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106th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                    106-1053




January 2, 2001.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed


  Mr. Burton, from the Committee on Government Reform, submitted the 


                   1ST AND 2D SESSIONS, 1999 AND 2000


             I. Jurisdiction, Authority, Powers, and Duties

    The Rules of the House of Representative provide for 
election by the house, at the commencement of each Congress, of 
19 named standing committees, 1 of which is the Committee on 
Government Reform.\1\ Pursuant to House Resolutions 6, 7, and 8 
(adopted January 6, 1999), membership of the Committee on 
Government Reform was set at 43 (7 vacancies at the beginning 
of the session) including 1 independent. Membership was 
decreased to 42 pursuant to communication to the Speaker on 
January 7, 1999. House Resolution 30 (adopted February 2, 
1999), increased the membership to 44. Membership was decreased 
to 43 pursuant to communication to the Speaker on March 3, 
1999. House Resolution 119 (adopted March 17, 1999), filled 
that vacancy, and brought the membership back to 44. Membership 
was decreased to 43 pursuant to communication to the Speaker on 
June 24, 1999, and House Resolution 223 filled that vacancy on 
June 25, 1999, and brought the membership back to 44.
    \1\ Rule X.
    Rule X sets forth the committee's jurisdiction, functions, 
and responsibilities as follows:

                                 RULE X

                       Organization of Committees

Committees and their legislative jurisdiction

    1. There shall be in the House the following standing 
committees, each of which shall have the jurisdiction and 
related functions assigned by this clause and clauses 2, 3, and 
4. All bills, resolutions, and other matters relating to 
subjects within the jurisdiction of the standing committees 
listed in this clause shall be referred to those committees, in 
accordance with clause 2 of rule XII, as follows:

           *         *         *         *         *

                   (h) Committee on Government Reform

    (1) The Federal Civil Service, including intergovernmental 
personnel; and the status of officers and employees of the 
United States, including their compensation, classification, 
and retirement.
    (2) Municipal affairs of the District of Columbia in 
general (other than appropriations).
    (3) Federal paperwork reduction.
    (4) Government management and accounting measures 
    (5) Holidays and celebrations.
    (6) Overall economy, efficiency, and management of 
government operations and activities, including Federal 
    (7) National Archives.
    (8) Population and demography generally, including the 
    (9) Postal service generally, including transportation of 
the mails.
    (10) Public information and records.
    (11) Relationship of the Federal Government to the States 
and municipalities generally.
    (12) Reorganizations in the executive branch of the 
    In addition to its legislative jurisdiction under the 
proceeding provisions of this paragraph (and its oversight 
functions under clause 2(a) (1) and (2)), the committee shall 
have the function of performing the activities and conducting 
the studies which are provided for in clause 4(c).

           *         *         *         *         *

General oversight responsibilities

    2. (a) The various standing committees shall have general 
oversight responsibilities as provided in paragraph (b) in 
order to assist the House in--
    (1) its analysis, appraisal, and evaluation of--
          (A) the application, administration, execution, and 
        effectiveness of Federal laws; and
          (B) conditions and circumstances that may indicate 
        the necessity or desirability of enacting new or 
        additional legislation; and
    (2) its formulation, consideration, and enactment of 
changes in Federal laws, and of such additional legislation as 
may be necessary or appropriate.
    (b)(1) In order to determine whether laws and programs 
addressing subjects within the jurisdiction or a committee are 
being implemented and carried out in accordance with the intent 
of Congress and whether they should be continued, curtailed, or 
eliminated, each standing committee (other than the Committee 
on Appropriations) shall review and study on a continuing 
          (A) the application, administration, execution, and 
        effectiveness of laws and programs addressing subjects 
        within its jurisdiction;
          (B) the organization and operation of Federal 
        agencies and entities having responsibilities for the 
        administration and execution of laws and programs 
        addressing subjects within its jurisdiction;
          (C) any conditions or circumstances that may indicate 
        the necessity or desirability of enacting new or 
        additional legislation addressing subjects within its 
        jurisdiction (whether or not a bill or resolution has 
        been introduced with respect thereto); and
          (D) future research and forecasting on subjects 
        within its jurisdiction.

           *         *         *         *         *

    (c) Each standing committee shall review and study on a 
continuing basis the impact or probable impact of tax policies 
affecting subjects within its jurisdiction as described in 
clauses 1 and 3.

           *         *         *         *         *

Additional functions of committees

    4. * * *
    (c)(1) The Committee on Government Reform shall--
          (A) receive and examine reports of the Comptroller 
        General of the United States and submit to the House 
        such recommendations as it considers necessary or 
        desirable in connection with the subject matter of the 
          (B) evaluate the effects of laws enacted to 
        reorganize the legislative and executive branches of 
        the Government; and
          (C) study intergovernmental relationships between the 
        United States and the States and municipalities and 
        between the United States and international 
        organizations of which the United States is a member.
    (2) In addition to its duties under subparagraph (1), the 
Committee on Government Reform may at any time conduct 
investigations of any matter without regard to clause 1, 2, 3, 
or this clause conferring jurisdiction over the matter to 
another standing committee. The findings and recommendations of 
the committee in such an investigation shall be made available 
to any other standing committee having jurisdiction over the 
matter involved and shall be included in the report of any such 
other committee when required by clause 3(c)(4) of Rule XIII.

           *         *         *         *         *


    8. (a) Local currencies owned by the United States shall be 
made available by the committee and its employees engaged in 
carrying out their official duties outside the United States or 
its territories or possessions. Appropriated funds, including 
those authorized under this clause and clause 6 and 8, may not 
be expended for the purpose of defraying expenses of members of 
a committee or its employees in a country where local 
currencies are available for this purpose.
    (b) The following conditions shall apply with respect to 
travel outside the United States or its territories or 
    (1) A member or employee of a committee may not receive or 
expend local currencies for subsistance in a country for a day 
at a rate in excess of the maximum per diem set forth in 
applicable Federal law.
    (2) A member or employee shall be reimbursed for his 
expenses for a day at the lesser of--
          (A) the per deim set forth in applicable Federal law; 
          (B) the actual, unreimbursed expenses (other than for 
        transportation) he incurred during that day.
    (3) Each member or employee of a committee shall make to 
the chairman of the committee an itemized report showing the 
dates each country was visited, the amount of per diem 
furnished, the cost of transportation furnished and funds 
expended for any other official purpose and shall summarize in 
these categories the total foreign currencies or appropriated 
funds expended. Each report shall be filed with the chairman of 
the committee not later than 60 days following the completion 
of travel for use in complying with reporting requirements in 
applicable Federal law and shall be open for public inspection.
    (c)(1) In carrying out the activities of a committee 
outside the United States in a country where local currencies 
are unavailable, a member or employee of a committee may not 
receive reimbursement for expenses (other than for 
transportation) in excess of the maximum per diem set forth in 
applicable Federal law.
    (2) A member or employee shall be reimbursed for his 
expenses for a day, at the lesser of--
          (A) the per diem set forth in applicable Federal law; 
          (B) the actual unreimbursed expenses (other than for 
        transportation) he incurred during that day.
    (3) A member or employee of a committee may not receive 
reimbursement for the cost of any transportation in connection 
with travel outside the United States unless the member or 
employee actually paid for the transportation.
    (d) The restrictions respecting travel outside the United 
States set forth in paragraph (c) also shall apply to travel 
outside the United States by a member, delegate, Resident 
Commissioner, officer, or employee of the House authorized 
under any standing rule.

           *         *         *         *         *

    Rule XI provides authority for investigations and studies, 
as follows:

                                RULE XI

            Procedures of Committees and Unfinished Business

In general--

    1. * * *
    (b)(1) Each committee may conduct at any time such 
investigations and studies as it considers necessary or 
appropriate in the exercise of its responsibilities under rule 
X. Subject to the adoption of expense resolutions as required 
by clause 6 of rule X, each committee may incur expenses, 
including travel expenses, in connection with such 
investigations and studies.

           *         *         *         *         *

    (d)(1) Each committee shall submit to the House, no later 
than January 2 of each odd-numbered year a report on the 
activities of that committee under this rule and Rule X during 
the Congress ending at noon on January 3 of each year.

           *         *         *         *         *

Power to sit and act; subpoena power

    (m)(1) For the purpose of carrying out any of its functions 
and duties under this rule and rule X (including any matters 
referred to it under clause 2 of Rule XII), a committee or 
subcommittee is authorized (subject to subparagraph (2)(A))--
          (A) to sit and act at such times and places within 
        the United States, whether the House is in session, has 
        recessed, or has adjourned, and to hold such hearings 
        as it considers necessary; and
          (B) to require, by subpoena or otherwise, the 
        attendance and testimony of such witnesses and the 
        production of such books, records, correspondence, 
        memoranda, papers, and documents as it considers 
    (2) The chairman of the committee, or a member designated 
by the chairman, may administer oaths to witnesses.
    (3)(A)(i) Except as provided in subdivision (A)(ii), a 
subpoena may be authorized and issued by a committee or 
subcommittee under subparagraph (1)(B) in the conduct of an 
investigation or series of investigations or activities only 
when authorized by the committee or subcommittee, a majority of 
the members voting, a majority being present. The power to 
authorize and issue subpoenas under subparagraph (1)(B) may be 
delegated to the chairman of the committee under such rules and 
under such limitations as the committee may prescribe. 
Authorized subpoenas shall be signed by the chairman of the 
committee or by a member designated by the committee.

           *         *         *         *         *

    (B) A subpoena duces tecum may specify terms of return 
other than at a meeting or hearing of the committee or 
subcommittee authorizing the subpoena.
    (C) Compliance with a subpoena issued by a committee or 
subcommittee under subparagraph (1)(B) may be enforced only as 
authorized or directed by the House.

           *         *         *         *         *

    The committee also exercises authority under a number of 
congressional mandates.

                           5 U.S.C. Sec. 2954

            Information to committees of Congress on request

    An Executive agency, on request of the Committee on 
Government Reform of the House of Representatives, or of any 
seven members thereof, or on request of the Committee on 
Governmental Affairs of the Senate, or any five members 
thereof, shall submit any information requested of it relating 
to any matter within the jurisdiction of the committee.

                          18 U.S.C. Sec. 1505

 Obstruction of proceedings before departments, agencies and committees

    Whoever, with intent to avoid, evade, prevent, or obstruct 
compliance, in whole or in part, with any civil investigation 
demand duly and properly made under the Antitrust Civil Process 
Act, willfully withholds, misrepresents, removes from any 
place, conceals, covers up, destroys, mutilates, alters, or by 
other means falsifies any documentary material, answers to 
written interrogatories, or oral testimony, which is the 
subject of such demand; or attempts to do so or solicits 
another to do so; or
    Whoever corruptly, or by threats or force, or by any 
threatening letter or communication influences, obstructs, or 
impedes or endeavors to influence, obstruct, or impede the due 
and proper administration of the law under which any pending 
proceeding is being had before any department or agency of the 
United States, or the due and proper exercise of the power of 
inquiry under which any inquiry or investigation is being had 
by either House, or any committee of either House or any joint 
committee of the Congress-
    Shall be fined under this title or imprisoned not more than 
five years, or both.

                           31 U.S.C. Sec. 712

                 Investigating the use of public money

    The Comptroller General shall--

           *         *         *         *         *

    (3) analyze expenditures or each executive agency the 
Comptroller general believes will help Congress decide whether 
public money has been used and expended economically and 
    (4) make an investigation and report ordered by either 
House of Congress or a committee of Congress having 
jurisdiction over revenue, appropriations, or expenditures; and
    (5) give a committee of Congress having jurisdiction over 
revenue, appropriations, or expenditures the help and 
information the committee requests.

                           31 U.S.C. Sec. 719

Comptroller General reports

           *         *         *         *         *

    (d) The Comptroller General shall report on analyses 
carried out under section 712(3) of this title to the 
Committees on Governmental Affairs and Appropriations of the 
Senate, the Committees on Government Operations and 
Appropriations of the House, and the committees with 
jurisdiction over legislation related to the operation of each 
executive agency.\2\
    \2\ For other requirements which relate to General Accounting 
Office reports to Congress and which affect the committee, see secs. 
232 and 236 of the Legislative Reorganization Act of 1970 (Public Law 
                       II. Historical Background

    The committee was initially named the ``Committee on 
Expenditures in the Executive Departments.'' Its antecedents 
are summarized in Cannon's Precedents of the House of 
Representatives, vol. VII, sec. 2041, p. 831 (1935), as 
          This committee was created, December 5, 1927, by the 
        consolidation of the eleven Committees on Expenditures 
        in the various Departments of the Government, the 
        earliest of which has been in existence since 1816. As 
        adopted in 1816, the rule did not include the 
        committees for the Departments of Interior, Justice, 
        Agriculture, Commerce, and Labor. The committees for 
        these Departments date, respectively, from 1860, 1874, 
        1889, 1905 and 1913.
    The resolution providing for the adoption of the rules of 
the 70th Congress discontinued the several committees on 
expenditures and transferred their functions to the newly 
created Committee on Expenditures in the Executive Departments:
          On March 17, 1928, the jurisdiction of the committee 
        was further enlarged by the adoption of a resolution, 
        reported from the Committee on Rules, including within 
        its jurisdiction the independent establishments and 
        commissions of the Government.\3\
    \3\ Examples of the wide-ranging scope of the committee's 
jurisdiction may be found in Cannon's Precedents, supra VII, secs. 
2042-2046, pp. 831-833 (1935).
    From 1928 until January 2, 1947, when the Legislative 
Reorganization Act of 1946 became effective, the committee's 
jurisdiction was set forth in Rule XI, 34, of the House Rules 
then in force (H. Doc. 810, 78th Cong., 2d Sess. (1945)), as 

powers and duties of committees

           *       *       *       *       *       *       *

    34. The examination of the account and expenditures of the 
several departments, independent establishments, and 
commissions of the Government, and the manner of keeping the 
same; the economy, justness, and correctness of such 
expenditures; their conformity with appropriation laws; the 
proper application of public moneys; the security of the 
Government against unjust and extravagant demands; 
retrenchment; and enforcement of the payment of moneys due the 
United States; the economy and accountability of public 
officers; the abolishment of useless offices, shall all be 
subjects within the jurisdiction of the Committee on 
Expenditures in the Executive Departments.
    The Legislative Reorganization Act of 1946, section 121(b), 
as adopted in paragraphs (a), (b), and (c) of Rule XI, 8, of 
later Rules of the House (XI, 9, the 93d Congress), provided:

                   committee on government operations

    (a) Budget and accounting measures, other than 
    (b) Reorganizations in the executive branch of Government.
    (c) Such committee shall have the duty of--
          (1) receiving and examining reports of the 
        Comptroller General of the United States and of 
        submitting such recommendations to the House as it 
        deems necessary or desirable in connection with the 
        subject matter of such reports;
          (2) studying the operation of Government activities 
        at all levels with a view to determining the economy 
        and efficiency;
          (3) evaluating the effects of laws enacted to 
        reorganize the legislative and executive branches of 
        the Government;
          (4) studying intergovernmental relationships between 
        the United States and the States and municipalities, 
        and between the United States and international 
        organizations of which the United States is a member.
    (d) For the purpose of performing such duties the 
committee, or any subcommittee thereof when authorized by the 
committee, is authorized to sit, hold hearings, and act at such 
times and places within the United States, whether or not the 
House is in session, is in recess, or has adjourned, to require 
by subpoena or otherwise the attendance of such witnesses and 
the production of such papers, documents, and books, and to 
take such testimony as it deems necessary. Subpoenas may be 
issued under the signature of the chairman of the committee or 
of any subcommittee, or by any member designated by any such 
chairman, and may be served by any person designated by any 
such chairman or member.\4\
    \4\ Paragraph (d) was adopted by the House Feb. 10, 1947.
    Rule X, 1(h), of later Rules of the House, effective 
January 3, 1975 (H. Res. 988, 93d Congress), added the 
additional jurisdiction of general revenue sharing (formerly 
within the jurisdiction of the Committee on Ways and Means), 
and the National Archives (formerly within the jurisdiction of 
the Committee on Post Office and Civil Service).
    Rule X, 1(j)(6), of later Rules of the House listed the 
additional jurisdiction of measures providing for off-budget 
treatment of Federal agencies or programs, which was added by 
sec. 225 of Public Law 99-177, the Balanced Budget and 
Emergency Deficit Control Act of 1985 (December 12, 1985).
    The 1946 act contained the following proviso:
          Provided: That unless otherwise provided herein, any 
        matter within the jurisdiction of a standing committee 
        prior to January 2, 1947, shall remain subject to the 
        jurisdiction of that committee or of the consolidated 
        committee succeeding to the jurisdiction of that 
This proviso was omitted from the Rules of the House adopted 
January 3, 1954.\5\
    \5\ H. Res. 5, 83d Cong. (99 Cong. Rec. 15). Cf. rules in H. Doc. 
562, 82d Congress, 2d session p. 328 and in H. Doc. 739, 81st Congress, 
2d session, p. 326.
    Under the Constitution (Art. I, sec. 5, cl. 2), ``Each 
House may determine the Rules of its Proceedings.'' Omission of 
the proviso made no substantive change, since the scope of the 
committee's jurisdiction prior to January 2, 1947, was embraced 
within the committee's jurisdiction as stated in existing rules 
and precedents.
    The committee's membership, which was fixed at 21 when it 
was consolidated on December 5, 1927, was increased to 25 when 
the Legislative Reorganization Act of 1946 became effective on 
January 2, 1947. In 1951, the committee's membership was 
increased to 27.\6\ From 1953 until January 1963, the 
committee's membership remained at 30.\7\
    \6\ H. Res. 60, 83d Congress, 1st session (97 Cong. Rec. 194).
    \7\ H. Res. 98, 83d Cong. (99 Cong. Rec. 436); H. Res. 94, 84th 
Cong. (101 Cong. Rec. 484); H. Res. 89, 85th Cong. (103 Cong. Rec. 
412); H. Res. 120, 86th Cong. (105 Cong. Rec. 841); H. Res. 137, 87th 
Cong. (107 Cong. Rec. 1677).
    Pursuant to H. Res. 108, 88th Congress, adopted January 17, 
1963, the committee was enlarged to 31 members. In the 89th 
Congress the membership of the committee was increased to 34 
through passage of H. Res. 114, January 14, 1965. The committee 
membership in the 90th and 91st Congresses of 35 was first 
established by H. Res. 128, 90th Congress, approved January 16, 
1967. The committee membership in the 92d Congress of 39 was 
established by H. Res. 192, approved February 4, 1971. It was 
raised to 41 by H. Res. 158, adopted January 24, 1973. The 
committee membership of 42 was established by H. Res. 1238, 
adopted July 17, 1974. It was increased to 43 by H. Res. 76 and 
101, adopted January 20 and 28, 1975. Membership was maintained 
at 43 in the 95th Congress by H. Res. 117 and 118, adopted 
January 19, 1977. The committee membership was set at 39 in the 
96th Congress by H. Res. 62 and 63, adopted January 24, 1979. 
The committee membership was set at 40 in the 97th Congress by 
H. Res. 44 and 45, adopted January 28, 1981. The committee size 
was increased to 41 by the adoption of H. Res. 370 on February 
24, 1982. Pursuant to House Res. 26 and 27, adopted January 6, 
1983, the committee membership for the 98th Congress was set at 
    In the 99th Congress, the membership of the committee was 
set at 39, pursuant to House Res. 34 and 35, adopted January 
30, 1985.
    In the 100th Congress, the membership of the committee was 
set at 39, pursuant to House Res. 45 and 54, adopted January 21 
and 22, 1987, respectively.
    The committee membership in the 101st Congress was 
established at 39 by H. Res. 29 and H. Res. 45, adopted January 
19 and 20, 1989. In the 102d Congress, the membership of the 
committee was set at 41, pursuant to H. Res. 43, 44, and 45, 
adopted January 24, 1991. The committee membership was set at 
42 in the 103d Congress by adoption of H. Res. 8 and 9 on 
January 5, 1993; H. Res. 34 on January 21, 1993; H. Res. 67 on 
February 4, 1993; and H. Res. 92 and 93 on February 18, 1993. 
The membership was increased to 44 by the adoption of H. Res. 
185 on May 26, 1993 and H. Res. 219 on July 21, 1993. Beginning 
September 28, 1949, the moneys appropriated to the committee 
were, by House resolution in each session of Congress, 
available for expenses incurred in conducting studies and 
investigations authorized under Rule XI, whether made within or 
without the United States.\8\ In the 103d Congress, these 
matters are covered in paragraph (b) of clause 1 of Rule XI, as 
set forth above and by clause 5 of Rule XI. The funds for the 
committee's studies and oversight function during the first 
session of the 103d Congress were provided by H. Res. 107 
adopted March 30, 1993 (H. Rept. 103-38).
    \8\ See items under (1) in footnote 3, of the final calendar of the 
committee for the 93d Congress (Dec. 31, 1974).
    The committee's name was changed to ``Committee on 
Government Operations'' by House resolution adopted July 3, 
1952.\9\ The Congressional Record indicates the reasons 
underlying that change in name were, in part, as follows: \10\
    \9\ H. Res. 647, 82d Cong. (98 Cong. Rec. 9217). The Senate had 
made a similar change of name on Mar. 3, 1952, after conference between 
the chairman of the House and Senate Committees on Expenditures in the 
Executive Departments to ensure both Houses would adopt the change in 
name. S. Res. 280, 82d Cong. (98 Cong. Rec. 1701-1702). See also S. 
Rept. No. 1231, 80th Congress, 2d Session, p. 3 (May 3, 1948).
    \10\ Letter of Feb. 19, 1952, from the chairman, Senate Committee 
on Expenditures in the Executive Departments, Senator McCellan to 
Senator Hayden (98 Cong. Rec. 1702).
          This committee is proposing the indicated change in 
        the present title, in view of the fact that it is 
        misleading and the committees' functions and duties are 
        generally misunderstood by the public.

           *       *       *       *       *       *       *

    In suggesting the proposed change the committee based its 
decision on what it considers to be the major or primary 
function of the committee under the prescribed duties assigned 
to it to study ``the operations of Government activities at all 
levels with a view to determining its economy and efficiency.'' 
It was the unanimous view of the members of the committee that 
the proposed new title would be more accurate in defining the 
purposes for which the committee was created and in clearly 
establishing the major purpose it serves.
    On January 4, 1995, the 104th Congress opened with a 
Republican majority for the first time in 40 years. The shift 
in power from Democrats to Republicans has resulted in a 
realignment of the legislative priorities and committee 
structure of the House of Representatives. Perhaps more than 
any other committee, the Government Reform and Oversight 
Committee embodies the changes taking place in the House of 
Representatives. The committee itself was created by 
consolidating three committees into one, resulting in budget 
and staff cuts of nearly 50 percent. The committees that were 
merged include the Committee on Government Operations, the 
Committee on the Post Office and Civil Service, and the 
Committee on the District of Columbia.
    In order to fulfill the Republican Contract with America, 
the committee held a record number of hearings and mark-ups, 
and members cast more votes during this 100 day period than in 
any of the previous committees' histories. Over the course of 
the first session, 295 bills and resolutions were referred to 
the committee and its subcommittees, and 180 hearings and mark-
ups were held. Five of these measures have been signed into 
    In addition to its greatly expanded legislative 
jurisdiction, the Government Reform and Oversight Committee 
serves as the chief investigative committee of the House, with 
the authority to conduct governmentwide oversight. Because the 
committee only authorizes money for a small number of Federal 
agencies and programs, it is able to review government 
activities with an independent eye.
    The 105th Congress and the Committee on Government Reform 
and Oversight under the leadership of Chairman Dan Burton (R-
IN) enjoyed a productive year as Congress continued to move 
closer to its goals established with the Contract of America to 
seek to achieve a smaller, smarter, and more efficient common 
sense government.
    In addition to the committee's oversight responsibilities, 
the Government Reform and Oversight Committee has pursued an 
active, ambitious agenda throughout the 105th Congress with its 
ongoing investigation of suspected illegal activities during 
the 1996 elections. The committee and its eight subcommittees 
conducted 252 hearings during the 105th Congress. Hearings 
covered the following diverse range of subjects: the year 2000 
computer crisis; the Federal Employees Health Benefits Program; 
the Persian Gulf war veterans illnesses; oversight and 
implementation of the Results Act; the investigation of 
political fundraising improprieties; and the review of the Food 
and Drug Administration and its regulations respecting 
terminally ill patients and their ability to access desired 
treatments. The committee staff developed a website 
( to post up-to-minute witness testimonies 
and reports for quick availability.
    The committee continued its oversight responsibilities 
during the 106th Congress. The committee continued with its 
investigation of suspected illegal fundraising during the 1996 
elections. Hearings also covered a wide range of subjects 
including the year 200 computer crisis, the President's 
decision to grant clemency to members of the FALN, oversight of 
Plan Colombia, an aid package to Colombia to fight the drug 
war, the Federal Employees Health Benefits Program, and 
oversight of the FDA. The committee also passed legislation to 
recover millions of dollars from government contractors through 
auditing. The committee also maintained a website 
( to post not only witness testimonies but 
live coverage of committee hearings.
                           III. Organization

                         A. SUBCOMMITTEES \11\

    In order to perform its functions and to carry out its 
duties as fully and as effectively as possible, the committee, 
under the leadership of its chairman, the Honorable Dan Burton 
of Indiana, at the beginning of the 106th Congress, established 
eight standing subcommittees, which cover the entire field of 
executive expenditures and operations. The names, chairpersons, 
and members of these subcommittees are as follows:
    \11\ The chairman and the ranking minority member of the committee 
are ex-offico members of all subcommittees on which they do not hold a 
regular assignment (committee rule 9).
          Subcommittee on the Census, Dan Miller, Chairman; 
        members: John T. Doolittle, Thomas M. Davis, Paul Ryan, 
        Mark Souder, Carolyn B. Maloney, Danny K. Davis, and 
        Harold E. Ford, Jr.
          Subcommittee on the Civil Service, Joe Scarborough, 
        Chairman; members: Asa Hutchinson, Constance A. 
        Morella, John L. Mica, Dan Miller, Elijah E. Cummings, 
        Eleanor Holmes Norton, and Thomas H. Allen.
          Subcommittee on Criminal Justice, Drug Policy, and 
        Human Resources, John L. Mica, Chairman; members: Bob 
        Barr, Benjamin A. Gilman, Christopher Shays, Ileana 
        Ros-Lehtinen, Mark Souder, Steven C. LaTourette, Asa 
        Hutchinson, Doug Ose, David Vitter, Patsy T. Mink, 
        Edolphus Towns, Elijah E. Cummings, Dennis J. Kucinich, 
        Rod R. Blagojevich, John F. Tierney, Jim Turner, and 
        Janice D. Schakowsky.
          Subcommitte on the District of Columbia, Thomas M. 
        Davis, Chairman; members: Constance A. Morella, Stephen 
        Horn, Joe Scarborough, Eleanor Holmes Norton, Carolyn 
        B. Maloney, and Edolphus Towns.
          Subcommittee on Government Management, Information, 
        and Technology, Stephen Horn, Chairman; members: Judy 
        Biggert, Thomas M. Davis, Greg Walden, Doug Ose, Paul 
        Ryan, Jim Turner, Paul E. Kanjorski, Major R. Owens, 
        Patsy T. Mink, and Carolyn B. Maloney.
          Subcommittee on National Economic Growth, Natural 
        Resources, and Regulatory Affairs, David M. McIntosh, 
        Chairman; members: Paul Ryan, Bob Barr, Lee Terry, Greg 
        Walden, Helen Chenoweth-Hage, John T. Doolittle, David 
        Vitter, Dennis J. Kucinich, Tom Lantos, Paul E. 
        Kanjorski, Bernard Sanders, and Harold E. Ford, Jr.
          Subcommittee on National Security, Veterans Affairs, 
        and International Relations, Christopher Shays, 
        Chairman; members: Mark Souder, Ileana Ros-Lehtinen, 
        John M. McHugh, John L. Mica, David M. McIntosh, Mark 
        Sanford, Lee Terry, Judy Biggert, Helen Chenoweth-Hage, 
        Rod R. Blagojevich, Tom Lantos, Robert E. Wise, Jr., 
        Gary A. Condit, John A. Tierney, Thomas H. Allen, 
        Edolphus Towns, Bernard Sanders, and Janice D. 
          Subcommittee on the Postal Service, John M. McHugh, 
        Chairman; members: Mark Sanford, Benjamin A. Gilman, 
        Steven C. LaTourette, Dan Miller, Chaka Fattah, Major 
        R. Owens, and Danny K. Davis.


    Rule XI, clause 1(a)(1)(A) of the House of Representatives 

          Except as provided in subdivision (B), the Rules of 
        the House are the rules of its committees and 
        subcommittees so far as applicable.
          (B) A motion to recess from day to day, and a motion 
        to dispense with the first reading (in full) of a bill 
        or resolution, if printed copies are available, each 
        shall be privileged in committees and subcommittees and 
        shall be decided without debate.

    Rule XI, clause 2(a)(1) of the House of Representatives 
provides, in part:

          Each standing committee shall adopt written rules 
        governing its procedures. * * *

    In accordance with this, the Committee on Government 
Reform, on February 3, 1999, adopted the rules of the 

                     Rule 1.--Application of Rules

    Except where the terms ``full committee'' and 
``subcommittee'' are specifically referred to, the following 
rules shall apply to the Committee on Government Reform and its 
subcommittees as well as to the respective chairmen.
        [See House Rule XI, 1.]

                           Rule 2.--Meetings

    The regular meetings of the full committee shall be held on 
the second Tuesday of each month at 10 a.m., when the House is 
in session. The chairman is authorized to dispense with a 
regular meeting or to change the date thereof, and to call and 
convene additional meetings, when circumstances warrant. A 
special meeting of the committee may be requested by members of 
the committee following the provisions of House Rule XI, clause 
2(c)(2). Subcommittees shall meet at the call of the 
subcommittee chairmen. Every member of the committee or the 
appropriate subcommittee, unless prevented by unusual 
circumstances, shall be provided with a memorandum at least 
three calendar days before each meeting or hearing explaining 
(1) the purpose of the meeting or hearing; and (2) the names, 
titles, background and reasons for appearance of any witnesses. 
The ranking minority member shall be responsible for providing 
the same information on witnesses whom the minority may 
        [See House Rule XI, 2(b).]

                            Rule 3.--Quorums

    A majority of the members of the committee shall form a 
quorum, except that two members shall constitute a quorum for 
taking testimony and receiving evidence, and one-third of the 
members shall form a quorum for taking any action other than 
the reporting of a measure or recommendation. If the chairman 
is not present at any meeting of the committee or subcommittee, 
the ranking member of the majority party on the committee or 
subcommittee who is present shall preside at that meeting.
        [See House Rule XI, 2(h).]

                       Rule 4.--Committee Reports

    Bills and resolutions approved by the committee shall be 
reported by the chairman following House Rule XIII, clauses 2-
    A proposed report shall not be considered in subcommittee 
or full committee unless the proposed report has been available 
to the members of such subcommittee or full committee for at 
least three calendar days (excluding Saturdays, Sundays, and 
legal holidays, unless the House is in session on such days) 
before consideration of such proposed report in subcommittee or 
full committee. Any report will be considered as read if 
available to the members at least 24 hours before 
consideration, excluding Saturdays, Sundays, and legal holidays 
unless the House is in session on such days. If hearings have 
been held on the matter reported upon, every reasonable effort 
shall be made to have such hearings available to the members of 
the subcommittee or full committee before the consideration of 
the proposed report in such subcommittee or full committee. 
Every investigative report shall be approved by a majority vote 
of the committee at a meeting at which a quorum is present.
    Supplemental, minority, or additional views may be filed 
following House Rule XI, clause 2(l) and Rule XIII, clause 
3(a)(1). The time allowed for filing such views shall be three 
calendar days, beginning on the day of notice, but excluding 
Saturdays, Sundays, and legal holidays (unless the House is in 
session on such a day), unless the committee agrees to a 
different time, but agreement on a shorter time shall require 
the concurrence of each member seeking to file such views.
    An investigative or oversight report may be filed after 
sine die adjournment of the last regular session of Congress, 
provided that if a member gives timely notice of intention to 
file supplemental, minority or additional views, that member 
shall be entitled to not less that seven calendar days in which 
to submit such views for inclusion with the report.
    Only those reports approved by a majority vote of the 
committee may be ordered printed, unless otherwise required by 
the Rules of the House of Representatives.

                          Rule 5.--Proxy Votes

    In accordance with the Rules of the House of 
Representatives, members may not vote by proxy on any measure 
or matter before the committee or any subcommittee.
        [See House Rule XI, 2(f).]

                         Rule 6.--Record Votes

    A record vote of the members may be had upon the request of 
any member upon approval of a one-fifth vote.
        [See House Rule XI, 2(e).]

                  Rule 7.--Record of Committee Actions

    The committee staff shall maintain in the committee offices 
a complete record of committee actions from the current 
Congress including a record of the rollcall votes taken at 
committee business meetings. The original records, or true 
copies thereof, as appropriate, shall be available for public 
inspection whenever the committee offices are open for public 
business. The staff shall assure that such original records are 
preserved with no unauthorized alteration, additions, or 
        [See House Rule XI, 2(e).]

                   Rule 8.--Subcommittees; Referrals

    There shall be eight subcommittees with appropriate party 
ratios that shall have fixed jurisdictions. Bills, resolutions, 
and other matters shall be referred by the chairman to 
subcommittees within two weeks for consideration or 
investigation in accordance with their fixed jurisdictions. 
Where the subject matter of the referral involves the 
jurisdiction of more than one subcommittee or does not fall 
within any previously assigned jurisdiction, the chairman shall 
refer the matter as he may deem advisable. Bills, resolutions, 
and other matters referred to subcommittees may be reassigned 
by the chairman when, in his judgement, the subcommittee is not 
able to complete its work or cannot reach agreement therein. In 
a subcommittee having an even number of members, if there is a 
tie vote with all members voting on any measure, the measure 
shall be placed on the agenda for full committee consideration 
as if it had been ordered reported by the subcommittee without 
recommendation. This provision shall not preclude further 
action on the measure by the subcommittee.
        [See House Rule XI, 1(a)(2).]

                      Rule 9.--Ex Officio Members

    The chairman and the ranking minority member of the 
committee shall be ex officio members of all subcommittees. 
They are authorized to vote on subcommittee matters; but, 
unless they are regular members of the subcommittee, they shall 
not be counted in determining a subcommittee quorum other than 
a quorum for taking testimony.

                            Rule 10.--Staff

    Except as otherwise provided by House Rule X, clauses 6, 7 
and 9, the chairman of the full committee shall have the 
authority to hire and discharge employees of the professional 
and clerical staff of the full committee and of subcommittees.

                       Rule 11.--Staff Direction

    Except as otherwise provided by House Rule X, clauses 6, 7 
and 9, the staff of the committee shall be subject to the 
direction of the chairman of the full committee and shall 
perform such duties as he may assign.

                 Rule 12.--Hearing Dates and Witnesses

    The chairman of the full committee will announce the date, 
place, and subject matter of all hearings at least one week 
before the commencement of any hearings, unless he determines, 
with the concurrence of the ranking minority member, or the 
committee determines by a vote, that there is good cause to 
begin such hearings sooner. So that the chairman of the full 
committee may coordinate the committee facilities and hearings 
plans, each subcommittee chairman shall notify him of any 
hearing plans at least two weeks before the date of 
commencement of hearings, including the date, place, subject 
matter, and the names of witnesses, willing and unwilling, who 
would be called to testify, including, to the extent he is 
advised thereof, witnesses whom the minority members may 
request. The minority members shall supply the names of 
witnesses they intend to call to the chairman of the full 
committee or subcommittee at the earliest possible date. 
Witnesses appearing before the committee shall so far as 
practicable, submit written statements at least 24 hours before 
their appearance and, when appearing in a non-governmental 
capacity, provide a curriculum vitae and a listing of any 
Federal Government grants and contracts received in the 
previous fiscal year.
        [See House Rules XI, 2 (g)(3), (g)(4), (j) and (k).]

                        Rule 13.--Open Meetings

    Meetings for the transaction of business and hearings of 
the committee shall be open to the public or closed in 
accordance with Rule XI of the House of Representatives.
        [See House Rules XI, 2 (g) and (k).]

                       Rule 14.--Five-Minute Rule

    (1) A committee member may question a witness only when 
recognized by the chairman for that purpose. In accordance with 
House Rule XI, clause 2(j)(2), each committee member may 
request up to five minutes to question a witness until each 
member who so desires has had such opportunity. Until all such 
requests have been satisfied, the chairman shall, so far as 
practicable, recognize alternately based on seniority of those 
majority and minority members present at the time the hearing 
was called to order and others based on their arrival at the 
hearing. After that, additional time may be extended at the 
direction of the chairman.
    (2) The chairman, with the concurrence of the ranking 
minority member, or the committee by motion, may permit an 
equal number of majority and minority members to question a 
witness for a specified, total period that is equal for each 
side and not longer than thirty minutes for each side.
    (3) The chairman, with the concurrence of the ranking 
minority member, or the committee by motion, may permit 
committee staff of the majority and minority to question a 
witness for a specified, total period that is equal for each 
side and not longer than thirty minutes for each side.
    (4) Nothing in paragraph (2) or (3) affects the rights of a 
Member (other than a Member designated under paragraph (2)) to 
question a witness for 5 minutes in accordance with paragraph 
(1) after the questioning permitted under paragraph (2) or (3). 
In any extended questioning permitted under paragraph (2) or 
(3), the chairman shall determine how to allocate the time 
permitted for extended questioning by majority members or 
majority committee staff and the ranking minority member shall 
determine how to allocate the time permitted for extended 
questioning by minority members or minority committee staff. 
The chairman or the ranking minority member, as applicable, may 
allocate the time for any extended questioning permitted to 
staff under paragraph (3) to members.

               Rule 15.--Investigative Hearing Procedures

    Investigative hearings shall be conducted according to the 
procedures in House Rule XI, clause 2(k). All questions put to 
witnesses before the committee shall be relevant to the subject 
matter before the committee for consideration, and the chairman 
shall rule on the relevance of any questions put to the 

                     Rule 16.--Stenographic Record

    A stenographic record of all testimony shall be kept of 
public hearings and shall be made available on such conditions 
as the chairman may prescribe.

      Rule 17.--Audio and Visual Coverage of Committee Proceedings

    (1) An open meeting or hearing of the committee or a 
subcommittee may be covered, in whole or in part, by television 
broadcast, radio broadcast, Internet broadcast, and still 
photography, unless closed subject to the provisions of House 
Rule XI, clause 2(g). Any such coverage shall conform with the 
provisions of House Rule XI, clause 4.
    (2) Use of the Committee Broadcast System shall be fair and 
nonpartisan, and in accordance with House Rule XI, clause 4(b), 
and all other applicable rules of the House of Representatives 
and the Committee on Government Reform. Members of the 
committee shall have prompt access to a copy of coverage by the 
Committee Broadcast System, to the extent that such coverage is 
    (3) Personnel providing coverage of an open meeting or 
hearing of the committee or a subcommittee by Internet 
broadcast, other than through the Committee Broadcast System, 
shall be currently accredited to the Radio and Television 
Correspondents' Galleries.

                Rule 18.--Additional Duties of Chairman

    The chairman of the full committee shall:
          (a) Make available to other committees the findings 
        and recommendations resulting from the investigations 
        of the committee or its subcommittees as required by 
        House Rule X, clause 4(c)(2);
          (b) Direct such review and studies on the impact or 
        probable impact of tax policies affecting subjects 
        within the committee's jurisdiction as required by 
        House Rule X, clause 2(c);
          (c) Submit to the Committee on the Budget views and 
        estimates required by House Rule X, clause 4(f), and to 
        file reports with the House as required by the 
        Congressional Budget Act;
          (d) Authorize and issue subpoenas as provided in 
        House Rule XI, clause 2(m), in the conduct of any 
        investigation or activity or series of investigations 
        or activities within the jurisdiction of the committee;
          (e) Prepare, after consultation with subcommittee 
        chairmen and the minority, a budget for the committee 
        which shall include an adequate budget for the 
        subcommittees to discharge their responsibilities;
          (f) Make any necessary technical and conforming 
        changes to legislation reported by the committee upon 
        unanimous consent; and
          (g) Will designate a vice chairman from the majority 

                     Rule 19.--Commemorative Stamps

    The committee has adopted the policy that the determination 
of the subject matter of commemorative stamps properly is for 
consideration by the Postmaster General and that the committee 
will not give consideration to legislative proposals for the 
issuance of commemorative stamps. It is suggested that 
recommendations for the issuance of commemorative stamps be 
submitted to the Postmaster General.
                     IV. Activities, 104th Congress


    1. In the 106th Congress, the committee approved and 
submitted to the House of Representatives 11 investigative 
reports. In addition, the committee issued 3 committee prints.
    2. In the 106th Congress, 530 bills and resolutions were 
referred to the committee and studied. Of these, the committee 
reported 35. In addition, 22 Memorials, 6 Petitions, and 6 
Presidential messages were referred to the committee.
    3. Pursuant to its duty of studying reports of the 
Comptroller General, the Congress officially received 1,754 
such reports during the 106th Congress, and the committee 
studied 68. In addition, 1,418 Executive communications were 
referred to the committee under clause 2 of Rule XIV of the 
House of Representatives.
    4. The full committee met 71 days during the 106th Congress 
while the subcommittees met a total of 269 days in public 
hearings, markups, and meetings.
    The significant actions taken by the committee with respect 
to these and a considerable number of other matters are 
discussed in detail below.

                        A. INVESTIGATIVE REPORTS

    During the 106th Congress, the Committee on Government 
Reform approved and submitted to the Congress eleven reports of 
an investigative nature.
    For convenience, the published reports are listed here with 
the names of the originating subcommittees. A more detailed 
discussion of the material will be found in part two below in 
the breakdown of the committee's activities by subcommittee:
          First Report (H. Rept. 106-50): ``A Citizen's Guide 
        on Using the Freedom of Information Act and the Privacy 
        Act of 1974 To Request Government Records.'' 
        (Subcommittee on Government Management, Information, 
        and Technology)
          Second Report (H. Rept. 106-170): ``Making the 
        Federal Government Accountable: Enforcing the Mandate 
        for Effective Financial Management.'' * (Subcommittee 
        on Government Management, Information, and Technology)
    * Denotes report accompanied by additional, dissenting, minority, 
separate, or supplemental views.
          Third Report (H. Rept. 106-488): ``The FALN and 
        Macheteros Clemency: Misleading Explanations, A 
        Reckless Decision, A Dangerous Message.'' *
          Fourth Report (H. Rept. 106-556): ``The Department of 
        Defense Anthrax Vaccine Immunization Program: Unproven 
        Force Protection.'' * (Subcommittee on National 
        Security, Veterans Affairs, and International 
    * Denotes report accompanied by additional, dissenting, minority, 
separate, or supplemental views.
          Fifth Report (H. Rept. 106-802): ``Making the Federal 
        Government Accountable: Enforcing the Mandate for 
        Effective Financial Management.'' * (Subcommittee on 
        Government Management, Information, and Technology)
          Sixth Report (H. Rept. 106-977): ``The Vaccine Injury 
        Compensation Program: Addressing Needs and Improving 
        Practices.'' (Subcommittee on Criminal Justice, Drug 
        Policy, and Human Resources)
          Seventh Report (H. Rept. 106-1009): ``Non-Binding 
        Legal Effect of Agency Guidance Documents.'' * 
        (Subcommittee on National Economic Growth, Natural 
        Resources, and Regulatory Affairs)
          Eighth Report (H. Rept. 106-1023): ``The Failure to 
        Produce White House E-Mails: Threats, Obstruction, and 
        Unanswered Questions.'' *
          Ninth Report (H. Rept. 106-1024): ``Management 
        Practices at the Office of Workers' Compensation 
        Programs, U.S. Department of Labor.'' * (Subcommittee 
        on Government Management, Information, and Technology)
          Tenth Report (H. Rept. 106-1027): ``Janet Reno's 
        Stewardship of the Justice Department: A Failure to 
        Serve the Ends of Justice.'' *
          Eleventh Report (H. Rept. 106-1037: ``The Tragedy at 
        Waco: New Evidence Examined.'' *

                             B. LEGISLATION

    The legislative jurisdiction of the Committee on Government 
Reform covers a wide range of important governmental 
operations. In accordance with jurisdiction assumed from the 
former Committee on Government Reform and Oversight, the 
committee receives all budget and accounting measures other 
than appropriations; all measures relating to the overall 
economy and efficiency of Government operations and activities, 
including Federal procurement, intergovernmental relationships, 
general revenue sharing (the latter subject was formerly within 
the jurisdiction of the Committee on Ways and Means), and the 
National Archives (formerly within the jurisdiction of the 
Committee on Post Office and Civil Service); all reorganization 
plans and bills providing for the establishment of new 
departments in the executive branch such as the Department of 
Energy and Department of Education; and most other 
reorganization legislation, examples of which are legislation 
to reorganize the intelligence community, international trade, 
and regulatory agencies. Other legislation includes debt 
collection and proposals relating to delinquent payments and 
paperwork reduction. It also receives legislation dealing with 
the General Services Administration, including the Federal 
Property and Administrative Services Act of 1949 and special 
bills authorizing the Administrator of General Services to make 
specific transfers of property, plus legislation dealing with 
the General Accounting Office, the Office of Management and 
Budget, the Administration Expenses Act, the Travel Expenses 
Act, the Employment Act of 1946, and Javits-Wagner-O'Day Act 
relating to the sale of products and services of blind and 
other handicapped persons. In addition, the committee has 
jurisdiction over the Freedom of Information provisions of the 
Administrative Procedure Act, the Privacy, the Government in 
the Sunshine Act, and the Federal Advisory Committee as well as 
the Inspector General Act.
    Rule X, 2(b) of the standing Rules of the House, requires 
the committee to see and review the administration of all laws 
in the legislative jurisdiction, and Rule XI, 1(d) requires 
that the committee report to the House thereon by the end of 
each Congress. The present report outlines the extent and 
nature of the committee and subcommittee activities 
constituting the review.
    During the 106th Congress, the committee reviewed 530 bills 
and resolutions referred to it and reported 85 to the House. 
The measures reported or ordered reported are discussed more 
fully in part two below. However, they are listed with the name 
of the subcommittee that initially considered them:
          H.R. 28, to provide for greater access to child care 
        services for Federal employees. (Subcommittee on 
        Government Management, Information, and Technology.)
          H.R. 170, to require certain notices in any mailing 
        using a game of chance for the promotion of a product 
        or service, and for other purposes. (Subcommittee on 
        the Postal Service.)
          H.R. 206, to provide for greater access to child care 
        services for Federal employees. (Subcommittee on the 
        Civil Service.)
          H.R. 208, to amend title 5, United States Code, to 
        allow for the contribution of certain rollover 
        distributions to accounts in the Thrift Savings Plan, 
        to eliminate certain waiting-period requirements for 
        participating in the Thrift Savings Plan, and for other 
        purposes. (Subcommittee on the Civil Service.)
          H.R. 391, to amend chapter 35 of title 44, United 
        States Code, for the purpose of facilitating compliance 
        by small businesses with certain Federal paperwork 
        requirements applicable to small businesses, and for 
        other purposes. (Subcommittee on National Economic 
        Growth, Natural Resources, and Regulatory Affairs.)
          H.R. 416, to provide for the rectification of certain 
        retirement coverage errors affecting Federal employees, 
        and for other purposes. (Subcommittee on the Civil 
          H.R. 436, to reduce waste, fraud, and error in 
        Government programs by making improvements with respect 
        to Federal management and debt collection practices, 
        Federal payment systems, Federal benefit programs, and 
        for other purposes. (Subcommittee on Government 
        Management, Information, and Technology.)
          H.R. 437, to provide for a Chief Financial Officer in 
        the Executive Office of the President. (Subcommittee on 
        Government Management, Information, and Technology.)
          H.R. 457, to amend title 5, United States Code, to 
        increase the amount of leave time available to a 
        Federal employee in any year in connection with serving 
        as an organ donor, and for other purposes. 
        (Subcommittee on the Civil Service.)
          H.R. 472, to amend title 13, United States Code, to 
        require the use of post census local review as part of 
        each decennial census. (Subcommittee on the Census.)
          H.R. 683, to facilitate the recruitment of temporary 
        employees to assist in the conduct of the 2000 
        decennial census of population. (Subcommittee on the 
          H.R. 807, to amend title 5, United States Code, to 
        provide portability of service credit for persons who 
        leave employment with the Federal Reserve Board to take 
        positions with other Government agencies. (Subcommittee 
        on the Civil Service.)
          H.R. 915, to authorize a cost of living adjustment in 
        the pay of administrative law judges. (Subcommittee on 
        the Civil Service.)
          H.R. 928, to require that the 2000 decennial census 
        include either a general or targeted followup mailing 
        of census questionnaires, whichever, in the judgment of 
        the Secretary of Commerce, will be more effective in 
        securing the return of census information from the 
        greatest number of households possible. (Subcommittee 
        on the Census.)
          H.R. 929, to amend title 13, United States Code, to 
        require that the questionnaire used in taking the 2000 
        decennial census be made available in certain languages 
        besides English. (Subcommittee on the Census.)
          H.R. 974, to establish a program to afford high 
        school graduates from the District of Columbia the 
        benefits of in-State tuition at state colleges and 
        universities outside the District of Columbia, and for 
        other purposes. (Subcommittee on the District of 
          H.R. 1009, to authorize the awarding of grants to 
        cities, counties, tribal organizations, and certain 
        other entities for the purpose of improving public 
        participation in the 2000 decennial census. 
        (Subcommittee on the Census.)
          H.R. 1010, to improve participation in the 2000 
        decennial census by increasing the amounts available to 
        the Bureau of the Census for marketing, promotion, and 
        outreach. (Subcommittee on the Census.)
          H.R. 1058, to promote greater public participation in 
        decennial censuses by providing for the expansion of 
        the educational program commonly referred to as the 
        ``Census in Schools Project.'' (Subcommittee on the 
          H.R. 1074, to provide Governmentwide accounting of 
        regulatory costs and benefits, and for other purposes. 
        (Subcommittee on National Economic Growth, Natural 
        Resources, and Regulatory Affairs.)
          H.R. 1219, to amend the Office of Federal Procurement 
        Policy Act and the Miller Act, relating to payment 
        protections for persons providing labor and materials 
        for Federal construction projects. (Subcommittee on 
        Government Management, Information, and Technology.)
          H.R. 1442, to amend the Federal Property and 
        Administrative Services Act of 1949 to continue and 
        extend authority for transfers to State and local 
        governments of certain property for law enforcement, 
        public safety, and emergency response purposes. 
        (Subcommittee on Government Management, Information, 
        and Technology.)
          H.R. 1788, to deny Federal public benefits to 
        individuals who participated in Nazi persecution. 
        (Subcommittee on Government Management, Information, 
        and Technology.)
          H.R. 1827, to improve the economy and efficiency of 
        Government operations by requiring the use of recovery 
        audits by Federal agencies. (Subcommittee on Government 
        Management, Information, and Technology.)
          H.R. 2842, to amend chapter 89 of title 5, United 
        States Code, concerning the Federal Employees Health 
        Benefits [FEHB] Program, to enable the Federal 
        Government to enroll an employee and his or her family 
        in the FEHB Program when a State court orders the 
        employee to provide health insurance coverage for a 
        child of the employee but the employee fails to provide 
        the coverage. (Subcommittee on the Civil Service.)
          H.R. 2885, to provide uniform safeguards for the 
        confidentiality of information acquired for exclusively 
        statistical purposes, and to improve the efficiency and 
        quality of Federal statistics and Federal statistical 
        programs by permitting limited sharing of records among 
        designated agencies for statistical purposes under 
        strong safeguards. (Subcommittee on Government 
        Management, Information, and Technology.)
          H.R. 2904, to amend the Ethics in Government Act of 
        1978 to reauthorize funding for the Office of 
        Government Ethics. (Subcommittee on the Civil Service.)
          H.R. 3137, to amend the Presidential Transition Act 
        of 1963 to provide for training of individuals a 
        President-elect intends to nominate as department heads 
        or appoint to key positions in the Executive Office of 
        the President. (Subcommittee on Government Management, 
        Information, and Technology.)
          H.R. 3995, to establish procedures governing the 
        responsibilities of court-appointed receivers who 
        administer departments, offices, and agencies of the 
        District of Columbia government. (Subcommittee on the 
        District of Columbia.)
          H.R. 4040, a bill to amend title 5, United States 
        Code, to provide for the establishment of a program 
        under which long-term care insurance is made available 
        to Federal employees, member of the uniformed services, 
        and civilian and military retirees, provide for the 
        correction of retirement coverage errors under chapters 
        83 and 84 of such title, and for other purposes. 
        (Subcommittee on the Civil Service.)
          H.R. 4049, to establish the Commission for the 
        Comprehensive Study of Privacy Protection.
          H.R.(Subcommittee on Government Management, 
        Information, and Technology.)
          H.R. 4110, to amend titled 44, United States Code, to 
        authorize appropriations for the National Historical 
        Publications and Records Commission for fiscal years 
        2002 through 2005. (Subcommittee on Government 
        Management, Information, and Technology.)
          H.R. 4387, to provide that the School Governance 
        Charter Amendment Act of 2000 shall take effect upon 
        the date such Act is ratified by the voters of the 
        District of Columbia. (Subcommittee on Government 
        Management, Information, and Technology.)
          H.R. 4437, to grant the U.S. Postal Service the 
        authority to issue semipostals, and for other purposes. 
        (Subcommittee on the Postal Service.)
          H.R. 4744, to require the General Accounting Office 
        to report to Congress on economically significant rules 
        of Federal agencies, and for other purposes. 
        (Subcommittee on National Economic Growth, Natural 
        Resources, and Regulatory Affairs.)
    There were also 50 bills dealing with the naming or 
renaming of U.S. Postal Offices. A description of these bills 
is located under the Subcommittee on the Postal Service section 
found on page 483.

                        OTHER LEGISLATIVE ACTION

    The following bills were referred to the Committee on 
Government Reform. After analysis by committee staff members 
the committee was discharged from further consideration, and 
therefore, the bills were not reported. They are listed as 
          H. Con. Res. 317, expressing the sense of the 
        Congress on the death on John Cardinal O'Connor, 
        Archbishop of New York.
          H. Con. Res. 381, expressing the sense of the 
        Congress that there should be established a National 
        Health Center Week to raise awareness of health 
        services provided by community, migrant, and homeless 
        health centers.
          H. Res. 264, expressing the sense of the House of 
        Representatives honoring Lance Armstrong, America's 
        premier cyclist, and his winning performance in the 
        1999 Tour de France. (Subcommittee on the Civil 
          H. Res. 293, expressing the sense of the House of 
        Representatives in support of ``National Historically 
        Black Colleges and Universities Week.'' (Subcommittee 
        on the Civil Service.)
          H. Res. 376, expressing the sense of the House of 
        Representatives in support of ``National Children's 
        Memorial Day.'' (Subcommittee on the Civil Service.)
          H. Res. 677, expressing the commitment of the Member 
        of the House of Representatives to fostering a 
        productive and collegial partnership with the 43rd 
          H.R. 417, to amend the Federal Election Campaign Act 
        of 1971 to reform the financing of campaigns for 
        elections for Federal office, and for other purposes. 
        (Subcommittee on the Civil Service.)
          H.R. 433, to restore the management and personnel 
        authority of the Mayor of the District of Columbia.
          H.R. 642, to redesignate the Federal building located 
        at 701 South Santa Fe Avenue in Compton, CA, and known 
        as the Compton Main Post Office, as the ``Mervyn 
        Malcolm Dymally Post Office Building.'' (Subcommitte on 
        the Postal Service.)
          H.R. 1907, to amend title 35, United States Code, to 
        provide enhanced protection for inventors and 
        innovators, protect patent terms, reduce patent 
        litigation, and for other purposes.
          H.R. 3312, to clarify the Administrative Dispute 
        Resolution Act of 1996 to authorize the Merit Systems 
        Protection Board to establish under such act a 3-year 
        pilot program that will provie a voluntary early 
        intervention alternative dispute resolution process to 
        assist Federal agencies and employees in resolving 
        certain personnel actions and disputes in 
        administrative programs. (Subcommittee on the Civil 
          H.R. 3488, to designate the U.S. Post Office located 
        at 60 Third Avenue in Long Branch, NJ, as the ``Pat 
        King Post Office Building.'' (Subcommitte on the Postal 
          H.R. 4404, to permit the payment of medical expenses 
        incurred by the U.S. Park Police in the performance of 
        duty to be made directly by the National Park Service, 
        to allow for waiver and indemnigication in mutual law 
        enforcement agreements between the National Park 
        Service and a State or political subdivision which 
        required by State law, and for other purposes. 
        (Subcommittee on the Civil Service.)
          H.R. 4519, to amend the Public Buildings Act of 1959 
        concerning the safety and security of children enrolled 
        in childcare facilities located in public buildings 
        under the control of the General Services 
        Administration. (Subcommittee on Government Management, 
        Information, and Technology.)
          H.R. 4853, to redesignate the facility of the U.S. 
        Postal Service located at 1568 South Glen Road in South 
        Euclid, OH, as the ``Arnold C. D'Amico Station.'' 
        (Subcommitte on the Postal Service.)
          H.R. 4931, to provide for the training or orientation 
        of individuals, during a Presidential transition, who 
        the President intends to appoint to certain key 
        positions, to provide for a study and report on 
        improving the financial disclosure process for certain 
        Presidential nominees, and for other purposes. 
        (Subcommittee on Government Management, Information, 
        and Technology.)
          H.R. 5157, to amend title 44, United States Code, to 
        ensure preservation of the records of the Freedmen's 
        Bureau. (Subcommittee on Government Management, 
        Information, and Technology.)
          S. 2686, a bill to amend chapter 36 of title 39, 
        United States Code, to modify rates relating to reduced 
        rate mail matter, and for other purposes.
          S. 3062, a bill to modify the date on which the Mayor 
        of the District of Columbia submits a performance 
        accountability plan to Congress, and for other 
        purposes. (Subcommittee on the District of Columbia.)

                        C. REORGANIZATION PLANS

    The most recent authority of the President to transmit 
reorganization plans to Congress was reestablished by Public 
Law 98-614. Approved November 8, 1984, this authority expired 
on December 31, 1984. Legislation extending executive 
reorganization authority was not enacted during the 106th 

                          D. COMMITTEE PRINTS

    Three committee prints, resulting from work by the 
committee staff, were issued during the 106th Congress, as 
          ``Rules of the Committee on Government Reform, House 
        of Representatives, Together with Selected Rules of the 
        House of Representatives (Including Clause 2 of House 
        Rule XI) and Selected Statutes of Interest.'' (Full 
        committee.) (February 1999.)
          ``Title 5, United States Code, Government 
        Organization and Employees.'' (Subcommittee on the 
        Civil Service.) (May 1999.)
          ``Rules of the Committee on Government Reform, House 
        of Representatives, Together with Selected Rules of the 
        House of Representatives (Including Clause 2 of House 
        Rule XI) and Selected Statutes of Interest.'' (Full 
        committee.) (March 2000.)


    Rule X, 4(c)(1)(A), of the Rules of the House, imposes the 
duty upon this committee to receive and examine reports of the 
Comptroller General referred to and make such recommendations 
to the House as it deems necessary or desirable in connection 
with the subject matter of the reports.
    In discharging this responsibility, each report of the 
Comptroller General received by the committee is studied and 
analyzed by the staff and referred to a subcommittee for 
action. Furthermore, in implementation of section 236 of the 
Legislative Reorganization Act of 1970, the committee regularly 
receives GAO reports that are not addressed to Congress but 
contain recommendations to heads of the Federal agencies. The 
committee received a total of 1,754 such GAO reports to Federal 
agencies or other committees and members within the legislative 
    Periodic reports are received from the subcommittees on 
actions taken with respect to individual reports, and monthly 
reports are made to the chairman as to reports received. During 
the session, the committee used the reports to further specific 
investigations and reviews. In most cases, additional 
information concerning the findings and recommendations of the 
Comptroller General was requested and received from the 
administrative agency involved, as well as from the General 
Accounting Office. More specific information on the actions 
taken appears in part two below.
    Complete files are maintained by the committee on all 
Comptroller General's reports received. Detailed records are 
kept showing the subcommittee to which the report is referred, 
the date of referral, and the subsequent action taken.
    The committee will review all of the Comptroller General's 
reports received during the congress in the light of additional 
information obtained and actions taken by the subcommittees, 
and determinations will be made whether specific 
recommendations to the House are necessary or desirable under 
Rule X.

                 I. Matters of Interest, Full Committee

                               A. GENERAL

1. Oversight Plans of the Committees of the U.S. House of 
    The 104th Congress adopted a new Rule that provides for 
each standing committee of the House to formally adopt 
oversight plans at the beginning of each year. Specifically, 
the Rule states in part:

          Rule X, clause (2)(d)(1). Not later that February 15 
        of the first session of a Congress, each standing 
        committee of the House shall, in a meeting that is open 
        to the public and with a quorum present, adopt its 
        oversight plans for that Congress. Such plans shall be 
        submitted simultaneously to the Committee on Government 
        Reform and to the Committee on House Administration.

    On March 31, 1999, Committee Chairman Dan Burton submitted 
the oversight plans of each House committee together with 
recommendations to ensure the most effective coordination of 
such plans and otherwise achieve the objectives of the House 


             Oversight Plans of the Committees of the House

    Congressional oversight, as envisioned by the majority 
leadership of the House, is ultimately about the public 
interest, the liberty of citizens, and the taxpayers' dollars. 
The ability, and duty, of popularly-elected representatives to 
oversee the executive branch is a fundamental component of the 
system of checks and balances established by the founding 
fathers. The Rules of the House of Representatives ensure 
Congress' responsibility to the public in this regard. Pursuant 
to House Rule X, clause 2(b)(1), each standing committee of the 
House shall review and study on a continuing basis--
          (A) the application, administration, execution, and 
        effectiveness of laws and programs addressing subjects 
        within its jurisdiction;
          (B) the organization and operation of Federal 
        agencies and entities having responsibilities for the 
        administration and execution of laws and programs 
        addressing subjects within its jurisdiction;
          (C) any conditions or circumstances that may indicate 
        the necessity or desirability of enacting new or 
        additional legislation addressing subjects within its 
        jurisdiction (whether or not a bill or resolution has 
        been introduced with respect thereto); and
          (D) future research and forecasting on subjects 
        within its jurisdiction.
    Congressional oversight in the 106th Congress focused on 
three fundamental efforts:
    (1) Review the implementation by the executive branch of 
recent policy changes enacted by Congress to assess their 
effectiveness. Congress enacted significant reform legislation 
in the 105th Congress. These reforms include balancing the 
budget, restructuring the Internal Revenue Service, improving 
public education in our classrooms, and providing tax relief to 
small businesses, the self-employed, and families with 
children. Other reform efforts include healthcare reforms, 
anticrime legislation that is helping to significantly lower 
crime rates, protecting our children from pornography on the 
Internet, strengthening our military, and cracking down on 
deadbeat parents.
    Many of these reforms have already resulted in major cost 
savings, improvements in the efficiency of the Federal 
Government, and improvements to the health, safety, and welfare 
of American citizens. But they will need monitoring and 
oversight by the Congress to ensure their success as effective 
legislative changes. In their oversight plans for the 106th 
Congress, House committees recognize the importance of their 
responsibility to oversee the implementation of recent 
legislative reforms. The Government Reform Committee recommends 
that House committees fully utilize the auditing and oversight 
services of the General Accounting Office, the Congressional 
Research Service, and agency Inspectors General to augment 
their efforts to oversee the implementation of these critical 
legislative reforms.
    (2) Review existing government programs in order to inform 
the public and build a compelling case for further change and 
reform. While the legislative successes of the 105th Congress 
are laudable, many other opportunities for streamlining, 
improving efficiency, and reducing costs to the American 
taxpayer exist. The House committee oversight plans reveal 
priorities areas for additional programmatic and agency reform 
efforts in the 106th Congress, including: public education 
system reform, Social Security trust fund solvency, fundamental 
tax code reform; and reforms to assure minimal year 2000 
computer conversion problems. Most committees recognize the 
importance of the Government Performance and Results Act as a 
tool for building the case for reform. The use of this 
important tool is affirmed in most committee oversight plans, 
but is most evident as it filters into the daily work of 
committees, particularly in hearings and legislative 
decisionmaking. The Government Reform Committee recommends that 
each House committee continue using agency strategic plans and 
performance plans mandated by the Results Act as a basis for 
conducting oversight of agencies and programs in its 
jurisdiction, and for holding government more accountable for 
the activities and services it delivers.
    (3) Review government programs to root out waste, fraud, 
and abuse, thereby maximizing accountability in the Federal 
Government to the public. The merits of Federal programs and 
activities are, of course, subject to intense debate-
particularly in times of keen competition for limited Federal 
resources. However, the importance of efficient, effective, and 
honest management is not a debatable issue, and is perhaps even 
more important in an era of budget surpluses. Fraud, waste, 
abuse, and mismanagement serve no legitimate constituency or 
political interest. They cheat both the taxpayers and the 
intended beneficiaries of the programs and activities they 
affect. They also undermine the confidence of the American 
people in the capacity and will of the Federal Government to 
perform its functions effectively. The Government Reform 
Committee recommends that House committees rigorously conduct 
oversight of the problems identified in (1) the General 
Accounting Office's ``High Risk List'' of Federal programs at 
risk for serious fraud, waste, and abuse, (2) the General 
Accounting Office's January 1999 report entitled, ``Major 
Management Challenges and Program Risks'' [GAO/OCG-99-8]; and 
(3) agency Inspectors General semi-annual and annual reports to 
Congress. These documents are an important source of serious 
problems currently festering in the Federal Government that 
need immediate attention by Congress.
2. Investigations
            a. Johnny Chung: Foreign Connections, Foreign 
                    Contributions, May 11, 1999.
    The committee held a hearing into the illegal activities of 
Johnny Chung in the 1996 Presidential election. Mr. Chung was 
questioned about contributions to the DNC and various 
delegations of foreign officials and businessmen that he 
brought to the White House. Mr. Chung testified about how the 
Democratic National Committee [DNC] began to solicit him for 
many different fundraisers in exchange for access to officials, 
including President Clinton. Mr. Chung confirmed reports that 
the Chinese Government was funneling contributions into United 
States elections. At a meeting in August 1996, General Ji 
Shengde, chief of Chinese Military Intelligence, gave Mr. Chung 
$300,000 to funnel into the Democratic party. In total, Mr. 
Chung contributed over $366,000 to the DNC. Mr. Chung also 
advised the committee that he witnessed Charles Parrish, a 
consular official at the United States Embassy in Beijing, take 
a bag full of cash and passports so visas could be issued to 
Chinese nationals visiting the United States.
            b. White House Insider Mark Middleton: His Ties to John 
                    Huang, Charlie Trie, and Other Campaign Finance 
                    Figures, August 5, 1999.
    At this hearing, the committee called Mark Middleton to 
testify about his knowledge of alleged campaign financing 
violations during the 1992 and 1994 Federal election cycles. 
Mr. Middleton had relationships with many of the individuals 
who have since pled guilty to numerous campaign financing 
schemes to funnel money to the Clinton/Gore election and 
reelection efforts, as well as the Democratic National 
Committee. Documents and testimony showed that he had 
information related to John Huang, James Riady, Charlie Trie, 
and other individuals related to the committee's investigation. 
In addition, several allegations of illegal fundraising had 
been made against Mr. Middleton himself. Mr. Middleton was 
subpoenaed to testify. However, when he appeared before the 
committee he refused to testify, invoking his fifth amendment 
privilege against self-incrimination.
            c. The Role of John Huang and the Riady Family in Political 
                    Fundraising, December 15-17, 1999.
    The committee received testimony from John Huang, a central 
figure in the committee's campaign finance investigation, about 
his activities in the 1992 and 1996 Presidential elections. 
Both Mr. Huang and James Riady, Huang's former boss at the 
Lippo Group, are longtime associates of President Clinton and 
Vice President Gore. Mr. Huang testified that he and Mr. Riady 
conspired to funnel $1 million in illegal contributions to 
President Clinton's 1992 Presidential campaign. After President 
Clinton's election, Mr. Huang took a job at the Department of 
Commerce in July 1994, where Mr. Huang continued to solicit 
political contributions. In November 1995, after the 
President's personal intervention, Mr. Huang was hired as a 
fundraiser at the DNC. Mr. Huang's main outside contact and 
fundraising partner was Yah Lin ``Charlie'' Trie, another 
central figure in the committee's investigation. Mr. Huang 
embarked on a series of fundraisers that took in mostly illegal 
foreign and conduit contributions. The DNC returned almost $3 
million raised by Mr. Huang. Mr. Huang also had unfettered 
access to President Clinton and the White House which he 
visited over 80 times.
            d. The State Department's Handling of Allegations of Visa 
                    Fraud and Other Irregularities at the United States 
                    Embassy in Beijing, July 29, 1999.
    The committee conducted an investigation of allegations 
that the chief of the Non-Immigrant Visa Section in the United 
States Embassy in Beijing, Charles M. Parish, was both 
improperly issuing visas to Chinese citizens, and accepting 
gratuities from Chinese citizens. The first witness at this 
hearing was Mr. Parish. Mr. Parish invoked his fifth amendment 
rights rather than testify regarding his activities in Beijing. 
The second panel of witnesses were State Department personnel 
who investigated Mr. Parish: Peter Bergin, Acting Assistant 
Secretary and Director of Diplomatic Security; Jacquelyn L. 
Williams-Bridgers, Inspector General for the Department of 
State; Bonnie R. Cohen, Under Secretary for Management; Edward 
W. Gnehm, Director General of the Foreign Service; Mary Ryan, 
Assistant Secretary for Consular Affairs; and Don Schurman, 
former Regional Security Officer. The second panel was 
questioned about the adequacy of the investigation of Mr. 
Parish, including the failure to secure important evidence 
regarding Mr. Parish, the failure to obtain important evidence 
about Mr. Parish, and the failure to discipline Mr. Parish for 
his improper conduct.
            e. National Problems, Local Solutions: Federalism at Work.
    The committee conducted an investigation focusing on 
innovative and successful reforms in government programs at the 
State and local levels. In so doing, the committee sought to 
determine which existing Federal regulations and programs best 
assisted State and local governments, and which hindered 
progress. The committee also explored new ways that the Federal 
Government could best assist State and local governments. The 
committee's investigation focused on four major issues: 
criminal justice; taxes; education; and, welfare reform.
    The committee was in contact with numerous States about the 
progress they had made in the areas outlined above. After 
reviewing many of the State and local programs in these areas, 
the committee held three hearings to highlight the reforms at 
the State and local levels and to demonstrate that many of the 
solutions to the problems facing America originate at the State 
and local level, rather than with the Federal Government.
            Part I, Fighting Crime in the Trenches, March 3, 1999.
    At this hearing, the committee heard testimony from New 
York City Mayor Rudolph W. Giuliani, who has had unparalleled 
success in lowering the crime rate in America's largest city. 
Mayor Giuliani explained his approach to fighting both violent 
and non-violent crime in an effort to stem general disrespect 
for the law. The committee also heard from State Attorney Harry 
Shorstein of Jacksonville, FL. Mr. Shorstein explained his 
innovative policies and successes in the area of juvenile 
justice that have also gained him broad bipartisan support. 
According to Mr. Shorstein, the keys to tackling juvenile crime 
include early intervention, truancy prevention, incarceration 
of habitual violent juvenile offenders as adults, and 
rehabilitation and aftercare. Philadelphia Police Commissioner 
John F. Timoney also testified.
            Part II, Tax Reform in the States, April 14 and 15, 1999.
    At this hearing, the committee heard testimony from 
Governors Christine Whitman of New Jersey, Mike Huckabee of 
Arkansas, Jim Gilmore of Virginia, and George Pataki of New 
York. Each Governor spoke about the tax plans they had 
implemented in their respective States. Governor Whitman 
discussed the 17 tax cuts she has enacted since taking office 
in 1994. The tax cuts resulted in $6 billion returned to the 
New Jersey economy and a surplus of $700 million. Governor 
Huckabee explained his sweeping overhaul of Arkansas' income 
tax system, including the $80 million tax cut package signed 
into law in 1997. Governor Gilmore spoke about his popular 
phase out of the ``car tax'' in Virginia, as well as his 
program of tax credits to promote business growth in Virginia. 
Governor Pataki discussed his 25 percent income tax cut in New 
York. The hearing was held on tax day to call attention to the 
fact that the average family today pays more in taxes than it 
spends on food, clothing, shelter, and transportation combined. 
All of the Governors testified that by cutting taxes, their 
overall economy grew.
            Part III, Welfare Reform is Working: A Report on State and 
                    Local Initiatives, April 22, 1999.
    In 1996, the Federal Government passed the Personal 
Responsibility and Work Opportunity Act, or welfare reform. 
Through the act, the Federal Government ultimately gave all 
States greater flexibility to achieve reforms that would work 
for their citizens. Wisconsin Governor Tommy Thompson testified 
on his successful Wisconsin Works program. To assist in the 
transition from welfare to work, Wisconsin instituted programs 
to assist recipients in their struggle for independence, such 
as programs for childcare, health care, job search assistance, 
and transportation. Virginia Secretary of Health and Human 
Services Claude A. Allen spoke about Virginia's welfare reform 
efforts. Since 1995, Virginia's welfare rolls have dropped 47 
percent. The chairman of Florida's Board of Directors for its 
welfare program, Michael Poole, testified about Florida's 
unique, independent oversight body for the welfare program, 
composed of private sector interests and State agency 
directors. Representing the private sector was Julia Taylor, 
CEO of YW Works. YW Works is a for-profit company that the 
State of Wisconsin contracted with to administer its welfare 
program in one region of Milwaukee. Jason Turner, the 
commissioner of New York City's Department of Social Services 
and Human Resources Administration, testified about the efforts 
of the Giuliani administration. New York City's welfare rolls 
had dropped by 400,000 since Mayor Giuliani instituted his 
reforms. The hearing demonstrated that with fewer Federal 
Government regulations, the States were able to more 
effectively serve their citizens.
            f. HUD Losing $1 Million Per Day--Promised ``Reforms'' Slow 
                    in Coming, March 23, 1999.
    In a previous hearing, the committee heard testimony about 
Federal programs that are wasting billions of taxpayer dollars 
a year. As a result of that hearing, Chairman Burton and 
Chairman Young of the Appropriations Committee cosigned a 
letter to every major Federal agency. The letter stated that 
they wanted to see serious efforts by these agencies to resolve 
these kinds of problems, starting with specific, measurable 
performance goals, and their annual Government Performance and 
Results Act plans.
    On March 23, 1999, the committee held a hearing to focus on 
the Department of Housing and Urban Development [HUD], which at 
the time of the hearing had not yet submitted its annual 
performance report, as required by the Results Act. The hearing 
entitled, ``HUD Losing $1 Million Per Day--Promised ``Reforms'' 
Slow in Coming'' was chaired by Dan Burton. The hearing 
specifically examined HUD's Federal Housing Administration 
[FHA] program.
    FHA is the home mortgage insurer for many people who 
wouldn't ordinarily qualify for a home loan in the private 
marketplace. In his opening statement, Chairman Burton 
expressed his concern about the large number of defaulted FHA 
homes. These properties go back to HUD, and as a result, HUD 
sits on a huge backlog of repossessed properties that become 
poorly managed, run down, and vandalized.
    The committee first heard from Nancy Cooper, District 
Inspector General, Southeast Caribbean District, U.S. 
Department of Housing and Urban Development. She discussed the 
ongoing audit of HUD's single family property management and 
disposition program. The audit was initiated by GAO findings 
from March 1998, which revealed poor property conditions and 
management efficiencies. The IG investigation showed that 
conditions overall had not improved since the GAO study.
    First, they found that there was an inability to turn over 
properties acquired by HUD. Second, sales to homeowners went 
down, while sales to investors went up. Third, HUD's ability to 
maximize returns to the mortgage insurance fund also declined. 
Finally, preliminary data indicated that HUD had not been 
effective in dealing with non-performing contractors.
    The committee also heard from William Apgar, Assistant 
Secretary for Housing, Federal Housing Commissioner, U.S. 
Department of Housing and Urban Development. He talked about a 
different type of HUD. He spoke about the success of FHA. For 
example, by insuring low down payment loans for people with 
less than perfect credit history, FHA has helped 27 million 
American families to become homeowners. He also spoke highly of 
the HUD's new management and marketing approach.
    Gale Cincotta, executive director, National Training and 
Information Center, Chicago; Grace Jackson, volunteer, Roseland 
Neighborhood Housing Services, Chicago; and Carl Edwards, 
president, Organization for a New Eastside, Indianapolis, all 
discussed their own personal experiences with FHA.
    Ms. Cincotta expressed her concern about the increased rate 
of FHA foreclosures, leaving abandoned buildings throughout our 
Nation's neighborhoods. She blamed the FHA foreclosure increase 
on two things. First, the changing of the FHA appraisal process 
to what is called lender select, meaning lenders are able to 
chose their own appraisers. This usually results in houses 
getting over appraised. Second, HUD's mortgage assistance 
program was replaced with the Loss Mitigation Program that 
makes it optional for mortgage bankers to do workouts with 
families that are facing foreclosures. In her written 
testimony, Ms. Cincotta gave several solutions that would 
prevent FHA foreclosures and reduce the number of abandoned 
    Mr. Edwards and Ms. Jackson also talked about the alarming 
rise in FHA foreclosures, and the negative impact this has had 
on both of their communities.
    Mr. Davis, director, Northeast Ohio Coalition for the 
Homeless and Mr. Czerwinski, Associate Director, Resources, 
Community and Economic Development Division, U.S. General 
Accounting Office, addressed the issue of homelessness. Mr. 
Davis focused on the status of the care system for homeless 
persons in Cleveland, OH, and the surrounding Cuyahoga County. 
In particular, he talked about a program operated by the 
Salvation Army that had problems working with HUD. He also 
discussed some modest changes that need to be made that could 
improve the HUD homeless assistance grant.
    Mr. Czerwinski summarized a GAO study that examined how 
well the Federal Government has been at helping State, local, 
and private entities assist homeless people. He urged the need 
for better coordination between the 50 different programs so 
that they could be more effective at providing services.
    The chairman voiced concern regarding the many problems at 
HUD, and expressed an interest in working with Mr. Cuomo to 
resolve these issues as quickly as possible.
            g. Fraud and Waste in Federal Government Programs, February 
                    10, 1999.
    Under House Rules, the Committee on Government Reform has 
the authority to look at the overall economy, efficiency, and 
management of all government operations. Therefore, it was very 
appropriate that the focus of the first full committee hearing 
investigate the waste, fraud, and abuse within Federal 
Government programs.
    The hearing reviewed reports recently delivered to the 
committee, specifically the Inspectors General's reports on the 
top 10 problems in their agency, GAO's ``High Risk List'' 
update, and GAO's ``Major Management Challenges and Program 
    The hearing was entitled, ``Fraud and Waste in Federal 
Government Programs.'' It was held on February 10, 1999, and 
was chaired by Dan Burton. In his opening statement Chairman 
Burton stressed that while it is important to publicize the 
dimensions of these problems, we must also begin to develop and 
enforce solutions, like the Government Performance and Results 
    Chairman Burton also appealed to appropriators to make 
better use of the Results Act, as well as the high-risk 
information available from the General Accounting Office. 
Appropriators have the authority to make agencies more 
accountable by cutting an agency's funding if it continues to 
waste taxpayers' dollars. Appropriators need to become part of 
the solution.
    The first panel had Inspector Generals from three problem-
plagued agencies, including Mr. Roger C. Viadero, Department of 
Agriculture; Susan Gaffney, Department of Housing and Urban 
Development; and June Gibbs Brown, Department of Health and 
Human Services.
    Mr. Viadero specifically discussed problems in the area of 
food safety and the Food Stamp Program at the Department of 
Agriculture. It was estimated that about $1 billion a year is 
lost in food stamp overpayments. Part of the problem is that 
prisoners and deceased individuals are included as members of 
the households receiving benefits.
    Ms. Gaffney talked about the overwhelming problems HUD is 
having with reinvention and reform, which is primarily due to 
internal control weaknesses. For example, the IG estimated that 
management delays in disposing of more than 41,000 properties 
in its inventory is costing HUD over $1 million per day.
    Ms. Brown discussed how HHS programs that are critical to 
the well being of all Americans are also vulnerable to waste, 
fraud, and abuse. The IG estimated $20.3 billion in net 
overpayments in fee-for-service payments in fiscal year 1997. 
These improper payments could range from inadvertent mistakes 
to outright fraud and abuse. HCFA's corrective action plan is 
to reduce the error rate to 10 percent by year 2002.
    The second panel included Mr. David Walker, Comptroller 
General at the General Accounting Office. His remarks 
highlighted the three major challenges facing the government. 
First, he stressed the importance of addressing high-risk 
areas. Since 1990, GAO has periodically reported to Congress on 
key areas in the Federal Government that are particularly 
vulnerable to waste, fraud, and abuse. The list has grown from 
14 areas in 1990 to 26 areas in 1999. Over that time period, 18 
problems were added, but only 6 have been addressed 
sufficiently to warrant removal.
    Second, he spoke about the urgency of moving toward full 
implementation of a management framework. Congress already has 
established this framework through the Results Act, the Chief 
Financial Officers [CFO] Act of 1990, and related financial 
management legislation, and information technology reforms. 
These laws should be used by agencies to instill a results-
oriented government, improve financial management, and revamp 
information technology practices.
    Unfortunately many agencies continue to struggle to 
implement basic tenets of performance-based management. For 
example, the government spends millions of dollars each year on 
information technology meanwhile the return on investment has 
been disappointing in some cases.
    Third, he said that there needed to be greater attention 
focused on human capital issues in order to achieve the goals 
of a performance-based government. Proper alignment of an 
agency's employees with program goals and strategies is 
essential to achieving program results.
    Chairman Burton expressed a firm commitment to work with 
GAO, department heads, and the Inspectors General to eliminate 
waste and enhance the effectiveness of important government 
            h. The Role of Complementary and Alternative Medicine in 
                    our Health Care System.
    a. Summary.--Based on concerns raised during the 105th 
Congress regarding Federal agencies' prejudice against 
complementary and alternative therapies, the committee 
initiated an inquiry into the role of complementary and 
alternative medicine in the U.S. health care system. While 
complementary and alternative medicine [CAM] usage continues to 
increase, research, regulation, and access have not met the 
needs of many Americans. A 1997 survey in the Journal of the 
American Medical Association showed that 42.1 percent of 
Americans used at least 1 of 16 alternative therapies during 
the previous year. This was up from 33.8 percent in 1990.\12\ 
The survey also indicated that more visits were made to 
alternative practitioners than to U.S. primary care physicians. 
The World Health Organization estimates that between 65 and 80 
percent of the world's population relies on traditional 
medicine as their primary form of health care.\13\ Four basic 
issues arose:
    \12\ Eisenberg D.M., Davis R.B., Ettner S.L., et al, Trends in 
Alternative Medicine Use in the United States 1990-1997. JAMA, Vol. 
280: pp. 1569-1575, Nov. 11, 1998.
    \13\ Complementary and Alternative Medicine at the NIH, Vol. III, 
No. 1, p. 3.
         Even with the establishment of the Office of 
        Alternative Medicine \14\ at the National Institutes of 
        Health in 1992, research to evaluate the effectiveness 
        of complementary and alternative therapies continues to 
        be inadequate.
    \14\ Now the National Center for Complementary and Alternative 
         Reliable and useful information regarding 
        complementary and alternative therapies provided from 
        Government resources was woefully inadequate.
         Conventional health care providers who 
        integrate CAM, CAM practitioners, and companies that 
        provide products continue to be challenged with 
        agencies who create barriers to the integration of CAM 
        into our health care system.
         Medical freedom in the United States is very 
        limited. Individuals, especially those with life 
        threatening illnesses, are not fully able to access CAM 
        products and therapies in the United States.
    The U.S. medical model of the 1980's and 1990's is not 
fully addressing the needs of Americans. With the graying of 
our population and the epidemic levels of chronic diseases such 
as cardiac disease, diabetes, depression, arthritis, and 
asthma, different approaches to health care are needed. 
Oftentimes, these chronic diseases, as well as hard-to-treat 
conditions such as fibromyalgia, chronic fatigue syndrome, and 
allergies, are improved through an integrative medicine or CAM 
approach. Cancer rates remain high in the U.S. population. One 
in three Americans will get cancer and one in four will die 
from it. An integrated approach to care that respects the 
wishes of the patient while encompassing holistic approaches to 
healing including the recognition of the importance of 
nutrition, mind-body approaches, spirituality, and stress and 
pain management is needed. A recently published survey of 
patients attending one of eight outpatient clinics of the 
University of Texas MD Anderson Cancer Center, Houston, TX, 
showed that over 83 percent of adult cancer patients used some 
form of CAM.\15\
    \15\ Richardson M.A., Sanders L., Palmer J.L., Griesinger A., 
Singletary S.E., ``Complementary/Alternative Medicine Use in a 
Comprehensive Cancer Center and the Implications for Oncology,'' J of 
Clinical Oncology, Vol. 18, Issue 13 (July) 2000: 2505-2514.
    The Health Care Financing Administration estimates that 
health care costs will double by 2007, to exceed $2.13 
trillion. Of that estimate, almost $1 trillion of those dollars 
will be public funds.\16\ While the United States continues to 
outspend the rest of the world on health care (13.7 percent of 
Gross Domestic Product or $4,187 per person), a World Health 
Organization report released in June 2000 ranked the United 
States as 37th out of 191 countries in quality of health care 
    \16\ Smith S., Freeland M., Hefler S., et al, The Next Ten Years of 
Health Spending: What Does the Future Hold? Health Affairs, Vol. 17: 
pp. 128-140, 1998.
    \17\ World Health Report 2000, Health Systems: Improving 
    Between 25 and 40 percent of Americans receive some or all 
of their health care through Federal funds, including services 
provided through Medicare, Medicaid, Department of Defense 
[DOD], Veterans Administration [VA], Indian Health Services, 
and public and community health clinics.
    Ongoing at the DOD are two demonstration projects that will 
expand access for members of the military and their dependents 
to chiropractic medicine and to the Ornish Lifestyle 
Modification Program for Cardiovascular Disease. Additionally, 
some facilities offer acupuncture when medical personnel have 
received additional training and are licensed acupuncturists. 
In 1998, the VA conducted a CAM survey to determine what CAM 
therapies were being offered to our Nation's veterans. While 
numerous programs were identified, there has been no concerted 
effort as yet to expand access to CAM therapies at all VA 
facilities or to offer consistent referrals to CAM providers.
    Through the Fiscal Year 1999 Omnibus appropriations bill 
signed into law in October 1998, the National Center for 
Complementary and Alternative Medicine was created. This was 
done to elevate the Office of Alternative Medicine into a full 
Center at the National Institutes of Health.
    b. Benefits.--Complementary and Alternative Medicine [CAM] 
has the potential for reducing costs while improving the health 
and well-being of Americans. With the graying of the 
population, and the epidemic-level increases of chronic 
diseases such as cardiac disease, diabetes, arthritis, asthma, 
and depression; as well as the high percentages of cancers such 
as lung, breast, prostate, colon, and melanoma; the committee 
sought to be open-minded in its look at additional options in 
medical care, research funding levels, and patient access to 
treatments that patients and their health care providers deem 
    The Federal Government provides health care primarily 
through three Departments--the Department of Health and Human 
Services [HHS], the Department of Defense [DOD], and the 
Department of Veterans Affairs [VA]. Health care is provided to 
between 25 and 40 percent of the U.S. population through 
Federal funds.
    Cost, scientific evidence, patient preference, and the 
``first do no harm'' philosophy are important factors in 
determining inclusion of services. The health care delivery 
paradigm is shifting dramatically and part of that shift 
includes CAM. There is an increasing body of scientific 
evidence that shows the efficacy of some CAM therapies. 
Patients often mention the desire for a more natural approach, 
the desire for personal choice, and for the inclusion of a 
whole being or holistic (body, mind, spirit) philosophy in 
their health care. CAM therapies are often lower in cost than 
conventional treatments and especially in chronic illnesses 
where conventional therapies often do not meet with great 
success. In these cases, CAM approaches may be more effective 
or can be used in conjunction with conventional treatments to 
enhance and improve outcomes.
    Botanical products often have few adverse effects when used 
wisely, whereas many pharmaceutical products, even when used as 
directed, have high rates of adverse effects. Over 100,000 
individuals in the United States die each year from adverse 
reactions from prescription medications, while only about 16 
each year die from adverse reactions from dietary supplements.
    In 1994 Congress passed the Dietary Supplement Health and 
Education Act. This legislation created a new framework for the 
regulation of dietary supplements. It signals a major departure 
from the well-established ``food'' versus ``drug'' dichotomy 
that guided the Food and Drug Administration's [FDA's] policy 
with respect to products for over 50 years. The legislation, 
the outgrowth of a phenomenal grassroots effort, is premised on 
the role of nutrition and the benefits of dietary supplements 
to health promotion.
    As reflected in numerous surveys, Americans are 
increasingly using complementary and alternative medicine as a 
means of improving their health. A large part of this trend has 
been utilizing nutritional approaches including dietary 
supplements to improve health and prevent illness. While many 
universities and Government agencies have long researched the 
benefits of foods, herbs, and vitamins for health, most medical 
schools are not teaching doctors adequately in this area.
    It has been noted numerous times in congressional reports 
that there is persistent evidence of FDA bias against 
supplements. Senate Report 103-410 states, ``Despite the fact 
that the scientific literature increasingly reveals the 
potential health benefits of dietary supplements, the FDA has 
pursued a regulatory agenda which discourages their use by 
citizens seeking to improve their health through dietary 
    Dietary Supplements--vitamins, minerals, and botanical 
products--have been shown through traditional use and through 
research to provide health benefits. Examples of the health 
benefits include:
         Vitamin C is necessary for wound healing. It 
        is needed for many functions in the body, including 
        helping the body use carbohydrates, fats, and protein. 
        Vitamin C also strengthens blood vessel walls. Dr. 
        Linus Pauling made a connection between the use of high 
        doses of vitamin C daily and the prevention of cancer.
         Vitamin E is important for the proper function 
        of nerves and muscles. A 1998 analysis from a large 
        prevention trial conducted by the National Cancer 
        Institute [NCI] and the National Public Health 
        Institute of Finland, shows that long-term use of a 
        moderate-dose vitamin E supplement substantially 
        reduced prostate cancer incidence and deaths in male 
        smokers. A study published in 1997 in the New England 
        Journal of Medicine, from research conducted at 23 
        Alzheimer's Disease Cooperative Study [ADCS] sites 
        across the United States showed that vitamin E may slow 
        important functional signs and symptoms of Alzheimer's 
        disease by about 7 months.
         Folic acid is necessary for strong blood. 
        Folic acid taken by women before they become pregnant 
        and during early pregnancy may reduce the chances of 
        certain birth defects (neural tube defects). Folic Acid 
        may also help prevent heart disease by lowering 
        homocysteine levels.
         Coenzyme Q10 is a powerful antioxidant both on 
        its own and in combination with vitamin E and is vital 
        in powering the body's energy production [ATP] cycle. 
        Coenzyme Q10 has the ability to protect the heart 
        during periods of ischemia (lack of oxygen). Several 
        clinical trials have recently shown that when patients 
        with heart failure are treated with Coenzyme Q10 for 
        months to years, serious complications such as 
        pulmonary edema and ventricular arrhythmia are reduced 
        in frequency. The number of hospitalizations is reduced 
        and survival is increased.
         Hypericum Perforatum, also known as St. John's 
        Wort has a 2,400-year history of safe and effective 
        usage in folk, herbal, and ancient medicine. A series 
        of recent double-blind, placebo-controlled studies 
        indicate that a specific extract of Hypericum 
        perforatum was as effective as prescription 
        antidepressants but had far fewer side effects and cost 
        considerably less. In Germany, more than 50 percent of 
        depression, anxiety, and sleep disorders are treated 
        with hypericum.Many CAM therapies have been safely used 
        for thousands of years are backed by a substantial body 
        of scientific evidence. Acupuncture for example, has 
        been used in traditional Chinese medicine for at least 
        3,000 years. However, until 1996, the Food and Drug 
        Administration regulated acupuncture needles as Class 
        III ``investigational devices'' rather than as Class II 
        for ``general acupuncture use,'' which made it 
        difficult for licensed or certified practitioners to 
        obtain disposable acupuncture needles in the United 
        States unless you were conducting research.\18\ 
        According to an NIH consensus panel of scientists, 
        researchers, and practitioners who convened in November 
        1997, clinical studies have shown that acupuncture is 
        an effective treatment for nausea caused by surgical 
        anesthesia and cancer chemotherapy as well as for 
        dental pain experienced after surgery. The panel also 
        found that acupuncture is useful by itself or combined 
        with conventional therapies to treat addiction, 
        headaches, menstrual cramps, tennis elbow, 
        fibromyalgia, myofascial pain, osteoarthritis, lower 
        back pain, carpal tunnel syndrome, and asthma; and to 
        assist in stroke rehabilitation.\19\
    \18\ Acupuncture Needle Status Change, FDA Communications, http://
    \19\ National Institutes of Health Consensus Panel. Acupuncture. 
National Institutes of Health Consensus Development Statement 
(Bethesda, MD, Nov. 3-5, 1997).
    Numerous complementary therapies are increasingly used in 
hospitals and clinics with good benefit. Those therapies 
include music therapy, aromatherapy, mind-body techniques, 
massage, qi gong, sand therapy, art therapy, and touch therapy. 
Additionally, the role of nutrition, including the use of 
dietary supplements--vitamins, minerals, and botanicals--is 
increasingly recognized by Americans as a valuable avenue to 
explore to improve and maintain health status. Diet and 
lifestyle play a major role in disease prevention.
    Dr. Dean Ornish and his research team have shown through 
rigorous research that heart disease can be reversed and that 
bypass and angioplasty surgery can be avoided at an immediate 
cost savings of $30,000 per patient.
    c. Hearings.--
    1. Complementary and Alternative Medicine in Government-
Funded Health Programs, February 24, 1999.--The purpose of the 
hearing was to explore the following questions:
    a. Have Federal agencies that deliver or fund health care 
begun integrating CAM therapies?
    b. Are research results translating into access to 
alternative treatments by the average American?
    c. Are alternative practitioners being included in Federal 
    d. What policies are currently in place or are proposed 
regarding integration?
    e. What, if any, impediments are there to further 
    f. How are Federal agencies combining patient access with 
the collection of outcomes research data on cost, 
effectiveness, and patient preference?
    The Department of Health and Human Services [HHS] is the 
Federal Government's principal agency for protecting the health 
of all Americans and providing essential human services, 
especially for those who are least able to help themselves. HHS 
is also the largest grantmaking agency in the Federal 
Government, providing approximately 60,000 grants per year. 
HHS' Medicare program is the Nation's largest health insurer, 
handling more than 900 million claims per year. HHS works 
closely with State and local governments, and many HHS-funded 
services are provided at the local level by State or county 
agencies, or through private sector grantees. In addition to 
the services they deliver, the HHS enable the collection of 
national health and other data. The HHS fiscal year 1999 budget 
was $387 billion.\20\
    \20\ HHS website--What We Do,
    Through the National Institutes of Health's Office of 
Alternative Medicine, recently elevated through legislation 
\21\ to the National Center of Complementary and Alternative 
Medicine, the majority of Government-funded research in 
complementary and alternative medicine is coordinated and 
funded. Good quality research has been and is being conducted 
in CAM and results of those are published regularly in peer 
reviewed publications. There are still gaps in the knowledge 
base and much research work still to be done. Through the 
National Institutes of Health's Consensus Development and 
Technology Assessment Programs--the premier health technology 
assessment and transfer program in American medicine--several 
complementary and alternative therapies have been recommended 
for integration into mainstream medicine. In each instance the 
panel recommended coverage of the CAM therapies in order to 
provide access.
    \21\ Fiscal Year 1999 Omnibus Spending, Public Law 105-277.
    Organizations and individuals within HHS have approached 
CAM with varying levels of enthusiasm and trepidation. For 
example, the NIH Warren Grant Magnuson Clinical Center has long 
been progressive in extending the availability of CAM to its 
patients. Since the early 1990's the Clinical Center has had 
Ming Tian, M.D. on call to provide acupuncture treatments for 
pain relief to those patients in the Clinical Center whose 
pharmacological pain interventions were not adequate. 
Additionally, patients and family members have access to music 
therapy chairs and mats for stress and pain relief through the 
Rehabilitation Department. Classes in Qi Gong, meditation, and 
Tai Chi have frequently been available in the Clinical Center. 
The Indian Health Service in its South Central Foundation's 
\22\ program has implemented a traditional healing component of 
its primary care program. In the Navajo area programs, each of 
the eight units has incorporated varying levels of Navajo 
traditional healing/medicine including sweat lodges, 
traditional healing services and rooms, and traditional 
medicine practitioners. The Bureau of Primary Health Care held 
a conference in 1997 to initiate a discussion in making 
alternative medicine available in public health clinics, but as 
yet has no policy in place to do so.
    \22\ The South Central Foundation Traditional Healing Program 
serves as a resource to staff and patients for referral to traditional 
healers and practitioners in South Central Alaska.
    However, for the most part, HHS and other Federal agencies 
have been slow to integrate CAM into health programs. Medicare 
still does not reimburse for acupuncture, even though the NIH's 
consensus panel found it a scientifically valid treatment for 
chemotherapy nausea and numerous other disorders. Nor has there 
been integration of the mind-body techniques recommended by the 
NIH Technology Assessment conference on insomnia and pain. 
Medicare offers only limited access to chiropractic treatment. 
Even in States with certification and licensure for various 
alternative practices, there is limited access in Government 
programs to Naturopathic doctors, licensed massage therapists, 
licensed and M.D. acupuncturists, certified nutritionists, and 
    The investigation in the 105th Congress indicated that 
there exists within Federal agencies an institutional bias 
against CAM or novel treatments that prejudices those in 
decisionmaking positions from establishing demonstration 
projects or other opportunities to provide access? Testimony 
was received from Douglas Kamerow, M.D., Director, Center for 
Health Care Technology, Agency for Health Care Policy Research, 
on behalf of the Department of Health and Human Services.
    The Department of Veterans' Affairs [VA] provides benefits 
and services to the country's veterans--a population of over 25 
million--as well as approximately 44 million family members. 
The fiscal year 2000 budget submission provides $18.1 billion 
(with provisions for $749 million in medical collections) to 
provide medical care to eligible veterans. The estimated number 
of eligible veterans that will receive care in 2000 is 3.6 
million.\23\ Given the increased demand by patients to have 
access to alternative therapies, in April 1998 the VA Under 
Secretary for Health, Kenneth W. Kizer, M.D., M.P.H., requested 
that the Office of Primary and Ambulatory Care assess what, if 
any, CAM therapies should be offered by the VA.\24\ The report 
which was due out in December 1998, had not been published 
prior to the February hearing.
    \23\ Department of Veterans' Affairs Fiscal Year 2000 Budget 
Submission, Summary, vol. 5; pp. 3-8.
    In 1998, the VAnguard Magazine, a VA employee's magazine, 
featured a few examples of alternative medicine practices 
within the VA.\25\ These included:
    \25\, Vanguard Magazine, 
Washington, DC.
          1. The Honolulu VA Medical and Regional Office Center 
        sponsored an interdisciplinary orientation to healing 
        from Native Hawaiian, Native American and Asian 
        perspectives, focusing on tri-cultural healing 
        alternatives. Included were workshops on herbal 
        medicine, Hawaiian conflict resolution, tai-chi, 
        acupuncture, Native American philosophy and more.
          2. The Phoenix VAMC has held day-long seminars for 
        medical staff members on alternative medicine and has 
        established a sharing agreement with local Indian 
        tribes to contract with them to provide tribal medicine 
        to Indian patients at the facility.
          3. VA offers a number of creative arts therapies 
        including dance, music and art therapy. Many VA 
        facilities also offer programs in garden therapy, pet 
        therapy, wood-carving therapy, humor therapy, yoga, tai 
        chi and meditation.
          4. VA's Chaplain Service is currently conducting a 
        multi-site study on the effects of spiritual care on 
        homeless veterans residing in VA domiciliaries in 
        Dallas, TX; Dublin, GA; Mountain Home, TN; Portland, 
        OR; St. Cloud, MN; Los Angeles, CA; and Anchorage, AK.
          5. Eye Movement Desensitization and Reprocessing 
        [EMDR], is used by some VA psychologists in treating 
        veterans with post-traumatic stress disorder.
          6. A study by doctors at the Palo Alto, CA, VA 
        Medical Center has shown that anodyne therapy hypnosis 
        combined with guided imagery helps patients relieve 
        pain, quicken recovery, and replace feelings of anxiety 
        with those of empowerment.
          7. Dr. Emilio Felipe Romeno, a psychiatrist at the 
        San Antonio, TX, VA Medical Center, works with 
        individuals interpreting dreams. He finds that about 60 
        percent of dreams have some connection to daily 
        activities and can be used to make decisions.
          8. VA physical therapists offer a number of manual 
        techniques such as massage therapy, acupressure, 
        myofascial release, cranial-sacral therapy and 
        Feldenkrais, among others.
          9. Of VA's 7,984 full-time physicians, 34 are 
        osteopathic physicians, most of whom completed 
        additional training and are specialists in surgery, 
        medicine, anesthesia or other areas.
          10. Acupuncture, as a method of pain control, may be 
        used by VA anesthesiologists who are trained in its 
        use. Privileging the anesthesiologist, or other VA 
        health practitioner, for acupuncture is within the 
        purview of individual VA medical centers.
          11. A researcher at the Boston VA Medical Center is 
        working with laser light on acupuncture sites to treat 
        carpal tunnel syndrome, stroke, accident victims, and 
        other neurologically-impaired patients.
    The article stated that within the VA, alternative medical 
practices may be used for treatment if they meet certain 
criteria. The alternative practice or technique must do no 
harm, be accepted by the patient, and reflect the interest of 
the practitioner. The practitioner also must be trained or 
certified in the technique and obtain privileges to practice 
that technique, and the practice or technique must have some 
level of acceptance as an ``alternative.'' Thomas V. Holohan, 
M.D., Chief Patient Care Services Officer, testified on behalf 
of the Veterans Health Administration.
    The Department of Defense provides health care to its 
active duty service members and active duty dependents, 
retirees and their dependents, and survivors of deceased 
members and certain former spouses through the Military Health 
Services System [MHSS] and the Civilian Health and Medical 
Program of the Uniformed Services [CHAMPUS]. TRICARE is a new 
initiative to coordinate the efforts of the service's medical 
facilities. The MHSS currently includes 102 hospitals and 489 
clinics operating worldwide with 42,000 civilian and 102,000 
active duty military personnel. The DOD requested $15.6 billion 
for health care in fiscal year 1999--$5.3 billion for military 
personnel costs and $3.5 billion for CHAMPUS and TRICARE 
Managed Support Contracts. The Department of Defense has been 
mandated by Congress to conduct two CAM demonstration projects.
         Chiropractic Health Care Demonstration 
    \26\ THE CHCDP was initiated through the National Defense 
Authorization Act for Fiscal Year 1995.
         Ornish Lifestyle Modification Program.\27\
    \27\ The Ornish Lifestyle Demonstration Program was initiated 
through the Omnibus Spending Bill of Fiscal Year 1999.
    There are an increasing number of health care providers 
within the DOD what have specialized training in complementary 
and alternative therapies. Military physicians, when assigned 
to military hospitals, develop their scopes of practice based 
on their specific training and the comfort level of the 
hospital administration with allowing CAM. Walter Reed Army 
Hospital and Andrews Air Force Base Hospital each have 
physician acupuncturists on staff. However, these physicians do 
not focus entirely on acupuncture, nor is there a policy within 
the new managed care environment to allow referrals. 
Additionally, former Office of Alternative Medicine Director, 
Wayne Jonas, M.D., and others with specialized complementary 
and alternative medicine training are on faculty at the 
Uniformed Services University of the Health Sciences. John F. 
Mazzuchi, Ph.D., Deputy Assistant Secretary of Defense for 
Health Affairs, Clinical and Program Policy, testified on 
behalf of the Department of Defense.
    Actress Jane Seymour presented testimony regarding her 
experiences in integrating natural healing approaches into her 
life. Ms. Seymour's own father was a conventional physician who 
late in life developed cancer. After his physicians did all 
they felt they could for him, Ms. Seymour took her father to an 
alternative cancer clinic in California where he received 
vitamins, converted to a Macrobiotic diet, received counseling, 
and greatly improved his overall well-being.
    Brian Berman, M.D., provided testimony on the current 
status of research and treatment in complementary and 
alternative medicine. Dr. Berman is the director of the first 
alternative medicine program in a U.S. medical school. An 
associate professor at the University of Maryland School of 
Medicine, Dr. Berman has long been an advisor to the Federal 
Government on alternative medicine. He also is the director of 
one of the NIH-funded research centers in alternative medicine. 
Dr. Berman has conducted clinical research in acupuncture, 
mind-body and relaxation techniques, and coordinates the 
complementary medicine field group of the Cochrane 
    Dean Ornish, M.D., clinical professor of medicine, 
University of California at San Francisco and Director of the 
Preventive Medicine Research Institute presented testimony 
regarding his clinical research in cardiovascular disease. Dr. 
Ornish developed a lifestyle modification program that has been 
shown through rigorous clinical trials that heart disease can 
be reversed and angioplasty and by-pass surgery can be avoided. 
This program which includes a low-fat diet, moderate exercise, 
yoga, meditation, and group therapy has been shown to be safe 
and effective including in an elderly population, as well as 
providing a tremendous cost-savings. (It is estimated that by 
avoiding by-pass or angioplasty, there is an immediate cost 
savings in excess of $20,000 per patient.) Dr. Ornish's 
research has been published in numerous peer-reviewed journals. 
Approximately 15 hospital-based centers, some at academic 
institutions, have been certified to offer the Ornish program. 
As a result of this hearing and with bi-partisan and White 
House support, the Health Care Financing Administration agreed 
to conduct a multi-site demonstration project in the Medicare 
population to determine if the program is viable as a means of 
avoiding by-pass surgery and improving cardiovascular health, 
while providing cost-savings.
    Ollie and Barbara Johnson of Columbia, SC, presented 
testimony about their personal experiences with the Ornish 
Lifestyle Modification Program. Mr. Johnson, retired both from 
the U.S. Air Force and the State of South Carolina Commission 
on Aging, was a prime candidate for a heart attack. Both his 
mother and sister died at 58 from cardiovascular disease. In 
the 5 years since they began the program, Mr. Johnson has had a 
reversal of his heart disease, and has avoided both angioplasty 
and by-pass surgery as well as drastically reducing 
prescription medication use.
    While there was some integration of CAM services within 
programs provided through HHS, DOD, and VA, there was no 
organized program in place within any agency to expand access 
to CAM therapies or practitioners. It appears to have been 
implemented at facilities where existing health care providers 
on their own initiative received additional training and gained 
licensure or certification in a CAM practice such as 
acupuncture. The full benefit, including cost-savings, and 
fewer adverse events of CAM therapies has not been realized. 
Because of long-term patient tracking capabilities, both the VA 
and DOD are optimum health systems to conduct CAM outcomes 
research studies including cost-benefit analysis.
    2. Cardiovascular Disease: Is the Government Doing More 
Harm Than Good? EDTA Chelation Therapy, March 10, 1999.
    The earlier committee investigation indicated that within 
the Federal Government there remains an institutional bias 
against some CAM therapies. There is no better example of a 
therapy that has been safely and effectively used for decades 
while a tremendous bias exists against it within the medical 
and Government establishments than EDTA Chelation Therapy. The 
off-label use of ethylene diamine tetraacetic acid [EDTA] 
Chelation Therapy consists of the intravenous injection into 
the body of a substance which, after bonding with heavy metals 
in the bloodstream, is expelled through the body's excretory 
functions. EDTA is a man-made amino acid and is used by some 
physicians to treat arteriosclerosis, claudication, and various 
other circulatory problems. It was originally licensed by the 
Food and Drug Administration for metal detoxification.
    When Congress created the Office of Alternative Medicine at 
the National Institutes of Health [NIH] it was with the express 
purpose of generating research interests in the areas of 
alternative, complementary, and unconventional medical 
practices; to evaluate and validate therapies; and to make that 
information known to the public. It has always been stated that 
the Institutes and Centers of the NIH were to cooperate with 
OAM and to further their congressional mandate. However, this 
has not always been the case. There are many alternative 
therapies that have generated great public debate through the 
years as well as having been the target of Federal agencies. In 
1998, the Committee on Government Reform heard testimony about 
the Food and Drug Administrations decade-long attack on Dr. 
Stanislaw Bryzynski's antineoplaston treatment for cancer. The 
committee also heard from physicians whose right to practice 
medicine was threatened because they chose to look at other 
options for treatment rather than the standards of chemotherapy 
and radiation. The committee also heard testimony regarding 
alternative medicine cancer research and the need for more 
focus on this area.
    It has been stated in interviews that everyone in the 
medical establishment has a bias against EDTA Chelation 
Therapy, even if they do not admit it. This bias has 
transcended across Federal agencies as well.
         The Food and Drug Administration fought (and 
        lost) legal battles in the 1970's to prevent a 
        physician from having access to EDTA Chelation.
         In 40 years, the National Heart, Lung, and 
        Blood Institute has never funded any research in EDTA 
        Chelation for cardiovascular and circulatory 
         The National Library of Medicine has refused 
        to index the Journal for the Advancement of Medicine in 
         The Federal Trade Commission has launched an 
        attack on the free flow of information from a non-
        profit professional medical association.
         The FTC additionally has been working with the 
        Federation of State Medical Boards and State Medical 
        Boards to identify physicians who offer EDTA Chelation 
        for off-label use and to remove their licenses.
    Dr. Joseph Jacobs made the following statement about 

          In 1992, I became the first director of the Office of 
        Alternative Medicine (OAM) at the National Institutes 
        of Health. The OAM was created by Congressional mandate 
        amidst an atmosphere of scientific skepticism. My staff 
        and I sought to identify therapies in each area of 
        alternative medicine that were deserving of study by 
        virtue of a therapy's possible efficacy or because of 
        the public health implications of the practice. An 
        alternative therapy that caught our attention was EDTA 
        Chelation. EDTA Chelation consists of the intravenous 
        infusion of multiple doses of the agent ethylene 
        diamianetetraacetic acid, usually together with high 
        doses of vitamins and nutritional supplements. In the 
        area of cardiovascular medicine, I came to the 
        conclusion that EDTA Chelation merited study because of 
        the possible truth of the claims made in favor of the 
        therapy and because of the exceedingly large numbers of 
        Americans who seek out and submit to this therapy.\28\
    \28\ Dr. Joseph Jacobs, Foreword to A Critical Review of EDTA 
Chelation Therapy in the Treatment of Occlusive Atherosclerotic 
Vascular Disease, ISBN-0-9668200-0-2, p. i.

    There are several theories on the mechanism of action. 
Various peer-reviewed articles support the use of EDTA 
Chelation in heart disease because of the observed effects on 
the health of the patients. A large retrospective study of 
2,870 patients in Brazil showed that 89 percent of the patients 
treated with EDTA Chelation had marked or good improvement.\29\
    \29\ Alternative Medicine: Expanding Medical Horizons, NIH-
Publication 94-066, December 1994, pp. 163-165.
    In 1978, a U.S. District Court rejected the actions of the 
FDA when they sought an injunction against a physician that 
administered Chelation. The court characterized the FDA's 
actions as ``an attempt to compel physicians to practice 
according to state-sanctioned protocols.'' Furthermore, the 
court determined that the weight of the evidence submitted to 
it supported the practice of Chelation.\30\
    \30\ A Critical Review of EDTA Chelation Therapy in the Treatment 
of Occlusive Atherosclerotic Vascular Disease, ISBN-0-9668200-0-2, p. 
    In 1981, the Office of Health Technology Assessment to the 
Health Care Financing Administration called for the safety and 
efficacy of EDTA Chelation to be established by well-designed, 
controlled clinical trials. The National Heart, Lung, and Blood 
Institute [NHLBI] was established in 1948 as the National Heart 
Institute through the National Heart Act with a mission to 
support research and training in the prevention, diagnosis, and 
treatment of cardiovascular disease. In 1962, the National 
Heart, Lung, and Blood Institute Act mandated the Institute to 
expand and coordinate its activities in an accelerated attack 
against heart, blood vessel, lung, and blood diseases. The 
current mission is to provide leadership for a national program 
in diseases of the heart, blood vessels, lung, and blood. This 
Institute plans, conducts, fosters, and supports basic 
research, clinical investigations and trials, observational 
studies, and demonstration and education projects. It 
coordinates with other Federal health programs relevant to 
activities in heart, blood vessel, lung, and blood 
    \31\ NHLBI Fiscal Year 1998 Factbook, p. 9.
    The NHLBI has never funded any research in the off-label 
use of EDTA Chelation in vascular disease. The committee 
learned that researchers from several leading U.S. medical 
schools approached the NHLBI with a desire to conduct studies 
in this area and were discouraged from doing so. Additionally, 
after extensive pre-application discussions with NHLBI 
leadership, another academic researcher submitted a grant 
proposal that was rejected by NHLBI in December 1998. In the 
review process, especially in areas that are not major research 
priorities for an Institute, getting a score on a grant is 
important, even if the score is too high for the Institute 
payline. The kiss of death to a grant proposal is to be triaged 
out with the ``Not Recommended for Further Consideration'' 
designation. This is what happened to the 1998 chelation 
proposal. The comments from the reviewers did not indicate 
anyone with any expertise in chelation having participated in 
the review.
    In the 40 years that EDTA Chelation has been used off-
label, various safety issues and toxicolgy issues have been 
addressed. According to Dr. Stephen Olmstead, conventional 
cardiologist in private practice in Washington with a clinical 
academic appointment at the University of Washington School of 
medicine, and the author of A Critical Review of EDTA Chelation 
Therapy in the Treatment of Occlusive Atherosclerotic Vascular 
Disease, ``only prospective controlled clinical trials can 
firmly establish whether EDTA chelation is effective for 
symptomatic coronary artery disease or can alter its natural 
    In a desire to address this public health need, Dr. 
Olmstead prepared a research proposal to conduct a clinical 
trial on EDTA Chelation. However, his own university refused to 
allow him to move forward with the study. He felt so strongly 
about the need for a clinical trial, that he assisted an 
associate of his from another institution in the preparation of 
a grant proposal that was submitted to NHLBI. This is the grant 
that NHLBI triaged out and did not even score. St. Mary's 
Hospital in England is currently developing two protocols in 
collaboration with a United States researcher to test Chelation 
in their facility. Additionally an Italian physician is having 
very good results with Chelation in the treatment of macular 
degeneration--a disorder for which there are few if any 
treatments. The problem with his treatment will be in tracking 
outcomes, for this Italian physician, just as all United States 
physicians, does not ordinarily conduct research. He does not 
have a nurse statistician on staff to extract research data 
from the patient files and track outcomes.
    It is estimated that maybe as many as 500,000 people 
receive off-label use of chelation in a year. While, this may 
not be the NHLBI's highest priority, it clearly warrants 
investigation by the premier biomedical research institute in 
this country. While the new National Center for Complementary 
and Alternative Medicine now has the ability to conduct 
research without clearing it through the various NIH Institutes 
and Centers, NCCAM leadership has stated that they will 
continue to utilize the expertise of these Institutes. 
Additionally, a large clinical trial which will be needed to 
address this therapy will likely cost over $30 million, which 
at present is approximately one-half of NCCAM's budget--much 
more than NCCAM could fund, but well within funding range for 
NHLBI. If the existing bias continues, it stands in the way of 
    While many individuals within the medical establishment 
state that there is no research in the use of this treatment, 
there is in fact a vast repository of research conducted around 
the world. There have been several books published outlining 
the existing body of evidence.
         In 1991 there is a retrospective study in 
        Denmark of 470 patients with vascular disease treated 
        with Chelation. Most patients reportedly improved with 
        an 80 to 91 percent response rate depending on the 
        parameter measured. Of 92 patients who had been 
        referred for vascular surgery, only 10 needed surgery 
        after EDTA therapy. Of 30 limbs, 3 were considered 
        saved from amputation. Diabetes-related limb amputation 
        is a major concern and expense within the veteran's 
         In 1992, another Danish study was published 
        that stated that in a double-blind, prospective, 
        randomized, placebo-controlled trial demonstrates that 
        EDTA Chelation had no beneficial effect on exercise 
        capacity and noninvasive parameters of lower extremity 
        perfusion. This study was conducted by a group of 
        researchers who opposed Danish Governmental funding of 
        EDTA Chelation. It was found by the Danish Committee on 
        Scientific Dishonesty that the researchers violated the 
        blind in their trial and that they did not follow the 
        ACAM protocol (the accepted protocol known to be safe). 
        This is one of the two ``scientifically valid studies'' 
        that the NHLBI references as indicating that EDTA 
        Chelation is not effective. During the hearing, Dr. 
        LenFant, NHLBI Director, stated that he was not aware 
        that this study had been deemed invalid due to 
        scientific misconduct.
    The Federation of State Medical Boards of the United States 
established an ad hoc committee to research, review, and 
evaluate questionable health care treatments, procedures, and 
promotions which may be unsafe and a risk to the public. The 
committee was charged with making recommendations for State 
medical boards' use in evaluating such questionable practices 
and use in evaluating such questionable practices and taking 
disciplinary action against such providers. In preparation for 
their August 28, 1995 initial meeting, they sent the following 
question out to all State medical boards: ``Has your state 
enacted any legislation or board policy related to the 
regulation of chelation therapy?'' The growing interaction 
between Federal agencies and the Federation's obviously biased 
approach to approaching CAM practices is of concern to the 
committee and to the public.
    In United States of America, Plaintiff, v. H. Ray Evers, 
M.D., an individual doing business as Ra-Mar Clinic defendant, 
U.S. District court, Alabama, June 27, 1978, ``. . . While 
weight of medical opinion in United States was that chelation 
therapy was of no benefit to treatment of arteriosclerosis, 
there was a school of thought among medical experts of the 
United States and some foreign countries that arteriosclerosis 
could be satisfactorily treated with chelation therapy. 
Complaint dismissed.''
    ``A physician must be free to use a drug for an indication 
not in the package insert when such usage is part of the 
practice of medicine and for the benefit of the patient.'' \32\
    \32\ Federal Food, Drug, and Cosmetic Act, Sec. Sec. 301(k), 
502(f)(1), 21 U.S.C.A., Sec. Sec. 331(k), 352(f)(1). As referenced in 
1978 U.S. District Court Case, 1978.
    In 1988, a municipal court in the State of Ohio ruled in 
favor of providing coverage for chelation as a necessary 
treatment. The court found that it was a necessary treatment 
for patient with artheriosclerosis and that chelation was a 
broadly accepted treatment and that the services were covered 
under the insurance contract.
    The National Library of Medicine [NLM], founded in 1836, is 
the world's largest medical library. The Library produces 
MEDLINE, GenBank, and other online databases that are available 
free to scientists, health professionals, and the public via 
the World Wide Web. MEDLINE is NLM's premier bibliographic 
database covering the fields of medicine, nursing, dentistry, 
veterinary medicine, and the preclinical sciences. Journal 
articles are indexed for MEDLINE, and their citations are 
searchable, using NLM's controlled vocabulary, MeSH (Medical 
Subject Headings). MEDLINE contains all citations published in 
Index Medicus, and corresponds in part to the International 
Nursing Index and the Index to Dental Literature. Citations 
include the English abstract when published with the article 
(approximately 76 percent of the current file).
    The committee has concerns that physicians and the public 
who refer to MEDLINE for access to medical information are not 
gaining access to novel treatments that have not been accepted 
in mainstream publication. It is widely known that there exists 
a publication bias, both for alternative medicine in 
conventional journals and in topics that while not alternative, 
are not of the mainstream focus. Therefore, specialty journals 
play an important role in providing information about 
treatments that do not get published in mainstream journals. 
Additionally, the bibliographic database of alternative 
medicine research at the NIH is drawn from MEDLINE. Dr. Donald 
Lindberg testified on behalf of the NLM.
    The Federal Trade Commission [FTC] enforces a variety of 
Federal antitrust and consumer protection laws. The Commission 
seeks to ensure that the Nation's markets function 
competitively, and are vigorous, efficient, and free of undue 
restrictions. The Commission also works to enhance the smooth 
operation of the marketplace by eliminating acts or practices 
that are unfair or deceptive. In general, the Commission's 
efforts are directed toward stopping actions that threaten 
consumers' opportunities to exercise informed choice. Finally, 
the Commission undertakes economic analysis to support its law 
enforcement efforts and to contribute to the policy 
deliberations of the Congress, the executive branch, other 
independent agencies, and State and local governments when 
requested. In addition to carrying out its statutory 
enforcement responsibilities, the Commission advances the 
policies underlying congressional mandates through cost-
effective non-enforcement activities, such as consumer 
    The FTC filed a complaint against the professional medical 
association, the American College for Advancement in Medicine 
[ACAM] stating that even though they are a professional 
association,\34\ the ACAM was under the purview of the FTC. The 
FTC determined that the ACAM disseminated to the public 
brochures and other written materials that constitute 
advertising under the Federal Trade Commission Act. These 
materials contain statements about chelation therapy. According 
to the complaint, ACAM distributes its brochures and other 
written materials to its members who disseminate the material 
to consumers. Additionally, ACAM disseminates its material to 
consumers through an Internet web page and to consumers who 
contacted ACAM through its toll-free telephone number.
    \34\ Founded in 1973, the American College 
for Advancement in Medicine is a non-profit medical society dedicated 
to educating physicians on the latest findings and emerging procedures 
in complementary/alternative medicine, with special emphasis on 
preventive/nutritional medicine. ACAM's goals include both improvement 
of physicians' skills, knowledge, and diagnostic procedures, and 
enhanced awareness in the public at large of alternative methods of 
medical treatment.
    FTC determined that these activities constituted commerce, 
i.e. advertising. Even though there existed a legal precedent 
that EDTA Chelation therapy had been deemed by a court or law 
to be an acceptable treatment for arteriosclerosis, the FTC 
also determined that the statements of benefit for 
cardiovascular disease where unsubstantiated. The ACAM for fear 
of financial devastation if attempting to take on the Federal 
bureaucracy, entered into a consent agreement in December with 
the FTC. A comment period of 60 days was announced with the 
press statement. That comment period has been extended until 
March 31. At the time of our hearing, over 700 statements have 
been submitted. Of those reviewed by the committee, the vast 
majority are not ``boilerplates,'' but personal, supportive 
statements by patients and physicians who wish to have access 
to chelation therapy and to information about the potential 
benefits of chelation therapy. It should be noted that in the 
publications mentioned, the ACAM clearly states: ``The reader 
is advised that varying and even conflicting views are held by 
other segments of the medical profession. . . . This 
information represents the current opinion of independent 
physician consultants to ACAM at the time of publication.''
    Apparently, the standard of evidence that the ACAM relied 
upon did not meet the standard of evidence the FTC expected. It 
has not been made clear in the consent order what the level of 
evidence would need to be. Without the NHLBI's involvement in 
research projects for cardiovascular disease, it is unlikely 
that other research projects would be considered of high enough 
caliber to be accepted by the FTC. As stated previously, the 
NHLBI has never funded research and continues to discourage 
potential grantees and turn down applicants. One researcher 
stated to the committee when interviewed that there was such a 
bias against chelation therapy in the medical community, that 
to delve into this project would be the death of anyone's 
    The ACAM has stated they felt they could not fight the 
Federal Government, that it was simply going to decimate the 
organization, when the FTC would have unlimited resources to 
wage court battles. Therefore, on December 8 they entered into 
an agreement that prohibits them from discussing the potential 
cardiovascular benefits of chelation as well as any part of the 
human circulatory system. In essence, this consent order 
restricts a nonprofit professional medical association who have 
made it their mission to provide information about alternative 
medicine to health care professionals and the public from doing 
so. Additionally, this order required the ACAM to notify the 
1,000 physician members, if they as physicians in the course of 
informing their patients about their treatment options provided 
information about the potential cardiovascular or circulatory 
benefits of chelation therapy could be prosecuted by the FTC 
    Of additional concern is the increased activity of the FTC 
in working with other Federal and State agencies to target 
physicians who utilize alternative therapies and chelation in 
their practice. In 1997, the FTC sponsored a conference in 
Dallas, TX, with the National Association of Attorneys General 
and the Federation of State Medical Boards. The conference, 
which was closed to the public and media was entitled, 
``Preventing Healthcare Fraud: Building Partnerships--A 
National Conference to Explore Practical Solutions.'' Two 
panels that specifically addressed alternative medicine were 
``Fraudulent Marketing Practices That Must Be Addressed'' and 
``Alternative/Complementary Therapies: Impact on States' 
Alternative Medicine Practice Laws on Healthcare.''
    The Federation has stated that it will step up disciplinary 
actions against M.D.s and DOs \35\ who utilize ``questionable'' 
methods in the treatment of patients and it will try to stop 
health freedom legislation from passage at the Federal and 
State levels of government. It should be noted that in 
attendance and speaking to this private meeting were several 
anti-alternative medicine advocates. These self-proclaimed 
experts have made a profession out of attacking everything 
alternative. The Federation has formed a subcommittee to look 
into health fraud issues. A report issued in April 1997 by this 
group, lists the Special Committee on Health Care Fraud. Among 
its members is at least one anti-alternative medicine advocate 
whose opinion of alternative medicine is so biased as to render 
his judgement on these topics entirely unreasonable. This 
``expert'' has stated that he believes 60 percent of 
chiropractors are quacks, that 10 percent of DOs are quacks, 
that 80 percent of health food stores sell quack remedies and 
devices, that 98 percent of homeopaths are quacks, and that 99 
percent of the health clinics practicing outside the United 
States are practicing quackery.
    \35\ Doctors of Osteopathy.
    The subcommittee continues to meet and is currently 
focusing on Chelation therapy. The FTC is working with the 
Federation on this topic. It should be noted that the 
Federation of State Medical Boards promotes itself as a 
national non-profit association with membership consisting of 
medical licensing authorities in all 50 States, the District of 
Columbia, Guam, Puerto Rico and the Virgin Islands. It's stated 
goal is to provide services to its members to help them carry 
out the responsibilities mandated by State law. The mission of 
medical boards as stated by the Federation of State Medical 
Boards is as follows: ``The primary responsibility and 
obligation of a state medical board is to protect consumers of 
health care through proper licensing and regulation of 
physicians and, in some jurisdictions, other health care 
professionals.'' \36\ Jody Bernstein testified on behalf of the 
    Testimony was also received from the following public 
    L. Terry Chappell, M.D., of Ohio, is board certified Family 
Practice, Chelation Therapy, Pain Management, and Added 
Qualification in Geriatric Medicine from the American Board of 
Family Practice. Dr. Chappel received his medical degree from 
the University of Michigan. Dr. Chappel is the immediate past 
president of the ACAM.
    Theodore Rozema, M.D., of North Carolina is board certified 
in Family Practice and Chelation Therapy. Dr. Rozema received 
his medical degree from Northwestern University Medical School. 
Dr. Rozema is the president-elect of ACAM.
    Norman Levin, M.D., of Virginia is board certified in 
Internal Medicine and Rheumatology. He received his medical 
degree from Temple University School of Medicine. Dr. Levin 
began looking into alternative therapies when he realized that 
he was not equipped in his standard medical practice to provide 
effective treatments.
    Dr. Victor Marcial-Vega of Florida is a physician board 
certified as an oncologist and medical examiner. He received 
his medical degree from the University of Puerto Rico School of 
Medicine and conducted his internship and residency in 
radiation oncology at the Johns Hopkins Hospital. Prior to 
going into private practice, Dr. Marcial-Vega was chief of Head 
and Neck Cancer Services at Washington University School of 
Medicine, and a clinical assistant professor, Department of 
Radiation Oncology, University of Miami School of Medicine.
    If shown to be a safe and effective treatment for 
cardiovascular conditions through high quality clinical 
research, EDTA would offer an additional treatment that is less 
costly and less risky than by-pass surgery. EDTA Chelation 
therapy remains one of the most controversial topics in 
alternative medicine. It is important to remove long-standing 
bias from our Government agencies to conduct research in areas 
such as this where there is a need, and to preserve the free 
flow of information in this country, including that of 
differing medical opinions.
    3. The Role of Early Detection and Complementary and 
Alternative Medicine in Women's Cancers, June 10, 1999.
    In the United States, a woman is diagnosed with a 
reproductive tract cancer every 64 minutes. One in eight women 
today will get breast cancer. In the 28 years since President 
Nixon declared the war on cancer, and after tens of billions of 
dollars in research, victory cannot yet be declared. Each week, 
1,355 women in America lose their lives to a reproductive tract 
cancer. Overall, 10,000 adults and children die each week from 
    The purpose of the hearing was to update the committee on 
the availability and effectiveness of early detection tests and 
devices, learn about the role of complementary and alternative 
medicine in the treatment of women's cancers, and explore 
opportunities to integrate the advances of biomedical research 
with complementary and alternative medicine in order to reduce 
cancer incidence and improve the health status of women with 
    The National Cancer Institutes [NCI] estimated that for 
1998 there would be 180,000 new cases of breast cancer (178,700 
of which are in women) and 80,400 new cases of cancers of the 
female genital organs (cervix, endometrium, ovary, vulva, 
vagina and other female genital organs.) It is also estimated 
that there would be 43,900 deaths from breast cancer in 1998 
(43,500 women) and 27,100 deaths from cancers of the female 
genital organs. The medical community recognizes that the 
earlier a cancer can be detected the better the chances of 
successful intervention. Surveys have shown that a growing 
number of cancer patients now include some form of 
complementary and alternative therapy in their treatment plan. 
Edward Trimble, M.D., testified on behalf of the NCI. At 
present the NCI only spends about $20 million of its $2.7 
billion budget on CAM research.
Ovarian Cancer
    There is no reliable early detection test for ovarian 
cancer. The CA125 is currently the best test available and is 
typically used only in high-risk patients and for relapse 
testing. Ultra sound can be used and laporoscopy when needed. 
Of ovarian cancers, 75 percent are not detected until late 
stage (3 and 4) and there is only a 25 percent survival rate of 
more than 5 years. However, of the 25 percent that are 
discovered in early stages, there is a 95 percent survival rate 
of more than 5 years. The symptoms of ovarian cancer are 
vague--bloating, sudden weight gain, gas pressure, lethargy. 
There is research to indicate that eating lots of meat and 
animal fats may increase your risk of ovarian cancer. There is 
also an indication that there can be familial clustering of 
cancers. That the women in families where the women who have 
ovarian cancer may be at a slightly higher risk for other 
cancers for breast and uterine cancer and colon cancer. 
Additionally, men in the family may be at higher risk for 
prostate cancer and these cancers may have an earlier onset. 
There is also epidemiologic data to indicate that the risk of 
ovarian cancer is reduced by as much as 50 percent for women 
who have used oral contraceptives for 6 premenopausal years and 
that the more children a woman has the lower risk for ovarian 
cancer is. The correlating factor is the increased time that a 
woman is not ovulating. In 1999, the American Cancer Society 
estimated that there were 25,200 new cases and 14,500 deaths. 
The current standard first line treatment is removal of the 
tumor and a plantinum type chemotherapy and taxol.
Breast Cancer
    More women get breast cancer than any other cancer except 
skin cancer. And more women die from breast cancer each year 
than any other cancer except lung cancer (which continues to be 
the leading cancer killer for men and women). Currently breast 
tumors are detected through one of three methods:
          (1) The Breast Self Exam [BSE] which every woman 
        should conduct on a monthly basis to check for lumps.
          (2) The Clinical Breast Exam [CBE] in which a 
        physician exams the breast and under arm tissue for 
        lumps and looks for unusual breast discharge.
          (3) The Mammogram which is a special x ray of the 
        breast that can often find tumors that are too small 
        for the patient or doctor to feel. Once a tumor is 
        found, a needle biopsy or similar procedure would be 
        conducted to test the tissue and determine if the mass 
        was benign or malignant.
    Unfortunately, the mammogram, as good as it is, is not a 
perfect system--many tumors go undetected sometimes. Of the 
three cancer survivors that testified, none had discovered 
their cancer through mammograms, even those who had annual 
mammograms. Thermography is a low cost and non-invasive 
procedure that may detect changes in breast tissue earlier than 
mammograms. Daniel Beilin, OMD, LAc., testified regarding the 
advances of cancer treatments involving alternative therapies 
and the latest developments of the thermography system and how 
it is being used to improve the diagnosis of breast cancer 
earlier and thus improve outcomes.
Other Gynecological Cancers
    Cervical cancer usually affects women between 40 and 55 
years of age. The Pap test is a valuable screening tool and has 
greatly reduced the deaths associated with cervical cancer. 
However, there are 16,000 cases of invasive cervical cancer 
each year in the United States and over 50,000 cases of 
preinvasive carcinoma in situ. There are over 400,000 cases of 
cervical cancer worldwide. For pre-cancerous lesions of the 
cervix, the great majority of women are cured without the need 
for hysterectomy. Cervical cancer may develop in women who have 
been infected with the human Papillomavirus [HPV], a sexually 
transmitted virus.
    Endometrial cancer of the uterus (sometimes called uterine 
cancer) is the most common type of cancer that develops in the 
pelvic area in women. About 35,000 new cases of endometrial 
cancer are diagnosed in the United States each year. The 
average woman who develops this type of cancer is in her early 
60's. Most of these cancers are carcinomas that develop in the 
glandular cells or endometrium lining on the inside of the 
uterine cavity. This is the same tissue that is shed each month 
during a normal menstrual period. A small number of endometrial 
cancers (3 percent) are sarcomas, which grow in the muscular 
and connective tissue elements of the uterus.
    The committee received testimony from the following public 
    Priscilla Mack, a breast cancer survivor and the national 
co-chair of the Susan B. Komen, National Race for the Cure 
testified about the importance of early detection. She also 
presented information on research activities sponsored by the 
Race for Cure and future research needs.
    Michio Kuchi, the world's leading authority on the 
macrobiotic diet testified about the use of this diet and other 
complementary and alternative healing methods in the treatment 
of women's cancer. Mr. Kuchi was honored during 1999 at the 
Smithsonian's National Museum of American History with an 
exhibit on the history of Macrobiotics and Alternative and 
Complementary Health Practices.
    Lee Gardener, Ph.D., a survivor of breast cancer from North 
Carolina, recently was able to return to work and begin using 
her personal experiences to help others facing cancer. Dr. 
Gardener used complementary and alternative therapies in her 
battle with cancer. Dr. Gardener stated during the course of 
her testimony concerns about preliminary research that 
indicated that for a small subset of the population, mammograms 
actually stimulated cancer growth.
    Carol Zarycki, a breast cancer survivor took an integrated 
approach also to treat her breast cancer and discussed the 
importance of doctors talking to their patients about 
supporting the immune system through diet. As a survivor, she 
has also become active in a women's cancer group in New York, 
    Linda Bedell-Logan's sister was a breast cancer victim. 
During her battle, Ms. Bedell-Logan's sister suffered with 
lymphadema. Linda, who was involved in health care researched 
her sister's treatment options and learned about manual 
lymphatic drainage. She has worked with individuals and the 
American Lymphadema Association to make this system available 
to cancer patients. Lymphadema is a serious complication for 
many cancer survivors which causes swelling, usually in an arm 
or leg, and sometimes the adjacent trunk quadrant. Anyone who 
has undergone lymph node dissection and/or radiation in the 
axillary, groin or neck region is at risk to develop 
lymphedema. If untreated, chronic lymphadema progresses to a 
fibrous, brawny texture and significantly impacts quality of 
life by: 1) acting as a constant reminder of the patient's 
cancer experience; 2) frequently causing pain or discomfort; 3) 
interfering with clothing fit; and 4) requiring lifelong 
management. Patients also express frustration that health 
professionals lack knowledge about the disorder and its 
    Susan Silver of George Washington University's Integrative 
Medicine Center testified about the development of integrative 
approaches to treating women's cancers including the program 
being developed at George Washington University. Ms. Silver 
outlined the Quality of Life Program available to cancer 
patients at the Center for Integrative medicine.

          We have asked ourselves this fundamental question: 
        ``How can we enhance the quality of life of the person-
        as-patient?'' Traditionally, on assuming the role of 
        patient, a person has willingly surrendered quality of 
        life--her sense of orientation and personal control--in 
        exchange for a cure. But we are beginning to suspect 
        that surrender may be self-defeating. We would suggest 
        that successful medical outcomes are diminished when 
        the patient lacks control, information and support. 
        Conversely, if these inputs are maximized, the patient 
        may recover more quickly and completely, and have a 
        higher quality of life, whatever the ultimate outcome.
          Most cancer patients say that from the moment of 
        their diagnosis, everything in life is changed. A life 
        that was going along routinely is suddenly out of 
        control, the entire focus on the ``what ifs'' of cancer 
        treatment and its outcome.
          The Quality of Life Program of the Center for 
        Integrative Medicine can assist the patient throughout 
        the course of her illness. At whatever stage of illness 
        the relationship with the Center is initiated, we help 
        determine and meet the patient's needs and goals in a 
        comprehensive way.
          For patients newly diagnosed and awaiting treatment 
        we offer:
          Stress reduction with a focus on personal control and 
          Immune system enhancement to help combat disease
          Relief from symptoms caused by anxiety or depression 
        such as appetite loss, nausea, or sleeplessness
          For patients undergoing aggressive curative 
          Relief from side effects of treatment such as nausea 
        or post-operative pain
          Immune system enhancement to help maximize the 
        effectiveness of treatment
          Relaxation and stress reduction to help restore the 
        mind and body between enervating treatments
          For patients in remission:
          Stress reduction during periods of watchful waiting
          Rebuilding of stamina and flexibility following 
        medical and surgical treatments
          Resumption of healthful diet and nutrition with added 
        emphasis on cancer prevention
          For patients who experience a relapse:
          All of the services and objectives of the pre-
        treatment and treatment phase programs resumed with 
        even greater intensity
          For patients whose illness is not responsive to 
        curative treatment:
          Control of pain and symptoms of the progressive 
          Mobilization of the powers of the mind to maximize 
        quality of life
          Reduction of stress to allow for end of life planning 
        and resolution.
          Overall, the Center for Integrative Medicine aims to 
        restore a sense of control and well being and offer the 
        patient the freedom to heal physically, emotionally and 
    \37\ Testimony of Susan Silver, Center for Integrative Medicine, 
George Washington University,

    During the hearing, it was learned that there are many 
cancer devices and treatments available in Europe, Canada and 
other countries that are showing tremendous promise for the 
early detection and less toxic treatment of cancer which are 
not currently available within the United States. And example 
of this is mistletoe. Several good clinical trials were 
conducted in Europe during the 1980's, but mistletoe is not 
available in the United States and the NCI had not picked it up 
as a potential new treatment for cancer. Upon being assured 
that the NCI was in close communication with its international 
colleagues and aware of promising treatments, the chairman 
asked for the NCI to prepare a list of devices, treatments, 
drugs, and alternative therapies available in Europe and Canada 
not available in the United States. At the end of 1999, the 
only thing that had been provided to the committee was a list 
of five chemotherapy agents licensed in Europe or Canada that 
were not available in the United States.
    While, the NCI created the Office of Cancer Complementary 
and Alternative Medicine to coordinate CAM activities within 
the NCI, neither the office, nor the Institute have gathered 
the data on innovative cancer therapies available outside the 
United States. One of the major complaints received by the 
committee from cancer patients, is that they were forced to 
travel outside the United States in order to have access to 
many alternative cancer approaches.
    4. Fighting Prostate Cancer: Are We Doing Enough? September 
23, 1999.
    This hearing provided an opportunity for the committee to 
review the current status of prostate cancer issues and 
illuminate issues regarding prevention, early detection, 
treatment, research, and the role of nutrition and 
complementary medicine. Prostate cancer is the most common 
cancer among men after skin cancer. In 1999 it was estimated 
that there would be 179,300 new cases of prostate cancer and 
37,000 deaths.\38\ The National Institutes of Health states in 
their report to Congress:

        Despite advances over the past decade, our treatments 
        for prostate cancer are inadequate, the side effects of 
        treatment are unacceptable, and troubling questions 
        remain about the relative benefit of early detection 
        for the disease. Every day, too many men in the United 
        States hear the life-changing words ``You have prostate 
        cancer.'' Every day, too many men are faced with the 
        agonizing decision of how to treat their prostate 
        cancer. And every day, too many men are dying too young 
        of this disease.

    Prostate cancer is the most common cancer among men after 
skin cancer and is the second leading cause of cancer death in 
men. There is a dramatically higher incidence of prostate 
cancer in African American men, with mortality rates more than 
twice as high. As with most cancers, the incidence increases 
with age. More than 75 percent of prostate cancers are 
diagnosed in men over 65. Genetic studies indicate that only 5 
to 10 percent of the cancers are from an inherited 
predisposition. There are an increasing number of studies that 
indicate that dietary fat may be a risk factor.
    The committee calculated the spending on prostate cancer 
research per each new case and found a disturbing disparity in 
research funding. In fiscal year 1999, for HIV/AIDS, the NIH 
spent on average $44,960 on research per each new case of HIV/
AIDS in the United States. In cardiovascular disease, the NIH 
spent $2,019.69 on research per new case of cardiovascular 
disease. And in prostate cancer in America, the NIH devoted 
$941.44 on research on average for each new case of prostate 
cancer in the United States.
    The signs and symptoms of prostate cancer are:
         Weak or interrupted urine flow;
         inability to urinate, or difficulty starting 
        or stopping the urine flow;
         the need to urinate frequently, especially at 
         blood in the urine;
         pain or burning on urination;
         continuing pain in lower back, pelvis, or 
        upper thighs.
Most of these symptoms are nonspecific and may be similar to 
those caused by benign conditions such as infection or prostate 
    Early detection: It is currently recommended that men over 
the age of 50 who have at least a 10-year life expectancy 
should talk with their health care professional about having a 
digital rectal exam of the prostate gland and a prostate-
specific antigen [PSA] blood test every year. The PSA blood 
test measures a protein (prostate specific antigen) made by 
prostate cells. PSA blood test results are reported as ng/ml 
which stands for nanograms per milliliter. Results under 4 ng/
ml are usually considered normal. Results over 10 ng/ml are 
high, and values between 4 and 10 are considered borderline. 
The higher the PSA level, the more likely the chance of 
prostate cancer. While PSA levels tell how likely a man is to 
have prostate cancer, the results do not provide a definite 
diagnosis. Men with a high PSA result are advised to have a 
biopsy to find out whether or not they have cancer.
    Current Treatment Options:
          Five kinds of treatment are commonly used:
                 radiation therapy
                 hormone therapy (using hormones to 
                stop cancer cells from growing)
                 biological therapy (using the body's 
                immune system to fight cancer)
    Surgery is a common treatment of cancer of the prostate. 
Radical prostatectomy is the removal of the prostate and some 
of the tissue around it. Radical prostatectomy is done only if 
the cancer has not spread outside the prostate.
    Transurethral resection is a procedure in which the cancer 
is cut from the prostate using a tool with a small wire loop on 
the end that is put into the prostate through the urethra. This 
operation is sometimes done to relieve symptoms caused by the 
tumor before other treatment or in men who cannot have a 
radical prostatectomy because of age or other illness.
    Cryosurgery is a type of surgery that kills the cancer by 
freezing it.
    Radiation therapy is the use of high-energy x rays to kill 
cancer cells and shrink tumors. Radiation may come from a 
machine outside the body (external radiation therapy) or from 
putting materials that produce radiation (radioisotopes) 
through thin plastic tubes in the area where the cancer cells 
are found (internal radiation therapy). Impotence may occur in 
men treated with radiation therapy.
    Hormone therapy is the use of hormones to stop cancer cells 
from growing. Hormone therapy for prostate cancer can take 
several forms. Male hormones (especially testosterone) can help 
prostate cancer grow. To stop the cancer from growing, female 
hormones or drugs called LHRH agonists that decrease the amount 
of male hormones made may be given. Sometimes an operation to 
remove the testicles (orchiectomy) is done to stop the 
testicles from making testosterone. This treatment is usually 
used in men with advanced prostate cancer. Growth of breast 
tissue is a common side effect of therapy with female hormones 
(estrogens). Other side effects that can occur after 
orchiectomy and other hormone therapies include hot flashes, 
impaired sexual function, and loss of desire for sex.
    Chemotherapy is the use of drugs to kill cancer cells. 
Chemotherapy may be taken by pill, or it may be put into the 
body by inserting a needle into a vein or muscle. Chemotherapy 
is called a systemic treatment because the drug enters the 
bloodstream, travels through the body, and can kill cancer 
cells outside the prostate. To date, chemotherapy has not had 
significant value in treating prostate cancer, but clinical 
trials are in progress to find more effective drugs.
    Biological therapy tries to get the body to fight cancer. 
It uses materials made by the body or made in a laboratory to 
boost, direct, or restore the body's natural defenses against 
disease. Biological treatment is sometimes called biological 
response modifier [BRM] therapy or immunotherapy.\39\
    While there are many advances in prostate cancer treatment, 
there is much more to the treatment to be considered than just 
the elimination of cancer. In addition to the side effects that 
all cancer patients may deal with--chemotherapy nausea, hair 
loss, mouth sores, fatigue, et cetera--prostate cancer patients 
have to make decisions about treatment that may leave them 
incontinent and/or impotent.
    The committee received testimony from two prostate 
survivors--Former Senator Robert Dole and Congressman Randy 
``Duke'' Cunningham (R-CA). Both shared personal stories of the 
agonies of facing cancer as well as the challenges in making 
decisions. Senator Dole also advocated expanded promotion of 
PSA testing. Congressman Cunningham compared the emotions 
generated by his cancer diagnosis to his Vietnam war 
experience, being shot at as an ace fighter pilot. He also 
shared information on the importance of dietary considerations 
such as the inclusion of tomatoes in the diet for lycopene.
    Mrs. Betty Gallo, the widow of former Congressman Dean 
Gallo--a prostate cancer victim--testified. Mrs. Gallo is now 
the Director for Advocacy and Fundraising of the Dean and Betty 
Gallo Cancer Institute of New Jersey: Only men can get prostate 
cancer, but it has a major effect on the women in their lives. 
Mrs. Gallo shared her perspectives on sharing Congressman 
Gallo's journey with cancer.
    Jeremy Geffen, M.D., executive director, Geffen Cancer 
Center and Research Institute, Vero Beach, FL, presented 
testimony on the human side of treating cancer patients, not 
only the physical issues of cancer, but the emotions and 
psychosocial issues. In addition to his oncology training, Dr. 
Geffen has studied Ayurvedic and Tibetan medicine in India, 
Nepal, and Tibet. He will outline a seven-step program he 
developed and uses in the Geffen Cancer Center. Dr. Geffen 
recently published a book entitled, The Journey Through Cancer.
    Konraid Kail, N.D., a naturopathic physician in Phoenix, 
AZ, testified. Dr. Kail is a member of the newly established 
National Advisory Council for Complementary and Alternative 
Medicine. Dr. Kail outlined natural therapies that may be used 
to treat prostate cancer and the coordination of care for 
patients who desire to include their naturopathic physician as 
part of their oncology team.
    Sophi Chen, Ph.D., associate professor, Brander Cancer 
Research Institute, New York Medical College, a chemist, 
testified about PC SPECs, a Chinese botanical compound that 
research indicates may be effective in slowing cancer cell 
    Alan Thornton, M.D., of Indiana Univeristy testified about 
proton therapy. This technique, uses protons--elementary 
particles found in the nuclei of all atoms rather than photons. 
Higher radiation doses can be delivered to the tumor by proton 
beam methods because the physical characteristics of protons 
mean that for many anatomic situations there can be a higher 
concentration of dose in the target and lesser doses to 
adjacent normal tissues.
    Richard Kaplan, M.D., testified on behalf of the National 
Cancer Institute. He presented National Institutes of Health's 
Five Year Plan for prostate cancer research.
    The minority called several witnesses. They included:
    Andrew C. vonEchenback, M.D., the executive vice president 
and chief academic officer of the Department of Urology at M.D. 
Anderson Cancer Center of Houston, TX, testified on behalf of 
the American Cancer Society.
    Dr. Ian Thompson, Col., M.D., University of Texas Health 
Science Center at San Antonio testified about ongoing research 
on prostate cancer prevention.
    5. Improving Care at the End of Life With Complementary 
Medicine, October 19, 1999.
    As the Committee investigated cancer therapies, it became 
obvious that end-of-life care in the United States needs 
improvement. Hospice care has become increasingly popular in 
the United States. Most individuals state they would prefer to 
die at home, or in a home-like setting, with their family and 
loved ones around them rather than in a hospital setting. 
Increasing discussion of euthanasia or physician-assisted 
suicide points to the severity of the problems with end-of-life 
    The graying of America will accelerate dramatically between 
2010 and 2030, as baby boomers turn 65 years old. By the year 
2030, 75 million Americans will be over 65, more than 20 
percent of the population. In addition, there are 40 million 
Americans living now with chronic illness. It is estimated that 
this figure may triple by 2050. Each month, 32,000 World War II 
veterans die, many alone and with inadequate pain management.
    While the graying of America accelerates, private 
caregiving resources within Americans' individual networks of 
relatives and close friends are rapidly falling. Social trends, 
including geographic mobility, smaller families and families in 
which both adults are working have all contributed to this 
decline. Specifically, in 1970 there were 21 healthy adults 
representing potential caregivers for every person 85 years or 
older. In 2030, there will be just six such potential 
caregivers for the aged and just four by the middle of the next 
    Informal caregiving provided by relatives and close friends 
represents the unrecognized backbone of care in America. It is 
an enormous resource that can be supported and expanded as we 
grapple with the crisis of how badly Americans now die. A 
survey conducted in 1996 by the National Alliance for 
Caregiving and AARP found that nearly one quarter of all 
households contained at least one caregiver.\40\ It is 
estimated that 25.8 million Americans spend an average of 18 
hours per week caring for frail relatives. The economic impact 
of such care is extraordinary. It amounts to $196 billion per 
year, more than formal home health care ($32 billion) and 
nursing home care ($83 billion) combined.\41\
    \40\ Family Caregiving in the U.S., Findings from a National 
Survey, National Alliance for Caregiving and the American Association 
of Retired Persons, 1997.
    \41\ Arno, P.S., Levine, C., Memmot, M.M., The economic value of 
informal caregiving. Health Affairs, 18(2): 182-188.
    Americans have come to fear the dying process. Studies have 
shown that Americans are afraid they will suffer and be in 
pain, that they will be alone at death, and that their family 
will be left destitute from exorbitant medical expenses. The 
Institute of Medicine's report, Approaching Death, details the 
severity and pervasive nature of this crisis and concludes that 
there are serious deficiencies in medical education, health 
systems financing, attitudes and culture, and extensive errors 
of omission and commission in clinical practice.\42\ Even in 
otherwise excellent medical institutions, pain and physical 
suffering among dying Americans remains inadequately treated--
or even recognized. Up to 40 percent of dying patients receive 
grossly inadequate analgesia.\43\ Being of minority ethnicity, 
older than 80, or having dementia seriously increase the risk 
of having one's pain untreated. In addition, most Americans 
still die in institutions, approximately 60 percent in 
hospitals and 20 to 25 percent in nursing homes.
    \42\ Approaching Death: Improving Care at the End of Life. 
Committee on Care at the End of Life, Institute of Medicine, ed: Field, 
M.J., Cassel, C.K., National Academy Press, Washington, DC, 1997.
    \43\ Knaus, W.A., Lynn, J., Teno, J., et. al. A controlled trial to 
improve care for seriously ill hospitalized patients, JAMA Nov. 22, 
1995, Vol. 274, No. 20. pp. 1591-1598; Cleeland, C.S., Gonin, R., 
Hatfield, A.K., et al. Pain and its treatment in outpatients with 
metastatic cancer. NEJM Vol. 330 (9) Mar. 3, 1994 pp. 592-596; 
Breitbart, W., Rosenfeld, B.D., Passik, S.D., et al. The undertreatment 
of pain in ambulatory AIDS patients, Pain 65: 243-249, 1996; Bernabei, 
R., Gambassi, G., Lapane, K., Landi, F., Gatsonis, C., Dunlop, R., 
Lipsitz, L., Steel, K., Mor, V., Management of Pain in Elderly Patients 
with Cancer, JAMA June 17, 1998, Vol. 279, No. 23, 1877-82.
    Patients' preferences for care often are not honored, even 
when those choices are clearly conveyed.\44\ Our health system 
as it exists today routinely pauperizes people and their 
families for being chronically ill and not dying quickly 
enough. In on large research study, one third of families of 
dying patients reported losing most or all of the family's 
major source of income; a third reported losing the family's 
life savings, and 20 percent said that a family member had to 
either move or delay their own medical care, education, or 
career to meet the basic needs of their dying loved one.\45\
    \44\ Danis, M., Mutran, E., Garrett, J., Stearns, S., Slifkin R., 
Hanson, L., Williams, J., Churchill, L., A Prospective Study of the 
Impact of Patient Preferences on Life-Sustaining Treatment and Hospital 
Cost, Crit Care Med 1996, 24(11), pp. 1811-1817.
    \45\ Covinsky, K., Goldman, L., Cook, E., Oye, R., Desbiens, N., 
Reding, D., Fulkerson, W., Connors, A., Lynn, J, Phillips, R., The 
Impact of Serious Illness on Patients' Families, JAMA, Dec. 21, 1994 
Vol. 272, No. 23. pp. 1839-1844.
    This hearing provided an opportunity to review the current 
status of end of life care across the United States including 
within the Veterans Administration and to discuss the role of 
improving care with complementary medicine. Death is not a 
subject most people like to discuss, but it is a necessary 
topic to cover when looking at improving health care.
    The importance of adequate and compassionate care is 
immeasurable. There are many challenges for physicians and 
health care workers today, including providing adequate pain 
management. The Veterans Administration has been looking at 
ways to improve care for dying veterans. A conference was held 
2 years ago to discuss this and to set up programs to assure 
that all veterans' facilities could provide quality and 
compassionate end of life care. We will hear about the progress 
to date and learn how complementary medicine can play a role at 
improving care.
    The Health Care Financing Administration oversees the 
Medicare program. Currently Medicare will reimburse up to 6 
months of hospice care. Hospice is a special kind of care 
designed to provide comfort and support to patients and their 
families in the final stages of a terminal illness. Hospice 
care seeks to enable patients to carry on their remaining days 
in an alert and pain-free manner, with symptoms under control, 
so that those last days may be spent with dignity, at home or 
in a home-like setting, surrounded by people who love them. 
Mrs. Kathy Buto testified on behalf of the Health Care 
Financing Administration.
    Hospice neither speeds up nor slows down the dying process. 
It does not prolong life and it does not hasten death. It 
merely provides its presence and specialized knowledge of 
medical care, psychological, emotional and spiritual support 
during the dying process in an environment that includes the 
home, the family and friends. Bereavement care is critical to 
supporting surviving family members and friends. Volunteers 
play an important role in supporting the family. Volunteers are 
there when the professional staff cannot be there.
    Hospice services are provided by a team of trained 
professionals--physicians, nurses, counselors, therapists, 
social workers, aides, and volunteers--who provide medical care 
and support services not only to the patient, but to the 
patient's family and caregivers. The patient is usually 
referred to hospice by the primary physician. Referrals can 
also be made by family members, friends, clergy, and health 
    The National Institutes of Health [NIH] has funded projects 
in palliative and end of life care. At the Warren Grant 
Magnuson Clinical Center, patients have access to acupuncture 
when pain becomes unbearable. The Clinical Center also provides 
access to vibroacoustic chairs and mats for stress relief for 
patients and family members. These specially designed chairs 
and mats, deliver music to the entire body and are very 
effective in stress reduction. In March 1998, the National 
Institute of Nursing Research issued a report on managing 
symptoms at the end of life. Dr. Patricia Grady, Director of 
the Nursing Institute, testified about the research funded by 
the National Institutes of Health on palliative medicine and 
end of life care including complementary therapies. Dr. Grady 
indicated that a combination of music therapy and guided 
imagery had proven to be effected in improving pain management.
    Mrs. Carolene Marks of San Francisco, CA, testified about 
her personal insights on caring for someone at the end of life 
and the role of complementary therapies at this time. Mrs. 
Marks served on the Alternative Medicine Program Advisory 
Committee for 4 years, is a cancer survivor and an alternative 
medicine educator and advocate. She is the wife of the late 
California State senator, Milton Marks.
    Ira Byock, M.D., also testified. Dr. Byock is the director 
of the Palliative Care Service, Missoula, MT, and is a 
recognized authority on palliative and end of life care. He is 
also the author of the book Dying Well Peace and Possibilities 
at the End of Life. Dr. Byock testified about the need to 
improve pain management and end of life care.
    Xiao-Ming Tian, M.D., L.AC., Bethesda, MD, is a physician 
trained in acupuncture and Traditional Chinese Medicine. He is 
also a Qi Gong Master. Dr. Tian testified about his personal 
experiences being called upon to treat intractable pain and 
relieve suffering for almost 10 years at National Institutes of 
Health. Among the experiences shared was that of treating 
Charles Harkin, brother of Senator Tom Harkin. Charles was 
being treated at the NIH for thyroid cancer and suffered 
unresolved hiccups as a result of medications he was given. He 
also was in a great deal of pain. Through the use of 
acupuncture and Qi Gong, Dr. Tian was able to resolve Charles' 
hiccups and help him to rest.
    Mr. Dannion Brinkley, Aiken, SC, (and Los Angeles, CA), 
chairman of the board of Compassion in Action testified. 
Compassion in Action is a non-profit organization that trains 
hospice volunteers as well as provides community and 
professional education about death and dying issues. Mr. 
Brinkley has served tirelessly for over 20 years recruiting and 
now training hospice volunteers. As the author of two 
international best sellers (Saved by the Light and At Peace in 
the Light), and a motivational speaker, Mr. Brinkley travels 
the world sharing his personal story, and helping others 
overcome their fear of death. He has been credited over the 
years with recruiting over 20,000 volunteers. Through his own 
personal experiences and research, Dannion has become an 
advocate of the importance of integrating complementary and 
alternative medicine into the U.S. health care system. 
Compassion in Action trains hospice volunteers and provides 
volunteers to Veterans Facilities in 17 cities across the 
Nation. Their National Office is housed at the West Los Angeles 
Veterans Administration campus.
    Particular focus at the hearing was on improving end of 
life care for veterans. As Congress grapples with veterans 
issues such as Agent Orange and Gulf War Syndrome, it is 
necessary that we remember those who served in the World wars 
earlier in this century. These heroes that stormed the Normandy 
beaches on D-Day and raised the flag atop Mount Suribachi on 
the island of Iwo Jima. Thirty-two thousand World War II 
veterans die each month. Is the Veterans Health Administration 
providing quality and adequate care? Dr. Thomas Holoran 
testified about VA programs and was accompanied by Dr. Judy 
Salerno. It was learned that there are pockets within the VA 
where hospice care is done very well and the goal within the VA 
is to develop processes to insure that every veteran receives 
quality end of life care.
    Some of the concerns raised at the hearing about 
inconsistency in quality hospice care for veterans follow:
         Because of the frequent rotation of interns 
        and residents, there is a serious discontinuity in 
        patient care within Veterans facilities.
         Pain management is less than optimal, and 
        there have been times when veterans have died in 
        unnecessary pain.
         The dying are kept in rooms where the noise 
        level is so high--radios and televisions blaring--that 
        these individuals cannot die peacefully.
         Inadequate discharge planning often leaves 
        veterans and their loved ones unsupported.
         Well-intentioned nurses cannot serve their 
        patients adequately due to serious under-staffing.
         Patients are moved either within the hospital 
        or to a facility off the grounds of the hospital when 
        they are actively dying.
    There are many complementary therapies that can be helpful 
for end of life care. They include music therapy, acupuncture, 
aromatherapy, massage, and guided imagery. Improving end of 
life care also includes focusing on life review, spiritual, 
physical, emotional, and relationship issues.
    The week of the hearing, Congress was scheduled to vote on 
H.R. 2260, the Pain Relief Promotion Act of 1999--a bill that 
recognizes the importance of good pain management and the 
necessary and legitimate use of controlled substances in pain 
management and palliative care. The bill called for the 
Department of Health and Human Services to develop and advance 
the scientific understanding of palliative care, the 
development of practice guidelines and better education on 
these issues. Through increased research and education, we can 
find better and more compassionate ways of relieving pain for 
those in terminal conditions--including complementary 
    d. Legislation.--As a result of these oversight activities, 
Chairman Burton introduced several pieces of legislation which 
were referred to a variety of committees. A brief summary these 
bills are attached here.
    1. H.R. 3305 Dietary Supplement Fairness in Labeling and 
Advertising Act.
    Introduced November 10, 1999, with two co-sponsors, H.R. 
3305 was referred to the Commerce Committee. A bill to amend 
the Federal Trade Commission Act to provide that certain types 
of advertisements for dietary supplements are proper was 
introduced to provide balance in the dispute process regarding 
FTC actions with dietary supplements.
    2. H.R. 3306.
    Introduced on November 10, 1999 with four co-sponsors, H.R. 
3306 was referred to the Committee on Ways and Means. A bill to 
amend the Internal Revenue Code of 1986 to provide that amounts 
paid for foods for special dietary use, dietary supplements, or 
medical foods shall be treated as medical expenses.
    3. H.R. 3304 Food Stamp Vitamin and Mineral Improvement Act 
of 1999 (Senate companion bill S. 1307).
    Introduced on November 10, 1999, with one cosponsor, H.R. 
3304 was referred to the Committee on Agriculture. A bill to 
amend the Food Stamp Act of 1977 to permit participating 
households to use food stamp benefits to purchase nutritional 
supplements providing vitamins or minerals.
    4. H.R. 2635 Access to Medical Treatment Act (Senate 
companion bill S. 1955).
    Introduced on July 29, 1999 with 43 co-sponsors, H.R. 2635 
was referred to the Commerce Committee. A bill to allow 
patients access to drugs and medical devices recommended and 
provided by health care practitioners that are not approved by 
the Food and Drug Administration.
    5. H.R. 2092 Inclusion of Alternative Approaches in Cancer 
Research Act.
    Introduced on June 9, 1999 and referred to the Commerce 
Committee. A bill to require that the membership of advisory 
bodies serving the National Cancer Institute include 
individuals who are knowledgeable in complementary and 
alternative medicine .
    6. H.R. 3677 Thomas Navarro FDA Patient Rights Act.
    Introduced in February 16, 2000 with 48 co-sponsors, H.R. 
3677 was referred to the Commerce Committee and testimony was 
heard at the Subcommittee on Health and the Environment in 
August 2000. A bill to amend the Federal Food, Drug, and 
Cosmetic Act to restrict the authority of the Food and Drug 
Administration to issue clinical holds regarding 
investigational drugs based on other existing treatments rather 
than safety concerns or to deny patients expanded access to 
such drugs.
    6. Dietary Supplement Health and Education Act: Is the FDA 
Trying to Change the Intent of Congress? March 25, 1999.
    There have been numerous complaints to the committee that 
the FDA's interactions with various supplement manufacturers 
have been less than helpful. One small manufacturer shared with 
staff that he was told by an inspector who showed up 
unannounced at his facility, ``we just want to get rid of all 
you little guys and only deal with the large manufacturers.'' 
Another manufacturer was forced into a long court battle when 
the FDA decided their botanical product was a drug not a 
dietary supplement. The manufacturer recently won this case. 
This product that has been shown in high quality research to 
have a beneficial health effect and is a good example of FDA's 
prejudice against supplements. The FDA has recently appealed 
another case they lost in which it was determined that in not 
allowing health claims on supplements they were violating first 
amendment rights.
    As part of the DSHEA legislation, a Presidential Commission 
was appointed to provide recommendations for the regulation of 
label claims and statements of dietary supplements, including 
the use of literature in connection with the sale of dietary 
supplements and procedures for evaluation of such claims. Their 
report was finalized in November 1997. FDA published their 
response to this report in April 1998 including a rulemaking 
that will take effect within 2 years after the report's 
issuance. Congressional intent clearly expressed that FDA 
authorize dissemination of more truthful and non-misleading 
health information about supplements on labels and in labeling, 
not less. FDA's proposed rule redefines ``disease or health-
related condition,'' a key term in the agency's definition of 
``health claims.'' This redefinition would so expand the scope 
of what a disease or health-related condition would include as 
to drastically reduce the amount of information allowed in a 
health claim. This action clearly contradicts the will of 
Congress and undermines the scope of protected speech under 
Section 6 of the DSHEA. Moreover, the proposed rule would 
render a structure function claim an impermissible health claim 
if it contained references to health components that could be 
used to diagnose a disease state by clinical or laboratory 
measures. This prohibition affects statements on liver tissue 
health, PMS, menopausal hot flashes, and other ``non-disease'' 
    Of particular concern to the committee is the failure of 
the FDA to approve claims. Congress has found on several 
occasions that the Significant Scientific Agreement Final Rule 
violates congressional intent and results in suppression of the 
very health information Congress expected FDA to authorize. In 
Senate Report 105-43, it was noted that ``the failure of the 
current system to give adequate weight to the statements of . . 
. authoritative bodies, coupled with the prohibitive economic 
burden that permits only the largest food companies and trade 
organizations to file a health claim petition to gain approval 
of a new health claim, has deprived the public of the full 
disease prevention benefits health claims were intended to 
    The primary focus of the hearing was the FDA's Proposed 
Rule on Structure/Function Statements. DSHEA was explicit in 
allowing for manufacturers to include information on labels 
regarding the benefits of a supplement on the structure or 
function of the body, while specifically not allowing for 
disease claims to be made. The FDA's proposed rule on 
Structure/Function was counter to congressional intent and 
specifically moved to redefine the term ``disease'' to make 
most, if not all, structure/function claims in violation of the 
    All systems of healing, except Allopathic medicine, 
including Ayurveda, Native American healing, or Traditional 
Chinese Medicine, have two parallel currents--the importance of 
spirituality in healing and the important role of botanical 
products and nutrition in healing. In earlier hearings the 
committee learned about the importance of herbal products and 
other dietary supplements in maintaining good health. The 
committee also received testimony from research experts about 
the importance of research into the use of dietary supplements 
such as Glucosamine to help Americans with arthritis and ginkgo 
biloba in delaying the onset of Alzheimer's disease. The 
potential cost savings to the Federal Government in these two 
debilitating illnesses is enormous, and justifies more research 
    Prior to the passage of DSHEA, the FDA relied principally 
on the 1938 Federal Food Drug and Cosmetic Act [FFDCA], to 
regulate dietary supplements. Under the FFDCA, any product that 
claimed to prevent, treat or mitigate a disease--or to affect 
the structure or any function of the body--was regulated as a 
drug by FDA, requiring pre-market approval and a substantial 
research investment. In today's research environment, bringing 
a new drug to market is estimated to cost upwards of $300 
    During the 1960's, as Americans increasingly began to look 
to natural health methods, including recognizing the role of 
diet in health, and as the work of individuals such as Dr. 
Linus Pauling was published, dietary supplements began to play 
an increasing role in the U.S. diet. FDA continued to adhere to 
the regulatory precepts of the 1938 statute. In the early 
1970's, FDA attempts to limit the potencies of vitamins and 
minerals met with huge popular opposition, leading to the 
enactment of Section 411 of the FFDCA, known as the ``Proxmire 
    The FDA then began to treat most health-related claims for 
dietary supplements as illegal drug claims. The FDA resisted 
efforts to allow Americans to receive health claims on labels 
on foods, including dietary supplements, in the early 1980's, 
which lead to the passage of the Nutritional Labeling and 
Education Act of 1990 [NLEA]. That act carved out health 
claims--essentially, claims that eating certain foods will 
reduce the risk of onset of chronic diseases--as an exception 
to the ``drug'' definition. At the same time, in Section 
403(r)(5) of NLEA, Congress gave FDA the opportunity to permit 
more information about advances in science to be communicated 
to consumers by adopting a different health claims evaluation 
process for supplements. However, the FDA declined that 
opportunity. In addition, the FDA determined that herbs were 
not ``nutritional'' in the sense that they did not have a 
recommended daily allowance or daily reference value, and thus 
leaving manufacturers unable to obtain health claims. These FDA 
pronouncements spawned a second consumer effort, this time to 
pass the Dietary Supplement Health and Education Act.
    The media, fueled by statements from FDA officials, 
frequently represent the passage of DSHEA as having stripped 
the FDA of the power to regulate dietary supplements and thus 
to remove unsafe supplements from the market. However, the FDA 
has seven points of authority to regulate dietary supplements. 
The FDA has the power to:
 Refer for criminal action any company that sells a 
dietary supplement that is toxic or unsanitary [Section 
 Obtain an injunction against the sale of a dietary 
supplement that has false or unsubstantiated claims [Section 
 Seize dietary supplements that pose an ``unreasonable 
or significant risk of illness or injury'' [Section 402(f)].
 Sue any company making a claim that a product cures or 
treats a disease [Section 201(g)].
 Stop a new dietary ingredient from being marketed if 
FDA does not receive enough safety data in advance [Section 
 Stop the sale of an entire class of dietary 
supplements if they pose an imminent public health hazard 
[Section 402(f)], and
 Require dietary supplements to meet strict 
manufacturing requirements (Good Manufacturing Practices), 
including potency, cleanliness, and stability [Section 402(g)].
    Additionally, industry self-regulatory efforts supplement 
these governmental powers, as do Federal Trade Commission 
powers over advertising and state safety laws.
    In their zealous regulatory efforts against dietary 
supplements, the FDA claimed that dietary supplements were 
``food additives'' like chemicals added to foods for 
processing. For example, the agency argued that ginseng 
capsules were foods; that ginseng is added to a ginseng 
capsule; and that ginseng is therefore a ``food additive.'' The 
reason the FDA pursued this theory was that it could not lose 
such a case. If the FDA called ginseng a food, the FDA had to 
prove it was unsafe. If the FDA said it was a food additive, 
all that the FDA had to prove was that a scientific expert, 
even an FDA staff member, had to state they thought that the 
ingredient was not ``generally recognized as safe'' among 
experts in the field. Then the manufacturer had to try to 
disprove a negative: no amount of evidence by the manufacturer 
could overcome the FDA expert's conclusory statement. In 1993, 
two Courts of Appeals invalidated the FDA's food additive 
theory, and Congress confirmed in DSHEA that dietary 
supplements were not food additives. DSHEA thus did not change 
the FDA's burden to prove its adulteration cases--that burden 
already existed.
    Recent Court of Appeals decisions have struck down FDA 
efforts to regulate free speech by pharmaceutical companies in 
promoting prescription drug products and by dietary supplement 
manufacturers in making health claims. [Washington Legal 
Foundation and Pearson v. Shalala.] \46\
    \46\ Testimony of I. Scott Bass, JD, before the Government Reform 
Committee, Mar. 25, 1998.
    This was one of Dr. Henney's first opportunities to discuss 
at length her vision for implementing dietary supplement 
regulations and to explain specific steps that have been taken 
to rectify the bias against supplements among FDA personnel and 
policy. During the hearing, Dr. Henney informed the committee 
that the FDA had all the authority necessary to adequately 
regulate dietary supplements.
    Actress, Raquel Welch provided a public perspective on the 
importance of dietary supplements in maintaining good health. 
As part of her testimony, Ms. Welch stated:

          My understanding is what the FDA proposes is to 
        expand the Definition of disease to the point that 
        virtually all ``Structure/Function Statements'' would 
        be discouraged or outlawed. I know there are instances 
        where label statements are beyond the explicit limits 
        stated in the dietary supplement act. But I believe 
        that even FDA records will show that these claims are 
        found on an infinitesimal number of products, less than 
        1 percent. As a consumer, it seems to me that FDA 
        should use its enforcement powers to eliminate these 
        questionable and unsubstantiated dietary supplement 
        claims. That they be understandable and logical. 
        However, instead, the Agency is proposing virtual 
        elimination of an entire category of consumer 
        information, with broad restrictions and confusing 
        rules. I'd say that's killing a flea with a cannon. Mr. 
        Chairman, millions of consumers like me have and will 
        benefit from learning more about these supplements from 
        ``Structure/Function Statements.'' What the FDA is 
        proposing seems like a regulatory slight-of-hand to 
        stifle such statements. I implore you and the members 
        of this committee to urge the FDA to withdraw its 
        proposed rule. The language in the existing dietary 
        supplement act already gives sufficient direction and 
        establishes explicit limitations on ``structure/
        function statements'' and it gives the FDA the 
        authority it needs to chase down delinquent companies 
        and their products. The FDA's proposal ignores 
        congressional intent and flies in the face of the best 
        interest of the 100 million Americans who take dietary 
        supplements every day.\47\
    \47\ Testimony of Raquel Welch,

    Also testifying were:
    I. Scott Bass, J.D., adjunct professor, Georgetown 
University Graduate School of Public Policy, Washington, DC, as 
well as leading food and drug attorney for Sidley & Austin, Mr. 
Bass was a key advisor to the drafting of the Dietary 
Supplement Health and Education Act. He is the author of 
Dietary Supplement Health and Education Act: A Legislative 
History and Analysis, published by the Food and Drug Law 
Institute in 1996. Mr. Bass presented a brief review of the 
history of legislation in dietary supplements and offered an 
explanation of the legal implications of the proposed FDA 
    Daniel Kracov, J.D., attorney, Patton Boggs, LLP presented 
testimony regarding Pharmanex's interactions with the FDA 
regarding the red yeast powder product, Cholestin. In 1999, a 
Salt Lake City judge ruled that Pharmanex was correct in 
marketing this product as a dietary supplement.
    Edward M. Croom, Jr., Ph.D., and ethnobotanist, is the 
coordinator of the Phytomedical Project, National Center for 
the Development of Natural Products Research Institute of 
Pharmaceutical Sciences at the School of Pharmacy for the 
University of Mississippi presented testimony about the status 
of research in botanical products and the level of information 
currently known about potential health benefits of botanical 
    Robert S. McCaleb, president of the Herb Research 
Foundation of Boulder, CO, served on the President's Commission 
on Dietary Supplement Labels. Mr. McCaleb testified regarding 
the Commission and the development of their report as well as 
concerns regarding the FDA's proposed regulations. He stated:

          The future of dietary supplement regulation in the 
        United States is uncertain, because of the FDA's 
        proposed rules for implementation of DSHEA. These 
        appear to be an attempt to circumvent the language of 
        DSHEA by preventing the very type of claims which DSHEA 
        was designed to allow. The FDA rules (Docket No. 98N-
        0044) suggest sweeping changes to the regulation of 
        supplements, including a proposed redefinition of the 
        term ``disease.'' By changing the definition of 
        disease, the FDA in effect changes what type of 
        supplement label statements can be made about a health 
        condition. For example, under the proposed FDA new 
        definition, any deviation from the normal function of 
        any combination of parts, organs and systems of the 
        body would be classified as ``disease,'' even if that 
        deviation is universal, such as menstruation or 
        menopause in women. By this proposed new definition, 
        any dietary supplement with virtually any effect on the 
        body could be classified as a drug. This runs counter 
        to the letter, spirit and intent of the Dietary 
        Supplement Health and Education Act of 1994.

    James Turner testified on behalf of Citizens for Health 
regarding the importance of access to quality dietary 
supplements and increased information on labels and labeling.
    Dr. Annette Dickinson, vice president, Scientific and 
Regulatory Affairs, Council for Responsible Nutrition and 
Professor Margaret Gilhooley, Seton Hall University School of 
Law testified on behalf of the minority.
    After this hearing, and reviewing over 200,000 comments to 
the docket, the FDA opted not to attempt to change the 
definition of disease.
    7. How Accurate is the FDA's Monitoring of Supplements Like 
Ephedra? May 27, 1999.
    The committee called a hearing to look at a disturbing 
attempt to promulgate the first regulation on a specific 
ingredient of a dietary supplement based on non-scientific data 
unveiled disturbing information about the monitoring of adverse 
events at the FDA as well as fueling concern that such bias 
continues within the agency regarding dietary supplements that 
a fair and scientifically based regulation is not in 
    The FDA is responsible for tracking adverse events for many 
health related products, pharmaceutical products, medical 
devices, over the counter products, cosmetics, some types of 
foods, dietary supplements, and even veterinary drug products. 
The Special Nutritionals/Adverse Events Monitoring System [SN/
AEMS] was established in early 1993 following the establishment 
of the Office of Special Nutritionals. Reports are received 
from FDA's MedWatch program, FDA's field offices, other 
Federal, State, and local public health agencies, letters and 
phone calls from consumers and health professionals. The 
objective of the hearing was to discuss the accuracy and 
effectiveness of the FDA's Special Nutritionals Adverse Events 
Monitoring System [SN/AEN], using the dietary supplement 
ephedra as an example. Through our investigation on the FDA's 
implementation of the Dietary Supplement Health and Education 
Act, concerns of the accuracy and effectiveness of the current 
monitoring of adverse events for dietary supplements have been 
    According to the FDA's website, adverse event monitoring 
systems serve as warnings for identifying emerging public 
health problems associated with use of marketed products:
          (1) Adverse event monitoring systems are designed to 
        identify unanticipated or unintended safety problems 
        with use of marketed products.
          (2) Patterns of adverse events help FDA identify the 
        need for further investigation to determine whether 
        public health actions are needed.
    In our March 25 hearing, Commissioner Henney testified that 
in the incidences where a manufacturer is erroneously listed in 
a report for a product they do not manufacture, the erroneous 
listing is not removed from the website, but a correction is 
listed as a footnote. We also learned that policymaking at a 
national an international level is based on this system while 
the FDA clearly admits that the system is fraught with errors. 
Through our investigation we have identified six problem areas:
    1. Timely updates to website: Adverse reactions are not 
promptly posted on the FDA website. Several months pass between 
site updates, leaving anyone outside the FDA unaware of 
potential clusters of adverse reactions. As of May 21, the site 
had not been updated since October 1998. This is of particular 
concern in light of the recent public alert that FDA issued 
regarding GBL, stating that 55 adverse events and 1 death had 
occurred. Most of these cases have not yet been posted on the 
    2. Brand and corporate name identification without 
confirmation: Companies may find their corporate name and brand 
name posted on the FDA website with an adverse reaction about 
which they are not aware, with no evidence as to whether the 
patient actually consumed their product, or a determination as 
to whether the symptoms observed were likely to have resulted 
from the product.
    3. Time lag for Freedom of Information requests: The 
established process for a manufacturer or trade association 
that desires to follow-up on an investigation of an adverse 
event is to request through the Freedom of Information Act, 
information about the case. A frequent excuse from the FDA to 
FOIA requestors is that they do not have the resources to purge 
the case reports of personal information in order to provide 
this information to the requestor in a timely fashion. We have 
received numerous reports of a lack of responsiveness by the 
FDA through this mechanism. In at least one case, a requestor 
is still waiting after 12 months for information requested 
under the FOIA. If the industry is to be responsive to adverse 
events, it is imperative they have access to information 
regarding adverse events in a timely fashion.
    4. Incorrect information not purged: On occasion, a product 
or ingredient is incorrectly stated in a report. However, the 
initial report remains on the website unchanged even when 
errors are identified. The FDA Commissioner eluded to this 
problem in response to questions at the March 25 hearing. We 
have learned that it is a monumental task to have the FDA make 
any corrections to the system--and that as Dr. Henney stated, 
corrections and purging does not occur, rather footnotes are 
    5. No classification of seriousness of event: There is no 
classification of adverse reactions as mild, moderate, or 
serious. The impression is sometimes given that there are 
hundreds of ``serious'' adverse reactions in a given year, when 
only a fraction of the reports actually involve serious 
reports. Additionally, MedWatch, the FDA's program for 
reporting serious reactions and problems with medical products 
such as drugs and medical devices, states that a reaction is 
considered serious if the product caused:
         a life-threatening situation,
         admission to a hospital or a longer than 
        expected hospital stay,
         a permanent disability,
         a birth defect, or
         the need for medical or surgical care to 
        prevent permanent damage.
    The SN/AEM's explanation of a serious adverse event is 
simply stated as an illness or injury associated with use of a 
special nutritional product: dietary supplements, infant 
formulas, and medical foods.
    6. Causality not established: There is no analysis of 
possible causal relationships between products and adverse 
reactions for dietary supplements. The principles of assessing 
possible cause are well established within the FDA and are 
applied in other arenas such as veterinary drugs. For example, 
in the Veterinary Medicine Reporting System, FDA evaluates 
reports to assess in terms of likely relation to use of the 
product. In 1997, of 3,000 adverse effects reports to the 
Center for Veterinary Medicine, only 1 percent were definitely 
associated with product, 31 percent probably were associated, 
45 percent possibly were associated, 12 percent were definitely 
not reported to the product, and 11 percent lacked adequate 
information to determine association.
    With the increased use of dietary supplements by Americans 
and with concerns of adulterated products, drug interactions, 
and the need to identify public health concerns, an accurate 
and effective reporting system for dietary supplements should 
be a high priority for the FDA.
Ephedra as an Example
    In January the FDA published its priority list for 1999. 
Ephedra was listed at the top of the Dietary Supplement ``A'' 
list. In June 1997, the FDA posted a proposed rule on dietary 
supplements containing ephedrine alkaloids. A proposed rule by 
the FDA has the same force and effective as law.

          The Food and Drug Administration (FDA) is proposing 
        to make a finding, which will have the force and effect 
        of law, that a dietary supplement is adulterated if it 
        contains 8 milligrams (mg) or more of ephedrine 
        alkaloids per serving, or if its labeling suggests or 
        recommends conditions of use that would result in 
        intake of 8 mg or more in a 6-hour period or a total 
        daily intake of 24 mg or more of ephedrine alkaloids; 
        require that the label of dietary supplements that 
        contain ephedrine alkaloids state ``Do not use this 
        product for more than 7 days''; prohibit the use of 
        ephedrine alkaloids with ingredients, or with 
        ingredients that contain substances, that have a known 
        stimulant effect (e.g., sources of caffeine or 
        yohimbine), which may interact with ephedrine 
        alkaloids; prohibit labeling claims that require long-
        term intake to achieve the purported effect (e.g., 
        weight loss and body building); require a statement in 
        conjunction with claims that encourage short-term 
        excessive intake to enhance the purported effect (e.g., 
        energy) that ``Taking more than the recommended serving 
        may result in heart attack, stroke, seizure or death''; 
        and require specific warning statements to appear on 
        product labels. FDA is proposing these actions in 
        response to serious illnesses and injuries, including 
        multiple deaths, associated with the use of dietary 
        supplement products that contain ephedrine alkaloids 
        and the agency's investigations and analyses of these 
        illnesses and injuries. FDA is also incorporating by 
        reference its Laboratory Information Bulletin (LIB) No. 
        4053, that FDA will use in determining the level of 
        ephedrine alkaloids in a dietary supplement.\48\
    \48\ Federal Register: June 4, 1997 (vol. 62, No. 107) proposed 
rules pp. 30677-30724

    The committee considered the following questions: If this 
proposed rule is based on an inadequate reporting system, then 
is the rule appropriate? Is it appropriate to establish law 
based on flawed information? Ephedra or Ma Huang has been used 
safely for thousands of years in Traditional Chinese Medicine. 
It is reported that over 15 billion servings of ephedra were 
consumed in the United States last year. Is the ratio of use to 
adverse events strong enough to warrant such a drastic 
regulation? Would a guidance document be more appropriate than 
a rulemaking, especially since several States have mandated 
regulations regarding ephedra at the State level?
    It is important to note that part of the problem with the 
ephedra issue was that a small number of companies marketed 
products specifically for purposes of abuse. There is the 
potential for a criminal element in every industry, including 
health care and dietary supplements. These euphoric products 
were a gross abuse of the system that responsible members of 
the supplement industry have worked diligently with the FDA to 
remove from the marketplace.
    Joseph A. Levitt, Director, Center for Food Safety and 
Applied Nutrition, Food and Drug Administration presented 
testimony on the development of the Special Nutritionals 
Adverse Events Monitory System. He outlined how this system 
functions and how it compares to other monitoring systems 
within the FDA and other HHS organizations. During the hearing, 
Mr. Levitt, admitted that the program was fraught with errors, 
that the FDA staff had not paid enough attention to responding 
to the FOIA requests and that a contractor had recently been 
hired to respond to the requests.
    R. William Soller, Ph.D., senior vice president and 
director of scientific and technical affairs, Consumer Health 
Care Products Association presented testimony regarding the 
elements of an effective monitoring system. Dr. Soller has 
extensive experience with non-prescription drugs and dietary 
supplements and offered viable solutions for the problems that 
have been identified.
    Theodore M. Farber, Ph.D., principal, ToxaChemica, is a 
pharmacologist and a board-certified toxicologist. Dr. Farber 
testified regarding the concern of some regarding FDA's misuse 
of adverse events reporting for policy setting. Dr. Farber 
conducted an extensive evaluation of the published adverse 
events on ephedra. He presented testimony about the scientific 
value of information gleaned from these reports. He reviewed 
the FDA's handling of the dietary supplement ephedra and the 
development of policy regarding its regulation. He showed a 
history of mishandling of this issue that points to the 
continued institutional bias against dietary supplements at the 
    Daniel B. Mowrey, Ph.D., president, American Phytotherapy 
Research Laboratory presented testimony on the use of ma huang 
or ephedra historically. He discussed the level of scientific 
research in ephedra and what is already known through 
scientific evaluation on usage, serving size, side effects, and 
adverse events. Dr. Mowrey, has pioneered basic and clinical 
research in medical botany with an emphasis on safety and 
efficacy of whole plant materials, standardized extracts, and 
guaranteed potency herbs for 25 years.
    Annette Dickinson, Ph.D., vice president for scientific and 
regulatory affairs, Council for Responsible Nutrition returned 
to testify about the development of a good monitoring system. 
Also testifying were Mrs. Karen Schlendorff, the mother of a 
young man who while on spring break in 1996 took Ultimate 
Exphoria and died; Mrs. Barbara Michal, the founder of 
H.E.A.T.--Halt Ephedrine Abuse Today--a nonprofit organization 
whose mission is to increase public awareness about the dangers 
of ephedrine and its related drugs, and to promote the 
prevention of abuse of ephedrine and its related drugs; and Dr. 
Raymond Woosley, a professor of pharmacology and medicine at 
Georgetown University.
    The initial concern with ephedra was raised when several, 
less-than-scrupulous companies marketed illicit street drugs 
containing high doses of ephedrine. It is the committee's 
understanding that these illegal products have been removed 
from the market. If such illegal products remain in the 
marketplace, the FDA clearly has the authority to seize them.
    The FDA admits that the SN/AEMS is flawed, but has made no 
move to correct the problems. The FDA took an additional 12 
months to provide FOIA information to requestors. Research 
conducted after the May hearing has shown that ephedra can be 
used safely and effectively for weight loss.
    8. Cancer Care for the New Millennium--Integrative Oncology 
(June 7-8, 2000).
    During this two-day hearing, the committee received updates 
from the Food and Drug Administration, the National Cancer 
Institute, the National Center for Complementary and 
Alternative Medicine, and the Health Care Financing 
Administration regarding research focus and access to an 
integrative approach to cancer care. The committee also 
received testimony from Congresswoman Deborah Pryce and Michael 
and Raphael Horwin--parents who have lost children to cancer. 
Also testifying was James Navarro, father of Thomas Navarro, a 
4-year-old child with medulloblastoma who has become the focal 
point of a grass roots cry for medical freedom. H.R. 3677 was 
introduced to remedy problems at the FDA which have prevented 
Thomas and thousands of other Americans from receiving access 
to clinical trials without first having failed standard 
therapies that have unacceptable risks.
    9. Ethnic Minority Disparities in Cancer Treatment: Why the 
Unequal Burden? (September 25, 2000).I21Cancer strikes all 
socio-economic, cultural, and ethnic groups in America. But it 
often takes the deadliest toll among minorities.
    Although many ethnic minority groups experience 
significantly lower levels of some types of cancer than the 
majority of the U.S. white population, other ethnic minorities 
experience higher cancer incidence and mortality rates. Some 
examples of this include:
 The incidence and mortality rates for multiple myeloma 
rose sharply in the United States from the 1950's to the 
1980's, then leveled off. The rates for African Americans were 
twice as high as for whites.
 Asian-Americans are five times more likely to die from 
liver cancer associated with Hepatitis.
 Vietnamese women suffer cervical cancer at nearly five 
times the rate of white women.
 Hispanics have two to three times the rate of stomach 
 Breast cancer occurs less often in African American 
women than white women, but it is typically detected later.
 African-American men develop cancer 15 percent more 
frequently than white males.
    The issues surrounding racial disparities in cancer are 
complex and not well understood. They can be related to a 
higher incidence of cancer, to later detection, and to cancer 
not being treated as well. Research has shown that all three of 
these factors contribute to the disparity in mortality.
            Other Health Issues
    a. Summary.--The acne drug Accutane, manufactured by Roche 
Pharmaceutical, has been linked to numerous serious adverse 
events. Through its adverse events monitoring system, the FDA 
has received reports of 66 suicides and 1,373 reports of 
depression and suicide ideation related to the drug Accutane. 
Accutane was licensed by the Food and Drug Administration [FDA] 
in 1982 as an oral prescription drug for the treatment of 
severe acne. Current recommendations indicate that the drug 
should only be used when a patient has not responded to other 
treatments including antibiotics. The committee learned that 
Accutane was intended to be used as a treatment of last resort, 
but that increasingly dermatologists are using it for less 
severe forms of acne. According to Roche Pharmaceutical, the 
manufacturer of Accutane, the number of domestic and foreign 
reports of serious adverse events in the post-marketing adverse 
events database for Accutane as of April 30 was 5,665. The 
largest percentage of these reports were psychiatric problems. 
Almost 19 percent of the adverse events reported to Roche were 
psychiatric. Also, the most recent Periodic Adverse Drug Event 
Report for Accutane includes, for a 12-month period, over 750 
new psychiatric adverse event reports (foreign and domestic), 
including 200 that were coded as serious events, nine reports 
of suicide attempts, and six reports of completed suicides.
    More aggressive patient education is needed. A Medguide is 
in development that will provide clear warning about depression 
and suicide. The existing patient informed consent document is 
being expanded to fully inform patients of all potential side 
    b. Benefits.--As a result of the raised awareness, 
Americans who are considering taking the drug Accutane will be 
better informed of all of the potential side effects. The 
manufacturer and FDA are finalizing a broader informed consent 
document that fully explains both the concerns about birth 
defects as well as the concern about depression and suicide. A 
Medguide will be developed and given to every patient by their 
pharmacist at the time they pick up their prescription. The 
committee learned that health care professionals, especially 
dermatologists that typically prescribe Accutane, need to more 
earnest in their actions to discuss possible side effects 
regarding Accutane and other drugs.
    c. Hearings.--One hearing was conducted.
    Accutane--Is this Acne Drug Treatment Linked to Depression 
and Suicide? (December 5, 2000).
    The committee conducted a hearing to receive testimony from 
families directly affected by suicide and suicide attempts as 
well as medical experts and the FDA. Two families testified 
whose sons committed suicide while taking Accutane. 
Additionally, the committee received testimony from Amanda 
Callais, a suicide-attempt survivor. While recovering from a 
suicide attempt, she continued on Accutane until the FDA's Talk 
Paper was issued warning families of concern about the link 
between Accutane and suicide. Shortly after ceasing the 
medication, she fully recovered from major depression and is 
now a senior in high school in an honors program.
            i. A Review of Vaccine Safety Concerns, Policy Issues, and 
                    Concerns of Links to Autism and Other Chronic 
    a. Summary.--Expanding on the vaccine investigations 
initiated in the Subcommittee on Criminal Justice, Drug Policy, 
and Human Resources, and the Subcommittee on National Security, 
Veterans Affairs, and International Relations the full 
committee began a review of vaccine safety, policy, and 
concerns about adverse effects of vaccines, including autism 
and other chronic conditions.
    Vaccines have been heralded as one of the most important 
public health advances of the 20th century. Indeed, vaccines 
have been instrumental in virtually wiping out many devastating 
childhood illnesses, such as polio. However, vaccines also have 
serious and unpredictable side effects for a small percentage 
of people who receive them. Each State establishes a mandatory 
childhood immunization schedule based on the recommendations of 
the Federal Government. Every child in the United States is 
required to receive these mandated vaccines prior to entry into 
day care and schools. Additionally, many adults are required to 
receive immunizations, in particular the Hepatitis B vaccine, 
as a condition of employment. Each State has established 
guidelines regarding medical and religious exemptions. Some 
States have established philosophical exemptions as well.
    Vaccines are the only medications that Americans are 
mandated to receive. Any policy that mandates a medical 
intervention to benefit the public at large creates an inherent 
conflict between the interests of the individual and the 
community. The tension between individual risks and public 
benefit is the classic ethical dilemma for public health. Some 
have described the current mandating of an increasing number of 
vaccines to children to be a good intention gone too far. The 
recommendations of the National Vaccine Immunization Committee 
now suggest that children receive at least 20 injections 
against 11 diseases by 6 years of age. If the current 
recommended schedule is followed, at 2 months of age, a child 
will be given four injections for six diseases in one medical 
visit. The same series would be repeated at 4 and 6 months. 
Between 12 and 18 months, a child will receive six injections 
in one visit for 10 diseases. Vaccines on the Childhood 
Immunization Schedule recommended for all children are for the 
following diseases: polio, diphtheria, pertussis (whooping 
cough), tetanus, hepatitis B, hemophilus influenza B, measles, 
mumps, rubella, and chicken pox. The Hepatitis A vaccine is 
recommended for children in certain geographic areas.\49\ The 
rotavirus vaccine had been included in this schedule and was 
removed when the manufacturer removed the rotashield vaccine 
from the U.S. market after serious adverse events occurred. The 
number of immunizations is expected to grow as new vaccines are 
licensed by the FDA.
    During the course of the committee investigation, it was 
learned that there is a significant lack of science 
investigating long-term safety effects of vaccines, the 
interactions of multiple vaccines in a single day, the 
connection between the increased rates of immunization and the 
upswing in rates of autism, attention deficit disorder, 
diabetes, and pediatric cancers. Vaccines contain numerous live 
viruses, bacterial agents, and numerous ingredients that raise 
concern--including aluminum, mercury, formaldehyde, animal and 
plant RNA, and dyes.
    Many vaccines use the preservative Thimerosal, which is a 
mercury derivative. Mercury is a known neurotoxin. Mercury 
toxicity results in symptoms that are parallel to the symptoms 
seen in autistic children.\50\ In 1999 the FDA evaluated the 
amount of mercury children received through their immunizations 
and learned that the amount of mercury injected into infants 
exceeded Federal safety guidelines. Many children are receiving 
40 or more times the amount of mercury than what is considered 
safe from their mandated immunizations. Repeated requests for 
thimerosal-containing vaccines to be removed from the market 
have been rejected by the FDA and the Department of Health and 
Human Services. The FDA has asked vaccine manufacturers to 
voluntarily reduce or remove thimerosal from vaccines without 
mandating such action. Other mercury-containing medications 
have been removed from the market, including topical ointments, 
but the FDA maintains that no proof of harm has been shown.
    \50\ Autism a Unique Type of Mercury Poisoning http://
    During the course of the investigation, the committee 
learned that the whole-cell pertussis vaccine continues to be 
used, even though the recommendation is for a-cellular 
pertussis vaccines are to be used. Whole-cell pertussis 
vaccines are known to cause adverse reactions 50 percent of the 
time. Many of the reactions are mild. However a significant 
number of these reactions are severe, brain-related reactions 
that cause death or disability. Because FDA did not recall the 
whole-cell pertussis vaccine, physicians, HMOs, and clinics 
continue to use their stock pile of vaccine rather than 
purchase newer, safer vaccines.
    Autism rates have risen dramatically in the last 20 years. 
What once was considered a rare disease affecting 1 in 10,000 
children, has now become all too common. Current estimates in 
the United States range from 1 in 500, to 1 in 150 children 
being affected with autism. California has reported a 273 
percent increase in children with autism since 1988. Florida 
has reported a 571 percent increase in autism. Maryland has 
reported a 513 percent increase between 1993 and 1998. While 
some increases in rates can be attributed to an expanded 
definition of autism and better reporting rates, the dramatic, 
near-epidemic levels far exceed what would be expected, and 
what is seen in other conditions over the same timeframe. The 
U.S. Department of Education reports dramatic increases in 
autism rates in every State. The State of California estimates 
an additional $2 million tax burden for each child diagnosed 
with autism in the State.
    Autism displays two distinct patterns--classical autism is 
typically recognized at birth, and late-onset or acquired 
autism typically develops in otherwise normal children in the 
second year of life. There has been no research to date to 
determine if acquired autism is completely genetic or whether 
environmental factors such as severe food allergies, 
immunizations, Vitamin A deficiencies, and environmental 
pollutants cause autism. Many of the children who develop 
autism after vaccination, when tested, have high levels of 
aluminum and mercury in their system. Because the Federal 
Government has not funded the research, many families and 
parent-driven organizations are now raising research funds to 
have these studies conducted.
    The committee received an overwhelming response to the 
investigation from families with autistic children. Mrs. Shelly 
Reynolds, the founder of End Autism Now collected thousands of 
pictures of autistic children from families across the United 
States. She testified, that when queried, 47 percent of the 
parents felt that vaccines contributed to their child's 
development of autism. We heard from physicians that 
oftentimes, children with acquired autism, would begin to 
recover if treated for the myriad of medical issues that arose 
with the onset of autism. Many of these children, when tested 
have high levels of mercury in their body, some have high 
levels of aluminum, copper, and tin as well. When these metals 
are removed through chelation therapy, the children will often 
calm and recover speech. Dr. Stephanie Cave, who testified, 
spoke of children who spoke almost immediately after the 
medical treatment. The committee also received testimony from 
physicians who have had success treating autistic children with 
a protocol that includes anti-fungal, anti-viral, and seratonin 
uptake medications as well as dietary approaches that include 
the exclusion of cassien and gluten products. The HHS position 
to date has been that no evidence of a link between autism and 
vaccines exists. However, HHS has neglected to focus any 
research on this issue. In fact, when researchers with history 
of obtaining NIH research funds, have submitted grant proposals 
to the NIH for studies to research vaccine adverse events, the 
studies are repeatedly rejected. Relevant clinical research 
showing evidence of measles in the bowel of autistic children 
has repeatedly been rejected by HHS while an epidemiologic 
review of children's immunization records that may have been 
flawed has been repeatedly touted as proof that there is not 
connection.\51\ Both researchers testified during the April 
2000 hearing. Dr. Taylor, to date, has been unwilling to share 
the data from the research for independant evaluation.
    \51\ Dr. Andrew Wakefield and Dr. Brent Taylor of the Royal Free 
and University College Medical School, London, England.
    The committee also initiated an investigation into the 
level of influence the pharmaceutical industry plays in the 
decisionmaking process at the FDA and the Centers for Disease 
Control and Prevention [CDC]. The committee found significant 
evidence to indicate that the conflict-of-interest waivers on 
two key advisory committees are issued too easily and that 
concerns about real or apparent conflicts need to be taken more 
seriously. The committee reviewed the records of the FDA's 
Vaccines and Related Biological Products Advisory Committee 
[VRBPAC], which makes recommendations on the licensing of new 
vaccines. The committee also reviewed the records of the CDC's 
Advisory Committee on Immunizations Practices [ACIP], which 
makes recommendations on which vaccines should be included on 
the Childhood Immunization Schedule.
    The committee focused its investigation on the evaluation 
of the Rotashield vaccine, which was approved by the FDA for 
use in August 1998 and recommended for universal use by the CDC 
in March 1999. Serious problems cropped up shortly after it was 
introduced. Children started developing serious bowel 
obstructions. The vaccine was pulled from the U.S. market in 
October 1999. The committee sought to determine if evidence 
existed at the time of licensing to indicate that the 
rotashield vaccine could cause intersucception, a life-
threatening bowel disorder that often requires corrective 
surgery. The committee found evidence to indicate that the 
intersucception concern had been raised and been discounted. 
There were also concerns about children failing to thrive and 
developing high fevers. Even with all of these concerns, the 
VRBPAC committee voted unanimously to approve it. the ACIP 
discussion centered around the cost-benefit ratio, yet 
unanimously to approve it as well. A number of problems were 
identified regarding conflict of interest and were detailed in 
a staff report.\52\
    \52\ Conflict of Interest in Vaccine Policy Making, Government 
Reform Committee Majority Staff Report,
    The committee learned that members, including the Chair, of 
the FDA and CDC advisory committees own stock in drug companies 
that make vaccines. Individuals on both advisory committees own 
patents for vaccines under consideration or affected by the 
decisions of the committee. Three out of five of the members of 
the VRBAC who voted for the rotavirus vaccine had conflicts of 
interest that were waived. Seven individuals of the 15 member 
VRBAC advisory committee were not present at the meeting, two 
others were excluded from the vote, and the remaining five were 
joined by five temporary voting members who all voted to 
license the product. The CDC grants conflict-of-interest 
waivers to every member of the ACIP a year at a time, and 
allows full participation in the discussions leading up to a 
vote by every member, whether they have a financial stake in 
the decision or not. The ACIP has no public members--no parents 
have a vote in whether or not a vaccine belongs on the 
childhood immunization schedule. The VRBPAC has only one public 
            j. Review of Vaccine Safety and Policy.
    a. Summary.--In 1997, President Clinton directed Secretary 
Shalala to work with the States to develop an integrated 
immunization registry system and to require that all children 
in federally subsidized child care centers be immunized. This 
mass tracking of childhood vaccinations has created State 
registries that are tracking children from birth to grave. With 
these State systems reporting back to the Federal level, this 
administration has back-doored the initiation of national 
medical tracking, something the American people have vehemently 
    One report stated that the long-term tracking strategy had 
three steps--first to notify families with a post card when 
their child was late for a vaccine. Second, if they did not 
comply, then a Government official would call them on the 
telephone and remind them, and third, if they still did not 
comply, a Government official would visit their home.
    b. Benefits.--The committee's investigation has raised 
awareness nationwide about the need to be fully informed prior 
to immunization. The committee learned that because 
vaccinations were required, many health care providers give 
sick children vaccines to meet immunization guidelines. Parents 
have not been receiving adequate information prior to 
vaccinations and their concerns about adverse events are often 
discounted. HHS has initiated an Institute of Medicine review 
of vaccine safety concerns beginning in 2001. The first 
question to be reviewed will be concerns about a potential 
Vaccine-Autism connection. A large meeting on research-needs to 
determine vaccine safety was conducted by the FDA in November 
2000. NIH institutes are expanding research into the causes of 
    c. Hearings.--
    1. Vaccines--Finding the Balance Between Public Safety and 
Personal Choice, August 3, 1999.
    As a result of the ongoing activities of the subcommittees 
and concerns raised to the full committee, a hearing was 
conducted to take a step back and look at the development of 
vaccine policy overall and to address numerous concerns about 
the short and long-term safety concerns with vaccines.
    U.S. Surgeon General, Dr. David Satcher, also serves as 
Assistant Secretary of Health for the Department of Health and 
Human Services [DHHS] to which office all vaccines programs 
within Department report. Dr. Satcher, former Director of the 
Centers for Disease Control and Prevention and a survivor of a 
childhood bout with whooping cough (pertussis) provided a 
review of the vaccine development and use in the United States.
Vaccine Injury Compensation Program
    Congress enacted the National Vaccine Injury Compensation 
Program as a no-fault alternative to the tort system for 
resolving claims resulting from adverse reactions to mandated 
childhood vaccines. Enacted in 1988, the program has received 
over 5,000 claims (85 percent were retroactive). This program 
is designed to provide compensation to those injured or killed 
by a vaccine, liability protection for vaccine manufacturers 
and administrators, and vaccine market stabilization. In 1986, 
255 lawsuits were brought against vaccine manufacturers for DTP 
injuries. That number dropped to just 4 in 1997. Claimants now 
must first have their case adjudicated and rejected through the 
Vaccine Injury Compensation Program before they can file a 
vaccine injury lawsuit against a physician who administers the 
vaccine or manufacturer.
    The Department of Health and Human Services has modified 
the injury table several times since Congress enacted the 
program. Some feel changes to this table have been specifically 
to exclude those cases that Congress specifically intended the 
program to cover. The Department states that these changes are 
science-based. The program is administered by the Health 
Resources and Services Administration within HHS.
Vaccine Adverse Event Reporting
    The Vaccine Adverse Event Reporting System [VAERS] is 
managed by the Food and Drug Administration. Licensed 
manufacturers are required to report adverse events. Health 
care providers are encouraged to report adverse events. Members 
of the public who have experienced an adverse event may also 
report this event. Unfortunately, it is estimated that only 1 
in 10 events is actually reported. Physicians and health care 
providers may not be adequately trained to recognize events or 
may not be diligent in making connections between illnesses and 
    Through subcommittee hearings, we learned that the 
Department of Defense filters their VAERS prior to submission 
to FDA. One DOD employee wrote us and said,

          I often read with interest the Anthrax statistics 
        that are published in various printed media both DOD 
        and non-DOD. The most recent article I read cited only 
        34 individuals were adversely effected by the Anthrax 
        vaccine out of hundred of thousands that have received 
        the vaccination. I have 12 employees that are required 
        to submit to the Anthrax vaccine as a condition of 
        employment. Of the 12, three have had adverse reactions 
        and were deemed by the DOD physician not to be able to 
        continue the series of shots.

It is suggested that the vast majority of adverse events with 
this shot are not being reported.
Vaccine Safety Datalink
    This CDC program is a partnership with four large health 
maintenance organizations to continually evaluate vaccine 
safety. While the VAERS system is passive, this system is 
active surveillance encompassing 2 percent of the U.S. birth 
cohort. The program is examining potential associations between 
vaccines and 34 serious conditions.
Research and Development
    Biomedical researchers, with funding from the National 
Institutes of Health and the pharmaceutical industry, are 
increasingly looking to vaccines as a mechanism of preventing 
disease. Recent news article touted that we may one day have a 
vaccine to prevent Alzheimer's Disease. There are over 100 
vaccines in development for a myriad of diseases at this time. 
The basic premise that vaccines work under is to introduce a 
weakened version of a disease into the body, and stimulate an 
immune response, that should develop immunity to the disease.
Immunization Schedule
    Currently, it is recommended that children from birth to 6 
years of age receive 22 doses of 7 vaccines and another 4 in 
the teen years.\53\ Each State sets its own policy as to which 
shots will be mandated and under what circumstances that 
someone may be exempted (medical exemption, religious 
exemption, et cetera.) Unfortunately, the committee heard 
numerous accounts of families who are being bullied by school 
officials who refuse to accept exemptions.
    \53\ Recommended Childhood Immunization Schedule, United States, 
January-December 1999, as Approved by the Advisory Committee on 
Immunization Practices [ACIP], the American Academy of Pediatrics 
[AAP], and the American Academy of Family Physicians [AAFP].
    When interviewing parents about the vaccination process, we 
learned that there is no real conversation with a health care 
provider at the time a child is vaccinated. It appears that no 
thorough medical background is taken to determine the 
likelihood of an adverse event. It appears that the medical 
profession has become complacent by blindly trusting that 
licensure by the FDA assures that products are safe and that 
they can be given without any review and discussion. However, 
some package inserts of vaccines list ingredients including 
lactose and state not to give the vaccine if a patient is 
allergic to any of the ingredients of the vaccine.
    Witnesses included: Mrs. Tonya and Mr. Jerry Nelson, 
Indianapolis, IN, shared their experience of loosing their 
daughter Abby to a vaccine reaction that was mislabeled as 
Sudden Infant Death Syndrome [SIDS]. Ronald Kennedy, Ph.D., 
University of Oklahoma, recently published a paper in the 
January 1999 issue of Scientific American on DNA vaccines. With 
so many vaccines in development, and the need to make safer, 
more effective vaccines, Dr. Kennedy presented testimony on 
where the science is leading us in vaccine development. He also 
discussed the need for more discussion at the time of 
vaccination. During questioning, Dr. Kennedy stated that the 
DTP vaccine had a known adverse event rate of 50 percent, 
including mild and serious events. It was discovered during the 
hearing that while the DTaP vaccine is now recommended, that 
the DTP vaccine has never been recalled and is still being used 
in the United States.
    Carola Zitzman, Salt Lake City, UT, a board member of Voice 
of the Retarded and is a strong advocate for immunization. 
Carola's first son was born in 1964 with severe mental 
retardation due to gestational exposure to rubella. Mrs. 
Zitzman discussed the realities of raising a child with severe 
mental retardation and the role vaccines play in preventing 
disease birth defects. Mrs. Zitzman raised concerns about 
institutional care for children and adults with mental and 
physical handicaps including concerns about parents and 
custodians losing choices in housing. While the current trend 
is for group housing for the handicapped, there is concern that 
may be regulatory loop holes in providing insuring quality 
    Ann Spaith, Falls Church, VA, is a Department of Defense 
civilian employee who received numerous vaccines at the request 
of her employer testified regarding the deleterious effects on 
her health of receiving work-related vaccines. Among these 
vaccines was anthrax and Bot Tox (an experimental vaccine). Ms. 
Spaith, was fit and healthy prior to vaccination, and was 
cleared for vaccination with blood work. As a result of her 
vaccinations, Ms. Spaith has a severe thyroid disorder that 
will require medication the rest of her life and may require 
removal of her thyroid. Additionally, she has suffered numerous 
other health maladies as a direct result of the vaccines, and 
is not taking the third dose. Along with Marines being court 
martialed for refusing the anthrax vaccine, other military 
members being discharged with dishonorable, or other than 
honorable discharges, reserve members who are resigning rather 
than risk a life of pain or illness from the anthrax vaccine, 
DOD civilian employees are now being fired for refusing the 
vaccine. This presents a serious military readiness issue. Ms. 
Spaith later filed a complaint with the committee that she was 
mistreated at work as a result of testifying before the 
    Marcel Kinsbourne, M.D., is a pediatric neurologist who has 
reviewed many vaccine injury compensation medical records. Dr. 
Kinsbourne will discuss the importance of vaccines as well as 
the injuries.
    Mr. Rick Rollens, California, a former employee of the 
California State Legislature, has a son that developed autism 
as a result of an adverse reaction to vaccines. The connection 
between autism and the MMR and DTP vaccine is very 
controversial. Mr. Rollens discussed a new California 
initiative that is tracking the upsurge in autism in 
    Rebecca Cole, PKIDS, Chapel Hill, NC, and Keith Bergen Van 
Zandt, M.D., PKIDS, Winston-Salem, NC, and Samuel L. Katz, 
M.D., American Academy of Pediatrics, and the Infectious 
Disease Society of American, Durham, NC, testified in support 
of vaccines.
    2. Autism--Present Challenges, Future Needs--Why the 
Increased Rates? April 6, 2000.
    The committee received testimony regarding the dramatic 
rise in autism rates, the challenges families of autistic 
children face, including making treatment choices, paying for 
selected treatments, the lack of research in some new 
treatments, and educational challenges. The committee also 
received testimony from British researchers regarding concerns 
that the MMR vaccine is causally connected to autism in some 
children. At the conclusion of the hearing, Chairman Dan Burton 
asked HHS Secretary Donna Shalala to assemple a panel of 
preeminent scientific experts, who are free of conflicts of 
interest to:
 Evaluate the existing literature and research 
regarding autism, vaccines, and any possible adverse event that 
could lead to the onset of autism.
 Determine if there is enough existing science to make 
a clear determination about a possible link between autism and 
 Provide a systematic evaluation to the quality of the 
existing body of research.
 Provide recommendations regarding the research that 
would be needed to conclusively determine where or not any 
vaccines can be linked to the onset of autism.
    3. FACA: Conflicts of Interest and Vaccine Development--
Preserving the Integrity of the Process? (June 15, 2000).
    The committee examined conflict-of-interest concerns with 
two HHS committees involved with recommending the licensing and 
universal use of vaccines. Significant concerns were raised 
about the influence the pharmaceutical industry has on the 
approval and recommendation process. A staff report is 
available on the committee website.
    4. Mercury in Medicine--Are We Taking Unnecessary Risks? 
(July 18, 2000).
    The committee examined concerns that mercury-based 
preservatives in childhood vaccines, which may have serious 
health effects, are not being removed from the market fast 
enough. A report was presented to the committee entitled 
Autism--a Unique Type of Mercury Poisoning. This report 
reviewed the existing body of scientific knowledge on mercury 
poisoning and compared the symptoms to those of autism and 
found alarming similarities. Testimony from William Egan, PhD, 
Acting Office Director, Office of Vaccine Research and Review, 
Center for Biologics Evaluation and Review, FDA, determined 
that while the FDA has asked vaccine manufacturers phase out 
the use of the main mercury-based additive (thimerosal), the 
FDA has not used its authority to remove this product from the 
            k. The Department of Defenses' Handling of the Anthrax 
                    Vaccine Immunization Program.
    a. Summary.--The Department of Defense's [DOD] mandatory 
Anthrax Vaccine Immunization Program [AVIP] has been fraught 
with problems since its inception. After the Gulf war, over 
100,000 of the 700,000 military members who served became ill. 
Over 20,000 have died. The symptoms of the condition, now known 
as Gulf War Syndrome or Persian Gulf Illness, are vague and 
often hard to treat. They include malaise, body aches, rashes, 
memory loss, and difficulty in concentrating. While 
environmental toxins may play a role in this condition, the 
experimental drugs and vaccines given to the troops have been 
cited as a potential contributing factor. Non-classified 
Intelligence briefings have indicated that several countries 
have or are suspected of having biological and chemical warfare 
capabilities including weaponized anthrax. The committee has 
received conflicting testimony as to the actual level of the 
threat and the ease with which anthrax can be weaponized.
    Secretary Cohen, when establishing the AVIP, gave four 
preconditions that were to be completed prior to the 
establishment of the program: supplemental testing of the 
vaccine; assured tracking of immunizations; approved 
operational and communications plans; and review of the health 
and medical aspects of the program by an independent expert. 
The DOD failed to successfully complete all of these 
preconditions before beginning the mandatory program.
    Additionally, adverse event rates in several of the initial 
Phase I recipients were significantly higher than expected. 
Pilots and flight crews at Dover Air Force Base suffered 
numerous adverse events such as heart lesions, dizzy spells, 
unresolving flu-like symptoms, malaise, difficulty in 
concentrating, arthritis, and Guillian Barre syndrome. Similiar 
reports have been received from other bases as well. The 
prospective studies indicate adverse events in about 20 percent 
of those who take the vaccine. Five to 35 percent will have a 
systemic reaction and women suffer adverse events at twice the 
rate of men.
    Many active duty and reserve service members raised serious 
concerns about the legality of the order to take the vaccine, 
since the vaccine was licensed for cutaneous exposure to 
anthrax and intended for use by veterinarians and mill workers 
who handled the skins of goats and sheep.
    Additionally, the sole manufacturer of the vaccine, 
Bioport, closed for remodeling rather than face an FDA 
enforcement action for repeated quality control violations. 
This has resulted in a serious shortage of the vaccine. At 
present all vaccine available for use comes from a stockpile of 
vaccine produced prior to 1998. After finishing renovations, 
Bioport has been slow to gain FDA approval to restart 
manufacturing. The DOD provided extraordinary financial relief 
to the company to keep it viable during the FDA approval 
process. Due to ongoing supply problems, the program continues 
to be slowed.
    b. Benefits.--While the DOD refused to halt the AVIP, DOD 
leadership have admitted that mistakes in implementing the 
program have been made and that communication with service 
members has improved. The committee continues to be disturbed 
at the effect on morale and readiness the AVIP program is 
having and the difficulty many vaccine injured have in 
obtaining adequate medical care.
    c. Hearings.--Three hearings were conducted:
    1. ``Defense Vaccines: Force Protection or False 
Security?'' October 12, 1999.
    The full committee examined the overall picture of vaccines 
for defense. As part of our ongoing investigation into 
vaccines, the committee examined the safety, efficacy, the 
importance of informed consent, the concerns about vaccine 
ingredients, purity, and the long-term safety concerns. The 
committee looked into the role of vaccines as a defense 
mechanism for biological warfare. Is it viable and appropriate 
to use vaccines as a defense mechanism? Will it be possible and 
practical to develop vaccines to protect against all known and 
potential biological threats.
    Chairman Burton made the following comments at the opening 
of this hearing:

          Much has been said by numerous Government officials 
        about the biological warfare threat. We have been told 
        in previous hearings and in testimony prepared for 
        today that ``at least 10 nation-states and two 
        terrorist groups are known to possess, or have in 
        development, a biological warfare capability.'' Are all 
        these nation-states our enemies? How many are confirmed 
        to actually have weapon-dispensable anthrax poised and 
        ready to launch? Intelligence and military officials 
        have testified that it is relatively easy to develop 
        and produce chemical and biological weapons. However, 
        they have also testified that it is much more difficult 
        to successfully deploy chemical weapons. For instance, 
        the Deputy Commander of the Army's Medical Research and 
        Materiel Command testified in 1998 that, ``an effective 
        mass-casualty producing attack on our citizens would 
        require either a fairly large, very technically 
        competent, well-funded terrorist or state 
        sponsorship.'' And in March 1999 another expert stated, 
        ``the preparation and effective use of biological 
        weapons by potentially hostile states and by non-state 
        actors, including terrorists, is harder than some 
        popular literature seems to suggest.
          We've also been told that anthrax is the most likely 
        candidate for a biological warfare threat. What is the 
        basis for that determination? With the aggressive 
        information offensive the Department has launched to 
        its military members and the American public, it's made 
        to sound like the equivalent of the Cuban Missile 
        Crisis. If that is so, then those who are in harms way, 
        and the American public, deserve to know the whole 
        story. A State Department fact sheet on chemical and 
        biological warfare states, ``The Department of State 
        has no information to indicate that there is a 
        likelihood of use of chemical or biological agent 
        release in the immediate future. The Department 
        believes the risk of the use of chemical/biological 
        warfare is remote, although it cannot be excluded.''
          There are several issues that need clarification 
        regarding the current anthrax vaccine program. 
        Including answering why the United States is the only 
        member of NATO that mandates this vaccine? The Defense 
        Department would have us believe that the concerns 
        raised about the anthrax vaccine are minor and by a 
        ``small and vocal group.'' In fact, on their website, 
        Major Guy Strawder, states, ``Much of the hand-wringing 
        and bizarre allegations about the vaccine is coming 
        from a vocal minority of people who think the `field' 
        is where a farmer works and `Gortex' is one of the 
        Power Rangers. Most of these folks have never spent a 
        single moment in harm's way and have no appreciation of 
        what that sacrifice means.'' How does that measure up 
        to the following statements that have been sent to us:
         ``I have served my country with honor and 
        total dedication since 1970. To have this unsafe and 
        unproven vaccine put an abrupt end to my service is a 
        travesty of justice. I have constantly received 
        excellent appraisals for the past three decades and had 
        nothing in mind but to continue receiving these favored 
        appraisals. We in the military have been told too many 
        false statements about this vaccine. We have been 
        misled about the safety, the long-term effects 
        associated with this vaccine, the proper number of 
        adverse reactions, and the attrition and refusals in 
        our total force. Many will leave the military because 
        of this vaccine and it's problems. Many of these folks 
        will give up a career dedicated to service to their 
         Or the Pilot from Maine who said, ``I will be 
        forced out of the Air National Guard and lose my 
        retirement. I have put in 15 good years as a pilot and 
        have enjoyed every one of them. I will not however, put 
        my health and my future ability to take care of my 
        family on the line for a DOD that refuses to examine 
        their own programs for the safety and cohesion of our 
         Or the F-16 fighter pilot who stated, ``I 
        personally have over 22 years of faithful service in 
        the Air Guard. My record is exemplary. I was not 
        planning to retire for at least two to three more years 
        but the anthrax vaccine program has expedited my 
        retirement plans. The commander of my unit will not 
        allow me to stay in until March 7, 2000, when I will 
        have three years time and grade to keep my LTC rank 
        into retirement. After almost 23 years of faithful 
        service to my country I will not be allowed to stay in 
        for the 67 additional days needed to carry Lieutenant 
        Colonel into retirement.''
          Either the Defense Department is being less than 
        forthcoming about objections being raised, or they have 
        their heads buried in the sand. At lot of the concerns 
        have been raised about the actual number of adverse 
        events from the anthrax vaccine. The numbers vary 
        greatly. Every thing from 0.0002 percent reported in 
        the media in February, to 0.2 percent on the package 
        insert, to 20 percent in the one active surveillance 
        currently underway. (Attachment). If the Department is 
        not doing active follow-up and tracking of health 
        concerns service-wide, then how will we ever garner an 
        accurate representation of adverse events?
          Vice Admiral Richard A. Nelson, Medical Corps Surgeon 
        General, U.S. Navy, stated, ``I am aware of the 
        controversy associated with AVIP and the concern our 
        troops have regarding potential side effects. The 
        vaccine is safe. . . . Of the over 82,000 Marines and 
        Sailors inoculated, only eight reactions have been 
        reported via the Vaccine Adverse Reporting System. All 
        have returned to full duty.'' In cross-examination, one 
        medic from 29 Palms had no knowledge of the existence 
        of a Vaccine Adverse Events Reporting System form. 
        Adverse event reports are difficult to file when the 
        medical personnel are not even aware that such a thing 
          The Defense Department states that it requires their 
        medical personnel to report all adverse events that 
        cause a loss of duty of greater than 24 hours or 
        hospitalization. Are these the only types of events 
        that are truly adverse? How is it that the Defense 
        Department has been allowed to determine what 
        constitutes a reportable adverse event? The former FDA 
        Commissioner stated that adverse events are 
        dramatically underreported, only one in ten typically. 
        We also know from previous statements made by the 
        Defense Department that military reporting is one-
        seventh of the civilian rate. Given these figures, less 
        than 2 of every 100 systemic adverse event are being 
        reported. And for those who have an adverse event, is 
        adequate care being provided? Why is it that many 
        individuals who have been suffering for a very long 
        time with adverse events, are still waiting for 
        appointments with appropriate specialists? Or the 
        statement from one Sergeant from Georgia who suffered 
        with memory loss, swelling, dizziness, a rash, muscle 
        twitching, and a month of diarrhea, ``the doctors 
        repeatedly ignored my statement that I became sick 
        after taking the anthrax vaccinations.'' And the Master 
        Sergeant from Michigan who was told that his symptoms 
        showed that he had the flu for an entire year. This 
        diagnosis from a military doctor who chose only to talk 
        to him and did absolutely no blood work or examination. 
        And what about plans for more vaccines? Just how many 
        vaccines can one human being safely receive in their 
        lifetime? The Federal Government currently recommends a 
        total of 26 doses of vaccines for children. The typical 
        twenty-year career military member can expect an 
        additional 37 doses of vaccinations, plus the anthrax 
        and other deployment vaccinations that would total at 
        least 40 doses over twenty years. There are currently 
        another 18 vaccines in development under the Joint 
        Vaccine Acquisition Program. And if all the potential 
        biological warfare threats are developed into vaccines, 
        these numbers will skyrocket. Are we going to vaccinate 
        our military to death?
          Maybe we need to look at other approaches to dealing 
        with the biological threat. For instance, with good 
        detection equipment and protective gear, the use of 
        products like the orphan drug that we have just learned 
        is currently in development that causes the anthrax 
        spores to explode rather than synthesize and can also 
        be used to decontaminate equipment and clothing.
          I hope that we can find solutions to these issues, 
        get the full story on issues raised, and by doing so, 
        take action to begin to restore trust in the ranks and 
        restore and preserve the careers that have been 

    This hearing provided an opportunity to review the 
development of policy regarding protection from biological 
warfare through the use of vaccines. The Subcommittee on 
National Security, Veterans Affairs, and International 
Relations has conducted five hearings on anthrax vaccine 
issues. Anthrax is an infectious bacterial disease spread by 
contact with infected animals, handling infected products, 
eating infected meat, or breathing weapon-dispersed anthrax 
spores. The Department of Defense has stated that anthrax is a 
confirmed threat and that the licensed vaccine is the only 
known protection for this threat. What is the role of detection 
devices, protection gear, and other vaccines? With increased 
concerns about the safety of the vaccine as well as concerns 
about military readiness, it is vital that all concerns be 
appropriately addressed and resolved.
    As part of our ongoing investigation, we learned that 
numerous vaccines are in development to protect the military 
against biological warfare agents. If implemented, these 
vaccines will equal about 300 shots for an individual during 
their military career, in addition to the routine immunization 
schedule they already comply with. Do we have scientific 
evidence to indicate that the human body can safely receive so 
many vaccinations? Do we have a well-developed policy in place 
for decisionmaking criteria?
    The Department of Defense categorizes the Persian Gulf war 
delivery of vaccines as the ``pre-modern era,'' stating that 
since that time, vast advances have been made in the tracking 
of vaccinations and of adverse events. They also have stated 
that no one has ever gotten anthrax that had received two 
vaccines. The Department stated that during the Persian Gulf 
war it was confirmed that Iraq had the capability to use 
anthrax as a weapon of mass destruction. It was stated that 
leaders in the field had the authority to use anthrax, but 
chose not to. The Department also stated that it was confirmed 
that North Korea has weapon-dispensable anthrax and, by flying 
close to the de-militerized zone at sunset, they could spray 
from airplanes enough anthrax that by dawn the next day, the 
entire South Korean population would be exposed to anthrax. If 
these statements are accurate, has the Department of Defense 
implemented an effective policy to insure the safe and 
appropriate delivery of protection to its members?
    The development of policy involves several Government 
agencies including the Department of State and the Food and 
Drug Administration. The Department of State is currently in 
discussion with DOD regarding the purchase of anthrax for 
dependents. The Food and Drug Administration is responsible for 
licensing manufacturers, inspecting facilities, for monitoring 
adverse events, and for monitoring Investigational New Drugs 
[INDs] of which the DOD has an IND for changing the shot 
delivery from subcutaneous to intramuscular and from a six shot 
cycle to a three shot cycle.
    Sue Bailey, M.D., Assistant Secretary for Health Affairs, 
Department of Defense, Major General Randall L. West, Special 
Assistant to the Secretary of Defense for Biological Warfare 
and Anthrax Department of Defense, and Lt. Col. Randy Randolph, 
Director, Anthrax Vaccine Immunization Program Agency testified 
on behalf of the Defense Department, presenting an outline of 
vaccine policy and adverse events monitoring.
    Cedric E. Dumont, M.D., medical director, Office of Medical 
Services, Department of State testified regarding State's 
consideration of making the anthrax vaccine available to 
dependents who reside in high-threat areas. Extensive 
discussion took place regarding the lack of research indicating 
safety for minors and the elderly. Dr. Dumont stated,

          Pre-exposure immunization against infectious diseases 
        is an integral part of Foreign Service life. Our 
        communities are often exposed to exotic infectious 
        agents and pre-exposure administration of vaccines is 
        the most effective means to protect against infectious 
        health risks. Good examples are the hepatitis and 
        yellow fever vaccines. Anthrax exposure, from our point 
        of view, is just one additional health risk. Placed 
        into this context, the anthrax vaccine has been added 
        to the Department's immunization armamentarium. Like 
        all our vaccines, it is offered on a strictly voluntary 
        basis. Aimed at protecting the workplace, this vaccine 
        is offered to eligible individuals overseas. It is 
        administered following strict FDA guidelines. The 
        mobility of the Foreign Service community and the 
        worldwide risk of a biological attack against our 
        missions compel us to make this vaccine available 
        worldwide. Recognizing the limited supplies of the 
        vaccine, we are implementing this program in a stepwise 
        manner, beginning at Posts where we previously pre-
        positioned the vaccine. As the vaccine becomes more 
        available, we plan on expanding the program to all our 
        missions throughout the world. Protection of the 
        Ineligible Population. One of the most difficult 
        challenges we face is how to protect those individuals 
        presently ineligible for the vaccine (less than 18 or 
        over 65 years of age or pregnant). The family members 
        of Foreign Service employees while arguably at a lower 
        risk of exposure to anthrax when its target is the work 
        place are still at risk of exposure especially at 
        missions where embassy housing is clustered near USG 
        offices and where services commonly used by family 
        members are located within the chancery (example: 
        commissary, medical services, etc. . . .). Sensitive to 
        this concern, the Department of State is engaged in a 
        dialogue with the Food and Drug administration and the 
        manufacturer of the vaccine, Bioport, in exploring the 
        feasibility of providing the vaccine on a voluntary 
        basis to presently ineligible individuals through a 
        Food and Drug Administration approved clinical 
        investigational new drug [IND] study. The purpose of 
        the IND study is to determine the safety and 
        immunogenicity of the vaccine in those individuals 
        otherwise ineligible.

    Kathryn C. Zoon, Ph.D., Director, Center for Biologics, 
Evaluation and Research, Food and Drug Administration testified 
regarding the FDA's role in the licensing and monitoring of 
vaccines and its interactions with the Defense Department 
regarding the Anthrax Vaccine Immunization Program. Dr. Zoon 

          In May 21, 1987, FDA entered into the current MOU 
        with DOD. This replaced the previous MOU signed in 
        1974. The 1987 agreement established procedures to be 
        followed by DOD and FDA regarding the investigational 
        use of drugs, biologics and medical devices. The MOU 
        affirms that clinical testing of new drugs will be done 
        in accordance with application regulations concerning 
        INDs and IRBs. The MOU addressed the possibility of a 
        need for expedited review of an IND by FDA to meet DOD 
        requirements concerning National defense 
        considerations. Under the MOU, DOD is responsible for 
        classifying medical research and development as it 
        relates to information that may be made public under 
        Freedom of Information Act regulations. It should be 
        stressed that this agreement, however, does not allow 
        DOD to perform research on humans without submitting an 
        IND and it requires DOD to comply with all FDA 
        regulations. FDA has not had an official role in the 
        development or operation of the Department of Defense's 
        Anthrax Vaccine Immunization Program, including the 
        AVIP tracking system or the program's adverse event 
        reporting system. In March 1997, DOD briefed FDA about 
        their draft plan for the possible use of the anthrax 
        vaccine to inoculate U.S. military personnel according 
        to the FDA approved labeling for six doses administered 
        on a specified schedule over eighteen months. 
        Subsequently, FDA learned that the DOD plan had been 
        adopted. In July 1998, DOD requested that CDC, in 
        conjunction with the Health Resources and Services 
        Administration, National Vaccine Injury Compensation 
        Program [VICP], organize and coordinate a program to 
        evaluate VAERS reports for the anthrax vaccine. In 
        response to the request by DOD, a group of non-
        government medical experts was convened by the VICP in 
        the fall of 1998 as the Anthrax Vaccine Expert 
        Committee [AVEC]. AVEC, coordinated by VICP, has met 
        eight times since 1998. These experts have been 
        reviewing all VAERS reports for the anthrax vaccine. 
        Representatives of VICP, FDA, CDC and DOD have attended 
        meetings, and FDA has provided information to assist 
        the committee in its deliberations. AVEC is unique in 
        that it provides an independent civilian expert 
        assessment of adverse events reported for the anthrax 
        vaccine. Upon learning that some DOD personnel may be 
        receiving their anthrax vaccine doses significantly 
        later than the FDA approved schedule, both Dr. Jane E. 
        Henney, Commissioner of the Food and Drug 
        Administration, and I, recently sent letters to DOD. In 
        the letters we asked DOD to expeditiously investigate 
        this matter as we are unaware of any data demonstrating 
        that any deviation from the approved intervals of doses 
        found in the approved labeling will provide protection 
        from anthrax infection. We will continue to monitor 
        this issue.

    John B. Classen, M.D., MBA, Baltimore, MD, raised concerns 
regarding the increased incidence of diabetes in veterans and 
the potential that this is linked to vaccines.
    Major Sonnie Bates, pilot, USAF was invited to testify 
before the committee to detail his observations and experiences 
with regards to the Anthrax Vaccine Immunization Program. Major 
Bates had intended to be innoculated with the anthrax vaccine 
as a part of his duties. After arriving at Dover Air Force 
Base, he learned of the unusually high rate of illnesses in 
otherwise healthy individuals who all had one common factor--
receiving the anthrax vaccine. Major Bates raised his concern 
during an initial meeting with his squadron commander, who was 
open and objective about the issue and recommended that Major 
Bates research the issue further in order to make an informed 
decision regarding innoculation. The information provided to 
the committee is a result of Major Bates' research. It is 
important to note that at the time of the hearing Major Bates 
had not yet been ordered to take the vaccine. At no time during 
the hearing did Major Bates indicate his decision to not take 
the vaccine. After the hearing, Major Bates felt retaliated 
against and felt that the order for him to take the vaccine was 
moved up. As a result of these actions, Major Bates refused the 
vaccine and eventually was granted a discharge from the Air 
    Major Bates learned 12 people, in his squadron alone, have 
unusual or disabling illnesses that did not exist prior to the 
anthrax vaccine and the causes are unknown. They included 
medically diagnosed conditions of thyroid damage, liver damage, 
external and internal cysts (including cysts around the heart), 
autoimmune disorders, crippling bone/joint pain, seizures, 
memory loss, vertigo, and inability to concentrate have been 
documented. In addition, there are as many as 60 cases of such 
unusual illnesses at DAFB. It is important to remember that in 
the military, physical fitness is a must, health status is 
rigorously monitored. If Major Bates' squadron health figures 
represented the norm, then approximately 4.4 percent of our 
military force would be disabled due to these strange 
illnesses. Major Bates expressed concern that the military 
leadership seems desensitized to the illnesses at Dover Air 
Force Base.
    Major Thomas L. Rempfer, Pilot, USAF Reserves offered the 
following testimony,

          I open my testimony with the core values of the US 
        Air Force.

          ``Integrity first, service before self, and 
        excellence in all we do.''

          I am not here today to speak about the safety and 
        efficacy of the anthrax vaccine. Instead, I am here to 
        discuss another reason for the growing retention 
        problem generated by the anthrax vaccination policy: it 
        is integrity, and its relationship to doctrine. After 
        exhausting all avenues within my chain of command, and 
        communicating with hundreds of service members over the 
        past year, I have concluded that the root cause of the 
        negative reaction to the anthrax vaccination policy is 
        a sense that the professional standards demanded of 
        military personnel have been consistently violated by 
        those implementing this policy. It is not, as DOD 
        officials assert, simply a failure to educate, but 
        instead a failure to communicate the truth, the whole 
        truth, and nothing but the truth. Here are just a few 
         First, when the anthrax vaccination policy was 
        announced on December 15, 1997, a senior officer, who 
        refused to be named, told reporters: ``It's been 
        licensed since 1970, [and has a] proven safety record. 
        It's been documented.''
         The whole truth is that in April 1998, Dr. 
        Kathryn Zoon of the FDA stated in a letter that, ``data 
        for clinical studies conducted on the long term health 
        effects of taking the anthrax vaccine have not been 
        submitted to the FDA.''
         The General Accounting Office reiterated this 
        fact on April 30, 1999.
         Just last week the Army announced they would 
        now conduct such a study.
         Next, the Assistant Secretary of Defense for 
        Health Affairs, who is a physician, told Congress on 
        March 24th that ``the safety of our AVIP was also 
        confirmed by an independent review of the program.''
         She was referring to a report by a Yale 
        University Medical School professor who was selected by 
        DOD to review the health and medical aspects of the 
        anthrax vaccination policy before its implementation. 
        The whole truth is that the doctor our DOD repeatedly 
        cited for over a year as their independent expert is 
        really an obstetrician and gynecologist. He wrote 
        Congress, upon being requested to testify last April, 
        that he had informed DOD at the time of the review that 
        he had ``no expertise in anthrax.''
         DOD has never acknowledged this admission by 
        their ``expert'' or explained why they asked an OB/GYN 
        to review a biological warfare immunization program. As 
        a result DOD's independent review is perceived as a 
         Next, the Assistant Secretary of Defense for 
        Public Affairs speaking about the vaccine in January 
        said, ``It's safe and reliable . . . It works and has 
        no side effects.''
         On June 29th he ridiculed the idea of adverse 
        reactions to the vaccine when he told reporters: ``I've 
        had three shots. My hair is growing more robust than 
        ever. I sleep better. I eat better, run farther. It's 
        been nothing but a great experience.''
         The whole truth is that DOD physicians met at 
        Ft. Detrick, MD, on 25 to 27 May, 1999 to discuss 
        adverse reactions to the vaccine, including the case of 
        an Air Force pilot who developed an auto-immune 
        disorder after receiving the vaccine and had been 
        grounded since November 1998.
         On September 30th the Army Surgeon General 
        admitted to 72 cases of adverse reactions that had 
        required hospitalization--while he continued to 
        minimize the risk of the vaccine.
         Next, the Assistant Secretary of Defense for 
        Public Affairs has also asserted for months that the 
        number of anthrax refusals is only about 200 service 
        members, inferring no significant impact to readiness. 
        Yet, on September 30th a DOD spokesman finally 
        acknowledged that DOD had made a conscious decision not 
        to track refusals.
         The whole truth is that DOD crafted a ``no bad 
        news'' tracking system that only tracks the 
        administration of shots, but does not track adverse 
        reactions or refusals. The Deputy Secretary of Defense 
        admitted to Congress on September 30th, ``he was 
        reluctant to count refusals through a central tracking 
        system because it would undermine command authority.''
         He did not elaborate why telling the truth 
        would undermine the chain of command. Next, the 
        Assistant Secretary of Defense for Reserve Affairs 
        stated on August 17, 1999: ``before Secretary Cohen 
        authorized the use of a single dose, he ordered 
        supplemental testing of the vaccine, doubly ensuring 
        the vaccine's safety and far exceeding any 
        pharmaceutical industry standards. Supplemental 
        testing, combined with the ongoing supervision of the 
        FDA, demonstrates that the vaccine is safe and 
         The whole truth is that on April 29, 1999, BG 
        Eddie Cain admitted that DOD had suspended the 
        supplemental testing after ``inconsistencies'' were 
        found in the procedures being used by the manufacturer, 
        Bioport, despite supervision by another DOD contractor 
        hired to oversee the testing.
         Additionally, the GAO reported that 
        supplemental testing couldn't compensate for a flawed 
        manufacturing process.
         Next, the Assistant Secretary of Defense for 
        Reserve Affairs additionally testified to Congress on 
        September 29th, after being reminded he was under oath, 
        that if someone is going to resign over anthrax, ``they 
        are certainly not going to be subject to any penalties. 
        This is one of the points of the Guard and Reserve.'' 
        The whole truth is that five days later the commander 
        of the 184th Bomb Wing, Kansas Air National Guard, 
        issued a written warning to a B-1 bomber pilot 
        threatening a $500 fine and six months in jail, because 
        the pilot had asked to transfer in lieu of submitting 
        to the vaccine.
         Next, the Deputy Secretary of Defense wrote 
        Newsweek Magazine on April 3, 1998 about the anthrax 
        vaccine manufacturer, stating, ``no shutdown was ever 
        directed or contemplated as a result of any FDA 
         Additionally, on August 5, 1999, a senior 
        officer who refused to be named told reporters that a 
        threatened FDA shutdown of the manufacturer's 
        production line was an ``urban legend.''
         The whole truth is that the FDA sent a 
        ``notice of intention to revoke'' the manufacturer's 
        license on March 11, 1997 after ``significant 
        deviations'' discovered during previous inspections 
        remained uncorrected. (20) A follow-up FDA report in 
        February 1998 found that, ``the manufacturing process 
        for Anthrax Vaccine is not validated.''
         The manufacturer subsequently ``voluntarily'' 
        suspended anthrax vaccine production. All of the 
        vaccine used on service members to-date was 
        manufactured during the period of repeated significant 
        deviations from FDA manufacturing standards. Next, in 
        September 1998, the Secretary of the Army wrote a 
        letter indemnifying the anthrax vaccine manufacturer.
         It stated: ``The obligation assumed by [the 
        manufacturer] under this contract involves unusually 
        hazardous risks associated with the potential for 
        adverse reactions in some recipients and the 
        possibility that the desired immunological effect will 
        not be obtained by all recipients.'' When that letter 
        surfaced in June, DOD called it ``a misreading of a 
        routine contracting procedure.''
         The whole truth is that the last vaccine to 
        receive similar indemnification was the swine flu 
        vaccine in 1976--a health care fiasco that was 
        supported by the health care community as the anthrax 
        vaccine appears to be today.
         Next, the Director of the Air National Guard 
        testified under oath on September 29, 1999, that only 
        one member of the Air National Guard had left over the 
        anthrax vaccine. The whole truth is that eight pilots 
        from the Connecticut ANG resigned or transferred 
        specifically because of the anthrax vaccine, as did 
        seven pilots in the Wisconsin ANG who are now grounded 
        while awaiting out-processing. Four days after this 
        testimony denying attrition, 22 of 50 pilots in the 
        Tennessee ANG unit in Memphis quit--along with 38 other 
        service members. These are just a few examples of the 
        current attrition and pale in comparison to the 
        expected losses to a program just beginning in the 
        reserves. Finally, the Secretary of Defense has stated 
        that he would be ``derelict'' in his duty if he did not 
        mandate use of the anthrax vaccine.
         The whole truth is that weaponized anthrax has 
        been available since World War II and the anthrax 
        vaccine has been available since 1970. Additionally, 
        the GAO has testified that, ``the nature and magnitude 
        of the military threat of biological warfare has not 
        changed since 1990.''
         Accepting the Secretary's statement means that 
        every other Secretary of Defense in the post-Cold War 
        era has been derelict for not mandating the vaccine. 
        Framing the anthrax vaccination as a moral imperative 
        has precluded an intellectually honest debate about 
        this policy and has resulted in punishment of those who 
        question it.


          These ten lapses of our core values are merely the 
        beginning in the unraveling of the truth. They have 
        placed military commanders at all levels in an 
        untenable position: either implement a questionable 
        policy or sacrifice their careers. Consequently, the 
        anthrax vaccine policy has turned into a biological 
        loyalty test. The anthrax vaccine is no longer a health 
        policy. Instead, it has become an issue of ``good order 
        and discipline'' and the ability of the military's 
        leadership to impose its will on subordinates. Loyal 
        service members now must express their fealty to the 
        chain of command by submitting to the vaccine. For 
        those who don't, there is arbitrary discipline--
        incarceration and court-martial for some, dismissal and 
        disgrace for others.
          Each of these examples demonstrates a breakdown of 
        intellectual honesty, which is the linchpin of 
        integrity and doctrine. Without honesty doctrine is 
        merely dogma. Congressman Shays has referred to the 
        anthrax vaccination policy as a ``medical Maginot 
          It requires the tacit cooperation of our adversaries 
        to use the only biological agent against which we have 
        invasively defended ourselves. It requires our 
        adversaries to not use chemical agents at all. It 
        requires our adversaries to attack only the one percent 
        of Americans who are vaccinated. Recognizing the 
        logical long-term implications of this facade of force 
        protection former deputy director of the Soviet 
        biological weapons programs, Dr. Ken Alibek, told the 
        Joint Economic Committee of Congress that: ``In the 
        case of most military and all terrorist attacks with 
        biological weapons, vaccines would be of little use.''
          Further, he recently stated: ``We need to stop 
        deceiving people that vaccines are the most effective 
        protection and start developing new therapeutic and 
        preventive approaches and means based on a broad-
        spectrum protection.'' Service members have discovered 
        an acute dichotomy between what defense officials are 
        telling Congress and the information readily available 
        in government documents, Congressional testimony, 
        medical research and news reports. This contrast 
        creates an ethical dilemma for service members whose 
        core values require the questioning of immoral orders. 
        Consequently, out of our respect for the Constitutional 
        imperative of civilian control of the military we have 
        reluctantly and repeatedly asked Congress to intercede 
        and stop the corrosive impact the anthrax vaccination 
        policy is having on our nation's military. If Congress 
        is not proactive in response to DOD's absence of 
        intellectual honesty, the unfortunate reality is that 
        those members of the all-volunteer military who do 
        embody its core values will simply leave.
          I close with an excerpt from The Soldier and the 
        State, by noted Harvard military scholar, Samuel 
        Huntington. He rhetorically asked, ``what does the 
        military officer do when he is ordered by a statesman 
        to take a measure which is militarily absurd when 
        judged by professional standards and which is strictly 
        within the military realm without political 
        implications?'' Huntington answered, ``the existence of 
        professional standards justifies military 
        disobedience.'' Our professional standards have been 
        made very clear: Integrity first, service before self, 
        and excellence in all we do. Therefore, I believe I 
        would be derelict in my duty if I did not take this 
        opportunity to express my adamant professional dissent 
        toward the Anthrax Vaccine Immunization Policy. As 
        well, it would be unconscionable for me not to seek 
        redress for all Service members, dedicated to the 
        profession of arms, who have been inexorably drawn into 
        this professional military dilemma.

    Neal A. Halsey, M.D., director, Institute for Vaccine 
Safety, Johns Hopkins University presented testimony supporting 
vaccine safety.
    Kwai-Cheung Chan, Director, Special Studies and Evaluation, 
U.S. General Accounting Office, presented the findings of the 
ongoing GAO investigation of the anthrax issues. The GAO's 
investigation has uncovered a higher than expected adverse 
reaction rate, including evidence that females have reactions 
at twice the rate that males do. Concerns raised by the GAO 
included the viability of the Anthrax Vaccine Immunization 
Program, concerns that the actual threat has not increased in 
10 years and is being misrepresented, and concerns that the 
program is having a deleterious effect on retention and morale.
    William J. Crowe, Jr. (Adm, USN Ret.) testified regarding 
the development of defense policy for biological warfare during 
his tenure as chairman of the Joint Chiefs of Staff and his 
role as part owner of Bioport, the anthrax vaccine manufacturer 
with a sole-source contract to sell anthrax vaccine to the 
Department of Defense to inoculate 2.4 million members of the 
military. Admiral Crowe testified,

        BioPort monitors all reports of any unusual reaction. 
        The company is dedicated ``first and foremost'' to 
        producing a safe vaccine. Since the takeover of the 
        laboratory in 1998, BioPort has installed an enhanced 
        quality system and made extraordinary efforts to ensure 
        the continued safety and efficacy of the vaccines. I 
        should note in this regard that not a single dose of 
        this vaccine has ever been released without FDA 
        approval. Frankly, there is no question in my mind that 
        we should bend every effort to protect our forces 
        against anthrax attacks. Believe me, the descriptions 
        of people dying from the anthrax spore are horrifying. 
        It is an agonizing way to die. The effect is very 
        similar to that of the Ebola virus. I suspect if we had 
        had more experience with anthrax deaths, we would 
        better appreciate what the Department of Defense is 
        trying to do. The argument as to whether the military 
        program should be voluntary or mandatory is outside my 
        purview. I have little desire to enter that argument 
        but, again, I have chosen personally to protect myself 
        by taking the vaccine. Before closing let me discuss 
        one peripheral issue. It would be naive of me not to 
        mention some of the vague and rather misinformed 
        criticisms of my association with BioPort. It has on 
        occasion been rumored that the decision to inoculate 
        all service personnel was made to benefit the BioPort 
        Corporation and indirectly me, presumably because of my 
        past associations with the military and the 
        Administration. If this charge were not so ridiculous, 
        it would be offensive. It outrageously exaggerates my 
        influence. I didn't have that much influence when I was 
        Chairman and I certainly don't have it now. Let me be 
        completely clear. I never, repeat never, solicited any 
        official of this Administration to install or promote a 
        mandatory inoculation program. Secretary Cohen's 
        announcement of the mandatory vaccine requirement was 
        made on May 18, 1998. The Steering Group's 
        deliberations took place many months before this date. 
        Actually, a Washington Post article reported in late 
        1996 that such a policy was being considered. At the 
        time of the official announcement, the group I was 
        associated with was engaged in a spirited competition 
        with a number of other bidders to privatize the old 
        Michigan Laboratory. The bid winner was not selected 
        until June 1998 and the decision was made by the State 
        of Michigan. The Department of Defense maintained a 
        neutral position throughout this process. Frankly, the 
        May 18 announcement made the final bidding phase of the 
        competition more intense. The attempt to link me with 
        the Secretary's decision is pure fantasy.

    Jack Melling, the Salk Institute, Biologics Development 
Center, Stroudsbourg, PA, testified regarding the development 
of the British program on biological defense and presented a 
comparison of the two programs including the use of the anthrax 
    Milton Leitenberg, senior scholar, Center for International 
and Security Studies at Maryland, University of Maryland, a 
policy expert on the proliferation of biological warfare 
testified regarding the current level of threat for anthrax to 
be used in war time situations.
    2. The Anthrax Vaccine Immunization Program--What Have We 
Learned? Part One (October 3, 2000).
    Congressman Metcalf presented his findings regarding the 
discovery of the additive Squalene in the anthrax vaccine. The 
committee also received testimony from numerous injured 
military members who feel their life-changing injuries are due 
to the anthrax vaccine.
    3. The Anthrax Vaccine Immunization Program--What Have We 
Learned? Part Two (October 11, 2000).
    This hearing reviewed the DOD's implementation of the 
anthrax vaccine program, including concerns about retention and 
readiness problems developing in the National Guard and Reserve 
forces due to seasoned military members, in particular pilots, 
leaving the military or transferring out of flight positions to 
avoid risks associated with the vaccine. The committee sought 
clarification from DOD witnesses on conflicting statements made 
under oath to Congress and to the troops.
    d. Legislation.--In July 1999, Congressmen Walter Jones and 
Ben Gilman introduced legislation in response issues raised 
through the committee's investigation. Both bills were referred 
to the Armed Services Committee.
    1. H.R. 2548 Department of Defense Anthrax Vaccination 
Moratorium Act.
    Congressman Gilman introduced this bill to suspend further 
implementation of the Department of Defense anthrax vaccination 
program until the vaccine is determined to be safe and 
effective and to provide for a study by the National Institutes 
of Health of that vaccine. There were 44 cosponsors.
    2. H.R. 2543 American Military Health Protection Act.
    Congressman Walter Jones introduced this bill to make the 
Department of Defense anthrax vaccination immunization program 
voluntary for all members of the Armed Forces. There were 40 
            l. Missing White House E-mails: Mismanagement of Subpoenaed 
                    Records, March 23, March 30, May 3, and 4, 2000.
    On day one of these hearings, the committee heard testimony 
from six employees of Northrop Grumman Corp.--an outside 
contractor that provides technology support services to the 
Executive Office of the President [EOP]--and one EOP employee 
responsible for the Automate Records Management System [ARMS]. 
The witnesses testified about a technical failure in ARMS that 
prevented the White House from completely searching archived e-
mail in response to various congressional and grand jury 
subpoenas, about the White House's knowledge of the failure 
dating back 2\1/2\ years to the summer of 1998, and about the 
threats and secrecy requirements from White House officials 
Mark Lindsay and Laura Crabtree. The committee also heard 
testimony from Mark Lindsay and Laura Callahan who each denied 
the allegations against them.
    On day two of these hearings, the committee heard testimony 
from Counsel to the President Beth Nolan and Deputy Attorney 
General Robert Raben. Beth Nolan testified about her and her 
office's knowledge of the ARMS failures and why it had never 
informed the committee about its inability to search archived 
e-mail records. Robert Raben testified about the criminal 
investigation launched by the Justice Department following the 
committee's first hearing on the e-mail matter and the refusal 
of the Department to make Civil Division attorneys available 
for interviews with committee staff.
    During days 3 and 4 of the hearings, the committee 
continued its investigation of alleged threats and obstruction 
of justice regarding the White House's failure to produce 
hundreds of thousands of e-mails potentially responsive to 
subpoenas from Congress, the Justice Department and the Office 
of the Independent Counsel. During the first panel of the May 
3, 2000 hearing, the committee heard testimony from Karl 
Heissner, Branch Chief for Systems Integration and Development 
at the Office of Administration, as well as Michael Lyle, 
Director of the Office of Administration. The committee learned 
that, although the reconstruction project was handed over to 
Heissner, he received no direction from Office of 
Administration officials--including Mark Lindsay--to move 
forward with the project. During the second panel of the 
hearing, the committee heard from Assistant Attorney General 
Robert Raben on the Justice Department's criminal investigation 
of the e-mail matter.
    On May 4, 2000, the committee also heard two panels, the 
first comprised of Mark Lindsay, Assistant to the President for 
Management and Administration, Charles F.C. Ruff, former White 
House Counsel, and Cheryl Mills, former Associate White House 
Counsel. Mr. Ruff testified that he was ultimately responsible 
for a faulty comparison test that the White House relied on to 
conclude that there was not a problem with searches for e-
mails. In the second panel, the committee received testimony 
from Beth Nolan, White House Counsel, and Dimitri Nionakis, 
Associate White House Counsel. Nolan argued that the e-mails 
generated for the comparison test were not responsive to the 
committee's investigation, but the White House nevertheless 
produced the documents.
            m. Contacts Between Northrop Grumman Corporation and the 
                    White House Regarding Missing White House E-mails, 
                    September 26, 2000.
    At this hearing, the committee received testimony from 
Deputy Attorney General Alan Gershel of the Justice Department. 
The committee asked Mr. Gershel to testify to help the 
committee determine the extent to which the Justice Department 
was taking its criminal investigation into the e-mail matter 
seriously. However, Mr. Gershel was unwilling to disclose how 
many attorneys have worked on the Campaign Task Force's 
criminal investigation of the e-mail matter and was unable to 
cite any legal authority or written policy for refusing to 
provide the staffing levels to the committee.
    Also, Mr. Gershel conceded that he misspelled the name of 
Daniel Barry, a key individual implicated in the e-mail matter, 
in a letter notifying him that he was not a target in the 
Justice Department's investigation. And, despite that Mr. 
Gershel supervises the Campaign Financing Task Force, at the 
hearing, he was unable to identify individuals central to even 
that investigation.
            n. The Committee's Oversight of the Department of Justice's 
                    Campaign Finance Investigation.
    The committee's investigation of campaign finance 
irregularities and violations of law in the 1996 Federal 
elections led the committee to conduct oversight of the 
Department of Justice's parallel investigation. The committee 
became concerned about the Justice Department's handling of the 
campaign finance investigation when it learned through media 
reports that Director of the FBI Louis J. Freeh, wrote a 
November 24, 1997, memorandum to the Attorney General 
recommending that an independent counsel be appointed. The 
committee subpoenaed a copy of the memorandum and Attorney 
General Reno declined to produce it. Eight months later, 
Supervising Attorney of the Task Force Charles G. La Bella 
wrote a July 16, 1998, memorandum to the Attorney General Reno 
recommending the appointment of an independent counsel. The 
committee subpoenaed the La Bella memorandum, and again, 
Attorney General Reno declined to provide it to the committee.
    For 2\1/2\ years, the committee struggled to obtain copies 
of the Freeh and La Bella memorandum from the Justice 
Department. During that period of time, the committee issued 
four different subpoenas for the memos, in addition to a number 
of additional formal requests for the documents. In May 2000, 
the Justice Department finally relented, and provided copies of 
the Freeh and La Bella memos, and a number of other memoranda 
relating to the Attorney General's independent counsel 
decisionmaking process, to the committee. The committee 
released those documents to the public a short time later, on 
June 6, 2000.
    The memoranda showed that both Director Freeh and 
Supervising Attorney La Bella believed that an independent 
counsel should have been appointed to investigate the campaign 
finance investigation. Furthermore, they agreed that the 
Department of Justice was applying the Independent Counsel Act 
in a manner that almost ensured that one would not be 
appointed. Both believed that there was a higher standard for 
initiating an investigation of individuals covered under the 
Independent Counsel Act. The committee found the memoranda 
troubling in that they painted a bleak picture of the Justice 
Department's handling of the campaign finance investigation. In 
August 2000, the committee learned through the media that the 
new Supervising Attorney of the task force, Robert Conrad, 
recommended that the Attorney General appoint a special counsel 
to investigate Vice President Gore. The Independent Counsel Act 
expired on June 30, 1999, therefore, only a special counsel 
could be appointed. The committee subpoenaed the Conrad 
memorandum in August 2000, however, the Attorney General has 
refused to produce it.
    In the course of its oversight investigation, the committee 
sought to ascertain what information and evidence the Justice 
Department's Campaign Financing Task Force was collecting. In 
so doing, the committee subpoenaed from various entities and 
individuals the document requests or subpoenas they had been 
issued by the Department of Justice. The committee found that 
the Justice Department failed to pursue key individuals in the 
investigation. For example, the task force waited years to 
request from the White House information on people who played 
major roles in the investigation. In addition, the Democratic 
National Committee refused to comply with the committee's 
subpoena for Department of Justice requests or subpoenas.
    The committee conducted its oversight investigation to 
ensure that the Attorney General was carrying out her 
responsibilities as the chief law enforcement officer in 
situations where it was apparent that she had a conflict of 
interest. The committee found that the Attorney General did 
have a conflict in investigating the campaign finance matter, 
and her decision to retain control of the investigation of her 
superiors and her political party showed an unacceptable 
indifference to the appearance of impropriety. The committee 
held several hearings related to its oversight investigation of 
the Department of Justice's handling of the campaign finance 
investigation and issued a report as well.
            o. The Role of Yah Lin ``Charlie'' Trie in Illegal 
                    Political Fundraising, Part I, March 1, 2000.
    The committee held a hearing with Yah Lin ``Charlie'' Trie, 
a major figure in the campaign finance investigation. Mr. Trie 
was questioned about his links to various foreign governments 
and businessmen, his contributions to the Democratic National 
Committee [DNC], and his access to President Clinton and the 
White House. Mr. Trie testified about his relationships with 
several powerful overseas businessmen who have ties to the 
Chinese Government, including Ng Lap Seng (a.k.a. Mr. Wu) and 
Tomy Winata. Mr. Trie used money from Ng Lap Seng to funnel 
illegal foreign contributions to the DNC. Mr. Trie and his 
companies contributed approximately $230,000 to the DNC. Mr. 
Trie admitted that the hundreds of thousands of dollars he 
received from overseas was not reported on his U.S. income tax 
returns. Mr. Trie then worked with DNC officials to invite 
several foreign nationals to join the a DNC donor program in 
exchange for political contributions. Mr. Trie also testified 
about his relationships and business dealings with various 
employees of the Lippo Group, including John Huang and James 
Riady. Mr. Trie confirmed that he solicited, and illegally 
reimbursed, contributions for DNC fundraising events where John 
Huang was in charge. The DNC returned $645,000 in contributions 
solicited by Mr. Trie.
            p. The Justice Department's Implementation of the 
                    Independent Counsel Act, June 6, 2000.
    The committee called this hearing after it received 
numerous memoranda regarding the implementation of the 
Independent Counsel Act from the Department of Justice. The 
committee heard the testimony of Lee Radek, Chief of the Public 
Integrity Section, U.S. Department of Justice; William 
Esposito, former Deputy Director, Federal Bureau of 
Investigation; Neil Gallagher, Assistant Director for 
Terrorism, Federal Bureau of Investigation. The committee 
questioned the witnesses about a meeting which took place 
between them on November 20, 1996, at which Mr. Radek told Mr. 
Esposito that there ``was a lot of pressure on him'' regarding 
the campaign finance investigation, and that ``the Attorney 
General's job could hang in the balance.'' Mr. Radek was also 
questioned about his role in the campaign finance investigation 
and the various memoranda he had written regarding the 
implementation of the Independent Counsel Act.
            q. Has the Department of Justice Given Preferential 
                    Treatment to the President and Vice President, July 
                    20, 2000.
    The committee questioned four top Justice Department 
officials--Assistant Attorney General James Robinson, Deputy 
Assistant Attorney General Alan Gershel, Assistant Attorney 
General Robert Raben, and the Campaign Financing Task Force 
Supervising Attorney Robert Conrad--about disparate treatment 
President Clinton and Vice President Gore received in the 
campaign finance investigation. The Justice Department provided 
the President and Vice President copies of their April 2000 
interviews with the task force, which the President and Vice 
President subsequently released, without giving copies to the 
committee because the release of the interviews would harm 
ongoing criminal investigations. The Justice Department 
officials would not comment on videotape evidence where Vice 
President Gore appeared to tell Indonesian gardener Arief 
Wiriadinata that they should show DNC issue advertisements to 
James Riady, who resided in Indonesia, for the purpose of 
soliciting political contributions. The Justice Department 
officials would also not comment on subpoenas issued by the 
Justice Department to various government agencies, including 
the White House, which showed that records relating to key 
individuals in the investigation were either just recently 
subpoenaed or not subpoenaed at all.
            r. Felonies and Favors: A Friend of the Attorney General 
                    Gathers Information from the Department of Justice, 
                    July 27, 2000.
    At this hearing, the committee received evidence that 
Rebekah Poston, a prominent Florida attorney who was also a 
friend of the Attorney General, was involved in potentially 
illegal conduct, and had also obtained highly unusual favors 
from the Justice Department. The evidence showed that Ms. 
Poston, who was representing Soka Gakkai, a prominent Buddhist 
sect, had hired private investigators who illegally obtained 
National Crime Information Center [NCIC] arrest record 
information on Nobuo Abe, the leader of a rival Buddhist sect. 
The evidence also showed that Ms. Poston tried to obtain this 
same information legally through the Freedom of Information Act 
[FOIA] process. When her FOIA request was rejected, she 
approached high-level political appointees in the Justice 
Department, including John Hogan, the Attorney General's Chief 
of Staff, and John Schmidt, the Associate Attorney General. As 
a result of these contacts, Ms. Poston obtained a reversal of 
Justice Department policy, and obtained the information she 
sought from the Justice Department. The committee heard 
testimony from Rebekah Poston, Richard Lucas, a private 
investigator who had worked for Ms. Poston, and Philip Manuel, 
another private investigator who worked for Ms. Poston. The 
committee also heard testimony from Justice Department 
witnesses John Schmidt, the former Associate Attorney General, 
John Hogan, the former Chief of Staff to the Attorney General, 
and Richard Huff, the co-Director of the Office of Information 
and Privacy at the Justice Department.
            s. Russian Threats to United States Security in the Post 
                    Cold War Era.
    On January 24, 2000 the committee held a field hearing in 
Los Angles, CA to inquire about the threat of Soviet arms 
caches left in the United States after the cold war. Witnesses 
included: Congressman Curt Weldon; Congressman Tom Campbell; 
Stanislav Lunev, former GRU agent; Dr. Peter Pry, author of War 
Scare; Dr. William Green, California State University-San 
Bernadino; a representative from the CIA; and a representative 
from the FBI.
    The committee heard testimony from Congressman Curt Weldon 
on how he has questioned members of our government and the 
Russian Government. Stanislav Lunev gave compelling testimony 
about how the Soviet government asked him to find locations in 
the Washington, DC area to hide weapons of mass destruction. 
Dr. Pry and Dr. Green explained the current state of the 
Russian military and how they still pose a threat to the United 
States. The CIA and FBI provided testified under a closed 
session of the hearing.
            t. Rising Fuel Prices and the Appropriate Federal Response.
    On June 28, 2000 the committee held a hearing to examine 
the causes for rising gasoline prices, the impact on the U.S. 
economy, and the administration's response to the situation. 
Witnesses included: Mr. Scott Schneider, vice president of 
sales, ``Mister Ice''; Mr. Mark Hrobuchak, CEO/president of MPH 
Transportation & Logistics; Elaine Oberweis, CEO of Oberweis 
Dairy; Doug Wilson, farmer and member of NGCA; Charles Bailey, 
an electrician; Secretary Bill Richardson, Department of 
Energy; Administrator Carol Browner, Environmental Protection 
Agency; and Chairman Robert Pitofsky, Federal Trade Commission.
    Midwestern citizens told the committee heard the impact of 
the high price of gasoline in the summer 2000 on their personal 
lives and businesses. The committee asked Secretary Richardson 
why the price of gasoline rose so dramatically and what steps 
the Department of Energy was taking to reduce the cost of fuel. 
Administrator Browner responded to questions on the impact of 
reformulated gasoline and other EPA policies on the price of 
fuel. Chairman Pitofsky explained to the committee the FTC 
investigation into possible price fixing by the oil companies 
in the Midwest.
    On September 20 and 21, 2000, the committee held hearings 
on the potential energy crisis in the winter of 2000. Witnesses 
on September 20 included: Mr. John Santa, Chief Operations 
Officer, Santa Fuel; Mr. Ray Tilman, former president, Montana 
Resources; Mr. David Pursell, vice president of Upstream 
Research, Simmons & Company International; Mr. Steve J. Lane, 
senior facilities engineer, SDL, Inc.; Mr. David Hamilton, 
policy director, Alliance to Save Energy; Mr. Bob Slaughter, 
general counsel and director of public policy, National 
Petrochemical Refiners Association; Mr. Curt Hildebrand, vice 
president of project development, Calpine Corp.; Mr. Steve 
Simon, president of Worldwide Refining and Supply, Exxon Mobil 
Corp.; and Mr. David Hawkins, director of Air and Energy 
Programs, Natural Resources Defense Council. Witnesses on 
September 21 included: Secretary Bill Richardson, Department of 
Energy; Administrator Carol Browner, Environmental Protection 
Agency; and Chairman James J. Hoecker, Federal Energy 
Regulatory Commission.
    Industry experts told the committee that clear signs of 
strain have emerged across the U.S. energy markets, raising 
concerns about the ability to deliver reliable supplies of 
energy to major markets. The market is experiencing electricity 
price spikes because of greater demand and a lack of 
transmission capacity; home heating shortfalls due to the lack 
of refining capacity; and concerns over the natural gas 
industry's ability to meet the Nation's current and future 
needs due to greater demand, lack of new production and 
government restrictions on drilling and exploration. The 
committee asked Secretary Richardson about the administration's 
energy policy and what steps the Department is taking to assure 
the reliability of the Nation's energy supplies. Administrator 
Browner responded to questions regarding the impact of new EPA 
regulations on the domestic oil refining industry and their 
effects on energy markets. Chairman Hoecker responded to the 
committee's questions on natural gas pipeline capacity and 
FERC's investigation into electricity price spikes in 
            u. Further Investigation Into the Events Near Waco, TX in 
    The Committee on Government Reform conducted a year-long 
investigation of the actions of the Federal Bureau of 
Investigation, the Department of Justice, and the Department of 
Defense with regard to the standoff which occurred at the Mt. 
Carmel Center outside Waco, TX, from February 28, 1993, through 
April 19, 1993, as well as actions taken after the tragic end 
of the standoff.
    Attorney General Reno, along with other Department of 
Justice and FBI officials, had been emphatic in their public 
statements about the means by which the FBI inserted gas into 
the Branch Davidian residence on April 19, 1993 were non-
pyrotechnic. However, it was publicly disclosed in late summer, 
1999 that pyrotechnic tear gas rounds had been used. As a 
result, the committee began its investigation and Attorney 
General Reno appointed John Danforth as Special Counsel to 
conduct a Justice Department investigation.
    In addition to questions about why the use of pyrotechnic 
devices was not disclosed to Congress and the American people, 
the committee investigated allegations that: (1) government 
personnel may have fired weapons at the Branch Davidian 
compound; (2) Department of Defense personnel may have violated 
the Posse Comitatus Act; and (3) the Department of Justice did 
not conduct a thorough investigation of its own actions 
following the tragedy.
    The committee's investigation was limited to resolving 
these new allegations, thereby building on, but not replacing, 
the report issued in 1996 by this committee's Subcommittee on 
National Security, International Affairs, and Criminal Justice 
and the Committee on the Judiciary's Subcommittee on Crime. The 
committee found no reason to revise the major findings of the 
1996 report.
            v. Oversight of the Drug Enforcement Administration: Were 
                    Criminal Investigations Swayed by Political 
                    Considerations? December 6-7, 2000.
    The committee held 2 days of hearings regarding a DEA 
investigation of a suspected drug trafficker in Houston that 
was curtailed, apparently as a result of political pressure. 
The investigation, which had produced more than 20 convictions, 
was shut down in 1999 following a letter of complaint to 
Attorney General Janet Reno from Representative Maxine Waters. 
Shortly following this intervention, the Special-Agent-in-
Charge of the DEA's Houston Field Office called a meeting of 
the investigating officers and informed them that the 
investigation was being closed down due to political pressure, 
according to the testimony of four DEA and Houston Police 
Department officers who were present.
    The Special-Agent-in-Charge, Ernest Howard, testified that 
he had never shut down the investigation. However, his 
testimony was contradicted by internal e-mails he sent to the 
DEA's Washington headquarters in March 2000. Those e-mails 
stated, in part,

          Now we bow down to the political pressure anyway. . . 
        . it is over now. The Houston Division will terminate 
        all active investigation of Rap-A-Lot, except for those 
        persons who have already been arrested/indicted.

Those e-mails followed by 2 days a visit from Vice President 
Gore to a church in Houston which receives substantial 
financial support from the target of the investigation--James 
Prince. That same week, the lead DEA investigator was re-
assigned to a desk job. In effect, an unsubstantiated complaint 
by the target of a drug investigation, made through a Member of 
Congress, resulted in the investigation against him being 
    On Wednesday, December 6, the committee heard testimony 
from one DEA agent and three Houston Police Department officers 
who were participating in the joint investigation. The 
committee also heard testimony from Special-Agent-in-Charge 
Howard, DEA Deputy Administrator Julio Mercado, and DEA Chief 
Inspector R.C. Gamble. On Thursday, December 7, the committee 
again heard testimony from the witnesses listed above, as well 
as DEA Administrator Donnie Marshall.
    Administrator Marshall stated that he had been unaware that 
the investigation was shut down, and that it should not have 
been. He stated that the Justice Department's Inspector General 
has been asked to conduct an internal investigation into the 
agency's handling of the case. The committee's inquiry into the 
matter is ongoing.
                           II. Investigations


                             Full Committee

                       Hon. Dan Burton, Chairman

1. ``The FALN and Macheteros Clemency: Misleading Explanations, a 
        Reckless Decision, a Dangerous Message,'' House Report No. 106-
        488, December 10, 1999, Third Report by the Committee on 
        Government Reform, together with Dissenting and Additional 
    a. Summary.--This report detailed the committee's findings 
and conclusions in its investigation into President Clinton's 
grant of executive clemency to 16 individuals who were members 
of the terrorist groups FALN and Macheteros. The committee 
found that, although the President has the Constitutional 
authority to grant clemency to anyone, several individuals 
working in the White House saw a political benefit in releasing 
the terrorists. In addition, the Justice Department, Office of 
the U.S. Attorneys, and the Federal Bureau of Investigation all 
recommended against granting clemency to the 16 individuals. 
The report detailed the background of the convictions of the 16 
individuals, the process leading up to the clemency offer, and 
the actual offer and acceptance of the clemency by 14 of the 
individuals. The President claimed executive privilege over 
numerous documents relevant to the investigation.
    b. Benefits.--The committee's investigation outlined the 
clemency process generally and provided insight into this 
particular grant of executive clemency to the American public.
    c. Hearings.--The committee held a hearing entitled, 
``Clemency for the FALN: A Flawed Decision?,'' on September 21, 
Investigation of the President's Decision to Grant Clemency to 16 
        Convicted Terrorists
    The Committee on Government Reform conducted an 
investigation of the President's decision to offer clemency to 
16 FALN and Macheteros terrorists. On August 11, 1999, 
President Clinton extended offers of clemency to these 
terrorists incarcerated in Federal prison. Prior to these 
offers, he had offered clemency to only three Federal 
prisoners. Thus, offers of clemency to so many members of a 
terrorist organization came as a great surprise. In an attempt 
to understand the justification for the offers of clemency, 
this committee subpoenaed documents from the White House and 
the Department of Justice (including, the Federal Bureau of 
Investigation, the Office of the Pardon Attorney, and the 
Bureau of Prisons). The President responded by claiming 
executive privilege over critical documents from all 
departments relating to his decision. In claiming executive 
privilege, the President refused to provide this committee with 
material that would allow Congress an opportunity to see what 
recommendations were made to the President prior to his 
    Granting clemency to violent terrorists is a matter of 
national significance. At least two of the individuals granted 
clemency were captured on videotape making bombs. Half of the 
individuals granted clemency were arrested in a van, along with 
an arsenal of weapons. The terrorist organizations to which 
these individuals belonged, the FALN and Macheteros, were 
responsible for hundreds of bombings in which U.S. citizens 
were killed and wounded. Nevertheless, the President granted 
them clemency. During its investigation, the committee found 
that there were serious discrepancies between the public 
statements about the clemency made by the President and his 
staff, and the documents and information reviewed by the 
committee. Documents showed that White House aides were 
actively supporting the clemency since the initial petition. In 
fact, White House staff assisted in organizing an outside 
campaign to support the clemency.
    When the lives of American citizens are endangered and the 
victims of violent crime are treated with contempt, the 
oversight function of Congress is never more important. This is 
particularly true because the President of the United States 
withheld information from the American people. In such a 
situation, Congress is obligated to exercise its oversight 
authority. The committee held a public hearing regarding the 
clemency matter on September 21, 1999, and a report was issued 
on December 10, 1999. The hearing was entitled, ``Clemency for 
the FALN: A Flawed Decision?'' Two Members of the House of 
Representatives testified before the committee on the first 
panel, the Honorable Vito Fossella and the Honorable Carlos 
Romero-Barcelo. Representative Fossella spoke about his 
opposition to the grant of clemency. He explained that one of 
his concerns was the message, that the United States was not 
serious about punishing terrorists, that clemency would send. 
Representative Romero-Barcelo testified that although he did 
oppose the unconditional release of the terrorists, he was able 
to support a conditional release. On the second panel, several 
victims of FALN violence testified: Detective Anthony Senft 
(retired NYPD); Detective Richard Pastorella (retired NYPD); 
Mr. Thomas Connor; and, Mrs. Diana Berger Ettenson. Each 
individual testified about how the FALN's violence had affected 
their lives. Detectives Senft and Pastorella were severely 
wounded and left crippled by an FALN bomb. Mr. Connor lost his 
father and Mrs. Berger Ettenson lost her husband in the FALN 
bombing of Fraunces Tavern in New York City. All of the victims 
were unconditionally opposed to the President's grant of 
    The third panel of the hearing consisted of: Jon Jennings, 
Acting Assistant Attorney General for Legislative Affairs, 
Department of Justice; Michael B. Cooksey, Assistant Director 
for Correctional Programs, Bureau of Prisons; and, Neil 
Gallagher, Assistant Director for National Security, Federal 
Bureau of Investigation [FBI]. Mr. Cooksey testified about the 
role the Bureau of Prisons plays in the clemency process, as it 
maintains all of the records on Federal prisoners. Mr. 
Gallagher testified about the FBI's role in clemency. He made 
clear that the FBI believed that the individuals to whom the 
President granted clemency were violent criminals, members of a 
terrorist group that continued to pose a threat to the United 
    The committee continued to receive documents relating to 
the clemency from the White House, Department of Justice, 
Bureau of Prisons and FBI, even after the hearing. From the 
documents, it became clear that both the Department of Justice 
and Federal Bureau of Investigation opposed the grant of 
clemency, and communicated their views to the White House. 
White House documents made it clear that several staffers on 
the President's Interagency Working Group on Puerto Rico were 
strongly advocating clemency for the FALN and Macheteros 
terrorists. They referred to the terrorists as ``political 
prisoners'' and organized outside groups to lobby the White 
House for clemency. However, the President continues to claim 
executive privilege over numerous documents relating to the 
clemency, making it impossible for the committee to come to any 
solid conclusions about the clemency.
2. ``The Failure to Produce White House E-Mails: Threats, Obstruction, 
        and Unanswered Questions,'' House Report 106-1023, December 4, 
        2000, Eighth Report of the Committee on Government Reform, 
        together with Minority and Additional Views.
    a. Summary.--Since February 2000, the committee has been 
investigating allegations of threats and obstruction of justice 
regarding the White House's failure to produce hundreds of 
thousands of e-mails potentially responsive to subpoenas from 
Congress, the Justice Department and the Office of the 
Independent Counsel. The committee's investigation also focused 
on the complete loss of about a year's worth of potentially 
responsive e-mail at the Office of Vice President.
    This report detailed the committee's work to date, and 
contained a number of new facts uncovered through the 
committee's work. For example, in the report, the committee 
found that the White House's e-mail problem was explained to 
senior White House staff but that the White House's management 
of the problem obstructed numerous investigations. The report 
also attributed the loss of a year's worth of potentially 
responsive e-mail at the Office of the Vice President to its 
decision not to store its e-mail in a way that would permit 
subpoena compliance. The committee also found that the White 
House failed to cooperate with its investigation into the 
committee's e-mail investigation and concluded that a special 
counsel must be appointed to investigate the e-mail matter. The 
committee also concluded that a special master should be 
appointed to supervise the review, reconstruction, and 
production of responsive White House e-mail.
    b. Benefits.--The committee's investigation into the White 
House's failure to produce subpoenaed e-mail revealed an 
affirmative attempt by the White House not to disclose to 
Congress, the Justice Department and the Office of the 
Independent Counsel, the existence of a massive universe of e-
mail potentially responsive to subpoenas issued by those 
investigative bodies. The committee's investigation also showed 
that handling of the matter by the White House Counsel's Office 
was either grossly negligent or purposefully inadequate. 
Because of the committee's investigation, prosecutors at the 
Justice Department and the Office of the Independent Counsel 
opened investigations into the e-mail matter. Generally, the 
report highlights the White House's refusal to appreciate the 
legitimate exercise of the committee's oversight jurisdiction.
    c. Hearings.--The committee held the following hearings 
entitled, ``Missing White House E-Mails: Mismanagement of 
Subpoenaed Records, Days 1 and 2,'' March 23 and 30, 2000; 
``Missing White House E-Mails: Mismanagement of Subpoenaed 
Records, Days 3 and 4,'' May 3-4, 2000; and ``Contacts Between 
Northrop Grumman Corporation and the White House Regarding 
Missing White House E-mails,'' September 26, 2000.
3. ``Janet Reno's Stewardship of the Justice Department: A Failure to 
        Serve the Ends of Justice,'' House Report 106-1027, December 
        13, 2000, Tenth Report of the Committee on Government Reform, 
        together with Minority Views.
    a. Summary.--This report detailed the committee's findings 
and conclusions in its investigation of the Justice 
Department's handling of the investigation into campaign 
financing irregularities and violations of law during the 1996 
Federal elections. The committee found that Attorney General 
Reno had a conflict of interest in conducting an investigation 
into activities relating to President Clinton, who appointed 
her, Vice President Gore, and her own political party. The 
Attorney General ignored her conflicts and disregarded the 
Independent Counsel Act by refusing to request the appointment 
of an independent counsel for the campaign finance matter. The 
report details facts which support the conclusion that the 
Department of Justice did not conduct a thorough investigation, 
and that the country would have been better served if an 
independent counsel or special counsel had been appointed to 
conduct the investigation.
    b. Benefits.--The committee's investigation brought to 
light the failures of the Department of Justice's 
    c. Hearings.--The committee held the following hearings 
related to the investigation: ``The Role of Yah Lin `Charlie' 
Trie in Illegal Political Fundraising, Part I,'' March 1, 2000; 
``The Justice Department's Implementation of the Independent 
Counsel Act,'' June 6, 2000; ``Has the Department of Justice 
Given Preferential Treatment to the President and Vice 
President,'' July 20, 2000; and, ``Felonies and Favors: A 
Friend of the Attorney General Gathers Information from the 
Department of Justice,'' July 27, 2000.
4. ``The Tragedy at Waco: New Evidence Examined,'' House Report 106-
        1037, December 28, 2000, Eleventh Report of the Committee on 
        Government Reform, together with Minority Views.
    a. Summary.--This report details the committee's findings, 
conclusions and recommendations after a year long investigation 
of the action's of the Federal Bureau of Investigation, the 
Department of Justice, and the Department of Defense with 
regard to the standoff which occurred at the Branch Davidian 
compound outside Waco, TX, from February 28 through April 19, 
1993, as well as the actions taken after the tragic end of the 
standoff. The committee found no evidence that any FBI agent, 
or others, fired their weapons at the Davidians on April 19th, 
and, although pyrotechnic tear gas grenades were fired at the 
compound by FBI agents, there was no evidence found that these 
grenades contributed to the conflagration. Additionally, the 
committee found no evidence that any military members involved 
with the Waco events violated the Posse Comitatus Act. The 
committee further found that the Department of Justice did not 
conduct a thorough investigation of its action as directed by 
the President.
    b. Benefits.--The committee's investigation reviewed new 
and additional information built upon and did not replace the 
Waco report issued in 1996 by this committee's Subcommittee on 
National Security, International Affairs, and Criminal Justice 
and the Committee on the Judiciary's Subcommittee on Crime. 
This investigation of new evidence provided the committee the 
opportunity for an enhanced review of the evidence of events 
surrounding the tragedy at Waco.

   Subcommittee on Criminal Justice, Drug Policy, and Human Resources

                      Hon. John L. Mica, Chairman

1. ``The Vaccine Injury Compensation Program: Addressing Needs and 
        Improving Practices,'' House Report 106-977, October 12, 2000, 
        Sixth Report by the Committee on Government Reform.
    a. Summary.--Since the 105th Congress, the committee has 
been conducting an investigation of vaccination policies and 
practices, with a special focus on childhood vaccine related 
injuries and the national vaccine injury compensation program. 
In the 106th Congress, the Subcommittee on Criminal Justice, 
Drug Policy, and Human Resources, chaired by Representative 
John L. Mica (R-FL), conducted hearings and an intensive 
investigation regarding some of these topics. On October 5, 
2000, Chairman Mica submitted to the Committee on Government 
Reform a report that had been prepared by the subcommittee, 
with the assistance and support of members and staffs of the 
majority and minority of both the subcommittee and full 
committee. This report was presented by subcommittee Chairman 
Mica and approved by the full committee without objection on 
October 12, 2000, with supportive statements from Chairman 
Burton and Ranking Member Waxman. Mr. Mica and others noted 
that the report resulted from bipartisan subcommittee hearings 
and investigations. The report addresses reforms to the program 
that Congress established to compensate fairly, adequately and 
efficiently persons who are injured or die as a consequence of 
our universal childhood vaccination policy. The report 
recognizes that childhood vaccines now protect millions in this 
Nation. However, in a relatively small number of cases, they 
cause serious injuries or even death. This report identifies 
ways to improve the system for compensating those who are 
harmed. This report recommends several key reforms that are 
needed to improve the National Vaccine Injury Compensation 
Program, which is administered by HHS with legal assistance 
from the Department of Justice. The report supports reforms to 
make the program more efficient, fair and less adversarial--as 
was originally envisioned by Congress. Primary recommendations 
presented in this report include the following reforms and 
improvements: (1) review the Vaccine Injury Table (the table) 
to ensure that it reflects current science and knowledge; (2) 
continue developing and implementing speedy and fair informal 
dispute resolution practices; and (3)--determine a reasonable 
standard for deciding cases that are not covered under the 
``table.'' The first recommendation calls for additional 
efforts to evaluate types of injuries and circumstances that 
deserve presumed benefit coverage using the table. This review 
should acknowledge that deficiencies exist in the study of 
causes of vaccine-related injuries. The second recommendation 
promotes practices to assist in the informal resolution of 
claims whenever possible. This is intended to prevent 
unnecessary, prolonged and adversarial litigation. The third 
recommendation calls for an alternative standard to be 
determined that would replace the ``causation'' requirements 
now applied in deciding which cases are compensated.
    b. Benefits.--Congress has always intended that claimants 
whose injuries do not fall squarely within coverage of the 
table be given a realistic opportunity to demonstrate that 
their injuries are vaccine-related. This report reflects the 
strong bipartisan interest in Congress to support sound and 
reasonable reforms that will promote fairer and improved 
vaccine injury compensation practices. This report is intended 
to ensure that our Government is fulfilling its duties and 
obligations to those families in need of help as a consequence 
of our universal childhood vaccination policies.

   Subcommittee on Government Management, Information, and Technology

                      Hon. Stephen Horn, Chairman

1. ``A Citizen's Guide on Using the Freedom of Information Act and the 
        Privacy Act of 1974 To Request Government Records,'' House 
        Report No. 106-50, March 11, 1999, First Report by the 
        Committee on Government Reform.
    a. Summary.--The Freedom of Information Act [FOIA], enacted 
in 1966, presumes that records of the executive branch of the 
U.S. Government are accessible to the public. The Privacy Act 
of 1974 is a companion to FOIA and regulates Government agency 
recordkeeping and disclosure practices. The Freedom of 
Information Act provides that citizens have access to Federal 
Government files with certain restrictions. The Privacy Act 
provides certain safeguards against an invasion of privacy by 
Federal agencies and permits individuals to see most records 
pertaining to them maintained by the Federal Government.
    ``A Citizen's Guide to Using the Freedom of Information Act 
and Privacy Act of 1974 to Request Government Records,'' 
explains how to use the two laws and serves as a guide to 
obtaining information from Federal agencies. The complete texts 
of the Freedom of Information Act, as amended (5 U.S.C. 552), 
and the Privacy Act, as amended (5 U.S.C. 552a), are reprinted 
in the committee report.
    b. Benefits.--Federal agencies use the Citizen's Guide in 
training programs for Government employees who are responsible 
for administering the Freedom of Information Act and the 
Privacy Act of 1974. The guide enables those who are unfamiliar 
with the laws to understand the process and to make requests. 
The Government Printing Office and Federal agencies subject to 
the Freedom of Information Act and the Privacy Act of 1974 
distribute this report widely.
    c. Hearings.--In its continuing oversight of this issue, 
the subcommittee held the following hearings during the 106th 
(1) ``H.R. 88, Regarding Data Available Under the Freedom of 
        Information Act,'' July 15, 1999.
    The Omnibus Consolidated and Emergency Supplemental 
Appropriations Act For Fiscal Year 1999 (Public Law 105-277) 
contains a provision (the Shelby Amendment) that would allow 
the public, for the first time, to obtain and review research 
data collected through federally funded grants and agreements 
with universities, hospitals, and other non-profit 
organizations. The amendment, sponsored by Senator Richard C. 
Shelby, R-AL, called for procedures established in the Freedom 
of Information Act [FOIA] to be used as the mechanism by which 
a third party could obtain these data.
    H.R. 88, introduced by Representative George Brown, D-CA, 
on January 6, 1999, sought to amend Public Law 105-277 and 
repeal the Shelby amendment. Those who favored the amendment's 
repeal were concerned that extending FOIA to include federally 
funded research would create a significant loss of voluntary 
participation in public health and bio-medical research. There 
was also concern that the Shelby amendment could facilitate the 
theft of intellectual property. Overall, proponents of H.R. 88 
who testified at the subcommittee hearing were concerned by the 
amendment's broad language and the lack of clarity in the 
Office of Management and Budget's proposed revisions to the 
    The amendment, introduced by Senator Richard D. Shelby, R-
AL, requires the Director of the Office of Management and 
Budget to amend Section 36 of Circular A-110 to require that 
all data produced under a Federal award be made available 
through the procedures established in the Freedom of 
Information Act [FOIA]. The amendment also allows an agency 
that is obtaining data solely at the request of a private party 
may charge a reasonable user fee equal to the cost of obtaining 
the data. Federal research data that fall within any of the 
nine exemptions under FOIA, which relate to privacy, national 
security, trade secrets, commercial information, and law 
enforcement, would also be exempted under the Shelby amendment.
    While Circular A-110 sets the administrative requirements 
for grants and agreements between Federal agencies and 
institutions of higher education, hospitals, and other 
nonprofit organizations, Section 36 of Circular A-110 gives the 
Federal Government the right ``to obtain, reproduce, publish, 
or otherwise use the data first produced under an award.'' 
Until passage of the Shelby amendment, agencies were given the 
discretion over whether or not to distribute the data.
    The underlying rationale of the Shelby amendment is the 
premise that the public should be able to obtain and review 
taxpayer-funded research information, which is often used to 
support Federal policies, regulations and findings. Witnesses 
testified that citizen groups, businesses, and others who are 
impacted by these Government policies and regulations are often 
unable to obtain the research data to verify the Government's 
(2) ``Agency Response to the Electronic Freedom of Information Act,'' 
        June 14, 2000.
    Witnesses at this hearing testified that agencies are not 
posting their most commonly requested records online, as the 
Electronic Freedom of Information Act of 1998 [EFOIA] requires.
    The Office of Information and Regulatory Affairs within the 
Office of Management and Budget [OMB] exercises broad authority 
for coordinating and administering various aspects of 
governmentwide information policy, but the subcommittee's 
examination found that the Department of Justice, rather than 
the OMB, is providing policy guidance and overseeing agency 
compliance with the EFOIA. In addition, witnesses testified 
that although Federal departments and agencies have generally 
established specific offices for processing EFOIA requests, 
program implementation is lagging.
    Witnesses, representing reporters and several agencies 
involved in implementing EFOIA, including the Justice 
Department, Department of Defense, and the Office of Management 
and Budget, testified that most agencies were not complying 
with the law. According to agency representatives, part of the 
problem involved insufficient financial resources, which left 
them unable to fill requests for information within the 
mandatory 20-day timeframe. In addition, many agencies still do 
not have electronic reading rooms, and frequently requested 
records are difficult to access. The subcommittee will continue 
to monitor the progress of agency compliance with the 
Electronic Freedom of Information Act.
(3) ``Government Compliance with the Nazi War Crimes Disclosure Act,'' 
        June 27, 2000.
    The subcommittee held an oversight hearing on the findings 
of the Interagency Working Group regarding compliance with the 
Nazi War Crimes Disclosure Act. The subcommittee heard 
testimony from Representative Tom Lantos, D-CA, a holocaust 
survivor and sponsor of several human rights declassification 
bills, who discussed the importance of the Interagency Working 
Group's efforts to declassify these records. Representative 
Lantos also discussed legislation he introduced that would 
expand the Interagency Working Group's effort to include the 
disclosure of Japanese war crimes.
    Members of the Interagency Working Group discussed the 
thousands of documents that have been declassified without any 
congressional appropriations. However, members testified that 
they would need funding to continue the declassification 
effort. Subsequently, the subcommittee worked with 
Representative Carolyn Maloney, D-NY, who introduced 
legislation that would appropriate $5 million for the 
declassification effort.
2. ``Making the Federal Government Accountable: Enforcing the Mandate 
        for Effective Financial Management,'' House Report 106-170, 
        June 7, 1999, Second Report by the Committee on Government 
        Reform, Together with Minority Views.
    a. Summary.--Billions of taxpayer-provided dollars are 
being lost each year to fraud, waste, abuse, and mismanagement 
in hundreds of programs within the Federal Government. Audits 
continue to show that most agencies have significant weaknesses 
in controls and systems. As a result of these weaknesses, 
Federal decisionmakers do not have reliable and timely 
performance and financial information to ensure adequate 
accountability, manage for results, and make timely and well-
informed judgments.
    In the late 1980s, Congress recognized that one of the root 
causes of this loss was that the Federal Government's financial 
management leadership, policies, systems, and practices were in 
a state of disarray. Financial systems and practices were 
obsolete and ineffective. They failed to provide complete, 
consistent, reliable, and timely information to congressional 
decisionmakers and agency management.
    In response, Congress passed a series of laws designed to 
improve financial management practices and to ensure that tax 
dollars are spent for the purposes that Congress intends. Each 
executive agency covered by the Chief Financial Officers Act of 
1990 (CFO Act) or specified by the Office of Management and 
Budget [OMB] is required to prepare and have audited a 
financial statement covering all accounts and associated 
activities of each office, bureau, and activity within the 
agency. In addition, consolidated governmentwide financial 
statements must be prepared and audited annually. Federal 
agencies are required to conform to promulgated Federal 
Government accounting and systems standards, and to use the 
Federal standard general ledger.
    Despite the passage and implementation of these laws, there 
has been limited progress. Much remains to be done before the 
Federal Government's financial management systems and practices 
provide reliable, timely financial information on a regular 
    March 31, 1998, marked a significant milestone in the 
implementation of financial management reform legislation. The 
CFO Act, Public Law 101-576, as expanded by the Government 
Management Reform Act of 1994 [GMRA], Public Law 103-356, 
required for the first time the preparation and audit of 
consolidated financial statements of the Federal Government for 
fiscal year 1997, and each year thereafter. GMRA required that 
the General Accounting Office [GAO] issue an audit report no 
later than March 31 of each year on the consolidated financial 
statements for the preceding fiscal year.
    GMRA also required that, starting March 1, 1997, and each 
year thereafter, all 24 Federal agencies that are subject to 
the requirements of the CFO Act must submit audited financial 
statements to the Director of OMB. These 24 agencies were 
responsible for approximately 97 percent of the total Federal 
outlays during fiscal year 1997.
    Fiscal year 1997 also marked the first year of 
implementation of the Federal Financial Management Improvement 
Act of 1996, Public Law 104-208. The purpose of FFMIA is to 
ensure that agency financial management systems comply with 
Federal financial management system requirements, applicable 
Federal accounting standards, and the U.S. Government Standard 
General Ledger (standard general ledger) in order to provide 
uniform, reliable, and useful financial information. FFMIA 
required that beginning with the fiscal year ending September 
30, 1997, auditors for each of the 24 major departments and 
agencies named in the CFO Act must report, as part of their 
annual audits, whether the agency's financial systems comply 
substantially with Federal financial systems requirements, if 
applicable, Federal accounting standards, and the standard 
general ledger at the transaction level. FFMIA also required 
the GAO to report on agency implementation of FFMIA by October 
1, 1997, and each year thereafter.
    It is imperative that these acts are implemented 
successfully. They form the basis for the data used in 
measuring program performance under the Government Performance 
and Results Act, Public Law 103-62 (Results Act). Thus, at a 
minimum, strong congressional oversight is needed to achieve 
the primary goal of all these laws--a Federal Government that 
is accountable to American taxpayers.
    b. Benefits.--Billions of taxpayer-provided dollars are 
lost each year to fraud, waste, abuse, and mismanagement in 
hundreds of programs within the Federal Government. Audits 
continue to show that most agencies have significant weaknesses 
in controls and systems. As a result, Federal decisionmakers do 
not have reliable and timely performance and financial 
information to ensure adequate accountability, manage for 
results, and make timely and well-informed judgments.
    c. Hearings.--The subcommittee held 15 hearings examining 
the status of financial management in the executive branch of 
the Federal Government during the 106th Congress. In 1999, 
subcommittee hearings focused on the Internal Revenue Service, 
the Federal Aviation Administration, the Department of Justice, 
the Health Care Financing Administration, and the Department of 
Defense. Collectively, these agencies accounted for more than 
98 percent of the Federal Government's annual revenue and a 
majority of the costs (excluding interest on the national debt 
held by the public and the Social Security program). In 
addition, the Department of Defense accounted for a significant 
portion of the assets held by the Federal Government. 
Consequently, these agencies play a significant role in the 
production of governmentwide statements, and they significantly 
affect the audit results.
    The hearings explored the audit results for fiscal year 
1998, the second year of full implementation of GMRA. The 
subcommittee examined the consolidated audit results for the 
entire executive branch of the Federal Government in addition 
to the individual audit reports of the five agencies noted 
above. Each of these agencies has experienced problems with 
their financial management, and has had varying degrees of 
success in resolving those problems.
    The subcommittee considered what, if any, additional 
congressional action might be necessary to improve financial 
management in the executive branch, and reviewed options for 
possible congressional actions needed to ensure the successful 
implementation of Federal financial management reforms.
(1) ``Oversight of the Internal Revenue Service's Fiscal Year 1998 
        Financial Statements,'' March 1, 1999, and
(2) ``Clinton-Gore v. The American Taxpayer,'' April 15, 1999.
    The IRS collects more than 95 percent of the Federal 
Government's $1.7 trillion in annual revenue. In fiscal year 
1998, the IRS issued its first set of financial statements 
covering both its custodial and administrative activities. 
Prior to 1998, the IRS had issued two sets of financial 
statements; one set for its custodial operations--the revenues 
collected, refunds paid, and related taxes receivable and 
payable--and another for its appropriated funds. The IRS' 
financial data were then incorporated into the agencywide 
statements prepared by the Department of the Treasury.
    The IRS is responsible for enforcing tax laws in a fair and 
equitable manner, but the agency has long been criticized for 
the perceived abuse of its broad enforcement powers. In 
response to this criticism, Congress established the Commission 
on the Restructuring of the IRS. Led by Representative Rob 
Portman of Ohio and Senator Bob Kerrey of Nebraska, the 
bipartisan commission released a comprehensive report in June 
1997, proposing several changes in the IRS' management. The 
Commission's recommendations were the basis of H.R. 2676, the 
Internal Revenue Service Restructuring and Reform Act of 1997, 
which was signed into law by the President on July 22, 1998. 
The underlying theme of the act is one of creating a cultural 
change within the IRS. In the broadest terms, the act shifts 
the emphasis within the IRS from its self-defined role as an 
enforcement agency to a role more closely resembling a 
financial service organization.
    Also at congressional urging, the Clinton administration 
appointed a new Commissioner with extensive experience in 
managing large organizations. Charles O. Rossotti, founder of a 
firm in the management systems and technology industry, was 
appointed Commissioner of the IRS in September 1997. Since his 
appointment, Commissioner Rossotti has proposed a sweeping 
reorganization of the IRS that exceeded the changes mandated in 
the legislation. Testifying before the subcommittee, 
Commissioner Rossotti stated that he plans on ``shifting the 
entire focus of the agency from one which focuses solely on 
conducting our own internal operations to one which puts far 
more emphasis on trying to see things from the point of view of 
taxpayers and emphasizing service and fairness to taxpayers.''
    For the second consecutive year, the IRS was able to 
reliably report on its financial activity covering the 
collection and refunds of taxes in 1998. This achievement, 
however, required extensive, costly, and time-consuming ad hoc 
procedures to overcome pervasive internal controls and systems 
weaknesses. The ability to provide reliable year-end data is an 
important first step for the IRS, but it is not an end in 
itself. The GAO audit report stated that the ``IRS continues to 
face significant financial and other management challenges and 
risks.'' These weaknesses must be addressed before the IRS can 
make any significant improvement in the area of financial 
    The IRS was unable to report on its administrative 
activities in fiscal year 1998. The GAO report found that 
``pervasive weaknesses in the design and operation of IRS' 
financial management systems, accounting procedures, 
documentation, recordkeeping, and internal controls prevented 
IRS from reliably reporting on the results'' of these 
    The subcommittee's oversight hearings on March 1, 1999, and 
April 15, 1999, highlighted the need for better computer 
systems to improve the IRS' debt management. At the time of the 
hearings, the IRS estimated that it collects only 11 percent of 
the $222 billion in debts the agency claims are owed by 
delinquent taxpayers. The hearing also illustrated the need for 
better controls over refunds. According to the GAO, the IRS 
does not have the preventive controls it needs to reduce the 
amount of inappropriate payments being disbursed for tax 
(3) ``Oversight of Financial Management Practices at the Department of 
        Justice and the Federal Aviation Administration,'' March 18, 
    The Department of Justice, under the direction of the 
Attorney General, is charged with protecting society against 
criminals and subversion, and upholding the civil rights of all 
Americans. In addition, the Department is responsible for 
ensuring healthy competition among businesses, safeguarding the 
consumer, enforcing environmental, drug, immigration, and 
naturalization laws, and representing the American people in 
all legal matters involving departments and agencies within the 
executive branch of Government.
    In 1998, the Department of Justice was again unable to 
provide reliable financial information to decisionmakers. Again 
this year, auditors were unable to render an opinion on 
Justice's financial statements. In addition, auditors reported 
significant weaknesses in internal controls and cases in which 
the law-enforcement department failed to comply with financial 
laws and regulations.
    At the March 18 hearing, the subcommittee learned that the 
weaknesses reported in the Department's consolidated financial 
statements were also prevalent in most of the Department's 
component entities. The audit report stated that weaknesses 
exist in the controls over computer security at the U.S. 
Marshals Service, the Federal Bureau of Investigation, the Drug 
Enforcement Administration, and the Immigration and 
Naturalization Service.
    The Federal Aviation Administration [FAA] operates the 
Nation's air traffic control system and regulates aviation 
safety, security, and the U.S. commercial space industry. In 
its position on the front line of aviation safety, the FAA 
works with the air transportation industry, other agencies at 
the Federal, State, and local level, and with its international 
    Due to long-standing and unresolved problems, the GAO 
designated financial management at the FAA as a high-risk area 
in its January 1999 report. The GAO report stated that 
``financial management weaknesses continue to render FAA 
vulnerable to waste, fraud, and abuse; undermine its ability to 
manage its operations; and limit the reliability of financial 
information provided to the Congress.''
    The subcommittee examined these weaknesses at a hearing on 
March 18, 1999. Because of the results of the Department's 1998 
financial statement audit, the subcommittee also discussed the 
findings with the Inspector General of the Department of 
Transportation. The Inspector General was unable to render an 
opinion on the 1998 financial statements. In addition, the 
Inspector General reported significant weaknesses in FAA's 
internal controls. These weaknesses included more than $9 
billion in property, plant and equipment that could not be 
verified. The FAA also could not reliably report on the costs 
of its operations. The combination of poor accounting and 
control over assets and costs are especially troubling, 
considering that the agency has an air traffic control 
modernization plan that is projected to cost more than $42 
billion by the year 2004.
    In 1981, the FAA had initiated earlier air traffic control 
modernization program. This effort involved acquiring new air 
traffic control facilities and a vast network of radar, 
automated data processing navigation, and communications 
equipment. The program, which was poorly managed, was shut 
down, costing taxpayers $4 billion for a system that did not 
work. The FAA's current modernization program has been put on 
the GAO high-risk list, due in large part to the agency's 
financial management problems, such as poor cost-accounting 
practices and lack of accountability over acquisitions.
(4) ``Can the Federal Government Balance Its Books? A Review of the 
        Federal Consolidated Financial Statements,'' March 31, 1999.
    The General Accounting Office released its audit report on 
the financial status of the Federal Government at the 
subcommittee's March 31 hearing. The financial audits for 
fiscal year 1998 were required under the Chief Financial 
Officers Act of 1990, as expanded by the Government Management 
Reform Act of 1994 and amended by the Federal Financial 
Management Improvement Act of 1996. The audits are intended to 
provide a more effective, efficient, and responsive Federal 
Government. To that end, the Government Management Reform Act 
specifically requires that consolidated governmentwide 
financial statements be prepared and audited, and that each 
executive branch agency prepare and have audited a financial 
statement covering all accounts and associated activities of 
each office, bureau, and activity within the agency.
    The subcommittee examined the results of this audit at its 
March 31 hearing. The 1998 audit report, the second annual 
report on the Government's financial management, once again 
provided a concise description of the myriad problems faced by 
the executive branch.
    In addition, the subcommittee released its second annual 
financial report card at the hearing. This report card measures 
the effectiveness of financial management in the 24 Cabinet 
departments and independent agencies with audited financial 
statements. The grades were based on the results of the audits 
prepared by the agencies' Inspectors General, independent 
public accountants, and the General Accounting Office. The 
report card is a gauge for Congress to see where attention is 
needed to prod agencies toward getting their financial affairs 
in order.
    The National Aeronautics and Space Administration and the 
National Science Foundation demonstrated they could effectively 
manage their finances. Both agencies received ``A's.'' The 
General Services Administration, the Department of Labor, and 
the Social Security Administration all earned commendable 
    These agencies were the exception rather than the rule. 
Seven of the 24 agencies--29 percent--had not filed reports by 
the subcommittee's March 31 hearing, 1 month after their March 
1st reporting deadline established by the Government Management 
Reform Act of 1994, and 6 months after the close of the 
Government's fiscal year--the Department of Commerce, the 
Department of Education, the Environmental Protection Agency, 
the Department of the Interior, the Small Business 
Administration and the Department of State, and the Department 
of Transportation.
(5) ``Oversight of the Financial Management Practices at the Department 
        of Defense,'' May 4, 1999.
    The General Accounting Office, the Defense Inspector 
General, and the Department's audit agencies have long reported 
problems in the Department of Defense's [DOD's] financial 
management systems and practices. Each year, numerous reports 
are issued with virtually the same problems as the prior years.
    The DOD's reported financial management problems include: 
inadequate control over assets such as real property, capital 
leases, construction in process, and inventories; the 
understatement of costs associated with environmental clean-
ups; liabilities, including military retiree benefits, that are 
not covered by current budgetary resources; and instances of 
noncompliance with laws and regulations. Because of these 
problems, the Inspector General was unable to render an opinion 
on the DOD's financial statements for fiscal year 1998. The GAO 
disclaimed an opinion on the Consolidated Governmentwide 
Financial Statements of the Federal Government, largely due to 
the Defense Department's inability to provide complete and 
verifiable information on its finances.
    The issues that need to be resolved cross operational lines 
within the DOD and the military services. Thus, action is 
needed at the top levels of DOD management to ensure that these 
long-standing problems are resolved.
    The subcommittee's May 4 hearing examined the results of 
the fiscal year 1998 audits at the DOD, and the status of the 
Department's plans to address its long-standing and severe 
problems. The GAO and DOD's Acting Inspector General 
highlighted the most serious financial management weaknesses at 
the Department. The subcommittee heard that the DOD remains 
unable to account for and properly report on billions of 
dollars worth of inventory and property, plants, equipment, and 
national defense assets, primarily weapons systems and support 
equipment. Nor could the Department estimate and report 
material amounts of its environmental and disposal liabilities, 
and related costs. In addition, the Department was unable to 
determine the liability associated with post-retirement health 
benefits for military employees, report the net costs of its 
operations, produce accurate budget data, or determine the full 
extent of improper payments.
    These weaknesses in DOD's financial management operations 
continue to result in wasted resources. Furthermore, they 
undermine the DOD's ability to manage an estimated $250 billion 
budget and $1 trillion in assets, all of which limit the 
reliability of financial information provided to Congress.
    During 1998, witnesses said that Department of Defense has 
taken these weaknesses more seriously than in previous years. 
The GAO testified before the subcommittee on March 4, stating 
that ``while in the past we have questioned the Department's 
commitment to fixing these long-standing problems, DOD has 
started to devote additional resources to correct its financial 
management weaknesses. The atmosphere of `business as usual' at 
DOD has changed to one of marked effort at real reform.'' The 
GAO went on to say, ``this commitment is imperative, as it will 
take considerable effort, time, and sustained top management 
attention to turn reform efforts into day-to-day management 
(6) ``Oversight of Financial Management Practices at the Health Care 
        Financing Administration,'' March 26, 1999.
    The Health Care Financing Administration [HCFA] accounts 
for more than 18 percent of all Federal budget outlays and pays 
for one-third of the health-care costs throughout the United 
States. The growth of HCFA's Medicare and Medicaid payments has 
far exceeded the growth in the Consumer Price Index for medical 
goods and services. Yet, the agency is unable to provide timely 
or reliable financial information. The GAO has cited HCFA's 
Medicare program as a high-risk area for fraud, waste, and 
    HCFA's fiscal year 1998 financial statements received a 
qualified opinion. The Inspector General of the Department of 
Health and Human Services was unable to find sufficient 
documentation to complete the Medicare accounts receivable. 
HCFA released its audited financial statements for fiscal year 
1998 at the subcommittee's March 26, 1999, hearing.
    Based on the last 2 years of audit results, the hearing 
focused on the actions HCFA is taking to resolve its financial 
management problems, including excessive Medicare payments. 
There has been marked improvement in the agency's annual 
overpayments, but the overpayment amount remains unacceptable. 
The estimated amount of overpayments for Medicare dropped from 
$23.2 billion in 1996 to $20.6 billion in 1997 and $12.6 
billion in 1998. The 1998 amount represents approximately 7.1 
percent of the total Medicare fee-for-service benefit payments 
made that year.
    The subcommittee found that, while progress has been made, 
much more is needed to ensure that the Medicare and Medicaid 
programs--critical to the security of 73 million elderly and 
impoverished Americans--are fiscally sound.
    The following specific issues were disclosed in the 
agency's audit report for fiscal year 1998: Medicare 
contractors were not maintaining the support necessary to 
determine the accuracy of reported collections of accounts 
receivable; auditors were unable to determine if records 
maintained by the contractors included all of the amounts owed 
to HCFA; and the GAO found that Medicare contractors did not 
have adequate control of their cash, including the collection 
of outstanding accounts receivable.
    During 1998, Medicare contractors reported more than $7.5 
billion in collections. Auditors reported serious breakdowns in 
controls in this area, including the fact that, in many cases, 
Medicare contractors failed to prepare bank reconciliations in 
a timely manner. When reconciliations were prepared, they were 
not adequately documented. In addition, at one location visited 
by auditors the same individual was responsible for receiving 
and endorsing incoming checks, preparing and recording 
deposits, and performing bank reconciliations. This situation 
greatly increases the risk that the money collected by this 
contractor could be misappropriated. The segregation of these 
duties is a common internal control adhered to by even the 
smallest private entities.
3. ``Making the Federal Government Accountable: Enforcing the Mandate 
        for Effective Financial Management,'' House Report 106-802, 
        July 27, 2000, Fifth Report by the Committee on Government 
        Reform, together with Minority Views.
    a. Summary.--In its continuing examination of financial 
management practices of Federal agencies in the executive 
branch, the subcommittee found that there has been a steady 
increase in the number of agencies that are successfully 
obtaining unqualified audit opinions on their financial 
statements as well as an increase in the number of agencies 
that are providing timely reports. This year, auditors gave 15 
of the 24 major agencies unqualified opinions on their fiscal 
year 1999 financial statements, compared to fiscal year 1998 
audits in which 12 agencies received unqualified audit 
    b. Benefits.--Billions of taxpayer-provided dollars are 
lost each year to fraud, waste, and mismanagement in hundreds 
of programs within the Federal Government. Audits continue to 
show that most agencies have significant weaknesses in 
financial controls and systems. As a result, Federal 
decisionmakers do not have reliable and timely performance and 
financial information to ensure adequate accountability, manage 
for results, and make timely and well-informed judgments.
    c. Hearings.--During the year 2000, the subcommittee held 
eight hearings examining the status of financial management in 
the executive branch of the Federal Government. These hearings 
focused on Federal agencies, including the Internal Revenue 
Service, the Health Care Financing Administration, the 
Department of Agriculture, the Department of Housing and Urban 
Development, the Department of Defense. In addition, the 
subcommittee examined the Government's Consolidated Financial 
Statements, and agencywide compliance with the Federal 
Financial Management Improvement Act of 1997.
    These hearings explored the audit results for fiscal year 
1999, the third year of full implementation of GMRA. Again this 
year, the subcommittee examined the consolidated audit results 
for the entire executive branch of the Federal Government and 
individual audit reports of the agencies noted above.
(1) ``Results of the Internal Revenue Service's 1999 Financial Audit,'' 
        February 29, 2000.
(2) ``Oversight of the Internal Revenue Service: The Commissioner 
        Reports,'' April 10, 2000.
    The Internal Revenue Service [IRS] is responsible for 
collecting taxes, processing tax returns, pursuing collection 
of amounts owed, and enforcing tax laws. In fiscal year 1999, 
the IRS collected $1.9 trillion in Federal tax revenues, 
disbursed $185 billion in tax refunds, and reported $21 billion 
in net taxes owed to the Federal Government.
    The subcommittee held two hearings on the IRS's financial 
management. The first hearing, on February 29, 2000, focused on 
the financial management challenges facing the IRS. This 
hearing highlighted the need for continued involvement and 
commitment by IRS senior management to ensure that the agency 
is successful in attempting to address its serious financial 
management problems.
    The IRS prepares financial statements on its custodial 
operations--revenues collected, refunds paid, and related taxes 
receivable and payable--and on its administrative activities 
associated with more than $8 billion of appropriated funds. 
During the General Accounting Office's [GAO] fiscal year 1999 
audit, auditors found that ``the agency continues to experience 
pervasive material weaknesses in the design and operation of 
its automated financial management and related operational 
systems, accounting procedures, documentation, record-keeping, 
and internal controls, including computer security controls.'' 
\54\ Such problems prevented the IRS from reliably reporting on 
the results of its fiscal year 1999 administrative activities. 
However, for the third consecutive year, the IRS was able to 
reliably report on its financial activity covering the 
collection and refunds of taxes. As in previous years, this 
achievement was accomplished through extensive, costly, and 
time-consuming ad hoc procedures to overcome pervasive internal 
control and systems weaknesses. Major problems identified 
during the hearing included deficiencies in controls over 
unpaid tax assessments and tax refunds. Such a lack of controls 
could result in both increased taxpayer burden and potentially 
billions of dollars in lost revenue and improper refunds.
    \54\ ``Internal Revenue Service: Results of Fiscal Year 1999 
Financial Statement Audit,'' GAO/T-AIMD-00-104 p. 1.
    The second hearing, held on April 10, 2000, focused on the 
progress and challenges the IRS faces in re-engineering its 
business practices and technology to meet the requirements of 
the IRS Restructuring and Reform Act of 1998. As noted by the 
GAO, the ``IRS has taken important steps over the last year; 
however, some of its most important and difficult work lies 
ahead.'' \55\
    \55\ ``IRS Modernization: Business Practice, Performance 
Management, and Information Technology Challenges,'' GAO/T-GGD/AIMD-00-
    The IRS has been the subject of many studies and much 
criticism. The studies have identified a long list of problems, 
including inadequate technology and the failure of technology 
modernization programs, poor service to taxpayers, and 
violations of taxpayer rights. On July 22, 1998, the IRS 
Restructuring and Reform Act of 1998 was signed into law.\56\ 
This law included many provisions to enhance taxpayer rights 
and to deal with specific organizational aspects of the IRS. 
The Commissioner of the IRS noted that because of the act, 
``the IRS continues to plan and implement the most significant 
changes to its organization, technology, and the way it serves 
taxpayers in almost a half-century.'' \57\ According to the 
Commissioner, progress is being made on the agency's short- and 
long-term goals and mandates set forth by the Restructuring and 
Reform Act, and with Congress's continued and assured support 
the IRS will be able to make the changes the American taxpayers 
expect and deserve. The GAO warned, however, that ``the 
magnitude of this modernization effort makes it a high-risk 
venture that will take years to fully implement.'' \58\
    \56\ Public Law 105-206, July 22, 1998.
    \57\ Testimony of Commissioner of Internal Revenue Charles O. 
Rossotti before the House Committee on Government Reform's Subcommittee 
on Government Management, Information, and Technology's hearing on 
``IRS Filing Season, IRS Restructuring Act and Budget,'' April 10, 
    \58\ ``IRS Modernization: Business Practice, Performance 
Management, and Information Technology Challenges,'' GAO/T-GGD/AIMD-00-
    At both hearings, the subcommittee heard testimony that the 
IRS's ability to collect taxes in an effective and efficient 
manner continues to be hindered by significant long-standing 
financial management and operational problems. These problems 
will take years to correct and will require continuous 
commitment from the agency's senior management.
(3) ``Results of the Health Care Financing Administration's 1999 
        Financial Audit,'' March 15, 2000.
    The Health Care Financing Administration [HCFA] is 
responsible for nearly 18 percent of all Federal outlays and 
pays for one-third of the health care costs throughout the 
United States. It is the largest single purchaser of health 
care in the world.
    In fiscal year 1999, $200 billion in Medicare benefit 
claims were administered by more than 50 Medicare contractors 
and $110 billion in Medicaid benefit payments were administered 
by 57 States and territories. HCFA finances more than 860 
million Medicare benefits claims annually to nearly 40 million 
seniors and disabled Americans, and provides States with 
matching funds for Medicaid health care services for 
approximately 33 million low-income individuals.
    For fiscal year 1999, the Department of Health and Human 
Services Inspector General issued the first unqualified audit 
opinion on HCFA's financial statements. However, HCFA continues 
to have internal control weaknesses that hamper its ability to 
safeguard the fiscal integrity of the Medicare and Medicaid 
programs. As of September 30, 1999, HCFA estimated that its 
improper payments were approximately $13.5 billion or 8 percent 
of the $169.5 billion in processed Medicare fee-for-service 
benefits. Auditors reported that no methodology exists for 
estimating the range of improper Medicaid payments on a 
national level and that since Medicaid is a grant program, any 
estimating methodology would need to be done in conjunction 
with the State programs. HCFA is currently working with States 
to apply a uniform methodology of calculating an error rate in 
the administration of the Medicaid program.
    The subcommittee's hearing focused on HCFA's efforts to 
resolve its financial management problems and address the 
challenges associated with administering the Medicare program. 
The Inspector General reported that it was encouraged by HCFA's 
sustained success in reducing Medicare payment errors and by 
the important progress being made toward resolving prior years' 
financial reporting problems. But auditors noted, ``We remain 
concerned, however, that inadequate internal controls over 
accounts receivable leave the Medicare program vulnerable to 
potential loss or misstatement. As HCFA begins a lengthy 
process to integrate its accounting system with the Medicare 
contractor systems, internal controls must be strengthened to 
ensure that debt is accurately recorded, an adequate debt 
collection process is in place, and information is properly 
reflected on the financial statements.'' \59\ The GAO further 
noted that ``shortcomings in HCFA's financial operations mean 
that it could not adequately ensure the reliability of data 
that the agency and the Congress use to track the cost of the 
Medicare program and to help make informed decisions about 
future funding.'' \60\
    \59\ ``HCFA: Fiscal Year 1999 Financial Statement Audit,'' 
testimony of June Gibbs Brown, Inspector General, U.S. Department of 
Health and Human Services before the House Committee on Government 
Reform's Subcommittee on Government Management, Information, and 
Technology, March 15, 2000.
    \60\ ``Medicare Financial Management: Further Improvements Needed 
to Establish Adequate Financial Control and Accountability,'' GAO/T-
    HCFA reported that there are several initiatives underway 
to bring the claims payment error rate down and that it is 
aggressively addressing financial management issues. Top 
management's continued support of these initiatives and 
sustained actions will be key to HCFA's success in resolving 
its financial management problems.
(4) ``Results of the 1999 Financial Audit of the Department of 
        Agriculture,'' March 21, 2000.
    The Department of Agriculture's mission has evolved beyond 
agriculture programs to include programs in such diverse areas 
as economic development, food assistance, food safety, 
international trade and marketing, and land management. Today 
the Department of Agriculture is responsible for major programs 
that boost farm production and exports; promote small community 
and rural development; ensure a safe food supply for the 
Nation; manage natural resources; and improve the nutrition of 
families and individuals with low incomes. Its vast resources 
include more than $118 billion in assets.
    Since fiscal year 1992, the Department of Agriculture's 
financial statements have been unauditable, and it continues to 
have serious financial management problems. One of the more 
significant problems preventing the department from reporting 
reliable information is its inability to reasonably estimate 
its cost of extending or guaranteeing $93 billion of credit. As 
the largest direct lender in the Federal Government, the 
department's inability to properly account for the costs of its 
loan programs continues to negatively impact the reliability of 
the consolidated financial statements of the U.S. Government. 
In addition, such a lack of reliable cost estimates prevents 
Congress from making decisions about whether to scale back or 
increase the loan programs.
    At the subcommittee hearing the Inspector General stated 
that ``Financial information in USDA is, on the whole, not 
reliable,'' and, as a result of serious internal control 
weaknesses, ``managers of the programs and operations may be 
relying on highly questionable information.'' The Department of 
Agriculture's Chief Financial Officer acknowledged the 
problems, the various initiatives underway, and the 
department's progress in resolving those problems. The GAO 
concluded that many of the problems are deeply rooted and will 
take time, substantial resources, and sustained commitment from 
top management to correct.
(5) ``Results of the 1999 Financial Audit of the Department of Housing 
        and Urban Development,'' March 22, 2000.
    The Department of Housing and Urban Development was 
established to promote adequate and affordable housing, 
economic opportunity, and a suitable living environment free 
from discrimination. It's major functions include insuring 
mortgages for single-family and multi-family dwellings; 
channeling funds from investors into the mortgage industry; 
making direct loans for construction or rehabilitation of 
housing projects for the elderly and the handicapped; providing 
Federal housing subsidies for low- and moderate-income 
families; providing grants to States and communities for 
community development activities; and promoting and enforcing 
fair housing and equal housing opportunities.
    For fiscal year 1999, the Inspector General was unable to 
express an opinion on HUD's financial statements in time to 
meet the statutory deadline of March 1, 2000, because of 
problems related to HUD's conversion to a new accounting 
system. The Inspector General's report noted that ``material 
internal control weaknesses with HUD's core financial 
management system and U.S. Government Standard General Ledger 
[SGL], adversely affected HUD's ability to prepare auditable 
financial statements and related disclosures in a timely 
    The Inspector General noted that material weaknesses and 
reportable conditions reported in previous years have 
essentially remained unchanged. However, the Inspector General 
stated that the department ``has recognized its areas of 
systemic weakness to a degree that it never did before, and 
that in each of these areas it has plans in place and 
activities underway to address the problems.''
    In addressing its financial management problems, the Deputy 
Secretary stated that HUD has ``dedicated resources to address 
each and every material weakness and reportable condition cited 
in the audit.'' He further stated that HUD's goal is to obtain 
unqualified opinions every year and that the final 
implementation of HUD 2020 Management Reform Plan will resolve 
each remaining material concern.
    Although an unqualified opinion is important, the 
department must continue to strive to achieve the goal of the 
financial management legislation passed by Congress--which is 
to ensure that agencies maintain financial systems that allow 
them to produce accurate, reliable financial information on a 
day-to-day basis.
(6) ``Are the Government's Financial Records Reliable?'' March 31, 
    The Chief Financial Officers Act of 1990 (Public Law 101-
576), as expanded by the Government Management Reform Act of 
1994 [GMRA] (Public Law 103-356), required that the Federal 
Government produce annual audited, consolidated financial 
statements, beginning in fiscal year 1997. GMRA also required 
that beginning in 1998, the General Accounting Office issue an 
annual audit report on the consolidated financial statements no 
later than March 31 of the subsequent year.
    At the subcommittee's hearing on March 31, 2000, the 
Comptroller General of the United States released the results 
of the fiscal year 1999 audit of the financial statements of 
the Federal Government. For the third consecutive year, he 
reported that ``because of serious deficiencies in the 
Government's systems, record-keeping, documentation, financial 
reporting, and controls, amounts reported in the Government's 
financial statements and related notes may not provide a 
reliable source of information for decision-making by the 
Government or the public.'' \61\ The Comptroller General 
further noted that as of March 31, 2000, 19 of 22 major 
agencies' financial systems did not comply with the 
requirements of the Federal Financial Management Improvement 
Act of 1996 \62\ and that agency financial systems overall are 
in poor condition and cannot provide reliable financial 
information necessary for managing day-to-day Government 
    \61\ ``Auditing the Nation's Finances: Fiscal Year 1999 Results 
Continue to Highlight Major Issues Needing Resolution,'' GAO/T-AIMD-00-
    \62\ The remaining two major agencies had not yet issued their 
audited financial statements. However, they had not complied with the 
act's requirements for fiscal years 1998 and 1997.
    The Office of Management and Budget recognized that 
necessary financial management improvements are difficult and 
require a great effort, and that modernizing financial 
management and reporting throughout the Federal Government is a 
long-term process that will take years, not months, to correct. 
The OMB reported, however, that steady progress is being made--
that the timeliness of financial reports has improved and the 
number of agencies receiving ``clean'' audit opinions has 
increased. Nonetheless, the Comptroller General cautioned that 
although clean audit opinions are essential to providing an 
annual public scorecard, they do not guarantee that agencies 
have the financial systems needed to produce reliable financial 
information. Modern financial management systems and good 
controls are essential to reaching the goal of providing 
reliable financial information necessary for managing 
Government operations on a day-to-day basis.
    On March 31, 2000, the subcommittee released its third 
annual report card, measuring the effectiveness of financial 
management in the 24 Cabinet departments and independent 
agencies required to produce audited financial statements. The 
grades were based on the results of the audits prepared by 
agency Inspectors General, independent public accountants, and 
the General Accounting Office.
    The report card is a gauge for Congress to see where 
attention is needed to prod agencies toward getting their 
financial affairs in order. Again, this year, the grades are 
dominated with ``D's'' and ``F's.'' This year, the subcommittee 
also graded the Federal Government as a whole. Based on this 
year's consolidated audit report, the subcommittee has 
determined that, overall, the Federal Government earned a ``D-
    The National Aeronautics and Space Administration and the 
National Science Foundation demonstrated they could effectively 
manage their finances. Both agencies received ``A's.'' The 
Social Security Administration, General Services 
Administration, Department of Labor, and the Department of 
Energy earned ``B's.'' Five agencies could not pass muster and 
earned failing grades of ``F.'' They were: the Agency for 
International Development, the Department of Agriculture, the 
Department of Defense, the Office of Personnel Management, and 
the Department of Housing and Urban Development.
    Although 14 agencies received ``clean'' audit opinions, 
they still missed the most important goal, which is to maintain 
financial systems that allow them to produce accurate, reliable 
financial information on a day-to-day basis.
    Five of the 24 agencies were late in issuing their 
financial statements, and two--the Department of Interior and 
the Department of State--had not filed reports by the 
subcommittee's March 31st hearing--6 months after the close of 
the Government's fiscal year.
(7) ``Results of the 1999 Financial Audit of the Department of 
        Defense,'' May 9, 2000.
    The subcommittee's hearing focused on the status of 
financial management at the Department of Defense and the 
importance of reliable financial information to the logistics 
operations of the Army, Air Force, and Navy.
    The Department of Defense [DOD] is the largest of the 
Federal Government's 14 Cabinet-level departments. Fiscal year 
1999 was the fourth year the Department of Defense had prepared 
audited, agencywide financial statements. For fiscal year 1999, 
the department reported total assets of $599 billion and total 
net cost of operations of $378 billion.
    Once again, the agency's Inspector General [IG] disclaimed 
an opinion on the department's financial statements, stating 
that internal control weaknesses, compilation problems, and 
financial management system deficiencies continued to exist. 
The audit report noted that the internal controls did not 
ensure that accounting entries impacting financial data were 
fully supported and that assets, liabilities, costs, and budget 
resources were properly accounted for and reported. The report 
also identified noncompliance issues related to the Federal 
Financial Management Improvement Act of 1996, the Chief 
Financial Officers Act of 1990, and the Government Performance 
and Results Act of 1993.
    According to the Assistant Inspector General for Auditing, 
``Despite commendable progress, the DOD remains far from CFO 
Act compliance, and aggressive measures will be needed over the 
next few years to achieve success. . . . sustained involvement 
by senior managers and the Congress are vital ingredients for 
progress.'' The GAO also noted that the ``DOD continues to make 
incremental improvements to its financial management systems 
and operations. At the same time, the department has a long way 
to go to address the remaining problems. Overhauling DOD's 
financial systems, processes, and controls and ensuring that 
personnel throughout the department share the common goal of 
improving DOD financial management, will require sustained 
commitment from the highest levels of DOD leadership--a 
commitment that must extend to the next Administration.''
    At this hearing, a panel of two Generals and a Vice Admiral 
from the logistics side of the military also stressed the need 
of having reliable financial information to assist in making 
accurate, timely, and good decisions to ensure the Nation's 
military readiness.
(8) ``Compliance with the Federal Financial Management Improvement Act 
        of 1996: Agencies Continue to Struggle,'' June 6, 2000.
    Historically, Federal agencies have struggled with 
reporting complete, reliable, and useful financial information. 
The lack of such information has hindered managers ability to 
efficiently manage operations on a daily basis, and has 
prevented Congress from making fully informed decisions in 
allocating limited resources. Recognizing the importance that 
financial management systems play in providing timely and 
reliable financial information, Congress passed the Federal 
Financial Management Improvement Act [FFMIA] (Public Law 104-
208) of 1996.
    On June 6, 2000, the subcommittee held its first oversight 
hearing on the status of the 24 CFO Act agencies' 
implementation of the FFMIA. The hearing focused on the 
progress agencies have made in complying with the law as well 
as the significant challenges that are preventing many of the 
agencies from having management systems that provide reliable 
financial information on a day-to-day basis.
    At this hearing, both the OMB and the GAO noted that many 
agencies continue to struggle FFMIA because of the overall 
longstanding, poor condition of agency financial systems. Their 
systems were designed to track cash outlays under budget 
appropriations law, not accrual-based financial accounting. 
Specifically, the GAO found five primary reasons that agencies 
are in noncompliance: (1) nonintegrated financial management 
systems; (2) inadequate reconciliation procedures; (3) 
noncompliance with the Federal Government Standard General 
Ledger; (4) lack of adherence to Federal accounting standards; 
and (5) weak security over information systems.
    Even though more agencies are receiving unqualified or 
``clean'' audit opinions, continued noncompliance with FFMIA's 
requirements prevent them from meeting the intent of the 
financial management reform legislation--reporting complete, 
reliable, and useful financial information. As of July 2000, 20 
of 23 CFO Act agencies did not have financial management 
systems that comply with FFMIA even though 14 of the 23 
agencies received ``clean'' audit opinions. According to the 
GAO, these clean audit opinions were attained using costly, 
heroic efforts that go outside the financial systems.
    Meeting the requirements of FFMIA presents long-standing, 
significant challenges that will ultimately be attained through 
investment, and sustained emphasis. As with the Government's 
year 2000 conversion efforts, success is dependent on the 
commitment of top agency managers to the effort. As noted by 
the GAO, ``consistent and persistent top management attention 
is essential to solving any intractable problem.'' Such a 
commitment is needed if the requirements of the FFMIA are to be 
4. ``Management Practices at the Office of Workers' Compensation 
        Programs, U.S. Department of Labor,'' House Report 106-1024), 
        December 4, 2000.
    a. Summary.--After 3 years of on-going oversight of the 
Office of Workers' Compensation Programs, on October 19, 2000, 
the subcommittee submitted a report entitled, ``Management 
Practices at the Office of Workers' Compensation Programs, U.S. 
Department of Labor,'' which was adopted by the full Committee 
on Government Reform. This report summarized the subcommittee's 
on-going oversight of management practices at the Office of 
Workers Compensation Programs.
    Over the last 3 years, the subcommittee has received 
hundreds of letters and documentation from Federal employees 
who have sustained work-related injuries, stating that the 
workers' compensation system is adversarial and biased against 
the injured worker.
    The subcommittee subsequently held three hearings to 
examine management practices at the Office of Workers' 
Compensation Programs. Hearing witnesses, who included 
claimants, their attorneys, union representatives, and health 
care providers, described similar problems to those cited by 
letter writers.
    The Office of Workers' Compensation Programs [OWCP] at the 
Department of Labor is responsible for processing injured 
employee compensation claims for most Federal workers. The 
subcommittee investigated the management of OWCP, including 
whether the Federal Employees' Compensation Act [FECA], 
administered by the Federal Employees' Compensation Program, is 
a fair, timely, and efficient process. The committee report 
summarized these problems and offers preliminary 
recommendations aimed toward resolving them.
    The subcommittee found that:
     Those responsible for the administration of the 
Federal Employees' Compensation Act at the Office of Workers' 
Compensation Programs are not providing adequate information or 
services to claimants who file appeals;
     Employees at the Office of Workers' Compensation 
Programs are not focused on customer service;
     In many cases, agencies are not providing adequate 
assistance to their employees who are injured while performing 
work-related duties; and
     Actions are needed to improve management practices 
and customer service at the Office of Workers' Compensation 
    The subcommittee made the following recommendations:
     Provisions of the Federal Employees' Compensation 
Act must be enforced, specifically those provisions dealing 
with employers who interfere with an employee's legitimate 
claim for compensation due to a work-related injury or illness;
     Provisions in the Employees' Compensation Act must 
be clarified to require a third opinion by a qualified 
physician when an employee's attending physician and a second 
opinion physician disagree on the diagnosis or prognosis of a 
work-related injury or disease;
     The Division of Federal Employees' Compensation 
should make every effort to provide telephone access to the 
Office of Workers' Compensation Programs for claimants, their 
representatives and medical providers. This effort should 
include a centralized communications system and studying the 
feasibility of providing a toll-free telephone number;
     While timeframes must be set for claim 
resolutions, they must not be at the expense of a quality, 
well-thought-out decision; and
     Congress should consider establishing an 
independent board, such as the board currently overseeing 
ongoing reforms at the Internal Revenue Service, to review, 
make recommendations, and oversee reforms at the Office of 
Workers' Compensation Programs. This board should also consider 
and recommend to Congress whether appeals by Federal workers 
under the Office of Workers' Compensation Program should be 
extended to include the Federal court system.
    b. Benefits.--Subcommittee action responded to widespread 
concerns among injured Federal workers, the medical community, 
the legal community, employee unions congressional caseworkers 
and the concerns of the Inspector General regarding customer 
service at the Office of Workers' Compensation Programs.
    c. Hearings.--
(1) ``Oversight of the Management Practices at the Office of Workers' 
        Compensation Programs,'' July 6, 1998.
    The subcommittee began its examination of the OWCP with a 
July 6, 1998, field hearing in Long Beach, CA, that addressed 
the agency's management practices and administration of the 
Federal Employees' Compensation Act. The hearing focused on the 
timely adjudication of Federal injured workers' claim and the 
process of a fair and just appeal.
    Joseph Perez and William Usher, hearing representatives 
from the Office of Workers' Compensation Program, presented 
testimony on the first panel. These two witnesses expressed 
their frustrations and criticism over the way in which the 
Department of Labor administers its Office of Workers' 
Compensation Programs, the slowness of the adjudication 
process, as well as existing waste, fraud, and abuse within the 
    The second panel consisted of injured Federal workers from 
the U.S. Postal Service and the Navy. Witnesses described their 
personal experiences with the Department of Labor, in 
particular the Office of Workers' Compensation Programs.
    The third panel consisted of officials from the Department 
of Labor who presented a status update on any questionable 
management practices at the Office of Workers' Compensation 
Programs. Michael Kerr, Deputy Assistant Secretary, Office of 
Workers' Compensation Programs testified on the third panel. 
The hearing was conducted to determine whether injured Federal 
employees received timely and equitable adjudication of their 
compensation claims and to determine methods to improve the 
compensation system.
(2) ``Oversight of Customer Service at the Office of Workers' 
        Compensation Programs,'' May 18, 1999.
    On May 18, 1999, the subcommittee held a second hearing 
examining customer service issues at the Office of Workers' 
Compensation Programs. The Federal Employees' Compensation Act, 
administered by the Office of Workers' Compensation Programs, 
authorizes Federal agencies to compensate Federal employees for 
traumatic injuries sustained on the job. In its creation, FECA 
was intended to develop a non-adversarial arrangement whereby 
Federal employees would be compensated for their injuries in a 
fair and equitable manner while also saving the Federal 
Government from tort liability.
    The subcommittee has received numerous complaints from 
injured Federal employees, alleging that FECA is no longer a 
non-adversarial system. The first panel at the hearing 
consisted of three Federal injured workers who presented their 
cases and described their experiences with customer service at 
the Office of Workers' Compensation Programs. Most of the 
subcommittee's investigations have focused on the appeals 
process. The first two witnesses, Dianne McGuinness and Thomas 
M. Chamberlain described, their unsatisfactory experiences, and 
each provided evidence to show the lack of care, fairness, and 
attention that had been given to their individual cases by the 
Office of Workers' Compensation Programs. The third witness, 
Matthew Fairbanks, who was granted compensation immediately 
upon submitting his claim, described his experience with the 
Office of Workers' Compensation Programs as beneficial and 
    The second panel consisted of people who work closely with 
the OWCP. These witnesses discussed the shortcomings that exist 
in the OWCP's customer service and suggested approaches to 
overcome such shortcomings. Beth Balen, administrator for the 
Anchorage Fracture and Orthopedic Clinic, testified that the 
OWCP's lack of responsiveness often required her to place many 
calls before getting a response. She described the difficulty 
of obtaining reimbursement payments and resolving outstanding 
bills with the OWCP. Because of the clinic's negative 
experiences with the OWCP, it no longer treats injured Federal 
workers, unless it is an emergency. The clinic does, however, 
welcome injured workers who are employed by the State of Alaska 
or private organizations. John Riordan, a union representative 
from the American Federation of Government Employees testified 
regarding his negative experiences in assisting and 
representing injured Social Security Administration employees, 
one of whom was hearing witness Dianne McGuinness.
    Mr. Riordan described the difficult and unresponsive 
environment that exists at the New York Regional Office of the 
OWCP. He presented signed affidavits and testimony describing 
actions by the Regional Director of the New York and Boston 
Offices, Kenneth Hamlet, who accosted Mr. Riordan for being in 
the building while attempting to drop off a package. Mr. 
Riordan also worked in the same building he was thrown out of.
    James Linehan, a lawyer from Oklahoma, described the 
difficulty of representing injured workers during the 
administrative appeals process. He described the difficulty of 
getting calls returned, responses to correspondence, and 
gaining access to his client's files.
    Tina Maggio, a congressional caseworker, in the office of 
Representative Michael F. Doyle of Pennsylvania, testified that 
she also found the OWCP to be nonresponsive to her calls, 
including a clearly stated emergency call, until after leaving 
many messages with the District Directors at OWCP regional 
office. She also testified that among the Federal she deals 
with, the OWCP is the worst.
    The third panel consisted of Patricia Dalton, Deputy 
Inspector General of the Department of Labor, and Shelby 
Hallmark, Deputy Director of the Office of Workers' 
Compensation Programs. Patricia Dalton testified regarding the 
Office of Inspector General's report on the OWCP's customer 
service survey. She testified that the questions were biased 
and the questionnaire was poorly constructed. She stated that 
of the 36 questions on the survey, OWCP only used the first, 
which she said was biased in favor of the agency, to measure 
customer service. Additionally, she testified that the 
information gathered was not retained for further analysis and 
    Shelby Hallmark testified regarding the allegations and 
evidence presented at the hearing. He stressed that the OWCP 
was very customer-friendly and that customer service rises each 
year. He described the situations and testimonies submitted at 
the hearing were unusual or unique situations and did not 
represent the whole of the OWCP's customer service in the 
appeals process.
(3) ``The Federal Workers' Compensation Programs: Are Injured Workers' 
        Being Treated Fairly?,'' September 21, 2000.
    Similar to previous hearings, witnesses testified about the 
problems they have encountered with the OWCP's appeals process. 
Witnesses at this hearing included an injured claimant, an 
attorney, a union representative, and the chairman of the 
Employees Compensation Appeals Board [ECAB]. Attorney Clete 
Weiser said that the average appeal takes about 2 years to be 
heard by the Employees Compensation Appeals Board. Claimant 
Greg Fox discussed the personal and financial hardships for 
claimants caused by these delays. ECAB Chairman Michael Walsh 
said that the Board has significantly reduced its backlog of 
appeals, but it often gets cases that must be returned to the 
OWCP because they need further review or files are incomplete.

   Subcommittee on National Economic Growth, Natural Resources, and 
                           Regulatory Affairs

                    Hon. David M. McIntosh, Chairman

1. ``Non-Binding Legal Effect of Agency Guidance Documents,'' House 
        Report No. 106-109, October 26, 2000, Seventh Report by the 
        Committee on Government Reform, together with Minority and 
        Additional Views.
    a. Summary.--Various laws enacted by Congress ensure legal 
protections for the public so that agencies may not issue 
documents that bind the public without the public's opportunity 
to participate in the policymaking process. These good 
government provisions are a key to our democratic process. They 
protect citizens from arbitrary decisions and enable citizens 
to effectively participate in the process. If agencies avoid 
these legal protections or issue documents that do not clearly 
state if they have binding legal effect or not, the public may 
be confused or unfairly burdened--sometimes at great cost.
    Agencies sometimes claim they are just trying to be 
``customer friendly'' and serve the regulated public when they 
issue advisory opinions and guidance documents. This may, in 
fact, be true in many cases. However, when the legal effect of 
such documents is unclear, regulated parties may well perceive 
this ``help'' as coercive--an offer they dare not refuse. 
Regrettably, the subcommittee's investigation found that some 
guidance documents were intended to bypass the rulemaking 
process and expanded an agency's power beyond the point at 
which Congress said it should stop. Such ``backdoor'' 
regulation is an abuse of agency power.
    In 1996, Congress enacted the Congressional Review Act 
[CRA] to oversee agency legislative rules and agency guidance 
documents with any general applicability and future effect. 
Despite repeated requests by the subcommittee and specific 
direction by Congress in two appropriation cycles, the Office 
of Management and Budget [OMB] failed to provide sufficient 
guidance to Federal agencies for implementation of the CRA. The 
result has been some agency confusion over the legal effect of 
agency guidance documents and incomplete agency compliance with 
the CRA.
    As a result of the subcommittee's 1999-2000 investigation, 
the major regulatory agencies each submitted letters from their 
chief legal officials to the subcommittee stating that their 
agency guidance documents have no binding legal effect on the 
public and that they are taking steps to clearly communicate 
this fact to the public. These officials state that these 
guidance documents are ``not legally binding'' on the public 
and conclude by saying, ``We recognize the importance of using 
guidance properly, and we have taken--and will continue to 
take--appropriate steps to address the concerns that guidance 
not be used as a substitute for rulemaking and to make the 
legal effect of our documents clear to the public.''
    Nonetheless, as Law Professor Robert Anthony stated in a 
1998 article entitled, ``Unlegislated Compulsion: How Federal 
Agency Guidelines Threaten your Liberty,'' ``Even though those 
documents do not have legally binding effect, they have 
practical binding effect whenever the agencies use them to 
establish criteria that affect the rights and obligations of 
private persons'' (Cato Policy Analysis No. 312, August 11, 
1998, p. 1).
    b. Benefits.--The subcommittee found that, since the March 
1996 enactment of the CRA, OMB failed to provide sufficient 
guidance to the agencies on implementation of the CRA. The 
result was some agency confusion about the CRA, especially 
about agency guidance documents subject to congressional review 
under the CRA, and incomplete agency compliance with the CRA. 
Under the CRA, agency guidance with any general applicability 
and future effect is subject to congressional review. Without 
the required congressional review, covered agency guidance has 
no legal force or effect.
    The subcommittee also found that agencies have sometimes 
improperly used guidance documents as a backdoor way to bypass 
the statutory notice-and-comment requirements for agency 
rulemaking and establish new policy requirements.
    The subcommittee further found that agencies often do not 
clearly state within their guidance documents that they are not 
legally binding on the public. As a consequence, the public 
often is confused and unfairly burdened, sometimes at great 
    In response, the subcommittee requested information from 
the major regulatory agencies about their use of nonregulatory 
guidance documents, their submissions for congressional review 
under the CRA, and their specific explanations within each 
guidance document regarding its legal effect. The agencies 
responded by submitting letters to the subcommittee confirming 
that their guidance documents have no legally binding effect on 
the public.
    The report includes these agency letters for the public's 
use; however, the subcommittee remains concerned about future 
backdoor rulemaking attempts by the agencies and future agency 
guidance documents without explanations regarding their non-
binding legal effect on the public. Consequently, the 
subcommittee intends to continue its oversight in this area and 
asks the public to inform the subcommittee about any instances 
of agency guidance which either establishes policy through the 
backdoor or is unclear about its non-binding legal effect on 
the public.
    c. Hearings.--On February 15, 2000, the subcommittee held a 
hearing entitled, ``Is the Department of Labor Regulating the 
Public Through the Backdoor?'' The purpose of the hearing was 
to examine the Department of Labor's [DOL's] use of 
nonregulatory guidance documents and to determine whether DOL 
was regulating the public through the backdoor--by imposing 
binding legal requirements in nonregulatory guidance documents. 
The hearing allowed the Department's chief legal officer, 
Solicitor Henry Solano, to discuss DOL's use of nonregulatory 
guidance documents instead of public rulemaking and the ways in 
which DOL disclosed or failed to disclose whether or not each 
such guidance document is legally binding on the public.
    Besides Mr. Solano, witnesses included: Michael E. Baroody, 
senior vice president, Policy, Communications and Public 
Affairs, National Association of Manufacturers [NAM] and Former 
Assistant Secretary of Policy, DOL; Robert A. Anthony, George 
Mason University Foundation professor of law and former 
chairman, Administrative Conference of the United States; Jud 
Motsenbocker, owner, Jud Construction Co., Muncie, IN; Dixie 
Dugan, human resource coordinator, Cardinal Service Management, 
Inc., New Castle, IN; Dave Marren, vice president and division 
manager, the F.A. Barlett Tree Expert Co., Roanoke, VA; and 
Adele Abrams, attorney with Patton, Boggs in Washington, DC.
    The hearing revealed that: (a) DOL and the Department of 
Transportation [DOT] had admitted that none of their listed 
guidance documents for their Occupational Safety and Health 
Administration [OSHA] and the National Highway Traffic Safety 
Administration [NHTSA], respectively, were legally binding on 
the public; (b) DOL and DOT had admitted that none of their 
listed guidance documents for OSHA and NHTSA were submitted to 
Congress for review under the CRA; (c) the vast majority of 
DOL's and DOT's submitted guidance documents did not make it 
clear to the public that the documents are not legally binding 
on the public; and (d) only 8 percent of DOL's 1999 OSHA 
guidance documents included any explanation of legal effect and 
only 5 percent put this explanation at the beginning of the 
document. In contrast, DOT included an explanation of legal 
effect in about 40 percent of its NHTSA guidance documents.
    The hearing also examined several areas of DOL guidance. 
Mr. Baroody provided many examples of agency guidance documents 
which make ``the point that the problem of non-regulatory 
guidance, `non-rule rules,' back-door rulemaking as it is 
variously described, is not just a problem at the Occupational 
Safety and Health Administration, nor is it just a problem at 
the Department of Labor. It is a problem widespread in this 
    The hearing, including testimony by Ms. Dugan, examined one 
aspect of DOL's Family and Medical Leave Act [FMLA] guidance. 
The hearing revealed that DOL issued a nonregulatory but 
policysetting guidance opinion letter which redefined a 
``serious health condition'' under the 1993 FMLA. DOL's 1995 
opinion letter said that minor illnesses, such as the common 
cold, were not a serious health condition. However, in December 
1996, DOL retracted its previous definition and stated that the 
common cold, the flu, ear-aches, upset stomachs, et cetera, all 
are covered by the FMLA if an employee is incapacitated more 
than 3 consecutive days and receives continuing treatment from 
a health care provider. Ms. Dugan's testimony explained that 
the consequences of this nonregulatory and costly redefinition 
reverberated throughout the employer world and actually created 
a problem for needy people.
    Ms. Dugan, a human resource coordinator for a private, for-
profit corporation whose services include group homes and 
supported living apartments, explained, ``When employees are 
legitimately on leave we find a way to cover for them; however, 
under DOL opinion letters unscheduled and unplanned absences 
and illegitimate leave hurts us. They threaten our ability to 
serve our clients who are counting on us to be there 24 hours a 
day. We share this dilemma with many industries where 
unscheduled and unplanned absences can affect customers and 
    The hearing noted DOL's backdoor work-at-home guidance. On 
January 5, 2000, the subcommittee wrote DOL about its November 
15, 1999, work-at-home policysetting guidance letter, which was 
not included in DOL's 3,374 OSHA documents submitted to the 
subcommittee, since it was issued after the subcommittee's 
October 8th request letter. The subcommittee sought to 
determine if DOL's 1999 guidance had been submitted to Congress 
for review under the CRA and if it was legally binding on the 
public. Of especial concern was DOL's expansion, without any 
express statutory delegation from Congress, of its jurisdiction 
into private homes. Subsequently, DOL withdrew this guidance 
    The hearing, including testimony by Mr. Marren, explored 
DOL's 1998 and 1999 guidance documents for arborists. DOL 
withdrew both of these guidance documents after threats of 
lawsuits against DOL for not following the Administrative 
Procedure Act's [APA's] statutory procedures for new 
    The next day (on February 16, 2000), the subcommittee 
submitted many post-hearing questions to DOL. For example, the 
subcommittee asked DOL to identify all other withdrawn guidance 
documents and to submit a chart identifying the number of 
guidance documents by category of guidance (e.g., compliance 
directives, compliance guides, interpretation letters, manuals, 
et cetera). Even though DOL, in its March 16th partial reply to 
some of the post-hearing questions, promised to provide this 
information to the subcommittee, it never did so despite the 
subcommittee's repeated requests for this information.

 Subcommittee on National Security, Veterans Affairs and International 

                    Hon. Christopher Shays, Chairman

1. ``The Department of Defense Anthrax Vaccine Immunization Program: 
        Unproven Force Protection,'' House Report No. 106-556, April 3, 
        2000, Fourth Report by the Committee on Government Reform, 
        together with Dissenting and Supplemental Views.
    a. Summary.--In the 106th Congress, the Subcommittee on 
National Security, Veterans Affairs, and International 
Relations held six hearings on issues raised by the Department 
of Defense [DOD] Anthrax Vaccine Immunization Program [AVIP]. 
The hearings examined the role of vaccines in force protection, 
specifically the design, implementation and procurement 
strategy of the AVIP. Witnesses also questioned the safety and 
effectiveness of the mandatory AVIP which proposes to 
administer an old, little-used vaccine to the entire 2.4 
million member U.S. military force.
    Based on the hearing record, and more than 100,000 pages of 
documents obtained from DOD and the Food and Drug 
Administration [FDA], the subcommittee staff prepared an 
oversight report containing five findings and five 
    The report finds the AVIP unsustainable in its present form 
due to an unreliable vaccine supply, unmanageable program 
logistics, uncertain safety monitoring and the unproven 
efficacy of the current vaccine against the biological warfare 
threat. The report recommends development of a safer, more 
effective vaccine for broad-based military use. In the 
meantime, the report recommends DOD undertake the research 
necessary to make the current vaccine safer, including limiting 
its use to clinical trials requiring informed consent of all 
those receiving the immunization. If necessary, DOD could 
request the President to authorize a waiver of informed consent 
procedures for certain deployed forces pursuant to the statute, 
regulation and Executive order put in place since the gulf war.
    1. The AVIP is a well-intentioned but over-broad response 
to the anthrax threat. It represents a doctrinal departure 
overemphasizing the role of medical intervention in force 
    2. The AVIP is vulnerable to supply shortages and price 
increases. The sole-source procurement of a vaccine that 
requires a dedicated production facility leaves DOD captive to 
old technology and a single, untested company. Research and 
development on a second-generation, recombinant vaccine would 
allow others to compete.
    3. The AVIP is logistically too complex to succeed. 
Adherence to the rigid schedule of six inoculations over 18 
months for 2.4 million members of a mobile force is unlikely, 
particularly in reserve components. Using an artificial 
standard that counts only shots more than 30 days overdue, DOD 
tolerates serious deviations from the Food and Drug 
Administration [FDA] approved schedule.
    4. Safety of the vaccine is not being monitored adequately. 
The program is predisposed to ignore or understate potential 
safety problems due to reliance on a passive adverse event 
surveillance system and DOD institutional resistance to 
associating health effects with the vaccine.
    5. Efficacy of the vaccine against biological warfare is 
uncertain. The vaccine was approved for protection against 
cutaneous (under the skin) infection in an occupational 
setting, not for use as mass protection against weaponized, 
aerosolized anthrax.
    1. The force-wide, mandatory AVIP should be suspended until 
DOD obtains approval for use of an improved vaccine. To 
accomplish this:
    2. DOD should accelerate research and testing on a second-
generation, recombinant anthrax vaccine; and,
    3. DOD should pursue testing of the safety and efficacy of 
a shorter anthrax inoculation regimen; and,
    4. DOD should enroll all anthrax vaccine recipients in a 
comprehensive clinical evaluation and treatment program for 
long term study.
    5. While an improved vaccine is being developed, use of the 
current anthrax vaccine for force protection against biological 
warfare should be considered experimental and undertaken only 
pursuant to FDA regulations governing investigational testing 
for a new indication.
    b. Benefits.--Acknowledging vaccine shortages and the 
failure of the sole-source vaccine producer to meet Food and 
Drug Administration requirements for new production, DOD scaled 
back the AVIP in July 2000, requiring inoculation of only those 
forces active in high threat areas for more than 30 days. 
Oversight of the AVIP also prompted a clarification of medical 
exemption policies, closer tracking of the immunization 
regimen, and a more focused effort to determine the impact of 
the program on reserve component readiness, retention and 
morale. As the result of sustained congressional interest in 
the AVIP, adverse medical events subsequent to inoculation are 
being more closely monitored by DOD, FDA and private 
organizations. U.S. service personnel have been provided a 
significant volume of objective information and testimony on 
the program's origins, design, implementation, policy 
implications and impacts.
    The report also helped define issues raised by a policy of 
reliance on medical force protection to the possible exclusion 
or detriment of other elements--protective suits, masks, 
detectors--effective against chemical and biological warfare 
    c. Hearings.--A hearing entitled, ``The Impact of the 
Anthrax Vaccine Program on Reserve and National Guard Units,'' 
occurred on September 29, 1999 with testimony from witnesses 
from the DOD and armed service members. A hearing entitled, 
``Force Protection: Improving Safeguards for Administration of 
Investigational New Drugs to Members of the Armed Forces,'' was 
held on November 9, 1999. Testimony was received from DOD and 
HHS witnesses on current procedures for obtaining informed 
consent from service personnel. Biomedical ethicists also 
testified on the implication of using investigational products, 
or licensed products for off-label purposes, in mandatory force 
medical force protection programs. Hearing entitled, ``Anthrax 
Vaccine Adverse Reactions,'' occurred on July 21, 1999 with 
testimony from GAO, FDA, DOD and service members; hearing 
entitled, ``Department of Defense's Sole-Source Anthrax Vaccine 
Procurement,'' occurred on June 30, 1999 with testimony 
received from officials from DOD, GAO and BioPort Corp.; a 
hearing entitled, ``DOD's Mandatory Anthrax Vaccine 
Immunization Program for Military Personnel,'' took place on 
April 29, 1999 with testimony from officials with GAO, DOD and 
members of the armed services. Hearing entitled, ``The Anthrax 
Immunization Program,'' occurred on March 24, 1999 with 
testimony received from officials with the DOD, members of the 
armed forces, and concerned citizens.

                        B. OTHER INVESTIGATIONS

                             Full Committee

                       Hon. Dan Burton, Chairman

1. Investigate the current regulation of Federal wetlands, in 
        particular the area owned by Mr. John Pozsgai of Morrisville, 
    a. Summary.--Wetlands are valued by many Americans for the 
very practical reason that they can act as a buffer against 
flooding or can purify streams and rivers, in addition to 
providing a home for a diverse species of wildlife. However, 
regulation and protection of wetlands has been one of the most 
controversial environmental issues that Congress has had to 
face. The debate over wetlands has evolved around the balance 
between protecting wetlands and private property rights.
    The Clean Water Act is the principal issue instrument of 
America's wetlands policy, with the focus exclusively, in 
stopping pollution. Yet over the years, the Army Corps of 
Engineers and the Environmental Protection Agency [EPA] 
steadily have expanded their jurisdiction, using the Clean 
Water Act as a means to protect wetlands, moving the focus away 
from actual polluters. In effect, the Clean Water Act has been 
transformed into a means to protect wetlands, yet Congress has 
never passed such a law.
    b. Benefits.--The investigation hopefully will compel the 
next administration and Congress to review and clarify our 
current wetlands policy.
    c. Hearings.--On October 6, 2000, the Committee on 
Government Reform held a hearing entitled, ``Federal Wetlands 
Policy: Protecting the Environment or Breaching Constitutional 
    On the first panel, the committee heard testimony from Mr. 
Paul Kamenar from the Washington Legal Foundation, Ms. Susan 
Dudley, from the Mercatus Center. The committee also heard 
testimony from Mr. John Pozsgai's daughters, Ms. Victoria 
Pozsgai-Khoury and Ms. Gloria Pozsgai-Heater. The final witness 
on the first panel was Ms. Kathleen Andria, Director of 
American Bottom Conservancy and chairman of the Environment 
Committee for East St. Louis Community Action Network.
    Mr. Kamenar and Ms. Dudley discussed the confusion 
surrounding the current definition of a ``wetland,'' and argued 
that the Federal Government has expanded the use of 
``wetlands'' designation beyond what the law originally 
    The committee specifically looked at the case of former 
Hungarian freedom fighter, now self-employed truck mechanic, 
John Pozsgai of Morrisville, PA. His daughters, Ms. Victoria 
Pozsgai-Khoury and Ms. Gloria Pozsgai-Heater testified that 
their father decided to purchase a 14-acre parcel of property 
across the street from where they lived. The property had 
historically been used as old dump in a highly urban area, but 
Mr. Pozsgai saw it as an opportunity to expand the family 
business and make a better life for himself and his family.
    Mr. Pozsgai cleaned it up, which entailed removing over 
7,000 old tires and rusting car parts. In order to build on the 
property, Mr. Pozsgai proceeded to fill approximately 5 acres 
of property with clean fill. Clean fill consists of topsoil, 
rubble, and bricks. Unfortunately for Mr. Pozsgai, the Army 
Corps of Engineers and EPA claimed that his property was a 
federally protected wetland and that this clean fill was 
considered a ``pollutant.'' Federal prosecutors argued the 
same, and succeeded.
    In civil court proceedings, Mr. Pozsgai was fined $200,000. 
In a criminal prosecution, a few weeks later, he was sentenced 
to 3 years in prison and fined an additional $202,000. The 
fines were reduced in both the civil and criminal cases, due to 
Mr. Pozsgai's inability to pay them. Mr. Pozsgai, however, did 
serve a year and half in Allenwood Federal Penitentiary and a 
year and a half in a half way house.
    During the second panel, the committee heard testimony from 
Mr. Michael Davis, Deputy Assistant Secretary of the Army for 
Civil Works, and Mr. Robert Wayland, Director of the Office of 
Wetlands, Oceans, and Watersheds at the Environmental 
Protection Agency.
2. Review of United States Counter-Narcotics Policy
            Aid to Colombia
    The committee has worked jointly with the House 
International Relations Committee during the 106th Congress to 
conduct oversight of the administration's counter-narcotics 
policy and strategy, particularly toward Colombia.
    Colombia's unstable democracy is a threat to the entire 
Andean Region. This instability is the result of both 40 years 
of civil strife and nearly three decades of a false economy 
fueled by the illicit narcotics trade. Colombia borders 
Venezuela, where 23 percent of United States petroleum products 
originate. Colombia virtually borders the Panama Canal, where 
nearly 80 percent of the world's economy passes at one time or 
    According to the DEA, nearly 90 percent of the cocaine and 
75 percent of the heroin on United States streets and 
schoolyards originates in Colombia. For the first time in our 
Nation's history, according to the CDC and the FBI, drug-
induced deaths surpassed homicides in 1998. Nearly 17,000 drug-
induced deaths occurred in America in 1998, the latest 
available statistics. In Baltimore, the DEA estimates that 1 in 
16 citizens is a heroin addict, and that the nearly 50,000 
heroin addicts in that city spend over $1 million per day on 
their habits.
    Working jointly, Chairman Burton of the Government Reform 
Committee and Chairman Gilman of the International Relations 
Committee have promoted a strategy of identifying and fighting 
the surging cocaine and heroin problems at their source, where 
our resources are most effective. They have been joined in this 
effort by Chairman John Mica of the Criminal Justice 
Subcommittee and the House leadership. Over the vigorous 
objections of the administration, Congress approved funding for 
equipment--including six Black Hawk Helicopters--for the 
Colombian National Police [CNP]--the main counternarcotics 
force in Colombia. Through the oversight process, the two 
committees have protested repeated delays in delivery of the 
helicopters approved by Congress. When the committees learned 
that the State Department planned to send the CNP 50-year-old 
ammunition and inadequate armour for the helicopters to 
Colombia, Chairmen Burton and Gilman protested forcefully. In 
the 6 months since the CNP received the helicopters mandated by 
Congress, they have eradicated more opium poppy than in all of 
last year, and 4 times as much as in 1998.
    In January 2000, the administration proposed ``Plan 
Colombia,'' a $1.3 billion aid package designed to assist the 
Colombian Government battle drug-trafficking. In the views of 
the two committees, the administration's package focuses its 
resources too heavily on the Colombian Army, which has been 
beset by human rights problems and a well-earned reputation for 
ineffectiveness. The Plan Colombia aid package focuses 90 
percent of its resources on the Colombian Army, and less than 
10 percent on the Colombian National Police, who have a proven 
track record in combating narco-terrorism. The Government 
Reform Committee will continue to closely monitor the 
administration of the ``Plan Colombia'' aid package.
            Field Hearing on Drug Trafficking through Cuba and Puerto 
    The committee held a field hearing in Miami, FL, on January 
3 and 4, 2000, focusing on Cuba and Puerto Rico as transhipment 
points for illegal drugs destined for the United States. On 
January 3, the committee heard vivid testimony about drug 
trafficking in Cuba by the Castro regime. A former Cuban 
Government official testified, along with the daughter of an 
executed Cuban Army officer. Also testifying were 
representatives from the DEA and the Customs Service. Witnesses 
were questioned about a seizure of 7.2 tons of cocaine in 
Cartegana, Colombia. The ship's manifest indicated that the 
drugs were to be shipped to Cuba. After investigating the 
seizure thoroughly in three countries, the committee firmly 
believes the drugs were ultimately destined for the United 
States, possibly through Mexico.
    On January 4, the committee heard testimony from several 
witnesses about the growing use of Puerto Rico as a 
transhipment point for drugs destined for the United States, as 
well as the lack of resources for combating this emerging 

                       Subcommittee on the Census

                       Hon. Dan Miller, Chairman

1. ``Oversight of the 2000 Census: Community Based Approaches for a 
        Better Enumeration,'' Phoenix, AZ, January 29, 1999.
    a. Summary.--The total undercount of the American Indian 
population was approximately 12.22 percent in 1990. Following 
the 1998 dress rehearsals, the Inspector General [IG] raised 
serious concerns that the Census Bureau had not become prepared 
to address the unique nature of the Tribal societies and 
American Indian Reservations to reduce this undercount in 2000. 
The IG's report on the dress rehearsal in Menominee, WI, 
indicated that complete count committees [CCCs] and paid 
advertising, both key components of a successful census, had 
problems. Advertising was found to be inappropriate for 
American Indians and the CCCs did not have strong coordination 
with the Tribal chairman.
    The dress rehearsal provided an opportunity for the Census 
Bureau to assess major risks which may be detrimental to the 
successful execution of the proposed plan. It is important that 
the Census Bureau be prepared to correct any problems which 
arose during the dress rehearsals and to work with local 
community members to find ways to reduce the undercount through 
partnership activities.
    b. Benefits.--This oversight provided the subcommittee with 
useful information about the unique nature of the Tribal 
societies and American Indian Reservations toward its effort to 
reduce this undercount for 2000. In addition, the subcommittee 
documented the problems associated with obtaining an accurate 
count in a rapidly growing community such as the greater 
Phoenix, AZ, area. The subcommittee elicited ideas and 
suggestions from stakeholders in the 2000 census, such as 
tribal leaders, local officials and community groups, about how 
local efforts can improve participation and accuracy of the 
census count.
    c. Hearings.--A hearing entitled, ``Oversight of the 2000 
Census: Community Based Approaches for a Better Enumeration,'' 
was held on January 29, 1999, in Phoenix, AZ. Witnesses 
included: The Honorable J.D. Hayworth (R-AZ); Dr. Taylor 
McKenzie, vice-president, Navajo Nation; the Honorable Ivan 
Makil, president, Salt River Pima Maricopa Indian Community; 
the Honorable Wayne Taylor, Jr., chairman, the Hopi Tribe; Mr. 
Rodney B. Lewis, general counsel, Gila River Indian Community; 
Mr. Scott Celley, executive assistant to Governor Jane Hull; 
Representative Doug Lingner, city council member, District 7; 
Mr. John R. Lewis, executive director, Inter-tribal Council of 
Arizona; Mr. Jack C. Jackson, Jr., director of Federal 
Relations, National Congress of American Indians; Mr. James 
Bourey, executive director, Maricopa Association of 
Governments; Ms. Levonne Gaddy, president, Multiethnics of 
Southern Arizona in Celebration [MOSAIC]; and Ms. Esther Lumm, 
chairwoman, Arizona Hispanic Community Forum.
    The hearing's primary focus revolved around the undercount 
of Native Americans in the 1990 census and several approaches 
that could be used in the 2000 census to reduce that 
2. ``Oversight of the 2000 Census: Examining the Benefits of Post-
        Census Local Review,'' February 11, 1999.
    a. Summary.--During the 1990 census, the Census Bureau 
utilized a program called ``post census local review'' [PCLR]. 
Prior to the 1990 census, the Census Bureau conducted a ``pre-
census local review'' where local and tribal governments could 
add their input to the Census Bureau's mailing lists. Described 
as a local quality check, the post census local review [PCLR] 
program allowed participating local and tribal governments to 
check the Census Bureau's work before the books closed on the 
census. This quality check found and corrected over 400,000 
errors in the census. Some of these errors were errors in the 
geographic placement of households, while others were whole 
census blocks that were missed by Census Bureau enumerators. 
Although this program was voluntary for eligible jurisdictions 
during the 1990 census, the process is crucial because errors 
can be found and corrected while the census is still underway.
    b. Benefits.--A post census local review [PCLR] would 
provide local and tribal governments an opportunity to ensure 
that no households in their jurisdiction are missed by the 
Census Bureau during the enumeration. It is important for local 
and tribal governments to have an accurate count in their 
jurisdiction for many different reasons, and PCLR is a tool 
they can utilize to flag missing households and geographic 
errors in the placement of those households. For census 2000, 
the Census Bureau is utilizing a program at the front end of 
the census process called the local update of census addresses 
[LUCA]. This pre-census activity is a voluntary program that 
empowers local and tribal governments to review the address 
list in their jurisdiction to ensure the accuracy prior to 
census day. This process was made possible by the Census 
Address Improvement Act of 1994, (Public Law 103-430) which 
allowed local and tribal governments the opportunity to check 
the actual address lists and maps that the Census Bureau will 
use during the decennial census. At this time, the Census 
Bureau does not plan to complement this ``front end'' program 
with PCLR. On January 25, 1999, the U.S. Supreme Court ruled in 
Glavin v. Clinton and through U.S. House of Representatives v. 
Department of Commerce that the Census Bureau must follow up on 
100 percent of all non-responding households as part of their 
plans for census 2000. Given this fact, many census 
stakeholders have encouraged the Census Bureau to utilize every 
proven traditional and legal methods at their disposal to 
ensure that every American is counted.
    c. Hearings.--A hearing entitled, ``Oversight of the 2000 
Census: Examining the Benefits of Post-Census Local Review,'' 
was held on February 11, 1999, and a bill was marked-up at this 
time. The hearing provided a forum for various stakeholders 
from local government and Members of Congress to comment on the 
potential addition of PCLR to census 2000 plans. Witnesses at 
the hearing included: The Honorable Thomas Petri (R-WI); the 
Honorable Thomas Sawyer (D-OH); the Honorable Kenneth 
Blackwell, Secretary of State, Ohio and co-chair of the Census 
Monitoring Board; Ms. Carol A. Roberts, county commissioner, 
Palm Beach County, FL; the Honorable Timothy M. Kaine, mayor, 
city of Richmond, VA; Mr. James Bourey, executive director, 
Maricopa Association of Governments, Maricopa County, AZ; Mr. 
Lanier Boatwright, president, National Association of 
Developmental Associations; Ms. Barbara Welty, member, National 
Association of Towns and Townships; Dr. Everett Ehrlich, 
member, U.S. Census Monitoring Board; Dr. Barbara Bryant, 
former Director, U.S. Census Bureau, National Quality Research 
Center, School of Business Administration, University of 
Michigan; the Honorable Alex G. Fekete, mayor, city of Pembroke 
Pines, FL; Mr. Steven D. Whitener, member, Board of 
Supervisors, Loudoun County, VA; and Ms. Jessica F. Heinz, 
assistant city attorney, city of Los Angeles, CA. Ms. Heinz and 
Mr. Whitener submitted testimony for the record but did not 
appear in front of the subcommittee.
    The hearing revolved around whether a post census local 
review of addresses, which allows census stakeholders to review 
their census figures for accuracy after the census is 
completed, would be beneficial. Some argued that this step is 
imperative to getting a proper count, while others said that 
the local update of census addresses program, which already 
allows stakeholders to review the census address list prior to 
the count, is enough stakeholder input.
3. ``Oversight of the 2000 Census: Examining the America Counts Today 
        [ACT] Initiatives to Enhance Traditional Enumeration Methods,'' 
        March 2, 1999.
    a. Summary.--The debate over the 2000 census has been over 
how to eliminate the differential undercount found to exist in 
the 1990 census. Democrats have insisted that the only way to 
eliminate the undercount was to use statistical estimation. 
Republicans maintained that a full enumeration without 
statistical estimation could be successful, if new and/or 
improved outreach efforts were used in 2000. The America Counts 
Today [ACT] initiative was the culmination of proposed outreach 
activities and other programs the subcommittee felt would be 
helpful in eliminating the differential undercount in 2000. It 
was first introduced publicly at the winter meeting of the U.S. 
Conference of Mayors on January 27, 1999. The ACT initiative 
focused heavily on ideas that related directly to hard to count 
communities and would have provided funding to community 
outreach groups.
    b. Benefits.--ACT and its subsequent oversight provided the 
subcommittee with important tools to help eliminate the 
differential undercount. Several of the ACT initiatives, had 
been previously considered by the Census Bureau, used in the 
dress rehearsals or in the 1990 census. The hearing gave the 
subcommittee the opportunity to hear from the Census Bureau and 
used its recommendations for the ACT plan. The issue of post 
census local review [PCLR] a significant part of ACT was 
considered in a separate hearing.
    c. Hearings.--The hearing was held on March 2, 1999. 
Testifying before the subcommittee was the Honorable Sue Myrick 
(R-NC), the Honorable Carrie Meek (D-FL), and Dr. Kenneth 
Prewitt, Director, U.S. Census Bureau.
    The hearing focused on America Counts Today, a group of 10 
initiatives that could help improve the census count. These 
tactics to improve the accuracy of the census came about after 
sampling was declared unconstitutional by the Supreme Court for 
the apportionment of congressional seats. Such examples 
included a greater advertising and promotion budget and an 
extension to the census in the schools program. The Bureau's 
Director Prewitt favored all but three of the initiatives, 
which were the mailing of a second census questionnaire, a post 
census local review process and an increase in languages on the 
census forms.
4. ``Oversight of the 2000 Census: Examining the Bureau's Policy to 
        Count Prisoners, Military Personnel, and Americans Residing 
        Overseas,'' June 9, 1999.
    a. Summary.--The subcommittee examined three measures 
introduced by Members of Congress concerning census 2000. It 
investigated whether the Bureau of the Census should include in 
the 2000 decennial census all citizens of the United States 
residing abroad. The Census Bureau intends to exclude more than 
3,000,000 citizens of the United States living and working 
overseas from the 2000 census because such citizens are not 
affiliated with the Federal Government. Several groups 
representing citizens abroad have been working for years to 
ensure they are counted in the decennial census. They are a 
taxpaying, voting segment of America requesting to be included 
in the census. It is necessary to understand the implications 
and viability of such an undertaking.
    The subcommittee also investigated whether the Secretary of 
Commerce should require the Census Bureau to make changes in 
tabulating the total population of prisoners in the United 
States in a decennial census. Currently, the Census Bureau 
plans to add the number of prisoners to the count of the State 
in which they are incarcerated. It has been suggested that 
procedure be changed so that any prisoner who is convicted in 
one State but incarcerated in another would be counted as a 
resident of the State from which more than half the costs 
associated with such a prisoner's incarceration are 
recoverable. It is the responsibility of the subcommittee to 
determine whether prisoners will be accurately counted by the 
Census Bureau's current plans or whether a change is warranted.
    Finally, the subcommittee investigated whether the 
Secretary of Commerce should be required to ensure that the 
Census Bureau makes changes to the way they allocate active 
duty members of the armed services back to the States. 
Currently, the Census Bureau plans to use the ``usual 
residence'' rule that places domestically stationed military 
personnel into the counts of the States where they are living 
and sleeping most on census day. It has been suggested that 
instead, the Census Bureau first allocate members of the armed 
forces on active duty to their home of record. This matter was 
carefully scrutinized, as it is essential that the subcommittee 
ensure that residents are counted in the appropriate place of 
residence in order to ensure fair and equitable apportionment 
of Congress, redistricting, and distribution of Federal funds 
among the States.
    b. Benefits.--This oversight provided the subcommittee with 
information about the feasibility of counting Americans abroad, 
prisoners in their originating State, and military personnel in 
their home of record. These three portions of the U.S. 
population constitute millions of Americans that deserve to be 
as accurately counted and included in the decennial census as 
possible. The subcommittee's review of the issues at hand 
provided documented accounts by both the Census Bureau and the 
stakeholders of the viability and implications of the proposed 
    c. Hearings.--A hearing entitled, ``Oversight of the 2000 
Census: Examining the Census Bureau's Policy to Count 
Prisoners, Military Personnel, and Americans Residing 
Overseas,'' was held on June 9, 1999. Testimony was received 
from: The Honorable Mark Green (R-WI); the Honorable Benjamin 
Gilman (R-NY); the Honorable Kenneth Prewitt, Director, Bureau 
of the Census; Mr. David Hamod, executive director of the 
Census 2000 Coalition; Mr. Don Johnson, vice president of the 
Association of Americans Resident Overseas; Mr. L. Leigh 
Gribble, secretary of the American Business Council of Gulf 
Countries and executive committee member of Republicans Abroad; 
Ms. Dorothy Van Schooneveld, executive director of American 
Citizens Abroad; and Mr. Joseph Smallhoover, chair of Democrats 
    This hearing discussed how to include certain groups--
Americans overseas, prisoners and the military--in the census 
count. The most prominent debate was over the American 
overseas. Bureau Director Prewitt said the Census Bureau could 
not credibly enumerate that population in the 2000 census 
because they did not know certain charactistics of the group, 
i.e., size. Legislation for an interim census of overseas 
Americans to prepare for their inclusion in the 2010 census was 
5. ``Oversight of the 2000 Census: Community-Based Approaches for a 
        Better Enumeration,'' Racine, WI, June 28, 1999.
    a. Summary.--Although the Census Bureau is headquartered in 
Suitland, MD, just outside of Washington, DC, the census itself 
is a very localized project. In fact, it will be the Nation's 
largest peacetime mobilization ever, carried out in communities 
across the country. The Census Bureau depends on local 
governments to provide them with correct address lists and 
updated maps. They also rely heavily on local organizations, 
ranging from civic to religious, to help recruit workers and 
find unique ways to reach traditionally undercounted members of 
each respective community. The Census Bureau has developed many 
programs to tap into the vast knowledge of local officials. It 
is the job of the subcommittee to determine the effectiveness 
of those programs through hearings and oversight activities.
    b. Benefits.--As part of the subcommittee's pledge to reach 
out to traditionally undercounted populations across the 
country, a series of field hearings was held throughout 1998 
and 1999. The most accurate census possible has always been the 
primary goal of the subcommittee, and reaching outside 
Washington, DC, for ideas toward achieving that goal seemed 
only logical. The unique perspective of local government 
leaders and other stakeholders provided members of the 
subcommittee with insights otherwise unavailable to them. In an 
effort to make every experience different from the last, each 
hearing was held in a different setting than the previous one. 
This allowed members of the subcommittee to draw on several 
different perspectives in their oversight responsibilities.
    c. Hearings.--The third of three field hearings was held on 
June 28, 1999, in Racine, WI, at the request of subcommittee 
member Paul Ryan (R-WI). In keeping with the same theme as 
previous field hearings, entitled, ``Oversight of the 2000 
Census: Community-Based Approaches for a Better Enumeration.'' 
Members of Congress in attendance were subcommittee Chairman 
Dan Miller (R-FL), subcommittee Ranking Member Carolyn Maloney 
(D-NY), subcommittee member Paul Ryan (R-WI), and the Honorable 
Tom Petri (R-WI). Witnesses included: The Honorable Bonnie 
Ladwig, Wisconsin State representative (R-63), The Honorable 
Gwendolynne S. Moore, Wisconsin State senator (D-4), the 
Honorable James M. Smith, mayor, city of Racine, WI, the 
Honorable John M. Antaramian, mayor, city of Kenosha, WI, Mr. 
Nathaniel E. Robinson, Office of Governor Tommy G. Thompson, 
Ms. Jean S. Jacobson, Racine County executive, Mr. Allan K. 
Kehl, Kenosha County executive, and Dr. Paul Voss, Department 
of Rural Sociology, University of Wisconsin, Madison.
    Wisconsin had the Nation's best response rate in the 1990 
census. This hearing discussed certain tactics that Wisconsin 
is using to keep its response rates high. Wisconsin depends 
upon a good census count in 2000, because it is at risk of 
losing a seat.
6. ``Oversight of the 2000 Census: Examining the Census Bureau's 
        Advertising Campaign,'' July 27, 1999.
    a. Summary.--As part of census 2000, the Census Bureau has 
introduced the first ever paid advertising campaign to promote 
the decennial census. Young and Rubicam [Y&R;] was awarded the 
contract for the advertising campaign. Y&R; worked with several 
subsidiaries/subcontractors, who have experience creating 
advertising for racial and ethnic minorities, to design the 
program. The campaign was implemented during the 1998 dress 
rehearsals and underwent independent evaluations by Westat, 
Inc., to determine its effectiveness. Since then, Y&R; and its 
subsidiaries have revised the campaign.
    The advertising campaign received $47 million for fiscal 
year 1999 and $13 million as part of a fiscal year 1999 
supplemental, and the Bureau has requested $114 million for 
fiscal year 2000 for a total of $174 million for the campaign. 
The English speaking base plan accounts for 51 percent of the 
spending, while in-language/in-culture overlays receive 49 
percent of the funding. While it is critical to reduce the 
undercount rate, it has not been proven that those unlikely to 
participate will be motivated by the advertising. Additionally, 
it is the concern of some members of the subcommittee that 
rural communities will receive a disproportionately low 
percentage of the advertising budget, despite high undercount 
rates in many rural areas.
    b. Benefits.--The subcommittee has investigated the 
campaign to obtain a better understanding of how the Census 
Bureau and Y&R; have addressed the problems found in the dress 
rehearsals, how the advertising contract was awarded, and how 
the money will be spent in detail. The investigation has 
afforded the subcommittee the opportunity to oversee the 
spending of a large appropriation for a process which is new 
for the Census Bureau and the advertising agency responsible 
for carrying out the task.
    c. Hearings.--A hearing entitled, ``Oversight of the 2000 
Census: Examining the Census Bureau's Advertising Campaign,'' 
was held on July 27, 1999. Witnesses included: The Honorable 
Kenneth Prewitt, Director, U.S. Bureau of the Census; Ms. Terry 
Dukes, account managing director, Young and Rubicam, New York; 
Mr. Samuel J. Chisholm, chairman and CEO, the Chisholm-Mingo 
Group, Inc., and Mr. Curtis Zunigha, Census Advisory Committee 
member on the American Indian and Alaska Native Populations.
    The hearing's aim was to review the advertising campaign 
and ensure that money was being spent wisely. Bureau Director 
Prewitt explained the selection process for the advertising 
company, Young and Rubicam, and each of its divisions explained 
what they were doing to reach out to appeal to specific 
populations that would be counted by the census.
7. ``Oversight of the 2000 Census: Discussion of the Effects of 
        Including Puerto Rico in the 2000 U.S. Population Totals,'' 
        September 22, 1999.
    a. Summary.--Since 1910, the Census Bureau has been 
enumerating Puerto Rico's population as required by title 13. 
The methods and questionnaires used to enumerate Puerto Rico 
have always been different than the methods and questionnaires 
used in the United States. For the first time in Puerto Rico's 
history, the Census Bureau will enumerate the island's 
population using methods and questionnaires similar to what 
will be used in the United States. The change in how Puerto 
Rico is to be enumerated created a demand from Puerto Rican 
leaders to include Puerto Rico's 2000 population count in the 
national population totals that will be produced by the Census 
Bureau in 2001. The change prompted Congressman Jose Serrano 
(D-NY) to propose language to be inserted into the fiscal year 
2000 Commerce State Justice report that recognized the change 
of enumeration methods that will be used in Puerto Rico. The 
proposed language suggested that the Census Bureau include 
Puerto Rico's count in all of the Census Bureau's national data 
products. The suggestion of the inclusion of Puerto Rico's 
population in the national totals caused concern for the 
subcommittee and the Census Bureau. The main concern of the 
subcommittee was the potential effect this change would have on 
national statistics. Furthermore, what was the Census Bureau's 
position and would the change even be possible?
    b. Benefits.--The oversight of the change in Puerto Rico's 
enumeration methodology and its effects on national statistics 
allowed Congress to make an informed judgement about including 
Puerto Rico's population in the national summary totals. Prior 
to this oversight, Congress and the subcommittee were unsure 
what the effects of the change would be on national statistics. 
The Census Bureau clearly stated their opposition to such a 
move, citing the difficulty of adjusting all prior national 
statistics to accommodate the addition of roughly 4 million 
people to the national population.
    c. Hearings.--A hearing entitled, ``Oversight of the 2000 
Census: Discussion of the Effects of Including Puerto Rico in 
the 2000 U.S. Population Totals,'' was held on September 22, 
1999. Witnesses included: The Honorable Jose E. Serrano, (D-
NY); the Honorable Carlos A. Romero-Barcelo, (D-PR); the 
Honorable Eni F.H. Faleomavaega, (D-AS); and the Honorable 
Kenneth Prewitt, Director, Bureau of the Census.
    The hearing was designed to examine the effects of 
including Puerto Rico's popuation into national census totals. 
This prompted questions such as: How will the inclusion of 
Puerto Rico affect the numerous data products produced by the 
Census Bureau and other agencies?; what effects will the 
inclusion of data on Puerto Rico have on Federal policy 
decisions that primarily impact the 50 States and the District 
of Columbia? If we decide to include Puerto Rico, should we 
then include the population totals of other American 
Commonwealths, related territories, and possessions as well? 
Bureau Director Prewitt was opposed to adding the Puerto Rico 
population to national totals without more exploration: ``For 
reasons of statistical consistency, the Census Bureau would 
hesitate unilaterally to establish a new denominator . . . Any 
fundamental change in this definition should be fully explored 
with stakeholders within and outside the Federal Government.''
8. ``Oversight of the 2000 Census: A Midterm Evaluation of the Local 
        Update of Census Addresses Program,'' September 29, 1999.
    a. Summary.--The most critical element of a successful 
census is a complete and accurate address list. The Census 
Bureau's address list, or ``master address file,'' determines 
which households will receive a census questionnaire in the 
mail. The address list is also used to conduct non-response 
follow up for households that do not mail back the 
questionnaire. Without a complete address list for the country, 
the chances of all households being enumerated decrease 
sharply, resulting in a greater undercount. Congress realized 
this important connection and passed the Census Address List 
Improvement Act of 1994 (Public Law 103-430). The law directed 
the Census Bureau to form partnerships with local and tribal 
governments in the compilation of the census 2000 address list. 
The law also permitted the Census Bureau and the U.S. Postal 
Service to share address information for the first time. The 
local update of census addresses program [LUCA], was created to 
work with local and tribal governments in sharing address 
    The basic steps of the LUCA program consisted of the 
    1. Governmental units signed a confidentiality agreement 
with Census Bureau.
    2. The Census Bureau sent materials such as address lists 
and maps to the participating local and tribal governments.
    3. Governmental units were given 90 days to review the 
lists and maps, adding and deleting addresses according to the 
governmental units own records.
    4. The governmental units then submitted all changes to the 
Census Bureau.
    5. The Census Bureau then conducted a full canvass of all 
addresses to verify all submitted address additions and 
    6. The Census Bureau then informed governmental units which 
additions and deletions were accepted based on their review.
    7. Finally, the governmental units were able to file an 
appeal with the Office of Management and Budget to rectify any 
final discrepancies. The LUCA program was conducted from 
January 1998 through December 1999.
    b. Benefits.--The benefit of the subcommittee's oversight 
of the LUCA program was the planning of future Census Bureau 
address list compilation programs that involve local and tribal 
governments. The Census Bureau had never interacted with local 
governments on such a national level before. The oversight and 
evaluation of specific LUCA procedures will be of valuable use 
in the planning and development of future 2010 census address 
list programs. Local participation is essential in designing 
the address list because it is the local governments that are 
the most knowledgeable when it comes to where people live. 
Future census address list programs are more than likely to 
have local participation as a key ingredient. Overseeing how 
local governments and the Census Bureau best work together will 
ensure a future address list that is accurate and complete.
    c. Hearings.--A hearing entitled, ``Oversight of the 2000 
Census: A Midterm Evaluation of the Local Update of Census 
Addresses Program,'' was held on September 29, 1999. Witnesses 
included: The Honorable Kenneth Prewitt, Director, Bureau of 
the Census; Mr. John Thompson, Associate Director for Decennial 
Census, Bureau of the Census; Mr. Preston Jay Waite, Associate 
Director for Decennial Census, Bureau of the Census; Mr. J. 
Christopher Mihm, Acting Associate Director of Federal 
Management and Workforce Issues, U.S. General Accounting Office 
[GAO]; Mr. Jack Maguire, planning/GIS manger for the city of 
Lexington, SC; Mr. George Pettit, assistant town manager of 
Gilbert, AZ; Mr. Don Rychnowski, executive director of the 
Southern Tier West RP&D; Board; Ms. Jessica Heinz, Los Angeles 
City Attorney's Office; Mr. Michel Lettre, assistant director, 
Maryland Office of Planning.
    The hearing provided an interim look at the progress of the 
LUCA program. At the time of the hearing, the Census Bureau was 
in the process of verifying additions and deletions in a 
nationwide address canvass. Some witnesses who testified said 
the LUCA program had been of a little help and that a post 
census local review would help them achieve a more accurate 
count, while others said the LUCA program worked well and was 
9. The Rushed Census: Quantity Over Quality?
    a. Summary.--Numerous reports received by the subcommittee 
throughout decennial census operations from independent news 
media and persons involved with census operations indicate that 
in some parts of the country quality assurance measures were 
neglected in a push to finish operations more quickly. 
Instances in which the Census Bureau felt that the quality of 
data had been compromised resulted in the re-enumeration of 
nearly 100,000 households nationwide, the most significant of 
which was the re-enumeration of the entire Hialeah, FL Local 
Census Office. Subcommittee analysis of production and staffing 
data provided by the Census Bureau indicates that there are 15 
other areas of the country where fraudulent or improper 
procedures may have been implemented.
    b. Benefits.--Congress appropriated over $6.5 billion for 
this decennial census--more than twice that invested in the 
1990 census--to ensure that it be conducted as accurately as 
possible. Because of the stakes involved with the outcome of 
the census- apportionment of the House of Representatives, the 
drawing of political districts, the distribution of Federal 
funds--an accurate census is of utmost importance to the 
Nation. It is imperative that the Census Bureau use all of the 
resources available and do all that is necessary to get an 
accurate census count. If fraud occurred or quality control 
measures were ignored during the collection of census data, the 
quality of that data might have been compromised.
    c. Hearings.--The status of census operations was the topic 
of oversight hearings held throughout the session. Concern with 
a ``rushed census'' was specifically raised during the hearing 
entitled, ``Non-Response Follow-Up and Close Out,'' held June 
22, 2000.
10. The American Community Survey [ACS]--A Replacement for the Census 
        Long Form?
    a. Summary.--During the mailout/mail back phase of the 2000 
census, concerns were raised that the 53 questions of the 
census long form are an unnecessary and inappropriate invasion 
of privacy by the Federal Government. As a result of privacy 
concerns, various Members of Congress introduced legislation 
aimed at limiting the scope of census questions or the 
penalties for not answering them, and the Census Bureau noted 
their plans for the American Community Survey [ACS]. The ACS, 
which is currently in testing, is planned as an ongoing survey, 
to be delivered nationwide to 30 million households over a 10-
year period, that asks largely the same questions as the census 
long form.
    b. Benefits.--As an ongoing survey, proponents of the ACS 
note that it will be able to provide more up-to-date economic, 
social, demographic, and housing information to the Nation's 
data users each year. Additionally, because the ACS is 
delivered to 30 million households on a continuous basis--that 
is, at times other than during decennial census operations--it 
is hoped that public discomfort with answering the questions 
will be minimized. The financial benefits and/or shortcomings 
of the ACS are still being investigated.
    c. Hearings.--A hearing entitled, ``The American Community 
Survey [ACS]--A Replacement for the Census Long Form'' was held 
July 20, 2000. The hearing provided a forum for Members of 
Congress, government officials, privacy advocates and data 
users, to comment on the American Community Survey as a 
replacement to the census long form.
11. The Accuracy and Coverage Evaluation [ACE]--Still More Questions 
        than Answers.
    a. Summary.--The Accuracy and Coverage Evaluation [ACE] is 
the Census Bureau's statistical adjustment plan for the 2000 
census. Plans to use a similar statistical adjustment in the 
1990 census were discarded due to concerns regarding 
fundamental problems with its accuracy, legality, and its 
potential for political manipulation. Those same concerns still 
surround the Census Bureau's ACE plans. On January 25, 1999, 
the Supreme Court ruled in the case of Glavin, et al. v. 
Clinton, et al., that the use of sampling to determine the 
population for purposes of apportionment of the U.S. House of 
Representatives is illegal.
    b. Benefits.--Questions still remain regarding the Accuracy 
and Coverage Evaluation. The subcommittee remains concerned 
about the potential for political manipulation associated with 
the sampling plan, as well as its methodology, accuracy, and 
legality. Expert statisticians from across the Nation have 
likewise expressed their concerns with ACE plans.
    c. Hearings.--A hearing entitled, ``The Accuracy and 
Coverage Evaluation [ACE]--Still More Questions than Answers,'' 
was held May 19, 2000 to determine Census Bureau plans for 
conducting the ACE.
12. A Transparent Census?
    a. Summary.--With over $6.5 billion invested in this 
decennial census, the subcommittee has made a significant 
effort to ensure that the proper oversight authorities have 
access to the Census Bureau's operational information needed in 
order to determine that appropriated funds were properly used.
    b. Benefits.--Given the funds appropriated for this 
decennial census and the stakes related to its outcome, it is 
imperative that the Congress and all other oversight bodies 
have full access to the information they need to carry out 
their obligations. Transparency is necessary to build public 
confidence in the census and is one of the qualities that, 
according to Census Bureau Director Kenneth Prewitt, make for a 
good census.
    c. Hearings.--The subject of transparency and the access of 
oversight bodies to information from decennial census 
operations was raised in multiple subcommittee hearings. 
Oversight access to census operational plans, information, and 
data was the topic of a discussion with Director Kenneth 
Prewitt during ``Oversight of the 2000 Census: Status of Bureau 
of the Census Operations and Activities'' held March 8, 2000. 
The General Accounting Office updated the subcommittee on its 
findings and its access to census information in testimony 
during hearings entitled, ``Oversight of the 2000 Census: 
Examining the GAO's Census 2000 Oversight Activities,'' held 
February 15, 2000; ``Oversight of the 2000 Census: Status of 
Key Operations,'' held March 14, 2000; and ``Oversight of the 
2000 Census: Mail-Back Response Rates and Status of Key 
Operations,'' held April 5, 2000.
    Shortly before a hearing entitled, ``Non-Response Follow-Up 
and Other Key Considerations,'' held May 11, 2000, the 
subcommittee was made aware of an e-mail from a Census Bureau 
Area Manager instructing Local Census Office Managers that they 
``can and must not share'' a particular report ``with any GAO 
representative.'' The e-mail was largely the topic of the 
hearing, and both Subcommittee Chairman Miller and Subcommittee 
Ranking Member Maloney consequently requested on May 22 and May 
18, respectively, that the General Accounting Office [GAO] 
investigate the matter to determine whether there had been any 
attempt by the Census Bureau to prevent Congress, the GAO, or 
any other oversight body from having access to information.
13. Census Bureau Data Processing Systems.
    a. Summary.--The Census Bureau's headquarters processing 
systems perform the key functions of controlling, managing, and 
processing census data.
    In order to determine the nature and state of Census' 
processing systems, Subcommittee Chairman Miller and 
Subcommittee Ranking Member Maloney formally requested that the 
General Accounting Office examine the systems.
    b. Benefits.--Because of the central role the Census 
Bureau's headquarters processing systems have in the success of 
census 2000, it is important that they be operating properly 
and without error. The General Accounting Office's evaluation 
of the Bureau's headquarters processing system found weaknesses 
in the process that indicate the potential for the occurrence 
of serious problems.
    c. Hearings.--None.
14. The Long Form.
    a. Summary.--Although this year's census long form was 
shorter than its predecessors, it nonetheless was the subject 
of concern from those who felt that its questions are an 
unnecessary government invasion of privacy.
    b. Benefits.--Voiced opposition to the long form was the 
greatest during the week prior to March 26, during which census 
forms were delivered by mail to the Nation's households. There 
was approximately a 12 percent difference between the mail 
response rate for the long and the short form, continuing a 
general increase in the percentage of non-response for the long 
form, and representative of increased privacy concerns.
    c. Hearings.--A hearing entitled, ``Oversight of the 2000 
Census: Mail-Back Response Rates and the Status of Key 
Operations'' was held April 5, 2000. Another hearing entitled, 
``Oversight of the 2000 Census: Status of Non-Response Follow-
Up'' was held May 5, 2000, during which the subject of public 
concern over the long form was discussed.

                   Subcommittee on the Civil Service

                     Hon. Joe Scarborough, Chairman

1. Federal Reserve Board Retirement Portability.
    a. Summary.--Although most Federal employees are covered by 
either the Civil Service Retirement System [CSRS] or the 
Federal Employees Retirement System [FERS], the General 
Accounting Office [GAO] reported to the subcommittee in 1996 
that Federal employees participate in 34 defined benefit 
retirement plans and 17 defined contribution retirement plans. 
In reviewing these plans, GAO noted that most of the defined 
benefit plans operate on ``pay as you go'' principles 
comparable to CSRS. That system, which covers Federal employees 
hired before December 31, 1983, had an actuarial accrued 
unfunded liability of $512.4 billion as of September 30, 1996. 
By paying benefits from current revenues, the system provides 
inadequately for future benefit obligations, resulting in a 
growing gap between the annual retirement fund payments from 
employees and their agencies and the system's long-term 
obligations. During fiscal year 1999, the Civil Service 
Retirement and Disability Fund is projected to pay $43 billion 
in benefits, while collecting less than $10 billion in 
revenues. This shortfall is accommodated annually by redeeming 
the Fund's assets (nonmarketable Treasury Special securities) 
using general fund receipts. Within the next 20 years, the 
annual CSRDF shortfall is projected to exceed $100 billion 
annually, leaving future retirement benefits vulnerable. The 
Federal Employees Retirement System Act of 1986 reformed this 
system, creating a benefit package [FERS] that relies in part 
on a defined contribution component, the Thrift Savings Plan, 
that enables employees to provide for part of their future 
retirement benefit through investment accounts. These defined 
contribution accounts are portable, in the sense that the 
benefit vests with the employee as it accrues, and employees 
who leave Federal service are able to roll over these 
retirement funds into other employers' 401(k) plans. 
Alternatively, employees may leave the investment in the TSP to 
accrue until they become eligible to withdraw the funds.
    The Federal Reserve Board operates both defined benefit and 
defined contribution plans that are counterparts of CSRS and 
FERS. Unlike the CSRDF, however, the Federal Reserve retirement 
investments are largely invested in market instruments 
(equities such as common and preferred stocks, government and 
corporate bonds, et cetera) that provide a pool of assets from 
which the Federal Reserve Board pays the benefits earned by its 
retirees. Where the CSRDF has an actuarial accrued liability, 
the Federal Reserve's retirement fund currently holds reserves 
that amount to approximately 150 percent of future liabilities. 
Although the Board's retirement program provides opportunities 
for Federal employees to gain credit for their service under 
FERS, Board employees who might otherwise desire to work for 
other Federal agencies are unable to gain FERS credit for 
service after January 1, 1988. This quirk in current law 
originated with the Federal Employees Retirement System Act of 
1986, and the Federal Reserve Board reported seeking a 
statutory correction for 5 years.
    /Although the difficulties of the cash-flow accounting of 
Federal retirement programs have drawn increasing criticism in 
recent years, alternative funding mechanisms have not gained 
the support necessary for adoption. Indeed, in October 1998, 
when the administration sought congressional approval to 
liquidate assets that the Department of the Treasury acquired 
from the District of Columbia Retirement Board, the leading 
rationale for liquidation was to make the management of the 
District's retirement funds consistent with the administration 
of other Federal retirement programs. During a hearing on April 
29, 1997, then-CBO Deputy Director Blum estimated that the 
long-term cost of the D.C. retirement liabilities could 
approach $36 billion. When the Department of the Treasury 
liquidated the D.C. retirement assets, consistent with 
requirements of the Omnibus Appropriations Act of 1998, it 
effectively converted an income producing source of revenues 
that could have paid benefits for 8 to 15 years into receipts 
that were expended during the then current fiscal year.
    b. Benefits.--This investigation of retirement portability 
and retirement funding enabled the subcommittee to address two 
concerns. The research supported a hearing which led to House 
adoption of H.R. 807, a bill that resolves the retirement 
portability problem of Federal Reserve employees who transfer 
to other Federal agencies. The investigation provided further 
evidence that current funding of future retirement benefits is 
superior to the prevailing Federal practice of paying annuities 
out of current revenues.
    c. Hearings.--The subcommittee conducted a hearing 
entitled, ``H.R. 807, Federal Reserve Board Retirement 
Portability Act,'' on February 25, 1999. Witnesses at the 
hearing were the Honorable Edward W. Kelley, Jr., Governor of 
the Federal Reserve System, and Mr. William E. ``Ed'' Flynn, 
Associate Director, Retirement and Insurance Services, Office 
of Personnel Management. Mr. Scarborough described the funding 
differences between the two systems, and noted the recurrent 
vulnerability of Federal retirement benefits in light of annual 
budget problems. He reviewed the advantages derived from 
independent funding sources, and asked the Federal Reserve 
Board about the potential vulnerability of the Federal 
Reserve's surplus retirement funds if there were a future 
desire on the part of the Treasury, comparable to the 
vulnerability of the District of Columbia retirement funds. 
Although both Governor Kelley and Mrs. Norton distinguished the 
District's liability that resulted in the Federal assumption of 
its assets and liabilities, a May 24, 1999, letter outlining 
the fiduciary responsibilities under section 401 of the 
Internal Revenue Code indicated that the Federal Reserve 
Board's retirement funds could indeed be vulnerable to 
subsequent changes in law.
2. Long-Term Care Insurance for Federal Employees.
    a. Summary.--Long-term care [LTC] refers to a broad range 
of supportive, medical, personal, and social services designed 
for individuals who are limited in their ability to function 
independently on a daily basis. Long-term care needs may arise 
at any time due to an injury, chronic illness, or the effects 
of the natural aging process. Long-term care services can be 
provided in a nursing home, an assisted living facility, the 
community or in the home.
    Longer life spans coupled with a steady increase in the 
elderly population as baby boomers (people born between 1946 
and 1964) age will lead to a dramatic rise in the numbers of 
Americans who will need long-term care. Continuing increases in 
the number of two worker families, more single workers, and the 
increased geographic spread of family members means that there 
will be fewer family members available to provide care on an 
informal basis. As a result of these trends, long-term care 
will increasingly be provided in institutional settings or by 
hired personnel.
    Most people believe that they are covered for long-term 
care by their health care plans, disability insurance, or by 
Medicare. Unfortunately, many learn the hard way--when they or 
a family member needs care--that they are not sufficiently 
covered and must pay for long-term care on their own. As 
nursing home costs rise faster than overall inflation and 
incomes, many more middle income baby boomers could become 
impoverished by nursing home costs and thus become eligible for 
Medicaid. To the extent that individuals purchase long-term 
care insurance, the burden of paying for long-term care will be 
shifted from Medicaid and other public programs to private 
resources, and individuals will be able to protect their life's 
savings and other assets.
    The subcommittee conducted a series of three hearings to 
evaluate legislative proposals to establish a program under 
which Federal employees and annuitants may purchase long-term 
care insurance. The first hearing explored the need for a 
program to provide long-term care insurance to Federal 
employees and annuitants, the second hearing focused on the 
eligibility of active and retired members of the uniformed 
services for the Federal program, while the third hearing 
examined unresolved issues such as the how the competition 
should be structured. The hearings addressed additional program 
issues, such as OPM's administrative role, options available 
for benefit package design, and whether policies should be 
written on a ``guaranteed issue'' basis. Prior to the first 
hearing, Chairman Scarborough introduced H.R. 602, the Civil 
Service Long-Term Care Insurance Benefit Act. H.R. 602 
establishes a long-term care insurance program for Federal 
employees that relies on principles of market competition among 
multiple carriers. OPM would establish and administer the 
program through which Federal employees, annuitants, and 
eligible relatives could purchase long-term care insurance.
    b. Benefits.--Long-term care is expensive. According to the 
American Council of Life Insurance Policy Research Department, 
by 2030 the average annual cost of a nursing home stay will 
increase from $40,000 today to more than $97,000 (in 1997 
dollars). Long-term care insurance is an affordable way to 
protect against the risk of losing your savings to pay for 
long-term care services. As a large employer, the Federal 
Government can reach over 2.8 million workers and an additional 
2.1 million retirees and survivors. Competition among carriers, 
group discounts, and volumes of sales will keep premiums 
affordable for Federal employees and annuitants. By offering 
long-term care insurance to individuals in their working years, 
the Federal Government can help encourage the purchase of this 
product at younger ages, when premiums are lower.
    c. Hearings.--Three hearings were held to examine various 
aspects of the long-term care insurance issue.
    (1) On March 18, 1999, Chairman Scarborough conducted the 
first in a three part series of hearings entitled, ``Long-Term 
Care Insurance for Federal Employees,'' to address H.R. 602 and 
H.R. 110, both of which establish a program under which Federal 
employees and annuitants may purchase long-term care insurance.
    Chairman Scarborough stated that achieving maximum 
participation would require affordable premiums and an ability 
to satisfy the varying needs of a diverse population. The 
success of the program would be measured by the number of 
participants in the Federal program. The chairman also noted 
that as one of the Nation's largest employers, the Federal 
program would serve as a model for employers throughout the 
    Three panels presented testimony to the subcommittee. The 
first panel consisted of Judy Kramer, a private individual with 
personal experience with the Medicaid spend-down process. The 
second panel provided the administration's views on H.R. 602 
and H.R. 110 through the testimony of OPM Director Janice 
Lachance and William E. Flynn III, Associate Director for 
Retirement and Insurance Services. The third panel consisted of 
representatives from the insurance industry, including the 
American Council of Life Insurance, the Health Insurance 
Association of America, and New York Life Insurance Co.
    Judy Kramer gave a compelling account of her struggles with 
the current system of government assistance as a custodian for 
her aging parents. After a difficult spend-down process, her 
parents had to rely on Medicaid to cover the costs of their 
nursing home care. She testified to her desire to purchase 
long-term care for herself and her husband, a retired Federal 
employee, yet noted without a group discount it would be 
difficult to afford such protection.
    Director Lachance provided the administration's views on 
H.R. 602 and H.R. 110. Director Lachance agreed that long-term 
care insurance for Federal employees is an idea whose time has 
come. The administration estimates that, initially, 300,000 
eligible participants would enroll in such a program. OPM hopes 
to seek competitive bids for long-term care insurance that 
meets specified quality and price criteria in order to select 
the best contractor or contractors possible. As program 
administrator, OPM envisions its role to negotiate an optimum 
price for a benefit package it predetermines and that 
subsequently information on available options is broadly 
    David Martin, on behalf of the American Council of Life 
Insurance, testified to the importance of a long-term care 
insurance program as an integral part of an employees' 
retirement security. Without this protection, retirement 
savings could be wiped out with just one long-term care 
    Mr. Martin's testimony spoke to the varying long-term care 
needs of individuals. Based on ACLI's experience in dealing 
with large employers, it would be appropriate for the Federal 
Government to offer a variety of options. More than one carrier 
would have to participate in order to underwrite the risk 
inherent in such a large population. The Federal participant 
group, as defined by both H.R. 602 and H.R. 110, would be 
greater than any group underwritten by a single carrier today.
    David Brenerman, on behalf of the Health Insurance 
Association of America, focused on the development of the long-
term care insurance market. He noted the ability of companies 
to offer quality products at affordable premiums results from 
the abilities of companies to freely compete with each other in 
the marketplace, not because of the imposition of Federal or 
State requirements that would regulate premiums, hinder product 
development, and stifle market competition. He drew a 
distinction between a quality, affordable product and the 
danger of promising a low-cost plan with ``rich'' benefits and 
minimum underwriting requirements that would be financially 
unsustainable in the long run.
    Ken Grubb provided the views of carriers who sell 
individual as opposed to group products. He raised concerns 
about the limitations in H.R. 602 and H.R. 110 restricting 
participation to group carriers only. He pointed out that 
several companies currently offer discounts on individual 
contracts or have specific individual LTC policies priced for 
offering on a group sponsored basis. Since the individual 
contracts are competitive with group coverage, Mr. Grubb 
stressed they ought not to be excluded from consideration in 
the Federal program.
    Mr. Grubb also highlighted the benefits of broad 
eligibility under H.R. 602, resulting in a broader, younger 
risk pool that would result in lower overall costs. Letting the 
marketplace dictate costs and benefits was key to both wide 
acceptance of the product and long term commitments from 
strong, reliable carriers.
    (2) On April 8, 1999, Chairman Scarborough held the second 
hearing entitled, ``Long-Term Care Insurance for Federal 
Employees,'' at the Naval Air Station in Jacksonville, FL. The 
purposes of the hearing were twofold. The subcommittee examined 
the benefit of including active and retired members of the 
uniformed services in any long-term care insurance program 
offered to civilian employees and retirees. The subcommittee 
also continued its examination of the scope of OPM's role in 
administering an LTC program and whether participating carriers 
would be required to offer policies on a ``guaranteed issue'' 
basis. Guaranteed issue refers to the practice of allowing 
individuals to purchase long-term care insurance without regard 
to their current health status and without answering any 
questions regarding their medical history. While of obvious 
benefit to at risk individuals, the costs of issuing policies 
on a guaranteed basis increase premiums substantially for all 
    Chairman Scarborough reiterated his intent to include both 
active and retired members of the uniformed services in the 
long-term care insurance program at the appropriate time in the 
legislative process. He recognized the valuable service active 
duty service men and women have provided as employees of the 
Federal Government. The chairman also emphasized the need to 
build on past successes in crafting legislation and the 
importance of offering competitive benefits at affordable 
    Two panels presented testimony to the subcommittee. The 
first panel consisted of representatives from the organizations 
representing active and retired members of the uniformed 
services including the Retired Officers Association [ROA], the 
National Military Families Association [NMFA], and the Retired 
Enlisted Association [REA]. The second panel consisted of 
witnesses on behalf of the Florida Health Care Association, the 
Health Insurance Association of America, and the Department of 
    Speaking for NMFA, Marilyn Cobb Croach provided testimony 
on the importance of affordable premiums. Few military families 
have the disposable income after the basics of housing, health 
care and food to afford a policy with high premiums, no matter 
how wise an investment they felt it might be. She also stressed 
that service members and their families should not be left out 
of a program that includes civilian employees and annuitants.
    Of particular importance to the National Military Families 
Association was the inclusion of parents and parents-in-law as 
eligible to receive coverage. Since thousands of miles often 
separate military families from their parents, significant 
stress occurs when parents can no longer care for themselves. 
The high operations tempo facing the armed services often puts 
the burden of care for both sets of parents on the spouse, who 
is left with few alternatives. The safety net of an affordable 
long-term care insurance policy would relieve families of the 
stress involved in caring for an elderly parent.
    Larry Hyland testified on behalf of the Retired Enlisted 
Association. Mr. Hyland emphasized the equity of including the 
military in a program that will provide access to long-term 
care insurance at group rates for civilian employees. He 
highlighted the increasing anxiety among aging retirees who 
were ``promised free health care for life,'' by the Department 
of Defense. The ability to purchase long-term care insurance in 
the same program would ensure some financial security for 
retired members of the uniformed services and ensure quality 
health care is available.
    Colonel Klyne Nowlin presented testimony on behalf of the 
Retired Officers Association. Colonel Nowlin spoke to the need 
for the subcommittee to remember those who served in the Armed 
Forces and who need comprehensive long-term care coverage for 
their remaining years. His testimony also provided an estimate 
of participation. Based on the national participation rate of 6 
percent, TROA expects that participation for military members 
would be approximately 203,000 individuals. By broadening the 
participation base to include the military community, all 
participants could be the beneficiaries of reduced premiums or 
enhanced benefits packages. Without access to the government 
plan, it is feared that most service members would not be in a 
position to afford long-term care insurance.
    Pat Freeman, Director of the John Knox Medical Center, 
provided testimony on the effect both affordable premiums and 
choice among a variety would have in encouraging the purchase 
of private long-term care insurance. The John Knox Medical 
Center has both nursing and assisted living facilities.
    Ms. Freeman provided the subcommittee information on a 
recently released American Health Care Association survey on 
long term care. While female baby boomers expressed concerns 
about their retirement security, survey results indicated they 
were not saving adequately for long-term care costs that nearly 
three out of five of them will encounter. The overall 
conclusion drawn from the survey findings was the reality that 
an alarming gap exists in how baby boomers viewed their 
retirement needs. While 91 percent of baby boomers are covered 
by health insurance, many incorrectly believe either these 
policies or Medicare would pay for their long-term care needs. 
The study also highlighted that 41 percent of the women 
surveyed have either been forced to quit their jobs or take an 
extended leave of absence to provide long-term care to a family 
member or friend.
    Ken Grubb provided information regarding the desirability 
and relative importance of both competition in price and 
variety of insurance products. Mr. Grubb discussed the 
importance of market competition in determining the 
availability, quality and affordability of long-term care 
plans. He also noted the need for the government to encourage 
personal responsibility for financing long-term care through 
the expansion of the private long-term care insurance market, 
including enhancement of the tax status of long-term care 
insurance. As a retired Air Force Reserve Colonel, Mr. Grubb 
felt the military should have the opportunity to obtain 
affordable coverage to protect themselves against the financial 
ravages of a long-term illness.
    Bill Carr, Deputy Director of Force Management Policy for 
the Department of Defense, provided testimony on the desire of 
the Department of Defense to have the military included in the 
list of eligible participants. Mr. Carr noted the willingness 
of the Department of Defense to study how the inclusion of 
uniformed service personnel in long-term care proposals might 
contribute to recruitment, retention and morale of military 
personnel. He also stated the Department of Defense was willing 
to work with the appropriate committees on the issue of long-
term care insurance.
    (3) On June 14, 1999, Chairman Scarborough held the third 
hearing, this time in Baltimore, to further discuss the various 
legislative proposals to establish a long-term care insurance 
benefit for Federal employees. Three bills referred to the 
subcommittee were addressed: H.R. 602, H.R. 110, and H.R. 1111.
    Chairman Scarborough emphasized the importance of letting 
beneficiaries, not government officials, make their own long-
term care decisions. The chairman also stressed the need for 
the legislation to allow for continued innovation of policies 
as the insurance industry continues to evolve and mature.
    Two panels presented testimony to the subcommittee. The 
first panel consisted of two witnesses from AT&T; and the 
Maryland Department of Health and Mental Hygiene, as well as a 
witness with the responsibility for caring for his elderly 
relatives. The second panel consisted of representatives of the 
National Association of Retired Federal Employees [NARFE], the 
Health Insurance Association of America, and Wright & Co.
    Charles Yocum provided an account of his experiences with 
long-term care as custodian for his aging relatives. His 
depiction of his struggles with the current system of 
government assistance further emphasized the necessity of 
finding a workable solution to the financing of long-term care. 
He described himself as a member of the ``sandwich 
generation.'' Although his children are not yet fully on their 
own, he now has the added responsibility of seeing to it that 
his parents and other elderly relatives are cared for. An 
attorney by profession, he noted the need to consult with an 
attorney specializing in ``elder law'' in order to understand 
the Medicaid spend-down process.
    Dr. Georges Benjamin provided informative testimony 
regarding the State of Maryland's initiatives to control the 
growth of public long-term care spending through partnership 
with public and private stakeholders. Maryland is implementing 
the Outreach Empowerment Campaign for Individual Long-Term Care 
Planning. Under this initiative, various Medicaid waivers and 
programs have been proposed or are under development to manage 
public long-term care spending and provide home and community 
based services as alternatives to institutionalization.
    Dr. Benjamin provided statistics regarding expenses for 
Maryland's Medicaid program. During fiscal year 1997, the 
program spent close to $557 million on long-term care for 
recipients aged 21 or over, representing 22 percent of the 
total Medicaid budget. His testimony highlighted the need for 
private long term care insurance to shift the burden of paying 
for long term care will be shifted from Medicaid and other 
public programs.
    David Carver testified about the long-term care insurance 
program offered by AT&T; to its employees. In 1990, AT&T; began 
work on the planning phase of its long-term care program. The 
market at that time was considerably less developed than it is 
today. AT&T; looked for its plan to achieve two goals: (1) 
assure financial protection by making the breadth of benefits 
extensive, and (2) permit employees to meet specific needs by 
offering significant choice of plan designs. AT&T; anticipated a 
5 to 7 percent enrollment rate for management, and a 2 to 3 
percent enrollment rate for retired employees and occupational 
employees. AT&T; has exceeded these targets, with 14 percent of 
management enrolled, 3 percent of retired employees enrolled, 
and 4 percent of occupational employees enrolled. Since 
inception of the program, AT&T; feels awareness for this type of 
coverage has increased, and touted its continued good 
experience with lower than expected lapse rates.
    The program was not without challenges, and AT&T; continues 
to be frustrated by the ineligibility of children, the 
mandating of certain provisions in specific States, the 
difficulty in protecting the integrity of the plan as employee 
expectations exceed what can be offered due to underwriting 
requirements, and exclusion from Section 125 of the Internal 
Revenue Code.
    Dave Cavanaugh provided information on products that offer 
the benefits of life insurance and long-term care insurance in 
a single policy. This ``linked benefits'' approach provides 
various options during the completion of the aging process, 
including long-term care coverage, a cash accumulation fund, 
death benefits, and, if necessary, a recapture of the dollars 
paid in premium. A key advantage to this type of policy is that 
the ``gamble'' aspect of paying premiums for long-term care 
insurance coverage is eliminated. The entire life insurance 
benefit can be paid as a tax-free benefit to a beneficiary or 
can be used to provide long-term care services.
    Frank Atwater, president of the National Association of 
Retired Federal Employees, testified on the importance of long-
term care insurance to meet its goal of assuring financial 
stability in retirement for government employees. Protecting 
retirement assets through careful financial planning means 
considering long-term care insurance as an option. Mr. Atwater 
commended the efforts of all members of the subcommittee to 
provide a long-term care insurance program.
    While NARFE's goal is to ensure that annuitant underwriting 
standards are less burdensome than those offered in the private 
market today, Mr. Atwater did recognize that insurance carriers 
would be unlikely to participate in the proposed Federal 
program if they were forced to sell policies to senior citizens 
that are probable candidates for long-term care.
    Ken Grubb, on behalf of the Health Insurance Association of 
America, emphasized the necessity of public education about the 
risks and costs of long-term care. Without understanding the 
problem, the public cannot be expected to understand the 
appropriate solutions. It is critically important for the 
public and private sectors to provide long-term care insurance 
education. By making the investment now and designing a 
financing arrangement our elderly can live with today, our 
future retirees can protect their assets. Successful employer 
plans that have experienced high participation rates are those 
that have invested in multi-faceted education and marketing 
campaigns. The Federal Government's involvement, in partnership 
with carriers, is critical to the success of this program. 
Without substantial employer participation and commitment to 
educating employees about the importance of a long-term care 
insurance policy, the Health Insurance Association of America 
believes the Federal program will not be successful.
    Mr. Grubb's testimony provided information regarding the 
costs of long-term care to employers. Long-term care related 
expenses cost employers $29 billion a year in lost time, lost 
employees, and lost productivity. A Federal employee long-term 
care insurance program would be the clearest signal of 
government support for encouraging personal responsibility and 
planning for long-term care through avenues such as long-term 
care insurance. The sheer size of the Federal Government as an 
employer would assure an immediate and heightened awareness of 
long-term care financing among working adults.
3. OPM's FEHBP Policy Guidance for Fiscal Year 2000.
    a. Summary.--In the spring of each year, OPM issues a call 
letter to instruct FEHBP carriers on the policies OPM intends 
to pursue for the next calendar year, including the benefits or 
coverages that will be mandated. These policies affect the 
FEHBP premiums that taxpayers and employees will have to bear.
    In light of recent premium increases in the FEHBP, the 
subcommittee has become increasingly concerned that OPM's 
policies have both added costs to the program, e.g., by 
mandating benefits, and deprived carriers of the flexibility 
they need to develop innovative benefit packages to restrain 
premium increases, or even lower premiums. On average, FEHBP 
premiums rose by 8.5 percent in 1998 and 10.2 percent in 1999. 
Witnesses at previous hearings have warned the subcommittee to 
be wary of mandated benefits and over regulation of the 
program. Mandates carry with them both a visible cost, the cost 
of providing the mandated benefit, and a hidden cost. This 
hidden cost arises because carriers and consumers both are 
required to accept an increasingly standardized package of 
benefits, and carriers lose the freedom to use innovative and 
less costly alternative offerings. Blue Cross Blue Shield has 
testified at past hearings that mandated coverages have 
increased its program costs by about $100 million per year.
    In this year's call letter, OPM has identified seven 
``significant initiatives'' for contract year 2000:
          1. Imposing the so-called patient's bill of rights 
          2. Quality healthcare;
          3. Family-centered care;
          4. Customer service;
          5. Provider contracts (fee-for-service plans);
          6. The DOD/FEHBP demonstration project mandated by 
        last year's defense authorization act; and
          7. Y2K compliance.
    The subcommittee examined the impact of these mandates and 
proposals on FEHBP premiums.
    b. Benefits.--Information developed at this hearing will 
assist the subcommittee in evaluating the causes of FEHBP 
premium increases for the year 2000 and OPM's overall 
administration of the FEHBP.
    c. Hearings.--The subcommittee conducted an oversight 
hearing entitled, ``FEHBP: OPM's Policy Guidance for Fiscal 
Year 2000'' on May 13, 1999. Witnesses were William E. Flynn 
III, Associate Director, Retirement and Insurance Services, 
OPM; Stephen W. Gammarino, senior vice president, Federal 
Employee Programs, Blue Cross Blue Shield Association; Dr. 
Joseph Braun, chief medical officer, George Washington 
University Health Plan; Bobby L. Harnage, Sr., president, 
American Federation of Government Employees.
    Subcommittee Chairman Scarborough noted that the FEHBP is 
the largest employer-sponsored health benefits plan in the 
Nation, covering approximately 9 million individuals, Federal 
employees, retirees, and their families. Both employees and 
annuitants view it as one of the most important benefits the 
Federal Government provides for active and retired civil 
servants. He also pointed out that many experts consider the 
FEHBP a model employer-sponsored health benefits plan and a 
model for reforming Medicare. However, Mr. Scarborough also 
identified several disturbing developments in the direction of 
the FEHBP in recent years, the most visible of which has been 
the dramatic premium increases during the past 2 years. There 
has also been a trend toward more mandated benefits and 
increased standardization in the FEHBP. This development is 
contrary to the market orientation that has been the key to the 
FEHBP's success over the years.
    Mr. Scarborough cited OPM directives to implement such 
portions of the President's so-called patients' bill of rights 
[PBOR] as information disclosure and the right to amend one's 
medical records as examples of mandates that can drive up 
carrier costs without providing a commensurate benefit to 
enrollees. On the other hand, allowing carriers the flexibility 
to design benefit packages can help restrain--or even reduce--
premiums. He suggested that the subcommittee carefully examine 
OPM's policies by asking three questions: Does the policy 
address a real problem in the FEHBP? Will the directive 
increase premiums or lower the quality of health care for 
Federal employees or retirees? Will the directive be 
implemented in a reasonable manner?
    Mr. Flynn testified that OPM is confident its policies will 
strengthen its ability to provide high quality, affordable care 
through the FEHBP. He contended that OPM has been able to 
implement the PBOR for less than $10 dollars a year for each 
policyholder, although under questioning he admitted that this 
added over $30 million a year to FEHBP costs. Mr. Flynn also 
identified further implementation of the PBOR as one of OPM's 
objectives for 2000, along with implementation of the DOD 
demonstration project (see section II. B.(5) below). Mr. Flynn 
asserted that OPM is concerned about costs and argued that 
FEHBP premium increases were driven by forces in the overall 
health care market. He also noted that in recent years there 
have been significant advances in the measurement of health 
care quality to identify techniques that produce healthy 
outcomes. OPM will do more to identify treatments that are 
effective and cost efficient. Mr. Flynn also suggested that OPM 
will consider establishing a national prescription drug benefit 
for the entire FEHBP and ``partnering'' with other government 
agencies on the purchase of drugs for Federal employees and 
other beneficiaries of Federal programs.
    Mr. Gammarino focused on several trends that he believes 
are adversely affecting the FEHBP: increasing administrative 
burdens on participating carriers; reduced carrier flexibility, 
movement away from a level playing field, and the 
standardization of health plans and health plan administration.
    With respect to the impact of this year's call letter on 
FEHBP costs and premiums, Mr. Gammarino cited the 
implementation of the PBOR as one likely to impact both. For 
example, he noted, the PBOR would require that patients have a 
right to obtain and amend their medical records. This could 
force Blue Cross Blue Shield to renegotiate its agreements with 
over 400,000 providers, agreements developed for the most part 
for its non-FEHBP commercial business, at tremendous cost 
without adding much value for patients and policyholders. He 
also pointed out that Blue Cross Blue Shield has no reason to 
become involved in the relationship between the physician and 
the patient with regard to medical records. In addition, he is 
concerned that some providers would leave the Blue Cross Blue 
Shield networks rather than renegotiate. Mr. Gammarino also 
emphasized that, though some have cited the FEHBP experience 
with the PBOR as proof that various ``patient's rights'' 
legislation pending in Congress would not be costly, the PBOR 
is far less onerous than some of those bills.
    OPM's has failed to provide plans with sufficient 
flexibility to adapt their benefit packages to today's trends, 
according to Mr. Gammarino. For example, while the growth in 
prescription drug costs outpace other cost trends, OPM has for 
2 years refused to allow Blue Cross Blue Shield to introduce a 
cost sharing program. Consequently, its FEHBP plans has 
experienced ``wastage and high utilization'' encouraged by the 
availability of ``free drugs'' to some of its enrollees.
    Mr. Gammarino also informed the subcommittee that Blue 
Cross Blue Shield understood that OPM was planning to use the 
FEHBP administrative reserve fund to offset carrier losses in 
the FEHBP/military retiree demonstration project, which he 
believes would be unlawful. In addition, he also noted that he 
was concerned about the administration's continuing attempts to 
impose the Cost Accounting Standards on FEHBP carriers. 
Congress blocked the administration's previous attempt to 
impose these standards on the FEHBP because, as OPM has 
acknowledged, they are incompatible with insurance industry 
accounting practices and would add no value to the FEHBP.
    Mr. Harnage attacked OPM's administration of the FEHBP, 
citing the rising premiums in recent years and its failure to 
allow unions to participate in negotiating contracts with 
carriers. OPM has offered to consult more closely with his 
union. But he contended that he was not looking for mere 
consultation; he wanted ``full participation at the table.'' He 
complained that instead of pledging to bring premium inflation 
under control, OPM merely repeats the insurance industry's own 
``propaganda.'' He also argued that carriers should have to 
comply with the Cost Accounting Standards.
    Dr. Braun testified that the American Association of Health 
Plans, on whose behalf he testified, had a close working 
relationship with OPM. He also warned that many of the 
provisions in bills pending before Congress and other recent 
mandates would micromanage health plans and freeze medical 
practice in today's patterns. They would drive up both health 
care costs and the number of the uninsured. Several provisions 
in the PBOR, he noted, would be especially difficult to 
implement. For example, he argued that OPM's information 
disclosure requirements are overly broad and burdensome and 
that its transitional care mandates could impose unnecessary 
burdens on health plans. In general, Dr. Braun cautioned that 
administrative and benefit mandates may make the FEHBP 
unwieldy, more expensive, and less responsive to the 
beneficiaries' needs. He also raised concerns about OPM's data 
collection plans, specifically that OPM has underestimated its 
cost and that many plans may not have a sufficient survey pool 
to obtain statistically valid results. Dr. Braun also expressed 
concern about the qualifications of some of the non-physician 
providers that OPM is encouraging health plans to use. In order 
to promote affordability and improved access in the FEHBP, Dr. 
Braun said that OPM and the Congress must allow health plans 
the flexibility to meet the needs of Federal employees.
4. FEHBP as a Model for Medicare Reform.
    a. Summary.--In March 1999, the National Bipartisan 
Commission on the Future of Medicare (Bipartisan Commission), 
co-chaired by Senator John Breaux (D-LA) and Representative 
Bill Thomas (R-CA), developed a set of proposals that would 
modify the financing of Medicare along lines shaped by the 
Federal Employees Health Benefits Program [FEHBP]. The Civil 
Service Subcommittee initiated an investigation of the 
similarities of the financing and benefit structure of the two 
systems to assess whether the FEHBP might serve as an 
appropriate model for providing more secure funding for 
    Congress and the President have long recognized the 
challenges facing the financing and administration of Medicare. 
The Balanced Budget Agreement of 1997 introduced a 
Medicare+Choice component of the Medicare benefit package as an 
endeavor to rely more upon market forces than existing Medicare 
options. In earlier efforts to control escalating Medicare 
costs, the program moved beneficiaries away from fee-for-
service medicine and toward managed care services. Since those 
reforms, HMOs have been charged with rationing care by limiting 
access to specialists and expensive services, and restricting 
options for consumers. While an increasing portion of treatment 
is provided through prescription pharmaceuticals, Medicare does 
not provide a direct drug benefit. As a result, some Medicare 
consumers consider themselves effectively denied treatments 
that are increasingly available for much of the population.
    Escalating medical care costs are widespread in American 
society. As the Civil Service Subcommittee learned in previous 
oversight of the FEHBP, escalating costs stem largely from 
increased use of prescription drug treatments by an aging 
population and increasing amounts of preventive care account 
for a significant portion of rising costs. Although drug 
treatments are cheaper individually than some alternative 
treatments that they replace (notably invasive surgeries), they 
enable longer life spans and the treatment requirements are 
often continuous. Longer term use of the drugs effectively 
increases the lifetime cost of treatment. In many cases, newer, 
more effective drugs are more expensive than the drugs that 
they replace, and research costs are integrated into pricing 
structures. As people live longer, lives that are extended by 
more effective pharmaceutical care eventually end as a result 
of chronic medical conditions--which can also be very expensive 
to treat.
    Extended life spans are the largest single factor 
contributing to long-term population growth. Birth rates have 
declined since the 1960's, and they have declined most 
precipitously in developed nations. Immigration contributes to 
some population growth, but at significantly lower rates than 
the extended life spans of senior citizens. With an increasing 
portion of the population over age 65 (and usually retired from 
the workforce), the smaller working portion of the population 
must produce the revenue to support the retired population. 
Medicare, therefore, must develop more effective methods of 
identifying and delivering treatment while controlling costs.
    In looking to the FEHBP as a model for ameliorating 
Medicare's financial challenges, the Bipartisan Commission 
developed a three-track approach, beginning with design of a 
premium support system, incorporating current improvements in 
the Medicare program, and moving to a more comprehensive 
solution to the solvency challenges facing Medicare. The 
Bipartisan Commission acknowledged that the separation between 
Part A and Part B Medicare benefits had become outmoded, and 
opted for an integrated benefit structure known as a ``premium 
support'' option. That structure would be administered by an 
appointed board, which would oversee one national, government-
sponsored, fee-for-service plan, and a variety of other plans. 
The board would provide oversight of premiums and benefit 
structures in other plans, but providers would have the 
flexibility to design and administer systems of premiums, co-
payments, benefits, and other factors. The board would also 
oversee periodic open seasons, and people would be able to 
shift between their current coverage and either higher or lower 
benefit plans depending on their current medical care 
requirements. The government would pay approximately 88 percent 
of standard option premium costs. Enrollees would bear the 
incremental costs of any ``high option'' benefits, and would 
pay the balance of premiums and any co-payment requirements 
and/or costs of non-covered services. For senior citizens with 
income less than 135 percent of poverty levels (currently 
$10,568 for an individual and $13,334 for a couple), premiums 
would be paid by the government, up to 85 percent of the 
national average of high option plans. States would continue 
current levels of effort, but additional costs would be paid 
from the Federal Treasury.
    Participants would be required to pay 12 percent of the 
total cost of standard option plans. Beneficiaries would not be 
required to pay premiums for plans whose premiums remained 
below 85 percent of the national weighted average of standard 
option plans. Beneficiaries would pay all premium costs above 
the national weighted average. However, in areas where the 
government's fee-for-service plan has no competition, 
beneficiaries would be responsible for no more than 12 percent 
of costs. The government would continue to fund medical 
education costs and other indirect expenses now attributed to 
the Medicare program.
    The Bipartisan Commission also recognized the changing 
shape of Medicare and included several ideas to reform current 
health care coverage for senior citizens. It would extend a 
federally-paid prescription drug benefit to low-income seniors 
while adding prescription drug coverage to health insurance 
plans covering senior citizens. Additionally, the combination 
of Medicare Parts A and B would blend the current Part A 
deductible ($768) and the Part B deductible ($100) into a 
single medical cost deductible of $440. To guard against 
unnecessary premium increases, Medicare would include a 10 
percent coinsurance requirement for all services other than 
inpatient hospital stays and preventive care. Where higher co-
payment requirements already exist, they would be retained. The 
proposals would revise eligibility for Medicare by conforming 
the minimum eligibility age for Medicare to the increasing age 
requirement for full Social Security benefits. Individuals 
between the age of 65 and the then-current Social Security 
eligibility age would be eligible to ``buy-in'' to Medicare 
without subsidy. People over 65 could also qualify for benefits 
if they met specific needs-based criteria, such as the 
inability to perform a range of activities of daily living. The 
Bipartisan Commission expected these reforms to slow the growth 
rate by 1 to 1.5 percent per year from the current long-term 
growth assumptions of 7.6 percent (intermediate) or 8.6 percent 
(the no slowdown baseline). Reducing this growth in Medicare 
costs will improve the system's financing, but not resolve the 
long-term fiscal challenges. Improvements in the technology of 
health care will affect the system substantially, but in mixed 
ways. As Federal Reserve Chairman Alan Greenspan told the 
Bipartisan Commission, effective improvements in medical care 
could both reduce the per-unit costs of treatment and result in 
an expanding demand for services.
    Over the past 15 years, the Congressional Research Service 
has shown, the annual increase in FEHBP premiums has been lower 
than annual growth in medical expenditures. In part, this 
control of costs is achieved by FEHBP participants' flexibility 
in moving between plans and adapting their health insurance 
coverage to meet changing needs. Using a variety of co-
payments, managed care, preferred provider discounts, and other 
market-oriented devices, carriers develop flexibility in 
designing benefits. That flexibility appears to be diminishing 
as the Office of Personnel Management mandates additional 
benefits and increasingly appears to standardize benefit 
packages. Linking responsibility for payment to the consumption 
of services provides the greatest array of incentives to both 
producers and consumers to act responsibly. For providers, the 
market provides incentives to keep costs as low as possible, to 
avoid pricing themselves out of the market. Cost reductions can 
be achieved through refinement of procedures, introduction of 
new technologies, or other innovations in the types of 
products, services, and procedures available. Health care 
delivery systems that guarantee providers the full cost of 
services, or establish a flat rate per activity, significantly 
reduce incentives to cut costs below those levels.
    At the same time, the absence of payment requirements on 
beneficiaries reduces incentives to control inefficient, or 
wasteful uses. Some observers have noted that the availability 
of prescription drugs through mail order at no cost (as 
provided by some FEHBP carriers) effectively enables 
beneficiaries to accumulate additional medication beyond 
current needs. A system of copayments, even minimal fees, 
provides some incentive to beneficiaries to direct their use of 
health care to essential services. In the absence of effective 
incentives to reduce costs--on the part of both producers and 
consumers--other methods of allocating care, such as rationing, 
inevitably are substituted for market forces.
    b. Benefits.--This oversight of the FEHBP and assessment of 
the Medicare program provided a broader understanding of 
factors affecting the costs and services available to address 
medical care concerns. It provided insight into the dimensions 
of the FEHBP that are widely admired and respected in the 
health care community, and provided insight about changes in 
the FEHBP that could jeopardize the market dynamics that have 
been effective in controlling costs.
    c. Hearings.--On May 22, 1999, the subcommittee conducted a 
field hearing entitled, ``The Federal Employees Health Benefits 
Program as a Model for Medicare Reform,'' assessing the 
Bipartisan Commission's report and to consider factors in the 
FEHBP that might contribute to easing future cost pressures 
affecting medical care. Chairman Scarborough conducted the 
hearing, with Mr. Mica attending. Witnesses included Mr. 
Jeffrey Lemieux of the Progressive Policy Institute, who served 
as staff economist for the National Bipartisan Commission on 
the Future of Medicare, Ms. Grace Marie Arnett, president of 
the Galen Institute, and Ms. Becky Cherney, president of the 
Central Florida Health Care Coalition. The hearing was held in 
Sanford, FL.
    Mr. Scarborough explained the cost factors and limitations 
on services increasingly affecting the Nation, with intense 
effects on the Medicare program. Mr. Lemieux described the 
multiple factors that were involved in reaching the majority 
perspective in the Bipartisan Commission report, and indicated 
that related issues would be facing the Congress in the coming 
session. He noted that, more than a cost factor, developing a 
competitive environment will require major cultural change 
within the organization responsible for administering the 
Medicare program. As Ms. Arnett reported, doctors, medical 
institutions, nurses, and other providers are experiencing 
increasingly frequent administrative challenges to their 
medical decisions. These decisions to reduce or withhold 
payments for services transfer care options from doctors and 
patients to administrative personnel. Ms. Cherney emphasized 
the importance of recent professional training in effecting 
better treatment, and described effectively the difficulties 
that patients encounter when confronting the administrative 
procedures associated with justifying medical services under 
current Medicare processes. The Central Florida Health Care 
Coalition compiles information about the performance of 
different medical facilities, and reports on changes in 
treatment practices and results. The panelists concurred that 
the aging of the population and the research and technology 
necessary to improve services would ensure that medical care 
costs would continue to increase. They agreed, however, that 
competitive factors and improvements in treatments will 
strengthen the ability to control the escalation of these costs 
in the coming years. Ms. Cherney noted that, as a result of the 
long-term commitment to medical education, we now have a 
relative glut of doctors, and these skilled professionals are 
an important factor in efforts to control cost escalation.
5. Implementing the FEHBP Demonstration Project for Military Retirees: 
        A Good Faith Effort or Another Broken Promise?
    a. Summary.--Congress established a limited demonstration 
project in the defense authorization act for 1999 (Public Law 
105-261, Sec. 721) to test the Federal Employees Health 
Benefits Program [FEHBP] as an option for dealing with the 
numerous problems plaguing the military health care system, 
including TRICARE. Under that project, up to 66,000 
beneficiaries, primarily Medicare-eligible retirees and their 
families, in 6-10 test sites around the country are permitted 
to enroll in the FEHBP in lieu of military health care for a 
period of 3 years, beginning in 2000. The legislation also 
provided for the sale of assets to pay for the demonstration 
    The subcommittee, which has jurisdiction over the FEHBP, 
has been actively involved in this issue since the 104th 
Congress. During that period, the subcommittee has considered a 
number of legislative proposals, including the provisions 
establishing this project, to offer various military 
beneficiaries the opportunity to participate in the FEHBP. In 
stark contrast to TRICARE, the FEHBP, which covers civilian 
employees, retirees, and Members of Congress, is widely 
acknowledged to be the model employer-sponsored health care 
benefit. It is a market-oriented program that has historically 
allowed participants to obtain high-quality health care at 
affordable prices.
    The subcommittee conducted this oversight hearing to 
determine whether the Department of Defense [DOD] and the 
Office of Personnel Management [OPM] were implementing the 
demonstration in the manner that Congress intended. The 
subcommittee found that actions of these two agencies have 
threatened the viability of the demonstration project. These 
actions include DOD's failure to adequately fund the project, 
the administration's refusal to use the funds Congress made 
available to pay for the project for that purpose, designing 
the site selection process to ensure a project much smaller in 
size than Congress intended, unsatisfactory efforts to educate 
potential participants about the project, and OPM's plans to 
use fees Congress intended to offset the agency's own expenses 
for the legally questionable purpose of subsidizing potential 
carrier losses.
    b. Benefits.--The information developed by the subcommittee 
through this examination will assist in evaluating the initial 
experience under the demonstration project and to develop 
corrective legislation, if necessary.
    c. Hearings.--``Implementing the FEHBP Demonstration 
Project for Military Retirees: Good Faith Effort or Another 
Broken Promise?,'' held June 30, 1999. Witnesses at this 
hearing were: Representatives Randy ``Duke'' Cunningham (CA) 
and James P. Moran (VA); Delegate Carlos Romero-Barcelo (P.R.); 
Sydney Talley Hickey, associate director, Governmental 
Relations, National Military Families Association; Charles C. 
Partridge, Col. (U.S. Army, Ret.), legislative counsel, 
National Association of Uniformed Services; Kristen L. Pugh, 
deputy legislative director, the Retired Enlisted Association; 
Stephen W. Gammarino, senior vice president, Federal Employee 
Program, Blue Cross Blue Shield Association; William E. Flynn 
III, Associate Director for Retirement and Insurance, OPM; and 
Rear Admiral Thomas P. Carrato (USPHS), Director, Military 
Health Systems Operations, TRICARE Management Activity, 
Department of Defense.
    Subcommittee Chairman Scarborough emphasized that providing 
high-quality health care to military retirees is a high 
priority issue for him because he represents more military 
retirees than any other Member of Congress, and he has seen 
first hand the problems that plague TRICARE. He recalled that 
he worked hard to persuade doctors in his district to join the 
TRICARE system only to see them leave again. Mr. Scarborough 
also said that it is unconscionable that miliary retirees, and 
only military retirees, are effectively expelled from their 
employer's health benefits program after a lifetime of 
dedicated service.
    Because of the way in which DOD and OPM have implemented 
the congressionally mandated demonstration program, however, 
Subcommittee Chairman Scarborough expressed his concern that 
many retirees will believe the Federal Government has broken 
yet another promise to them. Among other problems, he cited 
DOD's decision to limit the number of eligible beneficiaries 
living in the test sites to about 69,000. Unless almost all of 
these eligibles enroll in the FEHPB, which, as Mr. Scarborough 
noted, most believe unlikely since this is a temporary program, 
the demonstration project will be considerably smaller than 
Congress intended. He also pointed out that the small size of 
the project may drive up premiums for military retirees and 
deprive them of the wide range of choices available to other 
Federal retirees and employees.
    As chairman of the subcommittee, Mr. Scarborough pledged 
that he would continue to work with other Members, military 
organizations, and all other interested parties to improve the 
quality of health care available to military families and 
military retirees.
    Representative Cunningham described the sacrifices military 
personnel and their families are called upon to make, including 
frequent moves around the country and deployments to foreign 
lands. He also noted that the armed forces are having a 
difficult time retaining personnel, citing retention rates of 
only 23 percent for enlisted personnel and only 33 percent for 
pilots. He explained that the major reason for these low rates 
is the frequency of deployments, which separate servicemen and 
women from their families. But the second most important 
reason, he testified, is the erosion of promises that were made 
to those who joined the military, including the promise of 
health care for life. He cited the example of General Krulak, 
who retired as Commandant of the Marine Corps on the day of the 
hearing, to illustrate how the Federal Government treats 
military retirees and civilian retirees differently. While 
General Krulak is not guaranteed access to his employer's 
health care program after 30-years of dedicated service, 
including service in wars, at age 65, Mr. Cunningham noted, a 
65-year old civilian secretary who worked in the General's 
office would be able to participate in the FEHBP, as would a 
Member of Congress. This is wrong, he said; military retirees 
should have the same access to benefits as retired civilians 
and Members of Congress.
    Even though he sponsored legislation that established the 
Medicare subvention demonstration program for military 
retirees, Representative Cunningham characterized that program 
as a ``band-aid.'' To provide a level playing field for 
military veterans, Representative Cunningham said he, 
Representatives Moran and Watts, and others have sponsored 
legislation to expand the FEHBP demonstration project 
nationwide and remove the caps on participation. In response to 
questioning from the subcommittee chairman, Mr. Scarborough, 
Mr. Cunningham said the most important thing Congress could do 
to improve the demonstration project was to pass either his 
bill or one sponsored by Mr. Moran.
    Representative Moran testified that he has been involved in 
this issue for 4 years because of the difficulties his 
constituents encountered finding access to quality, affordable 
health care after they retired from the military. Mr. Moran 
noted that other solutions, such as Medicare subvention, are 
unsatisfactory because so few military retirees now live in the 
catchment area of a military treatment facility; the FEHBP, in 
contrast, is available everywhere in the Nation. In his view, 
Congress and the Department of Defense really should be 
expanding the FEHBP now to the larger military retiree 
population, and he characterized the demonstration project as 
an attempt to bide time, avoid tough decisions, and save money. 
Consequently, he has introduced legislation to open the FEHBP 
to all Medicare-eligible retirees.
    Nevertheless, Mr. Moran said he is pleased to see DOD 
moving forward with the project, but worries that its limited 
scope and funding will prevent Congress from obtaining a true 
measure of the FEHBP's effectiveness for military retirees. In 
order to achieve a worthwhile demonstration of the FEHBP, Mr. 
Moran said, DOD and OPM would have to ensure that the actual 
enrollment is as close to the 66,000 that Congress intended. He 
also urged expanding the demonstration project beyond its 
current sites. Representative Moran also emphasized that 
Congress must insist on adequate funding for the project, 
pointing out that it is incumbent on DOD to find the necessary 
offsets since it decided not to use the proceeds of selling 
assets to fund the demonstration as Congress intended. Finally, 
Mr. Moran urged the subcommittee to continue to conduct 
oversight on the project.
    Delegate Romero-Barcelo testified that he was very pleased 
that Puerto Rico was chosen as a test site for the FEHBP. He 
emphasized that military retirees have devoted a substantial 
part of their lives to defending the Nation and that the Nation 
must keep its promises to them. Puerto Rican veterans have 
particular difficulty in obtaining health care, according to 
Mr. Romero-Barcelo: Veterans Administration facilities on the 
island are inadequate and the only full service military 
treatment facility is in a remote location, an hour and a half 
from retirees in San Juan and 3 to 4 hours from retirees on 
Puerto Rico's western coast. These distances are unacceptable 
in medical emergencies, he noted, and impose unacceptable 
medical risks.
    Mr. Romero-Barcelo believes that many of the 9,900 eligible 
retirees in Puerto Rico will enroll in the FEHBP if the program 
is publicized adequately. (He plans to publicize it as much as 
he can.) He also believes Puerto Rico will provide a good test 
of the FEHBP's benefit for military retirees since so many are 
in remote locations and have limited proficiency in English.
    The representatives of the military organizations (Mrs. 
Hickey, Col. Partridge, and Ms. Pugh) were very critical of the 
way in which DOD and OPM have implemented the program. They all 
agreed that DOD's decision to limit the number of eligible 
beneficiaries living in the sites to slightly more than the 
maximum number of enrollees permitted in the project 
jeopardizes the test. They were all also concerned that certain 
decisions by OPM might drive premiums higher than they are in 
the FEHBP. And they all believed that additional test sites 
should be added, which would not require additional 
legislation. They also were concerned that DOD's marketing 
efforts will not sufficiently educate eligible beneficiaries 
about the FEHBP.
    In addition, Mrs. Hickey noted that one result of DOD's 
decision to choose sites by drawing them from a ``bingo drum'' 
was to include two sites, Dover, DE and Puerto Rico, that are 
not representative of the rest of the country. (Dover, the only 
site that also includes a subvention project, because of the 
small number of eligibles in it; Puerto Rico because its FEHBP 
enrollment pattern is very different than in other parts of the 
country.) She estimated that only around 20,000 eligibles would 
actually enroll. She also pointed out that while the military 
groups and many in Congress wanted a broader test, DOD wanted a 
limited test. Therefore, she suggested that DOD should ``bend 
over backwards'' to ensure that the test is as fair and 
representative as possible.
    Col. Partridge testified that not only are military 
retirees the only Federal employees who lose their health 
benefits at 65, but DOD has no plan for covering all 
beneficiaries by a date certain. He explained that TRICARE does 
not meet the needs of all beneficiaries, saying that, ``In 
addition to disenfranchising Medicare-eligibles, the 
reimbursement rates, the red tape, and the bureaucracy have not 
been solved.'' He also recommended that Congress enact 
legislation to modify the demonstration project to allow those 
who enroll in FEHBP to continue to use military treatment 
facilities, with those facilities billing FEHBP carriers, and 
to allow those who enroll after the first year have a full 3 
years in the program.
    Ms. Pugh emphasized that OPM must finalize operational 
regulations, particularly regulations to give carriers access 
to their own reserves, quickly so carriers can set rates and 
military groups can educate their members. Otherwise, she 
warned, carriers will have to set artificially high rates and 
OPM effectively will have created a system different than the 
FEHBP for the demonstration project. She also noted that by 
artificially restricting the number of eligibles in the test 
sites, DOD has increased the risk of adverse selection.
    Mr. Gammarino testified that the Blue Cross Blue Shield 
Association strongly supports the demonstration project and is 
committed to helping it succeed. Nevertheless, he criticized 
both DOD's decision to establish such a low ceiling on the 
number of eligibles in the demonstration site and OPM's 
proposal to use the FEHBP administrative fund to offset 
potential carrier losses under the project. Blue Cross Blue 
Shield actuaries have estimated that only around 20,000 
eligibles will actually enroll in the FEHBP under the current 
project design. He noted that this estimate was based on an 
analysis of the health care alternatives available to 
beneficiaries in the test sites, the cost of such alternatives, 
and the fact that the demonstration project is a temporary, 3-
year program. In his view, to reduce the risk of adverse 
selection the project should be expanded to provide a realistic 
opportunity to attract 66,000 actual enrollees and that it be 
done in a way that ensures the enrollees will truly be a cross-
section of the overall population of eligible beneficiaries.
    Mr. Gammarino said that OPM's proposal to use the FEHBP's 
administrative reserve fund to subsidize any losses carriers 
may incur in the demonstration project was illegal and could 
distort the project's FEHBP market. He explained that in Blue 
Cross Blue Shield's view, there is no statutory support for 
this scheme. The administrative reserve is intended to offset 
OPM's expenses, not carriers.'' In addition, Blue Cross Blue 
Shield believes this scheme could introduce a ``moral hazard'' 
that threatens the basic structure of the FEHBP as a market-
based program and, though limited now to the demonstration 
project, would establish a ``harmful precedent'' for the FEHBP 
as a whole. This ``moral hazard'' arises because OPM's proposal 
frees carriers from the discipline of sound actuarial rating 
practices by shifting the risk of loss from the carrier to OPM. 
According to Mr. Gammarino, Blue Cross Blue Shield provided OPM 
with its views and legal opinions on this issue. He also 
testified that, if necessary, Blue Cross Blue Shield would take 
legal action to challenge OPM's scheme in order to protect the 
integrity of the FEHBP market.
    Both Chairman Scarborough and Ranking Member Cummings asked 
whether the demonstration project had been designed to fail. 
The witnesses' responses raised troubling questions about the 
administration's good faith. Col. Partridge noted that there 
was substantial ``institutional opposition'' to the project 
within DOD. As he described it, military surgeons general 
``like to have their sheep pen with all the military retirees 
in that sheep pen'' so they can ``reach in there and pull out 
the ones they want for their training programs'' while the rest 
are left to get care where they can. Permitting military 
enrollees to join the FEHBP would reduce their ability to do 
this. Ms. Pugh stated that the demonstration project was ``on a 
one-way train to failure right now,'' citing the lack of 
guidance from OPM and DOD that prevents military groups from 
educating their members. She also noted that some members of 
the Retired Enlisted Association were willing to move to make 
themselves eligible for the FEHBP. (Chairman Scarborough said 
he is familiar with this phenomenon because many retirees live 
in one Pensacola zip code in his district to be close to the 
Navy hospital.)
    Admiral Carrato described the steps DOD has taken to select 
test sites and implement the demonstration project. He also 
defended DOD's decision to limit the overall population of 
eligible beneficiaries to slightly more than the maximum number 
permitted to enroll in the project, identifying two factors 
that influenced this decision. First, he asserted, DOD did not 
want to establish an ``artificial cap'' on enrollment. Second, 
he argued that Congress did not fund the demonstration project. 
According to his testimony, DOD estimated that a project in 
which 66,000 eligible beneficiaries actually enrolled in the 
FEHBP would cost over $130 million a year. However, he noted 
that the President's budget for fiscal year 2000 allocated only 
$79 million for this demonstration project and two others. 
Under questioning from Subcommittee Chairman Scarborough, 
Admiral Carrato disputed the enrollment estimates of the 
military groups and Blue Cross Blue Shield, saying that DOD 
expected about 83 percent of the eligible beneficiaries in the 
demonstration sites to enroll, not just 20,000. However, under 
additional questioning by Mr. Scarborough and Ranking Member 
Cummings, he admitted that the President's budget only 
allocated $62 million for this project. Admiral Carrato 
attempted to dismiss the discrepancy between this figure and 
the $112 million that would be needed to fund DOD's anticipated 
83 percent participation rate by pointing out that the 
President's budget covered only three quarters of calendar year 
2000. However, when converted to a calendar year expenditure of 
about $77 million, it is apparent that the allocation in the 
President's budget will not fund a project of the size DOD says 
it anticipates.
    In addition, Admiral Carrato described the marketing 
campaign DOD will employ to familiarize eligible beneficiaries 
with their options under the FEHBP. The campaign will include 
mailings, establishing an 800 number, and health fairs in 
    Although Admiral Carrato denied that DOD had designed the 
demonstration project to fail, his written statement reflected 
DOD's deep-rooted hostility to offering the FEHBP to military 
beneficiaries. In that statement, he painted the FEHBP as 
prohibitively expensive and a threat to military medical 
readiness. He contended that DOD has a ``sincere and enduring 
responsibility for the health of'' military retirees, and said 
TRICARE will remain incomplete until it has the capacity to 
enroll retirees over 65.
    Mr. Flynn testified that OPM and DOD have worked together 
very well on the demonstration project and that OPM has worked 
extensively with carriers and representatives of military 
organizations. He believes this work will lead to an effective 
roll out of the demonstration project. Mr. Flynn also said that 
the health care delivery system in the demonstration project 
has been tailored to mirror the FEHBP, with departures from 
FEHBP practices only where required by the nature of the 
demonstration project. Based upon OPM's preliminary 
negotiations with carriers, Mr. Flynn forecast that military 
retirees in the project will have an adequate number of health 
care plans to choose from; the number of choices in each site 
will range from 8 to 15, with an average of 11. He also 
defended OPM's proposal to use the administrative reserve to 
protect carriers against losses in the project. Without such 
mitigation of risk, he argued, because of the demonstration 
projects structure and temporary nature, premiums for all 
carriers could not be kept competitive. He also contended that 
OPM's scheme complied with the law.
6. FEGLI: New Options for Federal Employees.
    a. Summary.--The 105th Congress passed the Federal 
Employees Life Insurance Improvement Act (Public Law 105-311), 
which made numerous improvements to the Federal Employees Group 
Life Insurance program [FEGLI] and directed OPM to conduct a 
study to determine whether Federal employees are interested in 
group universal life, or group variable universal life, or 
additional voluntary accidental death and dismemberment 
insurance. Among the improvements enacted, were the following:
          a. eliminating maximum limitations on Basic life 
        insurance and on additional Option B coverage (which 
        permits employees to purchase at their own expense 
        additional insurance up to 5 times their salary);
          b. increasing the maximum amount of insurance that 
        employees may purchase on spouses (from $5,000 to 
        $25,000) and children (from $2,500 to $12,500); and
          c. permitting employees to carry unreduced Option B 
        insurance on themselves and Option C coverage for their 
        families into retirement at their own expense. 
        [Previously, Option B and Option C coverage was 
        automatically reduced by 2 percent per month beginning 
        at age 65 (or at retirement, if later) until coverage 
        was eliminated.]
    Coincident with implementing the improved benefits required 
by the Federal Employees Life Insurance Improvement Act, OPM 
also adjusted FEGLI premiums and created three new age brackets 
for Option B and Option C coverage. OPM has periodically 
adjusted FEGLI premiums as circumstances change. In light of 
lower mortality rates in most age groups, OPM has reduced 
premiums for basic insurance. Premiums for Options B and C have 
also been reduced for most age groups. Premiums have risen, 
however, for some older employees and annuitants. (For example, 
Option B monthly premiums for those age 55-59 have increased 
from $0.650 per thousand to $0.672.)
    Because increased levels of coverage under these options 
can be carried into retirement and former employees may now 
also continue Option B for 3 years after separating, OPM has 
created new age brackets for them. Previously, there was a 
uniform rate for everyone 60 years of age or older. Under the 
new rate structure premiums are scheduled to increase as 
individuals move through the three new age brackets of 60-64, 
65-69, and 70 and over. The creation of these rates has 
generated considerable controversy among older employees and 
annuitants, including Federal judges. Because of this 
controversy, OPM has postponed the application of the new 
    The purposes of this hearing were to examine OPM's 
implementation of the improvements mandated by law, to review 
OPM's studies of employee interest in new insurance products 
and proposals for such products, to examine new insurance 
products that might be offered to Federal employees, and to 
examine the new FEGLI rates established by OPM.
    b. Benefits.--The information developed through this 
oversight of the FEGLI program will assist the subcommittee in 
evaluating legislative proposals to offer new insurance 
products to Federal employees. It will also assist the 
subcommittee in evaluating the impact of OPM's new rates on 
various employees and retirees and to assess any legislative 
proposals to deal with the problems created by the new age 
    c. Hearings.--The subcommittee conducted a hearing 
entitled, ``Life Insurance: New Options for Federal 
Employees,'' on July 22, 1999. Witnesses at the hearing were: 
William E. Flynn III, Associate Director, Retirement and 
Insurance Services, OPM; Michael J. Bartholomew, senior 
counsel, American Council of Life Insurance; Dennis J. New, 
vice president, Special Risk Products & Markets, Unum/Provident 
Life Insurance Co.; and G. Jerry Shaw, general counsel, Senior 
Executives Association.
    Subcommittee Chairman Scarborough noted that currently the 
Federal Government only offers its employees term life 
insurance and accidental death and dismemberment through the 
FEGLI program. Insurance companies, however, are now offering a 
variety of flexible products worthy of consideration, and, he 
pointed out, with the likelihood of a more mobile workforce in 
the future, it would be logical for the Federal Government to 
follow the lead of private employers in offering these new 
products to its workforce. He also observed that the current 
FEGLI program is essentially a self-insured program that has 
been administered since its inception in 1954 by one company, 
MetLife. This was a pertinent fact to consider in evaluating 
additions or alternatives to the existing FEGLI system.
    Mr. Flynn described OPM's actions in implementing the 
changes to FEGLI mandated by Public Law 105-311, including 
conducting a statutorily required open season for FEGLI from 
April 24 through June 30, 1999. OPM provided extensive 
information to employees about the improved benefits and their 
new options under the FEGLI program, and interest in the open 
season among them was high. However, Mr. Flynn also reported 
that OPM will not know the results of the open season until 
September 2000. He noted that while FEGLI premiums for most age 
groups went down, OPM re-evaluated its existing premium 
structure in light of the new opportunities for retirees under 
the new law. As a result of this review, OPM created new age 
bands covering those 65-69 years old and those 70 or older. 
Many seniors objected to the new, higher rates they would be 
required to pay. The premium for individuals at age 70 doubled, 
which Mr. Flynn characterized as creating an unforseen but 
significant burden on older employees. Accordingly, OPM has 
postponed these increases until at least April 24, 2001 while 
it examines alternative approaches, including new legislation, 
and it has also advised retirees over 65 how they may 
ameliorate the rate increases that have already gone into 
    Mr. Flynn also reported that OPM's survey revealed 
significant interest in group universal insurance and other new 
insurance products. The administration is currently considering 
offering these new products, and Mr. Flynn hoped their internal 
discussions would be completed by the end of the fiscal year.
    Mr. Bartholomew testified on behalf of the American Council 
of Life Insurance, whose members account for about 80 
Representative of the group insurance market. He described 
group universal life as a combination of traditional group term 
insurance and a cash accumulation feature. Group variable 
insurance is similar, but it provides employees with the 
opportunity to choose to invest the cash value of the insurance 
among a variety of investment options. These policies help 
employees secure financial protection in the event of premature 
death and enhance their retirement planning.
    ACLI's data show that in 1997 its member companies issued 
group universal insurance with a face amount of $77 billion, 
and sold nearly $26 billion of group variable universal. 
Studies by other organizations also show that more and more 
private employers are offering these products to their 
employees. One such study shows that 76 percent of employers 
with 1,000 to 5,000 employees offered such products. Since 
1994, there has been a steady increase in the amount of group 
universal life insurance sold. Mr. Bartholomew said group 
universal and group variable universal are becoming more 
popular options for employees looking for alternatives to other 
forms of insurance. ACLI supports Congress's efforts to expand 
the insurance options for Federal employees by offering 
additional life and accidental death policies.
    Mr. New testified that many of the Fortune 1,000 offer a 
stand-alone voluntary accidental death and dismemberment [AD&D;] 
policy and that employees today want more choices in the 
insurance benefits offered to them. Voluntary AD&D; also fills a 
real need, covering accidents 24 hours a day, on and off the 
job, and around the world. Statistics cited by Mr. New show 
that accidents are the leading cause of death for those under 
38 and the fifth leading cause of death overall; nearly 9 out 
of 10 deaths occur away from the job. AD&D; can also be combined 
with a number of other benefits, such as paralysis benefits, 
home alteration and vehicle modification benefits, and travel 
assistance. It also requires no medical underwriting. 
Consequently it has been very popular with employees. Mr. New 
testified that in his company's experience between 35 percent 
to 50 percent of employees enroll in employer-sponsored AD&D; 
    Mr. Shaw testified that although FEGLI has served many 
Federal employees well over the years, during the recent open 
season many private companies took the opportunity to educate 
employees on alternatives to FEGLI. Consequently, employees 
often found they had better options available from private 
companies in the open market. Some learned that they could 
purchase the same or better coverage at lower rates from 
private insurers, while others discovered additional products 
like group universal life insurance linked to long-term care 
insurance. He pointed out that his firm issues a free weekly 
on-line newsletter that is read by over 50,000 Federal 
executives and managers. Many of them contacted his firm to 
complain that they had been lulled by the Federal Government's 
sponsorship of FEGLI into erroneously believing the government 
had negotiated the lowest possible rates for them. He 
emphasized that the members of the Senior Executives 
Association want choices. He noted the controversy in 
congressional consideration of long-term care insurance over 
whether only one company or several would be permitted in the 
Federal program. The SEA would support an approach to both 
long-term care insurance and additional life insurance 
offerings that offers employees maximum choices and competition 
among carriers, citing the FEHBP as a successful model.
7. Reauthorization of the Office of Government Ethics.
    a. Summary.--The authorization for the Office of Government 
Ethics expired on September 30, 1999. Although the Office is a 
small agency, the functions it performs are important in 
preserving impartiality and integrity in government operations. 
Based upon its examination of this issue, the subcommittee 
found that on the whole, the Office has performed its mission 
very well.
    Testimony received at this hearing also reinforced the 
importance of clarifying the definition of ``special government 
employee'' in 18 U.S.C. Sec. 202. The statutory definition of a 
special government employee has not been materially revised 
since its enactment in 1962. Under it, a special government 
employee is someone who is retained or appointed to perform 
duties on a full-time or part-time basis with or without 
compensation for no more than 130 days within 365 consecutive 
days. This definition does not give adequate notice of who is 
covered by the definition and therefore covered by conflict-of-
interest and financial-disclosure laws. Guidance issued by the 
Office of Government Ethics and the Department of Justice 
focuses on whether the advisor is in fact performing a Federal 
function, but there is no functional test in the statute. 
Neither the current law nor this Federal agency guidance 
adequately covers the various situations in which informal 
advisers in the White House have performed Federal functions 
and otherwise participated in the government's decision or 
policymaking process in recent years.
    b. Benefits.--Subcommittee Chairman Scarborough relied upon 
the testimony received in this hearing to introduce H.R. 2904 
to reauthorize appropriations for the Office of Government 
Ethics through fiscal year 2003. (H.R. 2904 is described in 
section III.A.8. [Subcommittee on the Civil Service]).
    c. Hearings.--The Subcommittee on the Civil Service held an 
oversight hearing entitled, ``Reauthorization of the Office of 
Government Ethics'' on August 4, 1999. Witnesses at the hearing 
were Stephen D. Potts, Director of the Office of Government 
Ethics, and Gregory S. Walden, an attorney in private practice 
and a former Assistant Counsel in the White House.
    Subcommittee Chairman Scarborough observed that the Office 
of Government Ethics is a small but well-respected agency that 
promulgates policies and ethical standards that are implemented 
in the executive branch through a network of more than 120 
designated agency Ethics Officers. He also pointed out that the 
Ethics in Government Act relies on financial disclosure 
requirements and post-employment restrictions to guard against 
conflicts of interest. However, he questioned whether these 
were sufficient to protect the public interest in the integrity 
of public officials in light of experience with the Clinton 
    Mr. Potts described the functions and operations of the 
agency, which, he testified, had ``overall responsibility for 
executive branch policies related to preventing conflicts of 
interest on the part of officers and employees.'' The Office 
administers a program that is primarily preventive, with 
enforcement entrusted to other executive branch agencies, 
including the Department of Justice. The Office issues rules 
and regulations regarding such matters as conflict of interest, 
post-employment restrictions, standards of conduct, financial 
disclosure, and ethics training. It also reviews the financial 
disclosure forms filed by certain individuals nominated for or 
appointed to Federal office by the President and counsels those 
individuals on the avoidance of conflicts of interest and, when 
necessary, recommends appropriate corrective actions. Educating 
Federal employees about the ethical standards governing their 
conduct is also an important part of the Office's 
responsibilities. Toward this end, the Office trains agency 
ethics officials and assists agencies in conducting their 
internal ethics training programs.
    The Office also issues formal and informal guidance on a 
variety of ethics matters. In limited circumstances, the Office 
will investigate alleged ethics violations and order corrective 
action or recommend disciplinary action. In general, however, 
enforcement falls to individuals agencies or the Department of 
Justice. The Office also evaluates the effectiveness of 
conflict of interest laws and related statutes and rules and 
regulations. Mr. Potts testified that the Office has been 
enlisted by other executive agencies to provide technical 
assistance to the anti-corruption efforts of foreign countries.
    From time to time, the Office will recommend modifying or 
repealing existing ethics laws or enacting new ones. In 
response to questioning, Mr. Potts testified that 18 U.S.C. 
Sec. 202, which defines the term ``special government 
employee,'' should be clarified by codifying the elements on 
which the Office currently relies considers in determining 
whether an individual is a special government employee. He 
pointed out that the Office had supported, and indeed had been 
``one of the forces behind,'' legislation introduced by 
Representative Mica and Representative Horn in the previous two 
Congresses to clarify this definition. (However, he also 
expressed reservations about tying such legislation to a 
reauthorization bill.)
    Mr. Potts asked Congress to reauthorize the Office for 7 or 
8 years. In support of that request, he cited the Office's 
record over the years, its small size (a budget of $9.1 million 
for fiscal year 2000 and a workforce of 84 full time equivalent 
employees), and the fundamental nature of the work it performs.
    Mr. Walden testified that he supported both the agency's 
reauthorization and the clarification of the term ``special 
government employee.'' In his opinion, the Office ``has 
performed exceptionally well and deserves to be reauthorized.'' 
He pointed out that he worked closely with the Office as an 
Assistant Counsel in the Bush White House and noted that it was 
the policy and practice of the Bush White House to solicit the 
Office's advice before making decisions or taking a course of 
action, and urged future administrations to follow that 
practice as well. As an independent agency, he pointed out, the 
Office helps both to maintain the public's trust in the 
integrity of the government and protects Federal officials from 
unwarranted or politically motivated criticism.
    In his testimony, Mr. Walden identified several matters 
that he believes the Office should address: issuing rules to 
implement the post-employment restrictions in 18 U.S.C. 
Sec. 207, rules to implement section 209 of the same title, and 
rules covering such matters as legal defense funds, the outside 
activities of Federal employees in professional associations, 
and the expenses that Federal employees may accept for 
unofficial teaching, speaking, or writing. He also urged more 
involvement by the Office in ethics investigations and that the 
Office audit the White House and every Cabinet Department in 
the second year of a new administration. Other recommendations 
included joint ethics training of political appointees by the 
White House Counsel and the Office and increased attention to 
training for employees in the field.
    Mr. Walden criticized the Office for too narrowly 
construing section 208, the conflict of interest statute, when 
it reviewed allegations that Hillary Clinton's stock portfolio 
created a conflict of interest with her responsibilities as the 
chairman of the President's Task Force on National Health Care 
Reform. He argued that the Office's conclusion that health care 
legislative proposals were too broad to constitute ``particular 
matters'' within the meaning of the statute ``exempts some 
conduct that fits the classic notion of a conflict of 
    In addition, Mr. Walden raised several legislative 
proposals, including clarification of the definition of 
``special government employee.'' The Clinton administration's 
``obvious struggle'' with the concept in connection with its 
perhaps unprecedented reliance on such informal advisers and 
consultants as Harry Thomason, Paul Begala, Dick Morris, and 
the numerous outsiders who worked on the Clinton health care 
proposal, as well as Mrs. Clinton's own unprecedented 
involvement in governmental affairs, according to Mr. Walden, 
highlight the need for such clarification. He pointed out that 
he had testified in support of legislation to do that in both 
1996 and 1997 and urged Congress to enact similar legislation 
before the next President is inaugurated.
    Mr. Walden testified that the length of the reauthorization 
period was a matter for congressional judgment on the best way 
to ensure regular oversight of the agency.
8. Federal Law Enforcement Retirement: Who Qualifies and Why?
    a. Summary.--In recent sessions, legislation has been 
referred to the subcommittee proposing to revise the terms and 
conditions extending enhanced retirement benefits (often 
referred to as ``law enforcement retirement coverage'' to 
additional occupations. During the first session of the 106th 
Congress, five bills addressing these issues were referred to 
the subcommittee. Two of these bills would extend enhanced 
retirement coverage, one to assistant U.S. attorneys, another 
to a broad range of occupational series, chiefly Immigration 
and Customs inspectors, Internal Revenue Service revenue 
officers, and police employed by several different Federal 
agencies. Additionally, other individuals who are currently 
covered by these enhanced retirement provisions have pursued 
legislation that would waive the mandatory retirement 
provisions associated with this benefit. Bills referred to the 
subcommittee include a measure to waive the age 57 retirement 
provision governing U.S. Capitol Police officers, a bill that 
would raise the mandatory retirement age for Federal 
firefighters from 55 to 57, and a bill that would increase the 
mandatory retirement age for all covered employees from 57 to 
60. In light of the interest in these proposals, and the 
differing effects associated with them, the subcommittee 
reviewed Federal employment practices associated with these 
occupations and conducted a hearing to assess the merits of 
such proposals and to evaluate their potential consequences for 
Federal workforce management and their costs to the government.
    b. Benefits.--This review of the proposed legislation and 
the employment practices of the agencies that would be affected 
by the legislation demonstrated that the bills extending the 
enhanced retirement benefit would be very costly. The 
Congressional Budget Office estimated the cost of extending the 
benefit to assistant U.S. attorneys at $660 million over 5 
years. The Department of the Treasury estimated its initial 
costs at more than $100 million per year in salaries and 
expense costs, plus causing additional unfunded liabilities of 
more than $1 billion on the Civil Service Retirement and 
Disability Fund. During the hearing addressing these issues, 
the Department of the Treasury, the Department of Justice, and 
the Office of Personnel Management concurred that, for most of 
the occupations targeted by these proposals, the Government 
does not have difficulty recruiting well-qualified employees 
under current pay and benefit structures. Additionally, the 
Department of Justice noted that granting this benefit to 
immigration inspectors would alter one of the career ladder 
opportunities that provides these employees entry into 
immigration examiner occupational classifications. The 
Department of Justice further testified that the extension of 
this benefit to attorneys would be inappropriate. The attorneys 
have no need of the physical fitness requirement normally 
associated with law enforcement responsibilities. Indeed, if 
such a physical requirement were imposed on attorneys, 
applicants who might be fine attorneys, but have physical 
limitations, might be barred from government service.
    In addressing the possibility of raising the mandatory 
retirement age associated with the enhanced retirement benefit, 
the Fraternal Order of Police recognized that this retirement 
age is linked to the enhanced accrual rate. If the mandatory 
retirement age were raised to age 60, then the covered 
individuals would be no different from other Federal employees 
who are eligible to retire with full benefits at age 60 with 20 
years' service. The Fraternal Order of Police concluded that 
the requirement for a young and vigorous workforce remains a 
valid policy consideration.
    As a result of this oversight, the subcommittee concluded 
that factors associated with costs, effects on career 
opportunities, and lack of support from employee organizations 
combined to support no change in the law at this time.
    c. Hearings.--The Civil Service Subcommittee conducted a 
hearing entitled, ``Law Enforcement Retirement Coverage,'' on 
the enhanced retirement benefits for law enforcement officers 
on September 9, 1999. Chairman Scarborough chaired the hearing, 
and Mr. Cummings and Mrs. Norton participated. Witnesses 
included: Mr. Bryant of Tennessee, Mr. Davis of Virginia, Mr. 
Filner of California, Mrs. Mink of Hawaii, and Mr. Traficant, 
of Ohio. Testifying on behalf of agencies were Mr. William E. 
Flynn, Associate Director, Retirement and Insurance Services, 
Office of Personnel Management; Ms. Kay Frances Dolan, Deputy 
Assistant Secretary for Human Resources, Department of the 
Treasury, and Mr. John Vail, Deputy Assistant Attorney General 
for Management, Department of Justice. Employee and taxpayer 
organizations' witnesses included: Mr. Peter J. Ferrara, chief 
economist of Americans for Tax Reform; Mr. Gilbert G. Gallegos, 
national president of the Fraternal Order of Police; and Ms. 
Colleen M. Kelley, national president of the National Treasury 
Employees Union.
    Mr. Scarborough noted the cost of the proposed extension of 
enhanced retirement coverage. Mr. Davis and Mr. Bryant 
supported the concept, but conceded that the CBO estimate of 
the costs associated with the current bill make the legislation 
``prohibitive.'' Agency witnesses agreed that the data on 
recruitment and retention provided by the Office of Personnel 
Management confirmed that the agencies do not face difficulties 
in most of the categories proposed for the enhanced benefit. 
Mr. Vail affirmed, in particular, ``The Department of Justice 
does not have problems recruiting attorneys.'' The Departments 
of Justice and the Treasury indicated that they would work with 
OPM to address concerns about projected increases in the 
inspections workforce of the Customs Service and the 
Immigration and Naturalization Service.
    Mr. Scarborough noted that, earlier in the session, when 
the subcommittee had required offsets before moving legislation 
to enhance participation in the Thrift Savings Plan, Federal 
employee organizations had opposed the offsets as likely to 
cause reductions in force [RIFs]. Although these retirement 
bills involved substantially greater costs, both the affected 
agencies and the employee organizations testified that these 
enhanced benefits could be administered in ways that would not 
require RIFs.
9. Civilian Personnel Readiness.
    a. Summary.--Over the past 10 years, the Department of 
Defense's civilian workforce has shrunk even more than our 
military forces. Active duty personnel have been reduced by 35 
percent from 1989 levels, while DOD has cut its civilian 
personnel by 38 percent. One third of that workforce reduction 
is attributable to base closures, but aggressive use of the 
contracting process, congressionally mandated reductions, and 
better ways of doing business have also contributed.
    This drawdown has raised questions about its impact on 
military readiness. Simply put, there is concern that military 
readiness will be degraded if the civilian resources available 
to DOD, both Federal employees and contractors, are 
insufficient in number or lack the requisite skills to support 
peak performance by our armed forces. Key issues include: (1) 
whether the dramatic reductions in personnel have so increased 
uncertainty about the stability of civilian careers at DOD that 
they are no longer attractive to highly qualified individuals; 
(2) whether the workforce has the skills to support DOD's 
current mission; (3) whether DOD has developed a strategic 
human capital program to ensure that its workforce will meet 
the requirements of the Department's missions in the future; 
and (4) whether its contracting activities have, in fact, saved 
    b. Benefits.--This examination provided a useful background 
for the subcommittee in evaluating a number of issues that have 
come before it, including the challenges presented by an aging 
workforce, the adequacy of agency training programs, pension 
portability, and personnel processes for hiring, retaining, and 
compensating Federal employees. It also assisted the 
subcommittee in analyzing a number of legislative proposals 
that were offered during the second session in conjunction with 
defense authorization bills and other measures.
    c. Hearings.--On March 9, 2000, the subcommittee conducted 
a joint hearing with the Subcommittee on Military Readiness of 
the House Committee on Armed Services, entitled, ``National 
Defense Authorization Act for Fiscal Year 2001--H.R. 4205, and 
Oversight of Perviously Authorized Programs.''
    Witnesses at the hearing were Mr. Frank Cipolla, Center for 
Human Resources Management, National Academy of Public 
Administration [NAPA]; Mr. Michael Brostek, Associate Director, 
Federal Management and Workforce Issues, General Accounting 
Office; Mr. Barry Holman, Associate Director, Defense 
Management Issues, General Accounting Office; Dr. Diane Disney, 
Deputy Assistant Secretary of Defense (Civilian Personnel 
Policy); Mr. David Snyder, Deputy Assistant Secretary of the 
Army (Civilian Personnel Policy); Ms. Mary Lou Keener, Deputy 
Assistant Secretary of the Navy (Civilian Personnel/EEO); Ms. 
Mary Lou Keener, Deputy Assistant Secretary of the Air Force 
(Force Management and Personnel); Mr. David O. Cooke, Director 
of Administration and Management (Office of the Secretary of 
    Representative Herbert Bateman, chairman of the 
Subcommittee on Military Readiness, noted that this was the 
first joint hearing conducted by these two subcommittees in his 
memory. He acknowledged that the civilian personnel provisions 
included in the defense authorizations bills that come before 
Congress each year fall within the civil service subcommittee's 
jurisdiction and thanked the subcommittee for its cooperation.
    Mr. Bateman noted that because of the way the agency's 
downsizing was conducted, employees with essential skills have 
permanently left the workforce. For that reason, he asked the 
witnesses to provide an assessment of their current skills 
inventory and what additional tools they would need to ensure 
that the agency's workforce will be able to support its current 
and future missions. He also addressed the issue of the aging 
workforce and asked whether the agency has planned for 
developing qualified successors to replace workers with 
critical skills when they retire. Mr. Bateman also emphasized 
that the agency has not yet demonstrated by careful analysis 
that the aging of its workforce presents a problem that can be 
solved only by abandoning long-established personnel practices. 
He also asked to learn what the agency has learned from the 
numerous demonstration projects it has been conducting. 
Pointing out that Federal jobs are still highly coveted in many 
areas, Mr. Bateman said it seems counterintuitive that the 
agency would have difficulty hiring new workers. Therefore, he 
would expect requests for new authorities to be supported by 
careful analysis and would insist that such new authorities be 
targeted at skills the agency has demonstrated it cannot hire.
    As the former chairman of the Civil Service Subcommittee, 
Mr. Mica thanked Mr. Bateman for his cooperation in the past 
and expressed his confidence that the two subcommittees would 
continue to work closely together on personnel issues. Defense 
downsizing, Mr. Mica noted, will account for 73 percent of the 
net government wide reductions in civilian personnel by the end 
of fiscal year 2001. He asked how this drawdown has affected 
the current ability of the workforce to support America's 
military, and he instructed the witnesses to identify critical 
short-term problems that must be addressed now and provide 
concrete proposals for the subcommittees to consider.
    Because an inadequate civilian support system will degrade 
the performance of even the best military force, Mr. Mica told 
the subcommittees it is incumbent on Congress to work with the 
executive branch to determine the optimum mix of contractors 
and employees and the optimum mix of skills in that support 
system. He expected the witnesses to demonstrate that their 
civilian personnel strategies are solidly tied to anticipated 
military needs. With respect to the aging workforce, Mr. Mica 
said he expected a clear explanation of why this is considered 
such a problem and what agencies are doing to train or retrain 
their employees. He also asked witnesses to address whether the 
civilian benefit structure should be modified to attract highly 
qualified and motivated individuals. In particular, he asked 
whether the Federal Government needs more flexible benefits and 
more portable retirement systems to compete for highly skilled 
workers, particularly younger ones who do not envision 
remaining with just one employer throughout their careers.
    Mr. Ortiz, ranking member on the readiness subcommittee, 
indicated that he was very concerned with the problems and 
challenges associated with a dwindling and aging workforce. He 
noted that by 2025, almost 18 percent of all Americans will be 
over the age of 65, which will impact, among other things, the 
quantity and quality of civilian personnel DOD will be able to 
recruit and retain to meet the department's technical and 
management challenges.
    Despite increased outsourcing, more reliable equipment, and 
innovative management and maintenance concepts, Mr. Ortiz 
believes a core DOD workforce will always be necessary. But he 
is not sure the agency is in the best position now to prepare 
for the future. In particular, Mr. Ortiz said the agency does 
not have in place the same kinds of programs for attracting, 
retaining, and training blue collar workers as it has for white 
collar workers. He proposed that the Department of the Army 
conduct a pilot apprentice program at Army depots to address 
future needs for blue collar technicians that are already hard 
to find. Noting that Congress needs to better understand the 
linkage between perceived problems, enacted legislation, and 
the agency's policies and practices, legislative proposals, and 
costs, Mr. Ortiz wants to ensure the development of an 
integrated investment strategy to guide implementation of 
rational and achievable civilian personnel goals.
    Mr. Cummings, ranking member of the Civil Service 
Subcommittee, said this hearing sent a message to agencies on 
the importance of planning for the future and developing 
strategic plans to manage, train, retain, develop, hire, pay, 
and evaluate their most valuable assets, their employees. He 
noted that downsizing, contracting out, reductions in force, 
and an aging workforce can depress employee morale and promote 
insecurity among employees. According to a 1996 GAO report 
cited by Mr. Cummings, DOD's civilian workforce has declined by 
about 25 percent since 1987, and will be 35 percent below 1987 
levels when the agency completes its downsizing plans in 2001. 
He asked the witnesses to address the current status of DOD's 
downsizing, its impact on civilian employees, and the agency's 
strategic plan to manage its workforce in the future.
    Mr. Cipolla testified that DOD's challenge of ensuring that 
the right people are in the right place at the right time is 
more daunting today than ever. DOD and other managers must 
determine what skills will be needed in the future, decide how 
to update and upgrade skills and knowledge of the current 
workforce, and identify the best approaches for recruiting 
individuals with scarce skills while retaining senior level 
employees with expertise in key occupations. Federal managers, 
he noted, are now competing with private employers for talented 
employees in a tough market.
    Managers in both the Federal Government and the private 
sector, according to Mr. Cipolla, are discovering that they 
cannot address these issues without instituting a systematic 
process of workforce planning. Most Federal agencies surveyed 
by NAPA are beginning to institute such processes.
    Mr. Cipolla identified seven key conclusions with respect 
to human capital planning:
          1. workforce requirements must be linked to the 
        agency's overall strategic plans;
          2. workforce planning must include collection and 
        analysis of data about the external environment as well 
        as information concerning the current workforce;
          3. projections of future workforce requirements must 
        be expressed in terms of needed skills and 
        competencies, and not just members of full time 
        equivalent employees;
          4. agencies should consider the use of flexible 
        employment arrangements;
          5. managers must be given maximum flexibility in 
        managing work and assigning staff to meet changing 
        mission and program requirements;
          6. human capital development and continuous learning 
        should be viewed as organizational investments and 
        given a high strategic priority;
          7. retirement incentives should be used selectively 
        to support restructuring and to retain needed talent in 
        scarce occupations.
    Mr. Brostek testified that DOD has undergone a significant 
downsizing of its civilian workforce, a process that is 
expected to continue and eventually result in a total reduction 
in the civilian workforce of about 43 percent from 1989 levels. 
In part, due to staffing reductions already made, imbalances 
appear to be developing in the age distribution of DOD civilian 
staff. The average age of this staff has been increasing, while 
the proportion of younger staff has been decreasing. To cope 
with downsizing, DOD also has numerous reform initiatives under 
way to change the way it does business. Such changes, Mr. 
Brostek observed, can affect the kinds of competencies that 
staff must have to carry out their responsibilities.
    In GAO's view, developments like these call for a strategic 
approach to human capital planning. And assessing human capital 
management policies and practices also is consistent with the 
management framework that Congress has adopted to focus 
agencies' attention on managing for results. To help agencies 
assess their human capital management policies and practices, 
GAO has developed a five-part self-assessment framework that 
can be useful in aligning human capital management with 
agencies' missions, goals, and other needs and circumstances. 
Federal agencies--DOD included--can and must define the kind of 
workforce they will need in the future, develop plans for 
creating that workforce, and follow up with needed actions and 
investments. This is important in order to ensure that when the 
future arrives, the right employees--with the right skills, 
training, tools, structures, and performance incentives--will 
be on hand to meet it. Mr. Brostek described that framework, 
whose parts, of necessity, are interrelated and overlapping, as 
including: (a) strategic planning; (b) organizational 
alignment; (c) leadership; (d) talent; and (e) performance 
    Dr. Disney testified that DOD's workforce has declined from 
1.15 million in fiscal year 1989 to 732,000 in fiscal year 1999 
(excluding employees of nonappropriated fund 
instrumentalities). Those 10 years of downsizing have 
significantly changed DOD's workforce in terms of age, 
occupational profile, grade, and educational level. The average 
age of the workforce has increased and will soon exceed 46, 
while the number of employees under 40 has dropped 
substantially. Dr. Disney warns that these developments present 
potential problems in the transfer of institutional knowledge. 
Because of sharp declines in clerical and blue collar 
occupations, DOD's workforce has become increasingly 
professional. Likewise, educational levels have risen because 
jobs that have remained in DOD require more advanced education 
and training than in the past. Grade levels have also 
increased, primarily because lower-ranked positions are more 
likely to have been outsourced or replaced by technology.
    According to Dr. Disney, DOD has accomplished the drawdown 
of its civilian workforce through base closure and realignment, 
privatization and outsourcing, re-engineering, attrition, and 
reductions in force. BRAC has accounted for about 44 percent of 
the reduction, a figure that would have been higher but about 
half of employees subject to it have been able to find jobs at 
other DOD locations. Based on a RAND Corp. study, Dr. Disney 
indicated that about 27 percent of contracting studies under 
OMB Circular A-76 resulted in outsourcing and 80 percent of 
outsourcings have resulted in some type of personnel 
displacement. However, DOD has been able to keep involuntary 
separations to less than 9 percent of total separations through 
use of a priority placement program, voluntary early 
retirements, and buyouts. Downsizing has also reduced 
promotional opportunities and brought to light skills 
imbalances. Despite the drawdown, according to a recent 
National Partnership for Reinventing Government study cited by 
Dr. Disney, 59-63 percent of DOD employees are satisfied or 
very satisfied with their jobs, compared to 60 percent overall 
in the Federal Government's workforce, and 62 percent of 
private sector workers.
    Dr. Disney also testified that while DOD's workforce has 
declined by about one third, constant-dollar costs for civilian 
personnel have only fallen by about 13 percent because of 
increases in age and grade levels, increased 
professionalization, and increases in compensation.
    A competitive job market, and rigidity in civil service 
regulations, Dr. Disney told the subcommittee, hinder Federal 
    To plan for the future, Dr. Disney said DOD is attempting 
to identify the skills it will need in the future. Her office 
is sponsoring, along with the joint staff, a ``Future Warrior/
Future Worker'' study by the RAND Corp. Preliminary indications 
from this study suggest that the jobs expected to change the 
most are: aircraft, automotive, and electrical maintenance 
specialists; computer systems specialists; environmental health 
and safety specialists; and intelligence specialists. Her 
office is also working with the Office of the Undersecretary of 
Defense for Acquisition, Technology, and Logistics to identify 
competencies that will be critical to the acquisition workforce 
in the future. The results of this work will be used to 
evaluate acquisition training and education and preparing a new 
    While the Goldwater-Nichols Act has yielded an officer 
corps that is more highly educated and with a stronger joint 
perspective, Dr. Disney said civilian personnel tend to remain 
``occupationally stove-piped'' even though their jobs are 
becoming broader and their responsibilities more complex. To 
address this problem, DOD created the Defense Leadership and 
Management Program [DLAMP] in 1997. This is the first 
systematic DOD-wide program to prepare civilians for key 
leadership positions at GS-14, 15, and SES levels. DOD is also 
considering expanding DLAMP and creating a DLAMP preparation 
program for lower-graded employees.
    Other activities that Dr. Disney cited were reorganizing 
the Defense Acquisition University, strengthening labor 
management relations, and making ``extensive and creative'' use 
of workforce shaping tools currently available to it.
    Dr. Disney asked the subcommittees for extension of 
authority to allow employees to volunteer for reductions in 
force, modification of existing authority for voluntary early 
retirements and buyouts, and to restructure restrictions on 
degree training. DOD is also working on a proposal for an 
alternative hiring system.
    Mr. Snyder testified that during the last 10 years, the 
Department of the Army has reduced total appropriated fund 
strength by more than 42 percent. By 2005, the Army's civilian 
personnel will be 48 percent below fiscal year 1989 levels. 
Demographic trends at Army, such as increased 
professionalization and higher educational levels, are similar 
to DOD-wide trends on the whole.
    Thirty percent of Army's civilians will be eligible for 
retirement in 2003 and 62 percent in 2010, according to Mr. 
Snyder. To counter these losses, Mr. Snyder said Army must 
significantly increase civilian recruitment and entry level 
hiring in professional, administrative, and technical 
occupations. However, an intern program through which Army 
hires and trains its future civilian leaders has declined 
substantially since 1989, when there were 3,800 interns in it. 
Mr. Snyder told the subcommittee there will be 950 interns in 
fiscal year 2001. The Army also anticipates greater difficulty 
in filling journeymen level and leadership vacancies with 
highly qualified and well-trained employees. Mr. Snyder 
ascribes this difficulty to civil service rules and regulations 
that put the agency at a competitive disadvantage in the job 
market. Army is working with the Office of the Secretary of 
Defense to develop an alternative hiring system.
    Ms. Welch described the impact of downsizing on the Navy's 
civilian workforce. She testified that Navy's workforce is 44 
percent smaller than it was 10 years ago, and she pointed out 
that the workforce is aging. Only 16 percent of Navy's 
workforce was eligible for retirement 10 years ago; today it is 
about 34 percent. According to Ms. Welch, in 5 years the 
retirement eligibility rates for several key white-collar 
occupations will be even higher (47 percent for engineers, 55 
percent for scientists, 64 percent for contract specialists), 
and 53 percent of blue collar workers will then be eligible for 
    Through the use of such tools as the priority placement 
program, outplacement, and buyouts, Ms. Welch testified, Navy 
has been able to minimize downsizing's impact on employees. In 
particular, she noted that before buyouts became available in 
1993, 56 percent of Navy separations were involuntary, a figure 
that dropped to 17 percent after 1993. Nevertheless, she noted 
that Navy now has an older workforce that is closer to 
retirement without an adequate number of replacements in the 
    Navy recognizes its need to attract, retain, and develop 
employees. It is establishing and coordinating a recruiting 
effort to attract highly-qualified individuals and reviving its 
apprenticeship programs for blue-collar workers, which Ms. 
Welch described as having ``slowed to a trickle'' due to base 
closures over the past 10 years.
    For its current workforce, Ms. Welch said the Navy is 
focusing on workforce development, quality of work life, and 
workplace dispute resolution. Navy is committed to improving 
its current workforce through DOD's leadership and management 
program, Navy's civilian leadership development program, and 
continuous learning initiatives. It is also encouraging Navy 
commands and activities to use flexible work arrangements, such 
as job sharing, part-time employment, alternative work 
schedules, and satellite work locations. Navy has also 
established a pilot program to revamp the ``costly, lengthy, 
divisive'' EEO complaint process. Ms. Welch testified that Navy 
managers and employees had cited this process as the ``number 
one problem.'' Under the pilot, more complaints are being 
resolved informally, and the processing time and costs of 
resolving EEO complaints have been significantly decreased.
    Ms. Keener assured the subcommittees that the Air Force has 
a plan to meet the challenges of ensuring that its workforce 
will be able to support future Air Force missions. The major 
areas of that plan are force renewal, force skills development, 
and separation management. Force renewal is a priority for the 
Air Force, especially in the depots, which Ms. Keener described 
as suffering severe imbalances in skills and levels of 
experience because of a decade of hiring freezes. Because the 
Air Force expects to lose more employees, particularly in blue-
collar occupations, it needs to undertake aggressive hiring 
    The Air Force will also invest in training and retraining 
current employees. However, Ms. Keener also contended that the 
Air Force must have the ability to offer targeted voluntary 
separation incentives that can be used with precision to shape 
the workforce so it will have the skills needed today and in 
the future.
    Mr. Cooke testified about the personnel situation in what 
he called the ``Fourth Estate,'' a wide variety of DOD 
components that are not part of one of the military 
departments. According to Mr. Cooke, the workforces in these 
components have higher proportions of civilians, white-collar 
workers, and women than the military departments. However, the 
problems of the ``Fourth Estate'' mirror those of the military 
departments. He also noted that while the ``Fourth Estate'' has 
grown over the years, primarily by consolidating functions 
previously fragmented among the military departments, it has 
also experienced workforce reductions similar to the military 
departments. The Office of the Secretary of Defense, for 
example, has been reduced by 33 percent. Mr. Cooke said the 
workforce shaping tools Dr. Disney described were also needed 
by the ``Fourth Estate.''
10. EEO Data and Complaint Processing Problems.
    a. Summary.--The subcommittee reviewed the backlog of cases 
regarding workplace disputes filed with the Equal Employment 
Opportunity Commission [EEOC], the lack of adequate data on 
discrimination complaints, and the use of alternative dispute 
resolution [ADR] techniques to resolve equal employment 
opportunity [EEO] disputes. In a report entitled, ``Equal 
Employment Opportunity: Data Shortcomings Hinder Assessment of 
Conflicts in the Federal Workplace'' (May 1999), GAO found that 
EEOC does not collect and report data that would shed light on 
several issues fundamental to understanding the nature and 
extent of workplace conflicts. It also reported that data EEOC 
collects from agencies is of questionable reliability. In 
addition, GAO's August 1999 study, ``Equal Employment 
Opportunity: Complaint Caseloads Rising, With Effects of New 
Regulations on Future Trends Unclear,'' revealed that the 
backlog of EEO cases at agencies and EEOC has continued to grow 
while the average age of these cases has also increased. The 
subcommittee has also examined alternative dispute resolution 
program of several agencies, including the Air Force, Navy, and 
the Postal Service.
    b. Benefits.--The subcommittee learned that alternatives to 
the current complaint procedures, especially the expanded use 
of ADR mechanisms, could aid agencies in resolving workplace 
disputes, thereby eliminating the involvement of EEOC. As a 
result of information revealed in the GAO reports and the 
hearing described in paragraph (c), Chairman Scarborough 
introduced H.R. 4362 to require agencies and the EEOC to 
maintain information necessary to assure fundamental questions 
about their EEO processes and make it available on the 
    c. Hearings.--The subcommittee held a hearing, ``EEO Data 
and Complaint Processing Problems'' on Wednesday, March 29, 
2000, in Washington, DC. Witnesses at the hearing were the 
following: The Honorable Albert R. Wynn (D-MD); Carlton Hadden, 
acting director of Federal operations, Equal Employment 
Opportunity Commission; Michael Brostek, Associate Director, 
Federal Management and Workforce Issues, General Accounting 
Office; Gerald R. Reed, president, Blacks in Government; 
Cynthia Hallberlin, Chief Counsel of Alternative Dispute 
Resolution Program, National Program Manager of REDRESS, U.S. 
Postal Service; and Roger Blanchard, Assistant Deputy Chief of 
Staff, Personnel, U.S. Air Force.
    Subcommittee Chairman Scarborough stated that Federal 
employees should have available a procedure for resolving EEO 
complaints that is fair, timely, and efficient. Mr. Scarborough 
expressed concern that EEOC fails to collect and report data in 
an efficient manner and spends an average of 3 years to process 
a case. Mr. Scarborough told subcommittee members that the use 
of ADR should be encouraged as a means by which agencies can 
resolve disputes in a more efficient manner.
    Congressman Wynn (D-MD) testified that unless the EEOC 
collects accurate data Congress would be unable to address 
discrimination in the Federal workplace. Mr. Wynn complained 
that he has heard from almost each Federal agency regarding 
discrimination complaints and thus, concludes that the 
``problem is systemic.'' Mr. Wynn told the subcommittee that a 
GAO report had found the number of unresolved complaints had 
increased by approximately 102 percent, from 16,964 at the end 
of fiscal year 1991 to 34,267 at the end of fiscal year 1997. 
Mr. Wynn concludes that the EEO process needs to be reformed. 
He called the current system ``underfunded [and] ineffective'' 
and called for new legislation that would address the current 
    Mr. Carlton M. Hadden, Acting Director, Office of Federal 
Operations, U.S. Equal Employment Opportunity Commission, 
testified that Chairwoman Castro, who has been the head of EEOC 
since 1998, has brought significant changes to the Federal 
sector EEO process. Mr. Hadden admitted that Federal employees 
wait too long for their complaints to be processed at almost 
every stage of the Federal EEO complaint process. Mr. Hadden 
reported that the rule on Federal Sector Regulatory Reform 
became final on November 9, 1999. The rule implements Federal 
sector reforms designed to streamline the complaint process. 
Mr. Hadden also referred to the change that requires agencies 
to institute ADR programs to resolve disputes.
    Mr. Roger Blanchard, Assistant Deputy Chief Of Staff, 
Personnel, U.S. Air Force, discussed the Air Force's use of ADR 
in resolving workplace disputes. Mr. Blanchard told the 
subcommittee that the Air Force has ``made significant 
progress'' with the ADR program. He testified that in fiscal 
year 1998, Federal agencies required an average of 384 days to 
resolve EEO complaints. However, the Air Force took 293 days, 
24 percent less.
    Ms. Cynthia J. Hallberlin, National Program Manager for the 
U.S. Postal Service testified about the Postal Service's ADR 
program, known as REDRESS, which is an acronym for ``Resolve 
Employment Disputes, Reach Equitable Solutions Swiftly.'' Under 
REDRESS, an employee contacts an EEO counselor and is given the 
option of mediation in place of traditional EEO counseling. 
When mediation is used, a professional mediator not from the 
Postal Service is used within 2 to 3 weeks. The idea behind 
REDRESS is a quick resolution of a dispute. This helps to 
ensure that mediation maximizes the chances of a resolution. 
REDRESS has been a success. In fiscal year 1999, over 8,500 
cases were mediated nationwide at the Postal Service; 61 
percent of these were successfully resolved with a mediator.
    Mr. Michael Brostek, Associate Director with GAO's Federal 
Management and Workforce Issues General Government Division, 
shared some of GAO's findings with the subcommittee. Mr. 
Brostek said that GAO concluded that EEOC failed to collect the 
type of data that would provide answers to basic questions such 
as the number of employees who filed complaints and the type of 
discrimination they alleged. GAO found that the number of 
complaints filed by Federal employees increased in the 1990's.
    Mr. Gerald R. Reed, president and CEO of ``Blacks in 
Government'' testified that Federal mismanagement should be a 
Federal offense. Specifically, Mr. Reed advocates new criminal 
laws to punish managers in the Federal workplace who commit 
11. Fulfilling the Promise.
    a. Summary.--The subcommittee examined extending enrollment 
in the Federal Employees Health Benefits Plan [FEHBP] to 
certain military health care beneficiaries. Throughout their 
career, military personnel are told in recruitment and 
retention brochures and by military officers that while their 
salary is low, part of their compensation package is lifetime 
medical care, earned by military service. However, when they 
reach age 65, military retirees are dropped from the military 
health care system, unless space is available in a military 
treatment facility. During the 106th Congress, two legislative 
proposals, H.R. 2966 and H.R. 3573, generated much discussion. 
The proposals recognize that those who entered the service 
prior to June 7, 1956 were promised free health care for life 
and should not be penalized by a subsequent change in statute. 
The legislation provided for health care under the FEHBP as 
part of a separate risk pool for military retirees, with 100 
percent of the associated premiums paid for by the Department 
of Defense.
    b. Benefits.--The subcommittee gained a clear understanding 
of the legislative options available in an effort to develop a 
consensus approach to implement necessary reforms to the 
military health care system.
    c. Hearings.--A hearing entitled, ``Fulfilling the 
Promise,'' was held on April 3, 2000, in Pensacola, FL. 
Witnesses at the hearing were the Honorable Ronnie Shows, D-MS; 
Colonel George ``Bud'' Day, Class Action Group; Colonel George 
Rastall, the Retired Officers Association; Stephen Gammarino, 
senior vice president, BlueCross BlueShield Association; 
William ``Ed'' Flynn III, Associate Director of Retirement and 
Insurance Programs, Office of Personnel Management; and Rear 
Admiral Thomas Carrato, director of military health system 
operations, TRICARE Management Activity.
    Subcommittee Chairman Scarborough stated that a strong 
military medical system was necessary to support not only the 
present active forces but also to uphold the promise made to so 
many of our military retirees. With recruiting shortages in all 
services except the Marine Corps, keeping faith with military 
retirees is necessary to maintain credibility with potential 
recruits and current service personnel. He reminded 
subcommittee members of the problems that have troubled 
TRICARE. The chief complaints have included the nonpayment of 
providers, lack of accessibility for patients, and 
unavailability of prescription drugs. Because of these and 
other deficiencies, TRICARE has fallen far short in delivering 
on its promised free medical care for life. He emphasized the 
issue of free medical care for life is a high priority for the 
    Mr. Cummings emphasized that without a doubt, military 
families and retirees deserve a quality health care system. He 
stated that to differing degrees FEHBP plans cover inpatient 
and outpatient care, prescription drugs, and mental health 
services, and it would be unfortunate if Congress attempted to 
help one group of beneficiaries and hurt another.
    Mr. Shows referenced the support of over 250 Members of 
Congress for legislation he introduced, H.R. 3573. He 
recognized the extensive grassroots effort, which was very 
active in generating support for the legislation. He questioned 
how Congress could defend giving Federal employees and elected 
officials, including themselves, health care as part of their 
retirement and not providing it for the men and women who 
served the country as members of the uniformed services.
    Colonel Bud Day discussed the history of the promise of 
free medical care for life, including reference to the Federal 
Government's defense on March 7, 2000, in the Federal Circuit 
Court of Appeals which stated that ``yes, the promise had been 
made but they did not have to keep it because there was no 
legislation that specifically tied retired medical care to an 
appropriations measure.'' He reminded the subcommittee of the 
moral and legal basis for providing quality health care to 
military retirees and their dependents.
    Colonel George Rastall reminded the subcommittee of Florida 
Federal District Court Judge Vincent's decision, in which the 
judge said that the plaintiffs certainly had a strong argument 
that the government should abide by its promises. Relief for 
the plaintiffs must come from the Congress, however, and not 
from the judiciary due to the constitutional separation of 
powers. Colonel Rastall reaffirmed that uniformed service 
members want fair treatment along with civilian Federal 
employees, including the opportunity to participate in the 
FEHBP. For the 173,200 retirees in Florida, including the 
36,000 in Pensacola, care is only available on a diminishing 
space-available basis.
    Mr. Gammarino provided background on the FEHBP as a model 
of efficiency and effectiveness that the private sector is 
often called on to attempt to replicate. As the largest carrier 
in the program, he stated the special responsibility BlueCross 
and BlueShield feels toward the program and its desire to work 
with the subcommittee as it examines various legislative 
proposals to allow military retirees access to the FEHBP. He 
discussed four basic principles that should be considered when 
evaluating suggestions for extending the FEHBP beyond its 
current enrollment base: establishment of a logical connection 
between the Federal Government as an employer and the 
population proposed to receive the coverage, preservation of 
the competitive nature and existing private sector role in the 
program, expansion of the infrastructure to handle the 
increased enrollment, and preservation of the insurance 
underwriting principles.
    Mr. Flynn provided an overview of the FEHBP. In order to 
expand health care access to military retirees, Mr. Flynn 
outlined several important principles that must be met. First, 
a separate risk pool must be established for purposes of 
setting premiums. Second, the Department of Defense must be 
prepared to conduct enrollment administrative-related financial 
activities as Federal employing agencies do. Finally, OPM must 
have the authority to manage the inclusion of the new 
    Admiral Carrato stated the Department of Defense's 
opposition to provisions extending FEHBP coverage to military 
retirees on a permanent basis, owing to their high cost and 
adverse effects on military readiness. The most serious 
consequences of these provisions would arise, according to 
Admiral Carrato, if the costs had to be absorbed by the Defense 
Health Program.
    Admiral Carrato predicted space-available care in the 
military treatment facilities would ultimately be reduced. He 
reminded the subcommittee that current statutory authority 
provides for space-available care in military treatment 
facilities for military retirees who have reached age 65. 
However, the growing number of military retirees and 
infrastructure downsizing have resulted in less space-available 
care for retirees, resulting in Defense Secretary Cohen's 
recent iterations of his commitment to expand health care 
access for military retirees.
12. The FEHBP Demonstration Project for Medicare-Eligible Military 
    a. Summary.--The subcommittee examined the administration's 
implementation of the demonstration project established in the 
Strom Thurmond National Defense Authorization Act for Fiscal 
Year 1999, which permits a limited number of Medicare eligible 
military retirees to enroll in the Federal Employees Health 
Benefits Program.
    As required by statute, the Department of Defense [DOD] 
selected at random eight demonstration sites, of the 6-10 
provided for under Public Law 105-261. In accordance with the 
legislative requirements, the sites included areas within and 
outside of the catchment areas of military treatment 
facilities, an area in which there is also a Medicare 
subvention demonstration project, and no more than one site per 
TRICARE region. The test sites selected were Dover, DE; 
Roosevelt Roads, PR; Fort Knox, KY; Greensboro, NC; Dallas, TX; 
Humboldt County, CA and surrounding counties; Camp Pendleton, 
CA; and New Orleans, LA. Each area contained enough fee-for-
service plans and HMOs participating in those areas to provide 
DOD beneficiaries an adequate choice of providers.
    The authorizing legislation limited participation in the 
demonstration to 66,000 military beneficiaries and dependents. 
DOD chose to offer an enrollment opportunity to only about 
70,000 persons. Consequently, almost 100 percent of eligible 
beneficiaries would have to enroll in the FEHBP to produce a 
demonstration project as large as Congress intended. After the 
first open season, which concluded December 31, 1999, there 
were 1,250 enrollees, slightly under 2 percent of the total 
eligible population.
    b. Benefits.--The subcommittee gained a clear understanding 
of the effects unsatisfactory marketing, artificial enrollment 
limitations, an ill-equipped information center, and poorly 
planned health fairs had on the success of the demonstration 
    c. Hearings.--A hearing entitled, ``The Failure of the 
FEHBP Demonstration Project: Another Broken Promise?,'' was 
held on April 12, 2000. Witnesses at the hearing were the 
Honorable Randy ``Duke'' Cunningham, R-CA; the Honorable 
Charlie Norwood, R-GA; the Honorable Jim Moran, D-VA; Colonel 
Charles Partridge, co-chair, National Military and Veterans 
Alliance; Kristen Pugh, deputy legislative director of the 
Retired Enlisted Association, on behalf of the Military 
Coalition; William E. Flynn III, Associate Director of 
Retirement and Insurance Programs, Office of Personnel 
Management; and Rear Admiral Thomas Carrato, Director of 
Military Health Systems Operations, Tricare Management 
    Subcommittee Chairman Scarborough expressed his concern 
that DOD's decision to artificially limit the total number of 
eligible beneficiaries in the test sites contributed to the 
dramatically depressed enrollment in the demonstration. He 
reminded the witnesses of his commitment to providing quality 
health care to America's men and women in uniform.
    Representative Mica expressed his disappointment at the 
manner in which the whole demonstration project had been 
handled, particularly with the limited number of beneficiaries 
eligible to participate. The demonstration project was not 
following the original intent of Congress to see that all 
personnel, retirees included, have access to health care on an 
affordable basis.
    Mrs. Morella stated she was eager to hear DOD and OPM 
explain what factors contributed to the initial low enrollment.
    Mr. Norwood reminded the subcommittee that many military 
retirees still have little or no access to health care, and are 
being kicked out of the TRICARE system at age 65. He referenced 
his legislation, H.R. 3573, which would expand the FEHBP option 
to all military retirees. Additionally, Mr. Norwood pointed out 
that military readiness was suffering since military retirees 
were less enthusiastic about encouraging young people to enlist 
with the armed services. He asked the subcommittee members if 
they would be willing to trade their healthcare, the FEHBP, for 
the TRICARE system. The answer was no.
    Mr. Moran discussed the overwhelming support of Congress 
for the original legislation authorizing the demonstration 
project and the importance of making the necessary resources 
available to meet the healthcare needs of military retirees. To 
achieve a worthwhile demonstration project, Mr. Moran felt OPM 
and DOD needed to ensure that enrollment is at least 66,000 
    Mr. Cunningham discussed steps Congress should take to 
address the inequities in the military health care system, 
including--lifting the geographic and numeric limits on the 
demonstration project, removing the prohibition on the use of 
military treatment facilities for those enrolled in the FEHBP, 
and allowing those participating in the demonstration project 
to continue their enrollment in the FEHBP at the conclusion of 
the demonstration.
    Colonel Charles Partridge stated that with base hospital 
closures, reductions in medical personnel, and perennial 
medical funding shortfalls, the increasing lack of available 
healthcare continues to be a major concern to active and 
retired personnel, alike. He predicted the situation would 
clearly get worse as additional hospitals are converted to 
clinics and medical personnel downsizing continues. Military 
retirees remain concerned that DOD has no plan to provide the 
promised health care benefit by a date certain. He reminded the 
subcommittee that military retirees are the only Federal 
employees that do not have a lifetime benefit.
    Colonel Partridge stated the reasons for low participation 
in the demonstration project included a lack of aggressive 
marketing, failure to educate military retirees on the 
interaction of FEHBP plans with Medicare, the 3-year limitation 
for participation, and the lock-out of participants from 
receiving care at military treatment facilities.
    Kristen Pugh stated the reasons for the extremely low 
participation rate included the lack of timely delivery of 
accurate and comprehensive information about the demonstration 
project, hastily planned health fairs conducted with little or 
no notification for eligible enrollees, and the lack of 
knowledgeable specialists at the call center to provide answers 
to simple questions and to send adequate educational materials. 
She cited several examples of poor marketing, including the 10 
percent error rate in DOD's first mail-out, which the 
department made no effort to correct. Ms. Pugh compared the 
inadequacy of marketing materials for the demonstration project 
with the informative post card, glossy brochures, and handsome 
benefit book prepared for the TRICARE senior prime supplement.
    On behalf of the Military Coalition, Ms. Pugh recommended 
the following in order to achieve a truly fair assessment of 
the demonstration project: a guaranteed enrollment beyond the 
conclusion of the demonstration project, an aggressive 
marketing and education program, mailings to all eligible 
beneficiaries in each site, and an expansion of the number of 
    Admiral Carrato shared the subcommittee's concern for the 
low enrollment and outlined the additional marketing activities 
undertaken by the Department, which resulted in an increased 
enrollment of 1,000. Given that enrollment fell far short of 
the levels authorized for the demonstration, the Department of 
Defense would be adding two additional sites to the 
demonstration, bringing the total number of sites to the 
statutory maximum of 10. Admiral Carrato felt the Department 
was gaining valuable information about beneficiary preferences 
and desires, and looked forward to the General Accounting 
Office's detailed findings from a beneficiary survey.
    Mr. Flynn stated the initial results from the demonstration 
project were, admittedly, disappointing. As a result, the 
demonstration would allow for belated open season enrollment, 
with coverage and premiums taking effect retroactive to 
January. A geographical evaluation of the enrollments suggested 
that when access to military treatment facilities was 
available, individuals were less likely to sign up for the 
13. FEHBP: OPM's Policy Guidance for 2001.
    a. Summary.--OPM administers the FEHBP, negotiating rates 
and benefit packages with participating carriers. Each year it 
issues a ``call letter'' outlining its objectives for the 
upcoming contract year, including benefits and coverages that 
will be required of participating carriers.
    b. Benefits.--The subcommittee determined that the 
increases generally reflected rising health care costs, in 
particular pharmaceutical costs due to increased utilization. 
The subcommittee remains concerned that increased mandates have 
both hidden and direct costs, contributing to premium 
    c. Hearings.--A hearing entitled, ``FEHBP: OPM's Policy 
Guidance for 2001,'' was held on June 13, 2000. Witnesses at 
the hearing were William E. Flynn III, Associate Director of 
Retirement and Insurance Services, OPM; Stephen W. Gammarino, 
senior vice president, BlueCross BlueShield Association; Mr. 
Bobby Harnage, president, American Federation of Government 
Employees; and Dr. Scott Nystrom, adjunct scholar, the Mercatus 
Center at George Mason University.
    Subcommittee Chairman Scarborough emphasized that the 
FEHBP, which is often cited as a model employer-sponsored 
health benefits program, succeeds because of its market 
orientation. He expressed concern over the dramatic rises in 
premiums over the past 3 years, and the substantial increase 
that seemed imminent for 2001. He stated his disappointment in 
the 2001 call letter, in which there was no retreat from 
mandates being imposed on the FEHBP. In particular, he 
expressed concern about the rising cost of pharmaceuticals, and 
the importance of developing a complete understanding of the 
causes of the increases and the impact of possible responses to 
    Mr. Cummings stated that given the aging Federal workforce 
and the fact that older Americans are the largest consumers of 
prescription drugs, the Federal Government had a responsibility 
to explore any and all avenues that may help contain premium 
and prescription drug costs.
    Mrs. Morella expressed her enthusiasm for mental health 
parity and patient safety initiatives to reduce medical errors 
within the FEHBP. In addition to her concern over the 
anticipated premium increases, she stated her desire to ensure 
that autologous bone marrow transplants for breast cancer were 
not hindering the use of more effective treatments.
    Mr. Flynn restated OPM's commitment to providing access to 
high-quality, affordable health coverage for Federal employees 
and retirees and members of their families. He provided details 
on OPM's mandate that coverage for clinically proven treatments 
for mental illness and substance abuse would be provided in a 
manner identical to coverage for other medical conditions. 
Networks of providers will be used to deliver the parity 
benefit. Analysts familiar with the FEHBP have projected that 
parity will result in cost increases somewhere between 1 and 3 
percent of the total premium. Mr. Flynn predicted the premiums 
would fall within the upper range of the estimate.
    Mr. Flynn stated that the budget for 2001 assumes an 
average premium increase of 8.7 percent. OPM feels the premium 
increases are unacceptable and will seek amendments to the 
current law to counteract them, including contracting directly 
for benefits. OPM has allowed the Special Agents Mutual 
Benefits Association to access the Federal Supply Schedule for 
prescription drugs for mail-order pharmaceuticals. Mr. Flynn 
said OPM looked forward to reviewing the results of this pilot 
to see whether or not the savings generated might be applicable 
to other areas of the FEHBP.
    Mr. Gammarino stated BlueCross and BlueShield's general 
opposition to mandates, believing they have a long-term adverse 
effect on the ability to provide affordable health care 
coverage. He described the care management strategy that would 
be implemented to accomplish mental health parity while 
controlling the costs associated with it. Mr. Gammarino 
believes that the true cost of this initiative would not be 
known for 3 to 5 years. He testified that the program currently 
spends about 30 percent of its premium dollar for 
pharmaceuticals. This cost continues to be driven by the rapid 
development of new, expensive drug therapies which substitute 
for less expensive existing therapies, rising prices for 
existing drugs, and heightened demand fueled by direct-to-
consumer advertising.
    Mr. Gammarino reiterated BlueCross and BlueShield's concern 
over OPM's continued efforts to impose cost accounting 
standards on the FEHBP. In his view, the standards are 
fundamentally incompatible and inappropriate for the FEHBP, and 
for these reasons Congress had granted annual exemptions from 
them. He reminded the subcommittee that BlueCross and 
BlueShield would not sign any contract with OPM that contains 
the CAS clause or otherwise sought to implement the standards.
    Mr. Harnage felt that while AFGE and OPM had been engaged 
in some dialog regarding the administration and pricing of the 
FEHBP, the relationship had fallen far short of what AFGE had 
wanted. He stressed the desire of AFGE to have a direct voice 
in negotiating the annual premiums and benefits. Mr. Harnage 
stated AFGE's strong opposition to proposals to contract 
directly for certain benefits on an employee-pay-all basis. Mr. 
Harnage felt cost accounting standards should be applied to the 
FEHBP to ensure the premium dollars are managed correctly.
    Dr. Nystrom provided an economic and market analysis of 
FEHBP access to the Federal Supply Schedule for prescription 
drugs. He highlighted two potential economic consequences of 
such a plan: increased prices for non-FEHBP purchasers of 
prescription drugs and increased prices of drugs for agencies 
currently receiving discounts on pharmaceuticals from the 
Federal Supply Schedule. He reminded the subcommittee that the 
group of non-FEHBP purchasers includes about one-third of all 
Medicare beneficiaries. With annual pharmaceutical costs of $5 
billion, the FEHBP dwarfs the Federal Supply Schedule, which 
has sold an estimated $1.6 billion in drugs for 1999.
14. Wildland Firefighters Pay: Are There Inequities?
    a. Summary.--The subcommittee reviewed H.R. 2814, a bill 
that would authorize equal overtime pay provisions for all 
Federal employees who work as wildland firefighters. Currently, 
pay equity problems have resulted in non-supervisors being paid 
more than supervisory firefighters at the Department of the 
Interior and the Department of Agriculture's Forest Service. 
The subcommittee is concerned about a reduction in the number 
of supervisory Federal wildland firefighters (the total number 
of firefighter teams decreased over 40 percent from 1992 to 
1997) because workforce reductions jeopardize not only the 
safety of persons and property located in wildland areas, but 
also the firefighters who perform their duties with support and 
assistance. According to a GAO report, ``Federal Wildfire 
Activities: Current Strategy and Issues Needing Attention,'' 
dated August 13, 1999, the Federal wildland firefighting 
workforce is becoming smaller, based in part, upon the current 
overtime pay structure under which many employees can earn more 
by refusing to accept more responsible positions that are 
exempt from the Fair Labor Standards Act, and many supervisory 
firefighters are nearing retirement age. Although H.R. 2814 
originally had the support of agency officials familiar with 
the problem, the administration subsequently opposed it. 
Interestingly, although invited, officials from Interior and 
Agriculture declined to testify at the hearing on this issue.
    b. Benefits.--The subcommittee learned that firefighters at 
Interior and Agriculture's Forest Service are working long 
hours battling wildfires that ravaged the Western part of the 
United States in 2000 with fewer crews than in previous years. 
The overtime pay disparity has affected the morale of many of 
the employees and made it difficult to attract highly qualified 
    c. Hearings.--The subcommittee held a hearing, ``Wildland 
Firefighters Pay: Are There Inequities?,'' was held on Tuesday, 
September 26, 2000, in Washington, DC. Witnesses at the hearing 
were the following: the Honorable Richard Pombo (R-CA); the 
Honorable Tom Udall (D-NM); Kent Swartzlander, professional 
firefighter; and Henry Romero, Office of Personnel Management, 
Associate Director for Workforce Compensation & Performance.
    Subcommittee Chairman Scarborough referred to the valiant 
work performed by firefighters in protecting the country's 
natural resources from destruction by fire. Mr. Scarborough 
pointed to the epidemic of widely publicized fires that have 
ravaged national forests this summer as proof of the importance 
of wildland firefighter's work. Mr. Scarborough stated that 
well-qualified managers and supervisors are necessary to 
maintain an efficient and effective wildland firefighting 
force. Thus, Congress must ensure that it continues to provide 
incentives to attract highly skilled and qualified individuals 
to fill firefighter positions.
    Congressman Richard Pombo (R-CA), the author of H.R. 2814, 
testified that he introduced the bill after listening to 
firefighters in his district complain about pay inequity. Mr. 
Pombo told the subcommittee that over 6.9 million acres have 
burned in the United States this year. He referred to a hearing 
held June 7, 2000, before the House Resources Subcommittee, 
where witnesses testified that more wildland fires are expected 
to occur. Mr. Pombo attributed the shortage of firefighters to 
pay inequities. He stated that pay inequities also create a 
disincentive for less experienced firefighters to strive for 
management positions. Mr. Pombo expressed disappointment with 
the administration's opposition to H.R. 2814 after he had 
involved responsible agency officials in the drafting of his 
    Congressman Tom Udall (D-NM) testified about the fires that 
swept through portions of his district in New Mexico earlier 
this year, destroying over 73,000 acres of lands. He told the 
subcommittee the Southwest Coordination Center in Albuquerque, 
NM has only filled 16 percent of the orders for skilled 
supervisors and managers this year. He also referred to fires 
in Florida, where over 1 million acres of land have burned 
since 1998. Mr. Udall believes that the shortage of 
firefighting personnel is a result of the pay equity issue. 
According to Mr. Udall, the pay inequity discourages many 
potential firefighters from advancing to supervisory positions.
    Mr. Kent Swartzlander, a professional firefighter, with 26 
years of experience as a firefighter, testified before the 
subcommittee. Mr. Swartzlander has performed over 2,000 hours 
of fire suppression. He testified that he is required to be 
available for assignment 24 hours a day, while only being paid 
for 8 hours a day if he remains in his home base. Mr. 
Swartzlander testified that Federal wildland firefighters 
sometimes spend up to 120 days away from their home fighting 
fires. He testified that OPM's classification of Federal 
firefighters as ``forestry technicians'' is ludicrous.
    Mr. Henry Romero, Associate Director of Workforce 
Compensation and Performance Service at OPM testified before 
the subcommittee. Mr. Romero testified about the 
administration's plan to deal with overtime pay for Federal 
employees. OPM prefers to address the problem as it affects all 
Federal employees engaged in emergency work. Therefore, they 
are opposed to H.R. 2814, which deals only with Federal 
fighters engaged in emergency fire suppression. Mr. Romero 
testified that the administration's bill, H.R. 5333, would 
rectify the problem faced by Federal firefighters as well as 
other Federal employees including those at the National 
Transportation Safety Board and Federal Emergency Management 
Agency. The administration bill will raise the overtime pay cap 
from GS-10, Step 1, to GS-12, Step 1. In response to his 
questions, Mr. Romero conceded that under the administration's 
bill rank-file employees would continue to earn more than some 
key managers during emergencies.
15. Oversight of Wage-Grade Pay in Georgia and Oklahoma.
    a. Summary.--The subcommittee reviewed the Federal Wage 
System to evaluate the effectiveness of the process for making 
wage-grade pay determinations for particular localities in 
Georgia and Oklahoma.
    b. Benefits.--The subcommittee investigated whether pay 
determinations for wage-grade employees in Georgia and Oklahoma 
are sufficient in their ability to recruit and retain qualified 
civil servants. Additionally, the subcommittee explored the 
administrative remedies available to agencies and employees to 
address any discrepancies in wage-grade pay.
    c. Hearings.--The subcommittee held a hearing entitled, 
``Oversight of Wage-Grade Pay in Georgia and Oklahoma'' on 
Wednesday, October 4, 2000, in Washington, DC. Witnesses at the 
hearing were the following: the Honorable Saxby Chambliss (R-
GA); Jim Davis, national secretary-treasurer, American 
Federation of Government Employees; Donald Winstead, Assistant 
Director for Compensation Administration, Office of Personnel 
Management; Roger Blanchard, Assistant Deputy Chief of Staff 
for Personnel, U.S. Air Force. Dr. Diane Disney, Deputy 
Assistant Secretary for Civilian Personnel Policy, Department 
of Defense, submitted written testimony.
    Subcommittee Chairman Scarborough stated he wanted to 
ensure the pay determinations were sufficient to recruit and 
retain qualified civil servants. He reminded subcommittee 
members that blue-collar workers provide valuable services for 
the government; it is only fair they are compensated adequately 
for their effort. In a system with over 256 local wage areas, 
attempting to resolve such issues legislatively would raise 
difficult, if not insurmountable obstacles, and would likely 
result in perpetual congressional intervention. But, he 
stressed that this did not relieve the subcommittee from its 
responsibility to ensure that the process for determining blue-
collar wage rates is working correctly.
    Congressman Chambliss testified that our military services 
are facing serious recruiting and retention problems, forcing 
the Department of Defense to compete intensely with the private 
sector to hire and keep the best and brightest of the 
workforce. Using Robins Air Force as an example, Mr. Chambliss 
stated that with an aging depot workforce, 50 percent of which 
are likely to retire in the next 5 years, it will be 
increasingly difficult to replace the valuable wage-grade 
workers soon leaving the civil service. Mr. Chambliss was 
puzzled that given the facts, Congress continued to tolerate 
such a gross disparity in the wage-grade pay scales in Georgia. 
He stressed the need for providing better pay and maximizing 
the effectiveness and efficiency of the depot system.
    Mr. Davis testified that since its inception, the Federal 
wage system has been plagued with problems. Congressionally-
imposed pay caps and the withdrawal of the Monroney protections 
for Department of Defense employees have prevented tens of 
thousands of Federal employees from receiving what the Federal 
wage system envisioned: wages that reflect prevailing rates for 
similar work in the local private economy. He stressed that if 
the Department of Defense wants to recruit qualified people, it 
should push for a conversion of wage-grade employees to the GS 
pay scale.
    Mr. Winstead testified that the pay situations in both 
Georgia and Oklahoma are largely a consequence of the principle 
that levels of pay are to be maintained in line with prevailing 
levels for comparable work within each local wage area. The 
levels of pay vary from one wage area to another, and if the 
Federal Government did not compete on equal footing with 
private sector employees in each, our overall employment costs 
would rise unnecessarily. He stated that OPM is convinced the 
Federal Wage System is accomplishing the purposes for which it 
was established in 1972. However, OPM is committed to working 
expeditiously to use existing administrative authorities to 
deal with any recruitment or retention problems that were 
brought to its attention.
    Mr. Blanchard stressed the Air Force's commitment to hiring 
and retaining the highest-skilled employees available. He 
reminded subcommittee members the other side of this balancing 
act is ensuring the blue-collar work force is cost-effective 
and efficient. This is becoming more important as the 
Department of Defense goes through the competitive sourcing 
process for many of its functions.
    Mr. Blanchard expressed the Air Force's desire to add 
flexibility to the Federal Wage System by expanding the 
authority to offer recruitment and relocation bonuses and 
retention allowances authorized as part of FEPCA. Currently, 
this flexibility is only available to General Schedule 
employees. The Air Force believes this additional flexibility 
together with the administrative flexibility already available 
would further enhance the Air Force's ability to react quickly 
to specific recruiting and retention problems.

   Subcommittee on Criminal Justice, Drug Policy, and Human Resources

                      Hon. John L. Mica, Chairman

1. National Drug Control Policy and Practices.
    a. Summary.--Pursuant to the Government Reform Committee's 
jurisdiction over the Office of National Drug Control Policy 
[ONDCP], as well as other departments and agencies engaged in 
drug control and counternarcotics efforts, the Subcommittee on 
Criminal Justice, Drug Policy, and Human Resources convened 16 
oversight hearings during 1999 and 26 hearings during 2000 to 
assess the effectiveness of the National Drug Control Strategy 
developed by ONDCP and the strategy's implementation nationally 
and internationally, and related drug control issues and 
    Congressional Delegation.--From August 27, 1999, through 
September 7, 1999, Subcommittee Chairman John L. Mica was 
joined by Congressmen Rohrabacher, Peterson, Sanders, Hinchey, 
and Romero-Barcelo on a congressional delegation (CODEL) which 
visited Slovokia, Ukraine, Romania, Bulgaria, Hungary, and the 
Netherlands. A major purpose of the visit was to conduct in-
country reviews of current U.S. counternarcotic efforts and 
determine the level of cooperation by transit countries. In the 
Netherlands, for example, briefings were given on the types and 
patterns of trafficking through the port of Rotterdam, a major 
gateway for illegal narcotics. The CODEL had meetings with high 
level officials including Presidents and Members of Parliament, 
trade officials, law enforcement and interior officials, 
ambassadors, and American Chamber representatives at all 
country stops. In Hungary, the CODEL visited a joint United 
States-Hungarian operated International Law Enforcement Academy 
[ILEA] to evaluate effectivenesss of taxpayer dollars. The 
CODEL explored how current drug interdiction and international 
counternarcotic efforts could be coordinated more effectively.
    Counterdrug Operations Assessment Trips.--From February 22-
23, 2000, the House Committee on Government Reform sponsored a 
trip to Puerto Rico to meet with area law enforcement official 
who comprise the Executive Committee of the local High 
Intensity Drug Trafficking Area [HIDTA]. Subcommittee staff 
participated. The focus of the meeting was the increased drug 
threat in and around Puerto Rico, and the need for additional 
resources and enhanced cooperation among drug and law 
enforcement officials.
    Participants learned that the significant increases in the 
Federal law enforcement effort to stem the flow of illegal 
drugs into Puerto Rico had waned since passage of the fiscal 
year-1999 Emergency Drug Supplemental. The Puerto Rico HIDTA 
was asked to submit a list of priority resource requirements to 
properly address the growing drug problem in Puerto Rico. The 
staff toured the Relocatable Over-the-Horizon Radar [ROTHR] 
site on the island of Vieques. The expected activation date for 
the site was estimated to be in late March 2000. The 
vulnerability of the ROTHR site to terrorist attack or possible 
island protests was raised by the staff. Efforts to address 
these security concerns were raised with the Department of 
Defense, who is responsible for the all the ROTHR sites.
    From April 25-29, 2000, the National Guard sponsored a 
counterdrug operations assessment of the United States Southern 
Command in Miami, FL and two of the four Forward Operating 
Locations [FOLs], specifically, Manta, Ecuador and Curacao, 
Netherland Antilles. A briefing was provided on the move from 
Panama to Miami, FL. Briefings were held on the importance of 
SouthCom's counterdrug mission, SouthCom's forces involved in 
counterdrug operations, and Plan Colombia. Additionally, 
briefings were held regarding the Joint Interagency Task Force 
East's [JIATF-East] command mission, the National Guard's 
counterdrug support role, current and planned future 
counterdrug operations and the role of insurgents, notably the 
FARC, in the drug trade in Latin America.
    After the briefings at SouthCom, the participants traveled 
to the FOL site in Curacao, Netherland Antilles. Participants 
toured the FOL, received briefings on its operation, military 
construction initiatives, current and planned counterdrug 
military operations and quality of life for assigned U.S. 
military personnel on station. There were additional briefings 
on operation Coronet Nighthawk and the Senior Scout program. 
Additionally, the U.S. Customs Service provided an overview of 
maritime interdiction efforts.
    Participants proceeded to the FOL site at Manta, Ecuador. 
They toured the FOL site, received briefings on its operation, 
military construction initiatives, specifically, the progress 
of runway construction, and current and planned counterdrug 
military operations. The Drug Enforcement Administration 
provided an overview of the drug trade in Ecuador and detailed 
the challenges of counterdrug operations in that region and the 
increasing role of the Colombian FARC guerrillas in Ecuador. 
Participants went on counterdrug monitoring missions.
    On August 7-11, 2000, the National Guard sponsored a 
counterdrug assessment trip to the Appalachia HIDTA and the 
states of Kentucky, West Virginia and Tennessee. Participants 
visited the HITDA headquarters and the Civil Air Patrol in 
London, KY, the 130th Airlift Squadron in Charleston, WV, the 
134th Air Refueling Wing at McGhee Tyson Air National Guard 
Base in Knoxville, TN and the Scott County National Guard 
Armory in Oneida, TN.
    In each State, the National Guard took participants to 
observe and actively participate in marijuana eradication 
efforts. UH-60 Blackhawk helicopters were used for 
transportation to the marijuana growing areas.
    Congressional Hosting of International Drug Control 
Summit.--In conjunction with the United Nations International 
Drug Control Programme [UNDCP], the U.S. Congress hosted this 
year's annual meeting of international parliamentarians in 
Washington, DC, on February 8-9, 2000. Subcommittee Chairman, 
John L. Mica (R-FL), and the subcommittee staff organized the 
    This groundbreaking international summit featured major 
addresses and vigorous roundtable debates focusing on many 
areas of drug control policy including: new global trafficking 
trends, the latest science on treatment, Plan Colombia, and 
money laundering. The goal of the International Drug Control 
Summit was to build consensus on priorities in drug control 
policy and provide participants from the European Community, 
Japan, Canada, and the United States, an opportunity to engage 
in a strategic dialog on the growing global drug crisis. Topics 
included: the latest illegal drug production and trafficking 
trends, drug enforcement, and demand reduction issues.
    The participation of key drug control policymakers from 
around the world facilitated a careful examination of the 
multifaceted, transnational drug problem and the development of 
effective strategies for the 21st century. Among the 
participants were: Speaker of the House Dennis Hastert, key 
Members of Congress, senior administration officials including 
ONDCP Director Barry McCaffrey, members of the European 
Parliament, members of the Japanese Diet and Former Prime 
Minister Hashimoto, members of the Canadian Government, and 
representatives from several Latin American countries. 
Congressman Ben Gilman, chair of the House International 
Relations Committee, Congressman Dan Burton, chair of the House 
Government Reform Committee and Congressman Mica took lead 
roles in the program.
    Highlights included a roundtable panel examining the Latin 
American perspective with Vice-President Jorge Quiroga of 
Bolivia and Colombian Police General Ishamel Trujillo among the 
featured speakers. The law enforcement round table featured 
William Ledwith, U.S. DEA Chief of International Operations, 
Paul Higdon, INTERPOL, Director of Criminal Intelligence, 
Jurgen Storbeck, EUROPOL Coordinator and Douglas Tweddle, World 
Customs Organization. Presentations were made on international 
money laundering, alternative development and enhancing the 
security belt around Afghanistan. Featured presenters included 
Pino Arlacchi, Executive Director of the UNDCP, Jack Stewart-
Clark, former MEP Speaker and Rand Beers with the U.S. 
Department of State.
    The Summit participants affirmed that international 
cooperation is a critical part of effective drug control. It is 
also recognized that the United Nations Office for Drug Control 
and Crime Prevention has an essential role in addressing the 
global challenges of the drug problem. Conclusions were reached 
that legislators and parliamentarians from around the world 
should continue to work together and share information about 
successful methods to reduce drug abuse, production and 
trafficking. A balanced approach--focusing on all aspects of 
drug control--was considered essential. Obtaining a significant 
reduction in the supply of and demand for illegal drugs, as 
called for at the UN General Assembly Special Session of June 
1998, was identified as a continuing priority. A series of 
specific drug control needs and steps for achieving them was 
    b. Benefits.--The numerous hearings on the National Drug 
Control Strategy, its implementation and the identification of 
additional priorities and needs have resulted in responsive 
actions domestically and internationally that will likely 
enhance drug control efforts, protect lives and punish drug 
criminals. The hearings have identified the need to improve 
domestic agency capabilities in preventing and treating drug 
abuse domestically. Federal agencies responsible for preventing 
and treating drug abuse and addiction have been notified of 
specific needs and their responsibilities to meet them more 
effectively. For example, major deficiencies in the Department 
of Education's Safe and Drug Free School Program have been 
identified and the department reportedly has embarked upon a 
major improvement effort. Similarly, significant contracting 
issues identified in the ONDCP national media campaign 
reportedly are being addressed. Subcommittee hearings on the 
issue of extradition have contributed to the recent successful 
extradition of criminals and drug traffickers from Mexico and 
Colombia. Finally, subcommittee hearings regarding military and 
strategic needs in protecting our border and interdicting drugs 
have been resulted in operational changes and improvements, as 
well as hastened the deployment of needed resources. The 
subcommittee initiated a letter, signed by members of the 
Border Caucus and the Speaker's Task Force on Drugs calling on 
the President to create a single border coordinator with 
decisionmaking authority. While the U.S. domestic and 
international drug control efforts continue to require further 
improvements and commitments in resources, the subcommittee 
hearings have been a critical forum for identifying specific 
needs and facilitating meaningful and timely responses.
    c. Hearings.--During the 106th Congress, the Subcommittee 
on Criminal Justice, Drug Policy, and National Security held 42 
hearings that addressed various aspects of the National Drug 
Control Policy, its implementation and the Nation's continuing 
drug control efforts and needs.
    (1) On February 25, 1999, the subcommittee, in its role as 
authorizing subcommittee for ONDCP, conducted a hearing to 
review its 1999 National Drug Control Strategy entitled, 
``Oversight of the 1999 National Drug Control Strategy.'' The 
report was endorsed and transmitted to Congress by President 
Clinton. The hearing examined the 1999 National Drug Control 
Strategy, as well as accompanying budget and performance 
measure documents. The 1999 National Drug Control Strategy 
outlined five specific goals: ``Goal 1: Educate and enable 
America's youth to reject illegal drugs as well as alcohol and 
tobacco; Goal 2: Increase the safety of America's citizens by 
substantially reducing drug-related crime and violence; Goal 3: 
Reduce health and social costs to the public of illegal drug 
use; Goal 4: Shield America's air, land, and sea frontiers from 
the drug threat; and Goal 5: Break foreign and domestic drug 
sources of supply.''
    Each of the subcommittee hearings held in 1999 on topics of 
national drug control efforts addressed issues and activities 
associated with one or more of the goals of the National Drug 
Control Strategy. The first National Drug Control Strategy goal 
of educating and enabling American youth to reject illegal 
drugs was a key topic of several subcommittee hearings in 1999.
    (2) On March 18, 1999, the subcommittee held a hearing 
entitled, ``Oversight of Agency Efforts to Prevent and Treat 
Drug Abuse.'' The hearing addressed prevention and treatment 
aspects of the National Strategy, including the role of Federal 
agencies and programs. A topic of importance at the hearing was 
developments regarding ONDCP's National Youth Anti-Drug Media 
Campaign. The 5-year media campaign is dedicated to reducing 
teen drug use. The administration claims that the campaign is 
beginning to show results. The campaign began in January 1998 
in 12 test sites and has now expanded nationwide. ONDCP claims 
that 95 percent of the target audience is being reached with 
anti-drug messages.
    The efforts of the Substance Abuse and Mental Health 
Services Administration [SAMHSA], a component of the Department 
of Health and Human Services [HHS], were of interest to the 
subcommittee. SAMHSA is responsible for providing national 
leadership to ensure that knowledge, based on science and 
``state-of-the-art'' practices, is used effectively for the 
prevention and treatment of addictive and mental disorders.
    The subcommittee considered expansion of SAMHSA's Substance 
Abuse and Prevention and Treatment Block Grant program. This 
grant program awards funds to States for prevention activities 
and treatment services. The grants include funding that targets 
substance-using pregnant women, women with dependent children, 
and injection drug users.
    SAMHSA also seeks to reduce the gap in treatment through 
its Targeted Capacity Expansion program that makes awards 
directly to States, counties, cities, and service providers. 
These grants are to target communities with serious and 
emerging drug problems. In 1999, this program is to include an 
HIV/AIDS component targeting minority populations at risk of 
contracting HIV/AIDS or living with HIV/AIDS.
    Another component of Federal prevention and treatment is 
work performed by the National Institute on Drug Abuse [NIDA], 
a component of the HHS National Institutes of Health [NIH]. 
NIDA conducts clinical and epidemiological research to improve 
the understanding of drug abuse and addiction. Over the past 
decade, NIDA-supported scientists have sought to develop and 
improve pharmacological and behavioral treatment for drug 
addiction. To improve treatment nationally, NIDA is 
establishing a National Drug Abuse Treatment Clinical Trials 
Network to conduct large, rigorous, multi-site treatment 
studies in community setting using diverse patients.
    (3) On October 14, 1999, the subcommittee held a hearing 
entitled, ``The National Youth Anti-Drug Media Campaign.'' This 
hearing closely examined the National Youth Anti-Drug Media 
Campaign to ensure that it is being conducted efficiently and 
effectively, and that Federal funds are being expended in 
accordance with congressional intent.
    ONDCP is responsible for conducting and administering the 
National Youth Anti-Drug Media Campaign. The predecessor of the 
current campaign was developed by the Partnership for a Drug 
Free America [PDFA], a not-for-profit organization created in 
1987. In a collaborative effort, the PDFA solicited anti-drug 
ads from various ad agencies that donated their creative talent 
to design and produce anti-drug television ads (pro bono). The 
PDFA solicited and obtained donated media airtime from the big 
three television networks to run the anti-drug ads as public 
service announcements [PSAs]. For over 10 years, the PDFA 
coordinated these activities with great success and at no 
expense to the American taxpayer. According to the annual 
University of Michigan Monitoring the Future survey, at the 
same time that the level anti-drug television ads were rising, 
attitudes about the social disapproval and the perceived risks 
of illegal drug use were also rising, and there was a 
corresponding decrease in illegal drug use among young people. 
The program seemed to be working.
    Beginning in 1991, the donated airtime from the big three 
media networks began to decline significantly due to increased 
competition resulting from industry deregulation. Throughout 
the 1990's, the PDFA worked diligently to rebuild the donated 
airtimes to previous levels (e.g., in 1991 the estimated value 
of donated media airtime was $350 million). In 1996 and 1997, 
the PDFA approached Congress for assistance. The PDFA worked 
with Congress to fund the President's budget request to replace 
the decline in donated media airtime. In 1996, the PDFA 
commissioned a study that an advertising agency that identified 
three target audiences and determined that the desired exposure 
rate. The minimum cost for such an effort was estimated to be 
$175 million.
    In 1997, Congress appropriated $195 million for the anti-
drug media campaign for fiscal year 1998, and another $185 
million was appropriated for fiscal year 1999. The funds, 
appropriated under the Treasury-Postal Appropriations Bill, 
were intended primarily to fund media buys. The ONDCP was 
selected as an appropriate organization to administer the new 
campaign, and a ``match'' requirement was established.
    ONDCP commissioned a contractor to produce a Communications 
Strategy Statement to guide the overall anti-drug media 
campaign. According to the Communications Strategy Statement, 
the goal of the media campaign includes ``preventing drug use 
and encouraging occasional user to discontinue use.'' The 
campaign now includes programs such as interactive Internet 
websites, entertainment outreach, corporate sponsorships, and a 
program on parenting strategies.
    The central focus of this oversight hearing was to 
determine whether the media campaign is being administered 
efficiently and effectively. Among the issues considered at the 
hearing was that of spending less than was intended for media 
buys and more than was intended for other aspects of the 
campaign, which did not have a proven track record. Significant 
questions were raised as to the efficiency of ONDCP's current 
contracting practices, and the benefits of non-media buying 
    (4) On October 21, 1999, the subcommittee held a hearing 
entitled, ``Substance Abuse Treatment Parity: A Viable Solution 
to the Nation's Epidemic of Addiction?'' It has been estimated 
that 26 million Americans are presently addicted to drugs and/
or alcohol. The cost of both drug and alcohol addiction to 
society--including costs for health care, substance addiction 
prevention and treatment, preventing and fighting substance-
related crime, and lost resources resulting from reduced worker 
productivity or death--was estimated at $246 billion for 1998.
    Substance abuse has an enormous impact on our society, both 
economically and psychologically. This hearing examined options 
for decreasing the demand for drugs and alcohol by providing 
treatment options for addiction recovery. More specifically, 
the hearing heard testimony regarding options for including 
substance abuse treatment coverage under certain employee 
health benefit plans. One proposal would require health care 
providers and employers to provide similar coverage for 
substance abuse treatment as other medical health needs, such 
as dental and emergency care coverage.
    A study by the Bureau of Labor Statistics [BLS] reported 
that more than 70 percent of those using illicit drugs and 75 
percent of alcoholics are employed. Currently, however, only 2 
percent of the alcoholics and addicts covered by health plans 
reportedly are able to receive adequate treatment. The BLS 
report indicated that fewer than 7 percent of employer provided 
health plans cover alcoholism and drug addiction treatment to 
the same degree as other medical conditions covered by health 
    Information was considered as to whether substance abuse is 
better classified as a behavioral condition or a brain disease. 
Brain disease research indicates that addicts experience 
changes in brain dopamine levels. Research shows that the brain 
can change in both structure and function after repeated 
exposure to drugs. In November 1995, the National Institute on 
Drug Abuse [NIDA] declared drug addiction to be a brain 
disease. The hearing focused on policy and legislative options 
for providing both medicinal and behavioral treatment to 
substance abusers who are covered by health care plans.
    Experts in the field of substance abuse prevention argue 
that treatment is an effective method to decrease the demand 
for drugs and alcohol, thus advancing the war on drugs. One 
study shows that every $1 spent on treatment saves $7 in health 
care costs, criminal justice costs and lost productivity from 
job absenteeism, injuries and sub-par work performance. Another 
recent study conducted by the Minnesota alcohol and drug 
authority reported that the State saved approximately $22 
million in annual health care costs by providing treatment. 
While these numbers sound impressive, employers are concerned 
about mandating the inclusion of substance abuse treatment 
coverage in employee health plans due to potential increase in 
    Mental health is a closely related condition that underwent 
similar legislative debate earlier in the decade. The Mental 
Health Parity Act of 1996 (Title VII of Public Law 104-204, 
``MHPA''), signed into law on September 26, 1996, provides 
limited parity for mental health coverage under employee-
sponsored group plans. The provision, which went into effect 
January 1, 1998, prevents insurers from establishing more 
restrictive annual and aggregate lifetime limits for mental 
health coverage than for other health coverage. The provision 
does not require that mental health benefits be offered as part 
of a health insurance package. Nor does it require parity in 
co-payments or deductibles for mental health services, or 
require a minimum number of inpatient days or outpatient 
visits. While the Congressional Budget Office estimated the 
provision would cause insurance premiums to rise by 0.16 
percent to 0.4 percent (depending on how employers react to the 
mandate), treatment requirement exemption can be granted if a 
plan's premiums increase by 1 percent or more due to required 
coverage. In addition to this waiver, health plans sponsored by 
employers with less than 50 employees are exempted from the 
    A number of legislative proposals have been introduced to 
address substance abuse treatment parity issues. H.R. 1977, the 
``Substance Abuse Parity Act of 1999,'' introduced by 
Representative Jim Ramstad (R-MN) is one proposal. This 
proposal would require parity and nondiscriminatory application 
of treatment limitations and financial requirements to 
substance abuse treatment benefits under private group and 
individual health plans which cover both mental and medical/
surgical benefits. As in the Mental Health Parity Act of 1996, 
this bill would provide an exemption for small employers with 
50 or fewer employees. This bill would go beyond the parity 
provided by the MHPA by prohibiting plans from imposing 
stricter limits on the frequency of treatments, the number of 
visits, or other stipulations on treatment for substance abuse 
benefits than for medical benefits. Further, the bill would not 
allow different co-payments, deductibles, out-of-network 
charges, or out-of-pocket contributions for substance abuse 
benefits than for medical benefits. As in the MHPA, H.R. 1977 
waives parity if premiums increase by more than 1 percent.
    H.R. 1515, the ``Mental Health and Substance Abuse Parity 
Act of 1999,'' introduced by Representative Marge Roukema (R-
NJ), would extend treatment and financial parity to both mental 
health and substance abuse benefits, prohibiting group and 
individual health plans from imposing treatment limitations or 
financial requirements on the coverage of ``behavioral health 
benefits'' (mental health, substance abuse and chemical 
dependency benefits) if similar limitations or requirements are 
not imposed on medical and surgical benefits. H.R. 1515 also 
repeals the 1 percent exemption offered in both the Mental 
Health Parity Act and H.R. 1977.
    S. 1447, the ``Fairness in Treatment: The Drug and Alcohol 
Addiction Recovery Act of 1999,'' introduced by Senator 
Wellstone (D-MN), provides full parity for substance abuse 
treatment. Also, S. 1447 reduces the 50-employee exemption down 
to 25 employees, and it does not include the 1 percent cost 
increase exemption.
    The second National Drug Control Strategy goal of 
increasing citizen safety by reducing crime and violence also 
was a key topic in several subcommittee hearings in 1999.
    (5) On January 22, 1999, the subcommittee held a hearing 
entitled, ``Our Drug Crisis: Where Do We Go From Here?'' Since 
this hearing was held before the official organization of the 
subcommittee, it is also listed as a full committee hearing. 
Hearing testimony indicated that central Florida teens are 
taking drugs at an unusually high rate. Arrests reportedly are 
skyrocketing and central Florida teenagers are dying from 
heroin overdoses each year. Drugs are increasingly playing a 
role in Orlando area teen suicides. For the first time, drug 
overdoses in 1998 surpassed homicides as a cause of death in 
greater Orlando.
    According to the Drug Enforcement Administration [DEA], 
Colombian heroin smuggled via Puerto Rico is the most common 
form of heroin found in Florida. Because of the close ties 
between Puerto Rico and Orlando, Puerto Rico's drug problem has 
become central Florida's drug problem. The drugs, the crime, 
and the violence associated with Puerto Rico reportedly have 
moved into Orlando. Central Florida has been designated as a 
High Intensity Drug Trafficking Area [HIDTA], making local and 
State agencies eligible for available Federal resource to fight 
illegal drugs. In 1998, Congress provided $1 million to fund 
the central Florida HIDTA. Local, State, and Federal officials 
are to use these resources to enhance and coordinate their 
intelligence gathering, law enforcement, interdiction, 
prevention and prosecution of drug criminals.
    (6) On February 24, 1999, the subcommittee held a hearing 
entitled, ``New York Mayor Rudolph Giuliani: Winning the War on 
Drugs and Crime.'' New York Mayor Rudolph Giuliani's first term 
in office resulted in a steep reduction in city crime rates. 
After his re-election, he promised to act as aggressively 
against illegal drugs.
    In October 1997, the mayor acknowledged the scope of New 
York's drug problem: 70 to 80 percent of arrestees testing 
positive for drug use; substance abuse costing the city more 
than $20 billion each year; $21 out of very $100 in taxes paid 
to New York City subsidizing the consequences of substance 
abuse; and 71 percent of children in foster care in New York 
City having at least one parent who was a substance abuser. The 
mayor's response was to announce a major anti-drug offensive to 
address drug abuse through enhanced treatment, education and 
law enforcement. The response included: 5 police anti-drug 
initiatives; increasing the number of drug-free school zones 
from 40 to 100; doubling the number of schools in the Safe 
Corridor program from 120 to 240; and designating 7 parks as 
drug-free zones. The mayor instituted a 24-hour, 7 day a week, 
toll-free drug hotline, encouraging New Yorkers to do their 
part in reporting drug activity, with an advertising campaign 
to make New Yorkers aware of the service.
    The mayor also responded to lax State laws dealing with 
repeat misdemeanor drug sellers, by supporting jail terms. The 
Department of Probation began a program designed to target 
1,000 juvenile probationers with court-imposed curfews as a 
result of a drug offense, using state-of-the-art tracking and 
beeper technology to monitor compliance on a 24-hour basis. The 
Board of Education was given resources to assign substance 
abuse specialists in each of the city's family courts, and to 
act as liaisons between the juvenile justice system and the 
school system. The Department of Correction was given resources 
to increase by 50 percent the number of drug treatment beds 
available in the Department's Substance Abuse Intervention 
Division--from 1,058 to 1,558 beds. The Department of Probation 
doubled its residential drug treatment capacity from 180 to 360 
probationers. Outpatient drug treatment capacity increased from 
890 to 965. Participating probationers have shown a 35 percent 
higher rate of completion of the terms of their probation than 
probationers who did not take part in drug treatment.
    The mayor opened a drug court in Manhattan (with plans for 
courts in Bronx, Queens & Staten Island), to complement one 
operating in Brooklyn. Defendants take part in an intensive 18-
month drug treatment program in exchange for reduced criminal 
charges and are monitored daily by case management court staff. 
The mayor created a Drug Treatment Coordinator unit within the 
mayor's office responsible for developing an on-line database 
of all available drug treatment services in the city, with a 
toll-free number.
    Under Mayor Giuliani, DARE was expanded in city schools, 
with extra resources made available to augment DARE program 
activities, such as the Gang Resistance Education Assistance 
Treatment [GREAT]. Other mayoral initiatives include: drug-
prevention youth programs in public housing; an anti-drug 
parent network program; making parents aware of the dangers of 
drugs, of counseling and of signs of drug use in their 
children; sponsorship of a clergy anti-drug abuse forum; a pro 
bono media anti-drug campaign through a major advertising 
agency; public service announcements to encourage mentoring; 
and mechanisms to measure the success of his anti-drug agenda.
    Over the past 5 years, crime in New York City reportedly 
decreased by 47.5 percent and the homicide rate by 70 percent. 
Besides making life better for city residents, tourism is at 
historic levels.
    (7) On May 13, 1999, the subcommittee held a hearing 
entitled, ``International Law: The Importance of Extradition.'' 
``Extradition'' is the formal surrender of a person by a State 
to another State for prosecution or punishment. Extradition to 
or from the United States is done pursuant to treaty. The 
United States has extradition treaties with over 100 nations. 
International terrorism and drug trafficking have made 
extradition an increasingly important law enforcement tool.
    Extradition is triggered by a request submitted through 
diplomatic channels. In the United States, it proceeds through 
the Departments of Justice and State. The request is presented 
to a Federal magistrate who typically holds a hearing to 
determine whether such request is in compliance with an 
applicable treaty. The magistrate also considers whether the 
request provides sufficient evidence to satisfy ``probable 
cause'' that the fugitive committed the identified treaty 
offense(s), and whether other treaty requirements have been 
met. If these conditions are established, the magistrate 
certifies the case for extradition at the discretion of the 
Secretary of State. Except as provided by treaty, the 
magistrate does not inquire into the nature of foreign 
proceedings likely to follow extradition.
    The laws of the country of refuge and the applicable 
extradition treaty govern extradition back to the United States 
of any fugitive located overseas. As a matter of practice, the 
fact that extradition may have been ignored, and a fugitive may 
have been forcibly returned to the United States for trial, 
typically constitutes no jurisdictional impediment to trial or 
punishment in the United States. Federal and foreign 
immigration laws sometime serve as a less controversial 
alternative to extradition to and from the United States.
    The United States and Mexico have had a mutual extradition 
treaty since 1980. In March 1999, the Government of Mexico 
extradited a Mexican national, Tirso Angel Robales, charged 
with drug trafficking and escaping from a United States Federal 
prison. On March 23, 1999, Robales was handed over by officials 
of Interpol-Mexico to the United States Marshals Service. 
Robales was convicted in the United States in 1991 for 
possession with intent to distribute a controlled substance, 
criminal association to possess a controlled substance with 
intent to distribute and continuous operation of a criminal 
enterprise. He escaped in 1995 from California's Terminal 
Island correctional facility and fled to Mexico. When he 
escaped, Robales had almost 12 years pending on his sentence.
    On December 4, 1995, United States authorities presented, 
under the provisions of the United States-Mexico Extradition 
Treaty, the formal request for his extradition. Mexican courts 
issued an arrest warrant on March 5, 1996. Robales was arrested 
on November 15, 1996. On February 10, 1997, judicial 
authorities opined that extradition should not be granted. In 
spite of the court's opinion, Mexico's Secretariat of Foreign 
Affairs granted extradition on February 28, 1997. Robales 
presented several appeals, including arguments of the 
unconstitutionality of both the extradition treaty and the 
decision granting extradition. The courts rejected these 
arguments. Extradition of Mexican nationals is not barred by 
the Constitution, but legislation allows an extradition from 
Mexico to the United States only in ``exceptional cases.'' 
Prior to 1995, no Mexican national had ever been extradited. 
Robales is the first Mexican national, non-dual citizen, to be 
extradited from Mexico, and while not a major drug kingpin, he 
was extradited.
    The U.S. Government has negotiated an assortment of 
treaties and agreements designated to serve as important tools 
in fighting drug trafficking. One type of bilateral agreement 
is the maritime counterdrug agreement, generally consisting of 
six parts and granting the United States full or partial 
permission for shipboarding, shiprider, pursuit, entry to 
investigate, overflight, and order to land. Bilateral 
agreements are not uniform and some provide very limited rights 
to U.S. law enforcement authorities.
    The third National Drug Control Strategy goal of reducing 
health and social costs of drug abuse was a key topic in 
hearings conducted by the subcommittee.
    (8) On June 16, 1999, the subcommittee held a hearing 
entitled, ``Pros and Cons of Drug Legalization, 
Decriminalization, and Harm Reduction.''
    (9) This hearing was followed by a related hearing on July 
13, 1999, entitled, ``The Decriminalization of Illegal Drugs.'' 
At both hearings, testimony was received arguing for and 
against a relaxation of existing anti-drug laws and law 
enforcement activities. Among the highlights of the hearing was 
the identification of many uncertainties and risks associated 
with significant changes to current laws and enforcement 
practices. Substantial human and social costs attendant with 
decriminalization and legalization options were highlighted and 
    Other subcommittee hearings (including those previously 
mentioned) have highlighted substance abuse prevention and 
treatment needs in the United States, and also are relevant to 
the third National Drug Control Strategy goal of reducing 
negative health consequences and social costs associated with 
drug abuse and addiction.
    The fourth National Drug Control Strategy goal of shielding 
America by air, land, and sea, was a key topic in at least five 
subcommittee hearings in 1999.
    (10) On March 4, 1999, the subcommittee held a hearing 
entitled, ``Oversight of United States/Mexico Counternarcotics 
    (11) This hearing was shortly followed by another 
subcommittee hearing on March 24, 1999, entitled, ``Oversight 
of Mexican Counternarcotics Efforts: Are We Getting Full 
Cooperation?'' The purpose of the hearings was to examine the 
United States-Mexican cooperation in counternarcotic efforts. 
Serious concerns were raised over the degree of cooperation by 
Mexico with United States efforts to combat drug trafficking.
    Hearing testimony indicated that cocaine is transshipped 
from Colombia to Mexico and then transported into the United 
States using various land, air, and sea routes. Mexico is also 
a major producer of marijuana, heroin, and methamphetamine. DEA 
estimates that Mexico has become the second-largest source of 
heroin in the United States. DEA also has identified an 
increase in methamphetamine ``cooks'' trained in Mexico who 
enter the United States to produce the drugs. While Mexico 
continues to mount significant eradication and supply reduction 
efforts, many of the 1998 eradication and drug seizure 
statistics are lower than those of 1997. Cocaine seizures 
reportedly were down 35 percent. Heroin seizures, on the other 
hand, were up 4 percent.
    In the past 3 years, the United States has made 
approximately 60 extradition requests, and approximately 65 
percent of these requests have been fulfilled. Mexico has 
requested approximately 58 extraditions from the United States, 
48 percent that have been fulfilled. In 1998, three Mexican 
nationals were extradited to the United States. On November 13, 
1997, the United States and Mexico signed a protocol to the 
current extradition treaty that will permit the temporary 
extradition of criminals for trial in the requesting country 
before they finish serving their sentence. This protocol was 
ratified by the United States Senate, and is under discussion 
in Mexico's Senate. There are a number of individuals whom 
Mexico has agreed to extradite, but who have filed appeals. It 
is unclear if and when these individuals will be extradited to 
the United States.
    Money laundering has been a criminal offense in Mexico 
since 1990, however, banking regulations and enforcement 
efforts reportedly have been lagging. A specialized unit 
against money laundering was created in January 1998. The unit 
is to work closely with the U.S. Financial Crimes Enforcement 
Network (FinCEN), and other international anti-money laundering 
agencies and organizations.
    ``Operation Casablanca,'' concluded in May 1998, was the 
largest money laundering sting in U.S. history. The sting was 
conducted over 2 years by undercover agents from the U.S. 
Customs Service. Forty Mexican and Venezuelan bankers, 
businessmen, and suspected drug cartel members were arrested, 
and 70 others indicted are fugitives. Casablanca resulted in 
tensions in United States and Mexico anti-drug efforts. United 
States officials apparently did not fully inform Mexican 
counterparts of the operation because they feared Mexican 
corruption would endanger agent lives. The United States has 
requested the extradition of five men wanted in the money-
laundering case. The Mexico Attorney General's office had 
threatened to bring charges against United States Customs 
agents who had operated in Mexico, but later said it was unable 
to find proof they had committed any crimes under existing 
laws. Recently, the Mexican Government has publicly stated that 
it has concluded the investigation and will not take actions 
resulting from Operation Casablanca. Three of Mexico's most 
prominent banks are implicated in the investigation. Bancomer, 
Banca Serfin, and Confia banks were indicted, along with more 
than a dozen low- and mid-level bankers who were accused of 
knowingly participating in the laundering of Cali and Juarez 
drug cartel proceeds.
    On June 1, 1998, Mexican law enforcement arrested two 
leaders of the Amezcua-Contreras organization, the most 
powerful and dominant methamphetamine trafficking organization 
in Mexico. Luis and Jesus Amezcua are incarcerated at the same 
Federal maximum security prison that holds their brother Adan, 
who was arrested November 10, 1997. On February 4, 1999, the 
Mexican Government announced a multi-faceted plan to assert its 
dedication to combating drug cartels. The $400 million plan is 
intended to strengthen Mexico's anti-drug programs and 
agencies. The initiative will fund equipment such as infrared 
cameras for airplane surveillance, special x-ray machines at 
border crossings, and encrypted satellite-communications 
    (12) On May 4, 1999, the subcommittee held a hearing 
entitled, ``Losing Panama: The Impact on Regional Counterdrug 
Capabilities.'' Panama, the hub of two oceans and two 
continents, has been home to the United States military since 
it seceded from Colombia in 1903. United States military forces 
in Panama have had several functions. A primary purpose for 
United States troops was to provide for the defense of the 
Panama Canal. Until September 1997, Panama served as the 
headquarters of the United States Southern Command (SOUTHCOM), 
a unified command responsible for all United States military 
operations throughout Latin America and the Caribbean, except 
for Mexico. In September 1997, SOUTHCOM moved to Miami, FL. 
Despite the move, SOUTHCOM has continued to provide support to 
Latin American nations combating drug trafficking, including 
such activities as aerial reconnaissance and counternarcotics 
training. Howard Air Force Base, in Panama, has provided secure 
staging for detection, monitoring, and intelligence collection.
    In spring 1999, there were less than 4,000 United States 
troops in Panama (down from 10,000 in 1993), stationed on four 
major military installations--Fort Sherman, Fort Clayton, 
Howard Air Force Base, and Fort Kobbe. Six major installations 
were returned to Panamanian control by that date--Fort Davis 
and Fort Espinar were returned in September 1995; Fort Amador, 
at the Pacific entrance to the Canal, was returned in October 
1996; Albrook Air Force Station was returned October 1997; 
Galeta Island was returned March 1999; and Rodman Naval Station 
was returned in March 1999. Implementation of the Panama Canal 
Treaty and the Neutrality Treaty have been major pillars of the 
United States-Panama bilateral relationship. The Panama Canal 
Treaty is to terminate on December 31, 1999, at which time the 
Government of Panama will assume control of the Panama Canal. 
At the same time, all United States military forces must be out 
of Panama, and all remaining United States military facilities 
revert to Panama.
    The Neutrality Treaty remains in force indefinitely and 
gives the United States the right to defend the neutrality of 
the Panama Canal. Roughly 13 percent of U.S. international 
shipborne commerce flows through the Canal. The figure for 
world trade is 4 percent. By the end of 1999, the United States 
military will have returned property consisting of about 70,000 
acres and about 5,600 buildings to the Government of Panama. 
Estimates of the value of the land and improvements range 
upward from $10 billion. The Panamanians plan to take advantage 
of reverting properties to make Panama a commercial and 
educational hub in the Western Hemisphere. The government plans 
on establishing new transshipment ports, a center of higher 
education, light manufacturing zones, and residential resort 
    Panama serves as a major transit point for illicit drugs 
heading to the United States. This is due to its proximity to 
major drug-producing countries, location on key transportation 
routes, openness to trade, and weak controls along borders and 
coasts. Panama's dollar-based economy and loosely regulated 
banking sector have made Panama attractive to money laundering. 
Panama also is an important hub for the distribution of South 
American-origin cocaine. The drugs pass through Panamanian 
waters in fishing craft and ``go-fast'' boats and either 
continue on to other central American countries or are dropped 
off in Panama. The shipments that get dropped off in Panama are 
repackaged and moved northward on the Pan-American Highway or 
depart in sea freight containers. Cocaine and heroin are also 
moved to the United States and Europe by couriers transiting 
Panama by air.
    On April 16, 1999, Defense Secretary William Cohen approved 
a plan to open new military operating facilities (Forward 
Operating Locations [FOLs]) on the Caribbean islands of Curacao 
and Aruba, and also in Ecuador. These FOLs are intended to 
offset the loss of Howard Air Force Base. Interim agreements 
have been agreed upon between the U.S. Government and the host 
nations. ``The Department of Defense is fully committed to 
ensuring that necessary steps are taken to bring the FOLs to 
full operational status,'' Cohen wrote in a memorandum. Among 
the features of the plan, Cohen said, is that ``the Air Force 
is designated `executive agent' for the FOLs at Curacao/Aruba, 
and Manta, Ecuador. As such, the Air Force will develop, 
establish and maintain the operation of these facilities.''
    The service designated as executive agent for a particular 
FOL would be responsible for funding it, and the concern is 
great among all the services that the moneys currently 
identified for the counterdrug mission will not cover the cost 
to open multiple operating sites on the Dutch islands of 
Curacao and Aruba, at Manta on Ecuador's Pacific coast, and 
possibly at Liberia, Costa Rica. Further complicating the 
matter is SOUTHCOM's insistence on counting Curacao and Aruba 
as a single FOL. The two islands are about 30 miles apart and, 
from the standpoint of the military operators, would reportedly 
require duplicate facilities. By SOUTHCOM's account, the Air 
Force is responsible as the executive agent at only two new 
FOLs: Curacao/Aruba as one, and Manta as another. The Navy 
would be responsible for a ``third'' site if an FOL is 
negotiated for Liberia, Costa Rica. A SOUTHCOM advance team was 
to be dispatched as early as this week to one or more of the 
FOLs to begin preparing the sites to accept assets on an 
expeditionary basis from Howard Air Force Base.
    The United States will not own or control the facilities in 
Ecuador, Aruba or Curacao. Rather, the United States will have 
operating rights, much as an airline operates at an airport. 
Critics say an important distinction, though, is that the 
United States will make a significant investment in building 
and upgrading facilities. Instead of permanently stationing 
aircraft at the three sites, the United States will rotate 
aircraft in and out on a temporary basis, probably from several 
weeks to months at a time. With the host nations performing 
many support functions, SOUTHCOM hopes to save on operating 
costs, which it currently projects at $14 million a year for 
the three sites. But Navy and Air Force officials counter that 
the use of three new sites instead of one could increase 
operations and maintenance costs by basing aircraft and ships 
at several locations. They estimate start-up costs of $50 
million or more, and a possible permanent force greater than 
that SOUTHCOM had proposed. The current effort to secure 
alternate sites was touched off by the collapse last September 
of negotiations with Panama to establish a Multinational 
Counternarcotics Center at Howard Air Force Base. The two 
countries had been negotiating to turn Howard Air Force Base 
into an anti-drugs center with intelligence-gathering 
facilities, air power and 2,000 U.S. troops, plus soldiers from 
other countries. In July, however, the talks reached an impasse 
when Panama would not offer more than a possibly renewable 
contract for 4 years for the counternarcotics center.
    No infrastructure work is planned until long-term 
agreements are signed with the host nations. DOD is planning 
that the appropriations for these upgrades and repairs will be 
handled by the Military Construction Subcommittee of the 
Committee on Appropriations. DOD is hopeful that these long-
term agreements will be for 10 years. DOD has made initial 
estimates of the costs that will be necessary to complete the 
requisite upgrades and repairs to the new FOLs, ranging from 
$78 to $125 million.
    (13) On September 24, 1999, the subcommittee held a hearing 
entitled, ``Examining the Drug Threat Along the Southwest 
Border.'' There are 10 States (4 United States and 6 Mexican) 
that adjoin the 2,000-mile border. The four United States 
border States (California, Arizona, New Mexico, Texas) include 
23 counties that touch the border and the 6 Mexican border 
States (Baja California, Sonora, Chihuahua, Coahuila, Nuevo 
Leon, Tamaupilas) include 39 municipalities that touch the 
    There are five principal U.S. Governmental Departments 
concerned with drug control-related issues in the Southwest 
border region: Department of the Treasury (drug interdiction, 
anti-money laundering and anti-firearms trafficking); 
Department of Justice (drug and immigration enforcement, 
prosecutions); Department of Transportation (drug 
interdiction); Department of State (cooperation with Mexico); 
and Department of Defense (counterdrug support). In addition, 
the Office of National Drug Control Policy [ONDCP] administers 
the High Intensity Drug Trafficking Area [HIDTA] program. The 
Departments of Interior and Agriculture also have 
responsibilities along the border.
    Located at key points along this international border are 
38 legal ports of entry, 3 of which are among the busiest in 
the world. The significant transportation networks in the 
Southwest border region include airports, railroads, and major 
United States and Mexican highways which facilitate the 
smuggling and delivery of drugs to other areas in the country, 
and money out of the United States. The region's strategic 
location adjacent to Mexico makes the region vitally important 
to drug trafficking organizations which ship cocaine, heroin, 
marijuana and methamphetamine into the United States. Mexico is 
both a major transshipment country for most drugs and 
responsible for the production of marijuana, Mexican heroin and 
methamphetamine. Its drug trade is dominated by some of the 
more powerful drug cartels.
    In 1998, 278 million people, 86 million cars, and 4 million 
trucks and rail cars entered the United States from Mexico. 
More than half of the cocaine on America's streets and large 
quantities of heroin, methamphetamine, and marijuana enter the 
United States across the Southwest border.
    Illegal drugs enter by all modes of conveyance--car, truck, 
train, and pedestrian border-crossers. The drugs cross the open 
desert on the backs of human ``mules.'' The drugs are tossed 
over border fences and then whisked away on foot or by vehicle. 
Planes and boats find gaps in United States-Mexican coverage 
and position drugs close to the border for eventual transfer to 
the United States. Small boats in the Gulf of Mexico and the 
eastern Pacific seek to outflank United States interdiction 
efforts and deliver drugs directly to the United States. 
Traffickers seek opportunities to corrupt local, State, and 
Federal officials to facilitate drug smuggling.
    Rapidly growing commerce between the United States and 
Mexico has complicated efforts to keep drugs out of cross-
border traffic. It has been reported that drug gangs have 
expanded into many legitimate businesses that can be used for 
smuggling. U.S. officials have reported purchases of airlines, 
trucking companies, new and used car dealerships, petroleum 
transport corporations and others. However, the increasing use 
of intermediaries as owners has made it almost impossible to 
trace their activities in detail.
    Twenty-three separate Federal agencies and scores of State 
and local governments are involved in drug-control efforts 
along our borders, air, and seaports. Currently, no single 
official is in charge to oversee, integrate and coordinate 
Southwest border counterdrug efforts. The ONDCP Director has 
voiced support for creating a coordinating authority for the 
border with the ability to set objectives and priorities and to 
recommend to agency heads the deployment of resources.
    Statistics compiled by the El Paso Intelligence Center 
[EPIC] indicate that 70 percent of the cocaine imported into 
this country is transported through the Southwest border area 
of the United States. In the past, Mexico-based criminal 
organizations limited their activities to the cultivation of 
marijuana and opium poppies for subsequent production of 
marijuana and heroin. The organizations were also used by 
Colombian drug cartels to transport loads of cocaine into the 
United States, and to pass this cocaine on to other 
organizations for distribution in the United States. However, 
over the past 7 years, Mexico-based organized crime syndicates 
reportedly have gained increasing control over many aspects of 
the cocaine, methamphetamine, heroin and marijuana trade.
    DEA arrests of Mexican nationals within the United States 
increased 65 percent between 1993 and 1997. Most of these 
arrests took place in cities that many Americans would not 
expect to be targeted by international drug syndicates--cities 
such as Des Moines, IA; Greensboro, NC; Yakima, WA; and New 
Rochelle, NY.
    The damage caused by trafficking is enormous. Typically, 
large cocaine shipments are transported from Colombia, via 
commercial shipping and ``go fast'' boats, and off-loaded in 
Mexican port cities. The cocaine is transported through Mexico, 
usually by trucks, where it is warehoused in cities like 
Guadalajara or Juarez, which are operating bases for the major 
organizations. Cocaine loads are then driven across the United 
States-Mexico border and taken to distribution centers within 
the United States, such as Los Angeles, Chicago, or Phoenix.
    Methamphetamine trafficking works in a similar fashion. 
With major organized crime groups in Mexico obtaining the 
precursor chemicals necessary for methamphetamine production 
from sources in other countries, such as China or India, as 
well as from rogue chemical suppliers in the United States. 
Methamphetamine labs capable of producing hundreds of pounds of 
methamphetamine on a weekly basis are established in Mexico and 
California, where the methamphetamine is then provided to 
traffickers to distribute across the United States.
    The heroin that is available in the United States is coming 
predominantly from Colombia and Mexico. Heroin mortality 
figures in the United States are the highest ever recorded--
close to 4,000 people have died in each of the last 4 years 
from heroin-related overdoses across the country. Heroin from 
Mexico now represents 17 percent of the heroin supply seized in 
the United States.
    (14) On November 17, 1999, the subcommittee held a hearing 
entitled, ``Cuba's Link to Drug Trafficking.'' Cuba's location 
between the United States and this hemisphere's major drug 
producing countries makes it a logical transshipment point for 
drug trafficking. While the Cuban Government has consistently 
denied official involvement in drug smuggling, Cuba does not 
publish comprehensive information regarding either its internal 
drug use or the level of drug smuggling activity.
    Numerous drug smuggling cases involving Cuba have received 
public attention, including the highly publicized 1989 court 
martial and execution by the Castro government of a top 
military official and decorated combat hero, Major General 
Ochoa, Commander of Cuba's Western Army. In this incident, the 
head of the Interior Ministry, Major General Jose Abrantes, 
also was arrested, tried and sentenced to 20 years in prison 
for complicity in drug smuggling. In 1993, United States 
Federal prosecutors in Miami reportedly drafted (but did not 
act upon) an indictment for cocaine smuggling against Raul 
Castro, Fidel Castro's brother and head of the Cuban Defense 
    According to State Department's March 1999 International 
Narcotics Control Strategy [INCS] report, ``The lack of 
authoritative information about the illegal narcotics situation 
in Cuba makes it difficult to assess the severity of Cuban's 
drug use and smuggling problems.'' The report indicates a 
moderate overall rise in drug use in Cuba, including the use of 
crack cocaine. Cuban officials blame a lack of resources for 
its inability to patrol its territorial waters. In a May 1999 
letter, the ONDCP Director, General McCaffrey, stated, ``The 
intelligence and law enforcement communities report that 
detected drug overflights of Cuba, although still not as 
numerous as in the other parts of the Caribbean, increased by 
almost 50 percent last year.''
    On December 3, 1998, the Colombian National Police seized 
six shipping containers in Cartagena, with 7.2 metric tons of 
cocaine. The shipment was consigned to a Havana company (51 
percent owned by the Cuban Government with two Spanish 
associates). Cuba has asserted that the drugs were destined for 
the Spanish port of Valencia (where the Spaniards have other 
business interests). A congressional staff investigation 
concluded that there is no reliable evidence that the shipment 
was bound for Spain, and that the shipment was likely headed 
for the United States. This case raises serious questions about 
the role of the Cuban Government in the trafficking of 
narcotics through Cuba.
    First enacted in 1986, the certification process requires 
the President to submit the majors list to Congress on November 
1st of each year. The majors list (some 28 countries in 1999) 
are those countries that meet the definitions set out in the 
Foreign Assistance Act of 1961 [FAA]. A ``major illicit drug 
producing country'' under paragraph (2) of FAA is any country 
in which 1,000 hectares of illicit opium poppy or illicit coca 
is cultivated or harvested, or 5,000 hectares of illicit 
cannabis is cultivated or harvested in any year. A ``major drug 
transit country'' under paragraph (5) of FAA is any country 
that is a significant direct source of drugs to the United 
States or a country through which drugs are transported which 
significantly affects the United States. The FAA requires that 
50 percent of the assistance appropriated for any country on 
the majors list not be obligated or expended unless the country 
is certified. By March 1st of each year the President is 
required to submit certification decisions to Congress (the 
annual State Department INCS report provides the justification 
for certification decisions). Based on the INCS report, the 
President may choose one of three options: (1) certify as fully 
cooperating with the United States; (2) decertify with a 
waiver; or (3) decertify.
    Despite substantial evidence of Cuba being a major transit 
country in 1998 and 1999, on November 10, 1999, President 
Clinton notified the Congress by letter that Cuba was not 
included on the majors list. The hearing explored the rationale 
for the administration excluding Cuba from the list, and 
arguments supporting its inclusion.
    The fifth National Drug Strategy goal of breaking foreign 
and domestic drug sources of supply was a key topic in two 
subcommittee hearings in 1999.
    (15) On June 23, 1999, the subcommittee held a hearing 
entitled, ``Getting Away With Murder, Is Mexico a Safe Haven 
for Killers?: The Del Toro Case.'' The focus of the hearing was 
an incident involving a tragic murder in Florida of the mother 
of six children, including 2-year quadruplets. The person 
identified as the killer, Jose Luis Del Toro, Jr., fled to 
Mexico. Del Toro was captured on November 20, 1997, in 
Monterey, Mexico. Del Toro was scheduled to be deported, 
because he was in Mexico illegally. However, within an hour of 
his scheduled deportation, Mexican officials requested that a 
formal extradition request be filed by January 22, 1998. On 
December 4, 1997, the United States Department of Justice 
informed the Florida prosecutor that the Mexican Government had 
demanded assurance that Del Toro would not receive the death 
penalty if convicted. The assurance was provided to facilitate 
the extradition. Upon approval of the extradition by the 
Mexican Foreign Ministry, Del Toro filed multiple court 
appeals, further delaying his extradition. As of the hearing 
date, it was 1 year and 7 months since Del Toro was arrested in 
Mexico, and 1\1/2\ years since the Florida State attorney 
granted Mexican demands on the death penalty. Within weeks 
following the hearing and its attendant publicity, Del Toro was 
extradited to the United States.
    (16) On August 6, 1999, the subcommittee held a hearing 
entitled, ``The Narcotics Threat From Columbia.'' According to 
United States Government [USG] estimates, Colombia is now the 
world leader in coca cultivation. Gross coca cultivation 
estimates in Colombia increased from 67,000 hectares in 1996 to 
101,800 hectares in 1998, an increase of almost 50 percent. The 
USG reports that Colombian coca growers are now cultivating a 
more potent coca leaf. It is estimated that this new coca could 
increase potential Colombian cocaine production from 1998 
levels of 165 metric tons to between 195 and 250 metric tons 
over the next 2 years.
    Coca is grown chiefly on the eastern plains in Guaviare and 
neighboring areas, and also along the Ecuadorian and Peruvian 
borders in areas of Putumayo and Caqueta. In 1998, significant 
amounts of coca were discovered under cultivation in Bolivar 
and Norte de Santander. In the 1999 International Narcotics 
Control Strategy [INCS] report, the State Department (DOS) 
reported that Colombia remains the source country for over 
three-quarters of the world's cocaine. HCl laboratories can be 
found in all regions of the country, but primarily are located 
in the plains and jungle regions near the coca-growing zones 
under guerrilla control.
    The Drug Enforcement Administration [DEA] reports that 
there has been a dramatic shift in the United States heroin 
market from Southeast Asian to Colombian heroin. Colombia now 
produces about 6 metric tons of heroin annually, almost all of 
which is destined for the United States. DEA's Heroin Signature 
Program estimates that 75 percent of the heroin seized in the 
United States is of Colombian origin. Colombian heroin is 
transported into the United States in small quantities by 
numerous couriers aboard commercial airlines, either directly 
from Colombia or through countries in central America or the 
Caribbean. Most opium is grown on the eastern slopes of the 
central Cordillera Mountains in Tolima, Huila and Cauca 
departments, plus in the Perija Mountains adjacent to Venezuela 
and, to a limited extent, in Antioquia department. Most opiate 
laboratories produce small quantities of drugs and use simple 
equipment and limited amounts of precursor chemicals. Colombia 
accounts for an estimated 2 percent of the world's opium 
    Colombian guerrilla organizations are increasingly involved 
in drug trafficking related activities and are controlling more 
territory. The two main Colombian guerilla organizations are 
the Revolutionary Armed Forces of Colombia (FARC) and the 
National Liberation Army (ELN). It has been reported that the 
guerrillas earn between $500 million and $600 million annually 
from drug-related activities.
    The FARC is the largest, and best-trained, and best-
equipped guerrilla organization in Colombia. It is estimated 
that the FARC consists of 10,000-15,000 armed combatants. FARC 
combatants have initiated attacks against Colombian political, 
economic, military, and police targets. The FARC has well 
documented ties to narcotics traffickers, principally through 
the provision of armed protection for coca and poppy 
cultivation and narcotics production facilities, as well as 
through attacks on government narcotics eradication efforts.
    The ELN is the second-largest guerrilla organization in 
Colombia. It is estimated that the ELN consists of 3,000-5,000 
armed combatants. ELN combatants have conducted assaults on oil 
infrastructure, extortion, and hundreds of kidnappings for 
profit. ELN combatants have also forced coca and opium poppy 
cultivators to pay protection money and attacks government 
efforts to eradicate these crops.
    Colombian President Andres Pastrana has initiated peace 
negotiations with the FARC and the ELN. These negotiations 
began in November 1998. In an effort to bring the FARC to the 
negotiating table, President Pastrana created a demilitarized 
zone covering about 42,000 square kilometers. The initial 
agreement was for the demilitarized zone to last for 3 months. 
In January 1999, the FARC broke off negotiations until April 
1999. The FARC demanded that the Colombian Government take more 
aggressive action against the paramilitary organizations. In 
February 1999, the ELN broke off negotiations and demanded a 
demilitarized zone. The FARC-controlled demilitarized zone is 
still recognized by the Government of Colombia [GOC]. In July, 
peace talks were postponed when disagreements over the role 
that international observers will play and for a clearer 
definition of a ``demilitarized zone'' controlled by the FARC.
    Despite the initiation of negotiations, the fighting has 
continued at an alarming pace. In a major offensive last fall, 
the FARC blew up one of the country's main oil pipelines. In 
February 1999, three Americans working with a remote indigenous 
Colombian group were kidnapped by FARC members and were found 
slain 2 weeks later on the Venezuelan side of the Arauca River 
that borders Colombia. Earlier in the year, the ELN hijacked a 
civilian airplane and committed two mass killings, including 
one attack on worshippers as they left a church in Cali.
    In 1998, the USG/GOC eradication program had its best year 
ever, successfully spraying over 65,000 hectares of coca and 
3,000 hectares of opium poppy. The traffickers responded by 
expanding coca cultivation to remote areas under guerrilla 
control beyond the reach of the spray aircraft operating from 
existing bases. Low altitude spray operations continue to be 
threatened by ground fire. Colombian and United States owned 
aircraft on eradication missions were hit 48 times during 1998. 
GOC counterdrug operations in 1998 resulted in the seizure of 
almost 57 metric tons of coca products, 418 kilograms of opium 
products, and 57 metric tons of marijuana; the destruction of 
145 cocaine base and 40 cocaine HCl labs and 10 heroin labs; 
the capture of over 1,130 metric tons of solid precursor 
chemicals and over 1.95 million gallons of liquid precursors; 
the seizure of over 300 vehicles, 300 boats, and 80 aircraft, 
and the arrest of over 1,400 persons.
    In 1997, the GOC signed a maritime shipboarding agreement 
with the United States. The agreement, which allows for a 
faster approval process for shipboardings in international 
waters and sets guidelines for improved counterdrug cooperation 
with the Colombian navy, has been credited with the seizure of 
over 13 metric tons of cocaine since its signing. Closure and 
reversion to Panamanian sovereignty of Howard Air Force Base 
and facilities at Fort Sherman, Fort Kobbe, Rodman Naval 
Station, and Galeeta Island have undercut United States 
counterdrug efforts in the region.
    On July 13, General McCaffrey released a discussion paper 
outlining proposed counterdrug program enhancements designed to 
meet the emerging drug control challenges in Colombia and the 
Andean Ridge. The program recommendations reflect preliminary 
interagency thinking. The major components include enhancements 
to: counterdrug operations in Southern Colombia; air 
interdiction; administration of justice; nationwide counterdrug 
operations; regional intelligence programs; interdiction 
support; alternative development programs; and USG interdiction 
and research and development.
    (17) On January 27, 2000 the subcommittee held a hearing to 
discuss the diminishing assets that the Department of Defense 
[DOD] under the Clinton administration has contributed to the 
Nation's efforts to curb the supply of illegal drugs. The 
nature and extent of DOD's reduced contributions to the 
Nation's drug control efforts were examined, as well as the 
reasons behind this serious development. The immediate 
ramifications and potential long term consequences to the 
Nation's drug control initiatives were explored. The hearing 
focused on findings by the General Accounting Office [GAO] Drug 
Control report issued in December 1999, entitled: ``Assets DOD 
Contributes to Reducing the Illegal Drug Supply Have 
    Despite the fact that DOD has critical responsibilities for 
interdicting drugs and stopping drugs at their source, GAO 
found that DOD's level of support to international drug control 
efforts has declined significantly since 1992. For example, the 
number of flight hours dedicated to detecting and monitoring 
illicit drug shipments has declined substantially--almost 70 
percent. This decline is particularly significant in view of 
recent developments, including increasing narco-terrorist 
activities in Colombia, the recent closing of Howard Air Force 
Base in Panama and delays in establishing new air bases in the 
region, and evidence of record amounts of heroin entering the 
United States.
    In 1999, closure of Howard Air Force Base and other U.S. 
facilities at Fort Sherman, Fort Kobbe, Rodman Naval Air 
Station, and Galeeta Island in Panama has undercut United 
States counterdrug efforts in the region. The failure to secure 
an agreement with Panama for continued access to these 
facilities forced the United States to identify three sites: 
Aruba and Curacao, in the Netherlands Antilles, and Manta 
Ecuador. The U.S. Southern Command [SOUTHCOM] estimates that by 
2002, it will be able to fly 85 percent of the counterdrug 
flights that were staged from Howard Air Force Base in 1997-
1998. Even with all of the 1997-1998 assets available, SOUTHCOM 
will only be able to cover 15 percent of key trafficking routes 
15 percent of the time. The administration is working to 
finalize plans for a fourth FOL in El Salvador.
    This oversight hearing examined GAO findings and explored 
whether the administration's practices were consistent with 
DOD's mission and role under the National Drug Control 
Strategy, and consistent with recent White House pronouncements 
of increased support for stopping the production of illegal 
drugs abroad and their flow into the United States.
    (18) On February 15, 2000, the subcommittee held an 
oversight hearing on the topic of: ``The U.S. Response to the 
Crisis in Colombia.'' The hearing examined the administration's 
efforts to stem rising narcotics trafficking and terrorist 
violence in Colombia, and the FY-2000 supplemental aid 
proposal. This hearing and a subsequent hearing (on October 12, 
2000) focused on the deteriorating situation in the oldest 
democracy in Latin America. In the past decade, approximately 
40,000 Colombians died in narco-guerrilla violence and the 
Nation's stability is at risk. Colombia has nearly 40 million 
people and a faltering economy. It continues to produce cocaine 
and heroin, with significant amounts reaching the streets of 
neighborhoods in the United States.
    According to United States Government estimates, Colombia 
is the world leader in coca cultivation. The 1999 United States 
State Department International Narcotics Control Strategy 
Report [INCSR], revealed that Colombia remains the source 
country for over three-quarters of the world's cocaine. Gross 
coca cultivation estimates in Colombia increased from 67,000 
hectares in 1996 to 101,800 hectares in 1998, an increase of 
almost 50 percent. Because Colombian coca growers are now 
cultivating a more potent coca leaf and because more efficient 
production methods are now being used, it has been estimated 
that Colombian cocaine production could increase from 165 
metric tons in 1998 to over 250 metric tons by the end of the 
year 2000.
    The Drug Enforcement Administration [DEA] reports that 
there has been a dramatic shift in the United States heroin 
market from Southeast Asian heroin to Colombian heroin, 
especially on the East Coast of the United States. Colombia now 
produces about 6 metric tons of heroin annually, most destined 
for the United States. DEA's Heroin Signature Program estimates 
that fully 75 percent of the heroin seized in the United States 
originates in Colombia.
    (19) On February 17, 2000, the subcommittee held an 
oversight hearing on the Substance Abuse and Mental Health 
Services Administration [SAMHSA]. The hearing focused on SAMHSA 
support for drug treatment services, including: (1) how 
effectively and efficiently Federal resources are utilized; and 
(2) what improvements are needed.
    On March 14, 2000, the subcommittee continued its hearing 
that began the previous month on February 17, examining the 
Substance Abuse and Mental Health Services Administration 
[SAMHSA]. The hearing continued to examine SAMHSA operations 
and program administration, including the agency's support for 
drug treatment services. The focus of this oversight included: 
1) how effectively and efficiently Federal resources are 
utilized; and 2) what improvements are needed.
    The Substance Abuse and Mental Health Services 
Administration, an agency of the Department of Health and Human 
Services [DHHS], is responsible for supporting mental health 
and substance abuse prevention and treatment services 
throughout the country by providing technical assistance, 
categorical grants, and block grants to the States. Created in 
1992 (Public Law 102-321), SAMHSA administers the Substance 
Abuse Prevention and Treatment [SAPT] Block Grant, which 
provides funds to States for alcohol and drug abuse prevention, 
treatment, and rehabilitation programs and activities. SAMHSA 
also administers the Block Grant for Community Mental Health 
Services, which provides funds to States for mental health 
services and support through community mental health centers. 
In addition to administering the two block grants and providing 
technical assistance to States, SAMHSA funds children's mental 
health programs, services to mentally ill homeless persons, 
programs designed to improve the delivery of substance abuse 
and mental illness prevention and treatment services. SAMHSA's 
fiscal year 2000 appropriation is $2.65 billion: $1.96 billion 
for substance abuse related activities; $632 million for mental 
health related activities; and $59 million for program 
management (Public Law 106-113).
    Over the last 30 years, Congress has created a variety of 
Federal programs supporting the prevention and treatment of, 
and research relating to, substance abuse and mental illness. 
From 1974 through 1992 these activities were administered in 
DHHS by the Alcohol, Drug Abuse, and Mental Health 
Administration [ADAMHA]. ADAMHA consisted of three research 
institutes: National Institute on Alcohol Abuse and Alcoholism 
[NIAAA]; National Institute on Drug Abuse [NIDA]; and, National 
Institute of Mental Health [NIMH] and two service offices: 
Office for Substance Abuse Prevention [OSAP] and Office for 
Treatment Improvement [OTI]. ADAMHA was responsible for 
administering the Alcohol, Drug Abuse, and Mental Health 
Services [ADMS] block grant, the major Federal program focused 
on these issues.
    The ADAMHA Reorganization Act of 1992 (Public Law 102-321) 
replaced ADAMHA with SAMHSA, a services-oriented agency, 
transferred ADAMHA's three research institutes to the National 
Institutes of Health [NIH], and replaced the ADMS block grant 
with two separate block grants: 1) the Block Grant for 
Prevention and Treatment of Substance Abuse, which provides 
funds to States for alcohol and drug abuse prevention and 
treatment programs and activities, and the Block Grant for 
Community Mental Health Services, which provides funds to 
States for mental health services and support through community 
mental health centers. SAMHSA's support of drug treatment, 
through its Block Grants for Prevention and Treatment of 
Substance Abuse, was a key topic of the hearing.
    (20) On February 29, 2000, the subcommittee held an 
oversight hearing on United States-Mexico counter-narcotics 
efforts. Held on the eve of the annual certification list 
release by the White House, the purpose of the hearing was to 
identify issues associated with United States-Mexico counter-
narcotics activities. A number of concerns were raised 
regarding the level of cooperation between the United States 
and Mexico.
    Cocaine continues to be transshipped from Colombia to 
Mexico and then transported into the United States using 
various land, air, and sea routes. Mexico is also a major 
producer of marijuana, heroin, and methamphetamine. Of 
increasing concern is the recent emergence of a higher purity 
Mexican heroin. DEA estimates that Mexico has become the 
second-largest source of heroin in the United States. 
Methamphetamine precursor chemicals, and increasingly the 
finished product, are smuggled in great volume into the United 
States. The DEA has also seen an increase in methamphetamine 
``cooks'' trained in Mexico coming to the United States to 
produce the drug.
    In the past several years, the United States has made 
approximately 70 extradition requests, and approximately 60 
percent of these requests have been fulfilled. Mexico has 
requested at least 58 extraditions from the United States, 48 
percent which have been fulfilled. To date, no major Mexican 
drug traffickers have been extradited to the United States.
    Money Laundering has been a criminal offense in Mexico 
since 1990, however banking regulations and enforcement efforts 
are just beginning to catch up with the intent of the 
legislation. The Specialized Unit against Money Laundering was 
created in January 1998, to implement the law. They work 
closely with the U.S. Financial Crimes Enforcement Network 
[FINCEN], and other international anti-money laundering 
    (21) On March 6, 2000 at Woodland, CA, the subcommittee 
held a hearing to investigate the drug crisis in northern 
California. The hearing examined the effectiveness of local and 
Federal efforts to combat the growing drug problem in the 
region, and the coordination of efforts through the Central 
Valley California HIDTA. In addition, the hearing focused on 
methamphetamine use and production in the region.
    The nine counties (Sacramento, San Joaquin, Stanislaus, 
Merced, Madera, Fresno, Tulare, Kings, and Kern Counties) of 
the Central Valley California HIDTA area comprise a major 
agricultural center for the Nation. The region is populated by 
approximately 4 million residents although the population 
swells seasonally as the need for agricultural migrant labor 
fluctuates. The residents of the Central Valley are serviced by 
two international airports and hundreds of private airstrips. 
The Central Valley also contains several major interstate 
highways including Interstate 5 and Highway 99 which are the 
traffickers' favored routes of transportation for moving 
methamphetamine, heroin, and cocaine from Mexico and the 
Central Valley to northern California and the Pacific 
Northwest. Additionally, Interstate 80 runs east from San 
Francisco directly through Sacramento before traversing the 
length of the United States through the Rocky Mountains and 
Midwestern States and provides a major pipeline for the 
transportation of controlled substances headed to the Midwest 
and Eastern United States. The Central Valley is also home to 
rail, bus, cargo, and shipping port facilities.
    The Central Valley continues to be a primary manufacturing, 
transshipment, distribution, and consumption area for illegal 
narcotics, and for methamphetamine in particular. Within the 
last several years the area has experienced a dramatic increase 
in the number and scale of clandestine methamphetamine 
manufacturing labs operating within the region.
    These labs, most of which are operated by multi-drug 
trafficking organizations based in Mexico, infest the Central 
Valley. These organizations tend to situate their labs and so 
called ``super-labs'' in the Central Valley due to its 
proximity to the State's principal precursor chemical supply 
companies and its major interstate highways. These large-scale, 
relatively sophisticated labs are set up long in advance of 
use, are well concealed, often heavily guarded, and can produce 
from 20 to 200 pounds of high purity methamphetamine per 
cooking cycle.
    The Central Valley HIDTA has a fiscal year 2000 budget of 
$800,000, run by an executive committee comprised of six local 
officials, one State and seven Federal officials.
    (22) On March 7, 2000, at the U.S. Coast Guard Station in 
San Diego, CA, the subcommittee held a hearing to investigate 
the drug crisis in southern California. The hearing examined 
the effectiveness of local and Federal efforts to combat the 
growing drug problem in the region, and the coordination of 
efforts through the Southwest Border HIDTA and its California 
Border Alliance Group.
    Designated as one of the original HIDTAs in 1990, the 
Southwest Border HIDTA region is a critical line of defense in 
efforts to reduce drug availability in the United States. It is 
estimated that 59 percent of the cocaine entering the United 
States passes through Mexico from South America. Mexico is the 
No. 1 foreign producer and supplier of marijuana and 
methamphetamine to the United States; and Mexican heroin 
dominates the market in the western and southwester United 
States. The Southwest Border HIDTA (fiscal year 2000 budget: 
$46,009,946) is located in San Diego, CA, and coordinates 
regional partnerships between southern California (California 
Border Alliance Group), Arizona (Arizona Alliance Planning 
Committee), New Mexico (New Mexico Partnership), West Texas 
(West Texas Partnership) and South Texas (South Texas 
Partnership). This territory consists of 39 legal crossing 
    Recent Southwest Border HIDTA initiatives include: (1) the 
Clandestine Laboratory Seizure System designed for centralized 
storage and remote retrieval of information relating to 
clandestine laboratory seizures for access by all HIDTA 
intelligence centers and law enforcement agencies; (2) the 
Southwest Border Unit, Research and Analysis Section that 
prepares organizational profiles of major drug trafficking 
organizations and trafficking along the Southwest Border by 
conducting research, analyzing and fusing local, State and 
Federal intelligence; and (3) the Southwest Border HIDTA 
Management and Coordination that develops border wide 
initiatives, identifies successful efforts, and recommends 
resource allocations.
    (23) On March 20, 2000, in Honolulu, HI, the subcommittee 
held a hearing to investigate drug challenges in Hawaii. The 
hearing examined the effectiveness of local and Federal efforts 
to combat the growing drug problem in the region, and the 
coordination of efforts through the Hawaii HIDTA.
    Marijuana cultivation continues to be significant in 
Hawaii--the market price for 1 pound of Hawaiian-grown 
marijuana is in the $5,000 to $8,000 price range, which is the 
highest price for domestic marijuana in the country. Both 
methamphetamine powder and more refined crystal ``ice'' are 
also a threat to the State, with an increasing number of 
clandestine methamphetamine laboratories. Finally, Honolulu is 
a principle financial center for the Pacific Rim, and often 
serves as the initial entry point for Asian money wire 
transfers, making money laundering a chief concern for the 
    Earlier in the year, the Hawaii House Judiciary Committee 
approved the use of marijuana for medical purposes, bringing it 
one step closer to being the eighth State to pass legislation 
aimed at legalizing some use of marijuana. Additionally, in 
1999, Hawaii became the first State to obtain Federal approval 
to begin testing the viability of industrial hemp as an 
agricultural resource for the State.
    Located in the middle of the Pacific Ocean, the Hawaii 
HIDTA is positioned to collect and analyze international and 
regional intelligence relating to the drug threat posed by West 
Coast, Mexican and Asian/Pacific Islander drug traffickers 
operating in the Pacific Basin. The Hawaii HIDTA presently 
consists of two operational initiatives: (1) the Joint 
Investigative Support and Intelligence Center that gathers and 
disseminates intelligence relating to drug trafficking and 
money laundering activities, and (2) the Honolulu Airport Task 
Force that focuses on airport interdiction.
    (24) On March 27, 2000, at the University of Maryland 
School of Nursing, the subcommittee held an oversight hearing 
on drug issues in Baltimore, Maryland. The hearing was 
entitled, ``Alternatives to Incarceration: What Works and 
Why?'' The hearing examined the growing drug problem in 
Baltimore and explored the impact of incarceration and the 
effectiveness of treatment alternatives.
    The Washington/Baltimore HIDTA [W/B HIDTA], established in 
1994, is 1 of 31 anti-drug task forces established and financed 
by the White House Office of National Drug Control Policy 
[ONDCP]. Since 1994, the total amount of funds allocated to the 
W/B HIDTA has been almost $52 million. The region, consisting 
of Washington, DC, and counties in Maryland and Virginia, is a 
corridor for drugs being smuggled up and down the East Coast of 
the United States. The Port of Baltimore, with its huge 
quantities of bulk cargo entering the United States, is 
particularly vulnerable to maritime drug smuggling operations.
    The W/B HIDTA provides police department executives and 
investigators with a truer picture of the crime problem in the 
region. It receives $11.4 million per year for three program 
areas: treatment/criminal justice, law enforcement, and 
    The W/B HIDTA treatment/criminal justice initiatives for 
Baltimore City are aimed at breaking the cycle of drug abuse 
and crime through well-organized, criminal justice based 
treatment programs for persons under correctional custody. The 
initiatives have focused on dismantling violent drug 
trafficking organizations, closing down open-air drug markets 
and disrupting illicit drug smuggling organizations that affect 
the Baltimore Metropolitan area.
    The 1999 threat assessment issued by the W/B HIDTA 
demonstrates that drug-related crime and homicides remain a 
major concern for Baltimore City. The W/B HIDTA has criticized 
the administration of the former mayor and recommended that 
priority be given to treatment of criminal offenders.
    (25) On April 4, 2000, the subcommittee held an oversight 
hearing on drug treatment options for the justice system. The 
hearing focused on promising drug treatment options for 
eligible non-violent offenders provided by drug courts and 
prosecutor-based programs. The hearing also examined 
operations, results and evaluations of programs.
    Federal funding to assist State courts in expediting and 
specializing in drug cases began in 1989, when the Department 
of Justice [DOJ] Bureau of Justice Assistance [BJA] announced 
funding for ``Expediting Management of Drug Cases'' as part of 
the Drug Control and System Improvement Discretionary Grant 
Program under the Anti-Drug Abuse Act of 1988. In 1991, BJA 
announced funding for ``Drug Night Courts,'' under its 
discretionary grants of the Edward Byrne Memorial State and 
Local Law Enforcement Assistance Program. In April 1991, the 
National Institute of Justice [NIJ] assessed the effects of 
expedited case management of drug cases as follows: 
``Differentiated Case Management [DCM] and Expedited Drug Case 
Management [EDCM] are new approaches to adjudication that 
streamline police, prosecution, public defender and court 
procedures with little additional costs. They have been shown 
to speed processing times, increase dispositions, and reduce 
jail crowding.'' (See ``Searching for Answers,'' A Report to 
the President, the Attorney General and the Congress, NIJ, 
April 1991.)
    Congress has continued to increase Federal funding for drug 
courts, prosecutor training, and drug treatment for offenders 
since 1989, eventually leading to authorization of a special 
funding program for drug courts. Title V of the Violent Crime 
Control and Law Enforcement Act of 1994 (Public Law 103-322) 
provided authority for the Attorney General to make grants to 
State and local governments and to court entities for drug 
court programs.
    In 1997 approximately 20,000 defendants appeared before the 
Nation's 215 drug courts, with 160 additional courts in the 
planning stages. In October 1999, 416 drug courts were reported 
operating nationwide, including 81 juvenile, 11 tribal, 10 and 
7 combined drug courts; 279 were in the planning stages, up 
from a dozen in 1994.
    According to the Arrestee Drug Abuse Monitoring system 
[ADAM] data, between one half and three-quarters of all 
arrestees tested in 35 cities around the country had drugs in 
their system at the time of arrest. Drug courts are designed to 
allow judges to hasten the disposal of drug cases and to 
monitor drug treatment of defendants as a means of ending their 
illicit use of drugs. Today, drug courts typically integrate 
alcohol and drug treatment services.
    There are two main activities associated with drug courts, 
with some courts engaged in one or both activities: (1) 
expediting the disposal of drug cases and (2) monitoring drug 
    Funding for drug court programs established by the 1994 act 
totaled $11.9 million in fiscal year 1995. Although Congress 
repealed the program' authorization in fiscal year 1996, it 
continued to fund the program at $18 million in fiscal year 
1996; and $30 million each for fiscal year 1997 and fiscal year 
1998. Under the Omnibus Consolidated and Supplemental Emergency 
Appropriations Act (Public Law 105-77), the Drug Courts program 
received $40 million in fiscal year 1999. $40 million again was 
appropriated for fiscal year 2000. Additional sources of 
Federal funding have included the Local Law Enforcement Block 
Grants [LLEBG] and the Juvenile Accountability Incentive Block 
Grants [JAIBG].
    A Department of Justice [DOJ] funded evaluation of Dade 
County's program in 1993 compared defendants both within and 
outside the program over an 18-month period. Among the 
findings: fewer cases were dropped; lower incarceration rates 
resulted; rearrests decreased; longer periods of time elapsed 
before rearrest; and higher failure-to-appear rates, caused 
mainly by the more frequent appearances required of drug court 
    In 1997, GAO reviewed 20 evaluation studies undertaken 
between 1991 and 1997 covering 16 drug courts. GAO found that 
existing studies were not comparable and did not include 
systematic cost/benefit analyses. GAO determined that time in 
treatment varied, as did completion rates.
    The National Drug Control Strategy: 2000 Annual Report 
issued by ONDCP in March 2000, states as follows: `` A review 
of thirty evaluations involving twenty-four drug courts found 
that these facilities keep felony offenders in treatment or 
other structured services at roughly double the retention rate 
of community drug programs. Drug courts provide closer 
supervision than other treatment programs and substantially 
reduce drug use and criminal behavior.''
    (26) On April 12, 2000 the subcommittee held an oversight 
hearing on the emerging drug threat from Haiti. Haiti's 
location between the United States and the major drug producing 
countries in South America makes it a logical transshipment 
point. As the poorest country in the Western Hemisphere, Haiti 
is also very vulnerable to official narcotics corruption.
    According to State Department's International Narcotics 
Control Strategy Report [INCRS] published in March 2000, 
``Haiti's weak democratic institutions, fledging police force, 
and eroding infrastructure provide South American-based 
narcotics traffickers with a path of very little resistance.'' 
Haiti is now responsible for 14 percent of the cocaine entering 
the United States from Colombia (up from 10 percent in 1998). 
The United States Government estimates that 67 metric tons of 
cocaine moved through Haiti last year (a 24 percent increase 
from the 1998 total). Haitian authorities continue to be 
deprived of long-needed criminal laws and law enforcement 
tools. The police to population ratio is one of the lowest in 
the world.
    According to DEA, the primary method for smuggling large 
quantities of cocaine through the Caribbean to the Untied 
States is via maritime vessels. Colombian drug traffickers have 
shifted to using ``go-fast'' boats to smuggle cocaine into 
Haiti. These drugs are often transferred overland to the 
Dominican Republic for further shipment to the United States 
(including Puerto Rico) and Europe. Over one third of the drug 
flow was done by ``airdrops'' into mountainous regions of 
    On February 29, 2000, President Clinton determined that it 
is in the ``vital national interests'' of the United States to 
certify Haiti. According to the Statement of Explanation, ``A 
cutoff would require termination of important USG initiatives, 
including programs targeting electoral support, police 
development, economic growth, education, social stability, 
hunger and environmental degradation. If critical U.S. aid is 
withdrawn, and U.S. support for the electoral process and 
public security is curtailed, assistance to illicit traffickers 
of drugs and migrants will be the unintended consequence. The 
risks posed to U.S. vital interests by a cutoff of bilateral 
assistance outweigh the risks posed by Haiti's failure to 
cooperate fully with the USG, or take adequate steps on its 
own, to combat the illicit drugs.''
    Democratic elections in Haiti have been repeatedly 
postponed. Protests, violence and theft have marred the 
election process in Haiti. Mobs of Haitians have stormed 
election offices, burned and stole voter material and several 
deaths have resulted from the violence arising from electoral 
protests and demonstrations.
    (27) On May 11, 2000, the subcommittee held an oversight 
hearing on drug sentencing practices, recent developments and 
issues. The hearing focused on Federal drug sentencing 
practices and Bureau of Prisons impacts, including drug 
treatment services. Additional topics explored included the use 
of mandatory minimum sentencing, and sentence reductions due to 
offender cooperation and prison ``good time'' credits.
    The U.S. Sentencing Commission (hereafter ``Commission'') 
is an independent agency in the judicial branch composed of 
seven voting and two non-voting, ex officio members (the 
Attorney General and chair of the U.S. Parole Commission). Its 
principal purpose is to establish sentencing policies and 
practices for the Federal criminal justice system that will 
assure the ends of justice by promulgating detailed guidelines 
prescribing the appropriate sentences for offenders convicted 
of Federal crimes. The Commission has the authority to submit 
guideline amendments to Congress each year between the 
beginning of a regular congressional session and May 1. Such 
amendments automatically take effect 180 days after submission 
unless a law is enacted to the contrary. For fiscal year 1999, 
the Commission's budget was $9,487,000.
    The act establishing the Sentencing Commission provides for 
the development of guidelines that will further traditional 
purposes of criminal punishment: deterrence, incapacitation, 
just punishment, and rehabilitation. The act contains detailed 
instructions as to how this determination should be made--the 
most important of which directs the Commission to create 
categories of offense behavior and offender characteristics. 
The Commission's initial guidelines were submitted to Congress, 
and took effect, in 1987, applying to all offenses committed 
after that date. The act abolished parole and substantially 
reduced and restructured good behavior adjustments.
    The Commission established a sentencing table that contains 
43 levels. Each level prescribes ranges that overlap with the 
ranges in the preceding and succeeding levels. A change of six 
levels roughly doubles the sentence. The guidelines are in 
keeping with the statutory requirement that the maximum of any 
range cannot exceed the minimum by more than the greater of 25 
percent or 6 months. According to the Commission, the table 
overlaps offense levels meaningfully, works proportionately, 
and at the same time preserves the maximum degree of allowable 
discretion within each level. An offender's criminal history 
category (for each offense level there are six permissible 
sentencing subcategories arranged according to the seriousness 
of the criminal defendant's history). Points are assessed for 
past convictions, for misconduct committed while under judicial 
supervision such as bail or parole, and for crimes of violence. 
Juvenile as well as general and specific court martial 
convictions are counted. There are past criminal activities 
which not only determine a defendant's criminal history 
category point total, but also provide the basis for increasing 
a defendant's offense level, as in the case or career 
criminals, armed criminals, or professional criminals.
    Normally, the sentencing court must select a sentence from 
within the guideline range. If, however, a particular case 
presents atypical features, the act allows the court to depart 
from the guidelines and sentence outside the prescribed range. 
The sentencing statute permits a court to depart from a 
guideline-specified sentence when it finds ``an aggravating or 
mitigating circumstance of a kind, or to a degree, not 
adequately taken into consideration by the Commission in 
formulating the guidelines that should result in a sentence 
different from that described.'' 18 U.S.C. Sec. 3553(b). In 
such instances, the court must specify reasons for departure. 
An appellate court may review the reasonableness of the 
departure. In sum, the court must impose a sentence within the 
guidelines unless: (1) the government moves for departure based 
upon the defendant's cooperation with law enforcement 
authorities; (2) the guidelines expressly authorize departure; 
or (3) the court feels that the Commission failed to consider 
adequately the kind of factors raised by a particular case when 
it developed the otherwise applicable guidelines.
    Nearly 90 percent of all Federal criminal cases involve 
guilty pleas and many of these cases involve some form of plea 
agreement. The Commission provides guidance regarding plea 
agreements by issuing general policy statements concerning the 
acceptance of plea agreements, and will collect data on these 
practices. The Federal Rules of Criminal Procedure govern the 
acceptance or rejection of such agreements.
    The statue provides that the guidelines are to ``reflect 
the general appropriateness of imposing a sentence other than 
imprisonment in which the defendant is a first offender who has 
not been convicted of a crime of violence or an otherwise 
serious offense . . .'' 28 U.S.C. Sec. 994(j). More 
specifically, the guidelines work as follows in respect to a 
first offender. For offense levels one through eight, the 
sentencing court may elect to sentence the offender to 
probation (with or without confinement conditions) or to a 
prison term. For offense levels 9 and 10, the court may 
substitute probation for a prison term, but the probation must 
include confinement conditions (community confinement, 
intermittent, or home detention). For offense levels 11 and 12, 
the court must impose at least one-half the minimum confinement 
sentence in the form of prison confinement, the remainder to be 
served on supervised release with a condition of community 
confinement or home detention.
    Mandatory minimums have existed in the American justice 
system throughout history. The most widely recognized are those 
that demand that offenders be sentenced to imprisonment for 
``not less than'' a designated term of imprisonment. Some are 
triggered by the offense, others by the criminal record of the 
offender. Some of the ``not less than'' category are less 
``mandatory'' than others, because Congress has provided a 
partial escape hatch or safety valve. For example, several of 
the drug-related mandatory minimums are subject to a ``safety 
valve'' that may render their minimum penalties less than 
mandatory for small time, first offenders.
    The Controlled Substances Act [CSA] assigns various plants, 
drugs and chemicals to one of five schedules and authorizes the 
Attorney General to add or reassign substances to the schedules 
according to the risks they represent and medical benefits they 
provide. Schedule I contains heroin, lysergic acid diethylamide 
[LSD] and other substances that are highly susceptible to 
abuse, have no accepted medical use, and cannot safely be made 
available under prescription. Schedule II house cocaine and 
other substances found to be highly susceptible to abuse and 
highly addictive, but for which there may be beneficial medical 
uses. The remaining schedules reflect progressively less 
dangerous and addictive--and progressively more beneficial--
classifications of substances. Within this basic scheme, the 
CSA and its offspring attack substance abuse and commerce in 
substance abuse at four levels: unlawful possession, 
production, distribution, and laundering of the proceeds 
illicit traffic generates.
    In 1998, there were more than 123,000 Federal prisoners. 
(92.5 percent of the prisoners were male; 59 percent were 
serving time for drug offenses). For drug offenders released in 
1998, the mean time served was about 40 months (41.4 months for 
trafficking; 9.3 months for possession); the median time served 
was 36.5 months (39.1 months for trafficking; 6 months for 
possession). In 1997, more than one-third (34.6 percent) of 
Federal prisoners serving time for drug offenses reported being 
under the influence of alcohol or drugs at the time of their 
offense (20 percent under influence of alcohol; 25 percent 
drugs). In 1997, 73 percent of all Federal prisoners reported 
prior drug use; 57.3 percent regularly; 44.8 percent within the 
month prior to offense; and 22.4 percent at the time of the 
offense. In 1997, among all Federal prisoners, 46.4 percent 
reported receiving prior drug treatment (39.2 percent while 
under correctional supervision; 28.2 percent since BOP 
    (28) On Tuesday, May 16, 2000, the subcommittee held an 
oversight hearing on the National Youth Anti-Drug Media 
Campaign. The hearing examined the effectiveness and efficiency 
of the National Youth Anti-Drug Media Campaign, now in its 
third year. At roughly $1B, this 5-year media campaign is the 
largest government sponsored and government funded campaign of 
its kind in history. The ONDCP is responsible for conducting 
and administering the National Youth Anti-Drug Media Campaign. 
The anti-drug media campaign is now in phase III. The National 
Institute on Drug Abuse [NIDA] is conducting the evaluation of 
phase III.
    The principle predecessor of anti-drug television ads was 
developed by the Partnership for a Drug Free America [PDFA], a 
not-for-profit organization created in 1987 to curb illegal use 
among America's youth. In a collaborative effort, the PDFA 
solicited anti-drug ads from various ad agencies who donated 
their creative talent to design and produce anti-drug 
television ads (pro bono). The PDFA also solicited and obtained 
donated media airtime from the big three television networks to 
run the anti-drug ads as public service announcements [PSAs]. 
For over 10 years, the PDFA coordinated these activities with 
great success and at no expense to the American taxpayer. 
According to the annual University of Michigan ``Monitoring the 
Future'' survey, at the same time that the level of anti-drug 
television ads was rising, attitudes about the social 
disapproval and the perceived risks of illegal drug use were 
also rising. Likewise, there was a corresponding decrease in 
illegal drug use among young people during the same period.
    Beginning in 1991, the donated airtime from the big three 
media networks began to decline significantly due to increased 
competition resulting from industry deregulation. Throughout 
the nineties, the PDFA worked diligently to rebuild the donated 
air times to previous levels (e.g., in 1991 the estimated value 
of donated media air time was $350 million). In 1996, the PDFA 
commissioned a study that identified three target audiences and 
determined that an effective media campaign would require an 
exposure rate of 4 times per day and frequency rate of 90 
percent of the target audiences. The minimum cost for such an 
effort was determined to be $175M (in 1996 dollars), which 
represented one-half of the $350 million donated in 1991. The 
remaining $175 million would come from donated media time and 
space. Realizing they needed help to reach their goals, the 
PDFA approached Congress for assistance. In 1997, the 
President's budget requested $175 million.
    In 1997, Congress appropriated $195M ($20 million over the 
President's request) for the National Youth Anti-drug Media 
Campaign for fiscal year 1998. Another $185M was appropriated 
for fiscal year 1999 and again for fiscal year 2000. The funds 
were appropriated under the Treasury-Postal Appropriations Bill 
primarily to purchase media time and space. The ONDCP was 
selected as the most appropriate Federal entity to administer 
the new anti-drug media campaign. Initially, the ONDCP did not 
have the appropriate staff to properly administer the various 
contracts related to the campaign, so they relied on an 
existing Department of Defense contract to allocate the funds 
and later used HHS contractors. Congress established a 100 
percent ``match'' requirement in the 1998 reauthorization of 
    The ONDCP commissioned a contractor to produce a 
``Communications Strategy Statement'' for use in guiding the 
overall conduct of the anti-drug media campaign. According to 
the Communications Strategy Statement, published in 1997, the 
goal of the anti-drug media campaign is to ``educate and enable 
America's youth to reject illegal drugs . . .'' and ``. . . 
preventing drug use and encouraging occasional users to 
discontinue use.'' Phase I of the Campaign (March 1998--
September 1998) ran paid TV, radio and print media public 
service announcements [PSAs] in a 12-city pilot program. In 
phase II (September 1998--June 1998), the media campaign went 
nationwide. In phase III, which began in the summer of 1999, 
the campaign evolved into a comprehensive effort (beyond paid 
and donated advertising). Phase III includes interactive 
Internet Web sites, entertainment outreach, parenting 
strategies and a recently published corporate sponsorship plan.
    In mid-January 2000 press reports surfaced concerning the 
ONDCP initiative to exchange match credit for the inclusion of 
anti-drug content in TV programming and print media articles. 
News reports on the issue appeared on every TV network and in 
every major newspaper in the country as the controversy erupted 
into a national discussion over Government censorship. Some 
reports charged that ONDCP was reviewing TV scripts before the 
programs aired and interfering with TV programming content. 
ONDCP denied the allegations, but later issued revised 
guidelines in an effort ``to clarify pro-bono match component 
of the anti-drug media campaign.''
    The central focus of the oversight hearing was to explore 
whether the anti-drug media campaign is working (i.e., whether 
it is making a difference in changing attitudes about illegal 
drug use and also drug use behaviors). Additional issues 
included the match credit component of the media campaign.
    (29) On May 26, 2000, the subcommittee held an oversight 
hearing on the shipment of illegal narcotics in the mail system 
and via commercial carriers. News articles have highlighted the 
increased use of the U.S. mail system and various U.S. 
commercial shipping carriers to facilitate drug trafficking. 
Illegal drugs are being sent interstate and internationally.
    Shipments of ecstasy from Europe have increased because the 
demand for the drug has skyrocketed among U.S. teenagers. 
Because ecstasy is formed in tiny tablets and does not require 
bulky packaging and several dozen tablets can be mailed in a 
standard envelop anywhere in the world for a relatively low 
cost. Mailing the drugs also acts to insulate the producer by 
minimizing the risk of getting caught.
    The U.S. Postal Service facilitates the exchange of over 
206 billion pieces of domestic mail annually. The various U.S. 
commercial shipping carriers facilitate the exchange of more 
than 2.8 billion domestic letters, packages and freight 
annually. The sheer volume of letter and package traffic offers 
a highly desirable way for smugglers to transport and 
distribute illegal drugs.
    Websites, offering the sale of illegal drugs, direct their 
buyers to use the mail service and the commercial shipping 
companies to ship drugs because the producers and smugglers 
feel that there is less chance of detection and arrest than 
trying to employ individuals to smuggle illegal narcotics 
across State lines and across the world.
    (30) On May 30, 2000, at the De La Salle High School in New 
Orleans, LA, the subcommittee held a hearing on the 
effectiveness of school drug testing programs and the Gulf 
Coast HIDTA.
    In 1986, ONDCP established the Gulf Coast HIDTA for 
designated counties and parishes in Alabama, Mississippi and 
Louisiana. This area serves as a gateway for drugs due to the 
numerous deep water ports and 8,000 miles of coastline. Drug 
trafficking organizations utilize the deep water ports, railway 
and highway systems and airports to facilitate trafficking. The 
growing casino gaming industry in Louisiana and Mississippi 
attract drug trafficking organizations for money laundering 
activities. With a $6 million budget, the Gulf Coast HIDTA 
provides funding to 12 drug enforcement initiatives, two 
intelligence support initiatives, one community empowerment 
initiative, and a management and coordination initiative. 
Forty-nine agencies participate in these initiatives. An 
initiative that receiving close scrutiny involved school drug 
    Clearly, substance abuse by youth has reached epidemic 
levels in the United States and has been responsible for poor 
school performance and juvenile crime and violence. In an 
attempt to address these concerns and deter substance abuse, 
many school districts are developing drug testing policies. The 
U.S. Supreme Court in Vernonia School District v. Acton, 115 S. 
Ct. 2386 (1995) approved random drug testing by urinalysis for 
elementary and high school athletes. The court held that 
deterring drug abuse by school children was a compelling State 
interest and did not violate a student's fourth amendment right 
against unreasonable search and seizure. Since then, the U.S. 
Court of Appeals for the Seventh Circuit approved a drug 
testing program which tested all students engaged in any 
extracurricular activities.
    In 1993, the Orleans Parish District Attorney's office [DA] 
developed a new diversionary program for non-violent, first 
time offenders with drug abuse problems. The program was funded 
by a Department of Justice [DOJ] National Institute of Justice 
[NIJ] grant. The program utilized hair drug testing. The DA 
encouraged school districts to adopt drug testing programs. In 
1998, De La Salle High School implemented a student and faculty 
testing program. In addition to a number of private schools 
which have adopted the drug testing program, in January 1999 
the Louisiana High School Athletic Associations [LHSAA] 
mandated that all Louisiana high schools participating in LHSAA 
sports implement a drug testing program.
    In May 2000, the Orleans Parish School Board approved a 
pilot program to conduct random hair testing at Frederick A. 
Douglass Senior High School, a public high school. The policy 
requires consent from each student's parent. The test results 
are not used for law enforcement purposes. The results are used 
for counseling and treatment.
    (31) On June 1, 2000 in Orlando, FL, the subcommittee held 
a hearing to investigate the drug crisis in the greater Orlando 
area. The hearing examined the effectiveness of local and 
Federal efforts to combat the growing problem of dangerous 
drugs, particularly ``Club Drugs,'' in the region.
    The Central Florida HIDTA covers seven counties in central 
Florida ranging from Pinellas County on the gulf coast in the 
Southwest area of the HIDTA to Volusia County on the Atlantic 
coast in the Northeast area of the HIDTA. This area is commonly 
referred to as the I-4 corridor. This area encompasses three 
international airport two major seaports, and several hundred 
miles of coastline. In 1998 this area experienced in excess of 
72 heroin overdose deaths. National attention to this problem 
resulted in the designation of the Central Florida HIDTA.
    All areas of central Florida show an increase in the use of 
methamphetamine and related violent crimes. Medical Examiners 
have indicated that deaths due to methamphetamine use have 
increased. Both marijuana and cocaine remain plentiful and 
drugs of choice.
    (32) On June 5, 2000, at West Mesquite High School in 
Mesquite, TX, the subcommittee held a hearing on the 
effectiveness of drug prevention efforts in local communities 
and schools. Federal, State and local information and ideas on 
the topic of local drug challenges and successful prevention 
initiatives were discussed. Testimony was provided by law 
enforcement and education professionals, as well as students 
who had resisted and overcome drug abuse.
    (33) On June 9, 2000, the held an oversight hearing 
entitled, ``Counterdrug Implications of the U.S. Leaving 
Panama.'' Prior to December 31, 1999, Panama, which is located 
at the hub of two oceans and two continents, had been home to a 
significant United States military presence since it seceded 
from Colombia in 1903. United States military forces in Panama 
served several functions. The primary purpose of the United 
States troops was to provide for the defense of the Panama 
Canal. Until 1997, Panama served as the headquarters of the 
United States Southern Command [SOUTHCOM], a unified command 
responsible for all United States military operations 
throughout Latin America and the Caribbean (excluding Mexico). 
In September 1997, SOUTHCOM moved to Miami, FL. Despite the 
move, SOUTHCOM has continued to provide support to Latin 
American nations combating drug trafficking, such as aerial 
reconnaissance and counternarcotics training. Starting in 1988, 
the Department of Defense had ``detection and monitoring'' 
responsibility for U.S. counternarcotics efforts. Until last 
year, Howard Air Force Base in Panama provided secure staging 
for detection, monitoring, and intelligence collecting assets.
    The Panama Canal Treaty terminated at noon on December 31, 
1999, at which time the Government of Panama assumed complete 
control of the Panama Canal and all remaining United States 
military facilities. The Neutrality Treaty remains in force 
indefinitely and gives the United States the right to defend 
the neutrality of the Panama Canal. Roughly 13 percent of U.S. 
international shipborne commerce flows through the Canal. The 
United States is the No. 1 user of the Panama Canal, which 
carries 13,000 ships per year. Four percent of the world's 
trade transits through the Panama Canal.
    Today, there are no permanently stationed United States 
troops in Panama (down from 10,000 in 1993). In leaving Panama 
last year, the United States military abandoned four major 
military installations--Fort Sherman, Fort Clayton, Howard Air 
Force Base, and Fort Kobbe. Six major installations had been 
returned to Panamanian control earlier--Fort Davis and Fort 
Espinar were returned in September 1995; Fort Amador, at the 
Pacific entrance to the Canal, was returned in October 1996; 
Albrook Air Force Station was returned October 1997; Galeta 
Island was returned March 1999; and Rodman Naval Station was 
returned in March 1999. By the end of 1999, the United States 
military had returned property consisting of about 70,000 acres 
and about 5,600 buildings to the Government of Panama. 
Estimates of the value of the land and infrastructure range 
from $10-$13 billion. The Panamanians plan to take advantage of 
reverting properties to make Panama a commercial and 
educational hub in the Western Hemisphere. The government plans 
on establishing new transshipment ports, a center of higher 
education, light manufacturing zones, and residential resort 
    Panama serves as a major transit point for illicit drugs 
heading to the United States. This is due to its proximity to 
major drug-producing countries like Colombia, location on key 
transportation routes, openness to trade, and weak controls 
along borders and coastlines. Panama's strategic location 
between the drug producing countries of South America and the 
United States and its United States dollar based economy, and 
large, well established, and until recently, loosely regulated 
banking sector make Panama particularly vulnerable to criminal 
organizations involved in illegal drug trafficking and money 
laundering. The Colon Free Trade Zone (established in 1948) 
also make Panama a prime target for the transshipment of 
illegal goods which are co-mingled with cargo to avoid 
    In addition, border incursions by Colombia rebel groups 
(the FARC and the ELN) into the Darien in southern Panama are 
increasingly common. In October 1999, nearly 60 Colombians were 
murdered by FARC guerrillas in the Uraba Department of northern 
Colombia. The FARC reported fled into Panama to avoid pursuit 
by Colombian Security Forces. Smuggling of arms through Panama 
from war ravaged Central America to arms-thirsty rebels and 
drug smugglers in Colombia and Peru is rampant. Panama, which 
does not have an army, also does not have sufficient border 
agents to patrol its borders.
    In December 1989, when the United States invaded Panama to 
oust the former dictator General Manuel Noriega, the Panamanian 
Defense Forces were disestablished. Panama now has no military. 
Panamanian security forces are comprised of three components 
(the Panamanian National Police [PNP], the Coast Guard-type 
National Maritime Service [NMS] and the National Air Service 
    When the United States shut down operations at Howard Air 
Force Base in Panama on May 1, 1999, it had significant impact 
on United States counterdrug surveillance flights. On April 16, 
1999, Defense Secretary William Cohen had approved a plan 
drafted by the United States Southern Command to open new 
military operating facilities (Forward Operating Locations 
[FOLs]) on the Caribbean islands of Curacao and Aruba and in 
Ecuador. These FOLs are intended to offset the loss of Howard 
Air Force Base. Ten-year agreements have been agreed upon 
between the U.S. Government and the respective host nations. 
Runway and other infrastructure improvement are necessary 
before these FOLs are fully operational, although flights are 
now being flown out of Aruba and Curacao and limited flights 
out of Manta, EC as well.
    The United States does not own or control the facilities in 
Ecuador, Aruba or Curacao. Instead of permanently stationing 
aircraft at the three sites, the United States rotates aircraft 
in and out on a temporary basis, from several weeks to months 
at a time. With the host nations performing many support 
functions, SOUTHCOM hopes to save on operating costs, which it 
currently projects at $14 million a year for the three sites. 
But Navy and Air Force officials counter that the use of three 
new sites instead of one could increase operations and 
maintenance costs.
    (34) On June 23, 2000, the subcommittee held a hearing on 
the topic of ``money laundering.'' The hearing covered topics 
regarding where and how money laundering occurs, especially 
involving international drug traffickers, and what is being 
done to combat the problem.
    Money laundering has been described as ``the process by 
which one conceals the existence, illegal source, or illegal 
application of income, and then disguises that income to make 
it appear legitimate.'' The act of money laundering is 
difficult to investigate and prosecute. More particularly, 
often it is hard to successfully prosecute a person who, using 
funds or property which are the proceeds of some crime, directs 
a financial transaction which is intended to conceal or 
disguise those proceeds so that the money appears to be from a 
legitimate source.
    The global nature of money laundering and the tremendous 
sums of money involved have had the effect of making 
traditional international borders irrelevant and have enabled 
corrupt foreign officials to systematically divert public 
financial assets to their own use. Money laundering has also 
tainted our own financial institutions and, if unchecked, will 
undermine public trust in these institutions' integrity. There 
is a growing concern that rapid advances in technology, coupled 
with the globalization of financial and business institutions, 
is contributing to uncontrolled illegal laundering of huge sums 
of money that can threaten the world's financial stability. 
Finally, money laundering is impacting and involving non-
financial businesses and professions which are related to 
financial institutions.
    The Department of the Treasury and the Department of 
Justice are the primary Federal agencies with responsibility 
for enforcing the criminal prohibitions of money laundering. 
Under Treasury are the Financial Crimes Network [FINCEN], 
Internal Revenue Service Criminal, Investigations [IRS-CI], 
Customs, Secret Service and Alcohol, Tobacco and Firearms 
[ATF]. Under the Department of Justice, which is responsible 
for enforcement of all Federal law, are the Asset Forfeiture 
and Money Laundering Section [AFMLS], the FBI, the Special 
Operations Division [SOD] and the Drug Enforcement Agency 
[DEA]. Also involved are the Department of State, the U.S. 
Postal Service and the Office of National Drug Control Policy. 
Assisting through information sharing and other cooperative 
means with the recordkeeping and reporting requirements are: 
Federal banking regulators, the Securities and Exchange 
Commission [SEC], the Internal Revenue Service [IRS] and the 
Commodity Futures Trading Commission [CFTC].
    (35) On June 26, 2000 in Sioux City, IA, the subcommittee 
held a hearing to investigate the methamphetamine drug crisis 
in Iowa and the Midwest. The hearing examined the effectiveness 
of local and Federal efforts to combat the growing drug problem 
in the region. The hearing focused on methamphetamine use, 
production and trafficking in the region as well as the 
coordinating efforts of the Midwest HIDTA.
    In February 1997, Iowa became one of the five Midwest 
States (Iowa, Nebraska, Missouri, Kansas, South Dakota) to form 
the new methamphetamine specific Midwest High Intensity Drug 
Trafficking Area [HIDTA]. In 1999, North Dakota became the 
sixth State to join the Midwest HIDTA which now has a total 
annual budget of $11.9 million. Iowa receives approximately 
$1.2 million of the $11.9 million for its enforcement 
    The Midwest HIDTA is responsible for promoting a 
comprehensive, cooperative strategy by law enforcement at the 
Federal, State, and local level to address needs associated 
with methamphetamine production and distribution. The 
establishment of the Midwest Intelligence Center is a priority 
of the Midwest HIDTA and the ONDCP.
    (36) On June 30, 2000 the subcommittee held an oversight 
hearing entitled, ``Black-Tar Heroin, Meth, Cocaine Continue to 
Flood U.S. from Mexico.'' The heroin that is available in the 
United States is now coming predominantly from Colombia and 
Mexico. Heroin mortality figures in the United States are the 
highest ever recorded--close to 4,000 people have died in each 
of the last 4 years from heroin-related overdoses across the 
country. Heroin from Mexico now represents 14 percent of the 
heroin supply seized in the United States, and it is estimated 
that organized crime figures in Mexico produced a total of 6 
metric tons of the drug last year.
    Mexico-based trafficking groups entered the illicit 
methamphetamine market in 1995 and now dominate the trade. With 
their ability to obtain large quantities of precursor chemicals 
on the international market, their access to already 
established smuggling and distribution networks, and their 
control over laboratories capable of large-scale production and 
distribution, these criminal groups from Mexico dominate 
trafficking in the United States.
    Statistics compiled by the El Paso Intelligence Center 
[EPIC] indicate that 70 percent of the cocaine imported into 
this country is transported through the southwest border area 
of the United States. In the past, Mexico-based criminal 
organizations had limited their activities to the cultivation 
of marijuana and opium poppies for subsequent production of 
marijuana and heroin. However, over the past 7 years or more, 
Mexico-based organized crime syndicates have gained increasing 
control over many aspects of the methamphetamine, heroin, 
cocaine and marijuana trade.
    (37) On July 11, 2000, the subcommittee held the second 
oversight hearing on the National Youth Anti-Drug Media 
Campaign. The hearing examined the effectiveness and efficiency 
of the National Youth Anti-Drug Media Campaign, now in its 
third year. The National Institute on Drug Abuse [NIDA] is 
responsible for conducting the evaluation of phase III and has 
contracted with Westat, Inc. and the Annenberg School of 
Communication at the University of Pennsylvania.
    (38) On September 18, 2000 at the Atlanta International 
School located in Atlanta, GA, the subcommittee held a hearing 
to investigate critical drug crisis issues particularly in 
Atlanta and neighboring areas. The hearing examined closely the 
effectiveness of local, State and Federal efforts to combat the 
growing problem of so-called ``club drugs'' in the region.
    Club drugs (including ``ecstasy,'' ``special-K,'' ``meth,'' 
``GHB'' and ``roofies'') are drugs of choice at many all-night 
dance parties called ``raves'' or ``trances.'' Gaining in 
popularity in the 1990's, club drugs include a wide variety of 
illegal drugs as well as prescription drugs taken illegally. 
Some are stimulants, some are depressants, and some are 
hallucinogens. They are all harmful and potentially deadly, and 
can produce immediate, as well as long-term, health problems. 
The use of ecstasy is a nationwide phenomenon. A federally 
sponsored survey of high-school students indicated that ecstasy 
increased 55 percent from 1998 to 1999. The Drug Abuse Warning 
Network [DAWN] estimates that 8 percent of high school seniors 
have used ecstasy at least once in their lifetime.
    (39) On September 19, 2000 the subcommittee held a hearing 
to examine drug trends, their consequences and implications for 
policies and programs.
    Numerous reports have been published and press releases 
issued on topics of drug abuse in America, based upon findings 
of some of the Nation's leading surveys and other research 
projects. Some surveys and research findings provide evidence 
of progress in combating drug abuse; others verify failures and 
disturbing trends that merit continuing concern and further 
efforts. An accurate assessment of the progress and failures of 
our drug demand reduction efforts is needed to: measure our 
progress in meeting national goals; identify where failures 
have occurred; determine what improvements are needed; and plan 
for how the improvements might be achieved. Within the 
Executive Branch, the Office of National Drug Control Policy 
[ONDCP] is assigned this responsibility.
    This subcommittee has oversight responsibility for ONDCP 
and its demand reduction activities, as well as the drug abuse 
and demand reduction efforts of the major Federal departments 
and agencies that play key roles, including the Departments of 
Health and Human Services [HHS] Education [ED] and Justice 
    This hearing included testimony of representatives from HHS 
and DOJ programs that sponsor or conduct drug abuse surveys and 
other research on drug use trends. Testimony was heard from a 
representative of ONDCP as to how these trends have been 
considered, analyzed and used in identifying continuing needs 
and responses to them (i.e., policy and program implications). 
Finally, the hearing examined consequences and implications of 
these trends.
    (40) On October 4, 2000 the subcommittee held a third 
oversight hearing on the National Youth Anti-Drug Media 
Campaign. The hearing examined issues of contract 
administration and accountability. Developments identified 
issues as to whether the Federal Government's largest and most 
expensive media campaign is experiencing problems in regard to 
ensuring that hundreds of millions of dollars in contracts for 
the purpose of buying media time are being effectively and 
efficiently administered and monitored.
    In July 2000, GAO published its review of the experiences 
of ONDCP in meeting various congressional mandates, and the 
progress of evaluation efforts. That report indicated that 
ONDCP generally was meeting certain requirements to provide 
financial reports to specific congressional committees, and had 
complied with selected statutory spending restrictions imposed 
for fiscal years 1998 and 1999. It found ``ONDCP's success in 
meeting the congressionally mandated program requirements was 
mixed.'' (``Anti-Drug Media Campaign: ONDCP Met Most Mandates, 
but Evaluations of Impact Are Inconclusive,'' p. 5)
    The hearing focused on issues regarding the Media 
Campaign's contract administration, including ONDCP contract 
administration practices and oversight, and past and planned 
contractual arrangements with other Federal agencies. The 
subcommittee was provided documents that raise issues of 
excessive costs and questionable billing practices. Internal 
ONDCP documents identified problems with the primary contract 
for the Media Campaign, which is a ``cost plus'' type of 
contract. Problems and issues identified include: possible 
excessive staffing levels (representing almost 250 full or 
part-time staff) and top-heavy staffing arrangements, 
questionable salary levels, apparently altered time sheets, 
late billings, unallowable compensation, and apparently faulty 
management practices. An outside consultant obtained by ONDCP 
estimated that costs under the contract appeared to be out of 
line with industry standards, substantial overspending was 
indicated, and potential savings could reach into the millions 
of dollars. Issues were raised as to why ongoing audits had not 
been planned, why ONDCP or HHS contract management officials 
did not order an immediate audit upon notice of possible 
serious irregularities, and plans for how contract management 
and accountability issues would be resolved in a timely manner 
in the future.
    (41) On October 12, 2000, the subcommittee held a hearing 
on Colombia entitled, ``Getting United States Aid to 
Colombia.'' The hearing examined United States efforts to 
deliver promised United States aid to Colombia in the most cost 
effective and expedite manner. The hearing focused on GAO 
findings that were critical of past administration efforts to 
provide approved United States aid and equipment to Colombia. 
Additional criticisms were reported by the Department of State 
Inspector General's office in a June 2000 report. The hearing 
examined criticisms and explored options for improving 
processes to better implement the $1.3 billion aid package 
approved this year.
    (42) On October 31, 2000, at Port Everglades, FL, the 
sbcommittee held a hearing to investigate the security of 
Florida seaports, specifically the ports of Miami and Port 
Everglades. The hearing focused on drug smuggling challenges in 
south Florida, security measures being taken, and the findings 
and recommendations of the Florida Seaport Security Assessment 
report released in September 2000.
    The Florida Seaport Security Assessment was conducted by 
contractors for Florida's Office of the Governor. The primary 
threat examined by the study was drug trafficking in Florida 
seaports, primarily cocaine smuggling. The Florida Department 
of Law Enforcement estimates that 150 to 200 metric tons of 
cocaine annually enter the United States via Florida. With over 
1,350 miles of coastline, much of the cocaine enters by sea. 
Florida is home to the top 3 cruise ports in the world and 4 of 
the 20 busiest ports in the United States. Florida's proximity 
to Latin American source countries makes Florida a conduit for 
the illegal drug trade. The U.S. Customs Service reports that 
in 1998, a full 65 percent of U.S. cocaine seizures were made 
in Florida.
    The study categorized Florida's major ports into three risk 
groups: (1) ``maximum security'' (Miami, Port Everglades, 
Jacksonville, Tampa); (2) ``moderate security'' (Palm Beach, 
Canaveral, Manatee, Fernandina, Pensacola, Panama City); and 
(3) ``minimum security'' (Ft. Pierce, Key West, Port St. Joe, 
St. Petersburg).
    The study generally found that Florida seaports are very 
vulnerable to drug smuggling and have not adopted adequate 
measures to tighten security. The study found that U.S. Customs 
staffing was inadequate to conduct needed inspections in 
Florida ports. While the ports of Miami and Port Everglades 
have relatively high percentages of imports inspected by 
Customs officials (12 percent and 7.5 percent respectively), 
the statewide average is only around 2 percent. Coverage of 
exports was found to be more deficient. The study recommended 
additional staffing and improved assignment practices.
    The report specifically recommended additional and improved 
non-intrusive inspection technology [NIIT] equipment. The study 
reported that there are currently only two NIIT systems at 
Florida seaports (one in Miami and one in Port Everglades). The 
report was also critical of the lack of a ``life-cycle'' 
approach to procuring, operating and maintaining such 
equipment. The study recommended the adoption of uniform 
``minimum'' standards for security at all Florida seaports, 
better leadership and intelligence sharing to address port 
security needs, and that further study to determine which State 
agency should be assigned oversight responsibility for all 
Florida seaport security. The study also recommended bringing 
HIDTA resources to bear on security issues and the 
establishment of a North Florida HIDTA.
2. Public Safety and Criminal Justice Priorities.
    a. Summary.--Subcommittee hearings have addressed a range 
of topics related to crime and public safety that received 
national attention in 1999 and 2000. In the area of crime 
prevention (as well as drug abuse prevention), the hearing on 
school violence provided a forum for experts and practitioners 
to share their thoughts on understanding, preventing and 
responding to violent crime in the Nation's schools. The 
subcommittee hearing on the role of the Department of Housing 
and Urban Development [HUD] in promoting litigation against gun 
manufacturers explored the rationale for HUD involvement and 
identified problems associated with Federal agency support to 
private litigants in this controversial and complex area. A 
later hearing on a successful approach to drug and gun-related 
violence--Project Exile--examined why the administration has 
not done more to replicate this promising approach to saving 
lives and reducing crime in other jurisdictions. Other hearings 
addressed numerous public safety and criminal justice 
priorities in context of drug control issues.
    b. Benefits.--A product of the hearing on school violence 
was the identification of deficiencies and inefficiencies in 
current Federal programs and practices to combat crime, such as 
the Department of Education's Safe and Drug-Free Schools 
program, as well as prevention and treatment programs 
affiliated with the Substance Abuse and Mental Health Services 
Administration [SAMHSA], a component of the Department of 
Health and Human Services [HHS]. On the topic of gun violence, 
the hearings identified significant legal and policy issues 
associated with Federal involvement in civil litigation against 
gun manufacturers and the failures of the Department of Justice 
and the Bureau of Alcohol, Tobacco and Firearms, a component of 
the Department of Treasury, to assist and replicate proven 
approaches to curbing gun violence through effective 
enforcement of existing Federal gun laws.
    c. Hearings.--In 1999, the subcommittee held hearings on 
topics of school violence, Federal agency involvement in 
litigation against gun manufacturers, and successful approaches 
to combating gun-related crimes and violence though the 
effective enforcement of gun laws.
    (1) On May 20, 1999, the subcommittee held a hearing 
entitled, ``School Violence: What Is Being Done to Combat 
School Violence? What Should Be Done?'' The problem of school 
violence is an issue of critical importance to our communities 
and Nation. The tragedy at Columbine High School focused 
national attention on the seriousness of violence in our 
schools and the impacts felt across our Nation. The National 
School Safety Center keeps track of school associated violent 
deaths nationally. Since 1992, more than 250 deaths have 
occurred that are associated with schools. There is increased 
concern with multiple killings associated with schools, and 
school associated deaths occurring in suburban and rural areas. 
The Department of Justice's Bureau of Justice Statistics 
announced that, in 1996, students between the ages of 12 and 18 
experienced about 225,000 incidents of nonfatal serious 
violence while at school and about 671,000 incidents away from 
school. Students living in urban areas experienced higher 
levels of victimization than students in suburban and rural 
areas both at and away from school. Given the continuing 
seriousness of this problem, the hearing examined programs and 
initiatives being pursued at the Federal, State and local 
    At the Federal level, the Department of Health and Human 
Services [HSS] is responsible for providing leadership, 
information and targeted assistance to States and communities. 
Created in 1992 as an agency within HHS, the Substance Abuse 
and Mental Health Services Administration [SAMHSA] directs 
Federal policy and advises the HHS Secretary on ways to improve 
the quality and availability of substance abuse prevention, 
addiction treatment and mental health services. SAMHSA's budget 
in 1999 was $2.5 billion. With a staff of approximately 600, 
SAMHSA administers Federal block grants to States for substance 
abuse and mental health services and programs. Mental health 
and substance abuse are considered to be topics of interest in 
determining why juvenile violence and criminal behaviors occur.
    The U.S. Department of Education administers the Safe and 
Drug-Free Schools Program, established by the 1986 Safe and 
Drug-Free Schools and Communities Act [SDFSCA]. The Improving 
America's Schools Act of 1994 reauthorized the act, adding 
violence prevention to the program's original emphasis on 
substance abuse education. The purpose of the act, as 
reauthorized, is: ``to support programs to meet the seventh 
National Education Goal by preventing violence in and around 
schools and by strengthening programs that prevent the illegal 
use of alcohol, tobacco, and drugs, involve parents, and are 
coordinated with related Federal, State, and community efforts 
and resources.'' Since 1986, the program has distributed more 
than $6 billion to the States and approximately 15,000 school 
districts. Grants are distributed to States primarily on the 
basis of the number of school-age youth. State agencies receive 
80 percent of the total State allotment, and Governor's offices 
receive 20 percent. Most of the State grant money is passed on 
to local agencies, which target 30 percent to high-need 
districts. The fiscal year 1999 appropriation for the program 
is $566 million ($441 million for State grants, $90 million for 
national programs, and $35 million for a new ``Coordinative 
Initiative''). According to a 1997 evaluation of the program, 
few programs were effective and delivery was inconsistent. 
Recent research findings presented to the Brookings 
Institution, Brown Center for Education Research, have raised 
serious questions about the efficacy of this program. The 
assessment by a leading researcher characterizes the program as 
``symbolic pork.''
    The Nation's school administrators, principals, 
psychologists, teachers and students represent the front-line 
in our efforts to identify the potential for school violence 
and to take actions to prevent it. Accordingly, the 
subcommittee examined challenges faced in our schools, and the 
reasons that underlie them.
    (2) On August 4, 1999, the subcommittee held a hearing 
entitled, ``What Is HUD's Role in Litigation Against Gun 
Manufacturers?'' On Wednesday, July 28, 1999, the Wall Street 
Journal published an article entitled, ``HUD May Join Assault 
on Gun Makers.'' According to a source in the article, HUD had 
asked outside law firms to consider options for a lawsuit to be 
brought against gun manufacturers by the 3,400 public housing 
authorities that receive Federal funding.
    The justification for the lawsuit reportedly was based on 
the premise that public housing areas tend to harbor a 
disproportionate amount of gun-related violence, therefore the 
gun manufacturers should provide funding to increase security 
measures and emergency medical services for the afflicted 
neighborhoods. While HUD would not necessarily be a direct 
litigant in the suit, the Wall Street Journal article indicated 
that the agency was considering organizing the federally funded 
housing authorities for purposes of a lawsuit. According to the 
news article, the Department of Justice could be a potential 
impediment to HUD entering into the litigation.
    At the time of the hearing, there were 23 cities and 
counties throughout the country that already had waged court 
fights against gun manufacturers. The hearing examined 
litigation issues, including the appropriateness of HUD 
intervening into this litigation.
    (3) On November 4, 1999, the subcommittee held a hearing 
entitled, ``Project Exile: A Case Study in Successful Gun Law 
Enforcement.'' Prior to 1997, for almost a decade, gun violence 
had plagued the city of Richmond, VA. The city had become one 
of the top five cities in the Nation with the highest per 
capita murder rates. In 1997, the U.S. attorney's office in 
Richmond instituted a coordinated effort with local police, 
State police, Federal investigators, and local and Federal 
prosecutors to respond to this problem. The response was an 
initiative identified as ``Project Exile.'' The initiative 
enlisted support and assistance from a coalition of businesses, 
business and nonprofit organizations, and community and church 
    The approach taken in Project Exile was to prosecute in 
Federal court cases involving felons with guns, gun/drug cases, 
and gun/domestic violence cases. Federal prosecutions had the 
advantage of stiffer bond rules and tougher sentencing 
guidelines, with mandatory minimum sentences. Additionally, a 
significant outreach and advertising effort was conducted, with 
substantial private sector financial contributions and 
assistance. The media message was simple and direct: ``An 
illegal gun will get you 5 years in Federal prison.'' The 
message was conveyed by television, radio, billboards, and 
business cards. A telephone number was provided for anonymous 
    After 1 year, more than 200 armed criminals were removed 
from Richmond's streets. More importantly, for the period 
November 1997 through May 1998, homicides were down 65 percent 
from the same preceding time period. In 1999, homicides in 
Richmond continued to drop. Project Exile has received 
bipartisan support, and is being studied for replication in 
various cities across the country. The Department of Justice 
has been criticized for not doing enough to support efforts 
aimed at implementing the approach in other jurisdictions.
3. International Commerce and Trade.
    a. Summary.--Subcommittee hearings on the critical economic 
issue of the Nation's trade deficit explored reasons that 
underlie the deficit as well as implications for our Nation's 
future. A topic of specific importance to the subcommittee was 
that of unfair trading practices. A related issue was examined 
in the hearing on defense offsets. That hearing identified 
benefits and costs to current practices in allowing defense 
    b. Benefits.--The subcommittee's examination of the U.S. 
trade deficit highlighted the need to encourage and promote 
U.S. exports, and to identify and prevent unfair trade 
practices. The following hearing on defense offsets revealed 
the lack of comprehensive and reliable information in 
determining the magnitude and scope of current practices in 
engaging in offsets. The subcommittee requested that GAO 
produce a report to gather better information on the quantity 
and nature of offsets and to determine whether an official 
mechanism should be created to gather the information. Better 
information on the benefits and costs will enable the Nation to 
better regulate and monitor offsets in the world marketplace, 
and to ensure that national security interests are protected.
    c. Hearings.--In 1999, the subcommittee held hearings on 
the Nation's growing trade deficit, and the costs and benefits 
of defense offsets.
    (1) On March 25, 1999, the subcommittee held a hearing 
entitled, ``A Record Trade Deficit, How Can the U.S. Government 
Prevent a Looming Trade Crisis?'' The hearing examined the 
increasing U.S. trade deficit that, in 1998, reached an all-
time high of $233.4 billion. This deficit represented an 
increase of approximately 50 percent over the 1997 deficit. The 
Commerce Department predicted that the 1999 U.S. deficit could 
reach $300 billion. In 1998, the growing deficit was 
accompanied by a fall in U.S. exports of goods and services. 
The hearing highlighted critical problems and risks associated 
with the growing deficit, including the role of unfair trading 
practices and the possibility that the deficit during an 
economic downturn could undermine U.S. public and industry 
support for free trade.
    (2) On June 29, 1999, the subcommittee held a hearing 
entitled, ``Defense Offsets: Are They Taking Away Our Jobs?'' 
Offsets generally reflect practices where a purchasing entity, 
usually a government, demands that a seller not only provide a 
service or product, but in addition helps the purchaser to 
obtain additional technology, business, or investment. For 
example, offset agreements may commit the seller firm to 
provide technology, purchase locally produced components, or 
provide other forms of assistance to the buyer country that go 
beyond compensation economically necessary to support the sale.
    Offsets are particularly prevalent in military sales 
contracts with foreign countries. By signing a contract with 
the U.S. Government or a U.S. company to purchase military 
equipment, a foreign government essentially agrees to spend 
money abroad that could theoretically be spent domestically to 
directly promote industry and employment. In order to justify 
this expenditure, foreign governments often seek to ensure that 
the transaction will directly benefit their own economy. 
Ordinarily, offset agreements specify the type and monetary 
value of the offsets required. While an individual agreement is 
usually specific in stating its offset requirements, these 
offset agreements can contain a variety of activities that U.S. 
contractors agree to undertake to satisfy their obligations.
    Offsets generally fall into two categories: direct and 
indirect offsets. Direct offsets are side benefits to the 
purchasing country that directly relate to the goods and 
services sold in the transaction. Indirect offsets involve 
goods and services unrelated to the exports referenced in the 
contract. The General Accounting Office has identified several 
different types of offsets. Co-production, subcontracting, 
technology transfers and procurements are the most prevalent 
forms of offsets used in the aerospace industry. Co-production 
occurs when defense companies agree to assemble, build, or 
produce articles for the weapon system sale in the buyer's 
country. Subcontracting occurs when a U.S. contractor procures 
defense-related components and subsystems for exports from 
suppliers in countries where the contractor has offset 
obligations. In a study done by the General Accounting Office, 
co-production and subcontracting accounted for 20 percent of 
the reviewed transactions. Technology transfers are commonly 
used to satisfy offset obligations and often accompany co-
production and subcontracting activities. Technology transfers 
are also commonly used in indirect offsets, unrelated to the 
contract at hand. Technology transfers may take the form of 
research and development conducted abroad, technical 
assistance, or training to the buyer country. Procurement is an 
indirect offset activity that involves the purchase of goods 
and services unrelated to the sale. If an American company is 
involved in an offset agreement with a foreign country, the 
American company will often purchase unrelated items from the 
foreign country in an effort to strengthen relations with the 
foreign country.
    In April 1990, the first formal statement on offsets policy 
by the U.S. Government declared a policy of noninvolvement in 
defense offsets. Any exceptions to the policy must be approved 
by the President through the National Security Council. Policy 
statements in the 1997 National Export Strategy augmented this 
policy on offsets by: discouraging foreign governments from 
requiring offsets; giving U.S. support to any U.S. company 
forced to comply with an offsets agreement; and acknowledging 
that further monitoring is needed.
    The aerospace industry is central to a discussion of 
offsets. U.S. technology and weapon systems, notably aerospace, 
are some of the best available on the world market. The Bureau 
of Export Administration's database (1993-1996) indicates that 
more than 90 percent of the dollar value of all new offset 
agreements ($13.8 of $15.1 billion) were written against 
aerospace exports. Domestic and international sales by U.S. 
aerospace companies in 1998 are estimated at $140 billion, or 
about 3 percent of all U.S. manufacturing activity. The 
industry currently employs approximately 890,000 Americans. The 
industry's export performance has been most remarkable, 
particularly when compared to that of other U.S. industries. In 
1997, aerospace exports totaled $59 billion, while imports of 
aerospace products reached about $22 billion. This means the 
U.S. trade surplus in aerospace products was roughly $37 
billion, a continuation of a long-term trend of positive trade 
    Today about 50 percent of U.S. aerospace products are sold 
to the U.S. Government for defense, space, and air traffic 
control. Of the other 50 percent, about 75 percent is exported 
to both commercial and military buyers. Government purchases 
are expected to remain flat, so that most growth in the 
industry will depend on success in the international market 
    This hearing discussed the impact of offsets on the U.S. 
economy and whether or not offsets unfairly take jobs away from 
the United States.
4. Immigration and Naturalization Service Operations and Resources.
    a. Summary.--The subcommittee hearing on the role of the 
Immigration and Naturalization Service [INS] in assisting State 
and local efforts to enforce laws and protect communities and 
businesses, revealed the need for significant operational 
improvements. Despite the commitment of substantial Federal 
resources to meet INS responsibilities, the hearing revealed 
that INS is deficient in its obligations to States and local 
governments, and to U.S. citizens.
    b. Benefits.--The need for greater enforcement of our 
Federal laws and coordination with local officials by INS was 
demonstrated. Improvements reportedly are underway. The 
subcommittee will continue to monitor INS progress to ensure 
that public safety is enhanced, our businesses and economy 
protected, our public dollars spent more wisely and immigration 
laws better enforced.
    c. Hearings.--On April 19, 1999, the subcommittee held a 
hearing entitled, ``INS Support for Local Efforts: Are There 
Sufficient Federal Resources?'' The hearing focused attention 
on problems encountered by local law enforcement officials, 
including problems posed by the failure of the Federal 
Government to apprehend and deport illegal aliens, especially 
those with criminal histories.
    From fiscal year 1993 to fiscal year 1998, Congress more 
than doubled the budget of the Immigration and Naturalization 
Service [INS], from $1.5 to $3.8 billion. INS staffing during 
this period increased from approximately 18,000 to nearly 
29,000 permanent positions, representing a 60 percent increase. 
INS is now the largest corps of Federal civilian employees 
empowered to make arrests and carry firearms. At the end of 
fiscal year 1997, the Federal Bureau of Prisons [BOP] estimated 
that 27 percent of its inmates in Federal and federally 
contracted correctional facilities were non-citizens subject to 
removal proceedings. From fiscal year 1993 to fiscal year 1998, 
funding for the Detention and Deportation Program grew from 
$193 to $733 million--an increase of 280 percent.
    The hearing addressed the need to respond to increasing 
State problems associated with the influx of illegal aliens.
5. Student Education Loans.
    a. Summary.--The subcommittee examined the operations of 
the Department of Education's student loan programs and 
identified numerous problems and deficiencies. The hearing 
explored a number of the problems recently identified in 
reviews conducted on the agency's operations, including reviews 
by the General Accounting Office [GAO] and the Department's 
Office of Inspector General. In particular, the subcommittee 
examined issues associate with the fairness and efficiency of 
the Department's Direct Loan Program in comparison with 
competing loan programs regulated by the Department.
    b. Benefits.--The hearings benefited the Department and 
other loan providers and servicing organizations by identifying 
deficiencies in Department of Education operations that result 
in problems and inefficiencies. Avoidable loan default 
consequences were identified for which changed regulations and 
practices are needed. As a consequence, the Department of 
Education is reportedly addressing some of the identified 
problems, and further streamlining its loan operations. The 
benefits of improved operations and fewer errors should accrue 
to many thousands of loan recipients across the Nation.
    c. Hearings.--On June 17, 1999, the subcommittee held a 
hearing entitled, ``Department of Education's Student Loan 
Programs: Are Tax Dollars At Risk?'' The hearing examined 
problems and issues associated with the Department of 
Education's regulation and administration of student loan 
    Title IV of the Higher Education Act [HEA], reauthorized in 
the 105th Congress, provides nearly $42 billion in federally 
supported student assistance (including grants, loans and work 
assistance), representing the largest source of aid for 
students. In fiscal year 1998, the combined student loans of 
the Federal Family Education Loan Program [FFELP] and the 
Federal Direct Loan Program ([FDLP] or ``Direct Loan'' Program) 
equaled $31.6 billion. The types of loans issued include: need-
based subsidized Stafford loans (government pays interest while 
borrower is in school); unsubsidized Stafford loans; Federal 
plus loans (for parents of undergraduates); and Federal 
consolidation loans. Student loan volume is increasing--from 
$24 billion in fiscal year 1994 to $32 billion in fiscal year 
1998. The average cumulative debt for undergraduates in 1995-
1996 was almost $12,000. Both FFELP and the Direct Loan Program 
are entitlements, with funding provided on a permanent 
indefinite basis, not subject to appropriations. Borrower 
defaults represent a significant Federal cost. Upon default, 
the guaranty agency or Federal Government engages in collection 
efforts. According to the General Accounting Office [GAO], the 
Federal Government paid out over $3.3 billion to cover 
defaulted student loans in fiscal year 1997. CRS reports annual 
default rates in fiscal year 1998 were $2 billion; collections 
in fiscal year 1998 were $1.8 billion. Cumulative FFELP 
defaults since fiscal year 1966 through fiscal year 1996 were 
$28.8 billion, out of total loan volume of more than $220 
billion. In recent years, default rates have declined and are 
now calculated at slightly below 10 percent, although 
implications of the definition and calculation of ``default'' 
are unclear.
    FFELP is one of the largest public/private partnerships 
sponsored by the Federal Government. FFELP, authorized by Part 
B of Title IV of the HEA, insures and subsidizes loans that 
private lenders make to students or their parents to assist 
with costs of post-secondary education. FFELP loans account for 
about two-thirds of the estimated $32.2 billion loan volume for 
fiscal year 1999. The Federal Government guarantees lenders 
against loss through borrower default, or death, permanent 
disability, or, in limited instances, bankruptcy. Besides 
lenders, FFELP involves secondary markets that buy loans from 
lenders and provide liquidity in the program, and the State and 
national nonprofit guaranty agencies that insure lenders 
against borrower default and provide other administrative 
    In 1993, the Federal Direct Loan Program was authorized 
under Part D of the HEA. The Direct Loan Program competes with 
FFELP for student loan business. The Direct Loan Program has 
made more than $30 billion in loans to students pursuing post-
secondary education, and currently accounts for about one-third 
of total student loan volume. Unlike FFELP, the Direct Loan 
Program loans are made by the Federal Government to students 
through their schools, without utilizing private capital or 
guaranty agencies. Schools may serve as direct loan 
originators, or the loans may be originated by Education 
Department contractors. The Direct Loan Program has additional 
repayment options, including income contingent repayment.
    Outside reviews have identified significant issues and 
challenges facing the Department of Education in administering 
its loan programs. Since the establishment of the Federal 
Direct Loan Program, specific issues have been identified and 
questions raised regarding the program's administrative costs, 
effectiveness and efficiency. The Advisory Committee on Student 
Financial Assistance, created by Congress as an independent 
source of advice and counsel to Congress and the Secretary of 
Education on student aid policy, has issued a number of reports 
identifying issues and recommending improvements regarding the 
Department's student loan programs.
    The GAO, in its January 1999 report ``Education Department: 
Major Challenges and Program Risks,'' designated student loan 
programs as a ``high risk'' for fraud, waste, abuse, or 
mismanagement. The GAO report concluded that: ``Education 
continues to lack the financial and programmatic information 
necessary to effectively budget for and manage its student 
financial programs and to accurately estimate the government's 
liabilities. For example, Education continues to lack accurate, 
reliable data on costs associated with outstanding student 
loans.'' GAO noted that the Education Department is responsible 
for tracking approximately 93 million student loans and 
collecting more than $150 billion owed by students.
    Macro International, Inc. (``Macro'') contracted with the 
Education Department to evaluate the administration of the 
Direct Loan Program. Part of the evaluation being conducted by 
Macro--comparing administrative costs of the Direct Loan 
Program to FFELP administrative costs--was canceled by the 
Department. Macro issued a 1999 report covering Direct Loan 
Program administration for the years 1993-1998. A follow-up to 
the Macro cost comparison effort was completed by the 
Department's Office of Inspector General [OIG]. The OIG report 
(March 1999) included found that: ``inefficiencies likely 
affect the Department's administration of the two programs 
[FFELP and FDLP]. To approximate the effect of these 
inefficiencies, we compared our estimate of the Department's 
cost to manage the FDLP--$17 per loan--to the average cost that 
we estimated (based on Treasury research) that large private 
lenders would have incurred to manage the FDLP--$13 per loan.'' 
Specific factors--including incompatible systems and missing 
data--were identified as apparently contributing to cost 
    The Semiannual Report to Congress (October 1, 1998-March 
31, 1999) by the Department of Education OIG, identifies 
problems and issues associated with the Department's student 
loan programs, ranging from fraud investigations and 
prosecutions to improving the management of default aversion 
    Other topics associated with the Education Department's 
student loan programs discussed at the hearing included: the 
Direct Loan Program's advantages due to higher administrative 
costs and the Department's regulatory authority over 
competitors; educational institutions apparently preferences 
for FFELP; the adequacy of default prevention, loan 
consolidation, loan collection, and reconciliation practices; 
and challenges facing the Department's new Performance Based 
6. Health Issues.
    a. Summary.--Among the most important and complex health 
issues facing the United States and other nations of the world 
is that of ensuring the most effective and safe administration 
of vaccines possible to combat serious and deadly diseases and 
illnesses. The subcommittee hearings identified problems 
associated vaccine administration for Hepatitis B, and problems 
associated with the Nation's vaccine injury compensation 
practices. A hearing devoted to the international HIV/AIDS 
epidemic revealed serious questions regarding the 
administration's policies that restrict the availability of 
drug treatment in certain foreign nations, such as South 
Africa. Two hearings devoted to Federal human subjects research 
oversight revealed serious shortcomings. Finally, a field 
hearing examined the quality of care being received by seniors 
and how regulatory policies and practices of the Department of 
Health and Human Services [HHS] impact such care.
    b. Benefits.--The hearings provide a forum that brought 
attention to numerous vaccine administration issues and vaccine 
injury compensation needs. Soon after the hearing on Hepatitis 
B, the U.S. Surgeon General announced changes to existing 
vaccination practices due to issues that had surfaced. After 
the subcommittee hearing on vaccine injury compensation 
practices, the Department of Justice began immediate training 
efforts for its attorneys dedicated to handling these claims. 
Further recommended actions were communicated to the Federal 
agencies and court officials by a bipartisan letter issued by 
the chairmen and ranking members of the full committee and 
subcommittee. The subcommittee and the full committee endorsed 
recommended reforms in the vaccine injury compensation program, 
reflected in bipartisan acceptance of the sixth report of the 
Committee on Government Reform (House Report No. 106-977), 
issued on October 12, 2000. Benefits of the hearings on human 
subjects research included bipartisan support for agency 
oversight improvements and reforms that would better protect 
the lives of those involved. The hearing on HHS regulation of 
healthcare and impacts on seniors revealed a continuing need 
for increased efficiencies and fairness.
    c. Hearings.--In 1999, the subcommittee held hearings on 
the safety of specific childhood vaccines and vaccination 
practices, the workings of the Federal program for compensating 
vaccine injuries, U.S. policies and practices that may limit 
other nations in providing much needed drug treatment to 
millions of HIV/AIDS infected persons, and oversight of human 
subjects research.
    (1) On May 18, 1999, the subcommittee held a hearing 
entitled, ``Hepatitis B Vaccine: Helping or Hurting Public 
Health?'' Hepatitis B vaccines currently administered are made 
using recombinant DNA technology. In 1986, the Food and Drug 
Administration gave certain pharmaceutical companies a license 
to market the first recombinant DNA vaccine. The vaccine is 
administered in three separate doses. The Centers for Disease 
Control [CDC] reports that Hepatitis B vaccines provide 95 
percent protection against chronic Hepatitis B infection.
    In 1991, the CDC issued guidelines recommending three doses 
of the vaccine for at-risk groups including: people with 
multiple ex partners, intravenous drug users, health 
professionals coming into contact with blood and every child 
born after 1990. Based on these guidelines, 42 States mandated 
the vaccine as a requirement for entering kindergarten. These 
State mandates have been of concern to some parents groups who 
argue that parents should not have to vaccinate their child if 
they have serious doubts about its appropriateness. In January 
1995, the CDC recommended universal immunization of children up 
to age 18. The CDC and the Federal Drug Administration [FDA] 
maintain the Vaccine Adverse Events Reporting System, which was 
established in 1986. While reports of adverse reactions to 
vaccines are usually reported by physicians, anyone can submit 
a report to VAERS.
    The National Vaccine Information Center [NVIC], an advocacy 
group dedicated to preventing vaccine injuries and deaths 
through public education, reported that between 1990 and 1998 
the system received 24,775 reports of adverse reactions to 
vaccinations including the Hepatitis B vaccination. The Center 
reported that more than two-thirds (16,000) of these reactions 
were from patients who had received only the Hepatitis B 
vaccine. The CDC asserted that Hepatitis B vaccines have been 
shown to be very safe when given to infants, children or 
adults. More than 20 million persons have received Hepatitis B 
vaccine in the United States.
    (2) On July 22, 1999, the subcommittee held a hearing 
entitled, ``What Is the U.S. Role in Combating the Global HIV/
AIDS Epidemic?'' Although the Acquired Immuno Deficiency 
Syndrome [AIDS] gained the world's attention less than 20 years 
ago, the virus has quickly grown to become one of the leading 
causes of death worldwide. Since 1994, AIDS has been the 
leading killer among adults between 25 and 44 years of age. 
Over 33 million adults and children are currently estimated to 
be living with HIV/AIDS. According to World Health Organization 
estimates, 11 men, women and children were infected with HIV/
AIDS per minute in 1998, bringing the total new infections for 
1998 close to 6 million. Since the beginning of the epidemic, 
13.9 million people have died due to the AIDS virus.
    Many of the viruses and diseases throughout history have 
remained relatively isolated to a specific region of the globe. 
The AIDS epidemic, however, has grown to impact almost every 
country in the world. The increasing globalization of the 
world's economy has further accelerated the spread of AIDS. 
Among the hardest hit in recent years have been the populations 
of developing countries. Of the 33.4 million people currently 
estimated to be living with HIV/AIDS worldwide, 95 percent 
(31.7 million) live in the developing world. Young adults in 
the prime of their productive and reproductive lives make up 
the most populous portion of the infected population. The 
impact of this statistic is worth noting for many reasons, 
including economic considerations in addition to health and 
humanitarian. In developing countries (as well as in 
industrialized countries), an epidemic that is concentrated 
among the young adult population will inevitably impact the 
productivity of the economy at large. As examples, productivity 
will decrease, the pool of skilled managers will diminish, 
health care systems will become overburdened, orphanhood will 
increase, life expectancy will decrease, all of which will 
further aggravate the struggling economies of all developing 
    Of the 33.4 million people infected worldwide, almost 23 
million victims live in Africa. Of this 23 million, 22.5 
million inhabit the region south of Saharan desert. While only 
one-tenth of the world's population lives in sub-Saharan 
Africa, the region accounts for 83 percent of all AIDS deaths. 
An UNAIDS report entitled, ``AIDS Epidemic Update: December 
1998'' estimates that 11.5 sub-Saharan Africans have died from 
the AIDS virus, a quarter were children. Sub-Saharan Africa has 
also faced the fastest spread of HIV/AIDS in the world. Of the 
5.8 million new HIV infections worldwide reported in 1998, 4 
million came from sub-Saharan Africa.
    Though 95 percent of all new HIV infections occur in 
developing countries, more than 90 percent of resources spent 
on HIV/AIDS prevention and care are devoted to people in 
industrialized countries. In other words, anti-HIV drugs are 
unavailable to more than 90 percent of the world's HIV 
sufferers. Furthermore, the developing world simply cannot 
afford the current high costs of treatment. AZT and the newer 
AIDS drugs cost between $500 and $1,000 a month, yet in sub-
Saharan Africa, for instance, the average annual income is $500 
a year.
    A central issue in the drug treatment access debate is how 
best to increase access to treatment drugs. In order to 
circumvent paying the high costs for AIDS drugs, for example, 
some developing countries are promoting parallel imports and 
compulsory licensing to increase the availability of AIDS drugs 
in their countries.
    Parallel imports (sometimes referred to as ``gray market'' 
imports) are cross border trade in a product, without the 
permission of the manufacturer or publisher. Parallel imports 
take place when there exists significant price differences for 
the same good in different markets. Parallel imports impact the 
pharmaceutical industry because of the substantial price 
differences in different markets. These varying prices are 
primarily due to differing levels of market competition and 
differences in intellectual property laws and regulations.
    When parallel importing is used with patented goods such as 
pharmaceuticals, an issue may arise regarding the 
``exhaustion'' of intellectual property rights and the resale 
of a legally purchased good. For example, if a French company 
legally purchases a patented AIDS treatment drug from an 
American drug company, the French company can turn around and 
sell the drug to the South African Government, perhaps at a 
dramatically reduced price.
    Compulsory licenses are licenses that are granted by a 
government to use patents, copyrighted works or other types of 
intellectual property. Compulsory licenses are used by a 
government to intervene in the market and limit patent and 
other intellectual property rights in order to prevent unfair 
market prices. The authority to issue a compulsory license is 
important, even when the right isn't exercised, because it may 
temper the exercise of market power or the abuse of a patent. 
In terms of pharmaceutical production, in times of a national 
emergency, trade agreements may permit the government of a 
developing country to grant production rights to a local 
    These two market access methods lie at the heart of the 
HIV/AIDS drug trade dispute. On the one hand, the drug 
producing companies argue that these methods practices may 
promote generic drugs that undermine research incentives and 
place unregulated, substandard drugs on the market. Much of the 
revenue from highly priced drugs, pharmaceuticals argue, gets 
reinvested in costly research initiatives. If countries are 
allowed to produce their own drug products, then companies will 
be less likely to invest in the research necessary to discover 
new and improved drugs. In addition, compulsory licensing and 
parallel importing increase the availability of generic, 
unregulated drugs. AIDS treatment drugs are much more 
sophisticated than your typical over the counter drug. These 
AIDS drugs must be taken on a regimented schedule, under 
certain conditions, and often times the drugs must be stored at 
certain temperatures. Pharmaceuticals fear that if generic 
drugs are not properly distributed, new strands of HIV may 
develop that will be resistant to the treatments.
    In addition to the arguments above, drug company supporters 
suggest that compulsory licensing and parallel importing are in 
violation of the World Trade Organization agreement on Trade-
Related Aspects of Intellectual Property Rights [TRIPS]. 
However, due to disagreements at the time of the TRIPS 
negotiations, rules governing parallel importing and compulsory 
licensing were intentionally left ambiguous, leaving 
settlements up to the players involved. TRIPS provides for 
compulsory licenses of patents in Article 31, but also provides 
a number of restrictions on the use of compulsory licenses. 
TRIPS addresses parallel importing indirectly by addressing the 
exhaustion of intellectual property rights. The agreement also 
provides ``For the purposes of dispute settlement . . . nothing 
in this Agreement shall be used to address the issue of the 
exhaustion of intellectual property rights.'' Parallel 
importing disputes cannot come before the WTO for the purposes 
of dispute settlement.
    In 1997, the South African legislature passed the 
``Medicines and Related Substances Control Amendment Act No. 90 
of 1997'' that essentially gave the Minster of Health the 
ability to parallel import and compulsory license as needed. 
The goal of this legislation was presumably to make more HIV/
AIDS treatment drugs available to a country experiencing a 
national emergency because of the HIV/AIDS epidemic. However, 
pharmaceutical companies worldwide gathered together to take 
the bill to the South African court to test its 
constitutionality. The legislation has been held up in court 
since its passage and has not been implemented. South Africa's 
1997 Medicines Act has become the central focus of the drug 
treatment trade dispute. The pharmaceutical companies have 
gained the assistance of the administration in disputing the 
South African Medicines Act.
    On April 30, 1999, the Office of the U.S. Trade 
Representative announced the results of its Special 301 annual 
review, which ``examines in detail the adequacy and 
effectiveness of intellectual property protection in over 70 
countries.'' The USTR placed South Africa on a ``watch list,'' 
determining to conduct an out-of-cycle review of South Africa's 
intellectual property laws this September. The Trade 
Representative called upon the Government of South Africa to 
``clarify that the powers granted in the Medicines Act are 
consistent with its international obligations and will not be 
used to weaken or abrogate pharmaceutical protection.''
    In addition to pressure from the administration, a rider 
was inserted into the fiscal year 1999 omnibus appropriations 
law cutting off aid to the Government of South Africa, pending 
a State Department report outlining its efforts to ``negotiate 
the repeal, suspension, or termination of section 15(c) of 
South Africa's Medicines and Related Substances Control 
Amendment Act No. 90 of 1997.''
    With a majority of the HIV/AIDS research resources being 
spent in industrialized countries, and with 95 percent of HIV/
AIDS victims living in developing countries, a simple and 
comprehensive solution to the growing global HIV/AIDS problem 
is not apparent. This hearing examined the nature and magnitude 
of the epidemic and effective approaches to combating it--
including breakthroughs in the discovery of promising vaccines 
and the expanded availability of drug treatments.
    (3) On September 28, 1999, the subcommittee held a hearing 
entitled, ``Compensating Vaccine Injuries: Are Reforms 
Needed?'' The National Vaccine Injury Compensation Program, 
Subtitle 2 of Title XXI of the Public Health Service Act was 
enacted on October 1, 1988. The program is administered jointly 
by the Department of Health and Human Services [HHS], the U.S. 
Court of Federal Claims (the Court), and the Department of 
Justice [DOJ]. The program was designed as a Federal ``no-
fault'' system designed to compensate those individuals, or 
families of individuals, who have been injured by childhood 
vaccines. Vaccines covered under the program include: 
diptheria, tetanus, pertussis, (DTP, DTaP, DT, TT, or Td), 
measles, mumps, rubella (MMR or any components), and polio (OPV 
or IPV), whether administered individually or in combination. 
Hepatitis B, Haemophilus influenzae type b, and varicella 
(chicken pox) vaccines were added for coverage under the 
program in 1997, and the Rotavirus vaccine was added to the 
program in 1998. Eight years' retroactive coverage is provided 
for vaccine-related adverse events associated with these newly 
added vaccines. The program is funded by a 75-cent per-dose 
excise tax paid by the vaccine manufacturer.
    A claim may be made for any injury or death thought to be 
the result of a covered vaccine. Claims may be filed by the 
injured individual; or a parent, legal guardian, or trustee may 
file on behalf of a child or an incapacitated person. 
Compensable injuries are either those listed in the Vaccine 
Injury Table, or those which petitioners can demonstrate were 
caused by the vaccine.
    The program was set up to work in the following manner: 
First, an individual claiming injury or death from a vaccine 
files a petition for compensation with the Court and with the 
Secretary of HHS. The Secretary of HHS is named as the 
respondent. Next, a physician at the Division of Vaccine Injury 
Compensation, HHS, reviews the petition to determine whether it 
meets the medical criteria for compensation and makes a 
recommendation on compensability. This recommendation is 
provided to the Court through a report filed by DOJ, although 
it is not binding. The HHS position is represented by an 
attorney from DOJ in hearings before a ``Special Master.'' The 
Special Master is a full-time attorney appointed by the judges 
of the Court to decide vaccine injury compensation cases. The 
Special Masters operate in a manner that is similar to other 
Federal administrative judges, applying evidentiary burdens and 
adjudicative standards to available facts and expert testimony. 
Special Masters prefer to be acknowledged as judges. Their 
decisions may be appealed to the Court, then to the Federal 
Circuit Court of Appeals, and finally to the U.S. Supreme 
Court. No action may be filed under this program if a civil 
action is pending for damages related to the vaccine injury, or 
if damages were awarded by a court or in a settlement of a 
civil action against the vaccine manufacturer or administrator.
    Petitioners are not required to have attorney 
representation during this process, but petitioners almost 
always obtain legal counsel to represent them for reasons that 
include: strict procedural rules, complex medical evidence, 
onerous evidentiary and burden of proof standards, and 
adversarial hearing practices and compensation determinations 
involving DOJ attorneys. The act provides for the payment of 
reasonable attorney's fees and costs, regardless of the Court's 
decision on compensability, providing the case is brought in 
good faith and there is a reasonable basis for the claim.
    Guidelines for vaccine related injuries are as follows: 1) 
reasonable compensation for past and future unreimbursable 
medical, custodial care, and rehabilitation costs; 2) $250,000 
cap for actual and projected pain and suffering, emotional 
distress; 3) lost earnings; 4) reasonable attorneys' fees and 
costs; and 5) deadline for filing: within 36 months after the 
first symptoms appeared.
    Guidelines for vaccine related deaths are as follows: 1) 
$250,000 for the estate of the deceased; 2) reasonable 
attorneys' fees and costs; and 3) deadline for filing: within 
24 months of death and within 48 months after the onset of the 
vaccine-related injury from which the death occurred.
    Since the program's inception, approximately 6,000 
petitions have been filed with the program, 75 percent of which 
involved pre-1988 vaccine injury allegations. Of cases 
adjudicated, more than 3,500 have resulted in dismissal. Over 
the past 11 years, the National Vaccine Injury Compensation 
Program has allocated over $1 billion in compensation.
    The National Vaccine Injury Compensation Program was 
established to provide a no-fault alternative to litigating 
adverse reactions to childhood vaccinations for certain 
childhood diseases. The number of adverse reactions to 
childhood vaccines is small relative to the number of injuries 
for other products, medical malpractice, or motor vehicle 
injuries. The program was designed to operate expeditiously. In 
December 1989, Congress amended the statute, in part to 
simplify court procedures. The Conference Report explaining the 
amendment admonished all involved with the program to 
rededicate themselves ``to the creation of an expeditious, less 
adversarial, and fair system.'' In cases not clearly falling 
within coverage of the Vaccine Injury Table, some petitioners 
claim that causation and compensation issues have become very 
adversarial, including reports of questionable tactics in 
attempting to discredit petitioner's expert witnesses. There 
are reports of cases being handled in an adversarial manner for 
many years before a final verdict, as well as appeals by DOJ of 
adverse decisions.
    As amended and currently applied, the Vaccine Injury 
Table--which is central to compensation adjudications--is 
considered by some petitioners to be unnecessarily restrictive. 
It is argued that if a claim does not fit squarely within the 
table, the research used to support the criteria in the table 
is relied upon by DOJ to argue against petitioner claims, with 
a frequently insurmountable medical/scientific burden (a 
preponderance of the evidence standard) resting upon the 
claimant to show causation. This is particularly difficult in 
areas where scientific research is incomplete and evolving. If 
the likelihood of causation is found to be 50 percent or less 
and the case is not covered by the Vaccine Injury Table, the 
petitioner loses. Also, petitioners claim that the amount of 
compensation is determined restrictively, with recent opinions 
relying on sovereign immunity principles to favor decreased 
award amounts.
    Currently, the program has $1.4 billion in trust for making 
vaccine injury compensation awards. During fiscal year 1999 
(through August 30, 1999), 392 petitions have been filed, and 
awards so far this year have totaled $99.2 million. Awards to 
individuals with an injury judged to be vaccine related have 
averaged $800,737. At a full committee hearing in August, 
Surgeon General Satcher revealed that HHS Secretary Shalala is 
considering proposing the reduction of the per-dosage tax paid 
into the fund. In addition, the idea of devoting a large 
portion of the National Vaccine Injury Compensation Program's 
moneys to vaccine research was discussed.
    While the fund contains a significant sum of money, the 
subcommittee raised the issue of whether efforts to reduce 
funding sources (vaccine taxes) or to use the moneys for other 
purposes (e.g., vaccine research) were premature. Vaccine 
research is now exploding, with many promising vaccines on the 
horizon. It is predictable that childhood vaccinations will 
grow in number, as will required vaccinations by those in the 
health field and other recipients. Adverse reactions will 
continue to occur.
    A number of legislative proposals have been introduced to 
amend the Public Health Service Act, the act that mandates the 
Vaccine Injury Compensation Program. These proposals range from 
extending the deadlines for submissions for claims and 
petitions, to reducing the tax on vaccines from 75 cents per 
dose down to 50 cents per dose. The Advisory Commission on 
Childhood Vaccines [ACCV] also proposed a number of changes to 
the program. These recommendations have been consolidated into 
one bill that HHS has sent to Congress for consideration. 
Following the hearing, a bipartisan letter signed by the 
chairmen and ranking members of the full committee and 
subcommittee was sent to HHS, DOJ, and the Court, requesting 
that interim improvements be made in the operation of the 
vaccine compensation program.
    (4) On December 9, 1999, the subcommittee held a field 
hearing in New York City, NY, entitled, ``Do Current Federal 
Regulations Adequately Protect People Who Participate in 
Medical Research?'' to examine the Office of Protection from 
Research Risks [OPRR] within the Department of Health and Human 
Services [HHS], and its oversight of human subjects research 
associated with Federal funding. Specifically, the hearing 
examined whether adequate protections are in place, including 
whether institutional review boards [IRBs] are operating 
properly and recommendations of the HHS Office of Inspector 
General [OIG] and the National Bioethics Advisory Commission 
[NBAC] are being implemented.
    Due to a growing concern over the safety of human research 
subjects, and the exponential growth of research involving 
medical and pharmaceutical industries, Congress determined that 
legal and regulatory safeguards to protect human subjects 
should be established. In regulations stemming from the 
National Research Act of 1974, and in FDA regulations issued in 
1981, the Institutional Review Board [IRB] process was formally 
    Institutional Review Boards review and approve research 
plans before research is carried out. This review encompassed 
the research protocol, the informed consent document to be 
signed by the subjects, any advertisements to be used in 
recruiting subjects and other relevant documents. In carrying 
out this review, IRBs seek to ensure any risks subjects may 
incur are warranted in relation to the anticipated benefits, 
that informed consent documents clearly convey the risks and 
the true nature of research, advertisements are not misleading 
and the selection of subjects is equitable and justified. IRBs 
review informed consent documents that are the vehicles for 
providing information to potential research subjects. In 
addition to the initial review, IRBs are responsible for 
conducting continuing oversight of research studies involving 
human subjects. This hearing discussed specific research and 
incidents involving research subjects.
    To provide oversight for these research projects, OPRR has 
set up agreements with more than 4,000 federally funded 
institutions to ensure common ethical standards for research 
activities. Each institution that receives funding must 
establish an Institutional Review Board [IRB] made up of 
doctors, scientists and patient representatives to clarify the 
standards that accompany Federal funding for research (e.g., 
Federal regulations require that a non-scientist and an 
individual not affiliated with the institution be included on 
every IRB). Under OPRR guidelines, all potential research 
subjects are to be fully briefed on the purpose, duration and 
procedures of a research project before agreeing to 
participation. OPRR also provides guidance to IRBs and 
administrators on the complex ethical issues relating to the 
use of animals and human subjects in research. OPRR has the 
authority to investigate and, if necessary, require corrective 
action or even suspend HHS funding to an institution until 
problems are resolved.
    In the early 1990's, the New York State Psychiatric 
Institute and the Mount Sinai School of Medicine and Queens 
College conducted studies that became the focus of OPRR 
investigations. Both institutions engaged in studies involving 
the administration of the drug fenfluramine to children who 
were determined by the researchers to be at risk of aggressive 
behavior. In these studies, researchers administered 
fenfluramine to produce increased levels of serotonin, a 
chemical produced by the brain that may help regulate behavior. 
Following administration of fenfluramine, researchers extracted 
blood through an intravenous catheter and measured changes in a 
blood chemical that is a by-product of serotonin production. 
The goal of the studies was to determine whether the serotonin 
levels in children may be affected by fenfluramine.
    The New York State Psychiatric Institute conducted its 
research on minority males aged 6-10 had an older sibling who 
was a juvenile offender. None of these children had ever been 
involved with the criminal justice system or exhibited violent 
behavior. The Mount Sinai School of Medicine conducted its 
research on white children over 12 years of age, all of whom 
came to the School for some kind of assistance, whether it was 
for attention deficit disorder, depression, or another form of 
mental disorder. Children in this study who were taking 
medication were subjected to a 1 month ``washout'' period 
during which they were removed from all medication. Both 
studies followed the same procedures, and both studies were the 
subjects of complaints filed with OPRR.
    In June 1998, OPRR issued its findings concerning the 
complaints. OPRR sharply criticized Mount Sinai and Queens 
College for procedural and substantive deficiencies in the 
research. OPRR found that it was impermissible to conduct the 
research on ``normal control children'' because they did not 
have the condition being studied and therefore could not 
legally be subjected to a greater than minimal risk experiment. 
OPRR did not penalize New York Psychiatric Institute. While 
OPRR found that the fenfluramine challenge exceeded the limits 
of minimal risk as defined by Federal law, it found the 
research unobjectionable because the IRB found that the 
``procedure was likely to yield generalizable knowledge about 
the subjects' condition which is of vital importance for the 
understanding or amelioration the subjects' condition.''
    The issue at stake in both studies dealt with the 
appropriateness of the human subjects, both those chosen and 
those excluded. The Mount Sinai study ended up receiving 
restrictions because it administered the tests on a control 
group of healthy children without signs of mental disorder or 
at risk of aggressive behavior. Prior hearings by the 
subcommittte in the 105th Congress had focused on this specific 
    The HHS Inspector General's Office issued a series of four 
reports on the effectiveness of IRBs in protecting human 
research subjects. The Inspector General made a number of 
findings and recommendations.
    Among the findings, the Inspector General noted that IRBs 
face major changes in the research environment, primarily that 
medical institutions are subject to increasing cost pressures 
due to the rise of managed care. In conjunction with the 
increase in managed care, a greater proportion of research is 
funded by commercial sponsors, and many research protocols are 
now multi-center trials involving thousands of subjects. This 
makes the IRB's task of overseeing research plans and human 
subject safety increasingly difficult.
    A second finding of the IG reports was that IRBs ``review 
too much, too quickly, with too little expertise.'' This has 
become especially apparent with the recent increase in multi-
center trials that have flooded the IRBs with adverse-events 
reports that the IRB must review. One IRB reported receiving 
200 such reports a month. In addition to the burdensome 
increase of adverse-event reports, the IG found that most of 
the review work done by IRBs involves paperwork, not on-site 
reviewing, and most of the review work results from 
investigating a complaint instead of resulting from regular 
oversight practices.
    A third IG finding was that IRBs experience conflicts that 
threaten their independence. Members of IRBs can be linked to 
the commercial groups that fund the research project. Pressures 
may arise from connections that are monetary, or less tangible 
influences such as the commercial group pressuring the IRB to 
expedite the plan's approval.
    In response to the findings listed above, the Inspector 
General made a series of recommendations to create a more 
streamlined approach to providing human-subjects protections, 
both at the local and Federal levels, while at the same time 
calling for a greater emphasis on accountability, performance 
and results.
    Institutional Review Boards should be granted more 
flexibility, but at the same time they should be held more 
accountable for their actions. For example, under current 
Federal regulations, IRBs must conduct full reviews of every 
research plan it oversees. The IG recommends that IRBs be 
allowed to strategize their reviews, focusing most of their 
attention on the studies most at risk of OPRR violations. At 
the same time, however, IRBs should undergo performance based 
evaluations made available to the public.
    The Inspector General report also recommends a 
reengineering of the Federal oversight process. In order to 
free up scarce OPRR resources currently devoted to reviewing 
and negotiating clinical research plans, the IG suggests 
reorienting the NIH/OPRR research approval process so that it 
rests essentially on an institutional attestation to conform to 
the IRB requirements set forth in Federal regulations. In 
addition, the IG recommends incorporating into their oversight 
efforts specific lines of inquiry to determine how well IRBs 
are actually protecting humans. This would call for the IRB to 
examine the processes of recruiting, selecting and gaining 
informed consent from human subjects to understand how the 
processes actually work.
    The IG also recommends strengthening the continuing 
protection for research subjects, moving beyond reliance on a 
signed informed consent document to ensure the integrity of the 
consent process itself. Existing groups like Data Safety 
Monitoring Boards could play a key role in this process of 
continuing protection, freeing the IRB up for other purposes.
    One other recommendation the IG reports makes is to enhance 
the education for research investigators and IRB members. For 
example, institutions that receive Federal funding for human 
subject research should have a program to educate investigators 
about human subject protections, a policy that is not currently 
in effect.
    The Inspector General's reports stressed that the 
effectiveness of the current system of human subjects 
protections is in need of reform--IRBs are struggling under 
intense workload and resource constraints, and the situation 
will likely intensify if funding for research is increased and 
if IRBs are expected to take on additional responsibilities.
    The hearing found that HHS and OPRR had not implemented 
major recommendations by the OIG and others, and that 
significant program deficiencies and dangers continue.
    (5) On April 10, 2000, in Fort Wayne, IN, the subcommittee 
held an oversight field hearing on the Health Care Financing 
Administration [HCFA], a component of the Department of Health 
and Human Services [HHS]. The hearing focused on HCFA's 
administration of Medicare benefits, including an examination 
of contractor practices and performance. Specific attention was 
devoted to issues of whether HCFA's regulations are unduly 
burdensome and deny due process to providers and beneficiaries. 
Service providers and patients expressed serious concerns and 
confusion regarding current regulations and practices.
    HCFA is the HHS agency with primary responsibility for 
administering the Medicare program. HCFA was created in 1977 to 
pull together the management of the Medicare and Medicaid 
programs. With expenditures of $316 billion, assets of $212 
billion, and liabilities of $39 billion, HCFA is the largest 
component of HHS. HCFA is also the largest single purchaser of 
health care in the world. In 1999, Medicare and Medicaid 
outlays represented 33.7 cents of every dollar of health care 
spent in the United States. The HHS Inspector General, in 
testimony before a congressional subcommittee on March 15, 
2000, noted that Medicare has 39.5 million beneficiaries, 870 
million claims processed and paid annually, complex 
reimbursement rules, and decentralized operations--resulting in 
the program being at risk for payment errors.
    Medicare makes payments based on a standard claim form. 
Providers typically bill Medicare using standard procedure 
codes without submitting detailed supporting medical records. 
However, regulations specifically require providers to retain 
supporting documentation and make it available upon request.
    Medicare is designed to provide health care coverage to 
people who are age 65 and older and to certain disabled 
persons. For fiscal year 1999, the total cost of the Medicare 
program was in excess of $200 billion, of which approximately 
$37 billion was spent on Medicare beneficiaries enrolled in 
prepaid health care plans commonly referred to as ``managed 
care organizations,'' and about $170 billion for the remaining 
85 percent of beneficiaries who chose Medicare's traditional 
pay-for-visit, or fee-for-service program. Medicare Part A--
hospital insurance--covers inpatient hospital care, some home 
health care, skilled nursing care and hospice services. 
Medicare Part B--supplementary medical insurance--covers the 
services which are provided by physicians, outpatient 
laboratories, and other service providers and suppliers.
    (6) On May 3, 2000, the subcommittee held a second hearing 
to discuss the Department of Health and Human Services [HHS] 
Office of Protection from Research Risks [OPRR]. The hearing 
examined HHS responses to the HHS Inspector General's 
recommendations to improve human research protection. The 
hearing identified continued deficiencies in OPRR policies and 
practices, and significant delays in fully implementing 
recommended and needed reforms. HHS selected new leadership for 
the program and reportedly further improvements are underway.
7. Housing and Urban Development Problems.
    a. Summary.--Subcommittee hearings on specific programs of 
the Department of Housing and Urban Development [HUD] revealed 
serious problems that support the agency ``at risk'' 
designation by the General Accounting Office [GAO]. HUD Federal 
Housing Authority [FHA] management and marketing efforts were 
found to have experienced serious and extensive waste, because 
it awarded a major contract covering 27 States to a company 
that proved incapable of performing its responsibilities. In 
addition, HUD developed and implemented an ill-defined 
``Community Builder'' program in a novel and questionable 
manner, resulting in the imposition of appropriations 
restrictions by Congress and critical reviews by the HUD Office 
of Inspector General.
    b. Benefits.--The subcommittee hearing identified serious 
problems of apparent waste and mismanagement. The findings have 
resulted in significant program changes and agency remedial 
actions. Also, continued monitoring is underway to identify and 
prevent further waste, and to provide remedies for some 
deserving businesses and individuals harmed by the defaulting 
HUD contractor. Continued monitoring is also underway to ensure 
that HUD does not repeat the mistakes made in administering the 
Community Builder program, and to better ensure that proper 
employment policies and practices are followed.
    c. Hearings.--On November 3, 1999, the subcommittee held a 
hearing entitled, ``Providing Adequate Housing: Is HUD 
Fulfilling Its Mission?'' The hearing examined two issues: (1) 
HUD's new property management and marketing program and agency 
problems with maintaining and selling houses to low and 
moderate income families; and (2) HUD's creation and 
administration of a new program that was intended to promote 
``community building.''
    The first hearing topic of HUD's new Marketing and 
Management initiative focused upon the failure of a major 
contract award to Intown Management Group. Intown went bankrupt 
soon after getting a $367 million contract from HUD, leaving 
many of its subcontractors and homeowners in financial 
distress. News reports indicate that one of the principals had 
a prior criminal conviction. The Assistant Secretary for 
Housing indicated that a clerk within the HUD Office of 
Inspector General might have been responsible for a deficient 
background check on the contractor. Subsequently, the Office of 
Inspector General indicated that it checks only its own 
records, as was communicated to HUD officials.
    The second hearing topic was HUD's community builders 
program, which hired 778 community builders at senior GS levels 
with accompanying high salaries during a period of planned 
budget cutting and personnel downsizing. Approximately one-half 
of the new hires involved the creation of temporary 
fellowships, utilizing special ``excepted service'' hiring 
authorities. Serious questions were raised about the selection 
and hiring process, the proper application of veteran 
preference requirements, nebulous roles and responsibilities 
assigned to community builders, identified and potential 
conflicts of interest, and conflicting performance assessments 
and accomplishments of those involved. The Senate 
Appropriations Committee on September 16, 1999, stated, ``In 
many cases, the Community Builders do not appear to act like 
HUD staff, but seemingly act in the capacity of lobbyists for a 
particular community or group.'' And the conference report on 
HUD appropriations went even further saying, ``. . . HUD must 
rebuild itself from within . . . Therefore, the conferees are 
terminating the external Community Builders program effective 
September 1, 2000 . . .'' The hearing highlighted continuing 
management problems, unnecessary expenses and the need to 
reduce risks in HUD's operations and programs.
8. The White House and the Privacy Act.
    a. Summary.--The hearing verified the importance of 
preventing privacy abuses by ensuring that White House 
officials are bound to the same requirements of the Privacy Act 
that apply to other Federal agencies and officials. Past 
privacy abuses by the Clinton administration and the Department 
of Justice were highlighted. Reforms were urged.
    b. Benefits.--The hearing identified the specific need for 
Congress to consider legislation to ensure that White House 
officials comply with Privacy Act requirements applicable to 
other Federal agencies and officials.
    c. Hearings.--On July 21, 2000, the subcommittee held a 
hearing on the topic of ``The Privacy Act and the Presidency.'' 
The hearing explored how the Privacy Act was intended to 
protect citizen privacy, and how these protections apply to the 
Executive Office of the President.
    The Privacy Act of 1974 (hereafter ``the Privacy Act'') is 
intended to provide individuals with safeguards against the 
loss of their privacy through misuse of their records by 
Federal agencies. The act and the Freedom of Information Act 
[FOIA] are the two major statutes that control information 
disclosure practices within the government. The Privacy Act is 
intended to protect an individual from the unauthorized 
collection of personal and inaccurate information, and from the 
release of certain information maintained in agency files.
    A fundamental purpose of FOIA is to provide an informed 
citizenry with information necessary to provide a check on 
activities and corruption in government. FOIA generally 
provides a right to access Federal agency records unless 
protected from disclosure by specific exemptions.
    The Privacy Act recognizes that an individual's right to 
privacy is a personal and fundamental right protected by the 
Constitution, the respect for which is essential to a 
democratic form of government. In general, the Privacy Act 
enables a citizen to learn how records are collected, 
maintained, used, and disseminated by the Federal Government, 
as well as limiting the Federal Government's collection, 
maintenance, use and dissemination of certain personal 
information from those records.
    Under the Privacy Act, an individual is provided with an 
additional safeguard in that he or she is permitted access to 
personal information, and to make changes to inaccurate, 
incomplete, untimely, or irrelevant information.
    The Privacy Act applies to personal information which is 
maintained by agencies in the executive branch of the Federal 
Government, including cabinet departments, military 
departments, government corporations, government controlled 
corporations, independent regulatory agencies and other 
establishments within the executive branch. The act does not 
apply to records which are kept by State and local governments, 
or by private companies and organizations. The Privacy Act only 
grants rights to U.S. citizens and aliens who have been 
lawfully admitted for permanent residence. A non-resident 
foreign national cannot use the act to protect his or her 
personal information.
    Generally, only those records maintained in a system of 
records are subject to the Privacy Act. A system of records is 
defined as a group of records from which information is 
retrieved by name, Social Security number, or other identifying 
symbol that has been assigned to an individual. The word, 
``record'' is itself defined to include most personal, 
individually identifiable information which is maintained by an 
agency about an individual including, but not limited to 
information concerning education, financial transactions, 
medical history, criminal history, or employment history.
    The Privacy Act provides for criminal penalties under the 
following circumstances: (1) Any officer or employee of an 
agency, who by virtue of his employment or official position, 
has possession of, or access to, agency records which contain 
individually identifiable information the disclosure of which 
is prohibited by this section or by rules or regulations 
established thereunder, and who knowing that disclosure of the 
specific material is so prohibited, willfully disclosed the 
material in any manner to any person or agency not entitled to 
receive it, shall be guilty of a misdemeanor and fined not more 
than $5,000. (2) Any officer or employee of any agency who 
willfully maintains a record system without meeting the notice 
requirements of this section shall be guilty of a misdemeanor 
and fined not more than $5,000. (3) Any person who knowingly 
and willfully requests or obtains any record concerning an 
individual from an agency under false pretenses shall be guilty 
of a misdemeanor and fined not more than $5,000.
    The Privacy Act also allows agency heads to promulgate 
rules to exempt record systems if the system is maintained by 
the CIA or maintained by an agency which has as a primary 
function any activity pertaining to criminal law enforcement. 
Specific exemptions, government contractors, mailing lists and 
matching agreements are addressed in subsequent sections. 
Finally, the Office of Management and Budget is given the 
responsibility for developing and prescribing guidelines and 
regulations for agencies to use in their implementations of the 
regulations and to provide these agencies with continuing 
oversight assistance of the act's implementation.
    There have been occasions when citizens have challenged 
whether or not the Privacy Act applies to the Executive Office 
of the President [EOP] and, if it does, whether that office 
feels bound by its provisions. One of these cases is Alexander 
v. Federal Bureau of Investigation (1997). The case resulted 
from the matter known as ``Filegate,'' involving the FBI's 
handing over of hundreds of personnel files of former political 
appointees and government employees from the Reagan and Bush 
administrations to the White House. The plaintiffs alleged that 
the White House violated the Privacy Act and that the EOP is 
included within coverage of the act as it applies to 
``agencies.'' The definition of ``agency'' as used in the 
Freedom of Information Act has been held to specifically apply 
to the EOP. The Clinton administration responded to this suit 
by arguing that the Office of Personnel Security and the Office 
of Records Management, both units within the EOP, were not 
subject to the Privacy Act. On March 29, 2000 the Federal 
District Court hearing the case rejected the administration's 
argument and held that ``under the Privacy Act, the word 
`agency' includes the EOP . . .'' DOJ continues to argue that 
the Privacy Act does not apply to the President and the White 
    On May 26, 2000, in a related proceeding, the 
administration was unsuccessful in trying to protect 
information sought by plaintiffs during discovery. The 
Department of Justice, on behalf of EOP, filed an emergency 
petition for a writ of mandamus, seeking to vacate the March 29 
ruling. The court of appeals ruled that the administration had 
not met the burden of proof for relief. In sum, the court of 
appeals: (1) found that the 1997 decision of the district court 
concerning the applicability of the Privacy Act to the EOP 
could be reviewed in the appeal of the final judgment in the 
Alexander litigation; (2) disapproved some of the language in 
the lower court's March 29 decision as dicta; and (3) 
determined that the 1997 decision was not binding on White 
House operations in matters unrelated to the Alexander case.
    During the Clinton administration, Privacy Act issues 
reportedly have surfaced in matters involving Ms. Kathleen 
Willey, Ms. Linda Tripp and others. The Department of Defense 
[DOD] Office of Inspector General [OIG] concluded that DOD 
employees who took information from Ms. Tripp's government 
employment application and released it to a reporter violated 
the Privacy Act. The OIG recommended that the Secretary of 
Defense consider appropriate corrective action. Secretary Cohen 
sent letters to the two officials which expressed his 
``disappointment'' in their judgment and described their 
actions in releasing the information as ``hasty and ill-
considered.'' In the past, DOJ has been involved in defending 
Privacy Act lawsuits, and has paid numerous settlements.
    With the exception of the representative of DOJ, legal 
scholars and experienced attorneys who testified expressed 
strong support for legislation to ensure that Privacy Act 
protections apply to actions of White House officials. A 
statement was read from a person reporting serious White House 
abuses in apparent violation of the Privacy Act. Another 
witness reported past abuses by DOJ that resulted in 
substantial monetary awards against DOJ. Except for the witness 
representing DOJ, there was agreement among witnesses that 
there exists a serious need to prevent future privacy abuses by 
officials at the White House. DOJ reported that it had no 
official position on the issue of expanded applicability of the 
Privacy Act to White House officials and their actions.

                Subcommittee on the District of Columbia

                     Hon. Thomas M. Davis, Chairman

1. New Visions for the District of Columbia.
    a. Summary.--Chairman Tom Davis convened this oversight 
hearing with the purpose of reviewing the progress of the city 
especially as it related to Public Law 104-8 and Public Law 
105-33. This law created the District of Columbia Financial 
Management and Assistance Authority (D.C. Control Board). 
Public Law 105-33 made significant management reform changes in 
the city whereas control of key city agencies were shifted from 
the Mayor's office to the D.C. Control Board under the auspices 
of a chief management officer. With a newly elected Mayor of 
the District of Columbia and a recently appointed chair of the 
D.C. Control Board, Chairman Davis was interested in the 
``health'' of the city. Notedly, crime was down and home sales 
were up, however the emphasis was on the continuing need to 
restore Washington's image in the eyes of the world. Although 
the city is far more stable than it was 5 years ago, it still 
has a way to go. Regional priorities include traffic, economic 
development, education, and public safety. It has been the 
philosophy of the chairman that a healthy city makes for a 
healthy region.
    Mayor Anthony Williams of the District of Columbia 
(formerly the Chief Financial Officer for the District) 
testified that his administration will be one of openness and 
accessability. He acknowledged the importance of his partners, 
City Council chair, Linda Cropp, and D.C. Control Board chair, 
Alice Rivlin as they go forward in the District's 
rehabilitation. The Mayor went on to highlight the progress 
that the District has made to date such as: balancing the 
budget for the past 3 years; receiving an upgrade of the 
District's Bond Rating from Wall Street; receiving a clean 
audit demonstrating that the city's financial house was in 
order; and generating a budget surplus of nearly $400 million 
in fiscal 1998. He testified of other achievements in public 
safety, notably that the homicides in the District have 
declined by 46 percent since 1991, and are at their lowest 
levels in 12 years. Mayor Williams also testified that he 
wanted to foster a strong Federal relationship with the 
Congress and the White House and the D.C. Control Board. The 
Mayor went on to focus on his vision for the city, ``One 
Government-Good Government-Self-Government, One City, One 
Government.'' The Mayor placed several initiatives on his 
agenda: the District's children and programs to support them; 
human service network; workforce development; economic 
development; leverage public-private partnerships; health care 
priorities; service delivery improvements such as public works, 
licenses and permits; and restoring hope and confidence in the 
District government.
    Dr. Alice Rivlin, chair of the District of Columbia 
Financial Management Responsibility and Assistance Authority 
(D.C. Control Board) testified on the District's recent 
progress. She reflected optimism along with the new Mayor of 
the new era of an effective and responsive city government. She 
cautioned however that while fiscal progress has been 
gratifying, it is important to understand that the city still 
faces an uncertain financial future. Her case in point was that 
deferred maintenance and inadequate investment have left a 
legacy of decayed and outmoded infrastructure from bursting 
pipes to leaky roofs that will take substantial resources to 
make the situation right. Dr. Rivlin also discussed the 
relationship with the elected officials. She said that the 
Control Board along with the Mayor had signed a memorandum of 
agreement [MOA] describing their new relationship. Dr. Rivlin 
made clear that the memorandum makes clear while the Control 
Board retains all its responsibilities under statute, the Mayor 
will be in charge of the day to day operation of the city and 
supervision of the executive branch departments. She said that 
there must be no confusion about who is in charge of delivering 
services--the Mayor is. Dr. Rivlin went on to explain some of 
the other details of the MOA. Dr. Rivlin also explained the 
Control Board's relationship with the City Council. She said to 
ensure effective communication, the Control Board had invited 
the chairwoman of the City Council along with the Mayor to 
attend meetings of the Control Board in a non-voting capacity. 
She mentioned her optimism of working on the fiscal year 2000 
budget together with the city officials. Dr. Rivlin also said 
that the District must make the transition to normal 
governance. She said that although it is not there yet, the 
District was on its way to accomplishing the goals and 
objectives of the congressional statutes of 1995 (Public Law 
104-8) and 1997 (Public Law 105-33).
    D.C. City Council Chair Linda Cropp testified that although 
the District has recovered much more quickly than other cities 
that have faced similar problems, it still needs to make much 
more progress in managing the government and improving basic 
municipal services such as public schools, public works, and 
public safety. Council Chair Cropp said that the council was 
pleased that the Control Board had returned the day to day 
operations of nine agencies and four cross cutting issues to 
the elected Mayor of the District. Mrs. Cropp said that the 
Council is committed to working side by side with Mayor 
Williams and Dr. Rivlin in achieving both short-term and long-
term results for both the residents and businesses of the 
District. Mrs. Cropp also noted a comprehensive study in which 
the Council had requested by the National Conference of State 
Legislatures. She said this study is part of an ongoing process 
to review and reform the city's legislative operations so that 
the Council like the rest of the government can optimize their 
performance. There were other reforms which the Council Chair 
enumerated in which she saw as steps to a revitalized District 
of Columbia.
    b. Benefits.--With a new Mayor in place, Chairman Davis 
announced that he was introducing legislation to enforce a 
recently signed memorandum of agreement [MOA] between the D.C. 
Control Board and the Mayor. In it Chairman Davis' legislation 
would enforce the provisions of the MOA and shift substantial 
authority from the Control Board to the city's elected Mayor 
and to give the Mayor the greater flexibility he has sought 
over top personnel. Chairman Davis also announced at this 
hearing of his plans to introduce legislation to afford high 
school graduates from the District of Columbia opportunities to 
pay in-State tuition at the State universities outside the 
    c. Hearings.--On January 22, 1999, Chairman Davis convened 
an oversight hearing entitled, ``New Visions for the District 
of Columbia.'' Those testifying were Honorable Anthony 
Williams, Mayor of Washington, DC; Dr. Alice Rivlin, chair of 
the District of Columbia Financial Responsibility and 
Management Assistance Authority; and Honorable Linda Cropp, 
chair, District of Columbia City Council.
2. District of Columbia's Year 2000 Conversion Compliance.
    a. Summary.--There were two hearings on this subject 
matter. Chairman Davis convened the first hearing on the year 
2000 conversion issue, commonly referred to as Y2K on February 
19, 1999. His concern was that this enormous challenge was not 
a high priority for the District of Columbia but for the rest 
of the world as well. The chairman acknowledged the leadership 
of two of his colleagues who are also members on the 
subcommittee for their national expertise and leadership in 
this field, Representative Steve Horn and Representative Connie 
Morella. These two members serve as co-Chairs of the House of 
Representatives Committee on Y2K Compliance. The chairman noted 
that the Y2K matter is a unique management issue for both the 
public and private sector. The systems may not be able to 
differentiate between the year 2000 and the year 1900. 
Microprocessors also have been programmed with the same two-
digit year and are therefore subject to the same failure 
potential. Several challenges are drawn in a special way to the 
District's challenges of the Y2K issue. The regional compacts 
which exist among various governmental entities require us to 
examine these matters in a more comprehensive manner. Examples 
include the D.C. Water and Sewer Authority, and the 
Metropolitan Washington Area Transit Authority. Regional 
cooperative agreements dealing with emergency response and 
emergency preparedness, along with several health and human 
services activities, just reinforces the need to work together 
to insure to the extent possible that none of these important 
public services are jeopardized. Additionally, the 
transportation and public safety activities which are critical 
to the ability of the Federal agencies to function efficiently 
are critical. The chairman reassured the city officials that he 
was committed to working closely with the District's technology 
office and others to help the city address these challenges.
    Mayor Anthony Williams of the District of Columbia 
testified that the Y2K project is proceeding in large part 
because of the financial and technical support that the city 
was receiving from Congress. He said that the success of the 
Y2K project is important because it mandates the District 
government review its systems in preparation for 21st century 
information technology applications. The Mayor said that the 
District had started late but is finishing strong. He said that 
the District's strategy has been to concurrently execute tasks 
that other cities executed sequentially. The Mayor referred to 
the detailed testimony which would be given by his chief 
technology officer later in the hearing. He said that he was 
confident that the District will meet its target dates for 
completion of the Y2K implementation.
    Mr. John Hill, executive director of the D.C. Control Board 
testified that the Control Board was effectively implementing 
an aggressive program to ensure that all major government 
services are provided throughout the millennium period.
    Mrs. Kathy Patterson, D.C. City Council member and chair of 
the council's Committee on Government Operations, testified 
that after a slow initial start, the District has mobilized 
resources and launched an aggressive program to meet the Y2K 
challenge. She said that she saw the three roles for the 
legislature in promoting a successful Y2K conversion: (1) 
oversight; (2) provide resources; (3) use of law to aid the 
conversion. She said that her committee will continue to 
monitor the Y2K conversion; to clear away regulatory and 
statutory obstacles; and to promote intergovernmental, 
regional, and public/private cooperation.
    Mrs. Suzanne Peck, chief technology officer for the 
District of Columbia government, testified in detail of the 
current status of the District's remediation and conversion for 
Y2K. She said that the District's system inventory consists of 
336 business applications. Of the 336 applications, 84 are Y2K 
ready, 117 require remediation and testing, and 135 have been 
remediated by their agencies and require testing only. 
Approximately 10 million lines of codes have been identified 
for remediation across the 117 applications in 16 different 
agencies. Mrs. Peck said that it is important to remember that 
when Y2K is over the District's overall technology 
infrastructure will need to be addressed. She said that the Y2K 
efforts are focused exclusively on existing, legacy information 
systems with the singular goal of fixing code so the millennium 
date changes will be recognized. The original management reform 
projects for information technology in the District are also 
focused in large part on stabilizing the information 
infrastructure rather than advancing it. She said that her 
office was looking forward to a group of follow-on projects 
which will establish the District of Columbia as an 
internationally recognized technology city, competing for and 
sharing in the technology growth of the region. She said that 
she envisions these projects as expanded and more user-friendly 
technological environment in which to do business with the 
District government.
    Mr. Jack Brock, Director of Government wide and Defense 
Information Systems Accounting and Information Management 
Division, U.S. General Accounting Office, testified that in a 
recent overview of the District's recent efforts, his office 
found the following in which the District had done: (1) 
identified 18 agencies that are critical to providing vital 
services to the city; (2) identified and prioritized 75 core 
business processes and over 200 mission-critical systems that 
support these processes; (3) developed a detailed project plan 
for remediating, testing, and implementing its mission-critical 
systems; (4) prepared and tested a contingency planning 
methodology and has begun to apply the methodology in 
developing business continuity and contingency plans for core 
business processes; (5) developed a system testing strategy; 
(6) strengthened its year 2000 organization by hiring 
additional staff; and (7) developed crisis management 
procedures to be used in the event a year 2000 failure is 
imminent or occurs. Mr. Brock further said that the District's 
schedule for year 2000 compliance offers little opportunity for 
further compression, no margin for error, and little room for 
corrective action if test results show continued problems with 
mission critical systems. GAO's recommendation to partially 
compensate was that the District place increased emphasis on 
(1) completing business continuity and contingency plans as 
early as possible to allow for testing and funding and (2) 
ensuring that contingency plans and priorities are updated to 
reflect information that becomes available as the Y2K project 
progresses, including new risk assessments based on the 
successes and failures encountered in the validation phase of 
the project. Second, GAO recommended that those who are the 
stakeholders (Mayor, agency heads, Control Board) must 
participate in making critical decisions throughout the 
reminder of the project by continued provision of resources and 
support for the program and taking action necessary to 
eliminate obstacles that could reduce the Y2K Program Office's 
chances of successfully executing its project plan.
    At the second hearing on September 24, 1999, Chairman Davis 
reemphasized his concern for the mitigation project. Because 
the Y2K remediation efforts started late, GAO reported serious 
problems along with communication, cooperation, and 
coordination. At this hearing, Chairman Davis was also 
concerned that a New Year's Eve ``Millennium Celebration'' of 
some sort was being planned for the District at the urging of 
the White House. Testimony addressed the impact and the ability 
of various local agencies to respond to potential Y2K problems.
    Mayor Williams testified at the second hearing that he was 
still committed to the promise of Y2K compliance. He said that 
despite of their late start, he believes that much progress had 
been made. He also said that he had initiated a resource review 
panel to conduct detailed implementation reviews. Mayor 
Williams said that while he was pleased with the city's 
progress, he takes nothing for granted. He tasked the city 
administrator with conducting an independent review of the 
District's Y2K efforts. After the findings of a consulting 
firm, he said that he has two concerns: (1) the lack of 
stringent financial management and tracking for the Y2K effort; 
and (2) responsibility is shared between the Y2K project office 
and the individual agencies, the management structure is 
fragmented. He said that his administration is addressing every 
contingency so that the city's services will continue to be 
delivered on January 1, 2000.
    Control Board Vice-Chair Connie Newman testified at the 
second hearing that recent reports indicated that marked 
progress had been made on a variety of critical projects 
underway to ready the District for January 1, 2000. She said 
that with respect to work that remains to be completed, the 
Control Board is working with the District officials to ensure 
that the highest priority be given to achieving Y2K readiness 
of all systems impacting health, safety, or economic welfare. 
Additionally, she said that the Control Board was monitoring 
the testing of contingency plans, and working with the Mayor's 
office to ensure that adequate resources will be in place to 
respond to any emergencies that may arise in the New Year.
    D.C. Councilmember Kathy Patterson testified during the 
second hearing that although the District started its Y2K 
effort late, it had made considerable progress during the past 
year and have adhered closely to the timetables set in June 
1998. Some tasks she said have fallen behind schedule, while 
others have been completed ahead of time. Mrs Patterson said 
that the Council has been a critical partner in the District's 
Y2K effort in providing oversight and in clearing away 
statutory and regulatory roadblocks. She said that the Council 
had worked closely and cooperatively with the Mayor, chief 
technology officer, and the Control Board and that they will 
continue to do so. She said that the partnership is important 
to have the Congress and the administration involved. She said 
that the Federal Government has contributed more than $100 
million to the District's Y2K project which has been essential 
to their progress.
    Chief Technology Officer Suzanne Peck testified during the 
second hearing that the District's systems and assessment 
process discovered 34 new systems, bringing the total to 370 
business applications in the District's systems inventory. Of 
these 370 applications, 242 (65 percent) were Y2K ready. Of the 
remaining 128 applications, 25 remain to be remediated, 40 have 
been remediated and are in testing, and 63 are in process of 
testing only. All 128 systems will complete their testing by 
the end of October 1999. All 370 applications will have been 
returned to production by the end of November 1999. She said 
that of the city's 370 systems, 223 are designated as mission-
critical. Of these 223 mission critical systems, 130 are Y2K 
ready as they stand; 23 remain to be remediated; 39 have been 
remediated and are in testing; and 31 are in process of testing 
only. The last 223 systems will be completing their testing by 
the end of October 1999 she said. Mrs. Peck also said that she 
was planning a group of projects to establish infrastructure 
for the electronic government initiative or ``technology 
city.'' Mrs. Peck said however, that the mission critical 
agencies such as the Police department and D.C. General 
Hospital have first call on her technical, financial and human 
    During the second hearing, GAO reported that the District 
has taken actions to strengthen its Y2K project management and 
continuity and contingency planning. For example, the District 
has done the following: (1) hired an outside contractor to 
review its project plan; (2) hired an outside contractor to 
oversee the contingency planning effort; (3) participated in 
the Metropolitan Council of Governments' Contingency Planning 
drill held on September 1, 1999; (beginning in June 1999), 
started to regularly convene its Year 2000 Steering Committee; 
(4) taken steps to establish consistent status reporting across 
agencies and reconcile differences in data reported by the 
agencies and the year 2000 program office which were discovered 
when preparing the District's most recent Y2K status report for 
the OMB.
    b. Benefits.--On October 2, 1998, this subcommittee, along 
with the Subcommittee on Government Management, Information, 
and Technology, and the Subcommittee on Technology, conducted 
an oversight hearing related to the District of Columbia's year 
2000 compliance effort. That hearing clearly established the 
fact that the District's Y2K compliance effort did not begin in 
any meaningful way until June 1998. That fact, in and of 
itself, put the effort into the ``emergency'' mode. The hearing 
that day provided an opportunity to define the magnitude of the 
challenge, including the corresponding risk, and the projected 
cost. It was also clearly established that because of the enemy 
of time, that the District would have no choice but to proceed 
with much of the remediation and testing effort simultaneously. 
This potentially has explosive ramifications, which could 
threaten not only the ability of the government of the District 
of Columbia to provide uninterrupted services, but also the 
ability, among other things, of the Federal workforce to get to 
their employment locations. On January 28, 1999, the District 
of Columbia's Office of the Inspector General issued its first 
management alert letter on the District of Columbia's year 2000 
readiness status. The OIG letter confirmed that a number of 
milestone dates related to Y2K efforts in the Metropolitan 
Police Department, the Department of Employment Services, and 
the Office of the Chief Financial Officer, had been met, yet 
there remained significant issues which had to be addressed.
    GAO testified at the second hearing by capitalizing on 
recent Y2K related experience, the District can implement 
management processes and controls needed to ensure that its 
technology assets are effectively supporting city operations. 
For example: (1) The District has learned that Y2K efforts 
cannot succeed without the involvement of top-level managers at 
the agency level and citywide level. Best practices have shown 
that top executives need to be similarly engaged in periodic 
assessments of major information technology investments to 
prioritize projects and make sound funding decisions. Such 
involvement is also critical to breaking down cultural and 
organizational impediments; (2) the District has recognized 
that having complete and accurate information on information 
systems can facilitate remediation, testing, and validation 
efforts. Maintaining reliable, up-to-date system information, 
including a system inventory, is also fundamental to well 
managed information technology programs since it can provide 
senior managers with timely and accurate information on system 
costs, schedule and performance; (3) the District has developed 
a better understanding of its core business processes and made 
some progress in prioritizing its mission-critical system based 
on their impact on these processes and the relative importance 
of the processes themselves. Once the Y2K program is completed, 
the District can build on these efforts to ensure that 
information technology initiatives will optimize businesses 
processes as well as to identify and retire duplicative or 
unproductive systems; (4) like many organizations, the District 
found that special measures were needed to build the technical 
expertise required to assist with all phases of the Y2K 
correction information technology management.
    c. Hearings.--On February 19, 1999, Chairman Davis convened 
a hearing entitled, ``Status of the District of Columbia's Year 
2000 Conversion Compliance.'' Those testifying were Honorable 
Anthony Williams, Mayor, Washington, DC; Honorable John Hill, 
executive director, District of Columbia Responsibility and 
Management Assistance Authority; Honorable Kathy Patterson, 
councilmember, D.C. City Council; Mrs. Suzanne Peck, chief 
technology officer, D.C. government; and Mr. Jack Brock, 
Director of Governmentwide and Defense Information Systems 
Accounting and Information Management Division, U.S. General 
Accounting Office.
    The second oversight hearing was on September 24, 1999, on 
the status of the District of Columbia's year 2000 conversion 
compliance and technology improvement plan. The slate of 
witnesses included all of the above listed witnesses with the 
exception of Mr. John Hill. In his place to represent the 
Control Board was Vice-Chair Connie Newman and Mrs. Gloria 
Jarmon, Director, Health, Education and Human Services 
Accounting and Financial Management Issues Accounting and 
Information Management Division, U.S. General Accounting 
3. District of Columbia Public Schools.
    a. Summary.--The purpose of this hearing was to review many 
of the issues and challenges and to examine the status of a 
number of reform efforts in the District of Columbia Public 
Schools. Chairman Davis stressed that there was a need to 
provide opportunities to achieve academic excellence in 
facilities that are safe; that have efficient heating and air 
conditioning; whose roofs don't leak; and that can be 
modernized. The hearing focused on the availability of 
opportunities for the schools to advance in technology, fiber 
optic cable, arts and science laboratories, and special 
programming activities.
    Mayor Anthony Williams of the District of Columbia 
testified that his vision for education has three central 
components: (1) the District's children deserve the best 
possible schools with first class teachers; (2) the District's 
approach to education must recognize that an equal part of a 
child's learning and development takes place outside the 
classroom--parents are first teachers; and (3) the District 
must mobilize all the resources of the community toward the 
education of the District's young people--involving parents, 
teachers, civic leaders, faith organizations, as well as the 
business community in the life of every child.
    D.C. City Councilmember Kevin Chavous, chairman of the 
Committee on Education on the Council testified that his 
committee has held an unprecedented number of hearings 
involving the District of Columbia Public Schools and Charter 
Schools over the last 6 months. He said that the topics 
included school bus transportation and certification of school 
bus drivers, as well as various other special education issues, 
student truancy and drop-out prevention policies and programs, 
public charter schools, long range facilities master plan, 
interagency collaboration and school based management. He said 
that there remains work to be done in support of the public 
education reform in the District. He stated his commitment to 
continue working together in support of public education with 
the Mayor, Control Board, superintendent and others. He said 
the school system had already begun to see a positive change 
with the superintendent, Mrs. Arlene Ackerman and pledged his 
support of her.
    D.C. Control Board Vice Chair Constance Newman testified 
that the Control Board devotes considerable time and attention 
to providing oversight over the D.C. Public Schools. She said 
that the Board's oversight efforts have focused on ensuring 
that the serious deficiencies in governance, academic 
performance, management, and the physical environment 
identified in the Board's November 1996 report, ``Children in 
Crisis: A Report on the Failure of the D.C. Public Schools,'' 
are corrected and that overall improvements in education are 
    D.C. Public School Superintendent Arlene Ackerman testified 
that the schools opened on time. She said that she hopes there 
will never be a question concerning basic educational issues 
again and that she would like to focus on the larger issues 
that face all urban systems as they try to provide youth with 
the skills and knowledge necessary to turn dreams into reality. 
She said that the central office and principals and teachers in 
each school have been busy with reform agenda. The focus she 
said was improving teaching and learning. Mrs Ackerman also 
said that she had invested more in professional development and 
plan to expand the department's efforts to reach every teacher 
with sustained learning opportunities. She talked about the 
department's partnership with the U.S. Army Corps of Engineers 
in making important capital improvements. The department's 
plans call for full school rehabilitation for one school in 
each ward next year while they wait for the elected Board's 
long range facility plan. She pledged her commitment to the 
children in that she agreed that to assure safe environments 
where principals and teachers have the adequate resources and 
support. Other subjects in which she testified to were 
principal evaluations, teacher evaluations, instructional 
technology, student achievement, special education, weighted 
student formula, and other reforms.
    Mrs. Maudine Cooper, chairwoman of the District of Columbia 
Emergency Transition Education Board of Trustees testified that 
over the past 11 months the board have witnessed a true 
renaissance in both spirit and actual reforms in the District's 
public school system. She said that spirit is catching and 
reforms are evident. She also gave testimony in detail 
concerning the Capital Improvement Plan and rehabilitation and 
modernization of facilities, academic plan, technology plan, 
teacher certification, budget in relation to resources to 
fulfill the academic excellence strategic plan, and the status 
of present as well as prospective public charter schools.
    b. Benefits.--Chairman Davis expressed confidence in the 
city by the recent events, including the decision of the bond 
houses in New York to upgrade the District's debt rating as 
evidence that overall efforts in the city across a wide front 
were producing results. Chairman Davis praised the 
superintendent for laying a foundation for future success. A 
priority mission as pointed out by Chairman Davis was to 
develop, update, and implement an academic plan which meets the 
needs of the school population and prepares students to compete 
in a global economy. However, in following the light of the 
management reform effort, it was stressed to the city schools 
officials to take care to operate in an environment in which 
students can learn without fear for their personal safety and 
an environment that invites stakeholders to share in the effort 
to develop creative solutions. The subcommittee's goal was to 
promote to the schools an environment that is not driven by 
    c. Hearings.--On April 30, 1999, Chairman Davis convened an 
oversight hearing entitled, ``Status of the District of 
Columbia Public Schools Plan for Capital Improvements and 
Academic Excellence.'' Those testifying were Honorable Anthony 
Williams, Mayor, Washington, DC; Honorable Kevin Chavous, 
chairman, Education Committee, DC City Council; Honorable 
Constance Newman, vice-chair, District of Columbia Financial 
Responsibility and Management Assistance Authority; Mrs. Arlene 
Ackerman, superintendent of D.C. Public Schools; and Mrs. 
Maudine Cooper, chairwoman, District of Columbia Public Schools 
Transitional Education Board of Trustees.
4. Public Law 104-8, District of Columbia Financial Responsibility and 
        Management Assistance Authority (D.C. Control Board).
    a. Summary.--On April 17, 1995 Public Law 104-8, 
originating in this subcommittee, was signed by the President. 
It created the D.C. Control Board and, in part conferred upon 
it responsibility and authority. Based on the substantial 
progress which was then made, in 1997 Public Law 105-33 was 
enacted, entitled the National Capital Revitalization and Self-
Government Improvement Act of 1997 under which, in part, the 
Federal Government assumed certain responsibilities in the 
District of Columbia normally performed by States and the 
District was, in part, directed to pursue certain management 
    b. Benefits.--The District of Columbia has largely 
recovered from the catastrophic conditions which existed in 
January 1995, when the subcommittee was created. At that time 
the city faced a crisis of epic proportions.
    c. Hearings.--On January 21, 2000 the subcommittee 
continued its ongoing investigation of major issues in the 
District of Columbia by conducting an oversight hearing 
focusing on efforts to monitor revitalization. Specific issues 
included the current and prospective financial condition in the 
Nation's Capitol, the progress of management reform initiatives 
undertaken by the District of Columbia government, mental 
health and public safety issues, and technology improvements. 
Witnesses included Mayor Anthony Williams, Control Board chair 
Alice Rivlin, and Linda Cropp, chair of the District of 
Columbia City Council.
5. Receiverships.
    a. Summary.--For more than 20 years the District of 
Columbia has been subject to significant court orders. Due to 
consistent failure to comply with various consent agreement, 
four entities were in receivership at the beginning of 2000. 
Federal and local court-appointed receivers governed operations 
and influenced the budgets of the District's mental health 
system, public housing, medical and mental health services for 
jail inmates and children and family services. Special Masters 
had been appointed by Federal courts to monitor compliance with 
mandates. These receiverships have made it very difficult for 
the city and Congress to control operations.
    b. Benefits.--The receiverships for public housing has 
ended successfully. The receiver for the Child and Family 
Services Agency [CFSA] has resigned and the parties to the La 
Shawn case, which triggered the receivership, have agreed to 
the terms for the transfer of CFSA from receivership to the 
District of Columbia government. Federal Judge Thomas Hogan has 
agreed to the terms.
    c. Hearings.--On May 5, 2000 the subcommittee investigated 
one of the receiverships then in force and effect in the 
District of Columbia by holding an oversight hearing entitled, 
``For Better or Worse? An Examination of the State of the 
District of Columbia's Child and Family Services 
Receivership.'' Witnesses included: Tom Delay, Majority Whip, 
U.S. House of Representatives; Cynthia Fagnoni, Director, 
Education, Workforce, and Income Security Issues, U.S. General 
Accounting Office; Judith Meltzer, deputy director, the Center 
for the Study of Social Policy; Ernestine F. Jones, general 
receiver, the District of Columbia Child and Family Services; 
Carolyn Graham, deputy mayor for Children, Youth and Families, 
District of Columbia; Grace Lopes, special counsel, 
Receivership and Institutional Litigation; Kimberly A. 
Shellman, executive director, the District of Columbia 
Children's Advocacy Center.
    On June 30, 2000 the subcommittee continued its 
investigation into receiverships in the District of Columbia by 
conducting an oversight hearing entitled, ``Beyond Community 
Standards and a Constitutional Level of Care: A Review of 
Services, Costs, and Staffing Levels by the Corrections Medical 
Receiver for the District of Columbia Jail.'' Witnesses 
included: Laurie Ekstrand, Director of Administration of 
Justice Issues, General Government Division, U.S. General 
Accounting Office; Ronald Shansky, M.D., corrections medical 
receiver; Karen Schneider, Special Office for the U.S. District 
Court for the District of Columbia; Erik Christian, deputy 
mayor for Public Health and Justice; and John Clark, District 
of Columbia corrections trustee.
    On September 20, 2000 the subcommittee continued its 
investigation of receiverships in the District of Columbia by 
holding a follow-up hearing entitled, ``Best Interests of the 
Child? A Reexamination of the District of Columbia's Child and 
Family Services Receivership.'' Witnesses included: Ernestine 
F. Jones, general receiver, the District of Columbia Child and 
Family Services; Carolyn Graham, deputy mayor for Children, 
Youth and Families, District of Columbia; Grace Lopes, special 
counsel, Receiverships and Institutional Litigation; Linda 
Mouzon, executive director, Social Services Administration, 
Maryland Department of Human Resources.
    The subcommittee also continued its investigation into the 
Transitional Receivership for the District of Columbia 
Commission on Mental Health Services, which is scheduled to 
terminate by April 2001, when the city will regain control of 
the agency. The subcommittee examined the progress of the 
Receivership in developing community-based mental health care 
and improving and expanding the services provided to its 
clients. The subcommittee worked with: Kathryn G. Allen, 
Associate Director of Health Financing and Public Health 
Issues, General Accounting Office; Dennis R. Jones, 
transitional receiver; Carolyn Graham, deputy mayor for 
Children and Families; Grace M. Lopes, Esq., special counsel 
for Receiverships and Institutional Litigation; and Susan 
Burke, Esq., of Covington and Burlington.
6. The Washington Metropolitan Area Transit Authority [WMATA].
    a. Summary.--In 1967, WMATA was created by a legislative 
compact between Maryland, Virginia, and the District of 
Columbia. Since then it has been responsible for planning, 
financing, construction, and operating a comprehensive mass 
transit system for the Washington Metropolitan Area. WMATA 
started building the Metrorail system in 1969, and the first 
phase of operation began in 1976. By 2001, WMATA expects to 
complete the originally planned 103-mile Metrorail system. In 
addition, Metrobus service began in 1973, when WMATA purchased 
four private bus companies. In fiscal year 1999 WMATA had a 
service area population of 3.4 million people and provided 339 
Metrorail and Metrobus passenger trips. Unfortunately, for 
about a year WMATA has been experiencing safety and reliability 
problems. The subcommittee saw a need to focus attention on 
improved communication, infrastructure, escalator repairs, 
overcrowding and emergency response.
    b. Benefits.--By investigating WMATA the subcommittee 
helped to highlight growing concerns, facilitate ongoing 
maintenance efforts, and bring the regional partners together 
under congressional aegis.
    c. Hearings.--On October 6 the subcommittee conducted an 
informational and oversight hearing of WMATA. The hearing was 
entitled, ``Examining Metro's Track Record.'' Witnesses 
included: Nuria Fernandez, Acting Administrator, Federal 
Transit Administration, U.S. Department of Transportation; 
Gladys W. Mack, chairman, Board of Directors, WMATA; 
Christopher Zimmerman, second vice chairman, Board of 
Directors, WMATA; the Honorable Decatur Trotter, vice chairman, 
Board of Directors, WMATA; Richard White, general manager and 
chief executive officer, WMATA; Ron Tober, chairman, American 
Public Transportation Association; Dorothy Dugger, deputy 
general manager, San Francisco Bay Area Rapid Transit [BART]; 
Honorable Kathy Porter, chairman, Transportation Planning 
Board, Metropolitan Washington Council of Governments; and 
Michael Carvalho, Transportation and Environment Committee, 
Greater Washington Board of Trade. A statement for the record 
was also included by Danny Alvarez, director, Miami-Dade 
Transit Agency.

   Subcommittee on Government Management, Information, and Technology

                      Hon. Stephen Horn, Chairman

1. Year 2000 Computer Challenge.
    a. Summary.--The Subcommittee on Government Management, 
Information, and Technology held its first hearing on the year 
2000 [Y2K] problem in April 1996. In the 106th Congress, the 
subcommittee held 25 hearings on the issue, including 6 field 
hearings. The hearings covered many topics including health 
care, domestic and international travel, defense, and local 
government preparations. The subcommittee also focused 
intensely on the executive branch, State and local governments, 
and private sector efforts to prepare computer systems and 
applications for the year 2000.
    In addition to the subcommittee's review of computer 
systems, it began a massive oversight undertaking to review the 
year 2000 readiness of the Federal Government's most essential 
``high impact programs'' such as Medicare, Temporary Assistance 
for Needy Families, and the Nation's air traffic control 
system. The Office of Management and Budget, in consultation 
with Federal agencies, identified 43 ``high impact programs'' 
that affect the lives of millions of families and individuals. 
Ten of these programs are Federal programs that are State-
administered. In June, we found that only 2 of the 43 programs 
were ready. In September, agencies reported that seven of these 
programs were ready. By November, the executive branch reported 
that 25 of the 43 programs were ready, leaving 18 that were 
not, including the 10 State-run programs that provide essential 
services such as child nutrition; food stamps; nutrition for 
women, infants, and children; child care; child support 
enforcement; child welfare; low income home energy assistance 
program; temporary assistance for needy families; and 
unemployment insurance.
    During the 106th Congress, the subcommittee also issued 
four quarterly report cards--one of the hallmarks of the 
subcommittee's year 2000 oversight work. In February 1999, the 
Federal Government received a ``C+.'' As a result of much hard 
work, by November, that grade had risen to a ``B+.''
    The year 2000 problem has many facets that pose great 
challenges particularly in light of the unmovable deadline of 
January 1. This effort has produced, perhaps, the most massive 
and coordinated worldwide computer repair efforts in history. 
Although much progress has been made, significant work remains. 
Rigorous management oversight and practical business continuity 
and contingency plans must remain top priorities if the job is 
to be completed on time.
    As noted above, the subcommittee held 25 hearings on this 
issue during the 106th Congress, of which 15 were held jointly 
with the Science Committee's Subcommittee on Technology. The 
first hearing focused on the status of the executive branch's 
year 2000 efforts. John Koskinen, chairman of the President's 
Council on Year 2000 Conversion provided an assessment of the 
council's work with State and local governments, as well as its 
work with foreign nations. Mr. Koskinen noted that Federal 
computer remediation was progressing and striving to meet the 
President's March 31, 1999, deadline for all Federal computer 
systems to be fixed. The committees also received testimony 
from the Lawrence Gershwin, National Intelligence Council, who 
provided a declassified assessment of the status of year 2000 
efforts among foreign governments. Mr. Gershwin noted that year 
2000 readiness data on foreign countries were sketchy. He also 
discussed concern over Russian nuclear power plants.
    Joel Willemssen of the General Accounting Office [GAO] 
testified that national, Federal, State, and local efforts must 
increase substantially to ensure that major service disruptions 
do not occur. He stressed that strong leadership and 
partnerships are essential if Government programs are to meet 
the needs of the public after the turn of the century. Mr. 
Willemssen also testified that agencies must perform end-to-end 
testing of their critical, core business processes to ensure 
that mission-critical systems can reliably exchange data with 
other systems and are protected from errors that could be 
introduced by external systems.
    The subcommittee's second hearing presented testimony on 
the efforts of the U.S. Postal Service [USPS], to prepare for 
the technical challenges associated with the year 2000 problem. 
The Postal Service is a critically important part of the 
Nation's infrastructure. Moreover, the subcommittees learned 
that the Postal Service is a vital part of the Y2K contingency 
plans of hundreds, if not thousands, of public and private 
agencies, organizations, corporations and individuals who 
currently rely on computers to exchange information. If those 
computer systems fail, nearly all will depend on the Postal 
Service to deliver their business and personal transactions.
    The USPS Inspector General and the GAO testified that the 
Postal Service had a long way to go to complete necessary 
computer systems remediation efforts and develop practical 
contingency plans. The Postal Service represented by Norman E. 
Lorentz, senior vice president, and chief technology officer, 
agreed that much work remained to be done, but the work was 
proceeding on schedule. The subcommittee also learned that the 
Postal Service had not thoroughly developed an overall, 
detailed year 2000 program plan. The Postal Service's initial 
plan was developed as a result of this hearing and was 
delivered to the subcommittee on March 12, 1999.
    The purpose of the third joint subcommittee hearing was to 
receive a status report on the year 2000 efforts of the 
Department of Health and Human Services [HHS]. Specifically, 
the subcommittees obtained information about HHS' payment 
management system, which processes about $170 billion annually, 
or approximately 75 percent of all Federal grant-in-aid funds. 
The HHS and GAO testified that this monolithic system was not 
yet year 2000 compliant, but would be ready by the early 
summer. In addition, the Health Care Financing Administration 
[HCFA] reported that it had 75 external computer systems that 
were deemed compliant. However, we learned that each of these 
75 systems had been reported as compliant ``with 
qualifications,'' meaning that fixes still remained.
    The fourth hearing focused on the year 2000 efforts at the 
Department of Defense [DOD]. According to Jack Brock of the 
General Accounting Office, this year 2000 dilemma was 
particularly daunting for the Defense Department for two 
reasons. First, the Department's size and scope of operations, 
criticality of mission, and heavy reliance on a diverse 
portfolio of information technology are unparalleled in either 
the public- or private-sector. Second, despite considerable 
progress during the prior 3 months, the Defense Department was 
still far behind schedule. The problem occurred largely because 
the Department had not had the necessary oversight and 
management framework to handle large-scale department-wide 
information technology projects.
    However, Dr. John Hamre, of the Department of Defense, 
testified that the Department had fixed most of its mission 
critical systems and was working hard to finish the remaining 
work. In addition, the Defense Department was developing and 
exercising continuity of operations plans for all key functions 
and processes. In particular, Dr. Hamre noted that the 
Department had focused special attention on nuclear systems and 
had already tested them several times. He closed by saying that 
the Defense Department is looking ahead, and plans to use its 
Y2K experience as a foundation for future information 
technology operations.
    The subcommittees' fifth hearing sought information on the 
prospects of litigation arising from potential year 2000 
computer problems. Some industry groups estimated that year 
2000-related litigation could cost as much as $1 trillion--
nearly double the estimated cost of actual computer repairs and 
testing worldwide. Thomas J. Donohue, president and chief 
executive officer of the U.S. Chamber of Commerce and chief 
executive officer of the U.S. Chamber Institute for Legal 
Reform, testified that he has a unique perception because he 
represented the interests of both potential Y2K plaintiffs and 
defendants. He testified that pending Y2K legislation would not 
alter the rights of people who are physically injured or 
otherwise truly harmed by a Y2K failure. Moreover, draft 
legislation before the House specifically excluded from its 
purview claims for personal injury. Finally, the legislation 
would allow those who are harmed because of a year 2000 problem 
to have access to the legal system and be fully compensated for 
their real losses. He also stated that the legislation 
encouraged remediation, and precluded costly litigation while 
allowing those with legitimate claims to have access to the 
legal system. In addition, it gave the courts the means to 
efficiently resolve Y2K-related disputes.
    However, another witness, Howard L. Nations, former vice 
president, American Trial Lawyers Association, testified that 
there was no need for Federal year 2000 legislation. He stated 
that year 2000 legislation was not needed because the 
principles of common law, State statutes and the Uniform 
Commercial Code, which has been approved in all 50 States, 
provide sufficient guidelines to measure the conduct of 
business entities, provide motivation for immediate remedial 
action, and remedies for wrongdoing. Mr. Nations added that the 
business law in question provides both rules and remedies. 
Responsible business leaders and consumers who have followed 
these business rules in matters relating to Y2K are now 
entitled to rely upon the remedies that business law provides 
in order to recover from those who ignore the rules and cause 
damage, he said. After lengthy negotiations between Congress 
and the administration, President Clinton signed the ``Y2K 
act'' into law in July 1999.
    The purpose of the sixth hearing was to receive a status 
report on the efforts of the Department of Transportation [DOT] 
and the Federal Aviation Administration [FAA] to prepare for 
Y2K technical challenges. FAA Administrator Jane Garvey 
testified that the FAA was meeting its milestones for planned 
activities. She stated that the FAA's project plan, published 
in March 1998, laid out a schedule for the FAA to complete 
renovation by September 30, 1998, validation by March 31, 1999, 
and implementation by June 30, 1999. In July 1999, the FAA 
reported that all of its mission-critical systems had been 
implemented by the June 30 deadline.
    Mr. Willemssen, GAO, reported that the FAA had made 
tremendous progress in the last year. However, much work 
remained to be done to complete validation and implementation 
of FAA's mission-critical systems. The FAA continued to face 
challenges in making its internal systems year 2000 compliant, 
he said. Additionally, Mr. Willemssen stated that the risk of 
failures caused by external entities, such as airports and 
foreign air traffic control systems could seriously affect 
FAA's ability to provide aviation services--which could have a 
dramatic effect on the flow of air traffic nationally and 
internationally. In order to mitigate the risk that critical 
internal or external systems will fail, FAA needed to develop 
sound business continuity and contingency plans, Mr. Willemssen 
said. Ken Mead, Department of Transportation Inspector General, 
testified that with less than 300 days until the year 2000, the 
DOT still has significant challenges ahead. He added that FAA 
faced a unique implementation challenge in fixing the air 
traffic control computer system. These systems, which had been 
operated in a test-center environment, were being installed at 
multiple sites throughout the system.
    The subcommittees' seventh hearing focused on lessons 
learned from emergency management. Over a 2-day session, 
emergency planning experts convened in four workshops and one 
hearing to discuss, catalog, and introduce emergency management 
products that could prove useful to citizens as well as public- 
and private-sector leaders. Mike Walker, Deputy Director, 
Federal Emergency Management Agency testified that two areas, 
in particular, needed greater attention: 911 emergency systems 
and fire services. Mr. Walker stated that results of a National 
Emergency Number Association [NENA] survey showed that only 17 
percent--or about 730--of more than 4,300 emergency centers 
were compliant, and an additional 69 percent--or 86 percent in 
all--were expected to be ready by January 1, 2000. He added 
that surveys of more than 2,300 students at the National Fire 
Academy [NFA], generally mid- to upper-level managers in fire 
departments, representing almost 1,300 departments in all 50 
States, revealed that 98 percent of the departments were aware 
of potential Y2K problems. Mr. Walker testified that 77 percent 
of these departments were actively working on solutions, and 35 
percent were already fully Y2K compliant.
    The subcommittees' eighth hearing focused on the status of 
the executive branch's year 2000 efforts. In addition, this 
hearing provided the groundwork for the executive branch to 
demonstrate the overall readiness of its critical business 
functions--the systems upon which the public relies. Witnesses 
included representatives from the Office of Management and 
Budget [OMB], Department of Agriculture, Department of State, 
Department of the Treasury, Agency for International 
Development, and the GAO. On March 26, 1999, the OMB issued a 
memorandum that listed the top 42 ``high impact Federal 
programs.'' (OMB later added a 43rd program.) For example, OMB 
noted that the Department of Agriculture had four ``high impact 
programs'': child nutrition, food safety inspection, food 
stamps, and special supplemental nutrition program for women, 
infants, and children.
    Deidre Lee, the OMB's Acting Deputy Director for 
Management, testified that the Federal Government fell short of 
meeting the President's March 31, 1999, deadline to complete 
remediation and testing of all mission-critical systems and 
have them back in operation. Ms. Lee reported that 92 percent 
of the Federal Government's mission-critical systems met the 
March 31 goal. Regarding the ``high impact Federal programs,'' 
she said that Federal agencies had been asked to help partners 
develop year 2000 plans to ensure that the program will operate 
effectively. According to Ms. Lee, such plans should include 
end-to-end testing, developing complementary business 
continuity and contingency plans, and sharing key information 
on readiness with partner organizations and with the public. 
The OMB asked agencies to report their year 2000 progress to 
OMB. Ms. Lee added that OMB's goal was to demonstrate to the 
public that these programs would work.
    Joel Willemssen, GAO, testified that, in some cases, 
serious problems had been discovered in compliant systems 
during the independent verification and validation process. For 
example, Mr. Willemssen noted previous subcommittee testimony 
in which the GAO found that none of HCFA's 54 external mission-
critical systems, which had reported compliant on December 31, 
1998, was, in fact, year 2000 ready. The non-compliance was 
identified by the validation contractor during the independent 
verification process.
    The purpose of the subcommittees' ninth hearing was to 
receive a status report on the efforts of the Federal 
Government to ensure that satellites, particularly the Global 
Positioning System [GPS], was ready for the new millennium. Dr. 
Marvin Langston, Deputy Assistant Secretary of Defense and 
Deputy Chief Information Officer and year 2000 for the 
Department of Defense, testified that the Global Positioning 
System [GPS] is a satellite-based radio-navigation system 
developed and operated by the Defense Department. GPS consists 
of a space segment (satellites), a ground-control segment, and 
a user-equipment (receiver) segment. Dr. Langston stated that 
GPS uses 24 satellites (28 are in orbit) to continuously 
broadcast coded signals that can be processed in a GPS 
receiver. These signals enable the receiver to computer 
position, velocity, and time 24 hours a day in all weather 
anywhere in the world. Receivers must process signals from at 
least four satellites in order to compute a position in three 
dimensions and time.
    Dr. Langston stated that there are two major issues 
concerning GPS: the end-of-week [EOW] roll over (from August 21 
to August 22, 1999) and the year 2000 compliance. He stated 
that the Defense Department would certify that its GPS 
receivers were Y2K compliant. However, he cautioned that 
consumers who have purchased commercial GPS receivers should 
have them checked by the manufacturer. Dr. Langston closed by 
stating that the Department of Defense will be prepared to 
execute its national security responsibilities before, on, and 
after January 1, 2000. Keith Rhodes, Chief Scientist, GAO, 
testified that GPS also plays a critical role in communications 
networks and, hence, the Internet. He also cautioned 
recreational users to ensure that their commercial GPS 
receivers were Y2K ready. In late August 1999, just after the 
GPS end-of-week rollover, Japan reported that thousands of 
automobile navigation systems failed and went blank, or 
displayed incorrect locations just after the rollover date.
    The purpose of the subcommittees' 10th hearing was to 
examine H.R. 1599, the ``Year 2000 Compliance Assistance Act,'' 
introduced by Representative Tom Davis, R-VA, on April 28, 
1999. The legislation would amend the Federal Property and 
Administrative Services Act of 1949 to authorize State and 
local governments to purchase information technology [IT] 
products and services related to the year 2000 computer problem 
through the Federal supply schedules. For further discussion of 
this hearing, please refer to section III.
    The Subcommittee on Government Management, Information, and 
Technology's 11th, 12th, and 13th hearings were field hearings 
during the July recess. The subcommittee traveled to Topeka, 
KS; Naperville, IL; and Detroit, MI to learn about local Y2K 
challenges and preparations. In general, the subcommittee 
received testimony from three distinct segments: government, 
utilities, and business. These sectors reported that much 
progress had been made during the previous year, and remaining 
efforts focused on testing and installing fixed computer 
systems, and developing and testing business continuity and 
contingency plans.
    Hearing witnesses in Topeka, KS, were: Joel Willemssen, 
GAO; Morey Sullivan, Kansas Department of Administration; Larry 
Kettlewell, Kansas Department of Administration; Jeff White, 
city of Topeka; Joy Mosier, State Adjutant General's Office; 
Bud Park, Western Resources; Shawn McKenzie, Southwestern Bell; 
Anne Rubeck, Kansas Hospital Association; Edwin Splichal, 
Kansas Bankers Association; and Al Lobeck, Kansas Broadcasters.
    Witnesses in Naperville, IL were: Joel Willemssen, GAO; 
Mary Reynolds, Illinois Governor's Office; Don Carlsen, city of 
Naperville; Tom Mefferd, DuPage County Office of Emergency 
Management; Robert Martin, DuPage Water Commission; Alan Ho, 
Commonwealth Edison; Dale Jensen, Ameritech; Craig Whyte, Nicor 
Gas; Philip Pagano, Metra; Gary Mielak, Edward Hospital; Clint 
Swift, Bank Administration Institute; Delores Croft, Illinois 
Attorney General's Office; Leonard Harris, Chatham Food Center; 
Ron Clark, Illinois Ayers Oil Co./National Association of 
Convenience Stores; Monty Johnson, Citgo Gas/American Petroleum 
Institute; and Ed Paulson, author.
    Hearing witnesses in Detroit, MI included: Joel Willemssen, 
GAO; George Boersma, State of Michigan; Captain Ed Buikema, 
Michigan State Police; Arun Gulati, Wayne County; Kathleen 
Leavey, Detroit Water and Sewerage Department; George Surdu, 
Ford Motor Co.; Don Constantino, General Motors Corp.; Roger 
Buck, Daimler Chrysler Corp.; John Parker, Northwest Airlines, 
Inc.; Jim Rosen, Detroit Edison; Raymond Laesione, Michigan 
Consolidated Gas; James Johnson, Wayne State University; Don 
Potter, Southeast Michigan Health and Hospital Council; and Dan 
McDougall, United Way.
    The subcommittees' 14th hearing focused on the potential 
for large financial and intellectual property losses due to 
year 2000 [Y2K] remediation-related fraud. Witnesses included 
the Gartner Group, Inc., Information Technology Association of 
America, WarRoom Research, and Bingham Dana LLP. Joe 
Pucciarelli, vice president and research director, Gartner 
Group, testified of Gartner's prediction that by 2004 there 
would be at least one publicly reported electronic theft 
exceeding $1 billion. In addition, he stated that the Gartner 
Group forecasted that year 2000 remediation efforts would be 
identified as a root cause of the security lapses that allow 
this theft to occur. Harris Miller, president, Information 
Technology Association of America, testified that ``information 
security'' is the next Y2K issue for the IT community and its 
    Mr. Miller explained that aggressors attack at the point of 
maximum leverage. He stated that for modern society, that means 
critical infrastructure--transportation, telecommunications, 
oil and gas distribution, emergency services, water, electric 
power, finance and government operations. Mr. Miller stated 
that a critical ``information infrastructure'' supports all of 
these vital delivery systems and becomes itself a target of 
opportunity for terrorists, adversarial nations, and criminal 
organizations. He noted that disrupting the underlying 
information infrastructure of a transportation or finance 
system is often as effective or even more effective than 
disrupting the physical infrastructure. Wayne Bennett, partner, 
Commercial Technology Practice Area, Bingham Dana, agreed with 
Mr. Pucciarelli that a $1 billion fraud will likely occur. 
However, he testified that its connection to the Y2K 
remediation effort would be more in the nature of serendipity 
than statistical inference. He also said that law enforcement 
would be in a better position to identify the perpetrator 
because of the changes brought about by the Y2K effort.
    During the August recess, the Subcommittee on Government 
Management, Information, and Technology held its 15th, 16th, 
17th hearings. The subcommittee traveled to Sacramento, CA, San 
Jose, CA, and Seattle, WA, to learn about local Y2K challenges 
and preparations. In general, the subcommittee received 
testimony at each of these hearings from government, utilities, 
and business. These sectors reported that much progress had 
been made in the last year, and remaining efforts focused on 
testing and installing fixed computer systems and developing 
and testing business continuity and contingency plans.
    Hearing witnesses in Sacramento, CA, included: Joel 
Willemssen, General Accounting Office; Elias Cortez, director, 
California Department of Information Technology; Doug Cordiner, 
principal auditor, Bureau of State Audits, State of California; 
Steve Ferguson, chief of information technology, county of 
Sacramento; Carol Hopwood, Emergency Management, county of 
Sacramento; the Honorable Joan Smith, supervisor, Siskiyou 
County, representing the Regional Council of Rural Counties; 
Cathy Capriola, administrative services director, city of 
Citrus Heights; Garth Hall, manager of the year 2000 project, 
Pacific Gas and Electric Corp.; Mike Petricca, product manager, 
Pacific Bell; Roy Le Nave, senior project manager, Y2K 
readiness program, Sacramento Municipal Utility District: 
Kathleen Tschogl, manager, governmental and regulatory affairs, 
Raley's Supermarkets; and Allen Rabkin, Sierra West Bank, 
representing the California Bankers Association.
    Hearing witnesses in San Jose, CA, included: Joel 
Willemssen, General Accounting Office; Mark Burton, Y2K project 
manager, city of San Jose; Dana Drysdale, vice president, 
information systems, San Jose Water Co.; Ronald E. Garratt, 
assistant city manager, city of Santa Clara; Christian Hayashi, 
year 2000 communications manager, city of San Francisco; Brad 
Whitworth, Y2K program manager, customer service and support 
group, Hewlett Packard Co.; Richard Hall, director, California 
governmental affairs, year 2000 program manager, Intel Corp.; 
Mike Petricca, product manager, Pacific Bell; Ralph Tonseth, 
director of aviation, San Jose International Airport; Garth 
Hall, manager of project 2000, Pacific Gas & Electric Co.; 
Karen Lope, division manager, administrative services, Silicon 
Valley Power; Dr. Frances E. Winslow, director, Office of 
Emergency Services, city of San Jose; William Lansdowne, chief 
of police, city of San Jose; and John McMillan, deputy fire 
chief, city of San Jose.
    Hearing witnesses in Seattle, WA, included: Joel 
Willemssen, GAO; Chris Bedrock, State of Washington; Cliff 
Burble, King County; Mr. Marty Chakoian, city of Seattle; Barb 
Graff, city of Bellevue; Joe O'Rourke, Bonneville Power 
Administration; Jerry Walls, Puget Sound Energy; James Ritch, 
Seattle City Light; Marilyn Hoggarth, GTE; Dave Hilmoe, Seattle 
Public Utilities; Brad Cummings, University of Washington 
Academic Medical Centers; Willie Aikens, the Boeing Co.; Don 
Jones, Microsoft; Joan Enticknap, Seafirst Bank (a Bank of 
America Co.); William Jordan, Public Instruction for the State 
of Washington; Rich Bergeon, NueVue International LLC/Audit 
    The purpose of the subcommittees' 18th hearing was to re-
evaluate the Federal Aviation Administration's [FAA] progress 
in solving its Y2K challenges. FAA Administrator Jane Garvey 
testified that all FAA computer systems, mission-critical and 
non-mission-critical, were Y2K compliant. She added that an 
independent contractor had reviewed documentation on the 
repairs and verified FAA's work based on the contractor's 
engineering judgment. Ms. Garvey stated that Transportation's 
Office of the Inspector General had also validated FAA's 
compliance. She concluded by saying that she was confident that 
the FAA would make the transition to the year 2000 smoothly, 
without compromising aviation safety in the National Airspace 
System [NAS].
    Ken Mead, Department of Transportation Inspector General, 
testified that the FAA had met the significant challenge of 
implementing 152 repaired systems at over 4,000 sites. He 
stated that his office sampled 14 systems, and verified that 
documentation supported system implementation, validation 
problems had been resolved, an independent verification and 
validation had been performed on all 152 repaired systems, data 
exchange issues were resolved, vendor-supported systems were 
compliant, acceptance testing was performed, and affected 
databases had been addressed. However, he said, now that 
implementation is complete, FAA needed to ensure that year 2000 
compliant computer systems in the field were not adversely 
affected by local programs or upgrades to compliant systems.
    Joel Willemssen, GAO, testified that, despite tremendous 
progress, the FAA continued to face challenges in ensuring that 
its internal systems will work as intended through the year 
2000 date change. He reported that the FAA's challenges 
involved managing modifications to compliant systems, 
independent verification of systems compliance, and systems 
testing. Mr. Willemssen stressed the point that the FAA must 
also mitigate risks posed by external organizations, including 
airports, airlines, and foreign air traffic control systems. He 
warned that these factors could impede FAA's ability to provide 
reliable aviation services, which could seriously affect the 
flow of air traffic across the Nation and around the world. Mr. 
Willemssen also testified that in the event critical internal 
or external systems do not work as intended, the FAA must have 
a comprehensive and tested business continuity and contingency 
plan ready to implement, and a trained staff to execute the 
    At this hearing, Chairman Horn requested that the FAA make 
public any information pertaining to the readiness of domestic 
airlines and airports, and, to the extent possible, any 
information on the readiness of international air traffic 
organizations. The FAA heeded Chairman Horn's request, and in 
late September, posted information on a new Internet website: 
    The subcommittees' 19th hearing focused on the Department 
of State's efforts to minimize the potential international 
impact of the year 2000 computer problem. John O'Keefe, Special 
Representative for Y2K, Department of State, testified that a 
day earlier the Department had issued updated Consular 
Information Sheets for every country in the world, about 196 in 
total. He reported that each revised ``Consular Information 
Sheet'' contains a section that assessed general Y2K risks and 
preparedness in a specific country. The information was 
gathered from a number of open and confidential sources. Mr. 
O'Keefe noted that the State Department's fundamental purpose 
in releasing this information was to apprise U.S. citizens of 
potential disruptions they may encounter due to the Y2K 
phenomenon, and to allow Americans to prepare and to make 
informed personal decisions about travel on or about January 1, 
2000. He added that the statements in the Consular Information 
Sheets represent the Department's best judgment on potential 
problems for U.S. citizens living and traveling abroad. He 
advised the subcommittee that these sheets were not a 
scorecard, and warned that no one can predict what will occur 
on and after January 1st.
    The purpose of the subcommittees' 20th hearing was to 
assess the readiness of the Nation's Medicare program. 
Witnesses included Joel Willemssen, GAO; Dr. Gary Christoph, 
Heath Care Financing Administration [HCFA]; Dr. Whitney 
Addington, American College of Physicians and American Society 
of Internal Medicine; Fred Brown, American Hospital 
Association; Elizabeth Wilkey, BlueCross BlueShield of Georgia; 
Joe Baker, Medicare Rights Center. Dr. Christoph testified that 
HCFA was still completing recertification testing to re-verify 
that its systems were working and that software changes made 
during the summer to fulfill legislative mandates and improve 
program operations had not affected previously achieved year 
2000 compliance. In addition, he stated that HCFA believed that 
the greatest risk to the Medicare program involved the 
readiness of HCFA's partners, namely HCFA's Medicare providers, 
including managed care organizations.
    Mr. Willemssen testified that HCFA must continue monitoring 
and continue testing with its health care contractors (e.g., 
insurance companies), which at the time of the hearing, 
although limited, had uncovered Y2K problems. He added that 
HCFA needed to continue its efforts to ensure that managed care 
organizations were adequately addressing their Y2K challenges. 
Mr. Willemssen concluded that a considerable amount of work 
remained in the next few months. He noted that it was crucial 
that the development and testing of internal, contractor, and 
M.O. business continuity and contingency plans move forward 
rapidly to ensure that, no matter what happens, providers would 
be paid and beneficiaries would receive care.
    The subcommittees' 21st hearing focused on the Y2K 
readiness of several essential ``high risk Federal programs.'' 
In June, the subcommittee had graded the readiness of the 43 
``high risk Federal programs,'' including 10 federally funded, 
State-run programs such as Medicaid and food stamps. At that 
time, the subcommittee found that the 10 State-run programs 
would not be ready until December 1999. John Spotila, Office of 
Management and Budget [OMB], testified that OMB's goal was 
simple: to ensure the delivery of uninterrupted services to 
individuals who depend upon those services and to reassure 
those individuals that they can depend on the services. Overall 
progress had been good, he said. Of the 43 programs, OMB 
reported that 12 had completed all end-to-end testing, 19 
others would be completed by October; 4 others were expected to 
complete in November; and the remaining 8 in December. Mr. 
Spotila noted that the remaining seven programs, which are 
State-run Federal programs, would not be completely ready until 
December. He noted that the Departments of Health and Human 
Services, Agriculture and Labor must work with all 50 States 
and several territories to ensure the year 2000 readiness of 
these programs. Mr. Spotila concluded that since the primary 
concern is the recipients in each State, OMB would not consider 
the task completed until all of the States and territories were 
year 2000 ready.
    John Callahan, Chief Information Officer, Department of 
Heath and Human Services testified that HHS was very concerned 
about the compliance status of some territories, because their 
remediation effort may not be completed by January 1, 2000. He 
stated that a small number of programs in Alabama, Delaware, 
the District of Columbia, Georgia, Mississippi, New Hampshire, 
and South Carolina had been assessed as being at a high risk of 
Y2K failure. He attributed the high risk to these States 
because the remediation and testing of systems was either not 
complete or behind schedule, and contingency plans were either 
underdeveloped or nonexistent. Also a number of States, 
regardless of the status of their automated systems, lacked 
complete business continuity and contingency plans [BCCP]. Mr. 
Callahan pointed out that these plans are necessary in the 
event that unanticipated failures occur. BCCPs provide for the 
implementation of alternate procedures and processes to 
continue program operations while the system failure is 
    The subcommittees' 22nd hearing focused on the Y2K 
readiness of domestic and international nuclear power plants. 
Witnesses were representatives from the General Accounting 
Office, Nuclear Regulatory Commission [NRC], and the Nuclear 
Energy Institute. Frank Miraglia, of NRC, testified that NRC 
had concluded that the Y2K problem would not adversely affect 
the continued safe operation of U.S. nuclear power plants. He 
noted that this assessment was based on NRC's review of 
responses from the nuclear power industry concerning Y2K 
readiness, independent inspection efforts at all 103 units, and 
ongoing regulatory oversight activities. Regarding 
international nuclear reactors, Mr. Miraglia stated that the 
NRC had been working with its foreign bilateral nuclear safety 
cooperation partners to raise awareness of the Y2K problem and 
offer assistance within means. He said that the most notable 
development in this area was the creation of the Y2K early 
warning system, which would allow all participating countries 
to rapidly share Y2K-related information on nuclear facility 
and grid performance.
    Keith Rhodes, of GAO, testified that, in general, the NRC 
had taken the lead in overseeing the Y2K nuclear problem. 
However, he noted that NRC had not required that its licensees 
perform independent verification and validation [IV&V;] of their 
Y2K programs. Mr. Rhodes suggested that use of IV&Vs; would 
provide NRC--and nuclear power plants and nuclear fuel 
facilities managers--with additional assurances that all 
critical applications and systems were Y2K ready.
    The purpose of the subcommittees' 23rd hearing was to 
assess the Federal agencies' year 2000 business continuity and 
contingency plans [BCCP] and day one plans. Chairman Horn 
stated that although agencies were making significant progress 
in renovating and testing their mission-critical systems, 
crossing the century boundary, nevertheless, presented many 
challenges. He stressed that each agency must have a BCCP and 
day one strategy for reducing the risk of failures occurring in 
agency facilities, systems, programs, and services during the 
weekend of the critical millennium rollover. Witnesses included 
Joel Willemssen, GAO; John Spotila, Office of Management and 
Budget; John Dyer, Social Security Administration; Dr. Marvin 
Langston, Department of Defense; John Gilligan, Department of 
Energy; Paul Cosgrave, Internal Revenue Service; and Norman E. 
Lorentz, U.S. Postal Service.
    Mr. Spotila, OMB, testified that based on the OMB's initial 
review of agency plans, the majority were on-track in preparing 
their plans. He added that although most agencies need to 
develop more detail to fill-out the plans, their submissions 
showed that they were or soon would be addressing all of the 
critical elements of effective day-one planning. Mr. Spotila 
concluded that although a few of the small independent agencies 
had provided excellent plans, a number of them had either not 
provided a plan or had provided incomplete plans. He concluded 
by saying that the OMB staff would continue working with each 
agency individually, providing them feedback during the coming 
weeks to help them complete their efforts.
    Mr. Cosgrave, IRS, stated that the IRS was still completing 
an inventory of its computer systems. Although this was very 
troubling, he stated that the IRS would soon finish the 
inventory process. In addition, Mr. Cosgrave said that the IRS 
had developed contingency plans that outline the necessary 
procedures to follow in the event that any of IRS' mission-
critical tax processing systems suffered a major failure. He 
stated that the IRS had completed testing on all but two of 
these plans, and had addressed GAO's suggestions in a recent 
report on IRS' contingency plans.
    Mr. Lorentz, U.S. Postal Service, testified that the Postal 
Service had identified its critical business processes--such as 
postage payment, and the acceptance, processing, 
transportation, and delivery of mail--and weighed them against 
a catalog of ``failure scenarios,'' essentially, external 
events that could interrupt the Postal Service's business 
processes. He stated that this exercise resulted in the 
creation of business continuity plans--a series of strategies 
to help the Postal Service work through disruptions to elements 
of its external support infrastructure, such as ground and air 
transportation, telecommunications, and utilities. Mr. Lorentz 
added that the basic continuity plans were then shared with the 
Postal Service's field units for customization to reflect 
specific local conditions. He mentioned that, for example, in 
the event of an airport closure, field operations officials 
would identify the best alternative transportation and routing 
for mail to and from that area.
    The purpose of the subcommittee's 24th and final hearing 
this year was to discuss and respond to Y2K questions that have 
been raised by the American public related to issues such as 
the Nation's overall preparedness, investor confidence, health 
care concerns, and Y2K marketing and myths. Witnesses included 
John Koskinen, chairman of the President's Council on Year 2000 
Conversion; Joel Willemssen, General Accounting Office; J. 
Patrick Campbell, Nasdaq-Amex Market Group, Inc.; Barry S. 
Scher, Giant Food, Inc.; and Ronald Margolis, University of New 
Mexico Hospital, Health Sciences Center, representing the 
American Hospitals Association.
    Mr. Koskinen testified that one of the more troubling Y2K 
myths is the notion that January 1 is a seminal date upon which 
everything--or nothing--Y2K-related will occur. He added that a 
corollary of this myth is that everyone will be able to ``close 
the books'' on the Y2K issue and declare victory or defeat by 
the end of New Year's Day. Mr. Koskinen stated that year 2000 
problems could occur any time that a non-compliant computer 
comes into contact with a year 2000 date--before or after 
January 1. He stated that a number of businesses and 
governments had already used year 2000 dates in their automated 
operations. In addition, information technology professionals 
are well aware that the Y2K challenge is not limited to January 
1, and will be monitoring systems well into the New Year for 
flaws in billing and financial cycles and possible slow 
degradations in service.
    Mr. Koskinen addressed myths in the form of Y2K 
``doomsday'' scenarios such as the claims that the Y2K issue 
could cause nuclear weapons to self-launch, or foreign trade to 
grind to a halt. He stated that none of the available 
information suggests that these stories are true. For example, 
nuclear weapons require human intervention to launch. A 
malfunctioning computer--Y2K or otherwise--could not cause 
weapons to misfire without human intervention. However, Mr. 
Koskinen was concerned about the ability of the Russian early 
warning systems to function effectively during the rollover 
period. He was pleased that Russia had agreed to participate 
with the United States in a joint stability center in Colorado, 
where information from United States and Russian early warning 
systems would be shared to ensure there would be no 
    Mr. Koskinen testified that there are several important Y2K 
realities. First, he said, it is important for the public to 
know that the U.S. infrastructure is ready for the date change. 
The information provided to the President's Council and the 
public indicates that the electric power grids, 
telecommunications networks, financial transaction systems, and 
key national transportation systems would make a successful 
transition into the year 2000. Mr. Koskinen added that the 
second Y2K reality is that, despite our best efforts to fix and 
test systems, there will be problems. Not every system will be 
fixed by January 1, and no amount of testing can ensure 
perfection. He stated that he had already seen Y2K problems 
surface in instances where systems had been fixed and tested, 
as was the case for a few Federal agencies that have already 
experienced minor problems with the transition to fiscal year 
2000. Mr. Koskinen said that he also expects failures in 
sectors where large numbers of organizations were late in 
starting or, even more troubling, are taking a ``wait-and-see 
approach'' to the date change. He concluded by stressing the 
importance of all organizations monitoring their systems for 
Y2K problems during the rollover period and having updated 
contingency plans to minimize potential disruptions.
    On January 1, 2000, the world awoke to find that little had 
changed. Lights still worked, telephones still rang, and planes 
kept flying. Y2K-related computer glitches did occur, but none 
was life threatening. The media and many citizens responded to 
this apparent non-event by pondering the wisdom of spending 
$100 billion on Y2K solutions.
    On January 27, 2000, the Subcommittee on Government 
Management, Information, and Technology, and the House 
Subcommittee on Technology jointly held the final Y2K hearing 
of the House Year 2000 Task Force. This hearing, entitled, 
``Year 2000 Computer Problem: Did the World Overreact and What 
Did We Learn?,'' presented the results of the Y2K computer 
problem, highlighting the Y2K-glitches that occurred and 
discussing the lessons learned from the experience. Concerns 
about possible disruptions on the forthcoming Leap Year date of 
February 29, 2000, were also discussed.
    Calling Y2K ``the greatest management challenge the world 
has faced in the last 50 years,'' John Koskinen, chairman of 
the President's Council on Year 2000 Conversion, credited the 
successful Y2K transition to the tremendous mobilization of 
people and resources in both the public and private sectors. 
Joel Willemssen of the General Accounting Office confirmed the 
relatively smooth transition noting that those Y2K-related 
errors that did occur did not affect the delivery of key 
services because they were either corrected quickly or 
contingency plans were implemented.
    Citing the potential consequences had the Government not 
adequately prepared for Y2K, witnesses also highlighted 
benefits and lessons learned that can continue to be applied to 
improve overall information technology management. In addition 
to the value of strong congressional oversight and leadership 
from the highest levels of Government, witnesses stressed the 
value of partnerships between private industry and the 
Government in solving major national issues. Other lessons 
included the need for ongoing top management involvement in 
information technology and the value of developing and testing 
contingency plans.
    b. Benefits.--The benefit of inspiring organizations to 
learn about the year 2000 problem and to take it seriously has 
been self-evident; the greater the progress in year 2000 
readiness, the fewer the failures on and after January 1, 2000. 
In addition, agencies generally reported they had developed 
practical, detailed contingency plans that were tested and 
ready for implementation in the event of unforeseen computer 
failures. Furthermore, serious action this year, promulgated by 
the actions of key Federal officials, served to reduce the 
panic this problem could have encouraged.
    Congressman Horn stated many times that the key to fixing 
the year 2000 problem is leadership. The subcommittees' 
oversight hearings, coupled with its year 2000 report cards, 
stressed the urgency to get the job done on time. Agency 
management needed to establish firm priorities and allocate the 
necessary resources to the project. This process was borne out 
this year.
    Furthermore, the year 2000 problem has been, and may 
continue to be, extremely costly to the taxpayers. Current 
executive branch cost estimates have grown from about $2.8 
billion in May 1997 to $8.9 billion in November 1999.
    c. Hearings.--The Subcommittee on Government Management, 
Information, and Technology held 25 hearings on this issue in 
the 106th Congress:
    (1) ``The Year 2000 Problem: Status Report on the Federal, 
State, Local, and Foreign Governments,'' January 20, 1999, held 
jointly with the Subcommittee on Technology of the Science 
    (2) ``Y2K Technology Challenge: Will the Postal Service 
Deliver?,'' February 23, 1999, held jointly with the 
Subcommittee on the Postal Service and the Subcommittee on 
Technology of the Science Committee.
    (3) ``Oversight of the Year 2000 Problem: The Y2K Status of 
the Department of Health and Human Services,'' February 26, 
    (4) ``Oversight of the Year 2000 Problem at the Department 
of Defense: How Prepared is Our Nation's Defense?,'' March 2, 
1999, held jointly with the Subcommittee on Technology of the 
Science Committee.
    (5) ``The Impact of Litigation on Fixing Y2K,'' March 9, 
1999, held jointly with the Subcommittee on Technology of the 
Science Committee.
    (6) ``Will Transportation and the FAA Be Ready for the Year 
2000?,'' March 15, 1999, held jointly with the Subcommittee on 
Technology of the Science Committee.
    (7) ``Year 2000 Emergency Management,'' March 22, 1999.
    (8) ``Are the Federal Government's Critical Programs Ready 
for January 1, 2000?,'' April 13, 1999, held jointly with the 
Subcommittee on Technology of the Science Committee.
    (9) ``Y2K in Orbit: The Impact on Satellites and the Global 
Positioning System,'' May 12, 1999, held jointly with the 
Subcommittee on Technology of the Science Committee.
    (10) ``H.R. 1599, The Year 2000 Compliance Assistance 
Act,'' June 23, 1999.
    (11) ``Oversight of the Year 2000 Technology Problem: 
Lessons to be Learned from State and Local Experiences,'' 
Topeka, KS, July 7, 1999.
    (12) ``Oversight of the Year 2000 Technology Problem: 
Lessons to be Learned from State and Local Experiences,'' 
Naperville, IL, July 8, 1999.
    (13) ``Oversight of the Year 2000 Technology Problem: 
Lessons to be Learned from State and Local Experiences,'' 
Detroit, MI, July 9, 1999.
    (14) ``Impact of Y2K: Expanded Risks or Fraud?,'' August 4, 
1999, held jointly with the Subcommittee on Technology of the 
Science Committee.
    (15) ``The Year 2000 Computer Problem: Lessons to Be 
Learned from State and Local Experiences,'' Sacramento, CA, 
August 13, 1999.
    (16) ``The Year 2000 Computer Problem: Lessons to Be 
Learned from State and Local Experiences,'' San Jose, CA, 
August 14, 1999.
    (17) ``The Year 2000 Computer Problem: Lessons to be 
Learned from State and Local Experiences,'' Seattle, WA, August 
17, 1999.
    (18) ``FAA and Y2K: Will Air Travel Be Stopped or 
Significantly Delayed on January 1st and Beyond?,'' September 
9, 1999, held jointly with the Subcommittee on Technology of 
the Science Committee.
    (19) ``The Year 2000 Computer Problem Implications for 
International Travel,'' September 15, 1999, held jointly with 
the Subcommittee on Technology of the Science Committee.
    (20) ``Year 2000 and Medicare: Is Health Service Delivery 
at Risk?,'' September 27, 1999.
    (21) ``State of the States: Will Y2K Disrupt Essential 
Services?'' October 6, 1999, held jointly with the Subcommittee 
on Technology of the Science Committee.
    (22) ``Y2K and Nuclear Power: Will the Reactors React 
Responsibly?,'' October 22, 1999, held jointly with the 
Subcommittee on Technology of the Science Committee.
    (23) ``Y2K and Contingency and Day 1 Plans: If Computers 
Fail, What Will You Do?,'' October 29, 1999, held jointly with 
the Subcommittee on Technology of the Science Committee.
    (24) ``Y2K Myths and Realities,'' November 4, 1999, held 
jointly with the Subcommittee on Technology of the Science 
    (25) ``Year 2000 Computer Problem: Did the World Overreact 
and What Did We Learn?,'' January 27, 2000.
2. Oversight of Federal Real Property Management.
    a. Summary.--Public buildings and lands are an integral 
part of Federal operations. They are used to house Federal 
workers, house historic, cultural and educational artifacts, 
and provide services to the public. As such, they should be 
viewed as capital resource tools that support agencies' goals 
and missions. Management of these facilities is especially 
challenging considering that roughly half of all Federal office 
buildings are 40 to 50 years old. More than half of the 8,000 
office buildings managed by the General Services Administration 
are over 50 years old. Faced with increasing budgetary 
constraints and the demand to improve public services, Federal 
agencies and departments must make the most cost-effective and 
efficient use of their capital assets.
    b. Benefits.--With a portfolio of more than 500,000 
buildings located on more than 560 million acres of land, the 
Federal Government is one of the world's largest land owners. 
These holdings are under the custody and control of more than 
30 Federal departments and agencies. They represent a taxpayer 
investment of more than $300 billion. The Federal Government, 
however, has not been a good steward of its real property 
assets. Enhanced congressional attention to the status of 
Federal real property assets is an essential step toward 
ensuring the maintenance of this substantial taxpayer 
    c. Hearings.--The subcommittee held 2 hearings on the 
Federal Government's real property holdings in the 106th 
    (1) ``Federal Real Property Management: Obstacles and 
Innovative Approaches to Effective Property Management,'' April 
29, 1999.
    On April 29, 1999, the Subcommittee on Government 
Management, Information, and Technology held a joint hearing 
with the Transportation Committee's Public Buildings 
Subcommittee to review Federal real property management. The 
subcommittees reviewed the status of the Federal Government's 
management of its real property assets and heard from witnesses 
who discussed obstacles and innovative approaches to effective 
and efficient real property management.
    The subcommittees heard from a variety of witnesses 
representing some of the larger land-holding Federal 
departments and agencies. A number of these witnesses agreed 
that many Federal buildings are crumbling and require 
substantial repairs in order to bring them up to acceptable 
standards of health, safety and quality. As the wear and tear 
on buildings increase, the need for maintenance and repair to 
sustain their functionality also increases. A witness from the 
General Accounting Office discussed the results of a study the 
agency released on public-private partnerships and how the use 
of such property management relationships have aided in the 
maintenance of certain Federal properties. A witness from the 
National Research Council discussed the findings of a 1998 
report the agency issued entitled, ``Stewardship of Federal 
Facilities.'' In the report the National Research Council 
focused on the deteriorating condition of the vast portfolio of 
Federal buildings, and offered recommendations on ways to 
improve the condition of these structures through improved 
facility management. According to the National Research 
Council, Federal facilities program managers are being 
encouraged to be more businesslike and innovative. However, the 
council found that current management and financial processes 
create disincentives and, in some cases, barriers to cost-
effective property management and maintenance. Millions of 
dollars are being spent on buildings that no longer serve their 
intended purposes. Downsizing of the Federal workforce and 
changing agency missions have resulted in an excess of Federal 
buildings and work space that is a costly and inefficient use 
of taxpayers' money.
    A witness from the General Services Administration 
testified that certain elements of the Federal Property and 
Administrative Services Act of 1949 restrict the Government's 
ability to adopt some ``best practices'' that have become 
commercial standards in the management and disposal of real 
property. According to this witness, certain statutory barriers 
must be removed and certain authorities must be modernized to 
meet the challenges facing Federal real property managers.
    (2) Legislative Proposals to Reform the Government's 
Approach to Property Management, ``S. 2805, the Federal 
Property Asset Management Reform Act and H.R. 3285, the Federal 
Asset Management Improvement Act,'' on July 12, 2000.
    At a July 12, 2000, hearing, the subcommittee examined the 
merits of two legislative proposals to reform the Federal 
Government's approach to property management. One proposal 
contained provisions, developed by the General Services 
Administration, in collaboration with other agencies, that 
would provide Federal departments and agencies with incentives 
and flexibility to manage their real and personal property 
    The second proposal, H.R. 3285, the ``Asset Management 
Improvement Act of 1999,'' introduced by Representative Pete 
Sessions (TX), would have amended the Property Act to authorize 
the General Services Administration or other agencies under 
delegated authority to enlist private-sector capital and 
expertise in public-private partnerships to develop or improve 
Federal real property.
3. Oversight of the Minerals Management Service's Royalty Valuation 
    a. Summary.--The Federal Government has been collecting 
royalties associated with mineral production from Federal 
onshore lands since 1920 and from offshore lands since 1953. 
The Minerals Management Service [MMS], an agency within the 
Department of the Interior, was established in 1982 with the 
mission of ensuring that all royalties from Federal and Indian 
mineral leases are accurately collected, accounted for, and 
disbursed to the appropriate recipients in a timely manner. To 
carry out its mission, the MMS manages the Offshore Minerals 
Management Program and the Royalty Management Program.
    Federal law requires that a portion of the royalties 
collected by the Federal Government be shared with the affected 
States. In the case of Indian lands, all royalties collected 
from mineral production go back to the Indian Tribes or 
individual landowners. Since 1982, nearly $100 billion has been 
disbursed from Federal onshore and offshore oil and gas leases. 
In fiscal year 1998, the Royalty Management Program generated 
nearly $6 billion from more than 26,000 leases--$4.6 billion 
from offshore leases and $1.4 billion from Federal onshore and 
Indian leases. Of that amount, $550 million was distributed to 
the States and used for schools, roads, public buildings, or 
general operations.
    Despite these accomplishments, there is concern that the 
Federal Government has not received its fair share of royalties 
from oil extracted from Federal lands. In the past two decades, 
a number of lawsuits have been filed alleging that oil 
companies have undervalued the price of oil extracted from 
Federal lands. Witnesses at a June 17, 1996, subcommittee 
hearing testified that oil royalties paid to the Federal 
Government were based on royalty valuations that were below 
market value. At this hearing, it was charged that the MMS 
delayed collecting the appropriate royalties and that the MMS' 
global settlements with major oil companies failed to protect 
taxpayers' financial interests.
    Current royalty regulations specify three types of contract 
prices: posted prices, which are offers made by purchasers to 
buy oil and often include a premium; spot prices, which are the 
prices reported in oil market survey publications based on 
contracts of oil sold and purchased at market centers; and 
prices of crude oil futures contracts that are sold on the New 
York Mercantile Exchange [NYMEX].
    Traditionally, posted prices were relied on for royalty 
valuation purposes because they were thought to represent 
market value. This assumption has been challenged, particularly 
in situations where crude oil moves internally within 
integrated companies. Recent evidence suggests that oil is sold 
for more than the posted prices, leading to the conclusion that 
the value of the oil from Federal leases and the amount of 
Federal royalties should both be higher.
    Allegations that posted prices do not reflect market value 
arose from a number of sources. In 1975, the State of 
California and the city of Long Beach initiated litigation 
against seven major oil companies operating in California. They 
alleged that the companies conspired to undervalue the price of 
crude oil produced on State leases, reducing the amount of 
royalties paid. In 1991, six of the oil companies involved in 
the suit settled with the city of Long Beach and the State of 
California for $345 million. As a result of this settlement, in 
1994 the MMS created an interagency task force to investigate 
whether posted prices were reflective of market value. The task 
force issued a report in 1996, charging that from 1978 to 1993 
oil companies underpaid by as much as $853 million. The task 
force also found that oil valuation regulations were confusing 
and difficult to administer. The task force recommended that 
the MMS recalculate the royalties owed and issue a new 
regulation to clarify royalty valuation.
    In response to the litigation and the recommendations of 
both the Subcommittee on Government Management, Information, 
and Technology and the interagency task force, the MMS issued 
bills to oil companies for several hundred million dollars. Not 
one company has thus far paid. Recently, charges of fraudulent 
undervaluation by seven oil companies were filed under the 
False Claims Act. One company has chosen to settle, but the 
remaining defendants deny the allegations, insisting they 
reported valuations of crude oil that accurately reflected 
market prices in the field.
    In an effort to simplify the valuation rules, in 1995, the 
MMS began revising its oil valuation regulations. To date, no 
new rule has been implemented. The Department of the Interior 
has reopened the comment period an unprecedented seven times. 
Also, twice in 1998, Congress passed specific language 
prohibiting the Department of the Interior from implementing a 
rule, unless a consensus could be reached with the oil 
companies. A third ``moratorium'' was attached to the 1999 
Senate supplemental appropriations bill.
    Under the MMS' current proposal, for transactions in which 
the parties have competing interests, called arms-length 
transactions, the rules would continue to require that gross 
proceeds be used to determine the royalties owed. For 
transactions that are not at arms-length, however, the proposed 
regulations amend the method for determining the price of the 
oil, no longer relying on the use of posted prices but instead 
relying on spot prices adjusted for the location and quality of 
the oil. The MMS proposal would define the price of oil not 
sold in arms-length transactions differently in each of the 
three domestic oil markets. The oil industry opposes this 
approach. As an alternative, it suggests that the Federal 
Government take its royalties in-kind.
    b. Benefits.--At the May 19, 1999, hearing, the 
subcommittee reviewed the Department of the Interior's 
management of the collection, valuation and distribution of 
revenues--or royalties--from oil produced on Federal lands. 
Royalties from oil and gas leases on Federal lands are one of 
the largest sources of non-tax revenues for the Federal 
Government. According to the Minerals Management Service, since 
1982, nearly $100 billion has been disbursed from Federal 
onshore and offshore leases. In fiscal year 1998, for example, 
the Royalty Management Program generated nearly $6 billion from 
more than 26,000 mineral leases. Of that amount, $550 million 
was distributed to the States and used for schools, roads, and 
public buildings. Congressional oversight into the management 
of this program along with the current efforts to produce a new 
royalty valuation rule are both essential to ensure a fair 
return to the American taxpayer. Oversight of the Department of 
the Interior's management of the valuation, collection and 
distribution of royalties from leases on tribal lands is also 
essential to ensure that the Federal Government is meeting its 
fiduciary responsibility as trust manager for the beneficiaries 
of these royalties.
    c. Hearings.--``Oversight of the Minerals Management 
Service's Royalty Valuation Program,'' May 19, 1999.
    On May 19, 1999, the Subcommittee on Government Management, 
Information, and Technology held a hearing to review the 
management of the Royalty Valuation Program by the Department 
of the Interior's Minerals Management Service. The subcommittee 
focused on the MMS' efforts to collect past-due mineral 
royalties as well as its progress in issuing a new regulation 
that clarifies the royalty valuation process and protects the 
financial interests of the Federal Government. Witnesses at the 
hearing included representatives from the Department of the 
Interior, the General Accounting Office, Indian tribes, the oil 
industry, and the State of California.
    James McCabe, deputy attorney for the city of Long Beach, 
CA, testified that oil produced on State lands should be sold 
at publicly quoted market prices rather than using posted 
prices. Alan Taradash, a private attorney representing the 
Jicarilla Apache Tribe discussed the undistinguished history of 
the Department of Interior and its attempts to account properly 
for tribal mineral development. According to Mr. Taradash, a 
conflict of interest exists between the United States as a 
mineral resource owner on its own account and as a trustee of 
tribal mineral resources. Actions taken by the United States 
regarding the Federal mineral estate on public lands affects 
both directly and indirectly the value of tribal mineral 
assets. As such, Mr. Taradash recommended that separate 
regulations govern tribal oil and gas leasing activities.
    David Deal, assistant general counsel for the American 
Petroleum Institute, and Ben Dillon, vice president of the 
Independent Petroleum Association of America testified on 
behalf of the American Petroleum Institute [API], the 
Independent Petroleum Association of America [IPAA], the 
Domestic Petroleum Council [DPC] and the U.S. Oil and Gas 
Association [USOGA]. Together, the members of these trade 
associations are responsible for the production of virtually 
all Federal oil and gas production from Federal lands and 
virtually all of the Federal royalties paid every month. Both 
of these witnesses testified in opposition to the MMS proposal 
that oil should be valued for royalty purposes using market 
prices or spot prices. According to these witnesses, the MMS 
rulemaking proposal falls short of reflecting all additions to 
the value of the oil and would lead, therefore, to inflated 
values and inflated royalty obligations. Moreover, these 
witnesses testified that the MMS proposal leads to an outcome 
at odds with the plain language of the mineral leasing statutes 
and the terms of the specific contracts or leases under which 
lessees operate. Notwithstanding their reservations about the 
proposed valuation rule, these witnesses testified that the 
valuation rule could be fixed if certain key changes are made.
    Susan Kladiva, associate director, Resources, Community, 
and Economic Development Division, General Accounting Office, 
discussed the results of a report issued by the GAO in August 
1998 on the Department of Interior's attempts to revise the 
Federal oil valuation regulations and the feasibility of the 
Government's taking its oil and gas royalties in kind. Ms. 
Kladiva testified that in deciding to revise its oil valuation 
regulations, the MMS relied heavily on the findings of its 
interagency task force. This task force concluded that the 
major oil companies' use of posted prices in California to 
calculate Federal royalties was inappropriate and recommended 
that the Federal oil valuation regulations be revised. Ms. 
Kladiva also provided an overview of the process the MMS had 
undergone to develop a new rule. At the time of the hearing, 
the MMS had solicited public comments on the proposed 
regulations in seven Federal Register notices, held 17 public 
meetings, and revised its regulations five times, she said.
    Sylvia Baca, the acting Assistant Secretary for Land and 
Minerals Management at the Department of Interior, gave an 
overview of the MMS Royalty Management Program and a status 
report on the Department's efforts to revise its regulations 
for valuing crude oil. Robert Williams, acting Inspector 
General of Department of Interior, discussed some audits and 
investigations performed by his office into the operations of 
the MMS and its oil royalty collection and valuation process. 
One Inspector General report discussed by Mr. Williams involved 
the MMS' failure to accurately identify additional royalties 
owed to the Federal Government for undervalued California crude 
oil. According to this report, the MMS did not adequately plan 
its work, accurately prepare supporting evidence, exercise due 
professional care in performing analyses, or have adequate 
quality control procedures to ensure the accuracy of its 
conclusions. As a result, 19 bills sent to oil companies were 
overstated by at least $185.6 million.
4. Oversight of Government Debt Collection Practices.
    a. Summary.--During the 106th Congress, the subcommittee 
held five hearings in addition to its ongoing oversight of the 
enormous tax and non-tax debt that is owed to the Federal 
Government. As of fiscal year 1999, the Government was owed $60 
billion in delinquent non-tax debts. The Debt Collection 
Improvement Act [DCIA], Public Law 104-134, which was moved by 
the subcommittee during the 104th Congress, established several 
programs to assist Federal agencies and State governments in 
collecting overdue non-tax debts. The Treasury Offset Program 
authorizes the Treasury Department to offset Federal payments, 
such as retirement and vendor payments and tax refunds, to 
satisfy delinquent non-tax debts owed to the Federal Government 
or delinquent child support and income tax debts owed to the 
States. The cross-servicing program requires Federal agencies 
to transfer debts that are more than 180 days delinquent to a 
designated debt collection center for processing. Currently, 
the Department of the Treasury's Financial Management Service 
is the only agency that has been designated as a governmentwide 
debt collection center. The Financial Management Service has a 
variety of tools available to collect these delinquent debts, 
including referring the debts to private collection agencies.
    b. Benefits.--In fiscal year 1999, the Government's offset 
and cross-servicing programs collected $2.6 billion, an 
increase of more than $570 million over that collected in 1998. 
To date, the program has collected nearly $2.4 billion in 
fiscal year 2000, including $1.3 billion in delinquent child 
support payments owed to States and $1.1 billion in non-tax 
debt owed to the Federal Government. Continued congressional 
oversight will encourage more Federal agencies to take 
advantage of these money-saving programs, which provide direct 
financial benefits for American taxpayers.
    The role of the Federal Government in the credit market is 
enormous. The Federal Government dominates the market for 
student loans and housing loans, and has a strong impact on 
other sectors as well. Effective Federal debt collection 
practices are essential to protect the interests of the 
taxpayers, but strong congressional oversight is essential to 
increase the effectiveness of the Federal Government's debt-
collection practices. At this point, the Government is still in 
the process of implementing the DCIA. There are a variety of 
steps in the implementation process that continue to warrant 
heightened congressional attention.
    c. Hearings.--During the 106th Congress, the subcommittee 
held three hearings examining Federal debt collection 
    (1) ``What is the Federal Government Doing to Collect the 
Billions of Dollars in Delinquent Debts it is Owed?,'' June 15, 
    On Tuesday, June 15, 1999, the subcommittee continued its 
oversight of the Government's implementation and compliance 
with the Debt Collection Improvement Act of 1996 [DCIA]. At the 
hearing the subcommittee evaluated the Department of the 
Treasury's progress in implementing the DCIA. The subcommittee 
also focused on compliance with the DCIA by three Federal 
departments holding some of the largest amounts of overdue 
debts: the Department of Agriculture, the Department of 
Education and the Department of Housing and Urban Development.
    As of fiscal year 1998, the Federal Government was owed $60 
billion in delinquent non-tax debt, reported the Department of 
the Treasury. Of that amount, more than $46 billion had been 
delinquent for more than 180 days. Of the $46 billion, $31.2 
billion was available for referral to the Financial Management 
Service [FMS] for collection action (including $8.1 billion 
that was eligible for referral to the cross-servicing program). 
Delinquent debt that is in bankruptcy, foreclosure, 
forbearance, disputed debt and foreign debt are excluded from 
offset and cross servicing. In April 1996, the Debt Collection 
Improvement Act [DCIA] was signed into law. The DCIA was 
enacted to improve the Federal Government's record in 
collecting delinquent debt. Since its enactment, however, the 
amount of delinquent non-tax debt owed to the Federal 
Government has increased. Total delinquencies rose from $51.9 
billion in fiscal year 1997 to its present level of $60 
billion. The DCIA centralizes non-tax debt collection 
responsibilities at the Department of the Treasury. The law 
requires Federal departments and agencies to refer debts more 
than 180 days delinquent to the Department of the Treasury for 
collection. The Department of the Treasury's Financial 
Management Service is responsible for administering the 
provisions of the DCIA.
    In addition to requiring agencies to transfer delinquent 
debts to the FMS for collection action, the DCIA expanded 
offset programs in which Federal payments are intercepted to 
satisfy delinquent debts owed to the Federal Government. The 
DCIA also authorized the offset of tax refunds to collect past-
due child support owed to the States. In addition, the DCIA 
established cross-servicing as a new debt-collection program. 
Cross-servicing is the process whereby the Department of the 
Treasury can collect delinquent debts by contacting a debtor to 
arrange repayment or refer the debt to private collection 
agencies for collection.
    The DCIA also contains a variety of other provisions 
designed to improve Federal debt collection. Under the DCIA, 
Federal departments and agencies are required to report both 
current and delinquent loans to consumer reporting agencies. 
The DCIA also bars delinquent debtors from obtaining new 
Federal loans or loan guarantees until the debt is repaid. The 
DCIA provides authority for Federal departments and agencies to 
sell their delinquent debts and authorizes them to retain a 
portion of the amount collected to be used for improving debt-
collection activities. The Secretary of the Treasury was 
required to report to the Congress, by April 1999, on 
collection services provided by the FMS and other entities that 
collect debts on behalf of Federal agencies.
    As of March 1999, Federal departments and agencies had 
referred $22.2 billion to the Department of the Treasury for 
collection ($2.3 billion of this total was referred 
specifically for cross-servicing). Of this amount, Treasury, 
using cross-servicing and administrative and tax refund offset, 
collected $863.1 million or about 3 percent of the total amount 
referred. The bulk of that amount was collected using the tax 
refund offset. Of the remaining amount collected, $20.9 million 
was collected using cross-servicing and private collection 
agencies and $5.6 million was collected using the Treasury 
Department's administrative offset program.
    The Tax Refund Offset Program was merged with the Treasury 
Offset Program on January 18, 1999. Prior to the merger, the 
Internal Revenue Service operated the Tax Refund Offset 
Program. This merger has increased the types of Federal 
payments that can be offset or intercepted to satisfy Federal 
debt. Other Federal payments that can be offset to satisfy 
delinquent debt include vendor payments and Office of Personnel 
Management retirement payments.
    The Federal Departments with the largest portfolios of 
debts delinquent for more than 180 days, include the Department 
of Education ($18.2 billion), the Department of Agriculture 
($6.09 billion), the Department of Health and Human Services 
($4.26 billion), the Department of Energy ($2.29 billion), and 
the Department of Housing and Urban Development ($2.22 
billion). Together, the debts owed to these five Federal 
departments that are more than 180 days delinquent account for 
more than $33 billion of the $46 billion owed to the Federal 
    The Department of Education administers the Federal Family 
Education Loan Program and the Federal Direct Loan Program. 
There are currently 59.6 million outstanding student loans 
totaling $152.7 billion. Of these, 13.3 million loans worth 
$26.7 billion are in default. In fiscal year 1998, the 
Department of Education's total student-loan portfolio 
increased by $13.8 billion. During the same period, 
delinquencies increased by $6.2 billion.
    The Department of Agriculture operates a variety of credit 
programs that finance utilities, housing, farms and businesses. 
As of fiscal year 1998, the Department of Agriculture had a 
total credit portfolio of $104 billion or 38 percent of the 
total non-tax debt owed to the Federal Government. Of the 
Department of Agriculture's delinquent-debt portfolio, $6.09 
billion had been delinquent for more than 180 days. Of that 
amount, $1.3 billion was eligible for referral to the 
Department of the Treasury for cross-servicing. However, as of 
April 30, 1999, only $5 million, or less than 1 percent, had 
been referred.
    The Department of Housing and Urban Development operates a 
number of credit programs that provide financial assistance for 
a variety of housing and community development programs. As of 
fiscal year 1998, the Department of Housing and Urban 
Development had debt more than 180 days delinquent that totaled 
$2.2 billion. Of that amount, $1 billion was eligible for 
referral to the Department of the Treasury for cross-servicing 
and $1.4 billion was eligible for referral for offset. Of these 
amounts, however, only $222 million and $400 million, 
respectively, had been referred.
    (2) Unpaid Payroll Taxes: Billions in Delinquent Taxes and 
Penalty Assessments are Owed to the Federal Government.
    On August 2, 1999, the Subcommittee on Government 
Management, Information, and Technology held a hearing to 
review the problem of employers withholding payroll taxes from 
employee paychecks, but failing to forward those amounts to the 
Federal Government, as required by law. At the hearing, the 
General Accounting Office released its report prepared on 
behalf of the subcommittee, entitled, ``Unpaid Payroll Taxes: 
Billions in Delinquent Taxes and Penalty Assessments Are 
Owed.'' This report outlines many of the problems associated 
with unpaid payroll taxes, the factors affecting the Internal 
Revenue Service's ability to force businesses to pay this debt, 
and its ability to collect this money. The Commissioner of the 
Internal Revenue Service also testified about the agency's 
efforts to combat this ongoing problem.
    As of September 30, 1998, nearly 2 million businesses owed 
the Federal Government approximately $49 billion in overdue 
payroll taxes, according to Internal Revenue Service [IRS] 
records. This amount represents about 22 percent of IRS' total 
$222 billion in outstanding, unpaid tax assessments. IRS 
records also revealed that on that same date, the assessed 
penalties, called trust fund recovery penalties, totaled about 
$15 billion. About 185,000 individuals were responsible for not 
paying the Federal taxes they had withheld from their 
employees' paychecks. The amounts withheld from the employees' 
salaries for Federal income tax, Federal Insurance Contribution 
Act [FICA] taxes, and the employer's matching portion of FICA 
taxes, comprise a businesses payroll taxes. FICA taxes finance 
the Social Security and Medicare trust funds.
    Each year, the Federal Government, through the IRS, 
collects tax revenue to finance various Government programs and 
activities. In fiscal year 1998, the IRS collected more than 
$1.7 trillion from individuals, businesses, corporations, and 
estates for taxes on wages, income, employment, sales, and 
consumption. While most individuals and businesses pay their 
taxes accurately and on time a substantial number do not. 
According to IRS records, on September 30, 1998, the Government 
was owed $222 billion in unpaid taxes, penalties, and interest. 
These amounts are referred to as unpaid tax assessments. Unpaid 
tax assessments include write-offs, compliance assessments, and 
tax receivables. The types of taxes that comprise the IRS' 
unpaid tax assessment balance are individual income taxes, 
self-employment taxes, payroll taxes, and corporate income 
    When employers withhold money from an employee's salary for 
Federal income taxes and FICA obligations, they are holding 
these amounts ``in trust'' for the Federal Government. To the 
extent these withholdings are not forwarded to the Federal 
Government, the business is liable for these amounts as well as 
its matching FICA contribution. Individuals can also be held 
personally liable for the amounts withheld for Federal income 
taxes and the FICA obligations.
    The majority of businesses pay the taxes they withhold from 
employees' salaries, as well as the required matching amounts. 
However, a significant number of businesses do not, creating a 
situation in which the general revenue fund subsidizes the 
Social Security and Medicare trust funds to the extent that 
those taxes are not collected. Over time, the amount of this 
shortfall, or subsidy, rose to $49 billion last year.
    The Chief Financial Officers Act of 1990, as expanded by 
the Government Management Reform Act of 1994, required the 
preparation and audit of consolidated financial statements of 
the Federal Government for fiscal year 1997 and each year 
thereafter. The Government Management Reform Act also required 
that, beginning March 1, 1997, and each year thereafter, all 24 
Federal agencies that are subject to the requirements of the 
CFO Act must prepare audited financial statements.
    The subcommittee's hearing highlighted the need for 
increased attention to the problem of unpaid payroll taxes. 
According to the General Accounting Office report released at 
the hearing, an estimated 1.9 million, have collected money 
from their employee's paychecks, for programs such as Social 
Security and Medicare, then failed to forward it to the Federal 
Government. The General Accounting Office, Congress' accounting 
arm, estimates this problem has cost taxpayers about $49 
billion. Continued oversight of this issue is essential, as 
audits of the Internal Revenue Service's financial statements 
have revealed significant weaknesses in the agency's financial 
    (3) ``H.R. 4181, the Debt Pay Incentive Act of 2000,'' May 
9, 2000.
    On May 9, 2000, the subcommittee held a hearing to consider 
H.R. 4181, the ``Debt Pay Incentive Act of 2000,'' introduced 
by the subcommittee's ranking member Jim Turner, D-TX. H.R. 
4181 would prohibit delinquent Federal tax and non-tax debtors 
from receiving Federal loans, loan guarantees or receiving 
Federal contracts, until the delinquency is resolved. The bill 
would amend the Debt Collection Improvement Act of 1996 to 
broaden a current provision in the law that bars delinquent 
non-tax debtors from obtaining loans or loan guarantees.
    As of fiscal year 1998, the Federal Government was owed $60 
billion in delinquent non-tax debt, according to the Department 
of the Treasury. Of this amount, more than $46 billion had been 
delinquent for more than 180 days. Moreover, according to 
Internal Revenue Service records, on September 30, 1999, the 
Government was owed $231 billion in unpaid taxes, penalties, 
and interest, called unpaid assessments. Of the $231 billion, 
an estimated $21 billion is considered to be collectible.
    At the May hearing, the subcommittee learned that Federal 
departments and agencies were doing a poor job of screening 
prospective loan applicants to determine if they owe an 
outstanding debt to the Federal Government that is in 
delinquent status. Office of Management and Budget Circular A-
129 requires Federal departments and agencies to determine 
whether loan applicants have delinquent Federal debt including 
tax debts. OMB Circular A-129 also requires agencies to 
question loan applicants if they have delinquencies. At the 
hearing, the General Accounting Office testified that Federal 
departments and agencies are not complying with this directive. 
Other witnesses testified that while information about 
delinquencies is requested by agencies in some instances to 
determine credit worthiness, the information is rarely verified 
or audited. Moreover, witnesses from Federal departments and 
agencies testified that few agencies are contacting the 
Internal Revenue Service to ascertain the credit worthiness of 
Federal loan applicants.
    Subcommittee investigations have found that implementation 
of these programs varies among Federal agencies. At a June 8, 
2000, hearing, the subcommittee learned that the Department of 
Veterans Affairs is currently owed $463 million in delinquent 
debts that by law should have been transferred to the 
Department of the Treasury for collection. However, the 
department has referred only $5 million, or about 1 percent of 
those debts to the Treasury Department's collection programs. 
The Social Security Administration is owed $390 million in 
qualifying delinquent debts. The agency has referred none of 
these debts to the Treasury Department.
5. Oversight of the Department of the Army's Chemical Stockpile 
        Disposal Project at the Umatilla Depot, Hermiston, OR.
    a. Summary.--The U.S. chemical weapons stockpile consists 
of 31,495 tons of chemical agents. These chemical agents are 
stored at eight sites in the continental United States and at 
the Johnson Atoll in the Pacific Ocean. On Monday, August 16, 
1999, the Subcommittee on Government Management, Information, 
and Technology conducted a field hearing in Hermiston, OR, to 
examine the management of the Chemical Stockpile Disposal 
Program at the Umatilla, OR, Chemical Depot. The Umatilla 
Chemical Depot houses more than 3,717 tons of chemical agents. 
Construction of an incineration facility has begun and disposal 
operations are scheduled to begin in 2002. The local 
communities surrounding the Umatilla Chemical Depot are 
concerned about emergency management and the economic impact of 
the development, operation, and closure of the incineration 
    On April 25, 1997, the Senate ratified the Chemical Weapons 
Convention, an international treaty banning the development, 
production, stockpiling, and use of chemical weapons. The 
Convention commits member nations to dispose of chemical 
weapons and related production facilities by April 29, 2007. To 
date, the United States is the farthest along, among member 
nations, in the destruction of their chemical weapons 
    To comply with congressional direction and meet the mandate 
of the Chemical Weapons Convention, the Army established the 
Chemical Stockpile Disposal Program and developed a plan to 
incinerate the agents and munitions on site in specially 
designed facilities. The Army currently projects the program 
will cost $12.4 billion to implement through 2007. Through 
fiscal year 1999, approximately $8 billion has been 
appropriated for the program.
    As of March 17, 1999, more than 13.5 percent, or 4,259 
tons, of the stockpile had been destroyed. The Department of 
Defense estimates that by the end of 1999, 6,865 tons of 
chemical agents (or 22 percent of the total amount) will be 
destroyed. The longer the weapons sit in storage the more 
unstable and dangerous they become. Currently, there are two 
sites that are actively incinerating chemical agents and five 
sites in the construction phase.
    The Umatilla Chemical Depot is located in eastern Oregon in 
Umatilla and Morrow counties. The facility, encompassing an 
area of about 19,728 acres, was established in 1941 as an 
ordinance facility for storing conventional munitions in 
support of the United States' entry into World War II. In 1962, 
the Army began storing chemical munitions at the facility. 
Conventional ordinance is no longer stored at the facility, 
however, the site houses 12 percent (3,717 tons) of the 
Nation's chemical weapons stockpile.
    Construction of a facility to incinerate the stockpile at 
the Umatilla Depot began in June 1997. Chemical agent disposal 
operations are scheduled to begin during the second quarter of 
    In 1988, the Army established the Chemical Stockpile 
Emergency Preparedness Program [CSEPP]. The program is intended 
to assist communities located near chemical stockpile storage 
sites to address emergencies from the storage and destruction 
of stockpiled chemical weapons. CSEPP provides community safety 
awareness, public education programs, coordinated response 
plans, and protective and decontamination equipment.
    The Army is responsible for determining the overall 
direction for CSEPP. Under a memorandum of understanding with 
the Army, the Federal Emergency Management Agency [FEMA] 
provides technical assistance and distributes Army funds to 
States through cooperative agreements. States and counties, in 
accordance with State and local laws, have primary 
responsibility for developing and implementing programs to 
enable communities to respond to a chemical stockpile 
emergency. FEMA provides both funds and technical assistance to 
Oregon Emergency Management for preparedness activities related 
to the chemical weapons storage site at the Umatilla Chemical 
    In June 1997, the General Accounting Office [GAO] reported 
that State and local communities surrounding the chemical 
stockpile storage sites lacked some items critical to 
responding to a chemical stockpile emergency. The GAO 
attributed the slow progress of the CSEPP program to long-
standing management weaknesses, including disagreement between 
the Army and FEMA over their respective roles and 
responsibilities. Local communities have expressed concern that 
money allocated for emergency services has not been received.
    The August 16, 1999, subcommittee field hearing in 
Hermiston, OR, focused on the management of the disposal 
project at the Umatilla Depot and the impact of the project on 
the local communities. Witnesses at the hearing included 
officials from the Department of the Army and the Federal 
Emergency Management Agency responsible for the management and 
safety aspects of this disposal project. The subcommittee also 
heard from officials from the State of Oregon, local counties 
and tribal groups. At the hearing, representatives from the 
local communities expressed concern over the state of emergency 
preparedness planning associated with the disposal project. 
These witnesses also testified about the effect of this 
temporary Government project on the local economy and local 
infrastructure. Local community leaders are seeking impact aid 
from the Federal Government to offset the various impacts of 
the project. The construction of the incineration facility at 
the Chemical Depot had begun and the incineration operation is 
scheduled for completion by 2005. The facility is scheduled to 
shut down permanently in 2006.
    b. Benefits.--The U.S. chemical weapons stockpile consists 
of 31,495 tons of chemical agents. These chemical agents are 
stored at eight sites in the continental United States and at 
the Johnson Atoll in the Pacific Ocean. The Department of 
Defense Authorization Act for Fiscal Year 1986 directs the 
Department of Defense to safely destroy all U.S. chemical 
warfare munitions and related materiel while ensuring maximum 
protection of the public, personnel involved in the destruction 
effort, and the environment. Because of the lethal nature of 
chemical weapons and environmental concerns associated with the 
proposed disposal methods, the program has been controversial 
from the beginning and has experienced delays, cost increases, 
and management weaknesses. Continued congressional oversight of 
the management of this enormous chemical weapons disposal 
project and at all disposal facilities is essential if the 
Department of the Army is to meet its mandate of safely 
destroying chemical weapons while ensuring maximum protection 
of the public, the personnel involved in the destruction 
effort, and the environment.
    c. Hearings.--``Emergency Management and Preparedness,'' 
field hearing in Hermiston, OR, on August 16, 1999.
6. Oversight of Government Procurement.
    a. Summary.--During the 106th Congress, the subcommittee 
continued its oversight of Federal acquisitions by conducting 
oversight hearings, initiating studies, and reporting 
legislation. As the Nation's largest purchaser, the Federal 
Government buys nearly $200 billion worth of goods and 
services, including everything from defense weapons and space 
exploration equipment to paper clips and pencils. The 
Department of Defense is responsible for more than half of the 
Federal Government's acquisition expenditures. In recent years, 
Congress has passed a number of laws, including the Information 
Technology Management Reform Act (Clinger-Cohen Act) and the 
Federal Acquisition Streamlining Act, which were designed to 
improve the efficiency of the Federal acquisition system.
    On September 30, 1999, the Office of Management and Budget 
published a notice in the Federal Register announcing that 
inventories of commercial activities performed by 52 Federal 
departments and agencies were publicly available for review. 
The release of these inventories, which included five Cabinet-
level departments, is the first time this information has been 
available to the public under the Federal Activities Inventory 
Reform Act of 1998 [FAIR Act]. According to the Office of 
Management and Budget, the remaining agency inventories will be 
available in upcoming months.
    The FAIR Act directs the head of each executive branch 
agency to submit inventories of the agency's commercial 
activities to the Director of the Office of Management and 
Budget by the end of the third quarter of each fiscal year 
(June 30). The inventories must include three elements: the 
fiscal year the activity first appeared on the inventory; the 
number of full-time equivalents [FTEs] necessary to perform the 
activity; and the name of a contact person who can provide 
additional information about the activity.
    The FAIR Act requires the Director of the Office of 
Management and Budget to review the inventories and consult 
with the head of the agency regarding its content. The agency 
head is required to transmit a copy of the inventory to 
Congress and make it publicly available. The Director is also 
required to publish a notice in the Federal Register that the 
inventories are publicly available. Under the law, each time 
the head of an executive agency considers contracting with a 
private-sector source for the performance of such an activity, 
the head of the agency is required to use a competitive bidding 
process. Currently, the Office of Management and Budget's 
Circular A-76 defines the process for agencies to follow when 
outsourcing an activity on their inventories. The A-76 process 
requires a public-private competition for the work in which the 
Federal employees who currently perform the work compete 
against private-sector bidders. The FAIR Act mandates that when 
conducting cost comparisons, agencies must ensure that all 
costs are considered.
    Interested parties have 30 days from the date of 
publication in the Federal Register to challenge either the 
inclusion or exclusion of an activity on the inventory list. 
The law limits those who can file a challenge to the inventory 
to Federal employees, private sector contractors, 
representatives of business or professional associations, and 
Federal labor organizations. Interested parties have 30 days 
from the date of publication in the Federal Register to 
challenge either the inclusion or exclusion of an activity on 
the inventory list. The law limits those who can file a 
challenge to the inventory to Federal employees, private sector 
contractors, representatives of business or professional 
associations, and Federal labor organizations.
    b. Benefits.--As the Nation's largest purchaser of goods 
and services, the Federal Government stands poised to save 
taxpayers billions of dollars a year through efficient and 
cost-effective purchasing procedures. A number of laws are in 
place to ensure that Government agencies utilize these 
procedures, yet the General Accounting Office has found that 
many Federal procurement operations remain at high-risk of 
waste, fraud, and mismanagement. Ongoing congressional 
oversight is needed to bring these programs into compliance 
with Federal laws, which will ultimately conserve millions of 
taxpayer dollars.
    c. Hearings.--On October 28, 1999, the Subcommittee on 
Government Management, Information, and Technology conducted an 
oversight hearing on the implementation of the FAIR Act. The 
FAIR Act, signed into law on October 19, 1998, requires Federal 
departments and agencies to assemble inventories or lists of 
the non-inherently governmental (i.e., commercial) activities 
they perform. The law requires these inventories to be made 
available to the public, and it authorizes certain interested 
parties, including private-sector entities and agency 
employees, to challenge the inclusion or exclusion of 
activities on the inventories. At the hearing, the subcommittee 
heard from a variety of witnesses who discussed the 
implementation of the law. The subcommittee focused on a 
variety of issues involving implementation of the FAIR Act, 
including the processes used to develop the inventories and the 
usefulness of the inventories.
    The sponsors of the law, Senator Craig Thomas, R-WY, and 
Representative John Duncan, R-TN, raised concerns about the 
efforts being made to implement the law. Specific concerns 
included the format and method of publishing the FAIR Act 
inventories and the uncertainty over the procedures to follow 
in order to challenge the inclusion or omission of an agency 
activity on the lists.
    The FAIR Act provides an essential tool for Federal 
departments and agencies to identify activities they perform 
that are not inherently governmental and could potentially be 
put up for competition with the private sector. The first 
release of FAIR Act inventories revealed that there remains 
much work to be done to fully implement this law. Continued 
congressional oversight of this law is necessary to ensure its 
successful implementation.
    (1) ``Federal Acquisition: Why Are Billions of Dollars 
Being Wasted?'' March 16, 2000.
    On March 16, 2000, the subcommittee convened a hearing to 
assess current issues related to Federal acquisition. The 
subcommittee learned that despite the impact of recent 
procurement reforms, significant challenges remain. The General 
Accounting Office testified that a number of Federal 
procurement operations are at high-risk of waste, fraud, and 
mismanagement. According to the GAO, acquisitions by the 
Department of Defense too often contain significant risks of 
cost overruns, schedule delays, and degraded performance. The 
Office of Inspector General at the Department of Defense 
discussed the results of a recent audit of 105 defense-
contracting actions. These contract activities, valued at $6.7 
billion, involved a wide range of professional, administrative 
and management support services. The Inspector General said he 
was startled to find problems in each of the 105 contract 
    In addition, major problems persist with weapon systems 
acquisitions. The GAO testified that the Department of Defense 
is still buying systems that cost too much, that are delivered 
late, or that fail to perform as expected.
    As well, the GAO has documented that billions of dollars 
have been wasted in the Government's purchases of information 
technology products and services that failed to deliver 
expected results. This problem has involved important 
Government programs, including air traffic control, tax 
collection, Medicare transactions, weather forecasting, and 
national defense. The acquisition problems persist largely due 
to agencies' inability to properly select, control, and 
evaluate these major investments. Agencies also face challenges 
in successfully implementing electronic commerce and the use of 
a paperless procurement system.
    In addition, agencies are having difficulty recruiting, 
training and retaining top-flight acquisition personnel. 
Witnesses at numerous subcommittee hearings have testified that 
the Federal Government needs to address an impending crisis in 
human capital as aging baby boomers begin to retire. According 
to the GAO, within the next several years, there will be a huge 
knowledge drain as many of the Government's more experienced 
and valued people leave the Federal workforce. Both the 
Department of Defense Inspector General and the General 
Accounting Office have found deficiencies in training 
requirements and continuing education for Federal acquisition 
personnel. This workforce issue will require increased 
congressional oversight and, perhaps, legislation in the 
upcoming Congress.
    Representative Sue Kelly, D-NY, added as a member of the 
subcommittee for this hearing by unanimous consent, questioned 
the panel of witnesses about the lack of progress by Federal 
departments and agencies to meet the 5 percent procurement goal 
for women-owned businesses. A number of agencies, including the 
Department of Defense, have failed to meet this goal. Office of 
Federal Procurement Policy Administrator Deidre Lee 
acknowledged that the Government does not have provide training 
to its acquisition workforce to identify women-owned businesses 
for Federal procurement opportunities.
    To address the shortage of skilled information-technology 
professionals in the Government, the subcommittee passed H.R. 
3582, the ``Federal Contractor Flexibility Act,'' sponsored by 
Representative Tom Davis, R-VA. This legislation restricts the 
use of minimum experience and education requirements in Federal 
information technology contracts, unless those requirements are 
justified by the contracting agency. Minimum education and 
experience standards that are written into Federal contracts 
can prevent otherwise qualified individuals from providing 
information technology goods and services to the Federal 
Government. The standards often fail to account for the various 
ways individuals acquire technical expertise, such as military 
service, technical schools, and on the job training, as well as 
traditional colleges and universities. The legislation is 
consistent with the Government's approach to performance-based 
contracting. Performance-based contracting is a method of 
acquiring services that focuses on successful results, or 
outcomes, rather than dictating how the work is to be 
performed. H.R. 3582 was enacted into law as part of the 
``Floyd D. Spence National Defense Authorization Act for Fiscal 
Year 2001.''
    (2) ``Implementation of the Federal Activities Inventory 
Act,'' October 28, 1999.
    On October 28, 1999, the subcommittee examined the 
implementation of the Federal Activities Inventory Reform Act, 
which was reported to the full House by the Committee on 
Government Reform in the 105th Congress. The FAIR Act (Public 
Law 105-270) requires Federal departments and agencies to 
compile and publish lists of commercial activities they 
perform. The subcommittee's hearing assessed agency 
implementation of the FAIR Act. Federal departments and 
agencies had identified 904,000 full-time-equivalent employees 
performing commercial activities. A number of concerns about 
the lists were raised, however, including the varied quality, 
content and format of agency inventory lists. Concerns were 
also raised about the FAIR Act's challenge and appeals process. 
As a result, the subcommittee requested that the GAO conduct a 
study on implementation of the FAIR Act by executive branch 
departments and agencies and examine the guidance provided by 
the Office of Management and Budget. The GAO reported that, in 
many cases, agency inventory lists were neither clear nor 
understandable. The GAO recommended that the Director of the 
Office of Management and Budget re-examine the agency's FAIR 
Act guidance to agencies in this area.
    The subcommittee hearing also examined the Government's 
initiatives in the area of electronic commerce. The advent of 
the Internet as a procurement tool has the potential to 
revolutionize the manner in which the Government purchases 
goods and services. A number of concerns were raised about the 
General Services Administration's online ordering system, GSA 
Advantage! The GSA Advantage! program, the Government's first 
catalog on the Internet, allows agencies to search for products 
and services and place orders with the GSA's Federal supply 
schedule vendors. A GAO report requested by the subcommittee 
found that vendors had problems with excessive data 
requirements and incomplete orders. In response, the GSA agreed 
re-tool and update its Web site.
    (3) Legislative hearing on ``H.R. 4012, the Construction 
Quality Assurance Act,'' July 13, 2000.
    During the 106th Congress, the subcommittee also conducted 
oversight hearings related to issues affecting Federal 
construction contracting. H.R. 1219, the ``Construction 
Industry Payment Protection Act,'' which the subcommittee 
reported to the full committee in early 1999, was enacted into 
law on August 17, 1999 (Public Law 106-49). H.R. 1219 updates 
the 1935 Miller Act by increasing the amount of payment bond 
protections for companies furnishing labor or materials for 
Federal construction projects. Another Federal construction 
contracting bill, H.R. 4012, the ``Construction Quality 
Assurance Act,'' sponsored by Representative Paul Kanjorski (D-
PA), was the subject of a subcommittee hearing on July 13, 
2000. H.R. 4012 would have required companies that bid on 
Federal construction projects in excess of $1 million to list 
the subcontractors they intended to use on the project.
7. Oversight of Federal Geographic Information Systems Policies and 
    a. Summary.--Geographical Information Systems [GIS] are 
automated systems used to capture, store, retrieve, analyze, 
and display spatial data referenced to the Earth. GIS 
applications have assisted governments, businesses, and 
communities for critical decisionmaking. Enhancements in 
technology and plummeting hardware costs have placed GIS and 
associated technologies on desktops everywhere. However, data 
created for one application may not easily be translated into 
another application. Data sharing of geographical information 
could potentially save millions of dollars annually and enhance 
the efficiency and effectiveness of governments and businesses.
    In the United States, geographic data collection is a 
multi-billion-dollar business. In many cases, however, these 
efforts are duplicated when organizations and individuals 
collect the same information for a given piece of geography, 
such as a State or a watershed. Networked telecommunications 
technologies, in theory, permit data to be shared, but data 
sharing is often difficult, because data created for one 
application may not be easily translated into another 
    The problems are not just technical. Institutions and 
governments are often not accustomed to working together. A 
local government may collect the best data, but they are 
unavailable to Federal and State government planners. 
Similarly, Federal agencies and State governments may not be 
willing to share data with one another or with local 
    Public access to GIS data is also a concern. Once found, 
digital data may be incomplete or incompatible, but the user 
may not know this because many data sets are poorly documented. 
The lack of metadata--or data that describes the content, 
quality, condition, and characteristics of other data--inhibits 
one's ability to assess the reliability of the data.
    b. Benefits.--The subcommittee focused on current 
challenges in sharing geospatial data maintained by Federal 
agencies. Data sharing of geographical information could 
potentially save millions of dollars annually and enhance the 
efficiency and effectiveness of governments and businesses, and 
better serve the public.
    The subcommittee held an oversight hearing on the Federal 
Government's policies and programs for GIS. The subcommittee 
focused on current challenges in sharing geospatial data 
maintained by Federal agencies. The subcommittee will evaluate 
the benefits of forming partnerships between multiple levels of 
government and the private sector to implement GIS, and in 
particular, how Federal, State, regional, and municipal 
governments are using GIS and spatial data to manage programs 
and serve the public more effectively and efficiently. The 
subcommittee also examined how the private sector uses GIS and 
spatial data to increase productivity, reduce operational 
expenses, and create new products and services. In addition, 
the subcommittee explored how Federal laws, regulations, and 
policies might be streamlined to improve compatibility across 
GIS networks.
    In addition, the subcommittee explored potential 
opportunities for the Federal Government to form partnerships 
with State, regional, and municipal governments, and the 
private sector to implement GIS in a cost-effective manner 
using the best data standards.
    c. Hearings.--``Geographical Information Systems Policies 
and Programs,'' June 9, 1999.
8. Implementation of the Government Performance and Results Act.
    a. Summary.--The American voters have made it clear that 
they think the Federal Government is too often ineffective, 
inefficient, and overly expensive. Real reform must involve 
fundamental changes in how the Government operates, beginning 
with the adoption of effective management techniques from the 
private sector. Outcome-oriented or results-driven performance 
management strategies adopted from the private sector are the 
driving force of the Government Performance and Results Act of 
    The Government Performance and Results Act is the 
centerpiece of Federal management reform in recent years. In 
essence, the act requires Federal agencies to ask and answer 
some very basic questions, such as: What is the agency's 
mission? What are its goals, and how will the agency achieve 
them? How can an agency's performance best be measured? How 
should that information be used to make improvements? These 
questions were to be answered in strategic plans, which were 
required by the Results Act to be completed by September 30, 
1997. The plans provide the framework for an agency's 
management to examine activities throughout the organization, 
ensuring that the activities relate to the agency's basic 
    The Results Act provides a unique opportunity to view the 
Federal Government on a comprehensive basis. In this context, 
the executive branch should seek to identify and set the 
priorities for the services that must be provided, the 
activities that must be carried out, and the measurement of the 
results that are achieved.
    The GAO found that agencies are confronting five key 
challenges that were limiting effective implementation of the 
Results Act: (1) establishing clear agency missions and 
strategic goals when program efforts are overlapping or 
fragmented; (2) measuring performance, particularly when the 
Federal contribution to a result is difficult to determine; (3) 
generating the results-oriented performance information needed 
to set goals and assess progress; (4) instilling a results-
oriented organizational culture within agencies; and (5) 
linking performance plans to the budget process.
    b. Benefits.--The quality of agency strategic plans and 
their derivative performance plans and performance reports 
affect the efficiency and effectiveness of the entire Federal 
Government. Without strategic plans and actual performance 
measures, it is impossible for any large organization to assess 
its success. That is particularly true of Federal departments 
and agencies because of the diverse nature of the programs they 
administer. For a large number of Federal programs it is very 
difficult to assess success. It is especially difficult to 
compare the relative success of duplicate or overlapping 
programs. Consequently, it is difficult for Congress to 
determine which programs are worth the taxpayers' investment; 
which programs should be expanded because they work efficiently 
and which programs should be canceled because they do not 
deliver the intended results.
    The subcommittee has conducted hearings to oversee the 
Government's implementation of GPRA and has made 
recommendations on how strategic plans should be developed. The 
subcommittee has explicitly expressed the intentions and 
expectations of Congress regarding the content and quality of 
GPRA strategic plans, and has worked with specific agencies 
such as the General Services Administration and the OMB to 
review their draft strategic plans. Further, because of the 
special function of the OMB in providing guidance to other 
Federal agencies, the subcommittee has insisted that the OMB 
set serious standards for all Federal agencies to deliver 
realistic strategic plans and meaningful performance measures.
    c. Hearings.--(1) ``The Results Act: the Status of 
Performance Budget Pilot Programs,'' July 1, 1999. A key 
expectation of the Results Act is that Congress will gain a 
clearer understanding of what is being achieved in relation to 
what is being spent. To accomplish this, the act required that, 
beginning in fiscal year 1999, agencies prepare annual 
performance plans. These plans are to contain annual 
performance goals covering the program activities in agencies' 
budget requests. In addition, the OMB guidance states that 
agency performance plans should display the funding level being 
applied to achieve performance goals. Plans that meet these 
expectations would provide Congress with useful information on 
the performance consequences of budget decisions.
    Paul Posner, Director of Budget Issues at the U.S. General 
Accounting Office [GAO], testified regarding their assessment 
of fiscal year 1999 performance plans and where Federal 
agencies stand in their efforts toward implementing performance 
budgeting. The GAO found that most of the agencies it reviewed 
were able to define some type of relationship between the 
program activities in their proposed budgets and the 
performance goals of their plans. However, far fewer translated 
these relationships into budgetary terms--that is, most plans 
did not explain how funding would be allocated to achieve 
performance goals. Agencies' first-year experiences show some 
progress in linking planning with budgeting structures and 
presentations, but much remains to be done if performance 
information is to be more useful for budgetary decisions.
    The Honorable Deidre Lee, Acting Deputy Director for 
Management at the Office of Management and Budget, provided a 
status update on agencies' progress in linking the budget to 
their respective performance plans. She was also asked to 
describe the status of agency pilot programs required by the 
Results Act. The act required these pilot programs to test 
innovative approaches to performance budgeting.
    The OMB, in consultation with the head of each agency, was 
required to designate for fiscal years 1998 and 1999 at least 
five agencies to prepare budgets ``that present, for one or 
more of the major functions and operations of the agency, the 
varying levels of performance, including outcome-related 
performance, that would result from different budgeted 
amounts'' (31 U.S.C. 1119 (b)). While the act requires agencies 
to define goals consistent with the level of funding requested 
in the President's budget, the pilot programs would also show 
how performance might change if the agency received more or 
less allocations than requested. The OMB was to include these 
pilot performance budgets as an alternative presentation in the 
President's budget for fiscal year 1999 and to transmit a 
report to the President and to Congress no later than March 31, 
2001. This report would detail the feasibility and advisability 
of including a performance budget as part of the President's 
budget. This report would also recommend whether legislation 
requiring performance budgets should be proposed.
    The performance budgeting pilot programs were to commence 
in fiscal year 1998 ``so that they would begin only after 
agencies had sufficient experience in preparing strategic and 
performance plans, and several years of collecting performance 
data.'' Recognizing the importance of a governmentwide 
implementation, the OMB announced on May 20, 1997, that the 
pilot projects would be delayed for at least a year. The OMB 
stated that the performance budgeting pilots would require the 
ability to calculate the effects on performance of marginal 
changes in cost and funding. According to the OMB, very few 
agencies had this capability, and the delay would give them 
time to develop it. In September 1998, the OMB solicited 
agencies' comments on these pilot programs, but no agencies 
were designated as pilots. At the time of the hearing, the OMB 
had no definite plans for proceeding with the performance 
budgeting pilot programs.
    (2) ``Seven Years of GPRA: Has the Results Act Provided 
Results?'' July 20, 2000.
    In a 1997 hearing before the Government Management, 
Information, and Technology Subcommittee, John Koskinen, the 
former Deputy Director for Management at the Office of 
Management and Budget believed that the Results Act forced 
Government agencies to ask the simple question: What are we 
getting for the money that we are spending? Under the Results 
Act, Federal agencies are required to develop strategic plans, 
annual performance plans, and performance reports. The 
subcommittee's hearing on July 20, 2000, coincided with the 
issuance of agency performance plans.
    At this hearing, the subcommittee reviewed the status and 
quality of the information contained in the performance 
reports. Hearing witnesses included Republican Majority Leader 
Richard K. Armey and a former New Zealand Cabinet Minister and 
Member of Parliament, the Honorable Maurice P. McTigue.
    Majority Leader Armey summarized the performance reports, 
saying that ``. . . 8 years after the Results Act was enacted, 
our Government is still too big and spends too much.''
    Witnesses testified that much work remains to be done 
before the Results Act works as it was envisioned.
9. Oversight of the National Archives and Records Administration.
    a. Summary.--The National Archives is an independent 
Federal agency charged with preserving the Nation's history by 
overseeing the management of all Federal records. The National 
Archives' mission is to ensure ready access to the essential 
evidence that documents the rights of American citizens, the 
actions of Federal officials, and the national experience, 
enabling citizens to inspect the records of the Federal 
Government and hold officials and agencies accountable for 
their actions.
    National Archives records document more than 200 years of 
American development. The agency has 33 facilities that hold 
about 21.5 million cubic feet of original text materials (more 
than 4 billion pieces of paper from the executive, legislative, 
and judicial branches of the Federal Government). The National 
Archives also contains nearly 300,000 reels of motion picture 
film, more than 5 million maps, charts, and architectural 
drawings, 200,000 sound and video recordings, 9 million aerial 
photographs, 14 million still pictures and posters, and about 
7,600 sets of computer data.
    Each year, the Federal Government creates an enormous 
quantity of official records. Generally, only about 3 percent 
of the documents that are created have sufficient historical or 
legal significance to become part of the National Archives. One 
of the agency's essential responsibilities is to determine 
which records should be preserved because they are essential 
documentation of the Nation's development and which documents 
are not.
    b. Benefits.--Subcommittee hearings help to ensure that 
Federal agencies are running their affairs in an effective and 
efficient manner. The National Archives maintains the most 
important records that detail American history. As the Nation 
moves from a paper-based society into the digital age, it is 
vital that the institution keep pace with the times and that 
its systems and procedures coincide with ongoing developments 
in the field of information technology.
    c. Hearings.--``The National Archives and Records 
Administration,'' October 20, 1999. The hearing focused on the 
myriad issues that are critical to the National Archives, 
including the agency's strategic plan, declassification of 
Government records, the agency's revolving fund, and electronic 
records management, including a July 19, 1999, GAO report 
entitled, ``National Archives: Preserving Electronic Records in 
an Era of Rapidly Changing Technology.''
    Governor John Carlin, Archivist of the United States, 
represented the National Archives at the hearing. His testimony 
focused on the National Archives' strategic plan. He described 
the agency's continuing efforts to provide state-of-the-art 
facilities and public access to archived records. Governor 
Carlin said that the National Archives is striving to maintain 
up-to-date records management standards. He stressed the 
importance of proper records management throughout the 
Government and described Archives' efforts to provide guidance 
to Federal agencies. Governor Carlin also addressed the issues 
of declassification, the agency's business process re-
eningeering plan, and its newly established reimbursable 
revolving fund.
    The second panel consisted of a variety of witnesses who 
generally praised the National Archives, but also noted some 
shortcomings. L. Nye Stevens, Director of Federal Management 
and Workforce Issues at the U.S. General Accounting Office, 
testified that the National Archives' re-engineering plan and a 
recent survey of governmentwide electronic records management 
were put on hold. Mr. Stevens expressed GAO's concern that 
Archives was delaying the survey until finalizing its re-
engineering plan, and described GAO's findings in a recent GAO 
report entitled, ``National Archives: Preserving Electronic 
Records in an Era of Rapidly Changing Technology.''
    Page Putman Miller, representing the Organization of 
American Historians, discussed the general issues that are 
important to those who wish to have access to National 
Archives' records, however, she concentrated on records 
declassification and electronic management. In regard to the 
declassification process, Ms. Miller said that National 
Archives was doing as effective as a job as possible, but she 
was concerned with the pace. Ms. Miller said that additional 
resources were needed to speed up the process. She also said 
that National Archives needed to issue more guidance for 
electronic records management and more effectively describe its 
own record holdings through record locators.
    Tom Hickerson, president of the Society of American 
Archivists focused on electronic records. He praised the recent 
work of the National Archives, but also stressed the need to 
provide Federal agencies with better