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104th Congress                                            Rept. 104-138
                        HOUSE OF REPRESENTATIVES

 1st Session                                                     Part 2
_______________________________________________________________________


 
          INTELLIGENCE AUTHORIZATION ACT FOR FISCAL YEAR 1996

_______________________________________________________________________


 July 19, 1995.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______


  Mr. Clinger, from the Committee on Government Reform and Oversight, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 1655]

      [Including cost estimate of the Congressional Budget Office]
    The Committee on Government Reform and Oversight, to whom 
was referred the bill (H.R. 1655) to authorize appropriations 
for fiscal year 1996 for intelligence and intelligence-related 
activities of the United States Government, the Community 
Management Account, and the Central Intelligence Agency 
Retirement and Disability System, and for other purposes, 
having considered the same, report favorably thereon with an 
amendment and recommend that the bill as amended do pass.
                                CONTENTS

                                                                   Page
  I. Background and need for the legislation..........................2
 II. Legislative hearings and committee actions.......................4
III. Committee hearings and written testimony.........................4
 IV. Explanation of the bill..........................................4
  V. Compliance with rule XI..........................................4
 VI. Budget analysis and projections..................................4
VII. Cost estimate of the Congressional Budget Office.................5
VIII.
     Inflationary impact statement....................................7
 IX. Changes in existing law..........................................7
  X. Committee recommendation.........................................8
 XI. Congressional Accountability Act; Public Law 104-1; section      8
     102(B)(2).
    The amendment to the bill, as reported by the Committee on 
Government Reform and Oversight, is as follows:
    Strike out section 505.

                      short summary of legislation

    The legislation amending H.R. 1655, the Intelligence 
Authorization Act For Fiscal Year 1996, strikes Section 505 of 
Title V of the Act.

               i. background and need for the legislation

A. Legislative history

    H.R. 1655, the Intelligence Authorization Act for Fiscal 
Year 1996, was ordered to be reported by the House Permanent 
Select Committee on Intelligence on June 14, 1995. Section 505 
in Title V of H.R. 1655 was sequentially referred to the 
Government Reform and Oversight Committee and then to the 
Subcommittee on Civil Service.
    On July 12, 1995, the Subcommittee on the Civil Service 
amended section 505 by striking the provision from the bill. No 
other amendments were offered and the bill was amended and 
ordered reported to the full Committee. On July 18, 1995, the 
committee favorably reported H.R. 1655, as amended by the Civil 
Service Subcommittee, to the full House.

B. Background

    Section 505 of Title V of H.R. 1655 would waive the 
provision of the Civil Service Retirement System that imposes a 
2% per year reduction in accrued benefits for early retirement 
before age 55 specifically for National Security Agency (NSA) 
employees. The waiver would be in effect for 90 days during 
fiscal year 1996 and could apply to as many as 3,700 NSA 
employees--ages 42 to 54--now eligible for early retirement.
    The Office of Personnel Management (OPM) has estimated that 
approximately 26% of the 3,700 employees could be induced to 
retire with the waiver of the 2% reduction of the accrued 
benefit. NSA has already used the $25,000 voluntary separation 
incentive payment (buyout) three times. In addition, as a 
component of the Department of Defense, NSA will continue to 
have buyout authority through fiscal year 1999. No provision of 
the bill approved by the House Select Committee on Intelligence 
would bar employees from collecting both buyouts and unreduced 
pensions. Report language recommends that this should happen 
``only if required to achieve the desired workforce reduction 
and with prior consultation with both the House and Senate 
Intelligence Committees.'' The bill contains no other 
restrictions on overlapping incentive payments.

C. Need for legislation

    The Committee believes that, the provision (section 505) to 
waive the 2% reduction penalty would, among other problems, set 
a costly and adverse precedent by placing in motion similar 
requests for such waiver authority by other agencies.
    The NSA has indicated that they need the early retirement 
option to reduce the size of their workforce and their payroll 
by encouraging the retirement of higher-paid employees with 
obsolete skills. The NSA penalty waiver proposal is thus 
focused directly at the largest subgroup of retirement eligible 
employees--those eligible for early retirement--approximately 
19% of their civilian population. However, this group has not 
taken advantage of the $25,000 separation incentive. The age 
distribution at NSA has two peaks, one centered at age 31 and 
the other at age 50. The older group constitutes a population 
that could largely move into retirement in the next ten years. 
NSA states ``Their skills, while still applicable, will--
without substantial retraining--become less valuable over 
time.'' This group is the target for increased attrition.
    Given this experience, there is no guarantee that Section 
505 would achieve the desired results. Unfortunately the 
provision takes a blunt approach to one age group with no 
guarantee that these incentives will effectively address the 
alleged skills mismatch. This ``skills mismatch'' could be 
claimed by numerous other agencies affected by restructuring 
measures, and this would have disastrous budget consequences.
    During the Subcommittee's May 17, 1995 hearing on Federal 
buyouts, both public sector expert and private consultant 
witnesses recommended that approval of any additional incentive 
program should be linked closely to approval of an 
organizational restructuring plan. The Committee found, 
however, that there is no such plan at the National Security 
Agency.
    The Permanent Select Committee on Intelligence report on 
H.R. 1655 reflects an extensive effort to review the human, 
technical, and financial resource requirements of several 
intelligence programs, but contains no strategic organizational 
plan. In the report NSA representatives indicated the skill 
categories that they would like to shift, but provided no 
organizational restructuring, no outline of a training or 
retraining program, nor an alternative mechanism to achieve the 
restructuring suited to future operations.
    There is also concern that the provision would have 
disastrous budget consequences. In testimony submitted for 
planned hearings before the Select Committee on Intelligence, 
O.M. projected, ``If a waiver of the two percent per year 
reduction for early retirement was applied on a government-wide 
basis, even if only 27 percent of those eligible elected to 
take it, retirement outlays would increase by more than $6 
billion over a five-year period. These pay-as-you-go costs 
would have to be offset by savings in other direct spending 
programs or by new revenues under the terms of the Budget 
Enforcement Act.'' The Select Committee planned hearings on 
these provisions, but they never occurred.
    There is also concern about the adverse precedent the 
provision would create if granted to NSA. Testimony at the 
Subcommittee's March 17 hearing on buyouts forecast that such a 
precedent would result in an immediate reduction in current 
retirement rates as employees would anticipate the potential 
for additional incentives. Additionally, such incentives 
inevitably would divert resources from current operations, 
minimizing any investment that agencies might be able to make 
into the technologies and training essential for the 
restructured organization.
    NSA desires to avoid a program of involuntary separations 
(Reductions-in-Force), but it has not yet exercised all 
management options currently available. The Administration does 
not support NSA's position. Although this legislation is 
targeted to one agency for a limited period, the Office of 
Personnel Management expressed concern about the consequences 
of such a program for other agencies.
    In short, this measure would establish adverse precedent, 
provide undesirable incentives to current employees, and 
inhibit progress toward organizational restructuring, all while 
imposing substantial financial burdens on both the retirement 
system and the costs of future government operations.

             II. LEGISLATIVE HEARINGS AND COMMITTEE ACTIONS

    H.R. 1655 was introduced on May 17, 1995 by the Honorable 
Larry Combest (R-TX), Chairman of the House Permanent Select 
Committee on Intelligence. The bill was referred to the 
Committee on Government Reform and Oversight on June 23, 1995 
to consider for a period until July 19, 1995, sections of the 
bill within its jurisdiction. The Subcommittee on the Civil 
Service held a mark up on section 505 of the bill on July 12, 
1995. One amendment was offered and adopted by the 
subcommittee, and the measure as amended was ordered favorably 
reported to the full Committee by a voice vote. On July 18, 
1995, the Committee on Government Reform and Oversight met to 
consider H.R. 1655, as amended by the Civil Service 
Subcommittee, and favorably reported the bill to the full House 
by voice vote and without further amendment.

             III. COMMITTEE HEARINGS AND WRITTEN TESTIMONY

    The Subcommittee on the Civil Service held no formal 
hearings on H.R. 1655. However, the Subcommittee has held, and 
will continue to hold, general oversight hearings on Federal 
workforce restructuring and retirement practices, such as 
buyouts, currently in use by Federal agencies.

          IV. EXPLANATION OF THE LEGISLATION AMENDING THE BILL

A. Overview

    The amendment simply strikes section 505 of H.R. 1655, 
thereby leaving in place existing law which provides for a 2% 
per year reduction in benefits for retirement before age 55 for 
National Security Agency employees.

                       V. COMPLIANCE WITH RULE XI

    Pursuant to rule XI, clause 2(l)(3) of the Rules of the 
House of Representatives, under the authority of rule X, clause 
2(b)(1) and clause 3(f), the results and findings from 
committee oversight activities are incorporated in the bill and 
this report.
                  VI. BUDGET ANALYSIS AND PROJECTIONS

    H.R. 1655 as amended provides for no new authorization, 
budget authority or tax expenditures. Consequently, the 
provisions of section 308(a) of the Congressional Budget Act 
are not applicable.

         VII. COST ESTIMATE OF THE CONGRESSIONAL BUDGET OFFICE

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 18, 1995.
Hon. William F. Clinger, Jr.,
Chairman, Committee on Government Reform and Oversight, House of 
        Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1655, the 
Intelligence Authorization Act for Fiscal Year 1996, as ordered 
reported by the House Committee on Government Reform and 
Oversight on July 18, 1995.
    The bill would affect direct spending and thus would be 
subject to pay-as-you-go procedures under section 252 of the 
Balanced Budget and Emergency Deficit Control Act.
    If you wish further details on this estimate, we will be 
pleased to provide them.
            Sincerely,
                                         June E. O'Neill, Director.
               Congressional Budget Office cost estimate

    1. Bill number: H.R. 1655.
    2. Bill title: Intelligence Authorization Act for Fiscal 
Year 1996.
    3. Bill status: As ordered reported by the House Committee 
on Government Reform and Oversight on July 18, 1995.
    4. Bill purpose: H.R. 1655 would authorize appropriations 
for fiscal year 1996 for intelligence activities of the United 
States government, the Community Management Staff of the 
Director of Central Intelligence, and the Central Intelligence 
Agency Retirement and Disability System (CIARDS).
    5. Estimated cost to the Federal Government of titles I 
(except sections 101-103), II, III (except section 301), IV, V, 
and VI:

------------------------------------------------------------------------
                      1995     1996     1997     1998     1999     2000 
------------------------------------------------------------------------
                                                                        
                             DIRECT SPENDING                            
Direct spending:                                                        
    Estimated                                                           
     budget                                                             
     authority....        0        0       0         2        3       1 
    Estimated                                                           
     outlays......        0        0       0         2        3       1 
                                                                        
                SPENDING SUBJECT TO APPROPRIATIONS ACTION               
                                                                        
Spending under                                                          
 current law:                                                           
    Budged                                                              
     authority \1\      291        0       0         0        0       0 
    Estimated                                                           
     outlays......      291       38      22         9        0       0 
Proposed changes:                                                       
    Estimated                                                           
     authorization                                                      
     level \2\....        0      295    (\3\)        4        5    (\3\)
    Estimated                                                           
     outlays......        0      264      23        11        7    (\3\)
                                                                        
                SPENDING SUBJECT TO APPROPRIATIONS ACTION               
                                                                        
Spending under                                                          
 H.R. 1655:                                                             
    Estimated                                                           
     authorization                                                      
      \1\ \2\.....      291      295    (\3\)        4        5    (\3\)
    Estimated                                                           
     outlays......      291      302      45        20        7    (\3\)
------------------------------------------------------------------------
\1\ The 1995 figure is the amount already appropriated.                 
\2\ Because parts of this bill are highly classified, CBO is unable to  
  provide a full accounting of the bill's costs over the 1996-2000      
  period and a comparison with the 1995 level.                          
\3\ Less than $500,000.                                                 

    CBO was unable to obtain the necessary information to 
estimate the costs for Title I (except section 104) and section 
301 of Title III of this bill because they are classified at a 
level above clearances now held by CBO employees. The estimated 
costs in the above table, therefore, reflect only the costs of 
section 104 and Titles II, III (except section 301), IV, V, and 
VI.
    6. Basis of estimate: For purposes of this estimate, CBO 
assumed that H.R. 1655 will be enacted by October 1, 1995, and 
that the full amounts authorized will be appropriated for 
fiscal year 1996. Outlays are estimated according to historical 
spending patterns for intelligence programs.

Direct spending

    CIA Separation Incentives.--Section 401 would allow the 
Central Intelligence Agency (CIA) to offer separation incentive 
payments to employees from the end of fiscal year 1997 to the 
end of fiscal year 1999. Additional retirement costs would 
occur in the near term because employees who retire under this 
program would receive their annuities earlier than they would 
otherwise. The cost of these annuities would constitute direct 
spending. CBO estimates no costs to occur in 1996 and 1997 as a 
result of section 401. However, direct spending costs are 
estimated to be $2 million in 1998, $3 million in 1999, and $1 
million in 2000.
    Based on projections from the CIA, CBO estimates that 550 
employees would be offered an incentive payment in 1998 and 700 
in 1999. The CIA expects that one quarter of those offered an 
incentive payment would take the incentive and retire. The 
estimate assumes that about 60 percent of the retirees would 
have retired anyway, without the incentive. The estimate 
assumes that the remaining 40 percent who accept the incentive 
would retire one or two years earlier than they would have 
otherwise.
    Thrift Savings Plan (TSP) forfeiture.--Section 304 would 
allow forfeiture of the U.S. government contribution to the TSP 
under the Federal Employees Retirement System, along with 
interest, if an employee is convicted of national security 
offenses. According to the CIA, savings from this provision 
would not exceed $35,000 annually.
    Spousal Pension Benefits.--Section 305 would allow 
restoration of spousal pension benefits to those spouses who 
cooperate in criminal investigations and prosecutions for 
national security offenses. According to the CIA, costs from 
this provision would not exceed $35,000 annually.

Authorizations of appropriations

    Section 104 would authorize appropriations of $80.7 million 
for 1996 for the Intelligence Community Management Account of 
the Director of Central Intelligence (DCI). Similarly, section 
201 specifies an authorization of appropriations for a 
contribution to the Central Intelligence Agency Retirement and 
Disability Fund of $213.9 million.
    In addition to the added retirement costs, section 401 
(discussed above under direct spending) would increase 
discretionary spending for incentive costs. The cash incentives 
would cost $4 million in 1998 and $5 million in 1999. CBO 
assumes that the savings in salary and benefits from these 
reductions would be incurred under current law as part of the 
anticipated reduction in the CIA workforce. Thus, these savings 
would not be a result of this bill and would not offset the 
cost of incentive payments in this estimate.
    Section 502 would extend comparable benefits and allowances 
to civilian and military personnel assigned to defense 
intelligence functions overseas. According to the Defense 
Intelligence Agency, this provision would increase personnel 
costs by approximately $200,000 annually.
    7. Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control Act of 1985 sets up pay-as-you-go 
procedures for legislation affecting direct spending or 
receipts through 1998. CBO estimates that H.R. 1655 as ordered 
reported by the House Committee on Government Reform and 
Oversight would have the following pay-as-you-go impact:

------------------------------------------------------------------------
                                        1995     1996     1997     1998 
------------------------------------------------------------------------
Change in outlays...................       0        0        0        2 
Change in receipts..................    (\1\)    (\1\)    (\1\)    (\1\) 
------------------------------------------------------------------------
\1\ Not applicable.                                                     

    8. Estimated cost to State and local governments: None.
    9. Estimate comparison: None.
    10. Previous CBO estimate: CBO prepared an estimate for 
H.R. 1655 as ordered reported by the House Permanent Select 
Committee on Intelligence on May 18, 1995. That version 
included a provision (section 505) that would allow employees 
at the National Security Agency (NSA) enrolled in the Civil 
Service Retirement System (CSRS) who retire before reaching age 
55 to receive unreduced annuities. This provision would reduce 
direct spending in 1966 by $2 million and increase direct 
spending by a total of $111 million over the 1997-2000 period. 
NSA would also be required to make an agency contribution to 
the CSRS trust fund of $15 million in 1996 to cover the long-
run actuarial cost to the retirement system of this incentive 
program. The version of the bill ordered reported by the House 
Committee on Government Reform and Oversight does not include 
this provision dealing with NSA retirees, and the two estimates 
differ for that reason.
    11. Estimate prepared by: Wayne Boyington and Elizabeth 
Chambers.
    12. Estimated approved by: Robert A. Sunshine, for Paul N. 
Van de Water, Assistant Director for Budget Analysis.

                  viii. inflationary impact statement

    In accordance with rule XI, clause 2(l)(4) of the Rules of 
the House of Representatives, this legislation is assessed to 
have no inflationary effect on prices and costs in the 
operation of the national economy.

                      ix. changes in existing law

    In compliance with clause 3 of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown in part 1 of the report, filed 
by the Permanent Select Committee on Intelligence.

                      x. committee recommendation

    On July 18, 1995, a quorum being present, the Committee 
ordered the bill favorably reported.

Committee on Government Reform and Oversight--104th Congress Rollcall

    Date: July 18, 1995.
    Final Passage of H.R. 1655, as amended.
    Offered by: Hon. John L. Mica (R-FL).
    Voice Vote: yea.

    xi. congressional accountability act; public law 104-1; section 
                               102(b)(3)

    H.R. 1655 as amended by the committee is inapplicable to 
the legislative branch because it does not relate to any terms 
or conditions of employment or access to public services or 
accommodations.