms will invest more in capital resources than other inputs, such as operating expenses and reserves for future maintenance. Because the LIHTC program provides subsidies to selected private suppliers (approximately 30% of applicants), the author argues, the excess demand from private suppliers infers higher returns are available with tax credit projects than without. That developers tend to reserve 100% of housing units in a project for low-income households, rather than only meeting the minimum requirement (typically 40%) also suggests, according to the author, that larger profits can be made. The Government Accountability Office (GAO) also estimated the costs of housing assistance programs. GAO found that first year total costs of LIHTC units were about 32% greater than housing vouchers, and the total federal cost for LIHTC units was 50% greater than vouchers. Over the life of the housing units studied, the total cost of tax credit units was 16% greater than the cost of vouchers and the federal cost of tax credit units was 19% greater than for vouchers. Aside from comparisons of the costs of tax credit units to other programs, the total costs of the LIHTC program have been criticized because LIHTC projects are dependent on additional subsidies in order to be viable. Many LIHTC projects rely on debt financing from private and government lenders, state-issued tax credits, and other federal housing assistance programs. Additionally, tenants of LIHTC are often housing voucher recipients, further subsidizing the LIHTC project. Estimates of the average subsidy per LIHTC unit have been as high as 96% of total development costs. Advocates of the LIHTC program, however, argue that the program is cost effective and that deep subsidies for projects are required because of the demands of the affordable housing market, not the LIHTC program. Concluding Observations This report has raised issues for policymakers to consider. First, it is unclear whether the lack of affordable housing is caused by a market failure. Second, it is difficult to assess the question given the problems with the existing definition of affordable housing as well as the lack of available information about the stock of low-cost housing. Third, the question of whether the LIHTC adds to the housing stock is an unresolved empirical question. Determine Affordable Housing Market Supply and Demand One of the difficulties in public policy analysis concerning the issue of affordable housing is that measures of housing affordability are not uniform and data about the number of affordable housing units across the country are not readily available. It would be very useful for policymakers to know the level of affordable housing stock on an annual basis. Additions to the affordable housing stock occur, primarily, in one of two ways—new construction or filtering. Subtractions from the affordable housing stock occur through abandonment and subsequent demolition or upgrades to market-rate housing. Questions include: How many new units have been placed in service? How many units have been withdrawn from service? What is the net gain in the affordable housing stock from these additions and subtractions? How do these data vary by state and over time? What kind of financing was used to build the housing? If the financing of the housing required the units to be affordable, when will the affordability requirement expire? Some housing analysts use the excess demand for housing as evidence of the affordability problem. Most often, the number of households on rental housing waiting lists is cited as evidence of the affordable housing problem. It may be helpful to policymakers to have an inventory of demand for affordable housing. Knowledge of the number of households waiting for housing and the tenure of their wait would help in clarifying the nature of the affordable housing market. Examine LIHTC Applicant Pool One approach to resolving the question of whether the LIHTC adds to the housing stock would be to systematically examine the LIHTC applicant pool. The effectiveness of the LIHTC relies on the ability of state housing authorities to select marginal projects (those projects that, if not for the LIHTC, would not be developed). Therefore, it would be useful to know whether states are indeed selecting marginal products. Currently, state housing authorities publish data on applicants and award winners of tax credits. Examining the applicants who fail to win credit awards may provide important insights. Do these failed applicants subsequently build housing without the tax credit? Is that housing affordable housing or not? Or, do applicants wait until the next round of award making to re-apply? How many times do they re-apply? After some number of re-applications, do developers simply withdraw? If some type of housing inventory along the lines discussed in the previous section were to be created, determining additions to the housing stock from the LIHTC could be more easily discernable. As LIHTC units are placed in service each year, data on the number of other units placed in service, and withdrawn from service, would provide useful information on net gains or losses to the affordable housing stock. Possible Policy Options This report concludes with comments about selected policy options available to the Congress. Congress may not alter the LIHTC program. As a tax expenditure, the program does not require an appropriation or reauthorization. If the program remains unaltered, it would continue, essentially as an entitlement program. The only change under this option is that the allocation amounts to states may increase, since they are adjusted for inflation annually. Alternatively, Congress might modify the LIHTC program. In the 109 th Congress there were several proposals for administrative change which included renaming the credit, changing the income restrictions for tenants, and increasing the amount of the credit available to states. More recently, some attention has focused on the issue of examining the rules of the LIHTC program to determine where its compatibility with other housing-finance programs can be increased. Other policy suggestions have included eliminating floating tax credit rates and fixing them at the 9% and 4% amounts to eliminate investment uncertainty and to reduce administrative costs. Policymakers have also discussed whether the LIHTC program could be modified to target affordable housing production for households with very-low income. Another option is to repeal the LIHTC program. The Congressional Budget Office (CBO) examined this option early in 2005, suggesting that the program could be phased out by repealing tax credits for new projects and allowing existing credits to expire. The CBO report estimated that the revenue gain from this option could be as much as $4 billion between 2006 and 2010. Proponents of this option argue that, since housing vouchers provide housing assistance to individuals at a lower cost than the LIHTC, then the revenue gain from repealing the LIHTC could be applied to the housing voucher program. Opponents of this option argue that the existing supply of affordable housing is insufficient to satisfy the demands of those with housing vouchers and thus the LIHTC is necessary. Appendix A. Calculation of The Value of the LIHTC As described in the body of the report, the annual LIHTC rate is set by the Treasury Department (as required by statute) so that the discounted present value of the 10-year stream of credits is 70% of the project's cost. The discount rate used in the Treasury's calculation is the after-tax average of mid- and long-term applicable federal interest rates; the assumed tax rate is 28%. In other words PV credits = 70% Q where Q is the cost of the project. Using discrete discounting, this equation translates to where k is the LIHTC rate and r is the Treasury's discount rate. The Treasury Department solves for k to determine the statutory rate for the 9% credit for the month: The Treasury Department also solves for k to determine the statutory rate for the 4% credit for the month: Appendix B. Calculation of the Discount Rate of the Investor The investor's discount rate, d, is the rate of return the investor must earn, after inflation and paying its taxes, in order to attract funds from savers. It is where i = the nominal interest rate u = the marginal tax rate of the investor p = the rate of inflation r = the risk premium for equity This equation assumes investors have a ratio of one-third debt financing and two-thirds equity financing, where debt financing is represented by and equity financing is represented by The example in Table 1 stated a discount rate for the investor of 4.21%. This assumes a nominal interest rate of 5.6%, a marginal tax rate of 35%, a 3.4% rate of inflation, and a risk premium for equity of 4%. Appendix C. Calculation of the User Cost of Capital The user cost of capital, c, is the minimum rate of return a corporation requires on an investment, before taxes, to break even and can be represented in the following manner: where r = the investor's real discount rate d = the rate of economic depreciation u = the statutory corporate tax rate z = the present value of depreciation The user cost of capital, c, before the incorporation of the LIHTC, is 7.50% given the investor's real discount rate of 4.21%, a 1.50% rate of economic depreciation, a statutory corporate tax rate of 35%, and a 41.87% present value of depreciation. When tax credits are added to the equation, user cost becomes The user cost of capital is reduced by tax credits, with the largest reduction caused by the LIHTC at 79.1% as compared to an 11.7% reduction caused by ITC and 24% reduction caused by the HRTC.

The Low-Income Housing Tax Credit (LIHTC) is an economic incentive to produce affordable rental housing. These federal housing tax credits are awarded to developers of qualified projects, who either use or sell the credits to investors to raise capital (or equity) for real estate projects. The tax benefit reduces the debt and/or equity financing that the developer would otherwise have to obtain. With lower financing costs, beneficiaries of tax credits can offer lower, more affordable rents. See CRS Report RS22389, An Introduction to the Design of the Low-Income Housing Tax Credit, by [author name scrubbed] for a detailed description of how the LIHTC program works and an overview of legislative developments. Proponents of the credit view the LIHTC as highly effective because of the more than one million rental units already financed by the credit. Proponents also emphasize that the credit is responsible for the production of up to 50% of all multifamily housing starts in any given year. Opponents argue that the LIHTC is not effective or, at a minimum, far less effective than supporters claim because LIHTC units have supplanted other affordable rental housing and because the supply-side credit program is more costly than demand-side subsidies like the Section 8 Housing Voucher Program. Opponents also argue that the LIHTC program does not serve very-low-income households, who are often most in need of affordable housing. As policy makers begin to address affordable housing issues, modifications to the LIHTC could be considered. This report, which will be updated in the event of significant legislative events, discusses some fundamental public policy questions—questions neither extensively explored nor resolved. Is the lack of affordable housing a result of a housing-market failure? Does the LIHTC address the affordable housing problem? And, is the LIHTC efficient, or could it be improved? These questions are not definitively answered in economics literature. Determining the size of the affordable housing market may be of value. A national inventory system could be created to record information about the net gains (or losses) of affordable rental units. Also, to the extent the effectiveness of the LIHTC relies on the ability of state housing authorities to select marginal projects (those projects that, if not for the LIHTC, would not be developed), it could be useful to know whether states are selecting these projects. Do applicants who fail to win credit awards subsequently go on to build housing without the tax credit? Congress may not alter the LIHTC program. As a tax expenditure, the program does not require an appropriation or reauthorization. Alternatively, Congress might modify the LIHTC program. Some attention has focused on examining the rules of the LIHTC program to determine where its compatibility with other housing finance programs can be increased. Policymakers have also discussed whether the LIHTC program could be modified to target affordable housing production for households with very low income. Another option is to repeal the LIHTC program.

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Introduction Congress is considering policies to reduce U.S. emissions of greenhouse gases. Prominent among these policies are those promoting the capture and direct sequestration of carbon dioxide (CO 2 ) from manmade sources such as electric power plants and manufacturing facilities. Carbon capture and sequestration is of great interest because potentially large amounts of CO 2 produced by the industrial burning of fossil fuels could be sequestered. Although they are still under development, carbon capture technologies may be able to remove up to 95% of CO 2 emitted from an electric power plant or other industrial source. Carbon capture and sequestration (CCS) is a three-part process involving a CO 2 source facility, a long-term CO 2 sequestration site, and an intermediate mode of CO 2 transportation—typically pipelines. Some studies have been optimistic about pipeline requirements for CO 2 sequestration. They conclude that the pipeline technology is mature, and that most major CO 2 sources in the United States are, or will be, located near likely sequestration sites, so that large investments in CO 2 pipeline infrastructure will probably not be needed. Other studies express greater uncertainty about the required size and configuration of CCS pipeline networks. A handful of regionally-focused studies have concluded that CO 2 pipeline requirements for CO 2 sources could be substantial, and thus present a greater challenge for CCS than is commonly presumed, at least in parts of the United States. Divergent views on CO 2 pipeline requirements introduce significant uncertainty into overall CCS cost estimates and may complicate the federal role, if any, in CO 2 pipeline regulation. They are also a concern because uncertainty about CO 2 pipeline requirements may impede near-term capital investment in electricity generation, with important implications for power plant owners seeking to reduce their CO 2 emissions. In the 110 th Congress, there has been considerable debate on the capture and sequestration aspects of carbon sequestration, while there has been relatively less focus on transportation. Nonetheless, there is an increasing perception in Congress that a national CCS program could require the construction of a substantial network of interstate CO 2 pipelines. The Carbon Dioxide Pipeline Study Act of 2007 (S. 2144), introduced by Senator Norm Coleman and nine cosponsors on October 4, 2007, would require the Secretary of Energy to study the feasibility of constructing and operating such a network of CO 2 pipelines. The America's Climate Security Act of 2007 (S. 2191), introduced by Senator Joseph Lieberman and nine cosponsors on October 18, 2007, and reported out of the Senate Environment and Public Works Committee in amended form on December 5, 2007, contains similar provisions (Sec. 8003). The Carbon Capture and Storage Technology Act of 2007 (S. 2323), introduced by Senator John Kerry and one cosponsor on November 7, 2007, would require carbon sequestration projects authorized by the act to evaluate the most cost-efficient ways to integrate CO 2 sequestration, capture, and transportation (Sec. 3(b)(5)). The Energy Independence and Security Act of 2007 ( P.L. 110-140 ), signed by President Bush, as amended, on December 19, 2007, requires the Secretary of the Interior to recommend legislation to clarify the appropriate framework for issuing CO 2 pipeline rights-of-way on public land (Sec. 714(7)). This report examines key uncertainties in CO 2 pipeline requirements for CCS by contrasting hypothetical pipeline scenarios in one region of the United States. The report summarizes the key factors influencing CO 2 pipeline configuration for major power plants in the region, and illustrates how the viability of different sequestration sites may lead to enormous differences in pipeline costs. Power plants, particularly coal-fired plants, are the most likely initial candidates for CCS because they are predominantly large, single-point sources, and they contribute approximately one-third of U.S. CO 2 emissions from fossil fuels. The report discusses the implications of uncertain CO 2 pipeline requirements for CCS as they relate to evolving federal policies for carbon control. Scenarios for CO2 Pipeline Development Under a national CCS policy, a key question is how to establish a CO 2 pipeline network at the lowest social and economic cost given the current locations of existing CO 2 source facilities and the locations of future sequestration sites. On its face, this may appear to be a straightforward analytic problem of the type regularly addressed in other network industries. The oil and gas industry, among others, employs myriad analytic techniques to identify and optimize potential routes for new fuel pipelines. In the context of CCS, however, predicting pipeline routes is more challenging because there is considerable uncertainty about the suitability of geological formations to sequester captured CO 2 and the proximity of suitable formations to specific sources of CO 2 . One recent analysis, for example, concluded that 77% of the total annual CO 2 captured from the major North American sources could be stored in reservoirs directly underlying these sources, and that an additional 18% could be stored within 100 miles of the original sources. Other analysts suggest that captured CO 2 may need to be sequestered, at least initially, in more centralized reservoirs to reduce potential risks associated with CO 2 leaks. They suggest that, given current uncertainty about the suitability of various on-site geological formations for long-term CO 2 sequestration, certain specific types of formations (e.g., saline aquifers) may be preferred as CO 2 repositories because they have adequate capacity and are most likely to retain sequestered CO 2 indefinitely. The Department of Energy estimates that the United States has enough capacity to store CO 2 for tens to hundreds of years. However, the large-scale CO 2 experiments needed to acquire detailed data about potential sequestration reservoirs have only just begun. Given current uncertainty about potential sequestration sites, policy discussions about CCS envision various possible scenarios for the development of a CO 2 pipeline network. If CO 2 can be sequestered near where it is produced then CO 2 pipelines might evolve in a decentralized way, with individual facilities developing direct pipeline connections to nearby sequestration sites largely independent of other companies' pipelines. The resulting network might then consist of many relatively short and unconnected pipelines with a small number of longer pipelines for facilities with no sequestration sites nearby. Alternatively, if only very large, centralized sequestration sites are permitted, the result might be a network of interconnected long distance pipelines, perhaps including high-capacity trunk lines serving a multitude of feeder pipelines from individual facilities. A third scenario envisions CO 2 sequestration, at least initially, at active oil fields where injection of CO 2 may be profitably employed for enhanced oil recovery (EOR). Indeed, a CO 2 pipeline network already exists for EOR purposes in the southwestern United States, although it is limited in geographic reach. Whether CCS policies ultimately lead to one or more of these scenarios remains to be seen; however, the configuration of the resulting CO 2 pipeline network, and its associated costs, may have a significant bearing on which CCS policies best serve the public interest. Hypothetical CO2 Pipelines in the Midwest Infrastructure requirements and policy implications related to CO 2 pipelines become clearer when considering what actual pipeline projects might look like. This section outlines contrasting scenarios for hypothetical CO 2 pipeline development in the region covered by the Midwest Regional Carbon Sequestration Partnership (MRCSP). The MRCSP is one of seven regional partnerships of state agencies, universities, private companies, and non-governmental organizations established by the Department of Energy to assess CCS approaches. The MRCSP serves as a good illustration of CO 2 pipeline issues because it has a varied mix of CO 2 sources and potential geologic sequestration sites, and because geologists have completed a number of focused studies relevant to CCS in this region. Sequestration in the Rose Run Formation The MRCSP has identified key CO 2 sources and geologic formations potentially suitable for carbon sequestration within its seven-state region encompassing northeast Indiana, Kentucky, Maryland, Michigan, Ohio, Pennsylvania, and West Virginia. Figure 1 shows the locations of 11 of the largest CO 2 sources located in the MRSCP region—all coal-fired electric power plants emitting over 9 million metric tons of CO 2 annually. There are numerous other CO 2 sources in this region, including many other power plants and large industrial facilities, but the 11 power plants in this analysis include the very largest in terms of annual CO 2 emissions. Figure 1 also shows the locations of the Rose Run sandstone, a deep saline formation identified by the MRCSP as a potential carbon sequestration site. As the figure shows, the plants all lie above or near to this formation, so suitable CO 2 injection sites presumably could be located very near to each of these plants. If the Rose Run formation proves to be viable for large-scale CO 2 sequestration, then some plants may be able to inject CO 2 directly below their facilities, and CCS pipeline requirements for some of the other 11 power plants could be small. If this were the case, then the CCS CO 2 pipeline network for the 11 plants might appear as shown in Figure 2 . The hypothetical pipeline layout in Figure 2 assumes that a 25-mile diameter, non-overlapping reserve area is needed for each plant's sequestration site and that any location within the Rose Run formation is viable for sequestration. Figure 2 also assumes that each power plant is either located at or is connected to the center of its respective sequestration field by a large trunk pipeline built along existing rights of way and capable of carrying its peak CO 2 output. Smaller pipelines branching from the centrally-located plant or from the trunk line distribute the CO 2 to multiple injection wells in the sequestration site. These smaller pipelines are not considered in detail in this report. Figure 2 shows that the longest trunk pipeline for CO 2 transportation is 32 miles long, and the average pipeline is approximately 11 miles long. According to models developed at Carnegie Mellon University (CMU), the capital costs to construct an 11-mile pipeline in the Midwestern United States with a capacity of 10 million tons of CO 2 annually would be approximately $6 million. The levelized cost would be approximately $0.10 per ton of transported CO 2 , including costs for operation (e.g., compression) and maintenance. Potential Barriers to Rose Run Sequestration Although the Rose Run formation is identified by the MRCSP as a major potential sequestration site, it has characteristics which may ultimately limit its viability for large-scale CO 2 sequestration. The most important of these is overall sequestration capacity. Because the Rose Run formation has low to moderate permeability and thickness, geologic models show that it is unlikely all of the CO 2 emitted in the Rose Run region can be efficiently sequestered in the Rose Run formation. The Rose Run formation is also relatively fractured. Geologists have concluded that injecting pressurized CO 2 into the Rose Run formation potentially could induce minor earthquakes along certain preexisting (but undetected) faults in otherwise seismically stable areas. Faults and fractures can, in some cases, provide additional sequestration capacity and be beneficial for sequestration. But faults or fractures can also be permeable conduits for leakage and "can be a significant pathway for the loss of sequestered CO 2 ." While studies are not yet available to establish the validity of any of these concerns, future research may conclude that significant parts of the Rose Run formation would be unsuitable for large scale, permanent CO 2 sequestration. Alternatives to CO2 Sequestration in Rose Run The CO 2 sequestration capacity of the Rose Run formation may turn out to be too limited because of its of overall size or integrity. If the policy goal is to sequester CO 2 from all major sources in the region, then at least some of the largest power plants in the MRCSP will need to sequester their carbon emissions elsewhere. The alternative sites for potential CO 2 sequestration nearest to Rose Run are unmineable coal beds, oil and natural gas fields, and another large saline formation—the Mount Simon sandstone. Unmineable Coal Beds The MRCSP region contains unmineable coal beds underlying the same general geographic footprint as the Rose Run formation, but located at different depths underground. Studies suggest that such coal beds may be suitable for sequestration. In some cases injected CO 2 could replace methane trapped in the coal seam, increasing natural gas available for extraction wells in a process similar to EOR known as enhanced coal-bed methane recovery. However, the potential capacity for storing CO 2 in regional coal beds is only about 5% compared to the Rose Run sandstone, and the practicability of storing CO 2 in coal seams is virtually untested. In addition, removing groundwater from coal seams prior to CO 2 injection may create environmental problems related to water disposal, and some studies indicate that coal swelling associated with CO 2 injection may curtail the permeability of the coal seam, limiting its overall capacity to store CO 2 . Oil and Natural Gas Fields The MRCSP region includes a number of oil and natural gas fields which may offer opportunities for CO 2 sequestration. The region also includes a number of natural gas storage reservoirs, both natural and manmade, which suggest that CO 2 could be similarly stored. However, according to the MRCSP, the ten largest oil and gas fields in the region have an average CO 2 sequestration potential of only 251 million tons. By comparison, the 30-year CO 2 output of the 11 plants in this analysis would range from 270 to 491 million tons at current emission levels. The oil and gas fields in the MRCSP region, therefore, even if they could achieve their stated sequestration potential, may not individually have sufficient capacity to sequester CO 2 from one of the 11 power plants in this analysis operating with current emissions over a 30-year period. Multiple fields possibly could be used by individual power plants to achieve adequate long-term sequestration, but this would require multiple pipeline networks and, consequently, could increase CO 2 transportation costs and complexity. Oil and gas production fields also present CO 2 sequestration challenges due to numerous boreholes from historical well-drilling activity. Geologists are concerned that old oil and gas wells may be inadequately sealed and that their locations may be uncertain. Increased leakage risks from old wells, as well as associated mitigation and monitoring costs, may reduce the economic CCS sequestration potential in oil or gas fields. Although revenues from CO 2 sales for EOR projects could offset CO 2 transportation and sequestration costs for some source facilities, long-term CO 2 emissions in the MRCSP region would far exceed CO 2 requirements for EOR. It is possible, therefore, that because of their limited sequestration capacity and wellbore leakage concerns, oil and natural gas fields in the MRCSP region may not be viable sequestration sites for the largest CO 2 sources either. Mt. Simon Formation If neither the Rose Run formation nor regional coal, oil, or gas fields can provide adequate CO 2 sequestration for the major power plants in the MRCSP region, the next best potential CO 2 sequestration site is the Mt. Simon formation. This formation is a deep saline aquifer like the Rose Run formation, but it is over four times larger in terms of sequestration capacity and is less fractured. Figure 3 shows hypothetical CO 2 pipelines which might be required if any of the major power plants in this analysis were required to transport CO 2 to the Mount Simon formation. As in the Rose Run case, Figure 3 assumes pipelines use existing rights of way and that a 25-mile diameter, non-overlapping reserve area is needed for each plant's sequestration site. However, consistent with the Rose Run limitations, the Mt. Simon scenario assumes that the thinnest parts of the formation (the easternmost contours on the contour map) are unsuitable sequestration sites. As the figure shows, the pipelines required in such a scenario could be substantial, ranging in length from 130 to 294 miles, and averaging 234 miles. According to estimates from CMU, the approximate capital costs for these pipelines would range from $70 million to $180 million, and would average $150 million. The average levelized cost would be approximately $2.00 per ton of transported CO 2 . Although Figure 3 shows a pipeline route for all the 11 power plants in question, how many of these pipelines might be needed depends upon which plants may be able to sequester their CO 2 emissions closer to home. Furthermore, there are potential scale economies for large, integrated CO 2 pipeline networks that link many sources together rather than single, dedicated pipelines between individual sources and sequestration reservoirs. The individual pipelines required in Figure 3 may be so large on their own that combining multiple CO 2 flows from multiple plants through shared trunk lines may be limited. While the Mt. Simon scenario in Figure 3 is far less favorable in terms of cost and siting requirements than the Rose Run scenario in Figure 2 , it is not necessarily the "worst" case in terms of overall pipeline requirements. Future work on sequestration capacity may conclude that the Mt. Simon sequestration sites should be located in thicker parts of the formation (in central Indiana and Michigan) to absorb the tremendous volumes of CO 2 generated by these power plants. Such a westward shift would require even longer pipelines than those illustrated here. Policy Implications The MRCSP pipeline scenarios, while only illustrative, nonetheless highlight several important policy considerations which may warrant congressional attention. These include concerns about CO 2 pipeline costs, siting challenges, pipeline and sequestration site relationships, and differences in sequestration potential among regions. Variability of CO2 Pipeline Costs The cost of CO 2 transportation is a function of pipeline length (among other factors), which in turn is determined by the location of sequestration sites relative to CO 2 sources. The scenarios in this report illustrate how different assumptions about sequestration site viability in the MRCSP region can lead to a 20-fold difference in CO 2 pipeline lengths and, therefore, similarly large differences in capital costs. (In this regard, CO 2 pipeline costs may present the cost component in integrated CCS schemes with the greatest potential variability.) At the international and national policy levels, some studies have recognized this potential variability. For example, an MIT analysis states that the costs of CO 2 pipelines are highly variable due to "physical ... and political considerations." The IPCC report likewise estimates total costs of CO 2 mitigation of $31- $71 per ton of CO 2 avoided for a new pulverized coal power plant, assuming CO 2 pipeline transportation costs, including operations and maintenance costs, of $0 to $5 per ton. Recent increases in the global price of steel used to make line pipe could push CO 2 pipeline costs above this range. At $5 per ton of transported CO 2 , pipeline costs account for a modest share of aggregate carbon control costs—between 7% and 16% based on the IPCC estimates. Nonetheless, if CCS technology were deployed on a national scale, overall CO 2 pipeline costs could be in the billions of dollars. Minimizing these costs while achieving environmental objectives may therefore be an important public policy objective. From the perspective of individual power plants, or other CO 2 sources, highly variable costs for CO 2 pipelines may have more immediate ramifications. If CO 2 pipeline costs for specific regions reach hundreds, or even tens, of millions of dollars per plant, then power companies may have difficulty securing the capital financing or regulatory approval needed to construct or retrofit fossil fuel-powered plants in these regions. For example, in August 2007, the Minnesota Public Utilities Commission rejected a developer's proposal to construct a new coal-fired power plant in the state, in large part because the associated costs of a 450-mile CO 2 pipeline to an EOR site in Alberta, over $635 million, were not viewed to be in the public interest. To the extent that other, lower-cost power plant options are available, the failure of a costly project like the Minnesota plant may not be a problem. However, if other generation sources are constrained (e.g., nuclear, renewable), then the inability to construct a new fossil-fueled power plant may negatively impact the regional balance of electricity supply and demand. Higher electricity prices or reliability concerns might ensue. Some analysts believe that CO 2 pipeline costs will be moderated in the future because generating companies will construct new power plants geographically near sequestration sites. Recent network cost models suggest otherwise. On a mile-for-mile basis, these models show that electricity transmission costs (including capital, operations, maintenance, and electric line losses) generally outweigh CO 2 pipeline costs in new construction. Accordingly, the least costly site for a new power plant tends to be nearer the electricity consumers (cities) rather than nearer the sequestration sites if the two are geographically separated. Analysts have therefore concluded that "a power system with significant amounts of CCS requires a very large CO 2 pipeline infrastructure." CO2 Pipeline Siting Challenges Any company seeking to construct a CO 2 pipeline must secure siting approval from the relevant regulatory authorities and must subsequently secure rights of way from landowners. There is no federal authority over CO 2 pipeline siting, so it is regulated to varying degrees by the states (as is the case for oil pipelines). The state-by-state siting approval process for CO 2 pipelines may be complex and protracted, and may face public opposition, especially in populated or environmentally sensitive areas. Securing rights of way along existing easements for other infrastructure (e.g., gas pipelines), as the scenarios in this report assume, may be one way to facilitate the siting of new CO 2 pipelines. However, questions arise as to the right of easement holders to install CO 2 pipelines, compensation for use of such easements, and whether existing easements can be sold or leased to CO 2 pipeline companies. Although these siting issues may arise for any CO 2 pipeline, they become more challenging as pipeline systems become larger and more interconnected, and cross state lines. If a widespread, interstate CO 2 pipeline network is required to support CCS, the ability to site these pipelines may become an issue requiring new federal initiatives. Pipeline and Sequestration Site Relationships Due to potential CO 2 transportation costs, individual generating plants have a strong interest in the selection of specific sequestration sites under future CCS policies. Since transporting CO 2 to distant locations can impose significant additional costs to a facility's carbon control infrastructure, facility owners may seek regulatory approval for as many sequestration sites as possible and near to as many facilities as possible. Furthermore, capacity limitations at favorably located sequestration sites (like the Rose Run formation) may lead to competition among large CO 2 source facilities seeking to secure the best local sequestration sites before others do. How the development of sequestration sites will be prioritized and how competition for such sites may evolve have yet to be explored, but they may create new and significant economic differences among facilities. Because CO 2 pipeline requirements in a CCS scheme are driven by the relative locations of CO 2 sources and sequestration sites, identification and validation of such sites must explicitly account for CO 2 pipeline costs if the economics of those sites are to be fully understood. Proposals such as S. 2323, which would require an integrated evaluation of CO 2 capture, sequestration, and transportation (Sec. 3(b)(5)), appear to promote such an approach, although the details of future sequestration site selection have yet to be established. If CCS moves from pilot projects to widespread implementation, government agencies and private companies may face challenges in identifying, permitting, developing, and monitoring the large number of localized sequestration reservoirs that may be proposed. Advantaged and Disadvantaged Regions Geologists have long recognized that some regions in the United States have high potential for carbon sequestration and others do not. For example, a 2007 study at Duke University concluded that "geologic sequestration is not economically or technically feasible within North Carolina," but "may be viable if the captured CO 2 is piped out of North Carolina and stored elsewhere." Likewise, states in the Northeast, Minnesota, Wisconsin, and possibly parts of other states appear to lack geological formations with potential for large-scale sequestration of the volumes of CO 2 they produce. If national CCS policies are implemented, power plants and other CO 2 -producing facilities in these states may face more extensive, and more costly, pipeline requirements than other states if they are to sequester their CO 2 . States such as North Carolina, with limited sequestration potential and a relatively high proportion of coal or natural gas in their electric generation fuel mix, may face particular challenges in this regard. The Duke study, for example, estimated it would cost $5 billion to construct an interstate pipeline network for transporting CO 2 from North Carolina's electric utilities to sequestration sites in other states. One particular concern among some stakeholders is that high CO 2 transportation costs could increase electricity prices in "sequestration-poor" regions relative to regions able to sequester CO 2 more locally. For states like Massachusetts, for example, which has some of the highest electricity prices in the country and may have little sequestration potential, CO 2 transportation costs could raise electricity prices even higher above the national average. Moving beyond this illustrative example to evaluate comprehensively the distribution of CO 2 transportation costs across the United States is beyond the scope of this report. Nonetheless, these kinds of regional price impacts, and their implications for regional economies, may become an issue for Congress. Conclusion The socially and economically efficient development of the nation's public infrastructure is an important consideration for policymakers. In the context of a national program for CCS, CO 2 pipelines may be a major addition to this infrastructure. Yet there are many uncertainties about the cost and configuration of CO 2 pipelines that would be needed to meet environmental goals within an emerging regulatory framework. Exactly who will pay for CO 2 pipelines, and how, is beyond the scope of this report, but understanding ways to minimize the cost and environmental impact of this infrastructure may be of benefit to all. In addition to specific questions about CO 2 pipeline requirements, the scenarios in this report raise larger questions about the ultimate development and allocation of sequestration capacity under a national CCS policy. How much individual companies may have to spend to transport their CO 2 depends upon where it has to go. However, even as viable sequestration reservoirs are being identified, it is unclear which CO 2 source facilities will have access to them, under what time frame, and under what conditions. While Congress is beginning to turn its attention to these questions, it will likely require sustained attention and the input of many stakeholders to refine and address them. Given the potential size of a national CO 2 pipeline network, many billions of dollars of capital investment may be affected by policy decisions made today.

Congress is considering policies promoting the capture and sequestration of carbon dioxide (CO2) from sources such as electric power plants. Carbon capture and sequestration (CCS) is a process involving a CO2 source facility, a long-term CO2 sequestration site, and CO2 pipelines. There is an increasing perception in Congress that a national CCS program could require the construction of a substantial network of interstate CO2 pipelines. However, divergent views on CO2 pipeline requirements introduce significant uncertainty into overall CCS cost estimates and may complicate the federal role, if any, in CO2 pipeline development. S. 2144 and S. 2191 would require the Secretary of Energy to study the feasibility of constructing and operating such a network of pipelines. S. 2323 would require carbon sequestration projects to evaluate the most cost-efficient ways to integrate CO2 sequestration, capture, and transportation. P.L. 110-140, signed by President Bush on December 19, 2007, requires the Secretary of the Interior to recommend legislation to clarify the issuance of CO2 pipeline rights-of-way on public land. The cost of CO2 transportation is a function of pipeline length and other factors. This report examines key uncertainties in CO2 pipeline requirements for CCS by contrasting hypothetical pipeline scenarios for 11 major coal-fired power plants in the Midwest Regional Carbon Sequestration Partnership region. The scenarios illustrate how different assumptions about sequestration site viability can lead to a 20-fold difference in CO2 pipeline lengths, and, therefore, similarly large differences in capital costs. From the perspective of individual power plants, or other CO2 sources, variable costs for CO2 pipelines may have significant ramifications. If CO2 pipeline costs for specific regions reach tens, or even hundreds, of millions of dollars per plant, then power companies may have difficulty securing the capital financing or regulatory approval needed to construct or retrofit fossil fuel-powered plants in these regions. High CO2 transportation costs also could increase electricity prices in "sequestration-poor" regions relative to regions able to sequester CO2 more locally. As CO2 pipelines get longer, the state-by-state siting approval process may become complex and protracted, and may face public opposition. Because CO2 pipeline requirements in a CCS scheme are driven by the relative locations of CO2 sources and sequestration sites, identification and validation of such sites must explicitly account for CO2 pipeline costs if the economics of those sites are to be fully understood. Since transporting CO2 to distant locations can impose significant additional costs to a facility's carbon control infrastructure, facility owners may seek regulatory approval for as many sequestration sites as possible and near to as many facilities as possible. If CCS moves to widespread implementation, government agencies and private companies may face challenges in identifying, permitting, developing, and monitoring the large number of localized sequestration reservoirs that may be proposed. However, even as viable sequestration reservoirs are being identified, it is unclear which CO2 source facilities will have access to them, under what time frame, and under what conditions. Given the potential size of a national CO2 pipelines network, many billions of dollars of capital investment may be affected by policy decisions made today.

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Background NTSB History The NTSB was established in 1967 as part of the newly formed Department of Transportation (DOT). In 1974, Congress passed the Independent Safety Board Act of 1974 (in P.L. 93-633 ), making the NTSB completely separate from the DOT. Doing so gave NTSB complete independence from DOT. As a fully independent agency, the NTSB can carry out unbiased investigations and make recommendations regarding safety regulations and oversight practices of DOT without the public perception of conflicting interests associated with being a component of a regulatory department whose policies and regulatory oversight might be brought into question during the course of an investigation. Over the course of its 39-year history, the NTSB has established a worldwide reputation as a model agency for investigating accidents and identifying needed transportation safety improvements. Through the issuance of safety recommendations and advocacy for transportation safety needs, the NTSB has earned considerable respect from Congress and the traveling public for its efforts in identifying needed transportation safety improvements and maintaining public confidence in transportation safety. NTSB Organization The NTSB consists of a five-member board and a staff of approximately 400, about half of whom are located at its Washington, DC, headquarters, with the rest distributed among several regional offices throughout the United States. In the current reauthorization cycle, the NTSB is seeking to increase its staff size to an authorized level of 475 full-time equivalent employees beginning in FY2008. The NTSB has indicated that this staffing increase is needed to fully carry out the NTSB's mission, which includes conducting investigations and safety studies and preparing safety recommendations and safety advocacy materials for all modes of transportation. While the initial House proposal included authorization for staffing increases that match the NTSB's request for an increase to 475 full-time equivalents (FTEs) in FY2008 (See H.Rept. 109-512 ), the initial Senate-passed bill would have maintained a staffing level of 399 FTEs in FY2008, which is consistent with the FY2007 budget request. While the final enacted version of the National Transportation Safety Board Reauthorization Act of 2006 ( P.L. 109-443 ) did not establish an authorized FTE level, it did authorize a funding increase of roughly 13.5% in FY2008 compared to FY2007 authorized levels. Absent specific report language directing how this additional funding authority is to be used, it is uncertain if this would be used in whole or in part to fund additional positions. If the increased funding authority were devoted exclusively for personnel compensation and benefits, the number of authorized FTEs could be increased to about 450. The five Safety Board members, presidentially appointed with the advice and consent of the Senate, serve five-year terms and may continue to serve beyond their term until a replacement board member is appointed. Not more than three Safety Board members may be appointed from the same political party, and at least three members must be appointed on the basis of technical qualifications, professional standing, and knowledge of transportation safety issues. One recent point of contention among board members is the appointment process for board members' personal staff. Under prior law, the NTSB chairman was the final authority with regard to staffing, including the staffing of member offices. The National Transportation Safety Board Reauthorization Act of 2006 ( P.L. 109-443 ), however, gives individual board members full authority to appoint individuals for personal staff positions, with the restriction that staff allocations be limited to a full time equivalent level of one senior professional staff position and one administrative staff position. NTSB Mission The NTSB core mission consists of investigating transportation accidents and, based on investigative findings and focused studies of transportation safety concerns, issuing safety recommendations and advocating for improvements in transportation safety. Additionally the NTSB provides assistance to victims' families in airline disasters and serves as a board of appeals for certain transportation regulatory actions. Accident Investigation The NTSB investigates the following transportation-related accidents and safety issues: All accidents involving civil aircraft and public aircraft, other than military or intelligence agency aircraft, within the United States and its territories; Selected highway and railroad grade crossing accidents; Railroad accidents involving passenger trains, loss of life, or significant property damage; Pipeline accidents involving significant property or environmental damage, or loss of life; In coordination with the Coast Guard, major marine casualties occurring on the navigable waters or territorial sea of the United States, or involving U.S. flag vessels, except those involving only public vessels; and Other selected catastrophic accidents or recurring problems involving transportation safety. In accordance with international treaties, the NTSB also participates in investigations of foreign aviation accidents involving any U.S. manufactured or registered aircraft. On occasion, the NTSB may also lend its expertise in foreign investigations at the request of another country, even though the United States may have no vested interest nor any specific right under international agreement to participate in the accident investigation process. In these instances, where NTSB is asked to consult or actively participate in an overseas investigation, the NTSB is sometimes reimbursed for associated costs. Historically, these reimbursements had been deposited to the Treasury General Fund. However, during this reauthorization cycle, the NTSB requested that this and other reimbursements to the NTSB be specifically designated as offsetting collections for use by the NTSB. The National Transportation Safety Board Reauthorization Act of 2006 ( P.L. 109-443 ) included a provision designating such receipts, whether in the form of fees or reimbursements, as offsetting collections available until expended. Prior to this legislative change, only reimbursements related to activities of the NTSB Academy, such as tuition payments or classroom rental fees, were specifically credited as offsetting collections. Other Related Functions In addition to its core responsibility of investigating transportation mishaps, the NTSB renders assistance to the families of passengers involved in air carrier accidents, and handles appeals of certificate actions by the FAA or the Coast Guard and certain appeals involving civil penalties from FAA enforcement actions. The NTSB also maintains a database of civil aviation accidents and conducts special studies of selected transportation safety issues. Safety Recommendations and Advocacy While the NTSB has no authority to change transportation safety regulations and practices, its principal means for effecting change in transportation safety is through the issuance of safety recommendations to regulators, operators, and users of transportation systems. Since investigations of complex accidents may take several years, the NTSB routinely issues recommendations over the course of an investigation as needed safety improvements are identified. The NTSB highlights its key safety recommendations on a list of "Most Wanted" safety improvements that currently includes: Reducing the dangers of in-flight icing; Eliminating flammable vapors in airliner fuel tanks; Preventing collisions and near-misses on airport runways (runway incursions); Improving cockpit voice recorders and flight data recorders and requiring cockpit video; Requiring crew resource management training for commuter and charter flight pilots; Implementing positive train control systems for railroads; Enhancing recreational boating safety; Improving the safety of motor carrier operations; Preventing medically unqualified drivers from operating commercial vehicles; Enhancing protection for school bus and motor coach occupants; Enhancing automobile seat-belt laws and enforcement; Eliminating risks posed by hard core drunk drivers; Improving school bus safety at railroad grade crossings; and Setting work hour limits and rest requirements that reflect current scientific understanding of human fatigue for safety-critical transportation workers in all transportation modes. These "Most Wanted" transportation safety improvements typically encompass multiple safety recommendations requesting action from the DOT and the states for statutory and regulatory change to address these safety concerns. While there is no statutory requirement to adopt NTSB-issued safety recommendations, the NTSB's ability to bring about transportation safety enhancements is rooted in its long-standing reputation for thorough investigation and assessment of needed safety improvements. However, there is not always universal agreement that NTSB recommendations are needed. For example, the FAA has opposed NTSB's urging to require child restraints on airliners for children under two, arguing that the increased cost of having to purchase tickets for these children could cause some families to drive instead, which is arguably more dangerous than flying. Also, pilot unions have strongly opposed NTSB recommendations for cockpit video recorders, arguing that video images would be of limited value and fearing that, despite statutory protections, these videos could be misused if publicly disclosed or used for other purposes. In other examples, some unfulfilled recommendations proposed by the NTSB were not technically feasible at the time they were issued, and several years of research and development have been devoted to addressing these recommendations, even though the recommendations have not yet been satisfactorily addressed. For example, following the crash of TWA flight 800 in 1996, the NTSB recommended procedures and technologies to reduce fuel tank flammability and explosive fuel/air mixtures in airline fuel tanks. While the NTSB has been disappointed that interim operational measures to reduce fuel tank fires and explosions have never been satisfactorily implemented by the airlines, the NTSB is encouraged that, through extensive research and development, viable technologies for reducing flammability and inerting fuel tanks now exist and will be required on certain airliners under proposed regulatory changes to reduce fuel tank flammability. However, despite the current progress toward addressing this longstanding safety need, the NTSB would like to see the requirements more broadly applied to all commercial airliners. In general, NTSB's safety recommendations and safety advocacy programs have influenced the regulatory agenda of transportation agencies regarding safety initiatives and have had a profound influence on Congressional decision-making and oversight of transportation safety issues. Since 1967, the NTSB has issued over 12,000 safety recommendations across all modes of transportation, of which about 83% led to the implementation of acceptable safety improvements. Despite the generally high level of acceptance of NTSB-issued safety recommendations, there is lingering concern over the amount of time it can take to implement recommended safety improvements. One significant factor contributing to the length of time it can take to adopt NTSB safety recommendations is the process of assessing the feasibility, cost, and benefits of adopting a recommendation and developing an implementation plan which is left up to the recipient of a safety recommendation. Since the last reauthorization in 2003, the NTSB has tried to improve this process by working more closely and collaboratively with DOT agencies when drafting safety recommendations to better ensure that these recommendations can be implemented in a timely and acceptable manner. The NTSB refers to this initiative as SWAT for "Safety With A Team." However, this approach has been criticized by some as having the potential effect of watering down the NTSB's safety objectives. These critics contend that by collaborating too closely with regulatory agencies and other stakeholders, the NTSB may be swayed away from issuing or wording safety recommendations that may be more difficult or challenging for regulators to address and could bring the NTSB's impartiality and independence into question. Striking an appropriate balance between identifying needed safety improvements and proposing recommendations that are operationally and technically achievable remains an ongoing challenge for the NTSB. Policymakers may deliberate about how to best structure interactions between the NTSB and recipients of NTSB recommendations to facilitate the communication of the NTSB's desired safety objectives and the operational and technical limitations that may stand in the way of fully meeting these objectives. The Senate NTSB reauthorization bill ( S. 3679 ) included a provision that would have required the NTSB to review the DOT's annual report to Congress detailing its responses to NTSB safety recommendations. Under this provision, the NTSB would have been required to transmit comments on this report to the appropriate congressional committees within 90 days after the report is submitted by the DOT. Under existing statute, the DOT is to submit its report to Congress each year on January 1. While this language was not included in the final enacted legislation, P.L. 109-443 did include a provision requiring the FAA to submit a report explaining why it has not implemented aviation-related safety improvements identified in the NTSB's Most Wanted Transportation Safety Improvements list issued in 2006. Also, the Senate reauthorization bill ( S. 3679 ) included a provision that would have required the NTSB to provide, as appropriate, recommendations and comments to Congress regarding pending transportation safety legislation. While legislation can serve as an appropriate means to implement NTSB safety recommendations that may otherwise languish and other improvements to transportation safety, formally involving the NTSB in the review and analysis of pending legislation may raise concerns regarding the separation of powers between the executive and legislative branches. The NTSB already actively participates in congressional oversight regarding transportation safety issues, for example, by providing testimony to Congress at safety oversight hearings and through more informal meetings with Members of Congress and their staff. However, formally involving an executive agency such as the NTSB in the legislative process and the work of Congress, even on a limited basis, may introduce complications and potential challenges regarding separation of powers and may raise concerns that the NTSB could be drawn into partisan debates over transportation safety issues or pressured by stakeholders and special interest groups. The enacted legislation ( P.L. 109-443 ) did not include this provision. NTSB Funding Levels Funding for the NTSB has historically consisted of: a base authorization or appropriation amount; a set-aside emergency fund to cover unforeseen accident costs such as wreckage recovery, salvage, and storage; and supplemental appropriations to cover the costs of large, complex investigations such as the investigation of the TWA flight 800 accident. The National Transportation Safety Board Reauthorization Act of 2003 ( P.L. 108-168 ), authorized base appropriations from FY2003 through FY2006 for the NTSB. The annual authorization level was set at $73.325 million in FY2003, and was increased at a rate of about 6% per year, reaching $87.539 million for FY2006 (see Table 1 ). In addition to these sums, P.L. 108-168 authorized additional funding for operating the NTSB Academy from FY2003 through FY2008. However, these additional funds for the academy were never appropriated. Instead, appropriations language over the past two years has instructed the NTSB not to increase academy funding or increase investigator details to the academy in a manner that may detract from their primary investigation duties. Since FY2003, appropriations for the NTSB have been slightly below authorized levels. In FY2003, the NTSB received $72 million. In FY2004, the NTSB received $73.5 million, plus an additional $600,000 to boost the balance of the NTSB's emergency fund back to $2 million. In FY2005, the NTSB received a base appropriation of $76.7 million, less a rescission of $8 million in unobligated supplemental appropriations intended to cover costs associated with the investigations of EgyptAir flight 990 in 1999 and Alaska Air flight 261 in 2000, both of which are now completed. Thus, the net appropriation for FY2005 was $68.7 million. In FY2006, the NTSB received $76.7 million, less a rescission of $1 million from the same supplemental funding account to cover the EgyptAir flight 990 and Alaska Air flight 261 investigations. After factoring in a government-wide 1% rescission, the NTSB's net appropriation for FY2006 was just under $75 million. In testimony before both the House Aviation Subcommittee and the Senate Subcommittee on Aviation, NTSB Chairman Mark Rosenker, then serving as Acting Chairman, asserted that the agency's FY2006 budget was unable to support the staff size of 416 full-time equivalents with which the NTSB began the year. The NTSB responded accordingly by reducing staff through attrition to a current level of 396 full-time equivalents. The administration proposed an authorization and appropriation of $80 million for FY2007, $4 million above FY2006 enacted levels, to cover salary and cost increases. In FY2008, the administration proposed a funding authorization of $100 million, 22% above the FY2007 requested amount. This increase would be used to hire about 75 additional investigators and support staff, a staffing increase that the NTSB believes is necessary to adequately perform its mission. For FY2009, the administration has requested an authorization of $105 million to sustain this increased staffing level and cover anticipated salary and cost increases. H.R. 5076 , as initially reported (see "House-proposed" in Table 1 ), roughly paralleled the administration request, proposing a slightly higher authorized amount in FY2007, $1 million less than the administration projection for FY2008, and an amount equal to the administration's projection for FY2009. In contrast, the Senate ( S. 3679 ) initially passed a two-year authorization that would have matched the requested funding level in FY2007, but did not include the increased funding sought in FY2008. The enacted NTSB reauthorization legislation ( P.L. 109-443 ) provides a two-year reauthorization, authorizing $82 million in FY2007, and $93 million in FY2008. In addition to these authorized amounts, existing statute provides for the continued maintenance of $2 million in the NTSB's emergency fund, and authorizes additional funding to increase the balance of the emergency fund up to the authorized limit of $4 million. Current Issues for Reauthorization Several issues were identified during the current debate over NTSB reauthorization The central issue during this reauthorization cycle was the adequacy of the NTSB's staff size. The NTSB requested a staff increase of roughly 22% starting in FY2008, an increase it believes is necessary to adequately carry out its mission. Other issues considered during the NTSB reauthorization process included the mission, operations, and funding of the NTSB Academy; relief from certain contracting requirements for investigation-related services; the designation of various reimbursements to the NTSB as offsetting collections; and payment for Department of Transportation Inspector General investigations and audits of the NTSB. NTSB Staffing Levels and Accident Coverage The Washington Post reported that in 2005, by NTSB's own estimates, its field investigators deployed to only 62% of all fatal airplane crashes in the United States, compared to 75% in 2001. The trend has alarmed some aviation safety experts who contend that the NTSB could miss opportunities to improve safety or identify a critical safety concern before it leads to more mishaps. The NTSB, on the other hand, asserts that its near-term strategy has been to target the deployment of its field investigators to focus on crashes where new safety issues are likely to present themselves. However, without on-scene involvement this is often difficult to assess, particularly in the early stages of an investigation. Therefore, it appears that the NTSB's long-term strategy is to request funding for additional investigative staff beginning in FY2008. This request for additional funding to hire new investigators and support staff was a central issue in the current reauthorization debate. Analysis by the GAO indicates that both the number of NTSB on-site field investigations of aviation accidents and investigations where only an FAA-inspector was sent to the crash site have been declining since 2002. However, the number of "data collection accidents," where investigators do not perform on-scene functions, has been steadily increasing. In 2002, the NTSB sent investigators to 322 aviation field accidents compared to 219 in 2005. Also, the number of "limited" investigations, where on-scene functions are delegated to FAA inspectors, has declined by about half in the past three years, from 1,461 in 2002 to 762 in 2005. During that same period, the number of "data collection" investigations—where most or all of the investigation process is completed in the office through telephone interviews and data gathering—has increased by a factor of almost five, from 159 in 2002 to 783 in 2005. While this trend may, in part, be due to a reduction in the severity of aviation accidents, it is also likely the result of NTSB's changing strategy to manage its limited investigator resources and clear a large backlog of uncompleted investigations. In 2001, the NTSB's backlog of cases more than six months old was 2,400. This backlog was reduced down to 944 cases in early 2006, but one apparent consequence is that investigators have been spending more time in the office completing old cases and less time in the field doing on-site investigation. While the most critical need for investigators appears to be for general field investigators that handle the bulk of NTSB's case load of aviation investigations involving smaller aircraft, expertise in certain speciality fields may also need to be expanded to address the growing complexity of major transportation disasters. For example, the Air Line Pilots Association (ALPA), the largest union representing airline pilots in the United States, has been critical of what they consider a lack of in-depth investigation by the NTSB delving into human factors aspects of airline crashes. A union representative stated that the NTSB tended to overlook human factors either for the sake of expediency or due to budget pressures. While human factors causes play a role in the majority of aviation accidents, workload and staffing levels may limit the involvement of NTSB's human factors experts in exploring the root causes of these accidents, such as training, policies, and procedures. Besides human factors, the NTSB also faces potential staffing needs in other highly specialized areas such as airline operations, air traffic control, aircraft structures and systems, and maritime operations. Because these disciplines are highly specialized, it takes considerable effort to recruit qualified individuals and train them to apply their knowledge and expertise to accident investigation. Staff attrition in these highly specialized disciplines could increase the NTSB's reliance on outside expertise and have an impact not only on the ability of the NTSB to fully investigate transportation accidents, but also on the quality of the NTSB's investigation and analysis. Policymakers may consider options to enhance the NTSB's ability to recruit and retain field investigators and specialists in a variety of critical science and engineering fields as well as professionals with unique operational experience in various transportation modes. While the House bill ( H.R. 5076 ) would have provided almost full funding to support the administration's request for increasing NTSB staffing levels by about 19% to address these concerns, the Senate bill ( S. 3679 ) did not include funding for increasing NTSB staff levels. The Senate bill ( S. 3679 ) did, however, include a provision that would have required the NTSB to include in its annual report lists of and explanations for: transportation accidents that the NTSB was statutorily mandated to investigate but did not; and any ongoing investigations that had exceeded the expected time allotted for their completion. Such information may provide better insight into whether, and to what extent, NTSB staffing levels are impacting its ability to meet statutory obligations for investigating transportation accidents and to carry out these obligations in a timely fashion. Such data may also provide a better sense of what transportation modes and specific areas of expertise may need additional staffing for the NTSB to effectively carry out its mission. The NTSB Reauthorization Act of 2006 ( P.L. 109-443 ) authorizes a funding increase of roughly 13.5% in FY2008 compared to FY2007 authorized levels. While the act did not specify how this additional funding authority is to be allocated, CRS estimates that, if such funds are appropriated in FY2008 and allocated exclusively for increasing staffing levels, the NTSB may be able to increase its FTE level to about 450 in FY2008. The NTSB Reauthorization Act of 2006 ( P.L. 109-443 ) also included a provision, adopted from the Senate bill ( S. 3679 ), that requires the NTSB to maintain at least one full-time employee in every state located more than 1,000 miles from the nearest NTSB regional office, to provide initial investigative response to accidents across all modes of transportation. This measure would most directly impact the state of Hawaii, where the NTSB does not have a field office or any staff. Currently, investigations of accidents in Hawaii are typically run out of the NTSB's Gardena, California field office. Air safety in Hawaii has particularly been a continuing issue of interest because of the importance of aviation for inter-island transportation and a large air tour industry in the state. The NTSB Academy The National Transportation Safety Board Amendments Act of 2000 ( P.L. 106-424 ) gave NTSB the authority to enter into agreements for facilities, technical services, and training in accident investigation theory and practice. In 2000, NTSB awarded a 20-year contract for a training site to the George Washington University (GWU). Construction on the NTSB Academy, located on the Loudon County Campus of GWU in Ashburn, Virginia, was completed in August 2003. In addition to assessing the funding needed to sustain the operations of the NTSB Academy, a key issue for Congress has been whether to fund the NTSB Academy as a separate entity or a component of the overall NTSB budget. Funding the NTSB Academy within the overall NTSB budget would give NTSB greater flexibility to fund Academy activities based on internal training requirements and external demand for training. However, doing so may place an additional burden on the NTSB's ability to carry out its investigative, research, and safety advocacy functions if operating costs for the Academy exceed projections or external demand for the NTSB Academy is less than projected. In addition to providing a separate funding authorization for the NTSB Academy on top of NTSB base authorization levels, P.L. 108-168 allows the NTSB to impose and collect fees for services provided by or through the Academy which may be credited as offsetting collections that remain available until expended. In the current reauthorization debate, the NTSB has proposed that funding authorization for the NTSB Academy be made part of the broader agency authorization, rather than a distinct entity. The NTSB asserts that a single authorization amount is more consistent with its objective of integrating the academy operations into the overall mission and program for the agency. This would also be in line with appropriations actions over the past three fiscal years that have not identified separate funding levels for the academy. Unlike P.L. 108-168 , H.R. 5076 goes along with this request and does not specify any separate or additional funding levels for the academy. Also, as requested, the bill would strike a statutory provision for separate reporting to Congress on NTSB Academy operations. The NTSB has proposed that this reporting be consolidated with the NTSB's annual report to Congress on its overall operations. The Senate bill ( S. 3679 ), likewise combines academy funding with the broader agency budget. While the NTSB seeks to better integrate the operations of the academy with the overall role of the agency, GAO analysis of academy operations suggests that significant progress is still needed to accomplish this objective. Despite the creation of the academy three years ago, the GAO found the "NTSB has not developed a strategic training plan, nor has it identified the core competencies needed to support its mission and a curriculum to develop these competencies." The GAO also found that the NTSB Academy facility is significantly underutilized, in part because the NTSB lacks a core curriculum for its own staff. In fact, for FY2006, 97% of NTSB staff training is expected to come from training vendors other than the NTSB Academy. GAO estimated that available classroom space was utilized less than 10% of the time they were available during FY2005. Moreover, in FY2004 and FY2005, NTSB staff made up less than 20% of the total enrollment in classes offered at the NTSB Academy. However, despite having an enrollment of about 80% fee-paying external students and having the option to rent out classroom space when it is not in use, revenues generated from these sources have covered only about 8% of the academy's total operating expenses, including lease of the facility itself under the terms of a long-term lease agreement with the George Washington University. Excluding the cost of the lease, reimbursements still only covered about 15% of NTSB's other costs to run the facility and offer instruction, even though the NTSB does not figure in instructor salaries for NTSB personnel assigned to teach classes at the academy. In response to these findings, policymakers may seek to improve NTSB's approach to staff training and its initiatives to generate additional revenue through course offerings, symposia, and other training opportunities offered through the NTSB Academy. The NTSB has indicated that, in 2006, it significantly revised the philosophy for the Academy and is focusing on developing "state-of-the-art training courses and programs." However, examination of the available course offerings and current academy operations suggest, on the contrary, that the academy is largely maintaining a status quo with regard to its operations and approach to training. Because the NTSB Academy has been operational for only a few years, opportunities exist for refining and expanding its structure and course offerings. The NTSB indicated that it plans to establish a training and academic oversight board for the academy. The oversight board will consist of senior NTSB staff and will work closely with other government training facilities to "benefit from their experience and best practices." Congressional oversight may seek to more thoroughly examine the NTSB's planning and execution of efforts to improve and expand the curriculum of the NTSB Academy. The Senate bill ( S. 3679 ) included language that would have required the NTSB to develop a plan to make the NTSB Academy self-sufficient. The bill proposed that a draft of the plan is to be submitted for committee and GAO review and comments within 90 days after enactment, and a final plan, addressing comments received on the draft, would be required 90 days thereafter. The bill would have required the plan to be fully implemented within two years. Language in the bill would have directed the NTSB to consider subleasing of the academy facility for generating revenue and would have required that the plan include a fiscal projection of its impact on academy expenses and revenue. However, a subsequent GAO study of NTSB Academy finances and business practices concluded that "... [the] NTSB may have difficulty increasing revenues or decreasing external training costs enough to ever fully offset the training center's costs." Also, the GAO report noted that the NTSB has been in violation of the Anti-Deficiency Act because it negotiated the lease on the NTSB Academy facility as an operating lease instead of a capital lease, and did not obtain budget authority for the full term of the 20-year lease. Language to remedy this situation was not included in the NTSB reauthorization legislation. Possible remedies identified by the GAO include obtaining a deficiency appropriation for the full amount of the lease, renegotiating the lease contract, terminating the lease, or obtaining authority to obligate lease payments on an annual basis. GAO concluded that vacating the space may be the most cost-effective strategy; however the potential benefits derived from this facility were not fully considered in the GAO's analysis. Because the reauthorization legislation did not address the issue of the NTSB Academy management practices, weighing the costs and benefits of maintaining the training center remains a specific issue for congressional oversight and possible legislation during the 110 th Congress. Relief from Certain Contracting Requirements The extensive and often lengthy processes involved in federal procurement are often not amenable to transportation accident investigations where obtaining unique services, such as wreckage recovery, must be completed in a timely manner. Often, only one source or a very small number of vendors possess the unique capabilities needed by the NTSB. The NTSB has the authority to enter into agreements and other transactions necessary to carry out its mission without going through normal procurement procedures required of contracts in excess of $25,000. However, the NTSB has been criticized in the past regarding its financial management and oversight. At issue is striking a balance between providing flexibility to complete needed investigative tasks in a timely and efficient manner while providing sufficient financial management controls and oversight to minimize the risk of fraud, waste, and abuse. P.L. 108-168 clarifies the NTSB's authority regarding exemption from contracting requirements to be used only if necessary to expedite an investigation, and requires the NTSB to list all such contracts over $25,000 in its annual report to Congress. However, this provision expired at the end of FY2006. The NTSB requested that the sunset clause of this provision be deleted and the NTSB's special contracting authority for investigation-related services be made permanent. The NTSB Reauthorization Act of 2006 ( P.L. 109-443 ) strikes the sunset clause of the NTSB's special contracting authority as requested, and requires reporting on contracts awarded under this special authority to be identified in the NTSB's annual report to Congress each year. Reimbursements to the NTSB As previously mentioned, the NTSB participates in some foreign accident investigations where it is not representing a particular United States interest in the process or outcome of the investigation, but rather lends its technical expertise and experience to the investigation. In some cases, the NTSB is reimbursed for the personnel, travel, and other expenses it incurs while participating in these accident investigations, but these receipts are currently not credited as offsetting collections. Similarly, airlines are required to pay the costs of disaster mortuary services for airline disasters. However, the NTSB often pays for these costs up front to ensure the immediate delivery of these services and later seeks reimbursement from those responsible for payment. In the past, these reimbursements were not specifically credited as offsetting collections. Under the statutes existing prior to the enactment of the NTSB Reauthorization Act of 2006 ( P.L. 109-443 ), the only reimbursements to the NTSB that were specifically credited as offsetting collections were those items related to the NTSB Academy, such as tuition payments for courses and fees for facility rentals. Because other reimbursements that were not specifically credited to NTSB funding lines, the NTSB expressed concern that it could face a funding shortfall if it is necessary to expend any sizable amount of agency funds on reimbursable items that are not directly offset by reimbursements received by the Treasury. Therefore, the NTSB requested that all such reimbursable items be credited as offsetting collections to the NTSB funding line. The NTSB Reauthorization Act of 2006 ( P.L. 109-443 ) included language that authorizes the NTSB to collect fees, refunds, and reimbursements as it determines appropriate for any services it provides, either directly or indirectly. Inspector General and Comptroller General Oversight of the NTSB While the NTSB is an independent agency completely separate from the DOT, the DOT Office of Inspector General was given limited authority to audit and review NTSB functions in the 2000 NTSB reauthorization act ( P.L. 106-424 ; 49 USC § 1137). This provision addressed concerns over identified fraud and inefficiencies in the NTSB's financial management office in the 1990s that went unchecked for some time, in part because there was no entity to oversee and audit these operations. The law gives the DOT Office of Inspector General limited oversight of the NTSB's financial management, property management, and business operations, but does not give the Inspector General authority to review the NTSB's investigative functions or safety recommendations process. The statutory authority specified that the Inspector General shall be reimbursed by the NTSB for any costs associated with audits or reviews of the NTSB. This, however, posed potential problems by creating a possible conflict of interest, or at least a perception of a possible conflict of interest. Also, because Inspector General audits are not specifically budgeted for, related costs could impact the NTSB's resources to carry out its core mission to investigate accidents and promote transportation safety. Therefore, the NTSB requested that this statutory language be repealed and the DOT Office of Inspector General be directly appropriated funds for its activities related to NTSB oversight. The DOT Office of Inspector General concurred with this recommendation. The NTSB Reauthorization Act of 2006 ( P.L. 109-443 ) authorizes such sums as may be necessary for the DOT Office of Inspector General's costs associated with investigations and audits of the NTSB. The provision, however, also includes a proviso stating that, in the absence of a specific appropriation for this purpose, the NTSB and the DOT Office of Inspector General shall establish a reimbursable agreement to cover such expenses. The NTSB Reauthorization Act of 2006 ( P.L. 109-443 ) also requires that the GAO evaluate and audit the programs and expenditures of the NTSB on at least an annual basis, or more frequently if determined necessary by the Comptroller General. The GAO is required to evaluate and audit the NTSB's information management and security; resource management; workforce development efforts; procurement and contracting planning, practices, and policies; the extent to which the NTSB follows leading practices in management; and the extent to which the NTSB addresses management challenges in completing accident investigations. The provision language also allows for the House Committee on Transportation and Infrastructure and/or the Senate Committee on Commerce, Science, and Transportation to carry out such audits and evaluations in lieu of or in addition to GAO-led audits, as deemed necessary. Other Possible Issues for NTSB Reauthorization and Congressional Oversight Besides the issues specifically identified during the NTSB reauthorization debate, two other prominent, and related, issues involving the NTSB may come under congressional scrutiny. First, some have expressed concerns over possible industry stakeholder lobbying of NTSB officials in attempts to influence the scope or language of NTSB investigative findings. Second, concerns have also been raised about the NTSB's heavy reliance on experts from transportation entities with a vested interest in the outcome of an investigation, such as airlines and aircraft manufacturers, for fact gathering and data analysis. Some experts argue that the NTSB should instead create stronger ties with government laboratories and academic institutions for expertise to lessen the chances that bias, or the perception of bias, could creep into the accident investigation process. These issues were not specifically addressed in reauthorization legislation. Stakeholder Lobbying of NTSB Officials One ongoing concern is the degree to which entities with a vested interest in the outcome of an investigation may be able to influence NTSB board members. This is an important consideration because under the NTSB party system of conducting investigations, entities with vested interests in an investigation are made a part of the investigation team and work closely with NTSB staff and officials to provide technical knowledge and experience. However, the potential exists for entities to cross a fuzzy line between providing technical knowledge and expertise and attempting to gain or exert influence in the NTSB investigative process and decisions about what findings, conclusions, and causal factors will be highlighted in the board's final report on an investigation. Former chairman Ellen Engelman Conners claimed that during the investigation of the crash of American Airlines flight 587, board members came under intense pressure from both the airline and the aircraft manufacturer, Airbus, in an effort to sway the NTSB's conclusions and language in the final report. Conners maintained that lobbying efforts have not yet influenced the outcome of an investigation, but these tactics have delayed the investigation process. It is notable, however, that in the American Airlines flight 587 investigation, the Safety Board, in a split decision, voted to change the order of causal factors recommended by the NTSB staff, a move that placed a greater emphasis on the design characteristics of the aircraft's rudder control system and de-emphasized the role that American Airline's pilot training played in the accident. Two board members at the time, issued a joint dissenting statement asserting that "[t]o diminish the role of the [training] in the accident is to downplay the role it played in the pilot's actions which caused the accident." The counter-argument for reversing the order was to emphasize the design problems with the rudder system which more closely paralleled the new recommendations issued by the NTSB in its final report. Recommendations pertaining to pilot training had previously been issued by the NTSB during the course of the investigation. The dissenting members believed that the statement of probable cause should accurately reflect the findings of the investigation and not be flavored to emphasize the importance of any particular recommendations being put forth. While the motives behind such a change in emphasis to a probable cause statement could arguably be justified based on more closely aligning the wording of the probable cause to the NTSB's agenda for advocating recommended safety changes based on investigative findings, in this case, the potential public perception that the adopted probable cause language may have, in part, been influenced by lobbying efforts by a party to the investigation could bring the board members' motives into question. A pattern of actions of this sort could potentially lead to a loss of public trust in the NTSB and the party process of investigating accidents. A variety of safeguards already exist to prevent external entities from influencing NTSB findings and conclusions. First, under the "Sunshine Act", the Safety Board as a whole must meet in public on most matters pertaining to accident investigations, which would increase the transparency of any attempt by a board member or members to sway an investigation. Also, while interested parties may provide technical expertise in the fact finding phase of an investigation, analysis of these facts is done strictly by the NTSB staff of investigators. The investigative process is designed to provide each party an opportunity to provide the NTSB with its perspectives and concerns. Parties are free to submit their own analyses and exchange information and ideas with NTSB investigators. Also, formal procedures exist for parties to petition the NTSB to reconsider or modify its investigative findings after an investigation has been completed and the final report has been adopted. Nonetheless, in a highly complex and contentious accident, evaluating competing perspectives brought forth by various parties to the investigation can prove challenging for the NTSB and can stretch out the length of time needed to complete an investigation. Also, despite these procedures, the potential for parties to exert their influence on the NTSB process still exists, and could have a negative impact on the effectiveness of the NTSB. Even if the NTSB was not swayed by such efforts to influence an investigation, a public perception that the NTSB was not fully impartial could diminish the agency's reputation and credibility. Striking a balance between allowing involved parties to provide unique data and technical analysis that often they alone possess while preventing these entities from subtly or overtly attempting to sway the investigative process in their favor or exert influence and pressure on board members is likely to be a sizable challenge. Policymakers may consider limitations or more formal rules for the interaction between investigative parties and the NTSB, although this issue has not been specifically addressed during the current reauthorization process. Use of Impartial Outside Expertise on Investigation Teams A lingering concern, closely tied to possible stakeholder lobbying of NTSB officials, is the NTSB's extensive reliance on entities with a stake in the investigation, such as airlines and aircraft manufacturers, for technical expertise. This reliance on subject matter experts from those entities that may be under investigation leaves open the possibility that NTSB could receive biased analysis of technical data and potentially puts the NTSB in the position of evaluating competing hypotheses and analysis of technical data provided by parties that approach the accident from a particular perspective with particular interests to protect. In 2000, the RAND Corporation Institute for Civil Justice reviewed the NTSB's aviation investigation practices and found that "[c]oncern about the party process has grown as the potential losses resulting from a major crash, in terms of both liability and corporate reputation, have escalated, along with the importance of NTSB findings to the litigation of air crash cases." The report strongly recommended that the NTSB develop policies and procedures for making greater use of outside experts from more impartial sources such as government laboratories and academia to participate in and contribute to the investigative process. The report also recommended that the NTSB's internal resources be enhanced through better training and strategic staffing if the agency's independence is to be assured. The report proposed a model in which private consultants and academics be made an integral part of the party process, instead of having peripheral roles of support and analysis of elements of the investigation. As a first step, RAND suggested that the NTSB perform a nationwide assessment of federal laboratories, universities, and independent corporations to identify the resources and expertise to augment NTSB investigative capabilities, and form memoranda of understanding (MOUs) and other formal relationships with these entities. While the NTSB has entered into formal MOUs with the National Aeronautics and Space Administration (NASA), and has a close working relationship with several Department of Defense (DoD) laboratories, these entities largely continue to play a support role in investigations and are not an integral part of the party process. While subject matter experts from academia are routinely consulted and sometimes asked to provide analysis of technical data and facts regarding an accident, these experts also do not participate in the investigation to the same degree of involvement as parties to the investigation such as aircraft manufacturers, airlines, and pilot unions. Policymakers may consider whether changes to the NTSB party process, such as allowing outside experts to play a more integral role in investigations, could improve the NTSB investigative process. This issue has not been formally addressed by Congress in the current reauthorization process. Other Transportation Safety Issues Addressed During NTSB Reauthorization The NTSB Reauthorization Act of 2006 ( P.L. 109-443 ) also served as a vehicle for enacting other transportation-safety related legislation outside the jurisdiction of the NTSB. These include a mandate for the FAA to complete a safety review examining runway safety area alternatives at Juneau International Airport, Juneau, Alaska; a provision directing the DOT Inspector General, in cooperation with the Department of Justice and the Attorney General of Massachusetts, to conduct investigations of criminal and fraudulent activities related to the construction of the Boston Central Artery Tunnel project; a provision directing the DOT Inspector General to provide oversight to the project-wide safety review of the Boston Central Artery Tunnel that was initiated in response to the July 10, 2006 collapse of a section of the tunnel's roof resulting in a fatality to a motor vehicle occupant; and a provision requiring the DOT Inspector General to provide periodic reports to Congress regarding the findings of its oversight, audits, and investigations of the Boston Central Artery Tunnel project. Legislative Actions On March 8, 2006, the House Aviation Subcommittee held a hearing on NTSB reauthorization. The National Transportation Safety Board Amendments Act of 2006 ( H.R. 5076 ) was introduced in the House by Representative Don Young on April 4, 2006, and ordered reported by voice vote of the Committee on Transportation and Infrastructure on April 5, 2006. The Senate Committee on Commerce, Science, and Transportation, Subcommittee on Aviation held a hearing on NTSB reauthorization on May 25, 2006. The National Transportation Safety Board Reauthorization Act of 2006 ( S. 3679 ), was introduced by Senator Burns on July 18, 2006, and was ordered reported without amendment favorably on July 19, 2006 by the Senate Committee on Commerce, Science, and Transportation. On September 15, 2006, S. 3679 was ordered reported with an amendment in the nature of a substitute, which was agreed to by unanimous consent of the Senate on September 25, 2006. On December 6, 2006, an amended version of H.R. 5076 , retitled the National Transportation Safety Board Reauthorization Act of 2006, was passed by the House. On December 7, 2006, the Senate passed H.R. 5076 without amendment, and it was signed by the President on December 21, 2006 becoming P.L. 109-443 .

The National Transportation Safety Board (NTSB) is a small, independent agency with responsibility for investigating transportation accidents; conducting transportation safety studies; issuing safety recommendations; aiding victim's families in aviation disasters; and promoting transportation safety. Near the conclusion of the 109th Congress, a two-year NTSB reauthorization measure, covering fiscal years 2007 and 2008, was enacted (P.L. 109-443). During the 109th Congress, legislation to reauthorize the NTSB for fiscal years 2007-2009 was ordered reported in the House (H.R. 5076) seeking a three-year funding reauthorization for FY2007 through FY2009, that included a 22% increase to authorized funding levels in FY2008 compared to FY2007 requested levels, largely to support a proposed staffing increase of about 19%. In contrast, the Senate initially passed a two-year reauthorization bill (S. 3679) in September, 2006, covering FY2007 and FY2008, that paralleled the administration's FY2007 funding request, but did not provide the increase sought in FY2008, instead proposing to maintain staffing at current levels through FY2008. The NTSB indicated in reauthorization hearing testimony that a staffing increase was needed to effectively carry out its mission. P.L. 109-443 authorizes funding in FY2007 slightly above the President's requested appropriation level, and authorizes a 13.5% increase in the authorized level in FY2008, compared to FY2007. Actual funding levels, however, are dependent on amounts specified in appropriations legislation. In addition to setting funding authorization levels, P.L. 109-443 extends and expands provisions that relax certain contracting requirements for investigation-related services; establishes various reimbursements to the NTSB as offsetting collections that are available until expended; and authorizes reimbursable payment from the NTSB for Department of Transportation Office of Inspector General (DOT OIG) investigations and audits of the NTSB. The act also requires the Federal Aviation Administration (FAA) to submit a report explaining why it has not implemented NTSB's most wanted aviation-related transportation safety improvements, and charges the GAO with the responsibility of evaluating and auditing NTSB programs, operations, and activities on an annual basis, or more frequently if determined necessary. The act also directs the DOT OIG to conduct oversight and investigations related to the Boston Central Artery Tunnel project. While not formally addressed during reauthorization debate, two other prominent issues involving the NTSB may come under congressional scrutiny: concerns over industry stakeholders lobbying NTSB officials in attempts to influence the scope or language of NTSB investigative findings, and the NTSB's heavy reliance on experts from transportation entities with a vested interest in the outcome of an investigation for fact gathering and data analysis. Some experts argue that the NTSB should instead create stronger ties with government laboratories and academic institutions for expertise to lessen the chances that bias, or the perception of bias, could creep into the accident-investigation process. This report will not be updated.

CRS_R40780

Introduction The existing authorization for federal surface transportation programs provided by the Safe, Accountable, Flexible, Efficient Transportation Equity Act: a Legacy for Users (SAFETEA-LU or SAFETEA) expires on September 30, 2009. Congress is now considering legislation that would either reauthorize these programs or extend the existing program into at least part of the next fiscal year. While it considers reauthorization or extension legislation, Congress must also address an ongoing financial shortfall in the highway account of the Highway Trust Fund. Just before leaving for its summer District Work period, Congress provided a short term fix for the funding problem by transferring $7 billion from the Treasury's General Fund Account to the highway account of the Highway Trust Fund ( P.L. 111-46 ). These funds are expected to keep the trust fund solvent through the remainder of FY2009 and may also provide an additional cushion that could extend later into the fall. This action does not, however, address program extension and provides no long term solution to the trust fund's financial problems. There are many issues associated with surface transportation legislation. Some, but not all, are discussed in the examination of the legislation under consideration presented in this report. Those seeking to understand all of the major issues at play in this debate should refer to: CRS Report R40053, Surface Transportation Program Reauthorization Issues for the 111 th Congress , coordinated by [author name scrubbed]. The SAFETEA Framework Funding The Highway Trust Fund consists of two separate accounts—highway and transit—which are sometimes mistakenly referred to as separate trust funds. In practice, the highway account and the transit account are discussed as though they were separate entities, with the term Highway Trust Fund being synonymous with the highway account. The Highway Trust Fund is financed from a number of sources including sales taxes on tires, trucks, buses, and trailers, as well as truck usage taxes, but approximately 90% of trust fund revenue comes from excise taxes on motor fuels. The majority of the motor fuel revenue dedicated to the trust fund is derived from an 18.3 cents per gallon tax on gasoline (24.3 cents on diesel). The highway account receives an allocation equivalent to 15.44 cents of the tax and the transit account receives the revenue generated by 2.86 cents of the tax. A separate and unrelated 0.1 cents per gallon tax on all fuels goes into the leaking underground storage tank (LUST) trust fund. As FY2009 comes to a close the highway account has once again needed a legislative rescue before the end of the fiscal year. Otherwise the Federal Highway Administration (FHWA) would have been unable to pay states for work they had already completed in a timely manner. This situation was a rerun of last year's trust fund rescue in which $8 billion was transferred from the general fund to the highway account to carry it through the end of FY2008 ( P.L. 110-318 , enacted September 15, 2008). What differed this year was that FHWA gave Congress considerably more notice of the impending problem than was the case last year, thereby allowing Congress to take action to provide the trust fund with sufficient funds, $7 billion, to carry it through the remainder of FY2009 ( P.L. 111-46 ). For the moment the transit account remains solvent, though its long term health is also believed to be in jeopardy. Over the 50-plus year life of the trust fund there have been several increases in the levels of taxation. The last increase in the fuels taxes occurred in 1993 (all of these funds were not actually deposited into the trust fund initially, but were deposited in the Treasury general funds for deficit reduction purposes until FY1998). Historically, the trust fund based revenue collection system has been a reliable, and ever growing, source of funding for surface transportation. This situation has changed under SAFETEA as spending on highways and transit has exceeded both highway and transit account revenues on a regular basis. Data provided by the Congressional Budget Office (CBO) spring FY2009 baseline calculation, Appendix B , Table B -1 , shows that the highway account had outlays of $35 billion for FY2007 against the aforementioned receipts of $34.3 billion. In FY2008 outlays of $37 billion were matched by only $31.3 billion in receipts, not including the aforementioned injection of $8 billion into the trust fund from Treasury general funds. For FY2009 the CBO estimates were for an even greater gap, outlays of $38.8 billion versus receipts of $31.6 billion. In reality, the FY2009 receipt level will be even worse than predicted by CBO in its spring baseline calculation because driving continues to be well below predicted levels due to the ongoing recession, and other trust fund tax components such as truck sales taxes, are also producing revenues well below expectations. These trends are shown clearly in an FHWA prepared chart attached to the end of this report in Appendix B , Figure B -1 . As a rule of thumb, adding a penny to the federal fuels tax provides the trust fund with between $1.6 and $1.8 billion in new revenues. Without an increase in the existing fuel taxes, a difficult political issue in recent years, the fuel-based trust fund taxation system will not be able to support increased surface transportation spending. The choice for policymakers, therefore, is to find new sources of income for the expanded program that transportation proponents desire, or alternatively, to settle for a smaller program that might look very different than the one currently in place. In the past nothing has solved the political problems of the surface transportation program faster than new money. TEA21 especially benefitted from a run up in fuel usage during the boom years of the late 1990s, that was at least partially the result of growing SUV purchases during the period. SAFETEA did not have quite the same financial backing, but the authors of the act were nonetheless able to find sufficient new revenues to make the act possible. The next reauthorization bill, as the above discussion indicates, lacks a ready source of new cash. This situation will define the upcoming legislative debate much more clearly than discussions of program structure, system needs, and a host of other items expected to be addressed in the weeks and months ahead. The American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5) The ARRA provided considerable new funding authority to surface transportation programs for FY2009 and FY2010. The federal-aid highway program received $27.5 billion to be distributed through the existing federal-aid highway program. The federal transit program will receive $8.4 billion. High Speed Passenger Rail, previously a relatively small federal program, will receive $8 billion. An additional $1.5 billion which can be used for any eligible surface transportation purpose is made available by a new Surface Transportation Discretionary Grant program. This new program is under the control of the Secretary of Transportation and must be spent on projects of at least $20 million and not more than $300 million. The ARRA also provides for changes in tax law that will enable additional spending on transportation projects using so-called innovative financing (in this case providing a tax credit for "Build America Bonds" amongst other provisions). Transportation activities normally outside the scope of surface transportation reauthorization also received funding. The reauthorization debate will proceed against this backdrop. Those seeking to delay reauthorization view this large boost in funding as a reason to move slowly on a new surface transportation bill. The alternative view, however, is that the ARRA provides only a down payment on what many consider to be serious national infrastructure deficiencies and that new funding is needed going forward to keep the momentum for improvement moving in the right direction. Highways The Federal-Aid Highway Program (Highway Program) is an umbrella term for an array of individually authorized programs administered by the FHWA. There are two categories of programs: formula and discretionary. Formula program funds are distributed annually amongst the states based on factors detailed in authorizing legislation. These annual state formula distributions are known in FHWA program parlance as "apportionments." All of the large highway programs are formula/apportionment programs. Discretionary programs tend to be smaller programs. Funding under these programs is allocated by the FHWA or is earmarked by Congress. The Highway Program is primarily a state run program. The state departments of transportation (state DOTs), operating within the federal programmatic framework, largely determine where and how money is spent (but have to comply with detailed federal planning guidelines as part of the decision making process). The state DOTs let the contracts and oversee the project development and construction process. Federal monies for highway project spending are not provided to states up front. Rather, when amounts are "distributed" to the states, it is initially a notification of the availability of federal funds. Once a project is approved and the work is started, the states may submit vouchers to the FHWA for reimbursement for the project's costs as, or after, they are incurred. The "reimbursable" nature of the highway program is designed to help prevent waste, fraud and abuse. The Highway Program is funded with contract authority (CA). CA is a type of budget authority that is available for "obligation" (which makes the federal government obligated to pay) according to the provisions of authorizing legislation, without further legislative action (i.e., prior to an appropriation). Because CA can be obligated without an appropriation, a spending control mechanism, called a "limitation on obligations" (ObLim or Oblimit), is used to control annual spending in the place of the appropriation. The ObLim sets a limit on the total amount of contract authority that can be obligated in a single fiscal year. In most discussions, the ObLim is analogous to an appropriation, in that it is considered to be the best indicator of the amount of federal funding actually being made available for use by the states. Federally funded highway projects generally require states and/or local governments to participate financially by providing a designated local matching share. For most Interstate System projects the match is 90% federal and 10% state/local (except in states with large amounts of federal land where the federal share may be larger). For other programs the match is generally 80% federal and 20% state/local. The "Core" Formula Programs The vast majority of the federal-aid highway money for project spending is apportioned to the state DOTs through several large "core" formula-driven programs. These programs are the "big money" programs (roughly 80% of the last authorization act's CA ) and are the sources of funding for most federal-aid highway projects. The core formula programs are: Interstate Maintenance Program (IM) National Highway System (NHS) Surface Transportation Program (STP) Highway Bridge Program (HBP) Congestion Mitigation and Air Quality Improvement (CMAQ) Program Highway Safety Improvement Program (HSIP) Equity Bonus Program (EB)—EB funds are distributed into the programs above The authorization act sets the total amount for each of these programs and formulas are run to determine the portion of the program's total authorization that is made available to each state. These programs were conceived, at least in part, to provide federal funds for specific needs as is indicated generally by the program names. There are also a number of smaller formula programs and activities such as the Safe Routes to School program, Appalachian Development Highway System (ADHS) program, and Metropolitan Planning. Over time, the state DOTs have been given increasing flexibility to shift funds from one program to another (excepting HSIP) to help implement their state transportation plans. Some Highway Program funding may also be used for transit projects. This flexibility has the effect of reducing the importance of funding formulas and program eligibility distinctions. Despite the growing funding flexibility, some state DOTs as well as some urban interests would argue that the programmatic structure still inhibits them from using federal highway funds in the way that they deem the most efficient or beneficial. The Equity Bonus Program is the largest highway program in dollar terms. Its purpose is to assure that each state receives a prescribed rate-of-return (currently 92%) to its core apportionment programs on its highway users' tax payments into the highway account of the trust fund. The program's operation is very complicated and cannot be described here for reasons of brevity. One effect of the Equity Bonus, however, is that, like the flexibility provisions, it can be viewed as diluting the policy rationales associated with the core program formulas. In some years, additional money has also been allocated to some formula programs through a process called Revenue Aligned Budget Authority (RABA). Discretionary Programs There are also a number of smaller discretionary programs (also referred to as allocated programs) that are also part of the Highway Program. These programs are nominally under the control of the FHWA and were designed to allocate funds to projects chosen through competition with other projects. Since FY2000, most discretionary program funding has been earmarked by Congress. Among the most commonly discussed discretionary programs are the Transportation, Community and System Preservation Program (TCSP), the National Corridor Infrastructure Improvement Program (NCIIP), Construction of Ferry Boats and Ferry Terminal Facilities, and Projects of National and Regional Significance (PNRS). The term "program" is used very broadly. The FHWA's Financing Federal-Aid Highways listing of Allocated Programs includes entries for 59 activities, some of which are clearly programmatic in nature, mixed in with others that more resemble specific project designations, temporary pilot programs, studies, and other narrowly directed activities that some observers might question being listed as programs. Alternative/Innovative Finance DOT has a number of financing mechanisms other than the grant programs. FHWA innovative financing mechanisms include the Transportation Infrastructure Finance and Innovation Act (TIFIA), Grant Anticipation Revenue Vehicles (GARVEEs), and State Infrastructure Banks. All of these financing techniques leverage federal funds through debt mechanisms. Transit The federal transit program, administered by DOT's Federal Transit Administration (FTA), is a collection of individual programs, each with different funding amounts, distributional mechanisms, and spending eligibility rules. There are four main federal transit programs in SAFETEA, together accounting for 85% of authorized funding. Funding in two of these programs, the Urbanized Area Formula Program and the Fixed Guideway (or Rail) Modernization Program, is distributed by formula. The Urbanized Area Formula Program, which accounts for 41% of authorized funding in SAFETEA, provides funding to urbanized areas with a population of 50,000 or more. Funds can be used for a broad range of expenses including capital, planning, transit enhancements, and operations in urbanized areas with a population of up to 200,000. Fixed Guideway Modernization Program funds, 16% of authorized funding, go mainly for the replacement and rehabilitation of transit rail system assets. The other two main transit programs, the New Starts Program and the Bus and Bus-Related Facilities Capital Program, are both discretionary programs, although funding in the Bus Program is mostly earmarked. New Starts funding, 18% of overall authorized funding, is available primarily on a competitive basis for new fixed guideway systems and extensions. While the majority of funding from this program over the years has gone to transit rail projects, the New Starts program has funded projects for busways and bus rapid transit, ferries, automated guideway systems, and vintage trolleys. Congress enacted a new "Small Starts" program in SAFETEA to fund projects with a total cost of $250 million or less in which the federal share is $75 million or less. Small Starts projects are funded with $200 million annually from the New Starts authorization beginning in FY2007. Bus Program funds, 9% of authorized funding, are provided to purchase buses and bus-related equipment, including the construction of buildings such as administrative and maintenance facilities, transfer facilities, bus shelters, and park-and-ride stations. A number of smaller funding programs, including the Rural Formula Program, the Jobs Access and Reverse Commute (JARC) program, the Elderly and Disabilities grants program, and the New Freedom Program, together with program administration account for the remaining 15% of program funds. Safety Highway transportation is by far the predominant cause of transportation-related fatalities and injuries in the United States. Three DOT agencies administer highway safety programs authorized in SAFETEA: the National Highway Traffic Safety Administration (NHTSA); the Federal Motor Carrier Safety Administration (FMCSA); and the FHWA through the Highway Safety Improvement Program (HSIP). National Highway Traffic Safety Administration (NHTSA) Highway safety is primarily the responsibility of the states, controlling as they do much of the road network and having the authority to legislate restrictions on driver behavior. Congress has established a federal highway safety program to assist states in improving highway safety. Within the DOT, the National Highway Traffic Safety Administration (NHTSA) is the office primarily responsible for promoting highway safety. NHTSA provides grants to states to support and encourage state traffic safety efforts, regulates motor vehicle safety, and carries out research on traffic safety. NHTSA monitors state highway safety activities and oversees the use of federal grant funds by requiring states to submit highway safety plans. A state's plan must be approved by the DOT in order for the state to receive federal traffic safety funds. Each state's plan must identify the state's primary safety problems, set goals for addressing the problems, and establish performance measures by which progress toward improving those safety problems can be measured. NHTSA also provides training and technical assistance to states. NHTSA's safety grant programs can be divided into two parts: formula and incentive programs. The largest program, the State and Community Highway Safety Program (often referred to as the Section 402 program, from its statutory identification as Section 402 of Title 23), provides grants to states by a formula, and is the core federal highway safety grant program. Congress has also established several smaller incentive grant programs which encourage states to adopt policies or carry out programs in support of federal safety priorities. The Section 402 program provides grants to states to carry out highway safety programs intended to reduce the number of traffic crashes and their resulting deaths, injuries, and property damage. Specifically, Section 402 requires states to carry out programs that address speeding, the use of occupant protection devices (seat belts and child restraint systems), drunk and drugged driving, motorcycle crashes, school bus crashes, and unsafe driving behavior (including aggressive driving, fatigued driving, and distracted driving caused by the use of electronic devices in vehicles). Grants are distributed to the states by a formula based on population and public road mileage. At least 40% of the funds each state receives must be passed on to local communities for implementation of highway safety programs. In addition to the Section 402 program, Congress established or amended six traffic safety incentive grant programs in SAFETEA that offer states the opportunity to qualify to receive additional federal funding by passing legislation or implementing programs that address these issues. The programs focus on promoting the use of occupant protection devices (seat belts and child car seats), reducing the incidence of driving while intoxicated, promoting motorcyclist safety, and improving state traffic safety data collection systems. The number of states which have qualified to receive grants under these programs each year during the period of SAFETEA-LU has varied from as few as five or six to all 50 states. Federal Motor Carrier Safety Administration The Federal Motor Carrier Safety Administration (FMCSA) promotes the safety of commercial motor vehicle operations through regulation, enforcement, training, and technical assistance. It also administers motor carrier safety grant programs that assist states in ensuring the safety of commercial motor vehicle operations, including inspection of vehicles and licensing of commercial drivers. Highway Safety Improvement Program (HSIP) The FHWA administered HSIP is one of the aforementioned core federal-aid highway funding programs. Its purpose is to reduce traffic fatalities and serious injuries on public roads by making improvements to the design or operation of the roadway. Each state receives funding according to a formula based on road lane-miles, vehicle miles traveled, and traffic fatalities. Each state receives at least 0.5% (1/2 of one percent) of the program's funding. HSIP includes a dollar set-aside for the Railway-Highway Grade Crossing Hazard Elimination Program from the program's funding and there is also a dollar set-aside within the formula funds distributed to the states for the purpose of construction and operational improvements on high risk rural roads. Extension Legislation The Obama Administration has asked Congress to extend the existing program for 18 months for a number of reasons, the most important being the need to identify a solid funding structure for long term program reauthorization. Senate Committee leadership has concurred with the Administration view and the Senate is now considering extension legislation. On July 22, 2009, the Senate Committee on Environment and Public Works (EPW) reported the Surface Transportation Extension Act of 2009 ( S. 1498 ). This legislation would extend existing surface transportation programs at current funding levels for 18 months (beginning October 1, 2009 and ending March 31, 2011). EPW has jurisdiction over highway titles of the surface transportation program and is the lead Committee on reauthorization. The 3 other Senate Committees with jurisdiction over various titles of the program have subsequently reported and/or introduced similar legislation: Commerce, Science, and Transportation ( S. 1496 ), Banking ( S. 1533 ), and Finance ( S. 1474 ). The provisions in these bills are likely to be merged into a single bill should the Senate choose to consider this issue in the fall of 2009. The Proposed Surface Transportation Authorization Act of 2009 (STAA) Status This legislation was made public on June 18, 2009 by the leadership of the House Committee on Transportation and Infrastructure. As released, the legislation is incomplete, lacking funding data and the details of several major provisions. Subcommittee on Highways and Transit mark up of the proposed legislation occurred on June 24, 2009. No amendments were considered during the markup session (several were introduced, but all were subsequently withdrawn). The bill is as yet unnumbered as it has not been formally introduced. Information on the contents of the not yet completed bill is available at the House Committee on Transportation and Infrastructure's website: http://transportation.house.gov/ . In addition, an Executive Summary of the contents of the bill and documents explaining the rationale behind its major provisions can be found at the same location. Overview The authors of this legislation view it as transformational. From their perspective this legislation presents a clear break from the existing structure of the federal surface transportation program that has developed incrementally over the last several decades. In part they hold this view because they see the proposed legislation as a refocusing and simplification of the program. Simplification here is facilitated by the elimination of 75 stand alone programs, the creation of a few new focused programs, and a rethinking of existing programs that are retained. This restructuring is especially true for what might be regarded as the traditional highway portion of the legislation (Title I–Federal-Aid Highways) although, as will be discussed, the bill to a significant extent tries to make Title I more intermodal in nature, and therefore might not be viewed by its authors as having a purely highway section. The legislation is not devoid of new initiatives. It creates several new programs: the critical asset investment (CAI) program, the freight transportation program (FIP), the metropolitan mobility and access program (MMA), and a program for projects of national significance (PNS). The bill also provides for structural and other changes in several retained programs. A principal feature of the legislation is its focus on intermodalism, which its authors consider an issue of overarching importance throughout the bill. To advance its policy goals the bill makes significant changes to the organization of the Department of Transportation (DOT), requires new national and regional (metropolitan) planning initiatives, greatly enhances the role of certain groups within the transportation planning and construction process - most notably in regard to Metropolitan Planning Organizations (MPOs) - and establishes broad program performance management systems. The interest in performance management is particularly notable. The terms "performance target" and "performance measure" appear a combined 95 times in the bill. These same terms appeared only eight times in SAFETEA. According to the preamble, the legislation is designed "to transform Federal surface transportation to a performance-based framework ... " While federal performance management systems requirements would be new, the extent to which this is transformational is debatable. This bill appears to add performance management on top of the existing rules, regulations, and reporting requirements within many of the categorical programs. Some would argue that to be transformational, performance-based management should be used to replace rather than supplement these requirements. In this way the federal government would not dictate to states, localities, and transit agencies how to spend federal funds, funds that might be distributed via a block grant, but would set performance standards that they must meet. Recipients of federal funds would then be free to develop their own solutions to transportation problems, but would be held accountable, through rewards and penalties, for the results. At 775 pages, without funding data, details on several programs, and an expected list of high priority projects (earmarks), the bill is nonetheless likely to be viewed as complicated and difficult to comprehend, especially for non-transportation practitioners. In part, the length of the bill is related to how it has been drafted. Whereas previous legislation usually contained language amending the U.S.C. Title 23 (Highways), this legislation redrafts significant portions of the title. But the length of the proposed legislation is also related to the aforementioned restructuring of the federal surface transportation programs and by significant changes in the overall policy goals advanced by the bill. Because STAA includes some limits on new highway lane construction and focuses on freight, transit, intermodalism, and livability policies, some observers might construe features of this bill as being biased against expanding highway capacity. Others, however, may view these features of the bill as reflecting policies that favor alternatives to the automobile, such as transit, bicycles, and walking. Funding remains the great unknown of this legislation. The T&I Committee in its supporting document calls for a $500 billion program; $450 billion, mostly from the Highway Trust Fund's two accounts, for surface transportation programs (with a U.S. Treasury general fund contribution for transit) and an additional $50 billion for high speed rail, most likely from the U.S. Treasury general fund account and/or other sources. Since the T&I Committee lacks jurisdiction over tax and other fundraising policy, it must wait for the House Committee on Ways and Means to come up with a revenue raising scheme that would fund the T&I Committee's proposals or limit the size of the bill to some other, as of yet, undetermined amount. Because the bill lacks a revenue title as well as programmatic funding information, it is, at this juncture, difficult to evaluate the relative importance that the STAA places on certain of its programs, especially its new ones. For example, it is clear that the FIP is an important policy direction for the bill, but without funding information, it is impossible to know whether it is viewed as a small start up program or a large long term initiative. In the supporting documents provided by the Committee transit appears to do well in terms of funding under the bill. T&I has stated that the federal transit program alone will be authorized at $99.8 billion over six years, an annual average of $16.6 billion. Not counting highway program funds that may go to support transit projects and the $50 billion proposed by the supporting documents for high speed rail, the share of the funding directed to transit by the STAA is 22%. This discussion basically follows the organization of the proposed legislation on a subject by subject basis. Because of the structure of the bill, some provisions, such as performance management, appear throughout the legislation, so there may appear to be some overlap and occasional redundancy in this discussion. This is largely intentional. Highway Provisions STAA would make major changes in the structure and policy focus in the Highway Title of the reauthorization bill (Title I). The bill represents a major programmatic shift away from highway construction in a broader sense and toward a concentration on: the maintenance/improvement of existing highways; the improvement of freight movement, in regard to both highway and intermodal improvements; multimodal improvements to metropolitan area mobility, access, and livability; addressing large projects of national significance; as well as continuing highway safety efforts. Some could see STAA as being more urban-focused in outlook than SAFETEA, in part by expanding the authority of Metropolitan Planning Organizations (MPOs) relative to the state DOTs. Among the structural changes the Highway Title of STAA would make to the Federal-Aid Highway program are the following. In Subtitle A, among the core programs, the Interstate Maintenance Program, the current Highway Bridge Program, and the National Highway System Program would cease to exist as independent entities and their programmatic responsibilities would be transferred mostly to the newly created Critical Asset Investment (CAI) and Freight Improvement (FIP) programs, or to the existing STP, which, it appears, could be substantially expanded by STAA in dollar terms. Of the SAFETEA core programs, STP, CMAQ, and HSIP are retained as core programs to be joined by CAI and the FIP, a total of five core programs. Funds under these core programs would be apportioned among the states by formula. In Subtitle B, Intermodal and Organizational Innovations, STAA creates two major intermodal programs, the Metropolitan Mobility and Access Program (MMA) and Projects of National Significance (PNS), which would be under the control of MPOs and the FHWA, respectively, and not state DOTs. STAA would allow for a major expansion of funding transferability between highway and transit programs and a broadening of direct project funding eligibilities to allow an increase in direct highway funding of transit projects or direct transit funding of highway projects. Historically, however, most of such funding transfers have been of Title 23 U.S.C., Highways funds to Chapter 53 of Title 49, Public Transportation projects and uses. Transferability is discussed further later in this section. STAA also continues a significant number of discretionary programs, consolidates or eliminates some, and creates others. Core Programs Under STAA Five STAA programs fit the profile of core programs under earlier legislation, programs that provide for the apportioning of contract authority for highways among the states by formula. Critical Asset Investment Program (CAI) The stated intent of this new program (Section 1110) is to bring the National Highway System (NHS) roads and bridges (which include all Interstate System routes and most other major arterial highways) up to a state of good repair and to preserve this condition. CAI is also intended to strengthen the connection between funding and performance outcomes. Eligibility is limited to highways on the NHS (about 4% of total U.S. road length) or bridges on Federal-Aid Highways. Capacity expansion that involves the addition of added travel lanes that are not auxiliary lanes are not eligible projects unless they are located on Federal-Aid Highway bridges. The provision includes a currently unspecified percentage that states could spend on certain CAI management, data collection, bridge inspection, and bridge inspection personnel training efforts. The CAI provision sets forth a variety of performance measures and targets for the program. It also requires each state to submit state CAI plans to DOT for approval. If DOT disapproves a state plan, the Department is not to approve funding for uninitiated projects until the plan, or updated plan, is approved. DOT may lower a state's required performance targets under certain conditions, including in a finding by the DOT that the state is receiving insufficient apportionments to meet its CAI targets or because of an emergency. Beginning in 2012, if DOT determines that a project is inconsistent with its plan, federal funding may be withheld from the project. Freight Improvement Program (FIP) STAA (Section 1105) creates a second new program that would provide apportionments to states to fund publicly owned highway freight transportation projects. The bill sets forth the four purposes of the FIP as: 1) to improve the existing freight transportation system, 2) to add physical capacity to the freight transportation system, 3) to strengthen the ability of rural communities to access national and international trade markets, and 4) to support regional economic development. FIP projects must be located on the NHS, the National [truck] Network, or secondary freight routes designated under procedures set forth in STAA. States are to develop state freight plans. Projects must be on the state plan to receive funding. States would be allowed to make grants to freight corridor coalitions (which must meet certain organizational requirements of the bill to qualify). Many observers would regard the FIP as a major new intermodal initiative. For some reason not made clear by the authors of the STAA, the FIP is made part of the core programs and not part of the intermodal section of the bill. This program is discussed in greater detail later in this report. Surface Transportation Program (STP) This existing program would, under STAA Section 1106, retain its SAFETEA requirements and eligibilities with a few changes. Former Highway Bridge Program projects, not eligible under CAI, would be directly eligible for STP funding, as would tunnels. Under current law 10% of STP funds must be obligated for Transportation Enhancement activities. STAA would also specifically require that ten percent of the STP funds sub-allocated to Metropolitan Planning Organizations (MPOs) be used only for Transportation Enhancement (TE) activities. The sub-allocation of STP funds, after TE funding is subtracted, is shifted to be 80% based on population and 20% to any area of the state (from 62.5% and 37.5% respectively under SAFETEA). STP is, in general, the most flexible of the existing Highway Programs both in terms of project eligibility and the transferability favored by many state and local officials. In this regard, STP contrasts with more restrictive programs, such as the proposed CAI. The federal share would remain 80%. Highway Safety Improvement Program (HSIP) STAA (Section 1108) would continue this SAFETEA created program with a number of changes. States would be required to develop HSIP investment plans. Funding after FY2012 would be contingent on implementation of the plan. DOT is to establish, in coordination with the states, quantifiable highway safety targets for each state. Strategies to meet these safety targets are to be integrated into states' existing Strategic Highway Safety Plans. The general cost share for HSIP is set at 90% (except as required by 23 U.S.C. 130). The High Risk Rural Road Program is consolidated within the HSIP but is given distinct funding under the bill (the amount is as yet unspecified). Several narrowly focused safety programs are also brought under the HSIP umbrella. The federal share is 90%. This program is also discussed in the safety section of this report. Congestion Mitigation and Air Quality Improvement (CMAQ) Program STAA (Section 1109) continues and modifies this existing core Highway Program. CMAQ provides funding for projects and activities which reduce transportation related emissions in air quality nonattainment and maintenance areas for ozone, carbon monoxide. and particulate matter. The bill would allow CMAQ funds to be used for High Occupancy Vehicle (HOV) lane construction. It also would reduce DOT's authority to allow use of CMAQ funds in Clean Air Act attainment areas. CMAQ funds would be allowed for purchase of clean-fuel public transportation buses. The CMAQ formula factors have been rewritten but their relative weights are not given. The federal share is 80%. This program is discussed in greater detail in the environmental section of this report. STAA Intermodal Programs Metropolitan Mobility and Access Program (MMA) STAA (Section 1205) creates the MMA program which would provide multimodal transportation funding and financing authority directly to metropolitan planning organizations (MPOs). As mentioned earlier, direct funding to MPOs would be a major change under the Federal-Aid Highway Program. The Transportation Research Board of the National Academy of Sciences would be required to provide recommendations for project selection and evaluation criteria. DOT would have 18 months to issue a rule to carry out Section 1205. Projects under either Title 23 (Highways) or under Chapter 53, Title 49 (Public Transportation) of the U.S. Code would be eligible for MMA funding. To be an eligible MPO under MMA, an MPO must serve an urban area with a population of over 500,000, must submit a proper application, have an approved metropolitan mobility plan in effect, demonstrate the ability to carry out congestion management, and demonstrate cost management strategies and systems. There are two tiers of grants: tier one grants are for MPOs serving urbanized areas with over 1,000,000 people that experience substantial travel time delays; tier two grants are available to eligible MPOs that have not received tier one grants. Of the funds made available under MMA, 40% are to be for tier one grants and 60% are to be for tier two grants. Tier one grants are limited to not more than 10 recipients. In allocating tier two grants, DOT is to ensure a geographically equitable distribution of financial assistance through such grants. DOT may enter into full funding grant agreements (FFGAs) with recipients establishing the terms and limits of federal participation. The FFGA must identify performance criteria for the eligible recipient entering into the agreement. Plans involving tolls or public private partnerships (PPPs) that are part of a metropolitan mobility plan, must be reviewed and approved or disapproved by the Office of Public Benefit (described later in this report). Some interest and other financing costs are eligible within certain limitations. Certain planning and reporting costs are also eligible. Eligible recipients may enter into an agreement with the DOT to establish a metropolitan infrastructure bank to provide credit to help carry out projects and activities in its metropolitan mobility plan. Although Section 1205 does not overtly discourage MPOs from using MMA funds on highway construction, it is likely that much MMA funding will be spent on transit improvements. The federal share is 80%. Projects of National Significance (PNS) STAA (Section 1206) establishes a new project program for very large projects of national significance that cannot be addressed through regular state highway apportionments. Projects are to equal or exceed the lesser of $500 million or 75% of a state's annual apportionment. Projects must be eligible under the highway title (Title 23) or the mass transit title (Chapter 53 of Title 49). In addition, Section 1206 also identifies as eligible: an international bridge or tunnel, a public rail facility or private rail facility that provides public benefit, an intermodal freight transfer facility, access improvements or service improvements such as intelligent transportation systems for freight rail facilities or intermodal freight transfer facilities. In some cases there may be limited assistance to ports for surface transportation infrastructure modification. DOT is to set competitive criteria for grant selection. DOT would carry out a national solicitation for grant applications and award the grants on a competitive basis. DOT would issue letters of intent followed by an FFGA. The federal share is 80% but a lower federal share may be requested by the grant recipient. Selected Additional Highway Programs STAA also includes a number of both new and existing programs that neither fit into the core formula program category nor the new intermodal program category. They include the following. Appalachian Development Highway System (ADHS) Under Section 1116, ADHS funds would be apportioned via the most recent cost-to-complete estimate. Each of the participating states are guaranteed a minimum of 1% of funds, and a maximum share is set at 25%. STAA would cut the allowable access road mileage on the ADHS from 1,400 miles to 1,000 miles. The bill repeals the designation of corridor O-1 in Pennsylvania and limits the federal share of the cost to complete corridor X-1 in Alabama to $500 million. Funds apportioned prior to September 30, 2009 but not obligated before September 30, 2013 are to be rescinded as of that date. The federal share under ADHS is 80%. Delta Region Transportation Development Program Section 1117 would reauthorize the program for FY2010-FY2015, but no amount is given. Ferry Program Section 1107 would reestablish the program for reconstruction of ferry boats and ferry terminal facilities as the Ferry Program. The new Section 147 does not include the current set-asides for Alaska, New Jersey, and Washington State. The provision would require the establishment of a National Ferry Database. The program is to be an apportioned program, but the apportionment formula is not provided. Federal and Tribal Lands, Puerto Rico, and Territorial Highway Program Section 1113 would consolidate the Federal Lands Highways programs (Public Lands Highways, Indian Reservation Roads, Park Roads and Parkways, and Refuge Roads) with the Territorial Highway System (Guam, the United States Virgin Islands, American Samoa, and the Commonwealth of the Northern Mariana Islands), and the Puerto Rico Highways program. Funding amounts are not provided. It appears that the individual programs would retain much of their individual programmatic structures under the broader programmatic umbrella. Recreational Trails Program Section 1114 would require DOT to encourage states to contract with qualified youth conservation and service corps to perform construction and maintenance of recreational trails. Tolling Programs and Public-Private Partnerships Although under current federal law, tolling of most federally funded roads, bridges, and tunnels is allowed, it is limited in regard to the Interstate System highways. From a policy perspective the limitation on tolling of the Interstate System is important because it is the Interstate System highways that most often carry sufficient traffic to potentially produce the level of toll revenue needed to support toll-based financing of highways. SAFETEA provided for a limited broadening of tolling of Interstate System highways, by adding a number of pilot programs and making a number of other modifications. STAA appears to be changing direction by eliminating several programs and instituting some new requirements. To begin with, STAA would eliminate the following toll or toll related programs: the Interstate System Construction Toll Pilot Program, the Interstate System Reconstruction and Rehabilitation Pilot Program, the Value Pricing Program, and the Express Lanes Demonstration Program. Perhaps more importantly, STAA would require that before instituting tolls a number of new conditions are met. A public authority would have to consider the negative effects of a toll on interstate commerce or travel, provide improvements to accommodate diverted travelers, and mitigate the effect of the toll on low-income drivers. Toll revenues are first to be used for facility capital and operating costs, for debt service, and for a reasonable return on investment. Excess revenues generated from a tolled high occupancy vehicle (HOV) facility may be used for public transportation facilities within the same travel corridor as the HOV lanes. This could potentially be a significant shift of resources from highways to mass transit in certain corridors. DOT is to review all toll rate schedules prior to implementation. Federal participation would be allowed in HOV projects where hybrids or other low-emission single-occupant vehicles pay a toll to use the HOV lanes. Public-private partnerships (PPP), often financed by vehicle tolls, have been created in many different ways to develop, construct, and operate highway and transit infrastructure. Under the proposed legislation, PPPs entered into by agreements at the state and local level, but involving federal-aid highway funds, would also be subject to a number of new federal requirements. Among the most important provisions is the requirement that a public authority entering into such an agreement must evaluate the costs and benefits of the PPP against traditional public delivery methods. The public authority would also be subject to some new requirements regarding public information and public involvement before awarding a contract. Furthermore, PPP agreements would be precluded from including a non-compete clause. These clauses are designed to prevent public authorities from providing new, competitive highway infrastructure near a privately controlled facility. The act also permits the public authority to terminate a contract early with fair market compensation to the private partner (Section 1504). To ensure compliance with these new tolling and PPP requirements, the act creates within the FHWA an Office of Public Benefit (OPB) to "provide for the protection of the public interest in relation to highway toll projects and public-private partnership agreements on Federal-aid highways" (Section 1204). Among other things, the director of the office is empowered to administer toll agreements by reviewing and approving toll rate schedules and changes. The OPB would also be required to provide leadership and technical assistance on the development of highway toll projects and highway PPPs. These new tolling and PPP oversight provisions appear to be designed to mitigate problems that detractors of these arrangements often mention, such as the possibilities for diverting traffic to other routes and travelers to other types of transportation, increasing driving costs to burdensome levels (particularly for low income travelers), and by-passing the public planning process. This may also be an attempt to develop a more systematic approach to identifying and evaluating the public interest in PPPs, as suggested by GAO among others, instead of the current project-by-project evaluation. Critics of more oversight worry, however, that these new requirements will dampen, if not extinguish, the desire of states and the private sector to pursue tolling and PPP agreements because of the extra time, expense, and uncertainties that they may entail. A possible major source of uncertainty is the requirement that the OPB review and approve a PPP on its compliance with new public transparency requirements. One critic suggests this review and approval might be forthcoming only late in the process when design and financing details have been settled. Because of the substantial time and money it takes to develop projects early on, risking disapproval at this juncture would likely be unacceptable to project partners, thus, the thought is, few projects would ever be advanced. Flexibility/Transferability Section 1103 appears to allow blanket highway-transit transfers to and from any Title 23 (Highway) or Chapter 53, Title 49 (Public Transportation) programs. States may also transfer funds to other states or to the FHWA for other uses. States with urbanized areas of over 200,000 individuals receiving STP sub allocations may not transfer such apportionments to highway uses without MPO agreement. In addition, the MMA and PNS programs provide that any projects eligible under either Title 23 (Highways) or Chapter 53 of Title 49 (Public Transportation) are directly eligible under the new programs. This appears to allow for funds, authorized under the highway title of STAA, to be spent directly on mass transit projects without an administrative transfer of funds. This could present DOT with organizational issues in regard to the tracking and management of spending under these provisions. It could also make it difficult to distinguish between federal highway and transit spending. The ability to transfer highway funding to mass transit uses and vice versa is not new, but STAA broadens the extent to which this can be done. The broadening of flexibility makes virtually all of STAA's Federal-Aid Highway title available for transit use through transfer or through direct eligibility. Although Section 1103 also provides for transfer of mass transit funding to highway projects, historically the transfers have mostly flowed from highways to transit. STAA appears to have retained existing interagency transfers among existing programs that would continue should the bill be enacted, but has not included interagency transferability provisions in the proposed legislative language of the new programs. It therefore appears that programs such as STP, CMAQ, and Recreational Trails may still transfer funds to each other, but transfers to and from the new Title 23 highway programs such as CAI, FIP, MMA, and PNS may not be allowable. Policy Issues The programmatic provisions under STAA, for the most part, share a number of administrative requirements. Detailed performance, planning, and reporting requirements are set forth for most of the programs in Title I (Federal-Aid Highways) of the bill. These planning and performance mandates could require a significant increase in personnel at DOT, state DOTs, and MPOs. As mentioned earlier, the state administration of Federal-aid Highway Program funded projects has been a basic program attribute since the Federal Highway Act of 1921 (42 Stat. 22). Under the Metropolitan Mobility and Access Program, financing authority would be made available directly to the Metropolitan Planning Organizations (MPOs). This would be a major change in the way the Federal-Aid Highway Program operates and could be seen as a major shift in authority from the states to the MPOs. There are some in the transportation community who question the ability of some MPOs to administer a program such as MMA efficiently. Another concern is that, at least in some states, MPOs may not have the legal authority to receive federal funds directly. Given the prohibition on new lane construction using CAI funding, the freight, intermodal, and livability focuses of the other major new highway programs, and the greatly expanded transferability between highways and transit, some highway interests might express concerns that solutions for highway passenger traffic congestion are not a focus of STAA. From a flow of funds perspective some might also question why Subtitle B of Section I of STAA, which includes MMA and PNR, is not funded from both the highway and transit accounts of the Highway Trust Fund rather than solely from the highway account. At this time STAA has no earmarks included, although a place is held for High Priority Projects. During the SAFETEA reauthorization process, funds for the Projects of National and Regional Significance were to have been distributed as competitive grants. Instead, as enacted, all of the funds associated with this program were earmarked. STAA programs that could be at risk for earmarking include Projects of National Significance and tier one grants from the Metropolitan Mobility and Access Program. The formula programs could also be subject to discretionary set asides that could be subject to earmarking later in the legislative process. STAA, as of this writing, has no equity adjustment program, but a place is held in the bill at Section 1104. However, because the bill includes programs to improve freight bottlenecks, to fund nationally significant megaprojects, and to encourage, mostly urban, intermodalism, the spending of Federal-Aid highway funds across the nation is likely to be uneven. This could both exacerbate the donor-donee conflict and make any attempt to bring donor states up to a targeted share of spending more expensive. Determining which programs would be kept within the auspices (often referred to as scope) of an equity adjustment could also be a problematic decision. If the MMA, PNS, High Priority Projects and perhaps FIP are kept within the scope, the states that benefit the most from these programs could have their core programs reduced via a lower equity adjustment. If these large programs were left out of the scope, the percent of the overall bill that would be brought up to a guaranteed rate-of-return would be reduced. In addition, the expanded transferability of funds between highway and transit programs could skew the conceptual framework of the rate-of-return rationale as highway account funds are used for transit purposes. Although STAA proposes numerous programmatic changes in the Federal-Aid Highways title (Title I) of the bill, as of this writing, authorization levels are not included. This limits analysis of the policy impact of the changes in the bill. For example, without knowing the funding levels of the new Critical Asset Investment Program (CAI) and Freight Improvement Program (FIP) relative to the Surface Transportation Program it is difficult to determine the relative importance of national needs supported by CAI and FIP versus an expanded STP. Historically, STP has generally been viewed as supporting more local needs than other core programs. Freight Transportation Initiatives Freight Improvement Program Many observers argue that unless there are significant and focused increases in freight infrastructure investment, the freight system will become increasingly inefficient and a drag on the U.S. economy. While most agree that more investment is necessary to accommodate current and future freight demand, there is significant disagreement about the best way to accomplish improvements in freight system infrastructure. Among the most important areas of disagreement are how to raise new funds for investment, the magnitude of the amounts required, and the role of the federal government in the planning process. There is no separate federal freight transportation program in SAFETEA, only a loose collection of freight-related programs that are embedded in a larger surface transportation program aimed at supporting both passenger and freight mobility. Most of the funding authorized by SAFETEA is provided to the states through the regular Highway Programs, such as the STP, that provide significant benefits to the freight industry. Of the total funding only relatively small amounts were specifically dedicated to freight transportation improvements, leaving most decisions about the types of infrastructure improvements to fund largely to state DOTs and MPOs. Because of this, some in the transportation community would like to see a larger and more well-defined federal freight program that addresses needs the regular programs have not or cannot address. Section 1105 of the STAA creates a new program, the Freight Improvement Program (FIP), that would direct funds to publicly owned highway freight transportation projects that provide community and highway benefits by addressing economic, congestion, security, and safety issues associated with freight transportation. Eligible projects must be on the existing National Highway System (NHS) or National Network (NN), or on a newly designated secondary freight route. These secondary freight routes would be selected by each state, in consultation with local governments, as being of substantial economic or freight-related significance, such as serving the mining, agricultural, timber, or tourism industries. DOT would review the state's list and then designate them as such. Each state would be required to measure and document the speed, reliability, and accessibility of freight movement along facilities that receive funding on the NHS or NN but not on the designated secondary freight routes. DOT would also establish performance targets against which to measure each state's progress toward improving freight movement. Every five years each state would be required to assess the condition of its secondary freight routes. The draft bill requires state DOTs to develop a freight plan, which may be stand-alone or incorporated in their statewide transportation improvement plan, and projects must be included in the freight plan to receive FIP funds. A freight advisory committee (comprised of representatives from state and local government transportation departments, port authorities, shippers, carriers, and transportation unions), would participate in the development of this plan and are intended to serve as a forum for communication between the public and private sectors in each state as well. The draft bill also allows funding to be provided to a maximum of ten freight corridor coalitions which are multistate planning organizations formed for the purpose of examining and identifying the transportation infrastructure needs of a defined interstate freight corridor. A coalition would be comprised of representatives from state DOTs, MPOs, port authorities, freight carriers, and shippers. Creating a specific funding category for freight movement, as well as requiring states to develop a separate freight plan, could elevate consideration of freight needs in the funding allocation process. However, without a specific authorized amount to indicate the program's share of total funding, it is impossible to assess the FIP's real significance. The establishment of freight advisory committees and funding for multi-state corridor coalitions builds on freight-related planning provisions enacted in SAFETEA and predecessor legislation. Some state DOTs and MPOs already have created freight advisory committees and multistate corridor coalitions have been established for a handful of interstate routes. The FIP attempts to address stakeholder concerns regarding accountability for funding decisions by requiring performance tracking of freight routes, but it does so at the state DOT level. Freight carriers and shippers are also concerned with the earmarking of transportation projects at the federal level which, in their view, has likely contributed to the neglect of nationally significant chokepoints in the surface freight network. Freight Rail Provisions Because freight railroad infrastructure is mostly held in private hands, much less is publicly known about the condition and performance of the railroad system compared to the highway system. Data that the railroad industry does provide publicly is aggregated so it is difficult to pinpoint locations with infrastructure constraints. Because the mainline rail system is a network, and the preponderance of rail cargo is moving long distances, a backup in one localized area can significantly affect fluidity on other parts of the system. SAFETEA created two capital grants programs and extended a loan program for freight rail infrastructure. Title VI of the STAA extends these programs through FY2015. Specifically, section 6002 extends the authorization of a capital grant program for relocating railroad track that is interfering with road traffic at railroad crossings or that is hindering economic development in a community. Section 6004 extends the authorization of a capital grant program to class II and III (a.k.a. regional and shortline) railroads and section 6005 extends the authorization of a loan program for railroad rehabilitation and improvement. Section 6008 of the draft bill creates a new requirement that the DOT provide quadrennial reports to Congress on the condition and performance of the freight and intercity passenger rail systems. DOT/FHWA Organizational Changes Intermodalism, as the name of the legislation suggests, was a major focus of the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA, P.L. 102-240 ). That legislation suggested that surface transportation programs should be administered with improved intermodal connections in mind. To facilitate this process the law created a new Office of Intermodalism within DOT that was supposed to give the concept a high profile in DOT program decisionmaking. The Office of Intermodalism, however, never lived up to the high level of expectation that the author's of ISTEA held for it. The Office itself has moved around within DOT over the years and has, by most accounts, had little direct influence on policymaking. The Under Secretary of Transportation for Intermodalism Several observers believe that the ISTEA created Office of Intermodalism failed to be effective because it did not have a prominent role within the DOT leadership structure. The authors of STAA appear to share this view and have proposed a new structure for intermodal planning within DOT headed by a newly created Under Secretary of Transportation for Intermodalism. As will be discussed in various places throughout the discussion of the STAA, the Under Secretary is given a number of responsibilities by the legislation. This includes, for example, approval/recommendation authority for MMA and PNS projects. The guiding mission, however, is to enhance coordination and planning among DOT's modally organized operating agencies. To facilitate the Under Secretary's mission, the STAA creates a new Office of Intermodalism within the Office of the Secretary of Transportation. The new office is to be headed by a Director appointed by the Secretary of Transportation. Potentially, the Office will play a significant policy role in the coordination, and perhaps vetting, of all MMA and PNS project proposals submitted to the Undersecretary. Depending on how the Undersecretary utilizes its staff the Office could be a fairly busy place. The STAA is silent on how staffing and funding levels for the Office will be set. Given its potentially broad role, however, its staffing needs could be significant. The STAA also requires the creation of a new Council on Intermodalism to address overall departmental coordination issues, such as agency planning. The Council is chaired by the Secretary of Transportation, or in his or her absence, the Under Secretary. The voting membership on the Council includes the Administrator of each DOT operating agency. Each Council member has one vote. The Coast Guard Commandant and the Chief of Engineers are named as nonvoting members of the Council. The Council is required to meet monthly. The clear intent of this provision is to keep intermodalism at the forefront of DOT policymaking decisions. There are some questions that can be raised as to how this group will be able to function effectively. For example, the provision establishing the Council precludes modal administrators from designating substitutes to act in their absence. The intent here is clearly to ensure that those at the highest level of decisionmaking take part in the Council's meetings. Inevitably, however, administrators will be absent due to illness, travel, etc. This could, at least in theory, allow the Council to determine policy without one or more of the major agency administrators present. Depending on who was absent, this situation could be problematic given the equal voting distribution required by the provision. This is particularly the case because the one agency, one vote mandate found here does not take into consideration the very significant differences between the operating agencies in terms of size and scope. The St. Lawrence Seaway Development Corporation and the Pipeline and Hazardous Materials Safety Administration, by way of example, are tiny agencies when compared to the FHWA or the Federal Aviation Administration (FAA). Offices of Expedited Project Delivery (FHWA and FTA) The STAA requires that an Office of Expedited Project Delivery be created in both the FHWA and FTA, each with a Director appointed by the Secretary of Transportation. As the title implies the major role of this Office is to facilitate the timely completion of projects being funded by FHWA and FTA. The Offices are charged with giving special attention to large and potentially complicated projects. In the case of FHWA these are defined as "significant" projects, those costing $500 million or more. For FTA the emphasis is on "New Start" projects, which are usually, but not exclusively, rail transit construction projects. Although the STAA provides special attention for large projects, the Offices are nonetheless charged with providing oversight for all FHWA and FTA funded projects. The Offices are expected to fulfill their mission by taking a "leadership" role in the project delivery process. This is largely done by identifying problems (especially those associated with environmental review issues), and working with project managers to find solutions for these problems. The Offices are required to provide annual reports to Congress on the project delivery process and make recommendations as to how it might be improved. The Offices are not given any specific authority to force action by any party or to penalize any party for not following through on its recommendations. One can assume that there might be consequences for noncompliance with the Offices' respective expediting efforts in future project contract awards, but such a mechanism is not spelled out in the bill. As a result, some critics might consider the new Offices to be somewhat powerless to actually provide for expedited project delivery. The Offices will likely need significant staffing and funding to fulfill this new mission. The STAA, however, does not set-aside funding for these Offices and instead proposes to fund these activities through the respective FHWA and FTA administrative budgets. Hence it is unclear from the bill as drafted how much these new functions might cost and/or whether the agencies would be required to reallocate funding from existing administrative activities. Office of Livability (FHWA) A new Office of Livability is to be established within FHWA with a Director appointed by the Secretary of Transportation. The Office is a response to the call, primarily, but not exclusively, from the environmental community, to move federal surface transportation policies and programs into closer alignment with the concepts of "sustainable transportation" and "livable communities." There is a considerable body of literature that explains these concepts, but in short they call for providing multiple transportation options to individuals (including transit, walking, and bicycling) and making land use decisions in ways that facilitate these goals (primarily by reducing sprawl type development and/or some of its attributes). While there is strong support for these ideas in some parts of the transportation community, there is equally strong opposition in others (but not necessarily to every aspect of the livable communities idea). To facilitate the expansion of the idea of livability in the context of the federal surface transportation assistance program, the Director is charged with administering several programs: the existing safe routes to school program; the existing nonmotorized transportation pilot program; the existing transportation enhancement program (a set aside within the STP); the existing recreational trails program, the existing national scenic byways program; and the new U.S. bicycle route system program. The Director is further charged with working with the Administrators of FHWA and FTA on planning and other programs that could be used to promote the livability concept in the delivery of surface transportation assets. The Director also serves as the point of contact within DOT for other Executive Branch agencies on livability issues and, in this role, coordinates DOT activities with agencies such as Housing and Urban Development (HUD) and the Environmental Protection Agency (EPA). The Director is charged with providing leadership, DOT-wide, on a range of "livability" issues. For example, the Director is charged with developing and disseminating street design policies and standards. While FHWA has no specific power to require states to adopt such standards, it appears that the authors of STAA believe that the standards will be adopted over time in conjunction with the implementation of other features of the highway and transit programs. The Director is also charged with developing model legislation, implementable by states, enunciating the rights of pedestrians and bicyclists. In these roles it seems that the Director is given the "bully pulpit" to promote livability, but has little real authority to require that any of the ideas and concepts developed in the Office are adopted outside of DOT. In one instance, however, in the development and implementation of a U.S. Bicycle Route System, the Director is the decisionmaker. It is the Director's role to issue the regulations that would lead to the designation of the national system. Once designation is complete, the Director will operate a grant program designed to implement the system. The amount of grant funding available for this purpose has not yet been determined but grants are available for the planning, mapping, signage, promotion, and construction of the designated system. Only 50% of the funds made available, however, can be used for construction. As is the case with the new DOT, FHWA, and FTA Offices described earlier in this section of the report, the STAA is silent on staffing and funding for the operation of the Office of Livability. Office of Public Benefit The new Office of Public Benefit has the stated task of providing "for the protection of the public interest in relation to highway toll projects and public-private partnership agreements on Federal-aid highways." This new Office is to be domiciled in FHWA and have a Director appointed by the Secretary. The most important responsibility reserved for the Director is the administration of toll agreements – which the Director is charged with approving or disapproving based on specific criteria detailed in this section of the STAA. Further, once a toll agreement is in place, the Director is charged with monitoring compliance with the agreement. A similar charge is given to the Director for monitoring other public-private partnership agreements. The creation of the Office of Public Benefit is intended to provide a safety net to protect the public interest. In the STAA supporting documentation, the authors set forth their view that to protect the integrity of the nation's surface transportation system and the public interest regarding trade and travel, the Federal surface transportation program requires strengthened public protections regarding highway toll projects and PPP agreements. The bill seeks to give the Office significant guidance by providing specific criteria to evaluate in its decision making process. Most of these criteria are mentioned earlier in this report. Implementing some of the guidance in the bill is likely to be difficult, however. For example, it might be difficult to evaluate the effect of a specific toll rate proposal on "low income travelers" without developing appropriate data at the local/regional level. Similarly, it could be difficult to measure the potential impact of tolling on transit service as called for in the bill. As proposed, the Office will apparently be a party to all alternative/innovative financing agreements dependant on toll revenues. Many in the transportation community hold the view that PPPs need to be a significant part of the Nation's highway infrastructure creation process going forward. A long standing concern expressed by many of these same observers is that PPPs are already difficult to execute from an administrative perspective. It is likely that supporters of increased tolling and the use of PPPs for infrastructure creation will be, to say the least, wary of this new Office, which they will likely view as another difficult bureaucratic hurdle to be crossed. They are also likely to see the approval/disapproval criteria spelled out in the bill as somewhat hostile to the use of non-grant financing mechanisms for infrastructure creation. Transportation Planning The act adds a substantial number of new transportation planning requirements at the national, state, and local levels, including the development of performance management systems throughout the planning process. At the national level, the proposed legislation creates a new requirement for the development of a National Transportation Strategic Plan by the Secretary of Transportation, a national equivalent to the statewide long-range transportation plan required under current law (Section 1207). The national plan is to be developed primarily from projects with significant national and regional benefits submitted by states. Funding for a project from the Projects of National Significance program will depend to some extent on inclusion in the strategic plan. Once created the plan is to be updated every two years. The creation and updating of the plan is to be the responsibility of the new Office of Intermodalism to be established in the Office of the Secretary. Many have called for the creation of a national transportation plan to guide the use of federal transportation funds. The National Surface Transportation Policy and Revenue Study Commission, for one, recommended the creation of a national strategic plan, although it believed the plan should be overseen by an independent commission and should include recommendations on how investment programs should be funded. By contrast, the STAA proposes to have DOT oversee the development of the plan, and the plan will not necessarily be constrained by available resources nor include funding recommendations. As currently written, the legislation is likely to require a significant amount of work for DOT, particularly in evaluating the proposals for inclusion in the plan. With an expectation that inclusion in the plan might help in securing federal funds, states may deluge DOT with what they consider worthy projects. Whether this is the case or not, the requirement that DOT must evaluate each project submitted within 60 days may be difficult. DOT is also required to disseminate data and 20-year projections to states on a range of topics for use in preparing transportation plans and projects, including a 20-year projection of passenger demand for suborbital space tourism. While states may have many project proposals already on the books through the statewide and metropolitan transportation planning processes, the requirements for inclusion in the national plan might also create substantial work for state DOTs. Another problem might arise when states try to identify projects involving infrastructure that is largely owned and operated by private companies, such as freight rail. If the DOT only puts together a list of projects from what states send in, some critics might wonder how "strategic" the ultimate plan is likely to be. On the other hand, DOT may face a barrage of criticism if, in the course of setting priorities, some states are significantly underrepresented and others overrepresented. The act proposes to alter state transportation planning in several ways. To begin with, the proposed bill makes a number of changes to the existing statewide planning requirements (Section 1509). Among other things, the act adds some factors that may be considered in the planning process such as enhancing sustainability and livability, reducing GHG emissions and dependence on foreign oil, and improving public health. In accordance with the Clean Air Act, the proposed legislation requires, as part of the planning process, each state to "develop surface transportation-related greenhouse gas emission reduction targets, as well as strategies to meet such targets." In places with congested airports and freight rail corridors, the plan is specifically required to include measures to alleviate the congestion. The plan must also take into consideration deep draft ports, inland waterways, and interconnectivity between modes. In the statewide transportation improvement program, the state is required to implement a system of performance management that includes the development of performance measures and targets. The proposed legislation also adds a freight improvement program that includes a requirement for each state to develop a state freight plan that "provides a comprehensive overview of the State's current and long-range freight planning activities and investments"(Section 1105). This freight plan may be either separate from or incorporated within the statewide plan. The state freight plan is required to include performance measures and targets related to freight movement, and to describe how the state plans to achieve those targets. Section 1105 also authorizes the Secretary to designate and make grants to a maximum of 10 freight corridor coalitions. A designated corridor coalition is required to develop a freight corridor plan that is modeled on the statewide strategic long-range plan. The plan is required to be consistent with the long-range statewide transportation plan, the statewide improvement plan, the metropolitan plan and improvement program, and the metropolitan mobility plan under Section 701 of the bill. Many of the changes made to statewide planning requirements are also made to the requirement for metropolitan planning, as, for example, with the setting of GHG emissions targets and strategies (Section 1508). If enacted, MPOs will also be required to implement a system of performance measurement. There are four notable provisions that apply only to MPOs. First, the act raises the urbanized area population threshold for MPO creation from 50,000 to 100,000, although existing MPOs in areas currently between 50,000 and 100,000 must be maintained as required by current law. Second, the act requires that voting members of the MPO are represented in proportion to the population of each political subdivision to the total population in the metropolitan planning area. This represents a major change, as voting structures currently vary widely according to state and local law and custom. Third, the act adds to the certification requirements both the new voting structure requirement and a requirement that the MPO is meeting or likely to meet its performance measurement targets. As part of the certification process, the Secretary may withhold up to 20% of funds attributable to the metropolitan planning area. Fourth, the act requires the creation of a database of MPO characteristics. As noted earlier in creating the Metropolitan Mobility and Access Program (Section 1205), the act provides funding directly to MPOs in areas of 500,000 or more. Additionally, this new program requires the development of a metropolitan mobility plan "that identifies projects that the eligible recipient, or another entity described in and subject to the plan, proposes to address surface transportation congestion and its impacts within the urbanized area served by the eligible recipient." According to the proposed legislation, this plan needs to be coordinated with state and transit agencies and is to be reviewed and approved by DOT. Finally, the act defines a rural planning organization (RPO) as "an organization designated by a State to enhance the planning, coordination, and implementation of statewide transportation plans and programs in areas with a population of less than 50,000 individuals, with an emphasis on addressing the needs of such areas of the State." The act requires a state to coordinate statewide planning with such organizations if designated, and to consult with a RPO in the obligation of transportation enhancement funds in its planning area. Performance Management The bill includes performance management as a new requirement in many programs throughout the federal surface transportation program, including, among others, the Freight Improvement Program (FIP), the Highway Safety Improvement Program (HSIP), the Critical Asset Improvement (CAI) Program, the Metropolitan Mobility and Access Program (MMAP), and statewide and metropolitan planning. The overall approach is to add performance management to focus attention on the most important objectives of a program, and to improve the transparency to program managers and the general public as to whether the objectives are being met or not. The requirements for performance management and the consequences for not meeting the requirements vary from program to program. In some cases, there are no explicit sanctions for not establishing performance management tools, nor for not meeting the performance goals that are established. For example, in the FIP a state is required to establish performance goals and performance measures, must include in its state freight plan how these goals will be met, and must report this information to the Secretary annually. But funds from the FIP do not appear to be dependent on the quality of the plan nor progress toward the goals, and there appear to be no other consequences for not following through. In other programs, however, there are sanctions for not establishing performance goals and for not meeting the goals themselves. For example, in the MMA an MPO must have an approved metropolitan mobility plan, supported by performance-based goals and metrics, to receive funds. Beginning in FY2012, continued funding is contingent on providing an annual report which documents progress toward the goals, reasons for failing to meet any of the goals, and a new plan by which the goals will be met going forward. Safety Provisions Highway Safety Improvement Program (HSIP) The STAA requires that DOT establish quantifiable safety performance targets for each state for their highway safety improvement plans, and to report to Congress annually on each state's progress in meeting its performance targets. It also requires states to develop highway safety improvement program investment plans describing how the state will address its highway safety needs. The DOT will review the investment plans, and approve or disapprove them based on whether the investment strategy will enable the state to meet its highway safety performance targets. The DOT is also required to oversee implementation of each state's investment plan to ensure that each state's use of funds is consistent with the investment plan. National Highway Traffic Safety Administration (NHTSA) The STAA would reduce the number of statutory programs that NHTSA administers from more than eight down to five (and does not fund a few other existing programs which do not have statutory language), incorporating some of the elements of the eliminated programs into the remaining programs. Specifically, it would eliminate the occupant protection incentive grants, the safety belt performance grants, and the alcohol-impaired countermeasures program. Instead, some currently unspecified percentage of the formula safety grant funds to states would be restricted to impaired driving programs, occupant protection programs, and motorcycle safety programs. If states meet their performance targets for these programs, they would gain the flexibility to use some of those funds for other safety purposes. By contrast, under the current structure states are eligible to receive additional funding through the incentive grant programs for occupant protection, impaired driving, motorcycle safety, and data improvement, if they meet certain criteria. In addition to requiring that a certain portion of each state's highway safety program funding be restricted to specific programs/goals (e.g., reducing impaired driving), the draft bill also strengthens the emphasis on performance. Currently, states are required to have a highway safety program that is linked to performance measures which have been selected in cooperation between DOT and representatives of state highway safety offices. The draft bill requires DOT to establish quantifiable safety performance targets for each state and to report to Congress annually on each state's progress in meeting its performance targets. In one respect, however, the draft bill reduces the existing linkage between highway safety programs and performance measures, by eliminating the NHTSA incentive grant programs which made it possible for states to qualify for additional federal highway safety funding by meeting safety performance targets. The existing seat belt incentive grant program enables states to qualify for additional funding by either passing a primary seat belt law (which allows a law enforcement officer to stop a vehicle in order to issue a ticket if a driver or front seat passenger is not wearing a seat belt) or attaining a certain rate of seat belt usage statewide. As of July 2009, 30 states have primary seat belt laws. The draft bill would replace that incentive program with a penalty: any state without a primary seat belt law in FY2013 would have 2% of some of its highway funding withheld, with the amount withheld increasing to 8% in FY2016 and thereafter. The existing alcohol impaired driving incentive program enables states to qualify for additional funding by either reducing their rate of alcohol-related fatalities or enacting several measures intended to reduce impaired driving. The draft bill would require that states install an ignition interlock device for at least 6 months on each motor vehicle operated by someone convicted of driving under the influence. Beginning in FY2013, a state without such a law would have 2% of some of its highway funding withheld, with the amount withheld increasing to 5% in FY2015 and thereafter. The draft bill adds pedestrian and bicycle safety to the existing list of traffic safety areas that states must focus on (reducing fatalities and serious injuries, impaired driving, occupant protection, speeding, and motorcycle safety). Federal Motor Carrier Safety Administration (FMCSA) The STAA requires DOT to set a national goal for reductions in crashes and fatalities of commercial vehicles, and states are required to set targets for enforcement activities to reduce crashes and fatalities (but not targets for the reduction of crashes and fatalities themselves). These targets must increase each year (subject to funding). The bill also converts an existing funding set-aside for high-priority commercial vehicle enforcement activities to an incentive grant program, which would reward states for reducing commercial motor vehicle crashes and fatalities. The bill also strengthens requirements for states to improve their commercial drivers licensing programs. The draft bill establishes a national clearinghouse for drug and alcohol test results of commercial drivers. This addresses the issue of commercial drivers who have failed such tests not notifying their employer of the result, or drivers who have been suspended for failing a test moving to another employer which may not be aware of the drivers' test results. This clearinghouse would make it more difficult for drivers to evade the consequences of failing these tests. The bill also requires that motor carriers subject to DOT's hours-of-service regulations equip their commercial motor vehicles with electronic on-board recorders. This addresses the issue of commercial drivers who do not keep accurate records of their hours of service, and who may pose an increased hazard due to driving while fatigued. The National Transportation Safety Board has been recommending the use of on-board recorders in commercial vehicles for many years. Transit Provisions The draft bill released by the House Transportation and Infrastructure Committee (T&I) appears to make significant changes to the structure of the overall federal transit program, along with some major and minor changes to individual programs. These proposed changes are emphasized in summaries of the legislation published by T&I, but, as noted earlier, the draft bill does not provide details of how the funding will be distributed among the programs, making it impossible to fully assess the changes that are being proposed. Transit Funding One of the most closely watched aspects of the new authorization will be the amount of funding that is directed to transit and transit's share of the whole bill. Funding numbers are not available from the committee print, but the supporting documents released with the bill by T&I indicate that the federal transit program would be authorized at $99.8 billion over six years, with a proposed $87.6 billion (88%) from the mass transit account of the Highway Trust Fund and $12.2 billion (12%) from the general fund of the U.S. Treasury. The proposed average annual authorization under the STAA, therefore, would appear to be $16.6 billion. Ignoring highway program funds that allegedly may go to support transit projects and the $50 billion that is proposed for high speed rail, the share of the funding that is directed to transit by the STAA could be 22% ($99.8 billion of $450 billion). In addition to the increases in funding and funding share for the transit program itself, there may also be more money for transit projects available from highway programs funds. To begin with, the bill appears to provide blanket permission to transfer (or "flex" as it is sometimes referred to) highway program funds to transit programs and vice-versa (Section 1103). Funding from three current highway programs—NHS, STP, and CMAQ—can be used to directly support transit projects. In addition, funds from NHS, IM, and the Bridge Program can be transferred to STP and then used to fund transit. Some transit funds are available for highway uses, but generally the flexibility provisions have been used to transfer highway funds to support transit projects. In the period from FY2004 through FY2007 an average of about $1 billion of highway funds per year were flexed to transit. The blanket provision in STAA might make it easier and more likely that such funds will be flexed. Furthermore, the bill proposes to create a new $50 billion Metropolitan Mobility and Access (MMA) program to tackle highway traffic congestion, a portion of which is likely to end up supporting transit. Transit Program Structure In terms of the structure of the federal transit program, there appear to be three major changes in the STAA from current law. First, the proposed legislation appears to abolish the discretionary, but heavily earmarked, Bus and Bus-Related Facilities Capital Program, with the program's funds and functions absorbed into the existing Urban and Rural Formula Programs (Sections 3006 and 3010) and a new discretionary Intermodal and Energy Efficient Transit Facilities Program (Section 3007) that replaces the existing Clean Fuels Grant Program. This new Intermodal and Energy Efficient Transit Facilities Program makes funding available to build, replace, or rehabilitate facilities that are intermodal, in that they connect public transportation to another transportation mode, or will reduce energy and greenhouse gas emissions. Making Bus Capital Program funds distribution partly formula and partly discretionary appears to be something of a compromise between those that argue for making the funds entirely formula driven and those that argue for keeping them discretionary. Some argue that distributing the funds by formula would be more equitable, would simplify the process and eliminate the vagaries of earmarking, and would make funding more reliable from year to year so that transit agencies can develop long term investment plans. Those in favor of discretionary spending argue that the Bus Program provides an important way for transit agencies to make expensive periodic bus purchases and facility investments that cannot be met with formula funds, and that earmarking provides an important way for Congress to control this funding stream. The second major change is the creation of a new Metropolitan Mobility and Access (MMA) program (Section 1205). Although this new program is in Title I of the bill, the highway title, this new program may provide a major new funding source for transit provision in large urban areas, those with more than 500,000 residents. The MMA is similar to a recommendation of the National Surface Transportation Policy and Revenue Study Commission for a highway congestion relief program, although the commission recommended such a program for metropolitan areas with a population of one million or more. Funding from this program in STAA would be distributed by formula according to population and highway traffic congestion. Funds would be available to fund improvements on a mode-neutral basis. As was mentioned earlier, in the creation of this new program a major change is being proposed in the relationship between federal, state, and local government in the federal-aid highway program. In the MMA program, as currently conceived, federal highway funds, for the first time, would be provided directly to metropolitan planning organizations (MPOs) instead of to and through state DOTs. The third major change is the creation of the Coordinated Access and Mobility Grants Program (Section 3009) that is created by combining the existing Elderly and Disabilities Program, the JARC Program, and the New Freedom Program. There has been criticism that as separately constituted funding streams, these programs have inhibited the coordinated development of human-services transit service and are administratively burdensome. Funding in the new program will be distributed by formula based on the number of people who are elderly, disabled, low-income, or welfare recipients. Under the program, recipients will be required to develop a performance plan with performance measures that at a minimum "ensure that transit systems and operations are fully compliant with the regulations established under Title 37 of the Code of Federal Regulations for Americans with disabilities." Flexibility for funding projects under the program is constrained if a recipient fails to meet the goals set forth in its performance plan. Transit Program Changes In addition to structural changes in the federal transit program, there are also important changes proposed within some of the major existing programs. Within the Urbanized Area Formula Program (Section 3006) a major change proposed by the bill is to allow transit operators in urbanized areas of 200,000 or more to use some funds for operating costs. Currently, only transit agencies in urbanized areas of 200,000 or less are permitted to use funds for operating purposes, although SAFETEA changed the definition of a capital expense to include some things that are traditionally considered operating expenses. The change in the proposed legislation would permit agencies in areas between 200,000 and 500,000 to use 20% of their federal funds for operating expenses; agencies in areas of between 500,000 and 1 million to use 10%; and areas over 1 million to use 5%. A requirement for the use of federal funds to cover operating expenses is that the transit agency must have a dedicated source of state or local government revenue for its operating costs or the non-federal share of operating costs (excluding system-generated revenues) must be greater than during the previous year. Current federal matching shares are left unchanged in the STAA, with capital expenses generally having a maximum federal share of 80%, and operating expenses having a maximum federal share of 50%. The use of federal funds for operating expenses has been controversial since the beginning of the federal transit program in the 1960s. Support for using federal funds in this way tends to rise when transit service is threatened by such things as high fuel prices, inflationary pressures, and fiscal problems at the state and local level. Opponents contend that while federal operating support has probably maintained a higher level of transit service than would have prevailed without it, such support causes productivity to decline (the amount of transit output relative to inputs). This is because government support, particularly from the federal government, allows transit operators to de-emphasize the need to control costs and generate revenues. Details on how the Rural Formula Program would be modified are largely missing from the draft legislation. However, in the T&I Committee's bill summaries, it states that the formula for distributing funds will be altered to include transit service provided and consumed, factors that are not currently considered. It also states that the legislation will increase the funding directed to small urban and rural transit service, although it is unclear from this whether the increase is in terms of the dollar amount or share of overall transit program funding. With most transit funding going to large urban areas, there has been a push by advocates of small cities and rural areas for more transit funding over the last few authorization cycles. Incorporating transit service factors in the funding formula would be a way to reward transit providers for their effort to provide service in places where it tends to be very costly to do so. Another major programmatic change proposed by the act is the simplification of New Starts/Small Starts project development and funding approval (Section 3008), a rigorous but time-consuming process that has been the subject of a lot of criticism. The current New Starts process requires an application to FTA for approval at three different stages of project development: entry into preliminary engineering, entry into final design, and approval of a Full Funding Grant Agreement (FFGA). The legislation proposes to reduce this to one step, the approval of a FFGA. Project sponsors must also have FTA approve the project for entry into project development, but this is assured if the project has been chosen as the locally preferred alternative as required under the metropolitan transportation planning process. The bill also does away with the alternatives analysis required under the New Starts program that was often seen as a duplication of the alternatives analysis required under the National Environment Policy Act (NEPA). To expedite projects, the act would also allow the Secretary the ability to fast track some projects, and would base FTA's evaluation partly on the amount of federal assistance being sought by the applicant. Finally, as mentioned earlier, the act would create an Office of Expedited Project Delivery within the FTA to speed capital projects, particularly New Starts/Small Starts projects. The Office would be expected to monitor project progress, promote best practices, help with coordination, use conflict resolution techniques, and coordinate with the Office of Expedited Delivery in FHWA. Advocates of simplifying the New Starts process argue that it will significantly shorten project delivery times. According to some, quick approval of federal funding is particularly appropriate where the risks are low, such as when the federal funding amount/share are relatively low, and where project benefits are likely to be high relative to costs. Critics worry that such changes may damage the rigor of the evaluation process, ultimately leading to federal support of less competitive projects. Simplifying the process by creating a low hurdle for entry into the New Starts pipeline also creates the possibility that FTA may receive a large number of projects that it has to manage through the evaluation process to ultimate denial. Another possibility is that FTA will approve or intend to approve many more projects for funding than can be supported by the available commitment authority. This may mean relatively quick funding approval for projects that then languish while waiting in line for more commitment authority to be made available by Congress. The STAA would also make a number of other changes to the New Starts/Small Starts program. The bill would alter the definition of a New Starts project to one which receives federal assistance of $100 million or more, up from the current $75 million; a Small Starts project would be defined as a project in which federal assistance is less than $100 million. Additionally, the bill attempts to clarify the way in which the evaluation factors are used by FTA to decide among projects. Many have criticized FTA for relying too heavily on the cost-effectiveness index that measures the time savings to transit system users. The bill therefore states that FTA must take into account a range of factors: mobility and accessibility, congestion relief, energy and environment, economic development, and supportive land uses and future patterns of land use. Furthermore, the legislation prohibits FTA from using a cost-effectiveness index, and only permits using a transportation system user benefit calculation to evaluate mobility. The STAA may make some major changes to the way in which funding under the Fixed Guideway Modernization Program is distributed, although details of how this would work are missing from the committee print. In summary material, T&I says that the complicated 7-tier formula for distributing funds will be simplified. Funding instead will be distributed by a formula "using readily available transit data that most closely aligns with maintenance needs." The summary also states that there will be no prohibition to funding going to fixed guideway systems in urbanized areas of 200,000 or less. There may also be a performance plan component, whereby recipients are required to develop performance goals related to bringing and keeping transit assets in a state of good repair. Performance planning, goal setting, and measurement is a pervasive theme throughout. Performance plans are required generally as part of the metropolitan transportation and statewide planning processes, and specifically as part of the Urbanized Area Formula Program, the Rural Formula Program, and the Coordinated Access and Mobility Grants Program. As noted above, performance planning may also be required as part of the Fixed Guideway Modernization Program. In the case of the Urbanized Area Formula Program, for example, to be able to receive federal funds, designated recipients will have to develop performance goals as part of a performance plan and have that plan accepted by FTA. Updates to the plans will be required periodically, and acceptance of an updated plan will rest to some extent on whether the recipient has made sufficient progress toward its goals. In other words, the legislation proposes to cut off federal funding to a recipient if it does not meet its performance goals. It almost goes without saying that this would be highly controversial. The legislation, therefore, provides FTA with the authority to reduce the performance targets, if appropriate, to keep federal funding flowing to a transit funding recipient. Environmental Issues Congestion Mitigation Air Quality Improvement (CMAQ) Program The STAA proposal would amend Title 23 provisions regarding the Congestion Mitigation Air Quality Improvement (CMAQ) Program. Generally, the entire section of the current law would be rewritten. More specifically, changes would be made to the following sections of the law: Eligible Projects —changes to this section of the law primarily result from reformatting the existing language. Changes to the law include listing the acquisition of certain public transportation vehicles as an eligible use for CMAQ funds. The proposal also eliminates the listing of certain types of projects as eligible for CMAQ funds. That does not mean those projects would no longer qualify for CMAQ funds, just that they are not specifically identified in the law. States Receiving Minimum Apportionment —the proposal would eliminate the current method of determining project eligibility for projects in states receiving the minimum apportionment. Interagency Consultation —the proposal would require (as opposed to the current law that encourages ) state and local metropolitan planning organizations to cooperate with state and local air quality agencies in nonattainment and maintenance areas on estimated emission reductions from proposed CMAQ programs and projects. Evaluation and Assessment of Projects —the proposal would amend the current law to specify how information regarding best practices should be made publically available. Under the current proposal, requirements regarding partnerships with nongovernmental entities would be eliminated. Also eliminated from the law would be a requirement that the Environmental Protection Agency (EPA) produce technical guidance with regard to diesel emission reductions from diesel retrofits. EPA has gathered the information required under current law and made it publically available. Expediting Environmental Review Requirements Under current law, final design activities, property acquisition, purchase of construction materials or rolling stock, or project construction are not allowed to proceed until FHWA or FTA has completed the appropriate environmental review pursuant to the National Environmental Policy Act (NEPA, 42 U.S.C. 4321 et seq.). DOT's NEPA regulations require FHWA and FTA to perform the work necessary to complete the appropriate NEPA documentation and to demonstrate compliance with any other related environmental laws and regulations during the NEPA process. Depending on a host of factors, an individual surface transportation project may involve compliance with any of a number of environmental requirements. For example, transportation projects often must comply with provisions of the Endangered Species Act, National Historic Preservation Act, Clean Water Act, and "Section 4(f)"of the Department of Transportation Act of 1966. To comply with applicable requirements, various local, state, and federal agencies (over which DOT has no authority) such as the U.S. Fish and Wildlife Service, the Advisory Council on Historic Preservation, the U.S. Army Corps of Engineers, or EPA may be required to perform scientific analysis, issue permits, or specify certain mitigation measures. Previous reauthorization legislation has included provisions intended to expedite the time it takes the various agencies to coordinate their required activities and comply with applicable environmental requirements. Specifically, SAFETEA amended Title 23 to include §139, "Efficient environmental reviews for project decisionmaking." To further address issues associated with the NEPA process, the STAA would: Amend §139 to allow certain elements of a state's transportation planning product to be integrated into an individual transportation project's NEPA documentation. Included in the proposal is a requirement to issue a final record of decision and allow a project to move to its final design stage no later than 120 days after a final EIS is completed (the proposal specifies conditions under which delays would be allowed). Amend §139 to encourage programmatic approaches regarding environmental programs and permits. The Office of Expedited Project Delivery is also encouraged to establish programmatic agreements in meeting a project's NEPA requirements. Direct the Office of Expedited Project Delivery to ensure that federal agencies and other relevant agencies are implementing §139 requirements, particularly with regard to implementing a schedule for public and agency participation (however, DOT has no authority to dictate compliance requirements, including the implementation of deadlines or timeframes, to other agencies). Amend Title 23 regarding the advance acquisition of real property to authorize DOT to encourage states to acquire transportation rights-of-way sufficient to accommodate long-range transportation needs (the law currently requires the state to complete the NEPA process before property acquisitions can be made, the bill does not waive that requirement). Greenhouse Gas Provisions New to the surface transportation bill this year is an emphasis on reducing greenhouse gas (GHG) emissions through transportation planning. Transportation sources accounted for 28% of U.S. emissions of GHGs in 2007, according to the EPA, up from 25% in 1990. Cars, trucks, and rail account for most of the transportation total and are among the fastest growing components of U.S. emissions: GHG emissions from passenger cars and light duty trucks have grown 24% since 1990; rail emissions grew 50%; medium- and heavy-duty truck emissions grew 80%. As a separate bill moves through Congress to require GHG emission reductions as great as 80% over the next four decades, it is clear that the nation cannot achieve that goal without reductions in emissions from the transportation sector. To achieve such reductions, a variety of measures might be implemented, including improving the fuel efficiency of each mode, switching to lower carbon fuels, switching to more efficient / lower emitting transportation modes, and reducing demand for transportation by better coordination among land use, housing, and transportation projects. The latter two options are among the goals of the proposed STAA. The bill would require that transportation plans prepared by MPOs and by states "address transportation-related greenhouse gas emissions by including emission reduction targets and strategies." (Sections 1508(h) and 1509(c)(1)(E)). The targets and strategies are to: be based on models and methodologies established by EPA; address sources of surface transportation-related GHGs; include efforts to increase public transportation ridership; and include efforts to increase walking and bicycling. The bill requires the Secretary of Transportation to develop performance measures including, for areas with populations of more than one million, a measurement of the degree to which the long-range transportation plan is developed through an assessment of: land use patterns that support reduced dependency on single occupant motor vehicle trips; limited impacts on air quality; a reduction in greenhouse gas emissions; an increase in energy conservation and efficiency; and other factors. The bill would require annual reporting by MPOs of their progress in meeting their performance targets, but it does not seem to contain any sanctions for failure to achieve the stated goals. High Speed Intercity Passenger Rail The STAA, according to the committee's documents, would authorize $50 billion over six years ($8.3 billion per year) for the development of intercity high-speed passenger rail corridors. The source of funds would be the General Treasury, not the Highway Trust Fund. This level of funding for high-speed rail is a substantial increase over the $100 million per year authorized in SAFETEA (section 9001) and the $300 million per year authorized in the Passenger Rail Investment and Improvement Act ( P.L. 110-432 , section 501) enacted in October 2008. It is more in keeping with the $8 billion appropriated in the American Recovery and Reinvestment Act (ARRA, P.L. 111-5 ) for high-speed rail. The bill defines "high-speed" as rail service that is reasonably expected to reach speeds of at least 110 miles per hour. The high-speed rail development program, as promulgated in section 6001 of the draft bill, would require a local match of 20% and allow the Secretary of Transportation to issue "letters of intent" regarding federal funding of specific projects in future years. States or Amtrak may enter into a cooperative agreement with any public, private, or non-profit entity to implement a high-speed rail project. Although the bill authorizes a substantial increase in funding for modernizing the nation's passenger rail network, without a dedicated funding source, which has benefitted the development of other modes of intercity travel, it is uncertain whether Congress can sustain, over the long-term, the level of funding it recently appropriated to passenger rail in ARRA. Sustaining higher levels of capital funding is not the only challenge confronting decision-makers. On many of the proposed routes it is unlikely that ticket and other revenues will be sufficient to cover operating costs, requiring public assistance to cover these losses in addition to funding infrastructure maintenance and improvements. Related Legislation Several Members of Congress have introduced legislation that would, if adopted or incorporated into the major reauthorization bill, have an impact on federal surface transportation policy. Clean, Low Emission, Affordable, New Transportation Efficiency Act (S. 575/H.R. 1329) This bill, sometimes referred to as CLEANTEA, establishes a new trust fund, the Low Greenhouse Gas Transportation Fund, to be funded with monies coming from the auctioning of greenhouse gas emissions allowances that might arise with the enactment of a cap-and-trade system. The bill requires money from 10% of the auctioned allowances to be deposited in the fund. Monies in the fund, distributed by formula, are to be used by states and MPOs to develop plans and targets to reduce GHG emissions from transportation, and to help fund projects that are planned. Highway Fairness and Reform Act of 2009 (S. 903) This bill would allow states to opt out of the Federal-Aid Highway program beginning in FY2011. A state opting out of the highway program would instead receive an amount equivalent to the state's contribution to the highway account of the Highway Trust Fund, less an amount to be determined by the Secretary to pay a portion of the funding necessary to maintain NHTSA and FMCSA activities. As part of this transfer, the state would agree to continue certain aspects of the existing highway program, such as the urbanized area suballocation distribution that would have occurred as part of the STP program. In addition, a state would agree to maintain the interstates and submit a plan on how the funds obtained from this transfer would be utilized. S. 903 is a donor state bill. By transferring funds directly to the state instead of through the existing federal aid program it addresses many of the long standing complaints expressed by donor states that they do not receive a full return on their contributions to the trust fund. At its core the bill is a policy statement favoring partial devolution of the surface transportation assistance program. It is partial because it deals only with the spending side of the program. The federal government would still be required to collect taxes and transfer them to the states. In some ways this process would be similar to the revenue sharing policies adopted during the Nixon Administration and repealed under the Reagan Administration. The bill as introduced does not contain detailed implementation provisions. The bill does not, for example, provide guidance on how the regulatory structure for this program restructuring would be created. One could assume that the Secretary would have this role, but the legislation does not make this clear. Federal Surface Transportation Policy and Planning Act of 2009 (S. 1036) The Federal Surface Transportation Policy and Planning Act of 2009 ( S. 1036 ), introduced by Senators Rockefeller and Lautenberg, sets out a number of national surface transportation policy objectives, and establishes 10 goals. The policy goals are: to reduce national per capita motor vehicle miles traveled on an annual basis; to reduce national motor vehicle-related fatalities by 50% by 2030; to reduce national surface transportation-generated carbon dioxide levels by 40% by 2030; to reduce national surface transportation delays per capita on an annual basis; to increase the percentage of system-critical surface transportation assets, as defined by the Secretary, that are in a state of good repair by 20% by 2030; to increase the total usage of public transportation, intercity passenger rail services, and non-motorized transportation on an annual basis; to increase the proportion of national freight transportation provided by non-highway or multimodal services by 10% by 2020; to reduce passenger and freight transportation delays and congestion at international points of entry on an annual basis; to ensure adequate transportation of domestic energy supplies; and to maintain or the reduce the percentage of gross domestic product consumed by transportation costs. In order to achieve the policy, objectives, and goals in the act, the Secretary of DOT is required, in consultation with a wide range of state and local governments, non-profits, and private entities, to develop and implement a National Surface Transportation Performance Plan. The Secretary is also required to evaluate how well federal surface transportation programs contribute to achieving the policy, objectives, and goals, and must "align the availability and award of Federal surface transportation funding to meet the policy, objectives, goals, and performance criteria established." Appendix A. CRS Surface Transportation Reauthorization Reports CRS Report R40053, Surface Transportation Program Reauthorization Issues for the 111th Congress , coordinated by [author name scrubbed] CRS Report RL34675, Surface Transportation Reauthorization: Selected Highway and Transit Issues in Brief , by [author name scrubbed] CRS Report RL33995, Surface Transportation Congestion: Policy and Issues , by [author name scrubbed] CRS Report R40451, The Donor-Donee State Issue: Funding Equity in Surface Transportation Reauthorization , by [author name scrubbed] CRS Report RL34127, Highway Bridges: Conditions and the Federal/State Role , by [author name scrubbed] and [author name scrubbed] CRS Report R40629, Freight Issues in Surface Transportation Reauthorization , by [author name scrubbed] and [author name scrubbed] CRS Report RL34183, Public Transit Program Funding Issues in Surface Transportation Reauthorization , by [author name scrubbed] CRS Report RL34171, Public Transit Program Issues in Surface Transportation Reauthorization , by [author name scrubbed] CRS Report RL34305, Motorcycle Safety: Recent Trends, Congressional Action, and Selected Policy Options , by [author name scrubbed] CRS Report RL34153, Seat Belts on School Buses: Overview of the Issue , by [author name scrubbed] CRS Report RL34657, Financial Institution Insolvency: Federal Authority over Fannie Mae, Freddie Mac, and Depository Institutions , by [author name scrubbed] and [author name scrubbed] CRS Report RL33492, Amtrak: Budget and Reauthorization , by [author name scrubbed] and [author name scrubbed] Appendix B. Trust Fund Financial Data

The existing authorization for federal surface transportation programs provided by the Safe, Accountable, Flexible, Efficient Transportation Equity Act: a Legacy for Users (SAFETEA-LU or SAFETEA) expires on September 30, 2009. Congress is now considering legislation that would either reauthorize these programs or extend the existing program into at least part of the next fiscal year. While it considers reauthorization or extension legislation, Congress has also had to address an ongoing financial shortfall in the highway account of the Highway Trust Fund. Just before leaving for its summer District Work period, Congress provided a short term fix for the funding problem by transferring $7 billion from the Treasury's General Fund Account to the highway account of the Highway Trust Fund (P.L. 111-46). These funds are expected to keep the trust fund solvent through the remainder of FY2009 and may also provide an additional cushion that could extend later into the fall. This action does not, however, address program extension and provides no long term solution to the trust fund's financial problems. Extension legislation introduced so far is straightforward in its nature, containing no extraneous legislative provisions. The Senate is considering a bill, S. 1498, the Surface Transportation Extension Act of 2009, and related legislation that would extend the existing surface transportation program for 18 months and would provide an infusion of $27 billion to insure that the highway and transit accounts of the Highway Trust Fund remain financially viable throughout the extension period. Action to this point has occurred at the Committee level and floor consideration of the legislation could occur in the fall of 2009. At this point only one reauthorization bill has been introduced, the Surface Transportation Assistance Act of 2009. At present, however, the bill is incomplete, lacking funding data and other details on several of what might be the most significant features in the bill. The bill, although not yet formally introduced and hence unnumbered, has nonetheless been subject to mark up by the House Committee on Transportation and Infrastructure, Subcommittee on Highways and Transit. There are many issues associated with surface transportation legislation. Some, but not all, are discussed in the examination of the legislation under consideration presented in this report. Those seeking to understand all of the major issues at play in this debate should refer to: CRS Report R40053, Surface Transportation Program Reauthorization Issues for the 111th Congress, coordinated by [author name scrubbed]. This report begins with a very brief discussion of the existing federal surface transportation program. Those already familiar with the program may choose to skip over this section of the report and move on to the sections that discuss the major provisions of significant legislation currently under consideration by the 111th Congress. As new legislation is introduced and more detailed information becomes available about already-introduced legislation, this report will be expanded and updated.

CRS_R42936

The unemployment insurance (UI) system has two primary objectives: (1) to provide temporary, partial wage replacement for involuntarily unemployed workers and (2) to stabilize the economy during recessions. In support of these goals, several UI programs provide benefits for eligible unemployed workers. Overview of Unemployment Insurance Programs In general, when eligible workers lose their jobs, the joint federal-state Unemployment Compensation (UC) program may provide up to 26 weeks of income support through the payment of regular UC benefits. UC benefits may be extended for up to 13 or 20 weeks by the Extended Benefit (EB) program if certain economic situations exist within the state. Previously, up to 47 weeks by the temporarily authorized Emergency Unemployment Compensation (EUC08) program were available. (EUC08 benefits expired on December 28, 2013, and are no longer authorized.) Figure 1 depicts the sequence of unemployment benefits that were available until December 28, 2013. Currently, only the UC and EB programs are authorized, although no state is in an active EB period. Unemployment Compensation Program The joint federal-state UC program, authorized by the Social Security Act of 1935 (P.L. 74-271), provides unemployment benefits for up to a maximum of 26 weeks. Former U.S. military servicemembers may be eligible for unemployment benefits through the unemployment compensation for ex-servicemembers (UCX) program. The Emergency Unemployment Compensation Act of 1991 ( P.L. 102-164 ) provides that ex-servicemembers be treated the same as other unemployed workers with respect to benefit levels, the waiting period for benefits, and benefit duration. Although federal laws and regulations provide broad guidelines on UC benefit coverage, eligibility, and benefit determination, the specifics regarding UC benefits are determined by each state. This results in essentially 53 different programs. Generally, UC eligibility is based on attaining qualified wages and employment in covered work over a 12-month period (called a base period) prior to unemployment. All states require a worker to have earned a certain amount of wages or to have worked for a certain period of time (or both) within the base period to be monetarily eligible to receive any UC benefits. The methods states use to determine monetary eligibility vary greatly. Most state benefit formulas replace approximately half of a claimant's average weekly wage up to a weekly maximum. The UC program is financed by federal taxes under the Federal Unemployment Tax Act (FUTA) and by state payroll taxes under the State Unemployment Tax Acts (SUTA). The 0.6% effective net FUTA tax paid by employers on the first $7,000 of each employee's earnings (no more than $42 per worker per year) funds federal and state administrative costs, loans to insolvent state UC accounts, the federal share (50%) of EB payments, and state employment services. SUTA taxes on employers are limited by federal law to funding regular UC benefits and the state share (50%) of EB payments. Federal law requires that the state tax be on at least the first $7,000 of each employee's earnings (it may be more) and requires that the maximum state tax rate be at least 5.4%. Federal law also requires the state tax rate to be based on the amount of UC paid to former employees (known as "experience rating"). Within these broad requirements, states have great flexibility in determining the SUTA structure of their state. Generally, the more UC benefits paid out to its former employees, the higher the tax rate of the employer, up to a maximum established by state law. Funds from FUTA and SUTA are deposited in the appropriate accounts within the Unemployment Trust Fund (UTF). Emergency Unemployment Compensation Program (Expired) On June 30, 2008, President George W. Bush signed the Supplemental Appropriations Act of 2008 ( P.L. 110-252 ), which created a new temporary unemployment insurance program, the EUC08 program. This was the eighth time Congress had created a federal temporary program to extend unemployment compensation during an economic slowdown. State UC agencies administered the EUC08 benefit along with regular UC benefits. The authorization for this program has been extended multiple times and was authorized through December 28, 2013, for all states except New York (December 29, 2013) and North Carolina. EUC08 benefits have not been available in North Carolina since June 2013. EUC08 Benefit Ended on December 28, 2013 The EUC08 program was amended 11 times, the final time by P.L. 112-240 . The EUC08 benefit amount was equal to the eligible individual's weekly regular UC benefits and included any applicable dependents' allowances. The most recent modifications to the underlying structure of the EUC08 program were made by P.L. 112-96 . These modifications included changes to the number of weeks available in each EUC08 tier as well as the state unemployment rates required to have an active tier in that state. These requirements were implemented during 2012 in three separate phases. The following weeks of EUC08 benefits were available in the tiers listed below through December 28, 2013: Tier I was available in all states, except in North Carolina, with up to 14 weeks of EUC08 benefits provided to eligible individuals. Tier II was available if the state's total unemployment rate (TUR) was at least 6%, with up to 14 weeks provided to eligible individuals in those states (not available in North Carolina). Tier III was available if the state's TUR was at least 7% (or an insured unemployment rate, IUR, of at least 4%), with up to 9 weeks provided to eligible individuals in those states (not available in North Carolina). Tier IV was available if the state's TUR was at least 9% or the IUR was 5%, with up to 10 weeks provided to eligible individuals in those states (not available in North Carolina). EUC08 Program Expired All tiers of EUC08 benefits were temporary and expired in the week ending on or before January 1, 2014. Thus, on December 28, 2013 (December 29, 2013, for New York), the EUC08 program ended. All entitlement to EUC08 benefits is no longer authorized. (There is no grandfathering of any EUC08 benefit.) Impact of Federal "Nonreduction" Rule on State UC Laws In response to similar state UC financial stress following prior recessions, states typically reduced the amount of UC benefits paid to individuals through reductions in the maximum benefit amount or through changes in the underlying benefit calculations. Under two temporary provisions in federal law, however, most states were prohibited from enacting legislation that would reduce the average UC benefit amount through changes to benefit calculation from February 2009 through December 2013. One state, North Carolina, implemented new legislation that reduced benefit amounts. As a result, the EUC08 agreement between North Carolina and the Secretary of the U.S. Department of Labor (DOL) terminated early. All tiers of EUC08 ended in North Carolina as of June 29, 2013. No EUC08 benefits have been available in that state since June 30, 2013. The implementation of this "nonreduction" rule coincided with new state actions that reduced UC benefit duration as an alternative means to decrease total UC benefit payments. As a result, these changes in state UC benefit duration may be a state response to state UC financing shortfall. For more information on the state law changes, see CRS Report R41859, Unemployment Insurance: Consequences of Changes in State Unemployment Compensation Laws . Extended Benefit Program The EB program was established by the Federal-State Extended Unemployment Compensation Act of 1970 (EUCA), P.L. 91-373 (26 U.S.C. §3304, note). EUCA may extend receipt of unemployment benefits (extended benefits) at the state level if certain economic situations exist within the state. The EB program is triggered when a state's insured unemployment rate (IUR) or total unemployment rate (TUR) reaches certain levels. All states must pay up to 13 weeks of EB if the IUR for the previous 13 weeks is at least 5% and is 120% of the average of the rates for the same 13-week period in each of the two previous years. There are two other optional thresholds that states may choose. (States may choose one, two, or none.) If the state has chosen a given option, it would provide the following: Option 1: an additional 13 weeks of benefits if the state's IUR is at least 6%, regardless of previous years' averages. Option 2: an additional 13 weeks of benefits if the state's TUR is at least 6.5% and is at least 110% of the state's average TUR for the same 13 weeks in either of the previous two years; an additional 20 weeks of benefits if the state's TUR is at least 8% and is at least 110% of the state's average TUR for the same 13 weeks in either of the previous two years. Each state's IUR and TUR are determined by the state of residence (agent state) of the unemployed worker rather than by the state of employment (liable state). EB benefits are not "grandfathered" when a state triggers "off" the program. When a state triggers "off" of an EB period, all EB benefit payments in the state cease immediately regardless of individual entitlement. Expired Temporary EB Provisions in P.L. 111-312 P.L. 111-312 , as amended (most recently by P.L. 112-240 ), made some technical changes to certain triggers in the EB program. These changes allowed states to temporarily use lookback calculations based on three years of unemployment rate data (rather than the permanent-law lookback of two years of data) as part of their mandatory IUR and optional TUR triggers if states would otherwise trigger off or not be on a period of EB benefits. Using a two-year versus a three-year EB trigger lookback was an important adjustment at the time of the signing of P.L. 111-312 (December 17, 2010) because many states were likely to trigger off of their EB periods despite high, sustained—but not increasing—unemployment rates. For more information on these state law changes see CRS Report R41859, Unemployment Insurance: Consequences of Changes in State Unemployment Compensation Laws . The authorization for the temporary EB trigger modifications expired the week ending on or before December 31, 2013. The EB benefit amount is equal to the eligible individual's weekly regular UC benefits. Under permanent law, FUTA finances half (50%) of the EB payments and 100% of EB administrative costs. States fund the other half (50%) of EB benefit costs through their SUTA. Beginning on February 17, 2009, P.L. 111-5 (most recently amended by P.L. 112-240 ) temporarily changed the federal-state funding arrangement for the EB program. The FUTA financed 100% of EB benefits from February 17, 2009, through December 31, 2013. The one exception to the 100% federal financing was for those EB benefits based on work in state and local government employment; those "non-sharable" benefits continued to be 100% financed by the former employers. Unemployment Insurance Benefits and the Sequester The sequester order required by the Budget Control Act of 2011 ( P.L. 112-25 ) and implemented on March 1, 2013 (after being delayed by P.L. 112-240 ), affects some but not all types of unemployment insurance expenditures. Regular UC, UCX, and UCFE payments are not subject to the sequester reductions. EB, EUC08, and most forms of administrative funding are subject to the sequester reductions. Please see CRS Report R43133, The Impact of Sequestration on Unemployment Insurance Benefits: Frequently Asked Questions for additional information on the impact of sequestration on UI benefits. FY2013 Sequester of UI Benefits The FY2013 sequestration reductions applied to the budgetary resources for all of FY2013 (October 1, 2012, through September 30, 2013)—but the actual EB and EUC08 payment reductions were not implemented before the week beginning March 31, 2013. The sequester order for FY2013 required a 5.1% reduction to be applied on all nonexempt nondefense mandatory expenditures. Thus, EUC08 and EB payments were required to be reduced by 10.7% for benefits paid for weeks of unemployment beginning on March 31, 2013, to meet the 5.1% reduction target for FY2013. The U.S. DOL released guidance on how states should implement the FY2013 sequester reductions to unemployment benefits for FY2013. These reductions began the week beginning on or after March 31, 2013. For states that were not able to implement these reductions by March 31, 2013, the amount of the benefit reduction was actuarially increased to be equivalent to a 10.7% reduction. Not all states implemented the sequestration reductions uniformly across all EUC08 beneficiaries. Several states were unable to implement the preferred method of reduction as outlined by the DOL and opted for an alternative method. No unemployment benefits already paid to individuals before the state began the sequester reductions were affected. FY2014 Sequester of UI Benefits In FY2014, the sequestration order required a 7.2% reduction in all nonexempt nondefense mandatory expenditures. EUC08: FY2014 Sequestration The FY2014 sequestration order required that EUC08 expenditures be reduced by 7.2% for EUC08 benefits paid for weeks of unemployment beginning on October 6, 2013 (ending December 28, 2013, when EUC08 authorization expired). According to its guidance, the DOL will work with states individually to assist them in administering the FY2014 sequester of EUC08: Due to the extraordinary programming challenges states experienced during sequestration implementation for FY 2013, and the additional challenges presented by the further changes necessary for sequestration implementation for FY 2014, the Department has reached out to states with various options that may be used in order to achieve the required FY 2014 sequestration savings. Letters have been sent to each state approving the implementation strategy agreed upon by the Department and the states in advance of further specific guidance in this UIPL [Unemployment Insurance Program Letter]. EB: FY2014 Sequestration The federal share of EB benefits would have been reduced by 7.2% for any benefits paid for weeks of unemployment beginning on October 6, 2013, and ending September 27, 2014. For the entire period, no state had an active EB program. FY2015 Sequester of UI Benefits In FY2015, the sequestration order requires a 7.3% reduction in all nonexempt nondefense mandatory expenditures. EB: FY2015 Sequestration In FY2015, the sequestration order requires that EB expenditures be reduced by 7.3% (only on the federal share of EB benefits) for weeks of unemployment beginning on October 4, 2014, through September 26, 2015. Alleviating State Unemployment Compensation Stress Eleven states and the Virgin Islands owed a cumulative $13.9 billion to the federal accounts within the UTF as of October 28, 2014. The American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ) temporarily stopped the accrual of interest charges on these state UC loans and deemed any interest payments due during that time as having been paid through December 31, 2010. Since January 1, 2011, interest charges again began to accrue and interest payments must be made. For calendar year 2013, employers in 13 states and the Virgin Islands faced an increased net FUTA because the state UC program had borrowed funds from the federal UTF loan account for two consecutive years. President's Budget Proposal for FY2015 The President's Budget Proposal for FY2015 attempts to address some of these state and federal financing concerns. The proposal includes extending the suspension of interest accrual for 2014 and 2015 as well as temporarily suspending net FUTA tax increases (because of outstanding state loans) for the same period. The proposal would increase the FUTA taxable wage base from $7,000 to $15,000 in 2017 while increasing the FUTA tax rate from 0.6% to 0.8% for 2015 and then decreasing the FUTA tax rate from 0.80% to 0.38% in 2017. Beginning in 2017, the FUTA tax base would be indexed to wage growth. Under federal law, the taxable wage base for SUTA taxes in states must be at least the taxable wage base for FUTA. Therefore, the proposed increase in the FUTA taxable wage in the President's Budget Proposal would have the effect of requiring states to have a SUTA taxable wage bas e of at least $15,000 in 2017, which would then be indexed to wage growth. The FY2015 President's Budget Proposal also includes various UC program measures: 1. Additional funding for Reemployment and Eligibility Assessments (REAs) 2. Funding ($2 billion) to encourage states to adopt Bridge to Work programs, which would allow individuals to continue receiving unemployment benefits while participating in a short-term work placement and would also support other strategies for getting UC claimants back to work more quickly 3. Reduction of an individual's Social Security Disability Insurance (SSDI) benefit in any month in which that person also receives an unemployment benefit In addition, the President's Budget Proposal would provide $4 billion in mandatory funding to support partnerships between businesses and education and training providers to train approximately 1 million long-term unemployed workers for new jobs. Enacted Legislation in the 113th Congress Unemployment Insurance Integrity Provision in P.L. 113-67 P.L. 113-67 , the Bipartisan Budget Act of 2013, was signed by the President on December 26, 2013. P.L. 113-67 included a provision that requires states (one year after the unemployment benefit overpayment debt was finally determined to be due) to recover any remaining state overpayments through reduced federal income tax refunds. Legislative Proposals in the 113th Congress Extension of Federal UI Provisions Numerous proposals have been introduced in the 113 th Congress to further extend some or all of the now-expired temporary federal provisions of UI law: the authorization of EUC08, the 100% federal financing of EB, the authorization for states to use a three-year lookback for state EB triggers, temporary railroad UI benefits, and funds for Reemployment Services and Reemployment and Eligibility Assessment Activities (RES/REAs). Additionally, some of these extension proposals also waive the nonreduction rule for states that had legislatively lowered their weekly UC benefit amount calculation. Table 1 provides summary details of these proposals. H.R. 3979 On April 7, 2014, the Senate passed a version of H.R. 3979 , the Emergency Unemployment Compensation Act of 2014, which includes an extension of various federal UI provisions. Among other provisions, H.R. 3979 would retroactively extend EUC08 authorization—and maintain the EUC08 tier structure that had been available prior to the program's expiration in December 2013—for five months (i.e., through May 2014). In addition, H.R. 3979 would also extend the expired EB provisions for five months; extend the expired railroad UI provisions for five months; reauthorize the funding for RES/REAs and change the timing of RES/REAs requirements; provide an exception to the nonreduction rule associated with EUC08 prior to its expiration; prohibit any individual reporting more than $1 million in adjusted gross income (AGI) in the preceding year from receiving EUC08 benefits; and make the same decreases in expenditures and increases in revenues to offset the cost of the proposed UI extensions as are found in S. 2148 and S. 2149 . Both H.R. 4415 and Title I of H.R. 4550 contain identical language to H.R. 3979 . Additional UI Extension Proposals Besides H.R. 3979 , H.R. 4415 , and H.R. 4550 , many of the other extension bills propose retroactively reauthorizing the expired federal UI provisions for one additional year through December 2014 ( H.R. 3546 , H.R. 3773 , H.R. 3885 , S. 1747 , and S. 1797 ). H.R. 2821 , however, would retroactively extend the expired provisions for an additional two years (i.e., through December 2015). A number of other bills would retroactively extend the expired provisions for less than a year: S.Amdt. 2631 proposes a retroactive extension of 10.5 months through mid-November 2014; H.R. 3936 and S. 2077 propose a retroactive, six-month extension through June 2014; S. 2097 , S. 2148 , and S. 2149 propose a retroactive, five-month extension through May 2014; and H.R. 3813 , H.R. 3824 , S.Amdt. 2714 , S. 1845 , and S. 1931 propose a retroactive, three-month extension through March 2014. In addition, two bills, H.R. 4970 and S. 2532 , would reauthorize the temporary federal provisions for five months from the time of enactment without any retroactive benefits. Most of the additional proposed UI extension legislation would maintain the EUC08 tier structure that had been available prior to the program's expiration in December 2013. H.R. 3885 , however, would only extend tier I of EUC08 with a maximum duration of up to 14 weeks. S.Amdt. 2631 and S. 1931 would reauthorize all four tiers of EUC08, but reduce the duration of the first two tiers to be up to 6 weeks each (i.e., for a total maximum duration of up to 31 weeks from all four tiers of EUC08). In addition, H.R. 4431 would introduce a gradual reduction of the weekly benefit amount if EUC08 benefits were reauthorized. There is additional variation among these proposals in terms of the other UI provisions: All of these bills—except for H.R. 3773 —would reauthorize the temporary EB and railroad UI provisions. Most of these bills—except for H.R. 3773 , H.R. 3813 , and H.R. 3885 —would reauthorize the funding for RES/REAs. Most of these bills—except for H.R. 2821 , H.R. 3546 , H.R. 3773 , S. 1747 , and S. 1797 —propose exceptions to the nonreduction rule associated with EUC08 prior to its expiration. Several of these bills contain offset provisions related to the concurrent receipt of UI and Social Security Disability Insurance (SSDI) payments ( H.R. 3885 , S.Amdt. 2631 , S. 1931 , and S. 2097 ). Two bills— S.Amdt. 2714 and S. 2097 —would prohibit any individual reporting more than $1 million in AGI in the preceding year from receiving from receiving federal unemployment compensation, including EB and EUC08 payments. H.R. 3979 , H.R. 4415 , H.R. 4550 , H.R. 4970 , S. 2148 , S. 2149 , and S. 2532 would prohibit any individual reporting more than $1 million in AGI in the preceding year from receiving EUC08 benefits. Several of these bills propose changes to REAs: S. 2097 would amend REAs to include an assessment of the reason for unemployment and allow states the option to require that a EUC08 claimant participate in job training program or community service if job training is not appropriate. In addition, it would enact changes to work search and suitable work requirements and disqualifications to conform to EB requirements (rather than UC requirements). S. 2148 , S. 2149 , S. 2532 , and H.R. 4970 would change the timing of REAs to require that REAs and employment services are available when an individual enters tier I of EUC08 and, if applicable, again when the individual enters tier III of EUC08. Several of these proposals include decreases in expenditures or increases in revenues to offset the cost of the proposed UI extensions: H.R. 4970 , S.Amdt. 2714 , S. 2097 , S. 2148 , S. 2149 , and S. 2532 would extend the changes that the Moving Ahead for Progress in the 21 st Century Act (MAP-21; P.L. 112-141 ) made to the discount rates that are used by defined benefit (DB) pension plans for four additional years. The bills would allow the sponsors of DB pension plans to contribute less to their pension plans, which would increase plans sponsors' taxable income. S. 2077 proposes to offset the cost of its provisions with previously enacted Farm bill savings found in P.L. 113-79 . H.R. 4970 , S. 2097 , S. 2148 , S. 2149 , and S. 2532 include an extension of certain customs user fees. S. 2148 and S. 2149 would allow the sponsors of single-employer and multiemployer DB pension plans to prepay the annual flat-rate, per participant premium paid to the Pension Benefit Guaranty Corporation (PBGC). Administrative Concerns Related to Proposals to Extend Federal UI Provisions On March 19, 2014, the National Association of State Workforce Agencies (NASWA), an organization of state UI administrators and other employment services stakeholders, provided a letter and fact sheet to Senate Majority Leader Reid and Senate Minority Leader McConnell outlining state administrative concerns related to a potential extension of UI. In particular, these March 2014 NASWA documents responded to the UI provisions in S. 2148 . NASWA highlighted a number of key administrative challenges for states raised by S. 2148 , including older state UI computer systems (average age of 25) that make rapid EUC08 program changes difficult to administer; potential difficulty in administering the work search requirement retroactively for all weeks of backdated claims; potential difficulty in administering the proposal to prohibit any individual reporting more than $1 million in AGI in the preceding year from receiving federal unemployment compensation (since UI benefits are not currently means-tested and state UI administrators do not currently collect tax information on UI claimants); and lack of clarity in legislation regarding prohibition on using federal funds to administer EUC08 claims. In sum, NASWA stated that—faced with the administrative challenges that S. 2148 , if enacted, would entail—some states might choose to terminate their EUC08 agreements with DOL: The requirements in S. 2148 would cause considerable delays in the implementation of the program and increased administrative issues and costs. Some states have indicated they might decide such changes are not feasible in the short time available, and therefore would consider not signing the U.S. Department of Labor's agreement to operate the program. On March 21, 2014, U.S. Labor Secretary Thomas Perez wrote a letter to Senate Majority Leader Reid and Senate Minority Leader McConnell responding to the administrative concerns raised by NASWA. In this letter, Secretary Perez maintains that NASWA's concerns can be addressed and overcome: I am confident that there are workable solutions for all of the concerns raised by NASWA. From the Great Recession to the present, the Congress has worked in a bipartisan fashion to enact twelve different expansions or extensions to the EUC program. A number of the extensions included changes to the program that were as or more complex than those included in the current bill. The Department of Labor has consistently worked with states to implement these extensions in an effective, collaborative and prompt fashion, and will do so again. For instance, to address NASWA's specific concern regarding the lack clarity in the legislation prohibiting the use federal funds to administer EUC08 claims, Secretary Perez suggested a "technical amendment without changing the substance of the agreement that is the foundation of the bill." S. 2149 , S. 2532 , H.R. 3979 , H.R. 4415 , H.R. 4550 , and H.R. 4970 incorporate this type of technical correction. On May 7, 2014, Secretary Perez wrote a similar letter to House Speaker Boehner. Additional UI Provisions in the American Jobs Act of 2013 (H.R. 2821) In addition to the two-year extension of federal UI provisions discussed in the previous section, Title III ("Assistance for the Unemployed and Pathways Back to Work") of H.R. 2821 includes several provisions relating to unemployment insurance. Reemployment NOW Program and Funding Opportunities H.R. 2821 would establish a "Reemployment NOW" program with $4 billion in federal appropriations. The $4 billion in funds would be allotted to the states based on a two-part formula: (1) two-thirds would be distributed to the states based upon the state share of the U.S. total number of unemployed persons and (2) one-third would be distributed to the states based on the state share of the long-term unemployed (measured as unemployment spells of at least 27 weeks). Up to 1% of the funds would be available for program administration and evaluation. To receive a Reemployment NOW allotment, a state would have to submit a plan to DOL describing the activities it would perform to reemploy eligible individuals, among other requirements (such as performance measures). Reemployment NOW funds would be available for several allowable programs uses: The "Bridge to Work" program, which would allow individuals to continue to receive EUC08 benefits as wages for work performed in a short-term work experience placement. Wage insurance, which would authorize states to provide an income supplement to EUC08 claimants who secure reemployment at a lower wage than their separated employment. Enhanced reemployment services, which would allow states to use funds to provide EUC08 claimants and individuals who have exhausted all entitlements to EUC08 benefits with reemployment services that are more intensive than any reemployment services provided by the states previously (for instance, one-on-one assessments, counseling, or case management). Start-up of Self-Employment Assistance (SEA) state programs, which would authorize states to use funds for any administrative costs associated with the start-up of SEA agreements. Additional innovative programs, which would allow states to use funds for programs other than the programs described above. These programs would be required to facilitate the reemployment of EUC08 claimants, among other requirements. Short-Time Compensation Programs ("Worksharing") H.R. 2821 would provide temporary 100% federal financing for up three years and six months after enactment for short-time compensation (STC) benefits in states with existing STC programs. States without existing STC programs would be allowed to enter into an agreement with DOL for up to two years and three months after enactment and receive federal reimbursement for administrative expenses, as well as temporary federal financing of 50% of STC payments to individuals, with employers paying the other 50% of STC costs. If a state enters into an agreement with the Secretary of Labor and then subsequently enacts a law providing for STC, that state would then be eligible to receive 100% federal financing. H.R. 2821 would also award grants of up to $700 million total to eligible states, with one-third of each state's grant available for implementation and improved administration purposes and two-thirds of each state's grant available for program promotion and enrollment of employers. This proposal would also provide $1.5 million for DOL to submit a report to Congress and the President, within four years of enactment, on the implementation of this provision. These provisions are similar to the STC provisions enacted in P.L. 112-96 . Long-Term Unemployed Work Opportunity Credits H.R. 2821 would add a targeted group for purposes of the Work Opportunity Tax Credit (WOTC) for individuals who have been unemployed for six months or more during the one-year period prior to being hired. For those long-term unemployed who are hired and remain on a firm's payroll at least 400 hours, an employer would be able to claim a non-refundable income tax credit of 40% of the first $10,000 in wages paid during the worker's first year of employment. For eligible hires who remain employed for 120 hours to 399 hours, the credit rate would be 25%. Under certain circumstances, tax-exempt employers may claim the credit for hiring long-term unemployed individuals. Exempting UI Benefits from the Sequester H.R. 2177 , the Unemployment Restoration Act, would make both EB and EUC08 exempt from sequestration. This exemption would be retroactive and would continue through FY2021. Any reduction of UI payments that occurred because of the sequester order would be paid back retroactively. Integrity Proposals H.R. 3205 , the Promoting Adoption and Legal Guardianship for Children in Foster Care Act; S. 1870 , the Supporting At-Risk Children Act; and S. 1876 also include proposals similar to the UI integrity provision enacted via P.L. 113-67 . The proposals in H.R. 3205 , S. 1870 , and S. 1876 would also require states (after two years since the state unemployment benefit overpayment occurred) to recover any remaining state overpayments through reduced federal income tax refunds. H.R. 2826 , the Permanently Ending Receipt by Prisoners Act, would require states to use the Prisoner Update Processing System (PUPS) data compiled by the Social Security Administration. States would use PUPS data to confirm that an individual is not confined in a jail, prison, or other penal institution or correctional facility. Any individual who is incarcerated would not be eligible for regular UC benefits because the individual would not be available for work. H.R. 3447 , the Furloughed Federal Employee Double Dip Elimination Act, would clarify that if a federal employee were to receive back pay for a period during which he or she had been furloughed due to a lapse in federal appropriations, the federal employee would have to repay any unemployment compensation for that period. Short-Time Compensation The Layoff Prevention Extension Act of 2014 ( H.R. 5583 and S. 2906 ) would extend several of the STC provisions in the Middle Class Tax Relief and Job Creation Act of 2012 ( P.L. 112-96 ). The 100% federal cost sharing provisions of approved STC programs would be extended for an additional year until August 2016. Similarly the STC grants for implementation or improved administration of an STC program or to promote and enroll employers in an STC program if state STC law conforms to the federal STC definition would be available for an additional year until December 2015. Concurrent Receipt of SSDI and UI Benefits42 H.R. 1502 , the Social Security Disability Insurance and Unemployment Benefits Double Dip Elimination Act, would require that for any month that an individual is entitled to UC, EB, EUC08 or Trade Adjustment Assistance (TAA), he or she shall be deemed to have engaged in substantial gainful activity (SGA) and so be disqualified from receiving Social Security Disability Insurance (SSDI) benefits after a certain period has elapsed. H.R. 3885 , the GROWTH Act, has a similar provision among its many proposals. S. 1099 , the Reducing Overlapping Payments Act, would require that for any month that an individual receives UC, no SSDI benefits would be paid. S.Amdt. 2631 , among its many provisions, would require that any UI benefit paid to an individual during a month offset any SSDI payment for that month. Among many other provisions, S. 1931 , the Responsible Unemployment Compensation Extension Act of 2014, and S. 2097 , the Responsible Unemployment Compensation Extension Act of 2014, would both require UI payments to offset SSDI payments except if based upon employment while participating in the Ticket to Work and Self-Sufficiency Program. Income Restrictions ("Millionaires") Four proposals in the 113 th Congress would prohibit any individual reporting more than $1 million in adjusted gross income (AGI) in the preceding year from receiving federal unemployment compensation, including EB and EUC08 payments: S. 18 (Section 401), H.R. 2448 , S.Amdt. 2714 (Section 7), and S. 2097 (Section 9). Several additional proposals contain provisions that would prohibit any individual reporting more than $1 million in AGI in the preceding year from receiving any EUC08 payments: S. 2148 (Section 7), S. 2149 (Section 7), S. 2532 (Section 7), H.R. 3979 (Section 7), H.R. 4415 (Section 7), H.R. 4550 (Section106), and H.R. 4970 (Section 7). Vouchers/Demonstration Projects H.R. 51 , the Hire Just One Act of 2013, and Section 201 of H.R. 4550 would create an employment assistance voucher program and would allow states to use UC funds to pay for the vouchers. Instead of paying UC directly to the unemployed worker, if an eligible individual is issued an employment assistance voucher and is hired by a participating employer, the employer would receive a subsidy from the state for the wages paid to the employee. The individual must have been unemployed for at least six months and would otherwise be eligible for UC, EB, or EUC08 and must have been profiled as likely to exhaust UC benefits. H.R. 3864 , the Flexibility to Promote Reemployment Act, and S. 2870 , the On the Job Training Act, would make a number of changes to the state UC demonstration projects created by the Middle Class Tax Relief and Job Creation Act of 2012 ( P.L. 112-96 ). For instance, the bills would expand the existing authority for state UC demonstration projects by authorizing 10 states per year to conduct approved demonstration projects (the current authority is only for 10 states total) and extending the time period that state demonstration projects may be approved by DOL by two years until December 31, 2017. They would also revise state UC demonstration project requirements, including removing a requirement that any direct disbursements paid to employers for hiring UC claimants not exceed an individual's UC weekly benefit amount and requiring that DOL approve state applications for UC demonstration projects based on the order of receipt. Additionally, the bills would transfer the responsibility for state UC demonstration project impact evaluation from states, as under current law, to DOL and require a specific procedure for termination of state UC demonstration project by DOL. Job Training and Education H.R. 1530 , the Opportunity KNOCKs Act, would require that states allow UC beneficiaries to participate in a Workforce Investment Act (WIA) authorized job training program and remain eligible for benefits. If the UC beneficiary has been profiled to exhaust regular benefits the individual may be enrolled in any coursework necessary to attain a recognized postsecondary credential. S. 2097 would require EUC08 claimants undergo an assessment for the cause of continued unemployment and allow states the option to require EUC08 claimants participate in job training programs or community services if job training is not appropriate. S. 2148 , S. 2149 , and H.R. 3979 would change the timing of REAs for EUC08 claimants so that REAs and employment services would be available, at the minimum, when an individual enters tier I of EUC08 as well as again when the individual enters tier III of EUC08, if applicable. Drug Testing47 H.R. 1172 would create a new federal requirement that individuals be deemed ineligible for UC benefits based on previous employment from which they were separated due to an employment-related drug or alcohol offense. The bill would deny benefits to anyone who (1) is discharged from employment for alcohol/drug use; (2) is in possession of controlled substance at place of employment; (3) refuses drug testing by employer; or (4) tests positive on employer drug test for illegal or controlled substances. This proposal would require states to amend their state UC laws. H.R. 1277 , the Accountability in Unemployment Act of 2013, would create a new federal requirement for states to drug test all UC claimants as a condition of benefit eligibility. If an individual tests positive for certain controlled substances (in the absence of a valid prescription or as otherwise authorized under a state's laws), he or she would be required to retake a drug test after a 30-day period and test negative in order to be eligible for UC benefits. H.R. 3454 , the Ensuring Quality in the Unemployment Insurance Program act, would require states to assess each UC applicant for substance abuse for each benefit year. The screening instrument would be approved by the Director of the National Institutes of Health and designed to determine whether an individual has a high risk of substance abuse. If the applicant is determined to be "high risk," the applicant would have to test negative for controlled substances within one week after the results of such assessment. H.R. 4310 , the Ready to Work Act, would provide DOL with a deadline of one year after enactment to issue a final rule with regard to the drug testing provisions in the Middle Class Tax Relief and Job Creation Act of 2012 ( P.L. 112-96 ). The drug testing provisions in P.L. 112-96 permit states to drug test UI claimants if (1) the claimant was discharged from employment for illegal use of drugs or (2) the claimant is only available for suitable work in an occupation that regularly conducts drug testing. States may deny UI benefits to claimants whose drug tests yield a positive result. The regulation deadline proposed in this bill refers to the identification of occupations in which drug testing is regularly conducted. Aid for Hurricane Sandy States S. 803 , Superstorm Sandy Unemployment Relief Act of 2013, would have allowed 13 additional weeks of Disaster Unemployment Assistance (DUA) for unemployment as a result of the disaster declaration made for Hurricane Sandy after October 20, 2012, to make such assistance available for 39 weeks after the date of the declaration (currently limited to 26 weeks). In addition, the bill would have reimbursed states 100% of the amount UC paid under state law to affected individuals in each affected state or any area within it. Payments would have been available until July 28, 2013. Rehiring UI Beneficiaries and Exhaustees Several proposals have attempted to target the rehiring of workers who have exhausted unemployment benefits. In addition to the measures described above in the " Additional UI Provisions in the American Jobs Act of 2013 (H.R. 2821) " section, H.R. 188 , H.R. 1617 , and H.R. 2889 give priority to those workers who have exhausted regular UC benefits. H.R. 3453 would extend the priority treatment tax treatment in P.L. 112-56 (Work Opportunity Tax Credits, WOTC, now expired) for employers who hire veterans who have exhausted unemployment benefits or are otherwise long-term unemployed for an additional two years, until March 31, 2016. H.R. 3726 , the Long-Term Unemployed Hiring Incentive Act, would similarly extend priority to all workers who had exhausted regular unemployment benefits for three additional years, until December 31, 2016. H.R. 3781 , the American Unemployed Worker Investment Act of 2013, would similarly extend priority to any worker who is receiving any state or federal unemployment benefit at the time of hire for the two years following enactment of the bill. H.R. 4033 , the American Worker Mobility Act of 2014, would provide a UC exhaustee with up to $10,000 in relocation expenses to begin a new job or to move to an area where the unemployment rate is at least two percentage points lower than the worker's current location. Domestic Violence H.R. 1229 , the Security and Financial Empowerment Act, would require states to consider an individual who quit a job as a result of domestic or sexual violence to be eligible for UC benefits.

The 113th Congress continues to face numerous issues related to unemployment insurance programs: Unemployment Compensation (UC), the temporary, now-expired Emergency Unemployment Compensation (EUC08), and Extended Benefits (EB). With the national unemployment rate decreasing but still high, the interest in extended unemployment benefits continues at elevated levels. P.L. 112-240 extended the authorization for the EUC08 program until the week ending on or before January 1, 2014 (December 28, 2013, for most states). In addition, P.L. 112-240 extended the 100% federal financing of the EB program through December 31, 2013. Congress continues to consider whether to extend the authorization for these expired key temporary unemployment insurance provisions. This report provides a brief overview of the three unemployment insurance programs—UC, EUC08 (expired), and EB—that may provide benefits to eligible unemployed workers. It contains a brief explanation of how the EUC08 program, as well as some other UC-related payments, began to experience reductions in benefits as a result of the sequester order contained within the Budget Control Act of 2011 (P.L. 112-25). This report also includes descriptions of enacted and proposed unemployment insurance (UI) legislation in the 113th Congress, organized by the following categories: Extension of federal UI provisions (H.R. 2821, H.R. 3546, H.R. 3773, H.R. 3813, H.R. 3824, H.R. 3885, H.R. 3936, H.R. 3979, H.R. 4415, H.R. 4431, H.R. 4550, H.R. 4970, H.R. 5352, S. 1747, S. 1797, S. 1845, S.Amdt. 2631, S.Amdt. 2714, S. 1931, S. 2077, S. 2097, S. 2148, S. 2149, and S. 2532) Exemption of UI benefits from the sequester (H.R. 2177) UI program integrity (P.L. 113-67, H.R. 3205, H.R. 2826, H.R. 3447, S. 1870, and S. 1876) Short-Time Compensation (STC) (H.R. 5583 and S. 2906) Concurrent receipt of Social Security Disability Insurance (SSDI) and UI benefits (H.R. 1502, H.R. 3885, S.Amdt. 2631, S. 1099, S. 1931, and S. 2097) UI income restrictions (S. 18, H.R. 2448, H.R. 3979, H.R. 4415, H.R. 4550, H.R. 4970, S.Amdt. 2714, S. 2097, S. 2148, S. 2149, and S. 2532) UI vouchers and demonstration projects (H.R. 51, H.R. 3864, H.R. 4550, H.R. 5352, and S. 2870) Job training and education (H.R. 1530, H.R. 3979, S. 2097, S. 2148, and S. 2149) Drug testing (H.R. 1172, H.R. 1277, H.R. 3454, and H.R. 4310) Aid for Hurricane Sandy states (S. 803) Proposals to aid in the rehiring of UI beneficiaries and exhaustees (H.R. 188, H.R. 1617, H.R. 2821, H.R. 2889, H.R. 3453, H.R. 3726, H.R. 3781, H.R. 4033, H.R. 4550, and H.R. 5352) Domestic violence (H.R. 1229) President's Budget Proposal for FY2015

CRS_R44147

T he Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended) includes a 40% excise tax on high-cost employer-sponsored health insurance coverage, often referred to as the Cadillac tax . The 40% excise tax is assessed on the aggregate cost of employer-sponsored health coverage that exceeds a dollar limit. If a tax is owed, it is levied on the entity providing the coverage (e.g., the health insurance issuer or the employer). Under the ACA, the excise tax was to go into effect in 2018; however, the Consolidated Appropriations Act of 2016 (CAA of 2016; P.L. 114-113 ) delays implementation until 2020. The excise tax is included in the ACA to raise revenue to offset the cost of other ACA provisions (e.g., the financial subsidies available through the health insurance exchanges). The most current publicly available cost estimate from the Congressional Budget Office (CBO) indicates that the excise tax was expected to increase federal revenues by $87 billion between 2016 and 2025, based on 2018 implementation. The excise tax also is expected to limit the tax advantages for employer-sponsored health coverage. Many economists contend that the tax advantages lead to an overconsumption of coverage and health care services. This report provides an overview of the excise tax. The report includes cost estimates for the excise tax and explores the excise tax's relationship with the tax advantages for employer-sponsored health coverage. The information in this report is based on statute and two notices issued by the Department of the Treasury (Treasury) and the Internal Revenue Service (IRS). Notice 2015-16 was issued February 17, 2015, and the comment period for the notice closed May 15, 2015. Notice 2015-52 was issued July 30, 2015. The comment period for the notice closed October 1, 2015. As of the date of this report, regulations related to the excise tax have not been promulgated. The Excise Tax on High-Cost Employer-Sponsored Health Coverage Many employers offer health insurance plans and other health-related benefits (e.g., health care flexible spending accounts, or FSAs). These benefits are one part of an employee's total compensation. Often employers pay for part or all of these benefits. To illustrate, 57% of employers offered health insurance plans to their employees in 2015, and on average employers covered 82% of the premiums for single coverage and 71% of the premiums for family coverage. Beginning in 2020, a 40% excise tax is to be assessed on the aggregate cost of an employee's applicable coverage that exceeds a dollar limit during a taxable period. Unlike some other ACA provisions, assessment of the excise tax is not dependent on an employer's characteristics (e.g., number of workers); assessment is dependent on whether the aggregate cost of an employee's applicable coverage exceeds a dollar limit. The entity responsible for paying the excise tax to the IRS is the coverage provider. The terms applicable coverage, dollar limit, and coverage provider are defined and described in more detail below. Applicable Coverage The excise tax is assessed on the amount by which the aggregate cost of an employee's applicable coverage exceeds a dollar limit. The amount is called the excess benefit . Determining the excess benefit requires knowing which types of coverage are considered applicable coverage and how the cost of such coverage is calculated. For example, consider an employee who has an employer-sponsored health plan, a separate vision-only plan, and a health care flexible spending account (FSA). To determine the excess benefit, if any, of the employee's coverage, it is necessary to know whether any of the coverage is considered applicable coverage and the methods for determining the cost of such coverage. Definition of Applicable Coverage Applicable coverage is defined as coverage under any group health plan made available to the employee by an employer which is excludable from the employee's gross income under section 106 [of the IRC], or would be so excludable if it were employer-provided coverage (within the meaning of such section 106). Coverage that is excluded from an employee's gross income under Section 106 of the IRC includes, but is not limited to, employers' contributions to health insurance premiums, Archer Medical Savings Accounts (MSAs), and health savings accounts (HSAs). Additionally, three arrangements are identified in the statute as applicable coverage: (1) the employee-paid portion of health insurance coverage (i.e., an employee's contribution to premiums); (2) a self-employed individual's health insurance coverage for which a deduction is allowable under Section 162(l) of the IRC; and (3) coverage under a group health plan for civilian employees of federal, state, or local governments. See Table 1 for a list of what is considered applicable coverage based on the statute and Notice 2015-16. Certain arrangements are excluded from the definition of applicable coverage ( Table 2 ). Arrangements not considered applicable coverage are not included in the calculation for determining the aggregate cost of applicable coverage. Determining the Cost of Applicable Coverage The cost of applicable coverage is to be determined under rules "similar to" the rules in Section 4980B(f)(4) of the IRC. These rules currently apply under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA; P.L. 99-272 ). Under COBRA, an employer with 20 or more employees that provided health insurance benefits must provide qualified employees and their families the option of continuing their coverage under the employer's group health insurance plan in certain cases where the employee's coverage otherwise would end (e.g., the employee is terminated). For COBRA purposes, the rules in Section 4980B(f)(4) of the IRC are used to determine the cost of the premium for the health insurance plan in which the former employee can continue. As of the date of this report, information is not available about how the rules in Section 4980B(f)(4) of the IRC will be applied in the context of the excise tax. In Notice 2015-16, Treasury and IRS describe potential approaches they are considering for applying the COBRA rules to determine the cost of applicable coverage. The statute also includes specific calculation rules for determining the cost of applicable coverage: Any portion of the cost of applicable coverage that is attributable to the excise tax will not be taken into account. The cost of applicable coverage will be calculated separately for single coverage and non-single coverage (e.g., family coverage). In the case of applicable coverage provided to retired employees, the plan can choose to treat a retired employee who is under the age of 65 and a retired employee aged 65 or older as similarly situated beneficiaries. With respect to a health care FSA, the cost of applicable coverage is the greater of an employee's salary reduction election or the total reimbursements under the FSA. With respect to Archer MSAs, the cost of applicable coverage is equal to an employer's contributions to the Archer MSA. With respect to HSAs, the cost of applicable coverage is equal to an employer's contributions, including salary reduction contributions, to the HSA. If the cost of applicable coverage is not determined on a monthly basis, the cost of the coverage will be allocated to months on a basis prescribed by the Secretary of the Treasury. Dollar Limits The excise tax is assessed on the excess benefit—the portion of an employee's applicable coverage that exceeds a dollar limit. Under the ACA, the dollar limits for 2018 were to be $10,200 for single coverage and $27,500 for non-single coverage (e.g., family coverage), as adjusted by the health cost adjustment percentage. For 2019, the limits were to be the 2018 limits adjusted by the Consumer Price Index for all Urban Consumers (CPI-U), plus 1%. For 2020 and beyond, the limits were to be the previous year's limits adjusted by the CPI-U. The CAA of 2016, which delayed implementation of the excise tax until 2020, did not change the 2018 dollar limits or modify how the 2018 dollar limits were to be adjusted. The Department of the Treasury has not yet issued the 2020 limits, but the Congressional Research Service estimates they will be about $10,800 for single coverage and $29,100 for non-single coverage. The dollar limits also could be subject to two different adjustments, which are described below. The CAA of 2016 did not modify these adjustments. Demographic Adjustment For some employers, the dollar limits for each year could be increased based on their employees' demographic characteristics. The adjustment could occur if the age and gender characteristics of all employees of an employer are significantly different from the age and gender characteristics of the national workforce. The adjustment uses the BCBS Standard plan offered through the FEHB program. The cost of the BCBS Standard plan is determined based on the age and gender characteristics of the employer's workforce and on the age and gender characteristics of the national workforce. The amount the dollar limits could be increased is equal to the excess cost of the BCBS Standard plan adjusted for the employer's workforce as compared to the BCBS Standard plan adjusted for the national workforce. Retiree and High-Risk Profession Adjustment The limits also may be adjusted for (1) individuals who are qualified retirees and (2) individuals who participate in an employer-sponsored plan that has a majority of its enrollees engaged in a high-risk profession or "employed to repair or install electrical or telecommunications lines." For purposes of this adjustment, qualified retirees are retired individuals aged 55 and older who do not qualify for Medicare. Employees engaged in high-risk professions are law enforcement officers (as such term is defined in section 1204 of the Omnibus Crime Control and Safe Streets Act of 1968), employees in fire protection activities (as such term is defined in section 3(y) of the Fair Labor Standards Act of 1938), individuals who provide out-of-hospital emergency medical care (including emergency medical technicians, paramedics, and first-responders), individuals whose primary work is longshore work (as defined in section 258(b) of the Immigration and Nationality Act (8 U.S.C. 1288(b)), determined without regard to paragraph (2) thereof), and individuals engaged in the construction, mining, agriculture (not including food processing), forestry, and fishing industries. Such term includes an employee who is retired from a high-risk profession described in the preceding sentence, if such employee satisfied the requirements of such sentence for a period of not less than 20 years during the employee's employment. Under this adjustment, the dollar limits are increased for these individuals by $1,650 for self-only coverage and $3,450 for coverage other than self-only. Coverage Providers The excise tax is not assessed on an employee; rather it is assessed on the entity providing the applicable coverage—the coverage provider . Table 3 lists the coverage providers identified in statute. It is possible that an employee's applicable coverage may not be provided by just one coverage provider. In the case of multiple coverage providers, each coverage provider is responsible for paying the excise tax on its applicable share of the excess benefit. A coverage provider's applicable share is based on the cost of the coverage provider's applicable coverage in relation to the aggregate cost of all of the employee's applicable coverage. In general, the employer is responsible for calculating the aggregate amount of applicable coverage that is in excess of the threshold and determining each coverage provider's applicable share of the tax. The employer is required to notify the Secretary of the Treasury and each coverage provider about the amount determined. A penalty may be imposed on the employer if the excess benefit is not calculated correctly. Under the ACA, the excise tax was nondeductible—coverage providers could not deduct the excise tax as a business expense. However, the CAA of 2016 includes a modification to allow coverage providers to deduct the tax. Cost Estimate The excise tax is one of several taxes and fees included in the ACA to raise revenue to offset the cost of other ACA provisions (e.g., the financial subsidies available through the health insurance exchanges). In March 2015, the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) estimated the excise tax would increase federal revenues by $87 billion between 2016 and 2025, based on the tax's implementation beginning in 2018. CBO and JCT indicate that the revenue raised by the excise tax will come from both collection of the excise tax and increases in taxable income, with most of the revenue raised a result of increases in taxable income. The relationship between the excise tax and taxable income is discussed in the following section. Relationship to the Tax Exclusion for Employer-Sponsored Insurance Employer-sponsored health insurance and benefits generally are excluded from employees' gross income for purposes of determining employees' income tax liability. Additionally, these amounts generally also qualify for exclusion from Social Security and Medicare (FICA) taxes and unemployment (FUTA) taxes. These exclusions often are collectively referred to as the tax exclusion for employer-sponsored health insurance and benefits. Modifying or repealing the tax exclusion has been discussed for many years. One reason federal policymakers are interested in the tax exclusion is that the exclusion results in considerable revenue loss to the federal government. JCT estimates the income tax exclusion will result in $785 billion in foregone revenue for the federal government between 2014 and 2018. Ending or modifying the tax exclusion could raise a significant amount of revenue, depending on how it would be modified or repealed and how employers and workers would adjust. The excise tax does not directly modify or end the tax exclusion; however, the excise tax is seen as an indirect method for limiting the tax exclusion. As discussed above, official scores indicate that the revenue raised by the excise tax will come both from collection of the excise tax and from increases in taxable income. The increases in taxable income are a result of the expectation that employers will reduce the amount of health coverage they offer to employees to avoid paying the excise tax. Provided employers do this but keep total compensation for employees constant (i.e., shift the compensation from health benefits to taxable wages), the result will be generally higher taxable wages for affected employees. CBO and JCT have estimated that about one-quarter of the revenue raised will come from collection of the excise tax, while about three-quarters of the revenue raised will stem from employers' responses to the tax.

The Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) includes a 40% excise tax on high-cost employer-sponsored health coverage. This excise tax is often called the Cadillac tax. Under the ACA, the excise tax was to be implemented beginning in 2018; however, the Consolidated Appropriations Act of 2016 (P.L. 114-113) delays implementation until 2020. The excise tax applies to the aggregate cost of an employee's applicable coverage that exceeds a dollar limit. Applicable coverage includes, but is not limited to, the employer's and the employee's contribution to health insurance premiums and certain contributions to tax-advantaged health accounts (e.g., health care flexible spending accounts, or FSAs). In 2020, the Congressional Research Service (CRS) estimates the dollar limits will be about $10,800 for single coverage and $29,100 for non-single (e.g., family) coverage. The dollar limits may be adjusted based on growth in health insurance premiums and characteristics of an employer's workforce. Additionally, the dollar limits are to be adjusted for inflation in subsequent years. The entity providing the coverage, the coverage provider, is responsible for paying its share of the excise tax. A coverage provider may be an employer, a health insurer, or another entity that sponsors the coverage. The employer is responsible for calculating the amount of tax owed by each coverage provider (if any). All of this information is covered in more detail in this report, which provides an overview of how the excise tax is to be implemented. The information in the report is based on statute and guidance issued by the Department of the Treasury and the Internal Revenue Service.

CRS_R44156

Introduction According to the U.S. Department of Agriculture (USDA), the United States is expected to be the fourth-largest producer and third-largest exporter of peanuts in the world in 2016. In addition to its prominent role in international markets, U.S. peanut production and marketing is an important activity in several states located in the southeastern and southwestern United States. Peanuts have participated in federal farm support programs since the 1930s—initially under a quota system, and since 2002 under the income support programs available for other covered commodities like corn, wheat, soybeans, and rice. This report uses the most current public information available (as of September 2016) to provide a brief overview of the U.S. peanut sector and current U.S. farm policy including a discussion of how peanuts (following market adjustments spurred by a 2002 federal quota buyout) fit within current policy relative to other program crops. Peanut Industry Basics Production Areas U.S. peanut production is located primarily in the southeastern United States. The crop is planted in an arc stretching from southern Mississippi to southern Virginia, but with some additional smaller clusters of production in Texas, Oklahoma, and New Mexico ( Figure 1 ). Georgia accounts for just under half of U.S. production, and Alabama and Florida each have 12%. Most neighboring states account for single-digit shares. This geographic location of production reflects the peanut plant's need for 120-160 frost-free days and soil that is sandy and loamy (relatively equal amounts of sand, silt, and clay) for optimal crop performance. The peanut industry is also geographically concentrated within each state, with peanuts accounting for a large share of farm and related agribusiness income earned in a number of peanut-producing counties. About three-fourths of U.S. peanut acreage is dryland (1.1 million acres in 2012), and the remainder is irrigated (0.5 million acres). Peanut Varieties and Uses The major types of peanuts grown in the United States are Runner, Virginia, Spanish, and Valencia ( Table 1 ). The Runner is the most common variety and is used in the manufacture of peanut butter. Peanut butter is the leading use of peanuts produced in the United States (45%), according to the American Peanut Council (APC). Snack nuts and in-shells account for approximately 30% of use. Candy and confections and peanut oil for cooking account for the remainder. According to APC, peanuts are the leading snack nut consumed in the United States, with a two-thirds share of the snack nut market. Industry Structure Peanuts were grown on 6,561 farms in the United States in 2012, according to the 2012 Census of Agricultur e , with an average farm size of 247 harvested peanut acres per farm ( Table 2 ). Similar to output for other commodities, peanut production is primarily through larger farms that typically have lower per-unit costs of production. Peanut farms with at least 250 acres account for one-third of all peanut farms and three-quarters of national production. Most peanut farmers also plant other crops such as cotton, corn, or soybeans in multi-year rotations with peanuts in order to maintain soil health and crop yields. The farm value of peanut production was $1.2 billion in 2015. After harvest, farmers move peanuts to buying points or stations located throughout the production regions. Buying stations are operated by shellers, independent dealers, or warehouse owners. These "first handlers" purchase the peanuts and provide services such as drying, cleaning, and arranging for marketing assistance loans provided by USDA. Shellers sell edible peanuts to processors for manufacturing and bid on USDA-owned stocks of peanuts (forfeitures under the marketing loan program) for processing or export. Sales between shellers and processors are arranged by brokers or done directly. Unlike markets for major crops like corn and soybeans, the U.S. peanut market is considered "thin," with only two peanut shellers reportedly buying over 80% of all peanuts from growers. No futures market exists for peanuts, and private contracts between producers and shellers reportedly account for most transactions. Given the peanut industry's structure and pricing practices (contracting), little public price and other market information is available to USDA. Production and Market Trends Two opposing but related trends have shaped peanut production during the last quarter century. Planted acreage has declined while productivity (yield measured in pounds per acre) has increased (see Figure 2 ). Acreage had been declining even prior to the policy change in 2002 from a quota system, which tended to lock acreage in place, to traditional commodity support programs (see " U.S. Farm Policy and Peanuts "). The policy change allowed market forces to play a stronger role in producer decision making. As a result, peanut production shifted to higher-yielding land with lower production costs. This acreage shift, including a greater proportion of plantings in Georgia, along with improvements in varieties and management practices, propelled a long-term uptrend in peanut yields that helped to lift peanut production in recent years ( Figure 2 ). Another phenomenon associated with the 2002 peanut quota buyout has been a substantial increase in market volatility as evidenced by the sharp up-and-down cycle of plantings and production since 2002. Some policy watchers are concerned that a new set of government policies established under the 2014 farm bill (discussed in the next section of this report) have artificially reversed the downward trend in peanut planted acreage as seen by higher plantings in 2015 and 2016. A critical long-run factor influencing peanut output is the nature of demand for peanuts. In general, the demand for peanuts and peanut products (especially peanut butter) is fairly inelastic. This implies that even small changes in supply can result in large price movements. Domestic food use has grown slowly but steadily over time. In contrast, the international marketplace has grown in importance in recent years. U.S. peanut exports averaged a 14% share of total use during the 2002 to 2011 period but jumped sharply in 2012 and have averaged 23% of total use since ( Figure 3 ). Canada, the Netherlands, and Mexico are the traditional top export markets and account for about half of U.S. exports. However, it was China—which entered the market in 2012 as a buyer because its regular supplier (India) had encountered yield problems due to drought—that was behind the surge in U.S. peanut exports. In 2015/16, China again entered the U.S. market to purchase peanuts, causing U.S. exports to jump 43% from the previous year to a record 1,544 million tons. This export surge was combined with a 28% jump in domestic peanut use to a record 5.1 million pounds, partly due to government purchases of 37.5 million pounds of processed peanut products (for distribution through domestic feeding channels) in FY2015 and another 39.1 million pounds in FY2016. This surge in total demand (+31%) contributed to an estimated 15% drop in U.S. ending stocks ( Figure 4 ), thus avoiding early-year expectations for large producer forfeitures under the marketing assistance loan program. In 2015/16 (August-July season), the average farm price of peanuts is expected to be 19.3 cents per pound—well above early-year predictions as low as 17 cents per pound. The unexpected jump in 2015/16 demand is in contrast to the trend that has evolved since 2012. High farm prices in 2011 encouraged U.S. producers to sharply increase plantings in 2012 (up 44% from the previous year). A record U.S. peanut harvest in 2012—driven by both large plantings and record yields—resulted in record large domestic ending stocks despite record exports and strong domestic use. The 2012/13 marketing year ending stocks were also record large in terms of their relative size as a share of total use (54%). The large domestic peanut supply has contributed to a strong downward trend in U.S. farm prices for peanuts since 2012 and helps to explain the pessimistic outlook for government program outlays under the new farm revenue programs of the 2014 farm bill as expressed by USDA and CBO in their February 2016 long-run outlooks. U.S. Farm Policy and Peanuts Farm policy for peanuts has followed a different policy trajectory from the other program crops for most of the last century. From the 1930s until 2002, peanuts operated under a system of marketing quotas that rigidly controlled domestic supplies and prices. In 2002, Congress eliminated peanut quotas under a new farm bill (Farm Security and Rural Investment Act of 2002, P.L. 107-171 , §1301-§1309) through a series of payments that offset the loss of quota rights—these payments are referred to as a "buyout." Since the 2002 buyout, farm policy for peanuts has followed essentially the same structure as for other "covered" program commodities. In addition to eligibility for major farm support programs, peanuts initially retained their long-standing eligibility for Commodity Credit Corporation (CCC) monthly storage payments (similar to the cotton storage payment program) when put under a nine-month nonrecourse marketing loan. However, eligibility for storage payments was terminated with the 2007 peanut crop. The current farm commodity program provisions in Title I of the 2014 farm bill (Agricultural Act of 2014; P.L. 113-79 ) include three types of support for covered commodities for crop years 2014-2018: Marketing Assistance Loan benefits , which offer interim (up to nine months) financing for loan commodities (covered crops plus several others) at statutory loan rates and, if prices fall below loan rates, additional low-price protection in the form of marketing loan gains, loan deficiency payments, or forfeiture; Price Loss Coverage (PLC) payments, which are triggered when the national season average farm price for a covered commodity is below its statutorily fixed "reference price"; and Agriculture Risk Coverage (ARC) payments, as an alternative to PLC, which are triggered when annual crop revenue is below its guaranteed level based on a multiyear moving average of historical crop revenue. Under the 2014 farm bill, farmers with base acres of covered commodities were given a one-time irrevocable choice between PLC and "county" ARC (based on a county guarantee) on a commodity-by-commodity basis for each farm. Alternatively, all covered crops on a farm could be enrolled in "individual" ARC, which is based on a farm-level guarantee. If no choice was made, the producer forfeited any payments for the 2014 crop year and the farm was enrolled automatically in PLC for the 2015-2018 crop years. For peanuts, almost all producers (99.7%) selected PLC because they expected it to provide higher payments and greater risk protection than would be available under ARC. Similarly most rice producers (100% for long grain and 96% for medium grain) and large majorities of barley (75%), canola (97%), sorghum (66%), and minor oilseed producers (56% to 84%) also selected PLC. In contrast, a near-unanimous majority of corn (93%) and soybean (97%) producers, and a large majority of wheat producers (56%), selected ARC. A Separate Program Payment Limit for Peanuts Under current peanut program provisions, the primary advantage that peanuts have over other program crops is that peanut producers participating in government support programs have a separate program payment limit—a consequence of the peanut quota buyout ( P.L. 107-171 ; §1603(c)). As a result of this feature, a farmer that grows multiple program crops including peanuts has essentially two different program payment limits: the first payment limit of $125,000 per person is for an aggregation of program payments made to all program crops other than peanuts; the second payment limit of $125,000 per person is for program payments made exclusively to peanuts. Thus, under an extreme scenario involving large payments for both peanuts and other program crops, this could potentially double a farmer's payment limits to as much as $250,000. Marketing Assistance Loan Program Peanuts and other designated crops are eligible for benefits under the Marketing Assistance Loan (MAL) program. MAL provides interim financing in the form of a government loan for up to nine months for participating producers following harvest of their crops. A farmer must produce a crop to benefit from the program because the crop serves as loan collateral if the producer applies for a loan. The MAL process begins after harvest, when farmers may request a marketing loan, which is offered by USDA at a loan rate established in statute for pledged production ( P.L. 107-171 ; §1202)—for peanuts the loan rate is $355 per ton or equivalently, 17.75 cents per pound. If a farmer puts their crop under a marketing loan, then they receive loan proceeds equal roughly to the quantity of peanuts placed under loan times the loan rate. Farmers then closely watch the relationship between market prices and the loan rate. In the case of peanuts, USDA estimates and announces a weekly national posted price to be used in determining the marketing loan repayment rate and other benefits. Prior to loan maturity, a farmer may repay the loan principal and interest if the posted price is at or above the loan rate. As a result, the loan provides interim financing, allowing the farmer to receive cash as soon as the crop is harvested and avoiding sale of the crop during harvest when prices tend to be at their seasonal low. The program essentially provides a price floor for producers because the government will take ownership of the loan collateral (i.e., the pledged crop) if prices drop below the statutory loan rate. Special Marketing Loan Benefits Defaults (or forfeitures) on marketing loans are not common because USDA provides the producer the opportunity to capture benefits even when the posted price is below the loan rate. In this case, farmers are allowed to repay the loan at the lower posted price, thus receiving a "marketing loan gain" (MLG) from the government because farmers do not repay the loan in full. The MLG is equal to the difference between the loan rate and the weekly national posted price. Also, accrued interest is waived, but the producer pays storage and handling charges for the quantity of peanuts under loan. As an alternative to putting the crop "under loan" when prices are low, farmers may request a "loan deficiency payment (LDP)," with a payment rate equal to the difference between the loan rate and the posted price (same as the MLG). Farmers then receive an LDP payment without going through the loan process. For most of the last decade, the farm (and posted) price of peanuts has been above the loan rate, so annual marketing loan benefits have been either zero or minimal ( Figure 5 ). Forfeiture of the Pledged Crop Forfeiture of the pledged crop in lieu of loan repayment is an option that is available for all marketing loan crops. Rather than repaying the loan with cash, farmers can fulfill their loan obligation by forfeiting the crop pledged as collateral. This option can be attractive for peanut producers if the posted price is below or even slightly above the loan rate because USDA, by law, then pays for costs associated with storage, handling, and interest. For large producers, another key feature of the forfeiture option is that the "gain" associated with forfeiting the crop, unlike a gain from repaying the loan with cash (or receiving an MLG or LDP), does not count toward the payment limit of $125,000 per person. Producers decide which route to pursue (repay loan with cash or forfeit) depending on the expected value of each option, their need for loaned funds, and their likelihood of exceeding the payment limit. If a farmer chooses to forfeit the crop, USDA takes ownership of the crop. Storage costs continue to accrue to USDA until it sells the crop or, in the case of peanuts, uses the CCC-owned peanuts for domestic nutrition programs. Price Loss Coverage (PLC) Payments on Peanut Base In addition to marketing assistance loan benefits, producers with base acres for any covered commodity (including peanuts) are eligible for a second (and higher) layer of income protection under the Price Loss Coverage (PLC) program. For peanuts, PLC payments are triggered when the annual farm price is below the statutory PLC reference price of $535 per short ton (i.e., 2,000 lbs) or equivalently, 26.75 cents per pound, as established under the 2014 farm bill ( Figure 6 ). PLC and ARC payments are made after October 1 following the end of the marketing year. As a result, government payments arrive more than a year after the crop is harvested. For example, any payments associated with the 2014 peanut crop (planted in spring 2014 and harvested in summer 2014) would be made after October 1, 2015. (In contrast, marketing loan benefits are available immediately upon harvest for crop years 2014-2018.) For individual farms, payments are calculated using the national PLC payment rate and individual farm information on historical program yield and acres. The PLC payment formula is the PLC payment rate times historical farm program yield times 85% of historical peanut base acres. The national PLC payment rate is equal to the PLC reference price minus the higher of the season-average farm price or the marketing loan rate. With respect to farm program yields , during program signup in early 2015, producers were given the choice of keeping the same farm-level program yield used for calculating the farm's counter-cyclical payments under the 2008 farm bill (generally based on 1998-2001 yields or earlier) or updating the farm program yield according to the formula of 90% of the 2008-2012 average yield per planted acre for the farm. Peanut base represents historical peanut planting on each farm and totals 2 million acres nationwide. As with program yields, the 2014 farm bill provided farmers with a one-time opportunity to update individual crop base acres by reallocating acreage within their previous base to match their actual crop mix (plantings) during 2009-2012. A new feature of the 2014 farm bill income support programs is that, unlike income support programs from previous farm bills, payments under PLC and ARC are made on base acres, not current plantings. This feature—decoupling payments from current plantings—is intended to better comply with World Trade Organization (WTO) commitments on domestic support and to minimize any influence on producer behavior and subsequent market distortion. The payments are considered "partially decoupled" because the payment amount remains connected to current market prices. An exception to the decoupling is payments associated with generic base acres, whereby current plantings can affect payment acreage. PLC Payments for Peanuts Planted on "Generic" Base PLC payments can also be made on "generic base acres." Generic base acres are the renamed cotton base acres from the 2008 farm bill. Under the 2014 farm bill, cotton is no longer a covered commodity and thus no longer eligible for PLC or ARC payments. Instead, the former cotton base, now "generic base," is added to a producer's total base for potential payments, but only if a covered crop is planted on the generic base. In other words, PLC payments on generic base acres are fully coupled to actual plantings (although payments remain subject to the 85% factor applied to eligible acres). Unlike PLC payments on peanut base acres, which are made regardless of which crop is planted, the PLC payment on generic base in any given year is proportional to a farm's plantings of peanuts and other covered crops on the entire farm. More specifically, for each crop year, generic base acres are attributed to a particular covered commodity base (for potential payment) in proportion to that crop's share of total plantings of all covered commodities on the farm in that year. The coupled nature of PLC payments on generic base is an important new program feature because of the large number of generic base acres available under the 2014 farm bill—17.5 million acres. Substantial coupled plantings could potentially occur to the extent that this land remains under cultivation (as discussed below in " Relative Planting Incentives Under Farm Programs "). It is likely that many of the former cotton base acres are no longer used for annual crops—similarly, the original decoupling under the 1996 farm bill resulted in base acres in many places returning to pasture or fallow, but still remaining eligible for assistance). Expanded Federal Crop Insurance Coverage in 2014 Farm Bill Federal crop insurance is available for about 130 crops, including peanuts. Traditionally, a yield-based federal crop insurance policy was available for peanut producers to protect against yield loss due to weather, if purchased by producers. The insurance guarantees are established just prior to planting, based on historical yields and expected market prices (not statutory prices used in farm programs). The insurance premiums are subsidized by USDA, and subsidy rates vary based on the type of policy and coverage selected. The 2014 farm bill mandated a peanut revenue insurance product for the 2015 crop year so farmers could choose between a traditional yield-based policy and one that protects against declines in revenue (yield times price). Revenue policies have been available for many other farm program crops for almost two decades, but developing one for peanuts has been problematic because its relatively small market is considered "thin" and futures market prices are not available for setting the price guarantee. After considerable study, USDA's Risk Management Agency decided to base prices for the new revenue product on several factors, including the futures prices of cotton, wheat, soybean oil, and soybean meal, as well as the Brazilian price of peanuts, peanut stocks, and the USDA loan rate for peanuts. Rapid adoption of the new revenue insurance policy by peanut producers suggests that there was a strong demand for this product. For the 2015 crop, peanut producers purchased a total of 23,419 federal crop insurance policies covering nearly 1.5 million acres—44% of the policies and 68% of the covered acres were enrolled in revenue insurance. In 2015, $96.2 million was paid out in indemnities, including $77.3 million under revenue policies. Adjusted Gross Income Limit As with other farm program crops, payment eligibility depends on a gross income limit and rules on being "actively engaged." To qualify for any commodity program benefits, recipients must pass an eligibility requirement based on adjusted gross income (AGI) used for federal taxes. The AGI limit is a single, total (farm and non-farm) AGI limit of $900,000 (using a three-year average). Also, to be eligible for payments, persons must be "actively engaged" in farming. Actively engaged, in general, is defined as making a significant contribution of (i) capital, equipment, or land, and (ii) personal labor or active personal management. Relative Planting Incentives Under Farm Programs Crop planting choices in general, and on base acres in particular, are based on relative net returns among competing crops, plus rotational considerations. Farm program payments do not figure in the determination because they are decoupled from planting decisions. In contrast, crop choices on generic base acres must consider both relative net returns as well as potential proceeds from government programs (i.e., both ARC and PLC) because of their coupling to crop plantings. Market conditions vary widely based on relative crop prices, yield prospects (both irrigated and non-irrigated), and production costs. A preliminary assessment of potential market conditions for 2016 using a combination of data from USDA and the University of Georgia suggests peanuts could be a very competitive option for producers on both irrigated and non-irrigated acres when comparing cost and returns for competing crops ( Table 3 ). It is important to note that Table 3 excludes fixed costs and thus does not attempt to predict actual profitability across crops. In the short run, crop choices can be made by comparing returns above variable costs; however, to ensure economic viability in the long run, producers must also cover fixed costs, which are not considered in this table. This consideration is particularly valid for peanuts, where equipment lines are unique to the crop and represent significant up-front costs. Also, the variable cost estimates used in Table 3 represent the estimate for a single point in time and are subject to changing market conditions for a host of farm inputs including fuel, fertilizer, pesticides, labor, and land. Furthermore, it is unclear how market conditions may evolve in 2017 and, thus, whether future prices will be near current levels. The outlook for 2016 PLC and ARC payments for major covered commodities—using USDA data from September 2016—suggests that peanuts are an attractive planting option on generic base acres relative to most other competing crops ( Table 4 ). Peanut program payments under PLC (the program choice of over 99% of peanut base owners) are projected at $290 per acre. This compares with $86/acre for wheat, $66/acre for corn, and $60/acre for sorghum. Over 90% of corn and soybean base owners chose the ARC program, compared with a negligible number of peanut producers. Under the ARC scenario presented in Table 5 , corn is projected to receive ARC payments of $92 per acre, while soybeans are not projected to receive an ARC payment in 2016. When potential PLC and ARC program payments ( Table 4 and Table 5 ) are combined with potential market returns ( Table 3 ), peanuts appear to have a strong advantage over other program crops in competing for generic base acres. This competitive edge will vary across producing zones with yield and cost conditions, as well as changes in relative prices. In an extreme case, if a producer with generic base acres expected a sizeable peanut PLC payment rate relative to other program crops, their entire farm could be planted to peanuts (or peanuts and no other covered crop), and their PLC payments on generic base would be calculated using exclusively the payment rate for peanuts. Alternatively, if expected market returns and PLC payment rates do not favor peanuts, farmers with generic base acres could plant their entire farm to crops other than peanuts. An outcome between these two extremes is expected to prevail if farmers maintain typical rotations, which are needed to maintain soil health and long-term yield potential for all crops. Nevertheless, high potential PLC payments on generic base could cause producers to "stretch" their rotations and benefit from additional peanut payments on generic base. Farm policy economists have noted that peanuts (and rice) have a statutory reference price that is set disproportionately above historical market prices, particularly when compared to the reference prices for other major program crops. Since the peanut quota buyout in 2002, monthly peanut farm prices have been below their respective reference price 88% of the time, and below the marketing loan rate 17% of the time. This compares with monthly corn farm prices (58% of the time below the reference price and 5% of the time below the marketing loan rate); soybeans (39% and 4%), wheat (55% and 4%), sorghum (59% and 11%), and barley (61% and 0%). Rice has comparable "in-the-money" percentages with 91% of the monthly Adjusted World Price (AWP) for rice falling below the reference price, and 29% below the marketing loan rate. Some contend that this potential advantage favors peanut production (relative to other program crops) on generic base acres. However, the extent to which this scenario might play out is unclear, and both agronomic and market circumstances suggest that it might be limited. The outlook for average farm prices across major program crops is likely to be a key determinant of both farm program payments and crop planting choices on generic base. This is because the size of the farm program payments increases in proportion to the decline in farm price below the reference price and loan rate. The largest impacts on planting decisions could be in states where the generic base is large relative to the total base ( Figure 7 ) because the planting mix determines the payment. At one extreme is a farm with 100% generic base, when acreage eligible for specific crop payments corresponds directly to the covered crops that are planted. At the other extreme, for a farm with no generic base acres, the payment acres are predetermined and will not change regardless of what the farmer plants—namely covered crops to the individual crop base acres. The share of generic base is more than 50% for several peanut-producing states, including Alabama, Texas, Georgia, Mississippi, and Florida ( Figure 7 and Table 6 ). These states could see additional plantings of peanuts in future years if relative returns (including government payments) favor peanuts. Table 6 summarizes peanut base acres and total generic base under the 2014 farm bill. In addition, annual planted peanut acreage for major producer states is shown for each of 2012 through 2016. Selected Policy Issues Generic Base Acres The domestic and trade policy concern is that farm program payments made to plantings on generic base are fully coupled to production and thus potentially market distorting. As a result, program payments made to generic base would likely count toward the U.S. amber box limit of $19.1 billion. Furthermore, if such payments are substantial and can be linked to a surge in exports, they could potentially be vulnerable to challenge by another WTO member. Potential Marketing Loan Forfeitures As mentioned earlier, large peanut producers who have pledged their peanut crops as collateral for nine-month USDA marketing loans could confront a payment limit issue leading to forfeiture of their crop to USDA. This situation could result if incurring marketing loan benefits (i.e., marketing loan gains or loan deficiency payments) would cause them to surpass the payment limit of $125,000. In such a situation, a producer could simply forfeit the collateral peanuts to USDA (via the Commodity Credit Corporation) and keep the original loan value. The CCC would then be responsible for handling and storage costs and the eventual marketing of the peanuts. USDA, in its November 2015 crop forecast, projected U.S. peanut ending stocks for the 2015/16 crop year to be record large at 2.87 billion pounds or 52.3% of total use. However, record large U.S. exports and domestic use caused USDA to substantially lower the estimate for 2015/16 peanut ending stocks to 1.79 billion pounds, or 27.1% of total use. This revised outlook significantly reduced both the likelihood of any forfeitures and the expected level of peanut-related program outlays in 2015/16. However, the prospects for large peanut plantings—relative to recent years—remains in place heading into 2017 as farm subsidies (via generic base) provide significant incentives to plant peanuts. If future U.S. peanut supplies are large enough to depress prices for successive years, a large amount of peanuts could go under loan and forfeitures could accumulate. In a severely depressed market, USDA might have difficulty finding a buyer without offering a deep discount, which would result in large net outlays for the government. USDA could wait for a price recovery, but doing so would result in additional storage charges. Sufficient storage capacity might also be an issue if stocks increase substantially. Prospective Government Farm Program Outlays Following the 2002 buyout of the peanut quota program, federal peanut income support payments (including storage payments and the buyout) averaged over $300 million per year through 2007. This includes peanut storage payments of $79 million per year from 1996 to 2007 (the last year of eligibility) ( Figure 8 ). From 2008 through 2015, federal peanut program outlays have averaged about $90 million. However, recent long-term budget projections suggest that federal peanut program outlays could become much larger in the future. In February 2016, USDA projected peanut program costs of $503.6 million in FY2016, $870 million in FY2017, and at least $910 million through FY2025. This included substantial peanut storage and handling costs (related to marketing loan forfeitures) that were projected to rise from $31.2 million in FY2017 to $52 million in FY2021. More recently, in August 2016, CBO projected CCC program outlays for peanuts at $413 million for FY2016, and averaging $548 million through the remainder of the 2014 farm bill period. However, CBO projections do not include costs associated with loan forfeiture but are limited to PLC, ARC, and marketing assistance loan benefits. As a point of reference, the annual market value of U.S. peanut production has traditionally been in the range of $1.1 billion to $1.4 billion, depending on crop size. Future government payments for U.S. peanut programs will depend on how market conditions evolve and how the average farm price for peanuts compares to the PLC reference price. Market Development The American Peanut Council (APC) administers the U.S. peanut industry's export market development program, receiving approximately $2 million per year in government funds under the Market Access Program (MAP). MAP aids in the creation, expansion, and maintenance of foreign markets for U.S. agricultural products. MAP funding has been targeted for reductions by some Members of Congress, who maintain that it is a form of "corporate welfare," or to help offset increased expenditures on other programs. Such efforts have been unsuccessful. For the domestic market, some in Congress have begun encouraging USDA to purchase more peanut butter for domestic food programs and for international food aid as a way to increase peanut usage. In FY2015, USDA purchased 37.5 million pounds of processed peanut products (for distribution through domestic feeding channels) and another 39.1 million pounds in FY2016. Arguments For and Against the Peanut Support Program Arguments for and against the peanut support programs are the same as for U.S. farm programs in general. Proponents argue that an income safety net is needed to help producers deal with the substantial price volatility associated with commodity markets. They say a marketing assistance loan program is needed to provide greater marketing options for producers who are at a distinct market-power disadvantage when dealing with a small number of powerful buyers. And in peanut's particular case, proponents argue that farm program support is needed to help offset the substantial market volatility that has emerged since the elimination of the peanut quota system. In contrast, critics argue that market signals are sufficient to allocate resources within the sector, and that subsidies distort resources away from more efficient uses. Some critics argue that farm subsidies actually keep small, inefficient operators in business and that, in the absence of subsidies, the inefficient operators would not be competitive and the land would be maintained and operated by more efficient, technologically savvy operators who would get better yields and returns from the same acreage. Others argue further that funds allocated to farm support would have greater returns if spent in other sectors.

According to the U.S. Department of Agriculture (USDA), the United States is expected to be the fourth-largest producer and third-largest exporter of peanuts in the world in 2016. In addition to its prominent role in international markets, U.S. peanut production and marketing is an important activity in several states located in the southeastern and southwestern United States. The U.S. peanut crop has been eligible for certain federal farm support programs since the 1930s—initially under a quota system and, since 2002, under the income support programs available for other major program crops like corn, wheat, soybeans, and rice. Today, under the 2014 farm bill (Agricultural Act of 2014, P.L. 113-79), the major income support programs are marketing loan benefits and either the price loss coverage (PLC) or agriculture risk coverage (ARC) program (as determined by a one-time producer choice). For peanuts, almost all producers (99.7%) chose PLC because they expected it to provide higher payments and greater risk protection than would be available under ARC. Marketing loan benefits are available immediately after harvest and are coupled directly to planting and production. In contrast, PLC and ARC payments are made to 85% of historical base acres and thus decoupled from producer crop choices. Also, PLC and ARC payments are not available until nearly a full year after harvest—October 1 following the end of the marketing year when full information on farm prices is available. The 2014 farm bill also created "generic" base acres—former cotton base acres from the 2008 farm bill. Generic base is added to a producer's total base for potential payments, but only if a covered crop is planted on the generic base. In other words, PLC payments on generic base acres are coupled to actual plantings (although payments remain subject to the 85% factor applied to eligible acres). Under current peanut program provisions, peanuts have a separate program payment limit—a consequence of the quota buyout (P.L. 107-171; §1603). As a result of this feature, a farmer that grows multiple program crops including peanuts has in effect two different program payment limits: the first payment limit (of $125,000) is for an aggregation of program payments made to all program crops other than peanuts; and the second (also of $125,000) is for program payments made exclusively to peanuts. Thus, under an extreme scenario involving large payments for both peanuts and other program crops, this could potentially double a farmer's payment limits. Farm policy economists have noted that peanuts have a statutory reference price that is set disproportionately above historical market prices, particularly when compared to other major program crops. Some contend that this potential advantage favors peanut production on generic base acres. However, the extent to which this scenario might play out is unclear, and both agronomic and market circumstances suggest that it might be somewhat limited. USDA estimates of peanut program outlays for FY2015 were modest at $74 million. However, most analysts expect substantial peanut program outlays in the future under both the PLC program and the marketing assistance loan program, as well as from storage and handling costs associated with peanut loan forfeitures. In February 2016, USDA projected annual average peanut program costs at $800 million for FY2016-FY2019. However, record U.S. peanut exports during the 2015/16 crop year, coupled with record domestic usage, have substantially reduced domestic peanut stocks and have likely dampened the outlook for program costs in FY2016. Going forward (FY2017-FY2019), outlays will depend on producer behavior and market conditions. As a point of reference, the annual market value of U.S. peanut production over the past 30 years has been primarily in the range of $0.8 billion to $1.2 billion.

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Most Recent Developments During the first session of the 110 th Congress, the Administration requested $196.5 billion in emergency supplemental appropriations for Fiscal Year (FY) 2008, including $189.3 billion for military operations, $6.9 billion for international affairs, and $325 million for other purposes. Through the end of December, 2007, Congress had approved $86.8 billion of the total requested for defense and about $1.5 billion of the amount requested for international affairs. Of the President's total emergency request, $102.5 billion for defense and $5.4 billion for international affairs remain outstanding. Congress is expected to consider these remaining requests in a spring 2008 supplemental appropriations bill. The Administration initially requested emergency supplemental FY2008 appropriations for military operations in Iraq, Afghanistan, and elsewhere along with its regular FY2008 budget request in February 2007. It submitted an additional request for $5.3 billion in emergency funding for MRAP vehicles in July, 2007, and $45 billion budget amendment for emergency defense and international affairs funding in October, 2007. Congress began to consider FY2008 supplemental appropriations in earnest in the fall of 2007. Throughout the fall, a key issue was what impact a continued delay in providing funding for overseas military operations would have on the Army and Marine Corps. Congress approved the regular FY2008 defense appropriations act, P.L. 110-116 , in November. The Army and Marine Corps used money in the regular bill to finance both day-to-day peacetime activities and also war-related operations. The high pace of operations in Iraq, however, meant that amounts in the base budget for Army and Marine Corps operation and maintenance, in particular, were being drained very quickly. Administration officials complained that, without supplemental funding, the Army would run out of money by February and the Marine Corps by early April. A key issue then became how long the Army and Marine Corps could extend operations in advance of supplemental funding, either with transfers of funds from other accounts or by slowing the pace of peacetime operations. The Defense Department could also have extended operations by invoking the "Feed and Forage Act," which allows funding for some purposes in advance of appropriations, or by using other measures. Congressional approval of a $70 billion "bridge fund" for military operations at least temporarily resolved the issue. Although the bill provided only about 37% of the total amount the Administration had requested, it included most of what the Defense Department had requested for the full year in Army and Marine Corp operation and maintenance and military personnel accounts. Defense officials now estimate that funding provided in the consolidated FY2008 appropriations act, P.L. 110-161 , for Army military personnel and operation and maintenance, together with amounts provided in the regular FY2008 defense appropriations act, P.L. 110-116 , will last until about the middle of June for personnel and until the end of June or early July for operation and maintenance. The Defense Department could extend operations further either by slowing the pace of obligations or by using available authority to transfer funds from other accounts to the Army – up to $11.4 billion in transfer authority is available. It could also invoke the Feed and Forage Act or use other standing authorities to extend operations further. Review of Congressional Action on FY2008 Supplemental Appropriations Through December 2007 Administration Request The Administration submitted requests for FY2008 emergency supplemental appropriations in three blocks. Along with the regular FY2008 budget that the White House sent to Congress on February 5, 2007, the Administration requested $141.7 billion in emergency supplemental funding for the Defense Department, $3.3 billion for the State Department and international affairs, and $325 million for other agencies. By submitting the defense request along with the President's FY2008 budget, the Administration complied with Section 1008 of the FY2007 national defense authorization act ( P.L. 109-364 ), which required the President's budget to include a request for estimated full year costs of operations in Iraq and Afghanistan and a detailed justification of the funds. The request constituted a Defense Department estimate of the full-year costs of continuing operations in Iraq and Afghanistan at about the same pace as in 2006. The Defense Department acknowledged that the estimate was only a rough, straight-line projection of current costs. By the time the budget was submitted, the Administration was proposing a surge in troops to Iraq that was not reflected in the budget, however, and it was expected that the Administration would later provide revised cost projections. On July 31, 2007,the White House requested an additional $5.3 billion for the Department of Defense to procure, outfit, and deploy 1,520 Mine Resistant Ambush Protected (MRAP) vehicles for the Army and Marine Corps. On October 22, the White House sent Congress an amendment to the FY2008 budget requesting an additional $45.9 billion for military operations, economic and reconstruction assistance, embassy security, and other activities mainly related to ongoing conflicts in Iraq, Afghanistan, and elsewhere. The request included $42.3 billion for the Department of Defense for military operations and $3.6 billion for international affairs programs. In all, the Administration requested $195.6 billion in emergency supplemental appropriations for FY2008, mainly for military operations in Iraq, Afghanistan and elsewhere and for related foreign affairs programs. FY2007 Supplemental Appropriations For the first several months of calendar year 2007, the main focus of congressional debate over Iraq policy was not on FY2008 funding, but on supplemental appropriations for FY2007. On March 9, the Administration submitted a revised request for FY2007 supplemental appropriations. On May 1, the President vetoed an initial FY2007 supplemental appropriations bill, H.R. 1591 , because of Iraq policy provisions. Congress approved a compromise FY2007 supplemental appropriations bill, H.R. 2206 , on May 24, and the President signed it into law, P.L. 110-28 , on May 25. The bill provided $99.5 billion for the Department of Defense, $6.1 billion for international affairs, and $14.5 billion for domestic programs (for a full discussion, see CRS Report RL33900, FY2007 Supplemental Appropriations for Defense, Foreign Affairs, and Other Purposes , coordinated by [author name scrubbed], updated July 2, 2007). The defense funding in the bill was in addition to a $70 billion "bridge fund" that Congress included in the regular FY2007 defense appropriations act. Congressional Action through December 2007 on FY2008 Supplemental Appropriations Congressional action on FY2008 emergency supplemental funding began in September and was not completed until the very end of the session shortly before Christmas. Congress quickly provided funds for MRAP vehicles, and then debated several different measures to provide partial year funding for overseas operations. At the end of September, Congress included $5.2 billion in emergency funding for Mine Resistant Ambush Protected (MRAP) vehicles (most of the mount requested in July) in a provision attached to the first FY2008 continuing resolution, H.J.Res. 52 , P.L. 110-92 , that the President signed on September 29, 2007. On November 8, 2007, the House and Senate approved a conference agreement on the FY2008 defense appropriations bill, H.R. 3222 , and the President signed the bill into law, P.L. 110-116 , on November 13. The measure provided $460 billion for baseline Defense Department activities in FY2008, including $27.4 billion for Army and $4.8 billion for Marine Corps operation and maintenance, which may be used to finance both peacetime activities and military operations abroad. The bill also provided an additional $11.6 billion in emergency funding for MRAP vehicles. Except for the MRAP money, however, the bill did not include funding to cover additional costs associated with ongoing military operations in Iraq, Afghanistan, and elsewhere. On November 14, 2007, by a vote of 218-203, the House approved a bill, H.R. 4156 , entitled the "Orderly and Responsible Iraq Redeployment Appropriations Act, 2008," to provide $50 billion for U.S. military operations in Iraq, Afghanistan, and elsewhere. The bill included enough money in Army and Marine Corps operating accounts to sustain military operations in Iraq and elsewhere through about April 2008. It also (1) required the President to commence the withdrawal of U.S. forces from Iraq within 30 days of enactment of the legislation and to provide within 60 days a plan for withdrawing most troops from Iraq by December 15, 2008; (2) limited the mission of remaining U.S. forces in Iraq to force protection, training, and pursuit of international terrorists; (3) prohibited deployment of units that are not fully trained and equipped; and (4) extended prohibitions on torture to all U.S. government agencies. On November 16, 2007, by a vote of 53-45, with 60 votes required, the Senate refused to close debate on a motion to proceed to consideration of H.R. 4156 as passed by the House, effectively killing the measure. The Senate also rejected, by a vote of 45-53, a motion to proceed to consideration of H.R. 2340 , a substitute offered by Senator McConnell, to provide $70 billion for the Defense Department without requiring withdrawal from Iraq. (Ultimately, however, with some revisions in the allocation of funds, the McConnell amendment was approved as part of the final consolidated appropriations act – see below.) Meanwhile, in a November 15, 2007, Pentagon press conference, Secretary of Defense Robert Gates warned that the Army and Marine Corps would have to begin implementing steps to limit operations unless Congress approved additional funding very soon. Without additional money, he said, the Army, would have to cease operations at all Army bases by mid-February 2008, which would require furloughs of about 100,000 government employees and a like number of contractor personnel. Plans would have to begin to be implemented in mid-December, he said. On November 20, the Defense Department announced that it was transferring $4.5 billion of funds to the Army and to the Joint IED Defeat Organization to extend their operations. The Army, DOD said, would only be able to operate with available funds, including the transfer, until February 23. Senior defense officials continued to warn that the Army and Marine Corps would have to halt all but essential operations very soon unless Congress approved additional funding. On December 17, 2007, the House brought up the foreign operations appropriations bill, H.R. 2764 , that had earlier been passed by the House and then amended by the Senate, as a vehicle for FY2008 "omnibus" or "consolidated" appropriations. The House approved two amendments to the Senate-passed bill. The first amendment, approved by a vote of 253-154, struck the Senate foreign operations language and inserted the text of conference agreements on 11 of the 12 FY2008 appropriations bills. In all, it provided $485 billion in regular and emergency appropriations for programs covered by all of the regular, annual appropriations bills except for defense. The second amendment, approved by a vote of 206-201, provided $31 billion in emergency defense appropriations, mostly restricted to Operation Enduring Freedom (OEF), which encompasses operations in Afghanistan and elsewhere, excluding Iraq. Funding for Army and Marine Corps operation and maintenance was made available only for OEF, except for amounts for force protection that could be allocated to any area. On December 18, 2007, the Senate took up the House-passed bill and, by a vote of 70-25, adopted an amendment by Senator McConnell to delete the House-passed $31 billion for OEF and to provide, instead, $70 billion in emergency supplemental appropriations for the Department of Defense for overseas operations, without limits on where the money could be used and without requiring a withdrawal of forces from Iraq. On December 19, 2007, the House considered H.R. 2764 as amended by the Senate. By a vote of 272-142, the House approved a motion to agree to the Senate amendment to the House-passed bill, thus clearing the measure for the President. The President signed the consolidated appropriations bill into law, P.L. 110-161 , on December 26, 2007. How Long Omnibus Appropriations Would Extend Army and Marine Corps Operations7 Congress's agreement to provide $70 billion for overseas military operations resolved, at least for a few months, a dispute over war funding that had led the Defense Department to announce plans to shut down Army and Marine Corps operations early in 2008. In the absence of supplemental appropriations, the Defense Department warned that money for Army operations would run out the end of February and for the Marine Corps in March, even after a transfer of $4.1 billion to the Army. On November 15, 2007, Secretary of Defense Gates said that the Defense Department would have to "cease operations at all Army bases by mid-February next year," which would result in furloughs of 100,000 civilian and another 100,000 contractor personnel. $70 Billion "Bridge Fund" Will Allow the Army to Operate into June Without Additional Funding The $70 billion for defense in the consolidated appropriations act averted the need for a shutdown until a least June 2008. It provided $35.2 billion for Army and $4.0 billion for Marine Corp operation and maintenance accounts. These amounts were in addition to $27.4 billion for the Army and $4.8 billion for the Marine Corps in the regular FY2008 Defense Appropriations Act ( P.L. 110-116 ). The supplemental funding, added to regular appropriations, provides enough money to sustain Army operations until about the end of June 2008 and Marine Corp operations until the about end of August at projected rates of obligation. The Army now says that it will exhaust the funds in its military personnel account by the middle of June, before it runs out of operation and maintenance money (see Table 1 for a calculation of the amount of time that appropriated amounts will last without transfers of funds or other measures to extend operations). The Defense Department may be able to extend operations further, either by transferring funds from other accounts to the Army and Marine Corps or, for the O&M accounts, by slowing the pace of Army and Marine Corps operations. DOD has available at least $11.4 billion of authority to transfer funds between accounts, including $3.7 billion in general transfer authority provided in the regular FY2008 defense appropriations act, $3.7 billion appropriated to the Iraqi Freedom Fund and available for transfer to personnel, O&M, or other accounts for operations in Iraq and Afghanistan, and $4.0 billion of authority to transfer funds provided as defense emergency appropriations provisions in the consolidated appropriations act. Additional amounts may be available in cash balances of DOD working capital funds. Transfers could conceivably extend Army operations for as much as another month without slowing down operations, although this would reduce DOD's financial flexibility to respond to other unexpected needs. The Defense Department could also extend operations by invoking the Feed and Forage Act, or by using other authority to allocate financing of support activities among the services. The Recurring Debate over the Impact of Delays in Providing Supplemental Appropriations While Congress's agreement to provide a $70 billion FY2008 bridge fund resolved the debate temporarily, it does not settle the underlying controversy. A recurring issue for Congress has been how much flexibility the Defense Department has to delay, if not to avoid entirely, shutting down operations when Congress does not provide full-year defense appropriations. In the absence of supplemental appropriations, the Defense Department may rely on funds in the regular defense appropriations acts to finance both day-to-day peacetime activities and war-related operations abroad. In FY2008, CRS calculated that these funds would be exhausted by February for the Army and by early April for the Marine Corps, which is about what the Defense Department projected. DOD's proposed transfer of $4.1 billion to the Army would have extend its operations for another two to three weeks. Without supplemental appropriations, the Defense Department could have extended operations for about another month by transferring limited additional amounts to the Army and Marine Corps and by slowing down spending. The Defense Department might have been able to sustain operations longer by invoking the Feed and Forage Act or by using novel, unprecedented measures, such as assigning the Navy and Air Force to pay costs of Army support operations abroad. Each of these alternatives might have extended operations for some time, but each has limits and disadvantages as well. Use of additional sources of funding for transfers would reduce DOD's financial flexibility. Steps to slow down obligations of funds might disrupt day-to-day operations. Use of the Feed and Forage Act to finance ongoing military operations has, in the past, led legislators to worry that it weakens congressional war powers. And the extensive use of Navy and Air Force funds to support Army operations might erode congressional controls on the use of funds. The potentially disruptive effects of these measures must be weighed against the potentially disruptive effects of initiating a process to furlough personnel sooner than might otherwise be necessary. Supplemental Funding for International Affairs in the Final Consolidated Appropriations Bill The FY2008 state department, foreign operations appropriations bill is one of 11 regular FY2008 appropriations bills that were incorporated into the consolidated appropriations act, H.R. 2764 , P.L. 110-161 . The bill provides not only regular FY2008 appropriations for international affairs, but also emergency supplemental funds, including part of the $6.9 billion that the Administration requested. In all, the consolidated appropriations act provides $1,473.8 million for programs in the Administration's overall FY2008 emergency request for international affairs, of which $965 million is for the State Department and $508.8 million is for foreign operations are. This leaves $5.4 billion of the request still to be considered. Supplemental funds for State Department accounts in the consolidated appropriations act include: $781.6 million for Diplomatic and Consular Programs—$575.0 million for operations and $206.6 million for worldwide security protection; $468.0 million for Contributions to International Peacekeeping for activities in Darfur, all of which the State Department counts for requested emergency programs; $12.0 million for International Broadcasting, all of which the State Department counts for requested emergency programs. Supplemental funds for Foreign Operations accounts include: $115 million for Global Health & Child Survival;. $110 million for International Disaster Assistance; (IDA had been requested for activities in Iraq); $20.8 million for USAID Operating Expenses for Iraq; $542.6 million for Economic Support Fund; ESF had been requested for Iraq Afghanistan, the West Bank and Gaza, Pakistan, North Korea, and Sudan; $200 million for Migration and Refugee Assistance; MRA had been requested for refugee situations in Iraq and the West Bank and Gaza; $100 million for Foreign Military Financing; and $35 million for Peacekeeping Operations. For a summary table that compares funding in the House bill to the request, see Appendix . For a discussion of funding for specific programs compared to the request, see " International Affairs Emergency Supplemental Request ," below. FY2008 Defense Supplemental/ Bridge Fund Alternatives Table 2 provides a summary of the main FY2008 defense supplemental appropriations or "bridge fund" proposals, including the Administration request; the November 14, House-passed bridge fund, H.R. 4156 ; the December 17 House-passed $31 billion Operation Enduring Freedom supplemental in the FY2008 consolidated appropriations bill, H.R. 2764 ; and the final, enacted amount in the McConnell $70 billion bridge fund as approved in the Senate on December 18 and in the House on December 19 and as signed into law by the President on December 26. A Comparison of Iraq Policy Provisions Considered in Action on FY2008 Supplemental Appropriations The original, House-passed bridge fund, H.R. 4156 , required a plan to withdraw most U.S. military forces from Iraq by December 2008. The final, $70 billion emergency funding legislation includes various reporting requirements, but no change in Iraq policy. Other Iraq policy amendments were proposed as amendments over the course of congressional debate. What follows is a brief overview of major Iraq policy provisions included in the original House-passed bill and considered in subsequent congressional action. Iraq Policy Provisions in the House-Passed Bridge Fund, H.R. 4156 The $50 billion bridge fund that the House approved on November 14, 2007, included a requirement that the President begin to withdraw troops from Iraq within 30 days of enactment, and it set a target date of December 15, 2008, as a goal for completing the withdrawal. It permitted a residual force to remain in Iraq for protection of U.S. missions and personnel, training, and targeted attacks on terrorist groups. The measure also included a requirement that deployed units be fully ready and it extended prohibitions on torture that now apply to the military services to all agencies of government. On key Iraq-policy and related matters, H.R. 4156 – Stated the sense of Congress that the war in Iraq should end as quickly and safely as possible and troops brought home; Extended prohibitions on the use of torture by Defense Department personnel to other government agencies; Prohibited the use of funds in the bill to deploy any unit abroad unless the President certifies 15 days in advance that the unit is "fully mission capable;" Required the President within 30 days to begin an immediate and orderly redeployment of U.S. forces from Iraq; Stated that the withdrawal from Iraq should be accompanied by a comprehensive strategy to work with neighbors and the international community to bring stability to Iraq; Set December 15, 2008, as a goal for completing the transition of U.S. armed forces to a limited presence, though the date is not a firm deadline; Restricted missions after the transition to protecting U.S. facilities, armed forces, and civilians; providing limited training and related assistance to Iraqi security forces; and engaging in targeted counter-terrorism operations against al Qaeda and other terrorist organizations in Iraq; Required quarterly reports beginning February 1, 2008, on plans to achieve the transition of the U.S. mission in Iraq; Said that congressional consideration of additional funding shall not begin until the first quarterly report on the transition of U.S. forces is submitted; Required by February 15, 2008, a comprehensive regional stability plan for the Middle East; Required additional quarterly reports, beginning on January 15, 2008 and continuing through the remainder of the fiscal year, that would establish performance measures for military and political stability in Iraq and specify a timetable for achieving the goals. Senate Rejection of the Levin-Reed and Feingold Amendments On December 18, Senators Levin, Reed, Voinovich, Hagel, Snowe, Reid, and Salazar offered an amendment to Senator McConnell's bridge fund amendment that would have added language expressing the sense of Congress that the U.S. mission in Iraq should shift by the end of 2008 to one of training, equipping, and supporting Iraqi security forces. The amendment would have inserted a new section, saying, Sec. – It is the sense of Congress that the missions of the United States Armed Forces in Iraq should be transitioned to the more limited set of missions laid out by the President in his September 13, 2007, address to the Nation, that is, to counterterrorism operations and training, equipping, and supporting Iraqi forces, in addition to the necessary mission of force protection, with the goal of completing that transition by the end of 2008. By a vote of 50-45, with 60 votes required, the Senate failed to approve the measure (though a majority supported it), and it was subsequently withdrawn. The breakdown of the vote was the same as on earlier Iraq amendments in July, reflecting no change in Senate support for, and opposition to, the war in Iraq. Earlier on December 18, Senators Feingold, Reid, Leahy, Dodd, Boxer, Kennedy, Kerry, Harkin, Whitehouse, Wyden, Durbin, Schumer, Obama, Sanders, Menendez, Lautenberg, and Brown, offered an amendment that would have required the President to begin withdrawing troops from Iraq within 90 days and that would have cut off funding for operations in Iraq after nine months from the date of enactment of the legislation. By a voter of 24-71, with 60 votes required, the Senate refused to approve the measure, and it was then withdrawn. Iraq Policy Provisions in the Enacted $70 Billion Bridge Fund The $70 billion "bridge fund" that Congress ultimately approved for FY2008 does not include language requiring the withdrawal of U.S. forces from Iraq. Instead, Section 609 of the measure required the Secretary of Defense to provide an extensive report on "Progress Toward Stability in Iraq" within 60 days of enactment of the legislation and every 90 days thereafter. The Administration interpreted these reporting requirements as being fulfilled by ongoing quarterly reports on stability and security in Iraq. Among other things, the report is required to include an explanation of "[t]he criteria the Administration will use to determine when it is safe to begin withdrawing United States forces from Iraq." Overview of FY2008 Supplemental Defense, International Affairs, and Other Funding Requests Taken together, the Administration requested a total of $196.5 billion in "additional" or "supplemental" appropriations for military operations, international affairs, and other activities in FY2008. Most of the money was requested in the Administration's original budget for FY2008, submitted in February 2007. The request included $141.7 billion for military operations abroad, $3.3 billion in emergency funds for international affairs programs, and $325 million in emergency funding for other agencies, including the Department of Energy for counter-proliferation programs, the Coast Guard, and the Department of Justice. Subsequently, on July 31, the White House sent Congress a budget amendment requesting $5.3 billion for mine resistant ambush protected (MRAP) vehicle procurement and deployment. And on October 22, the White House sent Congress a budget amendment requesting an additional $45.9 billion in FY2008 for military operations abroad and for a variety of international affairs programs. In all, the Administration asked for a total of $189.3 billion in FY2008 for military operations, $6.9 billion in supplemental funding for a variety of international affairs programs, and $325 million for other agencies. Table 3 provides a summary of supplemental requests in February, July, and October. Emergency Spending Designation The Administration requested all of these funds, including the amounts in the February budget and in the subsequent July and October budget amendments, with legislative language that would designate the amounts as "emergency" spending. The intention was to exempt the funds from caps on spending in the FY2008 congressional budget resolution. Section 204 of the FY2008 budget resolution, S.Con.Res. 21 , provides that amounts designated as necessary to meet emergency requirements "shall not be counted" against caps on discretionary spending act in the House and shall not be subject to points of order for exceeding spending limits in the Senate. Technically, however, the terms "emergency" or "emergency appropriations" may not apply to all of the money Congress may ultimately provide, particularly for ongoing war-related expenses. While S.Con.Res. 21 exempts emergency amounts from caps on spending, it also includes a restrictive definition of emergency spending that might permit a point of order to be raised in the Senate against a measure that designates funds for ongoing activities, including the war, as an emergency. Instead, the budget resolution permits limits on overall funding to be adjusted by up to $124.2 billion for "overseas deployments and related activities." That designation, rather than "emergency" appropriations, may be invoked to permit some of the requested spending to be considered without raising a point of order for exceeding budget limits in the Senate. Supplemental Appropriations for Other Programs Supplemental appropriations bills frequently provide substantially more money than the White House requests, and bills sometimes become vehicles for significant legislative initiatives as well. The FY2007 supplemental, for example, H.R. 2206 , P.L. 110-28 , included substantial amounts for disaster relief, farm programs, low-income energy assistance, and the SCHIP children's health insurance program. It also included a measure to increase the minimum wage. It was widely expected that the appropriations committee would include additional "emergency" funds for Hurricane Katrina recovery and for other purposes in any FY2008 supplemental appropriations bill for the war. With the prospect that the war supplemental would be delayed until January or later, however, appropriators decided not to wait to address hurricane recovery and other issues, and instead provided funding for several non-defense programs in the second FY2008 continuing resolution (CR). The second CR, which funds activities of the government from November 17 through December 14, 2007, was attached to the FY2008 defense appropriations bill, H.R. 3222 , P.L. 110-116 , which the President signed into law on November 13. The continuing resolution included $2.9 billion in additional funds for veterans health programs, $3 billion in community development funds for Louisiana to help residents return to their homes, $2.9 billion for the Federal Emergency Management Agency Disaster Relief Fund, and $500 million for wildfire management. Summary of FY2008 Defense Supplemental Appropriations As noted above, in the first continuing resolution and in the FY2008 defense appropriations bill, Congress provided $16.8 billion for MRAPs. The FY2008 continuing resolution, H.J.Res. 52 , P.L. 110-92 , that was signed into law on September 29, provided $5.2 billion for production and deployment of Mine Resistant Ambush Protected (MRAP) vehicles for the Army and Marine Corps. This is almost all of the amount that was requested in the Administration's July 31 budget amendment. The FY2008 defense appropriations bill, H.R. 3222 , P.L. 110-116 , that was signed into law on includes $11.6 billion for MRAPs, all designated as emergency appropriations. The $70 billion bridge fund in the omnibus appropriations bill that the President signed on December 26 includes $39 billion for Army and Marine Corps operation and maintenance; $11 billion for O&M for the Navy, Air Force, and other components; $1.35 billion to train and equip Afghan security forces and $1.5 billion for Iraqi forces; $3.7 billion for the Iraqi Freedom Fund, which provides flexibility to shift funds to meet evolving needs; $4.3 billion, the entire amount requested, for joint IED defense; and $6.1 billion for weapons procurement, less than 10% of the $67 billion requested. The bill also permits up to $4 billion to be transferred between accounts in the bridge fund. This may provide additional flexibility for the Defense Department to finance operations in the future if funding is again delayed. Highlights of the FY2008 Defense Supplemental Request The $189.3 billion requested for military operations in FY2008 continues a trend of perennially larger and larger amounts of money being provided to the Defense Department through supplemental appropriations that are over and above also-increasing "base" budgets for defense. In all, supplemental appropriations for DOD, together with war-related "bridge" funds provided as separate titles of regular annual defense appropriations bills since FY2005, have grown from $62.6 billion in FY2003, the year of the Iraq invasion, to $101.9 billion in FY2005, to $124.0 billion in FY2006, to $171.3 billion in FY2007, and now still higher (see Table 4 ). Why War-Related Supplemental Requests Have Grown19 The increases in funding for the war cannot be attributed to the pace of military operations. Though the number of troops deployed in Iraq and Afghanistan has fluctuated over time, and there was a "surge" of troops into Iraq in 2007, overall troop levels have remained relatively stable. Instead, the increases are due in large part to the growth of investments to repair or replace equipment lost or worn out in military operations and also to upgrade equipment across for ground forces. As Table 5 shows, the largest increases in funding have been for weapons procurement, which has grown from about $19 billion in FY2005 to a requested $64 billion in the amended FY2008 request. Operation and maintenance funding has grown also, much of that to repair equipment. And there have been increases, as well, in funding to train and equip Afghan and Iraqi military forces. Supplementals have also been used to finance costs of reorganizing the Army into a modular, brigade-centered force and to pay for initial costs of increasing the Army and Marine Corps by 92,000 troops by 2011. Table 6 shows the trend in funding according to functional categories that the Defense Department has used. DOD's functional breakdown shows large increases in funding for force protection and smaller increases in support to foreign security forces. The largest increases, however, have been for what the Defense Department refers to as "reconstitution." Early in the war, the Defense Department did not support Army requests for funding to reconstitute the force, with Secretary Rumsfeld and other officials citing uncertainly about what was needed. Congress, however, insisted on adding funds for new equipment and asked the Army to provide information on its requirements. Traditionally, the term "reconstitution" has been used to refer to repairing and replacing equipment lost or worn out in combat in order to restore the force to approximately its pre-war condition. Secretary of Defense Rumsfeld, however, preferred to use the term "reset" to describe what was needed. To reset the force meant to return the force, not to its prewar condition, but to the condition that it would have been in had planned changes in the force been carried on in the absence of a conflict. The intent was not to add to funding requirements, but to refine and perhaps reduce them. Secretary Rumsfeld argued, for example, that there was not necessarily a need to restore stocks of Army prepositioned equipment to prewar levels because plans to reduce overseas deployments might reduce prepositioning requirements. Now, the Defense Department has resumed using the term "reconstitution," but the concept appears to encompass much more than just restoring the force. In particular, it appears to encompass substantial upgrades to the force, especially for the Army and Marine Corps. The upgrades include measures to fix preexisting shortfalls in some kinds of equipment, to add substantially to transportation and communications equipment in combat units to reflect lessons about the way units have operated in the war, and to more fully equip later deploying units with the same equipment used in the theater in order to improve training. A large amount has also been devoted to more fully equipping Guard and reserve units that, in the past, were outfitted with older equipment retired from the active duty force, but that have now become part of the rotation base for overseas operations and, so are seen to need newer weapons and support systems. Taken together, these steps to upgrade the force explain much of the increase in spending. Congress has generally supported steps to upgrade ground forces, and legislators have questioned only a relatively small share of requested increases in equipment funding. In action on the FY2007 war supplemental, for example, there were questions about the rationale for an Air Force request for two F-35 Joint Strike Fighters, on which production is just beginning, to replace F-15 and F-16 aircraft lost in combat operations, and a Navy request for one V-22 tilt rotor aircraft to replace lost helicopters. In the end, the Administration withdrew those requests in a budget amendment that realigned funding to reflect costs of the troop surge. Selected Elements of the Amended Defense Request Funding for MRAPs is the largest single item in the amended defense request, and Congress has already responded by providing virtually all of the money requested. A few other elements of the amended request stand out. Costs of the troop surge: The October 22 budget amendment included $6.3 billion to cover costs of maintaining five additional Army brigade combat teams (BCTs) and one Marine regimental combat team (RCT) in Iraq through December 2007 and then returning to pre-surge levels. The budget assumes that the additional units will be withdrawn beginning in January and that the force will be reduced to the pre-surge level of 15 brigades by July. Other Iraq- and Afghanistan-related increases: The October 22 budget amendment included $1 billion in additional money for Iraqi security forces and $100 million to expand a program to reopen factories in Iraq. It also included $242 million for the Commanders Emergency Response Program for Afghanistan. And it includes $956 million, in addition to $739 million requested in February, to construct facilities and roads in Iraq and Afghanistan. Additional funds for reconstitution: Aside from MRAPs, the largest element of the October budget amendment is an addition of $8.8 billion to the $37.6 billion requested in February to repair, replace, and replenish equipment and supplies. The budget amendment includes $1 billion to improve Navy P-3 aircraft radar detection equipment and smaller amounts for a wide range of other programs. Restock inventories of equipment in non-deploying units: Under the title "Restore the Force," in addition to funds for reconstitution, the October budget amendment includes $5.4 billion to restock equipment inventories of combat support and combat service support (CS/CSS) units that have had equipment taken away in order to equip deployed and next-to-deploy combat and support units. Defense Department officials have said that is only part of the amount needed to make up shortfalls of inventories due to cross-leveling of equipment as units have prepared to deploy. Other requests: The budget amendment includes $2.5 billion for a variety of other initiatives. These include $762 million for fuel price increases; $416 million to accelerate the date for completing construction of facilities to replace the Walter Reed Army hospital from May 2011 to October 2010; $504 million for to improve other Army medical facilities and services; and about $800 million for soldier and family support programs, including programs to support soldiers returning from combat tours. International Affairs Emergency Supplemental Request On February 6, 2007, the Administration sent to Congress its regular FY2008 budget that included $35.1 billion for international affairs. At the same time, the President sent Congress an FY2008 emergency supplemental request of $3.301 billion for international affairs. On October 22, 2007, the Administration amended its supplemental request with $3.596 billion in additional spending. The total FY2008 emergency supplemental request for international affairs spending amounts to $6.897 billion. While the largest portion of the total request is for State Department operations and foreign assistance in Iraq and Afghanistan, it also includes sizeable requests for programs in Mexico, the West Bank and Gaza, North Korea, Sudan, and Pakistan. The State Department estimated emergency supplemental funding needs of $3.220 billion for Diplomatic and Consular Programs (DCP) in Iraq and Afghanistan, Worldwide Security Upgrades in Afghanistan, staff housing in Afghanistan, Contributions to International Organizations, and Contributions to International Peacekeeping Activities (CIPA) for Darfur. Two-thirds ($2.1 billion) of the State Department request was for Diplomatic and Consular Program funding for Iraq Operations. Foreign Operations comprise $3.678 billion, including $350 million for P.L. 480 food assistance. Nearly half of the total foreign operations package was allocated for assistance in Iraq and Afghanistan. The Bush Administration has increasingly requested emergency supplemental funds for international affairs budgets. Some budget experts and others have criticized the Administration for relying too heavily on supplementals, and that some items, particularly relating to Iraq and Afghanistan, have become routine and should be incorporated into the regular appropriations cycle. The Administration counters that given the nature of rapidly changing overseas events and unforeseen emergencies, it is necessary to make emergency supplemental requests for what it claims are unexpected and non-recurring expenses. State Department Operations23 In February 2007, the original FY2008 State Department portion of the emergency supplemental request consisted of $1.882 billion for Diplomatic and Consular Programs, all for operations in Iraq, and $53 million for Contributions to International Organizations (CIO). The Administration amended this supplemental, adding nearly $1.3 billion: $401.4 million for Diplomatic and Consular Programs (DCP), $160 million for Embassy Security, Construction, and Maintenance (ESCM), and $723.6 million for Contributions for International Peacekeeping Activities (CIPA). Total emergency funds requested for FY2008 for the State Department's Administration of Foreign Affairs equal $3.220 billion in addition to the regular budget request of $7.317 billion for the Administration of Foreign Affairs ( Table 7 ). The Mission in Iraq consists of about 1,000 direct-hire Americans representing 12 U.S. government agencies. For the Diplomatic and Consular Programs account, the Department requested a total of $2.283 billion, of which $2.120.6 billion was for emergency needs in Iraq. In addition, $402.6 million of carryover funds were available, for a total of $2.523 billion for Iraq operations. Of this sum, $978.7 million would pay for security needs, such as local guards ($151.6 million), compound guards ($164.0 million), regional security ($167.3 million), personal security details ($301.4 million), armored vehicles ($41.2 million), physical and technical security, such as vehicle barriers and bomb detective dogs ($8.7 million), equipment, such as bullet proof vests, ammunition, and masks ($6.4 million), other support, such as special agents traveling to Iraq and counterterrorism training ($28.1 million), and overhead cover protection to bolster rooftops ($110.0 million). Another $907.1 million would go toward Provincial Reconstruction Teams (PRTs), paying salaries ($187.6 million), operations ($63.8 million), living accommodations and medical support ($72.1 million), information technology ($60.3 million), vehicles ($3.3 million), security ($516.8 million) and leases of space in Baghdad ($3.2 million). The Administration also sought $162.4 million for worldwide security upgrades in Afghanistan. Of this amount, $80 million would pay for securing facilities, including overhead (roof) protection; $38 million would be for high threat protection teams and support for the election process; $36.5 million would fund unbudgeted security costs for other agencies; and $7.9 million would buy fully armored vehicles for the embassy and PRTs. Other expenses covered by the FY2008 emergency supplemental request for the Department of State included $160 million for U.S. staff housing in Afghanistan under the Embassy Security, Construction, and Maintenance account, $53 million for U.S. assessments for U.N. activities related to combat terrorism, and $723.6 million for U.S. Contributions for International Peacekeeping activities in Darfur. Congressional Action on State Department Operations Congress provided both regular funding and supplemental funding for the Department of State and the Broadcasting Board of Governors (BBG) in Division J of the Consolidated Appropriation Act ( P.L. 110-161 ). The enacted law contains $1.262 billion in supplemental funds for the Department of State—$781.6 million for State's Diplomatic and Consular Programs (D&CP) and $468.0 million for U.S. Contributions to International Peacekeeping (CIPA). In both accounts, the emergency supplemental amounts are significantly less than what the Administration had requested. Of the $781.6 million for D&CP, $575.0 million is specified for Iraq operations and $206.6 million is for worldwide security protection (WSP). According to State Department officials, the Department applied the $206 million to the FY2008 base request, resulting in $162.4 million to be still pending for WSP in Afghanistan. The appropriation does not require any specific allocation for the CIPA emergency supplemental funds, although the measure states that "not less than $550.4 million be used to establish a new United Nations/African Union hybrid peacekeeping mission to Darfur (UNAMID)." According to Department of State officials, $390 million is allocated for Darfur and $78 million for FY2008 U.N. Peacekeeping funds. Still pending is $333.6 million for Darfur, according to Department sources. Emergency supplemental funds for the BBG total $12.0 million in the consolidated appropriation. No funds for international broadcasting were requested in the Administration's emergency supplemental request. While the provision lists general funding allocations for BBG, no requirements for specific allocation of the supplemental funds is mentioned. Foreign Operations25 The Foreign Operations portion, totaling $3.678 billion, of the supplemental request was sent to Congress in two tranches. A $1.367 billion request accompanied the President's budget on February 6, 2007. An amended request for $2.311 billion, including P.L. 480 food aid, was sent to Congress on October 22 nd . Approximately one-third of the request was made up of $2.217 billion in Economic Support Funds (ESF) for Iraq ($797 million), Afghanistan ($834 million), West Bank and Gaza ($350 million), North Korea ($106 million), Sudan ($70 million) and Pakistan ($60 million). (See Table 8 for full request.) Anti-narcotics emergency supplemental funding for FY2008 totaled a requested $734 million, the largest portion allocated for Mexico and Central America ($550 million). Migration and Refugee Assistance (MRA) totaled $230 million, mainly for Iraqi and Palestinian refugees. International Disaster and Famine Assistance (IDFA), totaling $80 million, would fund programs in Iraq to assist internally displaced persons (IDPs). The request also includes $5 million for the Afghanistan Presidential Protection Service from the Nonproliferation, Anti-terrorism, Demining and Related Programs (NADR) account. A $350 million request for P.L. 480 food aid would support programs in the Horn of Africa, Kenya, Sudan, and a $30 million contingency fund to anticipate future needs elsewhere. Congressional Action on Foreign Operations Congress approved $1.123 billion in emergency supplemental funds for foreign operations in the omnibus bill in addition to regular FY2008 funding. In many instances, the amounts approved for emergency funds are less than that requested, making it difficult to ascertain what parts of the request will be funded. For example, the White House had requested approximately $2.2 billion in ESF funds for six recipients, but the legislation is not explicit, in every instance, as to where these funds should be directed, presumably leaving some discretion to the Administration. Supplemental funds approved by Congress include $115 million for Global Health & Child Survival (no CSH funds were requested); $110 million for International Disaster Assistance ($80 million had been requested for activities in Iraq); $20.8 million for USAID Operating Expenses ($61.8 million was requested for operations in Iraq and Afghanistan); $542.6 million for Economic Support Fund ($2.2 billion had been requested for Iraq Afghanistan, the West Bank and Gaza, Pakistan, North Korea, and Sudan); $200 million for Migration and Refugee Assistance for Iraqi refugees and Palestinian refugees in Lebanon, and the West Bank and Gaza ($230 million was requested); $100 million for Foreign Military Financing (no FMF funds were requested); and $35 million for Peacekeeping Operations (no PKO funds were requested). No supplemental funds were provided for counter-narcotics programs requested for Mexico and Central America, and the West Bank and Gaza. Iraq Reconstruction Assistance26 Until the passage of the omnibus FY2008 appropriations bill, nearly $42 billion in U.S. funds had been appropriated to support all facets of Iraq reconstruction. Almost all this funding was appropriated in annual supplemental legislation. For FY2008, the Administration made no request for security assistance in its regular Defense budget proposal, but asked for roughly $392 million under State and Foreign Operations appropriations. In both the June 2007-approved House and September 2007-approved Senate versions of the FY2008 State and Foreign Operations legislation ( H.R. 2764 ), Congress rejected the Administration request for Iraq. Therefore, funding for Iraq reconstruction in FY2008 was expected to come almost entirely from an emergency supplemental measure. Administration Supplemental Request for Iraq Reconstruction The Administration's FY2008 emergency supplemental appropriations request, revised on October 22, 2007, included $4.9 billion in funding for Iraq reconstruction. Reconstruction aid has two main components—security aid funded with Department of Defense (DOD) appropriations and political/economic/social sector assistance funded with State and Foreign Operations appropriations. The request for DOD reconstruction appropriations totaled about $3.7 billion. It would chiefly fund the training and equipping of Iraqi troops under the Iraq Security Forces Fund (ISFF) and reconstruction grants provided under the Commander's Emergency Response Program (CERP). The CERP allows military commanders to support a wide variety of economic activities at the local level, from renovating health clinics to digging wells to painting schools, provided in the form of small grants. CERP also funds some infrastructure efforts no longer supported with other U.S. assistance, such as repair or provision of electric generators and construction of sewer systems. Commanders are able to identify needs and dispense aid with few bureaucratic encumbrances. More recently, the CERP has paid salaries to the so-called Sons of Iraq (formerly known as the Concerned Local Citizens), mostly Sunnis who are joining with U.S. forces to provide security. The October budget revision added a $100 million request to the DOD-funded Iraq Freedom Fund account for the Task Force to Improve Business and Stability Operations in Iraq. The Task Force, funded at $50 million under the previous supplemental appropriations legislation, seeks to stimulate the economy and create employment for Iraqi citizens by rehabilitating some of the roughly 200 state-owned enterprises that comprised a large portion of the Iraqi economy prior to the U.S. occupation. News reports have suggested some difficulty with the program, resulting from the lack of electricity, the insecure environment, and a lack of enthusiasm from U.S. companies that had been expected to invest in the facilities, among other reasons. Under the State and Foreign Operations appropriations budget, the FY2008 emergency supplemental request would direct $1.2 billion toward Iraq—$797 million in the Economic Support Fund (ESF), $159 million in the International Narcotics and Law Enforcement (INCLE), and $195 million in the Migration and Refugee Assistance (MRA), and $80 million in the International Disaster and Famine Assistance (IDFA) accounts. ESF is the primary source of funding for the assistance provided by the Provincial Reconstruction Teams (PRTs), which have grown under the surge to 31, including 13 newly established ePRTs (embedded PRTs) embedded with U.S. combat battalions and concentrated mostly in Baghdad and Anbar province. The ePRTs are intended to help stabilize areas secured by U.S. and Iraqi forces by supporting local small-scale, employment-generating, economic projects, using ESF-funded community development grants, job training and micro-loan programs, among other activities. PRTs also utilize ESF to increase the capacities of local government officials to spend Iraqi-owned capital funds allocated by the Iraqi government for infrastructure programs. At the national level, ESF supports Ministerial capacity development, agriculture and private sector reform, and the strengthening of democratization efforts. The October budget revision added another $25 million to the ESF supplemental request and proposed authorization language to allow the Administration to establish a new Iraq enterprise fund based on the model created for east Europe and the former Soviet Union. Enterprise funds are U.S. government-funded private sector-run bodies that primarily provide loans or equity investments to small and medium business. In the former communist countries, enterprise funds also encouraged growth of the private sector, including support for mortgage lending markets and establishment of private equity funds. The most successful example, the Polish Fund, made many profitable investments, helping companies grow that otherwise were unable to obtain financial support in the period just after the fall of communism. Some of the funds, however, have been much less successful, either by taking on poor investment risks, or unable to locate promising businesses because of the poor business climate or competition from other private sector funding sources. Some observers question the usefulness of the funds because their ostensible development purpose seems often to conflict with pressures for economic profit. The INCLE account largely would support rule of law and corrections programs. The Administration request was expected to fund prison construction, something that Congress has sometimes cut from previous requests. The request was also intended to extend judicial reform and anticorruption efforts to the provinces. The MRA request would address the continuing refugee crisis in the region; an estimated 2.0 million Iraqis have fled the country and another 2.2 million have been displaced due to sectarian violence and instability. The IDA program would provide medical care, food, shelter and other relief to refugees and displaced people. FY2008 emergency funds were also requested for operational costs (not included in the reconstruction aid total) for staffing and administering reconstruction programs: $679 million for PRT and $45.8 million for USAID operations. Congressional Action on Iraq Reconstruction in FY2008 Consolidated Appropriations In its consideration of the regular and supplemental requests for Iraq reconstruction, Congress treated the two facets of reconstruction—security and economic—quite differently. On the one hand, Congress did provide a substantial part—$1.9 billion—of the Administration's $3.7 billion Defense appropriations supplemental request for security reconstruction aid. It appropriated half of the request for the Iraq Security Forces Fund and nearly half of the request for the CERP. On the other hand, with a few discrete exceptions—all involving humanitarian programs—Congress, in section 699K of Division J (the State and Foreign Operations part of the omnibus appropriations), specifically rejected almost all regular or supplemental economic assistance to Iraq, providing only about $250 million. It approved efforts to fund humanitarian demining ($16 million, drawing on regular NADR funds), assist refugees and internally displaced persons (drawing on supplemental MRA funds), and offer disaster relief (drawing on supplemental IDFA funds), and it provided $5 million for the Marla Ruzicka War Victims Fund, and $10 million for the rescue of Iraqi scholars (drawing on regular ESF funds, but the latter reportedly not yet allocated). In the end, Congress appropriated 24% of the total International Affairs budget supplemental request for Iraq reconstruction, which, with FY2008 regular and DOD emergency appropriations brings Iraq reconstruction funding since 2003 to $44.8 billion. However, until the 2 nd tranche of the supplemental is considered, U.S. funding for PRT operations and programs and a wide range of other programs designed to support the surge and enhance the capacity of the Iraqi government to address its own needs will have to rely on available FY2007 funds. Pending FY2008 Supplemental The Administration is seeking the remainder of its emergency Iraq reconstruction aid request—about $1 billion in unenacted Foreign Operations appropriations and $2 billion in unenacted Defense appropriations—when the 2 nd tranche is deliberated in Spring 2008. Afghanistan28 Background Afghanistan's political transition was completed with the convening of a parliament in December 2005, but in 2006 insurgent threats to Afghanistan's government escalated to the point that some experts began questioning the success of U.S. stabilization efforts. In the political process, a new constitution was adopted in January 2004, successful presidential elections were held on October 9, 2004, and parliamentary elections took place on September 18, 2005. The parliament has become an arena for factions that have fought each other for nearly three decades to debate and peacefully resolve differences. Afghan citizens have started to enjoy new personal freedoms, particularly in the northern and western regions of the country, that were forbidden under the Taliban. Women are beginning to participate in economic and political life, including as ministers, provincial governors, and senior levels of the new parliament. The next elections are planned for 2009. The insurgency, led by remnants of the former Taliban regime, escalated in 2006, after several years in which it appeared the Taliban was mostly defeated. U.S. and NATO military commanders have had recent successes in counter-insurgency operations, but the Taliban continues to present a considerable threat to peace and security in parts of Afghanistan. Slow reconstruction, corruption, and the failure to extend Afghan government authority into rural areas and provinces, particularly in the south and east, have contributed to the Taliban resurgence. Political leadership in the more stable northern part of the country have registered concerns about distribution of reconstruction funding. In addition, narcotics trafficking is resisting counter-measures, and independent militias remain throughout the country, although many have been disarmed. The Afghan government and U.S. officials have said that some Taliban commanders are operating across the border from Pakistan, putting them outside the reach of U.S./NATO forces in Afghanistan. In 2007, the Administration unveiled the Reconstruction Opportunity Zones (ROZ) in Afghanistan and the border regions with Pakistan, an initiative to stimulate economic activity in underdeveloped, isolated regions. The United States and partner stabilization measures focus on strengthening the central government and its security forces and on promoting reconstruction while combating the renewed insurgent challenge. As part of this effort, the international community has been running PRTs to secure reconstruction. Despite these efforts, weak provincial governance is seen as a key obstacle to a democratic Afghanistan and continues to pose a threat to reconstruction and stabilization efforts. The FY2008 original and amended emergency supplemental request The Administration requested $339 million in ESF for Afghanistan reconstruction assistance in the FY2008 emergency supplemental in February 2007. Other parts of the supplement request for Afghanistan included increases in embassy operations and security. The Administration amended the FY2008 supplemental request in October 2007 for a total request of $839 million for reconstruction, which included several provisions intended to continue U.S. efforts to stabilize Afghanistan and continue economic reconstruction efforts. The FY2008 Consolidated Appropriations Act funded most government operations for which regular FY2008 appropriations bills—11 in all—had not been enacted. Although emergency funds for military operations in Afghanistan were appropriated as part of the bridge supplemental in the Consolidated Appropriations Act ($1.753 million), the supplemental request of $839 for reconstruction was not appropriated. Key elements of the FY2008 emergency supplemental requests include funding for the ESF. In addition to the $339 million for ESF in the initial supplemental request, the amended supplemental included additional funding for democratic governance and reconstruction efforts to continue security and development strategy, which would be allocated as follows: $275 million to strengthen provincial governance and responsiveness to the Afghan people. Funding would support a wide range of programs, preparation activities for the 2009 election and ongoing programs, such as the National Solidarity Program ($40 million), the Afghanistan Reconstruction Fund ($25 million), and the Provincial Governance Fund ($50 million); $50 million as part of an effort to invest in basic social services, such as health and education, particularly in rural areas; and $170 million for economic growth and infrastructure, including the development of power sector projects ($115 million); road projects ($50 million) focused on those segments that are of strategic military importance and provide key connections between the central and provincial government capitals; and funding to support Reconstruction Opportunity Zones ($5 million) in designated economically isolated areas and to create employment alternatives. In addition to ESF funding, the request includes: $5 million in Non-proliferation, Anti-terrorism, Demining and Related Programs (NADR) to support the Afghan leadership through the Presidential Protection Service. Pakistan30 The Federally Administered Tribal Areas (FATA) are considered strategically important to combating terrorism while continued terrorist and militant activities in the frontier region remain a threat to the United States and its interests in Afghanistan. The Government of Pakistan has developed a FATA Sustainable Development Plan to be implemented over 10 years. In support of this plan, the State Department and the U.S. Agency for International Development have put forward a five-year $750 million development assistance strategy for the frontier region (a pledge of $150 million per year) that complements the Government of Pakistan's plan. The U.S. objectives are to improve economic and social conditions in the FATA in order to address the region's use by terrorists and militants. Programs would include governance, health and education services, and economic development, such as agricultural productivity, infrastructure rehabilitation, credit, and vocational training. On November 3, 2007, President Musharraf imposed emergency rule and suspended Pakistan's constitution. In light of these events, the Administration announced a review of U.S. assistance. However, no action was taken in 2007 and in February 2008, Pakistan held what was reported to be a reasonably credible national election that seated a new civilian government. On April 9, 2008, Secretary of State Condoleezza Rice determined that a democratically elected government had taken office in Pakistan on March 25, 2008, which permitted the removal of coup-related sanctions on Pakistan and the resumption of assistance. The FY2008 original and amended supplemental request The Administration did not request funding for Pakistan in its original FY2008 emergency supplemental request in February 2007. In the FY2008 regular budget, the President asked for $90 million for the frontier region development plan, which left a gap of $60 million in the overall U.S. pledge of $150 million. The FY2008 amended supplemental request for $60 million for ESF would address this funding gap and meet the full pledge as follows: Investment in governance and planning ($13 million); health and education programs ($15 million); and local economic development ($32 million). The $60 million emergency supplemental request is in addition to the regular appropriations from various accounts in the FY2008 budget. Sudan32 No funding was requested for Sudan in the original FY2008 emergency supplemental in February 2007. The Administration sought a total of $868.6 million in the amended emergency supplemental for Sudan, most of which was for humanitarian and peacekeeping support in the Darfur region. Under the Consolidated Appropriations Act, Sudan received $334.8 million in the regular FY2008 budget and also $468 for the African Union/United Nations Hybrid Operation in Darfur (UNAMID) peacekeeping mission. FY2008 additional emergency supplemental request Major elements of the FY2008 amended emergency supplemental included the following: A $70 million request in ESF for Sudan to support upcoming national elections that are to take place before July 2009, as determined in the 2005 Comprehensive Peace Agreement between north and south Sudan. The assistance will focus on strengthening political parties, drafting the electoral law, supporting an electoral commission, promoting civic education, and supporting election-related institutions and processes. The United Nations estimates that the elections could cost nearly $400 million because of the logistical hurdles in conducting elections in a post-conflict environment. $70 million remains in the pending FY2008 emergency supplemental; and $723.6 million in support of the African Union/United Nations Hybrid Operation in Darfur (UNAMID) in the amended FY2008 supplemental. In the Consolidated Appropriations, $468 million was appropriated; $333.6 remains in the pending FY2008 emergency supplemental. Mexico and Central America33 The emergency supplemental request included $550 million to meet the first installment of a reportedly $1 billion-plus anti-narcotics package for the Mexico and Central America Security Initiative. Composed entirely of funds from the International Narcotics Control and Law Enforcement Account (INCLE), the initiative is to address criminal gang and drug trafficking activities and to support improved justice systems and rule of law programs. Mexico would see $500 million of the initial package for border security technology and transport for law enforcement and to improve judicial and prison systems. Countries in Central America would receive $50 million to improve border security, deter the smuggling of drugs, arms, and persons, and improve the justice sector and gang prevention programs. Regular funding for Mexico totaled $65.4 million in FY2007 and a requested $45.1 million in FY2008. The countries of Central America received $134.8 million in FY2007 and are proposed to receive $146.5 million in FY2008. Congress did not include this request in the FY2008 omnibus act. West Bank and Gaza34 The FY2008 emergency supplemental request included $375 million to support the Palestinian Authority (PA) government. The focus is on rule of law, economic growth, and governance issues. The supplemental request was in addition to $77 million requested in the regular FY2008 budget and comes after a new PA government was formed without Hamas control. Consisting largely of ESF funds, $40 million is to address governance issues, $20 million would improve health care services, $130 million is to support job creation, infrastructure, trade and investment, and agriculture programs, and $150 million would consist of budget support in the form of a cash transfer. An additional $25 million in INCLE funds would be used to train and equip the Presidential Guards and National Security Force, and $35 million in MRA funds would be for Palestinian refugees in the West Bank and Gaza and in refugee camps in Lebanon. Congress included $542.6 million in emergency ESF and allocated $155 million of those funds to the West bank and Gaza. No emergency INCLE funds were provided. A total of $200 million in emergency MRA was provided; the request was $230 million, which included $35 million for the West Bank and Gaza. North Korea35 The Administration proposed $106 million in ESF funds for North Korea as a result of commitments made as part of the Six Party Talks. In February 2007, North Korea agreed to shut down and eventually abandon the Yongbyon nuclear facility, to allow International Atomic Energy Agency monitors back in the country and to disable all existing nuclear facilities. In return, the United States and other Six Party Talks members (South Korea, China, Russia and Japan) agreed to provide 1 million metric tons of heavy fuel oil, or the equivalent in other assistance, as North Korea meets its commitments. The U.S. share is one-quarter of the 1 million metric tons, or equivalent assistance. The total cost for the U.S. commitment is $131 million. The President authorized $25 million in FY2007 supplemental funds, leaving $106 million that would be provided with the FY2008 supplemental funding. The omnibus bill provided $53 million in ESF funds for North Korea but does not designate them as emergency. Other Humanitarian Assistance36 Although proposed aid packages for specific countries anticipate and identify some humanitarian needs, the Administration also seeks funding for what it describes as unmet or unforeseen humanitarian needs, including $350 million in additional P.L. 480 - Title II assistance to meet emergency food needs in the Darfur region of Sudan and eastern Chad and elsewhere worldwide, including places such as southern Africa, and the Horn of Africa and Kenya. In addition, the Administration's original request asked for $230 million for Migration and Refugee Assistance (MRA) for anticipated and unanticipated refugee and migration emergencies, of which $195 million was requested for humanitarian assistance to Iraqi refugees. This was an increase of $160 million for Iraqi refugees; $35 million was requested in the earlier version of the FY2008 emergency supplemental request. In addition, $35 million was requested for the emergency needs of Palestinian refugees in Gaza and West Bank, and for Palestinian refugee camps in Lebanon. $200 million was appropriated for MRA in the Consolidated Appropriations Act, of which $195 was allocated for Iraqi refugees. $30 million (of the original $230 million request) remains as part of the pending FY2008 supplemental request for assistance to Iraqi refugees. Appendix. FY2008 Emergency Supplemental Request, State Department and Foreign Operations

During the 1st session of the 110th Congress, in calendar year 2007, the Administration requested emergency FY2008 supplemental appropriations of $196.5 billion to cover costs of military operations in Iraq and Afghanistan, for war-related and other international affairs programs, and for some other activities. The request included $189.3 billion for the Department of Defense, $6.9 billion for international affairs, and $325 million for other agencies. Through the end of December 2007, Congress provided $86.8 billion in emergency funds for the Defense Department and $2.4 billion for international affairs, though only $1.5 billion of that is now being counted against the Administration request. These amounts were included in threebills – The first FY2008 continuing resolution, H.J.Res. 52, P.L. 110-92, enacted on September 29, 2007, included $5.2 billion in emergency funding for Mine Resistant Ambush Protected (MRAP) vehicles; The regular FY2008 defense appropriations act, H.R. 3222, P.L. 110-116, enacted on November 13, 2007, provided $11.6 billion more in emergency funding for MRAPs; The FY2008 consolidated appropriations act, H.R. 2764, P.L. 110-161, enacted on December 26, 2007, included $70 billion in emergency funding for defense and $2.4 billion for international affairs, of which $1.5 billion is allocated to requested programs. Approval of these measures left unresolved the status of $102.5 billion in FY2008 emergency funding for the Department of Defense, $5.4 billion for international affairs, and somewhat under $300 million for other programs. Congress is expected to consider these amounts in a second FY2008 supplemental appropriations bill in the spring of 2008. For congressional action on that measure, see CRS Report RL34451, FY2008 Spring Supplemental Appropriations and FY2009 Bridge Appropriations for Military Operations, International Affairs, and Other Purposes (P.L. 110-252), by [author name scrubbed] et al. Through the fall of 2007, congressional action on supplemental FY2008 funding was embroiled in the ongoing debate over Iraq policy. Initially, in mid-November, the House approved a bill, H.R. 4156, providing $50 billion for military operations, but the bill required that troop withdrawals from Iraq begin within sixty days and that the President prepare a plan for withdrawing most troops by December 2008. That bill failed when the Senate refused to close debate. In mid-December, the initial House-passed consolidated appropriations bill included $31 billion for military operations, but prohibited use those funds in Iraq except for force protection. The Senate took up that bill and substituted a measure providing $70 billion without conditions. The House then approved the Senate bill, which became law. This CRS report reviews congressional action on FY2008 supplemental appropriations through December 2007. It will not be updated.

CRS_R43138

Introduction The United States' supply of natural gas is growing due to technological improvements, such as horizontal drilling and hydraulic fracturing, which have increased producers' ability to extract natural gas from shale formations. Shale gas is projected to become the dominant source of the U.S. natural gas supply by 2040. The growth in U.S. shale gas production requires the expansion of natural gas pipeline infrastructure at the local level (to extract and gather the gas) and at the national level to transport natural gas from producing regions to consuming markets, typically in other states. Over 300,000 miles of interstate transmission pipeline already transport natural gas across the United States. However, if the growth in U.S. shale gas continues as projected, the requirement for new pipelines could be substantial. For example, an analysis by the INGAA Foundation, a pipeline industry research organization, estimates that the total cost of new gas gathering and transmission pipelines, including storage, could average over $8 billion per year and total over $200 billion through 2035. This ongoing expansion has increased congressional interest in the role of the federal government in the certification (permitting) of interstate natural gas pipelines. The Natural Gas Pipeline Permitting Reform Act ( H.R. 161 ) seeks to expedite the federal review of certificate applications by imposing deadlines on the agencies involved. This report provides an overview of the federal certification process for interstate natural gas pipelines. It discusses the length of the review for recent interstate gas pipeline applications—a topic of specific interest to Congress and industry. In this context, the report discusses the key provisions in H.R. 161 and their implications for gas pipeline certificate approval. Issues associated with Presidential Permits for natural gas pipelines crossing the international border are discussed in CRS Report R43261, Presidential Permits for Border Crossing Energy Facilities , by [author name scrubbed] and [author name scrubbed]. FERC Pipeline Certification Process Under Section 7(c) of the Natural Gas Act of 1938 (NGA), the Federal Energy Regulatory Commission (FERC) is authorized to issue certificates of "public convenience and necessity" for "the construction or extension of any facilities ... for the transportation in interstate commerce of natural gas" (15 U.S.C. §717f(c)). Thus, companies seeking to build interstate natural gas pipelines must first obtain certificates of public convenience and necessity from FERC. FERC's regulatory process for interstate gas pipeline certification consists of several principal steps, which may vary somewhat depending upon whether or not a pipeline developer opts to enter into a voluntary pre-filing process before formally applying for a pipeline certificate. Pre-Filing and Environmental Review Prior to applying to FERC for a pipeline certificate, developers may file a request with FERC to use the commission's pre-filing procedures (18 CFR §157.21). The commission established the pre-filing process to encourage the pipeline industry to engage in early project-development involvement with the relevant public and government agencies. Through this process a developer notifies all stakeholders—including state, local, and other federal agencies, and potentially affected property owners—about a proposed project so that the developer and commission staff can provide a forum to hear stakeholder concerns. The pipeline developer may then incorporate proposed environmental mitigation measures into the project design, taking into account stakeholder input. The expectation is that the pre-filing will improve a developer's proposal and avoid problems during the review of a subsequent FERC certificate application. The pre-filing process involves a set of specific activities by the developer. These activities would typically include the study of potential project sites, identifying stakeholders, and holding an open house for stakeholders to discuss the project. At the conclusion of pre-filing, the developer conducts pipeline route studies and field surveys to develop a final application and submit it to FERC. Concurrent with the developer's activities, FERC staff participate in the open house and publish in the Federal Register a Notice of Intent for Preparation of an Environmental Assessment or an Environmental Impact Statement (40 CFR §1508.22), opening a scoping period to seek public comments. FERC consults with interested stakeholders, including government agencies, and also holds public scoping meetings and site visits in the proposed project area. Although pre-filing precedes a certificate application, it is, nonetheless, part of the regulatory process and requires a written request to FERC's Office of Energy Projects. Developers wishing to begin the pre-filing process must do so seven to eight months prior to filing a certificate application. If the commission approves pre-filing, it will issue to the developer a pre-filing docket number establishing an official public record associated with the proposed pipeline project. There is, however, no provision at this stage for third parties to become formal "intervenors" in the pre-filing process, further discussed below. Application for FERC Certificate A pipeline developer formally files an application with FERC for a certificate of public convenience and necessity. Among other requirements, the application must contain a description of the proposed pipeline, route maps, construction plans, schedules, and a list of other statutory and regulatory requirements, such as permits needed from other agencies. The application must also include environmental reports analyzing route alternatives and studies of potential environmental impacts (on water, plants, and wildlife), cultural resources, socioeconomics, soils, geology, aesthetic resources, and land use. Upon receiving an application, the commission issues a public Notice of Application for authorization to construct and operate a new pipeline in the Federal Register and begins the application review process. FERC's decision whether to grant or deny a pipeline certificate is based upon a determination whether the pipeline project would be in the public interest. FERC accounts for several factors, including a project's potential impact on pipeline competition, the possibility of overbuilding, subsidization by existing customers, potential environmental impacts, avoiding the unnecessary use of eminent domain, and other considerations. FERC may also take into account safety concerns, but generally defers to the Department of Transportation, which has primary authority to regulate pipeline safety under the Natural Gas Pipeline Safety Act of 1968 and subsequent acts. Of the factors above, environmental review typically comprises the bulk of FERC's review. Key aspects of this review process are illustrated in Figure 1 and further discussed below. Environmental Review Among other factors, review of certificate applications requires examination of environmental impacts of the action in compliance with the National Environmental Policy Act (NEPA, 42 U.S.C. §4321 et seq.) and associated regulations promulgated by the Council of Environmental Quality (CEQ, 40 C.F.R. §§1500-1508). NEPA requires federal agencies to consider the potential environmental impacts of an action (e.g., granting a pipeline certificate) and to inform the public of those potential impacts before proceeding with that action. The Energy Policy Act of 2005 ( P.L. 109-58 , EPAct) designates FERC as the lead agency for coordinating NEPA compliance and "all applicable Federal authorizations" in reviewing pipeline certificate applications (§313(b)). If the applicant did not pre-file, FERC begins the environmental review process by publishing a Notice of Intent for Preparation of an Environmental Assessment or an Environmental Impact Statement. In reviewing environmental impacts associated with a certificate, the commission typically prepares an environmental assessment (EA), which is "a concise public document" intended to "briefly provide sufficient evidence and analysis" to determine whether a finding of no significant impact can be issued (40 C.F.R. §§1508.9). If the EA determines impacts are significant, a more extensive and detailed environmental impact statement (EIS) must be prepared (42 U.S.C. §4332(C)). If FERC determines a project falls within a category of activities that has already been found to have no significant environmental impact, the commission may classify it as a "categorical exclusion." For example, one of FERC's categorical exclusions allows certain pipeline construction and modification projects under "blanket" certificate applications and prior notice filings (18 C.F.R §380.4a(21)). As such, they are categorically excluded from the requirement to prepare an EIS or EA (18 C.F.R §380.4a). When an EIS is required, it is generally prepared in two stages: a draft and final EIS. Among other requirements, the EIS must include a statement of the purpose and need for the proposed project, a description of all reasonable alternatives to meet that purpose and need, a description of the environment that would be affected by those alternatives, and an analysis of the direct and indirect effects of the alternatives, including cumulative impacts. In preparing an EIS, FERC is the "lead agency" required to obtain input from other "cooperating agencies" with jurisdiction by law or with special expertise regarding any environmental impact associated with the project (40 C.F.R. §1508.5). Cooperating agencies for a pipeline project often include the Environmental Protection Agency; the Department of Transportation's Pipeline and Hazardous Materials Safety Administration; the Department of the Interior's Bureau of Land Management, Fish and Wildlife Service, and National Park Service; and the Army Corps of Engineers, among others. After FERC staff complete their environmental analysis and cooperating agency consultations regarding a certificate application, the commission issues a draft EIS that will include its initial recommendations for approval or denial of the pipeline certificate. Issuance of the draft EIS also begins a public comment period of at least 45 days, during which FERC will hold public meetings in the proposed project area. Notice of the availability of the draft EIS for public comment and the times and locations of public meetings are published in the Federal Register . Although FERC considers all public comments in its application review, simply filing comments does not make a commentor a party to the certificate proceeding. Only intervenors to the proceeding have the right to file briefs, attend hearings, and appeal the commission's decision regarding the certificate. They may also challenge final commission actions in the U.S. Circuit Courts of Appeal. Any person seeking to become a party to the proceeding must file a motion to intervene pursuant to the commission's rules (18 C.F.R. §385.214). Interevenors receive the certificate applicant's filings and other FERC documents related to the case, as well as materials filed by other interested parties. After the conclusion of the public comment period for the draft EIS, FERC reviews the comments it received and revises its draft EIS as necessary in response to comments. When these revisions are completed, FERC issues a final environmental statement with final recommendations for approval or denial of the certificate. Under NEPA, a final agency record of decision—in this context a FERC order—cannot be issued until at least 30 days after FERC publishes a notice of availability of the final EIS (40 C.F.R. §1506.10(b)(2)). However, there is no additional opportunity for public comment after the final EIS is issued. After the 30-day period is over, the commission may issue an order approving or denying the pipeline certificate application. Certificate Authorities If FERC grants a pipeline certificate, the commission's order will state the terms and conditions of the approval, including the pipeline route that has been authorized, as well as any construction or environmental mitigation measures required for the project. A FERC certificate confers on the developer eminent domain authority (15 U.S.C. §717f(h)). Also, federal law preempts any state or local law that duplicates or obstructs that federal law (e.g., siting or zoning) relevant to the project. In this way a FERC certificate provides a pipeline developer with the authority to secure property rights to lay the pipeline if the developer cannot secure the necessary rights-of-way from landowners through negotiation. In practice, however, eminent domain authority is considered a last resort and is seldom used by developers. Although a FERC certificate authorizes a pipeline under the Natural Gas Act, it cannot preempt other federal laws that may apply—such as the Endangered Species Act, the Coastal Zone Management Act, or the Clean Water Act—so any requirements under other federal statutes must still be met by the developer. These may include, for example, securing authorizations for water crossings from the Army Corps of Engineers, permission to cross federal lands from the Bureau of Land Management, and other federal approvals. A developer must secure these other federal approvals before proceeding with pipeline construction. Post-Certificate Proceedings Once FERC issues an order granting or denying a pipeline certificate, parties to the proceeding (e.g., intervenors) who object to the order for any reason may formally request a rehearing so that the commission can reconsider its decision. A party to the proceeding must file a request for rehearing within 30 days after issuance of the final order—a statutory deadline which the commission cannot waive or extend (15 U.S.C. §717(r)). There is no time limit for FERC to consider or conclude a rehearing. If a pipeline certificate is approved after rehearing, the pipeline project may proceed even if additional challenges have been filed in federal court. Once the developer has provided FERC with any outstanding information or taken other actions to satisfy the terms and conditions of the certificate order, including an implementation plan, FERC can issue a Notice to Proceed with Construction Activities and construction can begin. The pipeline developer must then file weekly status reports with the commission documenting project inspection and certificate compliance until construction is completed. Timing of FERC Certification and H.R. 161 There are no statutory time limits within which FERC must complete its own certificate review process, issue an order, or complete a rehearing. However, EPAct authorizes FERC to establish a schedule for all federal authorizations and provides for judicial petition "if a Federal or State administrative agency" fails to comply with that schedule (§313(c)). Congress included these provisions in EPAct to address concerns that some interstate gas pipeline and other energy infrastructure approvals were being unduly delayed by a lack of coordination or insufficient action among agencies involved in the certification process. FERC has promulgated regulations under the EPAct authority requiring certificate-related final decisions from federal agencies or state agencies (acting pursuant to delegated federal authority) no later than 90 days after the commission issues its final environmental document, unless another schedule is established by federal law (18 C.F.R §157.22). The Natural Gas Pipeline Permitting Reform Act The Natural Gas Pipeline Permitting Reform Act ( H.R. 161 ) would strengthen the EPAct provisions by imposing a 12-month deadline on FERC certificate reviews for projects using FERC's pre-filing procedures and by codifying the commission's 90-day regulatory deadline for any certificate-related agency decisions. Any agency decision not meeting the 90-day deadline would be approved by default. The relevant provisions in the bill as amended are as follows: (i)(1) The Commission shall approve or deny an application for a certificate of public convenience and necessity for a prefiled project not later than 12 months after receiving a complete application that is ready to be processed, as defined by the Commission by regulation. (2) The agency responsible for issuing any license, permit, or approval required under Federal law in connection with a prefiled project for which a certificate of public convenience and necessity is sought under this Act shall approve or deny the issuance of the license, permit, or approval not later than 90 days after the Commission issues its final environmental document relating to the project. (3) The Commission may extend the time period under paragraph (2) by 30 days if an agency demonstrates that it cannot otherwise complete the process required to approve or deny the license, permit, or approval, and therefor will be compelled to deny the license, permit, or approval. In granting an extension under this paragraph, the Commission may offer technical assistance to the agency as necessary to address conditions preventing the completion of the review of the application for the license, permit, or approval. (4) If an agency described in paragraph (2) does not approve or deny the issuance of the license, permit, or approval within the time period specified under paragraph (2) or (3), as applicable, such license, permit, or approval shall take effect upon the expiration of 30 days after the end of such period. The Commission shall incorporate into the terms of such license, permit, or approval any conditions proffered by the agency described in paragraph (2) that the Commission does not find are inconsistent with the final environmental document. H.R. 161 addresses continuing concern by some in the gas industry and in Congress that, despite the EPAct provisions, FERC review of gas pipeline certificate applications can still take too long, in large part because other involved agencies have not been complying with FERC's 90-day deadline for agency decisions. Under EPAct, the possibility of judicial action is the only consequence of failing to meet FERC's deadlines—and it may not be sufficient. A December 2012 study by the INGAA Foundation concluded that, despite the schedule provisions in EPAct 2005 intended to expedite the review of FERC certificate applications for gas pipelines, "anecdotal evidence has suggested that the time required to secure regulatory approvals for such projects is increasing." The study reported that nearly 20% of FERC certifications in the study sample were delayed 90 days or longer beyond FERC's agency deadline. According to the report, few developers have petitioned the courts to compel agency compliance with FERC's 90-day deadline, perhaps because that process, like any litigation, can be costly and time-consuming as well, with its own sources of delay. Notwithstanding the findings of the INGAA Foundation study, whether FERC's existing authorities and process for pipeline certification adequately meet the needs of the market for new pipeline infrastructure is open to debate. A February 2013 Government Accountability Office (GAO) study of FERC pipeline certificate reviews reported that the average time from pre-filing to certification was 558 days (18.6 months), and the review time was 225 days (7.5 months) for projects—typically smaller ones—that skipped pre-filing and began at the application phase. However, the pre-filing process (18 CFR §157.21) takes place prior to a developer's applying to FERC for a pipeline certificate, which is when the 12-month "clock" under H.R. 161 would start. Unfortunately, the GAO study did not report how many of the 558 days for the pre-filed applications were after the applications were actually filed. In 2004 regulatory guidance, FERC states that developers wishing to begin the pre-filing process must do so at least seven months (210 days) prior to filing a certificate application. Subtracting an estimated 210-day pre-filing period from the 558 days reported by GAO for the whole process suggests a post-application review period of at most 348 days, or about 11.6 months, on average, for projects that pre-filed. As Figure 2 shows, federal and state agencies have approved numerous pipelines associated with U.S. shale gas production since EPAct. In particular, FERC-regulated gas transmission capacity increased quickly with the onset of the shale gas expansion in 2006-2008 and continues to grow. Recent F.E.R.C. Perspectives In light of their record approving new gas pipelines, FERC commissioners were neutral or modestly supportive toward legislative proposals in the 113 th Congress for stronger certificate review authorities. In March 2013, FERC Commissioner Cheryl LaFleur stated in her written testimony before the House Committee on Energy and Commerce, Subcommittee on Energy and Power, that the nation's system for expanding pipeline capacity "has worked well overall—over the last decade, FERC has issued permits for construction of nearly 10,000 miles of new pipeline." At the same hearing, FERC Commissioner Philip Moeller similarly stated that "for the most part, people have been fairly satisfied with the process we have at FERC for new pipelines," although "it could be done quicker." Nonetheless, both commissioners acknowledged that FERC's review of certain pipeline applications had experienced significant delays, largely due to approvals needed from cooperating agencies after FERC's environmental reviews under NEPA had been completed. Both commissioners also expressed support for greater FERC authority to enforce its certificate review deadlines. Outgoing FERC Chairman Jon Wellinghoff reportedly was not opposed to legislation increasing FERC's deadline authority in this way, but did not necessarily see a need for it because, in his view, the commission had been moving quickly on pipeline certificate reviews. Potential Effects of H.R. 161 As stated above, H.R. 161 would make three major changes to FERC's pipeline certification process, all schedule-related. Thus, the bill would not change the way pipeline certificate applications are currently reviewed in terms of subject matter, funding, or inter-agency relationships. The bill would solely seek to impose explicit time limits on the existing process. The potential effects of the three proposed changes are discussed below. 12-Month Certification Deadline H.R. 161 would mandate a FERC certification process deadline of 12 months. The imposition by Congress of explicit agency deadlines for the review of energy project permit applications is not new. CRS has identified other statutes and legislative proposals with similar deadline provisions for the review of permit applications: for oil and gas drilling, liquefied natural gas terminals, electric transmission lines, and other facilities. These provisions are provided as examples in the Appendix . The optimal time for any deadline that Congress might impose on FERC is unclear. Compared to an 11.6-month benchmark implied by the GAO study, the 12-month deadline in H.R. 161 would be approximately the same as the average FERC certificate review time today. However, 12 months could represent a reduction in the review time that might be expected for atypically lengthy or complex pipeline projects, perhaps routed through heavily populated or environmentally sensitive areas. The safety or environmental reviews for such projects might place them in the "tail" of the review time distribution reported by GAO. For example, according to the GAO report, one pre-filed certificate review lasted 886 days. Assuming a 210-day pre-filing period for this project implies a certificate review time of 676 days, or 22.5 months. For such pipeline projects, it is unclear what FERC could do differently to shorten its review process if the bulk of the review involves a complex NEPA environmental evaluation. More information might be required to understand how FERC could adapt its process to meet a 12-month deadline for such projects and to gage the possible impact of this provision. If the 12-month deadline under H.R. 161 were imposed upon FERC, it raises the possibility that the commission might deny certificate applications for some projects solely on the grounds that it lacks sufficient time for an adequate (and legally defensible) review, especially in the case of NEPA compliance. This kind of denial is what occurred in 2012 when the State Department denied an application by TransCanada for a Presidential Permit to construct the Keystone XL oil pipeline, citing insufficient time under a 60-day deadline imposed by Congress under the Temporary Payroll Tax Cut Continuation Act of 2011 ( P.L. 112-78 ) to obtain all the necessary information to assess the project. When the 112 th Congress considered delegating permit authority for the Keystone XL Pipeline to FERC and mandating permit approval within 30 days under H.R. 3548 (see Appendix ), a senior FERC official testified that such a proposal would not provide enough time for an "adequate" public record, among other concerns. Another such permit review statute, the Mineral Leasing Act, includes a provision conditioning the deadline upon satisfying review requirements under NEPA and "other applicable law" within the given timeframe (30 U.S.C. 226(p)(2)(A)). In July 2013 testimony before the House Committee on Energy and Commerce, Commissioner Moeller stated that FERC could likely achieve the 12-month deadline proposed in H.R. 161 as long as gas pipeline certificate applications are complete when the process begins. Nonetheless, a 12-month deadline imposed upon all FERC certificate reviews may lead to the rejection or delay (due to re-application) of otherwise worthy proposals on administrative grounds if unanticipated issues arise. It might also force developers to reconfigure, or break up, larger projects into smaller proposals more "reviewable" within 12 months. The southern leg of the original Keystone XL pipeline project (now called the Gulf Coast Project) was separated this way and proceeded to construction under its own permit process. Reconfiguration of complex pipeline projects might lead to inefficiencies both in FERC certification and in the design or use of the infrastructure itself. Congress may consider whether a 12-month deadline could be made more flexible to accommodate projects which may require more review time due to their size and complexity at the discretion of FERC. Codifying the 90-Day Agency Deadline H.R. 161 codifies FERC's deadline—established through regulation—for other federal or state agencies to make final certificate-related decisions within 90 days after FERC issues its final environmental document. Because FERC has the statutory authority to establish such deadlines under EPAct, the only change to the status quo of this provision would be to mandate the 90-day time period rather than leaving the length of the time period up to FERC to determine. Like the 12-month deadline imposed by FERC, it is difficult to determine whether 90 days is optimal for a statutory deadline—although FERC, in this case, has an administrative record examining the question through its rulemaking process. Note that this deadline occurs only after FERC's environmental review is completed, so other agencies would presumably have months during FERC's NEPA review to conduct reviews of approvals under their jurisdiction. Although it affirms FERC's current regulatory judgment as to how long the cooperating agency deadline should be, H.R. 161 may tie the hands of the commission if, at some future date, FERC concludes that 90 days is no longer appropriate. In that case, FERC would have to seek new legislation rather than changing the deadline under its existing EPAct authority through the regulatory process. Some might view this provision as being insurance against the commission becoming more lax in the future with respect to review deadlines. Others might view this provision as being too prescriptive. Congress may consider whether imposing a prescriptive 90-day deadline strikes the best balance between FERC's deadline enforcement authority and the commission's ability to manage its own review process. Default Approval of Delayed Agency Decisions H.R. 161 would effectively issue by default any license, permit, or approval requested from a cooperating agency if the agency does not make its decision on the request within FERC's 90-day deadline. Statutory approval by default of agency decisions failing to meet a deadline appears to have few precedents in the specific context of energy project approvals. The clearest example CRS has been able to identify is P.L. 112-78 , which would have put "in effect by operation of law" the permit for the Keystone XL pipeline if the President failed to act on the permit prior to the mandated 60-day deadline (§501(b)(3)). In that case, the result was denial of the permit. However, additional statutes with default approval provisions not involving energy projects have been cited as precedents for the provisions like those in H.R. 161 . To date, FERC has had little enforcement authority under EPAct over its 90-day deadline. H.R. 161 might lead some cooperating agencies to increase efforts to meet the deadline. If those agencies view the deadline as inadequate, however, some of them may deny approvals on the basis of having insufficient time for review and the development of necessary permit conditions as discussed above in the context of the 12-month deadline for FERC. Opponents of this provision have cited, for example, statements from the Army Corps of Engineers, the Environmental Protection Agency, the Bureau of Land Management, and the Fish and Wildlife Service expressing this concern if a 90-day deadline for their respective permit reviews were imposed. In the 113 th Congress, the Obama Administration opposed deadline and default approval provisions like those in H.R. 161 because they could create conflicts with existing statutory and regulatory requirements and practices related to agencies' programs, thereby causing confusion and increasing litigation risk. The ... requirements could force agencies to make decisions based on incomplete information or information that may not be available within the stringent deadlines, and to deny applications that otherwise would have been approved, but for lack of sufficient review time. For these reasons, the bill may actually delay projects or lead to more project denials, undermining the intent of the legislation. Congress may consider maintaining FERC's existing authorities to set the agency review schedule, while providing alternative ways to strengthen FERC's ability to enforce those authorities at the commission's discretion. Resource Considerations The principal effect of H.R. 161 would appear to be imposing explicit (strict) time limits on the existing process for FERC certification of new natural gas pipelines. The ability of FERC and any other federal or state agencies it works with to expedite their parts of certificate review may be limited by available resources. The agencies may well have the administrative capability to meet these deadlines. That is, the review periods, public notice periods, and other regulatory requirements associated with the certificate review schedule may all be feasible. However, a shorter deadline under H.R. 161 might require more resources for agency staff, contractors, and external consultants to achieve the same level of review as a longer deadline. In considering the ability of FERC and other agencies to meet these deadlines, the availability and allocation of resources within the agencies may be important. This may be a concern not only for FERC, but also for various other federal, state, and local agencies whose ability to increase funding for regulatory review may vary considerably and may be limited due to budget constraints. Appendix. Statutory Deadlines for Energy Permits Requirements similar to those proposed in H.R. 161 have been imposed by Congress on other agencies to approve or deny energy projects. A number of statutes or bills over the last 10 years have included explicit deadlines (i.e., a specific number of days) for various types of federal energy permits—including drilling permits, liquefied natural gas (LNG) terminals, a nuclear waste repository, and electric transmission lines. They are summarized below. Note that, due to the limitations of such a legislative search, there may be additional statutes CRS has not identified. The Mineral Leasing Act as amended (30 U.S.C. 226(p)) requires the Secretary of the Interior to approve or disapprove of drilling permit applications submitted by federal leaseholders within 30 days of submission unless they fail to meet certain required criteria. The Maritime Administration (MARAD) has a 330-day time limit for granting or denying a deepwater port license (33 U.S.C. §1504), including a 45-day deadline after the last public hearing for specific agency reviews (33 U.S.C. §1504(e)(2)). Notably, this provision applies to offshore LNG terminal applications. The Outer Continental Shelf Lands Act as amended (43 U.S.C. 1340(c)) requires the Secretary of the Interior to approve or disapprove of oil and gas exploration plans (drilling permits) submitted by federal leaseholders within 30 days of submission unless the plans fail to meet certain required criteria. The Nuclear Waste Policy Act of 1982 ( P.L. 97-425 ) requires the Nuclear Regulatory Commission to issue a final decision approving or disapproving a nuclear waste repository project proposal "not later than the expiration of 3 years after the date of the submission of such application" (§405(b)(2)). The Energy Policy Act of 2005 ( P.L. 109-58 ) gives FERC authority to permit an electric transmission siting application if "a State commission or other entity that has authority to approve the siting of the facilities has—(i) withheld approval for more than 1 year…." (§1221). The Energy Policy Act of 2005 ( P.L. 109-58 ) requires the Secretary of Energy to approve or disapprove a tribal energy resource agreement from an Indian tribe not later than 270 days after receiving an initial agreement or not later than 60 days after the Secretary receiving a revised agreement (§2604(e)). The Temporary Payroll Tax Cut Continuation Act of 2011 ( P.L. 112-78 ) required the Secretary of State to issue a permit for the Keystone XL pipeline within 60 days, unless the President determined the project not to be in the national interest (§501(a)). In addition to these statutes, CRS identified a few recent unenacted legislative proposals that would have imposed statutory deadlines on energy project permit decisions. Examples are listed below. The Energy Policy Act of 2003 ( H.R. 1644 , 108 th Congress) would have required the Federal Energy Regulatory Commission to approve or deny any permit application for an Alaska natural gas pipeline project "not more than 60 days after the issuance of the final environmental impact statement" (§2004(c)). The American Clean Energy and Security Act of 2009 ( H.R. 2454 , 111 th Congress) would have required the Federal Energy Regulatory Commission or the Department of the Interior to complete review of "all permit decisions and related environmental reviews under all applicable Federal laws" for electric transmission project applications in the Western Interconnection within one year or, if provisions in another federal law required more time, as soon as practicable thereafter (§216B). The Energy Exploration and Production to Achieve National Demand Act ( H.R. 4301 , 112 th Congress) would have required the Administrator of the Environmental Protection Agency and the state or governing body of an Indian tribe to approve or disapprove a consolidated permit application for the construction of a new oil refinery within 365 days, or, if all parties agreed, within an additional 90 days (§501(b)(4)(A)). For the expansion of an existing refinery, the respective deadlines were 120 and 30 days (§501(b)(4)(B)). The North American Energy Access Act ( H.R. 3548 , 112 th Congress) would have transferred the permitting authority over the Keystone XL pipeline project from the State Department to the Federal Energy Regulatory Commission, requiring the commission to issue a permit for the project within 30 days of enactment. The bill would have deemed a permit to have been issued if the commission did not act upon a permit application within 30 days after receipt (§3(a)).

Growth in U.S. shale gas production involves the expansion of natural gas pipeline infrastructure to transport natural gas from producing regions to consuming markets, typically in other states. Over 300,000 miles of interstate transmission pipeline already transport natural gas across the United States. However, if the growth in U.S. shale gas continues, the requirement for new pipelines could be substantial. This ongoing expansion has increased congressional interest in the role of the federal government in the certification (permitting) of interstate natural gas pipelines. Under Section 7(c) of the Natural Gas Act of 1938, the Federal Energy Regulatory Commission (FERC) is authorized to issue certificates of "public convenience and necessity" for "the construction or extension of any facilities ... for the transportation in interstate commerce of natural gas." Thus, companies seeking to build interstate natural gas pipelines must first obtain certificates of public convenience and necessity from FERC. The Energy Policy Act of 2005 (EPAct) designates FERC as the lead agency for coordinating "all applicable Federal authorizations" and for National Environmental Policy Act (NEPA) compliance in reviewing pipeline certificate applications. There are no statutory time limits within which FERC must complete its certificate review process. However, EPAct authorizes FERC to establish a schedule for all related federal authorizations and provides for judicial petition if an agency fails to comply with that schedule. Congress included these provisions in EPAct to address concerns that some interstate gas pipeline and other energy infrastructure approvals were being unduly delayed by a lack of coordination or insufficient action among agencies involved in the certification process. FERC has promulgated regulations requiring certificate-related final decisions from other agencies no later than 90 days after the commission issues its final environmental document. Notwithstanding the EPAct provisions, there is continuing concern by some in the gas industry and in Congress that FERC review of pipeline certificate applications can still take too long. The Natural Gas Pipeline Permitting Reform Act (H.R. 161) seeks to expedite the federal review of certificate applications by imposing deadlines on the agencies involved. H.R. 161 would impose an explicit 12-month deadline on FERC certificate reviews for projects using FERC's pre-filing procedures and would codify the commission's 90-day regulatory deadline for any certificate-related agency decisions. Any agency decision not meeting the 90-day deadline would be approved by default. The optimal time for any deadline that Congress might impose on FERC or cooperating agencies is open to debate. The 12-month deadline in H.R. 161 would be approximately the same as the average FERC certificate review time today. However, 12 months could represent a reduction in the review time that might be expected for atypically lengthy or complex pipeline projects. In light of FERC's recent record approving new gas pipelines, FERC commissioners have been neutral or modestly supportive towards legislative proposals for stronger certificate review authorities. However, deadlines imposed on FERC or cooperating agencies could raise the possibility that they might deny permits for some projects solely on the grounds that they lack sufficient time for an adequate review. The ability of FERC and any other federal or state agencies it works with to expedite their parts of certificate review to meet an expedited schedule may be limited by available resources.

CRS_RS21987

Federal Protection for Account Holders Federal lawmakers view many financial businesses as having an important role in the U.S. economy, and therefore warrant providing these businesses protection for their individual account holders against loss, should the firms fail. Such protections exist both to protect the individuals from risks they probably could not discern for themselves and to protect the economy against the effects of financial panics when failures occur. Panics, the attendant collapses of wealth, and severe consequences for the economy occurred before Congress created federal deposit insurance in 1934. Prior to the enactment of the Emergency Economic Stabilization Act of 2008 (EESA; P.L. 110-343 ), government policy protected customers of depository institutions—banks, thrift institutions, and credit unions—in full for accounts up to $100,000 and up to $250,000 for retirement accounts. Although the enactment of EESA on September 23, 2008, immediately raised the maximum deposit insurance to $250,000, retirement accounts remain at $250,000 until December 31, 2009. Since then, Congress and the President enacted the Helping Families Save Their Homes Act of 2009 (HFSTHA; P.L. 111-22 ), extending both the EESA increases and the Federal Deposit Insurance Corporation's (FDIC's) $30 billion borrowing authority from the U.S. Treasury to as much as $500 billion until 2013. Because of the wording of P.L. 111-22 , after 2013, it is possible that deposit insurance protection could revert back to the $100,000 and $250,000 for retirement accounts. Other institutions such as insurance companies, securities broker/dealers, and many pension funds receive government or government-sponsored guarantees on specified accounts. Major Features of Customer Protection Systems This report provides a summary of the major features of financial institutions' customer protection systems, reflecting safety-net provisions legislated over time, usually in reaction to specific financial collapses. Besides these explicit guarantees, regulatory bodies can attempt the rescue of failing financial enterprises, using many tools authorized by laws and regulations and often implemented in the background. Such tools include liquidity lending, arranging memoranda of understanding, issuing cease-and-desist orders against risky practices, and arranging mergers of weak entities into stronger institutions. If the entire financial economy seems threatened by pending collapse of either a sizeable financial institution that is "too big to fail" or many financial businesses collectively, the Federal Reserve (Fed) can step in as the lender of last resort to avert serious adverse consequences for the economy (e.g., use of the Fed's liberal bank liquidity policy immediately after the 911 attacks, and currently the subprime meltdown led to failures of institutions once believed to be too big to fail—Bear Stearns, Fannie Mae, Freddie Mac, and AIG—all of which were or are being assisted by the federal government). Moreover, Congress may have to provide emergency funding when parts of the federal safety net are under severe pressure. The cleanup of the savings and loan industry in the 1980s and early 1990s, for example, required appropriated funds plus a new deposit insurance fund and regulator. A more recent example is the Emergency Economic Stabilization Act of 2008, which provided $700 billion to purchase distressed assets, and has been used to make direct capital investments in troubled financial institutions. An important conceptual distinction between support structures is who ultimately pays for the protection. Lawmakers originally created federal deposit insurance using a "user fee" model of insurance, in which the government owned and operated each insurance system and charged member banks for its use. Following the banking failures of the late 1980s ─ early 1990s, legislation moved deposit protection part way toward an alternative "mutual" model, in which the burden of financing the system falls more clearly on the banking industry. Mutual institutions are owned by their customers, such as saving associations' depositors and insurance companies' policyholders. As a result, some analysts now claim that the banking industry "owns" the deposit insurance fund (DIF) in mutual mode. However, when the FDIC begins to draw on its credit line at the U.S. Treasury, which it has never done before, the use of the credit line would move the system back to the user fee model as the banks would have to pay their FDIC assessments as well as pay back the borrowed funds to the federal government, which owns and operates the DIF. The ultimate guarantor of deposit insurance is the economic power of the federal government, particularly the power to tax. History has shown that deposit guarantees by governments beneath the federal level have universally been inadequate to prevent panics, runs, and severe economic damage when called upon. Industry-sponsored and state-level programs have contained the collapses of their covered entities only if the damages have been small. The troubled pension benefit arrangement remains mainly in user fee mode. Credit union share insurance, in contrast, more nearly follows the mutual model. Likewise, state insurance company guaranty and federally sponsored securities investor protection arrangements follow the mutual model. However, in the current financial crisis, the National Credit Union Administration (NCUA) has joined the FDIC in accepting an increased line of credit from the U.S. Treasury to resolve failing corporate credit unions and restoring the National Credit Union Share Insurance Fund (NCUSIF). Corporate credit unions are owned by retail or natural credit unions. Corporate credit unions operate as wholesale credit unions providing financing, investments, and clearing services for natural credit unions. It was the corporate credit unions that suffered most of the industry's losses in the current subprime foreclosure turmoil. Consequently, like the FDIC, when the NCUA uses its U.S. Treasury credit line to stabilize the NCUSIF, it too would move closer to the user fee mode. The following tabulation lists the major elements and components of these safety nets. Table 1 compares account protection at depository institutions. Table 2 does the same for the non-depository supports. Readers may obtain further analysis of each system via the websites of the administering agencies noted. Additional Protection: FDIC Temporary Liquidity Guarantee (TLG) Program On October 23, 2008, in the midst of the current financial crisis, the FDIC announced its Temporary Liquidity Guarantee program to help unfreeze the U.S. short-term credit markets. At the time, financial institutions were not lending to each other, especially in the commercial paper market, which was almost completely frozen. The two-part program temporarily guarantees all new senior unsecured debt and fully guarantees funds in certain non-interest bearing accounts at FDIC-insured institutions issued between October 14, 2008, and June 30, 2009, with guarantees expiring no later than June 30, 2012. The FDIC expects these guarantees would restore the necessary confidence for investors to begin investing in obligations of depository institutions. Evidence suggests that these short-term markets returned to normal after the TLG program was implemented. The second part of the FDIC's TLG program is to guarantee 100% of non-interest-bearing transaction accounts held in insured depository institutions until December 31, 2009. This addresses the concern that many small business accounts, such as payroll accounts, frequently exceed the current maximum deposit insurance limit of $250,000. The TLG program is being paid for by additional fees placed on depository institutions that use these guarantees, not taxpayers.

After the onset of the current financial crisis and economic contraction, the 111th Congress increased some of the long-standing provisions that protect account holders from risk. Specifically, provisions in the Emergency Economic Stabilization Act of 2008 (EESA; P.L. 110-343) and the Helping Families Save Their Homes Act of 2009 (HFSTHA; P.L. 111-22) increased account holders' protection. Both laws raised the maximum deposit account insurance to $250,000, and the HFSTHA extended the higher level of risk protection until 2013. Lawmakers have long recognized the importance of protecting some forms of financial savings from risk. Such provisions apply to deposits in banks and thrift institutions and credit union "shares." Remedial and other safety net features also cover insurance contracts, certain securities accounts, and even defined-benefit pensions. Questions over how to fund and guarantee Social Security, along with the troubles of the Pension Benefit Guaranty Corporation, have renewed interest in these arrangements. This report portrays the salient features and legislation of account protection provided by the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Share Insurance Fund (NCUSIF), state insurance guaranty funds, the Securities Investor Protection Corporation, and the Pension Benefit Guaranty Corporation. It provides a discussion of the FDIC's Temporary Liquidity Guarantee Program (TLG) , which extends unlimited temporary deposit guarantees to certain depositors and debt held in insured depository institutions. Overall, the report provides a summary of the major federal risk protections for account holders. This report will be updated as appropriate.

CRS_RL33078

Introduction Hurricane Katrina has resulted in the displacement of tens of thousands of families from theirhomes. While its magnitude is unprecedented, the resulting need to shelter and house displacedfamilies is not. The Department of Housing and Urban Development (HUD), the nation's agencywith a mission to provide safe and decent housing for all Americans, has played a role in meetingthose needs in the past and is playing a role in the wake of Katrina. This report is designed to lookat HUD's current programs and their ability and authority to respond to housing crises, and the waythat Congress has expanded that role and authority in the past. It does not track the Department'sresponse to Hurricane Katrina; see CRS Report RS22358 , HUD's Response to Hurricane Katrina ,by [author name scrubbed], [author name scrubbed], [author name scrubbed]. Emergency Housing Needs Before looking at existing housing resources, it is useful to think about the housing needs thatemerge after a disaster. Research by E.L. Quarantelli (1) identified four major stages of housing need following a disaster: emergency shelter, temporary shelter, temporary housing, and permanent housing. Emergencyshelter is designed to provide a safe location during or immediately after a disaster. In the case ofHurricane Katrina, people sought emergency shelter on roofs and overpasses, for example. Temporary shelter is one stage beyond emergency shelter, and while it lasts longer than emergencyshelter, families are generally not able to establish day-to-day routines during their stay. Temporaryshelter includes mass shelters that provide food and sleeping accommodation, and homes temporarilyshared by friends or family. Temporary housing is housing that is unique to a family and allowsthem to begin to establish day-to-day routines, but is not seen as permanent. It can last for monthsor even years, and examples include the temporary trailers often made available while damagedhomes are undergoing repair. Permanent housing is a familiar concept and can include families'return to their former residences, new residences in or near their original communities, or permanentrelocation in another community. While most aspects of emergency response are led and organized at the state and local level,the federal government provides resources to aid their efforts. (2) The Federal EmergencyManagement Agency (FEMA) generally provides assistance to meet all four states of shelter andhousing need, as authorized under the Robert T. Stafford Disaster Relief and Emergency AssistanceAct ( P.L. 93-288 ). FEMA helps localities designate evacuation areas to provide emergency shelter,and it coordinates with municipalities and organizations such as the American Red Cross and othercharitable organizations to establish temporary shelters. FEMA also provides, in conjunction withstates and municipalities, temporary housing options including rental assistance payments --sometimes under contract with HUD (3) -- that allow families to find temporary accommodation in theprivate rental market as well as temporary physical structures, such as trailer homes. Finally, FEMAalso provides loans and grants to help families repair damaged homes. (4) While FEMA is the primarydisaster response agency, other federal agencies also contribute housing resources, including theDepartment of Commerce (the Small Business Administration, primarily), the Department ofAgriculture (the Rural Housing Service), the Treasury (various tax programs and incentives,including the Low Income Housing Tax Credit (LIHTC)), and HUD, the agency that is the focus ofthis report. (5) Furthermore,a large majority of the restoration and creation of permanent housing is met through the use ofprivate and public insurance. (6) Existing HUD Programs and Authority In responding to disasters, HUD generally focuses on aiding families in the final two stagesof housing need; temporary and permanent housing. HUD's programs and assistance in response todisasters fall generally into one of three categories: direct assistance, flexible block grants to statesand localities, and mortgage programs. Direct Assistance Programs One primary form of direct assistance provided by HUD is rental assistance provided throughthe Section 8 Housing Choice Voucher program. (7) Section 8 vouchers are used by low-income families to reduce theirhousing costs in the private market to an "affordable" level. (8) Families with vouchers pay30% of their incomes towards rent and the federal government pays the difference between thefamilies' contributions and the actual rent, up to a limit. (9) In order to be eligible, families must be very low income, (10) however,75% of allvouchers are statutorily targeted to extremely low income families. (11) The subsidies are portable,meaning families can move anywhere in the country with their vouchers. The program isadministered at the local level by quasi-governmental Public Housing Authorities (PHAs), andCongress currently funds approximately 2 million vouchers. In FY2005, Congress provided almost$15 billion for the voucher program. Another form of direct assistance provided by HUD is low-rent public housing. Very lowincome families are eligible to live in one of the nearly 1.2 million units of public housing ownedand maintained by local PHAs. Families living in public housing pay 30% of their incomes towardstheir housing costs, and PHAs receive two streams of federal subsidies -- operating funds and capitalfunds -- to help make up the difference between tenant rents and the costs of maintaining theproperties. Operating funds are used to help cover day-to-day expenses including utilities, socialservices, staff and security. Capital funds are used to meet modernization needs, such as buildingrepair and refurbishment. In FY2005, Congress provided approximately $2.5 billion each to thecapital and operating funds. (12) The final form of direct assistance provided by HUD is a hybrid between vouchers and publichousing, called project-based rental assistance. The primary project-based rental assistance programsare Section 8 project-based rental assistance, the Section 202 program for the elderly, and the Section811 program for the disabled. In all three programs, private landlords own and manage housing unitsfor which the rent is subsidized by the federal government. Families who live in the units payroughly 30% of their incomes towards rent and the federal government pays the landlord thedifference between the tenant contribution and the negotiated rent for the unit. Generally, thesebuildings are FHA-insured (see discussion of FHA insurance below). In FY2004, 1,309,427 unitsreceived project-based Section 8 rental assistance, 75,227 units received Section 202 rentalassistance, and 21,646 units received Section 811 rental assistance. In FY2005, Congress providedover $5 billion for project-based Section 8, over $230 million for Section 811, and over $740 millionfor Section 202. (13) HUD's direct assistance programs can be both affected by disasters as well as used as toolsin recovering from disasters. When public housing units are damaged, HUD can tap into an existingemergency capital reserve. For private owners of HUD-assisted units, insurance is often availableto cover damage, as are SBA loans and HUD loans (discussed below). HUD-assisted families displaced by a disaster retain their assistance. Displaced voucherholders are eligible to find another unit in which to use their vouchers. For public housing and otherproject-based assisted families, HUD identifies vacant HUD-assisted units to which they are eligibleto relocate. HUD can also provide resources to non-assisted households; in other words, households thatwere not previously receiving HUD housing assistance prior to a disaster. Vacant units of HUDdirect-assistance housing can be made available during a disaster for non-assisted households. Inthe past, Congress has also created special emergency short-term vouchers that can be used toprovide temporary housing to displaced families. Flexible Block Grants HUD administers a number of flexible block grant programs that provide funds to states andlocalities. The Community Development Block Grant (CDBG) program is the largest of these,funded at $4.9 billion in FY2005. CDBG funds are formula-allocated to states and localgovernments in support of 23 categories of eligible activities, including neighborhood revitalization,economic development, and housing activities. Seventy percent of CDBG funds must be used oneligible activities and projects that principally benefit low- or moderate-income persons. CDBGgrantees are not required to provide a local match. For more information on the use of CDBG fundsfor disaster recovery, see CRS Report RS22303, Community Development Block Grant Funds inDisaster Relief and Recovery , by [author name scrubbed]. The HOME Investment Partnerships Program provides formula-based block grant fundingto states, units of local government, Indian tribes and insular areas to fund affordable housinginitiatives. Eligible activities include acquisition, rehabilitation and new construction of affordablehousing as well as rental assistance for eligible families. Grantees must meet a 25% matchrequirement, and 90% of all assistance must primarily benefit families at or below 60% of the areamedian income. For both HOME and CDBG, grantees must submit consolidated plans detailinghow they intend to use funds to meet local needs. HUD also administers several other special purpose grants and block grants targeting specialpopulations, including the Native American Housing Block Grant, the Homeless Assistance Grants,and the Housing for Persons With AIDS grants. When communities are impacted by a disaster, HUD has the authority to waive manyregulatory requirements governing the use of HOME and CDBG funds. (14) Generally, HUD will issuesuch waivers and permit local communities to redirect HOME and CDBG funds to meet disasterrecovery needs, both short and long-term. Congress has also used CDBG, and, to a smaller extent,HOME, as vehicles for providing emergency funds to communities impacted by disasters. Mortgage Programs While HUD does not provide any direct mortgage loan programs, the Federal HousingAdministration (FHA) does provide both single and multifamily mortgage insurance. Theseinsurance programs provide security to lenders to encourage them to make loans on terms that wouldnot otherwise be available to prospective homebuyers and to investors wishing to developmultifamily projects serving low- and moderate-income families. When the President declares a disaster, as in the case of Hurricane Katrina, the declarationautomatically triggers certain procedures with regard to FHA-insured mortgages in the affected areas. The procedures remain in effect for one year from the date of the declaration. The followingprocedures become effective: (1) a moratorium on foreclosures is in effect for 90 days from the dateof declaration; (2) lenders are encouraged to offer special forbearance, mortgage modification,refinancing, and waiver of late charges to affected borrowers; (3) families whose residences weredestroyed or severely damaged are eligible for 100% financing under Section 203(h) of the NationalHousing Act for the cost of reconstruction or replacement of the residences; (4) damaged propertiesbecome eligible for Section 203(k) financing under which the costs to purchase and to rehabilitatethe property are included in one loan, and HUD waives the requirement that the property has beencompleted for more than one year prior to application for a Section 203(k) mortgage; (5) theunderwriting guidelines are relaxed to permit disaster victims to qualify for loans even if their totalmonthly debt, including the proposed mortgage, would equal 45% of gross income; and (6) lendersare directed to ensure that hazard claims are expeditiously filed and settled, and lenders may notretain hazard insurance proceeds to make up an existing arrearage without the written consent of theborrower. The Section 203(h) program is available for borrowers who already own homes in theaffected area. The loans are limited to the FHA loan limit for the area, subject to the provision thatthe loan may not exceed 100% of the appraised value of the property. In some cases it may not bepossible to obtain 100% financing. It may often be the case that the cost to repair or replace theproperty exceeds the appraised value of the property. This is the reason that most lenders requireborrowers to obtain hazard insurance that covers the replacement cost of the property instead of itsappraised value. The Section 203(k) program permits borrowers who do not already own homes to purchaseand rehabilitate properties in the area that are either abandoned by owners, or are being sold byowners who do not want to repair them and remain in the area. The current FHA underwriting guidelines provide that a prospective borrower's total debt,including the proposed mortgage payment, may not exceed 41% of the borrower's gross monthlyincome. In recognition of the fact that borrowers in these areas may have to incur debt to replacepersonal property, the underwriting guidelines are relaxed to permit loans to borrowers whose totaldebt is up to 45% of gross monthly income. The limit may even be exceeded if justified bycompensating factors. A Look At Past Disasters In order to better understand the role of HUD in meeting the housing needs of families andcommunities impacted by disasters, the following section looks at several past disasters characterizedby major housing losses. This section is meant to be an introduction and is not meant to be acomprehensive assessment of post-disaster housing and community recovery. It does not includea discussion of broad community redevelopment nor does it include a discussion of the use of taxincentives. Table 1 lists past disasters in which Congress has provided supplemental appropriations toHUD, dating back to 1992. Table 1. Emergency Supplemental Appropriations for DisasterAssistance in Which HUD Received Funds, FY1992-FY2005 Source: CRS search of supplemental appropriations legislation identified in CRS Report RL33053 , Federal Stafford Act Disaster Assistance: Presidential Declarations, Eligible Activities, andFunding , by [author name scrubbed]. Hurricane Andrew On August 24, 1992, Hurricane Andrew struck the coast of southern Florida as a category5 hurricane, and then moved across the Gulf of Mexico to Louisiana, weakening to a category 3hurricane as it moved northward. (15) The majority of the damage occurred in Florida's South DadeCounty, including the cities of Homestead, Florida City, and Miami. At the time, Andrew was themost destructive hurricane the United States had experienced. Twenty six people died,approximately 250,000 were displaced, and damage was estimated to reach $26.5 billion. (16) In all, over 25,000 homeswere destroyed, and more than 101,000 were damaged. (17) In response to Hurricane Andrew, Congress passed the Dire Emergency SupplementalAppropriations Act, which the President signed into law on September 23, 1992 ( P.L. 102-368 ). Ittransferred $183 million from FEMA to HUD for additional Section 8 vouchers, not only for victimsof Hurricane Andrew, but for those of Hurricane Iniki, which struck Hawaii on September 11, 1992,and Typhoon Omar, which struck Guam on August 28, 1992. The transfer was expected to fund anestimated 12,000 two-year vouchers for families left homeless by Hurricane Andrew. (18) Another $100 million wasallocated for the development or acquisition of public housing, including major reconstruction ofobsolete public housing projects, in the areas affected by Hurricanes Andrew and Iniki, and TyphoonOmar. Congress also appropriated $60 million for the HOME program. An additional $500,000 wasappropriated for housing counseling assistance to both tenants and homeowners. Finally, FHAreceived $30.3 million to allow it to insure loans worth up to $2.4 billion to assist with rebuildingefforts. These loans were expected to support about 95,000 units of single-family and multi-familyhousing. (19) Inconnection with use of the Section 8 funds, the public housing funds, and the HOME funds, P.L.102-368 gave the Secretary of HUD the power to waive any provision of any statute or regulationthat the Secretary administered, except those that require nondiscrimination. Hurricane Andrew destroyed over 11,000 manufactured homes in Florida and Louisiana.Manufactured homes were hit hardest by the hurricane. (20) For example, Andrew destroyed 97% of all manufactured homesin Dade County, compared to 11% of all single family homes. (21) After studying the damageto manufactured homes, HUD developed new construction standards to increase their windresistance. (22) The newrule required improved design to make structures resistant to wind up to 110 miles per hour. (23) Midwest Flooding During the summer of 1993, 10 Midwestern states experienced rainfall levels that exceededthe normal range, resulting in large-scale flooding of the Mississippi and Missouri Rivers, andvarious smaller rivers and tributaries that flow into them. (24) In nine states (Illinois, Iowa, Kansas, Minnesota, Missouri,Nebraska, North Dakota, South Dakota, and Wisconsin) rivers overflowed their banks and levees,destroying homes and requiring many to evacuate. According to FEMA, 534 counties were declaredeligible for disaster aid, and 168,340 people applied for federal assistance. Approximately 50 peopledied as a result of the floods, and 54,000 people were left homeless. Estimates of property damageranged from $12 to $16 billion. (25) In August 1993, Congress passed the Supplemental Appropriations for Relief from theMajor, Widespread Flooding of the Midwest Act ( P.L. 103-75 ). The law appropriated $50 millionfor HUD's HOME program, and $200 million for CDBG, of which $25 million was earmarked forimmediate recovery needs not reimbursable by FEMA. On February 12, 1994, P.L. 103-211 madeavailable an additional $500 million in CDBG funds for both the Midwest flood recovery efforts,and the damage caused by the 1994 Northridge earthquake in California. Of the $500 million, theHUD Secretary was given the authority to transfer up to $75 million to the HOME program. Inconnection with use of both the HOME and CDBG funds, P.L. 103-75 gave the Secretary of HUDthe power to waive any provision of any statute or regulation that the Secretary administered, exceptthose relating to fair housing, nondiscrimination, the environment, and labor standards. HUD directed that CDBG funds be used only to repair, replace or restore facilities, includinghousing, damaged by the floods. (26) HUD waived the limits on the amount of CDBG funds that couldbe used for new construction for flood-damaged properties. All nine affected states received CDBGfunds in 1993 and 1994. Illinois received $84.1 million, Iowa $96.3 million, Kansas $37.2 million,Minnesota $27.1 million, Missouri $136.8 million, Nebraska $23.1 million, North Dakota $19.6million, South Dakota $12.8 million, and Wisconsin $13.1 million. (27) HOME dollars were alsodistributed to each of the nine flood-damaged states. Illinois received $10.8 million, Iowa $11.4million, Kansas $3.4 million, Minnesota $2.7 million, Missouri $15.3 million, Nebraska $1.3million, North Dakota $2.6 million, South Dakota $1.3 million, and Wisconsin $1.3 million. After floods it is common for local communities to engage in mitigation activities that willprotect properties located on flood plains against future damage. Mitigation activities include buyouts, relocation, elevation, and flood proofing. In the buy out, local communities purchase theproperties of businesses and homeowners located on flood plains. Owners agree to sell voluntarilyso that they can afford to relocate to areas that are not at risk of flooding. Some of the cities thatwere damaged by the Midwest flood used CDBG money to buy out properties located on floodplains. For example, St. Charles County, Missouri used $8.8 million in CDBG funds together with$5.78 million from FEMA to purchase 1,159 properties located on the flood plain. (28) Arnold, Missouri used$1.4 million in CDBG funds combined with an additional $2.9 million from FEMA to buy out 72properties. After the Midwest flood, a total of 12,385 properties were mitigated through acombination of funds, including CDBG. Of these, 11,888 were bought out, 356 were relocated, 31were elevated, and 110 were flood proofed. (29) Northridge Earthquake At 4:30 on the morning of January 17, 1994, a 6.7 magnitude earthquake hit the greater LosAngeles area. The Northridge Earthquake was the costliest in the nation's history, with lossesestimated at between $20 and $40 billion. More than 50 people were killed and more than 9,000were injured. (30) Over65,000 residential buildings were damaged in Los Angeles, which represented more than 250,000units of multifamily housing and almost 50,000 units of single family housing. (31) Congress responded to the disaster by passing several supplemental appropriations bills. TheNorthridge Emergency Supplemental Appropriations bill, signed into law on February 12, 1994 ( P.L.103-211 ), provided nearly $900 million in appropriations to HUD programs for impactedcommunities. Two-hundred million was directed to provide Section 8 rental assistance/vouchers toimpacted families. Twenty-five million was provided to repair damaged public housing and $100million was provided to repair damaged privately-owned assisted housing through the FlexibleSubsidy Fund. (32) Congress provided CDBG with $500 million, up to $75 million of which was transferrable to theHOME block grant program, to be used both for communities impacted by the NorthridgeEarthquake as well as those still recovering from the earlier Midwest flooding. For all of thesefunds, the Secretary was given the authority to waive or specify alternative requirements for anystatute or regulation in connection with the obligation of the Secretary or use by the recipient of thefunds, as long as the waiver was not inconsistent with the overall purpose of the statute or regulation. The waiver authority was not available in the case of fair housing, nondiscrimination, environmentalor labor standards. In addition to the funding provided, P.L. 103-211 made modifications to theSection 203(h) and Section 203(k) programs within the Federal Housing Administration, expandingthe benefits that could be provided to households impacted by the Northridge earthquake, althoughthe changes were only effective for 18 months. The Northridge Earthquake resulted in the displacement of thousands of families; as of April1994, 88,000 people had not returned home, 57,000 of whom were staying with friends and family. In recognition of the serious housing problem, Los Angeles convened a housing task force onJanuary 20, 1994 that included participants from the city, the county, the American Red Cross, theCalifornia Department of Housing and Community Development, the Governors Office ofEmergency Services, FEMA, and HUD. The task force had two main objectives; first, to get peopleinto shelters and registered with FEMA and second, to quickly get people out of shelters and intoreplacement housing. (33) Emergency short-term vouchers, funded both through the Section 8 program and throughCDBG (34) were providedto impacted families. A high percentage of those voucher holders were able to use them within thesame zip code as the home from which they were displaced. (35) City officials intervieweda year after the Northridge Earthquake expressed concern about what would happen to families withtemporary vouchers when they expired, noting that most families who had received them had notceased using them. (36) They stated that the city was pursuing options to have the vouchers made permanent and, in fact,they were eventually made permanent by Congress and absorbed into the Housing Authority of LosAngeles County's mainstream voucher program. (37) A July 26, 1994 report by the HUD Inspector General praisedHUD and the PHAs for responding quickly to the Northridge disaster by providing vouchers, butfound that there was an overlap in federal help. Families were provided vouchers without firsthaving been screened to assure that they were not also receiving FEMA assistance. HUD's Officeof Public and Indian Housing responded that families may have used the FEMA assistance forpurposes beyond rent, such as storage, purchase of furniture, moving expenses and utility connectioncharges and that the assistance should therefore not necessarily be considered duplicative. HUD used the $100 million in supplemental Flexible Subsidy Funds to develop a newprogram, introduced that spring, called the HUD Earthquake Loan Program (HELP). The funds wereavailable first for FHA-insured multifamily properties that were impacted by the earthquake, andsecond for other non-FHA-insured multifamily HUD-assisted properties that had beenimpacted. (38) HELPfunds could be used to cover mortgage payments, loss of rent, temporary staffing costs, tenantrelocation expenses, building repair or replacement, retrofitting, and to meet code requirements. AHUD Inspector General report issued in 1998 found that HUD had not designed the HELP initiativewith sufficient controls to prevent waste, fraud, and abuse. The report identified at least $7.1 millionin questionable funds awarded to 27 projects and directed the Department to investigate and attemptto recover those funds. (39) HOME and CDBG funds were used in the short-term to provide rental assistance, to meetsocial service needs (i.e. set up intake centers and provide housing counseling), (40) and some funds were usedfor longer-term redevelopment, including financing repairs on units that could not qualify for SmallBusiness Administration (SBA) loans. (41) Shortly before the earthquake struck, HUD had amended theminimum property standards to which HUD funded housing must comply to include seismic safetystandards. It was hoped that new units assisted with HELP, HOME, or CDBG funds would be betterequipped for a future earthquake as a result of the changes to these standards. (42) 2004 Hurricane Season The 2004 Atlantic hurricane season was one of the most active and destructive in recentmemory. Eight named storms formed, four of which, in the span of about four weeks, wreakedhavoc on the southern United States across 12 states, although Florida was by far hit the hardest. On August 13, a category 4 hurricane, Charley, made landfall on the southwest coast of Florida. Thestrongest storm to hit the United States since Hurricane Andrew, Charley caused about $14 billionin damages and resulted in 10 deaths in the United States. (43) On September 6, a category 2 hurricane, Frances, made landfallin the United States, striking the central western coast of Florida. Frances left five dead in Floridaand $9 billion in damages. (44) Less than two weeks later, on September 16, Ivan, a category3 hurricane made landfall on the gulf coast of Alabama and the western Florida panhandle. Hurricane Ivan left 25 dead in the United States and over $13 billion in damages. (45) Finally, on September 26,category 3 Hurricane Jeanne struck the eastern coast of Florida, leaving four Floridians dead and$6.8 billion in damages. (46) President Bush responded by making five supplemental funding requests to Congress ofalmost $14 billion. Congress responded by passing two supplemental funding measures totaling$13.6 billion. The Military Construction Appropriations Act and Emergency HurricaneSupplemental Appropriations law ( P.L. 108-324 ), provided $150 million for CDBG. The funds weredesignated only for use for disaster relief, long-term recovery, and mitigation in communitiesaffected by disasters designated by the President between August 31, 2003, and October 1, 2004. The funds were to be awarded by the Secretary directly to states, who were permitted to allocatethem to entitlement communities. The Secretary was also given discretion to waive or specifyalternative requirements for any statute or regulation in connection with the obligation of theSecretary or use by the recipient of the funds, as long as the waiver was not inconsistent with theoverall purpose of the statute or regulation. The waiver authority did not apply to fair housing,nondiscrimination, environmental or labor standards, and at least 50% of the funds provided had tobenefit primarily low- and moderate-income families. The funds could not be used for any projectunderway before the disaster unless the project was impacted by the disaster. States were requiredto provide a 10% match. The conference report accompanying the law ( H.Rept. 108-773 ) directedHUD to coordinate with FEMA to ensure that funds were used only for disasters and targeted to theareas of greatest need. The Conferees also directed HUD to report back to the AppropriationsCommittees prior to any allocation of funds and to submit quarterly reports on their use thereafter. Prior to the allocation of emergency CDBG funds, HUD took a number of steps to respondto the 2004 Florida hurricanes. HUD identified vacant HUD subsidized multifamily units andHUD-owned homes that could be used as temporary housing, relocated displaced HUD-assistedfamilies, permitted HOME and CDBG grantees to reprogram existing funds to meet disaster needs,activated the 203(h) program and 203(k) program waivers and issued a 90-day foreclosuremoratorium for FHA-insured properties. (47) On December 10, 2005, HUD published a notice in the Federal Register informing impactedstates of their eligibility for emergency CDBG funds. The notice included the state allocations andinformed states that, in order to access the funds, they must first submit a plan detailing how theywill use the funds. The allocation formula used SBA and FEMA data on unmet housing, businessand public assistance needs for all designated areas in major disaster declarations. The formulaweighted unmet housing needs at 50%, unmet business needs at 25%, and unmet public assistanceneeds at 25%. The notice also specified waivers applicable to HOME and CDBG funds used fordisaster assistance, primarily related to planning requirements. (48) Over the course of the recovery, HUD also provided more than $26 million in emergencycapital reserve funding to repair damaged public housing units; $40 million in additional Section 8voucher funding to meet the increased costs of serving currently assisted families whose rent hadgone up because of a housing shortage caused by the hurricanes; $10 million for repair of Section202 and Section 811 properties; and $16 million to relocate displaced HUD-assisted families. (49) The four 2004 hurricanes resulted in damage to more than 700,000 homes (50) in Florida. Poor familieswere disproportionately impacted. (51) In response, on November 10, 2004, the governor of Floridanamed a hurricane housing task force to advise the state legislature on how to create more affordablehousing. On February 18, 2005, the group made its final report. It recommended, in addition to theregular allocation of housing funds, the state legislature approve a one-time infusion of $354 millionin state funds to develop several new affordable housing programs including, among others, aHurricane Housing Recovery Program, a Rental Recovery Loan Program, and a FarmworkerHousing Recovery Program. (52) In March 2005, the state of Florida Department of Community Affairs (DCA) submitted itsplan to spend its emergency CDBG funds to HUD. The Action Plan for Disaster Recovery statesthat emergency CDBG funds will be used for repairs, long-term recovery and mitigation. GivenCongress's direction that funds be used in the hardest hit areas, the DCA's plan specifies that ratherthan providing funds to all 67 areas that had been declared emergencies in the wake of thehurricanes, they will invite the 15 communities that were hardest hit to apply for emergency CDBGfunds. The plan specifies that the first priority will be given to infrastructure and public assistanceprojects. Second priority will go to economic development and business assistance projects,including those designed to promote job creation and/or retention. Third priority is given to housingrepair and development projects. The plan explains that housing projects are given the lowestpriority because of the expectation that the state legislature will fund the governor's affordablehousing plan (described earlier). (53) Conclusion In times of major disaster, private citizens often cannot reasonably be expected to addresstheir own housing and shelter needs. When the United States Housing Act of 1937 set forth ahousing policy for the nation, it stated that the Federal Government should act where there is aserious need that private citizens or groups cannot or are not addressing responsibly. (54) While the Federal Emergency Management Agency is the primary federal entity chargedwith responding to a disaster, HUD is the primary entity charged with meeting the nation's housingneeds. The exact role that each agency is to play following a disaster is not entirely clear. FEMAassistance is available to meet a range of housing needs, from emergency shelters, to trailers, to homerepair grants. The review of past disasters included in this report shows that HUD's programs haveprimarily been used to provide longer-term housing aid, such as rental vouchers and new housingconstruction, as well as aid to communities to repair infrastructure and promote economicdevelopment. In the months following 2005's Hurricane Katrina, HUD's programs were not calledon to play a major role in responding to families' housing needs. FEMA's response has been metwith criticism from observers, including Members of Congress, some of whom have called for anexpansion of HUD's role. As the focus shifts from response to Katrina to the inevitable review ofthat response, the appropriate role for HUD to play following a disaster may be the subject ofCongressional debate.

Hurricane Katrina has resulted in the displacement of tens of thousands of families from theirhomes. While its magnitude is unprecedented, the resulting need to shelter and house displacedfamilies is not. The Department of Housing and Urban Development (HUD), the nation's agencywith a mission to provide safe and decent housing for all Americans, has played a role in meetingthose needs in the past and is playing a role in the wake of Katrina. This report looks at HUD'scurrent programs and how they have been used to respond to past disasters. The report begins by introducing the concept of a continuum of housing needs following adisaster. Displaced families' needs range from emergency shelter to temporary and permanenthousing. While the Federal Emergency Management Agency (FEMA) has primary responsibilityfor coordinating disaster relief efforts and providing certain services to help communities recover,other federal agencies, including HUD, also play an important role. HUD's programs fall into three distinct categories. The direct housing assistance programsinclude the Section 8 Housing Choice Voucher program, the public housing program, andproject-based rental assistance (including Section 202 and Section 811 programs for the elderly anddisabled). They can be used to provide temporary housing for both families who were receivinghousing assistance at the time of the disaster as well as those who were not. The block grantprograms, the Community Development Block Grant (CDBG) and HOME Investment PartnershipsPrograms, provide flexible funding sources to states and localities to meet housing and othercommunity development needs, including those in times of disaster. The Federal HousingAdministration (FHA) at HUD provides single-family and multi-family mortgage insurance, the rulesof which become more flexible following a disaster. In order to better understand the role HUD has played in response to disasters, this reportprofiles crises in which the housing stock was severely damaged. Congress provided emergencysupplemental funding to HUD in response to each of the following disasters: Hurricane Andrew,Midwest Flooding, the Northridge Earthquake, and the 2004 Florida Hurricanes. HUD programs have been used as a conduit for funneling short-, interim-, and long-termfunding to disaster-stricken communities many times in the past, however, Katrina's impact on theregion's housing stock eclipses that of any other natural or manmade disaster in the history of thiscountry. While looking to prior uses of HUD resources in times of disaster may be informative,given the scope of Katrina, new and broad initiatives to meet the interim- and long-term needs of theaffected region and its residents may be considered in the 109th Congress. This report containsreferences to other CRS products that track activities specifically in response to Hurricane Katrina. This report will not be updated. Key Policy Staff Division abbreviations: ALD -- American Law; DSP -- Domestic Social Policy; G&F --Government and Finance

CRS_R43793

Introduction Permanent, continuing, day-to-day oversight of the U.S. intelligence community (IC) by the two congressional intelligence committees will soon mark its 40th anniversary. The IC's missions, responsibilities, capabilities, size, and management have experienced dramatic changes over the past four decades. The congressional oversight committees have played a significant role in shaping these changes and continue to do so, particularly through their annual intelligence authorization bills. In recent years the IC has initiated a transformation from the agency-centric practices of the past to an "intelligence enterprise" established on a collaborative foundation of shared services, mission-centric operations, and integrated mission management to confront its ever growing list of challenges. The recently released National Intelligence Strategy 2014 lays out the strategic environment and identifies the scale of what James Clapper, the Director of National Intelligence (DNI), terms the "pervasive and emerging threats": While key nation states such as China, Russia, North Korea and Iran will continue to challenge U.S. interests, global power is also becoming more diffuse. New alignments and informal networks, outside of traditional power blocs and national governments, will increasingly have significant impact in global affairs. Competition for scarce resources such as food, water and energy is growing in importance as an intelligence issue as that competition exacerbates instability, and the constant advancements and globalization of technology will bring both benefits and challenges. The challenge for this and future Congresses is to help shape intelligence priorities while a more integrated IC adjusts to new budget realities. Congress has an important role in the oversight of the agencies responsible for dealing with this altered intelligence environment, and the annual authorization process represents one of the most important opportunities to exercise this role. Intelligence authorization legislation does not guarantee effective interagency intelligence efforts, but proponents of the oversight process maintain that authorization acts are the best lever that Congress has to address the interagency effort. Background The "congressional intelligence committees," as defined in 50 U.S.C. §401a (6) , consist of the Senate Select Committee on Intelligence (SSCI) and the House Permanent Select Committee on Intelligence (HPSCI). The intelligence committees were created in the 1970s to conduct continuous and "vigilant legislative oversight" over the IC to assure (1) "that the appropriate departments and agencies of the United States provide informed and timely intelligence necessary for the executive and legislative branches to make sound decisions affecting the security and vital interests of the Nation," and (2) "that such activities are in conformity with the Constitution and laws of the United States." They operate behind closed doors, for the most part, overseeing the most secret aspects of the U.S. government. The two intelligence committees are the repositories of most intelligence shared with Congress. Their secure office and hearing room spaces are guarded around the clock by Capitol Hill police. One of the few windows into the activities of the two intelligence committees is their authorization legislation and accompanying committee reports. They produce (but do not always pass) annual legislation that guides the activities of all 17 U.S. intelligence components—providing authorization for critical national security functions. All authorization bills are important resource documents in terms of both money and manpower, and the intelligence bills are particularly important in this regard. (See the Appendix for an IC framework that includes a list of IC components.) Separate and distinct from one another, the authorization and appropriations processes determine budget authority for agencies and programs. The authorization committees establish the necessity, legitimacy, and intent of agencies and programs. In doing so, authorization is an oversight function, communicating general guidance, leadership, and priorities and providing legislation and direction to agencies. Appropriations committees determine funding levels for policies and programs previously authorized. For the most part, the appropriations process provides specific details within the general guidance and limitations given by authorizations. Cutting funds, adding funds, or attaching provisions to funding are powerful ways to influence policy decisions. The funding associated with intelligence is significant. For FY2014 alone, the aggregate amount (base and supplemental) appropriated to the national and military intelligence programs totaled $67.9 billion. The complexity and range of activities the intelligence authorizing committees oversee covers a wide range. According to a recent House Intelligence Committee report, current legislation: provides authorization for critical national security functions, including: CIA personnel and their activities worldwide; tactical intelligence support to combat units in Afghanistan; NSA's [National Security Agency's] electronic surveillance and cyber defense; global monitoring of foreign militaries, weapons tests, and arms control treaties, including use of satellites and radars; real-time analysis and reporting on political and economic events, such as current events in the Middle East and Eastern Europe; and research and technology to maintain the country's technological edge. The authorizing legislation passed by the intelligence committees has particular power with the IC agencies because the respective rules that established the intelligence committees provided that, "no funds would be expended by national intelligence agencies unless such funds shall have been previously authorized by a bill or joint resolution passed by the Senate [and House] during the same or preceding fiscal year to carry out such activity for such fiscal year." In 1985, Section 504 of the National Security Act was tightened to require that appropriated funds available to an intelligence agency could be obligated or expended for an intelligence or intelligence-related activity only if "those funds were specifically authorized by the Congress for use for such activities." If and when intelligence authorization bills fail to pass, the IC relies on language in appropriation bills that both authorizes and appropriates funds, until such time as an authorization bill is passed. In terms of process, each year the House and Senate intelligence committees produce their respective versions of the Intelligence Authorization Act (IAA) . Each committee produces an unclassified bill, an unclassified report, and a classified "Schedule of Authorizations" (included within the "Classified Annex," or simply "the Annex") that provide detailed guidance to the nation's intelligence agencies. The Annex contains the schedule of authorization budget numbers as well as committee guidance and requirements that directly pertain to the classified material and cannot be disclosed publicly. Committee reports state that the Schedule of Authorizations "is incorporated by reference in the Act and has the legal status of public law." Both intelligence committees make the Annex available for review by Members of their respective chambers, subject to appropriate disclosure restrictions. Following passage of these bills, a conference committee is usually convened to resolve the various differences between the House and Senate versions. Despite the requirement for both an authorization and matching appropriation, in the years following the 9/11 attacks the intelligence committees have sometimes found it difficult to reconcile philosophical differences over important issues. In some years, IAAs failed to pass one or both chambers before the beginning of the fiscal years they represented, were never passed by one or both chambers, or were vetoed by the President. Table 1 illustrates this difficulty. The table summarizes the legislation associated with the annual intelligence authorization bill over the past 15 years. IAAs for nine fiscal years (2000-2005, 2012-2013, and 2015) were signed by the President three months into the respective fiscal year. Three intelligence bills were never sent to the President for signature (2006, 2007, and 2009) and two were vetoed (2001 and 2008). The IAA for FY2010 was passed in October 2010, a week after FY2010 was over. The IAAs for FY2011 and FY2014 were passed just a few months prior to the end of their respective fiscal years. According to media and academic accounts, and statements by Members in committee reports, the reputations of the intelligence committees suffered during the six-year period when no intelligence bills were passed. The absence of an authorization bill in a particular fiscal year does not mean that ongoing programs cease to be authorized. Authorization bills may enact far-reaching provisions that are essentially timeless—reporting requirements that recur each year until repealed or suspended by another authorization bill. In this case, however, no intelligence legislation was signed into law for six years (December 2004 to October 2010, see Table 1 ). During the years when there were no authorization bills, the appropriation committees had the de facto ability to both authorize and appropriate. In addition, other authorizing committees with intelligence-related oversight responsibilities began reestablishing their prerogatives in regard to IC activities that fell into their areas of jurisdiction. Beginning in 2009, intelligence committee leaders in both parties dedicated themselves to getting intelligence authorization bills passed on an annual basis. The combined efforts of SSCI Chairwoman Feinstein and HPSCI Chairman Rogers have been particularly effective, as were the efforts of HPSCI Chairman Reyes. Table 1 illustrates the fact that there has been an intelligence bill every year since FY2010, although in several cases there have been considerable lag times between the beginning of the fiscal year and bill passage. They have been successful in getting IAAs passed in both chambers and signed by the President for every fiscal year since 2010. The IAA for FY2015 was signed into law on December 19, 2014. Later in this report, Table 2 provides an overview of the intelligence authorization legislation considered in the 113 th Congress, with accompanying reports and the dates of major actions. Table 3 provides a summary of selected provisions from the IAA for FY2015 with comparable provisions in the original H.R. 4681 and S. 2741 . IAAs for FY2014 and FY2015: Selected Legislative Provisions The Intelligence Authorization Act (IAA) for Fiscal Year (FY) 2014 ( P.L. 113-126 ) was signed into law on July 7, 2014. An IAA for FY2015 ( P.L. 113-293 ) was signed into law on December 19, 2014. Understanding what has happened when in terms of actions for the IAAs for FY2014 and FY2015 is difficult because of sequencing issues and bill titles. Table 2 provides an overview of the intelligence authorization legislation considered in the 113 th Congress, with accompanying reports and the dates of major actions. The following timeline may also be helpful: October 1, 2013: Fiscal Year 2014 began. November 12, 2013: The SSCI reported an IAA for FY2014 ( S. 1681 ) out of committee to the Senate, accompanied a day later by S.Rept. 113-120 . November 25, 2013: The HPSCI reported an IAA for FY2014 ( H.R. 3381 ) out of committee to the House, accompanied by H.Rept. 113-277 . May 15, 2014: The HPSCI introduced an IAA for FY2015 ( H.R. 4661 ). May 20, 2014: The HPSCI introduced an IAA for both FY2014 and FY2015 ( H.R. 4681 ). May 27, 2014: The HPSCI reported an IAA for FY2014 and FY2015 ( H.R. 4681 ) to the House, accompanied later by H.Rept. 113-463 . May 30, 2014: The IAA for FY2014 and FY2015 ( H.R. 4681 ) was passed by the House and sent to the Senate for consideration. June 11 2014: Instead of considering H.R. 4681 , the Senate passed the IAA for FY2014 ( S. 1681 ) and sent it to the House. June 24, 2014: The House passed the IAA for FY2014 ( S. 1681 ) July 7, 2014: The IAA for FY2014 (S. 1681) became P.L. 113-126 . July 31, 2014: The SSCI reported an IAA for 2015 ( S. 2741 ) to the Senate, accompanied by S.Rept. 113-233 . It was placed on the Senate Calendar. October 1, 2014: Fiscal Year 2015 began. December 9, 2014: SSCI discharged H.R. 4681 by Unanimous Consent. The amended version represented the results of an informal HPSCI SSCI compromise and included provisions from the original H.R. 4681 and S. 2741 . The Senate amended version of H.R. 4681 passed in the Senate as the "IAA for FY2015." December 10, 2014: House agreed to the Senate amended H.R. 4681 . December 12, 2014: Presented to the President for his signature. December 19, 2014: Signed, became P.L. 113-293 . IAA for FY2014 (P.L. 113-126) Intelligence Advanced Research Projects Activity (IARPA) Provisions in Section 104 authorize additional appropriations and positions for advanced research and development to remain available through September 2015. The advanced research and development activity refers, in part, to the Intelligence Advanced Research Projects Activity (IARPA), the research and development arm of the Office of the Director of National Intelligence (ODNI). IARPA is the IC's version of the DOD's Defense Research Projects Agency (DARPA). Both IARPA and DARPA invest in high-risk, high-payoff research programs to tackle some of the most difficult challenges of the agencies and disciplines in the defense establishment. According to its Director, IARPA sees itself as "an agency that makes sure no important thing remains undone because it doesn't fit somebody's mission." According to the Senate report accompanying the legislation, the committee continues to strongly support the mission of the IARPA. It recommends that "IARPA's mission should remain a priority, even during the fiscal environment when research and development investment can come under pressure. Its mission and work should be integral to the IC R&D [Research and Development] strategic plan." The report goes on to say, "Therefore, the Committee strongly supports full preservation of the budget request for IARPA in FY2014 and encourages robust investment by the IC in IARPA in FY2015." Functional Managers Section 305 codifies the existing requirement in E.O.12333 for the DNI to designate "functional managers" for signals intelligence (SIGINT), human intelligence (HUMINT), geospatial intelligence (GEOINT), and other intelligence disciplines. At present, the functional managers for SIGINT, HUMINT, GEOINT, and Measurement and Signals Intelligence (MASINT) are the Director of the NSA, the Director of the CIA, the Director of the NGA, and the Director of the Defense Intelligence Agency (DIA), respectively. Duties of functional managers as described in E.O. 12333 may include: developing and implementing strategic guidance, policies, and procedures for activities related to a specific intelligence discipline or set of intelligence activities; setting training and tradecraft standards; ensuring coordination within and across intelligence disciplines and IC elements and with related non-intelligence activities; and advising on the management of resources; policies and procedures; collection capabilities and gaps; processing and dissemination of intelligence; technical architectures; and other issues or activities determined by the Director. Functional managers integrate and coordinate two "pots" of intelligence money—"national" and "military." ( Table A-2 in the Appendix contains funding sources and illustrates the fact that the Directors of DIA, NGA, NRO, and NSA manage several types of intelligence money.) In the original SSCI version of the legislation, Section 305 gave responsibility for designating functional managers (that is, the directors of the CIA, NSA, NGA, and DIA) to the President. In the IAA for FY2014 as enacted, the functional managers are designated by the DNI, consistent with E.O. 12333. The reporting requirements in Section 306 call on each functional manager to identify those programs, projects, and activities that comprise the intelligence discipline for which they are responsible and to report on resource issues and other matters relevant to the state of the function. The provision requires nine elements in the functional manager report: 1. An identification of the capabilities, programs, and activities of such intelligence function, regardless of the element of the intelligence community that carried out such capabilities, programs, and activities. 2. A description of the investment and allocation of resources for such intelligence function, including an analysis of the allocation of resources within the context of the National Intelligence Strategy, priorities for recipients of resources, and areas of risk. 3. A description and assessment of the performance of such intelligence function. 4. An identification of any issues related to the application of technical interoperability standards in the capabilities, programs, and activities of such intelligence function. 5. An identification of the operational overlap or need for de-confliction, if any, within such intelligence function. 6. A description of any efforts to integrate such intelligence function with other intelligence disciplines as part of an integrated intelligence enterprise. 7. A description of any efforts to establish consistency in tradecraft and training within such intelligence function. 8. A description and assessment of developments in technology that bear on the future of such intelligence function. 9. Such other matters relating to such intelligence function as the Director may specify for purposes of this section. Financial Auditability Section 309 directs the DNI and the Directors of the, CIA, DIA, NSA, National Reconnaissance Office (NRO), and NGA to undergo full financial audits beginning with FY2014 financial statements. Some background is useful on this provision because there is a very long history of presidential and congressional oversight efforts to force the IC into compliance with federal financial accounting standards. IAAs and committee reports have contained a multitude of provisions along these lines since at least FY2002. The Senate report accompanying the IAA for FY2002 called for the financial statements of the NRO, NSA, CIA, DIA, and what is now the NGA to be audited by a statutory Inspector General (IG) or independent public accounting firm by March 1, 2005. In the Senate report accompanying its IAA for FY2010, the SSCI noted the following IC response: The bottom line is that more than ten years after the President called for action, and more than four years after the Committee anticipated receiving auditable statements, the five agencies are still unable either to produce auditable financial statements or receive favorable audit opinions on those that are auditable. The current projection for doing so is at least four years away. The Senate report goes on to urge the IC to get its accounts auditable and to establish an IC-wide business enterprise architecture (BEA) and a consolidated financial statement for the National Intelligence Program: Accordingly, the April 2007 plan has now been superseded by the imperative to construct a BEA, which makes the 2012 auditability timeline difficult or impossible to achieve for most agencies. Nonetheless, the Committee strongly supports this BEA work, which, if successful, will provide a stronger foundation for sustainable, financial auditability. Indeed, the Committee has repeatedly called for a BEA over the last four years. Section 322 of this bill is designed to empower the DNI's fledgling BTO to produce this business systems architecture. Finally, the Committee believes that both the Congress and the DNI would benefit from the creation of a consolidated National Intelligence Program financial statement. Such a statement would provide valuable macro-level data and, once established, offer insight into financial trends within the Intelligence Community. Foreign Counterintelligence Program (FCIP) Merged Into General Defense Intelligence Program (GDIP) Section 314 directs the DNI to merge the Foreign Counterintelligence Program (FCIP) into the (GDIP). The Director of DIA is program manager for both programs. The FCIP designation was an accounting tool to track money used solely for counterintelligence purposes. The GDIP and other IC budget programs are included in the Appendix . Enhanced Oversight over Legal Opinions Section 321 of the IAA for FY2014 focuses on the opinions of the Office of Legal Counsel (OLC) in the Department of Justice (DOJ) concerning intelligence activities. The provision is designed to increase the committees' ability to understand and question the legal reasoning behind OLC opinions relevant to the committees' oversight functions. This section requires the Attorney General to provide a listing of every opinion of the OLC that has been provided to an element of the IC, whether classified or unclassified. Provisions were made for information associated with covert action "findings" and information subject to "executive privilege." The Senate report explains these provisions in the following manner: While the Committee generally is kept apprised of the legal basis for U.S. intelligence activities, as required by Sections 502 and 503 of the National Security Act of 1947, neither the Department nor the IC routinely advises the Committee of the existence of OLC opinions that are relevant to the Committee's oversight functions. This presents an impediment to the Committee's oversight function, as the Committee cannot request access to legal analysis when it is not made aware that such analysis exists. Section 321 would ensure that the Committee is aware of the existence of relevant OLC opinions so that it can obtain access to the legal analysis set forth in these opinions through a process of accommodation with the Executive branch. Enhanced Role in Appointments Title IV of the IAA for FY2014 ( P.L. 113-126 ) changes the appointment process for four key individuals, the Directors of NSA and NRO and the Inspectors General (IGs) of these two agencies, making all four presidential appointments with the advice and consent of the Senate. With this change to the appointment process, the Senate Intelligence Committee may take a more active part in the selection of these four key individuals than it has in the past, in conjunction with the Senate Armed Services Committee. See section below on " Implementing the Appointment Provisions ." Agency Directors Until the IAA for FY2014, the President appointed the Director of the NSA based on a recommendation from the Secretary of Defense and the concurrence of the DNI. Section 401 amends the National Security Agency Act of 1959 (P.L. 86-36) to provide that the Director of the NSA shall be appointed by the President by and with the advice and consent of the Senate, "in light of NSA's critical role in the national intelligence mission, particularly with respect to activities that may raise privacy concerns." Enhanced congressional oversight of the NSA and its Director took on a new urgency in 2013. Beginning in June of that year, NSA contractor Edward Snowden released of thousands of classified National Security Agency (NSA) documents detailing the agency's vast data collection programs. The revelations prompted demands for greater privacy protections primarily within the context of intelligence counterterrorism and law enforcement activities. Many wondered if provisions passed after the terrorist attacks in the United States on September 11, 2001 (9/11) had tipped the balance too far toward security at the expense of civil liberties. Section 411 amends the National Security Act of 1947 (P.L. 80-253) to provide that the Director of the NRO shall be appointed by the President by and with the advice and consent of the Senate because of concerns associated with the acquisition of complex, expensive programs. According to the Senate Report: The Director of the NRO is responsible for a number of highly technical programs that involve the obligation and expenditure of significant sums of appropriated funds. By requiring Presidential appointment and Senate confirmation of the NRO Director, Congress will be better able to fulfill its responsibility for providing oversight of these important programs. The NRO acquisition process was the subject of a HPSCI investigation throughout the 18-months preceding the IAA for FY2014. In July 2014, the HPSCI released a report titled Performance Audit of Intellig ence Major Systems Acquisition, with a number of recommendations. For example, according to a HPSCI white paper on its classified report, recommendation 3 suggested that the "NRO should justify to the ODNI and Congress how it chooses the pace of its satellite acquisitions." Inspectors General The Inspector General Act of 1978 ( P.L. 95-452 ) established a government-wide system of IGs, some appointed by the President with the advice and consent of the Senate and others administratively appointed by the heads of their respective federal entities. IGs are authorized to ''conduct and supervise audits and investigations relating to the programs and operations'' of the government and ''to promote economy, efficiency, and effectiveness in the administration of, and ... to prevent and detect fraud and abuse in, such programs and operations." They also perform an important reporting function by ''keeping the head of the establishment and the Congress fully and currently informed about problems and deficiencies relating to the administration of ... programs and operations and the necessity for and progress of corrective action." Traditionally, the issue of IGs in the IC has focused on how independent from an agency director they can and should be. Concerns have been raised over whether an overzealous IG might pose a threat to agency operations. For example, while the CIA has had an IG since 1952, it was only in 1989 that Congress enacted legislation mandating an "independent" IG at CIA, appointed by the President with the advice and consent of the Senate. Before that, CIA IGs were appointed by the Director of the Central Intelligence Agency. The IAA for FY2010 called for a completely independent ODNI IG appointed by the President, with the advice and consent of the Senate, to report directly to the DNI. To enhance the IG's independence within the ODNI, the IG may be removed only by the President, who must communicate the reasons for the removal to the congressional intelligence committees. By 2014, almost all the IGs in the IC were appointed by the President with the consent of the Senate, to include the IGs at the CIA, and the Departments of Defense, Energy, Homeland Security, Justice, State, and the Treasury. Sections 402 and 412 of the IAA for FY2014 amend the Inspector General Act of 1978 to include the NSA IG and NRO IG in this list. According to the Senate Report, the NSA IG provision was designed with independence and privacy concerns in mind: "[to] ensure the NSA Inspector General operates independently of the Director of the Agency in overseeing the activities of the NSA, particularly with respect to activities that may raise privacy concerns." The Senate Report explains the NRO IG provision in terms of independence and identifying fraud, waste and abuse: The Inspector General of the NRO performs a critical role in overseeing complex, high-dollar value programs conducted by the NRO. In the past, the NRO Inspector General has been successful in identifying significant instances of fraud, waste, and abuse within the NRO. By requiring Presidential appointment and Senate confirmation of the NRO Inspector General, this provision will ensure the NRO Inspector General continues to operate with appropriate independence from the NRO Director in overseeing the activities of the NRO. Implementing the Appointment Provisions S.Res. 470 was passed by the Senate on July 7, 2014 (in conjunction with the IAA for FY2014), to amend the committee's charter legislation and implement these new appointment provisions. The procedures in the Senate resolution point out the SSCI's shared jurisdiction with other IC oversight committees: 1) Assistant Attorney General for National Security: referred to the Judiciary Committee and, if and when reported, to the SSCI. This person heads the National Security Branch, a Federal Bureau of Investigation (FBI) component of the IC. 2) NSA Director, NSA/IG, NRO Director and NRO/IG: a) If military and on active duty—referred to the SASC and, if and when reported, to the SSCI. b) If civilian—referred to the SSCI and, if and when reported, to the SASC. Notice that in each case, only the primary committee with jurisdiction has the right of refusal. The nomination proceeds forward, via the mechanism of sequential referral, only if the primary committee reports it out of committee. If the secondary committee fails to report the nomination after a specified time, the nomination is automatically discharged and placed on the Senate's Executive Calendar. In its report, the SSCI notes that it believes Senate confirmation of these four positions will improve oversight and accountability and, ultimately, the effectiveness of the agencies in question. Insider Threats Title V of P.L. 113-126 contains a number of provisions designed to improve security. Several address the "insider threat problem" and speak to recommendations made by a presidential group established to review intelligence and communications technologies. The insider threat problem refers to efforts by individuals who work within the IC to purposefully leak classified data and sabotage networks. The problem assumed critical proportions in 2013, when Edward Snowden, a contractor working inside NSA, released thousands of classified documents to the British newspaper The Guardian . The Snowden leaks came on the heels of Army Private Manning's 2010 release of thousands of classified documents to WikiLeaks. In a short period of time, stealing secrets has gone from the laborious task of copying papers taken surreptitiously from filing cabinets to the current age in which files can be electronically copied onto thumb drives. Manning was said to have disguised his efforts by downloading secrets onto compact discs made to look like pop music recordings. A presidential group headed by Richard Clarke issued a final report known by many as "The President's Review Group." Section 501, for example, reflects the President's Review Group's recommendation (#38) to establish a personnel continuous monitoring program for those with classified information access. The HPSCI report language says ''the IC might have caught Snowden sooner if it had continuously evaluated the backgrounds of employees and contractors and if IC elements had more effectively shared potentially derogatory information about employees and contractors with each other." According to the HPSCI, continuous evaluation "allows the IC to take advantage of lawfully available and public information to detect warning signals that the current system of 5 year periodic investigation misses." The insider threat problem is discussed in some detail in the SSCI Report. It notes that "initiatives have been underway for years to deal with such contingencies, most recently the President's National Insider Threat Policy, signed in November 2012. However, the Committee is concerned that this policy has not been fully implemented across the IC. The Committee supports substantially enhancing and expediting efforts to deter the insider threat." Intelligence Community Information Technology Enterprise (IC ITE) In relation to protections against insider threats, the Senate report makes reference to the IC's information technology (IT) modernization effort—the IC Information Technology Enterprise (IC ITE, pronounced "eyesight")—and says that it "must provide the infrastructure to detect insider threats earlier and more effectively. Robust counterintelligence data and analytic tools to monitor, analyze and audit personnel behavior will be critical to this endeavor." By way of explanation, the goal of IC ITE is a secure and trusted IT environment. IC ITE services focus on providing a common IC desktop, secure online collaboration tools, and secure common cloud architectures. If all goes as planned, IC ITE will help the IC to pool IT resources, cut costs, increase data storage capabilities, increase mission agility and efficiency, and increase the ability to protect all levels of data. Security Clearance Reciprocity In terms of the clearance process, provisions address the time and money associated with the security investigation and adjudication process, and reciprocity of clearances between agencies. Security clearance reciprocity refers to ongoing efforts to have "all security clearance background investigations and determinations completed by an authorized investigative agency or authorized adjudication agency ... accepted by all agencies." Reports by the Government Accountability Office (GAO) and ODNI offer analysis which suggests that agencies may be reluctant to accept the background investigations or security clearance determinations made by other agencies. The Senate report accompanying S. 1681 provides background information to clarify some of the provisions associated with reciprocity—citing several problems associated with "out-of-scope" determinations. Out-of-scope refers to the fact that an individual's background investigation for one IC agency may not adhere to the requirements of another IC agency for a variety of possible reasons. For example, an out-of-scope determination may depend on factors associated with the depth and breadth of the background investigation or the lack of a particular type of polygraph examination. It may also be based on timing issues such as the time elapsed since the individual's initial investigation (or periodic update), a gap in his or her agency employment, or date of his or her last polygraph examination. If agency requirements do not match on any or all criteria, there may be an out-of-scope determination made by security personnel that overrides the reciprocity requirement. The Senate report points out that some agencies are inconsistent when it comes to applying out-of-scope determinations—waiving inconsistencies for its own employees but not for employees of other agencies. It also points out what may be inefficiencies and unnecessary costs associated with the adjudication process. The Committee understands that some agencies have denied security clearance reciprocity for some IC personnel where an eligibility determination is out-of-scope, even when the agency employs personnel whose eligibility determinations also are out of scope. In addition, the Committee understands that some agencies have delayed employment of personnel who have been determined to be eligible for access to classified information while the agency adjudicates their suitability for employment. The Committee believes that both of these practices inappropriately impede the movement of cleared personnel between agencies, often at significant cost to the government. Section 501 requires the DNI, subject to the direction of the President, to ensure that the background of each employee or officer and contractor of the IC is monitored continuously to determine their eligibility for access to classified information; and secondly, to require IC elements to share potentially derogatory security information concerning any employee that may impact the eligibility of such individuals for a security clearance. Section 504 requires the DNI to report to Congress each year, through 2017, on the reciprocal treatment of security clearances, including (1) the periods of time required by authorized adjudicative agencies for accepting background investigations and determinations completed by an authorized investigative entity or adjudicative agency; and (2) the total number of cases in which a background investigation or determination completed by an authorized investigative entity or adjudicative agency is, or is not, accepted by another agency. Whistleblower Protections Intelligence whistleblowers are generally IC employees or contractors who want to focus attention on possible agency wrongdoings. Such individuals can face retaliation from their employers for their disclosures, and the fear of such retaliation may deter whistleblowing. The IC Whistleblower Protection Act (ICWPA) of 1998 provides a process by which employees, or contractor employees, of the DIA, NGA, NRO, and the NSA can report matters of "urgent concern" to the intelligence committees of Congress. The act was augmented by Presidential Policy Directive 19, signed by President Obama in 2012, which required IC agencies to provide employees with protections from retaliation. This issue is a particular concern for the IC because it does not want individuals leaking classified information under the guise of "whistleblowing." On the other hand, whistleblowing is an important element of the oversight function, in that it helps overseers to identify "urgent concerns," defined as follows: A serious or flagrant problem, abuse, violation of law or Executive Order, or deficiency relating to the funding, administration, or operations of an intelligence activity involving classified information, but does not include differences of opinion concerning public policy matters; A false statement to Congress, or a willful withholding from Congress, on an issue of material fact relating to the funding, administration, or operation of an intelligence activity; and/or An action, including a personnel action described in Section 2302(a)(2)(A) of Title 5, constituting reprisal or threat of reprisal prohibited under Section 7(c) of the Inspector General Act of 1978, as amended, in response to an employee reporting an urgent concern. When NSA contractor Edward Snowden was asked why he did not go to the government first, he cited the severe retaliation that previous IC whistleblowers experienced when they worked through institutional channels without specific rights. Title VI of P.L. 113-126 provides additional protections for IC whistleblowers against reprisals. Section 602 includes due process protections, including the right (1) to an independent and impartial fact-finder; (2) for notice and the opportunity to be heard, including the opportunity to present relevant evidence, including witness testimony; (3) to be represented by counsel; (4) to receive a decision based on the record developed; and (5) to receive a decision within 180 days, unless the employee and the agency agree to an extension, or the impartial fact-finder determines in writing that a greater time period is needed in the interest of fairness or national security. An employee is permitted to appeal the agency's decision within 60 days of receiving it. Detailed procedures for each stage of the process are included in the bill. Some whistleblower advocates would like to see additional protections available to IC contractors as well. Section 604 states that the legislation affords no protections for certain terminations of employment, if, for example, the Director or agency head determines the termination to be in the interest of the United States, determines that the procedures prescribed in other provisions of law that authorize the termination of the employee's employment cannot be invoked in a manner consistent with national security, and notifies Congress within five days of the termination. Additional information on Title VI provisions is available in CRS Report R43765, Intelligence Whistleblower Protections: In Brief , by [author name scrubbed]. Contractor Responsibility Watch List There are several additional provisions in the SSCI Report that refer to activities not specifically mentioned in the unclassified bill but nonetheless include directive language. For example, the SSCI Report includes a management-focused provision designed to enhance the procurement process with a "Contractor Responsibility Watch List." The committee wants the IC to have a better sense of whether prospective vendors are debarred, suspended, or listed on the federal government's System for Awards Management (SAM), a Web-based system maintained by the General Services Administration (GSA). The report cites the following concerns. [T]he IC does not have an IC-wide mechanism for identifying and tracking exploitative, unscrupulous, suspended or debarred contractors to ensure the Community deals only with vendors who are responsible in fulfilling their legal and contractual obligations. It is through the sharing of such information that the IC can make informed decisions, ensure the Community conducts business only with responsible contractors, prevent suspended and debarred contractors from initiating or repeating business throughout the IC, and avoid misuse or loss of potentially billions of dollars of taxpayer money. The IAA for FY2015 (P.L. 113-293) In the normal legislative process, after one house passes a bill and the other then passes it with amendments, the House and Senate need to resolve the differences between their positions and agree to exactly the same language. A formal conference committee may not be necessary if the two chambers can reach an agreement through informal negotiations—as was the case with the IAA for FY2015. The IAA for FY2015 was the product of extensive inter-chamber negotiation. Several provisions in the original H.R. 4681 no longer appear in the amended version of H.R. 4681 passed in December. For example, Title IV, proposing a General Counsel to the NSA IG, is no longer included. Other provisions, such as Section 305 on "functional managers," were incorporated into the IAA for FY2014 passed in July 2014. In the absence of a conference committee, there was no formal conference committee report to accompany the amended version of H.R. 4681 . Instead, a short "Joint Explanatory Statement" was read into the Congressional Record on December 9, 2014. In a number of cases, the formal HPSCI and SSCI committee reports ( H.Rept. 113-463 and S.Rept. 113-233 ) accompanying the committee's originally proposed legislation offer fuller descriptions of the provisions in the amended H.R. 4681 than those contained in the joint statement. Unfortunately, section numbers for similar provisions vary across these reports, and determining what is new or different in the IAA for 2015 can be difficult. Table 3 lists selected provisions in the IAA for FY2015 ( P.L. 113-293 ) and provides corresponding provisions in the original House and Senate versions, if present. For example, Section 309 of the IAA for FY2015, on data retention, is Section 306 in S. 2741 . Section 307 on management and oversight of financial intelligence, is Section 304 in S. 2741 . Section 303 requiring a National Intelligence Strategy is new, but reads much like the provision for a Quadrennial Intelligence Strategic Review in S. 2741 . Section 310 is new but is simply a technical correction to existing statutory language (see " Whistle Blower Protections and Security Clearances " section below). Section 323 requiring an annual report on violations of law or EO has corresponding provisions in both the original H.R. 4681 (Section 321) and S. 2741 (Section 313). National Intelligence Strategy (NIS) Section 303 of the IAA for FY2015 requires the DNI to develop a NIS every four years beginning in 2017. In part, this requirement codifies an existing practice in that the ODNI has been producing a NIS since 2005, but it also adds specific requirements. Section 303 requires each strategy, in a manner consistent with other relevant U.S. agencies' strategic plans and national-level plans, to do a number of things such as the following: (1) address national and military intelligence, including counterintelligence; (2) identify current and future major national security missions of the intelligence community, including factors that may affect performance during the following 10-year period; (3) assess threats from foreign intelligence and security services, as well as insider threats; (4) outline organizational roles and missions; and (5) identify sources of strategic, institutional, programmatic, fiscal, and technological risk. The 2005 NIS was produced largely in reaction to provisions included in the Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ), referred to as the Intelligence Reform Act or IRTPA. The IRTPA did not specifically mandate one overarching NIS, but did require strategic plans for many intelligence-related activities such as counterterrorism and partnerships with foreign countries. The 2005 NIS implemented while Ambassador John Negroponte was DNI was updated in 2009 under DNI Dennis Blair and again in 2014 by DNI James Clapper. In addition to the NIS, Section 303 also requires a report on the NIS from the DNI no later than 45 days after the completion of such strategy. The suggested contents of the DNI report are not enumerated. Its intent appears to be to complement the NIS by providing additional information that clarifies the relationship between the NIS and other IC strategy and policy documents. Data on U.S. Persons Section 309 prescribes how long data on U.S. persons can be retained if it is acquired incidentally (that is, inadvertently obtained) as part of investigations of foreign persons—and therefore, obtained with out a court order and with out consent. Privacy advocates raised objections to Section 309 shortly before bill passage in the House arguing the provision expands the government's authority to collect the communications of U.S. persons. The intelligence committees defended the provisions, countering that Section 309 does the opposite—it "protects privacy rights.… Although the executive branch already follows procedures along these lines, Section 309 would enshrine the requirement in law." Section 309 requires all IC elements to adopt Attorney General-approved procedures to prohibit retention for a period in excess of five years of nonpublic telephone or electronic communications to or from a U.S. person that are acquired without a court order and without the consent of a person who is a party to the communication (including communications in electronic storage), with some national security-related exceptions. The section also requires the head of an IC element approving retention in excess of five years to certify to Congress (1) the reasons extended retention is necessary to protect U.S. national security, (2) the duration of the retention, the particular information to be retained, (3) the measures being taken to protect the privacy interests of U.S. persons or persons located inside the United States. Whistle Blower Protections and Security Clearances Section 310 is a technical provision that adds to the Whistle Blower protections discussed earlier in this report as part of the IAA for FY2014. It amends legislation pertaining to policies and procedures associated with security clearance actions taken against individuals alleging reprisal for having made a protected disclosure. If a determination is made to suspend or revoke a security clearance (or access to classified information), this provision allows employees to retain their government employment status while the challenge is pending. The provision extends protections, to the extent practicable, to individuals alleging reprisal for having made a protected disclosure (provided the individual does not disclose classified information or other information contrary to law) to appeal any action affecting an employee's access to classified information. The Homeland Security Intelligence Program Section 324 requires the Department of Homeland Security (DHS) Under Secretary for Intelligence and Analysis (USDHS/I&A) to provide the congressional intelligence committees with a report on each intelligence activity of each intelligence component of the Department that includes, among other things, the amount of funding requested, the number of full-time employees, and the number of full-time contractor employees. In addition, Section 324 requires the Secretary of Homeland Security to submit to the congressional intelligence committees a report that examines the feasibility and advisability of consolidating the planning, programming, and resourcing of such activities within the Homeland Security Intelligence Program (HSIP). According to the Joint Explanatory Statement accompanying the IAA for FY2015 The HSIP [Homeland Security Intelligence Program] budget was established to fund those intelligence activities that principally support missions of the DHS separately from those of the NIP [National Intelligence Program]. To date, however, this mechanism has only been used to supplement the budget for the office of Intelligence and Analysis. It has not been used to fund the activities of the non-IC components in the DHS that conduct intelligence-related activities. As a result, there is no comprehensive reporting to Congress regarding the overall resources and personnel required in support of the Department's intelligence activities. This section is significant from an oversight perspective because it addresses shared jurisdiction between the Intelligence and Homeland Security Committees. By way of explanation, DHS/I&A is an element of the IC and is funded with National Intelligence Program (NIP) dollars. However, DHS has other intelligence activities that are funded entirely with DHS money. Theoretically, those activities support the DHS mission, as opposed to an IC-wide mission (intelligence for the use of Customs only, for example). This DHS-only intelligence money is called the Homeland Security Intelligence Program (HSIP). Because it is not part of the NIP, it does not belong to the DNI; it belongs instead to the Secretary of Homeland Security. The Department of Homeland Security is overseen by the Homeland Security Committees. This is a case of shared jurisdiction over intelligence-related activities. For more on IC budget programs, see the IC budget section in the Appendix . Regional Issues Section 312 illustrates the way in which certain issues such as cybersecurity and cybercrime transcend traditional boundaries between law enforcement and intelligence, and between congressional committees—in this case intelligence and judiciary. Its provisions express the sense of Congress that the President, working with the government of Ukraine should: initiate U.S.-Ukraine bilateral talks on cybersecurity threat and cybercrime cooperation, with additional multilateral talks that include other law enforcement partners such as Europol and Interpol; work to obtain a commitment from Ukraine to end cybercrime directed at persons outside Ukraine and to work with the United States and other allies to deter and convict known cybercriminals; establish a capacity-building program with Ukraine, which could include joint intelligence efforts, U.S. law enforcement agents being sent to Ukraine to aid investigations, and agreements to connect U.S. and Ukrainian law enforcement agencies through communications networks and hotlines; and establish and maintain a scorecard with metrics to measure Ukraine's responses to U.S. requests for intelligence or law enforcement assistance. Two sections refer to diplomatic facilities in the Russian Federation. Section 313 is directed at the Department of State and requires the Secretary to ensure that every supervisory position at a U.S. diplomatic facility in the Russian Federation is occupied by a U.S. citizen who is subject to and has passed a thorough background check. It also directs the Secretary to submit to Congress a plan to further reduce the reliance on locally employed staff in such facilities. Section 314 requires restricted access space to be included in each U.S. diplomatic facility that is constructed in, or undergoes a construction upgrade in, the Russian Federation, any country that shares a land border with the Russian Federation, or any country that is a former member of the Soviet Union. Section 325 directs the DNI to report to the congressional intelligence committees, the Senate Foreign Relations Committee and the House Foreign Affairs Committee, regarding political prison camps in North Korea. It requires such report to describe U.S. actions to support implementation of the recommendations of the U.N. Commission of Inquiry on Human Rights in the Democratic People ' s Republic of Korea, including the eventual establishment of a tribunal to hold individuals accountable for abuses. It also requires as much information as possible on topics such as prisoner populations, treatment and living conditions. Contractor Level Assessments Improved planning for, and management of contractors has been a recurring theme in IC legislation, particularly since September 11, 2001. The IAA for FY2015 is no exception. Section 327 amends the National Security Act to require annual personnel level assessments for the IC that include a separate estimate of the number of intelligence collectors and analysts contracted by each element of the IC and a description of the functions performed by such contractors. The request echoes a similar requirement for information made five years ago—in Section 339 of the IAA for FY2010 ( P.L. 111-259 ). Section 339 required the DNI to submit a single report (by February 2011) describing a number of contractor related issues across the IC to include hiring, training and retention; clearances; conversion of contractors to U.S. government employees; accountability mechanisms; number of contracts; and costs. Section 339 requirements included contractors associated with intelligence collection, analysis, and covert actions (including rendition, detention and interrogation activities). The dramatic growth in IC contracting activities following the September 11, 2001, attacks on the United States has primarily been associated with the need for "surge" capacity. According to Ronald Sanders, Associate DNI when he wrote the following in 2007, [O]ur agencies simply did not have enough people to do the job. In the months after Sept. 11, 2001, contract personnel emerged as our "reserves," allowing us to surge to meet unprecedented mission demands. Why not just hire more civilians? We have, but it takes years to train and develop intelligence analysts and case officers. In the interim, contract personnel have filled the gap, in many cases with decades of priceless experience. Congressional overseers have long recognized that contractors provide a wide range of services for the IC (just as they do for the military) from transportation, construction, and support services, to intelligence collection, analysis and private security. Contractors provide a surge capability, quickly delivering critical support capabilities tailored to specific intelligence needs. Because contractors can be hired when a particular need arises and released when their services are no longer needed, contractors can be less expensive in the long run than maintaining a permanent in-house capability. Unfortunately, critics argue that contractors can also compromise the credibility and effectiveness of the IC and undermine operations. Concerns over government reliance on contractors often focus on cost, accountability, and workforce issues. Most recently, the SSCI Study of the CIA's Detention and Interrogation Program has renewed debate over which activities performed by contractors are "inherently governmental." According to the SSCI Study's Finding 13, "The psychologists carried out inherently governmental functions, such as acting as liaison between the CIA and foreign intelligence services, assessing the effectiveness of the interrogation program, and participating in the interrogation of detainees held in foreign government custody." Memoranda of Understanding May Improve Intelligence Sharing Section 328 requires the USDHS/I&A to provide appropriate congressional committees with an assessment of the usefulness of memoranda of understanding signed between federal, state, local, tribal, and territorial agencies to improve intelligence-sharing within and separate from the Joint Terrorism Task Force (JTTF). JTTFs are operated by the Federal Bureau of Investigation (FBI) and are based in 104 cities nationwide. Although they have been in existence since 1980, 71 have been created since 9/11. Their primary purpose is to co-locate counterterrorism-related resources to enhance coordination and collaboration. According to the FBI, they consist of "small cells of highly trained, locally based, passionately committed investigators, analysts, linguists, SWAT experts, and other specialists from dozens of U.S. law enforcement and intelligence agencies." The FBI describes a JTTF's duties as follows: "chase down leads, gather evidence, make arrests, provide security for special events, conduct training, collect and share intelligence, and respond to threats and incidents at a moment's notice." Section 328 was prompted by April 2013 bombing of the Boston Marathon. A 2014 Report collectively issued by four IGs (the IGs for the DNI, CIA, DOJ, and DHS) found that the FBI, CIA, DHS, and National Counterterrorism Center (NCTC) generally shared information and followed procedures appropriately, but improvements could be made. The report recommended (1) the FBI and DHS clarify JTTF alert procedures, and (2) the FBI consider establishing a procedure for sharing threat information with state and local partners more proactively and uniformly. According to the intelligence committees' Joint Explanatory Statement , Section 328 "should help identify any obstacles to intelligence sharing between agencies, particularly any obstacles that might have impeded intelligence sharing in the wake of the April 2013 bombing of the Boston Marathon, and find improvements to existing intelligence sharing relationships." Counterterrorism Strategy Section 330 directs the DNI to submit an unclassified comprehensive report on the U.S. counterterrorism (CT) strategy to disrupt, dismantle, and defeat al-Qaeda and its affiliated or associated groups to the appropriate committees in Congress. The committee envisions an interagency approach, coordinated by the DNI, including the views of the Secretaries of State, Treasury, and Defense, the Attorney General, and the head of any other appropriate department or agency of the United States Government. Required elements of the report include an assessment of the strengthening or weakening of the groups in question from January 1, 2010, to the present. The CT report required by Section 330 should complement a report required in the FY2008 Supplemental Appropriations Act ( P.L. 110-252 , §9304) that required a comprehensive global strategy to defeat al Qaeda and its affiliates—jointly submitted by the Secretaries of Defense, State, and Homeland Security, in coordination with the Chairman of the Joint Chiefs of Staff and the DNI. The strategy submitted to Congress in 2008 was classified. FIX-ITT (Financial Exchange and Intelligence Integration) The SSCI report accompanying the FY2015 legislation directs the DNI to provide performance assessments for a new initiative called "FIX-ITT" (Financial Exchange and Intelligence Integration). The committee "applauds" improvements made by the National Intelligence Manager for Threat Finance and Transnational Organized Crime in response to language in the FY2014 legislation. FIX-ITT is an ODNI integrating effort to bring all financial intelligence-related activities spread across various IC agencies together to better understand, map, and disrupt terrorist organizations, narco-trafficking networks, proliferation networks, organized crime, and other threats. Intelligence Community: In Brief The congressional intelligence committees oversee the activities of the 17 components that currently comprise the U.S. Intelligence Community (IC). This confederation of agencies is led and managed on a daily basis by the Director of National Intelligence (DNI), with the assistance of the leadership team within the Office of the DNI (ODNI) to include the Director of Defense Intelligence (DDI). The core mission of ODNI is to lead the IC in intelligence integration—synchronizing collection, analysis, and counterintelligence so that they are fused—effectively operating as one team. The task of leading the IC is particularly challenging because the IC is spread across six separate Cabinet departments and one independent agency within the executive branch. In fact, most intelligence offices/agencies have a dual mission: (1) support to national-level intelligence related activities managed by the DNI and (2) support to operational-level intelligence related activities managed by their parent department. An overview of the IC components, leadership structure, and the overarching budget aggregations known as the National Intelligence Program (NIP) and the Military Intelligence Program (MIP) provides some of the basic terminology necessary to understanding intelligence legislation. Components The IC, as defined in 50 U.S. Code §401a (4), consists of the following components: The Office of the Director of National Intelligence. The Central Intelligence Agency. The National Security Agency. The Defense Intelligence Agency. The National Geospatial-Intelligence Agency. The National Reconnaissance Office. Other offices within the Department of Defense for the collection of specialized national intelligence through reconnaissance programs. The intelligence elements of the Army, the Navy, the Air Force, the Marine Corps, the Federal Bureau of Investigation, and the Department of Energy. The Bureau of Intelligence and Research of the Department of State. The Office of Intelligence and Analysis of the Department of the Treasury. The elements of the Department of Homeland Security concerned with the analysis of intelligence information, including the Office of Intelligence of the Coast Guard. Such other elements of any other department or agency as may be designated by the President, or designated jointly by the Director of National Intelligence and the head of the department or agency concerned, as an element of the IC. Leadership Structure: the DNI and USD(I) The Director of National Intelligence The Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ), referred to as the Intelligence Reform Act or IRTPA, is widely considered to be the most significant legislation affecting the IC since the National Security Act of 1947. Most notably, the IRTPA established the position of DNI with more extensive authorities to coordinate the nation's intelligence effort than those formerly possessed by Directors of Central Intelligence (DCI). The 9/11 Commission concluded that a central lesson that Congress and the executive branch drew from the 9/11 attacks was that there had been inadequate interagency coordination partially as a result of separate statutory missions and administrative barriers. A number of reform measures were passed—a great many of which were designed to more closely and effectively coordinate the acquisition and dissemination of available intelligence. In terms of enhancing DNI's authorities over other IC leaders, the IRTPA focused particularly on personnel, tasking, acquisition, and budget. The IRTPA divided the DCI's three major responsibilities between two new positions—the Director of the CIA (DCIA) and DNI—making the new DNI both community manager and principal advisor to the President (and leaving leadership of the CIA to its director). The DNI speaks for U.S. intelligence agencies, he briefs the President, has authority to develop the budget for the national intelligence effort and manage appropriations made by Congress, and, to some extent, can transfer personnel and funds from one agency to another. The ODNI, a staff of some 1,600 officials along with additional contract personnel, works to carry out the DNI's responsibilities. The President appoints the DNI with the advice and consent of the Senate. The Office of the DNI The ODNI carries out what it calls its "core" integration responsibilities with the help of several statutory components within the ODNI to include the National Counterterrorism Center (NCTC), the National Counterproliferation Center (NCPC), the National Counterintelligence Executive (NCIX), and the National Intelligence Council (NIC). Figure A-1 illustrates the composition of the ODNI to include its core activities, "enabler," and "oversight" offices. Enabler offices focus on IC-wide concerns such as acquisition, budget, human capital, policy and strategy, and systems and resource analysis. Oversight offices such as the General Counsel, Inspector General, and the Civil Liberties and Privacy Protection Office focus on IC-wide activities such as compliance with U.S. law, investigating allegations of fraud, waste, and abuse, and other issues. The Under Secretary of Defense (Intelligence)/Director of Defense Intelligence For reasons similar to those associated with the creation of the DNI, but by means of a different statute, the position of Under Secretary of Defense (Intelligence) (USD(I)) was established in 2003. The law divided the duties associated with the former Assistant Secretary of Defense for Command, Control, Communications and Intelligence, or ASD/C3I, into two positions—one position responsible for managing the intelligence portfolio, and one position responsible for supervising information systems across the DOD. The statute and DOD directives gave the USD(I) significant authorities for the direction and control of intelligence agencies within the DOD. In May 2007, the Secretary of Defense and DNI formally agreed in a Memorandum of Agreement (MOA) that the position would be "dual-hatted"—the incumbent acting as both the USD(I) within the Office of the Secretary of Defense (OSD) and Director of Defense Intelligence (DDI) within the ODNI in order to improve the integration of national and military intelligence. According to the MOA, when acting as DDI, the incumbent reports directly to the DNI and serves as his principal advisor regarding defense intelligence matters. James Clapper, DDI at the time, said that the creation of the DDI position was a way to better "strengthen the relationship between the DNI and the DOD … (and) to facilitate staff interaction and promote synchronization." The MOA did not alter the statutory responsibilities or authorities of either the Secretary of Defense or the DNI. The Intelligence Budget Many authorities and responsibilities associated with the DNI and USD(I) make reference to the national and military intelligence programs—known commonly as "the NIP and MIP." The terms NIP and MIP are fairly new, the former created by the IRTPA of 2004 Section 1074, and the latter created by DOD Directive in 2005. Prior to the IRTPA, the NIP was known as the National Foreign Intelligence Program (NFIP). The MIP represents the merger of two programs formerly known as the Tactical Intelligence and Related Activities (TIARA) Program and the Joint Military Intelligence Program (JMIP). The DNI is most closely associated with the NIP and the USD(I) (in his role as DDI) is most closely associated with the MIP. Together, they oversee a number of interagency activities designed to facilitate the "seamless integration" of NIP and MIP intelligence efforts. Mutually beneficial programs, for example, may receive both NIP and MIP resources. The NIP is associated with national-level intelligence. Some NIP programs fall within the DOD, some do not. Dr. Mark Lowenthal, former HPSCI Staff Director, describes the NIP as "programs that either transcend the bounds of any one agency or are nondefense in nature." 50 U.S.C. Section 401a (6) defines the term "National Intelligence Program" as [A]ll programs, projects, and activities of the IC, as well as any other programs of the IC designated jointly by the Director of National Intelligence and the head of a United States department or agency or by the President. Such term does not include programs, projects, or activities of the military departments to acquire intelligence solely for the planning and conduct of tactical military operations by United States Armed Forces. Both defense and nondefense NIP funds are determined and controlled by the DNI, from budget development through execution. The NIP is often perceived as more complicated than the MIP because it is an aggregation of 14 programs that span the entire IC. NIP programs are capabilities based. Cryptology, for example, is a capability that spans several IC components. Each program within the NIP is headed by a Program Manager. These Program Managers exercise daily direct control over their NIP resources. The DNI acts as an intermediary in the budget process, between these managers, on the one side, and the President and Congress on the other. In contrast, "the MIP" is only those defense dollars associated with the operational and tactical-level activities of the military services. It all "belongs" to the Secretary of Defense. It refers to service specific and DOD wide intelligence assets that are seen as "organic" to military units (e.g., deployable SIGINT personnel and equipment or tactical reconnaissance aircraft). According to the MIP charter directive The MIP consists of programs, projects, or activities that support the Secretary of Defense's intelligence, counterintelligence, and related intelligence responsibilities. This includes those intelligence and counterintelligence programs, projects, or activities that provide capabilities to meet warfighters' operational and tactical requirements more effectively. The term excludes capabilities associated with a weapons system whose primary mission is not intelligence. The MIP label is a tool that allows the USD(I) to collectively manage all the dispersed funds associated with military intelligence support to the DOD "warfighters." As its Program Executive, the USD(I) as DDI [L]eads all Department of Defense actions involving the MIP, including issuing guidance, coordinating its development and execution, and chairing groups to address programmatic issues; and monitors the broader Battle Space Awareness Portfolio to achieve balance and synergies from its panoply of intelligence, surveillance and reconnaissance, command and control complementary capabilities. MIP Component Managers are "the individual(s) assigned by either this Directive, the Secretary of a Military Department, or the Commander, USSOCOM ... responsible for managing MIP resources within his or her respective MIP Component in accordance with USD(I) guidance and policy." The MIP components include the Office of the Secretary of Defense, Military Departments, U.S. Special Operations Command (USSOCOM), DIA, NGA, NRO, and the NSA/CSS. Table A-1 identifies four defense NIP programs: the Consolidated Cryptologic Program (CCP); General Defense Intelligence Program (GDIP); National Geospatial-Intelligence Program (NGP); and the National Reconnaissance Program (NRP). Intelligence authorization legislation passed in July 2014 merged the Foreign Counterintelligence Program (FCIP) into the GDIP program. Table A-1 identifies eight nondefense NIP programs: the Central Intelligence Agency Program (CIAP); the CIA's Retirement and Disability System (CIARDS); the Office of the DNI (CMA); and the intelligence entities within the departments of Energy, Homeland Security, Justice, State, and the Treasury. Table A-1 identifies 10 MIP programs: the DIA MIP, NGA MIP, NRO MIP, NSA/CSS MIP, OSD MIP, USSOCOM MIP and service-specific MIP (Air Force MIP, Army MIP, Navy MIP, and Marine Corps MIP). Of the nine Combatant Commands (COCOMs) only USSOCOM has its own budget. The other COCOMs submit their budget requests through the military departments. Table A-2 illustrates that six IC components have both MIP and NIP funding sources. The directors of DIA, NGA, NRO, and NSA are "dual-hatted" as Program Managers for their NIP funds and Component Managers for their MIP funds. Exactly what goes into what budgetary pot is not precise. Those decisions are guided by what is known as the NIP MIP "Rules of the Road."

Two Intelligence Authorization Acts (IAAs) were passed in 2014. The IAA for Fiscal Year (FY) 2014 (P.L. 113-126) was passed in July and an IAA for FY2015 (P.L. 113-293) was passed in December. This report examines selected provisions in the legislation and provides an intelligence community framework in the Appendix.

CRS_RS21977

Current Situation Major Players and Market Shares The federal government has a long history of assisting farmers with obtaining loans for farming. This intervention has been justified at one time or another by many factors, including the presence of asymmetric information among lenders, asymmetric information between lenders and farmers, lack of competition in some rural lending markets, insufficient lending resources in rural areas compared to more populated areas, and the desire for targeted lending to disadvantaged groups (such as small farms or socially disadvantaged farmers). Several types of lenders make loans to farmers. Some are government entities or have a statutory mandate to serve agriculture. The one most controlled by the federal government is the Farm Service Agency (FSA) in the U.S. Department of Agriculture (USDA). It receives federal appropriations to make direct loans to farmers and to issue guarantees on loans made by commercial lenders to farmers who do not qualify for regular credit. FSA is a lender of last resort but also of first opportunity, because it targets loans or reserves funds for disadvantaged groups. The lender with the next-largest amount of government intervention is the Farm Credit System (FCS). It is a cooperatively owned and funded—but federally chartered—private lender with a statutory mandate to serve agriculture-related borrowers only. FCS makes loans to creditworthy farmers and is not a lender of last resort but is a government-sponsored enterprise (GSE). Third is Farmer Mac, another GSE that is privately held and provides a secondary market for agricultural loans. FSA, FCS, and Farmer Mac are described in more detail later in this report. Other lenders do not have direct government involvement in their funding or existence. These include commercial banks, life insurance companies, individuals, merchants, and dealers. Figure 1 shows that the FCS and commercial banks provide most of the farm credit (41% and 42% , respectively) followed by individuals and others (9.2%) and life insurance companies (3.5%; based on 2016 USDA data, the most recent year with such detail). FSA provides about 2.6% of the debt through direct loans. FSA also guarantees about another 4%-5% of the market through loans that are made by commercial banks and the FCS. The total amount of farm debt ($374 billion at the end of 2016) is concentrated relatively more in real estate debt (60%) than in non-real estate debt (40%). FCS is the largest lender for real estate (46%), and both commercial banks' and FCS's shares have grown as others' shares have decreased ( Figure 2 ). Commercial banks are the largest lender for non-real estate loans (49%), although FCS has gained share in recent years as the shares by others have decreased ( Figure 3 ). As the figures show, market shares among these lenders have changed over time. Commercial banks held relatively little farm real estate debt through 1985 but now hold a sizeable amount ( Figure 2 ). The share of loans from "individuals and others" has steadily decreased over time, with fewer private contracts for farm real estate and relatively less dealer financing in operating credits. FSA held a much larger share of farm debt during the farm financial crisis of the 1980s, but that ratio declined as the farm economy improved through the 1990s ( Figure 3 ). The Farm Balance Sheet As a whole, farm sector assets have remained strong despite pressure on other real estate sectors. The value of farm assets has grown steadily since the end of the 1980s, particularly since 2003. At the end of 2017, farm sector assets totaled $3.04 trillion. In 2018, USDA forecasts that farm assets will increase 1.6% ( Figure 4 ). The Federal Reserve has found declining land values in recent years but a small recovery through 2017. Total farm assets now exceed the previous peak from 1980 in inflation-adjusted terms. Real estate is about 83% of the total amount of farm assets; machinery and vehicles are the next-largest category at about 8% of the total. Farm debt reached a historic high of $385 billion at the end of 2017 ( Figure 5 ). USDA forecasts that debt will increase 1% in 2018. In inflation-adjusted terms, however, this level of debt is still well below the peak debt levels of the 1980s. Debts and assets can be compared in a single measure by dividing debts by assets—the debt-to-asset ratio. A lower debt-to-asset ratio generally implies less financial risk to the sector than a higher ratio. Farm debt-to-asset ratio levels have declined fairly steadily since the late 1980s after the farm financial crisis and reached a historic low of 11.3% in 2006. When farm asset growth paused in 2009-2010, the debt-to-asset ratio rose slightly to 12.9% ( Figure 6 ). After returning to a historic low in 2012, the debt-to-asset ratio rose to 12.7 in 2017 and is forecasted to remain steady in 2018. But as a whole, farms are not as highly leveraged as they were in the 1980s. Net farm income has become more variable, especially since 2000. After reaching then-historic highs in 2004, net farm income fell by a third in two years ( Figure 7 ). After peaking again in 2008, net farm income fell by 25% in 2009. New net farm income highs were set in 2011 and 2013, but USDA's February 2018 forecast of $60 billion would be a 52% decline from 2013. The relatively low net farm income forecasted for 2018 is 29% below the 10-year average. Government payments to farmers have also risen from decades ago but do not always offset the variability in net farm income. Fixed direct payments that were not tied to prices or revenue were the primary form of government payments in recent years. These payments supported farm income but did not necessarily help farmers manage risks. Figure 8 shows that more of net farm income is coming from the market rather than the government compared to the 1980s. Another indicator of leverage compares debt to net farm income. A lower debt-to-income ratio (with the ratio expressing the number of years of current income that debt represents) implies less financial risk. The farm-debt-to-net-farm-income ratio is more variable than the debt-to-asset ratio. It reached a 35-year low of 2.3 in 2004 and rose to 4.3 in 2009 before falling again to 2.5 in 2013. However, the decline in net farm income into 2018 has caused it to rise to a ratio of over 6, not seen since the 1980s. This is outside the typical range of 2-4 over the past 50-years and is leading to an observed rise in repayment risk ( Figure 9 ). Delinquency Rates on Farm Loans While the global financial crisis in 2008-2009 was slower to affect the balance sheets of farmers and agricultural lenders than the housing market, its presence was observed in agricultural lending. Credit standards were tightened (more documentation and oversight of loans was required), and lenders sometimes made less credit available to producers. As the lender of last resort, the FSA experienced significantly higher demand for its direct loans and guarantees. In 2007, 2008, and 2010, farm commodity prices were particularly high, supporting farm income at above-average levels. But in 2006 and 2009, net farm income fell by about one-third ( Figure 7 ), reducing some farmers' ability to repay loans, particularly in some farm sectors such as dairy, hogs, and poultry. Strong farm income from 2011 to 2013 improved most farmers' ability to repay loans. But weakness in farm income since 2014 has increased pressure on some farmers' repayment capacity. Delinquency rates include loans that are 30 days or more past due and still accruing interest, as well as those in nonaccrual status. The delinquency rates on residential mortgages and all loans appear to have reached a recent peak in mid-2010 (11.5% for residential mortgages and 7.4% for all commercial bank loans, Figure 10 ). The delinquency rates for agricultural loans did not begin to rise until mid-2008 after continuing to fall to historic lows while delinquencies were rising in residential mortgages and other loans. Moreover, the rate of increase in delinquencies on farm production loans at commercial banks was not as sharp as in the non-farm sectors and peaked in June 2010 at 3.3%. Delinquency rates on farm production loans at commercial banks returned to historic lows below 1% but have risen slightly since 2015 and appear to have stabilized in 2017. A more severe measure of loan performance is nonperforming loans. Nonperforming loans include nonaccrual loans and accruing loans 90 days or more past due. These loans are more in jeopardy than delinquent loans and represent a smaller subset of loans. Within the agricultural loan portfolio, the FCS nonperforming loan rate has maintained the levels of the mid-2000s that indicated that the system had recovered from the farm financial crisis of the 1980s. FCS nonperforming loans rose from 0.5% at the beginning of 2008 to a near-term peak of 2.8% on September 30, 2009, before decreasing to 0.73% at the end of 2015. While FCS nonperforming loans have risen slightly in 2016 and 2017, they remain below 0.85% into 2018 ( Figure 11 ). At commercial banks, nonperforming farm loans rose during the 2008-2010 financial crisis, recovered into 2015, but have risen again as declining farm income has stressed repayment. Nonperforming farm real estate loans at commercial banks rose from a low of 0.7% in December 2006 to 2.9% in March 2011 before declining to 1% as of December 31, 2015. Nonperforming farm production loans rose from a low of 0.6% in December 2006 to 2.4% in March 2010 before declining again to 0.4% as of December 31, 2014 ( Figure 11 ). Nonperforming loan rates at commercial banks have risen for farm real estate loans and farm production loans to about 1.5% and 1.3%, respectively, at the end of 2017. Description of Government-Related Farm Lenders USDA Farm Service Agency (FSA) FSA is considered a lender of last resort because it makes direct farm ownership and operating loans to family-sized farms that are unable to obtain credit elsewhere. FSA also guarantees timely payment of principal and interest on qualified loans made by commercial banks and the FCS. Farm bills modify the permanent authority in 7 U.S.C. 1921. In FY2017, an appropriation of $90 million in budget authority (plus $317 million for salaries and expenses) supported $8 billion of new direct loans and guarantees. Direct loans are limited to $300,000 per borrower ($50,000 for microloans), and guaranteed loans to $1,399,000 (adjusted for inflation). Direct emergency loans are available for disasters. Part of the FSA loan program is reserved for beginning farmers and ranchers (7 U.S.C. 1994 (b)(2)). For direct loans, 75% of the funding for farm ownership loans and 50% of operating loans are reserved for the first 11 months of the fiscal year. For guaranteed loans, 40% is reserved for ownership loans and farm operating loans for the first half of the fiscal year. Funds are also targeted to "socially disadvantaged" farmers by race, gender, and ethnicity (7 U.S.C. 2003). Using these provisions, FSA is also known as lender of first opportunity for many borrowers. Farm Credit System (FCS) Congress established the FCS in 1916 to provide a dependable and affordable source of credit to rural areas at a time when commercial lenders avoided farm loans. The FCS is neither a government agency nor guaranteed by the U.S. government but is a network of borrower-owned lending institutions operating as a GSE. It is not a lender of last resort; it is a for-profit lender with a statutory mandate to serve agriculture. Funds are raised through the sale of bonds on Wall Street. Four large banks allocate these funds to 69 credit associations that, in turn, make loans to eligible creditworthy borrowers. Statutes and oversight by the House and Senate Agriculture Committees determine the scope of FCS activity (Farm Credit Act of 1971, as amended; 12 U.S.C. 2001 et seq . ). Benefits such as tax exemptions are also provided. Eligibility is limited to farmers, certain farm-related agribusinesses, rural homeowners in towns under 2,500 population, and cooperatives. The federal regulator is the Farm Credit Administration (FCA). Farmer Mac Farmer Mac is a separate GSE that is a secondary market for agricultural loans. Some consider it related to the FCS in that FCA is its regulator and that it was created by the same legislation, but it is financially and organizationally a separate entity. Farmer Mac purchases mortgages from lenders and guarantees mortgage-backed securities that are bought by investors. Recent Congressional Issues for Agricultural Credit Competition Between Farm Credit System and Commercial Banks The FCS is unique among the GSEs because it is a retail lender making loans directly to farmers and thus is in direct competition with commercial banks. Because of this direct competition for creditworthy borrowers, the FCS and commercial banks often have an adversarial relationship in the policy realm. Commercial banks assert unfair competition from the FCS for borrowers because of tax advantages that can lower the relative cost of funds for the FCS. They often call for increased congressional oversight. The FCS counters by citing its statutory mandate (and limitations) to serve agricultural borrowers in good times and bad times. In contrast, FSA's loan programs are supported by both the FCS and commercial banks. FSA is not regarded as a competitor since it serves farmers who otherwise may not be able to obtain credit. Commercial banks and the FCS particularly support the FSA loan guarantee program because it allows them to make and service loans that otherwise might not be possible or at reduced risk. Credit Title in the Farm Bill Credit issues are not expected to be a major part of a farm bill in 2018 or to be particularly significant in the overall scope of the permanent agricultural credit statutes. Nonetheless, several issues could arise, such as (1) further targeting of FSA lending resources to beginning, socially disadvantaged, and/or veteran farmers and (2) raising the maximum loan size per borrower. The enacted 2014 farm bill ( P.L. 113-79 ) made relatively small policy changes to USDA's permanently authorized farm loan programs. It gave USDA discretion to recognize alternative legal entities and allowed alternatives to meet a farming experience requirement. It increased the maximum size of down-payment loans and eliminated term limits on guaranteed operating loans, among other changes. Maximum Loan Size per Borrower For the FSA farm loan program, the maximum loan size per borrower for direct loans is $300,000 (7 U.S.C. 1925(a)(2) for farm ownership loans, and 7 U.S.C. 1943(a)(1) for farm operating loans). It was last increased in the 2008 farm bill from $200,000. For FSA guaranteed loans, the maximum size per borrower is presently $1,399,000, which is a $700,000 base amount in statute increased annually by an inflation factor (same U.S. Code sections as for direct loans). It was last updated in statute in 1998, when the inflation factor was added. As the average size of farms has increased and farms have become more capital intensive, these loan limits may increasingly be seen as limiting opportunities for some farmers. Two bills in the 115 th Congress would raise these limits: S. 1736 would raise the maximum size of direct loans to $600,000. It would raise the maximum size of guaranteed loans to $2.5 million, indexed for inflation. S. 1921 would similarly raise the maximum size of direct loans to $600,000. It would raise the maximum size of guaranteed loans to $3 million, indexed for inflation. The bill would also update and increase the overall program authorization levels and provide mandatory funding. The FSA farm loan program has historically been funded with discretionary appropriations. Term Limits on USDA Farm Loans Congress added "term limits" to the USDA farm loan program in 1992 and 1996 to restrict eligibility for government farm loans and encourage farmers to "graduate" to commercial loans. The term limits place a maximum number of years that farmers are eligible for certain types of FSA loans or guarantees. However, until the end of 2010, Congress had suspended enforcement of term limits on guaranteed operating loans to prevent some farmers from being denied credit, and the 2014 farm bill eliminated that term limit ( Table 1 ).

The federal government provides credit assistance to farmers to help assure adequate and reliable lending in rural areas, particularly for farmers who cannot obtain loans elsewhere. Federal farm loan programs also target credit to beginning farmers and socially disadvantaged groups. The primary federal lender to farmers, though with a small share of the market, is the Farm Service Agency (FSA) in the U.S. Department of Agriculture (USDA). Congress funds FSA loans with annual discretionary appropriations—about $90 million of budget authority and $317 million for salaries—to support $8 billion of new direct loans and guarantees. FSA issues direct loans to farmers who cannot qualify for regular credit and guarantees the repayment of loans made by other lenders. FSA thus is called a lender of last resort. Of about $374 billion in total farm debt, FSA provides about 2.6% through direct loans and guarantees about another 4%-5% of loans. Another federally related lender is the Farm Credit System (FCS)—cooperatively owned and funded by the sale of bonds in the financial markets. Congress sets the statutes that govern the FCS banks and lending associations, mandating that they serve agriculture-related borrowers. FCS makes loans to creditworthy farmers and is not a lender of last resort. FCS accounts for 41% of farm debt and is the largest lender for farm real estate. Commercial banks are the other primary agricultural lender, holding slightly more than FCS with 42% of total farm debt. Commercial banks are the largest lender for farm production loans. Generally speaking, the farm sector's balance sheet has remained strong in recent years. While delinquency rates on farm loans increased from 2008 into 2010 during the global financial crisis, farmers and agricultural lenders did not face credit problems as severe as those of other economic sectors. Since 2010, loan repayment rates have improved, but recent weakness in farm income has begun to put pressure on some farmers' loan repayment capacity.

CRS_RS22743

T he issue of health care fraud and abuse has attracted a lot of attention in recent years, primarily because the financial losses attributed to it are estimated to be billions of dollars annually. Considering that the Centers for Medicare and Medicaid Services (CMS) is the largest purchaser of health care in the United States, and that Medicare and Medicaid combined pay about one-third of the nation's health expenditures, it is not surprising that these federal health programs have been considered prime targets for fraudulent activity. Accordingly, efforts to address this fraud and abuse continue to be a priority for Congress. The federal government has an array of statutes that it uses to fight health care fraud. This report provides a brief overview of some of the key federal statutes, including program-related civil and criminal penalties, the anti-kickback statute, the Stark law, and the False Claims Act, that are used to combat fraud and abuse in federal health care programs. Basic Civil and Criminal Penalties and Exclusions Title XI of the Social Security Act contains Medicare and Medicaid program-related anti-fraud provisions, which impose penalties and exclusions from federal health care programs on persons who engage in certain types of misconduct. Under Section 1128A of the Social Security Act, the Office of the Inspector General at the Department of Health and Human Services (OIG) is authorized to impose civil penalties and assessments on a person, including an organization, agency, or other entity, who engages in various types of improper conduct with respect to federal health care programs, including the imposition of penalties against a person who knowingly presents or causes to be presented to a federal or state employee or agent certain false or fraudulent claims. For example, penalties apply to services that were not provided as claimed, or claims that were part of a pattern of providing items or services that a person knows or should know are not medically necessary. In addition, certain payments made to physicians to reduce or limit services are also prohibited. This section provides for monetary penalties of up to $10,000 for each item or service claimed, up to $50,000 under certain additional circumstances, as well as treble damages. Section 1128B of the Social Security Act provides for criminal penalties involving federal health care programs. Under this section, certain false statements and representations, made knowingly and willfully, are criminal offenses. For example, it is unlawful to make or cause to be made false statements or representations in either applying for benefits or payments, or determining rights to benefits or payments under a federal health care program. In addition, persons who conceal any event affecting an individual's right to receive a benefit or payment with the intent to either fraudulently receive the benefit or payment (in an amount or quantity greater than that which is due), or convert a benefit or payment to use other than for the benefit of the person for which it was intended may be criminally liable. Persons who have violated the statute and have furnished an item or service under which payment could be made under a federal health program may be guilty of a felony, punishable by a fine of up to $25,000, up to five years imprisonment, or both. Other persons involved in connection with the provision of false information to a federal health program may be guilty of a misdemeanor and may be fined up to $10,000 and imprisoned for up to one year. One of the most severe sanctions available under the Social Security Act is the ability to exclude individuals and entities from participation in federal health care programs. Under Section 1128 of the Social Security Act, exclusions from federal health programs are mandatory under certain circumstances, and permissive in others (i.e., OIG has discretion in whether to exclude an entity or individual). Exclusion is mandatory for those convicted of certain offenses, including (1) a criminal offense related to the delivery of an item or service under Medicare, Medicaid, or a state health care program; (2) a criminal offense relating to neglect or abuse of patients in connection with the delivery of a health care item or service; or (3) a felony relating to the unlawful manufacture, distribution, prescription, or dispensing of a controlled substance. OIG has permissive authority to exclude an entity or an individual from a federal health program under numerous circumstances, including conviction of certain misdemeanors relating to fraud, theft, embezzlement, breach of fiduciary duty, or other financial misconduct; a conviction based on an interference with or obstruction of an investigation into a criminal offense; and revocation or suspension of a health care practitioner's license for reasons bearing on the individual's or entity's professional competence, professional performance, or financial integrity. The Anti-Kickback Statute In light of the concern that decisions of health care providers can be improperly influenced by a profit motive, and in order to protect federal health care programs from additional costs and overutilization, Congress enacted the anti-kickback statute. Under this criminal statute, it is a felony for a person to knowingly and willfully offer, pay, solicit, or receive anything of value (i.e., "remuneration") in return for a referral or to induce generation of business reimbursable under a federal health care program. The statute prohibits both the offer or payment of remuneration for patient referrals, as well as the offer or payment of anything of value in return for purchasing, leasing, ordering, or arranging for, or recommending the purchase, lease, or ordering of any item or service that is reimbursable by a federal health care program. Persons found guilty of violating the anti-kickback statute may be subject to a fine of up to $25,000, imprisonment of up to five years, and exclusion from participation in federal health care programs for up to one year. There are certain statutory exceptions to the anti-kickback statute. Under one exception, "remuneration" does not include a discount or other reduction in price obtained by a provider of services or other entity if the reduction in price is properly disclosed and reflected in the costs claimed or charges made by the provider or entity under a federal health care program. Another exception includes, under certain circumstances, amounts paid by a vendor of goods or services to a person authorized to act as a purchasing agent for a group of individuals that furnish services reimbursable by a federal health program. In addition to these exceptions, the Department of Health and Human Services' Office of Inspector General (OIG) has promulgated regulations that contain several "safe harbors" to prevent common business arrangements from being considered kickbacks. Safe harbors listed by regulation include certain types of investment interests, personal services and management contracts, referral services, and space rental or equipment rental arrangements. OIG has indicated that the safe harbor provisions are not indicative of the only acceptable business arrangements, and that business arrangements that do not comply with a safe harbor are not necessarily considered "suspect." Stark Law: Physician Self-Referrals Limitations on physician self-referrals were enacted into law in 1989 under the Ethics in Patient Referrals Act, commonly referred to as the "Stark law." The Stark law, as amended, and its implementing regulations prohibit certain physician self-referrals for designated health services (DHS) that may be paid for by Medicare or Medicaid. In its basic application, the Stark law provides that if (1) a physician (or an immediate family member of a physician) has a "financial relationship" with an entity, the physician may not make a referral to the entity for the furnishing of designated health services (DHS) for which payment may be made under Medicare or Medicaid, and (2) the entity may not present (or cause to be presented) a claim to the federal health care program or bill to any individual or entity for DHS furnished pursuant to a prohibited referral. It has been noted that the general idea behind the prohibitions in the Stark law is to prevent physicians from making referrals based on financial gain, thus preventing overutilization and increases in health care costs. A "financial relationship" under the Stark law consists of either (1) an "ownership or investment interest" in the entity or (2) a "compensation arrangement" between the physician (or immediate family member) and the entity. An "ownership or investment interest" includes "equity, debt, or other means," as well as "an interest in an entity that holds an ownership or investment interest in any entity providing the designated health service." A "compensation arrangement" is generally defined as an arrangement involving any remuneration between a physician (or an immediate family member of such physician) and an entity, other than certain arrangements that are specifically mentioned as being excluded from the reach of the statute. The Stark law includes a large number of exceptions, which have been added and expanded upon by a series of regulations. These exceptions may apply to ownership interests, compensation arrangements, or both. Violators of the Stark law may be subject to various sanctions, including a denial of payment for relevant services and a required refund of any amount billed in violation of the statute that had been collected. In addition, civil monetary penalties and exclusion from participation in Medicaid and Medicare programs may apply. A civil penalty not to exceed $15,000, and in certain cases not to exceed $100,000, per violation may be imposed if the person who bills or presents the claim "knows or should know" that the bill or claim violates the statute. False Claims Act The federal False Claims Act (FCA), codified at 31 U.S.C. Sections 3729-3733, is considered by many to be an important tool for combating fraud against the U.S. government. The FCA is a law of general applicability that is invoked frequently in the health care context. It has been reported that from January 2009 through the end of the 2015 fiscal year, the Justice Department used the False Claims Act to recover more than $16.5 billion in health care fraud cases. In general, the FCA imposes civil liability on persons who knowingly submit a false or fraudulent claim or engage in various types of misconduct involving federal government money or property. Health care program false claims often arise in terms of billing, including billing for services not rendered, billing for unnecessary medical services, double billing for the same service or equipment, or billing for services at a higher rate than provided ("upcoding"). Penalties under the FCA include a penalty of $5,500 to $11,000 for each false claim filed, plus additional damages. Civil actions may be brought in federal district court under the FCA by the Attorney General or by a person known as a relator (i.e., a "whistleblower"), for the person and for the U.S. government, in what is termed a qui tam action. The ability to initiate a qui tam action has been viewed as a powerful weapon against health care fraud, in that it may be initiated by a private party who may have independent knowledge of any wrongdoing. Popularity of qui tam actions brought under the FCA may be attributed partially to the fact that successful whistleblowers can receive between 15% and 30% of the monetary proceeds of the action or settlement that are recovered by the government.

A number of federal statutes aim to combat fraud and abuse in federally funded health care programs such as Medicare and Medicaid. Using these statutes, the federal government has been able to recover billions of dollars lost due to fraudulent activities. This report provides an overview of some of the more commonly used federal statutes used to fight health care fraud and abuse. Title XI of the Social Security Act contains Medicare and Medicaid program-related anti-fraud provisions, which impose civil penalties, criminal penalties, and exclusions from federal health care programs on persons who engage in certain types of misconduct. Penalties apply in circumstances where, among many other things, services were not provided as claimed, or claims were part of a pattern of providing items or services that a person knows or should know are not medically necessary. Under the federal anti-kickback statute, it is a felony for a person to knowingly and willfully offer, pay, solicit, or receive anything of value (i.e., "remuneration") in return for a referral or to induce generation of business reimbursable under a federal health care program. The statute prohibits both the offer or payment of remuneration for patient referrals, as well as the offer or payment of anything of value in return for purchasing, leasing, ordering, or arranging for, or recommending the purchase, lease, or ordering of any item or service that is reimbursable by a federal health care program. The Stark law and its implementing regulations prohibit physician self-referrals for certain health services that may be paid for by Medicare or Medicaid. Under the Stark law, if (1) a physician (or an immediate family member of a physician) has a "financial relationship" with an entity, the physician may not make a referral to the entity for the furnishing of these health services for which payment may be made under Medicare or Medicaid, and (2) the entity may not bill the federal health care program or any individual or entity for services furnished pursuant to a prohibited referral. The federal False Claims Act (FCA) imposes civil liability on persons who knowingly submit a false or fraudulent claim or engage in various types of misconduct involving federal government money or property. Health care program false claims often arise in billing, including billing for services not rendered, billing for unnecessary medical services, double billing for the same service or equipment, or billing for services at a higher rate than provided ("upcoding"). Civil actions may be brought in federal district court under the FCA by the Attorney General or by a person known as a relator (i.e., a "whistleblower"), for the person and for the U.S. government, in what is termed a qui tam action.

CRS_R44718

Introduction The 21 st Century Cures Act ( P.L. 114-255 ) was signed into law on December 13, 2016, by President Barack Obama. On N ovember 30, 2016, the House passed an amendment to the Senate amendment to H.R. 34 , the 21 st Century Cures Act, on a vote of 392 to 26. The bill was then sent to the Senate, where it was considered and passed, with only minor technical modification, on December 7, 2016, on a vote of 94 to 5. The law consists of three divisions: Division A—21 st Century Cures; Division B—Helping Families in Mental Health Crisis; and Division C—Increasing Choice, Access, and Quality in Health Care for Americans. CRS has published a series of reports on this law, one on each division. This report provides information on Division B of the law. Enactment of Division B is the culmination of a multiyear congressional effort dating back at least to December 2013, when the Helping Families in Mental Health Crisis Act of 2013 ( H.R. 3717 in the 113 th Congress) was introduced. In the 113 th Congress, H.R. 3717 did not have a Senate companion (although other mental health bills were introduced in both chambers). In the 114 th Congress, the Helping Families in Mental Health Crisis Act of 2015 ( H.R. 2646 ) was introduced in June 2015. It gained a Senate companion in August 2015, with the introduction of the Mental Health Reform Act of 2015 ( S. 1945 ). The more recent Mental Health Reform Act of 2016 ( S. 2680 ), introduced in March 2016, includes elements of the earlier S. 1945 ; the Mental Health Awareness and Improvement Act of 2015 ( S. 1893 ), which passed the Senate in December 2015; and other bills that were smaller in scope. The bulk of Division B represents a compromise between the Helping Families in Mental Health Crisis Act of 2015 ( H.R. 2646 RFS) and the Mental Health Reform Act of 2016 ( S. 2680 RS). Within the final title of Division B (Title XVI), Subtitle A represents a version of the Mental Health and Safe Communities Act of 2015 ( H.R. 3722 , S. 2002 ), and Subtitle B represents a version of the Comprehensive Justice and Mental Health Act of 2015 ( H.R. 1854 , S. 993 ). This report provides a brief summary of each provision of the Helping Families in Mental Health Crisis Act (Division B of P.L. 114-255 ), by title and subtitle. Within each title (or subtitle), major provisions are organized by topic. In some cases, each topic corresponds with a section in the act. In other cases, multiple sections address the same topic or one section addresses multiple topics. Throughout this report, clarity takes priority over consistency. For example, some summaries are more detailed than others where such detail is necessary to highlight important changes. Technical edits to redesignating sections, subsections, paragraphs, et cetera are generally not noted. Edits to clarify meaning or replace outdated terminology are not provided in detail. For example, provisions throughout Division B replace the term "substance abuse" with the term "substance use disorder." See below for a list of which CRS author covers which topics. The Appendix provides a list of abbreviations used throughout this report. Summary of Provisions Division B begins before Title VI with the short title (Section 6000), "Helping Families in Mental Health Crisis Reform Act of 2016." Title VI—Strengthening Leadership and Accountability Subtitle A—Leadership Subtitle A makes changes to the leadership, organization, and responsibilities of the Substance Abuse and Mental Health Services Administration (SAMHSA), the agency within the Department of Health and Human Services (HHS) that has primary responsibility for increasing access to community-based services to prevent and treat mental disorders and substance use disorders. Assistant Secretary for Mental Health and Substance Use Subtitle A (Sections 6001 and 6002) replaces the position of SAMHSA Administrator with a newly established Assistant Secretary for Mental Health and Substance Use (ASMHSU), to be appointed by the President and subject to Senate confirmation (as was the case with the Administrator). It expands (and otherwise revises) the list of responsibilities to be carried out by the HHS Secretary, acting through the newly established ASMHSU (formerly the Administrator). For example, the revised list of responsibilities requires collaboration with other federal agencies, including the Secretaries of Defense and Veterans Affairs, and the Attorney General. Subtitle A (Sections 6005 and 6006) requires the ASMHSU to develop and carry out a strategic plan, with specified contents, by the end of FY2018 and every four years thereafter. It changes the required contents of a biennial report concerning activities and progress; the ASMHSU must prepare the report, with specified contents, by the end of FY2020 and every two years thereafter. Both the strategic plan and the report on programs and activities must be submitted to specified congressional committees and posted on the agency website. Chief Medical Officer Subtitle A (Section 6003) establishes a new position of Chief Medical Officer, to be selected by the ASMHSU from among physicians with relevant experience, knowledge, and licensure. It specifies the duties of SAMHSA's Chief Medical Officer. Authorizations for SAMHSA's Centers Subtitle A (Section 6007) modifies the authorities for SAMHSA's Center for Mental Health Services, Center for Substance Abuse Prevention, and Center for Substance Abuse Treatment. Changes include increased requirements for collaboration (e.g., with relevant institutes of the National Institutes of Health [NIH]). Each center was, and remains, permanently authorized. Subtitle A (Section 6004) also provides permanent statutory authority for SAMHSA's Center for Behavioral Health Statistics and Quality (which was not previously authorized explicitly in statute) and specifies the responsibilities of its Director. Advisory Councils and Peer Review Groups Subtitle A (Sections 6008 and 6009) changes the membership requirements for SAMHSA's advisory councils and peer review groups. It includes the newly established Chief Medical Officer and the Directors of relevant NIH institutes as ex officio members of each advisory council. It requires that not less than half of appointed members of the advisory council for each of three centers—the Center for Mental Health Services, the Center for Substance Abuse Prevention, and the Center for Substance Abuse Treatment—shall have relevant clinical experience and training (i.e., a medical degree, a doctoral degree in psychology, or other specified advanced degree or certification). It also requires that not less than half of any peer review group reviewing a grant, contract, or cooperative agreement related to mental illness treatment shall have relevant experience and training, as specified. It requires the HHS Secretary, in consultation with the ASMHSU, to ensure broad geographic representation on peer review groups (to the extent possible). Emergency Response and Technical Changes Subtitle A (Section 6002) provides that funds made available for emergency response grants under Public Health Service Act (PHSA) Section 501 shall remain available through the end of the fiscal year following the fiscal year for which such amounts are appropriated, and makes numerous technical edits, such as updating terminology (e.g., replacing "illnesses" with "diseases or disorders"). Subtitle B—Oversight and Accountability Subtitle B creates new planning and evaluation requirements, changes reporting and accounting requirements for state-designated protection and advocacy systems, and requires a report by the Comptroller General on programs funded by SAMHSA's Protection and Advocacy for Individuals with Mental Illness (PAIMI) grants. Planning and Evaluation Subtitle B (Section 6021) requires the HHS Secretary, acting through the HHS Assistant Secretary for Planning and Evaluation (ASPE), to ensure efficient and effective planning and evaluation of programs and activities for the prevention and treatment of mental disorders and substance use disorders. It requires the ASPE, not later than 180 days after enactment, to develop an evaluation strategy that identifies priority programs for evaluation. It specifies some contents of the evaluation strategy, requires consultation with others inside and outside HHS, and requires the ASPE to make recommendations to Congress and the HHS Secretary on improving the quality of relevant programs and activities. Protection and Advocacy System Reporting and Accounting The Protection and Advocacy for Individuals with Mental Illness Act of 1986 (PAIMI Act, P.L. 99-319 , as amended) authorizes formula grants to state-designated protection and advocacy systems mandated to protect individuals with mental illness residing in care or treatment facilities from abuse, neglect, and violations of their civil rights. The PAIMI Act requires each protection and advocacy system to prepare an annual report on the system's activities, accomplishments, and expenditures and to transmit the report to the HHS Secretary and the head of the state mental health agency. It also requires the HHS Secretary to provide a biennial report to the President, Congress, and the National Council on Disability describing the goals and outcomes of specified programs for individuals with disabilities; it requires the Secretary to include in each such report a separate statement containing specified information. Subtitle B (Section 6022) requires each protection and advocacy system to make the annual report publicly available, in addition to transmitting the report to the Secretary and the head of the state mental health agency. It also specifies inclusion of additional information in the separate statement in the HHS Secretary's biennial report. The separate statement must contain "a detailed accounting" of the protection and advocacy system's spending, broken down by funding source: federal government, state government, local government, or a private entity. GAO Report Subtitle B (Section 6023) requires the Comptroller General, not later than 18 months after the date of enactment, to submit a report to specified congressional committees on programs funded by PAIMI grants. It requires the Comptroller General to consult with the HHS Secretary and the ASMHSU in conducting the evaluation, and it specifies the contents of the report. Subtitle C—Interdepartmental Serious Mental Illness Coordinating Committee Interdepartmental Serious Mental Illness Coordinating Committee Subtitle C (Section 6031) requires the HHS Secretary (or a designee), not later than three months after enactment, to establish the "Interdepartmental Serious Mental Illness Coordinating Committee." It requires the committee to produce a report—not later than one year after enactment and again five years after enactment—summarizing advances, evaluating federal programs, and making recommendations related to services for adults with serious mental illness and children with serious emotional disturbances. It specifies that the committee shall terminate six years after the date on which it is established; however, it also requires the HHS Secretary, upon submission of the committee's second report, to make a recommendation to Congress as to whether operation of the committee should be extended. It includes requirements regarding committee membership, members' terms, and the frequency of committee meetings. It allows the committee to establish working groups. It specifies that the provisions of the Federal Advisory Committee Act shall apply to the committee except as provided in the section. Title VII—Ensuring Mental and Substance Use Disorders Prevention, Treatment, and Recovery Programs Keep Pace with Science and Technology Title VII establishes within SAMHSA a "National Mental Health Policy Laboratory," codifies SAMHSA's National Registry of Evidence-based Programs and Practices (which was not previously explicitly authorized in statute), and authorizes appropriations for SAMHSA's Programs of Regional and National Significance (for which authorizations of appropriations had expired). National Mental Health Policy Laboratory Prior to enactment of P.L. 114-255 , SAMHSA's Office of Policy, Planning, and Innovation, which was not explicitly authorized in statute, facilitated the adoption of evidence-based policies and practices to improve behavioral health services outcomes. Title VII (Section 7001) adds a new PHSA Section 501A establishing within SAMHSA a "National Mental Health Policy Laboratory," to begin implementation not later than January 1, 2018. It requires the laboratory to carry out specified responsibilities, including "the authorities and activities that were in effect for the Office of Policy, Planning, and Innovation" before enactment of P.L. 114-255 . New PHSA Section 501A allows the laboratory, in carrying out its responsibilities, to give preference to some types of service delivery models (e.g., those that improve coordination between mental health care providers and physical health care providers). It requires the laboratory to consult with SAMHSA's Chief Medical Officer, representatives of relevant NIH institutes, other federal agencies as appropriate, clinical and analytical experts in specified fields, and other individuals and agencies as determined appropriate by the ASMHSU. New PHSA Section 501A allows the ASMHSU, in coordination with the laboratory, to award grants for (1) evaluating promising service delivery models and (2) expanding the use of evidence-based programs (as specified). It requires the ASMHSU, in awarding such grants, to consult with SAMHSA's Chief Medical Officer, advisory councils, and relevant NIH institutes as appropriate. It authorizes to be appropriated $7 million for the period of FY2018–FY2020 to carry out each of the two grant programs (i.e., $14 million total). National Registry of Evidence-based Programs and Practices Prior to enactment of P.L. 114-255 , SAMHSA maintained a searchable online database of evidence-based programs and practices for the prevention and treatment of mental disorders and substance use disorders. The database, called the National Registry of Evidence-based Programs and Practices (NREPP), was not explicitly authorized in statute. Title VII (Section 7002) adds a new PHSA Section 543A essentially codifying the NREPP (but not by name). New PHSA Section 543A requires the ASMHSU, as appropriate, to post on SAMHSA's website "information on evidence-based programs and practices" for the purpose of improving stakeholders' access to such information. New PHSA Section 543A requires the ASMHSU to review applications before posting programs and practices on the website. It allows the ASMHSU to establish an application period and to prioritize the review of programs and practices to address gaps in information identified by the ASMHSU, the National Mental Health and Substance Use Policy Laboratory, or the ASPE. It requires the ASMHSU to provide notice of the application period in the Federal Register ; the notice may solicit applications for programs and practices meeting criteria for priority review. New PHSA Section 543A allows the ASMHSU to establish minimum requirements for applications and to use a rating system that takes into account the strength of evidence and the methodological rigor of the supporting research. It requires the ASMHSU to make publicly available the evaluation metrics and resulting ratings of applications. Programs of Regional and National Significance SAMHSA administers numerous grants and activities under authorities commonly known as Programs of Regional and National Significance (PRNS) in three areas: mental health, substance abuse treatment, and substance abuse prevention. Prior to enactment of P.L. 114-255 , authorizations of appropriations for PRNS had expired; however, programs operating under their general authorities have continued to receive funding through the annual appropriations process. Title VII (Sections 7003 through 7005) authorizes appropriations for mental health PRNS, substance abuse treatment PRNS, and substance abuse prevention PRNS. It authorizes to be appropriated $395 million (rounded) annually for each of FY2018–FY2022 to carry out mental health PRNS. It authorizes to be appropriated $334 million (rounded) annually for each of FY2018–FY2022 to carry out substance abuse treatment PRNS. It authorizes to be appropriated $211 million (rounded) annually for each of FY2018–FY2022 to carry out substance abuse prevention PRNS. It also makes technical edits to the mental health, substance abuse treatment, and substance abuse prevention PRNS authorities. Title VIII—Supporting State Prevention Activities and Responses to Mental Health and Substance Use Disorder Needs Title VIII focuses on SAMHSA's two biggest programs: the Community Mental Health Services Block Grant (MHBG, $533 million in FY2016) and the Substance Abuse Prevention and Treatment Block Grant (SABG, $1.9 billion in FY2016). The two block grants are authorized under PHSA Title XIX, Part B, Subpart I (MHBG) and Subpart II (SABG). Provisions in PHSA Title XIX, Part B, Subpart III also apply to the MHBG and the SABG. Community Mental Health Services Block Grant (MHBG) Each state may distribute MHBG funds to local government entities and nongovernmental organizations in accordance with a required state plan for providing comprehensive community mental health services for adults with serious mental illness and children with serious emotional disturbance (and subject to other federal requirements). Prior to enactment of P.L. 114-255 , PHSA Section 1911(b) listed three purposes for which states may expend MHBG funds, each of which refers explicitly to the required state plan. Title VIII (Section 8001) adds a new purpose, which is placed first and is more general: "providing community mental health services for adults with a serious mental illness and children with a serious emotional disturbance" (as defined). Title VIII (Section 8001) amends PHSA Section 1912(b), which lays out criteria for the state plan. It specifies that the state plan must be submitted to the HHS Secretary every two years. (The frequency was not previously specified in statute.) It preserves existing requirements for the content of the state plan and adds several new requirements. For example, it requires the state plan to identify a "single State agency" responsible for administering the grant—something SAMHSA already requires of states but that was not previously in statute. Some of the new requirements focus on efficiency (or cost-efficiency), effectiveness, and quality of services. Title VIII (Section 8001) also amends PHSA 1915(b), which requires states (as a condition of receiving MHBG funds) to maintain spending on community mental health services and allows the HHS Secretary to waive that requirement under certain circumstances. It adds a new provision giving the HHS Secretary 120 days to approve or deny a request for such a waiver; this provision parallels one already in place for the SABG. For a state that fails to maintain spending at required level (absent a waiver), it allows the state to request a negotiated agreement (to be approved by the HHS Secretary and carried out under guidelines issued by the HHS Secretary) rather than have its MHBG allotment reduced. Title VIII (Section 8001) amends PHSA Section 1920 to require a state to expend at least 10% of its block grant funds each fiscal year (or at least 20% by the end of the succeeding fiscal year) to support evidence-based programs to address early serious mental illness. It also makes several technical edits and authorizes to be appropriated $533 million (rounded) annually for each of FY2018–FY2022 to carry out the MHBG. Substance Abuse Prevention and Treatment Block Grant (SABG) Each state may distribute SABG funds to local government entities and nongovernmental organizations in accordance with a required state plan for providing substance use disorder prevention and treatment services (and subject to other federal requirements). Title VIII (Section 8002) amends PHSA Section 1932(b), which lays out criteria for the state plan. It preserves existing requirements for the content of the state plan and adds several new requirements. For example, it requires the state plan to identify a "single State agency" responsible for administering the grant—something SAMHSA already requires of states but that was not previously in statute. It adds a requirement for the state plan to include information on the need for substance use disorder prevention and services (and repeals PHSA Section 1929, which previously allowed the HHS Secretary to make an SABG grant to a state only if the state submitted a statement of needs). Title VIII (Section 8002) amends PHSA Section 1930, which requires states (as a condition of receiving SABG funds) to maintain spending on substance use disorder services and allows the HHS Secretary to waive that requirement under certain circumstances. For a state that fails to maintain spending at required level (absent a waiver), it allows the state to request a negotiated agreement (to be approved by the HHS Secretary and carried out under guidelines issued by the HHS Secretary) rather than have its SABG allotment reduced. In addition, Title VIII (Section 8002) eliminates a separate maintenance of effort requirement related to tuberculosis and HIV. Title VIII (Section 8002) amends PHSA Section 1928(b) by replacing a requirement for states to make available continuing education with a more detailed requirement for states to ensure opportunities for ongoing professional development, including specific topics (e.g., performance-based accountability). It preserves a requirement for states to improve the treatment referral process but strikes language in PHSA Section 1928(a) that requires such improvements "relative to fiscal year 1992." Title VIII (Section 8002) makes several technical edits and authorizes to be appropriated $1.9 billion (rounded) annually for each of FY2018–FY2022 to carry out the SABG. Public Health Emergencies Title VIII (Section 8003) adds a new PHSA Section 1957, which allows the HHS Secretary, in the case of a public health emergency, to offer a state flexibility in meeting deadlines or other requirements for the MHBG, the SABG, SAMHSA's Projects for Assistance in Transition from Homelessness grant, or SAMHSA's Protection and Advocacy for Individuals with Mental Illness grant. Joint MHBG/SABG Applications Title VIII (Section 8003) adds a new PHSA Section 1958, which allows the HHS Secretary, acting through the ASMHSU, to permit a joint application for the MHBG and SABG; this section codifies the joint application SAMHSA already allows in practice. Study of Block Grant Formulas Each of the SAMHSA-administered block grants is distributed according to a formula that takes into account the population at risk, cost of services, and available resources. Title VIII (Section 8004) requires the HHS Secretary, acting through the ASMHSU, to conduct a study on the formulas for distributing MHBG and SABG funds and, not later than two years after enactment, to submit to specified congressional committees a report on the findings and recommendations of the study. Section 8004 specifies the contents of the study and requires that the study be conducted through a grant, contract, or agreement with a third party. Title IX—Promoting Access to Mental Health and Substance Use Disorder Care Subtitle A—Helping Individuals and Families Changes to Existing Programs and Activities Treatment Systems for Homeless PHSA Section 506 authorizes a SAMHSA-administered program commonly known as Treatment Systems for Homeless. PHSA Section 506 requires the HHS Secretary to award grants, contracts, and cooperative agreements to eligible entities, as specified, to provide mental health and substance abuse services to homeless individuals. The section specifies granting preferences, conditions for services provided under the grant, and terms of awards, among other factors. Subtitle A (Section 9001) makes technical edits to PHSA Section 506 (e.g., replacing "substance abuse" with "substance use disorder"). It authorizes to be appropriated $41 million (rounded) annually for each of FY2018-FY2022. Criminal and Juvenile Justice Programs PHSA Section 520G authorizes a SAMHSA-administered program commonly known as Criminal and Juvenile Justice Programs. PHSA Section 520G requires the HHS Secretary to make grants to states, political subdivisions of states, Indian Tribes, and Tribal Organizations, directly or through agreements, for jail diversion programs (i.e., programs to divert individuals with mental illness from the criminal justice system to community-based services). Subtitle A (Section 9002) amends PHSA Section 520G to require the HHS Secretary to give special consideration, as appropriate, to entities supporting jail diversion services for veterans. It adds developing programs to divert individuals prior to booking or arrest as a permissible use of funds. It makes several technical edits (e.g., updating definitions). It authorizes to be appropriated $4 million (rounded) annually for each of FY2018-FY2022. Primary and Behavioral Health Care Integration PHSA Section 520K authorizes a SAMHSA-administered program commonly known as Primary and Behavioral Health Care Integration. Prior to enactment of P.L. 114-255 , PHSA Section 520K required the HHS Secretary, acting through the SAMHSA Administrator, to fund demonstration projects to provide coordinated and integrated mental health and primary care services. Eligible entities were community-based mental health programs. The target population was adults with mental illnesses and co-occurring chronic diseases. It included various other requirements (e.g., application, allowable uses of funds, and reporting). Subtitle A (Section 9003) replaces the text of PHSA Section 520K to establish a similar program. It renames the section "Integration Incentive Grants and Cooperative Agreements." Major differences include that it authorizes rather than requires these grants, does not reference the SAMHSA Administrator, and makes eligible entities state agencies in collaboration with qualified community programs. It expands the target population to include children and adolescents with serious emotional disturbance who have co-occurring physical health conditions or chronic diseases, adults with serious mental illness who have co-occurring physical health conditions or chronic diseases, and individuals with substance use disorders. It also includes various other requirements that differ from the prior program, such as its application procedures, reporting requirements, and the technical assistance that the HHS Secretary is authorized to provide. It authorizes to be appropriated $52 million (rounded) annually for each of FY2018-FY2022. Projects for Assistance in Transition from Homelessness PHSA Title V, Part C (Sections 521-535) authorizes a SAMHSA-administered program commonly known as Projects for Assistance in Transition from Homelessness. The program awards formula grants to states to provide outreach, support services, and mental health and alcohol and drug treatment services to homeless individuals with serious mental illness (with or without co-occurring substance use disorders) or those who are at risk of becoming homeless. Prior to enactment of P.L. 114-255 , PHSA Title V, Part C, required the HHS Secretary, acting through specified NIH institutes, to provide technical assistance to eligible entities. It authorized the formula grant program for FY1991-FY1994 and authorized appropriations for FY2001-FY2003; however, the program has continued to receive funding through the annual appropriations process. Subtitle A (Section 9004) amends PHSA Section 521 to authorize the formula grants for FY2018-FY2022. It requires the ASMHSU, not later than two years after enactment, to conduct a study of the allotment formula and to submit a report to Congress. It requires the HHS Secretary to provide technical assistance acting through the ASMHSU (rather than NIH institutes). It defines the term "substance use disorder services" (by reference) and makes technical edits (e.g., replacing "substance abuse" with "substance use disorder"). It authorizes to be appropriated $65 million (rounded) annually for each of FY2018-FY2022. Garrett Lee Smith (GLS) Suicide Prevention Resource Center PHSA Section 520C authorizes a SAMHSA-administered program commonly known as the Garrett Lee Smith (GLS) Suicide Prevention Resource Center. Prior to enactment of P.L. 114-255 , PHSA Section 520C authorized four additional centers that were never funded. Subtitle A (Section 9008) amends PHSA Section 520C to require the HHS Secretary, acting through the ASMHSU, to establish one technical assistance center focused on suicide prevention (i.e., the one existing center). It expands the existing program's focus from youth suicides to suicides among all ages, particularly high-risk groups. It requires the HHS Secretary, not later than two years after enactment, to submit to Congress a report on the activities carried out by the center. It authorizes to be appropriated $6 million (rounded) annually for each of FY2018–FY2022 for the center. GLS Youth Suicide Prevention State Grants PHSA Section 520E authorizes a SAMHSA-administered program commonly known as the GLS Youth Suicide Prevention State Grants. Prior to enactment of P.L. 114-255 , PHSA Section 520E required the HHS Secretary, acting through the SAMHSA Administrator, to award grants or cooperative agreements for statewide or tribal strategies targeting suicide prevention among youth. It specified that each state may receive only one grant or cooperative agreement. It authorizes appropriations through FY2007 and specified funding preferences that would be applied if less than $3.5 million was appropriated in any given fiscal year. Congress has continued to provide funding for the program in annual appropriations acts. Subtitle A (Section 9008) amends PHSA Section 520E in several places. It adds a requirement that the HHS Secretary consider the need of the applicant (e.g., rates of suicide) in awarding grants. It renews a reporting requirement by making the report due to congressional committees not later than two years after enactment. It eliminates the requirement that was previously in effect if the program's appropriation was less than $3.5 million in any fiscal year. It makes technical edits (e.g., replacing "substance abuse" with "substance use disorder"). It authorizes to be appropriated $30 million annually for each of FY2018-FY2022. Evidence-Based Practices for Older Adults PHSA Section 520A authorizes SAMHSA's mental health programs of regional and national significance. PHSA Section 520A(e) requires the HHS Secretary to establish programs for the purpose of disseminating and applying findings of other programs (as specified). Subtitle A (Section 9012) amends PHSA Section 520A(e) to require the HHS Secretary to provide technical assistance to grantees and to disseminate to non-grantees information about evidence-based practices for preventing and treating mental disorders (including those with co-occurring substance use disorders) among geriatric populations. National Violent Death Reporting System Under the authority in PHSA Title III, the Centers for Disease Control and Prevention (CDC) administers the National Violent Death Reporting System, which includes surveillance data from 42 states on violent deaths that have occurred (e.g., homicides and suicides). Subtitle A (Section 9013) encourages the HHS Secretary, acting through the CDC Director, to improve the National Violent Death Reporting System by including additional states. It specifies that reporting to this system is voluntary for states. Assisted Outpatient Treatment for Individuals with Serious Mental Illness The Protecting Access to Medicare Act (PAMA, P.L. 113-93 ) Section 224 authorizes a SAMHSA-administered program commonly known as Assisted Outpatient Treatment for Individuals with Serious Mental Illness. Prior to enactment of P.L. 114-255 , PAMA Section 224 required the HHS Secretary to establish a four-year pilot program to award no more than 50 grants each year to eligible entities to support implementation of new assisted outpatient treatment programs for individuals with serious mental illness. It limited grant amounts to not exceed $1 million in each year. It authorized to be appropriated $15 million annually for each of FY2015-FY2018. Subtitle A (Section 9014) amends PAMA Section 224 to extend the program's authorization through FY2022. It authorizes to be appropriated $15 million annually for each of FY2015-FY2017, $20 million for FY2018, $19 million annually for each of FY2019-FY2020, and $18 million annually for each of FY2021-FY2022. Sober Truth on Preventing Underage Drinking PHSA Section 519B authorizes a SAMHSA-administered program commonly known as the Sober Truth on Preventing Underage Drinking Act (STOP Act). Prior to enactment of P.L. 114-255 , PHSA Section 519B authorized a range of activities aimed at reducing underage drinking. It authorized to be appropriated separate amounts for each activity annually through FY2010, including (among other activities) (1) $1 million to support an Interagency Coordinating Committee on the Prevention of Underage Drinking and an annual report on state underage drinking prevention and enforcement activities; (2) $1 million for a National Media Campaign to Prevent Underage Drinking; (3) $5 million for ''enhancement grants'' aimed at maximizing the effectiveness of community-wide approaches to preventing and reducing underage drinking; and (4) $6 million for research on underage drinking. For each of the listed activities, Subtitle A (Section 9016) authorizes to be appropriated the same amount annually for each of FY2018-FY2022. Subtitle A (Section 9016) adds a new PHSA Section 519B(d), which allows the ASMHSU to award grants to support implementation of practices for reducing the prevalence of underage drinking. Codification of Existing Programs and Activities Suicide Prevention Lifeline Prior to enactment of P.L. 114-255 , SAMHSA funded the National Suicide Prevention Lifeline (1-800-273-8255), which was not explicitly authorized in statute but operated under SAMHSA's mental health programs of regional and national significance (PHSA Section 520A). The National Suicide Prevention Lifeline provides confidential, free, 24-hour-a-day, 365-day-a-year support for people who are in crisis or experiencing emotional distress. Subtitle A (Section 9005) adds a new PHSA Section 520E-3 requiring the HHS Secretary to maintain the existing National Suicide Prevention Lifeline authorized under Section 520A. It authorizes appropriations of $7 million (rounded) annually for each of FY2018-FY2022. National Helpline Prior to enactment of P.L. 114-255 , SAMHSA funded the National Helpline, also known as the Treatment Referral Routing Service, which was not explicitly authorized in statute. The National Helpline provides a confidential, free, 24-hour-a-day, 365-day-a-year referrals to local treatment facilities, support groups, and community-based organizations to individuals and family members facing mental and/or substance use disorders. Subtitle A (Section 9006) creates a new PHSA Section 520E-4 requiring the HHS Secretary, acting through the ASMHSU, to maintain the existing Treatment and Referral Routing Services. It specifies the protocol that the Secretary should follow including the contact included in the routing service, how information is made available, and how information is removed from the routing service. It also states that nothing in the new section prevents the ASMHSU from using any unobligated amounts to maintain the Routing Service. New Programs and Activities Strengthening Community Crisis Response Systems Prior to enactment of P.L. 114-255 , PHSA Section 520F authorized a grant program that had not been funded. It required the HHS Secretary to award grants to support the designation of hospitals and health centers as emergency mental health centers (as defined). It specified eligible entities, application procedures, permissible uses of funds, and a required evaluation. It authorized appropriations through FY2003. Subtitle A (Section 9007) replaces PHSA Section 520F with new language that requires the HHS Secretary to award competitive grants (1) to states, localities, Indian Tribes, and Tribal Organizations to enhance community-based crisis response systems (as defined); or (2) to states to develop, maintain, or enhance a database of beds at specified inpatient behavioral health treatment facilities. It specifies application procedures, defines the requirements of a database of inpatient beds, and requires an evaluation. It authorizes to be appropriated $13 million (rounded) for the period of FY2018-FY2022 to carry out the program. Adult Suicide Prevention Subtitle A (Section 9009) authorizes the ASMHSU to award five-year grants to eligible entities as described for suicide prevention efforts amongst adults aged 25 and older, as specified. It requires the ASMHSU to evaluate grant activities and provide appropriate information, training, and technical assistance to grantees. It authorizes to be appropriated $30 million for the period of FY2018-FY2022 to carry out the program. Assertive Community Treatment Subtitle A (Section 9015) adds a new PHSA Section 520M requiring the ASMHSU to award grants to support assertive community treatment programs for individuals with serious mental illness. Assertive community treatment is designed to support community living for individuals with the most severe functional impairments associated with mental illness. Such individuals tend to need services from multiple providers (e.g., physicians and social workers) and multiple systems (e.g., social services, housing services, and health care). In the assertive community treatment model, a multidisciplinary team is available around the clock to deliver a wide range of services in an individual's home or other community settings. Subtitle A (Section 9015) specifies the entities eligible for these grants and required "additional activities," including a report to Congress and technical assistance for grantees. It authorizes to be appropriated $5 million for the period of FY2018-FY2022, of which no more than 5% of funds are to be used for carrying out the specified "additional activities." Mental Health Awareness Training Prior to enactment of P.L. 114-255 , PHSA Section 520J authorized a grant program that had not been funded. It required the HHS Secretary to award grants to train emergency services personnel to identify and appropriately respond to individuals with mental illness (among other purposes). It authorized appropriations through FY2003. Subtitle A (Section 9010) makes a number of changes to PHSA Section 520J, including expanding the permissible uses of funds to include recognizing mental illness, resources available for individuals with mental illness, and safely de-escalating crisis situations involving individuals with mental illness. It authorizes to be appropriated $15 million (rounded) annually for each of FY2018-FY2022. Repeals of Unfunded Programs and Activities Subtitle A (Section 9017) repeals the authorizations for several grant programs that have never received funding: PHSA Section 514, "Methamphetamine and Amphetamine Treatment Initiative" PHSA Section 514A, "Early Intervention Services for Children and Adolescents" PHSA Section 517, "Prevention, Treatment, And Rehabilitation Model Projects for High Risk Youth" PHSA Section 519A, "Grants for Strengthening Families" PHSA Section 519C, "Services for Individuals with Fetal Alcohol Syndrome" PHSA Section 519E, "Prevention of Methamphetamine and Inhalant Abuse and Addiction" PHSA Section 520B, "National Centers of Excellence for Depression" PHSA Section 520D, "Services for Youth Offenders" PHSA Section 520H, "Improving Outcomes for Children and Adolescents Through Services Integration Between Child Welfare and Mental Health Services." Sense of Congress Prioritizing American Indians and Alaska Native Youth Within Suicide Prevention Programs Subtitle A (Section 9011) presents findings related to suicide among American Indian and Alaska Native youth and expresses the sense of Congress that the HHS Secretary, in carrying out programs for suicide prevention and intervention, "should prioritize programs and activities for populations with disproportionally high rates of suicide, such as American Indian and Alaska Natives." Subtitle B—Strengthening the Health Care Workforce Changes to Existing Programs and Activities Mental and Behavioral Health Training Grants PHSA Section 756 authorizes a program commonly known as Mental and Behavioral Health Training Grants, which is administered by the Health Resources and Services Administration (HRSA). It allows the HHS Secretary to award grants to eligible entities to support student recruitment, education, and clinical experiences in mental and behavioral health. Prior to enactment of P.L. 114-255 , PHSA Section 756(a) eligible entities included (1) social work programs offering a bachelor's degree or higher, as specified; (2) psychology programs offering a master's degree or higher, as specified; (3) accredited educational or professional training programs in specified disciplines that are establishing or expanding field placements in child and adolescent mental health; and (4) state-licensed mental health organizations paying for preservice or in-service training of paraprofessionals in child and adolescent mental health. Subtitle B (Section 9021) amends PHSA Section 756(a) to (among other changes) eliminate bachelor's degree programs in social work and master's degree programs in psychology from the list of eligible entities; make the descriptions of eligible social work programs and psychology programs more parallel; add occupational therapy to the list of eligible disciplines; specify that psychiatric nursing may include master's and doctoral-level training; and eliminate the focus on child and adolescent mental health as a requirement (but retain it as an included or preferred focus area). Subtitle B (Section 9021) also struck language regarding penalties imposed on institutions that violate the terms of their grant agreements and added language requiring eligible institutions to demonstrate their ability to recruit and place students in areas with high need and high demand populations. It also added language specifying granting priorities and requiring a new report to Congress that will include certain specified elements. Prior to enactment of P.L. 114-255 , PHSA Section 756 authorized appropriations through FY2013; however, Congress has continued to provide funding for the program in annual appropriations acts. Subtitle B (Section 9021) authorizes to be appropriated $50 million (allocated amongst the programs as specified) annually for each of FY2018-FY2022. National Health Service Corps PHSA Section 331 authorizes a HRSA-administered program commonly known as the National Health Service Corps (NHSC) to provide primary health services in health professional shortage areas. In addition, it authorizes the HHS Secretary to provide scholarships and loan repayments to corps members in exchange for providing primary health services in such areas. PHSA Section 338B requires the HHS Secretary to establish the NHSC loan repayment program, which provides loan repayment services to trained health professionals, including psychiatrists. Subtitle B (Section 9023) requires the HRSA Administrator to clarify that child and adolescent psychiatrists are eligible for the NHSC loan repayment program. Minority Fellowship Program The SAMHSA-administered Minority Fellowship Program provides grants to professional associations (e.g., the American Psychiatric Association and the American Nurses Association) to offer stipends to minority doctoral students who are studying for degrees in a mental or behavioral health profession. The program is an agency-wide initiative that is not explicitly authorized; instead, it operates under the general authorities for mental health, substance abuse prevention, and substance abuse treatment programs of regional and national significance (PHSA Sections 509, 516, and 520A). Subtitle B (Section 9023) provides explicit authorization for the Minority Fellowship Program. It adds a new PHSA Section 597 requiring the HHS Secretary to maintain a "Minority Fellowship Program" to award fellowships, which may include stipends, for post-baccalaureate training for mental health professionals in the fields of psychiatry, nursing, social work, marriage and family therapy, mental health counseling, and substance use disorder and addiction counseling. It authorizes to be appropriated $13 million (rounded) annually for each of FY2018-FY2022. Liability Protections for Health Professional Volunteers at Community Health Centers PHSA Section 224 provides certain health care entities (such as health centers funded under PHSA Section 330 and free clinics) with liability protection from medical malpractice claims under the Federal Tort Claims Act (FTCA, 42 U.S.C. §233). FTCA coverage applies to the entities' employees, board members, and certain contractors; however, it does not extend to health care providers who volunteer their services at health centers or free clinics. Subtitle B (Section 9025) adds a new subsection (q) to PHSA Section 224 to extend federal malpractice liability coverage to health care professional volunteers by deeming them to be employees of the Public Health Service in certain cases. To be deemed to be an employee of the Public Health Service under this provision, volunteers who are providing specified services at health centers would be required to meet specified requirements, as would the entities where they are volunteering. Section 9025 also requires the U.S. Attorney General, in consultation with the HHS Secretary, to provide an annual report that estimates the cost of claims incurred by the individuals deemed eligible for FTCA coverage by this subsection. It requires the Secretary to transfer the amount estimated in the required report to the Treasury by December 31, for each fiscal year, beginning October 1, 2017. The provision also permits the HHS Secretary to issue regulations to carry out the new subsection and to report to Congress. This authority will sunset on October 1, 2022. New Programs and Activities Training Demonstration Program PHSA Title VII authorizes several HRSA-administered health workforce programs, including some that target training the behavioral health workforce specifically (e.g., the Mental and Behavioral Health Training Grants authorized by PHSA Section 756 described above). Subtitle B (Section 9022) adds a new PHSA Section 760, requiring the HHS Secretary to establish a demonstration program that awards five-year grants to eligible entities to (1) support training in underserved community-based settings that integrate primary care and mental and substance use disorder treatment for psychiatry residents and fellows, nurse practitioners, physician assistants, and social workers, and (2) establish, maintain, or improve academic units or programs that provide training for students or faculty in the ability to recognize, diagnose, and treat mental and substance use disorders or develop evidence-based practice or recommendations for curricula content standards. Subtitle B (Section 9022) also specifies acceptable use of grant funds, eligible entities, granting priority, required studies and reports. It authorizes to be appropriated $10 million annually for each of FY2018-FY2022 to carry out the demonstration program Workforce Reports HRSA administers the National Center for Health Workforce Analysis (42 U.S.C. §294q), which regularly examines the health workforce and makes its analyses and reports publicly available. HRSA released its projections on the supply and demand for behavioral health practitioners from 2013-2025 in November 2016. Subtitle B (Section 9026) requires the HRSA Administrator, in consultation with the ASMHSU, not later than two years after enactment, to conduct and make publicly available a study on the mental health and substance use disorder workforce that contains certain specified elements. Subtitle B (Section 9026) also requires the U.S. Comptroller General to conduct a study on peer-support specialist programs in up to 10 states that receive SAMHSA funding for peer-support specialist programs. It specifies the contents of the study, the committees that will receive the study, and specifies that the study is to be completed not later than two years after enactment. Subtitle C—Mental Health on Campus Improvement Changes to Existing Programs and Activities Garrett Lee Smith Youth Suicide Prevention Campus Grants PHSA Section 520E-2 authorizes the SAMHSA-administered program commonly known as Garrett Lee Smith Youth Suicide Prevention Campus grants. It allows the HHS Secretary, acting through the Director of SAMHSA's Center for Mental Health Services and in consultation with the Secretary of Education, to award grants to institutions of higher education to enhance services for students with mental disorders and substance use disorders, as specified. Subtitle C (Section 9031) amends PHSA Section 520E-2 to expand the grant purposes and permissible uses of funds, to change the application requirements, to authorize the HHS Secretary to provide technical assistance to grantees, and to update terminology. Prior to enactment of P.L. 114-255 , PHSA Section 520E-2 authorized appropriations through FY2007; however, Congress has continued to provide funding for the program in annual appropriations acts. Subtitle C (Section 9031) authorizes to be appropriated $7 million annually for each of FY2018-FY2022 to carry out this section. New Programs and Activities College Campus Task Force Subtitle C (Section 9032) requires the HHS Secretary to establish a College Campus Task Force to discuss mental and behavioral health concerns on college campuses. It specifies the task force members who are representatives from each federal agency that has jurisdiction over, or is affected by, mental health and education policies and projects, including the Departments of Education, HHS, and Veterans Affairs, and others as determined appropriate. It also specifies the task force's required duties and meeting frequency. The section also requires the Secretary to sponsor an annual conference on mental and behavioral health on college campuses. Finally, Section 9032 authorizes to be appropriated $1 million for the period of FY2018-FY2022. National Public Education Campaign Subtitle C (Section 9033) adds a new PHSA Section 549 requiring the HHS Secretary, acting through the ASMHSU in collaboration with the CDC Director, to convene an interagency, public-private sector working group composed of representatives of certain specified groups. The working group will plan, establish, and begin coordinating a public education campaign, as specified, focused on mental and behavioral health on the campuses of institutions of higher education, as defined. New PHSA Section 549 specifies the elements required in the working group's plan. It authorizes to be appropriated of $1 million for the period of FY2018-FY2022. Title X—Strengthening Mental Health and Substance Use Disorder Care for Children and Adolescents Changes to Existing Grant Programs Children's Mental Health Services PHSA Title V, Part E (Sections 561–565), authorizes a SAMHSA-administered program commonly known as Children's Mental Health Services. PHSA Title V, Part E, requires the HHS Secretary to award grants to support "comprehensive community mental health services for children with a serious emotional disturbance." It specifies reporting requirements, technical assistance requirements, and the ages of children to be served, among other factors. Title X (Section 10001) amends the purpose of the grants to include efforts to identify and serve children at risk. It changes requirements for grantee reporting (such that a copy of the report must be provided to the state) and requirements for the HHS Secretary to provide technical assistance (such that the technical assistance is not limited to grant recipients). It also makes technical edits. It authorizes to be appropriated $119 million annually for each of FY2018-FY2022 to carry out the program. Children and Families PHSA Section 514 authorizes a SAMHSA-administered program commonly known as Children and Families. PHSA Section 514 requires the HHS Secretary to award grants, contracts, or cooperative agreements to support substance use disorder services for children and adolescents. Eligible entities include public and private nonprofit entities, including Native Alaskan entities and Indian tribes and tribal organizations. PHSA Section 514 requires the HHS Secretary to give priority to applicants meeting specified criteria (e.g., providing gender-specific and culturally appropriate treatment). Title X (Section 10003) amends PHSA Section 514 to specify definitions for Indian Tribes or Tribal Organizations and Indian Health Service facilities. It expands the grants' purposes to include early identification of children and adolescents who are at risk of substance use disorders, substance use disorder treatment services for children, and assistance in obtaining treatment services to pregnant and parenting women with substance use disorders. It also amends granting priority and makes technical edits. It authorizes to be appropriated $30 million (rounded) annually for each of FY2018-FY2022. National Child Traumatic Stress Initiative PHSA Section 582 authorizes a SAMHSA-administered program commonly known as the National Child Traumatic Stress Initiative (NCTSI). PHSA Section 582 requires the HHS Secretary to award grants, contracts, or cooperative agreements for the purpose of developing programs to improve behavioral health services for children and youth exposed to traumatic events. Eligible entities include public and nonprofit private entities, as well as Indian tribes and tribal organizations. PHSA Section 582 requires the HHS Secretary to prioritize mental health agencies and programs meeting specified criteria; to ensure equitable distribution across geographic regions and among urban and rural areas; and to require each applicant to submit an evaluation plan (as specified). It limits the duration of awards to a maximum of five years. Title X (Section 10004) amends PHSA Section 582 to make a series of changes to the NCTSI. It expands the purpose of the awards to include providing for the continued operation of the NCTSI, and it expands the types of entities to be given priority to include universities and hospitals. It adds new subsections requiring the NCTSI coordinating center to (1) collect, analyze, report, and make public NCTSI-wide data; (2) facilitate the coordination of training initiatives; and (3) collaborate with the Secretary in disseminating information to stakeholders. It adds another new subsection requiring the HHS Secretary to ensure that NCTSI applications are reviewed by appropriate experts. It establishes a minimum award duration of four years, while retaining the existing maximum duration of five years. It authorizes to be appropriated $47 million (rounded) annually for each of FY2018-FY2022 to carry out the NCTSI grant program. New Grant Programs Pediatric Mental Health Care Access Grants Title X (Section 10002) adds a new PHSA Section 330M, which requires the HHS Secretary, acting through the HRSA Administrator and in coordination with other relevant federal agencies, to award grants to support the development and improvement of "statewide or regional pediatric mental health care telehealth access programs" (as specified). Such programs are networks of teams—composed of mental health professionals including child psychiatrists and psychologists—that provide support to pediatric primary care practices through the use of telehealth consultations and by other means. Eligible entities for the grants include states, local governments, and Indian tribes and organizations. Grantees are required to (1) submit an evaluation of the activities carried out with the funds they receive and (2) provide nonfederal matching funds equal to at least 20% of the grant amount. In addition, Title X (Section 10002) permits the Secretary to coordinate with other agencies to ensure that funding opportunities are available to support broadband access for health providers. It authorizes to be appropriated $9 million for the period FY2018-FY2020 to carry out the grant program. Screening and Treatment for Maternal Depression Title X (Section 10005) creates a new PHSA Section 317L-1, which requires the HHS Secretary to award grants to states to establish, improve, or maintain programs for depression screening, assessment, and treatment services for women who are pregnant or who have given birth within the preceding 12 months. It specifies that such programs should use culturally and linguistically appropriate services. It also specifies the application procedures, awarding priorities, and acceptable uses of funds. It authorizes to be appropriated $5 million annually for each of FY2018-FY2022 to carry out the program. Infant and Early Childhood Mental Health Promotion, Intervention, and Treatment Title X (Section 10006) adds a new PHSA Section 399Z-2, which requires the HHS Secretary to award grants to develop, maintain, or enhance programs for infant and early childhood mental health promotion, intervention, and treatment. The program targets children up to age 12 who are at risk for, show early signs of, or have been diagnosed with a serious mental illness (including a serious emotional disturbance) and who would benefit from specified programs. Eligible entities are human services agencies or nonprofit institutions meeting specified criteria. Grantees must provide nonfederal matching funds equal to at least 10% of the grant amount. Title X (Section 10006) also specifies characteristics of the programs to be supported, eligible entities, application requirements, and allowable uses of funds. It authorizes to be appropriated $20 million for the period FY2018-FY2022 to carry out the grant program. Title XI—Compassionate Communication on HIPAA The HIPAA Privacy Rule, administered by the HHS Office for Civil Rights (OCR), permits a health care provider to disclose protected health information (PHI) to family, friends, or others directly involved in an individual's care (or payment related to that care) as long as the individual does not object to the disclosure or the provider reasonably infers, based on professional judgment, that the individual would not object. If the individual objects, the provider is prohibited from sharing any PHI with the individual's caregivers. The Privacy Rule also addresses situations in which the individual is not present, or the opportunity to agree or object "cannot practicably be provided because of the individual's incapacity or an emergency circumstance." Under such circumstances a health care provider may share the individual's PHI with family, friends, or others directly involved in the individual's care if, based on professional judgment, the provider determines that disclosure is in the "best interests" of the individual. On February 20, 2014, HHS released a guidance document ("HIPAA Privacy Rule and Sharing Information Related to Mental Health") that provides answers to several frequently asked questions about the circumstances under which the Privacy Rule permits a health care provider to disclose a mentally ill individual's PHI. In addition to disclosures to family and friends, the guidance covers disclosures to law enforcement pursuant to administrative requests and court orders, as well as disclosures to family, law enforcement, and others to avert a serious and imminent threat to the health or safety of the individual or others. Other federal law and regulations—commonly referred to as the "Part 2 regulations"—protect the privacy of patient records at federally assisted alcohol and drug treatment programs. The Part 2 regulations restrict the use and disclosure of any patient information that directly identifies a patient as an alcohol or drug abuser, or that links the patient to the alcohol or drug treatment facility (or provider). Such information may not be disclosed without the patient's prior written consent, except in a few specified circumstances. On February 9, 2016, HHS published a proposed rule updating the Part 2 regulations to facilitate the electronic exchange of substance abuse treatment records. Sense of Congress Title XI (Section 11001) includes a series of congressional findings regarding the prevalence of individuals with serious mental illness, including schizophrenia, bipolar disorder, and major depression, and the impact of serious mental illness on chronic physical illness and premature death. Congress also finds that confusion exists regarding the permissible uses and disclosures of patient information under the HIPAA Privacy Rule, which may hinder communication with caregivers. The section concludes with a sense-of-Congress statement that more clarity is needed regarding the circumstances under which the HIPAA Privacy Rule permits health care professionals to communicate with caregivers of adults with serious mental illness. Confidentiality of Records Title XI (Section 11002) requires the Secretary, not later than one year after finalizing the proposed changes to the Part 2 regulations, to convene stakeholders to determine the effect of the regulations on patient care, outcomes, and privacy. Clarification of Permitted Uses and Disclosures of Protected Health Information Title XI (Section 11003) requires OCR, not later than one year after enactment, to issue guidance clarifying the circumstances—consistent with the HIPAA privacy standards—under which health care providers (and other HIPAA-covered entities) may communicate with family members, caregivers, and law enforcement about individuals seeking or receiving treatment for mental health or substance use disorders. Development and Dissemination of Model Training Programs Title XI (Section 11004) requires the Secretary, not later than one year after enactment, to develop, disseminate, and periodically update model programs for training health care providers, lawyers, and patients and their families on the permitted uses and disclosures of PHI of individuals seeking or receiving treatment for mental health or substance use disorders, consistent with the HIPAA privacy and security standards. The Secretary must coordinate with OCR, ASMHSU, HRSA, and other relevant agencies. In addition, the Secretary must solicit input from relevant associations, medical societies, and licensing boards. The section authorizes to be appropriated $4 million for FY2018, $2 million annually for FY2019 and FY2020, and $1 million annually for FY2021 and FY2022 to fund the model training programs. Title XII—Medicaid Mental Health Coverage Same-Day Service Rule of Construction Medicaid is a joint federal-state program that finances the delivery of primary and acute medical services, as well as long-term services and supports, for certain low-income individuals, including children, pregnant women, adults, individuals with disabilities, and people aged 65 and older. In order for states to participate in Medicaid, the federal government requires them to cover certain mandatory populations and benefits, but the federal government allows states to cover other optional populations and services. This flexibility results in substantial variation among the states' Medicaid programs. For instance, some states prohibit Medicaid payment for more than one encounter a day per Medicaid patient at community health centers and/or federally qualified health centers, even though the Medicaid patient could have multiple appointments in one day (i.e., medical, dental, or mental health). Title XII (Section 12001) addresses Medicaid's same-day services prohibition. It establishes a rule of construction which states that nothing under Social Security Act (SSA) Title XIX (Medicaid) prohibits separate payment under Medicaid state plans (or under a waiver of the plan) for a mental health service or a primary care service furnished to an individual on the same day because the service is (1) a primary care service furnished to an individual at a facility on the same day as a mental health service is furnished at the facility, or (2) a mental health service furnished to an individual at a facility on the same day as a primary care service is furnished at the facility. Study and Report Related to Medicaid Managed Care Regulation Title XII (Section 12002) requires the HHS Secretary, acting through the CMS Administrator, to conduct a study on Medicaid coverage of mental health treatment for adults aged 22 through 64 in Institutions for Mental Diseases (IMDs) that are provided through a Medicaid managed-care organization or a prepaid inpatient health plan. It requires the study to include certain specified information, such as the extent to which states, the District of Columbia, and the five territories (i.e., Puerto Rico, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, and the Virgin Islands) are providing capitated payments to such organizations or plans for IMD services; data on the number of individuals receiving such services, as well as length of stay; how organizations or plans determine services through IMDs in lieu of other benefits; and the extent to which services through IMDs affect capitated payments. It also requires the HHS Secretary to submit to Congress a report on the study no later than three years after enactment. Guidance on Opportunities for Innovation SSA Section 1115 provides the HHS Secretary with broad authority to waive certain statutory requirements for states to conduct research and demonstration projects that further the goals of Medicaid and CHIP. States use the Section 1115 waiver demonstration authority to cover non-Medicaid and CHIP services, limit benefit packages, cap program enrollment, and test delivery system reforms, among other purposes. CMS has encouraged states to use the Section 1115 waiver authority, along with other opportunities for state innovation available through various statutory authorities (e.g., the Center for Medicare & Medicaid Innovation, Home and Community Based Waivers approved under one or more of the Section 1915 waiver authorities and/or Section 1332 waivers for state innovation), to pursue delivery system transformation initiatives focused on integrating physical and behavioral health services, among other program changes. Through the use of these authorities (alone or in combination), states have sought to engage in delivery system reforms that improve access, patient care, and population health while reducing health care costs. Title XII (Section 12003) requires, no later than one year after enactment, the CMS Administrator to issue a State Medicaid Director letter regarding opportunities to design innovative service delivery systems, including systems for providing community-based services, for adults with a serious mental illness or children with a serious emotional disturbance who receive Medicaid. The letter should include opportunities for demonstration projects under the SSA Section 1115 waiver authority to improve care for such individuals. Study and Report on Medicaid Emergency Psychiatric Demonstration Project Medicaid's IMD exclusion limits the circumstances under which federal Medicaid matching funds are available for inpatient mental health care. Two exceptions to the IMD exclusion are, at state option, Medicaid coverage of (1) services provided to individuals older than 65 in IMDs and (2) inpatient psychiatric hospital services to children under age 21 (or in certain circumstances under the age of 22). However, even with the IMD exclusion, states may receive federal Medicaid matching funding for inpatient mental health services for individuals aged 21 through 64 outside of an IMD. Section 2707 of the Patient Protection and Affordable Care Act (ACA, P.L. 110-148 as amended) established the Medicaid Emergency Psychiatric Demonstration project, in which eligible states provide Medicaid payments to certain IMDs for services provided to Medicaid enrollees, aged 21 through 64, who require medical assistance to stabilize a psychiatric emergency medical condition. To participate in the demonstration, an IMD must (1) not be publicly owned or operated and (2) be subject to the Emergency Medical Treatment and Active Labor Act (EMTALA, P.L. 99-272 ). The HHS Secretary selected 11 states and the District of Columbia to participate in the demonstration, which began July 1, 2012. The three-year demonstration was projected to expire on January 1, 2016. However, in August 2016, it was discontinued because the CMS's Office of the Actuary was unable to certify budget neutrality, which was a statutory requirement for the demonstration. Title XII (Section 12004) requires the HHS Secretary, acting through the CMS Administrator, to collect certain specified information from each state that has participated in the demonstration project. This information includes data on number of IMDs (and beds within these institutions) that receive payment under Medicaid through the demonstration, compared with the statewide total of IMDs (and beds within these institutions); any reduction in expenditures under the Medicaid program or other spending on health care for individuals under the demonstration; data on forensic psychiatric hospitals and beds throughout the state; disproportionate share hospital payments that IMDs received during the period July 1, 2012, through June 30, 2015, and the extent to which the demonstration reduced such payments; data on facilities or sites where individuals with mental health are treated; and utilization of hospital emergency departments during the demonstration project. It requires the HHS Secretary, no later than two years after enactment, to submit a report to Congress that summarizes and analyzes such information, either as part of the reporting requirements under ACA Section 2707(f) or separately. Providing EPSDT Services to Children in IMDs The Early and Periodic Screening, Diagnosis and Treatment (EPSDT) program is a required Medicaid benefit that provides health screenings and services for most children under the age of 21. Under EPSDT, states are required to provide all medically necessary Medicaid services (e.g., preventive, dental, mental health, developmental, laboratory tests and specialty services) to ameliorate health conditions identified through a health care screening without benefit limits. Title XII (Section 12005) amends SSA Section 1905(a)(16) to ensure that EPSDT services are available to individuals under age 21 in an inpatient psychiatric hospital setting, regardless of whether such services are furnished by the mental health provider. It applies to Medicaid items and services furnished on or after January 1, 2019. Electronic Visit Verification System for Personal Care Services and Home Health Care Services Federal Medicaid law requires states to cover certain populations and benefits, but states have discretion to cover other optional populations and services. Medicaid benefits can include long-term service and support (LTSS) coverage for certain beneficiaries. LTSS, health and related services provided to individuals who need assistance due to a physical, cognitive, or mental disability or condition, can be both optional and mandatory benefits. Personal care services (PCS) and home health care service (HHCS) are LTSS that help enable certain Medicaid beneficiaries to live independently by assisting with medical and nonmedical support services. Prior to the passage of H.R. 34 , states were required to provide HHCS services to some beneficiaries and may have used waiver and state plan authorities to also provide PCS and HHCS to other Medicaid populations. Expenditures for Medicaid PCS benefits have increased rapidly. The Department of Health and Human Services Office of Inspector General (OIG) has issued a number of reports documenting increasing federal PCS expenditures and raised concerns about state and federal PCS oversight. Nationally, HHCS expenditures have increased more slowly, whereas they have increased in some states and other areas, raising concerns about fraud and abuse. Electronic visit verification (EVV) systems use telephone and computer-based processes to electronically verify and document that a remote activity occurred and when it began and ended. Most EVV systems work similarly by identifying the location of the service provider (by telephone or global positioning satellite location) and the time services began and ended. By communicating with an EVV system, Medicaid PCS and HHCS providers can confirm and document that a PCS or HHCS worker arrived at a scheduled appointment and delivered the necessary services. Title XII (Section 12006) requires states to require Medicaid PCS and HHCS providers to use EVV systems by January 1, 2019, for PCS and by January 1, 2023, for HHCS or their Federal Medical Assistance Percentage (FMAP) rate—the percentage rate the federal government matches state Medicaid expenditures—will be reduced. Table 1 displays the percentage reduction that would be applied to a state's quarterly FMAP payment if a state does not implement an EVV requirement for Medicaid PCS providers. Table 2 displays the FMAP reduction on states if they do not implement an EVV requirement for Medicaid HHCS providers. In implementing the Section 12006 requirement for Medicaid PCS and HHCS EVVs, states are required to consult with agencies and entities that provide PCS and HHCS under the state plan or a waiver. Such consultation is intended to ensure that the EVV systems would be minimally burdensome, account for existing best practices and EVVs in use in the state, and comply with the Health Insurance Portability and Accountability Act of 1986 (HIPAA, P.L. 104-191 ) privacy and security requirements (as defined in Section 3009 of the Public Health Service Act). In addition, subject to guidance provided by the HHS Secretary, in implementing the Section 12006 EVV requirement, states are required to have a stakeholder process that obtains input from beneficiaries, family caregivers, individuals who furnish PCS and HHCS, and other stakeholders. States also are required to ensure that individuals who provide PCS and/or HHCS under the state Medicaid plan or a waiver are provided training in the operation of PCS and HHCS EVVs. States that already required providers to use EVV systems for both PCS and HHCS prior to enactment of P.L. 114-255 are exempt from the requirement to have an EVV, as long as the states continued to require providers to use those EVV systems. States that can demonstrate to the HHS Secretary they made good faith efforts—by attempting to adopt technology or through encountering unavoidable system delays—to implement a requirement for PCS and HHCS providers to use EVV systems may have a one-year exemption from the required FMAP reductions (for PCS, calendar year 2019; for HHCS, calendar year 2023). Title XII (Section 12006) defines PCS and HHCS EVVs as systems that capture the type of service performed, person receiving the service, date of the service, location of the service, person providing the service, and time the service begins and ends. It defines HHCS as those provided under Social Security Act Section 1905(a)(7) and PCS as services approved under a state Medicaid plan or other Social Security Act authorities (Social Security Act Sections 1905(a)(24), 1915(c), 1915(i), 1915(j), 1915(k), or under an 1115 waiver). Title XII (Section 12006) authorizes the HHS Secretary to pay states that require PCS and HHCS providers to use EVVs operated by the state, or by a contractor on behalf of the state, 90% of the EVV system design, development, or installation costs and 75% of the EVV system operation and maintenance costs. States that require PCS and HHCS providers to use EVV systems not operated by the state, or by a contractor on behalf of the state, will not receive these federal payments. By January 1, 2018, Title XII (Section 12006) requires the HHS Secretary to collect and disseminate to states PCS and HHCS EVV system best practices. These include (1) training for individuals who provide PCS and HHCS under a state Medicaid plan or waiver on the operation of PCS and HHCS EVVs and the prevention of PCS and HHCS fraud, and (2) providing notice and educational materials to family caregivers and beneficiaries on the use of PCS and HHCS EVVs and other means to prevent fraud. Under the Fair Labor Standards Act to Domestic Service (29 C.F.R Part 552), Title XII (Section 12006) does not establish an employer-employee relationship between PCS or HHCS agencies or entities and the individuals under contract to the agencies or entities to furnish PCS or HHCS. In addition, Title XII (Section 12006) does not require the use of a particular or uniform EVV to be used by all agencies or entities that provide PCS or HHCS under a state Medicaid plan or waiver. It does not limit PCS or HHCS provided under a state plan or waiver, or limit provider selection, constrain beneficiary selection of caregivers, or impede the manner in which PCS and HHCS are delivered. It does not prohibit a state from establishing quality measures in implementing a requirement for the use of a PCS and HHCS EVV system. Title XIII—Mental Health Parity Title XIII includes provisions related to mental health parity and provisions related to eating disorders, as well as one provision applying mental health parity to eating disorder benefits. Mental Health Parity The Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA, P.L. 110-343 , Title V, Subtitle B, as amended) requires covered group health plans and health insurance issuers to ensure that financial requirements (such as co-pays and deductibles) and treatment limitations (such as visit limits) applicable to mental health or substance use disorder benefits are no more restrictive than the predominant requirements or limitations applied to substantially all medical/surgical benefits. Medicaid and the Children's Health Insurance Program are neither group health plans nor issuers of health insurance; however, the Social Security Act requires Medicaid-managed care organizations, Medicaid alternative benefit plans, and health plans provided under the State Children's Health Insurance Program to comply with certain requirements of MPHAEA. MHPAEA is codified in three parts of federal statute: (1) PHSA Section 2726, related to health insurance; (2) the Employee Retirement Income Security Act (ERISA) Section 712, related to employer-sponsored health insurance; and (3) the Internal Revenue Code (IRC) Section 9812, related to taxes on health insurance premiums. Enforcement of MHPAEA is the joint responsibility of the Departments of HHS, Labor, and Treasury. Compliance Prior to enactment of P.L. 114-255 , PHSA Section 2726(a) addressed MHPAEA's general requirements in five paragraphs: (1) aggregate lifetime limits, (2) annual limits, (3) financial requirements and treatment limitations, (4) availability of plan information, and (5) out-of-network providers. Title XIII (Section 13001) adds the sixth and seventh paragraphs to PHSA Section 2726(a). New paragraph (6) requires the Secretaries of HHS, Labor, and Treasury (in consultation with the Inspectors General of their respective departments) to issue a compliance program guidance document to help improve compliance with MHPAEA. The compliance program guidance document is to be issued not later than one year after enactment and updated every two years. New paragraph (6) also specifies the contents of the compliance program guidance document (e.g., illustrative examples of compliance and noncompliance and recommendations). New paragraph (7) requires the Secretaries of HHS, Labor, and Treasury to issue, not later than one year after enactment, guidance to help group health plans and health insurance issuers offering group or individual health insurance coverage satisfy MHPAEA requirements, including disclosure requirements. It requires the HHS Secretary to provide a public comment period (not less than 60 days) on the draft guidance before issuing the final guidance. New paragraph (7) also specifies the contents of the guidance (e.g., clarifying information and illustrative examples of methods for disclosing information to ensure compliance). Title XIII (Section 13001) requires the Secretaries of HHS, Labor, and Treasury to solicit public feedback on how the disclosure request process can be improved (not later than six months after enactment); to make such feedback publicly available (not later than 12 months after enactment); and to share such feedback with the National Association of Insurance Commissioners. Finally, Title XIII (Section 13001) requires the Secretary of HHS, Labor, or Treasury, upon determining that a group health plan or health insurance issuer has violated MHPAEA at least five times, to audit plan documents for a health plan or issuer in the plan year following the determination. It provides that the requirement should not be construed to limit the Secretaries' authority (as in effect the day before enactment) to audit documents of health plans or issuers. Action Plan Title XIII (Section 13002) requires the HHS Secretary, not later than six months after enactment, to convene a public meeting of stakeholders (as specified) to produce an action plan for improved federal and state coordination related to enforcement of MHPAEA and state parity laws. It requires the HHS Secretary to finalize the action plan and make it available on the HHS website not later than six months after the conclusion of the public meeting. It also specifies the contents of the action plan (e.g., recommendations to Congress regarding the need for additional legal authority). Report on Investigations Title XIII (Section 13003) requires the Assistant Secretary of Labor of the Employee Benefits Security Administration (in collaboration with the Administrator of the Centers for Medicare & Medicaid Services and the Secretary of the Treasury), not later than one year after enactment and annually thereafter for the subsequent five years, to submit to specified congressional committees a report summarizing the results of all closed federal investigations with a finding of any serious violation of MHPAEA in the preceding 12-month period. It also specifies the contents of the report, which shall not include individually identifiable data. GAO Report Title XIII (Section 13004) requires the Comptroller General (in consultation with the Secretaries of HHS, Labor, and Treasury), not later than three years after enactment, to submit to specified congressional committees a report detailing MHPAEA compliance among group health plans, health insurance issuers, Medicaid-managed care organizations, and health plans provided under the State Children's Health Insurance Program that are subject to MHPAEA requirements. It also specifies the contents of the report. Application to Eating Disorder Benefits Title XIII (Section 13007) applies MHPAEA requirements to eating disorder benefits provided by a group health plan or a health insurance issuer offering group or individual health insurance coverage. That is, if such a plan or issuer provides coverage of eating disorder benefits, it must do so consistent with MHPAEA requirements. Eating Disorders Information and Awareness Title XIII (Section 13005) allows the HHS Secretary to advance public awareness on a range of topics related to eating disorders. It allows the HHS Secretary, acting through the Director of the Office of Women's Health, to update specified contents on the National Women's Health Information Center website and (in coordination with the Secretary of Education) to incorporate publicly available information into obesity prevention programs developed by the Office of Women's Health. Health Professional Training Title XIII (Section 13006) allows the HHS Secretary to "facilitate the identification of model programs and materials" for teaching health professionals effective strategies for preventing eating disorders and caring for patients with eating disorders (including identification, early intervention, referral, and treatment). Of note, PHSA Section 399Z authorizes similar activities, which are not currently funded. PHSA Section 399Z requires the HHS Secretary, acting through the CDC Director in collaboration with the HRSA Administrator and the heads of other agencies, to develop and carry out a program to educate and train health professionals to better identify, assess, counsel, refer, and educate patients (and their families) with obesity or an eating disorder or at risk of becoming obese or developing an eating disorder. Title XIV—Mental Health and Safe Communities Subtitle A—Mental Health and Safe Communities Provisions in Subtitle A fall into four categories: (1) changes to existing grant programs, (2) changes to existing initiatives and (non-grant) programs, (3) new grant programs, and (4) changes to new initiatives and (non-grant) programs. Changes to Existing Grant Programs Subtitle A amends the authorizing legislation for several Department of Justice (DOJ) programs and one Department of Homeland Security (DHS) grant program. Broadly, the amendments made by Subtitle A expand the scope of these programs to allow funds to be used to assist people with mental illness, substance use problems, or co-occurring substance abuse and mental health issues. The Edward Byrne Memorial Justice Assistance Grant Program The Edward Byrne Memorial Justice Assistance Grant (JAG) program (42 U.S.C §§3750 ‒ 3758) is a formula grant program administered by DOJ. JAG provides funding to state and local governments for initiatives, technical assistance, training, personnel, equipment, supplies, contractual support, and criminal justice information systems in one or more of seven purpose areas: (1) law enforcement programs; (2) prosecution and court programs; (3) prevention and education programs; (4) corrections and community corrections programs; (5) drug treatment programs; (6) planning, evaluation, and technology improvement programs; and (7) crime victim and witness programs (other than compensation) Subtitle A adds an eighth purpose area to the JAG program so funds can be used for "mental health programs and related law enforcement and corrections programs, including behavioral programs and crisis intervention teams." The Community Oriented Policing Services (COPS) Program The Community Oriented Policing Services (COPS) program (42 U.S.C §3796dd) is a competitive grant program administered by DOJ. The COPS program provides funding to state and local law enforcement to support programs that promote community policing and law enforcement operations. COPS grants may be used for a litany of purposes, including hiring or rehiring community policing officers; procuring equipment, technology, or support systems; and establishing school-based partnerships between local law enforcement agencies and local school systems. Subtitle A allows COPS grants to be used for providing specialized training to law enforcement officers on interacting with people who have mental health problems and recognizing people with mental illnesses; establishing collaborative programs that help law enforcement agencies address the mental health, behavioral, and substance abuse problems of people they encounter; providing specialized training to corrections officers to help them recognize people with mental illness; and enhancing the ability of corrections officers to address the mental health of individuals incarcerated in prison and jails. The Mental Health Courts Program Under the Mental Health Courts program (42 U.S.C §§3796ii ‒ 3796ii-7), grants may be awarded to states, state courts, local courts, units of local government, and Indian tribal governments for several purposes: providing continuing judicial supervision over offenders with mental illness, a mental handicap, or a co-occurring mental illness and substance use problem, who are charged with misdemeanors or nonviolent offenses; the coordinated delivery of services, which includes specialized training for law enforcement and judicial personnel to identify and address the needs of mentally ill offenders; voluntary mental health treatment that carries with it the possibility of dismissal of charges or reduced sentencing upon successful completion of treatment; centralized case management involving the consolidation of all of a mentally ill defendants' cases and the coordination of all mental health treatment plans and social services; and continuing supervision of treatment plan compliance by an offender and continuity of psychiatric care at the end of the supervision period. Subtitle A allows grants under the Mental Health Courts program to be used to provide "court-ordered assisted outpatient treatment when the court has determined such treatment to be necessary." This subtitle adds definitions of "court-ordered assisted outpatient treatment" and "eligible patient" to the authorizing legislation for the Mental Health Courts program. Subtitle A also allows DOJ to award grants under this program to states, units of local government, territories, Indian tribes, and nonprofit organizations for developing, implementing, or expanding pretrial service programs to improve the identification and outcomes of individuals with mental illness. Specifically, grants may be used for addressing behavioral health needs and risk screening of defendants; using validated methods to assess the risk of defendants and presenting the results to the court; reviewing defendants who cannot comply with the conditions of pretrial release; evaluating pretrial release programs; supervising defendants who are granted pretrial release; and collecting data and conducting risk assessment. This subtitle allows DOJ to award grants for expanding behavioral health screening and assessment in state and local criminal justice systems. Specifically, grants may be used for promoting the use of risk and needs assessment instruments to gauge individuals' criminogenic risk and the substance abuse and mental health needs; initiatives to match individuals with programs that address their risk and needs factors; implementing methods for identifying individuals most in need of coordinated supervision and treatment; and coordination between criminal justice agencies, judicial systems, and service providers to determine how to best allocate treatment and intensive supervision services. Subtitle A also puts in place requirements regarding supplanting, applications, grant distribution, and evaluation reports. This subtitle also creates a series of grant accountability requirements, which include requiring DOJ to audit grantees and outlining penalties for grantees with unresolved audit findings, prohibiting DOJ from awarding grants to nonprofit organizations that hold funds in offshore accounts for the purpose of avoiding taxes, placing limits on grantee conference expenditures, and requiring DOJ to take steps to limit duplicative grants to the same entity. The Justice and Mental Health Collaboration Program Grants under the Justice and Mental Health Collaboration program (42 U.S.C. §3797aa) may be used by state, local, and tribal governments to provide mental health and other treatment services for mentally ill adults or juvenile offenders who are overseen collaboratively by a criminal or juvenile justice agency or a mental health court and a mental health agency. Specifically, grants under the program may be used to, among other things, create or expand mental health courts or other court-based programs for preliminarily qualified offenders; offer specialized training to criminal and juvenile justice and mental health professionals on identifying the symptoms of people who might benefit from participating in a mental health court; offer law enforcement or campus security personnel training in procedures to identify and respond to incidents involving individuals with mental illnesses; and establish and expand cooperative efforts to promote public safety through the use of effective intervention with mentally ill offenders. Subtitle A allows grants under the Justice and Mental Health Collaboration program to be made to state, local, and tribal governments or nonprofit organizations to develop, implement, or expand programs that provide high-intensity, community-based services for individuals with mental illness who are involved with the criminal justice system with the intent of preventing future incarcerations. Specifically, grants may be used to establish multidisciplinary teams that address treatment protocols for individuals with mental illness involved in the criminal justice system; programs that involve criminal justice agencies and service providers who work together to provide recovery-oriented "24/7 wraparound services"; services such as "integrated evidence based practices for the treatment of co-occurring mental health and substance-related disorders, assertive outreach and engagement, community-based service provision at participants' residence or in the community, psychiatric rehabilitation, recovery oriented services, services to address criminogenic risk factors, and community tenure"; payments to licensed service treatment providers providing treatment to offenders participating in the program; and training to promote "high-fidelity practice principles and technical assistance to support effective and continuing integration with criminal justice agency partners." This subtitle also puts in place requirements regarding supplanting and applications for these grants. Subtitle A reauthorizes appropriations for this program at $50 million annually for each of FY2017-FY2021. The Adult and Juvenile Offender State and Local Offender Reentry Demonstration Program Under the Adult and Juvenile Offender State and Local Offender Reentry Demonstration program (42 U.S.C. §3797w), grant funds may be used within seven broad purpose areas: (1) educational, literacy, vocational, and job placement services; (2) substance abuse treatment and services, including programs that start in placement and continue through the community; (3) programs that provide comprehensive supervision and offer services in the community, including programs that provide housing assistance and mental and physical health services; (4) programs that focus on family integration during and after placement for both offenders and their families; (5) mentoring programs that start in placement and continue into the community; (6) programs that provide victim-appropriate services, including those that promote the timely payment of restitution by offenders and those that offer services (such as security or counseling) to victims when offenders are released; (7) and programs that protect communities from dangerous offenders, including developing and implementing the use of risk assessment tools to determine when offenders should be released from prison. In addition to the current preference requirements, Subtitle A requires DOJ to give priority consideration to applications for funding under the Adult and Juvenile Offender State and Local Offender Reentry Demonstration program that best "provide mental health treatment and transitional services for those with mental illnesses or with co-occurring disorders, including housing placement or assistance" or that best "target offenders with histories of homelessness, substance abuse, or mental illness, including prerelease assessment of the housing status of the offender and behavioral health needs of the offenders with clear coordination with mental health, substance abuse, and homelessness service systems to achieve stable and permanent housing outcomes with appropriate service." The Drug Court Discretionary Grant Program Under the Drug Court Discretionary Grant program (42 U.S.C §§3797u ‒ 3797u-8), funds are awarded to states, state courts, local courts, units of local government, and tribal governments for drug courts that involve continuing judicial supervision over nonviolent offenders who have substance use problems; coordinate with the state or local prosecutor; integrate the administration of other sanctions and services, including mandatory periodic testing for the use of controlled substances; provide substance abuse treatment; allow diversion, probation, or other supervised release involving the possibility of prosecution, confinement, or incarceration based on noncompliance with program requirements or failure to show satisfactory progress; and have offender management and aftercare services. DOJ is also authorized to provide training and technical assistance to drug court programs. Subtitle A allows individuals with co-occurring substance abuse and mental health problems to participate in courts funded by the Drug Court Discretionary Grant program. The act also allows training and technical assistance provided by DOJ to include training for drug court personnel on identifying and addressing co-occurring substance abuse and mental health problems. Offender Reentry Mentoring Grants Under the Offender Reentry Mentoring Grants program (42 U.S.C §17531), funds may be awarded to nonprofit organizations and Indian tribes to provide mentoring and other transitional services for offenders being released into the community. Grants may be used to provide mentoring services to adult and juvenile offenders during incarceration, through transition back to the community, and post-release; transitional services to assist in the reintegration of offenders into the community; and training regarding offender and victims issues. Subtitle A allows mentoring grants to be used for mental health care as a part of transitional services for inmates returning to the community. The Matching Grant Program for School Security Under the Matching Grant Program for School Security (42 U.S.C §§3797a – 3797e) the COPS Office is authorized to award grants to state, local, and tribal governments for the purpose of improving security at schools and on school grounds. Grant funds may be used for installing deterrent measures, including metal detectors, security assessments, security training of personnel and students, coordination with local law enforcement, and any other measure that the COPS Office believes may provide a significant improvement in security. Subtitle A allows grants under this program to be used for developing and operating crisis intervention teams, which may include coordination with law enforcement agencies and specialized training for school officials in responding to mental health crises. The Residential Substance Abuse Treatment Program DOJ's Residential Substance Abuse Treatment (RSAT) program (42 U.S.C §§3796ff ‒ 3796ff-4, 3793(a)(17)) is a formula grant program that assists state and local governments in developing and implementing residential substance abuse treatment programs in state and local correctional facilities. Subtitle A allows RSAT grants to be used for developing and implementing specialized residential substance abuse treatment programs that identify and provide appropriate treatment to inmates with co-occurring substance abuse and mental health problems. Staffing for Adequate Fire and Emergency Response Program Under the Staffing for Adequate Fire and Emergency Response (SAFER) program (15 U.S.C. §2229a), the Federal Emergency Management Agency (FEMA) makes grants to fire departments for hiring new firefighters. The grants are to be used to increase the number of firefighters to help communities meet industry minimum standards and attain 24-hour staffing. Subtitle A allows SAFER grants to be used for providing "specialized training to paramedics, emergency medical service workers, and other first responders to recognize individuals who have mental illness and how to properly intervene with individuals with mental illness, including strategies for verbal de-escalation of crises." Changes to Existing Initiatives and Programs Subtitle A makes changes to a couple of existing DOJ initiatives and programs to help law enforcement agencies respond to active shooters and to collect more data on how people with mental illness interact with the criminal justice system. VALOR DOJ's Preventing Violence Against Law Enforcement and Ensuring Officer Resilience and Survivability Initiative (VALOR) provides training to law enforcement personnel on how to survive violent encounters, especially ambush situations. Subtitle A allows DOJ to provide safety training and technical assistance to local law enforcement agencies, including active-shooter response training, through VALOR. Collecting Data on Crimes Committed by People with Mental Illness The Federal Bureau of Investigation (FBI), through its Uniform Crime Reporting program, collects and publishes data on offenses know to the police, the circumstances of reported homicides, law enforcement officers killed and assaulted in the line of duty, and hate crimes. The FBI announced in December 2015 that it is planning to expand the data it collects through the UCR program to go beyond justifiable homicides to include data on instances where a law enforcement officer causes serious injury or death to civilians. Subtitle A requires DOJ to promulgate or revise regulations within 90 days of enactment so that information submitted to DOJ regarding homicides; law enforcement officers killed, seriously injured, and assaulted; or individuals killed or seriously injured by law enforcement officers includes data on the involvement of mental illness with regard to such incidents. New Grant Programs Subtitle A authorizes two new grant programs to improve the criminal justice system's response to people with substance abuse, mental health, or co-occurring disorders. The Mental Health and Drug Treatment Alternative to Incarceration Program Subtitle A repeals the authorization for the Prosecution Drug Treatment Alternative to Prison program and replaces it with a Mental Health and Drug Treatment Alternative to Incarceration program. Under the program, DOJ may award grants to state, local, and tribal governments and nonprofit organizations to develop, implement, or expand treatment alternatives for nonviolent or low-level drug offenders who come into contact with or enter the criminal justice system and have a history of or current substance abuse disorder, mental illness, or both and who have been approved for participation in the program by the relevant authorities. Specifically, grants may be used for pre-booking treatment alternatives to incarceration—including law enforcement training on substance use disorders, mental illness, and co-occurring disorders or specialized units to respond to calls involving people with substance abuse, mental illness, and co-occurring disorders—or post-booking treatment alternatives to incarceration—including pretrial services related to substance abuse, mental illness, and co-occurring disorders; specialized probation; treatment and rehabilitation programs; and problem-solving courts (e.g., drug courts, mental health courts, or veterans treatment courts). This subtitle establishes a series of requirements regarding applications, supplanting, admission and monitoring of program participants, reporting, and the geographic distribution of grants. This subtitle also establishes a series of grant accountability requirements for the program, which include requiring DOJ to audit grantees and outlining penalties for grantees with unresolved audit findings, prohibiting DOJ from awarding grants to nonprofit organizations that hold funds in offshore accounts for the purpose of avoiding taxes, placing limits on grantee conference expenditures, and requiring DOJ to take steps to limit duplicative grants to the same entity. National Criminal Justice and Mental Health Training and Technical Assistance Center Subtitle A authorizes DOJ to make grants to national nonprofit organizations with experience in providing broad, national-level training and technical assistance on issues related to mental health, crisis intervention, criminal justice systems, and law enforcement, for the purpose of establishing of a National Criminal Justice and Mental Health Training and Technical Assistance Center. Funds may be used to, among other purposes, provide law enforcement officers with training on how to work with people with mental illness; provide training and technical assistance to mental health providers and criminal justice agencies on diversion, incarceration, and reentry programs for people with mental illness; develop suicide prevention and crisis intervention training for criminal justice agencies; and disseminate best practices, policy standards, and research findings relating to the provision of mental health services. This subtitle also puts in place a series of grant accountability requirements for this program, which include requiring DOJ to audit grantees and outlining penalties for grantees with unresolved audit findings, prohibiting DOJ from awarding grants to nonprofit organizations that hold funds in offshore accounts for the purpose of avoiding taxes, placing limits on grantee conference expenditures, and requiring DOJ to take steps to limit duplicative grants to the same entity. New Initiatives and Programs Subtitle A establishes a federal drug and mental health court pilot program and requires the Government Accountability Office (GAO) to study the cost of incarcerating people with mental illness. Federal Drug and Mental Health Courts Subtitle A requires DOJ to establish a pilot program to determine the effectiveness of diverting nonviolent or low-level drug offenders with mental illness, a mental handicap, or a co-occurring mental health and substance abuse disorder from prosecution, probation, or incarceration and placing them in a drug or mental health court. The pilot program is to be conducted in one or more federal judicial districts during FY2017 through FY2021. The subtitle places a series of criteria on the drug and mental health courts, including requirements that the courts provide continuing judicial supervision; mandatory periodic substance abuse testing; substance abuse treatment for participants with a need for it; community supervision with the possibility of prosecution, confinement, or incarceration for noncompliance with program requirements; outpatient or inpatient mental health treatment that carries with it the possibility of dismissal of charges or reduced sentencing upon successful completion of treatment; programmatic offender management, including case management and aftercare services, such as relapse prevention, health care, education, vocational training, and job and housing placement; and continuing supervision of treatment plan compliance for a term not to exceed the maximum allowable sentence or probation period for the relevant offense, and to the extent practicable, continuity of psychiatric care after the end of the supervision period. The subtitle also requires DOJ, before establishing a drug or mental health court, to obtain the approval of the U.S. Attorney and chief judge in the judicial district in which the court would be established and determine that the judicial district has adequate behavioral health systems for treatment, including substance abuse and mental health treatment. The subtitle requires the Administrative Office of the U.S. Courts and the U.S. Probation and Pretrial Services Office to assist DOJ with operating a drug or mental health court. Report on the Cost of Incarcerating People with Serious Mental Illness Subtitle A requires GAO to submit a report to Congress detailing the cost of imprisonment for individuals with serious mental illness within 12 months of enactment. Mental Health Training for Federal Uniformed Services Subtitle A (Section 14008) requires the Secretaries of Defense, Homeland Security, Health and Human Services, and Commerce to provide the uniformed services with (1) specialized and comprehensive training in procedures to identify and respond appropriately to incidents involving individuals with mental illnesses, (2) computerized information systems or technological improvements to provide timely information to federal law enforcement personnel, other branches of the uniformed services, and criminal justice system personnel to improve the federal response to mentally ill individuals, and (3) cooperative efforts to promote public safety through the use of effective intervention with respect to mentally ill individuals encountered by members of the uniformed services. These actions are to be accomplished not later than 180 days after the date of enactment. Codification of Due Process for Determinations by Secretary of Veterans Affairs of Mental Capacity of Beneficiaries Under current Department of Veterans Affairs regulations, the VA has the authority to determine the competency status of a person receiving VA benefits. Regulations define an incompetent person as "one who because of injury or disease lacks the mental capacity to contract or to manage his or her own affairs, including disbursement of funds without limitation." The VA may appoint a fiduciary to receive benefits on behalf of a beneficiary determined to be incompetent. In addition, the VA will refer the name of any beneficiary determined to be incompetent to the National Instant Criminal Background Check System (NICS), thus legally prohibiting the beneficiary from purchasing or owning any firearm or ammunition under the Gun Control Act of 1968, as amended. Current VA regulations provide certain due process rights to beneficiaries determined to be incompetent, including the right to be notified of the VA's competency decision and reasons for the decision and the right to challenge this decision in a hearing in which the beneficiary may present evidence and be represented by counsel. Subtitle A (Section 14017) creates a new section of Title 38 of the U.S. Code that codifies into the law the due process protections currently afforded by regulation to beneficiaries determined to be incompetent. Specifically, this section provides that the VA may not determine a beneficiary to be incompetent unless it provides the beneficiary with the following: a notice of the determination and supporting evidence; an opportunity to request a hearing; an opportunity to present evidence, including evidence from a medical professional or other person, as to the beneficiary's capacity to manage his or her VA benefits; and the right to be represented by counsel or another person at the hearing and to bring a medical professional or other person to provide testimony at the hearing. Subtitle B—Comprehensive Justice and Mental Health Subtitle B makes several changes to the Justice and Mental Health Collaboration program. The amendments largely expand the scope of the program so grants may be used for additional purposes to help respond to people involved in the criminal justice system who have substance abuse, mental health, or co-occurring disorders. The Justice and Mental Health Collaboration Program Grants under the Justice and Mental Health Collaboration program (42 U.S.C. §3797aa) may be used by state, local, and tribal governments to provide mental health and other treatment services for mentally ill adults or juvenile offenders who are overseen collaboratively by a criminal or juvenile justice agency or a mental health court and a mental health agency. Specifically, grants under the program may be used, among other things, to create or expand mental health courts or other court-based programs for preliminarily qualified offenders; offer specialized training to criminal and juvenile justice and mental health professionals on identifying the symptoms of people who might benefit from participating in a mental health court; offer law enforcement or campus security personnel training in procedures to identify and respond to incidents involving individuals with mental illnesses; and establish and expand cooperative efforts to promote public safety through the use of effective intervention with mentally ill offenders. Subtitle B allows grants under the Justice and Mental Health Collaboration program to be awarded to state, local, and tribal governments for "sequential intercept mapping," which involves convening mental health and criminal justice stakeholders to develop an understanding of how people with mental illness flow through the criminal justice system and to identify opportunities to improve responses to people with mental illness and develop strategies to address gaps in services. This process may serve as the beginning for a strategic plan to improve public health and safety outcomes. Grants may also be used to implement the strategic plan developed through the sequential intercept mapping process. In addition, Subtitle B allows grants under this program to be used for screening inmates held in correctional facilities for mental illness; providing mental health and substance abuse treatment for inmates with an identified need; developing, implementing, and enhancing post-release plans that coordinate health, housing, medical, employment, and other appropriate services for eligible inmates; increasing the availability of mental health and substance abuse treatment; developing alternatives to solitary confinement and segregated housing and provide mental health treatment to inmates who are placed in solitary confinement or segregated housing; and training correctional employees on how to identify and properly respond to incidents involving inmates with mental illness or co-occurring mental illness and substance abuse disorders. Further, Subtitle B allows grants under this program to be used to provide training to law enforcement personnel, either through a training academy or another training modality, on how to identify and respond to incidents involving people with mental health disorders or co-occurring mental health and substance abuse disorders. For frequent users of crisis services, Subtitle B allows grants awarded under the program to be used to develop or support multidisciplinary teams that coordinate, implement, and administer community-based crisis responses and long-term plans; provide training on how to respond appropriately to their unique issues; develop or support treatment alternatives to hospital and jail admissions; or develop protocols and systems to provide coordinated assistance. Subtitle B requires DOJ to give preferential consideration to applicants under the Justice and Mental Health Collaboration program if they propose to use evidence-based interventions for reducing recidivism or use validated risk assessment instruments to target offenders with a high or moderate risk of recidivism and need for treatment and services. Subtitle B amends the definition of a "preliminarily qualified offender" under this program to mean an adult or a juvenile accused of an offense who has previously been or currently is diagnosed by a qualified mental health professional as having a mental illness or a co-occurring mental illness and substance abuse disorders and manifests obvious signs of this diagnosis during arrest or confinement before any court. A "preliminarily qualified offender" must be approved for participation in a program by the relevant officials, must not pose a risk of violence to any person in the program or public, and must not be charged with or convicted of a serious sex offense or any offense related to the sexual exploitation of children, homicide, or assault with the intent to commit homicide. In the case of a veterans treatment court, a "preliminarily qualified offender" must be diagnosed with, or manifest obvious signs of, mental illness or co-occurring mental illness and substance abuse disorders and have been unanimously approved for participation in the court program by relevant officials. This subtitle requires the relevant officials, when considering whether to designate someone as a "preliminarily qualified offender," to take into account whether the defendant's participation in the program would pose a substantial risk of violence to the community; the criminal history of the defendant and the severity of the offense for which the defendant is charged; the views of any victims; the extent to which the defendant would benefit from participating in the program; cost savings that could be realized by the defendant participating in the program; and whether the defendant meets all of the eligibility criteria for participation in the program. In addition, Subtitle B establishes a series of grant accountability requirements for any grant made under the Justice and Mental Health Collaboration program, which include requiring DOJ to audit grantees and outlining penalties for grantees with unresolved audit findings, prohibiting DOJ from awarding grants to nonprofit organizations that hold funds in offshore accounts for the purpose of avoiding taxes, placing limits on grantee conference expenditures, and requiring DOJ to take steps to limit duplicative grants to the same entity. Training for Federal Criminal Justice Agencies Within one year of enactment, Subtitle B requires DOJ to provide direction and guidance regarding training programs for first responders and tactical units of federal law enforcement agencies, the Bureau of Prisons, the Administrative Office of the U.S. Courts, and other appropriate agencies. In particular, DOJ is to provide guidance regarding procedures to identify and appropriately respond to incidents involving people with mental illness and the establishment of, or improvement to, computerized information systems of federal criminal justice agencies to help improve their responses to incidents involving people with mental illness. Report on Responding to the Needs of People with Mental Illness Subtitle B requires GAO, in coordination with DOJ, and within one year of enactment, to submit to Congress a report on the practices that federal first responders, tactical units, and corrections officers are trained to use to respond to people with mental illness; procedures to properly identify and respond to the needs of people with mental illness; the application of best practices in a criminal justice setting to better address the needs of people with mental illness; and recommendations on how DOJ can expand and improve information sharing and dissemination of best practices. Appendix. List of Abbreviations ACA: Patient Protection and Affordable Care Act ( P.L. 110-148 , as amended) ASMHSU: Assistant Secretary for Mental Health and Substance Use AS P E: Assistant Secretary for Planning and Evaluation CDC: Centers for Disease Control and Prevention CHIP: Children's Health Insurance Program CMS : Centers for Medicare & Medicaid Services COPS: Community Oriented Policing Services CRS : Congressional Research Service DHS: Department of Homeland Security DOJ: Department of Justice EMTALA: Emergency Medical Treatment and Labor Act ( P.L. 99-272 ) EPSDT: Early and Periodic Screening, Diagnosis and Treatment ERISA: Employee Retirement Income Security Act EVV: Electronic visit verification FBI: Federal Bureau of Investigation FMAP: Federal Medical Assistance Percentage FTCA: Federal Tort Claims Act GAO: Government Accountability Office GLS: Garrett Lee Smith HHCS: Home health care service HHS: Department of Health and Human Services HIPAA: Health Insurance Portability and Accountability Act of 1996 ( P.L. 104-191 ) HRSA: Health Resources and Services Administration IMD: Institutions for Mental Diseases IRC: Internal Revenue Code JAG: Edward Byrne Memorial Justice Assistance Grant LTSS: Long-term services and supports MHBG: Community Mental Health Services Block Grant MHPAEA: Mental Health Parity and Addiction Equity Act of 2008 ( P.L. 110-343 , Title V, Subtitle B) NCTSI: National Child Traumatic Stress Initiative NHSC : National Health Service Corps NICS: National Instant Criminal Background Check System NIH: National Institutes of Health NREPP: National Registry of Evidence-based Programs and Practices NVDRS: National Violent Death Reporting System OCR: Office for Civil Rights OIG: Office of Inspector General PAIMI: Protection and Advocacy for Individuals with Mental Illness PAMA: Protecting Access to Medicare Act ( P.L. 113-93 ) PCS: Personal care services PHI: Protected health information PHSA: Public Health Service Act PRNS: Programs of Regional and National Significance RSAT: Residential substance abuse treatment SABG: Substance Abuse Prevention and Treatment Block Grant SAFER: Staffing for Adequate Fire and Emergency Response SAMHSA: Substance Abuse and Mental Health Services Administration SSA: Social Security Act STOP: Sober Truth on Preventing Underage Drinking Act ( P.L. 109-422 ) VA: Department of Veterans Affairs VALOR: Preventing Violence Against Law Enforcement and Ensuring Officer Resilience and Survivability Initiative

This report summarizes the Helping Families in Mental Health Crisis Reform Act of 2016, enacted on December 13, 2016, as Division B of the 21st Century Cures Act (P.L. 114-255). Division B comprises Title VI through Title XIV. The first five titles in Division B (Title VI – Title X) deal primarily with the Substance Abuse and Mental Health Services Administration (SAMHSA) within the Department of Health and Human Services (HHS). SAMHSA is the federal agency with primary responsibility for increasing access to community-based services to prevent and treat mental disorders and substance use disorders. The next four titles in Division B (Title XI – Title XIV) deal with confidentiality of patient records, Medicaid, mental health parity, and criminal justice programs. Title VI "Strengthening Leadership and Accountability" Within Title VI, Subtitle A makes changes to HHS and SAMHSA's leadership, structure, and responsibilities. Subtitle B creates new planning and evaluation requirements, changes reporting and accounting requirements for state-designated protection and advocacy systems, and requires a Government Accountability Office (GAO) report on programs funded by SAMHSA's Protection and Advocacy for Individuals with Mental Illness grants. Subtitle C requires the HHS Secretary to establish an Interdepartmental Serious Mental Illness Coordinating Committee. Title VII "Ensuring Mental and Substance Use Disorders Prevention, Treatment, and Recovery Programs Keep Pace with Science and Technology" Title VII establishes within SAMHSA a "National Mental Health Policy Laboratory," codifies SAMHSA's existing National Registry of Evidence-based Programs and Practices (which was not previously explicitly authorized in statute), and authorizes appropriations for SAMHSA's Programs of Regional and National Significance (for which authorizations of appropriations had expired). Title VIII "Supporting State Prevention Activities and Responses to Mental Health and Substance Use Disorder Needs" Title VIII focuses on SAMHSA's two biggest programs: the Community Mental Health Services Block Grant (MHBG, $533 million in FY2016) and the Substance Abuse Prevention and Treatment Block Grant (SABG, $1.9 billion in FY2016). It makes various changes—some increasing flexibility, some imposing additional requirements, and some codifying current practice. It also requires a study on the formulas for distributing MHBG and SABG funds. Title IX "Promoting Access to Mental Health and Substance Use Disorder Care" Within Title IX, Subtitle A reauthorizes and modifies various programs and activities (most of which are administered by SAMHSA), codifies existing SAMHSA-administered programs and activities, authorizes new SAMHSA-administered programs and activities, and repeals statutory authorities for programs that have never been funded. Subtitle B focuses on the mental health and substance use disorder workforce—authorizing, reauthorizing, or amending several programs and activities, most of which are administered by the Health Resources and Services Administration (HRSA) within HHS. Subtitle C authorizes or reauthorizes SAMHSA-administered programs and activities focused on mental health on college campuses. Title X "Strengthening Mental and Substance Use Disorder Care for Children and Adolescents" Title X focuses on expanding access to community mental and behavioral health services for youth. It reauthorizes and modifies several SAMHSA-administered programs and activities. It also establishes several new grant programs. Title XI "Compassionate Communication on HIPAA" Title XI focuses on confidentiality of patient records and the circumstances under which health care providers (and other entities) may communicate with family members, caregivers, and law enforcement about individuals seeking or receiving treatment for mental disorders or substance use disorders. It requires dissemination of model programs for training health care providers, lawyers, and patients and their families on permitted disclosures. Title XII "Medicaid Mental Health Coverage" Title XII focuses on Medicaid. It includes a rule of construction related to same-day services. It requires studies and reports related to Medicaid managed care regulation and (separately) Medicaid's Emergency Psychiatric Demonstration Project. It requires a letter from the Centers for Medicaid & Medicare Services to State Medicaid Directors regarding opportunities for innovation under the Social Security Act (SSA) Section 1115 waiver authority. It requires the use of an electronic visit verification system for personal care services and home health care services under Medicaid. Title XIII "Mental Health Parity" Title XIII focuses on mental health parity and (separately) eating disorders, as well as the application of parity to eating disorder benefits. It amends federal parity law to include provisions aimed at improving compliance and requires a GAO report on compliance. It authorizes activities to educate the public and health professionals about eating disorders. Title XIV "Mental Health and Safe Communities" Title XIV amends the authorizing legislation for several Department of Justice (DOJ) programs and one Department of Homeland Security (DHS) grant program. Broadly, the amendments made by Subtitle A expand the scope of these programs to allow funds to be used to assist people with mental illness, substance use problems, or co-occurring substance abuse and mental health issues. Subtitle B makes several changes to the Justice and Mental Health Collaboration program. The amendments largely expand the scope of the program, so grants may be used for additional purposes to help respond to people involved in the criminal justice system who have substance abuse, mental health, or co-occurring disorders.

CRS_R42516

Issues The debates and discussions among U.S. government officials and outside stakeholders about the use of partnership in support of national security are inchoate, but a number of facets of the debates are discernible, including worldview; goals; effects; priorities; resourcing; assessments; roles and responsibilities; and risk. These issues are variously addressed in recent strategic guidance documents. Key unclassified guidance documents include the 2006 Quadrennial Defense Review (QDR) Report, and its follow-on Building Partnership Capacity (BPC) roadmap; the 2010 National Security Strategy (NSS); the 2010 QDR Report; the 2010 Quadrennial Diplomacy and Development Review (QDDR); and the 2012 Defense Strategic Guidance (DSG). In addition, a wealth of internal DOD guidance reportedly addresses partnership—in particular the Guidance for the Employment of the Force (GEF) as well as planning and programming guidance documents under their various names. Yet the treatment of "partnership" by these documents is both inconsistent and partial—not all documents address all the major facets of strategy; some, such as resourcing, are barely treated; and in many cases the thrust of the guidance has changed over time. This section describes each facet of partnership strategy, analyzes its treatment in recent guidance, and raises questions that may be germane to congressional oversight. Worldview In general, a state's national security strategy is likely to derive from some worldview—a set of assumptions about the nature of the world order and the exercise of power within it, together with a view of that state's role on the world stage. That worldview, in turn, is likely to shape how a state defines its national interests. In any partnership strategy, these starting points are likely to affect what effects are desired, how efforts are prioritized, and how results are assessed. While worldview may not be explicitly stated, identifying its influence on U.S. strategy, including the role of partnership within that strategy, may be helpful to rigorous oversight. Recent strategic guidance documents vary significantly in both the extent to which worldview is explicitly stated, and the nature of their respective worldviews: The 2006 QDR went to great lengths to justify the whole idea of partnership. Partnership was depicted less as a given than as a new necessity, driven by two new realities in the global arena: the urgent threat of terrorism that required actions in new places; and the long-term, large-scale contingency operations in Iraq and Afghanistan that required more hands. In turn, the 2006 QDR ascribed to partnership a relatively linear causal logic: the United States would help build partners' capabilities, and then those partners would employ those capabilities in accordance with U.S. strategy. A basic—and in some ways remarkable—assumption of the 2006 QDR was that partners' decisions and actions would largely follow U.S. intent. The 2010 QDR adopted the worldview of the 2006 QDR, that partnership as a rule requires a rationale, as well as a similar view of the global security context. As a result it largely echoed the counter-terrorism (CT)-driven rationale for partnership from the 2006 QDR. The 2010 NSS, in contrast, is explicitly based on a worldview in which collective action in the service of common interests is taken as a given—the default way of doing business in general, and thus not an approach that needs to be justified in each case. That view, solidly echoed in the 2010 QDDR, may be contrasted with a more instrumental approach to partnership, in which specific partners are recruited, when circumstances so require, to help accomplish specific ends. Furthermore, the 2010 NSS adopts from the institutionalist school of international relations theory the premise that shared norms help shape outcomes in the international system; so part of the causal logic in the 2010 NSS is that the United States fosters shared norms through partnership efforts, and those norms in turn shape choices by other international actors. The 2012 DSG reflects the 2010 NSS worldview—that partnership is the default way of doing business. It also reflects a perception of the global security context that is very different from those described by the 2006 and 2010 QDRs. The DSG underscores that the large-scale contingencies in Iraq and Afghanistan are no longer the top U.S. defense priorities, and the sense of urgency about fostering partners with the kinds of capabilities required for those contingencies has disappeared. The DSG's fundamental "shift toward the future" underscores concern with a broad range of security challenges, in contrast to the almost singular focus on CT as a driver for partnership in 2006. With partnership as the default starting point, the DSG indicates that any or all of these challenges might be addressed in part through partnership. Key questions concerning worldview might include the following: What assumptions about the nature of the world order undergird proposed partnership initiatives? How powerful a role does U.S. leadership play in partnership activities—to what extent does strategy assume that partners will participate, and then act, based on U.S. intent? Should partnership be the default starting point for engagement on the world stage? Or does the choice to pursue partnership—given its inherent frictions and opportunity costs—require justification in each case? What role if any do shared norms play in shaping outcomes? And to what extent if any can the U.S. government shape shared norms? Goals In principle, worldview and national interests shape national security strategy, which in turn articulates goals. One fundamental, unresolved tension in the debates about the use of partnership in support of national security concerns the fundamental goal of partnership. One possible logic argues that the global security context today presents a greater or more complex array of challenges than it did in the past, so partnership, including greater participation and contributions by partners, is now essential in order to meet those challenges. Another possible logic argues that partnership generates savings—as U.S. partners assume greater responsibilities, the United States can do less. Those two logics are not mutually exclusive, but different choices about their respective importance could have different implications for prioritizing and resourcing partnership efforts. Recent strategic guidance has tended to suggest that both logics apply without clarifying their relative importance: In the mid-aughts, both logics were powerfully alive in the Pentagon debates that shaped the 2006 QDR and other decision-making. In the wake of the terrorist attacks of 9/11, and amidst attention-grabbing cyber attacks, officials underscored that the 21 st century presented a much broader array of security challenges than ever before. The 2006 QDR called for building international partners' capabilities in order to meet those broader challenges. For example, counter-terrorism (CT) would require new, highly local approaches—and many of them—designed to cut off initial manifestations of terrorism, wherever in the world it might take root. The 2006 BPC roadmap argued more pointedly that without partnership at home and abroad, "the nation's strategic objectives are unattainable." In other words, alone—we fail. At the same time, the 2006 BPC roadmap, more explicitly than any other guidance, also invoked the idea of savings: "The Department's efforts to build the planning and operational capabilities of partner agencies and international partners have the potential to reduce the length of U.S. force deployments, minimize the range of circumstances in which U.S. forces are called upon, and preserve the Department's financial resources." What the roadmap did not do was square the circle by addressing how partnership could achieve savings in the face of a larger overall requirement. The 2010 QDR echoed the 2006 QDR's concern with an increased span of challenges as well as its premise that partnership was an important tool for addressing them. In addition, the 2010 QDR noted one way in which partnership could generate savings—by rendering some actions unnecessary or reducing the U.S. share of the burden if action were required. By "strengthening relationships" abroad, it argued, the United States would become better at averting crises altogether or—if needed—at working with others to respond to them. The 2012 DSG, in turn, seems to skew in the direction of savings. It states that partnership "remains important for sharing the costs and responsibilities of global leadership." Also, DOD official communications associated with the DSG have frequently stressed that partnership is one pillar of its plan to mitigate risk in the context of constrained resources. Key questions concerning the fundamental goals of partnership might include the following: What is the fundamental goal of partnership in support of national security? Is the logic to save money, as U.S. investments pay off over time in terms of things the U.S. government no longer has to do? Is the logic to meet a greater array of global security challenges by working by, with, and through partners—challenges that the United States would simply not have time or resources to meet on its own? To the extent that both goals apply—meeting challenges and generating savings—what is the appropriate balance between these goals in driving decisions about prioritization and resourcing? Effects In theory, partnership might be used to help achieve any of a wide array of ends that support national security: enabling partners to do specific things (at home, abroad, or as part of multilateral efforts); giving the United States better situational understanding; ensuring U.S. access; and shaping partners' perceptions and decision-making. Moreover, many specific partnership activities may aim at multiple effects—digging a well might build local good will for further tactical-level cooperation but may also develop capabilities that host nation forces could apply at home or abroad, foster effective host nation civil-military collaboration, deepen U.S. ability to work with host nation partners on a range of issues, and/or demonstrate U.S. commitment as part of a broader, orchestrated bilateral relationship. Clearly establishing the strategic logic that links interests to desired effects, and effects to activities, is widely viewed by strategists as essential for prioritizing efforts, producing effective assessments, and providing accountability. Recent strategic guidance tends to describe desired effects omnivorously—after all, most potential effects of partnership sound desirable—without clarifying the interests-effects-activities logic trail: The 2006 QDR and its BPC roadmap, reportedly driven by a keeping-us-up-at-night view of global terrorism, were relatively specific and distinctly ambitious concerning the desired effects of partnership. The 2006 QDR helped propagate the view that effective counter-terrorism called for "going local"—countering the precursors to terrorism wherever it might take root. That approach, in turn, required working closely with interior as well as defense ministries of partners around the world. It also required a transformative approach toward state and society in partner countries: "improv[ing] states' governance, administration, internal security and the rule of law in order to build partner governments' legitimacy in the eyes of their own people and thereby inoculate societies against terrorism, insurgency, and non-state threats." This 2006 view did clearly link desired effects with U.S. interests, but that list of "effects" was unwieldy, because it failed to separate the essential from the merely desirable. Particularly from a 2012 vantage point—steeped in both emerging lessons from Iraq and Afghanistan, and a deeply austere fiscal context—the 2006 aspiration to "inoculate" may sound strikingly maximalist, and the view that the U.S. government can foster such inoculation, highly optimistic. The 2010 QDR largely echoed the CT-driven rationale for the use of partnership from the 2006 QDR, as well as its scope and high level of ambition regarding partnership's desired effects. For example, it explained that since terrorists exploit ungoverned and under-governed areas as safe havens, DOD would help strengthen the ability of local forces to provide internal security and would work with other U.S. agencies to strengthen civilian capacity. It also made an adjustment to the strategic logic of partnership by naming "building the security capacity of partner states" as one of its six key missions. While that move may have been intended to emphasize further the importance of partnership, it opened the door to confusion by suggesting that partnership was an "end" rather than a set of instruments for pursuing other ends. The 2010 NSS calls for the use of whole-of-government partnership approaches, including roles for a number of U.S. departments and agencies, to help achieve a wide array of desired effects in support of U.S. national security interests. In the NSS, the effects of "invest[ing] in the capacity of strong and capable partners" include everything from countering violent extremism and stopping proliferation, to helping sustain economic growth and fostering shared norms. Geographically, the NSS calls for pursuing those effects very broadly—with traditional allies, emerging centers of influence, and new partners. Whether or not the objectives are all laudable and the proposed categories of partners appropriate, the expansiveness of both categories raises questions about which effects are most essential for protecting U.S. interests. The 2010 QDDR uses the term "partnership" to refer to the full spectrum of U.S. engagement with other states and multilateral organizations, which makes the desired effects of partnership largely coterminous with those of U.S. foreign policy. It affirms that one major component of that partnership is security-focused, and it states broadly that "the United States is investing in the capacity of strong and capable partners and working closely with those partners to advance our common security." Within that security category, it describes a wide range of the desired effects of partnership—from improving justice sectors, to countering violent extremism, to curtailing criminal networks, to strengthening fragile states, to ending conflicts, to supporting the environment—a range that far exceeds the narrow CT focus of the 2006 and 2010 QDRs. The QDDR does not articulate how the application of partnership approaches yields specific effects, or which applications are most important for protecting U.S. interests. The 2012 DSG provides the least clarity, among the recent defense guidance documents, about the specific desired ends of partnership. That reflects both the worldview of the 2010 NSS, in which partnership is simply the way to do business, and the DSG's broader-spectrum view of future security challenges compared to previous defense guidance. In stressing the importance of partnership activities including rotational deployments of U.S. forces, and bilateral and multilateral training exercises, the DSG describes a long array of potential pay-offs including ensuring access, reinforcing deterrence, building capacity for internal and external defense, strengthening alliances, and increasing U.S. influence. But such a laundry list of desired effects does not indicate how specific activities generate specific effects, does not provide clear guidelines concerning which of the effects are most important for protecting U.S. interests, and does not convey the strategic logic, if any, by which some effects generate others. Key questions concerning effects might include the following: How exactly does building the capacity and capabilities of U.S. partners lead to outcomes that help protect U.S. national security interests? By what logic exactly do partnership activities generate their desired effects? How and under what circumstances might some partnership effects help generate others? Prioritization Opportunities for partnership in support of national security are theoretically unbounded, so prioritization is essential both to focus effort and to conserve resources. In theory, priorities—always based on advancing and protecting U.S. interests—might be based on geography; or on functional concerns such as CT, countering weapons of mass destruction, and preventing or mitigating conflict; or on qualities of a potential partner such as its willingness to participate, its existing capabilities, and its general importance on the world stage aside from the dynamics of its bilateral relationship with the United States. These three possible rationales are likely to drive decision-making in quite different directions. It makes sense for partnership strategy to provide some mechanism for adjudicating among and sensibly synchronizing these three sets of concerns. Published strategic guidance documents are generally short on prioritization, while internal guidance reportedly has not settled on a single approach toward prioritization: The 2010 NSS and QDDR cast the broadest net, using "partnership" to refer to the full spectrum of U.S. government engagement around the world, providing exhaustive lists of the geographic areas ripe for partnership, the substantive arenas in which partnership should be applied, and the categories of potential partners. Not surprisingly, DOD's publicly available strategy documents do not include detailed guidance for prioritizing the use of partnership. The DSG stresses the growing importance of the Asia Pacific region and the continued importance of the Middle East, but it does not cross-walk those broad geographical priorities with functional or partner-characteristic concerns. Reportedly, DOD's internal guidance regarding partnership is more forthcoming, but the logic of prioritization that it uses has varied over time and the thinking remains unrefined. Some earlier guidance reportedly emphasized cultivating "willing and capable" partners. Yet some of the most important engagements from a U.S. strategic perspective may be precisely with those states that are not fully willing, or do not yet have all the capabilities required. These might include weak states facing significant internal turmoil that could grow into a threat to U.S. interests; or states that may take a skeptical view of the United States but whose geographic proximity to sources of U.S. concern could offer important access. While having willing and able partners might in theory be welcome, investing in all of them, and only in them, might not yield the biggest pay-offs in terms of protecting U.S. interests. Reportedly, more recent internal DOD guidance has recognized multiple potential rationales for partnership beyond the simple "willing and capable" formulation. But the use of multiple rationales has led to long lists of designated partners—each designated perhaps for a different combination of reasons. Without an agreed mechanism for rationalizing the major logics that might drive prioritization, and without some appetite suppressant on the overall scope, such guidance may provide little basis for making tough choices. Key questions concerning prioritization might include the following: By what mechanism should priorities for partnership be determined? How might concerns with specific geographic regions, with specific kinds of threats and challenges, and with key characteristics of potential partner states best be reconciled to produce a coherent approach to prioritization? To what extent and in what ways should a sense of the overall requirement drive decision-making about priorities? To the extent that partnership efforts in support of national security may include states, multi-lateral organizations, non-governmental organizations, and societies writ large, how can partnership strategy best prioritize among unlike partners? Resources The broad partnership debates often seem to assume that partnership yields savings over time. To the extent that savings is part of the desired ends, it may be helpful for partnership strategy to outline the curves of investment and expected pay-off over time, including when and how both curves will be reflected in budget requests. As a rule, strategic guidance concerning partnership broadly intimates that partnership eventually produces savings without demonstrating how that is expected to occur. The 2006 BPC roadmap went further than other strategic guidance by recognizing a range of ways in which partnership might generate savings over time. It also required that DOD officials include "assessments of the fiscal impact" in future internal deliberations about partnership. Key questions concerning resources might include the following: To what extent, if any, does partnership, given the initial costs of investment, eventually yield savings? In what ways, and according to what broad timeline, are savings generated by partnership efforts expected to be reflected in budget requests? To what extent if any does, and should, anticipated savings drive the relative prioritization of proposed partnership activities? Assessments One potential fundamental challenge to congressional oversight of Administration partnership efforts in support of national security is the lack of a clear assessment model for gauging the impact of partnership efforts. A common but generally unhelpful approach is to assess easily quantifiable "outputs" rather than "effects"—for example, assessing a bilateral exercise as successful because the exercise did indeed take place, rather than gauging the immediate and cumulative impact of relationship-building and capabilities-fostering on protecting U.S. interests. In theory, rigorous assessment requires as a starting point a clear and specific articulation of desired ends, together with a clear logic for assessing progress toward those ends. The realm of partnership complicates assessment in two ways. First, partnership efforts may be aimed at achieving multiple effects simultaneously—ranging from immediate, concrete results to longer-term, less tangible outcomes such as stronger U.S. influence that shapes a partner's decision-making. Second, some effects may be achieved partially, along a spectrum, rather than in the binary terms of success or failure. As a rule, strategic guidance regarding partnership has been vague about desired effects, and it has not addressed the balance among qualitatively different kinds of effects. If anything, guidance tends to imply, without stating so, that accomplishing a tactical-level mission will naturally also yield an array of tangible and intangible benefits at the operational and strategic levels. Assessments depend on unambiguous statements of expected results. Among the recent guidance, only the 2006 BPC roadmap explicitly recognized the need to be able to assess return on U.S. investment, but it did not outline how to do so. Key questions concerning assessments might include the following: How can the effects of partnership efforts, and their role in protecting U.S. interests, best be assessed? How might an assessments process consider partnership efforts designed to generate multiple, tangible and intangible, discrete effects? How in particular can the growth and impact of U.S. influence best be weighed? How can an assessments process best account for the fact that the effects of partnership efforts may depend in significant part on decisions and actions by U.S. partners? What qualities must partnership strategy have in order to facilitate effective assessment? Integration Observers have suggested that in an ideal world, the U.S. government would closely integrate all of its partnership efforts in support of national security—in diplomacy, development, and defense—not only so that these efforts do not contradict each other, but also so that they actively leverage each other and, as a whole, reflect U.S. priorities. Furthermore, the U.S. government would have a clear internal division of roles and responsibilities for partnership—among departments, and among key components within departments—in order to prevent confusion, mitigate friction, and allow effective and efficient preparation and execution by each entity. That clear division of labor would be reinforced, in turn, by congressional oversight. In general, strategic guidance tends to be strong in calling for integration of effort, though usually without prescribing mechanisms for achieving that integration; and weak in calling for, let alone clarifying, a clear division of roles and responsibilities: At the systemic level, the 2010 NSS calls resoundingly—in a three-page section—for whole-of-government approaches, noting that "we must update, balance, and integrate all the tools of American power." It broadly describes the focus of each major component of U.S. effort—defense, diplomacy, economic, development, homeland security, and intelligence. But it does not assign roles and responsibilities to specific agencies. At DOD, the most ambitious guidance documents in this regard were those issued in 2006—the QDR and its follow-on BPC roadmap. At that time, the term "building partnership capacity" was applied ambitiously to all potential DOD partners including other U.S. agencies, non-governmental organizations, and the private sector, as well as international partners. The 2006 guidance documents recognized the need for both integration of effort and clarification of roles and responsibilities across these stakeholders. To that end, the guidance called for the use of national security planning guidance (NSPG)—internal, classified guidance, issued by the White House to all agencies with a national security role, which would confirm specific priorities, and clarify and assign roles and responsibilities. The BPC roadmap argued in support of the NSPG proposal that if the U.S. government is at cross purposes internally, partnership will cost more and be less effective. The 2010 QDR echoed its predecessor in portraying close interagency integration as necessary to successful partnership. The 2010 QDR also did something singular in terms of the internal DOD division of labor on partnership matters, by calling to "strengthen and institutionalize general purpose force (GPF) capabilities for security force assistance." Such a boost for the role of GPF might suggest the need for an updated rationalization of the respective contributions of GPF and Special Operations Forces (SOF) to partnership efforts. Key questions concerning integration of effort and division of labor for partnership efforts in support of national security might include the following: How can the U.S. government best establish, and refine as needed, shared overall priorities for partnership efforts in support of national security? How can it best ensure that overall priorities for partnership efforts also support U.S. foreign policy goals writ large? What is the proper distribution of roles and responsibilities for partnership in support of national security among U.S. government departments and agencies? What would be the best mechanism for regularly updating systemic-level guidance to departments and agencies about their roles in undertaking partnership efforts in support of national security? How can the U.S. government best ensure that the distribution of authorities and resources among agencies corresponds to the most appropriate division of labor? How can the partnership roles of all stake-holding departments and agencies, once clearly defined, best be integrated? Given that many different departments and agencies are likely to share responsibility for partnership in support of national security, and that many individual programs require various combinations of participation, funding, and consent from multiple agencies, how can Congress best provide effective oversight? Risk Many potential benefits of partnership are seemingly obvious—to the extent that they are rarely spelled out. But partnership efforts carry potential risks as well as rewards. For example, partners may, tacitly or otherwise, come to depend on U.S. assistance in lieu of fostering their own fully sustainable systems. Partners may deliberately slow their growth of capabilities, or perpetuate a negative security climate, in order to justify requests for continued assistance. Partners may accept U.S. assistance but then choose not to apply their new capabilities toward U.S. strategic objectives. Or partners may apply the skills, education, and/or weaponry gained through partnership toward ends that contradict U.S. policy, such as carrying out human rights violations and staging a coup against a legitimate government. Key questions concerning risk might include the following: What safeguards are in place to help ensure that partners appropriately assume responsibility over time? How and to what extent can the United States best encourage partners to apply new capabilities toward achieving shared objectives? What safeguards are in place to help ensure, at the very least, that partners do not misapply the benefits of their partnership with the United States? How much U.S. due diligence is enough to mitigate such risks?

Over the last few years, the term "partnership" has spread like wildfire through official U.S. national security guidance documents and rhetoric. At the Department of Defense (DOD), which spearheaded the proliferation of the term, "partnership" has been used to refer to a broad array of civilian as well as military activities in support of national security. At other U.S. government agencies, and at the White House, the use of the term "partnership" has been echoed and applied even more broadly—not only in the national security arena, but also to all facets of U.S. relationships with foreign partners. "Partnership" is not new in either theory or practice. To illustrate, U.S. strategy during the Cold War called for working with formal allies, through combined planning and the development of interoperable capabilities, in order to deter and if necessary defeat a Soviet threat. And it called for working with partners in the developing world to cultivate the allegiance of states and societies to the West, and to bolster their resistance to Soviet influence. Congress provided oversight in the forms of policy direction; resources and authorities for programs ranging from weapons sales to combined military exercises to cultural exchanges; and accountability. New in recent years is both the profusion of the use of the term partnership and—in the aftermath of both the Cold War and the first post-9/11 decade—a much less singular focus for U.S. global engagement. Recent defense and national strategic guidance clearly conveys the view that partnership is good. But as a rule, it provides much less sense of what partnership is designed to achieve and how that protects U.S. interests; it does not clearly indicate how to prioritize among partnership activities; it does not assign specific roles and responsibilities for partnership across the U.S. government; and it does not indicate how to judge whether partnership is working. A lack of sufficient strategic direction could raise a series of potential concerns for Congress: Without sufficient national-level strategic guidance, good decisions about the use of partnership tools in support of national security may still be made on a case-by-case basis. But the natural default, practitioners suggest, may be toward embracing available opportunities, building further on evident successes, and falling in on existing patterns of engagement. In effect, that approach means optimizing at the sub-systemic level—focusing on the trees rather than on the forest—which may not optimally address defense and/or national-level strategic priorities. Without a clear articulation of the "ends" of partnership in support of national security, and whether and how those ends contribute to protecting U.S. interests, it may be difficult for agencies to judiciously prioritize partnership requirements against those for other national security missions. Without a clear articulation of the "ways and means" of partnership in support of national security, it may be difficult for agencies to gauge the extent to which partnership capabilities are distinct from others, or alternatively constitute "lesser included" subsets of other capabilities; and it may be difficult for agencies to consider appropriately the implications of partnership requirements for shaping and sizing the military force and the civilian workforce. Without a clear strategy of partnership in support of national security, linking ends with ways and means over time, it may be difficult for U.S. agencies to craft appropriate assessment tools to gauge the impact of partnership efforts on achieving defense and national security objectives, rather than resorting to the common default of focusing on "outputs," such as whether or not a training event took place. Without a clear distribution of roles and responsibilities—and corresponding resources and authorities—across the U.S. government for partnership in support of national security, it may be difficult for departments and agencies to plan and execute efficiently, and to integrate their efforts effectively. Without a clearly stated premise regarding resourcing—one that links initial investments in partnership efforts to any expected future savings as partners assume greater responsibilities over time—it can be difficult to anticipate the budgetary implications of partnership in support of national security. Without sufficient strategy for partnership in support of national strategy, together with appropriate assessment tools, a clear division of labor across the U.S. government, and resourcing expectations, it can be difficult for Congress to effectively allocate resources and authorities among agencies, and to ensure accountability for effective and efficient execution.

CRS_R44677

T hirty-four temporary tax provisions expired at the end of 2016. Collectively, temporary tax provisions that are regularly extended as a group by Congress, rather than being allowed to expire as scheduled, are often referred to as "tax extenders." There are several options for Congress to consider regarding temporary provisions. Provisions that expired at the end of 2016 could be extended. The extension could be retroactive. The extensions also could be short-term, long-term, or permanent. Another option would be to allow expired provisions to remain expired. Congress may also choose to evaluate the extension of certain expiring provisions, in lieu of considering an extenders package that addresses most or all of the provisions scheduled to expire. Certain expiring energy-related provisions have received particular attention, as long-term extensions of certain energy tax benefits were provided for wind and solar, but not other technologies, in legislation enacted at the end of 2015. In recent years, Congress has chosen to extend most, if not all, recently expired or expiring provisions as part of "tax extender" legislation. The most recent tax extender package, the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), enacted as Division Q of the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), broke the typical practice of temporarily extending expiring provisions by making many expiring provisions permanent. Some contend that by making many temporary provisions permanent, the need to address extenders every year or two was negated. Others have suggested that tax extenders might be addressed as part of tax reform. This report begins by reviewing the concept of tax extenders, and discusses criteria for evaluating expiring tax provisions. A list of tax provisions that expired at the end of 2016 is then provided. Information on past extensions of these expiring provisions is also provided. The report also briefly discusses recent tax extender legislation. As part of that discussion, information is included on provisions that were either made permanent or extended through 2019 in the most recent tax extenders legislation. The final sections of the report discuss the cost associated with extending expired provisions. The Concept of "Tax Extenders" The tax code presently contains dozens of temporary tax provisions. In the past, legislation to extend some set of these expiring provisions has been referred to by some as the "tax extender" package. While there is no formal definition of a "tax extender," the term has regularly been used to refer to the package of expiring tax provisions temporarily extended by Congress. Oftentimes, these expiring provisions are temporarily extended for a short period of time (e.g., one or two years). Over time, as new temporary provisions were routinely extended and hence added to this package, the number of provisions that might be considered "tax extenders" grew. This trend was broken with the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), which made permanent a number of provisions that had been part of previous tax extender packages. As a result, there are fewer "tax extender" provisions that expired in 2016 than in previous years. Evaluating Expiring Tax Provisions There are various reasons Congress may choose to enact temporary (as opposed to permanent) tax provisions. Enacting provisions on a temporary basis, in theory, would provide Congress with an opportunity to evaluate the effectiveness of specific provisions before providing further extension. Temporary tax provisions may also be used to provide relief during times of economic weakness or following a natural disaster. Congress may also choose to enact temporary provisions for budgetary reasons. Examining the reason why a certain provision is temporary rather than permanent may be part of evaluating whether a provision should be extended. Reasons for Temporary Tax Provisions There are several reasons why Congress may choose to enact tax provisions on a temporary basis. Enacting provisions on a temporary basis may provide an opportunity to evaluate effectiveness before expiration or extension. However, this rationale for enacting temporary tax provisions is undermined if expiring provisions are regularly extended without systematic review, as is the case in practice. In 2012 testimony before the Senate Committee on Finance, Dr. Rosanne Altshuler noted that an expiration date can be seen as a mechanism to force policymakers to consider the costs and benefits of the special tax treatment and possible changes to increase the effectiveness of the policy. This reasoning is compelling in theory, but has been an absolute failure in practice as no real systematic review ever occurs. Instead of subjecting each provision to careful analysis of whether its benefits outweigh its costs, the extenders are traditionally considered and passed in their entirety as a package of unrelated temporary tax benefits. While most expiring tax provisions have been extended in recent years, there have been some exceptions. For example, tax incentives for alcohol fuels (e.g., ethanol), which can be traced back to policies first enacted in 1978, were not extended beyond 2011. The Government Accountability Office (GAO) had previously found that with the renewable fuel standard (RFS) mandate, tax credits for ethanol were duplicative and did not increase consumption. Congress may choose not to extend certain provisions if an evaluation determines that the benefits provided by the provision do not exceed the cost (in terms of foregone tax revenue). In recent years, some tax extender packages have included all (or nearly all) expiring provisions, while other packages have left some out, effectively allowing provisions to expire as scheduled. The tax extender package in the American Taxpayer Relief Act (ATRA; P.L. 112-240 ) did not include several provisions that had been extended multiple times in the past. Most, but not all, expiring provisions were extended in the one-year, retroactive, tax extender bill enacted at the end of 2014, the Tax Increase Prevention Act ( P.L. 113-295 ). The most recent tax extender package, the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), enacted as Division Q of the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), extended all expiring provisions. Unlike other recent extenders packages, the PATH Act included a permanent extension for many provisions. Other provisions were extended for five years, while most provisions were extended for two years, in more typical "tax extenders" practice. Tax policy may also be used to address temporary circumstances in the form of economic stimulus or disaster relief. Economic stimulus measures might include bonus depreciation or generous expensing allowances. Disaster relief policies might include enhanced casualty loss deductions or additional net operating loss carrybacks. Other recent examples of temporary provisions that have been enacted to address special economic circumstances include the exclusion of forgiven mortgage debt from taxable income during the housing crisis of the late 2000s, the payroll tax cut, and the grants in lieu of tax credits to compensate for weak tax-equity markets during the economic downturn (the Section 1603 grants). It has been argued that provisions that were enacted to address a temporary situation should be allowed to expire once the situation is resolved. Congress may also choose to enact tax policies on a temporary basis for budgetary reasons. If policymakers decide that legislation that reduces revenues must be paid for, it is easier to find resources to offset short-term extensions rather than long-term or permanent extensions. Additionally, the Congressional Budget Office (CBO) assumes, under the current law baseline, that temporary tax cuts expire as scheduled. Thus, the current law baseline does not assume that temporary tax provisions are regularly extended. Hence, if temporary expiring tax provisions are routinely extended in practice, the CBO current law baseline would tend to overstate projected revenues, making the long-term revenue outlook stronger. In other words, by making tax provisions temporary rather than permanent, these provisions have a smaller effect on the long-term fiscal outlook. Extenders as Tax Benefits16 Temporary tax benefits are a form of federal subsidy that treats eligible activities favorably compared to others, and channels economic resources into qualified uses. Extenders influence how economic actors behave and how the economy's resources are employed. Like all tax benefits, extenders can be evaluated by looking at the impact on economic efficiency, equity, and simplicity. Temporary tax provisions may be efficient and effective in accomplishing their intended purpose, though not equitable. Alternatively, an extender may be equitable but not efficient. Policymakers may have to choose the economic objectives that matter most. Economic Efficiency Extenders often provide subsidies to encourage more of an activity than would otherwise be undertaken. According to economic theory, in most cases an economy best satisfies the wants and needs of its participants if markets allocate resources free of distortions from taxes and other factors. Market failures, however, may occur in some instances, and economic efficiency may actually be improved by tax distortions. Thus, the ability of extenders to improve economic welfare depends in part on whether or not the extender is remedying a market failure. According to theory, a tax extender reduces economic efficiency if it is not addressing a specific market failure. An extender is also considered relatively effective if it stimulates the desired activity better than a direct subsidy. Direct spending programs, however, can often be more successful at targeting resources than indirect subsidies made through the tax system such as tax extenders. Equity A tax is considered to be fair when it contributes to a socially desirable distribution of the tax burden. Tax benefits such as the extenders can result in individuals or businesses with similar incomes and expenses paying differing amounts of tax, depending on whether they engage in tax-subsidized activities. This differential treatment is a deviation from the standard of horizontal equity, which requires that people in equal positions should be treated equally. Another component of fairness in taxation is vertical equity, which requires that tax burdens be distributed fairly among people with different abilities to pay. Extenders may be considered inequitable to the extent that they benefit those who have a greater ability to pay taxes. Those individuals with relatively less income and thus a reduced ability to pay taxes may not have the same opportunity to benefit from extenders as those with higher income. The disproportionate benefit of tax expenditures to individuals with higher incomes reduces the progressivity of the tax system, which is often viewed as a reduction in equity. An example of the effect a tax benefit can have on vertical equity can be illustrated by considering two students claiming the above-the-line deduction for higher education expenses. Assume both students are single and have $1,000 in qualifying expenses. If one student has an income of $30,000, and the other student has an income of $60,000, the students would be in different tax brackets. The student with the lower income may fall in the 15% tax bracket, meaning the maximum value of the deduction would be $150 ($1,000 multiplied by 15%). The student with the higher income may fall in the 25% tax bracket, meaning the maximum value of the deduction would be $250 ($1,000 multiplied by 25%). Thus, the higher-income taxpayer, with presumably greater ability to pay taxes, receives a greater benefit than the lower-income taxpayer. Simplicity Extenders contribute to the complexity of the tax code and raise the cost of administering the tax system. Those costs, which can be difficult to isolate and measure, are rarely included in the cost-benefit analysis of temporary tax provisions. In addition to making the tax code more difficult for the government to administer, complexity also increases costs imposed on individual taxpayers. With complex incentives, individuals devote more time to tax preparation and are more likely to hire paid preparers. Tax Provisions that Expired in 2016 Thirty-four temporary tax provisions expired at the end of 2016. These provisions can be categorized as primarily affecting individuals or businesses, or being energy-related. These categorizations follow those used in past "tax extender" legislation. Individual21 Four individual tax provisions expired at the end of 2016 (see Table 1 ). Three of these provisions have been included in recent tax extenders packages. The above-the-line deduction for certain higher education expenses, including qualified tuition and related expenses, was first added as a temporary provision in Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA, P.L. 107-16 ), but has regularly been extended since. The other two individual extender provisions are housing-related. The provision allowing homeowners to deduct mortgage insurance premiums was first enacted in 2006 (effective for 2007). The provision allowing qualified canceled mortgage debt income associated with a primary residence to be excluded from income was first enacted in 2007. Both provisions were temporary when first enacted, but have been extended as part of the tax extenders in recent years. The other individual provision that expired at the end of 2016 is one that allows taxpayers over age 65 to deduct medical expenses in excess of 7.5% of adjusted gross income (AGI). For most taxpayers, an itemized deduction for unreimbursed medical expenses is allowed to the extent that such expenses exceed 10% of AGI. The threshold for the unreimbursed medical expense deduction was increased from 7.5% to 10%, effective in 2013 for most taxpayers, as part of the Patient Protection and Affordable Care Act ( P.L. 111-148 ). However, an exception from the increase for tax years 2013 through 2016 provided that, if either the taxpayer or their spouse was age 65 or older, the 7.5% threshold would apply during this four-year period. Three individual provisions that were previously included in the tax extenders were made permanent as part of the PATH Act. More information on provisions that were permanently extended can be found below (see Table 2 ). Business26 Fourteen business tax provisions expired at the end of 2016 (see Table 1 ). All but one of these provisions have been included in recent tax extenders legislation. The largest of these provisions, as ranked by cost of the most recent two-year extension, are the empowerment zone tax incentives and the credit for railroad track maintenance. As discussed further below, however, the cost of extending expiring business-related provisions is less than in recent tax extenders packages. Many business-related extender provisions, particularly higher-cost provisions, were made permanent as part of the PATH Act. Most of the business provisions scheduled to expire at the end of 2016 have been part of the tax code for close to a decade or longer. Several were first enacted in the 1990s, including the temporary increase in the limit on transfer or "cover-over" of rum excise tax revenues to Puerto Rico and the Virgin Islands; the Qualified Zone Academy Bond allocation of bond limitation; the Indian employment tax credit; accelerated depreciation for business property on Indian reservations; and the empowerment zone tax incentives. Several others were first enacted in the mid-2000s, including the credit for railroad track maintenance; seven-year recovery for motorsport racing facilities; the domestic production activities deduction allowable for activities in Puerto Rico; the mine rescue team training credit; expensing for mine-safety equipment; and the special expensing rules for film and television production. The one business provision expiring at the end of 2016 that has not been extended in past tax extender legislation was enacted at the end of 2015, as part of the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ). Specifically, the provision provides that for taxable years beginning in 2016, corporate qualified timber gains are subject to an alternative tax rate of 23.8%. Twelve business provisions that were previously part of the tax extenders were made permanent as part of the PATH Act. Five others were extended through 2019. The provisions that were made permanent tended to be those that, in the past, cost more to extend than provisions that remain part of the tax extenders (see Table 2 ). Energy30 Sixteen energy tax provisions expired at the end of 2016 (see Table 1 ). Thirteen of these provisions were extended in the PATH Act. Of the energy tax provisions that were extended in the PATH Act, the largest, as ranked by cost of the most recent two-year extension, are the incentives for biodiesel and renewable diesel, the production tax credit (PTC) for nonwind technologies, and the credit for nonbusiness energy property (also known as the credit for energy efficiency improvements to existing homes). Most of the energy provisions that expired at the end of 2016 have been included in past tax extender legislation. Division P of the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ) also included extensions of certain energy tax provisions. Specifically, the Section 48 business credit rates for certain solar property and Section 25D residential energy investment credits for certain solar property were extended through 2021 (with reduced rates in 2020 and 2021). The Section 48 business and Section 25D residential energy investment credits expire at the end of 2016 for most other types of qualifying property. The production tax credit (PTC) for wind property was extended through 2019 (with reduced rates in 2017, 2018, and 2019). As noted above, the PTC for nonwind technologies was extended for two years, through 2016, in the PATH Act. For most nonsolar property, the business and residential investment tax credits are scheduled to expire at the end of 2016. Many of the components of these credits that are set to expire at the end of 2016 were first added to the code, as temporary provisions, in the Energy Policy Act of 2005 (EPACT05; P.L. 109-58 ) and subsequently included in tax extenders legislation. Under the Emergency Economic Stabilization Act of 2008 ( P.L. 110-343 ), certain temporary energy provisions were given long-term extensions, through 2016. The PATH Act did not include permanent extensions of any expiring energy tax provisions. This is in contrast to individual, business, and charitable extenders, where a number of temporary provisions were made permanent. Recent "Tax Extender" Legislation The most recent "tax extenders" legislation was enacted as the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), enacted as Division Q of the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ). The PATH Act either extended or made permanent all of the 52 temporary tax provisions that had expired at the end of 2014. As noted in Table 1 , most of the provisions set to expire in 2016 were extended as part of the PATH Act. The PATH Act, unlike other recent tax extender legislation, provided long-term extensions (through 2019) for a number of provisions, while making many other temporary tax provisions permanent. These changes are summarized in Table 2 . Of the six individual tax provisions that expired at the end of 2014, three were made permanent in the PATH Act. The provisions that were permanently extended were (1) the above-the-line deduction for teacher classroom expenses; (2) the deduction for state and local sales taxes; and (3) a provision providing parity for exclusion of employer-provided mass transit and parking benefits. A permanent extension of the deduction for teacher classroom expenses had been approved by the House Committee on Ways and Means earlier in the 114 th Congress. The 114 th Congress had also passed legislation to make the deduction for state and local sales taxes permanent, before this provision was included in the PATH Act. Of the 30 business tax provisions that expired at the end of 2014, 12 were made permanent in the PATH Act, while another 5 were extended through the end of 2019. Many of these provisions had been extended multiple times. The research tax credit, for example, had been extended a total of 16 times since being enacted in 1981, before being modified and made permanent in the PATH Act. Before being included in the PATH Act, stand-alone legislation was passed in the House in both the 113 th and 114 th Congresses that would have modified and made the research credit permanent. The exception under Subpart F for active financing income, which was first enacted in 1997, was another long-standing temporary provision made permanent in the PATH Act. The House Committee on Ways and Means had approved stand-alone legislation to make this provision permanent in both the 113 th and 114 th Congresses. Provisions that were made permanent in the PATH Act, particularly the business provisions, included those with the largest revenue cost. The modification and permanent extension of the research credit had an estimated revenue cost of $113.2 billion over the 10-year budget window, while the costs associated with making permanent the exceptions under Subpart F for active financing income and the increase in expensing limits under Section 179 were $78.0 billion and $77.1 billion, respectively. By contrast, it would cost no more than $3 billion to make permanent any single business provision scheduled to expire at the end of 2016. The PATH Act made permanent all four of the charitable provisions that had expired at the end of 2014 and were previously part of the tax extenders. The House had passed legislation in both the 113 th and 114 th Congresses that would have made these provisions permanent, but permanent extension was not enacted until the PATH Act. As discussed above, the PATH Act provided a temporary extension for all energy-related provisions that expired at the end of 2016. Division P of the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ) included long-term extensions of certain tax benefits for wind and solar. However, no long-term or permanent extensions of energy-related provisions were included in the PATH Act. Some of the provisions with longer-term extensions in the P.L. 114-113 included phaseouts. Specifically, the extension of 50% first-year bonus depreciation was subject to a phase down. The 50% bonus depreciation was extended through 2017, but the amount of qualifying investment that could be expensed is set to be reduced to 40% in 2018 and 30% in 2019. There were also phase downs associated with the longer-term extensions of the tax credits for wind and solar. The PTC for wind was extended through 2019, although the credit amount was reduced by 20% for facilities beginning construction in 2017, 40% for facilities beginning construction in 2018, and 60% for facilities beginning construction in 2019. The 30% ITC for business solar was extended through 2019 and the deadline changed from a placed-in-service deadline to a construction start date. The business solar ITC was set to be 26% for facilities beginning construction in 2020, and 22% for facilities beginning construction in 2021, so long as these facilities are placed in service before the end of 2023. The business solar ITC is scheduled to return to 10% in 2022. The tax credit for residential solar was extended through 2021, with a phaseout starting in 2020. The Tax Increase Prevention Act of 2014 ( P.L. 113-295 ), passed late in the 113 th Congress, made tax provisions that had expired at the end of 2013 available to taxpayers in the 2014 tax year. The act extended most (but not all) expiring tax provisions, and most of the provisions extended in P.L. 114-113 had been included in past tax extenders legislation. The cost of the tax extenders package enacted as P.L. 113-295 was estimated to be $41.6 billion over the 10-year budget window. Earlier in the 113 th Congress, the Senate Finance Committee had reported a two-year extenders package. The House had also passed legislation that would have made permanent certain expiring provisions. Ultimately, the one-year retroactive extenders legislation is what was passed by the 113 th Congress. The American Taxpayer Relief Act (ATRA; P.L. 112-240 ) extended dozens of temporary provisions that had either expired at the end of 2011, or were set to expire at the end of 2012. The provisions that had expired at the end of 2011 were extended retroactively. The cost of the tax extenders package enacted as part of ARRA was estimated to be $73.6 billion over the 10-year budget window. Several provisions that were considered "traditional extenders"—that is, they had been extended multiple times in the past—were not extended under ATRA. The Cost of Extending Expired Tax Provisions As lawmakers consider whether to extend expired tax provisions beyond 2016, cost is one factor. Since many provisions were made permanent in the PATH Act, a temporary extenders package for provisions that expired in 2016 would cost less than past extender packages. There are fewer provisions to extend, and many provisions with the largest revenue cost were made permanent in the PATH Act. Cost of Extensions Enacted in P.L. 114-113 In total, the extensions of expiring provisions or tax extenders in P.L. 114-113 are estimated to reduce federal revenues by $628.8 billion between 2016 and 2025. Of that cost, nearly one-third ($202.1 billion) is attributable to extensions of provisions that were scheduled to expire in 2017 (the reduced earnings threshold for the refundable portion of the child tax credit; the American Opportunity Tax Credit; and modifications to the earned income tax credit) and the two-year moratorium on the medical device excise tax. Thus, the cost of extending the "tax extender" provisions was an estimated $426.8 billion between 2016 and 2025. Of the total cost of the tax extenders in P.L. 114-113 , $559.5 billion, or 89% of the total cost, was associated with permanent extensions. The estimated cost of permanent extension of "tax extender" provisions (provisions that had expired in 2014 and were made permanent in P.L. 114-113 ) was $361.4 billion. Of the total cost of tax extenders in P.L. 114-113 , a small portion, $17.7 billion (or less than 3%) was for the two-year extension of provisions that had expired in 2014 through 2016. Cost of Extending Provisions that Expired in 2016 As discussed above, most provisions that expired at the end of 2016 were previously extended for two years in the PATH Act. Overall, the cost of temporary extensions of extenders provisions in the PATH Act was estimated to be $17.7 billion over the 10-year budget window (see Table 3 ). This estimate does not include the cost of temporarily extending provisions set to expire at the end of 2016 that were not extended in the PATH Act. Another option, instead of a short-term extension, is to provide long-term extensions of, or make permanent, tax provisions that are currently temporary. Federal revenues would be reduced by an estimated $158.0 billion over the 10-year budget window, if all temporary tax provisions that expired at the end of 2016 were made permanent (see Table 3 ). This, however, would remove the mechanism that short-term extensions introduce, mainly forcing policymakers to periodically reconsider extension of temporary provisions. Appendix. List of Previous "Tax Extender" Legislation There is no formal definition of "tax extenders" legislation. Over time, "tax extenders" legislation has come to be considered legislation that temporarily extends a group of expired or expiring provisions. Using this characterization, below is a list of what could be considered "tax extenders" legislation. Using this list, tax extenders have been addressed 17 times. The package of provisions that are included in the tax extenders has changed over time, as Congress has added new temporary provisions to the code, and as certain provisions are either permanently extended or given temporary extension in other tax legislation. Consolidated Appropriations Act, 2016 ( P.L. 114-113 ) Tax Increase Prevention Act of 2014 ( P.L. 113-295 ) American Taxpayer Relief Act of 2012 ( P.L. 112-240 ) Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ) Emergency Economic Stabilization Act of 2008 ( P.L. 110-343 ) Tax Relief and Health Care Act of 2006 ( P.L. 109-432 ) Working Families Tax Relief Act of 2004 ( P.L. 108-311 ) Job Creation and Worker Assistance Act of 2002 ( P.L. 107-147 ) Ticket to Work and Work Incentives Improvement Act of 1999 ( P.L. 106-170 ) Omnibus Consolidated and Emergency Supplemental Appropriations Act, 1999 ( P.L. 105-277 ) Taxpayer Relief Act of 1997 ( P.L. 105-34 ) Small Business and Job Protection Act of 1996 ( P.L. 104-188 ) Omnibus Budget Reconciliation Act of 1993 ( P.L. 103-66 ) Tax Extension Act of 1991 ( P.L. 102-227 ) Omnibus Budget Reconciliation Act of 1990 ( P.L. 101-508 ) Omnibus Budget Reconciliation Act of 1989 ( P.L. 101-239 ) Technical and Miscellaneous Revenue Act of 1988 ( P.L. 100-647 )

In the past, Congress has regularly acted to extend expired or expiring temporary tax provisions. Collectively, these temporary tax provisions are often referred to as "tax extenders." Most recently, in December 2015, Congress addressed tax extenders in the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), enacted as Division Q of the Consolidated Appropriations Act, 2016 (P.L. 114-113). This legislation extended all of the 52 provisions that had expired at the end of 2014. Unlike past tax extenders legislation, however, a number of provisions that had expired at the end of 2014 were made permanent. Several others were extended through 2019. Many provisions were temporarily extended for two years, through 2016. Thirty-four temporary tax provisions expired at the end of 2016. Most of these provisions were extended for two years as part of the PATH Act. Options related to extenders in the 115th Congress include (1) extending all or some of the provisions that expired at the end of 2016 or (2) allowing expired provisions to remain expired. If temporary tax provisions that expired at the end of 2016 are extended, retroactive extensions may be considered so that tax incentives and provisions are available in 2017. In the past, retroactive extensions have been common for expired temporary tax provisions. There are several reasons why Congress may choose to enact tax provisions on a temporary basis. Enacting provisions on a temporary basis provides legislators with an opportunity to evaluate the effectiveness of tax policies prior to expiration or extension. Temporary tax provisions may also be used to provide economic stimulus or disaster relief. Congress may also choose to enact tax provisions on a temporary rather than permanent basis due to budgetary considerations, as the foregone revenue from a temporary provision will generally be less than if it were permanent. The provisions that expired at the end of 2016 are diverse in purpose. There are education- and housing-related provisions for individuals. For businesses, there are several provisions related to the territories, Indian tribes, and economic development, in addition to provisions for specific industries. There are also a number of energy-related tax provisions that expired at the end of 2016. As lawmakers consider whether to extend expired tax provisions beyond 2016, cost is one factor. Since many provisions were made permanent in the PATH Act, a temporary extenders package for provisions that expired in 2016 would cost less than past extender packages. There are fewer provisions to extend, and many provisions with the largest revenue cost were made permanent in the PATH Act.

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Introduction Congress, Presidents, and executive branch agencies create federal advisory committees to gain expertise and policy advice from individuals outside the federal government. Federal advisory committees have historically been created on an ad hoc, provisional basis to bring together various experts—often with divergent opinions and political backgrounds—to examine an issue and recommend statutory, regulatory, grantmaking, or other policy actions. Federal advisory committees are one of only a few formalized mechanisms for private-sector citizens to participate in the federal policymaking process. Whether called commissions, committees, councils, task forces, or boards, these entities have historically been used to address a gamut of public policy issues, offering policy recommendations on topics ranging from organ transplant practices to improving operations at the Department of Homeland Security. In 1972, the Federal Advisory Committee Act (FACA) was enacted to set operational requirements for federal advisory committees. FACA defines a federal advisory committee as any committee, board, commission, council, conference, panel, task force, or other similar group, or any subcommittee or other subgroup thereof ... established by statute or reorganization plan, ... established or utilized by the President, ... established or utilized by one or more agencies, in the interest of obtaining advice or recommendations for the President or one or more agencies or officers of the Federal Government.... The definition also explicitly excludes any committee that is composed wholly of full-time, or permanent part-time, officers or employees of the Federal Government, and ... any committee that is created by the National Academy of Sciences or the National Academy of Public Administration. Even with this definition, it is sometimes unclear whether FACA should apply to particular advisory committees. Advisory bodies statutorily mandated may or may not be obligated to follow FACA requirements—often depending on whether Congress explicitly states in legislation whether FACA should apply. One general principle is that FACA's application can be determined by examining which branch of the federal government appoints committee members and to which branch the committee reports its findings. More detail on determining whether FACA's requirements apply to a particular committee are provided later in this report. Pursuant to statute, the General Services Administration (GSA) maintains and administers management guidelines for federal advisory committees. In FY2015, 1,009 active FACA committees reported total operating costs of $367,568,370. These committees reported a total of 72,200 members and were divided among 49 departments and agencies. With advisory committees' broad utility, agency administrators, the President, and Congress are likely to continue creating federal advisory committees throughout the 114 th Congress (2015-2016) and in the future. In the 114 th Congress, one bill has been introduced that, if enacted, would affect FACA's implementation and administration government-wide. The Federal Advisory Committee Act Amendments of 2016 ( H.R. 2347 ), introduced by Representative William Lacy Clay in May 2015, would require that advisory committee members be selected to serve without regard to partisan affiliation. Additionally, the bill seeks to ensure that any advisory body subcommittees and privately contracted advisory committees adhere to FACA's requirements. Currently, such subcommittees and privately contracted committees are not covered by FACA. Among other changes, H.R. 2347 seeks to clarify the ethics requirements of committee members and would increase certain federal advisory committee records access requirements. On March 1, 2016, H.R. 2347 passed the House. On March 2, 2016, H.R. 2347 was referred to the Senate Committee on Homeland Security and Governmental Affairs. No further action has been taken on the bill. H.R. 2347 is intended to clarify certain advisory committee transparency requirements and increase public participation with and records access to federal advisory committees. The bill, however, could increase the time and costs associated with starting and administering advisory committees. This report provides a legislative and executive-branch history of FACA, and examines its application. It also provides analysis of data on committee operations and costs over time, with a specific focus on advisory committee operations in FY2015. History Although FACA did not exist prior to 1972, George Washington is often credited with initiating a tradition of utilizing outside expertise to advise the president when, in 1794, he appointed an ad hoc group of commissioners to investigate the Whiskey Rebellion. Since the 1840s, Congress has legislated control over federal advisory bodies—mostly by limiting funding and committee member pay. In 1842, for example, a law was enacted that prohibited payment to "any commission or inquiry, except courts martial or courts of inquiry in the military or naval service" without explicit "special appropriations." Similarly, in 1909, another law was enacted that prohibited appropriation to "any commission, council, board, or other similar body ... unless the creation of the same shall be or shall have been authorized by law." The law also prohibited the detailing of any federal employee to work on an unauthorized commission. By the 20 th century, some Members of Congress believed the executive branch's advisory bodies were inefficient and not accessible to the public. Some Members believed that the public harbored concerns that a proliferation of federal advisory committees had created inefficient duplication of federal efforts. Moreover, some citizens argued that the advisory entities did not reflect the public will, in part because many committees' policies of closed-door meetings. Congress was called on to increase oversight of the proliferating advisory boards. Subsequently, Congress enacted FACA in 1972. The legislation requires advisory bodies that fit certain criteria to report a variety of information—including membership status, costs, and operations—annually to GSA, which then aggregates and reports the information to Congress. See the Appendix for more detail on the legislative and executive branch background of FACA. The Federal Advisory Committee Act As discussed above, FACA represents an attempt to address many historic concerns about federal advisory committees. The law established the first statutory requirements for management of, access to, and oversight of federal committees. The act requires that all advisory committees "be advisory only," and that issues on which they offer recommendations are to be "determined, in accordance with law, by the official, agency, or officer involved." FACA allocates a variety of oversight and management responsibilities to the standing committees of Congress, the Office of Management and Budget (OMB—these responsibilities were transferred to the General Services Administration), agency heads, and the President. FACA places certain requirements on the formation and oversight of federal advisory committees. For example, FACA requires congressional committees to continuously review whether existing federal advisory committees that fall under their legislative jurisdiction are necessary or redundant. Congress is also to determine if the committees are "fairly balanced in terms of the points of view represented and the functions to be performed." FACA committees established legislatively are to be created with enough autonomy from the appointing power (Congress, the President, or an agency head) so as to not be unduly influenced. Each committee's reporting requirements are to be clearly stipulated, and proper funding and staffing are to be provided. The 1972 statute authorized OMB to oversee the management of advisory committees. The OMB Director's first mandated task was to review, concurrently with Congress, existing advisory entities to determine whether they should be abolished. The Director was also to create operating policies for advisory committees and provide "advice, assistance, and guidance" to entities "to improve their performance." The guidelines were to include pay rates for members, staff, and consultants, and catalog overall costs for the committees to be used for budget recommendations to Congress. Agency heads were to ensure proper implementation of OMB's guidelines and to "maintain systematic information on the nature, functions, and operations of each advisory committee within [their] jurisdiction." In December 1977, the duties charged to OMB were reassigned to GSA by E.O. 12024. A FACA committee's recommendations are strictly advisory and cannot mandate policy action by recipients of the report. In the case of a presidential advisory committee, however, the President must submit to Congress—within a year of receiving a committee's public report—proposals for action or reasons for inaction on the recommendations in the public report. The President is also required to report annually to Congress the "activities, status, and changes in the composition of advisory committees in existence during the preceding year." FACA requires the President to exclude the activities and composition changes of advisory committees related to national security from the report. The law authorizes only Congress, the President, or an agency head to create an advisory committee. FACA requires all committees file a charter, a document that outlines committee mission, bylaws, and authorities, prior to its operation. A charter is required to include the committee's objectives, the support agency, the committee's duties, the estimated operating costs, the estimated number of committee meetings, and the anticipated termination date, among other information. Most committee meetings are required to be advertised in the Federal Register and open to the public. When FACA Applies As noted earlier, FACA defines an "advisory committee" as "any committee, board, commission, council, conference, panel, task force, or other similar group, or any subcommittee or other subgroup thereof" that is "established by statute or reorganization plan," "established or utilized by the President," or "established or utilized by one or more agencies." All advisory bodies that fit this definition, however, are not necessarily entities that must adhere to FACA. The Code of Federal Regulations defines an advisory committee nearly identically to FACA's definition, but adds that the body must be created "for the purpose of obtaining advice or recommendations for the President or on issues or policies within the scope of an agency official's responsibilities." In short, FACA applies when an advisory committee is "either 'established' or 'utilized' by an agency." Pursuant to FACA, any advisory body that performs a regulatory or policy-making function cannot be a FACA entity. Committees that consist entirely of part- or full-time federal employees are explicitly exempted from FACA, as are committees created by the National Academy of Sciences or the National Academy of Public Administration. Committees created by or operating within the Central Intelligence Agency or the Federal Reserve System are also FACA exempt. Additionally, some specific committees—for example the Commission on Government Procurement—are statutorily exempt from FACA. Although both FACA and the Code of Federal Regulations define advisory committees, it may sometimes be unclear whether some advisory committees—especially those created by statute—must adhere to FACA requirements. Advisory committees created by the executive branch that fit FACA criteria are governed by FACA. Advisory committees that are created by statute, however, may or may not be obligated to follow FACA requirements—often depending on which branch of the federal government appoints committee members and to which branch of the federal government the committee must report its findings. If, for example, a statutorily created advisory committee reported only to Congress and not the executive branch, FACA guidelines likely would not apply. If, however, the same committee reports to both Congress and the President, it is unclear whether FACA guidelines would apply. According to GSA, it is generally up to the agency that hosts the advisory committee to determine whether FACA statutes are applicable. To avoid confusion over whether a committee is governed by FACA, Members of Congress sometimes include a clause within committee-establishing legislation to explicitly clarify whether a committee is to be subject to FACA. While FACA may improve both the reality and perception of transparent governmental operation and accessibility, its requirements may also place a number of additional chartering, record-keeping, notification, and oversight requirements on the entity. In particular, agencies have claimed that compliance with the various FACA requirements are cumbersome and resource intensive, thereby reducing the ability of committees to focus on substantive issues in a spontaneous and timely fashion. Moreover, some scholars have argued that the scope of the openness requirements could have the practical effect of stifling candid advice and discussion within a committee. Congress may choose to exempt a statutorily established advisory committee from FACA to allow it potentially to operate more quickly and less expensively than FACA might permit. For example, the requirement that all meetings be posted "with timely notice" in the Federal Register may slow down the daily operations of an advisory committee, which will typically not hold meetings until 15 days after the notice is published. Current FACA Operations, Responsibilities, and Costs Each year roughly 1,000 active advisory committees operate. This section provides a brief analysis of the government-wide operations of FACA committees, using data from GSA's FACA database. The data are reported to GSA by federal employees assigned to ensure appropriate operation of each agency's affiliated advisory committees. Committee Operations and Cost Statistics44 In FY2015, 1,009 committees reported a total of 72,200 members and a cost to the federal government of $367,568,370. In the past five years, the number of FACA committees operating government-wide has remained consistent, while the number of committee members has increased by 2,450 (3.5%). Figure 1 shows the number of FACA committees that reported as active from FY2011 to FY2015. Within that time span, FY2011 had the greatest number of active FACA committees with 1,029, while FY2014 had the fewest with 989. In each year examined, a majority of the active committees were required to be established by statute. In FY2015, for example, of all operating FACA committees, Congress required the establishment of 53.4% of them, including 20 committees that began operations in FY2015. Five of the statutorily required committees newly established in 2015 operate within the Department of the Interior. Figure 2 shows the number of reported members serving on FACA committees from FY2011 to FY2015. The data show an inconsistent increase in the number of members, from 69,750 in FY2011 to 72,220 in FY2015. FY2015 marks a 5.9% increase from the number of members reported in FY2014. Figure 3 shows the costs affiliated with operating FACA committees from FY2011 to FY2015. The highest costs to administer FACA in this time period were in FY2011 ($416,398,354 in constant 2015 dollars). As shown in Figure 3 , costs decreased steadily from FY2011 through FY2014. This reduction over time appears prompted by fewer FACA members, as well as by a reduction in travel and per diem costs for members to attend advisory committee meetings. In FY2015, costs to administer FACA committees grew to $367,568,370, an increase that is concurrent with 2,450 additional members joining FACA committees. Open and Accessible Meetings FACA requires that advisory committees make their recommendations accessible to the public. All committee meetings that are governed by FACA's requirements are presumed to be open to the public, with certain specified exceptions. Pursuant to the Government in the Sunshine Act, however, federal advisory committee meetings that address the following topics may be closed to the public: those including discussions of classified information; reviews of proprietary data submitted in support of Federal grant applications; and deliberations involving considerations of personnel privacy. Adequate notice of meetings must be published in advance (usually 15 days prior to the meeting) in the Federal Register . Subject to certain records protections provided in the Freedom of Information Act, all papers, records, and minutes of meetings must be made available for public inspection. Membership must be "fairly balanced in terms of the points of view represented and the functions to be performed," and the committee should "not be inappropriately influenced by the appointing authority or by any special interest." Although FACA requires committee meetings be open and accessible to the public, most committee meetings are actually closed to the public because they meet certain the reasons authorized in the Government in the Sunshine Act. In FY2015, for example, 71.1% of meetings were closed to the public. Most of these closed committee meetings provided advice on agencies' grant-making decisions, which is one of the specified exceptions. Filing a Charter All advisory committees that are subject to FACA must file a charter every two years. The charter must be sent to the appropriate Senate and House committees of jurisdiction, the head of the agency in which the committee is located, and the Committee Management Secretariat in GSA. The charter must include, among other information, the advisory committee's mandate and duties, frequency of meetings, and membership requirements. GSA is required annually to review advisory committee accomplishments; respond to inquiries from agencies that seek to create new advisory bodies; and maintain an online, publicly accessible database of FACA bodies that includes a variety of information about each entity. The two-year lifespan of a FACA committee begins on the day a committee files its charter with the Senate and House committees of jurisdiction. Congress can override this two-year re-chartering requirement by writing into statute the lifespan of the committee. Congress may authorize a committee to exist for as long as it deems necessary. Membership and Oversight Executive-branch-established advisory committees that have at least one member who is not a federal employee are generally subject to FACA. The act requires each agency with an advisory committee to have a committee management officer (CMO) who supervises "the establishment, procedures, and accomplishments of advisory committees established by that agency." Moreover, the CMO is required to maintain advisory committee "reports, records, and other papers" related to the entity's proceedings and ensure that the body adheres to the Sunshine Act. Also, pursuant to FACA, a "designated federal official" (DFO) must be present at committee meetings to call and adjourn meetings. According to OMB Circular No. A-135, FACA committees must be "essential to the performance of a duty or responsibility conveyed upon the executive branch by law." The circular then states the following: Advisory committees should get down to the public's business, complete it and then go out of business. Agencies should review and eliminate advisory committees that are obsolete, duplicative, low priority or serve a special, rather than national interest. Committee Sunset All committees created since FACA's enactment are required to sunset after two years, unless legislation creating the entity specifies otherwise or the entity is renewed by the authority that created it. All committee reports, as well as records generated by the committee, that qualify as federal records must be provided to the appropriate authorities to ensure their future access. FACA and the 114th Congress On May 15, 2015, Representative William Lacy Clay introduced H.R. 2347 , the Federal Advisory Committee Act Amendments of 2015. H.R. 2347 seeks to clarify some of the language in FACA and make the process of establishing a committee and selecting members more transparent and participatory. H.R. 2347 would increase public access to federal advisory committees, clarify ethics requirements of FACA committee members, and extend FACA requirements to federal advisory committees established by entities outside of a federal agency, but under contract with the agency. These so-called federally contracted advisory committees are currently not governed by FACA. H.R. 2347 was referred to the House Committee on Oversight and Government Reform and the House Committee on Ways and Means. On March 1, 2016, H.R. 2347 passed the House. On March 2, 2016, H.R. 2347 was referred to the Senate Committee on Homeland Security and Governmental Affairs. No further action has been taken on the bill. H.R. 2347 incorporates language from bills Representative Clay has previously introduced in the 110 th , 111 th , 112 th , and 113 th Congresses. H.R. 2347 and FACA Membership H.R. 2347 would modify the committee-member appointment process. The bill adds language requiring agencies to publish a request for public comments and recommendations on who should be appointed to the committee in the Federal Register prior to making membership appointments. Pursuant to the bill, the public would be allowed to submit their recommendations electronically, and the agency would be required to "consider any comments" when making appointments to the committee. Additionally, H.R. 2347 would require the selection of members without regard to their partisan affiliations. H.R. 2347 would require each member, at the time of appointment, be explicitly designated as a representative or special government employee (SGE) and be provided a summary of the ethics requirements associated with that designation. Currently, not all federal advisory committee members must adhere to the ethical codes placed on federal employees. H.R. 2347 and FACA Committee Transparency and Independence H.R. 2347 would require that advisory body subcommittees and committees contracted through nongovernment entities adhere to FACA requirements. Currently, such subcommittees and contracted committees are not subject to FACA's provisions. H.R. 2347 would also require agency heads to "ensure that the agency does not interfere with the free and independent participation, expression of views, and deliberation by committee members." Committees would be required to provide a statement that describes the process used to come up with the advice and recommendations for the respective agency. H.R. 2347 would require that any individual who "regularly attends and participates in committee meetings … as if [he or she] were a member" be regarded as a member of the committee—although they need not be provided a vote or veto power. Agencies would be required to put FACA committee meeting minutes as well as a transcript, audio, or video recording of each meeting on an agency website. In addition, H.R. 2347 would require agencies to post on an agency website a description of the process used to establish and appoint the members of the advisory committee, including the following: The process for identifying prospective members The process of selecting members for balance of viewpoints or expertise The reason each member was appointed to the committee A justification of the need for representative members, if any A list of all current members, including the following for each member: The name of any person or entity that nominated the member Whether the member is designated as an SGE or a representative In the case of a representative, the individuals or entity whose viewpoint the member represents A list of all SGE members who acquired certification pursuant 18 U.S.C. §208(b), which permits them to provide advice as a committee member—even if there is a conflict of interest—in cases where a federal official determined that "the interest is not so substantial as to be deemed likely to affect the integrity of the services which the Government may expect from such officer or employee." The agency must also put online a copy of each such certification, a summary description of the conflict necessitating the certification, and the reason for granting the certification Any recusal agreement made by a member or any recusal known to the agency that occurs during the course of a meeting or other work of the committee A summary of the process used by the advisory committee for making decisions Detailed minutes of all meetings of the committee and a description of committee efforts to make meetings accessible to the public using online technologies (such as video recordings) or other techniques (such as audio recordings) Any written determination by the President or the head of the agency to which the advisory committee reports, pursuant to Section 10(d), to close a meeting or any portion of a meeting and the reasons for such determination Notices of future meetings of the committee Any additional information considered relevant by the head of the agency to which the advisory committee reports. The bill also details what information would be required in a FACA committee charter. The Administrative Conference of the United States and FACA On December 9, 2011, the Administrative Conference of the United States released recommendations that it believes would improve FACA. Some of the 11 recommendations are similar or identical to the reforms included in H.R. 2347 , including a requirement that agencies invite public comment on potential members of a committee prior to member selection, that members' ethics requirements be made explicit prior to committee service, and that any waivers issued to members related to conflict-of-interest requirements be placed on the committee's website. Among other recommendations were removing the cap on the number of FACA committees agencies can create; webcasting meetings when not cost-prohibitive; posting relevant documents online prior to meetings; and requiring statutes that create FACA committees to include details on their mission, duration, membership balance, and budget. Analysis Congress has continued to use FACA as a way to gain greater control and oversight of committees created by the President or executive branch agency heads. FACA has also resulted in increased transparency and enforcement of consistent recordkeeping among all advisory committees—whether they are created by the legislative or the executive branch. Below are discussions of potential policy options that Congress may consider when examining the operations of FACA committees. Clarifying Whether a Committee Is a FACA Committee Despite FACA's public notice, public access, and other reporting requirements, some parts of the act remain unclear. Whether an advisory committee should adhere to FACA, for example, is often open to legal interpretation. Congress may choose to enact legislation that would more clearly define which advisory bodies are subject to FACA. The applicability of FACA is most clear when the President or an agency head establish a committee. If such a body performed only advisory duties, included at least one member who is not a federal employee, and reported its findings to either an executive branch agency or the President, FACA would, most likely, apply. If, however, that same committee was created by statute and reported to Congress and the President, its FACA status would seem less certain. FACA was primarily created to provide the public and Congress greater access to the operations of certain qualifying federal advisory committees. Congress may choose to pass legislation that would require all statutorily established advisory committees to adhere to FACA's transparency provisions. Even though Congress could make one-time exceptions to such a provision, an overall requirement that all statutorily established committees be subject to FACA could impede Congress's ability to statutorily establish advisory committees that have flexibilities to act more quickly than a committee that is required to adhere to FACA's reporting and transparency requirements. Congress could clarify whether any committees created by or reporting to Congress should be considered FACA committees, thereby articulating to committees whether they must follow FACA's requirements. Additionally, Members of Congress could place certain desired transparency provisions (for example, publication of upcoming meetings or records access) within a FACA committee's statutory authority to tailor an advisory committee to the desired amounts of both flexibility and oversight. If Congress were to enact legislation exempting statutorily established committees from FACA, concerns about transparency in government may arise. If Congress chose not to amend FACA, there may likely be ongoing confusion as to whether statutorily required committees (that report to both Congress and the executive) are subject to FACA's requirements. Such uncertainty could result in future legal challenges to certain federal advisory committee operations. Clarifying Ethics Requirements for Members Congress may also choose to clarify whether federal advisory committee members must abide by certain ethics requirements that are placed on federal employees. Under current GSA regulations, "agency heads are responsible for ensuring that the interests and affiliations of advisory committee members are reviewed for conformance with applicable conflict of interest statutes and other Federal ethics rules." As noted earlier in this report, not all committee members must adhere to all federal ethics codes, according to the Code of Federal Regulations . If a committee member is designated as an SGE, under 18 U.S.C. §202(a), then he or she is subject to federal ethics regulations. If, however, the employee is deemed a "representative," federal ethics codes may not apply. Congress may choose to require agencies to clarify whether its FACA members are to adhere to federal ethics regulations. H.R. 2347 would require that committee members be explicitly designated as SGEs or representatives prior to beginning service on an advisory committee. Although such legislative language may clarify the ethical responsibilities of advisory committee members, FACA and existing federal ethics laws may be seen as already requiring such explicit member designations. Congress may determine that the language in H.R. 2347 , therefore, might be unnecessary or redundant. Requiring Public Participation in Committee Membership Selection Congress may also have an interest in making the process for selecting FACA committee members more transparent and participatory. H.R. 2347 would require agencies to publish in the Federal Register a request for comments and appointment recommendations prior to the agency making membership appointments. Agencies then would be required to consider the comments when making appointments. Additionally, the Administrative Conference of the United States recommended that agencies "invite public nominations for potential committee members." Congress may consider requiring public comment on membership appointments to advisory committees. Such action may inject FACA committees with the ideas and opinions of new and creative members. Such a requirement, though, could slow down the process of standing up a federal advisory committee. For example, it may take considerable time to publish a solicitation for comment in the Federal Register . Then agencies would have to provide a comment period, review the comments, and determine a way to demonstrate consideration of the comments received. Appendix. The Legislative and Executive Branch Background to FACA Enactment of FACA occurred over many decades and included debates and hearings in many congressional sessions as well as actions by the executive branch. This Appendix provides selected details on both legislative branch and executive branch actions that culminated in enactment of FACA. The Department of Justice In the 1940s and 1950s, private sector industries began creating advisory committees that attempted to influence federal government operations. In the 1950s, some of these entities were created under official auspices, using guidelines formulated by the Department of Justice (DOJ). These entities operated without explicit legislative or executive branch authority, but attempted to affect federal policies and practices. Government officials—including both the legislative and executive branches—as well as members of the general public grew concerned that these ad hoc committees were overstepping their authority. At various points within that era, DOJ released legal opinions on the creation, structure, and oversight of advisory committees. A 1944 statement by then-Attorney General Francis Biddle, for example, outlined limits to private industry's ability to form advisory committees that offered unsolicited policy advice to the government. According to Biddle's statement, "the responsibility for the formation of an industry committee to advise any particular department of the government is the responsibility of that department." A 1955 opinion released from the Office of the Deputy Attorney General created the following five-pronged collection of guidelines for the creation of a valid federal advisory committee: 1. There must be either statutory authority for the use of such a committee, or an administrative finding that use of such a committee is necessary in order to perform certain statutory duties. 2. The committee's agenda must be initiated and formulated by the government. 3. Meetings must be called and chaired by full-time government officials. 4. Complete minutes must be kept of each meeting. 5. The committee must be purely advisory, with government officials determining the actions to be taken on the committee's recommendations. Congressional Action On January 22, 1957, Representative Dante Fascell introduced a bill that would have made DOJ's five advisory committee requirements law (H.R. 3378; 85 th Congress). The bill included language noting "an increasing tendency among Government departments and agencies to utilize the services of experts and consultants as advisory committees or other consultative groups," but warned that "protection of the public interest requires that the activities of such committees and groups be made subject to certain uniform requirements." In addition to making the five DOJ standards law, the bill would have required the President to submit to Congress an annual report "detailing the membership of each advisory committee used by each Federal department or agency; the function of each such committee; and the extent to which the operations of the committees have complied with the Standards provided in this Act." The bill, as amended, passed the House on July 10, 1957. The bill was sent to the Senate and referred to the Government Operations Committee. No further action was taken. The President and the Executive Branch In 1962, President John F. Kennedy issued an executive order (E.O. 11007) that reinforced the DOJ advisory committee requirements. The executive order defined an advisory committee as any committee, board, commission, council, conference, panel, task force, or other similar group ... that is formed by a department or agency of the Government in the interest of obtaining advice or recommendations ... that is not composed wholly of officers or employees of the Government. E.O. 11007 also limited the lifespan of all federal advisory committees to "two years from the date of … formation" unless special actions were taken by an agency or department head to continue the committee. On March 2, 1964, the Bureau of the Budget issued Circular No. A-63, which laid out the executive branch's policies for creating, maintaining, and terminating advisory committees. The circular included guidelines that discouraged dual chairmanships, required annual status reports to the Bureau of the Budget, and compelled all advisory entities not created by statute to be called committees—not commissions, councils, or boards. Throughout the early 1960s and early 1970s, while Congress was holding hearings to determine effective ways to gain oversight and control over advisory committees, executive branch representatives maintained that legislation was unnecessary and used Circular No. A-63 as evidence of systematic oversight of advisory committees. On June 5, 1972, just months prior to congressional passage of the Federal Advisory Committee Act, President Richard M. Nixon issued E.O. 11671, which delineated new operating, transparency, and oversight standards for advisory entities. The order incorporated many of the elements within the bill that was to become FACA, including vesting the Office of Management and Budget (OMB—formerly the Bureau of the Budget) with oversight responsibilities for committee management. Congressional Reaction Congress held a series of hearings to examine the executive branch's use of federal advisory committees throughout the late 1960s and early 1970s. During an introduction to one of the hearings, the Senate Committee on Government Operations' Subcommittee on Intergovernmental Relations Chairman Edmund S. Muskie stated that Congress was using the hearings to examine "two fundamentals, disclosure and counsel, the rights of people to find out what is going on and, if they want, to do something about it." More than 30 witnesses testified before the Senate Subcommittee on Intergovernmental Relations over 12 days of hearings. As a result of the hearings, some Members concluded that advisory committees were "a useful means of furnishing expert advice, ideas and recommendations as to policy alternatives" but "there [are] numerous such advisory bodies that are duplicative, ineffective and costly, and many which have outlived their usefulness, and that neither the Federal agencies, the Executive Office of the President, nor the Congress, have developed any effective mechanisms for evaluating." In December 1970, the House Committee on Government Operations' Special Studies Subcommittee issued a comprehensive report titled "Role and Effectiveness of Federal Advisory Committees," which compiled research and information gathered from federal agencies from 1969 through 1970. The studies included policy recommendations for advisory bodies. On February 2, 1971, Representative John Mongan introduced the Federal Advisory Committee Standards Act (H.R. 4383; 92 nd Congress), which incorporated many of the study's recommendations. The bill addressed the responsibilities of Congress, the Director of OMB, the President, and agency heads to control and maintain federal advisory bodies. For example, congressional committees with legislative jurisdiction over particular issues were to review all advisory bodies related to that topic. The congressional committees were then to eliminate any statutorily created advisory bodies they believed were duplicative, clarify advisory body missions, and ensure that adequate staff and resources were assigned to advisory bodies under their jurisdiction. Additionally, the congressional committees were to make certain the ad hoc advisory committees had "a date established for termination and for submission of the committee report." The Director of OMB was to conduct a "comprehensive review" of duplicative advisory bodies and recommend to the relevant authority whether they should be eliminated or merged into existing advisory entities. The Director was to work with Congress and agency heads to "provide advice, assistance, guidance, and leadership to advisory committees." In the Senate, Senator William V. Roth, Jr., and others, introduced a similar bill (S. 1964; 92 nd Congress) "to authorize the Office of Management and Budget to establish a system of governing the creation and operation of advisory committees throughout the Federal Government." During introductory remarks on the Senate floor on May 26, 1971, Senator Roth acknowledged a lack of congressional oversight of the more than 2,600 advisory committees operating in the federal government. Advisory committees have contributed substantially to the effectiveness of the Federal Government in the past. But as the function of Government has become more complex and the decisions more difficult, numerous advisory committees have sprung up to advise the President and other decision-makers in the Federal Agencies and the Congress. Over 2,600 interagency and advisory committees exist today and it is possible that this figure could be as high as 3,200. In spite of the large number of advisory committees and their participation in the process of government, Congress has neglected to provide adequate controls to supervise their growth and activity. As a result, the use of committees or advisory groups has come under strong attack in the press and other media as wastes of time, money, and energy. The creation of another committee is often viewed by the public as another indication of inefficiency and indecisiveness in Government. S. 1964 was referred to the Senate Committee on Government Operations. No further action was taken on the bill. On May 9, 1972, Members of the House voted (357 to 9) to pass H.R. 4383, with several amendments, including the addition of "openness provisions" that required public notice of advisory body meetings and public access to advisory body records under the Freedom of Information Act (FOIA; 5 U.S.C. §552). The bill was then sent to the Senate. S. 3529, introduced on April 25, 1972, merged the goals of a number of pending advisory committee bills. According to the Senate report that accompanied the bill, S. 3529 aimed to make advisory committees less redundant and more accessible. The purpose of S. 3529 is to: strengthen the authority of Congress and the executive branch to limit the use of Federal advisory committees to those that are necessary and serve an essential purpose; provide uniform standards for the creation, operation, and management of such committees; provide that the Congress and the public are kept fully and currently informed as to the number, purposes, membership, and costs of advisory committees, including their accomplishments; and assure that Federal advisory committees shall be advisory only. The Senate debated on whether to make public participation and transparency of advisory committee meetings and recordkeeping mandatory. S. 3529 required facilitating public information requests by making committee records subject to FOIA. The bill, however, did not include explicit requirements for committee membership or participation. When the bill came up for vote on the Senate floor, an amendment was added exempting committees that furnish "advice or recommendations only with respect to national security or intelligence matters" from reporting requirements. Another amendment exempting the Federal Reserve Advisory Council was also added to the bill. S. 3529 passed the Senate by voice vote on September 12, 1972. The Senate then struck all the House language of H.R. 4383 and replaced it with that of S. 3529. The Senate then passed H.R. 4383 as amended. A conference report that reconciled differences between the House and Senate versions of H.R. 4383 was published on September 18, 1972. The final bill included reporting requirements for advisory committees planning to hold meetings, and ensured public inspection of advisory committee materials would be possible. The conference report was adopted by the Senate on September 19, 1972, and by the House on September 20. President Nixon signed the Federal Advisory Committee Act into law (P.L. 92-463) on October 6, 1972. Following the signing of FACA, then-President Nixon rescinded E.O. 11671, which previously had been the primary document guiding the creation and operation of federal advisory bodies. Legislative and Executive Branch Efforts Since FACA's Enactment In the years since FACA's enactment, congressional oversight hearings have resulted in legislative and executive branch attempts to clarify the statute or streamline the number of FACA committees. One substantial amendment to FACA was the 1977 Federal Advisory Committee Act, which incorporated the Sunshine Act ( P.L. 94-409 ) into the law. The Sunshine Act is specifically designed to make government agency meetings more publicly accessible and transparent. Another significant change in FACA's administration came in December 1977 when E.O. 12024 transferred advisory committee oversight duties from the Director of OMB to the Administrator of General Services. Additional executive orders have been issued since the law's inception; many of them abolished particular federal advisory committees or lengthened the lifespan of others. From 1983 through 1989, legislation was introduced in Congress to strengthen FACA's management controls, as well as to establish new ethical, financial, and conflict-of-interest disclosure requirements for committee members. None of these bills were enacted. On February 10, 1993, President William J. Clinton issued E.O. 12838, which required each executive department to "terminate not less than one-third of the advisory committees subject to FACA (and not required by statute) ... by the end of fiscal year 1993." Agency heads were required to review all advisory committees under their jurisdictions and eliminate them or justify in writing why they were necessary to continue. Committees would need approval from the OMB Director to continue operation. The following year, as part of the National Performance Review, Vice President Albert Gore issued a memorandum requiring all agencies to reduce advisory committee costs by 5%. The memorandum also stated that President Clinton would not support legislation that established a new advisory committee or exempted an advisory committee from FACA. On October 5, 1994, Alice M. Rivlin, then-acting Director of OMB, released a circular detailing management policy for remaining FACA committees. The circular reinforced the Clinton Administration's decision to reduce the number of advisory committees and cut costs. It also laid out the criteria GSA was to use when evaluating the utility of existing advisory bodies, and it required GSA to create a variety of operating and reporting guidelines for advisory committees. In 1995, two FACA-related laws were enacted. The first exempted intergovernmental advisory actions—official advisory efforts between federal officers and officers of state, local, or tribal governments—from FACA. The second was a law that eliminated GSA's annual reporting requirements to Congress. Pursuant to the law, GSA stopped creating its Annual Report to Congress in 1998, but GSA officials continue to collect and examine data on FACA committees and publish it in the Annual Comprehensive Review, an additional oversight document required by FACA. The Review is used to determine whether advisory bodies are executing their missions and adhering to statutes, or whether they are in need of revision or abolition. The Federal Advisory Committee Act Amendments of 1997 further provided for public comment on committee membership and public attendance at committee meetings for advisory bodies that existed within the National Academy of the Sciences or the National Academy of Public Administration.

Federal advisory committees—which may also be labeled as commissions, councils, task forces, or working groups—are established to assist congressional and executive branch policymaking and grantmaking. In some cases, federal advisory committees assist in solving complex or divisive issues. Federal advisory committees may be established by Congress, the President, or an agency head to render independent advice or provide the federal government with policy recommendations. In 1972, Congress enacted the Federal Advisory Committee Act (FACA; 5 U.S.C. Appendix—Federal Advisory Committee Act; 86 Stat. 770, as amended). FACA was prompted by the perception that some advisory committees were duplicative, inefficient, and lacked adequate oversight. FACA mandates certain structural and operational requirements, including formal reporting and oversight procedures. Additionally, FACA requires committee meetings be open to the public, unless certain requirements are met. Also, FACA committee records are generally required to be accessible to the public. Pursuant to statute, the General Services Administration (GSA) maintains and administers management guidelines for federal advisory committees. During FY2015, 1,009 active FACA committees reported a total of 72,200 members. Federal operating costs for those committees was reported as $367,568,370, of which $205,800,103 (56.0%) was spent on federal support staff to administer the committees. The preponderance of FACA committee members and meetings are providing advice and recommendations in the grantmaking processes of the federal government. For Congress, several aspects of federal advisory committees may be of interest. For example, Congress can require the establishment of new federal advisory committees; oversee the operations of existing advisory committees; and legislate changes to FACA or the ethics responsibilities placed on members who serve on FACA committees. This report offers a history of FACA, examines its current requirements, and provides data on federal advisory committees' operations and costs. To date in the 114th Congress (2015-2016), one bill has been introduced that would amend FACA's implementation and administration. H.R. 2347, the Federal Advisory Committee Act Amendments of 2016, would create a formal process for the public to recommend potential advisory committee members and require member selection without regard to partisan affiliations. In addition, H.R. 2347 seeks to clarify the ethics requirements placed on committee members, and would increase each FACA committee's records access requirements. On March 1, 2016, H.R. 2347 passed the House. On March 2, 2016, H.R. 2347 was referred to the Senate Committee on Homeland Security and Governmental Affairs. No further action has been taken on the bill.

CRS_R40577

Food safety in the United States is regulated mainly by the U.S. Department of Agriculture (USDA) and the Food and Drug Administration (FDA) within the U.S. Department of Health and Human Services (HHS). Although the FDA is the federal agency primarily responsible for ensuring the safety of a vast majority of foods under the current system, the USDA is responsible for regulating meat, poultry, and some egg products, as well as being responsible for animal and plant health. USDA's role in the food safety system is founded on its authority to regulate meat and poultry inspection and importation. The Food Safety and Inspection Service (FSIS) within USDA is responsible for inspecting domestic and imported meat and poultry products under the Federal Meat Inspection Act and the Poultry Products Inspection Act. This role in inspection of meat and poultry generally begins beyond the farm at slaughter and processing facilities. This authority does not include direct regulation of on-farm practices related to animal health. However, as the next step in the food chain after the farm, the standards set for inspection may be seen to indirectly regulate the health of animals on the farm. The Egg Products Inspection Act may be interpreted similarly. In other words, these acts restrict acceptance of animals that do not meet health standards at slaughtering and processing facilities, which effectively require farms to maintain healthy livestock in order to sell their livestock for food processing. Food safety regulation is not limited to processing plants. USDA has authority to exercise food safety oversight and enforcement on farms as well. Four statutes that provide the most significant authority related to on-farm activity and food safety are the Animal Health Protection Act, the Plant Protection Act, the Agricultural Marketing Agreement Act of 1937, and the Agricultural Marketing Act of 1946. USDA Statutory Authorities Related to Farms and Farm Activities Authority to Protect Animal and Plant Health The Animal and Plant Health Inspection Service (APHIS) within the USDA is responsible for the protection of health of animals and plants from agricultural pests and diseases. Issues of animal and plant health are of interest not only in the food safety context, but also in trade matters and the agricultural industry generally. Outbreaks of disease among animals may lead to negative consequences for the U.S. agricultural system and also may have negative effects on international trade if U.S. agricultural resources are deemed unsafe for import and consumption in other countries. The USDA's on-farm authority includes authority to monitor animal health, which would assist in government efforts to prevent the spread of some diseases from animals to human populations ( e.g. , bovine spongiform encephalopathy, or "mad cow disease"). Although there has been some concern about an April 2009 outbreak of influenza A(H1N1), initially dubbed "swine flu" because it contained genetic material from flu strains that normally circulate in swine, USDA has confirmed that "there is no evidence of the 2009-H1N1 virus in U.S. swine." The virus, however, is not a foodborne illness, meaning that it is not transmitted by consumption of certain foods like pork and pork products. Under authority currently in place, USDA may monitor or take other protective actions to prevent outbreaks of such diseases, whether they pose a foodborne or airborne risk to the health of other animals or humans. Animal Health Protection Act Congress enacted the Animal Health Protection Act (AHPA) as part of the 2002 farm bill in order to protect animal health through the prevention and control of animal diseases and pests. AHPA generally authorizes USDA to prohibit or restrict the importation, exportation, or entry of animals into interstate commerce if it determines such action is necessary to prevent the introduction or dissemination of any pest or disease of livestock. The AHPA also generally authorizes USDA to hold, seize, quarantine, or destroy any animal that is in interstate commerce and is believed to be carrying or have been exposed to any pest or disease of livestock. Most of USDA's authority under AHPA relates to animals moving in interstate commerce, but the AHPA specifically permits USDA to take some actions without explicitly requiring that the animal be in interstate commerce at the time. USDA is authorized to take protective actions such as seizing, treating, or destroying animals if the USDA determines that "an extraordinary emergency exists because of the presence in the United States of a pest or disease of livestock." For such emergencies, the presence of the pest or disease must threaten U.S. livestock and the protective action must be necessary to prevent the spread of the threat. USDA is also authorized to make inspections and seizures under the AHPA at any premises, including farms, if it obtains a warrant showing probable cause to believe there is an "animal, article, facility, or means of conveyance regulated under [the AHPA]." This inspection authority supplements USDA's authority to make warrantless inspections of any person or means of conveyance moving in interstate commerce that is believed to be carrying an animal regulated by AHPA. The AHPA also provides broad authority to USDA for detection, control, and prevention of the introduction and spread of outbreaks of animal diseases and pests. AHPA authorizes USDA to "carry out operations and measures to detect, control, or eradicate any pest or disease of livestock (including ... diagnostic testing of animals), including animals at a slaughterhouse, a stockyard, or other point of concentration." AHPA also expanded APHIS's authority to protect against the introduction of plant and animal disease and "otherwise improve the capacity of the [APHIS] to protect against the threat of bioterrorism." APHIS used this authority to implement a voluntary system of animal tracking known as the National Animal Identification System, which allows for registration of premises where livestock and poultry are raised or housed, identification of animals with unique identifier information, and tracking of identified animals. Plant Protection Act The Plant Protection Act (PPA), enacted in 2000, provides protections similar to the AHPA but specifically applies to plants, rather than animals. The PPA was enacted to control and prevent the spread of plant pests for the protection of the agriculture, environment, and economy of the United States by regulating plant pests and noxious weeds that are in or affect interstate commerce. The PPA defines plant pests as certain organisms "that can directly or indirectly injure, cause damage to, or cause disease in any plant or plant product." It defines noxious weeds as "any plant or plant product that can directly or indirectly injure or cause damage to crops ... , livestock, poultry, or other interests of agriculture, irrigation, navigation, the natural resources of the United States, the public health, or the environment." Under the PPA, the USDA has authority to prohibit or restrict the movement of plants and plant products in interstate commerce if it determines such action would be necessary to prevent the introduction or spread of plant pests or noxious weeds. APHIS has used the PPA to monitor genetically engineered crops that may cause negative effects on other agricultural products. The PPA authorizes USDA generally to hold, quarantine, treat, or destroy any plant, plant pest, or noxious weed that is moving or has moved in interstate commerce if it deems such action necessary "to prevent the dissemination of a plant pest or noxious weed that is new to or not known to be widely prevalent or distributed" in the United States. USDA may also order owners of plants, plant products, plant pests, or noxious weeds that are determined to threaten plant health to treat or destroy them. USDA's ability to impose remedial measures under this authority is limited, though. That is, USDA may not require that a plant, plant product, plant pest, or noxious weed be destroyed or exported if the Secretary believes there is a less drastic, feasible and adequate alternative available to prevent dissemination of the threat. In addition to the general authority to prevent the spread of plant pests and noxious weeds, USDA also has emergency authority under PPA. For USDA to act under its emergency authority, it must find "that the measures being taken by the State are inadequate to eradicate the plant pest or noxious weed" after consulting with the governor of the affected state. Under the PPA, if USDA determines that "an extraordinary emergency" exists, it may hold, seize, quarantine, treat, or destroy any plant, plant product, or premises that it "has reason to believe is infested with the plant pest or noxious weed." Like the limitation under its general authority to impose remedial measures, the USDA is prohibited from destroying or exporting anything under its emergency authority if there is a less drastic, feasible action "that would be adequate to prevent the dissemination of any plant pest or noxious weed new to or not known to be widely prevalent or distributed [in] the United States." Authority to Enforce Marketing Orders and Implement Marketing Programs Although the AHPA and PPA may provide more significant sources of authority for USDA to take regulatory actions on farms, other statutes provide USDA with oversight authority related to farm activities and food safety. The Agricultural Marketing Service (AMS) within the USDA oversees programs related to the standardization and marketing of agricultural products. The Agricultural Marketing Agreement Act of 1937 and the Agricultural Marketing Act of 1946 authorize programs that may involve oversight of producers regarding food quality and safety. Agricultural Marketing Agreement Act of 1937 The Agricultural Marketing Agreement Act of 1937 (AMAA) authorizes USDA to issue marketing orders that legally bind processors, associations of producers, and others engaged in the handling of certain agricultural commodities or products thereof. The AMAA provides a list of terms and conditions that may be included in marketing orders. Orders must include at least one of the possible terms and conditions provided by statute, and may not include other terms and conditions not provided by statute. The possible terms and conditions include regulating the amount, grade, size, or quality of the marketed commodity; regulating the containers used for packaging, transportation, sale, and handling of the marketed commodity; and requiring inspection of any commodity or product. Thus, depending on what terms and conditions are included in a marketing order, the order may create legally binding requirements relating to food quality and safety. Commodities eligible to be regulated by marketing orders include milk, fruits, vegetables, and nuts. The orders are limited to the regulation of any commodity or product "in the current of interstate or foreign commerce, or which directly burdens, obstructs, or affects, interstate or foreign commerce in such commodity or product thereof." USDA also has enforcement powers under the AMAA to ensure that entities covered by the marketing orders comply with the terms and conditions set forth. USDA may investigate individuals or entities that it believes may be in violation of provisions of orders created under the AMAA. USDA may also conduct hearings on the matter in order to determine whether to refer the matter to the Department of Justice (DOJ) for enforcement. Agricultural Marketing Act of 1946 The Agricultural Marketing Act of 1946 (AMA) authorizes the USDA to promulgate regulations related to agricultural markets and standards. The AMA does not provide specific regulatory authority to USDA, but it does authorize USDA "to inspect, certify, and identify the class, quality, quantity, and condition of agricultural products when shipped or received in interstate commerce" under regulations to be prescribed by the Secretary of Agriculture. USDA has used its authority to develop voluntary programs to allow agricultural producers "to help promote and communicate quality and wholesomeness to consumers." These programs allow interested producers to use third-party audits to certify that their products meet buyer specifications. An example of such a program includes AMS's Good Agricultural Practices and Good Handling Practices Audit Verification Program, which allows the food industry to use third-party audits to verify the conformance of producers to best practices on the farm. Although the USDA does not have a direct role in the testing and verification programs, the agency facilitates a process that provides heightened protections for consumers. USDA Regulation of On-Farm Activity USDA's role in the current food safety system appears to focus on inspections during production, but USDA appears to have authority under numerous statutes to regulate at least some on-farm activities. Although this authority does not explicitly provide for oversight of farm operations, the statutory language does not explicitly prohibit USDA from carrying out its authority on farms. Thus, it appears that USDA may apply its statutory authority to on-farm activities, if the on-farm activity is one that is generally covered by the relevant statute. The statutory authorities discussed in this report generally require that exercise of the authority provided be linked to products in interstate commerce. In the debate over food safety regulation on the farm, some have raised arguments that on-farm activities may not be sufficiently linked to commerce to justify congressional regulation. As a result, USDA's authority to implement programs related to food safety on farms before the agricultural products in question actually enter commerce has become an issue. Although it might seem obvious that agricultural products sold in stores are a part of commerce, one may question whether USDA would be authorized to take actions under these statutes on farms that do not sell their products, but rather are self-sufficient. It is likely that any farm would be subject to USDA's regulatory authority in the context of these statutes because of Congress's broad authority to act under the Commerce Clause of the U.S. Constitution. The Constitution empowers Congress "to regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes," and "to make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers." The U.S. Supreme Court has found that the Commerce Clause allows for three categories of congressional regulation: the channels of interstate commerce; the instrumentalities of interstate commerce; and "those activities having a substantial relation to interstate commerce ... i.e., those activities that substantially affect interstate commerce." One of the Court's most expansive Commerce Clause rulings, Wickard v. Filburn , concerned Congress's ability to regulate the production and consumption of homegrown wheat. The Court held that economic activities, regardless of their nature, could be regulated by Congress if the activity "asserts a substantial impact on interstate commerce." In Wickard , a farmer challenged a monetary penalty he received for growing wheat in excess of a quota established by the USDA to regulate wheat prices, arguing that the wheat never went to market but was grown and consumed on his own farm and thus outside the scope of interstate commerce. Although the Court recognized that one family's production alone would likely have a negligible impact on the overall price of wheat, if combined with other personal producers, the effect would be substantial enough to make the activity subject to congressional regulation. Although the Court has arguably narrowed its interpretation of Congress's authority under the Commerce Clause in recent decades, the Court has indicated as recently as 2005 that Wickard v. Filburn is still good law, holding that Congress can regulate purely intrastate activity that is not "commercial" if it concludes that failure to regulate the activity would undercut the interstate market. The relevant on-farm statutes, particularly the AHPA and the PPA, include provisions that generally apply to agricultural products in interstate commerce, which Wickard indicates would include items still on the farm. They also include some provisions that authorize USDA to inspect agricultural products at any time, including when on a farm, to control pests and diseases that might affect agricultural commerce generally. Thus, it seems that USDA's authority to regulate animals, plants, and other agricultural products on the farm itself is a proper exercise of authority and a valid interpretation of the authority delegated by Congress.

In recent years, outbreaks of foodborne illnesses and subsequent product recalls have highlighted concerns about the current food safety system. Some have argued for a more comprehensive approach to the regulation of food products. Among the questions raised in the debate on the adequacy and potential improvements for the U.S. food safety system is the appropriate starting point of federal regulation. The current system provides regulation of various food products under differing systems of inspection and oversight. Advocates of a more comprehensive approach to food safety regulation say it could be achieved by a thorough system of oversight beginning at the point of production—on farms and ranches. Opponents of this approach argue that some proposals for on-farm oversight would impose too great a burden on small farms, would be too costly to implement, and in some cases may not be sufficiently linked to commerce to constitutionally justify congressional regulation. The U.S. Department of Agriculture (USDA) has a major role in the U.S. food safety system through its inspection authority for meat and poultry products, but it also has authority to regulate the agricultural industry in other ways. This report will analyze the authority of USDA to regulate on-farm activities in the context of food safety. Specifically, the report will provide an overview of USDA statutory authorities related to on-farm activities, including the Animal Health Protection Act, the Plant Protection Act, the Agricultural Marketing Agreement Act of 1937, and the Agricultural Marketing Act of 1946. Although these statutes do not provide explicitly for USDA actions taken on farms, they do provide USDA broad general authority to protect animal and plant health and to enforce and implement marketing programs related to the quality and safety of agricultural food products. The report will also analyze the scope of USDA's authority to act on farms under these statutes. Because Congress's authority to enact these statutes falls under the Commerce Clause, the report will also analyze the question of whether USDA's authority applies to farms that do not directly participate in interstate commerce.

CRS_RL31900

Introduction More than 30 years ago, states agreed to control trade related to weapons of mass destruction (WMD) to complement the agreements comprising the nonproliferation regime. Supplier controls are not foolproof, but many observers believe that national and multilateral export controls can slow, deter, and make WMD acquisition more difficult or costly for the determined proliferator until political change makes the weapons irrelevant or no longer desirable. A recurrent problem in controlling technology transfers is that key states do not participate in the regimes. Although they are still targets of supply-side restrictions, some proliferating states now are able to reproduce WMD technologies and systems and sell them abroad without formal restraints on trade. North Korea, Pakistan, and India are three such examples in the case of nuclear weapons and missile technology. When export controls and interdiction fail, some U.S. laws impose penalties on countries, entities, or persons for proliferation activities. The provisions are varied and extend across the range of foreign assistance (aid, financing, government contracts, military sales). Penalties for engaging in enrichment or reprocessing trade were strengthened by the 1976 and 1977 Symington and Glenn amendments to the Foreign Assistance Act (now Sections 101 and 102 of the Arms Export Control Act). Later penalties were added for nuclear detonations, and other provisions established penalties for individuals. Missile proliferation-related sanctions were established in the Missile Technology Control Act 1990, which added Chapter VII to the Arms Export Control Act and similar language at Section 11B of the Export Administration Act of 1979. In addition to legislated penalties, the U.S. government also imposes sanctions through executive orders. In October 2002, the Bush Administration announced that North Korea had been pursuing a clandestine uranium enrichment program; U.S. intelligence officials leaked to the press a few days later that Pakistan, among other countries, was implicated. The outlines of a missiles-for-nuclear technology trade were reported in the press. Pakistani government officials denied such trade. The State Department offered assurances that cooperation between the two was a thing of the past. In March 2003, the Bush Administration imposed sanctions on North Korean and Pakistani entities for cooperation in missiles. In a letter to Congress, the State Department explained that "the facts relating to the possible transfer of nuclear technology from Pakistan to North Korea ... do not warrant the imposition of sanctions under applicable U.S. laws." In late 2003, a convoluted turn of events involving nuclear safeguards inspections in Iran and a decision by Libya in December to renounce its WMD programs provided evidence that Pakistani scientists had supplied nuclear technology to Iran, Libya, and North Korea. Pakistani officials denied any government knowledge of such cooperation and at first, denied that A.Q. Khan (former head of Khan Research Laboratories) and his associates had assisted Libya or North Korea. Khan confessed to his proliferation misdeeds in early February 2004 and was pardoned by President Musharraf immediately. Interviewed on February 17, 2004, Musharraf noted that Pakistan's investigation had not uncovered evidence of transfers to other countries other than Iran and Libya." It was not until President Musharraf published his memoirs in September 2006 that he admitted nuclear technology had been sold to North Korea. Nonetheless, President Bush, in a speech that focused on proliferation at the National Defense University on February 11, 2004, stated that Khan and others sold "nuclear technologies and equipment to outlaw regimes stretching from North Africa to the Korean Peninsula." Bush further stated that "Khan and his associates provided Iran and Libya and North Korea with designs for Pakistan's older centrifuges, as well as designs for more advanced and efficient models." Both North Korea and Pakistan have been subject to sanctions in the past for WMD trade. North Korea has been under one form or another of sanctions for close to fifty years; Pakistan has been sanctioned in what some observers deem an "on again, off again" fashion, mostly for importing WMD technology, and also for testing a nuclear device. The sanctions on the North Korean entity, Changgwang Sinyong Corporation, were imposed pursuant to the Arms Export Control Act and the Export Administration Act on the basis of knowing involvement in the transfer of Category I (under the Missile Technology Control Regime) missiles or components. The sanctions on the Pakistani entity, Khan Research Laboratories, were imposed pursuant to Executive Order 12938 from March 2003 to March 2005. Both of these entities have been sanctioned repeatedly in the past for missile trade. On the nuclear side, all sanctions were waived following September 11, 2001, and it is unlikely that such sanctions will be imposed again, absent significant evidence of the Pakistani government's involvement in nuclear trade. Rogue State Symbiosis? At first glance, North Korea and Pakistan do not seem the likeliest of proliferation bedfellows. However, they have traded in conventional armaments for over thirty years and forged a firm relationship during the Iran-Iraq War (1980-1988), during which both provided assistance to Iran. North Korea's sale of Scuds and production capabilities proved particularly important to Iran. Neither state lies completely outside the nonproliferation regimes. Despite its extreme isolation, North Korea signed the Nuclear Nonproliferation Treaty (NPT) in 1985 under pressure from the Soviet Union, and is a party to the Biological Weapons Convention (BWC). However, North Korea never lived up to its NPT obligations and formally withdrew from the treaty, effective April 10, 2003. Most observers believe North Korea has one or two nuclear weapons (or at least the plutonium for them) and may now be able to add six or eight weapons to its arsenal, given successful reprocessing of the spent fuel at Yongbyon. (North Korea told an unofficial U.S. delegation in January 2004 that it had completed reprocessing the fuel at the end of June 2003. The unofficial delegation, including former head of the Los Alamos National Laboratory Sig Hecker, was shown an empty spent fuel pond, but little else to prove North Korean claims). On October 9, 2006, North Korea tested a nuclear device, which many experts believe did not achieve its desired yield, if it achieved a nuclear yield at all. Most observers believe North Korea probably has biological weapons. North Korea does not participate in the Missile Technology Control Regime (MTCR), nor is it a party to the Chemical Weapons Convention (CWC). After successfully reverse-engineering Soviet-origin Scud missiles, North Korea became a leading exporter of ballistic missiles beginning in the 1980s. According to the Central Intelligence Agency (CIA), North Korea attaches high priority to exporting ballistic missiles, which is a major source of hard currency. Pakistan, on the other hand, has never been as isolated as North Korea. It has relied significantly on outside sources of technology for its weapons programs but has not been thought of as a major exporter of WMD-related items. It remains to be seen whether the Pakistani military and/or government was involved at all with Khan's nuclear deals. Pakistan has long rejected the NPT and tested nuclear weapons in 1998, but is a party to the BWC and the CWC. Nonetheless, the U.S. Department of Defense believes Pakistan has "the resources and capabilities to support a limited BW research and development effort," and likely has a chemical weapons capability. Pakistan has sought technical assistance in its ballistic missile programs from North Korea and China for over a decade. To some, proliferation by states that have newly acquired WMD is inevitable, resulting from diffusion of technology, insufficient political will to enforce controls, or demand fueled by perceived threats or the continuing prestige of WMD. In the past, however, technology transfers between countries outside of the control regimes seemed limited by the lack of technical skill and technology or hard currency. By the mid-1990s, however, North Korea had a proven track record in ballistic missiles, and Pakistan had demonstrated its uranium enrichment capabilities. Although Pakistan apparently was hampered by a lack of hard currency, it could provide North Korea with a route to nuclear weapons using highly enriched uranium (HEU). This route would not only circumvent North Korea's Agreed Framework with the United States, but would also be difficult to detect using satellite imagery. North Korean Enrichment At the time the 1994 Agreed Framework with North Korea was negotiated, there was concern about, but scant evidence of, North Korean interest in uranium enrichment. Reports relating to North Korea's procurement of enrichment-related equipment date as far back as the mid-1980s, a time when North Korea was progressing rapidly in its plutonium production program. For example, in 1987, North Korea reportedly received a small annealing furnace from the West German company Leybold AG. Although they have many other uses, annealing furnaces can be used in production of centrifuge rotors for uranium enrichment. A five-year-long German intelligence investigation conducted from 1985 to 1990 concluded that Iraq, and possibly Iran and North Korea obtained uranium melting information from Pakistan in the late 1980s. U.S. intelligence sources also believed that technicians employed by Leybold AG were involved in transferring equipment and information to North Korea. One or two such technicians were in North Korea in 1989 and another Leybold employee reportedly was seen there in 1990. Subsidiaries of Leybold AG were also involved in exporting centrifuge-related welding equipment to Iraq in the late 1980s. Negotiators of the Agreed Framework were aware that North Korea's NPT obligations did not prohibit uranium enrichment, and that the Agreed Framework did not directly address uranium enrichment. North Korea was bound not to possess plutonium reprocessing or uranium enrichment facilities by virtue of the 1992 Joint Declaration of a Denuclearized Korean Peninsula—a bilateral agreement with South Korea that called for subsequent meetings. The U.S.-North Korean Agreed Framework required North Korea to make progress in implementing the joint declaration, but the process languished. Throughout the 1990s, the U.S. government continued to look for signs of enrichment and in 1998, the United States sent a team to Kumchang-ni to look for undeclared nuclear activities, including uranium enrichment. The team concluded that the site was not nuclear-related. By 1999, according to one former official, however, there were clear signs of active North Korean interest in uranium enrichment. Current Status North Korea has continued to deny it has an enrichment program. Vice Minister Kim Gye Gwan told an unofficial U.S. delegation to Pyongyang in January 2004 that, "We do not have a highly enriched uranium program, and furthermore we never admitted to one." In addition, North Korea has not admitted that it has an enrichment program in the course of the six-party talks. On February 24, 2004, CIA Director George Tenet told the Senate Select Committee on Intelligence that "We ...believe Pyongyang is pursuing a production-scale uranium enrichment program based on technology provided by AQ Khan, which would give North Korea an alternative route to nuclear weapons." This estimate indicates either that North Korea has made progress since the CIA distributed a one-page, unclassified white paper to Congress on North Korean enrichment capabilities in November 2002, or that the CIA has new information on North Korean capabilities. The November 2002 paper noted that the United States had "been suspicious that North Korea has been working on uranium enrichment for several years," and that it obtained clear evidence "recently" that North Korea had begun constructing a centrifuge facility. The CIA concluded that North Korea began a centrifuge-based uranium enrichment program in 2000. Further, the paper noted that, in 2001, North Korea "began seeking centrifuge-related materials in large quantities. It also obtained equipment suitable for use in uranium feed and withdrawal systems." The CIA "learned that the North is constructing a plant that could produce enough weapons-grade uranium for two or more nuclear weapons per year when fully operational—which could be as soon as mid-decade." In the Deputy Director of National Intelligence's report, "Unclassified Report to Congress on the Acquisition of Technology Relating to Weapons of Mass Destruction and Advanced Conventional Munitions," 1 January-31 December 2004 (pursuant to Section 721 of the of the FY1997 Intelligence Authorization Act), there is no mention of any North Korean uranium enrichment activity or capability. Few observers believe that North Korea now has an operating uranium enrichment plant. Media reports suggested that the CIA had evidence of construction and of procurement. "Clear evidence" of construction of a centrifuge facility could mean photographs of construction sites, but the phrasing that the CIA "learned that the North has begun constructing a plant" is ambiguous enough to suggest the possibility that such information comes from a defector. According to former U.S. ambassador Donald Gregg, who became ambassador to South Korea in 1989 after retiring from the CIA, North Korea is "an extraordinarily difficult target to go after." The unclassified one-page paper distinguishes between North Korea seeking materials and actually obtaining equipment. According to U.S. intelligence officials, the CIA does not know where North Korea is enriching uranium. According to a State Department official, the Administration has narrowed possible uranium enrichment sites down to three. Outside observers have suggested that Yongjo-ri, Hagap, Taechon, Pyongyang, and Ch'onma-san might all be potential sites for enrichment. One defector, who was debriefed by Chinese officials in 1999 (he later returned to North Korea, where, it is assumed, he was killed), claimed that North Korea was operating a secret uranium processing site under Mt. Chun-Ma. Commercial satellite photos of Hagap show tunnel entrances but little else. Detecting clandestine uranium enrichment is generally considered to be more difficult than detecting clandestine plutonium production for several reasons. First, satellite imagery is most useful when changes can be detected at known facilities, or in detecting new facilities. Reactors and reprocessing facilities used in plutonium production often have telltale signatures (shape, size, features like no windows in a reprocessing plant, connection to a water source, power plants or connection to an electricity grid, environmental releases), which facilitate remote detection. Uranium enrichment plants often do not, although this varies among the techniques used. For example, gaseous diffusion enrichment plants often are very large and require tremendous amounts of electricity, offering some distinguishable features. In contrast, centrifuge plants can be small, emit few environmental signatures, and do not require significant amounts of energy to operate. Pakistani Assistance There is currently no detailed, unclassified information on the assistance Pakistan might have offered. One media report, citing Western officials, said the aid included a complete design package for a centrifuge rotor assembly, while a Japanese report stated that Pakistan had exported actual centrifuge rotors (2,000-3,000) to North Korea. The Washington Post reported that North Korean efforts to procure high strength aluminum and significant construction activity tipped off the United States. Apparently, North Korea attempted to obtain materials from China, Japan, Pakistan, Russia, and Europe, but Pakistan provided most of the assistance related to the rotors. A Pakistani official involved in Khan's investigation reportedly said North Korea ordered P-1 centrifuge components from 1997 to 2000. The scope of Pakistan's cooperation with Libya and Iran (including P-1 and P-2 designs, a nuclear weapon design for Libya, and some complete rotor assemblies) raises significant questions about how much other help Khan might have given to the North Koreans. In his September 2006 memoir, Pakistani President Musharraf stated that he believes that Khan sent some of "Pakistan's most technologically advanced nuclear centrifuges. Technical Implications If North Korea may already have plutonium-based nuclear weapons, what is the technical significance of acquiring a uranium enrichment capability? On the one hand, acquiring fissile material is, to many observers, the most difficult part of nuclear weapons acquisition. On the other hand, North Korea's plutonium production program is no longer bound by the Agreed Framework. North Korea began operating its 5MW reactor and has claimed to have completed reprocessing the spent fuel in storage (although the U.S. has not confirmed this). North Korea therefore now may be able to augment its current stockpile of 1-2 weapons' worth of plutonium with additional plutonium for about 5 to 6 weapons. Currently, most accounts suggest that North Korea does not have a completed enrichment plant. In order to produce enough HEU for 1 to 2 weapons (about 50kg), North Korea would require cascades of thousands of centrifuges. If North Korea has the capability to produce its own centrifuge rotors, or has completed assemblies already, producing HEU might be considered easier that its other fissile material production options. The unofficial U.S. delegation that visited North Korea in January reported that the larger reactor under construction at Yongbyon was clearly in disrepair. The unclassified CIA 2002 paper estimated that North Korea could produce enough weapons-grade uranium for two or more nuclear weapons per year when the enrichment plant is fully operational. It is not clear how this estimate was arrived at, and whether evidence that Pakistan provided P-1 or even P-2 centrifuge technology was available at that time. Revelations that Libya received a nuclear weapons design from a foreign source raise concerns about whether North Korea also received such a nuclear weapons design. According to media reports, the packet of information that Libya received on the nuclear weapon included Chinese text and step-by-step instructions for assembling a vintage-1960s HEU implosion device. The Chinese markings are significant because of long-standing rumors that China provided Pakistan with a nuclear weapons design. For North Korea, receiving a proven design for an HEU implosion device would be a significant advantage for its nuclear weapons program. Quite possibly, the main benefit of a centrifuge enrichment program—the ability to produce fissile material clandestinely—may no longer be of great importance to North Korea since it left the NPT in 2003. Nonetheless, such a program may make the North Korean arsenal less vulnerable to possible military strikes because centrifuge enrichment facilities are hard to detect. In addition, the production of highly enriched uranium, together with plutonium production, could give the North Koreans the option of producing more sophisticated nuclear weapons, for example, using composite pits or boosted fission techniques (although there are no indications that they have the technical skill to do so). Pakistan's Missile Development Pakistan, according to many observers, has two clearly distinct missile development programs. The first program is run by the Pakistan National Development Complex (PNDC) in collaboration with the Pakistan Space and Upper Atmosphere Research Commission (SUPARCO) and the Pakistan Atomic Energy Commission (PAEC) and has focused since the early 1980s on solid-fueled ballistic missiles. Pakistan currently fields about 80 of the first variant, the Hatf 1. The Hatf 1 is a short-range, solid propellant, unguided missile considered by some to be too small for a nuclear warhead, which was flight-tested in 1989 and fielded in 1992. The 80km-range was extended to 300km in the Hatf 2a, and to 800km in the Hatf 3. Despite claims of indigenous development, there are many indications that the Hatf 1, 2, and 3 benefitted from Chinese and European assistance. Some believe that Pakistan renamed some imported Chinese M-11 missiles as Hatf 2a missiles in the early 1990s; many believe that the Hatf 3 are variants of Chinese M-9 missiles, and there are those who believe that the Hatf 4 ( Shaheen 1) may be based on Chinese M-11s. Pakistan tested its Hatf 6 missile ( Shaheen 2), which reportedly has a 2000-km range, in early March 2004 for the first time. The second development program has been headed by Khan Research Laboratories. One report has suggested that these competing ballistic missile development efforts were aligned with competing nuclear warhead efforts—that is, the team developing a plutonium warhead for Pakistan's bomb, the PAEC, worked towards developing Chinese-derived nuclear-capable missiles, while the HEU team (KRL), collaborated with North Korea on liquid-fueled missiles derived from Scuds. In any event, it is clear that KRL cooperated with North Korea in developing the Ghauri ( Hatf 5 ), reportedly beginning around 1993. The Ghauri 1 is a liquid-propellant, nuclear-capable, 1500km-range ballistic missile, which was successfully flight-tested first in April 1998. Pakistan now fields approximately 5 to 10 of these missiles and is developing longer-range variants. North Korean Assistance Pakistani ballistic missile engineers developed working relationships with North Korean engineers in the mid-1980s when they both assisted Iran during the Iran-Iraq war. In fact, the close resemblance of Iran's Shahab missile and the Ghauri 1 has led many to conclude that the development of the missiles was coordinated between Pakistan, Iran, and North Korea around 1993. In 1992, Pakistani officials visited North Korea to view a No Dong prototype, and again in 1993 for a No Dong flight test. There are reports that then-Prime Minister Benazir Bhutto visited Pyongyang for one day in December 1993 and many analysts believe missile sales were on the agenda of her visit, despite her public denial. According to one report, North Korea sent 5 to 12 No Dong missile assembly sets to Pakistan between 1994 and 1997; North Korea denies the allegation. At the end of 1997, intelligence agencies observed regular flights from North Korea to Pakistan, accelerating in the beginning of 1998 when there were about 9 flights per month. These flights reportedly followed the visit of high-level North Korean officials to Pakistan. A.Q. Khan apparently made 13 visits to North Korea, beginning in the 1990s. Many observers believe Pakistan accepted between 12 and 25 complete No Dong missiles in the late 1990s. Some observers believe that cooperation has gone both ways—that Pakistan assisted North Korea in developing solid propellant technology. The Taepo Dong 1, which was flight-tested in August 1998, reportedly had a third, solid-propellant stage. Both Iranian and Pakistani personnel apparently were present for the flight test in 1998, and both Iran and Pakistan have expressed interest in space launch vehicles. North Korean missiles have overwhelmingly used liquid propellants. If Pakistan provided such cooperation, it likely would have come from PAEC and not KRL. Technical Implications In missile development, some important milestones include extending range and payload, improving accuracy, and enhancing deployability (for example, through stable propellants and mobile launchers). The medium-range Ghauri 1 missiles significantly increase Pakistan's ability to target India and improve Pakistan's ability to deploy nuclear warheads by increasing the payload. With a payload of 1200kg and a range of 1500km, the Ghauri well exceeds the MTCR standard for a Category I, or nuclear-weapons capable, missile (500kg/300km). By contrast, the Hatf 1 missiles have a range and payload of 80km and 500kg. A.Q. Khan has stated that the Ghauri is Pakistan's only nuclear capable missile. The Ghauri 2, still in development, will have a range of between 1800 and 3000km. Both could reach major Indian cities with large payloads. The Ghauri missiles, because they use liquid propellant, are not as easily deployed as the Shaheen 1 and 2 missiles ( Hatf 4 and 6). These solid-fueled, medium-range missiles apparently are based on Chinese M-11s. The Shaheens are easier to prepare, require fewer support vehicles and personnel, and are far more accurate than the Ghauris . There have been unconfirmed reports that the Ghauri missiles will be shelved in favor of the Shaheens . On the other hand, the Shaheen 1 has a range of just 600km, while the Shaheen 2 has a range, reportedly, of 2000km. North Korea adhered to a moratorium on flight-testing ballistic missiles from September 1999 to July 2006. On July 5, 2006, North Korea flight-tested seven missiles, including a Taepo-Dong-2 that failed 42 seconds after launch. How North Korea's renewed testing will affect North Korean-Pakistani missile cooperation is unclear because the objectives of North Korean testing and future directions of the Pakistani program are not known. However, Pakistan probably would be interested in increasing the payload and improving the accuracy and mobility of its missiles, which could indicate more interest in Chinese than North Korean assistance. Pakistan's Nuclear Sales The genesis of Pakistan's nuclear cooperation with North Korea is murky. There are a few reports in trade journals of equipment passing through Pakistan on the way to North Korea, but it is difficult to pinpoint when cooperation began. In 1986, Swiss officials seized equipment (autoclaves and desublimers) en route to Pakistan that is typically used in uranium enrichment. Special steel containers were also seized. One source reports that uranium enrichment information may have been diverted from the German partner in URENCO, Uranit GmbH, to Pakistan via Switzerland and then reexported to North Korea. Whether provided solely at the behest of Khan, or with the government's blessing, it is clear that nuclear cooperation accelerated in the 1990s. One report says that cooperation between Pakistan and North Korea expanded into the nuclear and missile areas in Benazir Bhutto's second term (1993 to 1996) to include exchanges of scientists and engineers. If Khan piggybacked his nuclear deals onto missile cooperation, then he certainly would have had many more opportunities in the mid- and late-1990s than before. As noted earlier, a Pakistani official involved in Khan's investigation reportedly said North Korea ordered P-1 centrifuge components from 1997 to 2000. It is clear that the Pakistan government sought to reorganize some of its nuclear programs and structure following the May 1998 tests, reportedly because it was now a "declared" nuclear weapons state. Part of this restructuring apparently included issuing regulations for controlling nuclear exports. In June 2000, the Pakistani government published an advertisement announcing procedures for commercial exports of nuclear material. Prospective exporters would need a "no objection certificate" from the Pakistan Atomic Energy Commission, which would also have the authority to verify and inspect all prospective nuclear exports. According to an article in the Pakistan daily, Dawn : The items listed in the advertisement can be in the form of metal alloys, chemical compounds, or other materials containing any of the following: 1. Natural, depleted, or enriched uranium; 2. Thorium, plutonium, or zirconium; 3. Heavy water, tritium, or beryllium; 4. Natural or artificial radioactive materials with more than 0.002 microcuries per gram; 5. Nuclear-grade graphite with a boron equivalent content of less than five parts per million and density greater than 1.5g/cubic centimeter. Many of those items would be useful in a nuclear weapons program. The advertisement also listed equipment "for production, use or application of nuclear energy and generation of electricity" including: Nuclear power and research reactors Reactor pressure vessels and reactor fuel charging and discharging machines Primary coolant pumps Reactor control systems and items attached to the reactor vessels to control core power levels or the primary coolant inventory of the reactor core Neutron flux measuring equipment Welding machines for end caps for fuel element fabrication Gas centrifuges and magnet baffles for the separation of uranium isotopes (emphasis added) UF6 mass spectrometers and frequency changers Exchange towers, neutron generator systems, and industrial gamma irradiators These guidelines, which implied that fissile material could be exported, apparently conflicted with earlier regulations. Several days later, Pakistan's Ministry of Commerce retracted the notice, saying that procedures were still under consideration. The U.S. State Department reportedly responded by suggesting that the regulations did not authorize such exports, but seemed to be drawn from international control lists. U.S. and Pakistani officials apparently have been discussing export control measures since at least 2000. A key feature of Pakistan's regulations, however, is the explicit exemption of Ministry of Defense agencies from controls, which suggests that weapons programs under military leadership could skirt domestic export control laws. U.S. Government Responses U.S. officials reportedly raised with Islamabad suspicions of nuclear technology transfers between Pakistan and North Korea in 2000, prompting an investigation that revealed that KRL scientists had large deposits of money in their personal bank accounts. Pakistani officials reportedly informed the United States that the cooperation was conducted by individuals In March 2001, reportedly at U.S. insistence, A.Q. Khan was removed from his position as head of KRL, but retained the post of presidential adviser until early 2004. Shortly after Khan's dismissal, Deputy Secretary of State Armitage was quoted by the Financial Times as saying that "people who were employed by the nuclear agency and have retired" could be spreading nuclear technology to other states, including North Korea. A senior U.S. nonproliferation official explained weeks later that Armitage's statement led to confusion about the cooperation; that it was really limited to missile cooperation. Initially after the allegations of October 2002, Pakistani officials denied any involvement with North Korea's nuclear program. Pakistan's ambassador to the United States, Ashraf Jehangir Qazi, told the Washington Post that "No material, no technology ever has been exported to North Korea," adding that while "Pakistan has engaged in trade with North Korea, nobody can tell us if there is evidence, no one is challenging our word. There is no smoking gun." Nonetheless, Secretary of State Powell told ABC's This Week that "President Musharraf gave me his assurance, as he has previously, that Pakistan is not doing anything of that nature ... The past is that past. I am more concerned about what is going on now. We have a new relationship with Pakistan." Powell stressed that he has put President Musharraf on notice: "In my conversations with President Musharraf, I have made clear to him that any, any sort of contact between Pakistan and North Korea we believe would be improper, inappropriate, and would have consequences." Khan's confession in 2004 raises an important question of whether the Pakistani government knew of, aided, or abetted his nuclear assistance to North Korea. Khan has alleged that military officials knew of the transfers, but few details have emerged. One account states that Generals Musharraf, Karamat and Waheed knew of aid to North Korea when they were chiefs of the Army staff. Pakistani officials have consistently averred that any nuclear technology was transferred on a personal basis, without the acquiescence or knowledge of the Pakistani government. This could explain why the Bush Administration thus far, has not sought sanctions against Pakistan. In a letter to key senators and members of Congress on March 12, 2003, Assistant Secretary of State for Legislative Affairs Paul Kelly wrote that "the Administration carefully reviewed the facts relating to the possible transfer of nuclear technology from Pakistan to North Korea, and decided that they do not warrant the imposition of sanctions under applicable U.S. laws." However, President Musharraf revealed in his 2006 memoir that he suspected Khan was cooperating with North Koreans as early as 1999, when he received a report that "some North Korean nuclear experts, under the guise of missile engineers, had arrived... and were being given secret briefings." Apparently President Musharraf sought to dampen rumors that Pakistan traded nuclear secrets for missile help by stating that "whatever we bought from North Korea is with money." Evidence of such a barter would clearly implicate the Pakistani military and government, which could complicate U.S. decisions on aid to Pakistan and possibly trigger U.S. sanctions. One analyst has suggested that Pakistan's foreign currency reserve crisis in 1996 might have made a barter arrangement attractive. In that year, the government was able to avoid defaulting on external debt with help from the International Monetary Fund and borrowed $500M from domestic banks. The reserves at that time were $773 million, the equivalent of about three weeks of imports. The next year, visits of North Korean and Pakistani officials accelerated, although this could be attributed solely to missile cooperation. Issues for Congress North Korea's actions alone raise significant policy questions for Congress, specifically, on how to roll back a capability that North Korea refuses to admit it has. However, WMD trade between two proliferators raises a host of other issues that may be pertinent to Congress' oversight of nonproliferation programs and strategy and counterterrorism. First, leverage is needed from outside the traditional nonproliferation framework, since neither North Korea nor Pakistan is a member of the missile or nuclear control regimes. China is an obvious source of leverage because of its longstanding diplomatic, military, and economic ties to both countries, but the development of a new relationship between the United States and Pakistan based on counterterrorism cooperation may also be a source of leverage. Second, this example of secondary proliferation highlights the critical roles of sanctions, interdiction, and intelligence. Nonproliferation sanctions appear to have had little effect on North Korea and Pakistan, while comprehensive sanctions against Libya, over thirty years, appear to have helped Libya decide to renounce its WMD. Although intelligence information was used to help alert Pakistani officials to Khan's technology trade, interdiction appeared to play a secondary role. It is not yet clear whether Khan's forced retirement in 2001 cut off trade (in which case intelligence would have played a leading role) or whether it continued beyond that, until inspections in Iraq and Libya's confessions made Khan's position untenable. Further, intelligence information has not been able to locate uranium enrichment facilities in North Korea. Congress may wish to explore, in the context of the President's nonproliferation initiatives outlined on February 11, 2004, how to improve these capabilities. The example of WMD trade between North Korea and Pakistan raises particular questions about how to interpret proliferation threats within the nexus of terrorism and WMD. Do these developments compromise the security of the United States and its allies because Pakistan and North Korea are developing new capabilities, or because sales of sensitive technologies continue unabated and could expand to terrorists? Since September 2001, the nexus of proliferation of WMD and terrorism has been called one of the greatest threats to U.S. security. Although North Korea is one of the seven state sponsors of terrorism, some in the administration believe that the nexus of terrorism and WMD is not as pronounced in North Korea as it has been elsewhere, for example, in Iraq. Others believe, however, that there is a danger of North Korea proliferating its nuclear technology. Pakistan, while not a state sponsor of terrorism, clearly has terrorist activities on its soil, and potential terrorist access to its nuclear weapons has been a particular concern since September 11, 2001. At that time, nonproliferation concerns about Pakistan centered on the security of the Pakistani nuclear arsenal from terrorists and the activities of Pakistani nuclear scientists providing assistance to terrorists or other states. The inadvertent leakage of nuclear know-how appeared to be a serious threat. Although the Pakistani government repeatedly has assured the world that its nuclear program is safe, there are those who believe this may not be true. In the case of trade with North Korea, it is unclear whether alleged nuclear transfers occurred with the blessing of the Pakistani government or on the personal initiative of scientists. Some have maintained that Pakistan should be able to provide evidence that it provided cash—rather than nuclear technology—in return for North Korean missiles and components that apparently were loaded onto government-owned C-130 aircraft. Others maintain the United States should press harder for direct access to Khan to learn the scope of his activities. A broader question is whether the Bush Administration has given higher priority, since September 2001, to cooperation on counterterrorism than to cooperation in nonproliferation. For example, when North Korea shipped Scud missiles to Yemen in December 2002, North Korea was sanctioned while Yemen was not sanctioned for receiving them; Yemen has been actively cooperating with the United States in counterterrorism activities. When asked if the countries that provided assistance to North Korea on the enrichment program would risk being cut off from U.S. assistance, White House spokesman Ari Fleischer responded: Well, yes, since September 11 th , many things that people may have done years before September 11 th or some time before September 11 th , have changed. September 11 th changed the world and it changed many nations' behaviors along with it. And don't read that to be any type of acknowledgment of what may or may not be true. But September 11 th did change the world. Fleischer's statement appears to imply that forgiveness of proliferation that occurred before September 11, 2001 is in order because counterterrorism takes precedence over counterproliferation. Combating terrorism and weapons of mass destruction, however, are both important objectives for the United States and Congress may consider, in its oversight role, how we can successfully balance both. Pakistan is clearly a key ally in the global war on terror, but the considerable uncertainty about the Pakistani government's involvement in Khan's activities, particularly with respect to North Korea, raises questions about its past, but also future, cooperation in combating the spread of weapons of mass destruction.

In October 2002, the United States confronted North Korea about its alleged clandestine uranium enrichment program. Soon after, the Agreed Framework collapsed, North Korea expelled international inspectors, and withdrew from the Nuclear Nonproliferation Treaty (NPT). U.S. intelligence officials claimed Pakistan was a key supplier of uranium enrichment technology to North Korea, and some media reports suggested that Pakistan had exchanged centrifuge enrichment technology for North Korean help in developing longer range missiles. U.S. official statements leave little doubt that cooperation occurred, but there are significant details missing on the scope of cooperation and the role of Pakistan's government. North Korea and Pakistan both initially denied that nuclear technology was provided to North Korea; President Musharraf admitted, however, in 2006 that such technology had been transferred. This report describes the nature and evidence of the cooperation between North Korea and Pakistan in missiles and nuclear weapons, the impact of cooperation on their weapons of mass destruction (WMD) programs and on the international nonproliferation regime. It will be updated as events warrant. The roots of cooperation are deep. North Korea and Pakistan have been engaged in conventional arms trade for over 30 years. In the 1980s, as North Korea began successfully exporting ballistic missiles and technology, Pakistan began producing highly enriched uranium (HEU) at the Khan Research Laboratory. Benazir Bhutto's 1993 visit to Pyongyang seems to have kicked off serious missile cooperation, but it is harder to pinpoint the genesis of Pakistan's nuclear cooperation with North Korea. By the time Pakistan probably needed to pay North Korea for its purchases of medium-range No Dong missiles in the mid-1990s (upon which its Ghauri missiles are based), Pakistan's cash reserves were low. Pakistan could offer North Korea a route to nuclear weapons using HEU that could circumvent the plutonium-focused 1994 Agreed Framework and be difficult to detect. WMD trade between North Korea and Pakistan raises significant issues for congressional oversight. Are there sources of leverage over proliferators outside the nonproliferation regime? Do sanctions, interdiction, and intelligence as nonproliferation tools need to be strengthened? How is the threat of proliferation interpreted within the nexus of terrorism and WMD? Further, has counterterrorism cooperation taken precedence over nonproliferation cooperation? If so, are there approaches that would make both policies mutually supportive? See also CRS Report RL33590, North Korea's Nuclear Weapons Development and Diplomacy, by [author name scrubbed], and CRS Report RS21391, North Korea's Nuclear Weapons: Latest Developments, by [author name scrubbed].